Old Dominion Freight Line, Inc.

Good day and welcome to the Old Dominion Freight Line First Quarter 2026 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 a touch-tone phone. 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. Please go ahead.

Thank you, Dorwin. Good morning, everyone, and welcome to the first quarter 2026 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through April 29, 2026 by dialing 1-855-669-9658. Access code 7699494. 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. We will hereby caution 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. Finally, before we begin, we note that we welcome your questions today, but ask that you limit yourselves to just one question at a time before returning to the queue. Thank you for your cooperation. At this time, for opening remarks, I'd like to turn the conference call over to our President and Chief Executive Officer, Marty Freeman. Marty, please go ahead.

Good morning and welcome to our first quarter conference call. With me on the call today is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Our first quarter results reflect a continuation of the encouraging trends that started to develop late last year. While our first quarter revenue declined on a year-over-year basis, demand for our service improved as the quarter progressed. This contributed to the acceleration in our LTL volumes during the quarter with strong sequential tonnage growth in February and March. Importantly, during the quarter, our team continued to deliver best-in-class service to our customers and maintained our disciplined approach to yield management. Providing our customers with superior service at a fair price is the cornerstone of our strategic plan. The consistency of our service performance day in and day out creates significant value for our customers and is something that we take significant pride in. As a result, We were pleased to once again deliver 99% on-time service and a claims ratio below 0.1% in the first quarter. The strength of our unmatched value proposition has differentiated us from our competition and allowed us to win more market share than any other LTL carrier over the last 10 years. Our value proposition will continue to support our ability to grow our business in the years ahead, and we continue to believe that we will be the biggest market share winner over the next 10 years as a result. Our best-in-class service also supports our yield management initiatives. Our long-term, disciplined approach to pricing is designed to offset our cost inflation and support our ability to make strategic investments back into our business. These investments will allow us to stay ahead of our anticipated growth curve to help us ensure that we'll always have the capacity we need to grow. Our ability to say yes when a customer needs us the most is the hallmark of our industry-leading customer service. Business levels in the LTL industry can change very quickly, and being able to respond to growth opportunities in an improving demand environment is one of the primary areas that differentiate us from our competition. We believe it is important to consistently invest throughout the economic cycle, despite the short-term caused headwinds associated with this strategy. This is why, despite a challenging operating environment, we invested nearly $2 billion capital expenditures over the past three years, and why we plan to invest an additional $265 million in 2026. We've also continued to invest in the most important component of our long-term success, which is our OD family of employees. Our people and our unique culture are truly what sets us apart Old Dominion as a result we have worked to ensure that we are providing a competitive wage and benefit package as well as various internal developmental programs like our in-house driver training schools and our management training program these programs not only provide important opportunities for career advancements for our team but they help ensure that our company is ready to respond when our customers need us the most while we were always focused on long-term It is critical that we remain diligent in controlling our cost and continue to operate as efficiently as possible without compromising our superior service standards. That remained the case in the first quarter as we continued to find ways to maximize our operating efficiencies and control our discretionary spending. We continue to believe that our business model contains significant operating leverage, which has been enhanced by our ongoing investments in our technologies, and continued focus on business process improvements. We produced solid results in the first quarter by continuing to execute our strategic plan, and I want to thank the entire OD family of employees for their unwavering dedication to our customers and to our company. Due to our consistent execution and investment, we are uniquely positioned to effectively handle incremental volume opportunities as the demand environment improves. As a result, we remain confident in our ability to win market share, generate profitable revenue growth, and increase shareholder value over the long term. Thank you very much for joining us this morning, and now Adam will discuss our first quarter in greater detail.

Thank you, Marty, and good morning. I'm a little under the weather today, so I'd like to ask you all to bear with me as we get through this call. Old Dominion's revenue totals $1.33 billion for the first quarter of 2026, which represents a 2.9% decrease from the prior year. Our revenue results include a 7.7% decrease in LTL tons per day that was partially offset by a 5.7% increase in our LTL revenue per hundredweight. Excluding fuel surcharges, our LTL revenue per hundredweight increased 4.4% compared to the first quarter of 2025, which reflects our long-term disciplined approach to yield management. On a sequential basis, our revenue per day for the first quarter increased 0.5 percent when compared to the fourth quarter of 2025, with LTL tons per day decreasing 0.4 percent and LTL shipments per day decreasing 0.7 percent. For comparison, the 10-year average sequential change for these metrics includes a decrease of 2.8 percent in revenue per day a decrease of 2.5 percent in LTL tons per day, and a decrease of 1.6 percent in LTL shipments per day. The monthly sequential changes in LTL tons per day during the first quarter were as follows. January decreased 3.4 percent as compared to December, February increased 4.9 percent as compared to January, and March increased 4.6 percent as compared to February. The comparative 10-year average change for these respective months is a decrease of 3.1% in January, an increase of 1.0% in February, and an increase of 4.5% in March. While there are still a couple of workdays remaining in April, our month-to-date revenue per day has increased by approximately 7.0% when compared to April 2025. This includes a decrease in our LTL tons per day of approximately 6.5% and an increase in our revenue per hundredweight excluding fuel surcharges of 4 to 4.5%. As usual, we will provide the actual revenue-related details for April in our first quarter Form 10-Q. Our operating ratio increased 80 basis points to 76.2% for the first quarter of 2026, as the increase in overhead cost as a percent of revenue more than offset the improvement in our direct cost. Our overhead cost increased as a percent of revenue primarily due to the deleveraging effect associated with the decrease in our revenue as well as an increase in our general supplies and expenses. This resulted in the 60 basis point increase in our general supplies and expenses and 40 basis point increase in our depreciation cost as a percent of revenue. All of our other combined costs improved as a percent of revenue for the quarter on a net basis. The improvement in our direct operating costs as a percent of revenue was primarily due to our continued focus on revenue quality and operating efficiencies. Despite the lack of density in our network associated with the decrease in our volumes, our team did a nice job of matching our labor costs with current revenue trends, and this will be a key focus for us over the balance of the year. That said, we currently believe we have an appropriately sized workforce to handle a sequential increase in volumes during the second quarter. Old Dominion's cash flows from operations totaled $373.6 million for the first quarter, and capital expenditures were $62.6 million. We utilized $88.1 million for our share repurchase program during the first quarter, and our cash dividends totaled $60.5 million. Our effective tax rate for the first quarter of 2026 was 25.0% as compared to 24.8% in the first quarter of 2025. We currently expect our effective tax rate to be 25.0% for the second quarter of 2026. This concludes our prepared remarks this morning. Operator will be happy to open the floor for questions at this time.

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

Yeah, hi, morning, everyone. Thanks for the update. I guess sort of in the context of, you know, some of those trends you've been seeing, maybe continue on the trend thought and share some color or thoughts on direction of OR as we move from the Q1 to Q2.

Thank you. Yeah, the 10-year average change for the operating ratio is three to 300 to 350 basis point improvement from the first to the second quarter. And we're comfortable with that range in the second quarter this year, assuming that we do see some sequential improvement or volumes from here. And that's what we'd anticipate. But obviously, there's a lot going on in the world right now. But based on what we're currently seeing, we're expecting that increase in volumes. And I think we're comfortable with hitting that normal sequential range as a result. And if we do so, that'd be the fourth straight quarter. that we've been able to be in or at least beat what our normal sequential change would be.

Thanks. And I don't know if I could ask a follow-up, but just sort of related to that, have you seen then a shift in sort of that excess terminal capacity? Has it come in a little bit as we've seen volumes look a little better?

In terms of our capacity?

Yes. I think you've been at like 30%, 35% terminal capacity excess. I'm just sort of curious if that's changed at all.

Yeah, we're still a little north of 35%. So our volumes are still down on a year-over-year basis. And obviously, this is the slower time of the year in the first quarter. But, you know, that's something that we continue to see as an opportunity and will drive part of that operating ratio improvement is we can continue to see sequential volume improvement and then leveraging those fixed costs, those investments that we've made and that depreciation headwind that we've been facing. So leveraging those and some of our other fixed overhead costs, but that benefit of density drive and improvement, both our direct operating costs as well as some of those overhead costs. Thank you.

The next question is from Jason Saddle with TD Cohen, please go ahead.

Thanks, operator. Morning, Marty, Adam, and Jack, and Adam, I hope you feel better. I'm going to stick on the OR topic a little bit here. You know, as we think about your commentary for the normalized sequential moves from 1Q to 2Q, Can you help us frame up the impacts in 1Q for both fuel as well as weather so we could figure out sort of where in the range we might want to be?

Yeah, I'm glad you asked that. Figured fuel would be a topic of conversation. It's come up a few times. Yeah, exactly. You know, fuel, as part of our yield management strategy, we've always talked about we want fuel, which is just a variable component of pricing, to really be indifferent. If fuel goes up or if it goes down, you know, essentially we want the bottom line to be the same, and that's how we look at things on an individual account profitability type basis. And I think when you look at what happened from the fourth quarter to the first quarter of this year, You know, we outgrew our normal sequential trend with tonnage by about 200 basis points. And that's really the story of the quarter in the sense of the strong operating ratio performance that we had there. But when you just look, our shipments per day from the fourth quarter to the first quarter were essentially the same. And when you look at, you know, fuel was up 10%, bill count's consistent, profitability is relatively consistent, a little bit better. overall, but obviously there's other things going on. And I compare that back to the first quarter of 2023 compared to the second quarter of 2023, a lot of similar circumstances. Bill count was the same between those two periods. Fuel was down 10% between those two periods. So you had revenue impact on the downside of fuel, but profitability was consistent between those two periods. So Obviously, there's always a lot of fluctuations, but I think those two sequential periods when you've got similar bill counts, similar mix of freight, kind of shows that fuel can go up or down 10%, and overall profitability stay the same. Now, obviously, we're looking at a much larger increase in fuel, and I would probably just point everybody back to the second quarter of 2022. I think this first quarter to second quarter, a 26 is probably going to have a lot of similarities to that first quarter to second quarter 22 period when we saw the fuel shock and, and all the other inflationary impact that that drives.

That's very helpful. And that was my one. Appreciate it guys.

The next question is from Chris Weatherby with Wells Fargo. Please go ahead.

Hey, thanks guys. Good morning. Um, you feel about, I guess, demand and then ultimately how you're faring from a market share perspective as you think about coming out of the really strong performance in February and then what you've seen so far in March and April. Just kind of curious if, you know, some improvement has continued or, you know, you feel like there's been, you know, more steady demand. Just kind of get a sense of how you're thinking about things.

Yeah, it definitely feels like it's continued to improve. And, you know, go back to last year. We've had you know, essentially through March is five months of normal sequential trends for us. And, you know, obviously, like I mentioned earlier, it's through a slower part of the year. But we felt like we started seeing a lot of adhering optimism from customers and from our sales team late last year. And we started seeing that return to seasonality. We've seen a pickup in our wait for shipment. And in fact, in April, our wait for shipment is up on a year-over-year basis a little over 1%. So, you know, that's usually a leading indicator of an improving demand environment. So all those things, the positive ISM trends that we've seen, and we'd expect another positive ISM for April, you know, I think those have all been consistent. The retail side of the sector has probably been driving more of the volume performance at this point, and we're looking for the industrial to start contributing as well. That usually starts performing on a live basis after you see that positive ISM performance. And, you know, and I think that, you know, what we seem to hear right now with, you know, obviously there's some geopolitical risk to everything right now, but it seems like most people are kind of looking through what's going on. And I think that's supported a positive consumer and these positive trends and thoughts that we're still hearing from customers that, you know, whatever can be settled within the next, you know, three, four months or whatnot, you know, hopefully we can get back to business restocking inventories, doing all the things that was starting to contribute freight to us and still is, you know, we'd like to see that momentum continue through the balance of this year.

And is there anything that informs about your sort of revenue assumptions for the second quarter?

I'm sorry, say that again, Chris.

And what you're seeing in the market, does that sort of give you a view on what you think revenue might look like for the second quarter? Sure.

You know, I think so. I mean, we're a little bit below normal seasonality right now in April, but I still feel good at just looking at the trend of seeing, you know, how the revenue is performing in our volumes as well. And, you know, we've had good acceleration through the month as well. So that's been good to see. But, you know, it's not a surprise to see things pull back a little bit and some customers showing a little bit of caution there. But I still feel like there's a lot of cautious optimism there from the feedback we're hearing. And we're starting to win more in bids that we're participating in. So there's a lot of positive trends that are developing. But I think that kind of going back to looking at that 2022 comparison, that was still a growing environment. Who knows what's going to happen with May and June, but if we can continue to see some sequential improvement in our volumes, which I believe we will, then I think that we can continue to show good, strong top-line improvement and then carry that through from an operating ratio that will produce some pretty good-looking numbers from a bottom-line standpoint.

Great. Thanks so much. Appreciate it.

Our next question comes from Scott Group with Wolf Research. Please go ahead.

Hey, thanks. Morning. Feel better, Adam. The last couple quarters, you've given us sort of a range of sort of revenue that you've embedded within the OR sort of guidance. I don't know if you can share something similar. And then bigger picture, you know, the truckload market clearly has gotten a lot tighter. We keep hearing it's more sort of supply driven. Are you seeing that typical, any of that typical spill from truckload back into LTL? And do you think a supply tightening in truckload means it's any different of a cycle this time as it relates to the LTL businesses maybe we've seen in the past?

Yeah, that definitely has been happening. And I think that's something that you obviously see what's going on in the truckload market with their rates and capacity changes I think is driving a lot of that. But We started hearing late last year, I think a lot of shippers were anticipating that this environment would finally turn this year. And I can think to a couple of large accounts that had mentioned part of their supply chain strategy the last year or so had been taking advantage of that market, consolidating some loads and whatnot, and that they were going to revert back to moving more freight via LTL. And so I can look at a couple of specific customer accounts. and see that that trend has reversed. But just bigger picture, we know that's something that's been a headwind for us for probably the last couple of years, and it's something that we felt like was going to need to sort of fix itself, that being the truckload world, to take some of the pressure off some of those load consolidation opportunities that shippers have been taking advantage of. I do think that's something that will unwind and will be a big benefit to the industry and something that I think that we'll be able to benefit from as we start getting back to market share opportunities and taking advantage of those.

Okay. And the first part was just like if there is like a revenue range or assumption for the quarter.

Yeah, I didn't really give, I didn't go through that this time. I think that, you know, obviously there's some volatility based on what fuel is going to do. And, you know, hopefully we'll see that continue to decline. But just, you know, thinking about the volumes, you know, as I mentioned, we're trending a little bit below from a tonnage standpoint, what our normal sequential change would be at this point. And so, you know, that's something that will probably be I'd expect unless we have, you know, strong performance like we did in February and March, you know, that may be something where the volumes come in a little bit lighter than what our normal sequential change would be. But just, you know, too many factors to try to figure out to give a top-line range. But I think that, you know, based on right now, like we mentioned, April is down 7%. So if you just kind of hold that bogey or up 7%, sorry, You know, if you hold that bogey across and then just sort of move here and there as we give our mid-quarter updates and see what fuel is doing and that volatility there will allow you to kind of flush that through your model, hopefully.

Okay. Very helpful. Feel better. Thank you.

Our next question comes from Eric Morgan with Barclays. Please go ahead.

Hey, good morning. Thanks for taking my question. I wanted to ask on pricing and yields. I think the 4.4% in the quarter was a bit ahead of your guidance. So just curious if you could speak to the drivers there. I think weight per shipment was pretty consistent throughout the quarter. And then I think you said four to four and a half percent in April, maybe weight per shipment a little bit more of a mixed impact at this point. So just wondering what kind of the right run rate is here for 2Q, just how we should calibrate that. Thanks.

Yeah, I think that 4% to 4.5% for the full quarter is still appropriate. And we will be looking at weight per shipment. If trends can hold, it should be up around 1% or so for the full quarter. Like I mentioned, we're up a little over 1% at this point in April. So hopefully that will continue to hold. And we'd love to see that number continue to move higher and be even more of a headwind, if you will. relative to our revenue per hundredweight performance because it would indicate that the economy is continuing to get stronger and we would continue to be winning business. But, yeah, the first quarter yield came in a little bit stronger overall. I mean, just a little bit. I think we had said up 4%. But I was probably anticipating a little bit more weight for shipment headwind than what we got. It was still nice to see its first quarter in some time where we've had a year-over-year increase in weight per shipment. But overall, I think our results just reflect what our consistent long-term strategy is. And we always want to be consistent and fair with our customers and get cost-based increases. And I think that that's what we've done over time. We've been able to do it over the last couple of years when the environment's been slower. And we can continue to maintain that measured approach as we go forward, that gets us really strong revenue per shipment, especially as the weight per shipment starts improving. And that's really what we've ultimately got to get back to is a positive revenue per shipment over cost per shipment spread. And we're not there yet, but we're certainly starting to close the gap, if you will, and can get those numbers moving back in the right direction. Typically, we want to see 100 to 150 basis points of of positive revenue per shipment over cost per shipment spread.

Thank you. Our next question comes from Ravi Shankar with Morgan Stanley. Please go ahead.

Great, thanks. Morning, everyone. So, Adam, again, sorry to keep straining your voice here, but just on the 2Q OR walk, I'm a little bit surprised that kind of you're not pointing to maybe doing better than the normal seasonality, just given some of the positive trends, kind of with April up 7% and such. Is that just you guys being conservative? Is that just a higher starting point with 1Q? Or can you just talk about some of the moving parts that can maybe help you kind of stop that normal seasonality? Thanks.

Yeah, I think that it's probably a couple of things. One, as a known, I feel like we're going to see some headwinds as it relates to our fringe benefit costs. They came in a little bit better than what I'm forecasting for the entire year in the first quarter. And already looking at the April trend, that's something that we expect we're going to see higher costs there for the full quarter. And then just as fuel changes, it creates a lot of headwinds from a variable cost standpoint that may get overlooked. And that's why pointing people back to 2022 might be a good sort of measure to look at. But obviously, anything petroleum-based products, any of those, we're going to see inflation. But other overhead-type costs, things you wouldn't think of, like credit card fees and the percent of bad debt write-offs that we have, things like that, you know, it's just going to create other ancillary costs. So, you know, it's not to say that if we get business levels that continue to pick up that we can't beat the guidance like we just did in the first quarter. And as you mentioned, we do have a pretty good starting point, if you will, with our 1Q performance. But I feel like that's a good starting point. And, you know, that's based on us talking about probably being a little bit lower than what our normal sequential trend would be from a tundish standpoint as well. So I feel like if we can kind of execute on some of those broad numbers that we just talked about, you know, we're starting to kind of map that out. And you're looking at double digit type of earnings growth. So, you know, all those numbers flowing through the model. You know, it certainly can get better, but I think this is a good starting point to start finally seeing things back in the green force.

Thank you, Adam.

Our next question comes from Jonathan Chappell with Evercore ISI. Please go ahead.

Thank you. Good morning. Maybe Marty can answer this one, give you a break, Adam. Okay. February obviously did a lot better than typical seasonality or your long-term averages. March was a smidge better, maybe in line. And now it sounds like April's maybe dipping a bit lower. Do you get a sense that there was any pull forward into the first quarter? And does that help framing kind of the way you're thinking about the second quarter as well as maybe borrowing a little bit from 2Q to get into 1Q? And then also I just want to raise this too. I mean, it feels like June is a really, easy comp. It was difficult last year in that tariff environment. Could it be a thing where you end the quarter on a higher note just based on a comp perspective?

Jonathan, I'll answer your pull forward. We're not hearing any major pull forward comments from our large customers as they visit our corporate office. As Adam said earlier, we see some of this truckload volume that LTL went to last year and the year before, we see some of that coming back because of the tightness of the drivers and so forth. So we're not hearing the pull forward comment at all.

Yeah, and I think, you know, obviously just as we go through the balance quarter, you know, there's just still a lot of uncertainty out there with, you know, everything that's going on in the world. And, you know, I'd love to have a clear crystal ball to say that we'll have, May and June performance similar to what we had in February and March. But, you know, it's hard to kind of pinpoint that at this point. You know, certainly feel like there's a lot of opportunities out there. And, you know, I think that's a good thing about us given our mid-quarter update. When we see the actual results for May, you know, we'll be able to talk about those trends as they're developing and, you know, that we see a continuation of the positive trends. But, You know, I think we've heard more optimism from customers really through the balance of the year. And like Marty said, I don't think that there was any pull forward per se that helped boost the numbers. I think it was just we got through that first quarter. We expected continued strength. And, you know, it's not totally unexpected given everything going on that, you know, people pulled back just a little bit. Still overall, you know, good performance in April. pleased with what we've been able to do and, you know, what our numbers are looking like. But, you know, certainly hope that we'll see a continuation of the buildup that, you know, not only through June, but this is what we'd expect really from now through September. Great. Thanks, Adam and Marty.

Our next question comes from Ken Huckster with Bank of America. Please go ahead.

Hey, great. Good morning, Marty Jack and Adam. It's spring, so hopefully you get well soon. Those truckload volumes you're talking about, are they good quality freight or bad? I'm always confused if that's stuff you want. And then if volumes are trending below seasonality, I just want to clarify, is this a share loss indication or are market volumes not as good as we're all expecting? And then my other one is just the average employee is down 7%. You were talking, I think, in an answer before about the kind of the add-on in employees or thoughts on employees and your ability to scale if you do get that inflection? Is that something you're focused on?

Yeah, I'll answer that one first. I think that, you know, we've talked about this for the last few quarters that I think where we're positioned now, you know, we're in a really good spot in terms of having people to be able to respond to sequential growth issues. from here on out through the balance of this quarter. Not to say there might not be some hiring here and there, but overall I would expect a pretty similar headcount level, if you will, as we go through the balance of this quarter. And we certainly have got the capacity from a people standpoint. We've got plenty of service center capacity and we've got the fleet to be able to accommodate sequential growth as well. And Now, I don't think that the April trend is any type of market share loss at all. I think it's just, you know, it's just the numbers are a little bit softer from a volume standpoint than, you know, what we had been seeing. Typically, you see a little drop off anyways in April. And so, you know, it is what it is. But, you know, I think that we're probably going to exit the month at a pretty good run rate and would expect, you know, these trends that I've seen the this past week and all last week as those continue to work our way through the balance of the quarter, you know, feel pretty good about saying that we're anticipating sequential improvement, if you will, from where we are now until getting to the end of June. So, you know, how strong will that be? That still remains to be seen. But I think there's a lot of opportunities out there. And that's what I referenced earlier. We're seeing a lot of wins as we're participating in bids right now. and a lot of behavior that's pretty consistent with the environment turning overall. So, you know, a lot of good things. Hopefully this is the early stage of recovery that, you know, we typically outperform our competitors the most. And, you know, when you look back over time, it's, you know, the early stages of recovery, those high growth years where from a volume standpoint, we've been able to outperform our competitors somewhere around 900 to a thousand basis points. So, you know, hopefully this is what's kicking off now. But, you know, just keeping everything in check, if you will, with, you know, the risk that we see in the economy right now and that uncertainty that's out there, just to be able to truly, you know, draw a line in the sand and say, yeah, the race has started. But definitely not any indication of any loss of share. And the final comment about truckload, you know, it's not that it's a full truckload of freight that's now coming in and we're moving a 40,000 pound load. It's just with load optimization software that's out there, a lot of customers in a weak truckload environment, many 3PLs have got mode optimization tools and things like that. And so they can consolidate some different loads and do some things to move freight at a lower cost. But I think that I haven't started necessarily seeing that completely unwind yet, but I think that we're in some early stages of that as well, just from looking through the underlying data of our 3PL business right now. So that's something that should continue or start providing, rather, a little bit more of a tailwind, probably getting little bits and pieces of it here and there from customer-specific activities, But I think that's something that will probably provide more opportunities as the demand environment continues to improve.

Again, also, it is good freight because many of these customers that transition some of their business over to full truckload, we're still handling LTL shipments for them, and that pricing is still in effect. So when it moves back over to us, it moves at that profitable LTL pricing that we have in effect for them. So it is good freight.

Very helpful. Thanks, Marty. Thanks, Adam.

Our next question comes from Tom Wadwitz with UBS. Please go ahead.

Yeah, thanks. I wanted to see if you could just tell us what the – I know you said it's a little worse in seasonality in April, but I guess down six and a half year over year. What would the 10-year average in normal seasonality be, just so we can make the clear assessment? I don't think you said that. And then I guess the broader question – You know, I think Ken asked a little bit about this, but we have seen some improvement from other players in the market. Like, I mean, you know, TFI is talking about service improvement, favorable trend in their volumes. But, you know, they say they're a low price point in the market. I just don't know if you see them. You know, ArcBest is active with their dynamic pricing. And, you know, FedEx Freight eventually makes investments, probably can be a better competitor looking out a way. So I just wonder, looking historically, do you tend to see it when others improve service? Or is it a big enough market that you say, really, you know, it's just a cycle in our own performance as opposed to what, you know, this LTL or that LTL are doing? Thank you.

Yeah, I would say that based on all the data that we have and feedback that we get, the service gap between us and our competition is as wide as it's ever been, if not getting wider. you know, don't want to comment necessarily on anyone specific, but, you know, I think other carriers obviously have got their own initiatives and things that they're working on. And, you know, all we can speak to is what we see with our business and our customers. And like I said, you know, I still feel like we've got a lot of optimism. We're starting to win more business and bids that we're participating in. And that's what gives us optimism to go through the balance of the year and and start working our numbers. We're still down on a year-by-year basis from a volume standpoint, but five straight months of sequential performance and may take a break on that this month for April. But we'll see where we go through the balance of the year. But we need to get back to getting our numbers back to neutral, if you will, from tonnage and the shipments. per day standpoint relative to last year and start getting back to what we do best, which is growth. And, you know, we're looking like we're going to have revenue growth in the second quarter. And, you know, and that should lend itself to good earnings growth as well. And, you know, we'll look and see where we get through the balance of the year. But I don't think that any specific carrier initiative right now is having any material impact on us. I feel like we're seeing more wins than anything when I look at our individual bid performance.

What about just the, you know, the numbers for what April was? I don't know if you want to say sequential versus, you know, what's your assessment of normal seasonality or the tenure? I think, I don't know if you gave us the specific numbers.

Yeah, I didn't give the specific number, and I hate to give it because the month of date, you know, depends on the last couple of days. It's kind of comparing apples and oranges, but it's, you know, the normal would be down 1%, and we'll see what these next couple of days. Tomorrow should be a really big day for us, and it'll skew the month of date number up or bring that number up. Today and tomorrow will, but it's still, you know, based on what the trend is, we'll be not below that 1% number, but I'm comfortable where we are. And, again, the run rate that we have today and just knowing what I know for how these trends generally develop, you know, I feel pretty good about saying that we should have sequential growth as we get into May and June to close out the quarter.

Okay, but you don't want to say what that month-to-date is versus the down 1% normal?

Nothing other than, you know, what we already said with, you know, right now it's running down on a year-over-year basis. Yeah. About six, yeah.

Oh, okay. All right, appreciate it. Thanks for your time.

Our next question comes from Brian Ossenbeck with J.P. Morgan.

Please go ahead. Hey, good morning. Thanks for taking the questions. Maybe just a couple of follow-ups, Adam. You gave some helpful comments about some of the cost pressures that you're seeing, maybe excluding the fuels or anything else that you can call out, we should be aware of from a cost-per-shipment perspective. You already have line of sight, too. It sounds like maybe some health care and benefits are moving up here throughout the rest of the year. And then just following up on the last questions about competition, maybe you can give us some perspective because we see a lot of new entrants or new conversations about things like grocery and expedited freight like How long do those bid cycles last? How long does it really take to get into those markets? Because I'm sure it takes a while. It's easier said than done. But we'd like to hear your perspective on how that really works in practice with some of these higher premium services. Thank you.

Yeah, on the, you know, I mentioned the fringe headwind that we're looking at. And, you know, obviously anything that's fuel related, we're going to see increased costs. But You know, on the flip side, we had an increase in our general supplies and expenses in the first quarter. I'd expect to see a little bit of improvement there, especially as we get leverage on those costs. Some of those G&A expenses are variable in nature, so as revenue continues to go up, you'll get a little pressure there. But, you know, some of those were more quarter-specific, if you will. And so you should see a little bit of benefit there relative to what our normal trends depreciation is the other item, you know, relative to what the 10-year average change in depreciation costs from 1Q to 2Q with our CapEx plan being lower this year, then we shouldn't see that same type of inflation, if you will, in those costs. So, we should be able to get a little bit leverage there to offset some of the other headwinds that we're anticipating. And, you know, with respect to other carriers focused on different segments, you know, it's, we compete with every carrier as it stands today, and with those same, you know, whatever line of business that you want to talk about, you know, there's no secret part of the market that we've got access to, you know, there's some things that I think we do really well, where we add a tremendous amount of value to our customers that we don't see the same value add from some of our competitors, and that's direct feedback from our customers. So, Yeah, we take none of that for granted, though, and we're always looking at ways that we can continue to enhance our services, you know, be it through technology and other measures to make sure that we keep that service gap there. But, you know, I've heard over my career different competitors that are targeting one segment of business that they think OD's got to lock on versus another, and, you know, it hasn't slowed down our growth over time, and I don't think it changes the trajectory what our growth opportunities look like over the long term either. As we've said plenty of times before, service is ultimately what wins share in this industry. And I think we've got a better service product than anyone else. And for that reason, I think we'll be the biggest market share winner over the next 10 years, just like we've been over the last 10.

Okay. Thanks very much, Adam.

The next question comes from Raja Harnein with Deutsche Bank. Please go ahead.

Okay, thank you. Good morning, everyone. So, Adam, I know you said you want to refrain from commenting on competitors, but with FedEx Freight's been right around the corner, I wanted to give a stab and try to get your impression. So, you know, earlier this month, we heard that team talk extensively about their differentiated dual service offering, priority, non-priority, as being, you know, again, a key differentiator in the market along with their scale and speed. Just curious if you think these attributes give them an edge, especially as they emerge as an independent entity with a dedicated sales force. And just, you know, broadly would love to get your impression on the strategy they laid out earlier in the month and, you know, what maybe surprised you with respect to their plan, how do you feel about them, and potential for change as a competitor. Also, just a quick clarification one, does Easter factor into, you know, how April is going to progress, you think? The timing of Easter this year versus last year, does that come into play? Thanks.

Yeah, the Easter was the beginning of the month. And, you know, so that certainly has an impact like it always does. We don't count half days, but usually the Good Friday is about a little more than half of a normal workday. So that certainly had an impact, you know, on the April trend and With respect to FedEx, we've been competing against them for years. The priority in the economy is not a new service offering, so we'd look to see them. They've been a good competitor over time, and we'd expect they'd continue to be a good competitor, but it doesn't really change the competitive landscape. If anything, it may be they've got to go through a lot of change as they go through that separation. And we'll see how they handle through all of that. But wouldn't expect that, you know, really from a customer standpoint, that there would be a lot of change with respect to those service offerings as a shipper would compare them to our service offering. And again, you know, be it through the MassTO measurements that we've won for multiple years in a row now versus being the biggest market share winner over the past 10 years, You know, all those measurements tell me we've got the best service in the industry. But we don't sit around and rest on our laurels. We want to continue to get better every day. And we want to continue to win that Massey Award year after year. And that's why we focus so intently on making sure that we're listening to customers and the things that they need and what they want. That's why we continue to refine our network, make changes. We've made plenty of lane changes where we've had to speed up transit times. in the past year. And so we'll continue to move as the market's moving and try to make sure that we are given the very best value proposition to our customers ultimately. And I think that's what we've proven over time. And again, it's why we're the biggest market share winner. And that's what gives me the confidence to keep investing in our business, to keep growing it, preparing it for our future market share opportunities.

All right. Thank you, Adam.

Feel better. The next question comes from Ari Rosa with Bank of America. Please go ahead.

Hey, good morning, gentlemen. So I wanted to ask about the nature of this downturn and potential upcycle relative to past cycles. I hear your point. You've said it a couple of times on winning the most market share over the past decade. very encouraging to hear the confidence on winning the most market share for the next decade. But if they look at the last three years, it's been somewhat anomalous in terms of having negative year on year growth or volume growth for each of the last three years. So just how are you thinking about ability and timeline to recover that loss volume? Is that something we should be expecting in the next up cycle? How much of that depends on kind of the competitive environment versus kind of macro versus idiosyncratic things that you can do to be a little bit more aggressive to take back share. Thanks.

Yeah, I think, you know, obviously we're not immune to the economy. And the last three years have been difficult. But, you know, every year we've reaffirmed our strategy. And, you know, typically what you see with our business is we maintain market share consistently. through the downturn, and then we win a significant amount of market share as the demand environment improves. And there's a couple of things that drive that. We've been the only carrier that's consistently invested in new capacity over time. And even over these past three years, we've spent $2 billion on CapEx to keep growing our business and to prepare our network to be ready for future growth. And We don't just build this network out with hoping that we'll be able to achieve market share. We do it through conversation with customers and engagement with our sales team and so forth and having the confidence of knowing where we believe we're going to see growth over time. And so that's been a key part of our strategy is to always stay ahead of the growth curve. But I think that we've seen before how quickly things can change. And I think the first quarter is, you know, a pretty good indicator of that. You know, look how quickly the volume changed in February and March and then what we were able to do from an operating ratio standpoint. And so, you know, we may not be able to carry that forward. I was hoping this would be more like a 2017 kind of year. And who knows? It still could be. I mean, we're not writing off what's going to happen in May or June yet. We're just saying that we're still optimistic, but there's a hint of caution there given the geopolitical risk. But I would say that if we can continue to carry forward some sequential improvement with our volumes, we get back to being positive on a year-to-year basis later in the year, or we should, and then we can continue to grow from there. But when I mention some of these high-growth years and the outperformance, I mean, all you got to do is go back and, you know, I know maybe some of the carriers are different, but if you look in kind of the really strong years that we've had, the 2014, 2015, the 2017, 2018, 21, and 22, and the double-digit type of volume growth that we've been able to produce when the competition is in single digits, it's because we run all of this excess capacity And our industry historically has been capacity constrained. And I know many carriers are talking about having excess capacity today, but the numbers simply don't bear that out. And we still see the industry as being capacity constrained. So that's why we're so confident. And once we see the demand environment start to improve, then we'll get back to outgrowing our competition like we've been able to do in prior cycles.

Very helpful, thanks. Our next question comes from Jeff Kaufman with Vertical Research. Please go ahead.

Thank you very much, and thank you for squeezing me in. I was just wondering if you could give us a little bit more color on weight per shipment. I don't know what level of detail you break it down to, but just under the idea, you know, it is improving. But do you have any idea whether that is a region of the country that may be coming back to life, whether it's certain industries that may not have been participating that are giving heavier weights per shipment coming in, or is it just we're throwing another hair dryer on a pallet and going from 49 to 50, and that's kind of how we think about it?

Yeah, generally it's more widgets per pallet, and, you know, And it typically follows when you start seeing the industrial performance as well. Typically, that industrial freight is going to be heavier in nature than retail related freight. And so that's some of the good thing that we're seeing right now. Most of our positive performance over the past five months has been in that retail side of our business. And so we're looking to start and starting to see some early indications in March. of the industrial starting to turn the corner as well. But as we get that industrial coming to us in kind of coordination with the positive ISM trends that we've seen, then we'd expect to see the weight per shipment continue to tack higher. And, you know, right now we're just around 1,500 pounds per shipment. That's about where we were in March. And a little bit lighter than that, normally the weight per shipment is falls back a little bit in April versus March as well. So we're trending around 1490 right now. But when I think back to really strong markets, we've been more like 1600 pounds per shipment. So, you know, that's a number that I'd love to see us continue to move up. Because again, what that means is it's going to be more revenue per shipment. And generally, the cost per shipment is not going to move in tandem with that. So That's what will help get us back in balance, start moving our cost per shipment back closer to our longer-term average of 3.5% to 4%, and then have that positive spread of revenue per shipment over cost per shipment.

All right. That was a great color. Thank you.

The next question is from Stephanie Benjamin with Truist. Please go ahead.

Wow, actually, blast from the past. It's Stephanie Moore with Jefferies, but still the same person here. Thanks for the question. Wanted to just touch a bit on the capacity. I know this has come up quite a bit over time. on this call today. But maybe if you could touch specifically on private capacity, I think that, you know, I think that's an area that maybe doesn't get as much airtime, just obviously given the nature of those businesses. But any color you can touch on, because I think, you know, as we know, many of the public names talk a lot about having excess capacity, but would be helpful if we could hear maybe any color you can provide on what you're seeing on broad industry and specifically the private things.

Yeah, sure. And that's good perspective as well. I think that once Yellow closed, it seems like a lot of those service centers went into the private world. And I think that a lot of that market share that Yellow had ended up with the private carriers as well. And obviously, many people took some elements of share there. But the factor that we look at is shipments per day per service center. we've been able to the public carriers they disclose the number of service centers so when we look at that type of data you know that's what tells us that some of the carriers don't have as much capacity as maybe what they talk about because the shipments per day per service center are pretty similar at the end of 2025 is where they were at 2022 when everybody was capacity constrained and they couldn't grow and And then when you look at the total number of service centers throughout the industry, both the public and the private carriers, you can see from that 22 to 25 period that shipments per day per service center is down about 3%, so pretty close. I think that there's probably 5% to 10% excess capacity across the industry as a whole, but much less than what some people think about, maybe talk about. But if you think about it from the 100,000-foot level, you had a carrier that did over 50,000 shipments per day and had over 300 service centers. Not all of those service centers have remained in our industry. And what was a capacity-constrained industry in 2022 will be an even more capacity-constrained industry as we move forward.

Thank you. I appreciate the time.

The next question comes from Bruce Chan with Stifel. Please go ahead.

Hey, gentlemen. This is Matt. I last talked to Bruce this morning. Thanks for asking. I just want to circle back to pricing. We're yield, and I'm assuming contract renewals seem to remain pretty strong. Curious if that strength and stability is sort of universal across the entire book, as we've heard about some increased competitiveness around 3PL business. And perhaps if you can share what percent of the total book is tied to 3PL, that'd be great. Thank you.

Yeah, about a third of our business overall is related to 3PLs. And, you know, as mentioned earlier, we're pretty consistent with what we target for increases every year. be it with our general rate increase that applies to our tariff-based business, and that's about 25% of our revenue overall, as well as what we try to achieve as we go through contract renewals. Obviously, every account is different, and we look at each account on its own merits and what their profitability measurements are, but we've been pretty consistent with getting increases and You know, it's a different approach that I think that we take versus some of our competitors. And with trying to be consistent, I think that helps customers know what to plan for, what the budget for. And I think it forms what's truly a partnership and a relationship versus just looking at things that maybe are more so market driven. And so it's worked out well for us over time. And, you know, that will continue to be the focus for us. is to try to achieve those reasonable increases that are fair but equitable and will drive our long-term performance, offsetting our cost inflation and supporting our ability to keep investing in our service center network, investing in new technologies that our customers in many cases are demanding, but to keep investing in our people to drive our business forward as well.

The next question comes from Joe Enderlin with Stevens. Please go ahead.

Hey, guys. Thanks for taking the question. Looking at the industry and public peers, everyone's focused on service as a means to drive yields higher. With your position as a service leader, what's your focus on when you think about continuing to improve your mix of business? And are there any end markets or services you're leaning into currently, given you might have a better value add relative to competitors? Thank you.

You know, Joe, service is not just delivering on time claims free. It's also how you handle issues, which relates to superior customer service. You know, being able to talk to a human on the phone. We're in a world of bots now, but customers still put a lot of stock in being able to pick up the phone and call one of our service centers or our corporate office, trace a shipment, talk to a human. Also, billing accuracy plays a big part in service. Sending a correct invoice the first time is very important to our customers. It creates less work for them, allows us to get paid faster. So there's a lot of components when we talk about service or customer service, and we feel like we lead the industry in all those factors.

Got it. Thank you, guys.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mari Freeman for any closing remarks.

Thank you all for your participation today. We really appreciate your questions, and please feel free to give us a call if you have anything further. Thanks, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.