Q3 2023 Old Dominion Freight Line Inc Earnings Call

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like turn the conference over to drew Anderson Investor Relations. Please go ahead.

Thank you good morning, and welcome to the third quarter 2023 conference call for old Dominion freight line.

Today's call is being recorded and will be available for replay beginning today and through November one 2023 by dialing 1877344 75 to nine access code 8344351.

The replay of the webcast may also be accessed for 30 days at the company's website.

This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding old dominions expected financial and operating performance for this purpose any statements made during this call that are not statements of historical fact.

Good morning, and welcome to the old Dominion freight line third quarter 2023 earnings Conference call.

May be deemed to be forward looking statements.

Without limiting the foregoing the words believes anticipates plans expects and similar expressions are intended to identify forward looking statements.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

You are hereby cautioned that these statements may be affected by the important factors among others set forth in old Dominion's filings with the Securities and Exchange Commission and in this morning's news release and consequently, actual operations and results may differ materially from the results discussed in the forward looking statements.

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then two.

Please note this event is being recorded.

The company undertakes no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise.

I would now let's turn the conference over to drew Anderson Investor Relations. Please go ahead.

Thank you good morning, and welcome to the third quarter 2023 conference call for old Dominion freight line.

As a final note before we begin we welcome your questions today, but we do ask in fairness to all that you. Please limit yourselves to just one question at a time before returning to the queue.

Today's call is being recorded and will be available for replay beginning today and through November 1st 2023 by dialing 1877344 75 to nine access code 8344351.

You for your cooperation.

At this time for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Marty Friedman. Please go ahead Sir.

The replay of the webcast may also be accessed for 30 days at the company's website.

Good morning, and welcome to our third quarter Conference call.

This conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including statements among others regarding old dominions expected financial and operating performance for this purpose any statements made during this call that are not statements of historical fact.

With me today on the call are Adam Satterfield, our CFO.

After some brief remarks, we will be glad to take your questions.

Old Dominions third quarter financial results reflect continued softness in the domestic economy as a result, our shipment levels decreased on a year over year basis for the fifth straight quarter.

Maybe deemed to be forward looking statements.

Without limiting the foregoing the words believes anticipates plans expects and similar expressions are intended to identify forward looking statements.

So I'm encouraging trends developed during the quarter as our L. P O shipments per day averaged 49670 <unk>.

After averaging 47077 per day for the first six months of the year.

You are hereby cautioned that these statements may be affected by the important factors among others set forth in old Dominion's filings with the Securities and Exchange Commission and in this morning's news release and consequently, actual operations and results may differ materially from the results discussed in the forward looking statements.

While a portion of this growth can be attributed to the loss of one large competitor. We believe we are winning new business from other carriers in the industry due to the quality of our service and overall value provided to our customers.

The Ot team effectively responded to this positive inflection in volumes by continuing to offer superior service at a fair price.

The company undertakes no obligation to publicly update any forward looking statements, whether as a result of new information future events or otherwise.

We were pleased that our on time performance was 99% during the quarter, while our cargo claims ratio was zero to 1%.

As a final note before we begin we welcome your questions today, but we do ask in fairness to all that you. Please limit yourselves to just one question at a time before returning to the queue.

As we have said many times before so this means much more than just picking up and delivering to our customers freight on time and claims free there.

For your cooperation.

There are many other attributes that shippers consider when selecting a carrier.

At this time for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Marty Friedman. Please go ahead Sir.

Such as consistent transit times carrier trustworthiness and ease of doing business.

That is the only company conducts a comprehensive <unk> study each year and they recently measured carriers on 28 different service and value related attributes.

Good morning, and welcome to our third quarter Conference call.

With me today on the call are Adam Satterfield, our CFO.

After some brief remarks, we will be glad to take your questions.

Matthew has published their 2023 results just this week and we are extremely proud proud to be named the number one national <unk> provider for the 14th straight year.

Old Dominions third quarter financial results reflect continued softness in the domestic economy as a result, our shipment levels decreased on a year over year basis for the fifth straight quarter.

Logistics professionals ranked <unk> as number one for 25 of the 28.

So I'm encouraging trends developed during the quarter as our L. P. L shipments per day averaged 49670 after averaging $47077 per day for the first six months of the year.

Individual attributes in the most recent survey.

Which was our best performance ever and demonstrates our unwavering commitment to excellence in customer satisfaction.

We believe the consistency and quality of our service over many years.

While a portion of this growth can be attributed to the loss of one large competitor. We believe we are winning new business from other carriers in the industry due to COVID-19.

Validated by mass vivo has differentiated old dominion in the marketplace and supported our ability to win market share over the long term.

Quality of our service and overall value provided to our customers.

Our superior service also continues to support our ongoing yield management initiatives.

The Ot team effectively responded to this positive inflection in volumes by continuing to offer superior service at a fair price.

We focus on obtaining consistent yield increases each year to offset our cost inflation and support our ongoing investments in capacity and technology.

We were pleased that our on time performance was 99% during the quarter, while our cargo claims ratio was 0.1%.

Maintaining excess capacity during slower economic environment comes at a cost, but we believe having an available capacity for customers when they need it. The most is critical element for our value proposition.

And we have said many times before so this means much more than just picking up and delivering to our customers right on time and claims free there.

There are many other attributes that shippers consider when selecting a carrier.

As a result, we consistently invest in service center capacity equipment technology, and most importantly, our people.

Such as consistent transit times carrier trustworthiness and ease of doing business.

Cause of these investments we are well positioned to respond to the positive inflection in volumes during the quarter.

As the only company conducts a comprehensive <unk> study each year and they recently measured carriers on 28 different service and value related attributes.

It is important to note that while other carriers may have the ability to invest in service centers in equipment and technology.

Matthew has published their 2023 results just this week and we are extremely proud proud to be named the number one national <unk> provider for the 14th straight year.

<unk> family of employees that truly distinguishes us from our competition.

We have a unique company culture that has defined who we are.

Logistic professionals ranked <unk> as number one for 25 of the 28.

For many years delivering superior service at a fair price, having a consistent approach to pricing and investing for growth may sound like a simple formula but it takes a committed team to keep delivering on these fundamental elements for our long term strategic plan.

Individual attributes in the most recent survey.

Which was our best performance ever and demonstrates our unwavering commitment to excellence in customer satisfaction.

We believe the consistency and quality of our service over many years.

The execution by our team and consistency in our long term financial results gives us continued confidence in our strategic plan.

Validated by mass vivo has differentiated old dominion in the marketplace and supported our ability to win market share over the long term.

We remain committed to this plan and believe we are better positioned than any other carrier in our industry to win market share over the long term.

Our superior service also continues to support our ongoing yield management initiatives.

As we continue to deliver our unmatched value proposition to our customers over the long term. We are confident that we can create further profitable growth and increase shareholder value.

We focus on obtaining consistent yield increases each year to offset our cost inflation and support our ongoing investments in capacity and technology.

Maintaining excess capacity during slower economic environment comes at a cost, but we believe having an available capacity for customers when they need it. The most is critical element for our value proposition.

Thank you very much for joining us this morning, and now Adam will discuss our third quarter financial results in greater detail.

Thank you Marty and good morning.

Old Dominion's revenue decreased five 5% in the third quarter of 2023 due to a six 9% decrease in <unk> tons per day that was partially offset by a three 1% increase in <unk> revenue per hundredweight.

As a result, we consistently invest in service center capacity equipment technology, and most importantly, our people.

Because of these investments we are well positioned to respond to the positive inflection in volumes during the quarter.

We also had one less operating day as compared to the third quarter of 2022.

It is important to note that while the carriers may have the ability to invest in service centers in equipment and technology.

The combination of this decrease in revenue and slight deterioration in our operating ratio contributed to the 8.0% decrease in earnings per diluted share to $3 1 million for the quarter.

The family of employees that truly distinguishes us from our competition.

We have a unique company culture that has defined who we are for many.

On a sequential basis revenue per day for the third quarter increased eight 9% when compared to the second quarter of 2023 with.

Many years delivering superior service at a fair price, having a consistent approach to pricing and investing for growth may sound like a simple formula but it takes a committed team to keep delivering on these fundamental element for our long term strategic plan.

<unk> tons per day, increasing three 6% and.

<unk> shipments per day, increasing five 7%.

The execution by our team and consistency in our long term financial result gives us continued confidence in our strategic plan.

For comparison, the 10 year average sequential change for these metrics includes an increase of two 9% and revenue per day.

We remain committed to this plan and believe we are better positioned than any other carrier in our industry to win market share over the long term.

And an increase of <unk>, 7% in tons per day, and an increase of one 8% in shipments per day.

As we continue to deliver our unmatched value proposition to our customers over the long term. We are confident that we can create further profitable growth and increase shareholder value.

As Marty just mentioned a portion of this increase can be attributed to the loss of one large competitor is underlying demand has remained relatively consistent throughout the quarter.

Thank you very much for joining us this morning, and now Adam will discuss our third quarter financial results in greater detail.

We do believe however that we are also winning new business from other carriers in the industry due to the quality of our service and overall value provided to our customers.

Thank you Marty and good morning.

Old Dominion's revenue decreased five 5% in the third quarter of 2023 due to a six 9% decrease in <unk> tons per day that was partially offset by a three 1% increase in <unk> revenue per hundredweight.

The monthly sequential changes in <unk> tons per day during the third quarter were as follows.

July decreased one 5% as compared with June.

<unk> increased four 7% versus July.

We also had one less operating day as compared to the third quarter of 2022.

September increased two 7% as compared to August.

The combination of this decrease in revenue and a slight deterioration in our operating ratio contributed to the 8.0 per cent decrease in earnings per diluted share to $3.09 for the quarter.

The tenure average change for the respective months a decrease of three 1% in July.

An increase of zero to 1% in August.

And an increase of three 6% in September.

On a sequential basis revenue per day for the third quarter increased eight 9% when compared to the second quarter of 2023 with.

For October we expect our revenue per day increased by approximately one 5% to 2% when compared to October 2022, with a decrease of approximately two to two 5% and our LTM tons per day.

L P L tons per day, increasing three 6% and.

<unk> shipments per day, increasing five 7%.

For comparison, the 10 year average sequential change for these metrics includes an increase of two 9% and revenue per day.

While our shipment levels for the month have been stronger than a normal sequential trend. We believe a portion of this outperformance is attributable to our cyber security incident disclosed by a competitor.

An increase of 0.7% in tons per day, and an increase of one 8% and shipments per day.

We would expect some of the incremental growth in October will return to that competitor in November.

As Marty just mentioned a portion of this increase can be attributed to the loss of one large competitor is underlying demand has remained relatively consistent throughout the quarter.

As usual, we will provide actual revenue related details for October and our third quarter Form 10-Q.

Our third quarter operating ratio increased to 150 basis points to 76%.

We do believe however that we are also winning new business from other carriers in the industry due to the quality of our service and overall value provided to our customers.

The increase in overhead cost as a percent of revenue more than offset the improvement in our direct cost.

The monthly sequential changes in <unk> tons per day during the third quarter were as follows.

While the decrease in revenue had a deleveraging effect on our cost categories that are more fixed in nature. We were pleased with the increase in operating efficiencies that helped drive the improvement in our direct cost.

July decreased one 5% as compared with June.

August increased four 7% versus July.

We also continued with our best efforts to control discretionary spending to minimize the increase in overhead expenses as a percent of revenue.

September increased three 7% as compared to August.

The tenure average change for the respective months there is a decrease of three 1% in July.

We did however continue to execute on our 2023 capital expenditure plan to help ensure that we have the necessary capacity for anticipated growth once the domestic economy improves.

An increase of 0.1 person in August.

And an increase of three 6% in September.

For October we expect our revenue per day increased by approximately 1.5% to 2% when compared to October 2022, with a decrease of approximately two to two 5% and our <unk> tons per day.

This resulted in a 110 basis point increase in our depreciation expenses as a percent of revenue that along with the increase in employee benefit cost largely contributed to the overall increase in overhead expenses.

<unk> cash flow from operations totaled $429 $2 million and $1 1 billion for the third quarter and first nine months of 2023, respectively.

While our shipment levels for the month had been stronger than a normal sequential trend. We believe a portion of this outperformance is attributable to our cyber security incident disclosed by a competitor.

While capital expenditures were $172 million and $651 4 million for the same periods.

We would expect some of the incremental growth in October will return to that competitor in November.

As usual, we will provide actual revenue related details for October and our third quarter Form 10-Q.

We utilized $65 $9 million and $368 1 million of cash for our share repurchase program during the third quarter and first nine months of 2023, respectively.

Our third quarter operating ratio increased 150 basis points to 76%.

The increase in overhead cost as a percent of revenue more than offset the improvement in our direct cost.

While cash dividends totaled $43 $7 million and $131 5 million for the same periods.

While the decrease in revenue had a deleveraging effect on our cost categories that are more fixed in nature. We were pleased with the increase in operating efficiencies that helped drive the improvement in our direct cost.

Our effective tax rate for the third quarter of 2023 and was 24.0% flat as compared to 23, 9% in the third quarter of 2022.

We also continued with our best efforts to control discretionary spending to minimize the increase in overhead expenses as a percent of revenue.

We currently anticipate our effective tax rate to be 25, 6% for the fourth quarter.

This concludes our prepared remarks. This morning, operator, we'll be happy to open the floor for questions at this time.

We did however continue to execute on our 2023 capital.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Our first question is from Allison <unk> with Wells Fargo. Please go ahead.

Hi, good morning.

Can you talk a little bit about the density improvement that you saw in the network in any way to quantify that and then maybe following that just touch on how much excess capacity you have in the system today to take on some more volume.

Sure our current level of excess capacity, which was in our service Center network is now between 25% to 30%.

We did improve density within our operations during the quarter and that was a big factor in driving the improvement in our direct operating cost at least the improvement that we saw.

Both sequentially and on a year over year basis, but.

We leveraged that inflection in the volumes.

We always say long term improvement in the operating ratio is driven by two key factors density.

Yield in both generally support.

Acquire the supportive of macro economic.

Environment is positive, but we had good leverage there that drove some nice operating efficiencies within our pickup delivery operations on the dock as well.

Had improvement we still had a slight decrease in our line haul load factor, but that's improved from where we were earlier in the year.

So all of those factors contributed to the improvement in our direct cost as a percent of revenue during the quarter.

Great. Thanks for the comment.

Okay.

The next question is from Jack Atkins with Stephens. Please go ahead.

Okay, great. Good morning, Thanks for taking my question. So I guess, Adam as you think about the sequential progression into the fourth quarter.

There are a lot of puts and takes with October.

And the disruptions further disruptions in the market in October but could you maybe talk about your expectation for or maybe how we should be thinking about operating ratio trend sequentially from the third quarter to the fourth quarter all things considered.

Sure.

Typically the fourth quarter operating ratio is 200 to 250 basis points worse than the third quarter. A couple of factors drive that usually revenues a little bit softer and we give our wage increase the first of September so we can get.

Three full months within the quarter with that new wage rate.

But multiple factors that generally are driving that change one thing to note. We also do an actuarial assessment each year, we conduct that in the fourth quarter.

We normalize for that just assume it stays flat with the previous quarter, but we've seen adjustments in the past.

That can be favorable which is what we had last year as well as unfavorable so assuming those call state differ.

A different I think that we can be in the 150 to 200 basis point.

Deterioration range, so slightly better than what we would historically see.

Some of that we're obviously starting the quarter out.

With a little favorability versus our normal sequential trends.

As we discussed and so.

I think that we expect some volumes to kind of normalize if you will back to where they otherwise would've been for November and December but that still gives us a little bit of a head start and I think will help us drive a little bit of.

Outperformance versus our normal trend there.

Okay makes sense, thanks for the time.

The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

Good morning, everyone. So just maybe a quick 24 question. If you will it looks like yourselves and maybe a lot of the big LDL still have a fair bit of excess capacity in their network, even after absorbing the yellow volumes I'm wondering how you think the kind of.

Speaker 1: zero.

Sure Tim.

Speaker 2: After today's presentation, there will be an opportunity to ask questions.

Typically the fourth quarter operating ratio is 200 to 250 basis points worse than the third quarter.

Speaker 2: To ask a question, you may press star, then 1 on your telephone keypad.

Couple of factors drive that usually revenues a little bit softer.

Speaker 2: To withdraw your question, please press star then 2. Please note this is.

We give our wage increase the first of September said, we'd get.

A number of them play out when the up cycle comes do you expect to see the market suddenly tighten up in there to be like a rising tide of pricing or do you just think that you get better incremental margin as the volumes come back.

Three full months within the quarter with that new wage rate.

Speaker 3: I would now like to turn the conference over to Drew Anderson, Investor Relations. Please go ahead. Thank you. Good morning and welcome to the third quarter, 2023 conference call for Old Dominion Frightline. Today's call is being recorded and will be available for replay beginning today and through November 1st, 2023 by dialing 1, 877, 344, 7529, Actious Code 8344351.

But multiple factors that generally are driving that change one thing to note. We also do.

Where do you think the 'twenty 'twenty four upcycle looks like in a post close integration of its Mike.

Actuarial assessment each year, we conduct that in the fourth quarter.

Well I think it's yet to be determined for 2024, certainly there is there is a lot of tea leaves that would suggest this could be a year of inflection but.

We normalize for that just assume it stays flat with the previous quarter, but we've seen adjustments in the past.

That can be favorable which is what we had last year as well as unfavorable so assuming those costs they.

We also believe the same thing we thought we were going to see a rebound in the spring of this year. So.

Different I think that we can be in the 150 to 200 basis points.

We're cautiously optimistic about what next year may bring.

Speaker 3: The replay of the webcast may also be accessed for 30 days at the company's website.

Deterioration range, so slightly better than what we would historically see.

We've said before.

Speaker 3: This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding old dominions, expected financial and operating performance.

The post yellow situation.

We want to be measured with our approach and continue to believe that slow and steady wins. The race. So we didn't try to go out and immediately.

Some of that we're obviously starting the quarter out.

With a little favorability versus our normal sequential trends.

When as much share as was out there in the market.

As we discussed and so.

I think that we expect some volumes to kind of normalize if you will back to where they otherwise would've been for November and December but that still gives us a little bit of a head start and I think will help us drive a little bit of.

Speaker 3: For this purpose, any statements made during this call that are not statements of historical fact, may be deemed to be forward-looking statements.

But we're trying to do it in the right way.

Leveraging the capacity that we have and not just the capacity in the service Center network.

Speaker 3: without limiting the foregoing to the words, beliefs, anticipates, plans, expects, and similar expressions are intended to identify forward-looking states.

There's people on a capacity element as well as equipment and I don't know that theres as much capacity in the market.

Outperformance versus our normal trend there.

As you May have indicated with your question.

Okay makes sense, thanks for the time.

Speaker 3: You are here by caution that these statements may be affected by the important factors among others set forth in old Dominions' filings with the Securities and Exchange Commission and in this morning's release and consequently actual operations and results may differ materially from the results discussed in the forward-looking statement.

Because we're hearing it every day, we're hearing about competitors that are missing pickups.

The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

They don't have the people part of the capacity equation solved and maybe took on too much free and they are starting to have negative implications from their overall service product. So.

Good morning, everyone. So just maybe a quick 24 question. If you will it looks like yourselves and maybe a lot of the big LDL still have a fair bit of excess capacity in the network, even after absorbing the yellow volumes I'm.

We believe that we will continue to win market share, but do it in the right way by given superior service at a fair price to our customers and offer them a value that is unmatched in our industry.

Im wondering how you think the kind of.

Speaker 3: The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Our numbers will play out when the up cycle comes do you expect to see the market is suddenly tighten up in there to be like a rising tide of pricing or do you just think that you get better incremental margins as the volumes come back.

Get some some positive economic support.

Speaker 3: As a final note, before we begin, we welcome your questions today, but we do ask in fairness to all that you please limit yourselves to just one question at a time before returning to the queue. Thank you for your questions.

I think that you've seen in past cycles, when we actually get there too.

2018, and 2021 are good examples where.

Where do you think the 'twenty 'twenty four upcycle looks like in a post yellow situation at this point.

We try to stay ahead of the growth curve with the capacity investments that we consistently make.

Well I think it's yet to be determined for 2024, certainly there is theres a lot of tea leaves that would suggest this could be a year of.

To be able to take on that volume when it's there and when we look at those two years that I just referenced.

Speaker 3: At this time, for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Marty Freeman.

Inflection but.

We also believe the same thing we thought we were going to see a rebound in the spring of this year. So.

Significantly outgrew.

The markets in those years, despite the strength in underlying demand because of that excess capacity that we had in place.

Speaker 4: Good morning and welcome to our third quarter conference call. With me today on the call was Adam Sadder Field, our CFO . After some brief remarks, we would be glad to take your question.

We're cautiously optimistic about what next year may bring as.

As we've said before.

Great. Thanks, Adam.

With the post yellow situation.

The next question is from Chris Wetherbee with Citigroup. Please go ahead.

We want to be measured with our approach and continue to believe that slow and steady wins. The race. So we didn't try to go out and immediately when as much share as was out there in the market.

Speaker 4: Old Dominion's third quarter financials results reflect continued softness in the domestic economy. As a result, our shipment levels decreased on a year-over-year basis for the fifth straight quarter.

Hey, Thanks, Good morning, guys, maybe I can piggyback on that a little bit as we think about 2024 I know normally you guys talk about cost you talked about price relative to cost and be able to.

But we're trying to do it in the right way.

Speaker 4: So I'm encouraging trends develop during the quarter. As our LPL ship is per day average 49,670. After averaging 47,77 per day for the first six months of the year.

Exceed that in any sort of a normal year I guess post yellow as you think about 'twenty four do we need to see something else to be able to surface spark a better than normal pricing year for you guys. In 2024, I think there are expectations that next year naturally would be because of what happened with yellow.

Leveraging the capacity that we have and not just the capacity in the service Center network.

There is people capacity element as well as equipment and I don't know that theres as much capacity in the market.

Speaker 4: While a portion of this growth can be attributed to the loss of one large competitor, we believe we are winning new business from other carriers in the industry due to the quality of our service and overall value provided to our customers.

As you May have indicated with your question because we're hearing it every day, we're hearing about competitors that are missing pickups.

Is a normal cyclical recovery enough to spark something that will be better than average just wanted to get your general take on how sort of spring loaded or not you think the pricing environment is.

They don't have the people part of the capacity equation solved and maybe took on too much freight and are starting to have negative implications from their overall service products.

Speaker 4: The OD team effectively responded to this positive inflection and volumes by continuing to offer superior service at a fair price.

Yes sure.

I think the environment continues to be strong overall, especially given the supply shock that happened but.

We believe that we will continue to win market share, but do it in the right way by given superior service at a fair price to our customers and offering a value that is unmatched in our industry. If we get some some positive economic support.

Speaker 4: We were pleased that our own type of performance was 99% during the quarter while our cargo claims ratio was 0.1%.

Our approach is different from many of our competitors, we believe in our long term consistent approach to pricing.

Speaker 4: As we have said many times before, service means much more than just picking up delivering to our customers freight on time and claims free. There are many other attributes that shippers consider when selecting a carrier, such as consistent transit times, carrier trustworthiness, and ease of doing business.

We tried to target obtaining 100 to 150 basis points of price above cost.

I think that you've seen in past cycles, when we actually get there too.

2018, and 2021 are good examples where.

Cost each year, we've had some cost pressure this year.

We try to stay ahead of the growth curve with the capacity investments that we consistently make to be able to take on that volume when it's there and when we look at those two years that Ive just referenced cigna.

That's evident in our numbers, but I believe that that starts improving as we go into next year, especially if we can get.

Speaker 4: Matthew and Cutney conducts a comprehensive LTF study each year. And they recently measured carriers on 28 different service and value related attributes.

A little bit of volume recovery.

Already seen in the core inflation in our business moderating that did.

Significantly outgrew.

The markets in those years, despite the strength in underlying demand because of that excess capacity that we had in place.

In the third quarter, and I think that same trend.

Speaker 4: Matthew published their 2023 results just this week and we are extremely proud proud to be named the number one national LPL Provider for the 14th straight year.

Can carry through in <unk> and into 2024 as.

Great. Thanks, Adam.

As well, but.

The next question is from Chris Wetherbee with Citigroup. Please go ahead.

I think the market should certainly be conducive.

To us being able to obtain the increases that we believe we need to justify.

Hey, Thanks, Good morning, guys, maybe I can piggyback on that a little bit as we think about 2024 I know normally you guys talk about cost you talked about price relative to cost and be able to.

Speaker 4: Logistic professionals ranked OD at number one for 25 of the 28 individual attributes in the most recent survey, which was our best performance ever and demonstrates our unwavering commitment to excellence and customer satisfaction.

And cover our cost inflation, but also the investments that we're making in capacity.

We're only carrier that's really investing significantly in service center capacity, we've invested $2 billion over the last 10 years.

Exceed that in any sort of a normal year.

Post yellow as you think about 'twenty four.

Speaker 4: We believe the consistency and quality of our service over many years has as validated by MassDO has differentiated old dominion in the marketplace and supported our ability to win market share over the long term.

Do we need to see something else to be able to surface spark a better than normal pricing year for you guys. In 2024, I think there are expectations that next year naturally would be because of what happened with yellow.

As a result, we've been able to increase our door capacity about 50%.

When you look at the public <unk>.

<unk> companies that lease, which are 65% to 70% of the market overall capacity.

It is a normal cyclical recovery enough to spark something that will be better than average just wanted to get your general take on how sort of spring loaded or not you think the pricing environment is.

Speaker 4: Our superior service also continues to support our own going yield management initiative.

There is they don't close to 10%.

And so I think that customers understand that and continue to to give us the increases that we need.

Speaker 4: We focus on obtaining consistent yield increases each year to offset our cost inflation and support our ongoing investments in capacity and technology.

Yes sure.

I think the environment continues to be strong overall, especially given the supply shock.

That basically support the value proposition that we're able to offer them and when you think about the supply chain challenges.

Speaker 4: Maintaining excess capacity during slower economic environments comes at a cost. But we believe having an available capacity for customers when they need it, the mother's just critical element for our value proposition.

But I think our approach is different from many of our competitors. We believe in our long term consistent approach to pricing and.

Whatnot shippers have had to work through over the last couple of years in particular capacity hasn't necessarily been at the forefront of the conversation over the last year, but over the last three and it certainly has been critical.

And we tried to target obtaining 100 to 150 basis points of price above.

Speaker 4: As a result, we consistently invest in service center capacity, equipment, technology, and most importantly, our people. Because of these investments, we are well positioned to respond to the positive inflection and volumes during the quarter.

Cost each year, we've had some cost pressure this year and.

So we feel like that's.

What we need to continue to focus on but but we will continue with our scene.

That's evident in our numbers, but I believe that that starts.

Like we always have.

Proving as we go into next year, especially if we can get a little bit of volume recovery. We are already seeing the core inflation in our business moderating it did.

It's produced good things for us.

Speaker 4: It is important to note that while all the carriers may have the ability to invest in service centers, equipment and technology, it is a person, the family of employees that truly distinguishes us from our competition.

A financial results standpoint, but an improvement in our balance sheet to support the ongoing investments that we believe we need to continue to me.

The third quarter and I think that same trend can carry through in <unk> and into 2024 as well but.

Okay. Thanks very much appreciate it.

Speaker 4: We have a unique company culture that has defined who we are for a couple of many years. Delivering superior service at a fair price, having a consistent approach to pricing and investing for growth may sound like a simple formula, but it takes a committed team to keep delivering on these fundamental elements for a long-term strategic plan. The execution by our team and consistency in our long-term financial results gives us a continued confidence in our strategic plan.

The next question is from Scott Group with Wolfe Research. Please go ahead.

I think the market should certainly be conducive to us being able to obtain the increases that we believe we need to justify.

Hey, thanks.

Morning, I wanted to ask about your perspective on share gains. So we've pulled forward I guess about 10 years of share gains from yellow into a quarter.

And cover our cost inflation, but also the investments that we're making in capacity.

I guess do you think post Elo the pace of share gain for you guys in future years.

Carrier, that's really investing significantly in service center capacity, we've invested $2 billion over the last 10 years.

We will be as good as what we've seen from from you historically and I guess I'm curious about this question in the context of this upcoming yellow auction.

As a result, we've been able to increase our door capacity by 50% and when you look at the public <unk>.

Speaker 4: We remain committed to this plan and believe we're in a better position than any other carrier in our industry to win market share over the long term.

I guess I want to know how much.

Companies that lease, which are 65% to 70% of the market overall capacity.

Speaker 4: As we continue to deliver our unmatched value proposition to our customers over the long term, we are confident that we can create further profitable growth and increase shareholder value.

What is your strategy in terms of terminal growth and how much do you want to add obviously you are involved in the stalking horse bid.

There is they don't close to 10%.

And so.

What's the strategy here with this upcoming auction.

That customers understand that and continue to to give us the increases that we need.

Speaker 4: Thank you very much for joining us this morning and now Adam will discuss our third quarter financial result in greater detail.

But we don't want to get into any details on that just given the fact that it's ongoing.

Basically support the value proposition that we're able to offer them and when you think about the supply chain challenges.

We're continuing to evaluate.

Speaker 5: Thank you Marty and good morning. Oldenmen in revenue decreased 5.5% in the third quarter of 2023, due to a 6.9% decrease in LTL terms per day, that was partially offset by a 3.1% increase in LTL revenue per 100 weight.

Those options, but our long term strategic plan didn't depend on one competitor going out of business.

And whatnot that shippers have had to work through over the last couple of years in particular capacity hasn't necessarily been at the forefront of the conversation over the last year, but over the last three and it certainly has been critical.

US being able to obtain real estate from them.

Our plan will continue to be give superior service at a fair price.

And so we feel like that's what.

Service is what wins market share for us as well as have an available capacity again, you look at the performance that we have with our volumes and market share in 2018 2021.

What we need to continue to focus on but but we will continue with our same approach like we always have.

Speaker 5: We also had one less operating day as compared to the third quarter of 2022.

Speaker 5: a combination of this decrease in revenue and slight deterioration in their operating ratio contributed to the 8.0% decrease in earnings for the looted share to $3.99 for the court.

It's produced good things for us.

From a financial results standpoint, but an improvement in our balance sheet to support the ongoing investments that we believe we need to continue to make.

10 points outperformance versus the industry and that wasn't just yellow that we were comparing against it is the industry.

Speaker 5: On a sequential basis, revenue per day for the third quarter increased 8.9% when compared to the second quarter of 2023, with LPL tons per day increasing 3.6%, and LPL 7 per day increasing 5.7%.

So we win share from others and I believe we've been able to capture more market share.

Okay. Thanks very much appreciate it.

The next question is from Scott Group with Wolfe Research. Please go ahead.

For the when you look at the growth in the industry than anyone else as well we've doubled our market share over the last 10 years that will require.

Hey, Thanks, Good morning, I wanted to ask about your perspective on share gains so we.

Investment as we go forward, we expect that we will continue to spend 10% to 15% of our revenues each year on capital expenditures.

We've pulled forward I guess about 10 years of share gains from yellow into a quarter.

Speaker 5: For comparison, the 10-year average sequential change for these metrics includes an increase of 2.9% in revenue per day, an increase of 0.7% in tons per day, and an increase of 1.8% in shipments per day.

I guess do you think post Elo the pace of share gain for you guys in future years.

That will continue to be within real estate and <unk>.

We will be as good as what we've seen from from you historically.

With equipment to support our anticipated growth, but but we certainly believe that we can be the biggest market share winner over the next 10 years, just like we have over the past 10 because of the value offering that we have just validated by.

I'm curious about this question in the context of this upcoming yellow auction.

Speaker 5: As Marty just mentioned, a portion of this increase can be attributed to the loss of one large competitor, as underlying demand has remained relative to the consistent throughout the court.

Ultimately I guess I want to know like how much.

What is your strategy in terms of terminal growth and how much do you want to add obviously you were involved in the stalking horse bid.

Matthew This week. We've won this award 14 years in a row, we're very proud we had better performance than we've ever had.

Speaker 5: We do believe, however, that we are also winning new business from other carriers in the industry due to the quality of our service and overall value provided to our customers.

What's the strategy here with this upcoming auction.

In the survey winning 25 of the 28 attributes that they measure.

But we don't want to get into any details on that just given the fact that it's ongoing.

Speaker 5: the monthly sequential changes in LTL tons per day during the third quarter were as follows.

Our overall gap between us and the industry widened out further than it's ever been so we feel good about where we are but we're also focused on making sure that our service continuously improves as we go forward.

We're continuing to evaluate.

Those options, but our long term strategic plan didn't depend on one competitor going out of business and us being able to obtain real estate from them.

Speaker 5: July decreased 1.5% as compared with June .

Speaker 5: August increased 4.7% versus July and September increased 2.7% as compared to August .

Our plan will continue to be give superior service at a fair price and.

<unk> will be key to our ability to win share.

So if I understand you don't think that like your long term volume growth share gain is any different going forward.

Service is what wins market share for us as well as have an available capacity again, you look at the performance that we have with our volumes and market share in 2018 2021.

Speaker 5: The 10-year average change for the respective months is a decrease of 3.1% in July .

Speaker 5: an increase of 0.1% in August and an increase of 3.6% in September .

Post yellow.

Not at all I don't think the formula changes.

10 points outperformance versus the industry and that wasn't just yellow that we were comparing against it is the industry.

Just because they're not here and there are 45 50000 shipments whatever it was.

Speaker 5: For October , we expect our revenue per day will increase by approximately 1.5% to 2% when compared to October 2022, with a decrease of approximately 2% to 2.5% in our LTL tons per day.

It is now dispersed.

So we win share from others and I believe we've been able to capture more market share.

That share is somewhat with us somewhat with other carriers I think there's probably an element of it that went into the truckload world as well that probably will at some point be rebalanced.

For the when you look at the growth in the industry than anyone else as well we've doubled our market share over the last 10 years that will require.

Speaker 5: While our shipment levels for the month have been stronger than our normal sequential trend, we believe a portion of this outperformance is attributable to a cybersecurity incident disclosed by a competitor.

Within LCL once the truckload world tightens up.

Investment as we go forward, we expect that we will continue to spend 10% to 15% of our revenues each year on capital expenditures.

Yet to be seen but trying to trace the number of shipments they had.

Versus at least what the public carriers have disclosed there is a missing element there that I believe may have landed in the truckload world but.

Speaker 5: we would expect some of the incremental growth in October will return to that competitor in November .

That will continue to be within real estate and <unk>.

With equipment to support our anticipated growth, but but we certainly believe that we can be the biggest market share winner over the next 10 years, just like we have over the past in because of the value offering that we have just validated by Matthew. This week. We've won this award 14 years in a row, we're very proud we had better performance.

Speaker 5: As usual, we will provide actual revenue-related details for October in our third quarter Form 10-Q .

For us the conversations that we have with with customers. The long term trends that we think will support growth in the hotel industry.

Speaker 5: Our third quarter operating ratio increased 150 basis points to 70.6% as the increase in overhead cost as a percent of revenue more than offset the improvement in our direct cost.

Be it continued improvement with e-commerce trends, that's conducive to moving freight by LTM.

Whether we see increased manufacturing at least in North America, a lot of those things will be more conducive to.

<unk> than we've ever had.

Speaker 5: While the decreasing revenue had a deleveraging effect on our cost categories that are more fixed in nature, we were pleased with the increase in operating efficiencies that helped drive the improvement in our direct cost.

In the survey winning 25 of the 28 attributes that they measure.

And our overall gap between us and the industry widened out further than it's ever been so we feel good about where we are but we're also focused on making sure that our service continuously improves as we go forward.

Freight moving by <unk> for which there is no one in the industry that is delivering the same type of service and value that we can offer customers and so that's that's what we'll remain focused on.

Speaker 5: We also continued with our best efforts to control discretionary spending to minimize the increase in overhead expenses as a percent of revenue.

We've got to continue to focus on.

And Thats, what will be key to our ability to win share.

Speaker 5: We did, however, continue to execute on our 2023 capital expenditure plan to help ensure that we have the necessary capacity for anticipated growth once the domestic economy improves.

Managing our cost inflation, and we focus very very intently on that as well. So we can continue to to.

So if I understand you don't think that like your long term volume growth share gain is any different going forward.

To have that 100 to 150 basis point.

Rice versus cost spread Keith.

Keeping our prices relative to the industry.

Post yellow.

Not at all I don't think the formula changes.

Speaker 5: This resulted in a 110 basis point increase in our depreciation expenses as a percent of revenue that, along with the increase in employee benefit cost, largely contributed to the overall increase in overhead expenses.

But certainly when you think about the overall value equation. There is no one that we believe can match, what we can offer a shipper.

Just because they're not here and there are 45 50000 shipments whatever it was.

I appreciate that thank you guys.

It is now dispersed and.

That share is somewhat with us somewhat with other carriers I think there's probably an element of it that went into the truckload world as well that probably will at some point be rebalanced.

The next question is from Amit Mehrotra with Deutsche Bank. Please go ahead.

Speaker 5: Old Dominion's cash flow from operations totaled $429.2 million and $1.1 billion for the third quarter and first nine months of 2023, respectively.

Thanks, Operator, Hi, Marty Hi, Adam.

I had two questions if that's okay.

First question.

Within LCL once the truckload world tightens up.

You just did like a 70 and change or in a broad freight environment.

Speaker 5: while capital expenditures were $172 million and $651.4 million for the same period.

Yet to be seen but trying to trace the number of shipments they had.

Pretty week to say the least.

Does that does that that informs the opportunity in a broadly better freight environment I know you have the six handle.

Versus at least what the public carriers have disclosed there is a missing element there that I believe may have landed in the truckload world but.

Speaker 5: We utilized $65.9 million and $368.1 million of cash for our share repurchase program during the third quarter and first nine months of 2023, respectively.

Our target, but I was wondering if you can update us that because I assume you are quite happy and impressed with the resiliency of the or and what has been weak market EBIT, including yellow and then I want to push back a little bit on the <unk>. Obviously, you guys on a headline basis have been exceptional and I know, it's really hard to get that number one.

For us the conversations that we have with with customers. The long term trends that we think will support growth in the <unk> industry.

Speaker 5: while cash dividends totaled $43.7 million and $131.5 million for the same period.

Be it continued improvement with e-commerce trends, that's conducive to moving freight by LTM.

Speaker 5: Our effective tax rate for the third quarter of 2023 was 24.0% as compared to 23.9% in the third quarter of 2022.

Whether we see increased manufacturing at least in North America, a lot of those things will be more conducive to.

National carrier position, but.

The value proposition for <unk>, historically has been where more expensive, but on a total cost basis, we're still better because of our claims ratio and our on time performance.

Freight moving by <unk> for which there is no one in the industry that is delivering the same type of service and value that we can offer customers and so that's what we'll remain focused on.

Speaker 5: We currently anticipate our effective tax rate to be 25.6% for the fourth quarter.

Speaker 5: This concludes our prepared remarks this morning. Operator will be happy to open the floor for questions at this time. We will now begin.

And you guys always we're in the middle or below that fair value band in the Masstige survey today Youre kind of at the Tippy top.

We've got to continue to focus on.

Managing our cost inflation, and we focus very intently on that as well. So we can continue to to.

And it's hard to improve 99% service, 0.1% claims ratio, but you are prices going up which on the margin reduces the value that you provide to the market, which may explain some of the market share I'm sure you disagree with this but help me understand how you think about moving up towards the very top of the fair value bands.

Speaker 2: To ask a question, you may press star, then 1 on your telephone keypad.

To have that 100 to 150 basis point.

Speaker 2: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press

Rice versus cost spread Keith.

Keeping our prices relative to the industry.

But certainly when you think about the overall value equation. There is no one that we believe can match, what we can offer a shipper.

Speaker 2: Our first question is from Allison Poleniak with Wells Fargo. Please go ahead.

And what that means for your market share opportunity going forward.

Speaker 6: Hi, good morning. Could you talk a little bit about the density improvement that you saw in the network and any way to quantify that? And then maybe, you know, following that, just touch on, you know, how much excess capacity you have in the system today to take on some more volume?

I appreciate that thank you guys.

Well, there is always going to be movement there.

The next question is from Amit Mehrotra with Deutsche Bank. Please go ahead.

And what we've got to go buy is not necessarily.

Thanks, Operator, Hi, Marty Hi, Adam.

That data that data is very important and we pay a lot of attention to it but it's the conversations we have every day with customers.

I had two questions if that's okay.

Speaker 5: Sure. Our current level of excess capacity, which is in our service center network, is now between 25 to 30 percent.

First question.

You just did like a 70 and change or in a broad freight environment.

The conversations when we go back to post pandemic Quinn.

Pretty week to say the least.

Speaker 5: We did improve density within our operations during the quarter, and that was a big factor in driving the improvement in our direct operating costs, at least the improvement that we saw.

Does that does that informs the opportunity in a broadly better freight environment I know you have the six handle.

Someone may have moved freight away from us because of price and trying to save a little bit but.

They were in jeopardy of losing a customer for both the freight never got picked up or it never got delivered.

Our target, but I was wondering if you can update us that because I assume you are quite happy and impressed with the resiliency of the or and what has been weak market EBIT, including yellow and then I want to push back a little bit on the mask you. Dave Obviously, you guys on a headline basis have been exceptional and I know, it's really hard to get that number one.

Speaker 5: both sequentially and on a year-by-year basis, but we leveraged that inflection in the volume.

Then there is.

Premium there for sure if youre products not on the shelf available for sale.

Speaker 5: You know, we always say long-term improvement in the operating ratio is driven by two key factors, density and yield, and both generally support or require the support of a macro.

You've got a production line that shut down waiting on a part or a piece.

I think shippers are looking more strategically of value.

Speaker 5: economic environment is positive, but we had good leverage there that drove some nice operating efficiencies within our pickup and delivery operations on the dock as well.

National carrier position, but.

That seems to be the outcome post pandemic world.

The value proposition for Ob, historically has been where more expensive, but on a total cost basis, we're still better because of our claims ratio and our on time performance.

Anytime we go through a slow environment like we have been for the last year there can be some some movement.

Speaker 5: had improvement, we still had a slight decrease in our line haul load factor, but that's improved from where we were earlier in the year. So all those factors contributed to the improvement in our direct cost as a percent of revenue during the quarter.

And within some of those categories, but for us.

And you guys always we're in the middle or below that fair value band in the Masstige survey today Youre kind of at the Tippy top.

To have a consistent approach to pricing each year being able to sit across the table from a customer and have an open honest.

And it's hard to improve 99% service, 0.1% claims ratio, but your prices going up which on the margin reduces the value that you provide to the market, which may explain some of the market share I'm sure you disagree with this but help me understand how you think about moving up towards the very top of the fair value bands.

Conversation about being fair to us and being fair to them.

Speaker 2: The next question is from Jack Atkins with Stevens. Please go ahead.

Is what we strive for.

Speaker 5: Okay, Greg, good morning. Thanks for taking my question. So I guess, you know, Adam, as you think about the sequential progression into the fourth quarter, you know, I know there are a lot of puts and takes with October and the disruption, further disruption of the market in October . But could you maybe talk about your expectation for, or maybe how we should be thinking about operating ratio trends sequentially from the third quarter to the fourth quarter, all things considered?

To be able to make the investments that we're doing like I said earlier capacity may not a bandwidth.

Top of mind over the last year.

And what that means for your market share opportunity going forward.

Cause of the overall.

And underlying demand and then you had a couple of carriers earlier this year that.

Well theres always going to be movement there.

And what we've got to go buy is not necessarily.

We are.

Making some changes and doing some different things with respect to their pricing.

That data that data is very important and we pay a lot of attention to it but it's the conversations we have every day with customers.

Speaker 5: Typically, the fourth quarter operating ratio is 200 to 250 basis points worse than the third quarter. A couple of factors drive that. Usually, revenue is a little bit softer. We give our wage increase the first of September , so we get three full months.

So those are the things that you always have.

That are challenges that manage through but.

That environment changes pretty quickly in.

The conversations when we get back to post pandemic win.

I keep referencing 2021 that was a period, where our competitors were increasing rates faster than us.

Someone may have moved freight away from us because of price and trying to save a little bit but.

Were they.

Speaker 5: within the quarter with that new wage rate, but multiple factors that generally are driving that change. One thing to note, we also do an actuarial assessment each year. We conduct that in the fourth quarter and we normalize for that, just assume it stays flat with the previous quarter, but we've seen adjustments in the past.

They were in jeopardy of losing a customer because the freight never got picked up or it never got delivered.

More up playing the market plan.

Versus having a consistent approach and all of a sudden we look like a lot.

Then there is.

Premium there for sure if youre products not on the shelf available for sale.

Better value if you will when our service is way ahead on the spectrum, but now that someone is closed that pricing gap because they've come in and taken the teen 15% type of rate increase that's what drives market share to us and its market share that stay sticky.

You've got a production line that shut down waiting on a part or a piece.

I think shippers are looking more strategically at value.

Speaker 5: that can be favorable, which is what we had last year, as well as unfavorable. So, assuming those calls stay different, I think that we can be in the 150 to 200 basis point deterioration range. So, slightly better than what we would historically see. Some of that, we're obviously starting the quarter out with a little favorability versus our normal sequential trend.

That seems to be the outcome post pandemic world.

Anytime we go through a slow environment like we have been for the last year there can be some some movement.

We have had great continuity within.

Our large accounts when we look at our top national accounts.

And within some of those categories, but for us.

We don't have turnover at that business over the past 12 months, we've not lost accounts or loss lanes.

To have a consistent approach to pricing each year being able to sit across the table from a customer and have an open honest.

In many cases.

The environment has been weaker so demand for.

Speaker 5: as we discussed, and so, you know, I think that we expect some volumes to kind of normalize, if you will, back to where they otherwise would have been for November and December . But that still gives us a little bit of a head start, and I think will help us drive a little bit of outperformance versus our normal trend there. Okay. Makes sense.

For our customers' products, if you will they've not been able to tender as much freight to us.

Conversation about being fair to us and being fair to them.

Is what we strive for.

It's something that we always are irrelevant and mindful of where our pricing is relative.

To be able to make the investments that we're doing like I said earlier capacity may not a bandwidth.

Two others, but.

We do what we need to do what makes sense for us that is part of our long term strategic plan and we just make sure we communicate.

Top of mind over the last year.

Cause of the overall.

And underlying demand and then you had a couple of carriers earlier this year that.

What our needs are going to be with customers.

Speaker 2: The next question is from Ravi Shankar with Morgan Stanley . Please go ahead.

Or.

It's a model that's work we've been able to grow our revenues, 11% to 12% on average.

Making some changes and doing some different things with respect to their pricing.

Each year, the past 10 years.

So those are the things that you always have.

And Thats the same formula that we want to be able to work as we move forward.

That are challenges that maintenance through but.

That environment changes pretty quickly in.

Speaker 7: I'm wondering how you think the numbers will play out when the upcycle comes. Do you expect to see the market to suddenly tighten up and there to be like a rising tide of pricing? Or do you just think that you get better incremental margin as the volumes come in? What do you think the 2024 upcycle looks like in a post-year situation at this point?

Consistent and it sounds like a simple plan, but there is a lot of <unk>.

I keep referencing 2021 that was a period, where our competitors were increasing rates faster than us.

Complexities behind the scenes, if you will and we just want to keep executing and believe we can.

Where are they.

More up playing the market plan.

I think as we go through the next 12 months, if we see some real economic recovery.

So having a consistent approach and all of a sudden we look like a lot.

I think that we will see our numbers continue to outperform from a growth standpoint than the industry just like we've seen in prior cycles.

Better value if you will when our service is way ahead on the spectrum, but now but someone has closed that pricing gap because they've come in and taken the 10, 15% type of rate increase that's what drives market share to us and its market share that stay sticky.

Speaker 5: Well, I think it's yet to be determined for 2024. Certainly, there's a lot of tea leaves that would suggest this could be a year of inflection, but we also believe the same thing. We thought we were gonna see a rebound in the spring of this year, so we're cautiously optimistic about what next year may bring. As we've said before, with the post-yellow situation,

Got it thank you very much appreciate it.

The next question.

<unk> is from Jon Chapell with Evercore ISI. Please go ahead.

We have had great continuity within our.

Thank you Adam.

We're able to handle this surge of <unk> business without really changing the cost structure that much.

Our large accounts when we look at our top national accounts.

So as we think about kind of a return to the cyclical recovery at some point next year, whether it's first half or back half loaded.

We don't have turnover in that business over the past 12 months, we've not lost accounts or loss lanes.

Speaker 5: We want to be measured with our approach and continue to believe that that's slow and steady wins the race So we didn't try to go out

In many cases the demand environment.

Did this surge in volume in the third quarter and October absorb a lot of spare capacity and a lot of the ability to have the incremental margin expansion. So as you can see the volume recovery on a more sticky basis you can still.

Speaker 5: and immediately win as much share as was out there in the market. But we're trying to do it in the right way in leveraging the capacity that we have. And not just the capacity in the service center network. There's a people capacity element as well as equipment. And I don't know that there's as much capacity in the market as you may have indicated with your question because we're hearing it every day. We're hearing about competitors that are missing pickups.

Environment has been weaker so demand for <unk>.

For our customers' products. If you will they have not been able to tender as much freight to us.

It's something that we always are irrelevant and mindful of where our pricing is relative to.

Increased the cost structure on a less for one for one basis and get that historical or improvement or is there going to be a bit of a catch up where youre going to have to add more labor more.

Two others, but.

We do what we need to do and what makes sense for us that is part of our long term strategic plan and we just make sure we communicate.

Resources, if the broader demand tailwind actually accelerates next year.

What our needs are going to be with customers.

Speaker 5: They don't have the people part of the capacity equation solved and maybe took on too much freight and are starting to have negative implications from their overall service products. We believe that we'll continue to win market share, but do it in the right way by giving superior service at a fair price to our customers and offering a value that's unmatched in our industry. And if we get some positive economic support.

Well we are.

Model, that's work, we've been able to grow our revenues, 11% and 12% on average.

We were in a great spot coming in to this quarter.

Each year over the past 10 years.

From a labor standpoint from an equipment standpoint.

And Thats the same formula that we want to be able to work as we move forward.

Definitely from a service center standpoint.

We've intentionally been heavy we've tried to protect as meaning.

Consistent and it sounds like a simple plan, but there's a lot of <unk>.

Driver positions in particular that we could.

<unk> behind the scenes, if you will and we just want to keep executing and believe we can.

We've gone through this slow period.

We certainly have seen some attrition.

I think that as we go through the next 12 months, if we see some real economic recovery.

Speaker 5: I think that you've seen in past cycles when we actually get there.

Our workforce over the past year.

Speaker 5: 2018 and 2021 are good examples where we try to stay ahead of the growth curve with the capacity investments that we consistently make to be able to take on that volume when it's there. When we look at those two years that have just referenced, we significantly outrood the markets in those years despite the strength and underlying demand because of that excess capacity that we had in place.

But we've tried to keep as many people.

I think that we will see our numbers continue to outperform from a growth standpoint than the industry just like we've seen in prior cycles.

On board as we could knowing that the inflection would individually happen.

We believe that it was going to happen earlier in the year.

And obviously, we are disappointed when it didn't but but we just continue to try to manage through.

Got it thank you very much appreciate it.

The next question is from Jon Chapell with Evercore ISI. Please go ahead.

And here, we are it didn't happen in the manner that we thought that it would but we were well positioned to respond.

Thank you.

To handle this surge its <unk> business without really changing the cost structure that much.

And our existing workforce has been able to do so now from here we have.

So as we think about kind of a return to the cyclical recovery at some point next year, whether it's first half or back half loaded.

Speaker 2: The next question is from Chris Weatherby with Citigroup. Please go ahead.

Restarted the hiring process in some locations and will continue to run our internal truck driving schools to produce new drivers and have them available.

Speaker 2: Hey, thanks. Good morning, guys. Maybe I could piggyback on that a little bit as we think about 2024. I know normally you guys talk about costs, you talk about price relative to cost and be able to

Did this surge in volume in the third quarter and October absorb a lot of spare capacity.

As the demand levels dictate if our shipment volumes continue to increase if we can see.

A lot of the ability to have the incremental margin expansion. So as you can see the volume recovery on a more sticky basis you can still.

Speaker 8: exceed that in any sort of normal year. I guess in post-yellow, as you think about 2024, do we need to see something else to be able to sort of spark a better-than-normal pricing year for you guys in 2024? I think there are expectations that next year naturally would be because of what happened with yellow. But is a normal cyclical recovery enough to spark something that would be better than average? I just want to get your general take on how sort of spring-loaded or not the pricing environment?

Sequential improvement through next year, we want to make sure that we've got all elements of capacity.

Sure.

Increase the cost structure on a less for one for one basis and get that historical or improvement or is there going to be a bit of a catch up where youre going to have to add more labor more.

Place to be able to deal with it and not be plant.

From behind if you will and having to try to catch it or not being able to say, yes to a customer if they are coming to us and asking if we can handle incremental volumes for them. So.

Resources, if the broader demand tailwind actually accelerates next year.

Well we are.

We were in a great spot coming in to this quarter.

It's always a challenge to try to walk that tight rope in terms of managing the elements of capacity, but I think that we did a great job we're getting through this year.

From a labor standpoint from an equipment standpoint.

Speaker 5: Yes, sure. Well, I think the environment continues to be strong overall, especially given the supply shock that happened. But I think our approach is different from any of our competitors. We believe in a long-term consistent approach to pricing.

Definitely from a service center standpoint.

We've intentionally been heavy we've tried to protect as many.

We may have carried a little extra cost in doing so.

Driver positions in particular that we could.

But I think our operating ratio has performed about where we thought it would given the decrease in volumes.

We've gone through this slow period.

Speaker 5: And we try to target obtaining 100 to 150 basis points of price above cost each year. We've had some cost pressure this year and

We certainly have seen some attrition within our workforce over the past year.

We said earlier in the year that our focus would be to managing their direct cost even in a low volume environment.

But we've tried to keep as many people.

Onboard as we could knowing that the inflection one individually happen.

Been able to do so without any sacrifice whatsoever to our service quality in fact, some of our service metrics have actually improved.

Speaker 5: Evident in our numbers, but I'll believe that that starts Improving as as we go into next year, especially if we can get

We believe that it was going to happen earlier in the year.

And obviously, we are disappointed when it didn't but but we just continue to try to manage through.

Speaker 5: a little bit of volume recovery. We're already seeing the core inflation in our business moderating that did in the third quarter. And I think that same trend can carry through and fork you and then to 2024.

As we've gone through this year. So we're pleased with where our service quality is the.

The performance of our team the improving efficiencies that we're seeing.

And here, we are it didn't happen in the manner that we thought that it would but we were well positioned to respond.

We will continue to add to the team and continue to rebalance our fleet as.

And our existing workforce has been able to do so now from here we have.

As well as.

Speaker 5: as well, but you know, I think the market should certainly be conducive to

As we go through 2024, we've still got some deferred replacements that we're we want to improve the average age of our fleet.

Restarted the hiring process in some locations and will continue to run our internal truck driving schools to produce new drivers and have them available.

Speaker 5: us being able to obtain the increases that we believe we need to justify.

But all of that will continue to be worked out as we go through the next year or so and we want to get back to a growth environment and improving operating ratio environment. All of those things were kind of used to seeing.

Speaker 5: and cover our cost inflation but also the investments that we're making in capacity.

As the demand levels dictate if our shipment volumes continue to increase if we can see a sequential.

Speaker 5: We're only a carrier that's really investing significantly in service and our capacity. We've invested $2 billion over the last 10 years.

Need a little cooperation from the economy to help us along the way.

Improvement through next year, we want to make sure that we've got all elements of capacity.

Got it thank you.

Speaker 5: As a result, we've been able to increase our door capacity by 50%.

The next question is from Tom <unk> with UBS. Please go ahead.

Place to be able to deal with it and not be plan.

Speaker 5: And when you look at the public LTO companies at least, which are 65% to 70% of the market, overall capacity there is down close to 10%.

From behind if you will and having to try to catch it or not being able to say, yes to our customer.

Yes, good morning.

Adam.

A bit about I think you said like inflation can come down somewhat next year, and then you've talked a bit about price as well and you're seeing a pretty constructive view on where price is going to be next year.

Coming to us and asking if.

Speaker 5: And so, you know, I think that the customers understand that and continue to give us the increases that we need that basically support the value proposition that we're able to offer them. And you think about the supply chain challenges.

We can handle incremental volumes for them so.

It's always a challenge to try to walk that tight rope in terms of managing the elements of capacity, but I think that we did a great job with getting through it this year.

We don't see.

The improvement in the freight market activity.

Do you think you'd be looking at those two factors supporting margin improvement.

Speaker 5: what not that the shippers have had to work through the last couple of years. In particular, capacity hasn't necessarily been at the forefront of the conversation over the last year, but our last three certainly has been critical. And so we feel like that.

We may have carried a little extra cost in doing so.

But I think our operating ratio has performed about where we thought it would given the decrease in volumes.

Because it seems that you can put those two together you would see the margin improve but how do you think about.

I guess.

We said earlier in the year that are <unk>.

Lower inflation and favorable price and what that does for margin.

Because it would be to managing our direct cost even in a low volume environment.

Speaker 5: what we need to continue to focus on, but we'll continue with our theme approach like we always have and it's produced good things for us.

Even if we don't see create improve.

Been able to do so without any sacrifice whatsoever to our service quality in fact, some of our service metrics have actually improved as.

Well I think that.

We had for one thing we had a pretty hefty capex year. This year and when you look at our operating ratio and the change that we have.

Speaker 5: from a financial result standpoint, but an improvement in our balance sheet to support the ongoing investments that we believe we need to continue to make.

As we've gone through this year. So we're pleased with where our service quality is the performance of our team the improving efficiencies that we're seeing will continue to add to the team and continue to rebalance our fleet.

In the third quarter.

That was a bit of a headwind of 110 basis points headwind on the depreciation side and some of the.

Speaker 2: The next question is from Scott Group with Wolf Research. Please go ahead.

The Capex was basically related to what's happened over the last couple of years with the OEM challenges that we've had.

As well.

As we go through 2024, we've still got some deferred replacements that we're we want to improve the average age of our fleet.

Speaker 9: Hey, thanks. Morning. I want to ask about your perspective on share gains. So, we've pulled forward, I guess, about 10 years of share gains from yellow into a quarter.

Shortages of parks that have required us to carry maybe a little bit more equipment on the books than we would sort of look at it from them, but we were optimizing the fleet.

But all of that will continue to be worked out as we go through the next year or so and we want to get back to a growth environment and improving operating ratio environment. All of those things are kind of used to seeing.

Speaker 9: I guess, do you think post-ello, the pace of share gain for you guys in future years?

Standpoint, so I think as we go through next year.

Need a little cooperation from the economy to help us along the way.

Speaker 9: Will be as good as what we've seen from from you historically, and I guess I'm curious about this question in the context of this upcoming yellow auction. I mean, ultimately, I guess I want to know, like, how much.

If it looks like it's going to be another flattish year were already sort of a leg up if you will.

Got it thank you.

A lot of times you can take September volumes for the month and kind of.

The next question is from Tom <unk> with UBS. Please go ahead.

Just use that to correlate to what the next year's volumes will be.

Speaker 9: What is your strategy in terms of terminal growth and how much do you want to add? Obviously you were involved in the stocking horse bid. What's the strategy here with this upcoming auction?

Yes, good morning.

Adam.

A bit about I think you said like inflation can come down somewhat next year, and then you've talked a bit about price as well and you've seen a pretty constructive view on where price is going to be next year.

And so we might be looking at even if it's.

Underlying demand doesn't change at all.

Speaker 5: But we don't want to get into any details on that, just given the fact that it's ongoing and we're continuing to evaluate those options. But in our long-term strategic plan, it didn't depend on one competitor going out of business and us being able to obtain real estate from them.

We believe that we've got the opportunity to.

When some of the share that we continue to believe will be turning around over the next six months to a year.

We don't see.

The improvement in the freight market.

<unk>.

Given some of the service issues that I referenced earlier, we're hearing about every day.

Do you think you'd be looking at those two factors supporting margin improvement.

But we're already in a position, where we might see a little bit of volume growth and then get some yield on top of that debt.

Because it seems that you can put those two together you would see the margin improve but how do you think about.

Speaker 5: Our plan will continue to be give superior service at a fair price and service is what wins market share for us as well as having available capacity.

I guess.

Environment, where costs may be improving as.

Lower inflation and favorable price and what that does for margin.

As well then yes.

Yes, thats the environment were in.

Even if we don't see create improve.

In the past, we've been able to produce some operating ratio improvement.

Well I think that.

Speaker 5: Again, you look at the performance that we have with our volumes and market share in 2018-2021.

We had for one thing we had a pretty hefty capex year. This year and when you look at our operating ratio and the change that we have.

Yes, I mean, it sounds like.

Pretty good about wind grab in 'twenty four even if you don't see a lot of improvement in the freight market.

Speaker 5: You know, 10 points out performance versus the industry and that wasn't just yellow that we were comparing against it is the industry

In the third quarter.

That was a bit of a headwind of 110 basis points headwind on the depreciation side and some of the.

I think so I mean.

Certainly.

Speaker 5: So we win share from from others and I believe we've been able to capture more market share when you look at the growth in the industry than anyone else as well. We doubled our market share over the last 10 years.

We saw the step up basically in August and then.

The Capex was basically related to what's happened over the last couple of years with the OEM challenges that we've had.

I was pleased with the performance that we had in September.

When we talked about.

<unk> is a parks that have required us to carry maybe a little bit more.

Speaker 5: That will require investment as we go forward. We expect that we'll continue to spend 10 to 15% of our revenues each year on capital expenditures.

Post the mid quarter update.

Equipment on the books than we would sort of look at if we were optimizing the fleet star.

Where we were from a shipments per day standpoint, we had been at 47000 shipments per day since December.

Standpoint so.

Last year and basically that averaged carried forward through July we saw that that step up we've talked about kind of an incremental 3000 shipments per day.

Speaker 5: That will continue to be within real estate and with equipment to support our anticipated growth. But we certainly believe that we can be the biggest market share winner over the next 10 years, just like we have over the past 10, because of the value offering that we have. We just validated by Matthew this week. We've won this award 14 years in a row. We're very proud. We had better performance than we've ever had.

As we go through next year.

If it looks like it's going to be another flattish year were already sort of a leg up if you will.

A lot of times you can take September volumes for the month and kind of.

That's where we were in August.

In September normally it's a 2.5% to 3% increase in shipments per day would be normal seasonality, while the last month of the first quarter in the second quarter, we saw a little bit of a pick up but nothing close to where normal seasonality would be that's kind of where we've been missing some of the growth over the last year, but our ship.

Just use that to correlate to what the next year's volumes will be.

So we might be looking at even if it's.

Underlying demand doesn't change at all we believe that we've got the opportunity to win some of the share that we continue to believe will be turning around over the next six months to a year.

Speaker 5: In the survey, winning 25 of the 28 attributes that they measure, and our overall gap between us and the industry widened out further than it's ever been, so we feel good about where we are, but we're also focused on making sure that our service continuously improves as we go forward, and that's what will be key to our ability to win shares.

<unk> per day were up two 1% so that performed a lot better.

Given some of the service issues that I referenced earlier, we're hearing about every day.

Then what we've been seen at least in the last month of the quarters and that really was was no new impact us just some share shift and then.

But we're already in a position, where we might see a little bit of volume growth and then get some yield on top of that debt.

<unk> customers that are giving us more freight.

Environment, where costs may be improving as.

Speaker 9: So, if I understand, Adam, you don't think that, like, your long-term volume growth share gain is any different going forward post-Yellow?

If you will so there's been a lot obviously going on over the last four months within the industry.

As well then yes.

Yes, thats the environment were in.

In the past, we've been able to produce some operating ratio improvement.

Some things obviously permanent and then like we mentioned I believe that we will see some of the.

I mean, it sounds like <unk>.

Speaker 5: Not at all. I don't think the formula changes just because they're not here and they're 45, 50,000 shipments, whatever it was, is now dispersed. And that share is just somewhat with us, somewhat with other carriers. I think there's probably an element of it that went into the truckload world as well that probably will at some point be rebalance.

Pretty good about win in 24, or even if you don't see a lot of improvement in the freight market.

The volume gain that we had in October that that will return to a competitor.

I think so I mean.

Trying to kind of figure out where the daily shipment count gets too.

Certainly.

We saw the step up basically in August and then.

November and December is a little difficult, but if things kind of shake out.

I was pleased with the performance that we had in September.

If we had just normalized if you will and were more along normal seasonal patterns, we would've been an environment, where if we get back to that for November December rather to where our shipment counts or more flattish with where were last year in the fourth quarter in revenues probably.

When we talked about.

Speaker 5: within LCL once the truckload world tightens up. That's yet to be seen but trying to trace the number of shipments they had versus at least what the public areas have disclosed. There's a missing element there that I believe may have landed in the truckload world.

Post the mid quarter update.

We were from a shipments per day standpoint, we had been at 47000 shipments per day since December of last year and basically that average carried forward through July we saw that step up we've talked about kind of an incremental 3000 shipments per day.

Becoming more flattish as well versus being down.

Five 5% in the third quarter it may still be down.

Speaker 5: the conversations that we have with customers, the long-term trends that we think will support growth in the LPL industry.

Where we were in August.

Slightly but it's getting everything is kind of getting back to flattish and I think that thats a good position to build on.

September normally its two 5% to 3% increase in shipments per day would be normal seasonality, while the last month of the first quarter in the second quarter, we saw a little bit of a pick up but nothing close to where normal seasonality would be.

Speaker 5: be it continued improvement with e-commerce trends.

As we go into 2024, hopefully, we'll continue to see some more of those share gains like I mentioned.

Speaker 5: that the conduce to moving freight by LTL, whether we see increased manufacturing, at least in North America, a lot of those things will be more conducive to freight moving by LTL, for which there's no one in the industry that is delivering the same type of service and value that we can offer customers. And so that's what will remain focused.

Just service related and then if we can get a little bit of help from the economy then that would.

That's kind of where we've been missing some of the growth over the last year, but our shipments per day were up two 1% so that that performed a lot better.

Billable and even more volumes and then we'll just continue to execute like I said earlier on the volume side and managing costs and if we can have that positive delta. There then that's a good setup, even if underlying demand is not significantly changing if it does and we're not going to pre call. It like we did last.

And then what we've been seen at least in the last month of the quarters and that really was with no new impact us just some share shift and then.

Speaker 5: We've got to continue to focus on managing our cost inflation. And we focus figuring Pint Real in that as well. So we can continue to have that 100 to 150 basis point price versus cost spread keeping our prices relative to the industry. But certainly when you think about the overall value equation, there's no one that we believe can match what we can offer a shipper.

<unk> customers that are giving us more freight.

Last year, but if it does.

If you will so.

The nice thing in that type of environment, where I think our model shines the brightest.

Theres been a lot obviously going on over the last four months within the industry.

When.

Things, obviously permanent and then like we mentioned I believe that we'll see some of the.

<unk> are at capacity issues, and we believe that's happening.

Just on customer feedback today.

The volume gain that we had in October that that will return to a competitor.

Then that's when we can really put on the incremental volumes that we build our network up to be prepared for.

So trying to kind of figure out where the daily shipment count gets too.

And so.

In November and December is a little difficult, but if things kind of shake out if.

Speaker 2: The next question is from Amit Merotra with Deutsche Bank. Please go ahead.

That possibility is out there, but but a lot depends on what we may see from.

If we had just normalized if you will and were more along normal seasonal patterns, we would've been in an environment, where if we get back to that for November December rather to where our shipment counts or more flattish with where we were last year in the fourth quarter in revenues probably.

Speaker 10: Thanks, operator. Hi, Marty. Hi, Adam. I had 2 questions if that's okay. So, so 1st question you just did like a 70 and change or in in a broad freight environment. That's pretty weak.

From an overall economic standpoint.

Right, Okay, great. Thanks for the perspective Adam.

The next question is from Jordan <unk> with Goldman Sachs. Please go ahead.

Speaker 10: Does that, does that, that actually informs the opportunity in a broadly better freight environment? I know you have this six-handle.

Yes, hi spoke quite a bit about price on the call today I'm just curious on mix and the types of shipments you are getting obviously weight per shipment.

Becoming more flattish as well versus being down.

Five 5% in the third quarter, it may still be down slightly but its getting everything is kind of getting back to flattish and I think that thats a good position to build on.

Speaker 10: O.R. target, but I was wondering if you can update us that because I assume you're quite happy and impressed with the resilience of the O.R. And what has been a weak market, even including yellow. And then I want to push back a little bit on the mask you're doing. Obviously you guys on a headline basis have been exceptional. And I know it's really hard to get that number one national carrier position. But.

Maybe discussing that which is basically trying to down yes.

Yes sort of thoughts around that and shipment mix. Thank you.

We go into 2024, hopefully, we'll continue to see some more of those share gains like I mentioned.

Yes, our weight per shipment has trended down and really.

Got it.

It went down I guess in August to about 485 pounds and that was some of that incremental freight that we saw that pick up of about 3000 shipments per.

Just service related and then if we can get a little bit of help from the economy, then that would be.

Speaker 10: You know, the value proposition for OD historically has been, you know, yeah, we're more expensive, but on a total cost basis, you know, we're still better because of our claims ratio and our on-time performance.

<unk>, even more volumes and then we will just continue to execute like I said earlier on the volume side and managing cost and if we can have that positive delta there.

Per day.

Increased a little bit in September, which you would expect and we're kind of hanging around that <unk> hundred 85 pound range.

Speaker 10: And you guys always, you know, were in the middle or below that fair value band in the Matthew survey. Today, you're kind of at the tippy top.

That's a good setup, even if underlying demand is not significantly changing if it does and we're not going to pre call. It like we did last year, but if it does.

Here in October as well, so that's something where I believe we're kind of at a baseline reflecting kind of the underlying.

Speaker 10: And, you know, it's hard to improve 99% service, 0.1% claims ratio, but your price is going up, which on the margin reduces the value that you provide to the market, which makes plain some of the market share. I'm sure you disagree with this, but help me understand how you think about moving up towards the very top of the fair value ban, and what that means for your market share opportunity.

The nice thing in this type of environment, where I think our model shines the brightest.

Great. That's in our book right now and that will be a metric to watch to see are there increased orders for widgets does that $14 85.

Lynn.

Patters are at capacity issues, and we believe that's happening just based on customer feedback today.

We see that grow to 500 to 15000 getting back.

Then that's when we can really put on the incremental volumes that we build our network up to be prepared for.

Those are to the 600 pound range that we've seen.

Robust economies.

So it's.

Speaker 5: Well, there's always going to be movement there. And what we've got to goodbye is not necessarily that data, that data is very important. And we pay a lot of attention to it, but it's the conversations we have every day with customers and the conversations.

And so.

Like anything the freight that you take on as long as you understand the handling characteristics and what the pricing ought to be that decrease in weight per shipment did have a little bit of a favorable impact on our yield metrics during the quarter.

That possibility is out there, but a lot depends on.

What we may see from <unk>.

And overall economic standpoint.

Right, Okay, great. Thanks for that perspective, Adam.

That's what we have built our business all of this is investing heavily in all of the.

Yes.

The next question is from Jordan <unk> with Goldman Sachs. Please go ahead.

Speaker 5: when we get back to post pandemic, when someone may have moved, afraid away from us because of price and trying to save a little bit, but if they were a jeopardy of losing a customer because afraid never got picked up or it never got delivered, then there's a premium there for sure. If your product not on the shelf available for sale, you've got a production line that shut down waving on a parter or a peach.

The tools and technologies to understand the freight that we're moving to make sure that we're moving.

Yes, hi spoke quite a bit about price on the call today Im just curious on mix and the types of shipments you are getting obviously weight per shipment.

Everything profitably with the right pricing in place and I think that we've made those adjustments to.

Maybe discussing that which is basically trended down.

So the incremental freight that we've seen thus far.

Sort of thoughts around that.

And shipment mix. Thank you.

Thank you.

The next question is from Eric Morgan with Barclays. Please go ahead.

Our wafer shipment has trended down and really.

Hey, good morning, Thanks for taking my question I, just wanted to come back to the near term.

Speaker 5: I think shippers are looking more strategically at value. That seems to be the outcome post-pandemic world. And any time we go through a slow environment, like we've been for the last year, there can be some movement within some of those categories, but for us.

It went down I guess in August to about 485 pounds and that was some of that incremental freight that we saw that pick up of about 3000 shipments.

I think for September you said.

Tonnage was about one point below average seasonality.

On a sequential basis.

Per day.

Increased a little bit in September, which you would expect and we're kind of hanging around that 40 585 pound range.

But you have confidence you are gaining market share in underlying demand has been steady. So I'm. Just wondering if you can clarify that and maybe if youre seeing any attrition from the initial wave of share shifts I guess kind of along the lines of an earlier question just wondering how.

Here in October as well so that's.

Speaker 5: You know, trying to have a consistent approach to pricing each year, being able to sit across the table from a customer and have an open office...

That's something where I believe we're kind of at a baseline reflecting kind of the underlying freight that's in our book right now and that'll be a metric to watch to see are there increased orders for widgets does that $14 85.

Any new customers you have from this are responding to your premium service, but also premium price offering.

Speaker 5: conversation about being fair to us and being fair to them is what we strive for. And, you know, to be able to make the investments that we're doing, like I said earlier, capacity may not have been at the top of mind over the last year because of the overall weakness and underlying demands. And then you had a couple of carriers earlier this year that...

Yes.

From a tonnage standpoint, the sequential increase in September from August was up two 7%.

Do we see that grow to 500 to 15 20 getting back closer to the 6800 pound range that we've seen.

The 10 year average changes of three 6% increase.

And robust economies.

So.

But that compares favorably.

<unk>.

Like anything the freight that you take on as long as you understand the haynesville and characteristics and what the pricing ought to be that decrease in weight per shipment did have a little bit of a favorable impact on our yield metrics during the quarter and but.

What our performance has been in the third.

Speaker 5: you know, making some changes and doing some different things with respect to their price.

The first few quarters of the year.

The point that I was making we've seen a little bit stronger pickup in September coming to us versus what we had seen earlier in the year.

Speaker 5: So, you know, those are things that you always have that are challenges that you manage through, but that environment changes pretty quickly. And, you know, I keep reference in 2021, that was a period where competitors were increasing rates faster than us.

What we have built our business on us.

And really no new <unk>.

Vesting heavily in all of the.

If you will within the industry.

The tools and technologies to understand the freight that we're moving to make sure that we're moving.

That we're driving any of that changed just a continuation.

Some of that freight.

Speaker 5: You know, where they're more up, playing the market, playing versus having a consistent approach. And all of a sudden we look like a lot better value if you will when our service is way ahead on the spectrum. But now that someone has closed that pricing gap because they've come in and taken a 10, 15% type of rain increase, that's what drives market share to us. And it's market share that stays sticky.

Everything profitably with the right pricing in place and I think that we've made those adjustments to.

That had to move at the end of July we had made the point on the last call that.

So the incremental freight that we've seen thus far.

Obviously shippers has defined an immediate home for.

Thank you.

That freight and they likely leverage the existing carriers that they had in their networks or at least the large national accounts did but.

The next question is from Eric Morgan with Barclays. Please go ahead.

Hey, good morning, Thanks for taking my question I, just wanted to come back to the near term.

We believed in and continue to believe that there's going to be some share shifting around.

I think for September you said tonnage was about one point below average seasonality.

But I think that especially as we go through the fourth quarter. The first quarter of next year two periods that are seasonally slower during the year.

Speaker 5: We have had great continuity within our large accounts. When we look at our top national accounts, we don't have turn over to that business.

On a sequential basis.

But you have confidence you are gaining market share in underlying demand has been steady. So just wondering if you can clarify that and maybe if youre seeing any attrition from the initial wave of share shifts I guess.

It is probably the type of environment that shippers will be looking at.

Speaker 5: Over the past 12 months, we've not lost accounts or lost lane.

Their overall supply chain partners and figuring out what's the right solution to have and so I think that we'll see some churn.

Speaker 5: Just in many cases, the demand environment has been weaker, said demand for our customers' products, if you will. They've not been able to tinder as much freight to a set.

Along the lines of an earlier question just wondering how.

Any new customers you have from this are responding to our premium service, but also premium price offering.

That will be happening over the next six months and I think that there are probably some customers that were.

Speaker 5: You know, it's something that we always are relevant and mindful of where our pricing is relative to others, but, you know, we do what we need to do, what makes sense for us as part of our long term strategic plan. And we just make sure we communicate what our needs are going to be with customers. And, you know, it's the model that's worked. We've been able to grow revenues 11 to 12% on average each year. And we're able to, you know, the past year.

Yes.

From a tonnage standpoint, the sequential increase in September from August was up two 7%.

At competitors previously that are taken on large increases right now at a time when there are services probably deteriorating.

The 10 year average changes of three 6% increase.

We'll also be looking at.

The value that <unk> can provide.

But that compares favorably to.

And those are the types of accounts that we've seen in prior periods.

What our performance has been in the third month of the first few quarters of the year with the point that I was making we've seen a little bit stronger pickup in September coming to us versus what we had seen earlier in the year.

Obviously, the situation is different but.

And I think it could be very similar to 2021 that environment wishes to all demand driven but demand was incredibly strong.

Speaker 5: And that's the same formula that we want to be able to work is we move forward.

Really no new events, if you will within the industry.

Speaker 5: It's a consistent and it sounds like a simple plan, but there's a lot of complexity behind the scenes if you will. We just want to keep executing and believe we can and I think that as we go through the next 12 months if we see some real economic recovery I think that we'll see our numbers continued outperformed from a growth standpoint than the industry just like we've seen in prior cycles

There is tremendous opportunity there from a volume standpoint, and a lot of the competitors simply couldnt take on the incremental volumes.

That we're driving any of that changed just a continuation.

Some of that freight.

Because they didn't have all the elements of capacity in <unk>.

That had to move at the end of July we had made the point on the last call that.

<unk> to be able to do so and they are missing pickups theyre.

They are not able to get the freight that they do pick up delivered on time.

Obviously shippers had to find an immediate home for.

That freight and they likely leverage the existing carriers that they had in their networks or at least the large national accounts did but.

Are the types of customers that increasingly call on old Dominion.

We're starting to have.

Some of those same types of conversations maybe not at the same level at this point, but we're having those same conversations today.

We believed in and continue to believe that there's going to be some share shifting around.

Speaker 2: The next question is from John Chappelle with Evercore ISI. Please go ahead.

And we think that that will create some some incremental volume opportunity for us as we progress.

But I think that especially as we go through the fourth quarter. The first quarter of next year two periods that are seasonally slower during the year.

Speaker 11: Thank you. Adam, you're able to handle this surge of 3Q business without really changing the cost structure that much. So as we think about kind of a return to the physical recovery at some point next year, whether it's first half or back half loaded.

Through the next few quarters.

Thank you.

This is probably the type of environment that shippers will be looking at.

The next question is from Ken <unk> with Bank of America. Please go ahead.

Hey, great good morning, Marty and item.

Their overall supply chain partners and figuring out what's the right solution to have and so I think that we'll see some churn.

Speaker 11: Did this surge in volume in the third quarter in October , of SOAR, of a lot of your spare capacity, and a lot of the ability to have the incremental margin expansion so as you can see the volume covering on a more sticky basis, you can still...

Excuse me.

So the market, obviously at 30 times earnings.

Taking this a little bit and stride here. This morning, maybe it's because the 225%.

That will be happening over the next six months and I think that there are probably some customers that were.

Downtick in October maybe some of the STS give back expectations, but I guess, maybe the expectation was for faster growth and that you'd be able to keep DLR. Yet you are talking about more measured growth. So I just wanted to dig into this.

At competitors previously that are taken on large increases right now at a time when their service is probably deteriorating.

Speaker 11: increase the cost structure on a less for one-for-one basis and get that historical or improvement or is there going to be a bit of a catch-up where you're going to have to add more labor, more resources if the broader demand tailwind actually accelerates.

We'll also be looking at.

The value that <unk> can provide.

Great discussion with Scott earlier into the into your outlook and your thoughts on sustained growth.

And those are the types of accounts that we've seen in prior periods.

Speaker 5: Well, we were in a great spot coming in to this quarter.

But maybe thoughts about the industry and the competitive nature of it right. So if you've got this bid process on the service centers coming up which means that the capacity just goes elsewhere. It doesn't go away and maybe everybody thought it was going to go away and that would enable you to continue to take that sure maybe.

Obviously, the situation is different but.

Speaker 5: from a labor standpoint, from an equipment standpoint, and definitely from a service center standpoint. And we've intentionally been heavy. We've tried to protect as many.

And I think it could be very similar to 2021 that environment wishes to all demand driven but demand was incredibly strong.

Maybe your thoughts on what does that lack of tightening right if more of that capacity spills out into the market on your ability to take that and I know Adam you Couldnt give your thoughts on it but maybe just give the factual stuff maybe the timing of the <unk>.

There is tremendous opportunity there from a volume standpoint, and a lot of the competitors simply couldnt take on the incremental volumes because.

Speaker 5: driver positions in particular that we could, as we've gone through this slow period. We certainly have seen some attrition within our workforce over the past year, but we've tried to keep as many people on board as we could, knowing that the inflection wouldn't eventually happen.

Because they didn't have all the elements of capacity in place to be able to do so and they are missing pickups theyre.

<unk> centre bids just so we're all on top of that the exact nature of the distribution of those.

They are not able to get the freight that they do pick up delivered on time and those are the types of customers that increasingly call.

Yes, I think over the.

Speaker 5: We believe that it was going to happen earlier in the year.

Old Dominion.

The next few weeks bids will be due and so.

We're starting to have.

Some of those same types of conversations maybe not at the same level at this point, but we are having those same conversations today.

Speaker 5: and obviously were disappointing when it didn't, but we just continue to try to mean this through.

I think a lot will be.

Term and obviously in the next month or so and figuring out who may end up with some of those service centers are still believe that.

Speaker 5: And here we are. It didn't happen in the manner that we thought that it would, but we were well positioned to respond.

And we think that that will create some incremental volume opportunity for us as we progress.

Some of that capacity will be leaving the industry overall, but.

Through the next few quarters.

Speaker 5: and our existing workforce has been able to do so. Now from here we have...

The reality is.

Thank you.

The next question is from Ken <unk> with Bank of America. Please go ahead.

Speaker 5: restarted the hiring process in some locations and will continue to run our internal truck driving schools to produce new drivers and have them available.

All of those shipments that were in place before.

It's been several months now.

Hey, great good morning, Marty and Adam.

They found a new home and so.

Excuse me.

So the market, obviously at 30 times earnings.

If you're someone on the strategic side that might be invest and you've got to look and think about how that would make sense.

Speaker 5: as the demand levels dictate if our shipment volumes continue to increase if we can see.

Taking this a little bit in stride here. This morning, maybe it's because the 225%.

How much incremental capacity do you want to buy that you would have to go out.

Speaker 5: sequential improvement through next year. We want to make sure that we've got all elements of capacity in place to be able to deal with it and not be disappointed.

Downtick in October maybe some of the St's give back expectations, but I guess, maybe the expectation was for faster growth in that.

How would you use it.

Kind of thing and so those are some of the thoughts that.

You'd be able to keep the or yet you are talking about more measured growth. So I just wanted to dig into this.

Speaker 5: from behind, if you will, and having to try to catch it or not being able to say yes to a customer if they're coming to us and asking if we can handle incremental volumes for them. So...

And considerations that I'm sure.

Great discussion with Scott earlier into the into your outlook and your thoughts on sustained growth.

That we have that others have as well but.

But again.

But maybe thoughts about the industry and the competitive nature of it right. So if you've got this bid process on the service centers coming up which means that the capacity just goes elsewhere. It doesn't go away and maybe everybody thought it was going to go away and that would enable you to continue to take that sure maybe.

From our standpoint, we believe we continue to grow.

Speaker 5: You know, it's always a challenge to try to walk that type road in terms of of managing the elements of capacity, but you know, I think that we did a great job with getting through it this year. And we may have carried a little extra cost in doing so, but I think our operating ratio is performed about where we thought it was given the decrease in volume.

We will continue to invest in.

One shape or form.

Whether it's trying to go back after some of these properties in that bid or <unk>.

Maybe your thoughts on what does that lack of tightening right if more of that capacity spills out into the market on your ability to take that and I know Adam you Couldnt give you or your thoughts on it but maybe just give the factual stuff maybe the timing of the <unk>.

Or if it's something totally independent which was the path that we were on before they closed their doors either way.

Speaker 5: You know, we said earlier in the year that, you know, our focus would be the managing our direct cost even in the low volume environment. We've been able to do so without any sacrifice whatsoever to our service quality. That are some of our service metrics have actually improved.

I think when we think about the long term and that's the lens that we try to view our business through.

Center bids just so we're all on top of that the exact nature of the distribution of those.

We believe we will be the biggest market share winner over the next 10 years.

Yes, I think over the.

Because of the quality of service that we offer and the value offering that we have in place.

The next few weeks bids will be due and so.

I think a lot will be deterred.

Speaker 5: as we've gone through this year. So we're pleased that our service quality is.

Is going to require investment.

Determined obviously in the next month or so and figuring out who may end up with some of those service centers I still believe that.

Just because the invest doesn't mean, you're going to go we can share.

Speaker 5: The performance of our team, the improving efficiencies that we're seeing, will continue to add to the team and continue to rebalance our fleet.

And if someone does is probably increasing their cost basis and that could be a good thing for us as well for our competitors' costs are increasing.

Some of that capacity will be leaving the industry overall, but.

Speaker 5: As we go through 2024, we've still got some deferred replacements where we want to improve the average age of our fleet, but all of that will continue to be worked out as we go through the next year or so, and we want to get back to a growth environment, improving operating ratio environment, all those things we're kind of used to seeing. We just need a little cooperation from the economy to help us along the way.

The reality is.

Acquiring them to increase rates.

All of those shipments that were in place before.

Further and maybe closing some of that price gap that exists between us and others.

It's been several months now.

They found a new home and so.

I think that we.

If you're someone on the strategic side that might be invest and you've got to look and think about how that would make sense.

We tried to say on the last.

Our quarter call that.

Our approach is going to be more slow and steady if you will.

How much incremental capacity do you want to buy that you would have to go out and.

This environment, where underlying demand is continues to remain relatively consistent we've not seen.

How would you use it.

Kind of thing and so.

Speaker 2: The next question is from Tom Waterwitz with UBS. Please go ahead.

Any type of true inflection in the economy at this point.

Those are some of the thoughts and.

And considerations that I'm sure.

And we're prepared for it when it happens.

Speaker 12: Yeah, good morning. Adam, you've talked a bit about, I think you said like inflation can come down somewhat next year and then you've talked a bit about price as well and you see that pretty constructive view on where price is going to be next year.

That we have in that others have as well but.

I think we've seen some.

But again.

Some really strong performance in the past when we get into those types of strong current demand environment. So we're ready for it.

From our standpoint, we believe we continue to grow.

We will continue to invest in.

Speaker 12: If we don't see improvement in the freight market activity, do you think you'd be looking at those two factors supporting margin improvement? You know, because it seems like you can put those two together, you would see the margin improve. But how do you think about, you know, I guess lower inflation and favorable price and what that does for margining, even if you don't see a parade improvement?

One shape or form.

From thinking about all elements of capacity, it's more than just service centers service centers drive what can be done over the long term, but you've got to have people and equipment as well.

Whether it's trying to go back after some of these properties in that bid or.

Or if it's something totally independent which was the path that we were on before they close their doors.

And we feel good about where we are with all elements of capacity and our ability to respond to growth when it comes to us and it will it's just a matter of time.

Other way.

When we think about the long term and that's the lens that we try to view our business through <unk>.

Before it comes.

And so.

We believe we will be the biggest market share winner over the next 10 years because of the quality of service that we offer and the value offering that we have in place.

We'll be ready when that time does come.

Thanks, Scott I appreciate it.

Speaker 5: You know, we had for one thing, we had a pretty hefty cat back to year, this year. And when you look at it, our operating ratio and the change that we have.

The next question is from Bascom majors with Susquehanna. Please go ahead.

Is going to require investment.

Okay.

Speaker 5: in the third quarter. You know, that was bit of a headwind, 110 basis points headwind on the appreciation side and some of the

You talked earlier about starting to invest again in head count and get ready for some of the growth that may come next year can you give us an update about where you are versus your capacity owned facilities people and equipment now and.

Just because the invest doesn't mean, you're going to go win share.

And if someone does then it's probably increasing their cost basis and that could be a good thing for us as well if our competitors cost are increasing.

Speaker 5: The CAPEX was basically related to what's happened over the last couple of years with the OEM challenges that we've had shortages of parts that have required us to carry maybe a little bit more equipment on the books than we would sort of look at from a, that we were optimizing the fleet standpoint. So, you know, I think as we go through next year, you know, if it looks like it's gonna be another fly this year, we're already sort of a leg up if you will.

And any thoughts about where those constraints are showing up first be it regionally or functionally. Thank you.

Acquiring them to increase rates, even further and maybe closing some of that price gap that exists between us and others.

Yes.

On the service center side, we're at about 25% to 30% excess capacity.

I think that we.

We tried to say on the last.

Recall that our approach is going to be more slow and steady if you will is.

I don't necessarily look at those other two pieces of the capacity equation than the <unk>.

It is environment, where underlying demand is continues to remain relatively consistent we've not seen.

Same type of way, but.

Our equipment.

We're in really good shape with where we are probably a little bit heavy steel EBIT.

Speaker 5: A lot of times you can take September volumes for the month and kind of

Any type of true inflection in the economy at this point.

Speaker 5: just use that to correlate to what the next year's volumes will be. And so, you know, we might be looking at, even if it's underlined the man doesn't change it all. We believe that we've got the opportunity to win some of this share that we continue to believe will be turning around over the next six months to a year.

Even with the influx of volume that.

And we're prepared for it when it happens.

That we've seen over the last few months, but like I mentioned earlier, we will continue to go through and evaluate and optimize that as.

I think we've seen some.

Some really strong performance in the past when we get into those types of strong current demand environment. So we're ready for it.

As we look at what our 2020 for Capex plan.

Might be we've not formulated that at this point and we will talk about it over the next earnings call.

From thinking about all elements of capacity, it's more than just service centers service centers drive what can be done over the long term, but you've got to have people and equipment as well.

But what the fleet size should look like.

Speaker 5: given some of the service issues that that reference thoroughly we're hearing about every day.

Given whatever our baseline forecast for 24 might be and then we always look at kind of a bull case scenario in a bear case scenario as well to make sure that we've got an operating plan that can meet if we were to see really strong growth or.

Speaker 5: But we're already in a position where we might see a little bit of volume growth and then get some yield on top of that that environment where we're cost may be improving as well. Then yeah, that's the environment where in the past we've been able to produce and operate racial improvement.

And we feel good about where we are with all elements of capacity and our ability to respond to growth when it comes to us and it will it's just a matter of time before it comes.

And so we'll be ready when that time does come.

The growth not necessarily at the levels that our baseline indicated.

Thanks Sam.

Got it.

On the people side, obviously, we've been able to step up and meet the incremental volumes.

Speaker 12: So I mean it sounds like you feel pretty good about where you're at in 24 even if you don't see a lot of improvement in the freight market

The next question is from Bascom majors with Susquehanna. Please go ahead.

Our people are getting more work, which I think makes them happy per se and we had drivers that were working on the dock and combo type of roles. So we're able to leverage that.

You talked earlier about starting to invest again in head count and get ready for some of the growth that may come next year can you give us an update about where you are versus your capacity owned facilities people and equipment now and in any thoughts about where those constraints are showing up first be it regionally or in functionally.

Speaker 5: I think so. I mean, yeah, we're certainly.

Speaker 5: We saw the step up, you know, basically in August . And then I was pleased with the performance that we had in September .

Putting those employees right back into a truck and.

And so overall I think we're in a really great spot with with all elements, but it will require.

Speaker 5: And when we talked about, you know, post the mid-quarter update, where we were from a shipments per day standpoint, you know, we had been at 47,000 shipments per day since December of last year. And basically that average carried forward through July . We saw that step up. We talked about kind of an incremental 3,000 shipments per day. And that's where we were in August .

Thank you.

Yes.

As we get into next year, if we do see some incremental growth from where we are now will require investment.

On the service center side, we're at about 25% to 30% excess capacity.

Don't necessarily look at those other two pieces of the capacity equation.

Our people and that's why we've restarted some of our truck driving schools.

The same type of way, but.

We are hiring in certain locations as well.

Our equipment.

We're in really good shape with where we are probably a little bit heavy steel.

For new drivers and employees on the platform.

Speaker 5: In September , normally it's a, but two and a half to three percent increase in shipments per day would be normal seasonality

That are moving the freight on our docks as well.

Even with the influx of volume.

So we will continue to add to the workforce if you will.

That we've seen over the last few months, but like I mentioned earlier, we will continue to go through and evaluate and optimize that as we look at what our 2020 for Capex plan might be we've not formulated that at this point and we will talk about it over the next earnings call.

Speaker 5: Well, the last month of the first quarter and the second quarter, I saw a little bit of a pick up, but nothing close to where normal seasonality would be. That's kind of where we've been missing some of the growth over the last year, but our shipments per day were up 2.1%. So that performed a lot better than what we've been seeing at least in the last month of the quarters. And that really was...

We make our best efforts to match the capacity of our workforce with the shipment levels that we sort of see coming at us.

But making sure that their own board ahead of the curve so they're properly trained.

But what the fleet size should look like.

Especially on the dock that we make sure that we're maximizing our load factor, we're using our claims revision tools to keep that cargo claims ratio where it is at <unk>, 1% all of those things are important but you can't just throw a person right into an environment where.

Given whatever our baseline forecast for 24 might be and then we always look at kind of a bull case scenario in a bear case scenario as well.

Speaker 5: with no new impact. That's just some share shift and then existing customers that are giving us more freight.

To make sure that we've got an operating plan that can meet if we were to see really strong growth or.

Speaker 5: uh... that he will so you know there's been a lot obviously going on uh... over the last four months within the industry uh... something's obviously permanent and then like we mentioned i believe that we'll see some of the uh... the body game that we had in October that uh... that will return to a competitor

We're growing double digits kind of thing they are just not going to be as efficient or effective.

The growth not necessarily at the levels that our baseline indicated.

As we probably otherwise won't so we tried to invest ahead of the curve. If you will for that reason.

On the people side, obviously, we've been able to step up and meet the incremental volumes.

People are getting more work, which I think makes them <unk>.

To make sure that we get appropriate training in place before we really see the growth.

Speaker 5: So trying to kind of figure out where the Daily Shipment Camp gets to in November and December is a little difficult, but if things kind of shake out.

The fee per Se and we had drivers that were working on the dock and combo type of roles. So we're able to leverage that.

Thank you for that.

The next question is from Bruce Chan with Stifel. Please go ahead.

Putting those employees right back into a truck and.

Speaker 5: If we had just normalized that it will and were more along normal seasonal patterns

And so overall I think we're in a really great spot with with all elements, but it will require.

Hey, Thanks, operator, and good morning, everyone.

Speaker 5: We would have been in an environment where, or if we get back to that from November to December rather, to where our shipment counts are more fly dish.

Adam maybe just want to follow up on some of your comments on the commercial side, you've got a couple of competitors out there that are targeting that field accounts business.

As we get into next year, if we do see some incremental growth from where we are now will require investment.

Speaker 5: with where we were last year in the fourth quarter and you know revenues probably you know becoming more flydishes well versus being down.

Wanted to ask you if you feel like you have the right mix of field National and <unk> at this point or if things are kind of changing post yellow and then just quickly on the sales force any additions that have happened there to maybe fill out the newer parts of the network.

Our people and that's why we've restarted some of our truck driving schools.

Speaker 5: 5.5% and the third quarter may still be down slightly, but it's getting everything's kind of getting back to flattish and I think that that's a good position to build on.

We are hiring in certain locations as well.

For new drivers.

And keep pushing on that share growth. Thank you.

The employees on the platform.

Yes, they are like our we've got a great sales team in place that national account team and local field sales.

Moving the freight on our docks as well so.

Speaker 5: as we go into the 2024. Hopefully we'll continue to see for more of those share games like I mentioned.

We will continue to add to the workforce if you will.

As we make our best efforts to match the capacity of our workforce with the shipment levels that we sort of see coming at us.

That had been working hard.

Speaker 5: just service related and then if we can get a little bit of help from the economy, then that would...

The last year.

In terms of continuing to build relationships staying in front of our customers letting them know that we're here when.

Speaker 5: build on even more volumes and then we'll just continue to execute like I said earlier.

But making sure that their own board ahead of the curve so they're properly trained.

When they need us.

Speaker 5: on the volume side and managing cost and if we can have that positive delta there then that's a good setup even if underlining the man is not significantly changing. If it does

Especially on the dock that we make sure that we're maximizing our load factor we're using our claims for mentioned tools to keep that cargo claims ratio where it is at <unk>, 1% all of those things are important but you can't just throw a person right into an environment where.

Our team.

Works hand in hand, with our pricing and cost can groups as well.

And I think that that coordination and cemetery that we have there.

Speaker 5: and we're not going to pre-call it like we did last year, but if it does, uh, the Nesting and the type of environment where I think our model shines, the brightest.

Evident.

When you look at our long term success in our financial results, but.

We're growing double digits kind of thing they are just not going to be as.

About a third of our business does come by way of <unk>, we've actually seen a little bit of an improvement there.

Speaker 5: when competitors are at capacity issues, and we believe that's happening, just based on customer feedback today. Then that's when we can really put on the incremental volumes that we build our network up to be prepared for. And so, you know, that possibility is out there, but a lot depends on what we may see from an overall economic standpoint.

As efficient or as effective as we'd probably otherwise malls. So we try to invest.

In the third quarter, we had a little bit of growth with the accounts that.

Ahead of the curve if you will for that reason.

To make sure that we get appropriate training in place before we really see the growth.

That are within that <unk> book of business.

Just.

Ever so slightly but at least it was in the green when the overall book of business. The overall revenue was down five 5% for the quarter. So.

Thank you for that.

The next question is from Bruce Chan with Stifel. Please go ahead.

That was good to see.

Hey, Thanks, operator, and good morning, everyone.

That was an area of weakness in particular in the first quarter.

Adam maybe just want to follow up on some of your comments on the commercial side you have got a couple of competitors out there that are targeting that field accounts business.

There are few carriers, we're putting some lower transaction type pricing in place and I think that market firmed up pretty quickly.

Speaker 13: The next question is from Jordan Alliger with Goldman Sachs. Please go ahead. Yeah, I spoke quite a bit about price on the call. But I am just curious on mix and the types of shipments you're getting. Obviously, weight-per-shipment. You may be discussing that, which is basically trended down. Sort of thoughts around that and shipment mix. Thank you.

Wanted to ask if you feel like you have the right mix of field National III PL at this point or if things are kind of changing post yellow and then just quickly on the Salesforce you know any additions that have happened there to maybe fill out the newer parts of the network and keep pushing on that share growth. Thank you.

At the end of July so some of that business is starting to come back to us.

And hopefully that can be a continuing trend as well, but we've got a great mix of our contract business.

Our continued to grow with our small mom and pop accounts as well.

Yes, they like our we've got a great sales team.

Speaker 5: Yeah, our wait for shipment has printed down and really

In place that national account team and local field sales.

And the <unk>, we see opportunity with within all of those categories really in.

<unk> had been working hard over the hill.

Speaker 5: It went down, I guess, in August to about 1485 pounds. And that was some of that incremental freight that we saw that pick up of about 3000 shipment.

Our sales team will continue to leverage that and hopefully be ready for for good growth year in 2024.

Last year.

And in terms of continuing to build relationships staying in front of our customers letting them know that we're here.

Speaker 5: per day. It increased a little bit in September , which you'd expect. And we're kind of hanging around that 1485 pound range.

When they need us.

Our team.

Works hand in hand, with our pricing and cost in groups as well.

The next question is from Stephanie more with Jefferies. Please go ahead.

Speaker 5: here in October as well. So, that's something where I believe we're kind of at a baseline, reflecting kind of the underlying freight that's in our book right now. And that'll be a metric to watch to see, are there increased orders for widgets? Does that 1485, do we see that grow? That's a 1500 to 1520 getting back closer to the 1600 pound range that we've seen in robust economies. So, yeah.

And I think that that coordination and cemetery that we have there.

Hi, good morning, and thank you all I'll keep it easy here and sheet essentially re ask Amit first question.

Evidence.

When you look at our long term success in our financial results, but.

Given the seventies and change our.

Second quarter in what is still a pretty weak freight environment.

About a third of our business does come by way of <unk>, we've actually seen a little bit of an improvement there.

And also I think you called out pretty well in the call, but just to spend your own kind of elevated expenses in 2023, but maybe just how is the dynamics over the last couple of months changed the timing of achieving that kind of six handle a large target.

In the third quarter, we had a little bit of growth with the accounts that.

That are within that <unk> book of business.

Just.

Ever so slightly but at least it was in the green when the overall book of business. The overall revenue was down five 5% for the quarter so that.

<unk> balances, obviously major industry events as well as your own kind of moderated growth and capacity investment in strategy. Thanks.

Speaker 5: Like anything, the freight that you take on as long as you understand the handling characteristics and what the pricing ought to be, that decrease in rate for shipment did have a little bit of a favorable impact on our yield metrics during the quarter. And, but that's what we have built our business on.

That was good to see.

Sure.

That was an area of weakness in particular in the first quarter.

It's.

When we laid out the goal to have a sub 70% annual operating ratio.

There are few carriers, we're putting some lower transaction type pricing in place and I think that market firmed up pretty quickly.

We didn't put a timeframe for say on that because we felt like we might go through.

Speaker 5: You know, investing heavily in all the tools and technologies to understand the freight that we're moving to make sure that we're moving.

And the macro environment, that's a little bit weaker and we didn't want to be beholden to some artificial timeline and do things that were more short term focused versus long term.

The end of July so some of that business is starting to come back to us.

Speaker 5: everything profitably with the right pricing in place and I think that we've made those adjustments To the incremental break that we've seen as far

And hopefully that can be a continuing trend as well, but we've got a great mix of our contract business.

And I think when you look at this year in particular to have our capital expenditure plan of $720 million in it.

<unk> continued to grow with our small mom and pop accounts as well.

Speaker 2: The next question is from Eric Morgan with Barclays. Please go ahead.

And the <unk>, we see opportunity with within all of those categories really in.

Environment, where at one point, we were our tonnage was down double digits.

Speaker 14: Hey, good morning, thanks for taking my question. I just want to come back to the near term. I think for September , you said that tonnage was about one point below average seasonality on a sequential basis. But you have confidence through your any market share and underlying demands and studies. So just wondering if you can clarify that and maybe if you're seeing any nutrition from the initial wave of share shifts. I guess I have along the lines of an earlier question, just wondering how.

Our sales team will continue to leverage that and hopefully be ready for for good growth year in 2024.

Is the focus that we try to take on looking now.

In the long term and being ready for future growth.

That comes at a cost and we've seen.

That increase in the operating ratio this year as a result.

The next question is from Stephanie more with Jefferies. Please go ahead.

Again, the depreciation is probably the biggest drag that we have right now.

Hi, Good morning, Thank you I will I'll keep it easy here and sheet essentially re ask Amit first question.

But thats something that when you look at it on the other hand when volumes come back.

Speaker 14: Any new customers you have from this are responding to your premium service, but also premium price offering.

Given the seventies and change how are you.

That's where we get leverage and have been pleased with the cost performance on the direct cost side.

Second quarter in what is still a pretty weak freight environment.

Speaker 5: Yeah, we, from a tundish standpoint, the sequential increase in September from August was up 2.7%. The tenure average change is a 3.6% increase.

And also I think you called out pretty well on the call, but just to spend your own kind of elevated expenses in 2023, and maybe just how does the dynamics over the last couple of months changed the timing of achieving that kind of six handle a large target.

Third quarter direct costs were 51 to 51, 5% of overall revenue.

While our overhead came in at about 19, 5% of revenue and that compares to last year, our overhead was 16, 5% to 17% so.

Speaker 5: But that compares favorably to what our performance has been in the third month of the first few quarters of a year with the point that I was making. We've seen a little bit stronger pickup in September coming to us versus what we had seen earlier in the year.

Just with your balances obviously major industry events as a voluntary kind of moderated growth in capacity investment strategy. Thanks.

Deterioration there, but once we get back to the volume environment.

Sure.

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Should be able to leverage that completely and get right back to improving our operating ratio so where.

It's.

When we laid out the goal to have a sub 70% annual operating ratio.

We're already close we've done a couple of quarters with.

Speaker 5: and really no new event that you will within the industry that we're driving any of that change. Just a continuation of some of that freight that had to move at the end of July .

We didn't put a timeframe for say on that because we felt like we might go through.

The second and third quarters last year.

With 69, something operating ratio and typically when we look back back through prior years, when we've gone through an environment.

The macro environment, that's a little bit weaker and we didn't want to be beholden to some artificial timeline and do things that were more short term focused versus long term.

Speaker 5: Yeah, we had made the point on the last call, but, you know, obviously, shippers had to find an immediate home for that freight.

Where volumes have been down on revenue was down.

And I think when you look at this year in particular to have our capital expenditure plan of $720 million in it.

Last a little bit on the operating ratio because of that leverage opportunity, we've been able to recover any or loss in the subsequent year. When we've had revenue recovery and I think thats.

Speaker 5: and they likely leverage the existing carriers that they had in their networks, or at least the large national accounts be it, but.

Environment, where at one point, we were our tonnage was down double digits.

The focus that we try to take on looking now.

Speaker 5: we believe in and continue to believe that there's gonna be some share shifting around. But I think that especially as we go through the fourth quarter, the first quarter of next year, two periods that are seasonally slower during the year, is probably the type of environment that shippers will be looking at.

Certainly what we're focused on and believe can happen. So we'll see where that gets us by the time, we get to the end of 2024, but.

In the long term and being ready for future growth.

That comes at a cost and we've seen.

That increase in the operating ratio this year as a result.

We will continue to perform on the direct cost side and continue to look for areas of opportunity.

Again, the depreciation is probably the biggest drag that we have right now.

As we can drive efficiency within our operations, but.

Speaker 5: You know, they're overall supply chain partners and figuring out what's the right solution to have. And so I think that we'll see some turns.

But thats something that when you look at it on the other hand when volumes come back.

Trying to get some leverage there on the overhead side.

That's where we get leverage and have been pleased with the cost performance on the direct cost side.

Really not having to invest as much in 2024, and if we can get some revenue growth going along with that.

Speaker 5: that will be happening over the next six months. I think that they're probably some customers that were at competitors previously that are taking on large increases right now at a time when their service is probably deteriorating.

Third quarter direct costs were 51 to 51, 5% of overall revenue.

It could potentially produce a beautiful thing when you start looking at that or.

While our overhead came in at about 19, 5% of revenue and that compares to last year, our overheads was 16, 5% to 17% so.

Speaker 5: Better will also be looking at the value that OD can provide.

Great. Thank you.

This.

Our question and answer session I would like to turn the conference back over to Marty Friedman for any closing remarks.

Speaker 5: and those are the types of accounts that we've seen in prior periods.

Deterioration there, but once we get back to the volume environment.

Speaker 5: You know, it's obviously the situation is different, but I think it could be very similar to 2021. That environment was just all demand driven, but demand was incredibly strong. There was tremendous opportunity there from the volume standpoint. And a lot of the competitors simply couldn't take on the incremental volumes because they didn't have all the elements of capacity in place to be able to do so. And they're missing pickup.

Thank you all today for your participation and we appreciate your questions and please feel free to give us a call later, if you have anything further.

Should be able to leverage that completely and get right back to them.

Hope you all have a great day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker 5: They're not able to get the freight that they do pick up delivered on time. Those are the types of customers that increasingly call on all the men. And we're starting to have some of those same types of conversations. Maybe not at the same level at this point. But we're having those same conversations today. And we think that that will create some incremental volume opportunity for us as we progress through the next few quarters.

Speaker 2: The next question is from Ken Haxter with Bank of America. Please go ahead.

Speaker 15: great. Good morning M?ori an Adam.

Speaker 15: So the market, obviously at 30 times earnings, taking this a little bit in stride here this morning.

Speaker 15: Maybe it's because the 2, 2.5% down-ticking in October , maybe some of the STs give back expectations, but...

Speaker 15: i guess maybe the expectation was for faster growth you know and that you be able to keep the all are yet you're talking about more measured growth so i just want to dig into this it's great discussion was got earlier into the into your outlook in your thoughts on sustained growth uh... but maybe thoughts about the industry in the competitive nature of it right so if you've got this big process on the service centers coming up which means that the capacity just goes elsewhere it doesn't go away and maybe everybody thought it was going to go away and that would enable you to continue to take that share you know maybe if Sidith decided the legacy Muslims on the supply that helped I decided to see a very good, advice letter from the community as i mentioned Well it isn't too I guess his perspective is short

Speaker 15: what does that lack of of tightening right if more of that capacity spills out of the market on your ability to take that and i know uh... adam you couldn't give your your thoughts on about maybe just give the factual stuff maybe that the timing of the the service center bids just so we're all on top of the the exact nature of the distribution

Speaker 5: Yeah, I think over the next few weeks, beds will be due. And so, I think a lot will be.

Speaker 5: determined obviously in the next month or so and figuring out who may end up with some of the service centers I feel believe that some of that back capacity will be leading the industry overall.

Speaker 5: You know, the reality is all of those shipments that were in place before. It's been several months now. They found a new home and so.

Speaker 5: If you're someone with a strategic side that might be investing, you've got to look and think about how that will make sense.

Speaker 5: how much incremental capacity do you want to buy that you have to go out and how would you use it?

Speaker 5: kind of thing. And so, you know, those are some of the thoughts that, you know, and considerations that I'm sure that we have and that others have as well. But, but again, you know, from from our standpoint, we believe we continue to grow. We will continue to invest in one shape of form.

Speaker 5: Yeah, whether it's trying to go back after some of these properties in that bid or Or if it's you know something totally independent which was the path that that we were on before they closed their doors

Speaker 14: Either way, you know, I think when we think about the long term, and that's the lens that we try to that be our business through, we believe we will be the biggest market share winner over the next 10 years.

Speaker 5: the quality of service that we offer in the value offering that we have in place.

Speaker 5: That's going to require investment. Just because you invest doesn't mean you're going to go when you share. And if someone does, then it's probably increasing their cost basis. And that could be a good thing for us as well for competitors cost or increasing requiring them to increase rates.

Speaker 5: even further and maybe closing some of that price gap that exists between us and others. So, you know, I think that we tried to say on the last.

Speaker 5: a quarter call that our approach is going to be more slow and steady if you will. This environment where underlined demand is continues to remain relatively consistent. We've not seen any type of true inflection in the economy at this point and we're prepared for it when it happens. I think we've seen some

Speaker 5: some really strong performance in the past, from what we get into those.

Speaker 5: types of strong demand environments that we're ready for.

Speaker 5: from thinking about all elements of capacity. It's more than just service centers. Service centers drive what can be done on a little long term, but you gotta have people in equipment as well.

Speaker 5: And we feel good about where we are with all elements of capacity and our ability to respond to growth when it comes to us and it will. It's just a matter of time.

Speaker 16: before it comes. And so, you know, we'll be ready when that time does come.

Speaker 2: The next question is from Vasco Majors with Saskoana. Please go ahead.

Speaker 17: You talked earlier about starting to invest again in headcount and get ready for some of the growth that may come next year. Can you give us an update about where you are versus your capacity on facilities, people, and equipment now, and any thoughts about where those constraints are showing up first, be it regionally or in functionally? Thank you.

Speaker 5: On the service center side, we're at about 25 to 30% excess capacity.

Speaker 16: You know, I don't necessarily look at those other two pieces of the capacity equation in the same type of way, but...

Speaker 16: You know, our equipment, you know, we're in really good shape with where we are, probably a little bit heavy still, even with the influx of volunteers.

Speaker 5: that we've seen over the last few months. But like I mentioned earlier, we'll continue to go through and evaluate and optimize that.

Speaker 16: as we look at it, what are 2024 CAPX plans?

Speaker 16: might be we've not formulated that at this point and we'll talk about it on the next earnings call but what the the fleet size should look like you know given whatever our baseline forecast for 24 might be and then we always look at

Speaker 16: kind of a bull case scenario, the bear case scenario as well, to make sure that we've got an operating plan that can meet.

Speaker 16: if we were to see really strong growth or the growth not necessarily at the levels that are baseline indicated. On the people side, obviously we've been able to step up and meet the incremental volume.

Speaker 16: Our people are getting more work, which I think makes them happy per se. And we had drivers that were working on the dock and in combo type of roles. So we're able to leverage that.

Speaker 16: putting those employees right back into a truck. And so overall, I think we're in a really great spot with all elements, but it will require, as we get into next year, if we do see some incremental growth from where we are now, will require investment in our people. And that's why we've restarted some of our truck driving schools.

Speaker 16: we are hiring in certain locations as well for new drivers, employees on the platform that are moving the freight on our docs as well. So we will continue to add to the workforce, if you will, as we make our best efforts to match the capacity of our workforce with the shipment levels that we sort of see coming at us.

Speaker 16: but making sure that they're on board ahead of the curve so they're properly trained.

Speaker 16: especially on the dock that will make sure that we're maximizing our load factor. We're using our claims for bench and tools to keep that cargo claims ratio where it is at 0.1%. All those things are important, but you can't just throw a person right into an environment where you have a growing double digits kind of thing. They're just not going to be as efficient or as effective as we probably otherwise won't. So we try to invest.

Speaker 16: ahead of the curve if you will for that reason to make sure that that we get appropriate training in place before we we really see the growth.

Speaker 2: Next question is from Bruce Chan with Steeple. Please go ahead.

Speaker 8: Hey, thanks operator and good morning everyone. Adam, maybe just want to follow up on some of your comments on the commercial side. You've got a couple of competitors out there that are targeting that field accounts business. Want to ask if you feel like you have the right mix of, field, national and 3PL at this point, or things are kind of changing post-yellow. And then just quickly on the Salesforce, any additions that have happened there to maybe fill out the newer parts of the network and keep pushing on that share growth. Thank you.

Speaker 16: We have to like our, we've got a great Phil team in place that National Account Team in local field sales.

Speaker 16: that have been working hard over the last year in terms of continuing to build relationships, staying in front of our customers, letting them know that we're here when they need us. And, you know, our team.

Speaker 16: Work's hand in hand with our pricing and costing groups as well. And I think that that coordination and symmetry that we have there is evident when you look at our long-term success and our financial results.

Speaker 16: Yeah, about a third of our business does come by way of 3PLs. We've actually seen a little bit of improvement there. In the third quarter, we had a little bit of growth with the accounts that are within that 3PL book of business.

Speaker 16: just ever so slightly, but at least it was in the green when the overall book of business.

Speaker 16: The overall revenue was down 5.5% for the quarter. So that was good to see. That was an area of weakness in particular in the first quarter, where a few carriers were putting some lower transaction type pricing in place. And I think that market firmed up pretty quickly in the end of July . So some of that business is starting to come back to us.

Speaker 16: and hopefully that can be a continuing trend as well. But we've got a great mix of our contract business and continue to grow with our small mom and pop accounts as well. And the three Pills, we see opportunity within all of those categories.

Speaker 16: really and our sales team will continue to leverage that and hopefully be ready for for good growth year in 2024.

Speaker 2: The next question is from Stephanie Moore with Jeffries. Please go ahead.

Speaker 18: Hi, good morning. And thank you. I'll keep it easy here and cheat and essentially re-ask on the first question. You know, given that the 70s and change OR you saw in this...

Speaker 3: for in quarter, what is immediately still a pretty weak freight environment. And also what I think you called out pretty well in the call, which is to spend your own kind of elevated expenses in 2023. So maybe just how is the dynamics of the last couple of months changed the timing of achieving that kind of six-handle OR target, you know, just as you balance this obvious major industry event as well as your own kind of moderated growth and capacity investment strategy. Thanks. Sure.

Speaker 16: When we laid out the goal to have a sub-70 annual operating ratio, we didn't put a timeframe for sale on that because we felt like we might go through in the macro environment that's a little bit weaker. And we didn't want to be beholden to some artificial time-wiling and do things that were more short-term focus versus long-term.

Speaker 16: And I think when you look at this year in particular, to have a capital expense you're playing in, that's $720 million.

Speaker 16: in an environment where at one point we were our tonage was down double digit.

Speaker 16: shows the focus that we try to take on looking now in the long-term and being ready for future growth. And that comes at a cost and we've seen that increase in the operating ratio this year as a result. And again, the depreciation is probably the biggest drag that we have right now. But that's something that when you look at it on the other hand, when volumes come back.

Speaker 16: That's where we get leverage. And I've been pleased with the cost performance on the direct call side. And the third quarter, our direct cost were 51 to 51 and a half percent of overall revenue while our overhead came in at about 19 and a half percent of revenue.

Speaker 16: You know, that compares the last year, our overhead was 16 and a half to 17 percent. So, you know, the deterioration there, but once we get back to the volume environment, we should be able to leverage that completely and get right back to improving our operating ratios. So we're already closed. We've done a couple of quarters with the second and third quarters last year.

Speaker 16: with a 69 something operating ratio and you know typically when we look back back through prior years when we've gone through an environment

Speaker 16: where volumes have been down and revenue is down. We've lost a little bit on the operating ratio because of that leverage opportunity, we've been able to recover any OR loss in the subsequent year when we've had revenue recovery.

Speaker 16: And I think that's certainly what we're focused on and believe can happen.

Speaker 16: And we'll see where that gets us by the time we get to the end of 2024, but.

Speaker 16: You know, we will continue to perform on the DRET cross-5 and continue to look for areas of opportunity.

Speaker 16: as we can drive efficiency with inner operations. But...

Speaker 16: trying to get some leverage there on the overhead side, potentially not having to invest as much in 2024, and if we can get some revenue growth, I go along with that.

Speaker 16: could potentially produce a beautiful thing when you start looking at that OR.

Speaker 2: This concludes our question and answers fashion. I would like to turn the conference back over to Marty Freeman for any closing remarks.

Speaker 4: Thank you all today for your participation. We appreciate your questions and please feel free to give us a call later if you have anything further. Hope you all have a great day.

Speaker 2: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.