Q4 2023 ArcBest Corp Earnings Call

Operator: Thank you for standing by. My name is Danica, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the ArcBest Fourth Quarter 23 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Danica and I'll be your conference operator today at this time I'd like to welcome everyone to the arc Best fourth quarter 23 earnings Conference call.

Danica: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. He would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. I would now like to turn the call over to David Humphrey, Vice President of Investor Relations. Please go ahead.

Danica: If you would like to withdraw your question Press Star one again.

Danica: I would now like to turn the call over to David Humphrey Vice President of Investor Relations. Please go ahead.

David Humphrey: Thank you for joining us. On today's call, we'll provide an update on our business, walk you through the details of our recent fourth quarter and full year 2023 results, and then answer some questions. Joining me today for the prepared remarks are Judy McReynolds, Chairman, President, and CEO of ArcBest, and Matt Beasley, Chief Financial Officer. In addition, Seth Runzer, President of ABF Freight, Stephen Leonard, Chief Commercial Officer and President of Asset Light Logistics, Dennis Anderson, Chief Strategy Officer, and Christopher Atkins, Vice President, Yield Strategy and Management, are available to help answer questions. To help you better understand ArcBest and our results, some forward-looking statements may be made during this call. Forward-looking statements, by their very nature, are subject to uncertainties and risk. For a more complete discussion of factors that could affect ArcBest's future results, please refer to the Forward-Looking Statements section of our earnings press release and our most recent SEC public filing. To provide meaningful comparisons, certain information discussed in this call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release.

David Humphrey: Thank you for joining us on today's call, we'll provide an update on our business walk you through the details of our recent fourth quarter and full year 2023 result.

Speaker Change: There are some questions.

David Humphrey: Joining me today for prepared remarks are Judy Mcreynolds, Chairman, President and CEO of Arc, Best and Matt Beasley Chief Financial Officer. In addition, SaaS runs or president of ABF freight Steven Leonard Chief Commercial officer, and President of asset light logistics.

David Humphrey: Chris Anderson, Chief strategy Officer, and Christopher Atkins, Vice President yield strategy and management are available to help answer your questions.

David Humphrey: To help you better understand our best and our results. Some forward looking statements could be made during this call.

David Humphrey: And we're looking statements by their very nature are subject to uncertainties and risk.

David Humphrey: For a more complete discussion of factors that could affect our best future results. Please refer to the forward looking statement section of our earnings press release and our.

David Humphrey: Our most recent SEC public filings.

David Humphrey: To provide meaningful comparisons certain information discussed in this call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release.

David Humphrey: Reconciliations of the GAAP financial measures to the related non-GAAP measures discussed in this call are also provided in the additional information section of the presentation slide. As a reminder, there is a conference call slide deck that can be found on the ArcBest website, arcb.com, in exhibit 99.3 of the 8K that was filed earlier this morning, or you can follow along on the webcast. I will now turn the call over to Judy. Thank you, David. And good morning, everyone.

David Humphrey: Reconciliations of GAAP financial measures to the related non-GAAP measures.

David Humphrey: Just in this call are also provided in the additional information section of the presentation slides.

As a reminder, there's a conference call slide deck that can be found in the art best website.

<unk> Dot com in exhibit 99.3 of the 8-K that was filed earlier this morning or you can follow along on the webcast I will now turn the call over to Judy.

Judy R. McReynolds: Thank you David and good morning, everyone 2023 was a special year as we celebrated our company's 100 year anniversary.

Judy R. McReynolds: 2023 was a special year as we celebrated our company's 100-year anniversary. This extraordinary milestone reflects ArcBest's resilience, innovation, and customer focus, and we recognize this accomplishment with events and programs throughout the year, including supporting our communities with over $1 million in centennial giving.

Judy R. McReynolds: This extraordinary milestone reflects art best resilience innovation and customer focus and we recognize this accomplishment with events and programs throughout the year, including supporting our communities with over $1 million as centennial, giving.

Judy R. McReynolds: As we look back on our past, we remain focused on our present and future.

Judy R. McReynolds: As we look back on our past, we remain focused on our present and future. Despite a slower freight market, ArcBest delivered solid fourth-quarter and full-year results thanks to our diverse portfolio of solutions, our investment in technology and innovation, and our commitment to operational excellence. We continue to serve as trusted advisors to our customers, helping them navigate a complex and evolving logistics landscape with our integrated service offering and century of experience. Let me share with you some highlights from the year. We achieved annual revenue of $4.4 billion, the second highest in company history.

Judy R. McReynolds: Despite a slower freight market art best delivered solid fourth quarter and full year results. Thanks to our diverse portfolio of solutions, our investment in technology and innovation and our commitment to operational excellence, we continue to serve as trusted advisers to our customers, helping them navigate a complex and evolving.

Judy R. McReynolds: Logistics landscape with our integrated service offering and century of experience.

Speaker Change: Let me share with you some highlights from the year.

Speaker Change: We achieved annual revenue of $4 $4 billion, the second highest in company history. We.

Speaker Change: We implemented cost cutting measures that improves our asset based operating ratio in the third and fourth quarters and we believe these measures will benefit us as the market recovers.

Speaker Change: We participated in 90% more new business L. T L bids and increased our wins by more than 150% when compared to 2022.

Speaker Change: We finalized a five year labor agreement last July, reflecting our strong employee relationships.

Judy R. McReynolds: We implemented cost-cutting measures that improved our asset-based operating ratio in the third and fourth quarters, and we believe these measures will benefit us as the market recovers. We participated in 90% more new business LTL bids and increased our wins by more than 150% when compared to 2022. We finalized a five-year labor agreement last July, reflecting our strong employee relationship.

Speaker Change: We accelerated our existing service center facility plan, increasing our asset base capacity.

Speaker Change: We grew our asset light shipment volume, while improving key productivity metrics, we better aligned our business with our growth strategy by selling fleet net America for $100 million, we launched the box freight movement system, which was recognized by fast company and time as one of the year's best.

Speaker Change: Inventions.

Speaker Change: And we invested in our business, while also returning over $100 million to shareholders through dividends and share repurchases.

Speaker Change: Our employees hard work and dedication did not go unnoticed and I'm proud of the more than 40 awards. We won in 2023, including the American trucking associations excellence and cargo claims and loss Prevention Award, making a b S. The only 10 time winner about award.

Judy R. McReynolds: We accelerated our existing service center facility plan, increasing our asset base capacity. We grew our asset light shipment volume while improving key productivity metrics. We better aligned our business with our growth strategy by selling FleetNet America for $100 million. We launched the Vox Freight Movement System, which was recognized by Fast Company and Time as one of the year's best inventions. And we invested in our business while also returning over $100 million to shareholders through dividends and share repurchases. Our employees' hard work and dedication did not go unnoticed, and I'm proud of the more than 40 awards we won in 2023, including the American Trekking Association's Excellence in Cargo Claims and Loss Prevention Award, making ABS the only 10-time winner of that award.

Speaker Change: Ranking number 20 on bright waves bright take 25.

Speaker Change: Receiving five quest for quality award from logistics management readers.

Speaker Change: Turning our third Echo Bottas bronze medal, placing us in the top 50% of rated companies for sustainability.

Speaker Change: And being named to Forbes list of America's Best insight employers for the fourth consecutive year.

Speaker Change: Furthermore, three of our ABF freight drivers were recently chosen as America's Road team captains for 2024, and 2025, a tremendous honor that showcases their excellence professionalism and safety record. They joined a team of 21, other captains, who will represent our industry and travel across the.

Speaker Change: Asian to educate and inspire others about the importance of trucking.

Speaker Change: Finally, 2024 marks the 40th anniversary of our quality process a program that has shaped arc burst into the efficient and effective organization. It is today.

Our customers expect us to deliver a high quality product, which means excellent service to celebrate this milestone we are re energizing our focus on excellence. This year striving for daily excellence in everything we do no matter, how big or small as we embark on our journey into our next 100 years.

Judy R. McReynolds: Ranking number 20 on FreightWay's Freight Tech 25. Receiving five Quest for Quality Awards from Logistics Management Readers, earning our third ECHOvatis bronze medal, placing us in the top 50% of rated companies for sustainability, and being named to Forbes list of America's Best In-State Employers for the fourth consecutive year. Furthermore, three of our ABF freight drivers were recently chosen as America's Road Team Captains for 2024 and 2025, a tremendous honor that showcases their excellence, professionalism, and safety record.

Speaker Change: Now I'll turn it over to Matt to take you through the results in greater detail.

Matt Beasley: Thank you Judy and good morning, everyone I'm.

I'm pleased to report that aren't best delivered solid financial performance for fourth quarter and full year 2023, despite the softer market let.

Let me start with an overview of our consolidated results in the fourth quarter of 2023, we generated $1 $1 billion in revenue down 6% year over year, mainly due to lower revenue in our asset light segment as a result of lower truckload brokerage revenue consol.

Matt Beasley: Consolidated operating income on a non-GAAP basis was $81 $7 million, which was comparable to the same period last year.

Matt Beasley: We achieved a slight increase in adjusted earnings per share, reaching $2 47 up from $2 42 and.

Matt Beasley: In the fourth quarter of 2022.

Matt Beasley: Before year 2023 revenue was $4 4 billion down.

Matt Beasley: Down from the record revenue levels in 2022.

Matt Beasley: Our non-GAAP operating income was $258 million and adjusted earnings per share were $7 88, which were both down from the prior year.

Judy R. McReynolds: They will join a team of 21 other captains who will represent our industry and travel across the nation to educate and inspire others about the importance of trucking. Finally, 2024 marks the 40th anniversary of our quality process, a program that has shaped ArcBest into the efficient and effective organization it is today. Our customers expect us to deliver a high-quality product, which means excellent service. To celebrate this milestone, we are re-energizing our focus on excellence this year, striving for daily excellence in everything we do, no matter how big or small. As we embark on our journey into our next 100 years. Now I'll turn it over to Matt to take you through the results in greater detail. Thank you, Judy, and good morning.

Matt Beasley: Now, let me turn to our segment results, starting with our asset based business.

Matt Beasley: In the fourth quarter, our asset based revenue was $710 million in line with the same quarter last year.

Matt Beasley: We also improved our non-GAAP operating ratio to 87, 7%, a 90 basis point improvement year over year, and 110 basis point improvement sequentially.

Matt Beasley: This is a notable achievement considering that historically, our fourth quarter operating ratio was 100 to 300 basis points higher than the third quarter, excluding pandemic affected periods.

Matt Beasley: This accomplishment highlights of collaboration value pillars, and was a result of disciplined pricing operational efficiency and cost management as well as our ability to respond quickly to customer needs due to our integrated approach I want to thank our employees who contributed to this outstanding result.

Matt Beasley: Our fourth quarter tonnage per day decreased seven 2%, while our daily shipments decreased by less than 1%. These declines were driven by lower transaction volumes due to higher transactional prices are.

Matt Beasley: Our core L. P. L daily shipments grew by over 10% year over year in the fourth quarter, and our fourth quarter revenue per hundredweight, including fuel surcharges increased by six 8%.

Matt Beasley: We secured an average increase of five 6% on our asset based customer contract renewals and deferred pricing agreements during the quarter, which was the highest quarterly percentage increase we've achieved for these types of accounts since the third quarter of 2022.

For full year 2023, our asset based revenue was $2 9 billion down.

Matt Beasley: I'm pleased to report that ArcBest delivered solid financial performance for the fourth quarter and full year 2023, despite the softer market. Let me start with an overview of our consolidated, In the fourth quarter of 2023, we generated $1.1 billion in revenue, down 6% year-over-year, mainly due to lower revenue in our asset-light segment as a result of lower truckload brokerage revenue. Consolidated operating income on an on-gap basis was $81.7 billion, which was comparable to the same period last year.

Matt Beasley: Down 4% from 2022, and our non-GAAP operating ratio was 94% up 400 basis points from the prior year.

Matt Beasley: Looking at preliminary January 2024 results total shipments and tonnage declined from 2023 levels due to lower transactional shipments as a result of higher transaction prices.

Matt Beasley: In addition, due to smaller customer orders and changes in freight profile and business mix, our average weight per shipment and the asset based segment decreased year over year. Despite.

Matt Beasley: Despite the softer freight environment, our asset based segment core shipments and tonnage have increased on a year over year basis.

Matt Beasley: Remain agile responsive to market changes and are ready to scale up as demand increases.

Matt Beasley: Excluding pandemic affected periods. The average sequential change in art best asset based operating ratio from the fourth quarter to the first quarter over the past 10 years has been an increase of about 400 basis points with larger increases occurring during declining economic environments.

Matt Beasley: We achieved a slight increase in adjusted earnings per share, reaching $2.47, up from $2.42, in the fourth quarter of 2020. Before year 2023, revenue was $4.4 billion, down from the record revenue levels in 2022. Our non-GAAP operating income was $258 million, and adjusted earnings per share were $7.88, which were both down from the prior year.

Matt Beasley: For more details on our January trends. Please refer to the form 8-K exhibit we filed this morning.

Matt Beasley: Moving on to our asset light segment fourth quarter revenue was 400 and $413 million down 14% year over year on a daily basis.

Matt Beasley: Shipments per day increased 12% driven by higher demand for our managed solutions, while revenue per shipment decreased 24% due to continued softness in market rates.

Matt Beasley: While we reduced operating expenses and improve productivity. This segment saw a non-GAAP operating loss of $1 million for the quarter.

Matt Beasley: Before year 2023 asset light revenue was $1 7 billion.

Matt Beasley: Down 21% from 2022 on a daily basis.

Our shipments per day increased 5%, while our revenue per shipment decreased 25%.

Matt Beasley: Now, let me turn to our segment results, starting with asset-based revenue. In the fourth quarter, our asset-based revenue was $710 million, in line with the same quarter last year. We also improved our non-gap operating ratio to 87.7%, a 90-basis point improvement year-over-year and a 110-basis point improvement sequentially. This is a notable achievement, considering that, historically, our fourth quarter operating ratio was 100 to 300 basis points higher than the third quarter, excluding pandemic-affected periods. This accomplishment highlights our collaboration value and was a result of disciplined pricing, operational efficiency, and cost management, as well as our ability to respond quickly to customer needs due to our integrated approach. I want to thank our employees who contributed to this outstanding performance. Our fourth quarter tonnage per day decreased 7.2 percent, while our daily shipments decreased by less than 1 percent. These declines were driven by lower transactional volumes due to higher transactional prices.

Matt Beasley: Our full year non-GAAP operating income was $5 million and adjusted EBITDA was $13 million.

Matt Beasley: We also provided preliminary asset light business trends for January 2024, and the form 8-K exhibit filed this morning.

We continue to see lower revenue levels and shipment and shipment growth is offset by lower revenue per shipment in the softer market.

Matt Beasley: Transportation expense as a percentage of revenue increased as we saw more limited carrier capacity after the holiday season and during several winter storms.

I'm pleased to share that our business momentum in 2023 generated robust cash flow and our best consolidated adjusted EBITDA from continuing operations reached $370 million.

Matt Beasley: Our business performance and solid financial position enabled us to strategically invest for the future in 2023, including investments in equipment real estate technology and innovation, while returning over $100 million to shareholders through share repurchases and dividends.

Matt Beasley: Our net capital expenditures in 2023, including equipment financing were $245 million.

Matt Beasley: Of which $144 million was allocated to revenue equipment.

Matt Beasley: We faced some challenges with manufacturing delays in parts shortages last year, which resulted in a portion of our planned 2023, capex, primarily for new city tractors and trailers being deferred to 2024.

Matt Beasley: The supply chain issues that affected our truck tractor and trailer orders have mostly been resolved lead times are shortening and we are anticipating the same level of revenue equipment Capex carryforward in future periods. We also had some real estate project work that will carryover into 2024.

For 2024, including financed equipment, we anticipate net capital expenditures in the range of $325 million to $375 million. This includes a $155 million of revenue equipment and $130 million of real estate.

Matt Beasley: Our core LTL daily shipments grew by over 10% year-over-year in the fourth quarter, and our fourth quarter revenue per hundredweight, including fuel surcharges, increased by 6.8%. We secured an average increase of 5.6% on our asset-based customer contract renewals and deferred pricing agreements during the quarter, which was the highest quarterly percentage increase we've achieved for these types of accounts since the third quarter of 2020. For full year 2023, our asset base revenue was $2.9 billion, down 4% from 2022, and our non-GAAP operating ratio was 90.4%, up 400 basis points from the prior year. Looking at preliminary January 2024 results, total shipments and tonnage declined from 2023 levels due to lower transactional shipments as a result of higher transactional prices. In addition, due to smaller customer orders and changes in freight profile and business, our average weight per shipment in the asset-based segment decreased year-over-year.

Matt Beasley: Remaining amount includes items related to technology, and miscellaneous dock equipment upgrades and enhancements.

Matt Beasley: We are constantly evaluating opportunities to expand and enhance our ABF network.

Matt Beasley: In January we purchased three yellow facilities for $30 million and spent $8 million to acquire the lease for another yellow facility.

Matt Beasley: These locations are part of our long term facility roadmap are strategically strategically located in their respective markets and a more cost effective than new construction.

Matt Beasley: The yellow auction process highlighted the value of LTE of real estate assets, while underscoring the high barriers to entry in this sector.

Matt Beasley: We are currently evaluating additional real estate investment opportunities and will provide you with more updates as opportunities develop.

Matt Beasley: As always we are being disciplined and prudent and expect at any investments will generate attractive returns.

Matt Beasley: As you May recall in February 2023, we announced a $125 million share repurchase program in conjunction with our fleet net sale announcement.

Matt Beasley: We recognize that repurchasing undervalued shares creates value for remaining shareholders as valuation gaps narrow.

Matt Beasley: I am pleased to report that we repurchased almost 1 million shares over the last year at an average price of less than $100 per share for a total of almost $100 million. I'm also pleased to report that yesterday, our board of directors increased our share repurchase program authorization to $125 million. This will allow us to continue returning capital to share <unk>.

Matt Beasley: Little to shareholders, while maintaining sufficient liquidity and financial flexibility to invest in our business and pursue strategic opportunities.

Matt Beasley: We intend to continue executing this program in a disciplined and opportunistic manner.

Matt Beasley: As Judy mentioned, we are proud of our best performance in 2023 Wheeler.

Matt Beasley: We leveraged the company's century of experience customer centric approach and solid financial position to navigate a changing market, while pursuing long term growth and profitability.

Matt Beasley: In November 1993, our former chairman and CEO, Robert a young a third dedicated to grow the trees on one of our campuses to the retired men and women of art best who planted seeds for the company's success as.

Matt Beasley: Despite the softer freight environment, our asset-based segment core shipments and tonnage have increased on a year-over-year basis; we remain agile and responsive to market changes and are ready to scale up as demand increases. Excluding periods affected by pandemics, the average sequential change in ArcBest's asset-based operating ratio from the fourth quarter to the first quarter over the past 10 years has been an increase of about 400 basis points, with larger increases occurring during declining economic environments. For more details on our January trends, please refer to the Form 8K exhibit we followed. Moving on to our Asset Light segment, fourth-quarter revenue was $413 million, down 14% year-over-year on a daily basis. Shipments per day increased 12 percent, driven by higher demand for our main solutions, while revenue per shipment decreased 24 percent due to continued softness in the market. While we reduced operating expenses and improved productivity, the segment saw a non-gap operating loss of one million dollars.

Matt Beasley: As we enter our second century, we continued planning investing and investing for the future and remain confident about the opportunities ahead now I'll turn the call back to Judy for some final comments.

Judy R. McReynolds: Thank you, Matt our fourth quarter and full year performance is a testament to the experienced values and dedication of the entire arc best team I'm honored to work with such a talented group of people, who always go above and beyond.

Judy R. McReynolds: Want to emphasize that we are not only focused on managing our cost, but also on investing for growth.

Judy R. McReynolds: We are investing in technology to enable our employees to work smarter and more efficiently. We are not just following the trends that leading the way with our AI projects, which have already delivered significant efficiency gains and our employees for further development.

Judy R. McReynolds: Our city route optimization project has contributed over $1 million per month, and operating income improvement and we began a pilot to extend this program into our shipments pick up process.

Judy R. McReynolds: We are investing in solutions to deliver exceptional value to our customers, we pay attention to customer feedback and collaborate with them to solve their logistics challenges one of the common request, we hear from them is to have more visibility into their shipments even before they are picked up and that is why I'm excited to share that we are launching a new feature on <unk>.

Judy R. McReynolds: <unk> Dot com tomorrow that will give our customers real time pre pickup status information for LDL shipments. This is just one of the many digital toolset enhancements that we are developing and rolling out this year.

Matt Beasley: Before the year 2023, asset-like revenue was $1.7 billion, down 21% from 2022 on a daily basis. Our shipments per day increased 5% while our revenue per shipment decreased 25%. Our full year non-GAAP operating income was $5 million, and the Just DIVA Dollar was $13 million.

Judy R. McReynolds: We're investing in our people who are the heart of our success, we have built an industry, leading employee experience fostering engagement and productivity and I'm proud to say that we have the best team in the industry and sentiment routinely echoed by our customers.

Judy R. McReynolds: Over the last year, we have evolved from our beginnings as a local freight hauler into a leading logistics company that keeps the global supply chain moving arent mess has differentiated itself through and our unrelenting customer focus and suite of full service logistics solutions, including our own assets, which makes it easier for our customer.

Matt Beasley: We also provided preliminary asset-light business trends for January 2024 in the Form 8K Exhibit file this month. We continue to see lower revenue levels as shipment growth is offset by lower revenue per shipment in this softer market. Purchase transportation expense as a percentage of revenue increased as we saw more limited carrier capacity after the holiday season and during several winter storms.

Judy R. McReynolds: To do business, our continued investments in technology solutions and people benefit our employees customers capacity partners and shareholders as we enter our second century, we are better positioned than ever to capitalize on the vast market opportunity available to us by partnering with our customers to solve their most car.

Complex logistics challenges that concludes our prepared remarks, and I'll turn it back over to David Humphrey.

Matt Beasley: I'm pleased to share that our business momentum in 2023 generated robust cash flow, and ArcBest's consolidated adjusted EBITDA from continuing operations reached $370 million. Our business performance and solid financial position enabled us to strategically invest for the future in 2023, including investments in equipment, real estate, technology, and innovation, while returning over $100 million to shareholders through share repurchases and dividends. Our net capital expenditures in 2023, including equipment financing, were $245 million, of which $144 million was allocated to revenue equipment.

David Humphrey: Okay, Danica I think we're ready for some questions.

Danica: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Your first question comes from Jason Seidl with TD Cowen. Please go ahead.

Jason H. Seidl: Thank you, operator, Hey, Judy hygiene good morning.

Jason H. Seidl: I wanted to talk a little bit about January trends that you guys sent us how much of it do you think was weather impacted and then can you guys are also remind us when do we start lapping the transactional business declines.

Judy R. McReynolds: Yes, I mean, Seth do you want to talk about the weather impact on the weather side. So obviously winter weather comes every year, it's nothing new to us, but January was a little bit more extreme than traditional January is that we've seen so in January we had about 130 <unk>.

Seth: Service Center closures due to weather and if you look at our trailing 10 year average it's about 57 service center closures in January so for the full first quarter, we generally average about 174.

Seth: Closures on a 10 year average so we're already at about 75% of that and we're just getting into February. So January was pretty extreme from a weather perspective, but I'm proud of the team that we fully recovered networks back on cycle and we feel good that we're positioned well.

Matt Beasley: We faced some challenges with manufacturing delays and park shortages last year, which resulted in a portion of our planned 2023 CapEx, primarily for new city tractors and trailers, being deferred to 2021. The supply chain issues that affected our tractor and trailer orders have mostly been resolved, lead times are shortening, and we are anticipating the same level of revenue equipment CapEx carry forward in future periods. We also had some real estate project work that we'll carry over. For 2024, including financed equipment, we anticipate net capital expenditures in the range of $325 to $375 million. This includes $155 million of revenue equipment and $130 million of real estate.

Speaker Change: And where were you guys last year.

Speaker Change: On whether you are saying on the amount on the service Center closures. Yeah. You gave the 10 year average, but last year. If I remember was kind of a late winter.

Yes. It was it was around that 10 year average 57, it was around okay perfect.

Speaker Change: Yes.

Speaker Change: Great I'll ask Christopher to jump in here also hey, Jason Good morning.

Speaker Change: The transactional business really that first half of 2023 is where we've relied more heavily on that and then as you think about the market disruptions in the second half, that's where our core business took a pretty meaningful step up or over you were able to swap out that transactional business for more core business. So I would say say <unk> first half of 2023 is when we are.

Speaker Change: Are more reliant on that transactional.

Speaker Change: Okay, Great. That's my one plus I guess thank you.

Speaker Change: Thank you [laughter].

Speaker Change: Alright, our next question comes from Jordan Ellinger with Goldman Sachs.

Jordan Ellinger: Yeah, Hi, Good morning, I was wondering you mentioned I think yes. Good morning, you mentioned in the 8-K, I think that traditional or typical seasonality <unk> is about 400 basis points worse.

Matt Beasley: The remaining amount includes items related to technology and miscellaneous dock equipment upgrades and maintenance. We are constantly evaluating opportunities to expand and enhance our AVF network. In January, we purchased three yellow facilities for $30 million and spent $8 million to acquire the lease for another yellow facility. These locations are part of our Long-Term Facility Roadmap, are strategically located in their respective markets, and are more cost-effective than new construction. The yellow auction process highlighted the value of LTO real estate assets while underscoring the high barriers to entry in the sector.

Jordan Ellinger: Or higher depending on I guess, the economic condition. So is there a way to think about the plus minus this year you have still soft economy, but you're really shifting hard into the core L. T L shipments, which I assume.

Jordan Ellinger: As you know favourable for profitability and mix. So how do we think about that interplay. Thanks.

Jordan Ellinger: Yes, Jordan this is Matt so you're right over the last 10 years are you excluding the pandemic affected periods. It's about a 400 basis point increase that we've seen in operating ratio from the fourth quarter to the first quarter. There's certainly a few other factors that are in play this year.

Jordan Ellinger:

Jordan Ellinger: I think one.

Jordan Ellinger: Just some of the the market disruption impacts that we saw in the fourth quarter.

Jordan Ellinger: Obviously, there is as you mentioned the.

Jordan Ellinger: <unk> substantially increases that we've seen on our core business over the last few months that we're carrying into this year, we already talked about a little bit of weather impact certainly fuel has come down some over the last.

Jordan Ellinger: Month, or so and so I think those kind of are just a few items that I would highlight in addition to maybe what we had seen on a historical basis sequentially.

Jordan Ellinger: The other thing I'll mention Jordan is that we did put in some cost controls.

Matt Beasley: We are currently evaluating additional real estate investment opportunities and will provide you with more updates as opportunities develop. As always, we are being disciplined and prudent and expect that any investment will perform. As you may recall, in February 2023, we announced a $125 million share repurchase program in conjunction with our FleetNet sale announcement. We recognize that repurchasing undervalued shares creates value for remaining shareholders as valuation gaps... I'm pleased to report that we repurchased almost a million shares over the last year at an average price of less than $100 per share for a total of almost $100 million.

Really back in say the August timeframe that have carry forward now and.

Jordan Ellinger: And to the first quarter as well. So you know that we have the union contract increase I think that was I mean that was there in the fourth quarter it'll be there in the first quarter.

Jordan Ellinger: Their item is just that the union incentive will apply.

In all of 2024.

Jordan Ellinger: So that's a factor, but we have put in cost controls and then you know if you.

Jordan Ellinger: If you take a look at the fourth quarter you'll know.

Jordan Ellinger: You know pretty good decreases and cartage and purchase transportation and rented equipment. You know all of that is still in place and so.

Jordan Ellinger: That's a relatively consistent comment I guess to the fourth quarter. So yeah, there's a lot going on here, including the weather that that Seth mentioned earlier.

Jordan Ellinger: We're looking forward to having you know the month of February hopefully with maybe fewer storms or something to be able to look at but you know I'm really pleased with the strength of our core business and the opportunities that we're seeing.

Matt Beasley: I'm also pleased to report that yesterday, our Board of Directors increased our share repurchase program authorization to $125 million. This will allow us to continue returning capital to shareholders while maintaining sufficient liquidity and financial flexibility to invest in our business and pursue strategic operations. We intend to continue executing this program in a disciplined and opportunistic way. As Judy mentioned, we are proud of ArcBest's performance.

Jordan Ellinger: In terms of bids in our win rate.

Jordan Ellinger: And you know that.

That's helpful. As we think about the rest of 2024.

Speaker Change: Okay, certainly a lot of puts and takes but I think the <unk> did better than seasonality.

Speaker Change: So I don't know I guess, the weather makes it a little tricky but.

Speaker Change: But as he said the cost controls are still in place so.

Speaker Change: Maybe it could look a little bit better than normal who knows.

Speaker Change: No you're absolutely.

Speaker Change: Totally right Jordan, Yeah, we definitely saw.

Speaker Change: Great improvement from the third quarter, the fourth quarter that was.

Speaker Change: Ahead of what we would've expected seasonally for.

Speaker Change: For those quarters.

Speaker Change: Alright, thanks, so much.

Speaker Change: Thanks Jordan.

Speaker Change: Alright. Our next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi Shankar: Thank you good morning, everyone.

Ravi Shankar: I wanted to ask question on your Capex. Your Capex is stepping up somewhat from 'twenty three 'twenty four but <unk> seen some of your peers.

Matt Beasley: We leverage the company's century of experience, customer-centric approach, and solid financial position to navigate a changing market while pursuing long-term growth and profitability. In November 1993, our former chairman and CEO, Robert A.

Ravi Shankar: Pretty significantly ramp up their capex into 'twenty 'twenty four.

Ravi Shankar: Is that something you consider kind of is there a risk that others may spend more on kind of end up in more capacity and more opportunity for growth. How are you thinking about that for next year for this year.

Speaker Change: Well Ravi I, you know I think that.

Speaker Change: Yes, we what we're doing specifically is just relative to a very purposeful plan.

Judy R. McReynolds: Young III dedicated a grove of trees on one of our campuses to the retired men and women of ArcBest who planted seeds for the company's success. As we enter our second century, we continue planning and investing for the future, and remain confident about the opportunities ahead. Now, I'll turn the call back to Judy for some final instructions. Thank you, Matt. Our fourth quarter and full year performance is a testament to the experience, values, and dedication of the entire ArcBest team. I'm honored to work with such a talented group of people who always go above and beyond. I want to emphasize that we are not only focused on managing our costs but also on investing for growth. We are investing in technology to enable our employees to work smarter and more efficiently. We are not just following the trends but leading the way with our AI projects, which have already delivered significant efficiency gains and are poised for further development. For example, our city route optimization project has contributed over $1 million per month in operating income improvement, and we've begun a pilot to extend this program into our shipment pickup process.

That we had in place I think N R.

Speaker Change: Our presentation that we put.

Speaker Change: Out there today, there's a facility plan.

Speaker Change: Outline there of how that the doors that we have in the network can be increase since 2021, I think it's on page 10 of that and so that that could be instructive for you, but it is interesting all that's happened because we you know we were embarking on a facility plan to really.

Speaker Change: Make more efficient some of the facilities that we have improved some of the existing facilities and then also to add facilities in areas, where we knew that we had.

Speaker Change: Great opportunities for growth and so it's very purposeful as we think through it. So when we were looking at the auction properties that were available and.

Speaker Change: Considering what we would bid and then I guess you can see what we ultimately won them all of that fit together pretty well and the other thing was I was really proud of our team for how informed we were about the values that should be paid and you know.

Speaker Change: As we looked at those we knew that we would we could really gain some benefit from them and so I see what we've done is really an efficiency gain as well as a growth opportunity and that's really a win win for us over the longer term.

I feel like that there's a lot going on with other competitors you know I'll I'll, just let Christopher comment about from a pricing standpoint, I think that's the ultimate concern what your view of that is an and.

Christopher Atkins: Sure. So you know really as you think about all the investment that's going into other carriers' networks that to me that's a level of in terms of the cost basis that they have to cover for so I expect that could could lead to some positive trends in pricing and the other thing is that as other LPL carriers are investing in their networks, we collaborate with them from a maintenance.

Judy R. McReynolds: We are investing in solutions to deliver exceptional value to our customers. We pay attention to customer feedback and collaborate with them to solve their logistics challenges. One of the common requests we hear from them is to have more visibility into their shipments, even before they are picked up. And that is why I'm excited to share that we are launching a new feature on ARCB.com tomorrow that will give our customers real-time pre-pickup status information for LTL shipments.

Christopher Atkins: Perspective, we work really have some really strong relationship with those other carriers and so we see this as they become stronger in the market, we've seen an opportunity for us to collaborate even stronger with them to find mutual win win opportunities.

Speaker Change: Very helpful. Thanks, everyone.

Speaker Change: Alright. Your next question comes from Ken <unk> with Bank of America. Please go ahead.

Ken: Hey, great good morning.

Ken: And great job on the margin.

Ken: Talking about that I guess.

Ken: Judy or Matt Youre looking at your yields up your new adds up five 6% against best in class, just a little bit higher than that up just over 8% can you talk about your service levels, what's left on the core versus transactional mix.

Judy R. McReynolds: This is just one of the many digital tool set enhancements that we are developing and rolling out this year. We're investing in our people, who are the heart of our success. We have built an industry-leading employee experience fostering engagement and productivity. And I'm proud to say that we have the best team in the industry, a sentiment routinely echoed by our customers. Over the last year, we have evolved from our beginnings as a local freight hauler into a leading logistics company that keeps the global supply chain moving. ArcBest differentiates itself through our unrelenting customer focus and suite of full-service logistics solutions, including our own assets, which makes it easier for our customers to do business.

Ken: In order to still convert back to court because it looked like core was up while a big down dip on the transactional so maybe just kind of walk us through that so we understand the trend transition still to occur.

Speaker Change: Yeah, I would I would say on the service levels, we've returned to our historical levels. We've been in a good place now for for quite some time, Judy mentioned, the external recognition and I'm proud of the team being the only 10 time winner of the excellence and cargo claim Prevention award for the HCA and we go head to head with our all of our competitors there. So.

Speaker Change: As we shift to 2024, we talked about that focus on excellence in our quality process. The 40 year anniversary and we've had that in place and that's really ingrained in our culture. When you think about it as one of our core values excellent. So we have a lot of initiatives in place to take service offering to another level to be honest with you.

Speaker Change: In 2024 that includes tactical execution, our shipment visibility tool, which Judy mentioned, we're rolling out some new pre pickup statuses tomorrow to all of our customers. We're testing a lot of digital tools with a small group of customers right now we expect those to be installed mid mid 2024.

David Humphrey: Our continued investments in technology, solutions, and people benefit our employees, customers, capacity partners, and shareholders. As we enter our second century, we are better positioned than ever to capitalize on the vast market opportunity available to us by partnering with our customers to solve their most complex logistics challenges. That concludes our prepared remarks, and I'll turn it back over to David Hunt. Okay, Danica, I think we're ready for some questions.

Speaker Change: And thats really going to expand the digital functionality across all of our service lines and we mentioned our focus on compliance last quarter we.

We have a team that's going out to the field team of operational experts that are getting with some of our newer folks and get them trained up with how to run an efficient operation and the better efficiency you have the better it is going to translate to service. So I am excited about our high level of service, we already offer and this focus on excellence in just our history with quality processes go only.

Speaker Change: Going to accelerate that as we move forward.

Speaker Change: Do you provide kind of cargo claims levels or on time performance numbers relative to peers or.

Speaker Change: Is that not given.

Operator: At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from Jason Seidl with TD Cohen. Please go ahead. Thank you, operator. Hey, Judy.

Well I mean, Ken I think I think there's a lot to consider when you do that and so are our preferences is to not do that but it's not because we're shy about it I mean, our service levels are.

Speaker Change: Good and customers value them, but there are lots of comparison issues. When you look across and we're fully aware of those especially because you know we have our managed offering and we do business with a lot of that.

Jason H. Seidl: Hi team. Good morning. I wanted to talk a little bit about the January trends that you guys sent us. How much of it do you think was weather-impacted?

Speaker Change: Carriers that are competitors of regional carriers, and we see those differences.

Speaker Change: But on a cargo claim side you know we've been best in class for a long time as as that turn time.

Speaker Change: Winning award.

Indicates.

Jason H. Seidl: And then can you guys also remind us when we start lapping the transactional business declines? Yes, I mean, Seth, do you want to talk about the weather impact? Yeah, on the weather side, so obviously winter weather comes every year.

Speaker Change: Got it.

Speaker Change: And then just to clarify do you at this point do you still talk I don't know excess capacity or what is available to still switch between the core and the transactional side.

Speaker Change: And so we have opportunity we've talked about before to do the mix update and we still have plenty of runway there to to grow our core business and make room with transactional but we also have upside just in total shipment count to grow and we've demonstrated that over the last 12 months that we can handle more business. We can bring on more of that varies.

Seth Runzer: It's nothing new to us, but January was a little bit more extreme than traditional Januaries that we've seen. So in January, we had about 130 service center closures due to weather. And if you look at our trailing 10-year average, it's about 57 service center closures in January. So for the full first quarter, we generally average about 174 closures on a 10-year average. So we're already at about 75% of that, and we're just getting into February. So January was pretty extreme from a weather perspective, but proud of the team that we fully recovered, the network's back on cycle, and we feel good that we're positioned well. And where were you guys last year?

Speaker Change: <unk> expense that could give us upside in total shipment growth as well. So I don't know Seth if you want to speak to any of that yes, I would say on the long term network side of things, we talked about the doors we're at in there.

Seth: And I really view growth in capacity, it's not just the physical doors, you're adding or the people. It's also the efficiency gains that we have so when Judy was talking about the facilities.

Seth: To an earlier question, what we saw as a good example in 2020 threes, we opened a facility in camp Hill and.

Seth: We had our Carlisle facility, where we transfer some of that freight over to camp Hill and when you look at the combined operating ratio of those two locations Thats improved over 600 basis points. Since we opened that facility. So I view efficiency as a lever lever for growth.

Seth: We've seen that in our real estate plan, and that's where we're investing our dollars so I'd.

Seth: I'd say overall, we probably have about 15, 20% latent capacity right now so we feel pretty good about where we're at from.

Seth Runzer: On the weather, you're saying? On the amount of closures? Yeah, on service center closures, yeah. You get a 10-year average, but last year, if I remember correctly, was kind of a light winter.

People standpoint equipment, and real estate perspective, as well as efficiencies.

Speaker Change: Appreciate the time and thoughts thanks, guys.

Speaker Change: Thanks Keith.

Speaker Change: Okay, Great. Our next question comes from Chris Wetherbee with Citi. Please go ahead.

Seth Runzer: Yeah, it was around that 10-year average of 57. It was around, okay, perfect. I'm gonna ask Christopher to jump in here also. Hey, Jason, good morning. Hey, good morning. The transactional business, really, the first half of 2023 is where we've relied more heavily on that. And then as you think about the market disruptions in the second half, that's where our core business took a pretty meaningful step up where we were able to swap out that transactional business for more core business. So I would say the first half of 2023 is when we were more reliant on that transaction business. Okay, great. That's my one plus, I guess.

Speaker Change: Hey, good morning, guys, it's Rob on for Chris.

Speaker Change: Thank you.

Speaker Change: Could you give us some update in terms given the terminal terminals you guys were able to acquire from yellow auction could you give us an update on your thoughts about that total shipments per day are targeting in the network today relative to that 2500, you guys were talking about last quarter.

Speaker Change: Yes, I would say, it's really fluid to be honest with you. So we're.

Speaker Change: We're targeting and honestly as much growth as we can get.

Speaker Change: So I would say in the what what our real estate plan is based around is around 25% growth and Thats really what were trying to achieve in the longer term, obviously, but I would say, we're really doors wide open on the growth side of things and then you might get into the detail of your of the what we bought yes, well locations and Bob Yeah on the actual yellow real estate.

Speaker Change: Side of things, we purchased three properties under the lease buyout of one so we purchased the Moines Springdale in Columbus, Ohio.

Speaker Change: But that really is part of a longer term real estate plan that we've had so in 2022, we added about 135 doors to the network 2023 about 299 doors to the network and then in 2024, we plan to add about 347.

Christopher Atkins: Thank you. All right, our next question comes from Jordan Allinger with Goldman Sachs. Yeah, hi, morning.

Speaker Change: Hello property accounted for 77 of those door, Ed So and those were markets that were already in.

Speaker Change: We already do business in but we saw an opportunity upgrade whether it's doors our yard capacity or whatever the case may be because we see growth opportunities in those markets.

Jordan Allinger: I was wondering, you mentioned this morning, you mentioned the 8K. I think that traditional or typical seasonality, 4Q to the 1Q is about 400 basis points worse or higher, depending on, I guess, the economic conditions. So, is there a way to think about the plus-minus this year? You still have a soft economy, but you're really shifting hard into the core LTL shipments, which I assume is, you know, favorable for profitability and mix. So, how do we think about that interplay? Thanks. Yeah, George.

Speaker Change: And then just for my clarification piece on the shipments per day Theres, just a lot of noise and more tonnage per day Theres a lot of noise given the transactional business. You guys were doing can you speak a little bit about the sequential trend from December from the fourth quarter that youre seeing so far in the first quarter just so.

Speaker Change: We level set.

Speaker Change: Kind of expectations from from a volume perspective.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: So I think overall, our shipment count is down.

Speaker Change: If you think from third to fourth.

Speaker Change: And then going into January I think I think in January we were averaging right around 19000 shipments per day is it similar for December right around 19000 shipments per day and like we talked about earlier some of that is a weather effect that we think there's upside as the weather clears up to handle more like Seth was talking about.

Speaker Change: We're managing that on a day to day basis, our sales yield and the operations teams are closely connected there to make sure that we're getting the right result from a short term positioning standpoint, but also preparing ourselves for long term growth.

Speaker Change: Rob we did share in the 8-K. This morning, we are continuing to see higher transactional prices year over year, which.

Speaker Change: The resulting lower transactional volumes, but core shipments as we moved into January we're up 6% core tonnage I'm sorry, yes core shipments were up 8% core tonnage was up 6% as we moved into January.

Jordan Allinger: You're right, you know, over the last 10 years, excluding the pandemic effective periods, it's about a 400 basis point increase in Operating Ratio from the fourth. There are certainly a few other factors that are in play this year. One is some of the market disruption impact that we saw in the fourth quarter. Obviously, substantial increases that we've seen on our core business over the last few months that, You know, we already talked about a little bit of weather impact have come down some over the last month or so. And so, you know, I think those kind of are just a few items that I would highlight, what we've seen on a historic basis. The other thing I'll mention, Jordan, is that we did put in some cost controls really back in, say, the August time frame that have carried forward, you know, into the first quarter as well. So, you know, we have the union contract increase, I think that was, I mean, that was there You know, another item is just that the union incentive will apply, you know, throughout 2024. So that's a factor.

Speaker Change: Year over year.

Speaker Change: I appreciate the perspective, thanks, guys.

Speaker Change: Thank you thanks, Rob.

Speaker Change: Alright. Our next question comes from Jack Atkins with Stephens. Please go ahead.

Jack Atkins: Okay, great good morning, and thanks for taking my questions.

Jack Atkins: So Seth if I could go back to something you were talking about earlier, which was sort of this idea that you're kind of positioning the network over the long term for 25% share.

Jack Atkins: Shipment growth levels.

Jack Atkins: I guess, how are you thinking about core LPL market growth over the over the long term I mean do you think it's kind of GDP GDP plus just kind of.

Speaker Change: What are some of the drivers there if you could maybe talk about that.

Seth: Yes, I would say, it's a mix of everything obviously, the macroeconomic conditions PMI things like that are obvious indicators weight per shipment, but the way I try to look at it as a.

Seth: Our view of our pipeline and its robust and there's a lot of opportunities that are coming our way as shippers are looking for long term logistics partners and I think about how our strategy is working because being an integrated logistics company with assets allows us to respond to customers like we did throughout the turbulence in 2023, so we leverage both of them.

Seth: Our networks, the asset based and asset light networks to meet our customer demand. So when we see the shift to more core business that has allowed us to be more strategic with our resources.

Seth: And when you look at most recent pandemic years, it was challenging to find labor. So we're trying to position ourselves for the short term and the long term for these growth opportunities that we see in our pipeline.

Speaker Change: Yes, absolutely and I'm sure there's a lot of demand for our high service network like like yours.

Matt Beasley: But we have put in cost controls. And then I, you know, if you take a look at the fourth quarter, you'll see pretty good decreases in cartage and purchase transportation and rented equipment, you know, all of that is still in place. And so that's a relatively consistent comment, I guess, about the fourth quarter. So, you know, there's a lot going on here, including the weather that Seth mentioned earlier. We're looking forward to having the month of February, hopefully with maybe fewer storms, or something to be able to look at.

Speaker Change: Okay I guess for my for my follow up question, just kind of back to the yield commentary.

Speaker Change: Seeing continued acceleration in terms of the car.

Speaker Change: Contract renewal rates year over year in the fourth quarter.

Speaker Change: Are you seeing customers wanting to pull renewals forward or you know I think another carrier you talked about seeing a significant increase year over year and renewal rates.

Speaker Change: The number of renewals in the fourth quarter are you seeing that as well.

Speaker Change: It would just be kind of curious about that.

Speaker Change: Yes, I don't know that were seeing in necessarily any change of trends and renewal rates. So we're we're constantly evaluating those renewals, making sure that we're getting compensated for the service that we're providing one trend that I am seeing as it relates to renewals and bids is that there is an interest among the shipping community and diversifying their carrier base and not rely.

Speaker Change: And just on one carrier so I think that really plays well like set was saying to our integrated logistics approach that plays well into our managed solution, where if they want to diversify their carrier base, where we have a stable of carriers that were able to introduce to them to really derisk their supply chain to not be overly overly reliant on one or two carriers.

Matt Beasley: But, you know, I'm really pleased with the strength of our core business, the opportunities that we're seeing in terms of bids, and our win rate. And, you know, that's helpful as we think about the rest of 2024. Okay, certainly a lot of put and takes, but I think the 4Q did better than seasonality. So, I don't know. I guess the weather makes it a little tricky, but as you said, the cost controls are still in place. Maybe it could look a little bit better than normal, who knows? But no, you're absolutely right, Jordan.

Speaker Change: Okay fantastic Thanks for the time guys.

Speaker Change: Thanks Jack.

Speaker Change: Alright, our next call comes from Scott Group with Wolfe Research. Please go ahead.

Scott H. Group: Hey, Thanks, Good morning, So I just wanted to go back to this.

Scott H. Group: Core shipment score tonnage up 6% total tonnage down 18%, that's a pretty massive spread at this point what percentage of the business is this transactional.

Speaker Change: Well lets say you know Scott, it's certainly lower I mean.

Speaker Change: We use transactional.

Speaker Change: To fill in the gaps that we need.

Speaker Change: What's changed from last year.

Speaker Change: Is.

Speaker Change: And emphasis on wanting to make sure that we have we serve our core customer as well, but we also have capacity to serve them well last year. When you think back about where we were.

Jordan Allinger: Yeah, we definitely saw a great improvement from the third quarter, and the fourth quarter that was ahead of what we would have expected. All right, thanks so much. Thanks, everyone. All right, our next question comes from Ravi Shankar with Morgan Stanley. Please go ahead. Thank you. Good morning, everyone.

Speaker Change: We were in a period, where it was very important to US you know to have consistency in our network.

Speaker Change: We had brought on a lot of people are it had been a very challenging hiring environment.

Speaker Change: As we got into lighter first quarter into second quarter, we were working to you now.

Speaker Change: Get our labor deal done and so it was really important to us to keep the network working keeping our people working and staying in a consistent place.

Ravi Shankar: I want to ask a question about your CapEx. Your CapEx is stepping up somewhat from 2023 to 2024, but we've seen some of your peers pretty significantly ramp up their CapEx in 2024. Is that something you consider, kind of, is there a risk that, you know, others may spend more and kind of end up with more capacity and more opportunity for growth? And how are you thinking about that for next year and this year? Well, Ravi, you know, I think that, you know, what we're doing specifically is just relative to a very purposeful plan that we had in place. I think, in our presentation that we put out there today, there's a facility plan outline there of how the doors that we have in the network have increased since 2021. I think it's on page 10 of that.

Speaker Change: And as we.

Speaker Change: <unk> entered the latter part of the second quarter and ended the ended the third quarter, we started to hear the noise about the yellow situation.

Speaker Change: Customers were reaching out to us we started to see.

Speaker Change: A lot of opportunity there, but we were also in early July wrapping up our labor deal.

Speaker Change: We saw an opportunity to really.

Speaker Change: Emphasize the core business opportunities that we were seeing we also saw an opportunity to really right size. The network from a resource standpoint that the most effective resources on them. We wanted to emphasize the use of our people rather than third party resources.

Speaker Change: And that equation has proven to be an improvement in our growth.

Speaker Change: Growth opportunity in the core customers, but also.

Speaker Change: Our profitability improvement and that's where we are as we enter 2024 as well.

Speaker Change: What we want to do is be sure that we stay in that place, where we're optimizing growth profitability and the use of our own labor and resources and it does create some odd comparisons I would tell you. This too that the January weather also plays a role in some of those statistics in the latter part of January.

Judy R. McReynolds: And so that could be instructive for you. But it is interesting, all that's happened, because we were embarking on a facility plan to really make some of the facilities that we have improved some of the existing facilities more efficient, and then also to add facilities in areas where we knew that we had great opportunities for growth. So it's very purposeful, as we think through it. So when we were looking at the auction properties that were available, and, you know, considering what we would bid, and then I guess you can see what we ultimately won. You know, all of that fit together pretty well.

Speaker Change: We saw much stronger you know.

Speaker Change: In terms of our core customers. So we really think there's a lot at play there, but sometimes when you're giving.

Speaker Change: Good day like we do in our 8-K that one month is just not as constructive as you'd like for it to be for the rest of what youre doing in so just.

Speaker Change: Just hope that you can take all of that into consideration as youre looking at it in and how that affects what you're doing and thinking in your modeling.

Speaker Change: I guess ultimately what I'm trying to figure out is are you clearly we've pivoted away from this transactional stuff, it's helping yield it's helping margin are we happy with the mix today do we want to go even pushed the transactional even lower or do you think maybe in your view, if we overshot a little too much on tonnage.

Speaker Change: Pressure and we want to actually increase our transactional what are we trying where are we trying to take this transactional from here.

Speaker Change: I feel like it's in a pretty good place we feel we have access to a lot of transactional business. So we have the access to it you know that's what we'd like to do but we do see that it is at a more optimal level. Then certainly it was last year, but we are constantly evaluating that Scott I mean.

Judy R. McReynolds: And the other thing was, I was really proud of our team for how informed we were about the values that should be paid. And, you know, as we looked at those, we knew that we would really gain some benefit from them. And so I see what we've done is really an efficiency gain as well as a growth opportunity. And that's really a win-win for us over the longer term. You know, I feel like there's a lot going on with other competitors. You know, I'll just let Christopher comment about, you know, from a pricing standpoint, I think that's the ultimate concern, what your view of that is. Sure.

Speaker Change: We do it every day, we look at the opportunity set that's there we look at the lanes that we're running in how you know that one more shipment could affect it and so it's very.

Speaker Change: Very analytically, driven let's just say and so you know, but I feel like it's probably in a more optimal place today than it was in last January or the environment that we have today last year, we had some different objectives that we were working toward.

Speaker Change: And I outlined those already so.

Christopher Atkins: So, you know, really, as you think about all the investment that's going into other carriers and networks, that, to me, that's a level up in terms of the cost basis that they have to cover for. So I expect that could lead to some positive trends in pricing. And the other thing is that as other LTL carriers are investing in their networks, we collaborate with them from a managed perspective. We really have some really strong relationships with those other carriers. And so we see that just as they become stronger in the market, we see an opportunity for us to collaborate even stronger with them to find mutual win-win opportunities. Very helpful. Thanks, everyone. All right, your next question comes from Ken Hoexter with Bank of America. Please go ahead. Hey, great. Good morning.

Alright, thank you.

Thanks.

Speaker Change: Okay. Our next question comes from Dan Moore with Deutsche Bank. Please go ahead.

Hi, Judy that Chris and Dave Thanks for taking our questions following up on the service discussion when we look at the most recent <unk> data, it's been pretty volatile in terms of customers' perception of Earth's best service I'm not sure if thats more to do with the adjustments you've made on pricing or that highlights some deficiencies.

Speaker Change: In some areas that we need to focus.

Yes.

Speaker Change: Go ahead <unk> been <unk> bin this is Dennis.

Dennis: Yes, certainly.

Dennis: When we look at the math Youll study, we are not in a place that we that we want to be that we're striving to be and I think Seth <unk>.

Dennis: Highlighted some of the things from a service perspective that we're working on.

Dennis: <unk> have improved really even since that study was in market.

Dennis: And we have more coming so we look at in service. It's also about how we communicate with our customers and so we talked about some of those tools, especially on the visibility side that we're providing rolling out in fact tomorrow.

Ken Hoexter: And great job on the margin. So talking about that, I guess, Judy or Matt, you're looking at your yields up, your new ads up 5.6%, and get Best in Class just a little bit higher than that, up just over 8%.

Dennis: Some things on the project upside so definitely continuing to listen to customers make changes.

Dennis: Make their experience better with us and I think also you mentioned from a price perspective.

Ken Hoexter: Can you talk about your service levels? What's left on the core versus transactional mix in order to still convert back to core? Because it looked like core was up, while a big down dip on the transactional. So maybe just kind of walk us through that to understand the trend transition still to occur. Yeah, I would, I would say on the service levels. We've returned to our historical levels. We've been in a good place now for quite some time. Judy mentioned external recognition.

Dennis: Certainly it helps to be more consistent and as we've migrated more to a core.

Dennis: Tight mixed here as we've been discussing.

Dennis: That is helpful in that and that consistency conversation with customers.

Thanks, and maybe just as a follow up the team did a great job on cost in the quarter can you just talk about how you expect the asset based cost structure to trend throughout this year, given a lower inflationary environment. It also stepped down inflation inflation.

Dennis: Yes.

Speaker Change: Yeah, Yeah. So maybe just a few comments on that I mean, certainly we do have.

Speaker Change: The.

Speaker Change: Contract increases that we saw in the third quarter of last year carrying into this year and then those obviously moderate significantly on a go forward basis on the contract.

Seth Runzer: And I'm proud of the team being the only 10 time winner of the Excellence in Cargo Claim Prevention Award for the ATA. We go head to head with all of our competitors there. So as we shift to 2024, we talked about that focus on excellence and our quality process, the 40th anniversary. And we've got that in place. And it's really ingrained in our culture; when you think about it, it's one of our core values, excellence.

Speaker Change: All of the work that we've done on the asset side that we highlighted that's continuing and in a lot of ways accelerating this year as we continue to work on service and optimization efforts. So again, all the purchased transportation and cartage and and maintenance costs and just all the work.

Speaker Change: That we've done as well as all the efficiency work that we've done we expect that to continue to have impacts throughout the year in 2024.

Speaker Change: Great. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Alright. Our next question comes from Bruce Chan with Stifel. Please go ahead.

Thanks, operator, and good morning, everyone I appreciate the time as always.

Seth Runzer: So we have a lot of initiatives in place to take our service offering to another level, to be honest with you, in 2024. That includes tactical execution, our shipment visibility tool, which Judy mentioned. We're rolling out some new pre-pickup statuses tomorrow to all of our customers. We're testing a lot of digital tools with a small group of customers right now; we expect those to be installed mid, mid 2024.

Bruce Chan: Judy or Steve maybe just a big picture question here on the strategy of asset light.

Bruce Chan: Couple of years ago, you bought a young high growth company, obviously, the market has changed pretty significantly since then a lot of movement with some of your big competitors in the business. If you could maybe just share how you're thinking about how asset light fits into the model in terms of cross selling and other synergies and then maybe what kind of long term growth or long term margin profile.

Bruce Chan: Ultimately, we'd like to get out of this business in a more normalized environment that would be really helpful. Thank you.

Seth Runzer: And that's really going to expand the digital functionality across all of our service lines. And we mentioned our focus on compliance last quarter; we have a team that's going out to the field, the team of operational experts, they're meeting with some of our newer folks and getting them trained up on how to run an efficient operation. And the better efficiency you have, the better it's going to translate the service.

Speaker Change: Yes, so from a strategy perspective, I mean, we are.

Speaker Change: We're customer led so we want to have.

Speaker Change: Every opportunity to say, yes, and help our customers.

Speaker Change: Improve their supply chains from an efficiency.

Speaker Change: <unk>.

Speaker Change: Effectiveness perspective, and so in order to do that you have to have the services and so we want to provide those services in an integrated way and so we feel like what we're doing in asset light is a strong part of our long term.

Speaker Change: And on top of that we feel great about where we are with our people and our technology, what we're doing.

Seth Runzer: So I'm excited about the high level of service we already offer. And this focus on excellence and just our history with the quality process is only going to accelerate that as we move forward. Thank you. Do you provide kind of cargo claims levels or or on time performance numbers relative to peers, or is that not a... Well, I mean, Ken, I think there's a lot to consider when you do that. And so, you know, our preference is to not do that, but it's not because we're shy about it.

Speaker Change: To build out that business and continue continuously improve.

Speaker Change: You mentioned the acquisition of <unk> in.

Speaker Change: One of the things that we really like about that is the focus that that team has on our customers. We continue to hear from our customers that we.

Speaker Change: We're a leader for them from a service perspective.

Speaker Change: Also from a from.

Speaker Change: From an employee perspective were a.

Speaker Change: <unk>.

Speaker Change: Continuously having getting recognition for being a great place to work so that allows us to attract the right talent.

Speaker Change: Which leads to a great customer experience, but overall.

Speaker Change: We see this and when you look at even our pipeline our pipeline for opportunities whether it be and manage our truckload continues to grow the number of deals throughout fourth quarter.

Judy R. McReynolds: I mean, our service levels are, you know, good, and customers value them. But there are lots of comparison issues when you look across, and we're fully aware of those, especially because, you know, we have our managed offering, and we do business with a lot of carriers that are competitors or regional carriers, and we see those differences. But on the cargo claim side, you know, we've been best in class for a long time, as the 10-time winning award indicates. Got it.

Speaker Change: The number of deals in our pipeline increased.

Speaker Change: Month over month, and we've seen that as we move into the first part of the year. So those services are resonating very well as you mentioned, we are in a challenging market environment, but.

Speaker Change: We expect that to improve in.

Speaker Change: And then from a margin perspective, we've talked about that 4% to 6%.

Speaker Change: Range that we're targeting and so that's how we're thinking about it in the long term.

Okay I appreciate that and just maybe a really quick follow up I mean, if I look at the business today Youre roughly.

Speaker Change: Call. It 60 40.

Ken Hoexter: And then just to clarify, do you still talk about, I don't know, excess capacity or what is available to still switch between the core and the transactional side? And so we have the opportunity, we've talked about before, to do that, that mix update. We still have plenty of runway there to grow our core business and make room for transactional. But we also have upside just in total shipment count growth. And we've demonstrated that over the last 12 months that we can handle more business; we can bring on more of that variable expense that could give us upside in total shipment growth as well. So I don't know, Seth, if you want to speak to any of that.

Speaker Change: ABF to asset light is that the right kind of mix of overall business is that something you are trying to manage too.

Speaker Change: I'll take that.

Speaker Change: What we see whenever we look at the market opportunities and our presence in some of those markets, which is relatively small.

Speaker Change: We really feel like that the asset light solutions that we have at.

Speaker Change: Stephen mentioned truckload and manage I would add expedite too that we'll continue to that the growth there will continue to outpace the asset base grows.

Speaker Change: That's just a level of maturity in those markets that we have I mean, we have a national network or mature on the asset base side customer still really are compelled by the service offering that we have there but just.

Speaker Change: The math would take you to a place where over time the asset light could.

Speaker Change: Could be a better part or a greater percentage I guess of the total that we have.

Speaker Change: And what I see about that is that would be a good thing, particularly we've talked a little bit about managed and that just gives us the <unk>.

Christopher Atkins: Yeah, I would say on the long-term network side of things, we talked about the doors we're at in there, and I really view growth and capacity. It's not just the physical doors you're adding or the people; it's also the efficiency gains that we have.

Speaker Change: Gnosis relationship with the customer and it allows us to help them optimize our supply chain and allows us to enact the capacity that we have a relationship with whether it's truckload or LPL carriers or its business that runs in our own network and I'm really excited about the growth potential.

Speaker Change: There as well so.

Seth Runzer: So, when Judy was talking about, you know, the facilities to an earlier question, what we saw as a good example in 2023 is we opened a facility in Camp Hill, and we had our Carlisle facility where we transferred some of that freight over to Camp Hill. And when you look at the combined operating ratio of those two locations, that's improved over 600 basis points since we opened that facility. So I view efficiency as a lever, a lever for growth.

Speaker Change: Well, what we see is a great opportunity for growth with the asset light solutions.

Speaker Change: Okay I appreciate the answers.

Speaker Change: Yes.

Tom Wavelengths: Alright. Our next question comes from Tom wavelengths with UBS. Please go ahead.

Tom Wavelengths: Thanks. This is Mike triano on for Tom.

Mike Triano: So the increase in core <unk> shipments post yellow has been beneficial from an efficiency standpoint, and it's allowed you to bring down purchase transportation costs and the asset based business do you think theres more opportunity for PT cost reduction in 'twenty four or are you optimized on PT given your current mix of <unk>.

Mike Triano: <unk> business.

Speaker Change: I would say, we're pretty close to optimize but we're always looking at.

Speaker Change: It's almost a daily management of resource to business levels, and we want to be positioned to scale up when the market turns.

Speaker Change: But those actions that we took in third and fourth quarter Theyre going to continue throughout the year and we will continue to look for duck reductions where possible.

Speaker Change: Eddie mentioned the rollout of Citi optimization that allows us to optimize our city operation, which in turn reduces some of these external city cartage cost. So we're constantly looking at our optimization roadmap and we feel pretty good about some of the projects that are coming online in 2024.

Seth Runzer: And we've seen that in our real estate plan, and that's where we're investing our dollars. So I'd say overall, we probably have about 15, 20 percent latent capacity right now. So we feel pretty good about where we're at from the people standpoint, equipment, and real estate perspective, as well as efficiency. Appreciate the time and thoughts.

Speaker Change: The PT side, we're down to a pretty optimal level. When you look at PT over the road type usage. So we think thats, a pretty spot, but we get pretty good spot but.

Speaker Change: We're always looking for opportunities as we move through the network to reduce cost and be more efficient.

Speaker Change: The other thing that we've done is we've hired.

Speaker Change: Some of the yellow drivers and so that helps us with the resources and line haul.

Speaker Change: That added to our board and.

Chris Wetherbee: Thanks, Keith. Great. Our next question comes from Chris Wetherbee with Citi. Please go ahead. Hey, good morning, guys. It's Rob on for Chris.

Speaker Change: It's been beneficial as well and should continue to be beneficial as we go forward and I think about the investments in the fleet too. So we had OEM delays as we move through 2008 2000, 2021 22 now that we've seen those more normalize by getting the equipment that we ordered more timely that's going to help us reduce our rental expense.

Seth Runzer: Could you give us an update on the total shipments per day you're targeting in the network today relative to the 20,500 you guys were talking about last quarter? Yeah, I would say it's really fluid, to be honest with you. So we're targeting, honestly, as much growth as we can get. So I would say in what our real estate plan is based around is around 25% growth. And that's really what we're trying to achieve in the longer term, obviously. But I would say we're really doors wide open on the growth side. And then you might give them the details of what we bought, the locations we bought. Yeah. On the actual yellow real estate side of things, we purchased three properties and then did a lease buyout of one.

Speaker Change: As we move through the new year.

Speaker Change: Right.

Speaker Change: So as we think about the volume growth in your ability to scale moving forward do you think that you'll lean more on.

Speaker Change: On and on company assets or do you think that youll have to to scale up PT as the volume growth comes down.

Speaker Change: I really think that we want to lean on our own assets as much as possible. That's the most cost efficient and the best experience for our customers. When you have one of our driver show up.

Speaker Change: So we're going to lean more on that side. So when we talked about transactional business earlier some of what we're doing there is trying to keep that consistency in business. So we can keep our head count in a good spot for when this turns and we also have some fleet capacity as well we've been in the fourth quarter, removing some of our older cost City unit.

Speaker Change: But with the new equipment coming online in 'twenty four we felt good about that.

Speaker Change: So I think we're positioned well with our strategy, we're deploying to be positioned when the market does turn to service our core customers.

Speaker Change: Great. Thanks for the time.

Speaker Change: Our next question comes from Stephanie Moore with Jefferies. Please go ahead.

Seth Runzer: So we purchased Des Moines, Springdale, and Columbus, Ohio. But that really is part of a longer-term real estate plan that we've had. So in 2022, we added about 135 doors to the network. In 2023, about 299 doors to the network. And then in 2024, we plan to add about 347. The yellow property accounted for 77 of those door additions.

Stephanie Moore: Hi, Good morning, Hi, everybody. Thank you good morning.

Stephanie Moore: Kind of a two part question here little bit of a focus on maybe the underlying macro environment. So first maybe if you could just touch on what youre seeing on the asset light side you saw some pretty strong volume growth. This are in the fourth quarter. So love to get your thoughts on what Youre seeing there and then maybe more of a media.

Stephanie Moore: Term question kind of your thought on how the freight environment shakes out in 2024, just based on what Youre seeing today and conversations you might be having and then I guess, maybe similarly that same question on the underlying freight environment on the asset base side and in your wholesale business, if you're seeing any any possible green shoots. Thanks.

Stephanie Moore: Stephanie It is interesting I mean, we were.

Stephanie Moore: Talking about this is we were gathering for the call about the crystal ball that we need to have for 2024.

Seth Runzer: And those were markets that we're already in, we already do business in, but we saw an opportunity to upgrade, whether it's doors or yard capacity or whatever the case may be, because we see growth opportunities in those. And then, just for my clarification piece, on the shipments per day, there's just a lot of noise or tonnage per day. There's a lot of noise given the transactional business you guys are in. Can you speak a little bit about the sequential trend from December or from the fourth quarter that you're seeing so far in the first quarter just so we can level set kind of expectations from a volume perspective? I think overall, our shipment count is down. We think from 3rd to 4th, and then going into January, I think in January we were averaging right around 19,000 shipments per day. Similar for December, right around 19,000 shipments per day. And like we talked about earlier, some of that is a weather effect that we think there's upside as the weather clears up to handle more, like Seth was talking about.

Stephanie Moore: It's it's really kind of interesting when you sit back and you think about the length of time that the manufacturing sector has been in recessionary category.

Stephanie Moore: It's almost going on two years and that's pretty unusual.

Stephanie Moore: <unk> also seen the.

Stephanie Moore: <unk>.

Stephanie Moore: The impact of just I guess that the topline reduction for truckload in particular and ground expedite. The you know the fact that there has not really been a spot market to speak of some of those things are just really unusual and so we've asked ourselves a lot about what we're look.

Stephanie Moore: <unk> four and I think the.

Stephanie Moore: The truckload team in particular has said that they feel like we're at the bottom, but it seems like we are there for a long time and we're just waiting for the most part for capacity to exit and there are some signs that we've seen capacity.

Stephanie Moore: Beginning to exit although.

Stephanie Moore: Not at the pace that we would all like to see but we look at these things over the long term and again I think we discussed a little bit ago, just the importance of having the.

Stephanie Moore: The solution set that we have whenever we go to have a discussion with a customer that's really going to be responsive to their needs.

Stephanie Moore: And.

Speaker Change: The only other thing I would add as you know this yellow event has really helped the LTM market to have some good opportunities for our core business.

Christopher Atkins: We're managing that on a day-to-day basis; our sales, yield, and operations teams are closely connected there to make sure that we're getting the right result from a short-term positioning standpoint but also preparing ourselves for long-term growth. And, Rob, we did share in the 8K this morning. We are continuing to see higher transactional prices year over year, resulting in lower transactional volumes, but core shipments as we moved into January were up 6%. Core tonnage, I'm sorry, yeah, core shipments were up 8%. Core tonnage was up 6%. Appreciate the perspective. Thanks, guys. Thanks, Rob. All right. Our next question comes from Jack Atkins with Stevens. Please go ahead.

Speaker Change: <unk>.

Speaker Change: We have to be careful with those because we want to be sure that it's a business that works well for for our customer, but also works well for us and in our network.

And some of that takes time I think we mentioned some stats about bids and winning bids and that sort of thing.

Speaker Change: We're encouraged by those and Theyre running all of that is kind of running counter to what's going on in the macro.

Speaker Change: And that's a really good thing but.

Speaker Change: We're pleased with how we're positioned and we do see that our strategic positioning is such that we can be in those conversations even if the LTE network is not the ultimate decision that the customer makes a.

Speaker Change: And I really like that and it's like you know our company is set up well for what's happening as far as the.

Speaker Change: The yellow advent and where that business ultimately lands.

Jack Atkins: Okay, great. Good morning, and thanks for taking my questions. So Seth, if I could go back to something you were talking about earlier, which was sort of this idea that, you know, you're kind of positioning the network over the long-term for 25% shipment growth levels. I guess, how are you thinking about core LTL market growth over the long-term? I mean, do you think it's kind of GDP plus, GDP plus, just kind of, what are some of the drivers there, if you could maybe talk about that? Yeah, I would say it's a mix of everything.

Speaker Change: But I'll stop there and I'm not going to give you a prediction because I don't really have one, but we are positioned well sort of.

Regardless of what's going on in the macro because of what we've put together as an approach.

Speaker Change: Got it that's all really helpful. Thanks for the time.

Speaker Change: Hi, Dana So we've got a couple of repeat so let's see if we can kind of squeeze them. I mean, we don't have a lot of time, but maybe we can go pretty quick on these last two.

Dana: Absolutely we have Ravi Shanker with Morgan Stanley Once again. Please go ahead.

Ravi Shankar: Great. Thanks, so much I'll follow up Judy just a bigger picture question for you what percentage of the business now comes from E. Commerce, we are seeing some structural shifts in the e-commerce supply chain.

Ravi Shankar: With increasing our regionalization and falling length of haul what does that mean for the LPL business over time.

Seth Runzer: Obviously, macroeconomic conditions, you know, PMI, you know, things like that are obvious indicators, weight per shipment. But the way I try to look at it is as a view of our pipeline, and it's robust. And there are a lot of opportunities that are coming our way as shippers are looking for long-term logistics partners. And I think about how our strategy is working, because being an integrated logistics company with assets allows us to respond to customers, like we did during the turbulence in 2023. So, we leverage both of our networks, the asset-based and asset-light networks, to meet our customer demand. And when we see the shift to more core business, it's allowed us to be more strategic with our resources. And when you look at the most recent pandemic years, it was challenging to find labor.

Ravi Shankar: Okay.

Ravi Shankar: Yes.

Judy R. McReynolds: Well whenever I think through that just real quickly about 15% of our business is retail now not 100% of that would be e-commerce.

Judy R. McReynolds: But a large percentage of it what I can think of examples that really don't have an online presence that we do business with them, we do that well, but so it ends up being I want to say.

Judy R. McReynolds: 11, or 12% of our shipment whenever I think about last mile. So and then again the 15% retail I think that gives you some perspective on that.

Speaker Change: Great. Thank you.

Speaker Change: Thanks, Ravi and we've got one more question I think danica.

Speaker Change: Yes, Sir our final question is from Scott Group with Wolfe Research. Please go ahead.

Scott H. Group: Hey, Thanks for the quick one can you just maybe give us a quick update.

Scott H. Group: Where we are with these innovative tech.

Scott H. Group: Technology costs.

Seth Runzer: So, we're trying to position ourselves for the short term and the long term for these growth opportunities that we see in our pipeline. Yeah, absolutely. And I'm sure there's a lot of demand for a high-performance network like yours. Okay, I guess for my follow-up question, just kind of back to the yield commentary, you know, we're seeing continued acceleration in terms of the contract renewal rates year over year in the fourth quarter. Are you seeing customers wanting to pull renewals forward, or, you know? I think another carrier talked about seeing a significant increase year over year in renewal rates, just the number of renewals in the fourth quarter. Are you seeing that as well? I would just be kind of curious about that.

Scott H. Group: What we are.

Scott H. Group: What we're getting from them and then at what point, if any do we need to start thinking about moving those into the sort.

Scott H. Group: Core Opex number.

Scott H. Group: Well, it's really right now as it stands and say, it's a creating a new revenue opportunity is is what will ultimately gain from that but at this point.

Scott H. Group: We've got.

Scott H. Group: <unk> really more than one thing going on but in the main.

Scott H. Group: Box system, there's a box system that involves hardware and software.

Scott H. Group: And is focused on the rapid pace of loading unloading and transferring bright takes it from Ana from hours to minutes.

Scott H. Group: Coming out of the trailer and then we also have the software applications that go along with that.

Scott H. Group: In the next few weeks, we're going to be introducing a more offerings that are coming from that and the pilot work that we're doing is with the fortune 500 companies are in automotive manufacturing and retail.

Scott H. Group: And.

Scott H. Group: Some some pretty exciting.

Jack Atkins: Yeah, I don't know that we're necessarily seeing any change in trends and renewal rates. You know, we're constantly evaluating those renewals, making sure that we're getting compensated for the service that we're providing. You know, one trend that I am seeing as it relates to renewals and bids is that there is an interest among the shipping community in diversifying their carrier base and not relying just on one carrier. So I think that really plays well, like Seth was saying, into our integrated logistics approach, that plays well into our managed solution, where if they want to diversify their carrier base, we have a stable of carriers that we're able to introduce Okay, fantastic. Thanks for the time, guys. Thank you. Thanks, Jack. All right, our next call comes from Scott Group with Wolf Research. Please go ahead. Hey, thanks. Good morning.

Scott H. Group: Pilot opportunities that we're working toward but its amazing how we are experiencing the different applications.

Scott H. Group: The hardware and the software and the combinations.

Scott H. Group: With some of this pilot work and so what we find is that.

Scott H. Group: The shippers or customers that are managing warehouses are trying to do is access labor.

Scott H. Group: They need workflows that are more efficient and they also are interested in safety and reducing claims damage and those are all the things that are the focus of this technology.

Scott H. Group: Both software and hardware that we're advancing and so these are what you are seeing are the costs associated with that and obviously.

Scott H. Group: We're looking forward to the revenue stream that can come from that and theres going to be more that unfolds in the next few weeks, but also as we get further into 2024 there.

Scott H. Group: But I guess.

Scott H. Group: As the revenue picks up do we need to start expensing some of this stuff or does it mean.

Speaker Change: I'm trying to figure out there is any change in accounting coming yeah, Yeah, I mean, I think once it's operationalized, yes, Scott you would I think the reason that we're handling it the way that we are right. Now is that this is pilot work that we're doing or advanced work that we're doing to get into the pilots, but it doesn't.

Scott H. Group: So I just want to go back to this, you know, core shipments, core tonnage up 6%, total tonnage down 18%. That's a pretty massive drop. At this point, what percentage of the business is this transaction? Well, it's, you know, Scott, it's certainly lower.

Scott H. Group: I totally agree with you once it becomes operationalized so to speak than it than it would be.

Speaker Change: Okay. Thank you guys appreciate the follow up.

Speaker Change: Okay, well I think that concludes our call. We appreciate you joining me this morning, and appreciate your interest and our best in so that concludes our call. Thank you very much.

Judy R. McReynolds: I mean, and I, you know, we use transactional to fill in the gaps that we need. And, you know, I think what's changed from last year is an emphasis on wanting to make sure that we have, we serve core customers well, but we also have capacity to serve them well. Last year, when you think back about where we were, you know, we were in a period where it was very important for us to have consistency in our network. You know, we had brought on a lot of people; it had been a very challenging hiring environment. As we got into the later first quarter and into the second quarter, we were working to, you know, get our labor deal done. And so it was really important to us to keep the network working, keep our people working, and, you know, stay in a consistent place. And, you know, as we entered the latter part of the second quarter and into the end of the third quarter, we started to hear the noise about the yellow situation.

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Judy R. McReynolds: Customers were reaching out to us, and we started to see, you know, a lot of opportunity there. But we were also, in early July, wrapping up our labor deal. And so we saw an opportunity to really emphasize the core business opportunities that we were seeing. We also saw an opportunity to really right-size the network from a resource standpoint to put the most effective resources on them. We wanted to emphasize the use of our people rather than third-party resources.

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Judy R. McReynolds: And that equation has proven to be, you know, an improvement in growth opportunities for the core customers but also a profitability improvement. And that's where we are as we enter 2024 as well. You know, what we want to do is be sure that we stay in that place where we're optimizing growth, profitability, and the use of our own labor and resources. And it does create some odd comparisons. I would tell you this too, that the, you know, the January weather also plays a role in some of those statistics.

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Judy R. McReynolds: In the latter part of January, we saw much stronger, you know, trends in terms of our core customers. So, we really think there's a lot at play there. But, you know, sometimes when you're giving a good update like we do in our AKs, that one month is just not as instructive as you'd like for it to be for the rest of what you're doing.

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Judy R. McReynolds: And so, I just hope that you can take all of that into consideration as you're looking at it and how that affects what you're doing and thinking in your model. I guess ultimately, what I'm trying to figure out is, are we, you know, clearly we've pivoted away from this transactional stuff, it's helping yield, it's helping margin. Are we happy with the mix today?

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Judy R. McReynolds: Do we want to even push the transactional even lower? Or do you think maybe, in your view, we have overshot a little too much on tonnage? pressure and we want to actually increase our transactional volume, where are we trying to take this transaction from here? I feel like it's in a pretty good place.

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Judy R. McReynolds: We feel we have access to a lot of transactional business, so we have access to it, you know, if that's what we'd like to do. But we do see that it's at a more optimal level than it was certainly last year. But we are constantly evaluating that, Scott. I mean, you know, we do it every day.

Scott H. Group: We look at the opportunity set that's there, we look at the lanes that we're running in, how, you know, that one more shipment could affect it. And so, it's very, very analytically driven, let's just say. And so, you know, but I feel like it's probably in a more optimal place today than it was last January for the environment that we have today. Last year, we had some different objectives that we were working toward, and I outlined those already. So, Thank you. Thanks. Okay, our next question comes from Ben Moore with Deutsche Bank. Please go ahead.

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Ben Moore: Hi Judy, Matt, Chris, and Dave, thanks for taking our questions. Following up on the service discussion, when we look at the most recent Mastio data, it's been pretty volatile in terms of the customer's perception of the ArcBest service. I'm not sure if that's more to do with the adjustments you've made on pricing or if that highlights some deficiencies in some areas that we need to focus on. Yeah. Hey Ben, this is Dennis, and you know, I think, you know, you certainly, when we look at the Mathieu study, we're not in a place that we want to be, or that we're striving to be.

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Dennis Anderson: And I think Seth, you know, highlighted some of the things from a service perspective that we're working on and have improved really, even since that study was released into the market. And we have more coming. So, you know, we look at service. It's also about how we communicate with our customers. And so we talked about some of those tools, especially on the visibility side that we're providing, and rolling out, in fact, tomorrow, some things on the pre-kickup side. So definitely continue to listen to customers and make changes to make their experience better with us. And I think also, you know, from a price perspective, certainly it helps to be more consistent. And as we've migrated more to a core type mix here, as we've been discussing, that is helpful in that consistency conversation. Yeah. Thanks.

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Ben Moore: And maybe just as a follow-up, the team did a great job on costs in the quarter. Can you just talk about how you expect the asset-based cost structure to trend throughout this year, given a lower inflationary environment and also a step down in wage inflation? Yeah, so maybe just a few comments on that.

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Matt Beasley: I mean, certainly, we do have the contract increases that we saw in the third quarter of last year carrying into this year, and then those obviously moderate significantly on a go-forward basis on the contract. You know, all the work that we've done on the asset side, you know, that we highlighted, that's continuing and, in a lot of ways, accelerating this year as we continue to work on service and optimization efforts. So, you know, again, all the purchase transportation and cartage, maintenance costs, and just all the work that we've done, as well as all the efficiency work that we've done, we expect that to continue to have impacts throughout the year in 2020. Great, thanks very much, www. ArcBest.com: All right, our next question comes from Bruce Chan with Stifle. Please go ahead.

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Bruce Chan: Hey, thanks, Operator, and good morning, everyone. I appreciate the time, as always. Judy or Steven, maybe just a big-picture question here on the strategy of AssetLight. A couple years ago, you bought a young, high-growth company. Obviously, the market's changed pretty significantly since then, with a lot of movement among your big competitors in the business. If you could maybe just share how you're thinking about how AssetLight fits into the model in terms of cross-selling and other synergies, and then maybe what kind of long-term growth or long-term margin profile you'd ultimately like to get out of this business in a more normalized environment, that would be really helpful Thank you.

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Stephen Leonard: Yeah, so from a strategy perspective, I mean, we are, you know, customer-driven. So we want to have every opportunity to say yes and help our customers improve their supply chains from an efficiency and effectiveness perspective. And so in order to do that, you have to have these services.

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Stephen Leonard: And so we want to provide those services in an integrated way. And so we feel like what we're doing in AssetLive is a strong part of our long-term plan. And on top of that, we feel great about where we are with our people and our technology, what we're doing to build out that business and continuously improve. You mentioned the acquisition of Molo.

Stephen Leonard: And one of the things that we really like about that is the focus that that team has on the customers. We continue to hear from our customers that we're a leader for them from a service perspective. Also, from an employee perspective, we're continuously having, you know, getting recognition for being a great place to work. So that allows us to attract the right talent, which leads to a great customer experience. But overall, you know, we see this.

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Stephen Leonard: And when you look at, you know, even our pipeline, our pipeline for opportunities, whether it be in managed or truckload, continues to grow. The number of deals, you know, throughout the fourth quarter, the number of deals in our pipeline increased, you know, month over month. And we've seen that, you know, as we move into the first part of the year.

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Stephen Leonard: So, you know, those services are responding very well. As you mentioned, we are in a challenging market environment, but, you know, we expect that to improve. And then, you know, from a margin perspective, we've talked about that four to six percent range that we're targeting. And so that's how we're thinking about it in the long term. Okay, I appreciate that. And just maybe a really quick follow up.

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Bruce Chan: I mean, if I look at the business today, you're roughly, you know, call it 6040. You know, ABF to asset light. Is that the right kind of mix of overall business? Is that something you're trying to manage?

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Judy R. McReynolds: I'll take that. You know, what we see whenever we look at the market opportunities and our presence in some of those markets, which is relatively small, you know, we really feel like that the asset-light solutions that we have, Stephen mentioned truckload and manage, I would add expedite to that, will continue to, that the growth there will continue to outpace asset-based growth. But that's just a level of maturity in those markets that we have. I mean, we have a national network.

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Judy R. McReynolds: We're mature on the asset base side. Customers are still really compelled, you know, by the service offering that we have there. But just, you know, the math would take you to a place where, over time, the asset light could be a better part or a greater percentage, I guess, of the total that we have. And what I see about that is that would be a good thing, particularly as we talked a little bit about managed, which just gives us, you know, the closest relationship with the customer. It allows us to help them optimize their supply chain, it allows us to use the capacity that we have a relationship with, whether it's truckload or LTL carriers, or it's business that runs on our own network, and, you know, I'm really excited about the growth potential there as well. So, you know, what we see is a great opportunity for growth with the asset lights. Okay, I appreciate the answers.

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Bruce Chan: All right. Our next question comes from Tom Wadewitz with UBS. Please go ahead. Thanks. This is Mike Tran. I went for Tom.

Tom Wadewitz: So the increase in core LTL shipments post yellow has been beneficial from an efficiency standpoint, and it's allowed you to bring down purchase transportation costs in the asset-based business. Do you think there's more opportunity for PT cost reduction in 24 or are you optimized on PT given your current mix of LTL business?

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Seth Runzer: I would say we're pretty close to optimized, but we're always looking at it's almost a daily management of resource to business levels. And we want to be positioned to scale up when the market turns. But those actions that we took in the third and fourth quarters, they're going to continue throughout the year.

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Seth Runzer: And we'll continue to look for reductions where possible. Judy mentioned the rollout of city optimization that allows us to optimize our city operation, which in turn reduces some of these external city cartage costs. So we're constantly looking at our optimization roadmap, and we feel pretty good about some of the projects that are coming online in 2024. The P.T. On the other hand, we're down to a pretty optimal level when you look at P.T. over the road type usage.

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Seth Runzer: So we think that's a pretty good spot, but we're always looking for opportunities as we move through the network to reduce costs and be more efficient. You know, the other thing that we've done is we've hired some of the yellow drivers. And so, you know, that helps us with the resources and line haul, and it adds to our, you know, road board. And, you know, that's been beneficial as well and should continue to be beneficial as we go forward. Yeah, and I think about the investments in the fleet too. So we had OEM delays as we moved through 2020, 21, 22.

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Seth Runzer: Now that we've seen those more normalized by getting the equipment that we ordered more timely, that's going to help us reduce our rental expenses as we move through the new year. So as we think about this volume growth and your ability to scale moving forward, do you think that you'll lean more on company assets? Or do you think that you'll have to scale up PT as the volume growth comes in? I really think that we should lean on our own assets as much as possible.

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Seth Runzer: That's the most cost efficient and the best experience for our customers when you have one of our drivers show up. So we're going to lean more toward that side. So when we talked about transactional business earlier, some of what we're doing there is trying to keep that consistency in business so we can keep our head count in a good spot for when this turns. And we also have some fleet capacity as well. We've been in the fourth quarter removing some of our older cost city units.

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Seth Runzer: But with the new equipment coming online in twenty-four, we felt good about that. So I think we're positioned well with a strategy we're deploying to be positioned when the market does turn to service our core customers. Great. Thanks for the time. All right, our next question comes from Stephanie Moore with Jeffries. Please go ahead. Hi. Good morning. Hi, everybody. Thank you. Good morning.

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Stephanie Moore: Kind of a two-part question here with a little bit of a focus on maybe the underlying macro environment. So first, maybe if you could just touch on, you know, what you're seeing on the asset light side, which saw some pretty strong volume growth this or in the fourth quarter. So, I'd love to get your thoughts on what you're seeing there. And then maybe more of a medium-term question, kind of your thoughts on how the freight environment will shake out in 2024, just based on what you're seeing today and conversations you might be having. And then I guess maybe similarly that same question on the underlying freight environment on the asset base side and in your LTL business if you're seeing any possible green shoots.

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Stephanie Moore: Thanks. You know, Stephanie, it is interesting. I mean, we were talking about this as we were gathering for the call about the crystal ball that we need to have, you know, for 2024. And, you know, it's really kind of interesting when you sit back and you think about the length of time that the manufacturing sector has been in the recessionary category. I mean, it's almost going on two years, and that's pretty unusual.

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Judy R. McReynolds: You know, you've also seen the impact of just, I guess, the top line reduction for truckload in particular and ground expedite, the, you know, the fact that there's not really been a spot market to speak of. You know, some of those things are just really unusual. And so, you know, we've asked ourselves a lot about what we're looking for. And, you know, I think the truckload team in particular has said that they feel like we're at the bottom, but it seems like we're there for a long time. And, you know, we're just waiting for the most part for capacity to exit, you know, and there are some signs that we've seen capacity beginning to exit, although not at the pace that we would all like to see.

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Judy R. McReynolds: But, you know, we look at these things over the long term, and again, I think we discussed a little bit ago just the importance of having the solution set that we have whenever we go to have a discussion with a customer about what's really going to be responsive to their needs. And, you know, the only other thing I would add is that this yellow event has really helped the LTL market to have some good opportunities for core business. You know, we have to be careful with those because we want to be sure that it's a business that works well for our customers but also works well for us and on our network. And some of that takes time.

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Judy R. McReynolds: I think we mentioned some stats about bids and winning bids and that sort of thing. You know, we're encouraged by those, and they're running, you know, all of that kind of running counter to what's going on in the macro. And that's a really good thing.

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Judy R. McReynolds: But, you know, we're pleased with how we're positioned. And we do see that our strategic positioning is such that we can be in those conversations, even if the LTL network is not the ultimate decision that the customer makes. And, you know, I really like that.

Judy R. McReynolds: It's like, you know, our company is set up well for what's happening as far as, you know, the yellow event and where that business ultimately lies. But I'll stop there and, you know, I'm not going to give you a prediction because I don't really have one, but, you know, we are positioned well, sort of, you know, regardless of what's going on in the macro because of what we put together as an approach. I got it.

Okay.

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Stephanie Moore: That's all really helpful. Thanks for the time. Thanks. Hey Danica, we've got a couple of repeats, so let's see if we can kind of squeeze them in. We don't have a lot of time, but maybe we can go pretty quick on these last two. Absolutely. We have Ravi Shankar with Morgan Stanley once again.

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Ravi Shankar: Please go ahead. Great, thanks so much for the follow-up. Judy, just a bigger picture question for you. What percentage of your business now comes from e-commerce? We are seeing some structural shifts in the e-commerce supply chain with increasing regionalization and falling length of haul. What does that mean for the LTL business over time? Yeah, um, well, whenever I think through that, just real quickly, about 15% of our business is retail. Now, not 100% of that would be e-commerce, but a large percentage of it would. I can think of examples that really don't have an online presence that we do business with, and we do that well. But, you know, so it ends up being, I want to say, 11 or 12% of our shipments whenever I think about the last mile. So, you know, and then again, the 15% retail, I think that gives you some perspective on that.

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Judy R. McReynolds: Great, thank you. Thanks, Ravi. And we've got one more question, I think, Danica.

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Scott H. Group: Yes, our final question is from Scott Group with Wolf Research. Please go ahead. Hey, thanks for the quick one. Can you just maybe give us a quick update on where we are with these innovative technology costs and what we're getting from them. And then at what point, if any, do we need to start thinking about moving those into the sort of core OpEx numbers?

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Judy R. McReynolds: Yeah. Well, it's really right now, as it stands, it's creating a new revenue opportunity is what we'll ultimately gain from that. But at this point, you know, we've got really more than one thing going on. But in the main, you know, it's the box system.

Judy R. McReynolds: There's a box freight system that involves hardware and software and is focused on the rapid pace of loading, unloading, and transferring freight takes it from hours to minutes coming out of the trailer. And then, you know, we also have the software applications that go along with that. In the next few weeks, we're going to be introducing more offerings that come from that. And the pilot work that we're doing is with Fortune 500 companies in automotive manufacturing and retail, and some pretty exciting pilot opportunities that we're working toward. But it's amazing how we are experiencing the different applications of both the hardware and the software and the combinations with some of this pilot work. And so, you know, what we find is that the shippers or customers that are managing warehouses are trying to access labor.

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Judy R. McReynolds: They need workflows that are more efficient, and they are also interested in safety and reducing claims damage. And those are all the things that are the focus of this technology, both software and hardware that we're advancing. And so these are the costs associated with that.

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Judy R. McReynolds: And obviously, you know, we're looking forward to the revenue stream that can come from that. And there's going to be more that unfolds in the next few weeks, but also as we get further into 2024. But I guess, as revenue picks up, do we need to start expensing some of this stuff? Or do I mean, I'm trying to figure out if there's any change in accounting coming. Oh, yeah, yeah. I mean, I think once it's operationalized, yes, Scott, you would. I think the reason that we're handling it the way that we are right now is that this is pilot work, you know, that we're doing, or advanced work that we're doing to get into the pilots. But it doesn't, you know, I totally agree with you, once it becomes, you know, operationalized, so to speak, then it will.

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Scott H. Group: Thank you guys, I appreciate the follow. Okay. Well, I think that concludes our call.

David Humphrey: We appreciate you joining us this morning and appreciate your interest in ArcBest, and so that concludes our call. Thank you very much. Thank you, everyone. You may now disconnect. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? For more information, visit www.fema.gov © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon www.

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Operator: ArcBestCorp.com www.arcBestCorp.com www.arcBestCorp.com www.arcBestCorp.com www.

ArcBestCorp.com For more information, visit www.fema.gov © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon © transcript Emily Beynon, Do you love JoBlo Movie Trailers? Subscribe now!! Click on the bell for the latest notifications! Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. Updated daily Monday to Friday. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??

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