Q4 2024 XPO Logistics Inc Earnings Call
Welcome to X P. O Q4, 'twenty 'twenty four earnings conference call and webcast. My name is Latanya and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question answer session. If you have a question. Please dial.
Got it one on your telephone keypad. Please limit yourself to one question when you come up into the queue. If you have additional questions you're welcome to get back into queue and we'll take as many as we can please note that this conference is being recorded before the call begins let me read a brief statement on behalf of the company.
Regarding forward looking statements and the use of non-GAAP financial measures. During this call. The company will make certain forward looking statements within the meaning of applicable securities laws, which by their nature involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those projected.
Forward looking statements.
A discussion of factors that could cause actual results to differ materially is contained in the company's SEC filings as well is it earnings release. The forward looking statements in the company's earnings release or made on this call are made only as of today and the company has no obligation to update any of the.
These forward looking statements except to the extent required by law.
During this call. The company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earning release and the related financial tables or on its website.
You can find a copy of the company's earnings release, which contains additional important information regarding forward looking statements and non-GAAP financial measures in the investors section on the company's website.
Mario Harik: Now I'll turn the call over to X P O Chief Executive Officer, Mario habit. Mr. Harris, you may begin.
Speaker Change: Good morning, everyone. Thanks for joining our call.
Mario Harik: And even with kind of a smooth our chief financial officer.
Speaker Change: I'll, let <unk>, our chief strategy Officer.
Speaker Change: This morning, when he posted a strong fourth quarter with year over year earnings growth and margin expansion and outperform the industry.
Speaker Change: I'm pleased with the substantial progress we've made in the trough of the freight market cycle.
Speaker Change: For the full year, we grew revenue by 4% to a record $8 $1 billion company wide.
Speaker Change: We also generated $1 $3 billion of adjusted EBITDA.
Speaker Change: 27% increase from the prior year, reflecting significant operating leverage.
Speaker Change: And we delivered 31% increase in adjusted diluted EPS of $3.83 for the year.
Speaker Change: So I wouldn't feel segment, we're making great strides in executing our plan and optimizing all parts of the business.
Speaker Change: But he has also been delivered so far are just the beginning about potential.
Speaker Change: You can see that in the 260 basis point improvement.
Speaker Change: Adjusted operating ratio, which was better than I was talking to the range.
Speaker Change: This was underpinned by record customer service levels, which translated to profitable market share gains and above market growth for the year.
Speaker Change: And we have a well defined plan to keep driving out or toward becoming industry best.
Speaker Change: We also seamlessly integrated 25, new service centers into our network.
Speaker Change: <unk>, a major competitive advantage of customer service capacity.
Speaker Change: And we operate more cost efficiency across the board, including our line haul operations, where we didn't used to outsource smiles the best level in our history.
Speaker Change: Now I'll summarize the highlights of 2024 and each of these areas starting with World Class service.
Speaker Change: This is our most important lever for growth and profitability.
Speaker Change: In the fourth quarter, we delivered a damage claims ratio of 0.2%, which is an improvement from 0.3% last year.
Speaker Change: Importantly, what did use damage frequency each quarter for a new company record.
Speaker Change: This metric is a real time indicator of the service quality that our customers experience.
Speaker Change: So put it in perspective with improved damage frequency by over 80% since 2021, and we have significant room to make further progress overtime.
We also improved our on time performance year over year for the 11th consecutive quarter. This is a testament to the speed and reliability that our customers value in our network.
Speaker Change: Yeah.
Speaker Change: Next I want to talk about the lever that touches every part of our plan our network investments.
Well the real estate side I mentioned that we brought 25, new service centers online last year and will integrate the remaining acquired sites over the next few months.
Speaker Change: What do we expand our network capacity, we could eat more opportunity to improve service because it balances out with network adversity in strategic markets and helps us run the business more efficiently.
Speaker Change: But also adding holding stock to serve our customers and support our ongoing in sourcing of line haul transportation.
Since 2021 we've produced over 15000 trailers in house manufacturing facility and we're the only MTL carrier in North America with this capability.
Speaker Change: This is a major advantage because the dealers are the backbone of efficient operations.
Speaker Change: We rely almost capacity to consolidate and move freight across our network.
Speaker Change: We've also purchased nearly 5000 tractors during the same period.
Speaker Change: We enter 2024 with an average fleet age of four one years, giving us one of the youngest tractor fleets in the industry.
Speaker Change: As a result, we're operating our fleet at the lowest cost per mile.
Speaker Change: Because we made strategic investments throughout 2023 and 24, we currently have nearly 30% access door capacity in our robotics fleet in the trough of the cycle.
Speaker Change: That's a major improvement from a few years ago without access capacity was about half of what it is today.
Speaker Change: We're one of only if U S TL carriers in North America, with the skies of capacity and head.
Speaker Change: It allows us to respond quickly to surges in demand and it puts us in a strong position to accelerate operating leverage and profitable growth in the freight market upcycle.
Speaker Change: He'll as another key lever for us and the most impactful metric underlying margin improvement.
Speaker Change: For the full year, we grew yield excluding fuel by seven 8% year over year directly contributing to our 260 basis points of what improvement.
Speaker Change: Well healed and motion are being driven by our internal initiatives and proprietary technology.
Speaker Change: Here again, we see a long runway for further gains, including a double digit pricing opportunity in the coming years propelled by three dynamics.
Speaker Change: First by aligning price with the service value, we deliver we've been consistently outperforming the market and yield growth and we expect this to continue.
Speaker Change: Second we're committed to evolving our service offerings to meet our customers' needs.
Speaker Change: The premium services being introduced last year contributed to above market yield wrote and account for an increasing share of our revenue mix.
Speaker Change: And third investments in our sales force all generating market share gains with local customers. This is a strategic lever for the margin expansion.
Speaker Change: The final component of our strategy, let's call sufficiency with our primary focus being line hauled in sourcing and variable costs.
Speaker Change: And 'twenty 'twenty four we did use our purchased transportation cost by 32%.
Speaker Change: Driven by a reduction of more than 600 basis points in line haul miles outsourced to third parties.
Speaker Change: We accelerated this initiative in the fourth quarter, when we did use our outsource smiles to 10, 7% of total miles.
Speaker Change: That's nearly 900 basis points lower than a year ago, primarily due to the expansion of our road flex operation.
Speaker Change: And we expect this metric to drop into the single digits this year, which would be in your historic low.
Speaker Change: What did you use reliance on third party truckload carriers will help insulate our cost structure when demand returns and truckload rates rise generating higher incremental margins versus prior up cycles.
Speaker Change: Importantly, we're also managing our labor costs would effectively without proprietary technology.
Speaker Change: Our systems can't forecast volume trends using predictive AI. So we can quickly align labor hours at the service center level.
Speaker Change: In 2024, this resulted in consistent stable productivity improvements and a changing volume in vitamin.
Speaker Change: And we expect our technology to continue to deliver incremental benefits solid cost structure as we grow.
Speaker Change: Turning to Europe, we increased full year segment revenue by 3%, which outperformed the industry and the soft macro.
Speaker Change: Our most robust performance within the U K what are we grew year over year organic revenue by double digits.
Speaker Change: In summary, we delivered our strongest year of LCL margin improvement since 2016, and we achieved that in the historically soft freight and vitamins.
Speaker Change: It also cemented our foundation for future growth.
Speaker Change: That it is the opportunity ahead of us and positioned the business to capitalize quickly in the freight market recovery.
Speaker Change: What did that were strongest position yet to unlock the potential within our network and we expect to deliver significant margin expansion and earnings growth this year.
Kyle: Now I'm going to hand, the call over to Kyle to discuss the financial results I'll over to you.
Kyle: Thank you Mario and good morning, everyone I'll take you through our fourth quarter financial results balance sheet and liquidity as well as our planning assumptions for 2025.
Kyle: We reported a strong fourth quarter, reflecting the continued execution of our plan.
Kyle: Our total revenue for the quarter was $1 $9 billion.
Kyle: It was 1% lower than the prior year on a company wide basis.
Kyle: <unk> segment revenue was down 3% year over year, reflecting a 23% decline in fuel surcharge revenue.
Kyle: Tied to the price of diesel.
Kyle: Excluding fuel we increased revenue by 2%.
Kyle: We continue to realize cost efficiencies in our hotel operations.
Kyle: The other material reduction in purchase transportation due largely to insourcing more of line haul miles.
Kyle: Our first transportation expense in the fourth quarter was 47% lower than a year ago.
Kyle: According to a savings of $39 million.
Kyle: We also manage LDL labor effectively with hours person and improving year over year by 1%.
Kyle: This helped mitigate a fourth quarter increase of 3% and total salary wages and benefits primarily due to inflation.
And we realized continued cost efficiencies in our fleet operations.
Kyle: With our investments in new equipment, bringing down our maintenance cost per mile by 10% year over year.
Kyle: Depreciation expense increased by 16% or $11 million, reflecting the investments, we're making in the business.
Kyle: This continues to be a key priority for capital allocation yeah.
Kyle: Next I'll add some details to adjusted EBITDA, starting with the company as a whole.
Kyle: We generated adjusted EBITDA of $303 million in the quarter, an increase of 15% from a year ago.
Kyle: Our adjusted EBITDA margin of 15, 8% with a year over year improvement of 220 basis points.
Kyle: Looking at just the RTL segment, we grew adjusted EBITDA by 20% to $280 million.
Kyle: LTM adjusted EBITDA includes the impact of $34 million real estate gain in the fourth quarter.
Kyle: This is primarily stemmed from the planned sale of a service center in Brooklyn, as we opened a larger site we acquired in the same market.
Kyle: Excluding real estate, we grew hotel adjusted EBITDA by 6% year over year to $246 million.
Kyle: The increase was driven by yield growth and cost efficiencies.
Kyle: It's more than offset the non operational headwind from lower fuel surcharge revenue.
Kyle: Yeah.
Kyle: In our European Transportation segment, adjusted EBITDA was $27 million and corporate adjusted EBITDA was a loss of $4 million for the quarter.
Kyle: Looking at the fourth quarter company wide, we reported operating income of $148 million up 24% year over year.
Kyle: And we grew net income from continuing operations by 31% to $76 million, representing diluted EPS from continuing operations of 63 cents.
Kyle: On an adjusted basis diluted EPS increased by 16% year over year to 89 cents.
Kyle: And lastly, we generated $189 million cash flow from operating activities in the quarter.
Kyle: And deployed $108 million of Capex.
Kyle: Moving to the balance sheet.
Kyle: Ended the quarter with $246 million of cash on hand.
Kyle: Combined with available capacity under our committed borrowing facility. This gave us $757 million of liquidity.
Kyle: Our net debt leverage ratio at year end.
Kyle: It was $2 five trailing 12 months adjusted EBITDA.
Kyle: This is an improvement from three times at the end of 2023.
Kyle: While we remain committed to investing in our long term growth initiatives, we expect <unk> capex to moderate as a percent of revenue.
Kyle: From the past two years, a significant network expansion and additions to our fleet.
Kyle: With a lower capex profile and sustained earnings growth, we can generate higher levels of free cash flow.
Kyle: US greater flexibility to return capital to shareholders over time.
Kyle: Before I close I'll summarize since she was planning assumptions to help you with your models.
Kyle: For 2025, we expect total company gross capex of $600 million to $700 million.
Kyle: Interest expense of $220 million to $230 million.
Kyle: Pension income of approximately $6 million.
Kyle: And adjusted effective tax rate of 24% to 25%.
Kyle: And a diluted share count of 120 million shares.
Kyle: These assumptions are included in our fourth quarter Investor presentation.
Kyle: Now I'll turn it over to Charlie who will cover our operating results.
Charlie: Thank you Kyle I'll start with our L. T L segment, which delivered another quarter of margin improvement and earnings growth.
Charlie: Our results were characterized by strong underlying trends in our volume outperformed the industry as a whole.
Charlie: On a year over year basis, our shipments per day were down four 4% and our weight per shipment was down 1.3%.
Charlie: All thing and a five 7% decline in tonnage per day.
Charlie: Within shipments per day, we grew volume from our local customer base year over year by high single digits.
Charlie: This is our highest margin business and an important part of our strategy.
Charlie: We expect to accelerate market share gains and our local channel this year.
Charlie: On a monthly basis October tonnage per day was down 8%.
Charlie: November was down 4.1% and December was down four 4%.
Charlie: Looking just that shipments per day October was down six 5%.
Charlie: November was down four 3%.
Charlie: And December was down 2%.
Charlie: For January tonnage was down 8.5% from the prior year with a three point impact from weather disruptions throughout the month.
Charlie: Excluding this impact January tonnage per day was largely in line with seasonality.
Charlie: Our pricing trends remained strong throughout the quarter, reflecting our progress in aligning price with the value of our service and growing range of premium offerings.
Charlie: This is one of our most promising underlying trend.
Charlie: This enabled us to deliver another quarter of above market pricing growth.
Charlie: On a year over year basis, we grew fourth quarter yield ex fuel by six 3% and revenue per shipment by five 8%.
Charlie: Importantly, we achieved sequential improvements in both yield growth and revenue per shipment from the third quarter as well as on a two year stack basis.
Charlie: We've now increased revenue per shipment sequentially in every quarter for two consecutive years.
Charlie: And we expect to accelerate yield growth in the current quarter, reflecting the ongoing momentum of our pricing initiatives.
Charlie: Turning to margin, we improved our fourth quarter adjusted operating ratio by 30 basis points year over year to 86, 2%.
Charlie: Over the past two years, we've improved adjusted or by a total of 410 basis points.
Charlie: Sequentially, our fourth quarter, adjusted or increased by 200 basis points outperforming normal seasonal trends.
Charlie: We're driving this outsized margin expansion through a combination of yield growth cost initiatives and productivity gains all facilitated by our proprietary technology.
Charlie: We've now delivered your for your own water who've met for five consecutive quarters and have historically soft freight environment.
Charlie: And not only did margin come in above our target range. We were the only public L. T L carrier to expand margin in 2024, and the trough of the cycle.
Charlie: Yeah.
Charlie: Moving to the European business, we made meaningful gains in the quarter against the soft macro backdrop.
Charlie: We increased net revenue on a year over year basis for the sixth consecutive quarter supported by strong pricing.
Charlie: In some key geographies like the U K, we increased adjusted EBITDA by double digits versus the prior year, reflecting disciplined cost control.
Charlie: And we grew our fourth quarter sales pipeline sequentially by high single digit positioning our European business to accelerate result, when the macro recovers.
Charlie: Before we go to Q&A I want to summarize the key drivers behind the considerable outperformance we achieved in 2024 and how that enhances our market position.
Charlie: Our service quality is at record levels, and we expect our pricing initiatives to continue to drive above market yield growth.
Charlie: We're just beginning to capture the massive pricing opportunity ahead of us.
Charlie: We're also optimizing our cost structure I, reducing line-haul outsourcing the historic lows and leveraging our technology to become more productive and cost efficient.
Charlie: And we remain intently focused on margin supported by our operational initiatives investments in network capacity and compelling value proposition for customers.
Charlie: We've created a solid foundation for years of ongoing margin expansion with meaningful upside and a freight market recovery.
Charlie: Now we'll take your questions operator, please open the line for Q&A.
Speaker Change: Thank you we will now conduct a question and answer session.
Speaker Change: To ask a question. Please press star one on your telephone keypad. Please limit yourself to one question and one follow up when you come into the queue. If you have additional questions you're welcome to get back into queue and we'll take as many as we can.
Speaker Change: Our first question comes from Ken expert with Bank of America. Please proceed.
Speaker Change: Great Good morning, great.
Speaker Change: Great job on the continued performance you mentioned going to single digits on the AR on the in source. Maybe can you talk about you know where you are in that network to dot all right. What what other opportunities you can still see to continue to improve that cost base Ali you mentioned.
Mario Harik: Still room to go in and then Mario you know you've talked about the kind of different things.
Mario Harik: Service level improvements that lead you to get that pricing long term can you talk about what you still see as the opportunity there to close that that margin gap versus.
Mario Harik: The industry leader that you you kind of talked about in terms of using that price and what's left on that margin game. Thanks.
Speaker Change: Thanks, Thanks, Ken if you if you look at the I'll talk about the latter part of the question. If you look at the opportunity ahead of US a lot of it goes back to yield improvements. When we started I would plan back in 2021, but it was about 15 points of yield differential between us and best in class and over the last few years, we are now call. It in the low teens.
Speaker Change: In terms of margin opportunity or pricing opportunity ahead of us and that's that all three levers for us to capture the pricing opportunity and that's going to lead to above market yield growth like we saw here in 'twenty 'twenty four and we expect that to be the case over the years to come but that's more of an opportunity. The three levers are the ones that continue with service improvements, but heating would've moved from out.
Speaker Change: Customers they want to do more business with us and we are being able to about half that delta was driven by your better service for a longer period of time, that's the old now bridging over over the years to come and they'll say five to 10 year runway of bridging that gap. The second categories that aren't premium services. If you mentioned this earlier, but last year, we launched a half a dozen or so.
Speaker Change: Premium services and these are things that I would call somebody at asking for whether its shipping into the retail store rollout or shipping in and out of a trade show and today. We're at the sodium as a percent of revenue. When we started the plan with about the 10% best in class is 15% and in 'twenty 'twenty four we were able to get one point of that Delta and do you expect that the cadence to get to.
Speaker Change: Point over the next 40 years in terms of bridging that gap and the third area is around local accounts. Okay. I don't wouldn't be soda 20, or so percent of our business with local accounts. These all come at a higher margin and higher yielding and we've made some tremendous progress in 2024, and we've added more than 10000, you local accounts and this was based on less hiring 25.
Speaker Change: 5% more local centers, but that's the overall book what should if you think of it as being in the low teens of incremental yield improvements over the next five to 10 years above what we're seeing in markets yield growth in terms of line hauled in sourcing. So we delivered our 2027 target three years ahead of plan like we said, we would and we in the fourth quarter of you.
Speaker Change: At 10, 7% outsourced, which was nearly 900 basis points of in sourcing on a year over year basis.
Speaker Change: That would be in the single digit territory in 2025, So we're going to continue to in source most of them opportunity. There would always be somebody has a dual we're gonna keep as outsourced probably in that mid single digit plus range as we exit next year, but importantly, it can well. The reason why we are very excited about the outlook on this because you use.
Speaker Change: What do you when the cycle turns truckload rates go up as well and this is going to help insulate, our P&L and our margin performance and gets higher incremental margins in the upcoming upcycle versus compared to prior up cycles, given the lower reliance on third party truckload.
Speaker Change: Great stuff. Thanks.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Jon Chapell with Evercore ISI. Please proceed.
Speaker Change: Okay.
Jon Chapell: Thank you good morning Ali if I heard you correctly, you said expect a yield to accelerate in the current quarter. So I just wanted to be clear that's $6 three someone pointed out to me today, probably the best pricing on any industrial company, let alone transport company.
Speaker Change: Environment do you expect that to be better than 6.3 in the first quarter and if so what does that translate to as far as sequential or a guy who's concerned.
Speaker Change: So John we do expect our yield growth to accelerate here in the first quarter relative to the six 3% growth that we delivered in the fourth quarter. We would also expect our contract renewals to accelerate as well and that's being driven by the initiatives that Mario just to outline. This our service continues to improve that's allowing us to earn a higher price.
Speaker Change: We're also making continued progress on improving our mix of premium services and local customers and all of that is what's translating to that acceleration that we're seeing here in the first quarter now for in terms of a war, we do expect a strong quarter from a margin from a margin performance standpoint here in the first quarter normal seasonality for us is for.
Speaker Change: I'll watch it deteriorate about 50 basis points from the fourth quarter to the first quarter and we expect to outperform seasonality. We also expect John Ferrara or to improve sequentially from Q4 to Q1, and that's going to be driven by the continued strength that were seeing from both the yield side and the cost side as well and as I noted our baseline expectation is for yield to it.
Speaker Change: Celebrate here in the first quarter now from a volume perspective, Q1 does tend to be a tougher quarter to predict given the weather impact and also the fact that the quarter tends to be more heavily weighted towards stuff towards the month of March and the magnitude of how much we're going to improve our or sequentially into the first quarter will ultimately depend on how punish I'll plays out through the rest of it.
Speaker Change: In the quarter. However, we do expect to outperform seasonality, even with that weather impact that we saw earlier in the quarter.
Speaker Change: That's great. Thanks Ali.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Scott Group with Wolfe Research. Please proceed.
Speaker Change: Hey, Thanks morning, guys. So just wanted to follow up there rather than looking sequentially. Do you guys think you'll see margin improvement in the first quarter year over year, and then I know last year, you gave some full year guidance on the L. T. L operating ratio I'm just curious if you have any thoughts in terms of.
Speaker Change: How much improvement we can expect this year. Thank you.
Speaker Change: Yeah, Yeah, it's called food so for the first quarter as Ali said, we typically see that deterioration from Q4 to Q1, and a 50 basis points, we expect to outperform that we expect to outperform also on a sequential basis to approval are now getting on a year on year basis, Theres, a bad for that but we'll we'll see what the rest of the quarter has has in store.
Speaker Change: For us here.
Speaker Change: We executed in February and March in terms of full year expectation, we do expect to have another strong year from both an order improvement and earnings growth perspective, and this is despite continuing to be in a tough macro environment, our baseline expectation of total ought to improve 150 basis points for the full year and a high level all the things I mentioned.
Speaker Change: Earlier are all contributors from a yield perspective, we continued to do a great job in terms of the surface product being excellent for our customers and being able to get to your flow through on that we are ramping our premium services a lot of these things we launched through the course of the year. So we are building the pipeline and converting that pipeline or the local channels, we have our 'twenty four 'twenty five.
Speaker Change: Per cent more local centers are now fully ramped up and we've on boarded more than 10000, new local accounts on the cost side. The team I'm very proud of the team for their execution, we keep all doing a great job of managing labor to the volume we're seeing in the environment with insourcing line haul faster than we've ever done before I would road flex operation and ultimately we have a luxury locations in menu.
Speaker Change: Markets, we will end the quarter with 30% excess capacity, which is also going to help us. So if you look at all of these things 150 basis points as the baseline as we expect further improvement for the full year and if we do see an inflection in demand and demand improves through the course of the year and we start seeing the upcycle, there's upside to that number as well.
Speaker Change: I appreciate it thank you guys.
Speaker Change: Thank you.
Speaker Change: The next question comes from Chris Wetherbee with Wells Fargo. Please proceed.
Chris Wetherbee: Hey, Thanks, Good morning, guys wanted to pick up on the pricing. So obviously you guys have initiatives that are driving upside relative to what we're seeing in the market, but I guess could you maybe walk us through kind of how these conversations are going and kind of how you think you are realizing this relative outperformance I guess yeah.
Chris Wetherbee: Obviously, it's been on the softer side, but you know pricing accelerating I guess you guys you break that down and think about the conversations with customers. What are the key points that are sort of allowing you to continue to outperform and maybe how you think about the sustainability of that through 2025.
Speaker Change: So when you look at Chris at the at the conversation with customers not all of our pricing is coming in from price increases so customers. So a lot of it is coming from the mixed dynamic of having more local business and we are being able to onboard that business and grow it and it's also coming by giving the customers and incremental services that they are.
At asking for in these incremental services, obviously come at a cost for us with higher yield and higher margin as well and they appreciate that tremendously, but when you think about areas like shipping into retail stores and being able to have 1000 shipments going to multiple retailers. All at the same time and meeting those expectations. All of that is is really constructive for customers.
Speaker Change: And similarly on the service product that keep in mind that we still have a big gap between us and the best in class provider. So we are bridging the difference in that gap. So the way we think high level about pricing is that do you want to price incrementally typically higher than cost inflation by 100 to 200 basis points, there's always upside to that but all the things I just mentioned.
Speaker Change: Okay. That's helpful. One quick follow up I think you noted once you tonnage inline with normal seasonality, where do you guys see as normal seasonality for <unk> touch.
Chris Wetherbee: So Chris typically what you what Youll see is that tonnage is about flattish sequentially from Q4 to Q1. So if you roll for normal seasonality here that would imply tonnage down somewhere in that mid single digit plus range on a year over year basis. So a few points better on a year over year basis relative to what we.
Chris Wetherbee: Saw it in the month of January and as we noted earlier March does have an outsized impact on the quarter. Overall, so we'll see how the rest of the quarter plays out and as normal we'll give another update on our February volume trends in early March.
Chris Wetherbee: Okay.
Speaker Change: Thank you. Our next question comes from Tom why do it with UBS. Please proceed.
Chris Wetherbee: Hum.
Speaker Change: Yeah, good morning, and great to see the continued strong execution.
Speaker Change: Wanted to if you could give me a couple of thoughts on just maybe a competitive dynamic in local I I guess I'm kind of thinking about you know, what's going on with Fedex freight and you're going to invest in a couple of hundred salespeople. You know maybe that's just an offset to was telling before but I wonder are you seeing other lpl's invest more in local.
Speaker Change: Is there any change in competitive dynamic or is that kind of a clean runway for you to keep.
Speaker Change: Leveraging that investment you made and continuing to see that mix improve in terms of just you know high single digit growth in that area.
Speaker Change: Well first starting with the where the spend all pay off a competitor I mean, they order competitor today that would be a competitor tomorrow, but we do believe high level being a standalone MTL care to your only reinforces the great dynamics in our industry because one of our most important scorecards as a carrier as margin improvements over time, which predominantly <unk>.
Speaker Change: You have to get to your noses, it's driven by yield performance. So again, we don't expect things to change their drastically now when you look at the competitiveness for the local afford the local business I mean, we compete today with all the carriers out there I would go to provide the best service possible I always tell the team with the customer loving organization and every interaction we had with a customer.
Speaker Change: Wanted to be a interaction of the light and when do you think of a local mom and pop shop. This is what they want they want the great relationship with the local center they want to make sure that we're gonna go through through anything we can to make sure. They are getting a great experience with us and that these dividends over time. Similarly, we have added more salespeople to the team and it's a combination of again.
Speaker Change: Some of the ground and heading discrete service product is what is enabling us to grow in that channel.
Speaker Change: Okay.
Speaker Change: And in terms of be I.
Speaker Change: I guess the incremental margins you know you mentioned.
Speaker Change: You would expect stronger performance with without the headwind of stronger you know higher truckload rates when the cycle improves right. So Uh huh.
Speaker Change: Maybe just refresh on what the right area is for incremental margins and you know what what can it be if you really see the cycle may be see weight per shipment improve in pricing and celebrate all that so thanks for the time.
Speaker Change: Hey, Tom its Kyle so when you think about incremental margins, we would expect 25 to be another strong year of incremental margins you know comfortably above 40%, that's really where we've been tracking more recently and if you think about why we can drive that it's really as we've talked about earlier on the call. It's a lot of the yield strength that can contribute to the top line growth and obviously, if youre driving top line with higher yield that'll have strong flow.
Mario Harik: Through and as Mario mentioned, and you think about the yield initiatives being early innings, whether it's growing local and drive more premium service tiers. We ran a strong renewals that will really help us drive strong strong incremental margins here in 'twenty five and then again I think the other point to when you think about US is as the demand network recovers right now it wasn't a great position to really pulling more of that volume again, we're gonna have.
Mario Harik: Up to 30% of additional capacity right now that's really going to help us capture more of that volume and that volume coupled with a really strong program helped drive strong incremental margins in 'twenty five.
Mario Harik: Yeah.
Speaker Change: Thank you. Our next question comes from Jordan Alegar with Goldman Sachs. Please proceed.
Speaker Change: Yeah, maybe just following a little bit can you give some thought I you know a lot of talk spin on yield and what have you could give a little bit of thought on you know as we roll into this year, perhaps some positive signals from ISI am you know any any sense from customer sentiment perspective around demand and perhaps some optimism and then sort of secondly, the.
Speaker Change: 150 basis points of or improvement any sense for what sort of your base level vol.
Speaker Change: Volume.
Speaker Change: Our expectation would be to sort of centering on that thanks.
Speaker Change: I'll first start with the customer demand outlook, and then throw it over to Kyle to discuss so those are some of the output through the course of the year, but on the customer side. Although we are hearing more positive positivity from customers that we have in the past.
Speaker Change: Obviously, you put off the 150 basis points does not imply any coverage through the course of 2025, but that could be potential upsides I know as you know, we typically survey customers on a quarterly basis some of our top customers.
Speaker Change: What they're seeing in the overall macro.
Speaker Change: The majority expect a gradual improvement in demand. This year just to give you. An example, we saw a 10 point increase in the percentage of customers that they expect an acceleration in demand and twenty-five versus what the survey we have done three months ago and for the first half of the year has the cost similar to respond that they expect an acceleration in demand while only 15 per.
Speaker Change: <unk> expect a deceleration and if you go back three months ago. It was but it was a bigger portion of flat customers and then the acceleration versus deceleration whereabouts. Even so we are seeing much more optimism as you said we are also seeing it in the I S. N. Today, two thirds of our customers are industrial companies and we've seen the I assume he a pump over 50 in the month of January.
Speaker Change: Fortunately, we have seen the new orders part of that I S. M Index I get to 55 and all of these are very good leading indicator for Ford higher industrial demand over time again, because obviously, we can't control the macro and we see what the euro has absorbed but to be old hearing more optimism from customers.
Speaker Change: Jordan as you think about tonnage and how we think about that for 2025, our baseline expectation that we're contemplating in your improvement is really flattish tonnage and $25. So any any improvement in underlying demand backdrop should be upside to that again, when you think about tonnage our expectation is to outperform.
Speaker Change: Thinking about our service improvements give me the damage claim there so 0.2% reflects that and we're also continue to make gains in local channels very talked about on the call. You know when you think about that coupled with again, having upwards of 30% excess capacity you know we're in a great position to capitalize on the demand recovery when that happens, but our baseline expectation for 25 and the outlook is a flattish sort of your expectation.
Speaker Change: Yeah.
Speaker Change: Thank you. The next question comes from Brian <unk> with J P. Morgan. Please proceed.
Speaker Change: Yeah.
Speaker Change: Hey, good morning, Thanks for taking the question. So maybe just a quick follow up on the incremental margins can you talk a little bit about the ramp up of the new facilities. It looks like you sold one in Brooklyn.
Speaker Change: But is that still above what was that.
Speaker Change: How are those progressing and then.
Speaker Change: A separate comment question.
Speaker Change: Obviously, the NMFC as moving to change some how some of the classes are organized and categorized them, assuming that youre dimension and a lot of stuff already but given your high exposure to smbs I'm not quite sure if they're ready for such a change. So maybe you can talk through a little bit about what that means for the for the shipper base if there's gonna.
Speaker Change: Any sort of.
Speaker Change: Friction disruption or confusion there.
Speaker Change: Thank you Brian.
Speaker Change: Thanks, Brian I'll start with the latter half of the question sort of over to cards will talk about the real estate side, but when you look at the at the changes that are coming here in the month of July the N M. S. T. A S implementing effectively changes how freight is getting classified whereas it's based on sub categories of products, where density could change the class by which freight as a b.
Speaker Change: Great.
Speaker Change: Let's see that's a change for customers and a lot of customers are worried about that change, but the overall if you look at we analyze all of our shipment data, where some customers could have a slightly higher life. Some customers could have a slightly lower price, but overall, we don't expect the change to be material in terms of how we do how we do pricing and our goal is to be there to support our customers through through the <unk>.
Speaker Change: <unk>, we're doing a lot of outreach communication training all of these kind of pieces, where they will see impact on.
Speaker Change: Dimension, Inc. We are so they'd be the mentioned the majority of I would phrase we use a combination of overhead dimension or as a methodology on the handheld devices that our drivers can dimension freight at the dock of customers and we also obviously you got the dimensions from customers as well so we'd use that dimension data and work with our customers to make sure that it's a it's a smooth change for them and it doesn't impact that that operation either.
Speaker Change: Yeah, Brian anything about the real estate you know in the quarter. We did have a game that gain was driven by the Brooklyn site. So we completed the sale of Brooklyn, and we opened a large it and really better located facility in the same market and if you think about what that means. This is part of the overall plan that we had when we acquired the sites at the end of 'twenty three so a little less than half those sites. We acquired are gonna be net ads.
Speaker Change: So they're gonna be some service centers, we're going to exit and from those some are leased lease property that we're gonna, let those roll off or sublease with favorable terms and then on the one property side, we're still working through a divesture plan, starting there with Brooklyn, which was a good thing, but when you think about what that means for 25, it's fair to assume we're going to get some level of proceeds and 25 in gains.
Speaker Change: It's a bit early to quantify and provided timing for those but youll see those repressed through 'twenty five.
Speaker Change: And one point of context to get to when you think about what we've marketed so far we are seeing interest from companies outside of LCL Brooklyn. As example, actually purchased by a non hotel company so more to come here throughout 'twenty five.
Speaker Change: Okay.
Speaker Change: Comes from Jason Seidl with TD Cowen. Please proceed.
Mario Harik: Thank you operator of Mario and the team good morning appreciate the time.
You guys have a big focus on local customers, maybe you could help us out with some numbers you know where do they stand when you compare them to sort of national customers.
Mario Harik: And in terms of profitability and what percent of the business or are they now and where do you think you can get them too.
Mario Harik: Yeah.
Mario Harik: Good morning, Jason This is Ali so we're looking to grow our local chain, we're looking to grow our local channel mix from roughly about 20% of revenue to 30 plus percent overtime and this is both higher yielding and higher margin business for us, we're making a lot of good progress on that you saw in the fourth quarter. We grew our local shipments by high single.
Mario Harik: Digits on a year over year basis as Mario noted we also on boarded over 10000, new local customers in 2024, if you look at our mix currently we're somewhere in the low 20% range. So we've closed a few points of that gap from going from 20% of revenue to 30% and we would expect as we move out over the next few years, you'll see us.
Mario Harik: A few hundred basis points of that revenue mixed gas every single year as we move to growing our mix to that 30% target we have over the next few years and beyond.
Speaker Change: No. That's good color a quick follow up Mario you said D b.
Mario Harik: Networks at 30% excess capacity currently.
Speaker Change: Given the network that you have now versus where it was before where do you think excess capacity sort of needs to be to be at an optimal level for your operations.
Speaker Change: We are currently so usually has an empty LTA yohji. So do you want to be at that 30% excess capacity at the trough of the cycle, because usually you need about call it mid teens and excess capacity for the fluctuation of volume between the beginning of the month and the end of the month or at the beginning of the quarter at the end of the quarter, so effectively being at 30% in the trough.
Mario Harik: It's a very good place to be at and I'll keep in mind. When we purchased the service centers at the end of 2023, we think all of the locations, where we historically were capacity constrained think of markets like Nashville, Tennessee, Atlanta, Georgia, Our Columbus, Ohio, Indianapolis, Minneapolis, Houston, Texas. So all of these are sites that are or the areas that we needed that incremental capacity that we've got.
Mario Harik: Got it so when you think about the next up cycle. We are positioning we've been positioning the business for the last few years to be able to capitalize on that very effectively and if you look at all the categories in real estate with feeling fantastic. What are we are on rolling stock I would fleet ages down to four one years. We've added nearly 5000 used trucks in more than 15000 youth trailers over that period of time.
Mario Harik: And we're feeling very good about being able to capitalize on that you couple this with a lower reliance on purchase transportation, which usually goes up in the context of an up cycle. This gives us a ton of confidence of getting high incremental margins as Scott just mentioned and future up cycles whenever it cycled stock could be this year.
Mario Harik: Yes.
Mario Harik: Okay.
Mario Harik: Oh gosh.
Mario Harik: I see.
Mario Harik: Pete.
Mario Harik: Your line is live.
Mario Harik: Oh I am sorry.
Speaker Change: Sorry, I couldn't hear that good morning, everyone. I guess first question is obviously getting a lot of benefit in the ore from yield, but costa is contributing as well just Mario could you address.
Speaker Change: Some of your initiatives there where are you what inning essentially as you know a lot more opportunity to go in area such as dock operations actually a smart pick up delivery optimization. Thanks.
Speaker Change: You got its concept. So there are two primary levers for improvements and cost management that we have one is that I don't believe it efficiency and density in our line haul network. So it ties so how many labor hours using versus the volume we have in the network and the second area is that all third party line haul in sourcing when it comes to labor.
Speaker Change: <unk> as you know our technology is proprietary and we have tools like smart that use AI to predict what demand is going to look like and then being able to help I would also need them in the field getting this real time visibility in terms of when and where they need those labor hours to support the volume in our business and LPL, if you'd overstaffed, it's not good.
Speaker Change: If you are under staff as well as good because you won't be able to deliver the service for the customers so being able to forecast how much people you need and how many hours you need on a dog within the city is incredibly important that our technology is helping us with that I would going back to your question on what inning. We are in we do expect on a consistent basis over the next.
Speaker Change: A few years as we execute on our plan to improve productivity in that low single digit territory on an annual basis as we keep on improving productivity as a as we go along the second area is around line hauled in sourcing and we've made tremendous progress on that as we all three years ahead of flying you're exiting 'twenty 'twenty four and <unk>.
Speaker Change: Into 2025 for this year, we expect another strong year for in sourcing our baseline expectation is that for the full year would be in that mid to high single digit outsource, but exit the year in the mid single digit plus the territory and that's going to help us get insulates, our our P&L from truckload rates going up.
Speaker Change: And the up cycle.
Speaker Change: Great. Thanks, I appreciate that and just 10% of EBITDA, but still meaningful and the story just a little bit more elaboration on Europe. It sounds like the U K was great, but if you could just speak to what sounds like outperformance across the region.
Speaker Change: With a little bit more level of detail. Thanks.
Speaker Change: Yes, if you think about Europe, I mean, I think you said the Europe's outperforming the overall market and if you think about it from a top line perspective, we grew year on year revenue for the sixth consecutive quarter that was really supported by <unk>.
Speaker Change: Stronger pricing and if you think about which regions you're driving for us it's really the U K I mean, the U K had organic growth of 14% year on year. If you go across the market you know, France is a bit soft on a relative basis and that's consistent with some of the macro indicators. We've seen do you think about the PMI that's been weaker in recent months, so theres, probably slower overall manufacturing activity there.
Speaker Change: We think we're well positioned for an eventual improvement in the demand backdrop and again when you think about our sales pipeline right now is at record levels at one point and to doing so and we've also tried to focus on right sizing the cost structure.
Speaker Change: If we kind of move forward. We do think 25 can be a stronger year for them, we think EBITDA and if you think about it on a constant currency basis should be up somewhere in that low single digit range from 24, and it's a good outcome given some of the pressure they are seeing right now in Europe.
Speaker Change: Thank you. The next question comes from Daniel <unk> with Stephens. Please proceed.
Daniel: Hey, good morning, everybody, thanks for taking our questions.
Daniel: Maybe on the hotel side your weight per shipment did decline a bit sequentially at least some of your peers saw some strength. There. So curious if you could talk about maybe what drove that.
Daniel: Softness what you were expecting this year from a weight per shipment standpoint, especially if we see your industrial begin to recover and then once a clarifier on the or outlook. The 150 basis points of improvement is that including the gain on sale here of work. You are is it a 150 basis points, excluding that gain and for Q4. Thanks.
Speaker Change: So Daniel I'll take the second part first so our O arm does not include real estate gain. So when you think about that 150 basis points that we're expecting for the full year that that does not assume any sort of benefit from up from real estate gains now on the weight per shipment side. If you look at the fourth quarter, our weight per shipment was down about 1.3.
Speaker Change: Percent on a year over year basis that was a modest sequential decline as you noted versus the third quarter. However that was largely in line with seasonality as well as in line with our expectations for the quarter now if you just roll forward seasonality into the first quarter, which is our baseline expectation for weight per shipment it would imply weight per shipment being down on a.
Speaker Change: Year over year basis, a similar magnitude to what we saw in the fourth quarter and for the full year. If you continue to assume seasonality through the balance of the year. It would imply on a full year basis that weight per shipment will be flattish for the year as a whole.
Speaker Change: I can understand the future or doesn't include gains on sale, but does the base. We're growing off of include the gain on sale from his past work you were not.
Speaker Change: It does not Danielle when we report our R. O R. So you think about the 86, 2% in the fourth quarter that does not include real estate gains and so on so it's coming off of a base that includes that does not include real estate.
Speaker Change: Perfect. Thank you.
Speaker Change: Yeah.
Speaker Change: The next question comes from Eric Morgan with Barclays. Please proceed.
Eric Morgan: Hey, good morning, Thanks for taking my question I.
Eric Morgan: I guess I wanted to follow up on the weight per shipment a question there.
Eric Morgan: Is there any way to quantify you know what the impact of that is on your yields that you're realizing in the business and.
Eric Morgan: If we go if we do get into an up cycle here, where do you think weight per shipment can go.
Eric Morgan: And should we assume that that kind of you know has some moderating effect on yields that you're able to to generate here. Thanks.
Eric Morgan: So Eric when you think about weight per shipment and we wouldn't expect it to be a swing factor as we think about our yield outlook. We do expect as we noted yield to accelerate here in the first quarter on a year over year basis, and that acceleration is being driven by an underlying improvement in core pricing that we're seeing and we also expect contract renewal.
Eric Morgan: To accelerate here in the first quarter as well so when you think about yield largely flattish on a year over year basis for the full year. So as we think about our strong pricing growth that we expect this year won't be impacted by by weight per shipment either positive or negative.
Eric Morgan: Yeah.
Speaker Change: Next question comes from Ravi Shanker with Morgan Stanley. Please proceed.
Speaker Change: Oh. Thanks, Good morning, guys apologies if I missed this but just on Capex just given the run rate of Capex in 'twenty four 'twenty five what do you think all of US at Gordon normalized long term run rate and also about 25 can you give us a split between our real estate, our rolling stock and other like deck.
Speaker Change: It probably is Kyle so when you think about Capex just in general for 25, and you think about the outlook you know the wholesale business for 2024, we spent $14 6% of revenue into Capex, that's going to moderate by a few points here in 'twenty five there's a couple of reasons for that so one you know we brought 25 service centers online. This year, we set about a few million dollars per day.
Speaker Change: Those online that's not going to repeat.
Speaker Change: In 'twenty five and when you think about our fleet additions were down four 1% or $4. One years on fleet age and you think about all the work done and in sourcing that will require less capex. So both of those to help us to contribute a drop that percent of revenue by a few points.
Speaker Change: This year here in 'twenty, five and when you think about the breakdown specifically on the Capex.
Speaker Change: For the spend we're typically.
Speaker Change: About half of it goes to a fleet when anybody else here, specifically hackers to fleet about 40% is land and building and the rest is a mix between different kinds of equipment in it spend.
Speaker Change: Very helpful. Thank you.
Speaker Change: The next question comes from Stephanie more with Jefferies. Please proceed.
Speaker Change: Hi, Good morning. This is Joe Hoffman on for Stephanie more congrats on the good results.
Speaker Change: Speaking about those 25 service centers Mario could you speak to maybe the ramp that you've seen or maybe the productivity improvement you've seen as you've brought those 25 service centers online and sort of what your expectations would be for what they can contribute moving into next year I guess I guess this year.
Mario Harik: When you look overall at the DRAM. So the the biggest improvement put us in the near term has been at all costs and cost efficiency and it's Saturday quick foot us I mean, we've added 25 service centers last year and just to give you an idea of the net head count Joe We already added 150 people to support this increase.
Mario Harik: Mental capacity because the lion's share of these service centers, we're in markets, where we already had presence and they weren't able to give us immediate efficiencies. So Saudi with line haul where do we opened up those locations. We saw an improvement in productivity rather than that low single digit territory for to afford those sites and in the city operation I always give the example of a place to eat.
Mario Harik: Goodness, let out Nashville, where do we where do we had a site south east of Nashville, because we used to have up to 35 drivers that'd be they drive up to and I would know within an hour south to service the customers. So by opening up is tight and Goodlettsville people are able to relocate 35 drivers and have much lower spend times on our on our P. M D routes and by doing it that way we saw in those locations.
Mario Harik: All the new locations a mid single digit improvement in miles per stop which is one of the kpis. We used for line haul and improvement in efficiency. So it's a high level. We saw it called <unk> in 2024, and we expect that contribution to continue in 2025 and beyond that some of the emotional locations. The biggest impact. We've also are seeing is that all service because when you think.
Mario Harik: I would've business whenever you have more dark space, you turn towards less frequently and you can build more pure trade offs coming out of your location and that feeds uses that he handling in your network, which improves service and reduces cost as well. So we've seen those they are all the sites are at or above our expectations in terms of contribution at this point in terms of volume.
Mario Harik: Modest contribution and some of the markets, where we had capacity constraints in the past, but the bigger contribution is going to come in the future. When you think of the up cycle, having 30% excess capacities, there's gotta be fantastic for us to be able to support our customers and service them in some of these markets.
Speaker Change: Thanks, so much of the time and congrats again on the strong momentum.
Ari Rosa: Our next question comes from Ari Rosa with Citigroup. Please proceed.
Mario Harik: Yeah.
Ari Rosa: Hi, good morning, Congrats on a strong quarter here. So I wanted to ask about the or and certainly some impressive oh, our improvement year over year and I know you guys have noted that you know obviously buck the trend of the broader industry.
Speaker Change: Yes, there were a couple of headwinds and specifically I'm thinking of the macro which has obviously been challenging and also the costs associated with adding new service centers I was hoping you could kind of discuss it.
Speaker Change: To what extent those factors have been a headwind and kind of where the ore would have been you think for 2024, if you hadn't had those those particular headwinds.
Speaker Change: Well, what what overall every every every year and it's got to come with tailwind and headwinds, but when do you think foot US. We obviously had both strong performance in the fourth quarter and on a full year basis as well the the headwinds of the Saudi with the new service centers are the they would actually or a slightly or accretive in 2024, because despite of ads.
Speaker Change: 25 service centers. The team has done an impeccable job on execution in terms of staffing those locations moving people and making sure we are delivering a high quality service, while improving efficiency. So we actually have seen those being more of a tailwind through the excellent operational execution across our across our network now in terms of the macro if you will.
Speaker Change: Recall, when we gave our initial outlook for 2024, we said 150 basis points to 50 basis points of or improvement lets see were expecting higher volume contribution now the full year actually came in the first half was stronger last year in the back half was a was a softer and I would go with is to always operate no matter.
Speaker Change: The environment is and execute and make sure we are managing our cost structure to match the volume and vitamins now obviously, if it was a stronger than vitamin we would have seen a higher order improvement and our goal is no matter, what the macro throws out a ways to execute and deliver great service for the customer and deliver great margin improvements and the efficiency across our network.
The next question comes from Bruce Chan with people. Please proceed.
Bruce Chan: Hey, good morning, Gents and thanks for the question here I'm wondering if you could help us to understand the local market opportunity a little bit better.
Bruce Chan: A customer that tends to grow in line with the broader market or do they tend to grow faster in an up cycle and you know when you think about the growth you are these local accounts, mostly new customers is it more.
Bruce Chan: Freight and more shipments from existing customers or maybe you know conversion from three PL to a direct relationship. Thank you.
Bruce Chan: Yeah. So what do you think about the Bruce about those local accounts. They typically are.
Bruce Chan: Local because the local manufacturers could be local consumer package goods companies, but typically that a customer that has one outbound location, where they ship product out of out of and it goes to multiple locations across the country, depending on where that customers are at a we are they are a customer that values. The relationship they already customers that value is excellent.
Bruce Chan: Service because they don't have the volume afraid that you would see from your molecule shippers they could be doing a couple of shipments a week or a couple of shipments a day, but they are typically lower volume shippers than their larger counterparts.
Bruce Chan: Let's work.
Bruce Chan: These type of customers that you have less density on your pick up points in your delivery points. So it's important to make sure as we onboard those customers. They are in the right markets at our service centers and again, we've been we've grown our sales force and the improvements in our service product.
Bruce Chan: I think also earn more of that business with these with these customers. They are sticky relationships that they stay with us for a long long time, and it's a great source of growth in volume and an improvement of overall financial performance for the company as well.
Bruce Chan: Yeah.
Yeah.
Bruce Chan: Hoffman with vertical research. Please proceed with your question.
Speaker Change: Thank you very much and first of all congratulations on terrific results in a difficult quarter.
Speaker Change: I wanted to ask about currency. This is something that's been flagged by a lot of other companies in the industry and we do think of North America and L. T L as being kind of insulated, but can you talk about any currency impact that's affecting you know translation or results in the North American business as well as the European business, how should we think about this.
Speaker Change: Yeah.
Speaker Change: Sure. Jeff. This is Ali so when you think about hard European business, we did see an impact of the stronger dollar that was a bit of a headwind for that business for the quarter as a whole. However, as Kyle noted earlier, we were still able to deliver growth in that business above the market in the fourth quarter, we delivered the fixed <unk>.
Speaker Change: Second quarter of year over year revenue growth and that's despite an impact from a stronger dollar so where you would see that FX impact impact us specifically would be primarily within our European business and we did see a bit of that in the fourth quarter.
Speaker Change: If I could just follow up on that is that more of just a revenue impact or does that affect the.
Speaker Change: The operating income line as well.
Speaker Change: It's a little bit of both Jeff.
Speaker Change: Sure and thank you.
Speaker Change: Thank you at this time I would like to turn the call back over to Mr. Mario Harris for closing comments.
Speaker Change: Thank you operator, and thank you everyone for joining us today as you saw from our results we delivered above market results and he's already did it resolved I would focus on execution as we continue to invest in customer service network expansion and cost efficiencies. We're confident in delivering another strong performance this year and more importantly, they have a long run.
Speaker Change: To unlock many more years of margin expansion and earnings growth on that note. Operator, you can end the call.
Speaker Change: Thank you. This does concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Speaker Change: Okay.
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