Q3 2024 ArcBest Corp Earnings Call
Good morning, and welcome to the architect third quarter 'twenty 'twenty four earnings conference call.
All participants are in a listen only mode.
After the Speakers' remarks, we will conduct question and answer session.
To ask a question you will need to press star followed by the number one on your telephone keypad.
As a reminder, this conference call is being recorded.
Speaker Change: I would now like to turn the call over to Amy Hall, Vice President Treasury and Investor Relations. Thank you. Please go ahead.
Amy Hall: Good morning, I'm here today, with Judy Mcreynolds, Chairman and CEO that runs our president and Matt Beasley Chief Financial Officer. We also have other members of our executive leadership team available for the Q&A session. Before we begin. Please note that some of the comments, we'll make today will be forward looking statements. These statements.
Amy Hall: <unk> are subject to uncertainties and risks, which are detailed in the forward looking section of our earnings release and SEC filings.
Amy Hall: To provide meaningful comparisons we will discuss certain non-GAAP financial measures. During this call. These measures are outlined as described in the tables of our earnings release reconciliations of GAAP measures to non-GAAP measures discussed in this call are also provided in the additional information section of the presentation slides you can access the.
Amy Hall: A conference call slide deck on our website at <unk> Dot com in our 8-K filed earlier this morning or follow along on the webcast and now I will turn the call over to Judy.
Thank you Amy and good morning, everyone.
Judy Mcreynolds: We remain steadfast in our commitment to our strategic pillars of growth efficiency and innovation and continue to invest in our people solutions and technology as we position art best to capitalize on today's opportunities and those that arise as the freight cycle improves.
Judy Mcreynolds: Our people are at the heart of our success for providing them with the right tools training and support we enhance their ability to deliver exceptional value to our customers and shareholders. This year our investments in training have not only enabled our workforce to succeed but we have also seen say.
Judy Mcreynolds: <unk> significant cost savings for example, the operations experts deployed to our largest ABF facilities have already saved $7 million. This year with more savings anticipated as we expand these efforts into 2025.
Judy Mcreynolds: It's crucial that we have the right people in the right roles and investments in our leadership team and employees guarantee a deep bench of talent for the future.
Judy Mcreynolds: Last year.
Judy Mcreynolds: Excuse me last quarter, we promoted to president of art, best and Mac Godfrey to ABF President.
Judy Mcreynolds: Recently, we announced that upon Michael New cities retirement, Dennis Anderson will succeed him as chief strategy and innovation officer.
Judy Mcreynolds: Dennis is a forward thinking leader with a deep understanding of our customers and employees challenges. He has been instrumental in driving significant improvements to our digital tools contributing to our number one mass Seo ranking for the most useful website.
Judy Mcreynolds: And speaking of mass we are proud to receive external recognition for our hard work in the 2024 survey result, where a b S exceeded the industry benchmark standard for service and ranked number one or number two in half of the category surveyed these rankings affirm our status.
Judy Mcreynolds: As a premium provider that customers trust and rely on.
Judy Mcreynolds: I am proud of how we listen and collaborate across our organization to be responsive to our customers' needs.
Judy Mcreynolds: As we navigate a dynamic landscape our commitment to delivering shareholder value remains unwavering each and every day, we make decisions to enhance our capabilities and drive sustainable growth and now I'll turn it over to Seth and Seth will discuss some of the key initiatives that are propelling us forward.
Seth: Thanks, Judy and good morning, everyone as I step into my new role I've had the pleasure of meeting with teams across the organization to identify ways to unlock additional value and drive efficiency I'm inspired by our employees engagement and dedication to our customers and our company we.
Seth: We remain committed to managing what's within our control delivering industry, leading service and operating our business sufficiently.
Seth: Despite the challenging macro environment I am confident in our ability to grow and deliver on our strategic priorities my confidence stems from our strong customer relationships ongoing service improvements and progress on facility expansions and investments in innovation, our high customer retention underscore.
Seth: The effectiveness of our relationships and satisfaction of our customers. In addition, we have a strong pipeline that represents substantial opportunity for topline growth, we carefully evaluate each opportunity to ensure we create value for the customers while producing the returns that our shareholders expect.
Seth: Transportation solution is leading the way with double digit shipment growth.
Seth: This solution helps customers optimize their supply chains and it is clear that efficiency driving solutions are more valued than ever.
Seth: <unk> to see the demand is growing and the customer agreements. We are securing now are more than five times larger on average than those from five years ago.
Seth: Our revamped onboarding process is improving customer retention and lowering our cost to serve as more customers opt for managed solutions, we grow both our topline and bottom lines.
Seth: As we've mentioned before Abf's LTE all on time service is the best has been in five years, we have made significant improvements to shipment visibility with approximately 30% better accuracy on R. E T E calculations, reducing customer inquiries by 19%.
Speaker Change: As Judy commented on already our focus on continuous improvement and serving our customers with excellence as reflected in the recent recognition by mass deal.
Speaker Change: Superior service drives future growth in a win win outcome on pricing.
Speaker Change: While I'm proud of the progress. We've made we are not sitting still we have more work to do we.
Speaker Change: We are progressing on our long term ABS facility roadmap and strategically adding capacity, we opened three newly remodeled facilities from the yellow auction, which added nearly 80 doors and replace current locations. We are wrapping up. The addition of 66 stores in Chicago and in early 2025, which we plan to complete.
Speaker Change: The facility expansion in San Bernardino, California, which will add another 40 doors of capacity and a growth market.
These updated facilities in door additions will enable us to handle more freight with improved productivity and better service.
Speaker Change: In addition to our facility expansion, we are investing in equipment and technology to further improve our results.
Speaker Change: New equipment investments ensure our fleet remains one of the youngest and most efficient in the industry in the third quarter of 2024.
Speaker Change: Our repairs and maintenance costs were $5 million lower than last year's third quarter. Our modern fleet reduces our total cost of ownership and underscores our dedication to operational excellence and long term sustainability new.
Speaker Change: New Doc management software provides employee level visibility into productivity.
Speaker Change: This tool in the hands of our frontline managers enables quicker action and provides consistency in our processes and service.
Speaker Change: We have also developed advanced labor planning tools, which will enable us to forklift forecast labor needs more accurately ensuring we have the right people in the right places at the right times driving productivity and supporting our growth objectives, you've heard us discuss our city route optimization project at ABF before and we are expanding into.
Speaker Change: The next two phases, which will use AI to predict daily demand and optimize our pickup routes. These have been in pilot for three months, what the rollout plans to begin in the fourth quarter.
Speaker Change: For our truckload solution.
Speaker Change: We have developed a self serve carrier quarter with features like lane matching and auto offer negotiation, which is resonating with our truckload carriers. We are already seeing a 13% adoption rate, which is ahead of our original targets and we should grow as more features are added.
Speaker Change: I am pleased that we are wrapping up the implementation of trying to pay a third party solution for carrier payments and invoice oddity. This technology will reduce manual tasks and fraud improve our carrier partner experience and allow for scalable growth. These.
Speaker Change: These investments in facilities technology equipment, and innovation are contributing to our year over year productivity improvement of 20% for asset light and 6% for asset based.
Speaker Change: Our company has evolved tremendously over the past several years and as you can see we are intelligently investing for the future to benefit our customers and shareholders ill now turn it over to Matt to go through the financials in greater detail.
Matt Beasley: Thank you Seth and good morning, everyone.
Matt Beasley: The third quarter presented another period of softer demand for our industry.
Matt Beasley: The truckload market continues to face challenges and we are comparing to a strong third quarter in 2023 for our asset based segment, which saw higher business levels as we out customers navigate market disruptions.
Matt Beasley: Consolidated revenue decreased by 6% from last year's third quarter to $1 1 billion.
Matt Beasley: non-GAAP operating income from continuing operations was $55 million.
Compared to $75 million in the prior year.
Matt Beasley: Our asset based segment saw a $19 million decrease in non-GAAP operating income, while the asset light segments non-GAAP operating loss of $4 million was unchanged.
Matt Beasley: Adjusted earnings per share were $1 64 down.
Matt Beasley: Down from $2 31 in the third quarter of 2028.
Matt Beasley: Now, let's discuss our two segments in more detail.
Matt Beasley: Starting with our asset based business.
Matt Beasley: Second quarter revenue was $710 million per day decrease of 6%.
Matt Beasley: <unk> non-GAAP operating ratio was 91% an increase of 220 basis points year over year, and 120 basis points sequentially.
Matt Beasley: Our August 8-K highlighted expected sequential operating ratio performance of flat to a 50 basis point increase.
Matt Beasley: September weight per shipment was lower than expected and was the largest contributor to the higher than expected operating ratio.
In addition, higher insurance costs added 40 basis points to the operating ratio sequentially.
Matt Beasley: In the third quarter daily shipment saw a slight decline of less than 1% on a year over year basis.
Matt Beasley: However, weight per shipment decreased by 11%, resulting in an 11% decrease in tons per day compared to the previous year.
Matt Beasley: This decline is primarily due to broad industrial weakness as customers are producing less than the current economic environment. Additionally.
Matt Beasley: Additionally, higher interest rates and low housing inventory has led to fewer household goods moves, which typically involve heavier shipments.
Matt Beasley: Some higher weight LDL shipments have also shifted to the truckload market with its continued low rates and excess capacity.
Matt Beasley: It's also worth noting that some of our shipments related to yellows bankruptcy in the third quarter of 2023 for project related.
Matt Beasley: While other shifted to other providers over the past year.
Matt Beasley: Revenue per hundredweight increased by 7% in the third quarter.
Matt Beasley: On September 9th we implemented a five 9% general rate increase and we secured an average increase of four 6% on our contract renewals and deferred pricing agreements during the quarter.
Matt Beasley: Price improvements were partially offset by decline in fuel costs.
Matt Beasley: Excluding fuel surcharges revenue per hundredweight increased in the high single digits year over year.
Matt Beasley: The pricing environment remains rational and we are focused on using pricing and operational efficiency improvements to outpace rising costs and enhance our margins.
Matt Beasley: Changes in the wage rate under our Union contract took effect on July one and benefits increased August one for a combined increase of approximately two 7%.
Matt Beasley: This equates to approximately $8 million in additional costs for the third quarter.
Matt Beasley: Despite lower tonnage levels the volume of shipments remained relatively stable, which meant that labor costs didn't scale proportionately to tonnage declines.
However, improved productivity through technology and training helped mitigate increased contract cost deployment of <unk>.
Matt Beasley: Gaining high service standards.
Matt Beasley: Cost for fuel repairs and purchase transportation will all look were all lower on a year over year basis, but insurance costs increased by $6 million, adding 100 basis points to our operating ratio year over year.
Matt Beasley: On page 15 of our slide deck, you'll see that our trailing 12 month non-GAAP operating ratio stands at 91%.
Matt Beasley: This marks a 700 780 basis point improvement since 2016, highlighting the success of our strategic initiatives.
Matt Beasley: In October 2020 for <unk> asset based segment experienced lower shipment and tonnage levels compared to the same period last year. This.
Matt Beasley: This decrease is primarily attributed to the exceptionally strong performance in October 2023, which was driven by additional business at higher prices following the cyber attack on our competitors.
Matt Beasley: And capacity.
Matt Beasley: As we served our customers during this market disruption in October of last year.
Matt Beasley: We achieved an eight 1% year over year increase in billed revenue per hundredweight.
Matt Beasley: This October our results were impacted by weak industrial production disruptions from Hurricanes and a port strike.
Despite these challenges pricing remains rational the decrease in revenue per hundredweight is also influenced by lower fuel prices.
Matt Beasley: Excluding fuel surcharges revenue per hundredweight remained flat year over year.
Matt Beasley: From September to October tonnage per day remained flat.
Matt Beasley: We expect the year over year decrease in revenue that we saw in October to moderate throughout the rest of the quarter, resulting in a total expected year over year decrease in revenue per day for the quarter in the mid single digits.
Matt Beasley: Yeah.
Matt Beasley: Historically, the average sequential change in the asset based operating ratio from the third quarter to the fourth quarter has ranged from a 100 basis points to a 200 basis point increase.
Matt Beasley: With continued softness in the manufacturing environment in truckload markets. We currently expect to be on the high end of the historical range.
Matt Beasley: Moving on to the asset light segment.
Matt Beasley: Third quarter revenue was $385 million of.
The daily decrease of 10% year over year.
Matt Beasley: Shipments per day were down less than 1% and revenue per shipment decreased by 9% due to the soft freight market and growth in our managed business, which is smaller shipment sizes and lower revenue per shipment levels.
Matt Beasley: Our managed solution set a record in September for both volumes and margins as we onboard new customers and grew with existing accounts.
Matt Beasley: We maintained our focus on reducing operating expenses and improved employee productivity.
Matt Beasley: However, the non-GAAP operating loss of $4 million shows that our business continues to be impacted by current market conditions.
Our motto acquisition contained an earn out feature based on EBITDA targets through 2025.
Matt Beasley: Due to current market conditions, the estimated contingent consideration liability for the earn out was reduced by $92 million in the third quarter.
Matt Beasley: This is reflected as a reduction to expense in our GAAP operating income results, but has been excluded from non-GAAP results to better represent normal operations.
Matt Beasley: In October we saw a 3% year over year decline in shipments per day, and a 10% decrease in revenue per shipment sequentially.
Sequentially from September to October shipments per day decreased by 6% and revenue per shipment rose by 4% as we implemented strategic pricing adjustments.
Matt Beasley: Given the current market conditions, we anticipate our non-GAAP operating loss between $5 million 7 million for the fourth quarter.
Matt Beasley: Our asset light offerings clean important role in our overall strategy as customers seek long term logistics logistics partners for all their transportation needs.
Matt Beasley: We continued to reduce costs and better align resources to match business levels.
We are maintaining our pricing discipline and strategically reducing less profitable freight when appropriate.
Matt Beasley: These initiatives are our top priority as we focus on returning the asset light segment to profitability.
Matt Beasley: Turning to capital allocation year to date through September we returned $65 million to shareholders through share buybacks and dividends.
Matt Beasley: We ended the third quarter with a net cash position of roughly $500 million in available liquidity.
Matt Beasley: The capital expenditure estimate for the year has been revised downward to approximately $300 million.
Matt Beasley: Primarily due to lower expected spending on real estate.
Our strong financial position and strategic investments in technology has significantly enhanced our operational efficiencies.
Matt Beasley: We plan to build on this success as we continue to innovate and position ourselves for sustained growth I'll now hand, it back to Judy.
Judy Mcreynolds: Thank you Matt our team continues to show incredible resilience and adaptability their hard work and dedication has been pivotal in driving significant improvement.
Judy Mcreynolds: Want to extend my heartfelt thanks to our customers employees and shareholders for their continued support and trust. We are committed to building on this momentum and delivering even greater value in the future.
Judy Mcreynolds: That concludes our prepared remarks, and I'll turn it over to the operator for questions.
Speaker Change: As a reminder to ask a question. Please press star followed by the number one on your telephone keypad.
Speaker Change: And the interest of time, we ask that you. Please limit yourselves to one question and rejoin the queue for any additional questions. Thank you.
Our first question comes from Jason Seidl from TD Cowen. Please go ahead. Your line is open thank.
Speaker Change: Thank you operator.
Jason Seidl: Thanks for taking the question Judy and team.
Jason Seidl: You talked about a rational pricing environment.
Jason Seidl: It seems like you are still doing pretty well about getting that four 6%.
Jason Seidl: Is it trended lower throughout the quarter has trended higher as a sort of much sort of state that same that four 6% can you just give us some perspective on that.
Speaker Change: Hey, Jason Good morning. This is Chris Boerner, I would say there wasn't necessarily a trend up or down it was pretty consistent by month throughout the quarter and I know, we already talked about it but we took a five 9% general rate increase on September nine.
Speaker Change: We had really good retention of that customer base that impacts around 20% of our revenue. So good good results there the four 6% in the third quarter really pleased with that result, I think year to date, we're right at about a 5%, which as you know at that rate. We're outpacing just the inflationary costs that we're experiencing in the business. So.
Speaker Change: Really just continue to work on that and making sure that our prices are good place in a good place for the value that we're providing our customers. Yes that makes sense. Thank you said you had really good retention is that would you describe the retention is as normal.
Speaker Change: I think we've seen some positive trends and retention with our customers our customers are challenged with the environment that they're in so.
Speaker Change: We're able to position ourselves as a logistics company to serve them and to improve their efficiency with our managed business. We see really strong customer retention there as we're able to serve them not just through our asset based solution, but also through other solutions as well to help them optimize their supply chains.
Speaker Change: I appreciate the time that was my one.
Sure. Thank you.
Speaker Change: Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead. Your line is open.
Ravi Shanker: Alright, Thanks, good morning, great to see the traction in mass T O.
Ravi Shanker: But the question is.
Ravi Shanker: Some of the service improvement probably coming through.
Ravi Shanker: Higher cost or kind of how long does it take to get recognition for our service improvement both in the form of price and share.
Speaker Change: Yes. Good morning, Ravi This is Mac Godfrey and I appreciate it.
Mac Godfrey: You're calling out the success, we've seen around the <unk> and when we think about that success. It really speaks to that high level of execution by our teams in the field and our <unk> employees to serve our customers with a high level of excellence and it also speaks to our teams here as we listen to our customers.
Ravi Shanker: And understand our customer needs.
Ravi Shanker: Spending time on the right initiatives and investments to give our leaders in the field the right tools to serve our customers well and reduce our cost so not only have we increased our efficiency. We've seen continued improvements in our productivity.
Ravi Shanker: So when you think about that and where we fell on the mass deal falling on that fair value line I think it really speaks to that we've been able to increase the service level to our customers and do it efficiently. So that we're keeping our cost in line. So I expect those trends to continue as we move forward because what excites me. The most is while we've rolled out a lot of initiatives.
Ravi Shanker: It's aimed at our service and productivity levels, we have a lot still to do.
Ravi Shanker: Seth mentioned, what we're rolling out additional phases of our city route optimization here as we get into the fourth quarter and we have several initiatives in 2025 that will continue to impact our results positively.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from Jordan <unk> from Goldman Sachs. Please go ahead. Your line is open yeah.
Speaker Change: Yeah, Hi morning.
Speaker Change: So I think you indicated revenue per day, I'll get less negative as we move through the quarter and settle in at down mid single digits.
Speaker Change: Well is this more volume driven is it yield driven and.
Speaker Change: I mean, what does it imply is as we move through the balance of the quarter from a volume perspective. Thanks.
Speaker Change: Sure Yes.
Speaker Change: Yes, so Jordan. Thanks for the question. This is Matt. So it really is the impacts and we highlighted a little bit, but certainly we did see.
Speaker Change: Just.
Speaker Change: In October of last year, an increase in volumes and an increase in pricing that was somewhat contained in October as we serve customers through the cyber attack that happened on a competitor last year and so I would say in all of those categories that you mentioned are certainly overall when we're looking at revenue.
Speaker Change: Per day, we do expect that to moderate and.
Speaker Change: Improve as we move into November and December and I would say.
Speaker Change: Some of the other on a at least on a year over year basis, the comps get easier really across the board. So both on a pricing and a volume perspective, we expect both of those stats to improve as we move through November and December.
Speaker Change: Thank you.
Our next question comes from Daniel Enbrel from Stephens. Please go ahead. Your line is open.
Daniel Enbrel: Hey, good morning, guys. Thanks, taking my questions.
Daniel Enbrel: Can you maybe wondering maybe we can unpack the ABF results a little bit more of that would be great. I think you talked about it in your prepared remarks, but the mid quarter, you expected or kind of flat to up 50 basis points. It came in at 120 basis sequentially. You mentioned September wafer shipment I guess the biggest drivers to can we unpack maybe that weight per shipment move lower what.
Speaker Change: It is driving that big of a step down obviously it was more than you expected and when do you think we're starting to see that stabilize what are you hearing out there and when would you expect it to stabilize I guess.
Speaker Change: As we look forward on weight per shipment.
Speaker Change: Hey, Good morning, Daniel This is Christopher.
The weight per shipment difference that we're seeing from a year over year standpoint, it's related to a couple of things that we commented on was just the truckload environment just as that continues to be suppressed the prices are low in that area.
Speaker Change: You see just some LCL business historically as LPL and is moving on truckload. The other thing that we're just seeing any or manage the business that we're able to help optimize our customer supply chain by bundling some <unk> shipments into truckload answers theres some mode optimization going on in the network or in really in the industry I think.
Speaker Change: The market turns you could see some of that business transit transition back from truckload to LCL, that's one area and I know that we commented earlier on in the script just that.
Speaker Change: Hold goods moving business, just not as strong as it historically has been given just the higher interest rates. So homeowner mobility isn't as strong as we have historically seen in that business tends to be heavier weight per shipment as well. So those are two kind of key areas that are pushing our weight per shipment lower than what we would historically see there yeah and Daniel This is Matt I would just say.
It also is just kind of just a difference versus our expectations, particularly for September when we were calibrating that mid quarter update and so we were just expecting to see a little bit of improvement in weight per shipment just that just didn't come through I think likely.
Speaker Change: Likely just given the macro backdrop that we're looking at now.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Ken <unk> from Bank of America. Please go ahead. Your line is open.
Speaker Change: Hey, great good morning.
Speaker Change: I guess sticking on that weight per shipment.
Speaker Change: I don't know if this is for sat there Judy but it seems like a larger decline versus peers.
Speaker Change: Or just.
Speaker Change: Kind of run rate now a much lower level than <unk> historically done I think you used to run around 12500 pounds.
Speaker Change: Is there a.
Speaker Change: That just economic is there something changing in the mix and then we didn't really hear much about the mix of transactional versus core this quarter can you describe what's going on within the within the network now and kind of where does that stand.
Speaker Change: Yes, So hey, this is Seth so when we look at weight per shipment and whats going on really what we're trying to highlight with revenue and weight per shipment in our 8-K is october's unusually from.
Speaker Change: From a comp standpoint, we think that's going to normalize on the on the front side. So.
Speaker Change: As we move through the rest of the quarter, but really where we're focused right now is on revenue growth of boats across the business, but it <unk> specifically to your question and we've seen our pipeline increase pretty.
Speaker Change: Pretty decently, but what we're focused on in the pipeline is making sure that those opportunities are profitable for our business. Our retention rates have been in a really good spot and growth really comes down to this service you provide your customers and we were happy to see the results there on the <unk> side. Our claims numbers continue to be in a good spot. So we think we're bringing value to our customers.
Speaker Change: The second piece is the more efficient we are the better the better our services to our customers, obviously and we feel like that also impacts the price we deliver to our customers. The more we can reduce our cost to serve.
Speaker Change: I feel like as we move forward there is not something structurally changing.
Speaker Change: There is the macro impact and things that are going on but we're focused on things in our control and we feel pretty good about the pipeline that's coming in and the growth that we're going to see as we move best kind of a strange comp period, Yes, and Ken. This is Matt I'd just highlight retention remains high.
Speaker Change: We can we can really see this across the business.
Speaker Change: Particularly when we're looking at our managed business in our asset light segment, where we're managing the entirety.
Some of our customers.
Speaker Change: Logistics spend I mean, we're just seeing weight per shipment levels be down when we're stopping by to make pickups, you know when we might be picking up two palettes and now instead of three pallets and so again, it's high retention on the customer side, just a little bit smaller shipment sizes, when we're coming to pick them up.
Speaker Change: Then you also mentioned this is Seth again, you mentioned the mix of dynamic the majority of our businesses core and transactional or dynamic business really helps us just maintain consistency in the network fill empty empty capacity, our core business continues to increase.
Speaker Change: That's where we're seeing the growth in our pipeline. So youll see that continue to normalize as we move past this unusual comp in October.
Thank you.
Speaker Change: Our next question comes from Tom Waterworks from UBS. Please go ahead. Your line is open.
Tom Waterworks: Thank you.
Tom Waterworks: Yes, good morning.
Tom Waterworks: Hi, Good morning, I appreciate that I guess this is a little bit of a follow up on ken's on the dynamic pricing. So I think you don't like to give is precisely what the mix of dynamic pricing is versus core <unk>, but can you can you give us kind of a ballpark of what that looks like is it 10% dynamic.
Tom Waterworks: 90% of LTI or just so we kind of have a sense of what how that looks it sounds like maybe that's been stable, but I wanted to see if you could give any further comments on that.
Speaker Change: Yes, Tom this is us up again.
Speaker Change: The majority of our business is core we don't disclose that specific mix between transactional and core really what that does like I like I said was position us to maintain consistency in the in the network, especially during this slower times and we've seen the core continued to improve.
When you look at weight per shipment, our transactional or dynamic shipments there generally heavier and that contributes to some of the weight per shipment changes that you see but really what we're focused on is the profitable growth mixed management and making sure that we're delivering excellent service to our customers what's important to understand as we optimize our mix on a daily base.
Speaker Change: And it's based on profit maximization maximization based on the market prices and available capacity and that's a daily exercise we've seen we've seen and you've seen the improved results. If you look over the longer term that these tools have given us some flexibility in the network that we haven't had before.
Speaker Change: Okay, and I guess related to that can you give a little more perspective on like how much of the shift to truckload is affecting it sounded like that might.
Speaker Change: Be having an effect on the mix as well like how big of a move is that is it seems like.
Speaker Change: Is that a couple of points shifting volume to truck or whats the magnitude of that.
Speaker Change: Yeah. Thanks, Thomas Christopher I don't know that we have a clear line of sight on exactly how much that is I'll, just say again through our managed business, we see that that is having an impact.
Speaker Change: I'd say just that we're prepared to manage the business regardless of how much that shift is just through our daily management of pricing and through the mix of our business and just through our.
Speaker Change: The large pipeline that we've discussed we're prepared in any environment, but don't have really a clearer understanding of how much that impact as we know it's having an impact because we see it we actually helps our customers to do it but don't have a specific number there.
Speaker Change: Yeah, Okay. Thank you.
Speaker Change: Thanks, Tom.
Speaker Change: Our next question comes from Brian Ashton back from J P. Morgan. Please go ahead. Your line is open.
Speaker Change: Hey, good morning, Thanks for taking the question.
Speaker Change: You mentioned that there is an impact in the quarter from Hurricanes and port strikes and some of the other disruptions I wanted to see if you could put.
Speaker Change: A little bit more context around that.
Speaker Change: And then maybe just as a quick follow up can you just talk a little bit more about the weight per shipment and yield dynamics in October.
Of her confidence.
Speaker Change: Skewing, it a little bit, but I wouldn't have thought to see you.
Speaker Change: Yields ex fuel flat with weight per shipment is still down 6%. So is that going to normalize as you go forward and maybe you can give more context around that as well. Thanks.
Speaker Change: Sure. So just to comment on the hurricane and Port strike. So we saw some impact in late September from those events September started off stronger and then we can be on what we would normally see in September just thinking about it would be an end of quarter month. So it wasn't as strong as we'd like to see and then you saw.
Speaker Change: Some impact from Hurricanes in October as well just from some service areas being closed and then when they reopen we saw some of that demand pull back, but I don't know that it recovered to the level that we would like to see.
Speaker Change: And then just from a weight per shipment perspective in October I would just encourage you to look at more of sequin digital trends rather than year over year. There's just some abnormality that we've already discussed in October of last year. So if you look September to October it's more normal trends and I think as we get into November and December you're going to see some some normal.
Speaker Change: <unk> in there, but just we had an odd month last October as it relates to a cyber event last year that we've discussed.
Speaker Change: Alright, and then from a yield perspective, though I guess it still.
Speaker Change: Down 3%.
Speaker Change: Sequentially is that on.
Speaker Change: Inclusive of fuel perspective or.
Speaker Change: Is that excluding fuel.
Speaker Change: Yes, yes.
Speaker Change: Yes, I think it was so I think we commented that it wasn't it was minus 3% September to October that was with fuel and without people I think we said it was flat.
Speaker Change: Sequentially. Thank you.
Speaker Change: But we also commented that it was profile related that's right I.
Speaker Change: I mean, and I think that it just is there just a different mix as we entered the ninth.
Speaker Change: October.
Speaker Change: I feel like that when we're looking across what we've seen in third quarter and into fourth quarter, we're not seeing a dramatic change in the yield environment. In fact, we feel like it's still.
Speaker Change: A good place and rational I think we've seen some of the competition continued to raise rate.
And announced that publicly and that's all really good as far as we're concerned.
Speaker Change: Yes, sorry, I stand corrected the minus three I think that was with and without fuel sequentially. Yes.
Speaker Change: Right right Okay.
Speaker Change: Okay. Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Chris Wetherbee from Wells Fargo. Please go ahead. Your line is open.
Chris Wetherbee: Hey, great. Thanks, Good morning, maybe you want to pick up on some of those truckload comments I guess I'm curious as you think about it.
Chris Wetherbee: Sort of significant differences in the pricing environment in both truckload and <unk>, if the sort of normal back and forth that we've seen through previous cycles will hold this time in particular, what do you need to see on the truckload side to be able to have some of that volume come back and then if I could squeeze in kind of.
Chris Wetherbee: Unrelated follow up just on the asset light side I guess, obviously it looks like the fourth quarter is maybe looking at another operating loss I guess can we get a sense of what needs to happen to kind of get that business moving in the right direction is it at this point just simply an improvement in the cycle or are there other levers that you can pull particularly on the cost side that can improve profitability there.
Chris Wetherbee: Hey, Chris This is Seth I'll answer your first question on the truckload migrating and how far it goes back and forth between channels.
Chris Wetherbee: Truckload market still has too much capacity and thats driven rates down as we're all aware.
Chris Wetherbee: And that's caused some of those shipments on the fringe and that kind of 7500 to 20 range kind of shift the truckload then.
Chris Wetherbee: That freight probably works better in an <unk> environment, that's going to shift back when the market normalizes.
Chris Wetherbee: That shift is really maybe more pronounced this time versus previous cycles, because we've just never seen the level of truckload capacity enter the market as we did in 'twenty one 'twenty two throughout the pandemic. So truckload carriers really don't like to do multi stop loads. So I think that freight is ultimately going to shift back to.
So the <unk> market when the market does turn so.
Chris Wetherbee: What gives me a lot of confidence and positivity as we've continued to invest in our fleet. During this time that we can handle those heavier loads as they can make their way back into the <unk> market.
Chris Wetherbee: On the asset light side I feel I feel like we can get asset light profitability to a better spot in part of my confidence as we've as I've moved into this new role we've really focused on.
Chris Wetherbee: Different ways, we can do that and we started evaluating that closely in the first is really we need to improve the profitability of our account may on account base. We have been challenged by the macro as you know, but we've developed some tools recently within the last quarter that allows us to take deep dive into account level profitability.
Chris Wetherbee: And also to the lane level. So we started to take those actions and you heard Matt in his prepared comments talk about some of those pricing actions, but we have more work to do and we think we've got a lot of runway there.
Chris Wetherbee: Is the mix of our business within truckload is more heavily weighted towards enterprise and we're trying to get the mix more to <unk>.
Chris Wetherbee: Focus on SMB middle market as much.
Chris Wetherbee: To kind of increase that amount of business simply because it's more profitable we've invested in a team of about 50 people that are focused on growing middle market and SMB and we're seeing early signs of success there to get our mix is in a better spot.
Chris Wetherbee: The third is really around cost control, we took some additional actions in mid third mid to late third quarter, and we expect to see those kind of baked themselves in but we're constantly looking at cost and the way we control based off the revenue levels that were given because we don't want to impact future growth opportunities. So it's a delicate balance, but I feel like we're <unk>.
Chris Wetherbee: Really focused in that area. The fourth is really around managed solutions.
That service has resonated with our customers we've seen double digit growth. It is contributing positive operating income to our results. So we feel like we're going to continue to grow there and then the last is really around efficient, let's say, we saw productivity improved 20% asset light and we have a really good roadmap of future improvements.
Chris Wetherbee: The carrier portal load board automation, all the AI tools, we're working on we feel like efficiency is going to be in a really good spot and really we've continued to focus on our people. We feel like we have the best people and getting them the training and tools they need to execute on the business will get asset light to a better spot.
Speaker Change: Okay I appreciate the comments thank you.
Speaker Change: Our next question comes from Scott Group from Wolfe Research. Please go ahead. Your line is open.
Scott Group: Hey, Thanks, Good morning, So I wanted to come back to the yield backdrop, I'm, just not sure I'm fully understanding.
Scott Group: I totally get Theres, a tougher a bit of a tougher comp in October but to go from high single digit yield growth to flat and maybe November December up a little bit, but wafer shipments down which should be helping yields you've talked about the <unk> them.
Scott Group: The renewables I guess I'm, just not sure why the reported yield trends or just ex fuel or <unk>.
Scott Group: Slowing so much.
Matt Beasley: Scott This is Matt I mean, certainly we've talked about some of the year over year dynamics on the sequential dynamics from September to October there just are some profile impacts and so actually weight per shipment was up from September to October and then we saw a little bit low.
Matt Beasley: Bit of a decrease in length of haul.
Matt Beasley: Again, I think thats, not really indicative of any broader trends related to pricing. It's just more some of the freight mix that we saw in October and its impacts on pricing.
Scott Group: And maybe just bigger picture right. So we've got tonnage down yield may be flattening out margins I think your guidance implies down like 500 basis points or something year over year.
Speaker Change: Do we just need to wait for the truckload market tightened and ISN and we're sort of stuck with this for the time being or is there stuff. We can do to start seeing margin improvement again in 'twenty five.
Speaker Change: Irrespective of the cycle turning better.
Speaker Change: Hey, Scott. This is Seth we believe we can improve ror on the asset base side and it really comes down to a few areas that we're focused on.
Speaker Change: Revenue growth, obviously will help that's been that's been a headwind and when that becomes a tailwind that will be great. But what gives me a lot of encouragement is the growth in our pipeline. We've seen our core business continued to improve with our service levels improving our retention rates are in a good place our customers are just shipping less instead of giving us three they are given.
Speaker Change: US too skids and Thats, why youre seeing that weight per shipment piece, but growth really comes down to that service you provide and we've made some great strides over the past year to get to a better spot get back to where we've historically been and we hear from our customers that that is what they are feeling as well and that really helps us continue to grow.
Speaker Change: The next is efficiency, we've talked about city optimization, we're getting ready to roll out those next two phases. The new dock software rollout is going well as well that's given us visibility that we have the team of experts that we deployed that we mentioned in our opening comments Theyre really just getting started we've only done a few facilities, we still have the whole net.
Speaker Change: Work to go and we have a very detailed road map of efficiency gains we can make such a large cost basis. So we think we can although we've had a multi year high on efficiency, we feel like we got a lot of runway there.
Speaker Change: Real estate investments they are really centered around where we see opportunities for growth efficiency and service.
In each case, where we've opened a new facility or added capacity, we've seen efficiency gains in the double digits and we've also seen growth opportunities for.
Speaker Change: Or we wouldn't be investing in those areas. So that's been a great win for US we've added about 800 doors. This year, but these aren't one year decisions. These are multiyear decisions, which is why we invest in these type of cycles. So we can be positioned when things turnaround.
Speaker Change: The fourth is around equipment, we really have made sure to maintain a new fleet keep the uptime in a good spot and it also is helping us from a cost perspective, we saw about $4 $7 million reduction in our fleet costs and really I mentioned our people when I was speaking earlier, but we have spent enormous amount of time with our people in the.
Speaker Change: Field, bringing them into our corporate headquarters training them up and we've seen those results directly impacted and our efficiency numbers, our service numbers and that's why I feel like we'll get asset based or to a better spot as well.
Speaker Change: Thank you guys.
Scott Group: Thanks Scott.
Our next question comes from Bruce Chan from Stifel. Please go ahead. Your line is open.
Bruce Chan: Hey, Thanks, operator, and good morning, everyone.
Bruce Chan: Just wanted to follow up on some of the asset light commentary. If you can maybe help us parse the results by service I know, we don't have the.
Bruce Chan: Same reporting granularity that we used to so any color on whether some of the non brokerage businesses are contributing positively are those also loss, making and then just a quick follow up here I don't know if I missed it but.
Bruce Chan: You talked about some of the pricing actions and brokerage does that imply that we need to wait for that contract repricing cycle to see maybe some positive contribution from that segment.
Matt Beasley: Hey, Bruce it's Matt.
On the asset light side, you're right. We don't provide service line level details, but certainly I would say.
Matt Beasley: The biggest two contributors one is just the truckload brokerage pricing environment that we've talked about but on the positive side. We certainly are seeing strong contributions from our managed service line, which is which is.
Speaker Change: Contributing positively to the overall operating income result, and then as it relates to pricing I don't know, Steve If you want to comment at all on just maybe kind of what we might expect to see or what that timing might look like yes, I think as market conditions improve youll, obviously see.
Speaker Change: <unk> for for prices improve but.
Speaker Change: <unk>.
Speaker Change: Prior to that I mean, we as.
As Seth mentioned, we are looking at line level customer level pricing.
Speaker Change: We want to make sure that we're compensated for the services, we provide so we're doing that.
Speaker Change: On a regular basis and so we will continue to focus on.
Any area to improve net revenues.
Speaker Change: As we kind of work towards an improved macro environment.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Not to harp on it too much but.
Speaker Change: It sounds like that would probably be later in 2025 kind of timeframe for that flip to profitability. There is that is that fair.
Speaker Change: Well.
Speaker Change: Other thing as Seth mentioned is the mix of business, we think about segments and we are seeing.
Speaker Change: Growth outside of maybe the contract area. So we have opportunities to improve there as well.
Speaker Change: Can do that ahead of the cycle. So you know again the cycle helps you know as it gets.
Speaker Change: The macro gets better that helps us, but we have opportunities to improve.
Speaker Change: Outside of just a macro improvement.
Speaker Change: Just on those areas we've got.
Speaker Change: Our people focus there and we're making progress.
Speaker Change: Okay fair enough. Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Ari Rosa from Citi. Please go ahead. Your line is open.
Ari Rosa: Hi, great. Thanks. Good morning. This has been more on Ferrari here at Citi.
Ari Rosa: Following up on Scott's.
Ari Rosa: Question on margin outlook looking to 'twenty five for your <unk>.
Ari Rosa: Just wondering to get your thoughts on.
Ari Rosa: Historical average sequential seasonality for or based on what we estimate looking at your last 10 years Q1.
Speaker Change: On average up a 100 to 200 basis points Q2 down 400 basis points Q3 down 100 basis points for Q.
Speaker Change: 100 to 200 basis points and your business has changed over time.
Speaker Change: With your space based pricing your service and Culture initiative, you mentioned in your city route optimization wanted to get your sense is this reasonable can you get us give us better ranges of what are puts or takes on meeting those in 2025.
Speaker Change: Yes, so Ben.
Speaker Change: I appreciate the question I think we've hit on.
Speaker Change: A lot of the key themes that I think SaaS has done a good job just just highlighting the focus.
Speaker Change: In the ABF business I mean, we feel we feel like we're focusing on what we can control. We've we're in a great spot from a service perspective on time perspective productivity perspective feel great about our pipeline and how that's developing for next year certainly we can.
Speaker Change: Talk about just kind of what we've experienced historically quarter to quarter over the last 10 years and certainly we have that history and its available we can talk through it.
Speaker Change: In some more detail.
Speaker Change: <unk> if that's helpful. But certainly we continue to be focused on just continuing to achieve pricing outcomes that are one just reflective of the great value that we're providing to our customers and again a lot of thats being reflected in the results that youre seeing from last year, this year and really achieving some great improvement.
Over the.
Speaker Change: The cost.
Speaker Change: Items that we're seeing in those increases on a year over year basis, and we feel good about where that's headed.
Speaker Change: Great. Thank you very much for the color.
Speaker Change: Okay. Thanks.
Speaker Change: Our next question comes from Stephanie Miller from Jefferies. Please go ahead. Your line is open.
Stephanie Miller: Hi, good morning, Thank you.
Speaker Change: Good morning, Good morning Lynn.
Maybe sticking on the margin front, if you could just talk about the puts and takes that the <unk> margin guide.
Stephanie Miller: Clearly called out that the weaker topline environment, but maybe if you could kind of talk through whether it's wage inflation insurance, but also what productivity initiatives you have underway that to maybe offset some of that pressure and then kind of taking a step further.
Stephanie Miller: To comment a little bit better than your expectations, leading to see thanks.
Speaker Change: Yes, so thanks Stephanie.
Not.
Speaker Change: The items in the quarter like we had in the third quarter, we had our annual increase.
Speaker Change: Our union wage and benefits and so I think we've done a good job just just highlighting today, how we're focused on the cost side and we're going to continue that focus and finish out the year strong there.
Speaker Change: And so I do think that just in terms of where the expectation is for the quarter Thats just based on where we see the macro backdrop developing here over the next couple of months and so to the extent that that ends up in a stronger place than what we're seeing right now we could see some improvement but.
Speaker Change: I think we're going to we're going to continue to see dividends paid on all the projects that we've been talking about on the productivity and efficiency side, both as we exit the year and as we head into 2025.
Hey, Stephanie understood.
Speaker Change: I just wanted to be sure that.
Speaker Change: We're thinking about.
Speaker Change: I guess the way that we're going to market and the opportunity set that we have we've talked a lot today about our pipeline.
Speaker Change: And we've also talked about the macro and various initiatives that we have to try to.
Speaker Change: Gain ground, both in growth and efficiencies and I, just think it's really important for us to be able to relay to you the confidence level that we have and our ability.
Speaker Change: Gauge with customers and constructive way, even in a weaker environment.
Speaker Change: We don't take our foot off the gas pedal because of a weakness in the economy. In fact that positioning that we have really helped us and especially our customers to.
Speaker Change: To navigate through these things so we're talking about all the insights we have it's because we're doing business with customers in different ways, whether it's in our managed offering or somewhere else in the business, but what I love is our ability to navigate around.
And to the solutions that are going to work best for customers in this kind of environment and we are seeing a lot of success there and the pipeline that we have in managed and.
Speaker Change: <unk> and truckload are all really strong and.
Speaker Change: Growing in momentum and we have a lot of that in late stage. So.
Speaker Change: We as we close out this year and into next year I feel like we're really strongly positioned.
Speaker Change: To say, yes, and to help our customers navigate to the best solutions.
Speaker Change: That can possibly have to help their business.
Thanks, Judy really appreciate it.
Speaker Change: Okay.
Speaker Change: Our next question comes from Jason Seidl from TD Cowen. Please go ahead. Your line is open.
Jason Seidl: Thanks, Operator, I appreciate you guys squeezing me back in here.
Look I hate to beat a dead horse, but I'm going to have to break out the crop here can you help me with a little bit of the details behind your increase sequentially in your weight per shipment that you mentioned and the decrease in your length of haul because I'm just trying to sort of level set where you are at because you pushed.
Jason Seidl: Through those.
Jason Seidl: Nice Gi at five 9% and then Youre getting four 6% on your contractual business. So I would have assumed ex fuel even on a sequential move that you would have been a lot better with those yield numbers and I would love to seize here sort of like what was the big shifts in your freight on a sequential bay.
Jason Seidl: <unk>.
Jason Seidl: Yes, Hey, Jason This is Christopher again.
Jason Seidl: Sequential to October.
One thing that we haven't talked a lot about is just the weather effect that happened in September and there is some some underlying trends that having a week be close the service center down for a few days and once you reopen and something that we've just observed is that those customers. You know they may they may have had some freight that they were about to ship one pal.
Speaker Change: Now that they've reopened how they ship to pallet. So just done some profile dynamics that the external factors influence on those areas sequentially September to October or do you think about those impacted areas had a higher weight per shipment. So you just have some mix changes that I would say were abnormally sequentially September to October that is.
Speaker Change: Influencing that revenue per counterweights that and again, we just we just are managing our business day to day to make sure. We're getting the best results really regardless of the profile that we have and revenue per hundred weight is one yield stat, but obviously, we're looking at the core profitability of the business and that's not really the end all be all of the profitability.
Speaker Change: <unk> of our business.
Speaker Change: No I understand that I was just trying to you guys to put some numbers around the weight per shipment increase and your length of haul decline do you have any sequential numbers for us. So we can sort of give us a sense of how bad the mix was.
Speaker Change: Yes.
Speaker Change: We can we can talk about it in a little more detail I mean, they are really those numbers are not significant I mean, we're talking about.
Speaker Change: A low single digit increase in weight per shipment and a low single digit decrease in length of haul.
Speaker Change: Again, I think there is some of these dynamics that Christopher has talked about that we think probably contributed to that but.
Speaker Change: But no big trend or read through as it relates to pricing just with the sequential September to October move.
Speaker Change: Okay I appreciate that that's helpful take care.
Speaker Change: Okay. Thanks.
Speaker Change: Our next question comes from Brian Austin back from J P. Morgan. Please go ahead. Your line is open.
Brian Austin: Hey, Thanks for taking the follow up question, maybe if you can just walk through sort of the changes in the capex spending real.
Brian Austin: Our real estate went down a little bit as well as equipment is that sort of just normal true ups through the end of the year, you're taking a different.
Brian Austin: Sort of approach there and then I guess on the back of that obviously the rest of the facilities are.
Speaker Change: Still up for auction so anything there that we should expect you to look at or potentially pick up here in the next round.
Speaker Change: Yes, Brian so as it relates to Capex I would say on the equipment side, we expect spin consistent with what we had laid out for the year on the real estate side. There were some opportunistic purchases that we were considering and that we thought might come to market and so those have been.
Speaker Change: Delayed a little bit were still looking at opportunistically, making some purchases in some markets.
Speaker Change: Where it makes sense and then as it relates to the yellow process I'll, let Matt Godfrey, maybe just comment a little bit on that and what we might be hoping to see there yeah. Thanks, Matt. So so as Seth mentioned, we acquired four yellow facilities in the.
Matt Godfrey: Previous auction, we've opened three of those already and will bring the last one online in the fourth quarter and those facilities have been positive contributors to our efficiency service and capacity in those markets and we really appreciate what our people have done to transition facilities and not have any disruptions.
Speaker Change: For our customers and so as you mentioned the second phase.
Speaker Change: The auction is about to kick off indications of interest where do.
Speaker Change: Last month, we submitted our interest in a few locations and these are locations that we were interested in previously and we're just really awaiting the next steps.
Speaker Change: In the auction process on how that will move forward.
Okay. Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Ari Rosa from Citi. Please go ahead. Your line is open.
Speaker Change: Hey, this is <unk>.
Speaker Change: Then again for Ari just going back to <unk> margin and touching on what Ravi asked about on your mass Steel survey.
Speaker Change: You are showing tremendous really fantastic improvement across the board damaged shortage on time pickups deliveries, and especially billing accuracy, where you're better than a number of your peers, which is very important for all of these for volume and pricing in upcoming quarters.
Wanted to ask how much do you attribute.
Speaker Change: These to your various initiatives you're training your culture service your city route optimization and others and then more importantly, how much runway.
Speaker Change: Is there less you mentioned on a lot of these you're done with the first phase at three phases. So theres two more phases does this mean roughly about 66% more runway.
Speaker Change: For all or most of these initiatives for service improvement, which could get you more volume more more margin.
Speaker Change: Yes, Ben this is us I'll start and then I'll, let Matt Godfrey chime in as well so we.
Speaker Change: We thank all of the all of the things that you mentioned around efficiency ultimately improve service, but when we look we feel like we do have quite a bit of runway there.
We went back to our historical <unk>.
Speaker Change: Position on the mass deal, we always exceeded industry benchmarks for 19 of the last 20 years in 2023, we hired a lot of new people. We got a lot of new process, just a lot of things happen. So we listened to our customers and we responded very quickly to get back on track and move back into the position where we've historically been.
Speaker Change: Most of the initiatives that we did I would say improved service on a tactical side now.
Speaker Change: Now we're focused on kind of holistically like website, eth visibility into customer supply chain a lot of the work around efficiency, which Matt will mentioned is also going to improve that so I felt like we still have quite a bit of runway to go because even though we're in a great position. We ultimately our goal is to be number one on the mass deal because we think thats translates.
Speaker Change: It's a better growth and better price from our customers.
Speaker Change: Yes, it's a follow up there I. Appreciate your question on city route optimization and trying to understand the percentage of runway I think the way to think about that is the first phase of city route optimization had the largest impact is going to have the bulk of the impact, but we are excited about phase II and phase III and really phase.
Speaker Change: III around pickup optimization, not only is there an efficiency runway there, but when you think about the the most important things as it relates to the Masco survey and pickups being high on that list. We think that'll have a really positive impact for <unk>.
Speaker Change: For our customers on the pickup process. So we're pretty excited about that and some other things that we are working on that we're going to begin piloting here later this year.
Speaker Change: Around appointments and optimizing that process.
Speaker Change: Something our people spend a lot of time on is something our customers rely on us for as a service that they find value.
Speaker Change: And our offering and we really want to make that process easier for our people.
Speaker Change: And our customers and then another thing we're working on around line hopped off line haul optimization again, another project focused on service.
Speaker Change: And efficiency, we've made some gains this year kind of in the early stages on that and we're really excited about what's to come on that as well. So we think we have a pretty significant runway not only to improve our service, but to increase our efficiency at the same time.
Speaker Change: Great. Thanks, so much for the color.
Speaker Change: Our last question today will come from Scott Group from Wolfe Research. Please go ahead. Your line is open.
Scott Group: Hey, Thanks for the follow up I, just had a longer term.
Scott Group: Question on the pension side, I know no immediate impact and it's still.
Scott Group: A final ruling still to be determined but.
Scott Group: Does the does the outcome of the yellow pension.
Scott Group: Withdrawal liability how does that how do you think that impacts.
Scott Group: Your long term pension pension contributions in anyway, because they have to pay bigger withdrawal liabilities does that help or how do you think about that.
Speaker Change: Well Scott.
Speaker Change: The.
Speaker Change: We've watched this at these.
Speaker Change: These issues and monitored them for decades and what our.
Speaker Change #100: Our obligation is just to pay in the hourly rate that we negotiate based on the hours worked.
Speaker Change #100: And so we have that negotiated obviously through 2028.
Speaker Change #100: But also.
Speaker Change #100: A larger impact here was the American rescue plan.
Speaker Change #100: That's put in place a lot of funding and really has positively impacted the.
Speaker Change #100: Most distressed multi employer pension funds.
Speaker Change #100: And so.
Speaker Change #100: I don't know what the dollars are going to be related to this other settlement.
Speaker Change #100: But my feeling is that those won't be significant to the overall situation that we're in today and so I feel like that every five years, we negotiate the rates here and.
Speaker Change #100: And the fact that the American rescue plan better funded the most distressed funds.
Speaker Change #100: US in a place that's better than we were before that at law was enacted and I think that's the way to think about it because we're just planning to continue to do the same things that we've always done and it's.
Speaker Change #100: To put us in a more reasonable place.
Speaker Change #100: And large increases in pension we haven't seen anything like that since 2013, so more than a decade.
Speaker Change #100: We've been in a position where.
Speaker Change #100: The hourly rates, we pay them.
Speaker Change #100: There are more than adequate to address our situation and so that's the way I'd think about it it's just something.
Speaker Change #100: Something that we obviously have to stay close to it and monitor but it's not a negative for us as we see it.
Speaker Change #101: Makes sense. Thank you guys I appreciate it.
Speaker Change #101: Thanks Scott.
Speaker Change #103: We have no further questions I would like to turn the call back over to Amy Mendenhall for closing remarks.
Amy Mendenhall: Thank you for joining us joining us today, we appreciate your interest in our best hope everyone have a great day.
Speaker Change #105: This concludes today's conference call. Thank you for your participation you may now disconnect.
Amy Mendenhall: Okay.
Amy Mendenhall: [music].
Amy Mendenhall: Yes.
Amy Mendenhall: [music].
Amy Mendenhall: Yes.
Amy Mendenhall: [music].
Amy Mendenhall: Okay.
Amy Mendenhall: [music].
Amy Mendenhall: Okay.