ArcBest Corporation

Greetings and welcome to the ARCBEST third quarter 2020 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session, and at the time, if you have a question, you can press the one followed by the four on your telephone. If at any time to the conference you need to reach an operator, you can press star zero. And as a reminder, this conference is being recorded Tuesday, November 3rd, 2020. I'd now like to turn it over to Mr. David Humphrey, Vice President of Investor Relations. Please go ahead.

Welcome to the ARCBEST third quarter 2020 earnings conference call. Our presentation this morning will be done by Judy McReynolds, Chairman, President, and Chief Executive Officer of ARCBEST, and David Cobb, Chief Financial Officer of ARCBEST. We thank you for joining us today. In order to help you better understand ARCBEST and its results, some forward-looking statements could be made during this call. As we all know, forward-looking statements by their very nature, are subject to uncertainties and risk. For more complete discussion of factors that could affect the company's future results, please refer to the forward-looking statement section of the company's earnings press release and the company's most recent SEC public filings. In order to provide meaningful comparisons, certain information discussed in this conference call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. We will now begin with Judy.

Good morning, everyone, and thank you for joining us for our third quarter earnings report. At ARC Best, you will hear us talk about our vision, We'll Find a Way, and that appropriately describes what this year has been like for us and what our employees are seeking to accomplish. I'm incredibly proud of our team for fighting through a pandemic, weathering the associated recession and being ready to respond to increased demand as our customers' businesses quickly come back online. 2020 is an extremely unique year and the challenges everyone faced going through the first half of the year sit in contrast to what has played out over the last few months. 2020 is also filled with good examples of customers utilizing our integrated solutions to their advantage. Our transformation into a provider of choice and a leader in the logistics industry is purposeful and also responsive to the complexities faced by our customers. An indication of our effectiveness in serving customer needs is our third quarter in October sequential revenue trends, which are some of the best in our history. We closed out the third quarter with 32% of our revenues from asset light solutions, And on a preliminary basis in October, that percentage further improved to 34%. Our October progress is even more encouraging when you consider that our asset-based business is growing at 9%. We are proud to serve our customers always, but especially during these volatile times. In addition to improving revenue trends, we are encouraged that our third quarter consolidated non-GAAP operating income increased 20% year over year, and 82% sequentially and represents one of the best third quarter performances in our history. The solid execution by our employees is enabled by a number of technology and analytics advancements that increased operational efficiencies and improved responsiveness to customers and carriers in the channels they desire. David and I are looking forward to going through the third quarter results in more detail with you today. During the third quarter, our asset-based segment benefited from sequentially improving economic trends and the resulting positive impact on our customers' businesses. Many of them are returning to more normal shipping patterns, and during the recent quarter, we were able to effectively serve their needs. Although average daily shipments in the ABF network increased sequentially, they decreased versus last year's third quarter. On a year-over-year basis, our higher weight per shipment was driven by several factors. including the improving economy, changes in customer mix, the addition of larger LTL shipments designed to fill available empty capacity in our system, and increased demand for our household goods moving service. At this time, we are not seeing an impact from traditional truckload shipments spilling over into our LTL network as these truckload shipments decline on a year-over-year basis. As we experience during the most severe period of the pandemic, Our e-commerce business was strong in the third quarter compared to the previous year as consumers continue to purchase a variety of products that they receive and use in their homes. Strengthening trends in housing were another positive factor that generated both year-over-year and sequential quarterly increases for UPAC, our Consumer Residential Moving Service. The pricing environment remained solid and rational during the recent quarter. Though our total third quarter asset-based revenue per hundredweight was below the prior year, the decrease was related to shipment and account mix changes and lower fuel surcharge. The increase in shipment size I mentioned earlier was also a factor in reducing our total yield metric, but that was offset by the positive effects of an increase in average revenue per shipment. Our traditional pricing discipline combined with Our evolving use of lane-specific information that helps in adding needed shipments in the right place at the right time forms a solid foundation for our asset-based business that we lean on, especially during uncertain times like we've experienced this year. Our operations team has executed extremely well during a period when we have managed through an entire freight cycle in a matter of only six months. The resulting ups and downs of trying to match labor resources to business levels during such extreme swings in shipment counts has certainly presented its challenges. We had to quickly reduce labor resources in the second quarter and then rapidly increase them as business returned in the third quarter. I am very proud of how well we've maintained year-over-year improvements in most all of the important operational metrics and measures that we closely follow. As customer business levels began to return and the need for transportation services increased during a period of tight carrier capacity in the marketplace, demand for our asset light services contributed to revenue growth and higher operating income. Despite a slight decrease in total average daily shipments during the quarter, greater revenue per shipment, highlighted by increases at expedite, truckload, and manage, drove the top line revenue growth. Because of market conditions, Purchase transportation costs were a higher percentage of revenue, thus pressuring margins. However, efficient cost controls enabled by technology advancement in all other areas of the business resulted in an increase in operating profit. Ground Expedite benefited from higher demand associated with our customers' need for reliable, timely transportation services and from the environment created by challenges they experienced in securing the equipment capacity they must have. Our truckload brokerage was also a positive part of the third quarter revenue growth, but the challenge of matching customer charges with rapidly increasing mileage rates for carrier capacity pressured truckload margins. As many of our customers are emerging from the worst of the pandemic's impact on their businesses, we continue to have opportunities to help them navigate the changing trends in their supply chain and in their need to service their customers in unique ways. As a result, growth in managed transportation services was another positive contributor to asset-light revenue and profit improvements in the recent quarter. The year-over-year revenue growth in our managed business so far this year is significant and is on top of the strong growth we experienced in this area last year. At FleetNet, a reduction in both roadside repair and preventative maintenance events primarily resulting from lower demand contributed to reduce third quarter revenue compared to last year. Reduced event count also contributed to lower operating income during the quarter. Next, I would like to ask David Cobb to go over the earnings results and operating statistics.