Q2 2023 XPO Logistics Inc Earnings Call

Welcome to the X P. O Q2, 2023 earnings conference call and webcast. My name is Sherry and I will be your operator for today's call.

Speaker 1: Welcome to the XBO Q2 2023 Earnings Conference call and webcast. My name is Sherry and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question.

At this time all participants are in a listen only mode.

Later, we will conduct a question and answer session if.

Speaker 1: If you have a question, please dial SAR1 on your telephone keypad. Please limit yourself to one question when you come up in the queue.

If you have a question please dial star one on your telephone keypad.

Please limit yourself to one question when you come up in the queue.

If you have additional questions Youre welcome to get back into the queue and we'll take as many as we can please note that this conference is being recorded.

Speaker 1: If you have additional questions, you're welcome to get back in the queue and we'll take as many as we can. Please note that this conference is being recorded.

Before the call begins let me read a brief statement on behalf of the company regarding forward looking statements and the use of non-GAAP financial measures.

Speaker 1: Before the call begins, let me read a brief statement on behalf of the company regarding fore-booking statements and the use of non- GAAP financial measures.

Speaker 1: During this call, the company will be making certain board booking statements within the meeting of applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ from materially from those projected in the forward booking statement.

During this call the company will be making certain forward looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those projected in the forward looking statements.

A discussion of factors that could cause actual results to differ materially is contained in the companys SEC filings as well as in its earnings release.

Speaker 1: A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings as well as in its earnings relief.

The forward looking statements in the company's earnings release or made on this call are made only as of today and the company has no obligation to update any of these forward looking statements.

Speaker 1: The forward-looking statements in the company's earnings release or made on this call are made only as of today and the company has no obligation to update any of these forward-looking statements, except to the extent required by law.

To the extent required by law.

During this call. The company May also refer to certain non-GAAP financial measures as defined under applicable SEC rules.

Speaker 1: During this call, the company may also refer to certain non- GAAP financial measures as defined under applicable SEC rules.

Speaker 1: Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earning release and the related financial tables or on its website.

Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release, and the related financial tables or on its website.

Speaker 1: You can find a copy of the company's earnings release, which contains additional important information regarding for-looking statements and non- GAAP financial measures, and the investor's section on the company's website.

You can find a copy of the company's earnings release, which contains additional important information.

Information regarding forward looking statements and non-GAAP financial measures in the investors section on the company's website.

Speaker 1: I will now turn the call over to XBO's Chief Executive Officer Mario Harak. Mr. Harak, you may begin. Good morning everyone.

I will now turn the call over to X P O's, Chief Executive Officer, Mario Heart, Mr. Hart you.

You may begin.

Good morning, everyone. Thanks for joining our call.

Speaker 2: I'm here in Greenwich with Kyle Wissmans, our incoming chief financial officer, Carl Anderson, our outgoing CFO , and Avi Fauci, our former CEO , and our former CEO ,

I'm hearing British with Kyle Wissmann, <unk>, our incoming chief financial Officer.

Anderson.

Going CFO and.

In <unk>, our chief strategy Officer.

This morning, you saw US report a solid quarter, despite a soft operating environment.

Speaker 2: This morning, you saw us report a solid quarter despite a soft operating environment.

Speaker 2: Company-wide, we generated revenue of $1.9 billion and adjusted EPS of $0.71.

Company wide, we generated revenue of $1 9 billion and adjusted EPS of 71 cents.

Speaker 2: We also delivered a adjusted EBTAF of $244 million, coming in as-

We also delivered adjusted EBITDA of $244 million.

Coming in above expectations.

And our North American <unk> segment, adjusted EBITDA was 208 million also above expectation.

Speaker 2: In our North American LTL segment, adjusted EBTOW was 208 million, also above expectations.

I want to focus my comments. This morning on the progress, we're making with the four pillars of our plan for LTE else to point out.

Speaker 2: I want to focus my comments this morning on the progress we're making with the four pillars of our plan for LTL 2.0.

Speaker 2: The first pillar is to provide industry leading customer service.

The first spinner supervised industry, leading customer service.

Speaker 2: Last year, we implemented multiple initiatives to elevate our customer service levels.

Last year, we implemented multiple initiatives to elevate our customer service levels.

Speaker 2: including a new incentive compensation structure for the field.

Including in your incentive compensation structure for the field.

We've made it clear to the team that customer service is our top priority and.

Speaker 2: We've made it clear to the team that customer service is our top priority.

Speaker 2: And we're seeing the impact of that in our key service metrics.

And we're seeing the impact of that in our key service metrics.

Speaker 2: In the second quarter, our claims ratio for damages was 0.7%.

In the second quarter, our claims ratio for damages was 0.7%.

Speaker 2: which is an improvement compared with 0.9% in 2022 and 1.2% at the end of 2021.

Which is an improvement compared with 0.9% in 2022, and one 2% at the end of 'twenty or 'twenty one.

And in the month of June our damage claims for shipment came in at the best level in over seven years.

Speaker 2: And in the month of June , our damage claims for shipment came in at the best level in over seven years.

Another key metric is on time performance, we improve this by 10 percentage points in the quarter year over year.

Speaker 2: Another key metric is on time performance. We improve this by 10 percentage points in the quarter year over year.

Going forward, we're keeping up the momentum as we begin to roll out new tools for the field, including higher quality straps airbag systems, and you sort of tracks in our service centers.

Speaker 2: Going forward, we're keeping up the momentum as we begin to roll out new tools for the field, including higher quality straps, air back systems, and new storage racks in our service center.

More recently with the acceleration in July volumes, which continues to improve key service metrics.

Speaker 2: More recently, with the acceleration in July volumes, we've continued to improve key service metrics.

Speaker 2: During this period of industry disruption, we're protecting capacity for our existing customers and being disciplined in what phrase we bring on into our network.

During this period of industry disruption with protecting capacity, you put out with existing customers and being disciplined in what freight we bring on into our network.

While we've made considerable progress with service in a relatively short time.

Speaker 2: While we've made considerable progress with service in a relatively short time, there's a lot more we can do.

A lot more we can do.

Speaker 2: Our entire organization is laser focus on providing the best LTL service in the industry.

Our entire organization is laser focused on providing the best LTE service in the industry.

The second pillar of our plan is to invest in our network for the long term.

Speaker 2: The second pillar of our plan is to invest in our network for the long term.

As you know, we anticipate allocating capex of 8% to 12% of revenue on average over the next several years.

Speaker 2: As you know, we anticipate allocating CapEx of 8-12% of revenue, on average, over the next several years.

Speaker 2: Now that we've completed our two spinoffs, we have more opportunities to invest in driving long-term growth in LTL, a business that generates a highly turned on invested capital.

Now that we've completed our two spin offs, we have more opportunities to invest in driving long term growth and LPL.

The business that generates a high return on invested capital.

Speaker 2: Most of our CAPEX is here is being deployed to increase the capacity of our fleet.

Most of our Capex. This year is being deployed to increase the capacity of our fleet.

Speaker 2: We've added more than 900 tractors, which has brought down the average age of our fleet to 5.1 years from 5.9 years at the end of 2022.

We've added more than 900 tractors, which has brought down the average age of our fleet to five one years from 549 years at the end of 2022.

We've also produced nearly 3100, new trailers at our manufacturing facility in Arkansas.

Speaker 2: We've also produced nearly 3,100 new trailers at our manufacturing facility in Arkansas.

Speaker 2: and we're on track to meet our target for over 6,000 new traders this year.

And we are on track to meet our targets for over 6000 youth trailers this year.

In addition, we expanded capacity at our service centers in Norcross, Georgia and in Salt Lake City.

Speaker 2: In addition, we expanded capacity at our service centers in North Cross, Georgia and in Salt Lake City.

Speaker 2: This aligns with our plan to add new doors and markets where more capacity can sustain more growth over time.

This aligns with our plans to add new doors and markets, where more capacity can sustain more growth over time.

Speaker 2: At this point, we've added more than half of the 900 net new doors contemplated in our plan, and we expect to open the remainder by early 2024, primarily by expanding existing terminals.

At this point, we've added more than half of the 900 net new doors contemplated in our plan and we expect to open the remainder by early 2024, primarily by expanding existing terminals.

Speaker 2: These targeted expansions will help improve network density and fluidity over the long term.

You saw good expansions what has improved network density and fluidity over the long term.

Given the recent market dynamics, we're evaluating the pace of our Capex plan to see if he wants to accelerate our investments in network capacity.

Speaker 2: Given the recent market dynamics, we're evaluating the pace of our capex plan to see if we want to accelerate our investments in network capacity.

Speaker 2: There's a potential for our annual Catholics as a percent of revenue to exceed the high end of our target range in the near term.

There's a potential but I would annual capex as a percent of revenue to exceed the high end of our target range in the near term.

The third pillar of our plan is to accelerate growth.

Speaker 2: The third pillar of our plan is to accelerate yield growth.

Speaker 2: We grew yields, excluding fuel, by 1.4% year over year, in line with our outlook for the second quarter.

We grew yield excluding fuel by one 4% year over year in line with our outlook for the second quarter.

We still had a headwind from mix as we described last quarter. However, our underlying pricing trends remain solid with contract renewal pricing up by mid single digits.

Speaker 2: We still had a headwind from MIX, as we described last quarter. However, our underlying pricing trends remain solid with contract renewal pricing up by mid-single digits.

Yes, it's our single biggest lever for margin improvement going forward and.

Speaker 2: Yield is our single biggest lever for Martian improvement going forward.

Speaker 2: And we have multiple initiatives underway to leverage the gains we're making in service quality and operating excellence.

And we have multiple initiatives underway to leverage the gains we're making in service quality and operation Excellence.

We started to see the impact of these initiatives grow in the second quarter and we expect this acceleration to continue.

Speaker 2: We started to see the impact of these initiatives grow in the second quarter and we expect this acceleration to continue.

The fourth and final pillar of LCL to point, though is to continue to drive cost efficiencies.

Speaker 2: The Ford and Final Billor of LDL 2.0 is to continue to drive cost efficient.

Speaker 2: The main opportunities here are in purchase transportation, our variable cost structure and overhead expense.

The main opportunities here are in purchased transportation, our variable cost structure and overhead expense.

In the second quarter, we did use our purchased transportation cost by 35% year over year by utilizing two letters.

Speaker 2: In the second quarter, we reduced our purchase transportation costs by 35% year-over-year by utilizing two levers.

Speaker 2: First, we continue to reprice contracts with third-party carriers to capitalize on favorable market conditions.

First we continue to reprice contracts with third party carriers, the capitalize on favorable market conditions.

Speaker 2: At the same time, we reduced third-party line haul miles in the quarter by 400 basis points versus last year.

At the same time, we did use third party line haul miles in the quarter by 400 basis points versus last year.

Speaker 2: This aligns with our plan to achieve a 50% reduction in purchase transportation costs as a percent of revenue by 2027.

This aligns with our plan to achieve a 50% reduction in purchased transportation costs as a percent of revenue by 2027.

Speaker 2: Labor is another opportunity to control variable costs in our field operation. We did that effectively.

Labor is another opportunity to control variable cost and I would field operation.

We did that effectively in the second quarter.

Speaker 2: I would head count and labor hours were down year over year, while our shipment count was up.

I would head count and labor hours were down year over year, while our shipment count was up.

Speaker 2: We also made significant progress in reducing our corporates overhead as we continue to rationalize our cost structure after the latest spin-off.

We also made significant progress in reducing our corporate overhead as we continued to rationalize our cost structure after the latest spinoff.

Speaker 2: While we're committed to becoming continuously more cost efficient, we're also careful to set the company up for long term growth.

Well, we're committed to becoming because then it would seem more cost efficient, but also careful to set the company up for long term growth.

Speaker 2: This includes investments in new tools for the field to further improve service quality and the significant expansion of our local sales force.

Includes investments and used tools for the field to further improve service quality and the significant expansion of our local sales force.

Turning to Europe , our business continues to perform well in a soft operating in vitamin with organic revenue largely unchanged.

Speaker 2: Turning to Europe , our business continued to perform well in a soft operating environment, with organic revenue largely unchanged.

Speaker 2: Despite the macro uncertainty in parts of Europe , we continue to see a strong pricing environment across the segments, and our sales pipeline is robust.

Despite the macro uncertainty in parts of Europe , we continue to see a strong pricing environment across the segment and our sales pipeline is robust.

Speaker 2: I wrap up my remarks on the quarter by summarizing the progress we've made today with our LTL 2.0 plan.

I'll wrap up my remarks on the quarter by summarizing the progress we've made to date with our L. T. L 2.0 Plaid.

We're continuing to generate some of our best service levels in years, and this is enabling us to gain profitable market share.

Speaker 2: We're continuing to generate some of our best service levels in years, and this is enabling us to gain profitable market share.

This has put the business on a path to stronger yield growth as we're able to price based on the increasing value we're providing customers.

Speaker 2: This has put the business on its path to stronger yield growth, as we're able to price based on the increasing value we're providing cuts.

Speaker 2: We're also continuing to make strategic investments in our network to capitalize on upturns in demand.

We're also continuing to make strategic investments in our network the capsulize on upturns in demand.

Speaker 2: We have a long track record of delivering high returns on investments in this business.

We have a long track record of delivering high returns on investments in this business.

And we're becoming more cost efficient by using our use of purchase transportation managing variable labor cost effectively and rationalizing our cost structure at the corporate level.

Speaker 2: And we're becoming more cost-efficient by reducing our use of purchase transportation, managing variable labor costs effectively, and rationalizing our cost structure at the corporate level.

Speaker 2: With our operational momentum and discipline investments in long-term growth, we remain on track to deliver on our outlook for at least 600 basis points of adjusted operating racial improvement through 2027.

Without operational momentum and disciplined investments and long term growth what do you mean on track to deliver on our outlook for at least 600 basis points of adjusted operating ratio improvement through 2027.

Speaker 2: In closing, I want to comment on the CFO transition we announced in July .

In closing I want to comment on the CFO transition we announced in July .

Speaker 2: Some of you already know Kyle, who will take over as our Chief Financial Officer next week.

Some of you already know Kyle who will take over as our Chief Financial Officer next week.

Speaker 2: Cal has been a senior finance leader with public companies for over 17 years, including a long career with General Electric.

It's been a senior finance either with public companies for over 17 years.

Losing a long carrier with general electric.

And he has been immersed in our business for the past 40 years. Most recently as that would head of revenue management and finance and LTE M.

Speaker 2: and he's been immersed in our business for the past four years, most recently as our head of revenue management and finance in LTL.

This will be a seamless transition.

I also want to thank Carl our outgoing CFO for his leadership of our finance team.

Speaker 2: I also want to thank Carl, our outgoing CFO , for his leadership of our finance.

Speaker 2: Call is rejoining a former colleague in an industry where he worked for over a decade. When I'm confident he'd have continued success.

Call is rejoining affordable colleague in an industry, where he worked for over a decade, but I'm confident you'll have continued success.

Now I'm going to hand, the call over to Kyle to discuss our second quarter results I'll over to you.

Speaker 2: Now, I'm going to hand the call over to Kyle to discuss the second quarter results. Kyle, over to you.

Thank you Mario and good morning, everyone.

I'm excited to step into the CFO role, we have a significant opportunity ahead of us to create even more shareholder value with a clear line of sight to our goals.

Speaker 2: I'm excited to step into the CFO role. We have a significant opportunity ahead of us to create even more shareholder value with a clear line of sight to our goals. And I'm looking for...

And I'm looking forward to building on our momentum as we continue to execute on the L. T. L. Two point El plan.

Speaker 2: as we continue to execute on the LPL 2.0 plan.

Now turning to the second quarter.

Speaker 2: Revenue for the total company was $1.9 billion, down 6% year over year, and up 1% sequentially from the first quarter.

Revenue for the total company was $1.9 billion down 6% year over year and up 1% sequentially from the first quarter.

In our <unk> segment revenue was down 8% year over year and up 1% sequentially.

Speaker 2: In our LTL segment, revenue was down 8% year over year and up 1% sequentially.

Almost all of the decline was related to fuel surcharge revenue.

Speaker 2: Almost all of the decline was related to fuel surcharge revenue.

Excluding fuel revenue was down just 1% year over year and up 4% sequentially.

Speaker 2: excluding fuel, revenue is down just 1% year over year and up 4% sequential.

L T L salaries wages and benefits in total were $4, 6% higher than a year ago.

Speaker 2: LTL salaries, wages and benefits in total were 4.6% higher than a year ago. Primarily due to wage increase.

Primarily due to wage increases.

As Mario noted.

Speaker 2: We did a good job of managing our field labor costs in the quarter.

We did a good job of managing our field labor costs in the quarter.

Speaker 2: We handled more shipments per day with lower headcount and fewer hours than in the second quarter a year ago.

We handled more shipments per day, with lower head count and fewer hours than in the second quarter a year ago.

Purchase transportation expense was down year over year by 35% or $47 million as we in sourced more line haul miles to reduce our use of third party carriers.

Speaker 2: Purchase transportation expense was down year over year by 35% for $47 million as we ensourced more line haul miles to reduce our use of third-party carriers.

Speaker 2: We ended the quarter at 20.7% of Line-Haw Miles outsource.

We ended the quarter at 27% of line haul miles outsource.

Which was a 400 basis point improvement from the same quarter last year.

Speaker 2: which was a 400 basis point improvement from the same quarter last year. We also paid significantly lower contract rates in the quarter, as our

We also paid significantly lower contract rates in the quarter.

As a renegotiated contracts cycle thing with the carriers.

Depreciation expense in the quarter increased by 24% or $12 million driven by our investments in the LTE network.

Speaker 2: Depreciation expense in the quarter increased by 24% or $12 million. Driven by our investments.

Speaker 2: Our CapEx spend was primarily related to bringing in new tractors from the OEMs and manufacturing more trailers in

Our capex spend was primarily related to bring in new tractors from your Oems and manufacturing more trailers in house.

Speaker 2: Next, I'll add some detail to adjust the EBITDA, starting with the company as a whole.

Next I'll add some details to adjusted EBITDA, starting with the company as a whole.

We generated adjusted EBITDA of $244 million in the quarter.

Speaker 2: We generated adjusted EBITDA of $244 million in the quarter, down 16% year over year.

Down 16% year over year.

We've reduced corporate expenses by 71% for savings of $24 million, which we achieved by rationalizing our corporate cost structure. Following the Rx a spin off.

Speaker 2: We reduced corporate expenses by 71% for savings of $24 million, which we achieved by rationalizing our corporate cost structure following the RX-O spin-off.

Speaker 2: Our adjusted EBITDA margin was 12.7%. Representing a year-over-year deterioration of 140 bases.

Our adjusted EBITDA margin was 12, 7%, representing a year over year deterioration of 140 basis points.

Speaker 2: Looking at just the LTL segment, adjusted EBITDA was $208 million, down 24% from a year ago.

Looking at just the LTE segment, adjusted EBITDA was $208 million down 24% from a year ago.

Speaker 2: Our gains and cost efficiency were offset by the aggregate impact of the current operating environment.

Our gains and cost efficiencies were offset by the aggregate impact of the current operating environment.

Speaker 2: namely lower fuel surcharge revenue, tonnage, wage inflation, and lower pensioning.

Namely lower fuel surcharge revenue tonnage wage inflation and lower pension income.

In our European Transportation segment, adjusted EBITDA was $46 million down $3 million year over year.

Speaker 2: And our European transportation segment, adjusted EBITDA, was $46 million, down $3 million year over year.

Companywide, we reported net income from continuing operations of $31 million in the quarter.

Speaker 2: Company-wide, we reported net income from continuing operations of $31 million in the quarter.

Representing diluted earnings per share of 27 cents.

Speaker 2: representing deluded earnings per share of 27 cents.

Speaker 2: This compares to income of $96 million, and earnings of 83 cents per deluded share a year ago.

This compares to income of $96 million and earnings of 83 cents per diluted share a year ago.

The year over year decline in income from continuing operations was partially due to higher transaction and integration costs.

Speaker 2: The year-over-year decline in income from continuing operations was partially due to higher transaction and integration costs.

And restructuring charges.

Speaker 2: We had $17 million of transaction and integration costs related to the RXO spinner.

We had $17 million of transaction and integration costs related to the arc So spin off.

Speaker 2: and another $10 million of restructuring charges across the segment.

And another $10 million of restructuring charges across the segments.

Speaker 2: We expect the cost in both categories will step down materially by the end of this year.

We expect the costs in both categories will step down materially by the end of this year.

Speaker 2: On an adjusted basis, our EPS for the quarter was 71 cents, which is down 38%.

On an adjusted basis, our EPS for the quarter was 71.

Which is down 38% from a year ago.

Speaker 2: And lastly, we generated $131 million of cash flow from continuing operations.

And lastly, we generated $131 million of cash flow from continuing operations and deployed $126 million of net capex.

Speaker 2: and deployed $126 million of net capital.

Reinvesting in the business remains our top priority for capital allocation.

Speaker 2: Reinvesting in the business remains our top priority for capital allocation.

Moving to the balance sheet.

Speaker 2: We ended the quarter with $290 million of cash on it.

We ended the quarter with $290 million of cash on hand.

Combined with available capacity under committed borrowing facilities. This gave us $802 million of liquidity at quarter end.

Speaker 2: Combined with available capacity under committed borrowing facilities, this gave us $802 million of liquidity at quarter-end.

We had no borrowings outstanding under our ABL facility at quarter end.

Speaker 2: We had no borrowings outstanding under our AVL facility at quarter-inch.

And our net debt leverage was two three times trailing 12 months adjusted EBITDA.

Speaker 2: and our net debt leverage was 2.3 times trailing 12 months adjusted EBITDA.

In May we completed the refinancing of our $2 billion term loan.

Speaker 2: In May, we completed the refinancing of our $2 billion term.

Speaker 2: This doubled our weighted average maturity timeline to approximately six years.

This doubled our weighted average maturity timeline to approximately six years.

Speaker 2: while our interest expense is effectively unchanged this year.

While our interest expense is effectively unchanged this year.

And notably we received upgrades on our secured debt from Moody's and S&P.

Speaker 2: And notably, we received upgrades on our secured debt from Moody's and FM.

Speaker 2: We also now have two investment grade ratings on our secured

We also now have two investment grade ratings on our secured debt.

Speaker 2: Our capital structure gives us the financial flexibility to execute on the significant opportunities we have at XPO.

Our capital structure gives us the financial flexibility to execute on the significant opportunities we have at X P O.

Speaker 2: Now, I'll turn it over to Ali, who will cover our operating results.

Now I'll turn it over to Ali who will cover our operating results.

Speaker 3: Thank you, Kyle. I'll start with the review of the second quarter operating results for our LTL segment.

Thank you Kyle I'll start with a review of the second quarter operating results for our L. T L segment.

During the quarter demand for L. T L stayed below historical levels.

Speaker 3: During the quarter, demand for LTL stayed below historical levels.

Speaker 3: This drove a 4.7% decline in our weight persh shipment in the quarter.

This drove a four 7% decline in our weight per shipment in the quarter.

Speaker 3: We offset some of this with a 1.9% increase in shipment count, led by 15% growth in our local sales channel.

We offset some of this with a one 9% increase in shipment count led by 15% growth in our local sales channel.

Speaker 3: These share gains are direct reflection of the service improvements we're making in the network.

These share gains are a direct reflection of the service improvements, we're making in the network.

Speaker 3: As a result, we were able to limit the decline in tonnage per day to 2.8%.

As a result, we were able to limit the decline in tonnage per day to two 8%.

On a monthly basis April tonnage per day was down 2% year over year.

Speaker 3: On a monthly basis, April tonnage per day was down 2% year over year. May was down 2.3%. And June was down 4%.

May was down two 3% and June was down 4%.

Speaker 3: Looking just at shipments per day, April was up 3.1% year over year, May was up 1.8%, and June was up 0.9%.

Looking just at shipments per day April was up three 1% year over year May was up one 8% and June was up <unk>, 9%.

Speaker 3: On a two-year stack basis, monthly tonage improves each month throughout the second quarter.

On a two year stack basis monthly tonnage improved each month throughout the second quarter.

In July we moved even more freight through the network with tonnage up four 2% year over year and shipment count up eight 8%.

Speaker 3: In July , we moved even more freight through the network, with tonnage up 4.2% year over year and shipment count up 8.8%.

On a sequential basis from June July tonnage was up two 6% and shipment count was up three 2%.

Speaker 3: On a sequential basis from June , July tonnage was up 2.6% and shipment count was up 3.2%.

Looking at yield on an ex fuel basis increased by 1.4% versus last year in line with our outlook.

Speaker 3: Looking at yield on an X fuel basis increased by 1.4% versus last year, in line with our outlook.

Speaker 3: on a sequential basis, we increase yield, ex-fuel, quarter over quarter, outperforming typical seasonality.

On a sequential basis, we increased yield ex fuel quarter over quarter outperforming typical seasonality.

While mix has continued to be a headwind to yield our underlying trends remained solid with contract renewal pricing up 5% in the quarter versus last year.

Speaker 3: While mix has continued to be a headwind to yield, our underlying trends remain solid with contract renewal pricing up 5% in the quarter versus last year.

Also our yield initiatives are continuing to gain traction and resulted in stronger yield growth as the quarter progressed into July .

Speaker 3: Also, our yield initiatives are continuing to gain traction and resulted in stronger yield growth as the quarter progressed into July .

Speaker 3: As we look ahead, we're excited about the trends we see in yield in our outlook for the third quarter, as well as the long term.

As we look ahead, we're excited about the trends, we see in yield and our outlook for the third quarter as well as the long term.

Speaker 3: We expect our year-over-year yield growth X fuel to further accelerate in the third quarter versus Q2.

We expect our year over year yield growth ex fuel to further accelerate in the third quarter versus Q2.

Turning to margin performance.

Speaker 3: Turning to margin performance, our second quarter adjusted operating ratio was 87.6%, which is unfavorable by 440 basis points compared with second quarter a year ago.

Our second quarter adjusted operating ratio was 87, 6%, which was unfavorable by 440 basis points compared with second quarter a year ago.

As part of our L. P. L 2.0 strategy, we have been increasing our capital investments to drive long term growth.

Speaker 3: As part of our LPL 2.0 strategy, we have been increasing our capital investments to drive long-term growth.

In the near term there is a headwind to our margins from higher depreciation as these investments ramp.

Speaker 3: In the near term, there is a headwind to our margins from higher depreciation as these investments ramp.

If we exclude the impact of depreciation as well as fuel our adjusted operating ratio in the quarter would have improved on a year over year basis.

Speaker 3: If we exclude the impact of depreciation as well as fuel, our adjusted operating ratio in the quarter would have improved on a year-over-year basis.

On a sequential basis, we improved adjusted or by 200 basis points compared with the first quarter.

Speaker 3: On a sequential basis, we improved adjusted OR by 200 basis points compared with the first quarter. This outperformed our expectation.

It's outperformed our expectations.

Speaker 3: Moving to our European business, we delivered another solid financial quarter with organic revenue down slightly despite a soft macro backdrop.

Moving to our European business, we delivered another solid financial quarter with organic revenue down slightly despite a soft macro backdrop.

This was supported by a mix of new customer wins and contract renewals.

Speaker 3: This was supported by a mix of new customer wins and contract renewal.

Two of our key markets, the U K and Central Europe outperformed the European segment as a whole.

Speaker 3: Two of our key markets, the UK's and Central Europe , outperformed the European segment as a whole.

Speaker 3: and our pricing in Europe was higher than the same period last year, outpacing inflation.

And our pricing in Europe was higher than the same period last year outpacing inflation.

Speaker 3: Before we go to Q&A, I want to highlight our significant progress we're making toward becoming a world-class LTL provider.

Before we go to Q&A I want to highlight our significant progress, we're making towards becoming a world class L. T L provider.

Speaker 3: We've meaningfully improved service and are rolling out new initiatives to drive further improvements.

We've meaningfully improved service and are rolling out new initiatives to drive further improvements.

Speaker 3: As we take on more volume, like we did in July , we're maintaining strong service levels and being disciplined about the freight we accept into our network.

As we take on more volume like we did in July we're maintaining strong service levels and being disciplined about the freight we accept into our network.

We're also building yield growth and expect an acceleration in the second half of this year as our initiatives continue to ramp up.

Speaker 3: We're also building yield growth and expect an acceleration in the second half of this year as our initiatives continue to ramp up.

Speaker 3: And importantly, we're carefully managing variable costs while continuing to make strategic investments in the network.

And importantly, we're carefully managing variable costs, while continuing to make strategic investments in the network.

Speaker 3: For all these reasons, we're excited about our trajectory and our momentum towards achieving our long-term target.

For all these reasons, we're excited about our trajectory and our momentum towards achieving our long term targets.

Speaker 3: With that, we'll take your questions. Operator, please open the line for Q&A.

With that we'll take your questions operator, please open the line for Q&A.

Speaker 4: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Kim if he would like to ask a question. Please press star one on your telephone keypad.

Formation tone will indicate your line is in the question queue. You May press star two if he would like to remove your question friendly Kim.

Speaker 4: for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please limit yourself to one question and re queue for additional questions. Our first question is from Ken Huckster with Bank of America. Please proceed.

Speaker 4: yourself to one question and req for additional questions.

Speaker 4: Our first question is from Ken Hoekster with Bank of America. Please proceed.

Great Good morning.

Speaker 5: Mario, maybe talk about the ramp in July post yellow. It seems like you were a little bit more guarded on adding freight in the discussion, but yet you're also targeting to accelerate. So should we see maybe in above industry, average yield growth?

Mario maybe talk about the ramp in in July post yellow. It seems like you were a little bit more guarded on on adding freight are in the discussion, but yet you're you're also targeting to accelerate so should we see maybe an above industry average yield growth as you are our selective on on the freight you're adding is it that the freight moved really quickly.

Speaker 5: as you are selective on the freight you're adding, is it that the freight moved really quickly and now it's realligning itself over time.

Now it's realigning itself over time, and then contrast that with your comments on Capex and how we think about how fast do you want to you want to grow to maybe absorb some more of those volumes.

Speaker 5: And then contrast that with your comments on catbacks and how we think about how fast you want to you want to grow to maybe absorb some more of those volumes.

Speaker 6: Good morning, Ken, and thanks for the question. Well, first starting with the July tonnage. So when you look at our tonnage, it was up 4.2% year on year in the month of July . And shipment count was up 8.8% in the month of July .

Good morning, Kevin and thanks for the question well first starting with the July tonnage. So when you look at our tonnage was up four 2% a year on year in the month of July and shipment count was up eight 8% in the month of July now when you compare that to typical seasonality usually June two.

Speaker 6: Now when you compare that to typical seasonality, usually June to July , we see shipment count be down 2.8%. But for us this July , we went up 3.2%. So call it a 6% swing above typical seasonality. And same thing on the tonnage side, we usually see seasonality June to July go down 4.1%, while this July we saw it go up 2.6%. So about also 6 to 7% higher.

July we see shipment count eat down two 8%, but photos. This July we went up three 2% so call it 6% swing above typical seasonality and same thing on the tonnage side, we usually see seasonality a June to July go down four 1% y O. This July we saw it go up.

Two 6%. So that's also six 6% to 7% higher now when you look at the beginning of the month versus the end of the month, we already had seen positive tonnage and shipments at the beginning of July and we saw that accelerate the shipment count accelerated into high single digits range from the beginning of the month.

Speaker 6: Now when you look at the beginning of the month versus the end of the month, we already had seen positive tonnage and shipments at the beginning of July , and we saw that the shipment count accelerated in the high single-digit range from the beginning of the month till the end of the month.

The end of the month now it's tough to tell them what the rest of the quarter. It is going to do with is a very fluid situation at this point and we'll see how these how do you use that number's, obviously shake out here for August and beyond.

Speaker 6: Now, if it's up to them, what the rest of the quarter is going to do, it is a very fluid situation at this point, and we'll see how these numbers are obviously shake out here for August and beyond.

Speaker 6: On the capital side, we have been investing more capital into our business as part of our LTL 2.0 plan to add more capacity.

On the capital side, so we have been investing more capital into our business as part of our LTE attitude two points or plan to add more capacity and with this much capacity coming out of the industry. We're looking to accelerate these capacity adds and this would be indoors in tractors and trailers and just to give you. An example, our source.

Speaker 6: And with this much capacity coming out of the industry, we're looking to accelerate these capacity adds. And this would be in doors and tractors and trailers. And just to give you an example, at our sewer seed facility, we have the ability to produce 7,500 trailers per year. And initially we had planned to produce slightly north of 6,000 trailers for the year. But we could expand that production here to 7,500 trailers for the year, given what we're seeing.

C facility, we have the ability to produce 7500 trailers for the year and initially we have planned to put us slightly north of 6000 and flavors for the year, but if we could expand that that production here 7500 trailers for the year given what we're seeing I would long term guide is 8% to 12% of the Catholic.

Speaker 6: Our long-term guide is E212% of the cat-bex is a percent of revenue and we expect to be at the high end of the range or above the high end of the range here on the near-term as we add more capacity.

As a percent of revenue and we expect to be at the high end of the range or above the high end of the range you know the near term as as we add more capacity.

Our next question is from Tom weighed with UBS. Please proceed.

Speaker 4: Our next question is from Tom Wade with with UBS. Please proceed.

Speaker 7: Good morning. I wanted to see if you could put it in like shipment count terms for us in terms of maybe like you know how many shipments per day you're seeing at the present time and what that would have been in

Yeah. Good morning wanted to see if you could put it in like shipment count terms for us in terms of maybe like you know how many shipments per day, you're seeing at the present time and what that would've been in I don't know.

Speaker 7: I don't know, two weeks ago, something like that, just to give a little additional perspective, I think you talked maybe in percentage terms.

Two weeks ago, something like that just to give a little additional perspective, I think you've talked maybe in percentage terms and then I guess related to that how well do you handle those shipments in terms of you know you get pretty strong incremental margins on those or is it something where you have to stretch to handle a big step up so the kind of margin impacts maybe not.

Speaker 7: And then I guess related to that, how well do you handle those shipments in terms of, you know, you get pretty strong incremental margins on those, or is it something where you have to stretch to handle a big step up so the kind of margin impact, maybe not, you know, I don't know. Well, how do we think about the margin impact on that? Thank you.

You know I don't know Uh huh.

How do we think about the margin impact on that thank.

Thank you.

Good morning, Tom. This is a this is ali so as Marty noted, we did see positive tonnage and shipment counts on a year over year basis in the early part of July , but we did see that accelerate towards the end of the month at the end of July we saw roughly about a high single digit increase in our shipment count versus.

Speaker 3: Good morning, Tom, this is this is Ali. So, as Mario noted, we did see positive tonnage and shipment counts on a year over year basis in the early part of July . But we did see that accelerate towards the end of the month. At the end of July , we saw roughly about a high single digit increase in our shipment count versus the beginning of the month. So call it somewhere in that 3000 shipments per day increase.

As of the beginning of the month, so call it somewhere in that 3000 shipments per day increased.

Speaker 6: pastimaria in terms of the flow through. So when we think about it, we have been adding quite a bit of capacity over the last year and a half.

I'll pass to Mario.

And in terms of the of the flow through so when we think about it we've been adding quite a bit of capacity over the last year and a half. So we've added for the first time, the rolling stock perspective, but we've added more than Nike and Hollywood attracts more than 8000 trailers over the last year and a half. We've also added more doors and markets, where we needed more capacity.

Speaker 6: So we've added force first from an rolling stock perspective. We've added more than 1900 tractors, more than 8,000 traders over the last year and a half.

Speaker 6: We've also added more doors and markets where we needed more capacity. Last year we opened up six new service centers this year so far we expanded two service centers. So on the rolling stock and the actual physical capacity we're feeling good about where we are. And on the people's side, we have had a headroom on the headcount side.

That scared we opened up six new service centers. This year, so far we expand that to service centers and so on do it rolling stock and the actual physical capacity, we're feeling good about our about where we are and all the people side we.

We have had a headroom on on them on the head count side, but at the same time in some locations, where we're seeing higher than that but we're gonna be adding more head count and potentially lean into more of a cautious transportation if it if it makes sense as well as the flow through these additions of additional capacity you do have a short term cost impact associated with them.

Speaker 6: But at the same time, in some locations where we're seeing higher demand, we're going to be adding more headcount and potentially lean into more purchase transportation if it makes sense as well. The flow through these additions of additional capacity do have a shorter term cost impact associated with them. But at the same time, we do expect a good flow through on the additional business we're adding, so being very selective.

But at the same time, we do expect a good flow through on the additional business with adding so we're being very selective.

Speaker 4: Our next question is from Scott, group with wolf research, please.

Our next question is from Scott Group with Wolfe Research. Please proceed.

Hey, Thanks morning, guys I just wanted to try one different way can you maybe because we don't really know intra month seasonality like just in the last week or so like what is kind of your shipments are tracking up year over year, I'm guessing something better than that.

Speaker 2: Hey, thanks morning guys. I just want to try one different way. Can you maybe, because we don't really know in some months seasonality, like just in the last like week or so, like what is tonnager shipments tracking up year over year? I'm guessing it's something better than that.

Speaker 2: know, four and nine, but any color on the year over year, you know, just in the last week or so. And then, just, we want to just sort of get a sense on the run rate into August . And then, you know, any color on how to think about the OR sequentially, Q2 to Q3, that would be helpful.

Four nine but any color on the year over year, just in the last week or so and then we wanted to just sort of get a sense on the run rate into August and then any color on how to think about the the or sequentially Q2 to Q3 and that that would be helpful. Thank you.

Good morning, Scott. This is our this is all these so in terms of the tonnage and shipment counts as we mentioned that in the month of July tonnage was just up over 4% year over year in shipment counts were up about 9% given the acceleration we did see towards the end of the month you can assume that the year over year growth rates for both tonnage and shipment.

Speaker 3: Good morning, Scott. This is Ali. So, in terms of the tonnage and shipment counts, as we mentioned, in the month of July , tonnage was just up over 4% year-over-year, and shipment counts were up about 9%. Given the acceleration we did see towards the end of the month, you can assume that the year-over-year growth rates for both tonnage and shipment counts were up more than we saw for the full month. As we mentioned, from the beginning of the month to the end of the month, shipment counts were up about high single digits Now, when you think about the third quarter, I'll walk you through the moving pieces here. So, from a tonnage perspective, normal seasonality is about a 4% sequential decline in tonnage Q3 versus Q2. Now, that would imply Q3 tonnage down in that low to mid single-digit range on a year-over-year basis. We would expect to do better than that. July clearly outperformed with tonnage up slightly over 4%, but I would point out that the monthly compares do get more difficult as the quarter progresses. Last September , we saw tonnage inflect positive year-over-year. So, overall, we would expect positive tonnage year-over-year in the third quarter, and we'll give another update on August and early September . On the yield side, we did have strong momentum even before the recent industry disruptions.

<unk> were up more than we saw for the full month as we mentioned from the beginning of the month to the end of the month shipment counts were up about high single digits sequentially now when you think about the third quarter I'll walk you through the moving pieces here. So from a tonnage perspective normal seasonality is about a 4% sequential dip.

Klein and tonnage Q3 versus Q2, now that would imply Q3 tonnage down in that low to mid single digit range on a year over year basis, we would expect to do better than that of July clearly outperformed with tonnage up slightly over 4%, but I would point out that the monthly compares do get more difficult as the quarter progresses.

Last September we saw tonnage inflect positive year over year. So overall, we would expect positive tonnage year over year in the third quarter and we'll give another update on August and early September on the yield side. We did have strong momentum even before the recent industry disruptions yield growth accelerated through the second quarter.

Speaker 3: yield growth accelerated through the second quarter, and that continued into July . Our current baseline forecast is that Q3 yield X fuel will accelerate versus 2G on a year-over-year basis.

And that continued into July our current baseline forecast is that Q3 yield ex fuel will accelerate versus two Q on a year over year basis call. It somewhere in that 3% year over year growth range and then lastly from an operating ratio perspective, a typical seasonality, it's about a 230 basis points to two.

Speaker 3: call it somewhere in that 3% year-over-year growth range.

Ration Q3 versus Q2, given how the month of July played out we would expect to outperform seasonality for or by at least 100 basis points now the magnitude of that outperformance versus seasonality, that's going to be driven by how tonnage performs through the rest of the corridor and as Mario noted there are some incremental costs to consider.

To that uptick in volume for example, we may need to increased field labor and also tap into purchase transportation as a source of supplemental capacity on a short term basis, but overall, we would expect to outperform seasonality by at least 100 basis points and we'll have a better idea on the magnitude as the quarter progresses.

Speaker 2: Okay, help one then just Mario just real quick like yellow leaving how does it change in your mind the timeline of getting to that low 80s 80 operating reshore that you want to get

Okay. How appointment just Mario just real quick like yellow, leaving how how does it change in your mind the timeline of getting to that low Eighty's 80 operating ratio that you want to get too.

Well when you when you look at the long term target Scott, there's a good likelihood that the current market disruption will enable us to accelerate price and volume growth beyond our original targets are now with what's happened over the last few weeks, it's a bit too early to tell how it's kind of manifests itself for the long term I would focus.

Speaker 6: When you look at the long-term targets, Scott, there's a good likelihood that the current market disruption would enable us to accelerate price and volume growth beyond our original targets. Now, with what's happened over the last few weeks, it's a bit too early to tell how it's kind of manifested itself for the long-term. Our focus continues to drive or are meaningfully lower in the years to come. And that's why we always said this at least 600 basis points by 2027, and we feel very comfortable with that.

<unk> continues to drive all meaningfully lower in the years to come and that's why I've always said, there's at least 600 basis points by 2027, and we see it but some people are very comfortable with that.

Okay. Thank you guys.

Thank you.

Speaker 4: Our next question is from Fadi Chumon with BMO Capital Markets. Please proceed. Yeah, good morning. Thank you. So Mario, given kind of the focus on service, and obviously the, you know, that being strategic priority for the long term, how is the network handling? This kind of uptick and volume of scene in July versus, you know, Q2 and, and, and how are you making sure that kind of, you know, you maintain that momentum on the service side and related to that maybe like from a pricing perspective, is there an opportunity to accelerate the mid single digit in the back half this year, just given?

Our next question is from Saudi Chairman with BMO capital markets. Please proceed.

Speaker 4: Our next question is from Fadi Jamon with BMO Capital Markets. Please proceed.

Yeah. Good morning, Thank you.

Speaker 8: So Mario given kind of the focus on service and obviously the you know that being strategic priority

So Mario given kind of the focus on service and obviously the.

That being strategic priority.

Speaker 8: for the long term, how is the network handling this kind of uptick in volume seen in July versus Q2 and how are you making sure that you maintain that momentum on the service side and related to that, maybe like from a pricing perspective, is there an opportunity to accelerate the mid single digit in the back half this year, just given the environment we're in now.

For the long term how is the network handling this kind of uptick in volume as seen in our in July versus you know Q2, and and and how are you, making sure that kind of you know.

Human thing that momentum on the service side and are related to that maybe like from a pricing perspective is there an opportunity to accelerate the mid single digits in the back half of this year just given.

The environment, we're in now.

Makes sense, thanks fatty I'll talks with the service piece and turn it over to Kai in Florida, 40 yield and pricing.

Speaker 6: Thanks, thanks, Fadi. I'll talk to the service teeth and turn it over to Kyle for yield and pricing.

Speaker 6: Well, service our top priority and if we continue to be our top priority.

Service is our top priority and it will continue to be our top priority and Dave and the team are doing a great job of being able to handle that additional influx and freight that we're seeing here and just to give you. An example in the month of July we've seen our shipment count go up 9% year on year, yet our service metrics improve.

Speaker 6: and they send the team are doing a great job being able to handle that additional influx in phrase that we're seeing here.

Speaker 6: And just to give you an example, finally, in the month of July , we've seen shipment count go up 9% year on year. Yet our service metrics improved relative to June . When you think about claims for shipment, when you think about on-time service, we see those continue to take out in the month of July .

Relative to June when do you think about the claims filed per shipment. When you think about the on time service, we still see those continue to take up the in the month of July now there's a few reasons for that one is that as I mentioned earlier, we have been investing in capacity over the last year and a half we've added more doors in markets, where we needed to have those doors here.

Speaker 6: Now, there's a few reasons for that. One is that, as I mentioned earlier, we have been investing in capacity over the last year and a half, where we've added more doors and markets, where we needed to have those doors here recently, in Salt Lake City and North Cross, Georgia. We've been adding more to our rolling stock. We've added more than 1900 tractors since we initiated LTL 2.0. We've added more than 8,000 traders since we initiated the program as well.

The insult Big city in Norcross, Georgia, we've been adding more to our rolling stock we've added more than 1900 attractors since we initiated L. T. L. Two point, though we've added more than 8000 trailers since we initiated the program as well.

Speaker 6: Also, a lot of the changes we implemented on improving service are now cultural, that part of what we do every day, including incentive-com changes, including new technology and how we load trailers, including overall recognition programs that are out service. And moving forward, that momentum is building through new training programs for launching new tools, we're launching our people in the field as well, now that we have Dave on board, driving a lot of these initiatives.

Also we have a lot of the changes we implemented on improving service Oh, no cultural that part of what we do every day, including incentive comp changes, including new technology, and how we load trailers.

I think overall the recognition programs that all service and moving forward that momentum is building through new training programs with launching new tools with launching that with people in the field as well now that we have Dave on board driving a lot of these initiatives.

Speaker 6: On the labor side, as Ali mentioned, if we need more labor in some of the sites where we're seeing more volume, we are adding the head counts where we need it. We could also lean more into purchase transportation on the near term if we need it as well.

I'll do on the labor side as I mentioned, if we need more labor and some of the sites, but we're seeing more and more volume.

Adding to head count, where we need it we have also leaned more into purchase transportation on in the near term if we if we need it as well and then finally, we're very focused on being selective on the freight we take on a lot of it goes down to being picky on the freight that we want the four by four feet the pallets or skids that's it.

Speaker 6: Then finally, we're very focused on being selective on the phrase we take on. A lot of it goes down to being picky on the phrase. We want four by four feet pallets or skids that we onboard from our customers. That's hit well in LTL network. And at the same time, we're looking for margin at creative business that would improve our overall over time. So we're being very disciplined. And our service product is a continuous to be our top priority as we move forward from here.

Onboard from our customers that fits well in LTE network and at the same time, we're looking for margin accretive business that would improve our all over time, so we're being very disciplined and our service product is it continues to be our top priority as we move forward from here.

The body style so.

Speaker 7: Hey, everybody, it's Kyle. So as Ali mentioned, our yield growth strengthens in the second quarter and into July . And a lot of our internal initiatives gain traction.

You mentioned you know our yoga strengthens in the second quarter and into July there's a lot of our internal initiatives gain traction.

Speaker 7: And as Mario mentioned, our focus continues to be on providing excellent service. But given there is a less near term capacity, we are taking pricing action with customers. We implemented a GRI with our transactional free-scale business, and we've also moved up our target for contract renewal.

And as Mario mentioned, you know our focus continues to be on providing excellent service.

Given there is less near term capacity, we are taking pricing action with customers.

Implemented a journey with our transactional retail business and we've also moved up our.

Our target for contract renewals.

Speaker 7: Now, some of these actions will take hold very quickly like the GRI. Others with annual contracts.

Now some of these actions will take hold very quickly like did you ray.

Others with annual contract will take time to realize.

Speaker 7: But our customers understand when you take 10% capacity out of the market, it's going to cost more to move for it. What did you say, our baseline expectation is 3% a year over your growth. And these initiatives can help us move above.

But our customers understand when you take 10% of capacity out of the market is going to cost more to move freight.

But as he said our baseline expectation of 3% year over year growth.

And these initiatives help us move above that range.

But it's too early to tell what that's going to look like and we'll update you later on.

Thank you.

Okay.

Our next question is from Ravi Shanker with Morgan Stanley . Please proceed.

Speaker 4: Our next question is from Robbie Changer with Morgan's family. Please.

Speaker 9: Thank you, Amr everyone. Mario, just obviously you guys kind of have been on the growth path for a while, so it makes sense that you're stepping up your investments.

Thank you morning, everyone. Mario just Oh, the thing you guys kind of have been on the growth path for a while so it makes sense that you are stepping up their investments.

But what would you say to those who believe I mean, just doing the reference point that was just made that and you take 10% of capacity out of the market and pricing goes up for everyone.

But do you think there's a natural backstop to how much capacity. This industry will add so that that that rising tide stays high or do you think that the industry kind of backfill that capacity overtime.

Speaker 6: Thanks, Ravi. When you look at the overall industry capacity, it has been fairly tight for a long time. Over the last decade, the number of service centers in our industry has stayed flat.

Thanks, Robby when you look at the overall industry capacity. It has been fairly tight for a long time over the last decade, the number of service centers and our industry has stayed flat and now when you look at taking out 10% of capacity. That's obviously, a big hole in terms of the amount of capacity.

Speaker 6: And now when you look at taking out 10% of capacity, that's obviously a big hole in terms of the amount of capacity that is available.

It is available on the road a few carriers, adding more capacity also includes it but these ads will take time to materialize and when you think about the service centers and doors.

Speaker 6: Now there are a few carriers adding more capacity, also included, but these ads will take time to materialize when you think about service centers and doors to be added across the network. These don't happen overnight.

To be added across the network is the diesel has happened over overnight. So we do think that over time. So the frayed gets absorbed first and then over time, you will see us and a few other carriers added capacity, but it's going to be a longer term process to be able to get there as Carl said, it's still early to tell.

Speaker 6: So we do think that over time, so the freight gets absorbed first, and then over time, you will see us, and if you are the carriers at the capacity, but it's gonna be a longer-term process to be able to get there. As Kyle's.

Speaker 6: It's still early to tell what the impact on pricing is going to be. When you look at LTLs, pricing has always been very disciplined, given that dynamic of shortage of capacity versus the mad and growth.

The impact on pricing is going to be when you look at Npls pricing has always been very disciplined given that dynamic of shortage of capacity versus demand and growth.

Speaker 6: And when you take out the semantic capacity, we would expect yield at the sea tailwinds in the quarters and years to come here. And you coupled that with potential freight recovery as we had in 2024, that's gonna accelerate from there as well.

And when you take out this amount of capacity, we would expect yields to see tailwind in the quarters and years to come here and you couple that with the potential freight recovery as we head into 2024 that that's going to accelerate from there as well.

Speaker 9: I guess squeeze in a really quick follow up, kind of shifting gears a little bit, kind of away from the cycle and what's going on in LTL. Obviously, you are a tech geek. I don't think you'll mind me calling you that. So if you can just kind of help us with kind of understanding, you know, everything you're seeing out there within our AI, ML, kind of, obviously, actually has been leveraged on the LTL side for a long time, but kind of, what are some of the one or two things that really excite you about new technology that you're doing as well?

God I guess squeezing a really quick follow up kind of shifting gears, a little bit kind of away from the cycle and what's going on in Npls. Obviously, you are a tech geek I don't think Oh, you, you'll mind me, calling you that so if you can just kind of help us with kind of understanding you know everything you're seeing out there with our AI ml kind of.

Oh, obviously extra years been liberties on the LTV side for a long time, but kind of where some of the one or two things that really excited you about new the new technology that you would do it as well.

Well first as you know Ravi technology has been part of our DNA since the onset of the company and all of our systems and L. T. L that operate the network on proprietary and what do you think about the Nokia business, we're very much into data business, because we move more than 50000 shipments a day and we have a lot of data.

Speaker 6: Well, first, as you know, Ravi technology has been part of our DNA since the onset of the company and all of our systems in LCL that operate the network on proprietary. And when you think about the LCL business, we're very much in the data business because we move.

Speaker 6: more than 50,000 shipments today, and we have a lot of data points and how we move those shipments across the network. But just to give you a couple of examples, how we operate our line haul network, our models do use AI and ML to optimize how many loads we're building in each hop and the network.

Points and how we move those shipments across the network, but just to give you a couple of examples how we operate our line haul network I would model do you use AI and ml to optimize how many loads. We're building in each hub in their network and we're launching new technology and how we do things like directed loading and as an example.

Speaker 6: And we're launching new technology and how we do things like directed loading as an example to improve how we build trailers to bypass service centers and improve efficiency, similar thing on how we plan labor and how we manage labor in the field, similar technology and how we run and how we pick up and delivery routes.

To improve how we build trailers to bypass service centers and improve efficiency a similar thing on how we plan labor and how we manage labor in the field similar technology, and how we don't and I would pick up and delivery routes and on that basis at the end of the day all of these things lead to better results to the bottom line just to give you. An example in the second quarter I would.

Speaker 6: And on a net basis, at the end of the day, all of these things lead to better results to the bottom line. Just to give you an example, in the second quarter, our shipment count was up roughly 2%, but our labor hours and head count was down 2%, and these tools enabled us to build these efficiencies into the operation.

Shipment count was up roughly 2%, but I would leave with ours in head count was down 2% and these tools enable us to build these efficiencies into the operation.

Our next question is from Brian I sent back with J P. Morgan. Please proceed.

Speaker 4: Our next question is from Brian Assemblack with JP Morgan. Please proceed.

Speaker 10: Hey, good morning. Thanks for taking the question. I just wanted to come back maybe for...

Hey, good morning, Thanks for taking the question.

I just wanted to come back I guess, maybe for tile how do you see I think you mentioned that there's a G are either was already implemented and maybe you can just touch on that in terms of the.

Speaker 10: Kyle, I think you mentioned that there's a GRI that was already implemented. And you can just touch on that in terms of the timing and what you'd expect for the rest of the year. Because we're trying to get at is, you know, is there a little bit of a lag here in terms of the additional cost offset by a little bit of operating leverage on the new volumes before you can really get some of those pricing gains to be reflected in the network, whether it's through additional GRIs or a new contract?

And what you'd expect for the rest of the year, because that's what I'm trying to get at is is there.

They're a little bit of a lag here in terms of the additional costs offset by a little bit of operating leverage on the new volumes before you can really get some of that some of those pricing pricing gains to be reflected in the network, whether it's through our traditional G. A rise or a new contract negotiations.

Speaker 7: Yeah, thanks Brian . So when you think about the Fiji Riberto, that was a transactional free PL business. So that's really the broker business.

Yeah. Thanks, Brian So when you think about the did you already took thousands they transactional free gel business. So that's that's really the broker business.

Speaker 7: You know, there was an expected GRI later in the year, so that's kind of steady state, maybe pulled forward slightly. So we wouldn't expect too many differences there. We're not anticipating this point, other GRIs, as we progress, and we'll continue with our yield initiatives to drive up profitably in the back half. But when you think about the initiatives, again, some of those are gonna be...

There was an expected youre right.

Later in the year. So that's that's kind of a steady state maybe pulled forward slightly so.

So we wouldn't expect too many differences there we're not anticipating at this point other jurors.

As we progress and we will continue with our yield initiatives to drive up profitability than in the back half, but when you think about the initiatives again some of those are gonna be immediate impacts like its euro and others. As you work through contractual renewals will take time to realize.

Speaker 7: Let me get you to impact like a GRI and others as you work for Contractor or Nuals will take time to realize.

Okay. Then if I can just ask a quick one for Marty you mentioned the.

Speaker 10: So the catpacks is the capacity comes out of the market. Is there any opportunities in evaluating them? Maybe pick up some stuff that comes to the market? Where do you feel like this is something that you'd rather do internally based on your current network versus what might be available up?

The capex as the capacity comes out of the market is there any opportunities I'm sure evaluating them maybe pick up some stuff that comes to the market or do you feel like this is something that you'd rather do internally based on your current network versus what might be available out there. Thanks.

Speaker 6: Thanks, right? If that is an opportunity for us to accelerate our capacity growth, we would definitely look at it. Now our focus is to continue to execute on our long-term plan.

It takes right. If there is an opportunity for us to accelerate our capacity grows we would definitely look at it now I would focus is to continue to execute on our long term plan to expand capacity, which has been a pillar of court pillar in our LTI was 2.0 plan now regardless of if this capacity.

Speaker 6: to expand capacity which has been a pillar, court pillar, and our LGL 2.0 plan.

Speaker 6: Now, regardless of if this capacity becomes available, we are looking at continuing also our expansion, where so far I mentioned earlier, we expanded two service centers so far this year, and we have another dozen or so projects for expanding other service centers in key markets, especially in the Texas area in Florida and Arizona. So in a number of markets.

Becomes available. We you know we are looking at continuing all solid expansion, where so far I mentioned earlier, we expanded two service centers. So far this year and we have another dozen or so projects for the expanding other service centers in key markets, especially in the Texas area in Florida and Arizona.

In a number of markets now again. If these are if you said sort of teased go onto market. Then we would definitely look at them as well.

Speaker 6: Now again, if these facilities go on the market, then we definitely look at them as well.

Okay.

Our next question is from Stefan anymore with Jefferies. Please proceed.

Speaker 4: Our next question is from Stephanie Moore with Jefferies. Please proceed.

Hi, good morning, Thank you.

I wanted to touch a little bit on kind of maybe the strategy and what's your managing this dislocation in the market and you know and if you could touch a little bit on you know what.

Speaker 1: I wanted to touch a little bit on kind of maybe the strategy in which you're managing this dislocation in the market and you know and if you could touch a little bit on you know if your your immediate focus is more so on kind of capturing the volume opportunity and how do you kind of manage that strategy with you know pricing and kind of maybe more of a longer term opportunity here so maybe just talk a little bit about the the initial reaction to the the volume and flow.

If your your immediate focus is more so on kind of capturing the volume opportunity and how do you kind of manage that that strategy with you know pricing and kind of maybe a more of a longer term opportunity here. So maybe just talk a little bit about the initial reaction to the volume and flow.

Speaker 6: Thanks, Stephanie. Well, we are looking at it in a very balanced approach. Step number one is making sure that we safeguard the capacity to existing customers and we keep on honoring the capacity commitments we had with them. But when you think about the influx of volume, we are assessing those opportunities to bring incremental freight on a case-by-case basis, both from existing and from new costs.

Thanks, Stephanie what we we are looking at it in a very balanced approach step number one is making sure that we safeguard the capacity to existing customers and we keep on the honoring the capacity commitments, we had with them, but when you think about the influx of volume will be at assessing those opportunities to bring incremental.

Freight on a case by case basis, both from existing and from new customers.

Speaker 6: We are using that as an opportunity to improve the next as a whole for our customers. And as I mentioned earlier, we're looking at it in two main criteria. One is making sure that the customers that we are onboarding freight for have four by four feet type skids that fit well in an LTL network.

We are already using that as an opportunity to improve the mix as a whole, but I wouldnt put our customers and as I mentioned earlier, we're looking at it in two main criteria. One is making sure that the customers that we're onboarding freight for have a four by four feet types kids that fits well in an LTE network and we're also looking at it from a order perspective.

Speaker 6: And we're also looking at it from an OR perspective and making sure that we are onboarding margin at creative business as we are adding it. So we're being very disciplined into the shipments and tonnage we're bringing on to our network. And now on the pricing.

Active and making sure that we are onboarding margin accretive business as we as we are adding gets we're being very disciplined into the shipments and tonnage, we're bringing onto our network and now on the pricing side. When you take out that Scott mentioned earlier, 10% of the capacity in the market, thus costs more to move freight for your customers and.

Speaker 6: When you take out, as Kyle mentioned earlier, you're 10% of the capacity in the market does cost more to to move freight for your customers. And also we wanna make sure we're charging a fair price given the value that we are offering our customers as well with the improvements we're seeing in our service product over time as well. So we're looking at it in a very balanced way in terms of being disciplined how we add volume while leaning onto the price level as well.

And also we want to make sure we're charging a fair price given the value that we are offering our customers as well with the improvements we're seeing in our service product over over time as well. So we're looking at it in a very balanced way in terms of being disciplined how we as volume while leaning onto the price lever as well.

Speaker 1: Great, no, that's very clear. And then maybe switching gears entirely, could you give us an update on your European business and any strategic changes you might have, you know, selling that business and kind of where we stand today? Thanks.

Great No that's very clear and then maybe switching gears entirely can you give us an update on your European business and any strategic changes you might have you don't sell any of that business and kind of where we stand today.

Speaker 6: Thank you. Well, we are now starting that process in the near term in the month of December , but I would go long-term continues to be a being a pure play in North American LCL company. Now the status business is operating really well. As you heard from Ali and Kyle, we're doing really well despite the soft macroeconomic environment in Europe , our organic revenue is largely unchanged on a year-on-year basis, and the team there is doing fantastic job service and customers.

Thank you well, we're not stopping there that process in the near term in the month of December .

I would go a long term continues to be a being a pure play in North America and L. T. L company. Another set this business is operating really well as you heard from from Allianz Kyle.

We're doing really well despite the soft macroeconomic environment in Europe , our organic revenue was largely unchanged on a year on year basis and the team there is doing a fantastic job servicing customers.

Speaker 4: Our next question is from Chris, whether be with city, please.

Our next question is from Chris Wetherbee with Citi. Please proceed.

Speaker 5: I guess Mary, we talked about the potential for...

I guess Mary you talked about the potential for pricing.

Speaker 5: pricing improvement and closing the gap with peers. And I think when we talk to you guys back in May, there's the opportunity for maybe double digit over a multi-year basis. But obviously what's going on, I think is accelerating pricing and yield opportunities.

And in closing the gap with peers and I think when we talked to you guys back and made her the opportunity for maybe double digits over a multi year basis, but obviously, what's going on I think it's accelerating pricing and yield opportunities as you think about that particularly as it relates to your longer term operating ratio targets, how much of a journey.

Speaker 5: As you think about that, particularly as it relates to your longer term operating ratio targets.

Speaker 5: Now, how much are there, is there a way to think about what the sort of newer term opportunity is on that 10% or that operating ratio? I don't want to get a sense if you're looking pricing, I mean, how much of that's being pulled forward as it mess a couple of years and to maybe the next couple of years?

We just think about what sort of nearer term opportunity to use on that 10% of that operating ratio trying to get a sense of sort of lumpy.

The dynamic of how much of that is being pulled forward over the next couple of years and maybe the next couple of quarters.

I guess I was wondering when you think about it. This is still a very fluid situation here given the disruption that's happened in the market. So Chris it's it's tough to evaluate how quickly the pace of improvement is it's gotta go here in the near term, but over the next week.

Speaker 6: So when you think about it, this is still a very fluid situation here given the destruction that happened in the market. So Chris, it's tough to evaluate how quickly the pace of improvement is going to go here in the near term. But over the next weeks and a month, we're going to have a better picture on where things are shaking out. But it's fair to assume that you would see a overall yield and price acceleration.

Weeks and the months, we're going to have a better picture on where things are shaking out, but it's fair to assume that you would see a overall yield and price acceleration and also the way we look at it it's all about charging a fair price for the services offering our customers. So when you look at the service improvements and I'm incredibly excited about having Dave on the <unk>.

Speaker 6: And also the way we look at it, it's all about charging a fair price for the service that we are offering our customers. When you look at these service improvements.

Speaker 6: I'm incredibly excited about having Dave on the team and all the progress that I would operate in teams that are doing on keeping on improving the service product as I mentioned in my opening remarks.

Team and all the progress I would also add eating teams are doing on keep on improving the service product as I mentioned in my opening remarks, we are adding new tools to the fields, such as higher quality straps airbag systems racks and service centers, we are improving the instructions of how we load trailers and training associated with that and all of these would lead to better service, which over.

Speaker 6: We are adding new tools to the field, such as higher quality straps, airbags, systems, racks, and service centers. We are improving the instructions of how we load trailers and training associated with that. And all of these would lead to better service, which over time would also lead to a higher yield. Now again, the phase with the destruction here that we're seeing would accelerate, but it's tough at this point to predict what it's gonna look like given it's all fairly new over the last few weeks.

I would.

Also lead to a higher yield that we're going to face with the disruption here that we're seeing with etcetera right, but its tough at this point to predict what it's going to look like given given it's all a fairly new over the last few weeks.

Speaker 5: Okay, that's very helpful. And on one point of clarification, do you expect more shared of come over in the coming weeks we talked about the one rate exiting July and during August ? But is that share shift largely done? Or do you think there's incremental room for that to go?

Okay. That's very helpful. And then one point of clarification do you expect more share to come over in the coming weeks, we talked about the run rate exiting July entering August .

Is that share shift is largely done or do you think theres incremental room for that to go from here.

Good morning, Christy This is I'll leave it it's hard to know at this point, how much incremental share is going to come our way as Mario mentioned, we're being very disciplined with with the freight that we're bringing into the network are our priority is to make sure that it's good freight that fits our network and most importantly.

Speaker 3: Good morning, Chris. This is all we, it's hard to know at this point how much incremental share is going to come our way. As Mario mentioned, we're being very disciplined with the freight that we're bringing into the network. Our priority is to make sure that it's good freight that fits our network. And most importantly, it's margin-e creative. And so that's our strategy as it relates to the incremental volumes. And then we'll give you another update in terms of August trends in early September .

Is margin accretive and so that's the that's our strategy as it as it relates to the incremental volumes and then we will give you another update in terms of August trends in early September .

Our next question is from Jon Chapell with Evercore ISI. Please proceed.

Speaker 4: Our next question is from John Chappelle with Evercore ISI. Please.

Thank you and good morning Ali.

Speaker 11: Thank you, good morning. Ali, quick one on Europe . Is there any update there on the sales process or even the desire to do that as the market continues to fall? And I asked mostly for an update, but also there was this gain on equipment and sales. Are you looking to maybe spell that off in piecemeal when you get opportunities, or are you still kind of holding off for a big sale when the markets can do so?

One on Europe , I mean is there any update there on the sales process or even a desire to do that as the market continues to evolve and I asked mostly for an update but also there was a screen on equipment sales are you looking to maybe sell that awesome piecemeal when you get opportunities or are you still kind of holding off for a big sale when the market synthesis.

Good morning, Brian So in the fourth quarter of last year, we did announce that we won't be selling the European business in the near term and we're not going to address.

Speaker 3: Good morning Brian . So in the 4th quarter of last year, we did announce that we won't be selling the European business in the near term and we're not going to address the potential sale further beyond what we had said in that December filing. That being said, our long term plan remains to be a pure play North American LTL carrier. Having said that, as Mario noted that business continues to perform well in a soft macro backdrop, organic revenue was down slightly. We saw constant currency revenue growth in both our UK business as well as our central Europe business as well.

The potential sale further beyond what we had said in that December filing and that being said our long term plan remains to be a pure play North American L. T. L carrier, having said that as Mario noted that business continues to perform well in a soft macro backdrop, our organic revenue was down slightly and we saw.

Constant currency revenue growth in both our U K business as well as our central Europe business as well.

So what did the games then relate to.

Speaker 11: So what did the games then relate to?

Speaker 7: The gains are related to the asset turn-in, so it's part of the normal process, John , for turning in equipment out there. So part of normal business. Okay, thanks.

The gains are related to the asset turn and so it's part of the normal process John for turning in equipment out there so partner business.

Okay. Thanks, Scott Thanks Ali.

Thank you.

Speaker 4: Our next question is from Jordan Alger with Goldman Sachs. Please proceed.

Our next question is from Oregon, Alger with Goldman Sachs. Please proceed.

Speaker 12: Hi, morning. I'm thinking about volumes differently from a capacity perspective. I think if memory serves...

Yeah, Hi, good morning, maybe sort of thinking about volumes.

Differently.

From a capacity perspective, I think if memory serves.

You know last quarter, I think you've talked about maybe 20% spare capacity at the terminals given the soft demand conditions, maybe I might not be right on that but you know given all that's going on with yellow and given where your network is today, you know where do you feel comfortable drawing that down to I mean can you go.

Speaker 12: You know, last quarter, I think you talked about maybe 20% spirit capacity at the terminals, given the soft demand conditions, maybe I might not be right on that, but given all that's going on with yellow and given where your network is today, you know, where do you feel comfortable drawing that down to? I mean, can you go to 5%, 0%,?, ok? But were making the

At a 5%.

Zero percent just curious thanks.

Speaker 6: Thanks Jordan. Well first on the capacity side we ended the second quarter at roughly 20% excess capacity from a physical capacity perspective so think doors and service centers.

Thanks, Jordan well first of all the capacity side, we ended the second quarter at a roughly 20% excess capacity from a physical capacity perspective, so think doors in service centers and that moderated down call. It to the mid teens here in the month of July as we've seen that in.

Speaker 6: And that moderated down color to the mid teens here in the month of July , as we've seen, that in fact, in higher volume.

In fact in high yield volumes.

Speaker 6: Now, usually on a longer term basis, we want to be in that 20 to 25% range of excess capacity.

Usually on a longer term basis, we want to be in that 20% to 25% range with excess capacity now as you know within LCL network. It's not linear so you have some markets, where we have excess capacity and then we have other markets, where we already are are we all at capacity and the goal is to add these and in these markets, where we need those extra doors.

Speaker 6: Now, as you know, in an LPL network, it's not linear. So you have some markets where we have access capacity and then we have other markets where we already are at capacity. And the goal is to add these, in these markets where we need those extra doors, the additional physical capacity.

Additional that they should all the physical capacity on the rolling stock side. We are we are feeling very good based on where we are now over the last year and a half as I mentioned earlier, we've added more than 1900 tractors that we've added more than 8000 youth traders. So the rolling stock side is feeling is feeling very good for us and we are planning on etsy.

Speaker 6: On the rolling stock side, we are feeling very good based on where we are now. Over the last year and a half, as I mentioned earlier, we've added more than 1,900 tractors and we've added more than 8,000 new traders. So the rolling stock side is feeling very good for us. And we are planning on accelerating some of these investments here in the near term.

At a rating some of these investments here in the near term.

Speaker 6: The third part of capacity is on the people side. Today we are staffed to current volumes and we have some headroom but also in some markets we also are looking to add more headcount and potentially lead into purchase transportation if we need it as well. The good news there is that the labor markets are very right to hiring people and just to give you an example Jordan in the second quarter

The third part was capacities on the people side today, we are staffed to coordinate the volumes that we have some headroom, but also in some markets. So we also are looking to add more head count and potentially lead into purchase transportation. If we if we need it as well the good news there is that the labor markets are very ripe for hiring people and just to give you. An example.

Jordan in the second quarter, the applicant, but open wreck that we had went up three folds on a year on year basis. So it's a very good market to be able to add people, but these are the different aspects of capacity and again all the door side, we're going to continue on adding doors to get to that 20% to 25% excess free capacity.

Speaker 6: The applicants were open-wrecked that we had went up three folds on a year-on-year basis. So it's a very good market to be able to add people. But these are the different aspects of capacity. And again, on the doors side, we're gonna continue on adding doors to get to that 20, 25% excess free capacity that we can leverage for longer-term growth.

Leverage for longer term growth.

So just as a thought in the near term at least I get the 20% to 25%, but the near term at least between rolling stock head count et cetera, you could probably draw down that excess capacity further if need be.

Speaker 12: So just as a thought in the near term at least, I get the 20, 25% but the near term, at least between rolling stock, head count, et cetera, you could probably draw down that excess capacity further if needed.

Speaker 6: That's correct. And again, it will depend on some of the markets where we are at capacity. Then these obviously, we need to add more in the near-term as well.

Yes, that's correct.

Again, it will depend on some of the markets wherever you are at capacity that these obviously will need to add more in the in the near term as well.

Thank you.

You got it.

Speaker 4: Our next question is from Eric Morgan with Barclays. Please proceed.

Our next question is from Eric Morgan with Barclays. Please proceed.

Hey, good morning, Thanks for taking my question and best of luck Carl Congrats to Kyle I wanted to come back to service, maybe from just a higher level.

Speaker 13: Hey, good morning. Thanks for taking my question. And best of luck to Carl and congrats to Kyle. I wanted to come back to service maybe from just the higher level. You obviously made some good progress here in a pretty short time frame just looking specifically at the claims ratio. And so just kind of wondering if you have any thoughts on the runways from here? Have you captured most of the low hanging fruit and maybe the next 50 dips improvement in that number?

So we've made some good progress here in a pretty short time frame just looking specifically at the claims ratio.

And so just kind of wondering if you have any thoughts on the runway from here and you captured most of the low hanging fruit and maybe the next you know 50 bps improvement and that was in that number is tougher or it takes a little bit longer than the first 50 bps.

Speaker 13: tougher takes a little bit longer than the first 50 bits.

Speaker 13: or do you have lines fight to, you know, improving at a similar pace going forward.

Or do you have line of sight to you know improving at a similar pace going forward.

Speaker 6: What our long-term goal is to get to a claims ratio of 0.1%, but the improvement won't be linear and it will take a number of years for us to get there. And now having Dave on the team and the experience of him driving a better service product over time is going to allow us to get there on a faster timeline, but it still would take us a number of years to get there.

Our long term goal is to get the claims ratio of 0.1%, but the improvements won't be linear and it will take a number of years for us to get there and now having Dave on the team and the experience of him driving a better service product over time is going to allow us to get there on a on a.

Our timeline, but it still would take us a number of years to get there now when you look at what we've done so far I mentioned earlier over the last year and a half we have tight incentive compensation plans to improvements in service we side the recognition programs at the service center level to the improvements in service and we've also launched technology.

Speaker 6: Now when you look at what we've done so far, I mentioned earlier over the last year and a half, we tied incentive compensation plans to improvements and service. We tied the recognition programs at the service center level to the improvements and service. And we've also launched technology that enables us to rate every trailer that we load across the network every single night and having a rating of quality of loading at that particular load.

That enables us to raise equity trailers that we load across the network every single night.

And having a rating of quality of floating at that particular for that particular loan and moving forward. We are launching used tools as I mentioned earlier for the field, including in your airbag system across all of our service centers are sort of drags that help with how you Aldo and reload appointment freight higher quality thrash would also improving.

Speaker 6: And moving forward, we are launching new tools, as I mentioned earlier, to the field, including a new air back system across all of our service centers, a storage rack that help with how you unload and reload the appointment freight.

Speaker 6: higher quality straps, we're also improving how we're operating training and loading procedures for our dock workers to further improve service. I get our June claims for shipment was the best in seven years.

How we how we are operating training and loading procedures, what our dock workers to further improve service I get I would June claims for shipment was the best in seven years, and I would put us to keep on improving but again it won't be linear from from here all the way down to 0.1%, but the expectation is to continue to see that service product improvement over there.

Speaker 6: and I would all just keep on improving, but again, it won't be linear from here, all the way down to 0.1%, but the expectation is to continue to see that service product improvement over the years to come.

So come.

Thanks for the color.

Okay.

Our next question is from Bruce Chan with Stifel. Please proceed.

Speaker 4: Our next question is from Bruce Kenwood's T-Fell, please proceed.

Speaker 7: Thanks, and good morning, everyone. Mario, maybe just a comeback to your comments about people. You recently had a terminal that voted to do to-

Hey, Thanks, and good morning, everyone. Mario maybe just to come back to your comments about people you recently had a terminal that voted to certify.

Certify the union, it's probably perhaps even more of an achievement given the current climate, but just want to see if you could talk about some of the work that you've done on the employee engagement side. You know and then you had your annual wage increase any comments on where you stand relative to peers and whether you anticipate any you know maybe wage cost pressure given some of the new contracts that have come through in the rest of the industry.

Speaker 7: I see if you could talk about some of the work that you've done on the employee engagement side. And then you had your annual wage increase any...

Thanks, Bruce. So this is a topic in terms of employee engagement and satisfaction that is very important for all of us and here recently I would lead to score the employee engagement service. A survey we did here in the month of July had another record of employee engagement and satisfaction across across.

Speaker 6: Thanks Bruce. This is a topic in terms of employee engagement and satisfaction that is very important for all of us. And here recently I would leave this quarterly employee engagement service a survey we did here in the month of July had another record of employee engagement and satisfaction across our organization.

Our organization and I would leases.

Speaker 6: And I would lead this frontline employee survey for dog workers and drivers was a company record since Conway started measuring it back in 2009.

Frontline employee survey for dock workers and drivers was a company record since callaway's started measuring it back in 2009 and the way we've been able to achieve those numbers is that the entire organization is spending a lot of time in the field just to give you an idea last year for me personally I visit the 50 to 60 service centers.

Speaker 6: And the way we've been able to achieve those numbers is that the entire organization is spending a lot of time in the field. Just to give you an idea, last year for me personally, I visited 50 to 60 service centers, so one to two per week.

So wanted to put a week, where we enter supplies for Dave has been with US now for four three months he's out in the field every single week same thing with the folks who are on our eastern West divisions and all of the entire leadership team is spending time in the field getting feedback from our employees and how we can improve what we're doing with them in some of these could be and how how we manage.

Speaker 6: where we and the supplies for your day have been with us now for three months, these thousands of fields every single week. Same thing with the folks who run our eats and West divisions and all the entire leadership team is spending time in the field getting feedback from our employees and how we can improve what we're doing with them. And some of these could be how we manage work, some of it could be around compensation, some of it could be around tools that we offer them. And when you listen and take action, you see that your workforce, also be part of the company, a growing company and providing great service for the customers as well. So a lot of these are things that we're doing and we continue to see here record employee engagement.

Work some of it could be around compensation some of it could be at our tools that can be offered them and when you listen and take action you see that you you your workforce wants to be part of the company a growing company and providing great service for the customers as well. So a lot of these are things that we're doing and we continue to see here record employee engagement on the wage increase.

Speaker 6: On the wage increases, we typically do those on April 1st. And this year we have taken, we've also given all of our folks in the field that wage increases in the beginning of April .

As we typically do those on April 1st and this year, we have taken a we've also given all of our folks in the field that wage increases at the beginning of April .

Speaker 4: Our next question is from Scott Schneeberger with Oppenheimer & Company, please.

Our next question is from Scott Schneeberger with Oppenheimer <unk> Company. Please proceed.

Speaker 14: Thank you very much. Good morning and congrats Kyle. Mario, could you just speak to what you see out there as far as the demand environment across your end markets? Obviously a lot of focus on what happens post yellow, but just on the general environment heading into the back half, the back school season, the peak holiday. What are you seeing? How are you feeling about where we are in the cycle?

Thank you very much good morning, and Ah Congrats call Mario could you just speak to that.

What you see out there as far as the demand environment across your end markets. Obviously, a lot of our focus on on what happens post yellow, but just on the general environment heading into the back half the back to school season peak holiday just what what are you seeing how are you feeling about.

Where we are in the cycle. Thanks.

Thank you I'll first start with the first half of the year and then what we're seeing pre disruption what ought to be solidly disruption, but we saw the trough in the first half of the year from a freight demand perspective in the month of March and volumes modestly improved in April and May and then got it got weaker again in the month of June now Joe.

Speaker 6: Thank you, Alper, for the first half of the year and then what we're seeing pre-destruction or what we saw pre-destruction. But we thought that throughout the first half of the year from a pre-demand perspective in the month of March.

Speaker 6: and volumes modestly improved in April and May, and then got weaker again in the month of June . Now, July , ahead of the disruption, in the first half of the month, we had seen our shipment count and punish flipped to positive, signaling a slightly improved trade demand environment. Now, if you break it down today, two thirds of our customers are industrial companies.

Lie ahead of the disruption in the first half of the month, we had seen our shipment count and punished flipped to positive signaling a slightly improved trade demand in vitamin now if you break it down today two thirds of our customers are industrial companies and what we're seeing there is it a U.

Speaker 6: And what we're seeing there is that ISM, which is an index we look at for manufacturing, has been trailing below 50 for the past nine months. It did modestly improve in the month of July versus June . And we're hearing that from our customers. That is mixed feedback. Some portions of the industrial economy are doing well. Others are seeing softer demand in the back half. So it's fairly mixed.

S M, which is an index we look at for manufacturing has been trailing below 50 for the past nine months. It did modestly improve in the month of July versus June and where do you think that from our customers that is mixed feedback some portions of the industrial economy are doing well others are seeing softer demand in the back half. So it's it's fairly mixed.

Speaker 6: Namely, automotive and industrial are doing very, very strongly here. On the retail side, we continue to see a improvement in managing elevated inventory levels. Most of our retail customers have worked through that inventory and do expect stronger demand in the back half and they do expect also a decent holiday season coming up here. So it does look like the freight markets have dropped from a demand perspective, but we'll see how things rolled forward year over the next couple quarters. In the end, we'll see how things rolled forward year over the next couple quarters.

The automotive and industrials are all doing very very strongly here on the retail side, we continue to see a improvement in managing elevated inventory levels at most of our E. Tail customers has have worked through that inventory and do expect stronger demand in the back half and they do expect also a decent holiday.

And coming up here. So it does look like the free markets have dropped from a demand perspective, but we will see how things are rolled forward with you over the next couple of quarters.

Speaker 14: Thanks appreciate the overview and then just ask the story of charges is is an initiative of yours. I don't think you were going to really delve into that too much until the back half of this year. And it's a long term initiative, but could the yellow situation help you jump started? I know you're about low double digits of overall revenue right now where you see that moving how quickly and just a progress report on where that is. Thanks.

Thanks, I appreciate the overview and then I'm just curious.

Aspersorium charges is a it is an initiative of yours I don't think you were going to really delve into that too much until the back half of this year and that's a long term initiative, but could be yellow situation help you jumpstarted that I know you're about a low double digits of overall revenue right now where we are.

Do you see that moving how quickly and it just didn't have a progress report on why that is.

Speaker 15: Sure, thanks for the question. So when you think about accessorials, it's one of our many pricing initiatives we're excited about and certainly this disruption will enable us to drive some of this maybe more quickly. You know, when you think about what we're doing, most recently we put in place technology and process improvements to ensure we're consistently capturing location-based accessorials.

Sure. Thanks for the question. So when you think about <unk>. It's one of our many pricing initiatives. We're excited about and certainly this disruption will enable us to drive some of this might be more quickly. When you think about what were doing most recently, we put in place technology and process improvements to ensure we're consistently capturing location based accessorial.

Speaker 15: We're also consistently making updates to our tariffs, not just make sure we get paid fairly for the services we provide.

We're also consistently making updates to our tariffs that just make sure we get paid fairly for the services we provide.

Speaker 15: We also see opportunities around certain services we don't have now, really value added services, and all these things can help us accelerate really in the back.

We also see opportunities around certain services, we don't have now really value added services and all these things can help us accelerate really in the back half.

Okay.

Speaker 4: We have reached the end of our question and answer session. I would like to turn the conference back over to Mr. Harris for close.

We have reached the end of our question and answer session I would like to turn the conference back over to Mr. Harris for closing comments.

Thank you operator, and thanks, all for joining us today and for all your questions are this is a very dynamic and vitamins in our industry and what are your main focus on unlocking the massive potential we have in our company by continuing to provide great service to our customers.

Speaker 6: Thank you operator and thanks all for joining us today and for all your questions. This is a very dynamic environment in our industry and we remain focused on unlocking the massive potential we have in our company by continuing to provide great service to our customers.

Speaker 6: One month into this quarter and we have a lot of great momentum. We're making further investments in capacity. We're moving more freight than our network and we're driving higher yield growth. We look forward to seeing you guys again in the call in November . Thank you.

One month into this quarter and we have a lot of great momentum, we're making further investments in capacity, we're moving more freight in our network and we're driving higher yield growth. We look forward to seeing you guys again in the call in November Thanks Al.

Speaker 4: This concludes today's conference. You may disconnect your lights at this time. And thank you for your participation.

This concludes today's conference you may disconnect your lines at this time and thank you for your participation.

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