Q3 2022 Old Dominion Freight Line Inc Earnings Call
Good day and welcome to the old Dominion freight line third quarter 2022 earnings Conference call.
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I'd now like to turn the conference over to drew Anderson. Please go ahead.
Thank you good morning, and welcome to the third quarter 2022 conference call for old Dominion freight line today.
Today's call is being recorded and will be available for replay beginning today and through November 2nd 2022 by dialing 187734475 to nine access code three three to 4067.
The replay of the webcast may also be accessed for 30 days at the company's website.
Call that are not statements of historical fact may be deemed to be forward looking statements.
Without limiting the foregoing the words believes anticipate plans expects and similar expressions are intended to identify forward looking statements.
You are hereby caution that these statements may be affected by the important factors among others set forth an old dominion's filings with the Securities and Exchange Commission and in this morning's news release and consequently, actual operations and results may differ materially from the results discussed in the forward looking statements.
The company undertakes no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise.
As a final note before we begin we welcome your questions today, but we ask in fairness to all that you limit yourselves to just a couple of questions at a time before returning to the queue. Thank you for your cooperation.
At this time for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mister Greg Gant. Please go ahead Sir.
Good morning, and welcome to our third quarter Conference call with me on the call today U L. Satterfield R. C. A boat after some brief remarks will be glad to take your questions.
During the third quarter, the ultimate into extended the company's track record with double digit growth in revenue and profitability.
The third quarter of 22, 2022 bizarre seventh string quarter.
With double digit revenue growth Amazon striped core of double digit growth in earnings per diluted share. These financial results reflect the onboarding strings and demand for our services as we continued to deliver value to our customers by providing superior service at a better price.
Consistently executing a list of.
Over a long term strategic plan is critical to our continued ability to win longterm market share.
We were pleased to provide our customers with 99% <unk> service and a cargo claims ratio of 0.2% during the third quarter.
Service me as much more than just picking up and delivering our customer spray the hold time and then it's free.
In fact, Matthew and company conducts a comprehensive industry studying each year.
Most recently major carriers 28 service.
Related atrophy.
We are extremely proud that mask recently named O D. As the number one L. P L provider for the 13th straight ear.
And the slightest survey shippers and logistics professionals, Frank O D. As number one for 24 of the 20th individual attribute.
The consistency of our service performance over many years as validated by Matthew reflects the commitment from each of our team members, who works hard every day to go above and beyond for our customers.
Are superior service performance has not only allowed us to win market share over the longterm is also supported our longterm yield management strategy.
Simple strategy focus focus is all increasing rd meals to all set our cost inflation each year, while also supporting our ongoing investments and capacity.
We have consistently invested 10% to 15% of our revenue and capital expenditures each year.
Regardless of the economic environment.
Investments in our fleet and technology.
Does improve our operating efficiency and customer service.
A significant investments in our service Center network generally support our growth.
We have expanded the capacity of our services and network with 50% in the past 10 years, while doubling our market share and we believe further investments will be necessary to ensure that our network is never a limiting factor to our growth.
We believe a big part of our value proposition is having available capacity when our customers maybe at the most.
The capacity advantage, we have in the marketplace was especially critical for customers.
Dealt with various supply chain issues over the past two years, while I understood capacity was generally limited.
We increased our revenues by over 2 billion over the past two years, which would not have been possible. If we had not consistently increase our network capacity.
Our business model continues to prove itself time, and again and we are extremely grateful to our customers for their trust in us.
Great is relationship business and we believe are superior service available network capacity and consistent approach to pricing have allowed us to strengthen our long term relationships. We also believe the value offered by carrier is becoming increasingly important to shippers, which is why we.
Remain absolutely committed executing on the fundamental elements of our long term strategic plan.
As a result, we will continue to focus on providing customers with superior service at a fair price. We will also continue to invest in our own the family of employees.
And our service Center network to support our long term growth initiatives.
<unk> has a financial strength to make these investments and as a result, we believe we are better position that any carrier to produce long term profitable growth and increase shareholder value.
Thank you for joining us this morning, and now animal discuss our third quarter financial results in greater detail.
Thank you, Greg and good morning <unk>.
Dominions revenue grew 14.5% in the third quarter to $1.6 billion and are operating ratio improved to 69.1%.
The combination of these changes help produced 36 per cent increase in earnings per diluted share for the quarter.
Ah revenue growth was due primarily to the 17.4% increase in L. T O revenue per hundredweight, which more than offset the 2.6 per cent decrease in or L. T at all times.
We believe this decrease in it'll feel tonnes reflects the overall softness in the domestic economy that is generally caused a decrease in demand for our customers products demand for our services remains strong. However is customers are continuing to take advantage of our value proposition.
On a sequential basis revenue per day for the third quarter decreased 3.8% when compared to the second quarter of 2022 with L. T L tons per day, decreasing 4.3% and lpl's shipments per day decreasing 3.6%.
For comparison, the 10 year average sequential change for these metrics includes an increase of 3.6 per cent and revenue per day and.
An increase of 1.2% tons per day, and an increase of 2.4% in shipments per day.
At this point in October or revenue per day is increased by approximately 8% when compared to October of 2021.
This month the date revenue performance includes a decrease of approximately 7% <unk> tons per day.
As usual, we will provide actual revenue related details for October and are.
Third quarter Form 10-Q.
Our third quarter operating ratio improved 69, 1% with improvements in both our direct operating costs and overhead cost as a percent of revenue.
Many of our calls categories improved as a percent of revenue during the quarter, although our operating supplies and expenses increased 300 basis points due primarily to the rising cost of diesel fuel and other petroleum based products as well as the increased calls for parts and repairs to maintain our fleet.
We more than offset the impact of this increase with the improvement in our salaries wages and benefits and purchase transportation.
The improvement these expenses as a percent of revenue reflects our best efforts to effectively manage all of our variable cost with current revenue in volume trends.
Openings cash flow from operations totaled $514 $2 million and $1.3 billion for the third quarter and first nine months of 2022, respectively.
Capital expenditures were $181.7 million and $504 $8 million for the same periods.
We noted in our release this morning that our capital expenditures are now estimated to be $720 million for this year.
Decrease from a prior estimate is primarily due to the time, you know and equipment deliveries that we expect to be pushed into next year.
We will provide further details about of 2023 capital expenditure plan with our fourth quarter earnings release.
We utilized $345.4 million and $1.1 billion of cash for our share repurchase programs during the third quarter and at first nine months of 2022, respectively, while cash dividends totaled $33 $4 million and $101.4 million for the same periods.
Are effective tax rate for the third quarter of 2022 was 23.9% as compared to 25.2% in the third quarter of 2021.
Currently anticipate are effective tax rate to be $25, 6% for the fourth quarter.
This concludes our prepared remarks. This morning, operator will be happy to open for for questions at this time.
We will now begin the question and answer session.
To ask a few questions you may have <unk> and one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like someone to try your question. Please <unk>. Thank you.
At this time, we will pause momentarily to assemble our roster.
Mmm.
The first question today comes from Jack Atkins, That's Steven Please go ahead.
Great. Good morning, and thank you for taking my questions.
So that's why I guess first Adam.
I'd be curious if you could maybe give us the the the full stats for September in terms of tonnage per day on a year over year basis <unk>.
And was there anything unique kind of going on in in September with regard to the end of the quarter with the Hurricane and I guess, just kind of wrapping up at September October commentary I guess do you do you feel like that.
Quench all trends are the underperformers verses seasonalities may be accelerating somewhat and if you can maybe provide some color on sort of what's driving that so anyway, I know a lot there, but just sort of curious on current trends and and if you could provide some additional color there.
Sure, we'll test my memory, I guess and see if I can as soon as all those but.
So <unk>.
September .
Looking at on a year over year basis, or tonnage was down 5.4%.
And then shipments.
Those were let's see here shipments per day were down 6.8%.
So we had a little bit of an increase in weight per ship. It for the month it was up about a.
Per cent to have overall and so if you remember we've talked before about the wait for shipment traded last year.
Third quarter was are low watermark, if you will where we were at a total of 15 and 38 pounds.
So we did start seeing a sequential increase from the third quarter.
Fourth quarter of last year, so that should somewhat normal wise as we transition looking at things on a.
Sequential basis.
For the tonnage we did have in September about 1.4% increase.
Versus August .
The tenure averaged 3.9% increase so.
Similar I think what we saw in the third quarter is similar to the second quarter.
We we did underperformed for the total a quarter of the the average sequential trends into cue and we did again.
The third straight quarter of underperforming if you will but we started out with a decrease in July which is pretty typical when we were down 4% at the 10 year average is down 3% and then we dropped a little bit further in August which is normally about flattish and then we just didn't see the.
Mm sizable increase that we typically do in September .
Will say that so far and obviously there are still days to be finished for October but we it looks like we are training pretty much right in line with with normal seasonality at this point, which I think is an encouraging trina certainly a lot of.
<unk> left to do as.
As we go through the fourth quarter typically we would see an increase in November .
And then it drops off in December normally overall, you've got a decrease.
Average for the fourth quarter versus a third last year, we did have an increase.
Which makes the costs quite a bit tougher.
Fourth quarter, and we anticipated that.
Really is goin' instead of the beginning of this year really so I think it's just one of those things like we said our prepared remarks that.
Certainly feels like demand for us the feedback that we're getting from our customers has been positive.
Seeing good friends with their national account reporting are not losing customers.
So things are all training favorably in that regard, it's just a matter of the demand would feel like is not out there.
For our customers products. If you were just not picking up as much bright from those same customers that we may be making stops every day of their location. So.
Just continuing to kind of work through through these challenges. If you will we certainly made adjustments all year I think when you look at the operating ratio performance in general and what our service metrics are we.
We've been making adjustments to this lower than anticipated volume environment that we've been in but.
Yeah, we typically when we've been in a down cycle, we've been in a negative GDP environment. This year and a Lotta times, we'll see three to five quarters.
We kind of underperform, our 10 year average and always like to remind everyone that our 10 year average includes doubling their market share, but there's like I said with the third quarter, where we underperforms, they're going into the winter, it's always a little bit seasonally slower in any ways.
So we feel like based on what we've been able to do so far this year producing over $900 million of revenue growth.
Good solid operating ratio improvement will get through this literature, and then perhaps we start seeing some someone buildup once we get into the spring and I'm talking on a sequential basis.
Start seeing that build up back in the business once we get into the spring.
B centers, obviously, what's going on with the economy, but.
But that's that's some of the baseline for what we're thinking right now Okay. That's very helpful. Colorado. Thank you for that and you got all my all the different questions in there I guess, maybe for my one quick follow up would just be curious to kind of get your search for you know sequential how we should be thinking about this as much will change and operating ratio <unk>.
To your point typically tonnage is a bit softer sequentially, you know and and there's <unk> I'm sure a lot of puts and takes out there historically, it's about 200 basis point degradation three Q to Fork you is that the right way to think about it this year or you know it just some additional color would be helpful.
Sure it's.
For one of the fourth quarter.
We usually have an annual actuarial assessment that can impact if you just look at the raw numbers.
The peer average, but it's usually about 200 to 250 basis point <unk>.
Sequential deterioration from three to four cute.
You know I I think probably the appropriate target would be about a 400 basis points increase off of 69.1 that.
That we had and just talking through a few of those puts and takes that that'll go into it and I'd say 400 problem plus or minus.
A little bit just depending on in some cases somebody's expense items I was about to talk about but you know also that the top line but.
But obviously, we've got we had a one time item that favorably impacted our operating ratio by about 100 basis points.
And the third quarter, so I've kind of adding that back to normal wise what are fringe benefit costs have been training earlier this year.
Then I think that similar to the two two to three to change in our general supplies and expenses, we generally see a little bit of improvement from the third quarter to the fourth quarter.
<unk> that from one dollar standpoint that should remain somewhat flattish, but as revenues typically a little bit lower would expect that the increase.
I don't know, maybe 20 basis points from three two to four two depreciation is another items were still taken delivery of equipment normally kind of have all your depreciation in there. So I would expect to see that continue to pick up a little bit and then finally or miscellaneous expenses.
As if trying to load throughout the year those are typically around about half a point I.
Think we're at 20 basis points, 0.2% in the third quarter. So.
Expect that to normalize at some point as well. So you know some of those cost items just may create just a little bit of a variance versus list. The 10 year average might otherwise suggests but but you know us I mean, we're looking at.
Every dollar we can from a discretionary spending standpoint, and we'll be managing productivity and other costs as tightly as we can as we continue to adjust.
To current top line revenue in volume training, Okay, well, Adam Greg. Thanks, So much for the time really appreciate it.
Thanks Jack.
The next question comes from Alison Pontiac like well Bye now. Please go ahead.
Hey, guys James on for Allison.
Actually I just wanted to get a little bit more color on September and just kind of wanted to understand if there was a mix shifting.
Months, they might've impacted yields and trying to sort of get.
Get a sense of what pricing was independent of sort of that mix shift change instead of how we should think about that move forward.
Yeah, nothing major that we had not already been seeing certainly that you know our wait for shipment has been training higher as I mentioned at least through the third quarter.
And then are linked to fall has been a bit lower as well that's down.
Almost 1% so both of those metrics, putting a little downward pressure on that reported revenue per hundredweight metric and which I think we've talked a little bit about that the last earnings call overall, excluding the fuel surcharge. The redness of hundred legs was up 7%. So we're still seeing.
Good yield performance overall.
And then those does you are mixed metrics it'd be real somewhat reconcile how we got from the growth rate that we are seeing for the second quarter to the third quarter, but but overall as contracts were renewing we're continuing to.
To look for increases in design with our long term philosophy as we always are looking to try to increase yields to all set or cost inflation I would say Gordon places is probably a bit higher than what some of these <unk>.
Increases were getting right now.
Dealing with this inflationary environment, but we're always looking at things on a long term basis and said, we're continuing to make progress on those renewals try to get our cost-plus type pricing to ultimately support the investments that we're making back of the system.
We've invested a lot in real estate in capital expenditures.
Look over the last 10 years, it's been almost $4 billion under the best Man in total was about $2 billion going into a real estate network. So yeah. I think we've certainly done a good job of making sure. We're investing ahead of growth and we don't want the network to be a limiting factor to our ability to growth and so it's been important to.
To build in that capacity into the service in a network and it it certainly makes years like 2021 and.
The growth that we've seen in revenue this year possible.
Got it and.
Just to follow up on that just given the renewals that you're seeing.
Certain deficiency in the network.
Tennis trends continue or negatively or even sort of become more negative G. Just just 2023 year that you can still get our expansion at or above 100.
At this point or you Gotta start bumping up against six <unk> fairly soon.
Well you know I think the thing that we typically see in the past.
And you can look at that sort of a 2016.
2019 is example is when we get into the environment, where revenue is flat to down overall, that's something where we are going to continue to invest.
Greg mentioned in his comments earlier, we're gonna continue to to invest for the long term and so that that often creates a little headwind. If you will the depreciation cost as a percent of revenue.
But the vor change that we saw in 16 to 19, the slight deterioration of both of those periods was pretty much limited.
To that change in depreciation cost as a percent of revenue. We certainly are looking to manage all of our variable cost.
To match, what those those revenue in volume trained Zarf will be looking for productivity and we'll be looking closely at every dollar that we spend we certainly want to spend dollars. When there's an appropriate return that's there and don't want to do anything that might limit the long term performance.
But you just gotta be careful when it comes to the district discretionary spending.
Generally been able to manage all those other costs flat our cost structure is highly variable more than two thirds almost three fourths of our call for your email. So we just.
Continued to work those cough.
We can look for productivity in in any way that we can save money to offset any kind of pressure we may be seeing on the top line.
[noise] great. Thank you for the <unk>.
The next question comes from Georgia, Malaga with Goldman Sachs I've gone ahead.
Yeah, just a follow up maybe on the cost front looking ahead beyond even in the current quarter you talked about inflation is there any relief on the installation front, whether it be on the wage side I I assume on the purchase transport side, but just sort of your thoughts on sort of the cost inflation environment.
As we move beyond this what you're saying today.
Well from a core inflation standpoint, as we go into next year, you know I think everybody in this country is probably hoping for seeing some type of relief and really I think that starts with we've gotta have improvement only energy side energy drive inflation overall.
For this country and we've got to see some type of movement there.
Think that gives kinda removes the hurdle of uncertainty for many business owners and our customers.
Because then it should control what the fed action may be inside once you get those in a bank.
At least cleared you get reimbursement back in businesses, and so forth and hopefully start seeing a break flows.
Once again, a little bit stronger than at the levels that we anticipated when we started this year, but for us in particular.
Salary wages and benefits are probably 65 per cent of our total cost and we did just give a wage increase at the first of September this year.
Reward in our employees for the performance that they've been able to produce over this last year.
And so we.
We control that element of inflation.
Certainly on the benefit side, we've seen a little bit higher call later.
Osama bin.
The medical costs in particular, but as we continued to improve paid time off benefits and some of those other fees.
Features that we rewarded employees with.
Another 15 per cent of our call center or the operating supplies and expenses.
Fuel is obviously, a big component I think our surcharge program has been effective at all setting the increase there and we hope that we'll see a decrease as we make our way through 2023 and that should help on some of the parts and other component tires and so forth that we've taken.
Big increases on this year and then certainly on the depreciation side with.
With respect to equipment, we've taken some some increases there we hope some of those moderate as we we get into next year as well, we haven't finalized what our equipment orders and at what price and so forth will look white, but those.
Those are some of the biggest elements. We certainly are faced increase the insurance premiums like every other carrier.
Over the past several years and and again, it's just you gotta keep looking for ways that when you know you've got an increase in one area. So you gotta try to find some savings and the other and the biggest area for us will be to continue to focus on improved productivity with salaries wages and benefits being our biggest cost element.
We can offset we control the inflation, but we can help ourselves by continue to drive improved performance in those areas.
Great. Thank you.
The next question comes from Scott Group Wycoff Research. Please go ahead.
Hey, Thanks, Good morning, Adam I wanted to just follow up I I thought I heard you say that.
Core inflation is now tracking above some of the recent pricing increases your you're getting that feels like a pretty big change.
Four third quarter rug for shipment next fuels up 9%, so just add a little bit of color or clarity to what you were.
You are saying there.
Well, just mainly talking about what we've seen in terms of cost on a per shipment bases and sometimes as per shipment call us.
Increase a little bit more than a year and a little bit softer environment. Overall, I mean, we've still got a positive spread.
Terms of when you look at it revenue for shipment performance.
Versus cost per shipment.
And we certainly think that can continue overall and that's the focus is always to try to achieve 100 to 150 basis points of a positive sprayed it overall and what we can get on a revenue appreciate that faces with the field.
Versus what the the call for shipment was appeal it can be as well, but but just looking at things up your call for <expletive> that base is certainly training a lot higher than than what.
I thought I thought we would see moderation.
In the back half of this year as we started coughing again some of those they increased inflationary items that we experienced in the second half of 21, but certainly that moderation.
As it happens so we're still seeing some some pretty big increases I think a lot of it is driven bodies increased fuel prices that are just.
Remained high throughout the year, we thought we were going to start seeing some relief.
A few weeks ago on that as it started trending.
Down a little bit the last two or three weeks I think it's back up about 50 cents over where we had dropped to a.
A bit prior but but no no change in terms of of what we're we're going to be looking for from an increase standpoint, and what we think we can achieve because again, we've got to have cost plus pricing in our business.
All set that inflation, but more importantly to keep supporting the reinvestment back our business.
So you weren't trying to imply that.
Pricing is solid a sudden slowing a lot or anything like that no no not at all.
If I said that I misspoke for sure that were really pleased to think when you look at it.
In terms of the yield trans that we've had all year, they've certainly have been very positive and that continuing into October .
I mean, we didn't gave the number in terms of what we're seeing it from a you know at least as of right now with the tonnage of Zealand, but certainly that that implies that that that revenue per hundredweight.
Excluding the feels pretty consistent with where we were maybe a touch higher for the third quarter. Overall. So we would certainly expect that as we continue to go thru renewals generally mixes held constant that number increases sequentially from quarter to quarter and.
And certainly that that will be the objective is we have increase would come and do and will be coming up fairly soon on the general rate increase as well.
Apply to about 25%.
Of our business, but you know all of those factors, we got really seeing any change in the price of environment. It's remained steady.
Throughout this year and certainly supportive of the increases we've been able to get.
Okay. Thank you guys.
The next question comes from Chris Weatherby with Citigroup. Please go ahead.
Many thanks good morning.
Adam I just wanted to make sure I understood the sequential chadians in operating ratio from three to four Q. I think you said it was for maybe 400 basis points plus or minus relative to the 69, one I just want to make sure that that is right and then as you think about sort of the potential variables that maybe you could add to that I guess that would.
Get you closer to a large flat a show or one of your of your basis I think you're still below is based on the guidance, but once you get a sense of conceptually as we start to string out over the next few quarters. What are some of the dynamics that could then start to potentially push a deterioration in the operating ratio.
Well I mean, obviously the the top line is the biggest the element.
Yeah.
Certainly when you've got revenue.
That covers a lot of cost and some of those fixed call settlements that we have but but yeah. The the 400 basis points plus or minus that was off the 69 one reported.
Operating ratios.
And obviously, just the delta versus the normal cadence the biggest being that hundred basis points benefit that that was one time in nature that was recorded and.
In the third quarter, but but yes, we certainly transition into the next year.
Typically the first quarter is about 100 basis points worse in the fourth quarter.
And the first quarter of 2002, we have a 70 basis point improvement. So we know we've got some tougher comparisons coming up from both the top line standpoint ended operating ratios standpoint, just given.
You know the the phenomenal performance that we've had this.
This year and you know, it's almost 300 basis points improvement in the operating ratio for a year to date standpoint.
So it's been incredibly strong here.
Coming off of the improvement that we made in 2021. It means had $1.2 billion of revenue growth in and we put another $900 million a year to date on top of that so.
And probably a negative G D P environment so.
We're probably in a stronger position than we've ever been.
Terms of going through a slower macro environment with respect to the relationships that we have with our customers. We you know I mentioned earlier, we have not.
Lost any business that we've got to try to go back and regain if you will it's just gonna be a function of when our.
Our customers have more freight.
Be able to give to us and so.
That's encouraging.
You have mentioned that I feel like the October trains encouraging as well so just be a function of getting through you know trying to this winter and seeing.
Where that baseline becomes where we finished the fourth quarter.
This year from the volume standpoint, and then you know getting through one Q and like I mentioned seeing if we can't.
<unk> getting some some of that seasonal build up that we would typically see you know coming to US early next year.
But got it but yeah. It's.
A lot of it in terms of an O R standpoint is.
It becomes more challenging to get a year over year improvement.
And Ah, a flattish or Dale revenue environment, but but like I mentioned before it's straw is we're gonna manage all of our variable costs.
And then just sort of keep investing of might see some some lost their depreciation line, but but that's something that we know once that volume returns to the business.
We say to produce long term operating ratio improvements takes improvements in density and yields I once once it starts coming back to us.
Proven what we can do in terms of the model and so getting that throughput through the system. You know I think we can can start working and trying to achieve.
The long term operating ratio goal that we laid out at the end of last year of of producing some 70 annual operating ratios.
Yep, Oh God that that makes sense and then did you guys had done historically a good job of outperforming on the touch base is relative to peers. Both I think it up cycles as well as down cycles. I guess, if you think about this one maybe.
Maybe with maybe more of your competitors lenient trauma growth perspective, I don't know if you would agree with that comment first off but you know how how do you receive that relative performance opportunity for you. It should go through what could be a software period over the course of the next year or so.
A lot of times, our market share <unk>.
Has been flat or if you will like again looking at 2016 and 2019.
His recent examples but for the last three quarters, while we've been still produce and really solid volume growth.
Back us out at least from the puddle of carrier groups.
Volume instead of being negative on a year over year basis going back to <unk> <unk>.
Last year and really just looking at the total tonnage it it kind of on an average basis was flattish pretty much since the first quarter of 21 through second quarter of 22. So yeah, we'd certainly significantly increased our market share when you look at the volumes and the revenue.
To transfer us through.
Through these last couple of years, but.
A lot of times like I said it just it it.
It may be a point where we.
We may get to where they're sort of flattish if you were with the group but.
Yeah right now it just it feels a little bit different and that's what I mean by we've not lost and I'll look into national account recording.
Talking to customers.
There's more conversations about the value add how we felt customer supply chain is really over these last couple of years as people who dealt with the pandemic.
And supply chain challenges and yeah, what we're able to do by 21 in particular, while they were a lot of capacity issues within the industry and to be able to support our customers and their growth and to try to keep their networks.
Supply chain balance I think that's going a long ways, we've proven our value proposition. So that's why I think we're in a better spot and perhaps we've ever been so whenever we come out of this slower economic environment to really start building on the.
The the market share levels that that we currently have in place so.
So yeah, that's that's kind of what what we've seen in the past and certainly where we think we might.
Might be but but where we've been flattish we might still see a little positive delta from a shared standpoint like through the groups certainly within probably three straight quarters of negative GBP and when you compare our volume performance versus the other public areas at least there's probably been a wider spread there.
Perhaps and other times in the past.
Oh, Okay. That's really helpful call I appreciate your time thank you.
The next question comes down.
Okay, Let's switch bank. Please go ahead.
Thanks, Operator, hi, everyone.
I don't know if you.
Gives me mentioned this before but you talked about.
October being a little bit better could you just quantify that for us like typically obviously, what's the historical shipment volume or time to draw you from October September October versus what it was and then and then lots of a nitpicky question I guess, you know I'm not so I'm not so worried about.
That old dominion's ability to see a positive spread between revenue would cost per shipment I think you've done. It you know <unk> in the last 15 years, because obviously the mask of your data in the service and you guys are your best in class there, but I guess the question really is the industry's ability to see.
Be positive yield X fuel growth next year and some of this is the pricing discipline question for the industry, which I ask every quarter, but just once you get your perspective in terms of.
<unk>, what do you think the industry has the ability to see yield like she'll positive pricing is next year based on everything you're seeing out there from a pricing perspective.
Sure Yeah, one thank you for recognizing the service performance and and certainly as we said service support yields.
You can't go into an account.
Renewal beef had.
Service failures, and so forth and iPad rolling embargoes, and Miss pick ups late deliveries damaged shipments those types of things and to be able to get the consistent increases like we've been able to achieve.
Really going back for for many years now, but but yeah that is a differentiated quality from us versus the group as well as I think that we look for consistency with our program is not necessarily.
And who's favorite the market today versus tomorrow, we just wanted to build in a fair approach that tries to create win win scenarios for us and for our customers. They know what the how to forecast and plan for from an extent standpoint, but more importantly, they can.
What is the value and there's a difference between price and cost and I think we're increasingly seeing customers recognize that that value.
We are able to deliver for now but yeah.
So we certainly will will continue with our initiatives and I can't comment on what the other carriers, we'll be doing what their strategies will be.
Going forward, but you know what I think that like I mentioned, the last three quarters. The other carriers at least had been negative from a volume standpoint.
Continue to push pricing, so it's hard to imagine that that that changes it certainly seems like.
Favorable to their financial results, there's been a general improvement and industry dynamics appears but but uhm. Yeah are are you a philosophy has been different from the group for for many years and certainly.
It's been rewarding for us and has allowed us to do a lot of things in terms of the investment cycle and the dollars that we've been able to.
To put into our system, so as to keep growing and to have the baseline, we've probably got 20% to 25% excess.
Excess capacity in the system today and so.
We know we're building up for blood that next big like a growth comes to US and we are confident in what are alarmed longterm market share capabilities should be and I feel like this we can get through the challenges the short term and softer economic environment, but it's what you do in those up.
Cycle's, they're really make a difference instead of so yeah. It's a lot of encouraging transit if you will for us and just yeah, we want to make sure that we say ahead of the game.
And they've got the capacity, we've got the people and we've got the fleet to be able to take advantage of the next up cycle whenever it starts.
And what about the October versus September that appointment yeah sure from a ton as standpoint, and again keep in mind, we typically don't even talk about the details which is D. A sort of an average chain.
Changing the revenue, but just knowing that it is sensitivity around this point, but yeah. The number will change a little bit as we finish out. These final few days of the month, but right now what we're seeing.
You know from a month the date standpoint.
It looks like that we're gonna be pretty much right in line with the normal sequential change for for October typically it's October is decreases about 3.5% <unk>.
Sequentially versus September and we're right in that ballpark and certainly it can move around a.
A little bit as we finish at the moment, but but that's really the first time since February of this year, but the numbers.
Much better than the one that's.
Look and see.
You know, there's not necessarily a positive catalyst coming if you will but if we can kind of keep touch and keep pace, yeah with with normal sequential trends to depart.
Positive catalyst, meaning in the economy right now, but if we can kind of keep pace. What these these normal sequentials as we go through four two and one Q.
Then we have an idea of what type of build up we might see sequentially as we start getting into the spring of next year.
Right. Okay very good. Thank you very much I appreciate it.
Next question comes from Todd Fallor Rettke Bank capital markets. Please go ahead.
Alright, great. Thanks, and good morning, I'm, sorry M. I think you've touched on this in a couple of different ways on the call here, but I just wanted to kind of square up the comments on the weight per shipment is up in the third quarter sounds like it's still turning positive what would your comments about customers seeing less demand I would think that that would have some impact where they're just be less you know free time.
Each pallet. So can you just talk a little bit about the mixer, what's been going out with weight per shipment and it seems like it's kind of a normalised level, but just wanted to make sure that that's the right way to think about it right now.
From a sequential standpoint decreased about 10 pounds for the second quarter for the third quarter and.
Yeah right now in October .
Pretty much about the same as as wherever we were right around 1500 and 60 pounds.
If you will and so so yeah that that that trend held true through the the fourth quarter. Then we would be looking at a decrease yeah. We took action last year in terms of getting some of the heavier weighted shitness out of our system some of those spot.
Systems shipments.
As well those spot close to the total of our business or decreased.
As a result of what we're doing last year really in an effort to protect capacity for our existing LPL customers and make sure that we could deliver what they needed and but we started seeing and the increase sequentially in the fourth quarter of 20 more verses that low watermark that we hit.
Three Q. So it went from 1500 38 pounds up to 15 75, and four Q and then increased further in the first quarter of this year to 15 89 since that point it it's been <unk>.
Declining a bit but.
Yeah, I mean that that supporting your last year was such a strong fourth quarter in terms of we ended up with an increase in our tons per day typically down about a per cent half and they were actually up almost 2.5% sequentially versus the third quarter. So we have that strength as we.
Went through for you was was while we had such high expectations coming into this year and it's just been sort of this this flash environment.
If you will from a volume standpoint, all year, but but but yeah that that's kind of what we've been seeing from a waiting for <expletive> at the same point.
Okay, no that sounds I mean, peanut Chinese being download of a wait for shipment holding and it seems like a decent combination all things considered.
Just for a follow up I'm curious if you have any comments on head count It was down sequentially I guess, that's probably letting a little bit attrition kind of run its course, and I don't think the fourth quarters of big hiring period, but.
How should we think about like Higgins, a head count either sequentially or year over year, just given the demand trends. Thanks.
Thank you <unk> can you say that trend track of shipments.
Right now like you said, we've we've been simply letting nutrition take care of our our maintenance or unlimited is back in the right direction, but.
And we will continue to do that during the first quarter, which is typically you know our slowest colder, but we are daily hiring.
Failing vacancies and whatnot, but.
Not much going on from that standpoint at this point in time.
Got it so you've got a little bit of Glidepath, you know for the next couple of quarters, just on nutrition nutrition <unk>.
Yeah, I think so.
But keep in mind, we've we've continued to have driving schools and continue to work for us and and continue to get drivers trained because we know this thing a chance.
Some point in time, and we will come out on the other side in a better position certainly.
Certainly from them I think from a driver's standpoint, and and certainly from.
Capacity standpoint, so like we're doing the right things today that set the stage for.
Time today recovery and get better.
I haven't been in the past in our business you know.
That time will come hopefully sooner than later.
Yeah understood. Thanks, Greg Thanks, Adam.
The next question comes from a Rabbit Stinker Morgan Stanley . Please go ahead.
Thank you you're wanting everyone.
And then do I just wanted to follow up on some of the the tonnage commentary already specifically if he were to take a little bit of a glass half full approach you are I think it said on the side of the call that you know you kind of underperforming unfair for like three to four quarters already three quarters into it if you're a historical look at like you are punished state is negative for.
Like two or three months Maxim when you're already kind of pretty much all the way into that you you didn't say that you don't think that there is a positive catalyst on the horizon, but what are you looking for for any potential signs of the cycle may be turning and we may be going up in a restock kinda you know I'll.
I'll pick position, maybe the next couple of months.
Well I mean, the biggest thing is just.
This was the conversation that we've had with customers like I said earlier I think that.
There's just so much uncertainty in the market today.
And that just gets in the <unk> business owners in terms of the risks that they're gonna take for capital.
Yeah, I think there's still a labor issue and supply chain issue that it's impacting many customers today and.
We've heard first hand that you know just given the.
Certainly out there with the economy that some customers have made the decision to to not be as aggressive to feel open physicians from a labour standpoint.
For fear of what May come on the demand side for their business, but you know I think that we certainly let me think about there's three big late layers of uncertainty that that people are facing right now the upcoming midterm elections.
But then after that you got clarity.
Yeah, but at least for the next couple of years, but then comes with the the energy issue that has got to be dealt with we've got to see.
Some type of improving overall in terms of where.
Where fuel prices are and the impact that as an overall inflation for the domestic economy, and I think that it that <unk>.
<unk> it'll get solved and you get some clarity in terms of the the interest rate environment and so.
Yeah, I think we've got to start knocking some of those down to get back into growth.
Type of mother, but you know even when we look back at it prior periods.
Be it even look at it as bad as 2009 was we started getting <unk>.
Growth in the sequential growth that is in the spring of that year. So.
Yeah, we had a really bad for 208 and in one to you from the sequential standpoint.
Like many businesses looking.
Looking at 2016, and then you have another slower and environment.
Same kind of thing where the fourth quarter of 15 things are slowing down we kind of went through the winter we started getting build up back in the spring at some point people have got to get some inventory back in the system now there's been a lot of conversation about inventories that frankly, we continue to face issues and.
Terms of getting parts of many of our customers give us the same feedback that they don't have the right levels of the inventories in the right places that.
That creates a bright demand and we still look at an inventory to celebrate show that slower than prepaid deneke levels. So.
I think there's certainly.
A lot of factors that there's gotta be dealt with but just having those conversations with customers and our sales team to deal with that on a day in day out basis I'm trying to figure out what their plans are going into next year and we take those from each of our sales.
Account, representing does each of our service in your managers that are 255 locations in and tried to build that into you know somewhat a baseline forecast plan to to build around for the equipment planning standpoint head count cleaning.
Service Center capacity planning, but but yeah that that's the best feedback and you can read all the economic reports in the world, but the best is feedback we get from the ground up.
To help us plan for our business.
Great. Thanks for walking us through that and maybe as a quick follow up apologize that I missed it and you said it but are you seeing any signs of T. L. Players kind of try to encroach into the N. P. L. A market kind of given how lose things are on the deal site.
Not really and the reason for that is is you know where that may come into play and has in the past say back in a 2018 timeframe would be on some of those slot club type shipments before the strategic actions that we took last year.
Spot quote shipments are like eight to 10000 pounds type loads and historically 10000 pounds somewhat the following the LPL industry.
But those heavier shipments you might have a truckload carrier come in and tried to bill multiple stops or just be willing to take one mode.
If you will and that would that spill over type of fright, but the actions that we took last year were designed to try to get some of that phrase it wouldn't be a sickie proactively out of our system and instead of the result, those spotless shipments that used to average maybe 5% of our total so small number overall.
It's probably more like 1% to 2% at this point. So we were fortunate that we proactively tried to flush some of that out of the network really designed for it to make sure that we were protecting our.
Consistent lpl's shippers and the capacity means that they had in particular last year and what we thought was gonna transpire this year as well, but but I don't think looking at it sort of our competitors wait for shipments that I think some other companies took a similar approach I don't think that's as big of a.
Kind of a challenge to work through the.
The past, there's that freight with swing back into truckload create somewhat of vacuum effect that other carriers would look to feel I don't think that risk is out there as much as it has been in prior cycles.
Very helpful. Thank you.
The next question comes from Dotcom nature of Susquehanna. Thank God.
Following up on touch headcount question, if I look at your shipments per employee they're still call at 8% below where they were this quarter. In 2019 can you talk a little bit about you know might be a more problems up look at productivity and your own matrix, how does productivity compare to history on the.
Dark right now how does the driver productivity compare and just see is there an opportunity in some of these tops down matrix that we can calculate to get back to historic levels and a weaker demand environment or is it makes sense to stay a little long head count and a structurally tighter labor market. Thank you.
Yeah I'll answer the last part of your question first or a basket.
I think it definitely does make sense to stay a little while probably level labour standpoint, because we.
Talked about it prior calls.
We had to work at an awful lot harbor and the <unk>.
Recent past that.
Wrap up from a driver standpoint, particularly that we have and you know.
Over the years it just much more difficult like the market was a heck of a lot tighter.
And we didn't work an awful lot harder than we always had an ear for to ramp up so for sure we will be.
A little more diligent on trying to maintain that driver force.
And keep it.
Have a level as we possibly can without negatively affecting productivity.
To go back to the general productivity questions are starting to see <unk>.
Some improvements so marked improvement on the platform, which is a good thing and it's pretty typical when we get in this environment or labor force.
Comes better trained and more experienced suddenly start to save it positive.
Positive change and and we are seeing that so that's certainly a good thing certainly struggling a little bit <unk> to pick up and delivery sad.
Because we're obviously just not picking up the same number of shipments that at each stop we will do it when we were related Nancy <unk>.
Certainly more of a challenge your your miles stop so that California become a.
Oh great.
Certainly more difficult to keep up from that standpoint.
So obviously, we will continue to focus on those we we always think we have room for improvement.
<unk> platform and from a load factor standpoint. So we'll continue to study laser focused almost dot things and continue to try to address and calls out.
Where we can.
Thank you Greg.
The next question comes from first can with people. Please go ahead.
Hey, good morning team. This is Matt on for Bruce Thanks for squeezing this in here.
Curious to get your current view on net capacity in the industry and maybe how you might expect <unk> over the next couple of years here.
Well.
Certainly I think in this type of environment.
Certainly capacity out there.
Much more so than there was last year back.
2021, prior but like we were the only one that maybe wasn't really suffering from our capacity standpoint, certainly we were in better shape for months.
Adam mentioned before we spend an awful lot of money to wrap up on capacity and I think we've done extremely good job of that we continue to stay focused on.
<unk> capacity like I mentioned before you know it will come out of this thing hopefully sooner.
Later it will.
Will be in good shape, but.
There is some capacity obviously out there now we don't see the same things going on this year that we did last year carriers were in trouble like set embargoes.
And various things to limit pick ups and whatnot and certainly we're not seeing or hearing about those kind of things ma'am.
So yeah, there's capacity obviously, but.
I think the question is.
<unk> about it they're going to try to wrap up.
Arises.
On the other side.
You know what we're doing.
Got a large number of capacity.
Increasing projects underway now and.
We'll keep working all of those in again.
Lakh 70 in better shape.
Volumes they change it and when we start to pick back up so feel good about where we are at all.
Honestly, what the others do they do.
We can certainly can't control that.
Great Lastly, you guys seeing any changes or differences in underlying demand by specific and market for a geography. Thanks a lot.
No, we would probably seen a little bit better.
Performance with our industrial related accounts once again in the most recent quarter.
It probably groove couple hundred basis points faster than than the overall company average revenue growth rate and on the retail side was probably a couple of hundred basis points below.
But overall still seeing growth at all segments. If you will but it's probably a little bit better performance on the industrial side and most of our regions you got some growing a little bit more than than others.
When we look at it but most are saying fairly balance which is a good thing uhm, it's helped us to be able to effectively reduce our purchase transportation, which was a positive for the third quarter, we're effectively back to pre pandemic levels. The sense that we're essentially fully in source again.
And that's where we want it to be cause we know that improves our service value overall and so that that's been a positive trend. If you will but yeah. If you don't have somewhat consistent growth and all of those reasons you can get a little bit out of balance and we might not have been able to achieve that objective. So.
That's been a positive development at least to help from a service in a costume standpoint.
That's a super helpful. Congratulations again on the exceptional performance.
Like.
The next question comes from Todd complaint that's B.
Please go ahead.
[noise] Yeah. Good morning, it's <unk>, it's just I think Adam you gave quite a bit of commentary on September October , but I don't know if you offered what the revenue per hundred weight was kinda trending in October X feel <unk> can you give us kind of a sense of that is that kind of stable or where's that at.
Yeah, it's pretty stable, Tom I didn't give a specific number so to speak but it just mentioned that it's it's right in line may be a little bit better.
Than what we saw the average for the third quarter, we were up 7.2% of revenue per hundred late in the third quarter, excluding fuel surcharge and worried about that that same level.
October .
So do you think that that's kind of the <unk> level you stabilize at I mean, it gets you talked about inflation being you know maybe a bit more stick your higher than you thought I think we normally think of you know maybe.
45% as being what's a normal growth in revenue per hundred wait to to get a bit more than inflation.
But I guess, if you're running with higher inflation, you gotta get more price right. So you think that's the right level or do you think that in a week or you know kind of a we create a market you're gonna see that decelerate a bit further as you go into 2023.
So I think that yeah. When you look at our long term revenue for shipment perform it's a little bit differently per hundred, but longterm revenue per shipment, we've been able to average.
Between 4.5% to 5% is.
That.
Whether you look at his uncertainty years, including feel or <unk>, yeah. That's kind of been the goal will cause long term our costs. Appreciate your performance has been kind of in three to 3% to 5% range, mainly the increase is that we get journal employees each year from.
The wage improvement, but yeah. We we certainly we've faced the increased cost of equipment in insurance premiums and Fortunately I've been able to offset some of those other inflationary items through improved productivity.
Productivity and efficiencies with within our operation but.
Certainly we will have the same objectives as we go through.
The rest of this fourth quarter and as we transition into next year as well looking at the per hundred.
Certainly we had a bigger increases.
In 2021.
Yeah. Some of that started tickling the back half of the year when inflation was picking up and this year has been solid increases as well, but you know the key is just as contracts renewed and they renewed throughout the year for US is is to continue to make improvements. So it's yeah, we work a continuous improvement cycle whether it's.
With our yield management.
The efficiency of our operations every department is looking at continuous improvement and certainly we've got to continue with our best efforts they around the yield side, but.
You know I think that will see core inflation, we certainly hope that that moderates as we transition.
Transition into next year so.
We shouldn't need as big of an increase perhaps as what we've seen but at the last two but certainly want to see <unk>.
Sequentially increases from quarter to quarter.
Right, Okay, great makes sense, thanks for the time.
The next question comes from John as possible with Evercore I S.
Go ahead.
Thank you and good morning, and I'm just too quick follow ups for your first time, a T. T brought it up and and answer a couple of questions ago, 2.1% as far as I can tell us about as low as it's ever been in your network. So as you contemplate keeping maybe more resources from a head count perspective, just because of the challenges in hiring is there any more room to flat.
<unk> P T or are you kind of at the absolute minimum there and we think about it holistically salaries wages and benefits plus P. T. Probably stay is a little bit elevated for the foreseeable future.
Yeah that that level, where we are we effectively in the third quarter didn't use any P. T within our domestic line-haul network that that balance that we've historically had generally transfer between 2% to 2.5% of revenue.
Reflects mainly are this week, we have a little small truckload brokerage operation.
So you've got those carrier costs, there and then partners that we have with our Canadian operation as well those purchase transportation cost room and that baseline number. So so I certainly wouldn't necessarily expect that to get much lower as a percent of revenue unless something is changing with those.
Businesses, which we don't foresee, but they get nothing really out there to Nicole at the wheel as it impacts the domestic operations <unk>.
Certainly flags.
We went through the balance of 2021, primarily.
Using that P T to supplement our workforce and to a degree our fleet, where some of what I mentioned earlier, we had some reasons that will grow and you have a much stronger like coming off the list as it came out of the pandemic with grown incredibly strong and <unk>.
<unk> get your fleet out of balance.
Appropriately manage so so that was some of why we were using a little bit of P. T as well as just keep the network overall imbalance.
Okay that helps and then also to tie a couple of things together I mean, it sounded like you're pretty optimistic I mean, maybe optimistic is a strong word but not as pessimistic regarding some of your customer commentary, but in your prepared remarks.
I wrote down you said directly demand just isn't there for some of your customers grade. So do we foresee maybe a late peak season, where you know it's not there today, but you know going into a time they might seasonally the slower you start to see a reversion or of ketchup or do we kind of just right off the rest of this year is.
It's gonna be weak and maybe things are right size by 23, and it's starting to see a pick up then.
Yeah, Yeah for US we don't have a peak season per se usually September is our busiest month of the year just from a function of seasonality and our business and we have pretty consistent seasonal trends year in and year out as we progress.
Whether it's week by week within the moments and then most of them are through the quarters, but.
But nevertheless.
Certainly some of the most that we had in the earlier part of the year coming off the screen with how we finished 21.
And it looks like Mark will be our busiest month in terms of just the average weight and ship it to if you will but.
But yeah, it's just managing through kind of the the base level of where we are looking at mentioned earlier that when we get whether it's enough cycle or a down cycle. We a lot of times, we'll have three to five quarters, where we either outperformer underperform.
Normal seasonality and so the third quarter was the third such quarter of underperforming. So I will just continue.
Continue to watch the trends give me like I mentioned, what we've seen at least through the second and third quarters.
Just in the months, where we see a lot of build up we didn't see.
That same type of acceleration September for example that would normally be up sequentially about 4% we were up.
Half a percent so.
Get the build up in November remains to be seen and then December kind of drops off but I I feel like if we can kind of somewhat say a little bit closer in touch with with our normal sequential trends 342 in one to your next year then.
That's kind of the looking at getting to the spring and see and when we start seeing some.
Some volumes coming back to the business two Q of this year quite a bit different where we're used to seeing volumes increase sequentially about 7.5% for the first quarter to the second quarter and we were off about seven tenths of a percent.
Just haven't had that build up that we otherwise would see but yeah. So it's just gonna be a function of kind of getting through and watching these developments, but yeah October generally fits the trains when we look back for the fourth quarter and look back at some prior periods, where we were kind of in or going into an economic slow.
Go down you know you've had a lot more of their performance. If your bill with with October versus September . So that was something that we've been closely washing internally. It makes us feel a little bit better as we really get into the winter months, where we're always going to be a little bit of seasonally slower so.
Just as a function of continuing to execute on the plan.
Justin may be to what the overall volume environment dictates and.
Just trying to stay engaged with our customers and figure out where we really see that that spring build up next year or not.
And all the while you were probably focusing a little bit more sequential trends now.
Certainly again from a year over year standpoint, the fourth quarter was so strong we've been kind of do the fourth quarter and the first quarter from a year over year standpoint, we're gonna need let charter comparisons.
Volume side so.
That's why I would probably paying a little bit closer attention now how some of these the seasonality has pointed out for us.
That's very helpful. Thank you Adam.
The next question comes from a case mosquito with talent. Please go ahead.
Thank you operator gentlemen, thank you for squeeze me in there just one question from me and it it's sort of been asked in different ways, but.
How should we think about the industry's continue to <unk> to gain pricing above cost inflation with many larger LPL carriers sort of expanding capacity into a downturn is is that something we should be concerned about or is the fact that we're seeing so much cost inflation across to everybody's network.
That we shall remain confident that everyone's gonna maintain pricing discipline that we've seen over the last decade.
Yeah, well, we'd certainly like I mentioned, we've the the carrier group on average to exclude US has some negative volumes on a year over year basis for the last three quarters and but it has continued to increase.
Their their yields and so yeah, we Whitney anticipates a lot of change for that yeah with respect to whether capacity is really being added or not.
Remains to be seen we've not seen.
Really any material edition.
Some people are talking about it.
There had been one other carrier I guess that that certainly is is increase their servicing your account, but when you look at the the industry at least the public carriers.
On average over the last 10 years, there has been a decrease in the industry capacity said you know don't don't really foresee a lot of change in that regard as we move forward, but certainly will continue to watch it but but yeah. We believe the industry will stay disciplined but.
We know what our plan is what we can control and will continue the control the elements that we can and you know what the other carrier soon will just continue to sort of watch and see but.
I think we've got a long term track record in terms of what we've been able to do.
Over the last 10 years with average curling a revenue, 11% a year and we certainly have made.
Improvements to the operating ratio along the way and again, it's been through a combination of consistent improvements in yield and then the the density through that the volume throughput and the system. That's allowed us to produce this consistent operating ratio improvement.
Different carriers have had different strategies, along the way and certainly recent periods. Other carrier has been increasing rate faster than us but.
We don't control what they do but we will continue to certainly watch but.
Our conversations with customers or or what's going on with within old Dominion, what our cost inflation looks like the investments that we want to make to help support our customers and the the growth of their business and ultimately what's the value that we can add to our customers supply chains and those are the conversations we have versus trying to compare.
Our our our price versus someone else's price, it's all about value and that's service value is what has won the day for US what will continue to drive.
Star ability to win market share in the long term.
Oh, well clearly your game plan is worth so I think sticking with it's a good thing gentlemen, I. Appreciate the time is always alright.
The next question comes from can help Sir with Bank of America. Okay go ahead.
Hey, great Good morning, Greg and Adam just Adam just to balance out your last commentary your 100 basis point revenue over cause she noted before but also noting higher inflation just want to understand you still target. The the kind of 50 to 100 basis point operating ratio improvement on a on a full year going forward or does that change.
If volumes are weaker here.
Well I think we talked a little bit about this earlier certainly in in periods, where revenue has been been flat or been down we've.
We've had a little bit of a lot of degradation.
Generally limited to the depreciation cost is a percent of revenue.
The reason for that is we want to continue doing the best for the long term market market share opportunities. We believe we have and you certainly when you look at the second quarter of 2020, we had a big decrease in revenue that year, but.
We were a lot more aggressive in terms of managing cough and actually improve the operating ratio 10 basis points, but you know I think that I'm looking more at a 2016.
<unk> 2019 for the general performance.
Doing some of the things that really protect our long term opportunities.
Keep it a little bit of inflated head cannot like Greg mentioned earlier.
Continue with our investment cycle you know those are the types of long term decisions that we want to make that improve our opportunities for out years gift.
Get prepared for maybe one of 2024 2025 looks like.
Versus just trying to focus too closely.
Short term and what the first half of next year.
Otherwise like like so <unk>.
Certainly a lot of it depends on the overall revenue environment and.
You know, what we will see there's a lot of uncertainty out there but.
That's 2016 in 2019 are probably better examples to look at it in terms of how we tried to manage the business manager Oliver variable called slack.
As best we can prevent any type of increase in duration. There in those call settlements and then just might see that those depreciation cost increase in as a percent of revenue because of the the investment driving increased depreciation dollars.
And then your denominator being essentially flat to down from a revenue standpoint.
And then the per cent of volume you mentioned from the spot boards, but how 'bout from the third party carriers.
Brokers does that shift in this kind of a market when when things get softer do you add more do you keep it steady how do how do you think about that.
Strategically.
I mean, we've got you know a good long term relationships with many <unk> hear about a third of our business overall, a lot of times, what you'll see in a slower macroenvironment. We're seeing is a little bit now is some of those levels.
<unk> that kind of flattening out a little bit and.
We'll continue to watch that but you know certainly feel like that a lot of the the big <unk> customers that we have Neil in some ways can can help us.
Demonstrating the value independently for the shippers that they're potentially helping manage transportation services for and talking through what with the different elements of value in terms of our superior service all the time.
Pick us on time deliveries low damages all those sorts of things if they're talking to someone that has just been solely focus on price.
Past they can they can help us talk more about value said in some ways they could could be beneficial to us in a slower macro environment.
So.
Are you seeing that increases the percentage or does it stick. It does you just stick around that third level up and down in the market.
You're already seeing changes.
No. It's it's remaining about a third it's just okay.
The growth is flattening out a little bit in.
In terms of looking at the overall revenue with our <unk> right now.
And then last for me is the the fuel it seems relatively neutral this quarter in terms of kind of a quarterly impact I guess versus.
July of impact last quarter. It does that sound right to you and then R. R. In your negotiations our customers kind of talking I mean, I know you keep raising your rates, but the customers pushed back even harder now are you is it a bigger struggle as you go through these negotiations given the volume environment.
Well no.
There is always conversation about total all in price if you will because that's that's ultimately the bill the customers pain, but yeah for US certainly the there was a slight decrease in <unk>.
Average price of a few in the third quarter versus the second.
Yeah, that's something we'll probably talk a little bit about war.
The last call but.
Like I mentioned earlier, we hope that we see that continue to decrease and you know I'd have to say.
Say looking at the impact it had been a lot of questions about that uhm. If we were to see a decrease in the impact of fuel surcharge and.
Our philosophy is we want.
The fuel surcharge is just one element of pricing and whether fuel goes up or down we hope that's.
Neutral to the bottom line for us and probably.
Probably the best periods to go back and look if we are to get some type of material improvement in fuel prices.
2015, the average price of these appeal was down about 30% that year. We were fortunate we still had some volume growth going.
That year to help us.
Have good revenue Trans overall, and we were able to improve the operating ratio.
Fuel dropped another 15% in 2016 in that year was a little bit different in terms of the overall topline environments and a little bit more pressure from.
From a volume standpoint, but but we certainly we'd like to see overall the fuel prices continue to drop in and certainly that would decrease the all in price that that is being paid today.
[noise] Hi, Adam Greg. Thank you very much for the time I appreciate the morning.
Thanks.
Does that question and answer session I would like to turn the conference back over to Mr. Bhatt any clothing online.
Well, we thank you all for your participation today. We appreciate your questions and please feel free to give us a call. If you have anything further thanks and have a great day.
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