Q1 2025 ArcBest Corp Earnings Call
Good morning, and thank you for standing by welcome to the Ark Best first quarter 'twenty 25 earnings conference call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
As a reminder, this call is being recorded.
Speaker Change: Now ill turn it over to MS. Amy Mendenhall, Vice President of Treasury and Investor Relations. Please go ahead.
Speaker Change: Good morning, everyone I'm pleased to be here today with Judy Mcreynolds, our chairman and CEO Beth runs are our president and Matt Beasley Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session.
Speaker Change: Before we begin please note that some of the comments we make today will be forward looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward looking statements section of our earnings release and SEC filings.
Speaker Change: To provide meaningful comparison, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release.
Speaker Change: Reconciliations of GAAP to non-GAAP measures are provided in the additional information section of the presentation slides.
Speaker Change: You can access the conference call slide deck on our website at <unk> Dot Com and our 8-K filed earlier this morning or follow along on the webcast and now I will turn the call over to Judy.
Judy Mcreynolds: Thank you Amy and good morning, everyone.
Judy Mcreynolds: I want to start by thanking our employees for their unwavering dedication and hard work despite challenges in the freight environment driven by soft industrial production and a changing trade policy landscape I'm proud of our progress and how our team carried out strategic initiatives that have led to significant surge.
Judy Mcreynolds: Office improvements and efficiency gains.
Judy Mcreynolds: We remain steadfast in our commitment to creating value for our shareholders and customers through the disciplined execution of our strategy.
Judy Mcreynolds: Our ongoing efforts to drive operational efficiency leverage innovative solutions and strengthen customer relationships are a strong foundation for sustained success.
Judy Mcreynolds: As our customers navigate changes to U S tariffs and trade policies, we're focused on helping them quickly adapt.
Judy Mcreynolds: It's more important than ever for shippers to drive efficiencies across every aspect of their supply chain and build flexibility into their operations.
Judy Mcreynolds: Art Best comprehensive suite of integrated solutions innovative technology and problem solving mentality position us to help customers achieve the efficiencies.
Judy Mcreynolds: Efficiencies and build better supply chain.
Judy Mcreynolds: Our managed solution in particular does just that.
Judy Mcreynolds: Having been in this industry for a long time, one thing is certain disruptions are inevitable.
Judy Mcreynolds: Take great Pride in hearing stories from our customers about how our services solutions and dedicated team have helped them overcome real challenges.
Judy Mcreynolds: Recently, we partnered with a leading manufacturer of lighting solutions to modernize their shipping operations.
Judy Mcreynolds: Historically, they use manual processes to route orders and determined warehouse shipping locations.
Judy Mcreynolds: Through our reporting abilities and the automation of key processes like shipment consolidations in routing we are driving tangible results. In addition to soft benefits. They now project, a 5% savings using our managed solutions.
Judy Mcreynolds: This innovative approach supports their needs and help them better serve their own customers.
Judy Mcreynolds: As a perfect example of how we partner with customers.
Judy Mcreynolds: And as we always say when our customers succeed we succeed.
Judy Mcreynolds: The upcoming NMFC classification changes present, another potential disruption to our industry years ago, we anticipated that the industry would move towards space based pricing.
Judy Mcreynolds: And art best became the first in the L. T L industry to launch this pricing approach.
Judy Mcreynolds: Our long history of capturing accurate dimensions positions us well to support customers with these changes we.
Judy Mcreynolds: We are proactively working with customers to help them understand the potential impacts on their break profiles and successfully navigate new classification codes.
Judy Mcreynolds: Art best fore sight regarding the freight industry's move to space based pricing also led us to develop a mobile dimension or and ultimately introduce box vision, which we announced in February.
Judy Mcreynolds: This innovative three D perception technology transforms forklifts into intelligent mobile dimension errors that provide precise real time freight measurements images and detailed shipping insights on the go.
Judy Mcreynolds: The pilot Phase of box Division will give us critical data to refine the technology and ensure it delivered significant value we.
Judy Mcreynolds: We expect box vision to be a cost effective solution that can easily be adopted and integrated enhancing transparency and compliance and freight handling workflows.
Judy Mcreynolds: Following the pilot period, we're excited to roll this technology out more broadly to the market.
Judy Mcreynolds: We remain deeply committed to continuous improvement across the business and are taking steps to ensure our customers have the right solutions and capacity to meet their needs ultimately our innovative solutions and our team are why our customers come back to us time and time again.
Judy Mcreynolds: Looking ahead I'm as confident as ever that our best is well positioned to deliver long term value as a leading logistics partner and innovator I'll now turn the call over to Seth to update you on our progress in key areas of focus for 2025.
Seth: Thanks, Judy and good morning, everyone as we discussed last quarter, our priorities for 2025 or driving profitable growth advancing our premium service for customers and focusing on optimization and efficiency.
Speaker Change: The recent leadership and organizational changes instituted earlier this year are already fostering increased collaboration across the business and I am pleased with the early signs of success.
Speaker Change: By addressing workflow bottlenecks, we've sped up decision, making and streamline processes with our sales legal and pricing teams, enabling a 31% improvement in the speed of deal execution, we've accelerated growth in our sales pipeline with a higher mix of core <unk> opportunities and we're investing in our sales.
Speaker Change: As teams, particularly to grow our share of small and medium sized business.
Speaker Change: Customers increasingly prefer digital engagement and our initiatives to capture new business and service existing customers digitally are paying off.
Speaker Change: We are now receiving over 200000 dynamic quote request from customers each day more.
Speaker Change: More digital quotes give us the opportunity to be more selective in the freight we choose optimizing our network and profitability.
Speaker Change: We have seen a 50% increase in revenue per shipment levels for dynamic business since 2020, and we expect even greater profit contributions from this business as we continue to grow our daily quoting opportunities.
Speaker Change: Through our integrated solutions, we are uniquely positioned to say, yes to our customers addressing their diverse needs and helping them drive efficiencies and manage supply chain uncertainties Jude.
Speaker Change: Judy highlighted our managed transportation solution, which delivers flexible tailored solutions.
Speaker Change: We continue to see encouraging demand for this solution, which achieved double digit growth and all time quarterly highs for both shipments and revenue.
Our focus on service Excellence includes continued investments in shipment visibility, which has led to the majority of our customers now tracking their shipments digitally.
Speaker Change: This contributes to reduced customer service requests and improve productivity.
Speaker Change: We're also advancing solutions like flex deliveries, which provides customers with a delivery window and a picture of doorstep deliveries for added convenience and transparency.
Speaker Change: Additionally, our appointment optimization project is in its first pilot in select service centers.
Speaker Change: Initiatives speed valuable data into our optimization tools enhancing the efficiency of our pickup and delivery routes, while elevating the overall customer experience.
Speaker Change: We continue to prioritize reducing customer churn by strengthening our onboarding and retention efforts. We've established a multi department focus group dedicated to aligning resources analyzing key factors and recommending actionable changes to improve retention. Additionally.
Speaker Change: Additionally, we're streamlining the onboarding process to identify customer requirements earlier and meet those needs more effectively ensuring a seamless and efficient experience for new customers. We believe this new process will further improve our retention statistics and enhance the customer experience.
Speaker Change: We are progressing our targeted optimization projects to enhance efficiency and service quality.
Speaker Change: The route optimization phase II Leverages daily demand predictions to streamline pickup routes, allowing us to better accommodate customer request and enhanced service sufficiency.
Speaker Change: Phase III introduces dynamic routing tool that generates nearly real time automated customized routes, while allowing for human adjustments based on local expertise.
Speaker Change: We're rolling out these phases strategically starting with the most impactful service centers one.
Speaker Change: Notably at our Baltimore Service Center implementing the software reduced the managers planning hours from four hours to just 45 minutes, allowing for more direct engagement with teams on the dock and less screen time.
Speaker Change: We continue our campaign of having a team of operational experts visit our facilities to support best practices across our network driving improved service and efficiency.
Speaker Change: This highly specialized team carefully evaluates the unique needs of each location and customizes training and software adjustments to ensure optimal outcomes. During the first quarter training was completed at nine sites, resulting in $6 million in savings.
Speaker Change: Our truckload digital roadmap continues to make steady progress carrier portal adoption has reached 22% while 45% of shipments are now digitally fulfilled to further enhance efficiency. We've launched an inbound call automation pilot aimed at automating routine calls so our teams can focus on servicing.
Speaker Change: More value added customer requests. Additionally, digital quote argumentation is on the rise with further advancements on the horizon.
Speaker Change: During the first quarter of 2025, these efficiency and optimization projects drove productivity improvements of 1% for asset based operations and 24% for asset light operations. While these improvements are impressive we recognize the opportunity to achieve even greater efficiencies in the future.
Speaker Change: Our strategy and optimization team is tasked with advancing operational excellence and scalable growth through.
Speaker Change: Through job shadowing and a comprehensive review of enterprise processes. The team has identified opportunities for improvement by leveraging previous successes in technology compliance campaigns and optimization initiatives. This team will advance our highest priority initiatives and work to further streamline processes and improve productivity.
Speaker Change: <unk>.
Speaker Change: Disciplined execution and moving with urgency has been central to our efforts this quarter with these principles guiding our strategy, we are well prepared to meet the evolving needs of our customers in any environment and drive profitable growth I'll 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: As we navigate the soft industrial economy, and challenging truckload market, our focus remains on driving actions that strengthen our business.
Matt Beasley: We have made significant progress boosting operational efficiency and eliminating unnecessary costs.
Matt Beasley: These efforts position us to adapt effectively to dynamic market conditions, while driving long term value creation.
Matt Beasley: Turning to our first quarter results.
Matt Beasley: Consolidated revenue decreased by 7% from last year's first quarter to $967 million.
Matt Beasley: non-GAAP operating income from continuing operations was $17 million compared to $43 million in the prior year.
Matt Beasley: Our asset based segment saw $27 million decrease in operating income, while the asset light segments non-GAAP operating loss of $1 million.
Matt Beasley: It was $4 million better than the prior year.
Matt Beasley: Adjusted earnings per share were <unk> 51.
Matt Beasley: Down from $1 34 in the first quarter of 2024.
Matt Beasley: Now, let's discuss our two segments in more detail.
Matt Beasley: Starting with our asset based business.
Matt Beasley: First quarter revenue was $646 million.
Matt Beasley: Per day decrease of 3%.
Matt Beasley: Abf's operating ratio was 95, 9%.
Matt Beasley: An increase of 390 basis points over first quarter 2024.
Matt Beasley: Abf's operating ratio also increased 390 basis points sequentially within the historical range of 350 to 400 basis point increase.
Matt Beasley: In the first quarter daily shipments were flat year over year, while weight per shipment decreased by 4%, resulting in a 4% decrease in tons per day compared to the previous year.
Matt Beasley: This decline is primarily due to industrial weakness as customers are producing less than the current economic environment.
Matt Beasley: Additionally, higher interest rates and low housing inventory led to fewer household goods moves, which typically involve heavier shipments.
Matt Beasley: Some higher weight LTE shipments have also shifted to the truckload market.
Matt Beasley: This continued low rates and excess capacity.
Matt Beasley: Despite lower tonnage levels with volume of shipments remained relatively stable, which meant that labor costs didn't decrease proportionately with the tonnage declines.
Matt Beasley: However, improved productivity through technology and training to help manage cost while maintaining high service standards.
Matt Beasley: Year over year cost for fuel and repairs decreased but nonunion healthcare and insurance related expenses increased by $6 million, adding 90 basis points to our operating ratio.
Matt Beasley: We secured an average increase of four 9% on our contract renewals and deferred pricing agreements during the quarter.
Matt Beasley: Revenue per hundredweight increased by 2% in the first quarter compared to the first quarter of 2024.
Matt Beasley: Price improvements have been partially offset by declining fuel costs.
Matt Beasley: Excluding fuel surcharges revenue per hundredweight increased in the low to mid 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: Turning to April 2025 trends in our asset based business, we achieved a 4% year over year increase in daily shipments highlighting our success in capturing new core business opportunities.
Matt Beasley: Despite the market backdrop, leading to a 3% decrease in weight per shipment, we saw 1% increase in daily tonnage levels compared to the same period last year.
Matt Beasley: On the pricing front, we saw a 2% year over year decrease in revenue per hundredweight for April.
Matt Beasley: When excluding fuel surcharges, the decline was less than 1%.
Matt Beasley: This decrease was partly driven by an increase in shipments from core customers with easier to handle frame, which generally have a lower revenue per hundredweight profile, but are operationally more efficient.
Matt Beasley: Additionally, there was a decline in shipments within the manufacturing vertical where we typically see a higher revenue per hundredweight profile.
Matt Beasley: The ongoing trend of fewer household goods moves influenced by current economic and interest rate conditions also continued to impact our results in April.
Matt Beasley: Historically abf's non-GAAP operating ratio has improved by 300 to 400 basis points from the first to the second quarter and we expect our second quarter operating ratio improvement to remain within this range.
Matt Beasley: Moving on to the asset light segment.
Matt Beasley: First quarter revenue was $356 million of daily decrease of 9% year over year.
Matt Beasley: Shipments per day were down 4% as we strategically reduce less profitable truckload volumes offsetting double digit growth in our managed solution.
Matt Beasley: Revenue per shipment decreased by 6% due to soft rate market and growth in our managed business, which is smaller shipment sizes and lower revenue per shipment levels.
Matt Beasley: Our non-GAAP operating loss of $1 2 million was an improvement compared to last year's non-GAAP operating loss of $4 $7 million.
Matt Beasley: This improvement was driven by our focus on improving margins, while reducing operating costs.
Matt Beasley: In April 2025 asset light year over year daily revenue was down 10% due to fewer shipments from a strategic reduction in less profitable truckload volumes offsetting the continued strength in managed.
Matt Beasley: Lower revenue per shipment resulted from soft freight market conditions, and a higher proportion of managed business with smaller shipment sizes.
Matt Beasley: Given current market conditions, we anticipate a non-GAAP operating loss for this segment of between 1 million and $2 million for the second quarter of 2025.
Matt Beasley: I'll now turn to our long term balanced approach to capital allocation.
Matt Beasley: Our 2025 capital expenditure guidance of $225 million to $275 million.
Matt Beasley: It reflects maintenance capital spending to optimize our total cost of ownership and strategic capital investments and our highest priority projects.
Matt Beasley: We are focused on deploying this capital in the most effective way possible to enable growth improve service and increase efficiencies across our network and we currently expect to be at the lower end of our capital range for the year.
Matt Beasley: We also acquired leases for two strategically located facilities through the recent yellow property auction process during the quarter, while returning over $24 million to shareholders through both share repurchases and dividends.
Matt Beasley: We will act opportunistically on share repurchases based on share price balancing organic capital investments, while maintaining reasonable leverage levels.
Matt Beasley: Our balance sheet remains strong and we have approximately $350 million in available liquidity.
Matt Beasley: While external factors can be unpredictable art best is focused on controlling what we can.
Matt Beasley: Serving our customers with excellence, optimizing our operations and maintaining financial discipline.
Judy Mcreynolds: I'll now hand, the call back to Judy.
Judy Mcreynolds: Thank you Matt as we move forward, we will continue to adapt to the evolving trade environment, leveraging our strengths to support customers and drive sustainable growth.
Judy Mcreynolds: Best remains well positioned to navigate challenges and capitalize on opportunities reinforcing our role as a trusted logistics partner.
Judy Mcreynolds: That concludes our prepared remarks, I'll turn it over to the operator for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question. Please press Star then the number one on your telephone keypad.
Speaker Change: We request that you limit yourself to one question, we will pause for just a moment to compile the Q&A roster.
Speaker Change: Your first question comes from the line of Daniel <unk> with Stephens, Inc. Please go ahead.
Speaker Change: Yes.
Hey, good morning, everybody, thanks for taking our questions.
Speaker Change: Maybe I'll start a little bit on the near term set up I think of a filing in your comments you noted normal seasonality is what three to 400 basis points better at ABF I guess, what's assumed in the sequential change in revenue that's underpinning that sorry, if I missed that in the comments and then just put a finer point on the profitability beyond revenue I guess are there any specific cost reductions that your target.
Speaker Change: Due to the macro that's changing or no specific changes happening on the cost structure here as we think about the sequential move through the year. Thanks.
Speaker Change: Yeah. Thanks for the question Daniel So I'd say just at a high level.
Speaker Change: We didn't provide any particular outlook around revenue, but certainly we said as we see the move from the first quarter to the second quarter, we do expect normal seasonality with that change.
Speaker Change: You would expect just the normal typical seasonal increases in revenue per day that are a big driver of that improvement in the operating ratio I would say on the cost side.
Speaker Change: Got a full portfolio of cost initiatives.
Speaker Change: <unk> certainly the compliance campaigns that have continued to be successful for us those are continuing at our largest service centers and distribution centers. This year, we continue to make sure that we are aligning.
Speaker Change: Our workforce to our business levels and have a lot of flexibility. There. So I would just say just continued progress on the cost side in line with what you've seen from us over the last few years.
Speaker Change: Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.
Scott Group: Hey, Thanks. Good morning, So I think you said March to April.
Speaker Change: <unk> is up 1% sequentially.
Speaker Change: But Rev per hundredweight down 1% sequentially is there any way you could share what like what the normal seasonality is for those two metrics March taper I guess ultimately what I'm trying to understand is we're in this sort of uncertain.
Speaker Change: Maybe weakening macro backdrop in tonnage is turning positive for the first time in.
Speaker Change: A couple of years, but now yields are turning negative right are we.
Speaker Change: With the dynamic pricing are we sacrificing some price in order to get volume I'm just trying to.
Speaker Change: Stand like the moving pieces here.
Scott This is Judy and good morning.
Speaker Change: No we.
Speaker Change: When we look at the opportunities that we have.
Speaker Change: Nothing has changed.
Speaker Change: We're very driven by reviewing the opportunity set which by the way the pipeline is up 55%. This year because of some of the alignment that we have with our sales and customer solutions teams, which we're really excited about that.
Speaker Change: But as we're looking at those opportunities and evaluating them.
Speaker Change: We have a very disciplined approach we've got a strong team we have the strongest pricing metrics in the industry and we're seeing good increases on the most price sensitive accounts I think nearly 5%.
Speaker Change: In the quarter on those so.
Speaker Change: You know from a from a dynamic standpoint.
Speaker Change: Eddie I'll turn it over to you see if you have some comments about that as well, yes. Thanks Judy.
Eddie: From a dynamic standpoint, nothing has really changed from quarter to quarter month to month in terms of.
Eddie: How much of that is contributing to our numbers.
Eddie: If anything our diamond prices have improved over time.
Eddie: Just a SaaS mentioned earlier, our quote pool continues to expand and that's given us an opportunity to really optimize.
Eddie: The shipments that we are able to get from the coding.
Eddie: Quoting mechanism. So we feel really good about the price levels are dynamic, but really the story of our growth is just our improvement.
Eddie: To capture more core <unk> business and as Judy mentioned it.
Speaker Change: We're very disciplined in how we're pricing that business is profitable for us. It does has some different characteristics of our average and thats whats driving some of the change, but ultimately we're going to make the right decisions on an account by account basis to drive profitable growth for the company.
Speaker Change: Your next question comes from the line of area ROFO with Citigroup. Please go ahead.
Ben Morris: Yes, Hi, good morning. This is Ben Morris Citi on Ferrari.
Speaker Change: Thanks for taking our question.
Speaker Change: Your guide for 300 to 400 bps of improvement sequentially into Q can you break that out a bit is there some headwind to your or on lower volumes from the tariffs.
Speaker Change: But offset by your cost outs in other words without the tariff headwind, but with your cost outs, how much better than your historical 300 to 400 could.
Speaker Change: Could you, possibly do.
Speaker Change: Well you know what.
Speaker Change: I would say Ben is with as we develop.
Speaker Change: The disclosure in our view of the ore range and how we feel.
Speaker Change: That we're going to perform against history and it really takes into account all of those factors. We have macro inputs, we have internal initiative impacts and what.
Speaker Change: I'm really proud of is we have made.
Speaker Change: Sizable investments.
Speaker Change: Not only in technology initiatives as we've been mentioning but also on the equipment side and in some real estate investments and those are really key.
Speaker Change: Contributing factor and what I'd like to do is ask Matt Godfrey to talk about the benefits of what we're seeing on some of those investments with our equipment and real estate that we put in place yes. Thanks, Judy when we look at our real estate portfolio and the investments. We've made it's really been a strategic and disciplined approach.
Speaker Change: To add capacity to our network and so it's been a mix of adding facilities around our distribution centers to add transfer capacity and in those situations as Judy mentioned, we've seen the expected growth in inefficiency and service that we expected to see and those are gains in efficiency.
And service support our strong pricing.
Speaker Change: He was talking about earlier and then in locations where we are.
Speaker Change: Replace the facility we have.
Speaker Change: Move into larger facilities, that's a long term decision to add capacity to the network, but we're not adding cost in the short term to continue to service that market will add the cost to service the business as it comes on and then also on the equipment side, we've been able to bring in equipment at our optimal.
Speaker Change: Total cost of ownership model would support we've seen a reduction in our maintenance cost again year over year after a significant improvement.
Speaker Change: In 2004 year over year, so we like where we're at from an equipment and a capacity standpoint to continue to serve our customers well and support growth.
Speaker Change: Dan.
Speaker Change: I just want to make sure that everyone has a good understanding as you know.
Speaker Change: The benefits that are flowing into the.
Speaker Change: The second quarter as we see it and then for the remainder of 2025 and we're just in the early stages of some of those.
Speaker Change: So it's just important to stay focused on that as well as all the macro noise that's going on.
Speaker Change: Your next question comes from the line of Elliot Wilbur with TD Cowen. Please go ahead.
Elliot Wilbur: Yes. Thank you this is elliott on for Jason Seidl.
Speaker Change: Contract renewals increased sequentially from.
Speaker Change: Four 5% last quarter to four nine in Q1 can you talk about.
Speaker Change: The pricing environment in LTE right now, maybe how we should interpret that sequential growth and pricing.
Speaker Change: And an environment that at least so far feels maybe incrementally weaker compared to last quarter and maybe more uncertainty in the macro.
Eddie: Yes Elliot this is Eddie.
Speaker Change: From a overall macro standpoint, we're still seeing.
Eddie: The market would be very rational in terms of pricing.
Eddie: Theres really no what I would say a peer out there thats thats really going after growth as expense of pricing.
Eddie: I'm really proud of the team and how we're able to have great conversations with our customers about the value, we're providing them and I think thats really what why we're able to get a good increase with these renewals.
Eddie: This is in this environment.
Eddie: I think theres always a chance there.
Eddie: That increases could suffer at the expense of our business, but we're really not seeing that at this point customers.
Eddie: Appreciate the value were offering them and they are responding appropriately.
Eddie: Ranking these increases.
Speaker Change: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead.
Chris Wetherbee: Hey, Thanks, good morning, guys.
Speaker Change: I guess I wanted to hit on weight per shipment. So obviously, we've seen some softness there it sounds like there's some mixed components going on there with maybe less industrial freight, but we're seeing levels that are fairly low and in the long term kind of history of the company. So I guess I'm just kind of curious how youre thinking about it if theres anything youre doing with either the dynamic pricing or the approach to the market that's influencing.
Speaker Change: That's a bit more than just what the market is giving you I just wanted to get some sense on how thats playing out going forward.
Speaker Change: Yeah. Thanks, Chris This is Seth so obviously weight per shipments being impacted by just the softer macro environment and what's going on as shippers reduced shipment size, we've talked in the past about shipping <unk> down to two things like that so.
Speaker Change: Although our retentions and a great place.
Speaker Change: Customers are just simply producing a little bit less than than they have been thats kind of the same story, we've been talking about for a few years now so although we feel great about those retention stats, we don't want to lose any customers, which is why we're investing in that retention team that we mentioned in.
Speaker Change: In the beginning of our prepared remarks, but we are impacted a little bit more on weight per shipment because of the <unk> service, we offer which is the housing market and interest rates, where they are it's resulted in just fewer household. Good news those are generally smaller shipment count, but they are heavier in nature.
Speaker Change: As we move so customers continue to utilize that service just at a reduced rate.
Speaker Change: Because of where the housing market is so we've talked a little bit about freight migrating over to truckload due to the excess capacity in the truckload space right now so nothing new really going on from what we saw in 2024, we think that freight is going to eventually flow back to the <unk> space when the market flips, but we've been encouraged.
Speaker Change: By ultimately what our customers are looking for in that sufficiency in supply chain and their supply chain and that's why we continue to be encouraged by our pipeline stats. The change we mentioned in January we've seen the pipeline go up 55% the speed of deal velocity that I mentioned in my prepared remarks are just impressive to be on.
Speaker Change: Honest with you so customers are ultimately looking for a partner they can trust.
Speaker Change: And when you think about our history were 102 years old we have seen a lot of cycles in our history.
Speaker Change: Lot of disruptions. These last five years, but we're focused on what's in our control and we're having great momentum with the initiatives our pipeline in all of these investments that we've made so we're positioning ourselves for growth now, but also remaining disciplined on our pricing and our cost as we move into the future. So I feel like we have the best team in the industry and I feel confident in our ability to X.
Speaker Change: Cute for our customers and our shareholders.
Speaker Change: Our next question comes from the line of Ken Hollister with Bank of America. Please go ahead.
Hey, great good morning.
Speaker Change: Judy I hear a lot about the rational pricing is still rational from you Seth and the team but.
Speaker Change: If I think about <unk> talked about some some negative pricing youre talking about negative pricing moving into into April <unk> talked about using some Gi discounts, maybe just help me understand that I mean, I understand weights are going down and so maybe that's that's part of the issue. We're seeing here, but I wanted to say because I think that's what investors are really concerned about is is what is going on.
Speaker Change: <unk> set to that last answer in terms of the edge and then you had a 50% increase in revenue per shipment on the dynamic businesses is that just doing more spot how should we think about the shifts there because I'm just trying to understand the impacts to the ore which had been maybe greater than we've seen at industry peers in terms of the degradation.
Speaker Change: So hey, Scott. This is Ken this is Seth again so.
Speaker Change: We mentioned the April we did see the 2% decrease in revenue per hundredweight, excluding fuel, it's less than 1%. So we talked about how the mix is kind of driving this those easier to handle shipments that generally have a lower revenue per hundredweight profile, but a better operational efficiency. So we mentioned that I talked about the household goods moving.
Speaker Change: Things like that those generally have higher revenue per hundredweight, so we're getting impacted a little bit more than our peers, but there is also the comparison thats playing into this a little bit.
Speaker Change: Look at <unk> 23 to <unk> 20 for the post yellow disruption and all the things that were going on our price was up 23% from <unk> 23 to <unk> 24, So we've got a little bit of comp going in there are mix of dynamic shipments remained consistent with prior year and prior quarter no change in strategy there.
Speaker Change: It really strong prices, so I mentioned that more customers want to engage with us digitally and as our KOL pool grows we in turn to end up picking the shipments that best fit our network that are the most profit optimal as well so as that cool pool grows we have more opportunities or swings at the bat, which allows us to make the profit loss.
Speaker Change: <unk> decision as I mentioned, so the new business, we're bringing on it is incrementally profitable. It's the right decision for the company and it's great to see the growth that we achieved in April 4% year over year was it was good to see that our strategies and initiatives are paying off so normally that average sequential or changed Matt mentioned in his opening comments three to 400.
Speaker Change: <unk> basis points, we are expect them to stay in that range because of all the initiatives and all the strategies that we're enabling to get improved results. So I really like the position we're in regardless of all the noise in the market.
Speaker Change: Really for any environment, we stay close to our customers and when you look at our revenue stats, 80% of our revenue comes from customers, who have been with us over 10 years, so they've been coming to us through this disruption and we've been able to help navigate them and Thats why we think we're going to come out on the other side in really good shape. So.
Jordan: Your next question comes from the line of Jordan <unk> with Goldman Sachs. Please go ahead.
Jordan: Good morning.
Speaker Change: So in terms of revenue per day, which I think in April you said it was down about 1% I know, there's a lot of puts and takes but is there any sense from a year over year trend perspective look better or worse from here for the balance of the quarter and then secondly.
Speaker Change: Again, realizing theres a lot of tariff uncertainty out there have you specifically heard from customers about changes in behavior or thoughts on pulling back orders or particularly in the manufacturing sector. Thanks.
Speaker Change: Yes.
Speaker Change: I'll start by saying just the relationships that we have with our customers.
Speaker Change: Our truly close and we work in a N a.
Speaker Change: Partnership with them.
Speaker Change: Advocate these challenges we were looking back.
Speaker Change: Warning back to 2019, which was a recessionary environment also in thinking about all of that has changed since then and it's just really been in a constant state of disruption. So we've learned a lot and do that well and so I'll turn it over to Eddie for the specifics, but it is very healthy.
Speaker Change: To us and beneficial to our shareholders ultimately the relationships that we have with our customers and the solutions that we bring to bear.
Speaker Change: Especially in a in a state of disruption that Andy go ahead, yes. Thanks Judy.
Speaker Change: This is definitely a topic that is top of mind for our customers. We're having lots of conversations trying to be there for our customers to help them navigate through these challenging times.
Speaker Change: It's really a mixed bag, though what we're hearing from customers. There is a group that's kind of in a wait and see mode.
Speaker Change: Really trying to figure out what the next tweet is going to come out and say in and maybe are there really going to be changes across the different countries.
Speaker Change: And then there is another group that they are.
Speaker Change: Not waiting and they've taken advantage of some inbound are in bond warehousing options to get their freight moved that's given them some great solutions there.
Speaker Change: There are some customers who are just utilizing more domestic manufacturing and supplier options.
Speaker Change: There are some customers who have implemented surcharges or pass along the higher cost and then there's a big group of customers is just business as usual this is not having a material impact on them right now.
Speaker Change: Ultimately.
Speaker Change: We offer our customers a wide range of solutions and we're there to support them and we felt like we can help them navigate through any of these challenges.
Bruce Chan: Your next question comes from the line of Bruce Chan with Stifel. Please go ahead.
Bruce Chan: Good morning. This is my last one for Bruce.
Bruce Chan: Two.
Speaker Change: The overall retail exposure as a percentage of your enterprise and perhaps how much of that money directly beside the inbound traffic from China.
Speaker Change: Yes, so Matt just overall.
Speaker Change: I would say, it's a brown, 10%, probably a little bit less in our asset based business and a little bit more in our asset light business, but overall not a significant exposure to the retail sector.
Stephanie Ma: Your next question comes from the line of Stephanie MA with Jefferies. Please go ahead.
Stephanie Ma: Hi, good morning, Thank you.
Stephanie Ma: I have more questions.
Speaker Change: Maybe J D is a little bit of a higher big picture question and to your point, yes. The one.
Speaker Change: 100, plus year old company been through many cycles can you talk about some of the levers are operating.
Speaker Change: Opportunities you can pull and maybe it's more of a stagflation environment clearly you've dealt with inflation in the last several years, but the backdrop of a relatively more constructive create environment at least back in 2022 and the likes but maybe if we were to see inflationary pressures persist while the overall macro.
Speaker Change: It was a little bit weaker.
Speaker Change: Thank you Stephanie that's a great question and I will just start by reminding everyone that debt.
Speaker Change: The Union labor contract for IVF, we have.
Speaker Change: Certainty on that and we've got clarity.
Speaker Change: We're going to be in that sort of thing.
Speaker Change: 3% range.
Speaker Change: In terms of cost increases there throughout the contract period and so that's that's a big influence on the IVF costs are asset based cost.
Speaker Change: Somewhere in the neighborhood of <unk>.
Speaker Change: 55% to 60%.
Speaker Change: Of the cost that we have for that before that part of our business, but I'll.
I'll turn it over to SaaS to talk a little bit more what I feel like.
Speaker Change: That that we're doing is that we have our focus on operational efficiencies. We also see that improving service levels for the company, but we've done some great work just identifying areas that can be more efficient and they are across the organization.
Stephanie Ma: Seth you want to talk about those yes, Stephanie I would add that.
Stephanie Ma: When you think about the tremendous opportunity that we have we view markets like this as opportunity and we operate in markets with over $400 billion. So we have a lot of potential for growth regardless of what's going on in the macro so that's where we're focused on the revenue side of things and <unk> seen some of the early results of the changes we've made the second is really around efficiency what Judy.
Stephanie Ma: Mentioned, we've been working on a multiyear plan for efficiency, what's under our asset based operation as well as asset light and we've been pleased with the results and there's a whole portfolio of projects within both business units utilizing things like AI and machine learning different tools that we built that have made us more nimble than we've ever been in our past so.
Stephanie Ma: We feel like we can scale cost we can increase capacity, we can move with whatever the market brings to us.
Stephanie Ma: Really when you think about what we've done around real estate.
Stephanie Ma: That's been a great story, Matt talked about some of the improvements in service and efficiency. It's great that we were very strategic there and then overspend, our capital and make sure that we're positioning for the future and then when do you think about some of the different things going on on the asset light side, we made a big improvement on the profit as you saw in our results and a lot of that.
Stephanie Ma: Has to do with improving the mix of our account base the profitability, there and really that cost control by implementing various technology initiatives, which got us to that 24% improvement year over year and productivity. So we're we're happy with the progress we're making but we're not satisfied we know we got a lot of runway and we see it in our in our front front.
Stephanie Ma: Windshield, so looking forward to what the future holds with the investments that we're making and so Stephanie you know when you think about that all of that in an environment, where inflation persists is just I think a very proactive approach to try to addressing key cost areas for us that we know that we can we can bring down and.
Stephanie Ma: Our expectation our customers expectation and it helps us.
Stephanie Ma: Improve margins and enhance shareholder value as well.
Speaker Change: Your next question comes from the line of Tom <unk> with UBS. Please go ahead.
Tom <unk>: Yes, good morning.
Speaker Change: I don't think you talked about this one.
Speaker Change: You've had on the competitive environment, and so forth, but maybe within that SMB versus enterprise are you seeing changes in your mix.
Speaker Change: And if youre seeing more competition for SMB, we've heard some of the <unk> talk about that and then just kind of how you look at that and I think your commentary on demand as it sounds like it's stable I guess, if you look at like April versus March, but how do you think about May June like do you think it's reasonable to expect a seasonal pick up in May and June or would you say.
Speaker Change: Hey.
Speaker Change: We're not overly tariff levered, but you know that.
Speaker Change: That gives us some caution about expecting normal seasonality so.
Speaker Change: Yes, I appreciate your thoughts on those two thank you.
Speaker Change: Hey, Tom it's Matt So overall in the SMB side, certainly that has been a major focus for us on the ABS side, we've got a large diverse base of customers, including a significant number of SMB customers, which certainly has been a big story on the asset light, particularly in the truckload business as we've really doubled down on our SMB.
Speaker Change: Focus and made some significant shifts in the shift the shipment mix, there, which has really helped in terms of our overall profitability.
Speaker Change: As you think about some of the trends from here.
Speaker Change: We do expect to see a continued.
Speaker Change: Continued pick up sequentially as we look forward certainly in shipments in line with what we would expect to see.
Speaker Change: On seasonal basis, historically, and certainly that will drive our revenue per day pickup, which will be a big part of what will be driving the improvement in our or that three to 400 basis point improvement, which again is we expect to be in line with that seasonal.
Speaker Change: The historic seasonality.
Speaker Change: Before going to the next question again, if you would like to ask a question press Star one on your telephone Keypad. Your next question comes from the line of Brian <unk> with Jpmorgan. Please go ahead.
Speaker Change: Hey, good morning, Thanks for taking the questions.
Speaker Change: I had a couple of cleanup ones. So I'll just ask them all in a row pretty short.
Speaker Change: Low end of the Capex I don't know if I heard as to why youre moving or targeting that direction. If you could provide some more details on that.
Speaker Change: With the U pack versus history as I feel like we've talked about this being moved for a while maybe you can put some context around that.
Speaker Change: In terms of like where its been in prior low points for for housing market and then lastly with Fox.
Speaker Change: <unk>.
Speaker Change: Pilot and I think it was paused in 'twenty three.
Speaker Change: It sounds like Youre getting some benefits from this so when does that start to become part of <unk>.
Speaker Change: EPS not adjusted.
Speaker Change: Thank you.
Speaker Change: Yes, so Bryan Pugh different items, there and just want to make sure that I cover them all but so on the capital front. We certainly took a hard look at capital as we started the year just knowing what the environment was looking like for 25, certainly made sure that we were one targeting on our.
Speaker Change: Our maintenance projects that those investments kept us in line with our total cost of ownership targets. There are strategic capital make sure that we were focusing on the highest priority projects there.
Speaker Change: So I would say as we move through the year, just looking at the pace and timing of those investments this year.
Speaker Change: And particularly what we expect on the real estate side I think in general our revenue equipment is going to be in line with what our expectations are for the year, but I do think there could be a little bit of a shift on the real estate side. We also see some opportunity for real estate sales to transpire as we move through the year just based on some of the property.
Speaker Change: <unk> that we've made to our portfolio over the last year, or so which could offset the net capital.
Speaker Change: Talking about box certainly that has been a great story that continues to be something that is customer led and customer driven just listening to the feedback from our customers. It answers a lot of the challenges that they're facing just in terms of labor labor availability addressing damages certainly the box vision.
Speaker Change: Released that we had a few months ago really addresses some customers' needs around dimensions, and it's very timely with the upcoming NMFC changes and so yes, we certainly will be looking at that as we move forward and as we start to scale that business, we've got a strong and growing pipeline, but as we continue to make progress.
Speaker Change: On converting those to committed revenue dollars then we'll look at the non-GAAP presentation. There trying to remember I think there might have been one other component of your question.
Speaker Change: You pack, Okay, yes, sorry, so that has continued to be a trend.
Speaker Change: Certainly we continue to see year over year decreases in that business.
Speaker Change: We're certainly focusing on the most profitable aspects of that and that is still helping our overall tonnage and are overall our revenue per hundredweight, but we are still seeing on an absolute volume basis year over year decreases in that business.
Speaker Change: And that I think part of the question was around past housing market downturns and is this consistent with that and it absolutely is.
Speaker Change: Been around long enough to think back about the fourth quarter of <unk>, six which was one of those.
Speaker Change: And at the same type of trends, but what I'll say is that team continues to perform at a very high customer satisfaction level and always has and that business has been around it was one of the innovations that we brought to the market.
Speaker Change: More than 20 years ago, and it's an excellent product.
Speaker Change: And as available. This is one of the reasons why we bring that up in April is because it's moving season as we come into it and there are just some unique things about I think the interest rate environment and housing prices and some other things that have kind of stalled that market place, but I actually saw one of the <unk>.
Speaker Change: Shining stars employees on Saturday night, and she is there she said that team is ready to go.
So hopefully there'll be some interest rate news and we can get back to a little bit more normal activity there, but anyway. So just thought I'd give you that perspective.
Speaker Change: Okay.
Speaker Change: I will turn the call back over to Amy Mandel Hall for closing remarks.
Speaker Change: Just wanted to thank everyone for joining us today and we certainly appreciate your interest in our best have a great day.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
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