Q4 2025 Old Dominion Freight Line Inc Earnings Call

February 4, 2026

Operator: Good morning and welcome to the Old Dominion Freight Line Q4 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Investor Relations. Please go ahead.

Speaker #1: Good morning, and welcome to the Old Dominion Freight Line Fourth Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode.

Speaker #1: Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star then one on your telephone keypad .

Speaker #1: To withdraw your question , please press star . Then two . Please note this is being event recorded . I would now like to turn the conference over to Jack Adkins , director , Investor Relations .

Jack Atkins: Thank you, Gary. Good morning, everyone, and welcome to the Q4 2025 conference call for OLD DOMINION FREIGHT LINE. Today's call is being recorded and will be available for replay beginning today and through 11 February 2026, by dialing 1-855-669-9658, access code 9011045. The replay of the webcast may also be accessed for 30 days at the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding OLD DOMINION's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements.

Q4 2025 Old Dominion Freight Line Inc Earnings Call

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Old Dominion Freight Line

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Q4 2025 Old Dominion Freight Line Inc Earnings Call

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Wednesday, February 4th, 2026 at 3:00 PM

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Jack Atkins: You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. As a final note before we begin, we welcome your questions today, but ask that you limit yourself to just one question at a time before returning to the queue. At this time, for opening remarks, I'd like to turn the conference over to the company's President and Chief Executive Officer, Marty Freeman. Marty, please go ahead.

Marty Freeman: Good morning and welcome to our Q4 conference call. With me on the call today is Adam Satterfield, our CFO, and after some brief remarks, we will be glad to take your questions. OLD DOMINION produced solid financial results during the Q4 that reflect our ongoing commitment to revenue quality and cost discipline. We once again delivered best-in-class service to our customers, and our yields continue to improve. Although our operating ratio increased to a 76.7 for the quarter, we believe our profitability metrics will continue to lead our industry, and they reflect our team's ability to operate efficiently despite the challenging environment. I want to thank our OD family of employees for their dedication to our customers and their unwavering commitment to executing our long-term strategic plan.

Marty Freeman: We maintain a disciplined approach to yield management that is designed to offset our cost inflation over the long term while also allowing us to continue to make strategic investments in our capacity, our technology, and most importantly, our people. While these investments have increased our overhead costs in the short term, we believe they will support our ability to grow with customers in the years ahead. Our consistent investment in capital expenditures throughout this economic cycle has differentiated us from our competitors over time. This is also a fundamental component of our value proposition, which has been critical to our ability to win more market share over the last decade than any other LTL carrier. During the Q4, our team continued to operate efficiently while also managing our discretionary spending.

Marty Freeman: These efforts are reflected by how well we have controlled our variable operating costs over the last few years despite the decline in our overall network density and other inflationary headwinds. To put this in context, in 2022, when we generated a company record operating ratio of 70.6, our direct operating expenses were approximately 53% of revenue. In 2025, our direct operating costs as a percent of revenue were also 53% despite the loss of network density associated with the decrease in volumes. Our efforts to enhance productivity have been made possible by key technology investments as well as business process improvements, which we believe will allow us to improve our operating ratio and business levels ultimately improve again. As we begin 2026, we are cautiously optimistic that we will see some recovery in demand within the industry.

Adam Satterfield: Thank you, Marty, and good morning. OLD DOMINION's revenue totaled $1.31 billion for the Q4 of 2025, which was a 5.7% decrease from the prior year. Our revenue results reflect a 10.7% decrease in LTL tons per day that was partially offset by a 5.6% increase in our LTL revenue per hundredweight. Excluding fuel surcharges, our LTL revenue per hundredweight increased 4.9% compared to the Q4 of 2024. On a sequential basis, our revenue per day for the Q4 decreased 4.1% when compared to the Q4 of 2025, with LTL tons per day decreasing 4.8% and LTL shipments per day decreasing 6.5%. For comparison, the 10-year average sequential change for these metrics includes a decrease of 0.3% in revenue per day, a decrease of 1.3% in LTL tons per day, and a decrease of 3.1% in LTL shipments per day.

Adam Satterfield: The monthly sequential changes in LTL tons per day during the Q4 were as follows: October decreased 5.3% as compared to September, November increased 2.6% as compared to October, and December decreased 4.0% as compared to November. The 10-year average change for these respective months is a decrease of 3.0% in October, an increase of 2.7% in November, and a decrease of 6.8% in December. For January, our revenue per day decreased 6.8% when compared to January 2025 due to a 9.6% decrease in our LTL tons per day that was partially offset by an increase in our LTL revenue per hundredweight. LTL revenue per hundredweight excluding fuel surcharges increased 3.9% in January. Our operating ratio increased 80 basis points to 76.7% for the Q4 of 2025.

Adam Satterfield: While we continued to operate efficiently and diligently managed our discretionary spending during the quarter, the decrease in our revenue had a deleveraging effect on many of our operating expenses. Our overhead costs, which tend to be more fixed in nature, increased 140 basis points as a percent of revenue due to this effect. The increase in our overhead costs also includes a 70 basis point increase in depreciation as a percent of revenue, which reflects the continued execution of our long-term capital investment plan that Marty just discussed. Our direct operating cost as a percent of revenue improved by 60 basis points as compared to the Q4 of 2024. This was primarily due to the net impact of adjustments we record in the Q4 each year that are related to third-party actuarial reviews of our injury and accident claims.

Adam Satterfield: The results of this annual review impact both the salary, wages, and benefits, and the insurance and claims line items on our income statement. We were otherwise able to effectively manage our direct variable costs to be consistent with the prior year. OLD DOMINION's cash flow from operations totaled $310.2 million for the Q4 and $1.4 billion for the year, respectively, while capital expenditures were $45.7 million and $415 million for the same periods. We utilized $124.9 million and $730.3 million of cash for our share repurchase program during the Q4 and the year, respectively, while our cash dividends totaled $58.4 million and $235.6 million for the same periods. We were pleased that our board of directors approved a quarterly cash dividend of 0.29 cents per share for the Q4 of 2026, which represents a 3.6% increase compared to the quarterly cash dividend paid in the Q4 of 2025.

Adam Satterfield: I think we've talked for multiple quarters now when we've been trying to make the call on when is the demand environment going to finally turn. We've talked about looking at that weight per shipment, for example, as really the indicator within our business. So that really increased. We were down about 1,450lbs in kind of September, October timeframe. We saw that increase to 1,489lbs in November, which is above what our long-term seasonal increase would be for that month. And then we saw it increase further to 1,520lbs in December. Again, that was about a 2% increase. The 10-year average is about a 1% increase from November to December in weight. Saw it pretty much perform in January. We're right at 1,492lbs, so a little bit of a decrease, but that was right in line with seasonality.

Adam Satterfield: Yeah, obviously, the revenue per day is going to lead right into it. And given the data that we just discussed for January, we're starting out a little bit behind seasonality again on a revenue per day standpoint. I feel like we'll close that gap. We've seen good performances early, but probably a little catch-up in business this week where we had the weather disruptions last week. So I think that'll normalize. But hopefully, we can close the gap with seasonality as we progress through the remaining months of the quarter. Just from a big picture top-line standpoint, I feel like our revenue for the full quarter will probably come in somewhere between $1.25 and 1.3 billion. The low end of that range would be if we underperform seasonality at a rate similar to what we just did in the Q4, and then the top end would be normal seasonality.

Adam Satterfield: Yeah, I think the weight is probably coming from all the above. Looking at our contract customers, weight's up a little bit. Our smaller mom-and-pop customers, which actually we saw a little bit more growth out of or better performance, I shouldn't say growth, in the Q4, weight per shipment was up as well. And so I think that exactly what you said, as the truckload market is changing we've talked a lot about the spillover effect and how that's impacted volumes over the last couple of years. I think we're probably in the early innings of some of that starting to normalize. I don't know that we're completely there yet, but just given how there's some supply rationalization there, it certainly feels like that is beginning to happen. And the weight certainly will put a little bit of pressure on our yield metrics.

Adam Satterfield: Yeah, I think that it's a natural sort of change that happens. I think that when you look at that truckload environment and a lot of those carriers are barely breaking even or worse, we've seen some capacity rationalization, if you will, in that environment. I think that's changed the pricing environment there. So hopefully, we'll continue to see those trends change at a time where it feels like overall industrial demand is ready to start showing some signs of improvement again. Again, we say we're cautiously optimistic about all this because we had improvement in the ISM last year at about this same time. Then we had the event in April that threw cold water on everything. So we're in a great spot to continue to handle any business that comes our way. We've got more capacity than we've ever had in our network.

Adam Satterfield: Yeah, we're definitely prepared for the up cycle. The average age of our fleet actually improved this past year. It's now down to an average of 3.9 years for our tractor fleet. That's about where we like it, somewhere around four years. We've been below that before, and we've let it age up a little bit. But really pleased with our operations team as they've continued to try to right-size the fleet to make sure we've got all the equipment in the places we need, but also managing through our cost inflation from a repairs and maintenance standpoint. When we went through, go back to 2022, 2023, we had cost per mile inflation that was more in the 10% to 20% type of range for each of those years. We've been sort of flattish, just some mild increases, if you will, over the last couple of years.

Adam Satterfield: And I think that's a reflection of the management team's efforts in that area and continuing to right-size. But from an employee count standpoint, I think we continue to manage through. And at the local level, our service center managers are making sure they've got the right amount of people and have got the ability to flex hours up to meet the increased demand from our customers. So we're in great shape there. We'd anticipated that we would see a little attrition through the Q4. That's about what we saw happen. And so the overall headcount drifted down a little bit throughout the Q4 as we somewhat expected. So I think that'll likely be stabilized here. And when you look over the long term, the change in headcount and the change in shipments really kind of match with one another.

Adam Satterfield: Yeah, it's just a function, really, of what the volume environment has been for the last couple, three years. We've continued to run our CapEx plan. That, too, is something that I think has differentiated us over time from our industry. In fact, we've spent about $2 billion in capital expenditures over the last three years. The volume environment, obviously, has not been robust. But I think we're in a really good spot when you sort of go down the elements of spend from a service center standpoint. We've got some projects that are in flight, and that's a lot of the spend that we've got this year. We've got a little over 35% capacity in our service center network. We're handling a little over 40,000 shipments per day right now. Our network is built to handle more like 55,000 or even more.

Adam Satterfield: We've done more in certain months back in 2021 and 2022. So we've got a lot of flex there to be able to grow. And the same thing with the fleet. Just like I mentioned earlier, we've continued to right-size the fleet, if you will, and take some of the older units out. But we've got some that continue to need to be replaced. And that's the majority of what's in the spend there in that category for this year. So it is lower as a percent of revenue than our typical range being 10% to 15%. But that's really just a function of the consistent investment that we've made over the past three years and kind of where we stand now and just wanting the business to grow into the network that we've got built. And when that starts happening, you think about our fixed cost.

Adam Satterfield: Yeah, I think we normally just take it one quarter at a time. Obviously, there's a lot of ifs and buts that have got to play out and could play out in that scenario. But what they say, ifs and buts and beer and nuts, you have a hell of a party. So I'll let all you guys sort of go through all those gymnastics. But just looking at more in the short run because I don't want to undersell what the long term could be. We've produced some serious improvement in our operating ratio once we get into those stronger demand environments. When we actually see the script flipped still remains to be seen. But the second quarter, we've kind of laid the framework out for the first quarter. But the second quarter, typically, you see revenue grow sequentially about 7%.

Adam Satterfield: The average operating ratio improvement is sequentially 300 to 350 basis points. That would, if we see all of that, if we see the spring surge that typically would happen and lead to that 7% type of sequential increase, then that would put the operating ratio pretty close to being flat on a year-over-year basis in the second quarter. We would just have to sort of take it from there. But I still think we don't want anyone to really get out over their skis necessarily at this point from an expectation standpoint. It remains to be seen if this really is going to lead into that spring surge that we would typically see. We certainly feel like the stars are coming into alignment, but we've felt that way before and in particular about February and March of last year.

Adam Satterfield: It says a lot to the continued investment technology, the tools that we give the team to help kind of manage those costs, and also to the yield discipline. If you weren't disciplined with yields throughout, we wouldn't have been able to keep those costs consistent as well. So a lot goes into it. And it's a total team effort from sales, operations, pricing costs, and you name it. It all kind of feeds into how we've been able to continue to produce strong, profitable growth over the long term. But the last 10 years, despite this 3-year freight recession, we've still got a 10-year average growth rate of about 15% in our net income. So it just says a lot to what we've done. But we think about the future. We got a lot of room for growth ahead and operating ratio improvement.

Adam Satterfield: So I'd love to see our weight per shipment go back up to 1,600lbs, which is where we've been in stronger demand environments. And yeah, that might put pressure on that revenue per hundredweight. That's going to do wonderful things for the overall top-line revenue as well as what we would be able to do from an operating ratio standpoint. So we'll continue to kind of manage through that. But certainly, would hope we see that weight per shipment. And if we're talking about some revenue per hundredweight that might be a little bit lower than what was reported the last couple of years, that's probably a good thing in the sense of what's really going on with the demand environment. It's certainly no change with what our yield management philosophy is or how disciplined we continue to be as we manage cost and manage yields.

Richa Harnain: Hey, thanks, guys. So Adam, you mentioned that last week you saw some disruption. Maybe just clarify what went into that. Was it just weather, and did that weigh on your costs? Should we expect higher costs this quarter or Q2 in light of that weather? Is that embedded in your 150 basis points change in OR target? Also, another clarification, curious if the government shutdown had any impact on Q4 or potential impact this quarter from that on you or the industry this quarter. So that's a clarification. And then I guess just my real question beyond those clarifications is incremental margins. You said you have more excess capacity than you've ever had in your network. I know you said you're quite excited about what's to come. Should we think that your incremental returns on growth can be higher than we've ever seen?

Adam Satterfield: Yeah, I'll probably spend more time addressing the last real question. But yeah, the snowstorm last week, obviously, was disruptive, and that was baked into our revenue and margin guidance, and really nothing material to speak of from a government shutdown standpoint. But I think, just thinking about incremental margins, to me, one, we got to get back to revenue growth to produce them. But I like to think about that breakdown in our income statement structure. And we talk a lot about our direct variable costs. Those were 53% of revenue in 2025. So if you bring on a dollar of business, you should be able to generate a 47% incremental margin if it just takes variable costs from that standpoint and just get complete leverage on all your overhead. And typically, that is what's happened in the early innings of our recovery.

Adam Satterfield: We just see more of that variable cost and getting that leverage there before you've got to get back into investing in new service center expansion and new equipment and those other assets. But as you add new service centers, that creates incremental costs. You've got a new service center manager and a team of employees at the facility and the office and salespeople and things like that. So it all kind of ties in together. But when I think about just where we stand now, 75 Operating Ratio, we've been at a 70.6. We've talked before about getting to a sub-70 Operating Ratio. I think that sort of mid-40s makes sense from an incremental margin standpoint, makes sense in the early innings. But then let's just stay focused on getting back to achieving that sub-70 Operating Ratio. And we certainly can get there.

Adam Satterfield: Yeah, I think that obviously, we solicit feedback constantly from our customer base and our sales team. In the fourth quarter, we build a bottoms-up forecast, and we marry that with a top-down forecast where we're looking at other macroeconomic indicators. Things are starting to feel a little bit better. Even in the fourth quarter last year, I feel like we've had some really good customer conversations in the sense of what they were anticipating their volumes might look like, the amount of business that they would tender to us, and so forth that gave us a little sense of optimism. I just continue to say that that's one month of a print with the ISM, and that's why we want everyone to be cautious with it. We're still looking at volumes that have been down on a year-over-year basis, but we feel like things are getting better.

Adam Satterfield: We're still talking about revenue that would be down on a year-over-year basis in Q1. But one of the things about our business model is I feel like when you think about our long-term strategy of giving superior service, allowing that service to support a fair price, pricing targeting 100 to 150 basis points of yield above price or cost, rather, that's allowed us to improve our cash from operations. There's a flywheel effect to our business model, and we've got to get that flywheel effect going again. So as we can get into the early innings, those first rotations are a little bit slower. We're just making sure everybody's thinking through all of those factors. And it's not just going to turn around on a dime starting tomorrow because that one economic data point came out.

Adam Satterfield: We use a tractor for about 10 years, so we've got some that are at that point of being replaced, but continuing to right-size the equipment pool as well and making sure that we've got equipment in all the right places where we're seeing growth to keep the linehaul network in balance. And we continue to make adjustments to linehaul throughout the year. The team has done a phenomenal job of making sure that we're meeting service standards. We've continued to tighten some of our transit times in certain lanes as well despite the limited density that's been in the network. So looking forward to getting more freight back in the system. That'll make some of that a lot easier, reduce our empty miles, allow us to start running more directs, and bypassing some brakes and so forth.

Adam Satterfield: So that's why we're confident that when we see the demand environment growing again, that I think we'll be able to significantly outgrow the industry. And when we do so, we'll see stronger returns coming in. And despite the challenging environment that we've had for the last few years, we're still producing returns on invested capital of 25% to 30%. And when you look at GAAP numbers, true GAAP earnings, we've got some competitors that have got net income margins in the low single digits. And so I think that'll be the opportunity. What we see in past cycles is that's when other carriers will increase rates more and take advantage of the supply and demand imbalance. But for us, we want to continue on with just more of a consistent strategy, and that's when we see that big density opportunity, if you will.

Adam Satterfield: We're driving operating efficiencies that really minimize the true inflationary impact that we're seeing from things like insurance costs, group health and dental medical costs, the cost of equipment, and so forth and so on. So our team has done a great job leveraging technologies, business process improvements to be able to keep our cost inflation low. And then that, in turn, allows us that when we think about trying to target 4.5% to 5% type of increases that we've generated over the long term in our revenue per shipment, that's that positive 100 to 150 basis points delta that we want to be able to generate those too. But we can't take our eye off the ball when it comes to managing costs. You've got to think about cost day in and day out in good times and bad.

Adam Satterfield: Yeah, I think many of those service centers ended up with the private carriers, as it's been reported. But again, looking at overall capacity for the industry, the number of service centers is the best thing we have. That looks to be down versus about 6%. And there may be some service centers that were swapped, adding a few more doors, but I think that's a good proxy for capacity that's been removed from the market. So again, if you had a capacity-constrained industry back in 2021 and 2022, the number of shipments per day per service center are the same in 2024 with where we were back in that capacity-constrained environment. I think we're going to see capacity constraints when we start coming back into a stronger demand environment.

Adam Satterfield: Well, 55% to 60% of our revenue is industrial-related, and I think that's similar for the industry. That's why I assume it's so highly correlated with industry volumes. So kind of hearing it across the board, I think that seeing some improvement there. We've had feedback that inventories have generally been lower, so we're thinking that we're going to see some inventory replenishment. But I think it's sort of different factors for different customers. And our business is so diversified, we move everything, including the kitchen sink. So if housing starts improving, you'll see things like faucets and so forth that will have increased demand there. And obviously, all of the products that go into someone moving into a new home. But I think that'll be important to see some continued improvement there.

Adam Satterfield: Yeah, I would put it in the broader context of technology investments. And obviously, AI is kind of the buzzword of the moment, and we've got some investment there that's going into some of the tools. But I think from a bigger picture standpoint, you think about Old Dominion; I think the investment that we've made in technology, it goes back decades. And we've got OD Technology is one of our branded products. And so we've been at the forefront of tech investment, I think, for years and years, and that'll be no different going forward. But there's got to be investment that's going to end up with a return. We don't want to just say we're investing in machine learning and AI just to be able to say it. Where's the proof in the pudding?

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