NASDAQ:ODFL Old Dominion Freight Line Q2 2024 Earnings Report $162.25 -0.18 (-0.11%) As of 02:46 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Old Dominion Freight Line EPS ResultsActual EPS$1.48Consensus EPS $1.45Beat/MissBeat by +$0.03One Year Ago EPS$1.33Old Dominion Freight Line Revenue ResultsActual Revenue$1.50 billionExpected Revenue$1.50 billionBeat/MissMissed by -$520.00 thousandYoY Revenue Growth+6.10%Old Dominion Freight Line Announcement DetailsQuarterQ2 2024Date7/24/2024TimeBefore Market OpensConference Call DateWednesday, July 24, 2024Conference Call Time10:00AM ETUpcoming EarningsOld Dominion Freight Line's Q2 2025 earnings is scheduled for Wednesday, July 23, 2025, with a conference call scheduled at 10:00 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Old Dominion Freight Line Q2 2024 Earnings Call TranscriptProvided by QuartrJuly 24, 2024 ShareLink copied to clipboard.There are 16 speakers on the call. Operator00:00:00Good morning, and welcome to the Old Dominion Freight Line Second Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Investor Relations. Operator00:00:38Please go ahead. Speaker 100:00:40Thank you, Gary, and good morning, everyone, and welcome to the Q2 2024 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through July 31, 2024, by dialing 1-eight seventy seven 344-seven thousand five hundred and twenty nine, access code 9,201,305. 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. Speaker 100:01:30Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to forward looking statements. 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 and in this morning's news release. And 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. Speaker 100:02:14At this time, I would like to turn the conference call over to Mr. Marty Freeman, the company's President and Chief Executive Officer, for opening remarks. Marty, please go ahead, sir. Speaker 200:02:23Good morning, and welcome to our Q2 conference call. With me today on the call is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Old Dominion's 2nd quarter results represent our 3rd consecutive quarter with year over year growth in revenue and earnings per diluted share despite the ongoing sluggish in the domestic economy. These results were made possible by the hard work and dedication of the OD family of employees who continue to execute our long term strategic plan during the Q2. Speaker 200:03:00I'd like to congratulate our outstanding team for maintaining our commitment to providing superior customer service at a fair price as well as our disciplined approach to managing yield, our laser focus on operating efficiencies and controlling our discretionary spending. Delivering superior service at a fair price is the cornerstone of our business model and our unmatched value proposition has continued to differentiate Old Dominion Freight Line from our competition. I'm pleased to report that during the Q2, we once again provided an on time service level of 99% and a cargo claims ratio of 0.1%. Constantly delivering the level of service for our customers regardless of the economic cycle has strengthened our customer relationships over time. We help our customers keep their promises they have made to their customers by delivering their freight on time and damage free, which in turn allows us to continue to help the world keep their promises. Speaker 200:04:03The consistency of our service is also validated by Mastio and Company who has named OD as the number one national LTL carrier for 14 consecutive years. Our strong track record of industry leading service also means our customers view us as a trusted partner, which supports our consistent cost based approach to pricing. Our long term yield management strategy is designed to help offset our cost inflation, while also supporting further investments in the capacity and technology that our customers expect. We have been one of the only LTL carriers to constantly and consistently invest in new capacity over the past 10 years, which has supported our ability to almost double our market share over the same period. We are committed to constantly investing ahead of anticipated growth curve, which is another differentiating quality for Old Dominion and what has been and what we believe will continue to be a capacity constrained industry. Speaker 200:05:05Over the past 10 years, we have invested over $2,000,000,000 in our service center network and we plan to invest another $350,000,000 on real estate this year. These investments have positioned us to grow with our customers over time through the ups and downs of the economic cycle, which hasn't been the case with most of our competitors. Maintaining excess capacity in our service center network, which has approximately 30% at the end of the second quarter, does create some short term cost headwinds during periods with slower demand. But we are confident that the capacity will be critical to support our customers when the economic environment starts to improve and business levels reaccelerate. With all that said, our network investments are not being made simply to handle the overflow during stronger periods of economic activity. Speaker 200:05:58Instead, as we look into the future, we believe demand for service sensitive LTF capacity will continue to grow. We believe that the combination of our best in class service and disciplined investments in network capacity position us to capture even more of the growing market in the years ahead. Over the last decade, Old Dominion Freight Line has won more market share than any other LTL carrier by consistently executing our strategic plan and remaining focused on long term opportunities instead of short term challenges. While we continue to wait on a recovery in the domestic economy, we believe the investments in our network, our technology and most importantly, our people will continue to drive value to our customers. As a result, we believe we are the best positioned carrier in our industry to win market share over the long term, while further enhancing shareholder value. Speaker 200:06:56Thank you today for joining us this morning. And now Adam will discuss our Q2 financial results in greater detail. Adam? Speaker 300:07:04Thank you, Marty, and good morning. Ultomillions revenue for the 2nd quarter of 2024 of $1,500,000,000 was a 6.1% increase from the prior year. The increase in revenue was due to a 4.4% increase in LTL revenue per hundredweight and a 1.9% increase in LTL tons per day. Our operating ratio improved to 71.9%, which contributed to the 11.3% increase in earnings per diluted share to $1.48 for the quarter. On a sequential basis, our revenue per day for the 2nd quarter increased 2 point 6% when compared to the Q1 of 2024, with LTL tons per day increasing 3 point 3% and LTL shipments per day increasing 3.2%. Speaker 300:07:57For comparison, the 10 year average sequential change for these metrics includes an increase of 8.7 percent in revenue per day, an increase of 5.8% in tons per day an increase of 5.8% in tons per day and an increase of 6.5% in shipments per day. The monthly sequential changes in LTL tons per day during the Q2 were as follows: April increased 0.4% as compared to March May increased 0.1% as compared to April, and June increased 1.9% as compared to May. The 10 year average change for these respective months is a decrease of 0.4% in April, an increase of 2.7% in May and an increase of 2.3% in June. I would like to note, however, that in years when Good Friday occurs in March, as it did this year, the average sequential change in the LTL tons per day from March to April is a 2.6% increase. For July, we expect our revenue per day will increase by approximately 4% to 4.5% when compared to July of 2023, assuming the remaining days of the month follow normal historical trends. Speaker 300:09:20The growth rate in our revenue per day through the first half of July was relatively consistent with the Q2. The comparisons have now become a little more difficult, however, as the final week of July last year was when we began to see freight diversion from a large competitor that ultimately filed for bankruptcy. We will provide the actual revenue related details for July and our 2nd quarter Form 10 Q. Our operating ratio improved 40 basis points to 71.9 percent for the Q2 of 2024, due primarily to the quality of our revenue growth and continued focus on operating efficiencies. Our team continued to do a great job of managing our direct variable costs during the Q2, which allowed us to improve these costs as a percent of revenue. Speaker 300:10:11Our overhead costs, however, continued to increase as a percent of revenue despite our best efforts to minimize discretionary spending. As we have often said before, the 2 main ingredients to long term operating ratio improvement are the combination of density and yield, both of which generally require a favorable macroeconomic environment. While we continue to execute on our yield management initiatives, it will likely take an improvement in the domestic economy before we see sustained momentum in shipping demand that generally leads to incremental market opportunities and operating density. We remain confident that once we have both of these elements working again in our favor, our team can produce further improvement in our operating ratio and make progress towards our goal of achieving a sub-seventy percent annual OR. Old Dominion's cash flow from operations totaled $387,800,000 $811,700,000 for the Q2 and first half of twenty twenty four, respectively, while capital expenditures were $238,100,000 $357,600,000 for those same periods. Speaker 300:11:28We utilized $551,800,000 $637,100,000 of cash for our share repurchase program during the 2nd quarter and first half of twenty twenty four, respectively, while cash dividends totaled $56,000,000 112 point $1,000,000 for the same periods. This year to date total for share repurchases includes $40,000,000 that is deferred until the final settlement occurs on our current accelerated share repurchase agreement, which would be no later than November of 2024. Our effective tax rate for the Q2 of 2024 was 24.5%, which was lower than originally expected due to the benefit of certain discrete tax items. The effective tax rate for the Q2 of 2023 was 25.4%. We currently anticipate our effective tax rate to be 25.0 percent for the Q3. Speaker 300:12:30This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time. Operator00:12:37We will now begin the question and answer session. Our first question today is from Jordan Alliger with Goldman Sachs. Please go ahead. Speaker 400:13:08Yes, hi, morning. Thanks for the update. I wonder as you often do, is it possible to get some sense for given the context of revenue per day and what you're seeing in the economy, how things could look seasonally 2Q to 3Q in terms of the operating ratio? Thanks. Speaker 300:13:28Yes, sure. Unfortunately, we're still dealing with an economy that's not contributing too much to us right now with 55% to 60% of our revenue being industrial related. The ISM continues to be below 50%, and I think 19 out of the past 20 months. So it's hard to say what will happen from a top line basis. And as you know, the revenue will dictate a lot of the performance, at least when we go sequentially. Speaker 300:13:57But I feel like some things, if there have been some bright spots to look at in terms of the trend that we saw through June and so far this month in July from a revenue and a volume standpoint. So we'll see how that continues to play out as we progress through the quarter. And as we always do, we will give our mid quarter update with the August performance once that is finished. But based on kind of where we are today, normal seasonality is typically about a 50 basis point increase sequentially from the 2nd to the 3rd quarter. And I think that's achievable. Speaker 300:14:38It's certainly what the goal would be. And I think that regardless of which way the revenue goes, if we stay kind of flattish like we've seen from a quarter to quarter standpoint, Typically, the average sequential change in revenue is about a 3.5% increase from the 2nd to the 3rd quarter. So where we follow along that spectrum from the top line basis, I still think that something along the lines of that 50 basis point sequential increase, plus or minus, of course, we generally give ourselves kind of plus or minus 20 basis points. But I think that's something that's certainly very achievable for the Q3. Speaker 400:15:21And just as a quick follow-up, if I could. Just on the demand. You mentioned the sub-fifty ISM and new orders index as well. I mean, as you sort of look ahead and talk to customers, I mean, do you feel that there could be finally some change in that as we move through the year? Or is it tough to tell Speaker 300:15:42still? Well, I think it's still tough to tell. I mean, we're I feel like things are starting to fall a little bit. Again, I felt like we had a good performance through June. We finally had some good sequential increase there from a volume standpoint. Speaker 300:16:01And so a little bit of acceleration and somewhat similar to what we had in the final month of the Q1 with March there, but a nice increase from the May to June period. So something that we'll continue to watch. We've got the Q3 here and then we typically go through the seasonally slower Q4 and Q1. But hopefully, some things are building. I think when you look at some of the macroeconomic factors, it would suggest that maybe some of the things that the Fed would watch would indicate that we may be closer to the interest rate environment, maybe improving a little bit and seeing some cuts out there that certainly helped from a business standpoint. Speaker 300:16:44So it seems like we're coming close to the end of a long slow cycle and we'll just have to continue to watch and see what's presented to us. But it certainly feels like we're seeing a little bit more opportunity out there than what we have been seeing. Speaker 400:17:02Thank you so much. Operator00:17:04The next question is from Daniel Imbro with Stephens Inc. Please go ahead. Speaker 500:17:10Hey, good morning guys. Thanks for taking our questions. Maybe Adam, I wanted to ask one on the pricing side. I think the mid quarter update suggested pricing was stable. June actually seemed to improve a bit. Speaker 500:17:21I guess how is pricing continuing into July? Are we seeing any changes? And stepping back just from an industry standpoint, demand remains tepid to your point. Can the industry support further GRIs and other rate increases in the back half of this year as comparisons get more difficult? Thanks. Speaker 300:17:37Yes, I think what we've seen is just a continuation of executing on our long term yield management philosophy. And we continue to target increases that offset our cost inflation and support the continued investment and capacities that our customers expect from us. And our yield trend in June what we're seeing thus far in July is pretty similar. From a year over year standpoint, if you just sort of look at normal seasonality and revenue per hundredweight, at least excluding fuel, normal sequential would imply that for the full quarter, it would be up 4% to 4.5%, that metric. And some of that will be some mix change will go through more so in August September. Speaker 300:18:29If you think last year following the disruption to the industry, our weight per shipment decreased quite a bit as we move through August September last year. Overall, for the Q3 of 'twenty 3, it was down about £30 versus the Q2 of 'twenty three. So had that reduction in weight per shipment. And I would like to see that at least our weight per shipment has been stable. If that continues to increase further in a reflection if there is any improvement in the economy, then that just becomes more challenging from a mix standpoint. Speaker 300:19:08But so far, what we've seen in July is pretty consistent with where we were in the Q2 in June in particular. So we'll continue to see how that plays out. Speaker 500:19:21Thanks so much. Best of luck, guys. Operator00:19:24The next question is from Chris Wetherbee with Wells Fargo. Please go ahead. Speaker 600:19:29Yes, hey, thanks. Good morning. Maybe Adam, if you could talk a little bit about weight per shipment trends, it's pretty flattish the last couple of quarters and certainly sequentially from 1Q to 2Q. Just kind of your general thoughts on how you see that playing out. Obviously, that could be part of just a sluggish economy as we're moving forward here. Speaker 600:19:47But you're going to get a sense of maybe what you're seeing in July, if there's any change in that? Speaker 300:19:52Yes, no real change in July. It's still kind of continuing to bounce around that 1500 pounds mark. And to me, I think that's what we've seen. Obviously, we saw the unique change that happened last year right at the end of July going into August and that took our weight down quite a bit like I just mentioned. But it just feels like we've been bouncing along the bottom and I think that's an indicator really where the industrial economy has been as well. Speaker 300:20:25So I think that should be one of the first signs and early indicators if we start seeing some incremental weight on each shipment that we're picking up that orders might be picking up and that would obviously be good for a lot of measurements. We can get more weight per shipment. Generally, that's going to lead to improvement in operating efficiencies. And generally, that leads into improved volumes in general, if the underlying economy truly is improving. So all things that we are very prepared for in terms of the capacity in our service center network, the capacity of our people and our fleet, we are primed and in position to respond whenever the market does in fact inflect to the positive. Operator00:21:15Got it. Thank you. The next question is from Scott Group with Wolfe Research. Please go ahead. Speaker 700:21:23Hey, thanks. Adam, just a couple of follow ups if I can first. The 4% to 4.5% revenue, any sense of breaking that down between tonnage and then yield? And then I just want to make sure I'm understanding your commentary about the 50 basis points worse, which is normal, are you saying even if we don't get the full typical 3.5% sequential revenue increase, we can still stay with the normal OR degradation and it's not worse. Is that the message that you're giving? Speaker 300:21:58Yes. I think to answer that question first, yes, I think that we're going to go with the 50 basis points being the target. And again, keep in mind, just like we said last quarter, put a plus or minus around that, not being that specific, anything can happen. But I think that our team is continuing to do a great job with managing cost in this lower volume environment, and we will continue to do so as we progress through the Q3. And so obviously, it's a little bit easier if we've got some revenue contribution. Speaker 300:22:33We typically have an increase in certain cost elements as we progress through the quarter. We're continuing to execute on our CapEx plan, so that we will have incremental depreciation dollars in the Q3 versus the second. We have a wage increase that will go out the 1st September as well, as it always does. So you get 1 month of that. And so we'll continue to monitor and measure operating efficiencies, and we've been seeing some improvements there and have some other offsets as well, continue to manage every discretionary dollar that's going out the door and managing to the business levels that we're seeing. Speaker 300:23:15So we'll continue to do all those things, but certainly hope that we'll see a little bit of incremental revenue improvement and that will make things easier, obviously. But we're going to continue to manage and have that hanging out there is our goal to achieve. Speaker 700:23:34And then any just quick thoughts, record buyback in the quarter, is this a change in sort of capital returns? Is this a new sort of run rate to think about going forward? Speaker 300:23:48No, it's no change. I think it's similar. It was a record level, as you say, but you go back a couple of years ago and when our stock performed similar to the big drop that we saw during the Q2. If you give back to 2022, we spent $1,300,000,000 in total that year. So had some pretty hefty quarters, it was just spread more through the year. Speaker 300:24:13But our stock was off 20%, 25% from 52 week highs going back to last quarter's phone call and earnings call. And so as we've done in the past, we stepped in and we're more aggressive with our repurchases and now the stock price has recovered a bit. And so going back more so to kind of our normalized grid based approach to repurchasing shares. But we just stepped in a little bit more aggressively with the cash that we had on the balance sheet and purchase more during the Q2, including an accelerated share repurchase agreement as well, which we still have got a little bit of about $40,000,000 that was deferred on that agreement that should settle sometime late Q3, early in the Q4. Speaker 700:25:08Thank you, guys. Appreciate the time. Operator00:25:11The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Speaker 800:25:17Thanks. Good morning, everyone. So this is probably the first upcycle in a while, maybe ever, where it's not just you who has the excess capacity, but a lot of your peers do as well. I think you kind of alluded to that in your prepared remarks as well. Do you have a sense that their approach to having this excess capacity and dealing with the drag on incremental margins is similar to your own? Speaker 800:25:40Or do you feel that they may be kind of looking to deploy that capacity a little bit earlier than you guys? Speaker 300:25:47Yes. It's I can't answer for what they're going to do with any measure of any excess capacity any individual carrier has. But with respect to just looking at the industry broadly, I feel like that we're going to be a more capacity constrained industry than we were previously. If you go back, we estimate that shipping volumes are down about 15% from kind of the peak back in 2021. And when you look at the number of service centers that have settled from that bankruptcy proceeding, not all are in operation yet, but probably at least 10% and maybe more capacity will be coming out of the market. Speaker 300:26:35So all those shipments that were being picked up and delivered by that carrier, they are LTL shipments. They will come back to the market and our market will recover to the levels where it was previously, and I believe we'll continue to increase further. So that's why we continue to believe and continue to invest ahead of our anticipated growth curve. We don't see anything that has changed with the look for high quality service carriers, inventory management continues to be an operating focus, especially in a higher interest rate environment. I think it puts the burden on shippers to select high quality carriers and there's none better than Old Dominion. Speaker 300:27:25So we look at the market generally and believe we've got strong an opportunity that we've ever had, and we think we're better positioned than any other carrier to capitalize on an improving industry. Speaker 800:27:40Understood. Thank you. Operator00:27:43The next question is from Tom Wadewitz with UBS. Please go ahead. Speaker 500:27:49Yes, good morning. So Adam, I wanted to see if you could give us I apologize if I missed this, but I think just like the July tonnage and shipments, I think you talked about revenue terms, but not the tonnage and shipments. I don't know if you want to give us like normal seasonality July versus June or year over year, but some kind of framework for thinking about shipments and tonnage in July? Speaker 300:28:13Yes. The breakdown, if you will, of the revenue, it's definitely in flux. I mean, like I mentioned, we were in the 1st part of this month, we were growing at a similar rate from a revenue per day standpoint is where we were for the Q2 and kind of that 6% range. And obviously, the comps have changed pretty considerably, mainly starting this week in particular. And so it's going to cause a little disruption to what the tonnage numbers look, what we're seeing today, we can extrapolate out, and we do, where we think we'll finish. Speaker 300:28:52But I think there's going to be a little flux with respect to what those final volume numbers and yield numbers might look like, given the drastic change in business levels and mix that we saw in that last part of the month of July. But at this point, I would say that 4% to 4.5%, I would say that the volumes are probably about flattish and that could be plus or minus one way around that and that flatness. And then from a yield standpoint, again, pretty consistent with what we just saw in the second quarter. And right now, it's looking a little bit stronger, but we'll see where those final numbers land. And of course, we'll put the final details out there. Speaker 300:29:41But just from a pure revenue standpoint, though, and just looking at revenue per day, July October are the months that we see decreases and as we go month to month progress through the year. And what we're seeing from a pure revenue today standpoint is pretty consistent with what normal seasonality would otherwise be, which is a drop off somewhere in kind of the 2.5% type of range. And that's pretty consistent with what our 5 year average has been there. So we'll look to see that we get some recovery back in August, which is normal. And then September, as you know, is pretty much our strongest month of the year. Speaker 300:30:25So can we see stronger acceleration going into the end of the quarter? I would hope so. We saw strong performance in March, strong performance in June. And if that can repeat, we'll see where we land. But that's kind of the lay of the land and what things are looking like at the moment. Speaker 300:30:45And of course, we'll update, as I mentioned earlier, with the final July and then the mid quarter update with our August trends. Speaker 500:30:54Okay. Yes. Thank you for that. Just one other quick one. On headcount, how are you thinking about headcount sequentially? Speaker 500:31:00Are you in kind of a flattish volume environment? Are we modeling headcount down a little bit sequentially? Are you kind of keeping it flat and keeping some capacity for when the volume improves? Speaker 300:31:11Well, I think we're in a good spot from an overall headcount standpoint. We're at the end of June, we're 150 to 200 people ahead of where we were in September of last year when we were handling 51,000 shipments per day. So we're in a good spot there. It drifted down just normal attrition kind of taking place through the Q2. And if that continues to occur as we go through the second half of the year, we're always balancing the changes and so forth, generally in alignment with what our shipment counts are and how they're changing. Speaker 300:31:54So it will be something that we continue to watch and deal with. But at this point, we're getting closer to where you generally have the seasonally slower parts of the year once we get into 4Q and 1Q, but we're keeping our eye out for what 2025 might look like. And you don't wait until it's coming at you. You got to get ahead of the curve, if you will. That's why this year, we invested so much and we always are investing in our people and restarted our truck driving schools and so forth and have continued to increase the number of employees with their CDLs to be ready for when our customers call on us and they need capacity, we want to be in a position to be able to respond with a yes, we can help you versus trying to play catch up and be reactive. Speaker 500:32:46Great. Thank you for the Operator00:32:49time. The next question is from Jon Chappell with Evercore ISI. Please go ahead. Speaker 900:32:55Thank you. Good morning. Adam, you know as well as anybody the bare thesis about capacity coming online, whether it's the other terminals that were auctioned or the organic growth by some of your peers and what that may be to pricing. It sounds like early stages of 3Q pricing has been relatively consistent. But as we think about the anniversarying the yellow bankruptcy starting in 4Q, most especially from a yield perspective, is there any reason why you wouldn't see typical seasonal trends in yield beyond this summer, whether that relates to capacity or any other factors in the market? Speaker 300:33:31Like I said earlier, maybe to just elaborate on that, but we're continuing to see good yield performance and that's what we expect. I mean, this is something that we work on day by day. Our sales team and our pricing and costing teams are all working together and working with our customers to ultimately provide value to their supply chains. But our yield management philosophy is to attain increases that not necessarily are market driven in a sense of the markets in our favor or not. It's what's our cost inflation looking like and then what are the continuing needs of our business. Speaker 300:34:12And that's been a long term philosophy that is consistent and has worked for us. And so that's what we would continue to expect as we move forward as well. And we're negotiating and working every day and would expect that as any contracts are coming due that we will work through and need to obtain increases on those. So regardless of what other carriers and specific issues or areas or whatnot may be going on, we expect that we'll continue to see disciplined environment in the industry and that's what we've seen thus far. So we'll just continue to manage through that and keep sort of focusing on what we do and what we can deliver and continue to add value to our customer supply chains. Speaker 900:35:08Okay. Thank you, Adam. Operator00:35:11The next question is from Eric Morgan with Barclays. Please go ahead. Speaker 1000:35:16Hey, good morning. Thanks for asking or for taking my question. I wanted to ask one on cost inflation. Your comp per employee has been up maybe mid single digits or so for about a year now. Just wondering as you think about another wage increase later this quarter and as broader inflation measures are trending down a little bit, should we start to see that moderate? Speaker 1000:35:40And maybe how does that factor into the sequential OR outlook for 3Q? Thanks. Speaker 300:35:46Well, generally speaking, when you look over the longer term, when you look at our cost per shipment, if you will, wage cost per shipment is generally going up about 3% to 3.5 percent and more in line with what the wage increase that we give every year has been. There has been inflation that we've seen in our benefit cost, though, and we experienced some of that as well in the Q2. And those fringe benefit costs include multiple factors, some of which are improvements to the overall comp program that we offer to employees and things like paid time off benefits that we've improved over the years and the quality of our group health and dental programs as well. So I mean those are incremental changes that we're always having to manage. And maybe there's a little bit more variability in terms of when you're self insured on the health program, you can have changes in 1 quarter versus the next that aren't necessarily going into alignment with what shipment volumes may be changing. Speaker 300:36:56But looking over time, that's just something that we would expect will continue to change and reflect the improvements in terms of the benefit program and comp program that we offer employees. But 65% of our costs are salaries, wages and benefits. So that's generally been the biggest driver of our total cost per shipment inflation that's averaged 3.5% to 4% over the long term as well. So that all goes into it. We've had a lot of other incremental inflationary items, things like the cost of our equipment, maintenance costs that have been up double digits on a per mile basis the last few years, insurance costs that is a problem for the industry that have been up double digits for multiple years in a row. Speaker 300:37:45All of those things we continue with and that's why there's got to be an ongoing focus on operating efficiency and discretionary spending. And we're managing our costs day by day in good times and bad. If you wait until it's too late, if you wait until they're bad times, you got to have that focus going every day or you may not even know where to start. So that's something that we're always looking at, how can we offset all those other costs to basically keep our cost inflation in check. And then as you know, the yield management philosophy is we try to achieve 100 to 150 points of positive spread over top of that cost inflation metric. Speaker 300:38:26So that keeps our pricing levels in check with the rest of the industry as well. So it all kind of goes into it, but it's a day by day fight to try to keep our cost inflation minimized as best as we can. Speaker 1100:38:44Appreciate it. Operator00:38:47The next question is from Bascome Majors with Susquehanna. Please go ahead. Speaker 1200:38:53Adam, it's encouraging to hear that some signs of seasonality have stuck with you through July so far and appreciate the framing of typical 3Q seasonality about the top line and the margin side. Can we look ahead to 4Q without necessarily blessing whether the market suggests will be above or below? But how do you frame seasonality for your business into 4Q, both on top line and a margin basis looking back historically as we try to level set our views? Thank you. Speaker 300:39:24Yes. So as I've said a couple of times, the 4th quarter and the first quarter are seasonally slower periods, if you will. The 4th quarter from just a pure revenue per day standpoint, it's just a slight drop off. And then you go into the Q1 and revenue is down, maybe down in the 4th quarter, 0.5% sequentially versus the 3rd quarter and then you drop on average about 1.5% going into the 1st quarter. From an operating ratio standpoint, the 4th quarter is typically about 200 basis points to 2 50 basis points higher than the third. Speaker 300:40:05And a lot of that is the revenue level softening a little bit. We've got 3 months of that wage increase. And that normal change, if you remember from last year, we always have actuarial assessment of our insurance reserves in the 4th quarter, and those adjustments can go one way or the other. I generally view those as a reconciling item to whatever that normal change is. And last year was an unfavorable adjustment to the insurance and claims line, but few years prior, they had been favorable adjustment. Speaker 300:40:38So kind of throw that out of the window when just looking at what is that normal cost progression change. Speaker 900:40:48Thank you. Operator00:40:51The next question is from Ken Hoexter with Bank of America. Please go ahead. Speaker 600:40:56Great. Thanks and good morning. I guess maybe I need to check numbers a little bit. I think we've got a 10 year average in Q2 or the Q3 of a 10 basis point improvement, not a 50 basis point decrease. So I just wanted to double check that. Speaker 600:41:10And then as you start to lap the yellow freight data, last year you went from down upper teens on revenue per day and mid teens tons per day to kind of much smaller losses. I guess given that backdrop, how should we think about the market kind of tonnage per day growth? I know you've talked a lot about revenue per day, but how do we think about the tons per day shift as we move into the 3rd quarter or into the back half of the third quarter and into the 4th quarter? Speaker 300:41:41Yes. And I'll come back to that. Let me just address that, the second quarter to third quarter change. You're right, the pure math is more about a 10 basis point change, but there are a couple of years in there that skew that And 'twenty three last year, obviously, we had a major acceleration in revenue that allowed us to improve the operating ratio of 170 basis points from the 2Q to 3Q. And then 2020 was similar, where you had the COVID cliff that happened and then the reacceleration of business levels. Speaker 300:42:17So when I just look at more of a normalized kind of progression, that's typically what we'd expect unless you've got something unusual going on that would drive some change there. With respect to the tonnage question and shipments, I mean, obviously, as you said, we're we had the acceleration that was meaningfully happening last year. If you recall, we were at 47,000 shipments per day really from December of 'twenty two through July of 'twenty three and immediately stepped up to about $50,000 in August and then accelerated further to 51,000 in September. So step function change that would be well above anything that was really happening with the underlying economy, if you will. So if we can see some type of normal acceleration, if you will, just like from a tonnage standpoint, Our 10 year average from July to August is 0.6% increase there and then about 3.5% increase in September. Speaker 300:43:33So we'll see how that goes. But right now, even if you hit those, it would look like you would have negative change in those volumes. But overall, I think it's just as we look at things sequentially, maybe more so than just the year over year, given that challenge is what can we achieve relative to what normal seasonality would be and what we've seen at least so far through July. From a tons per day standpoint, just from a pure quarter, we're typically up about 1%. And when we gave the numbers earlier, but in the Q2, that average is just, call it, 6%, and we were up 3% just sort of rounding numbers. Speaker 300:44:20So we were up kind of half of what normal seasonality would suggest. So we've got to make up some ground. Like I said earlier, we always lose a little bit of business in July, and that's normal. And so if we can have kind of a little bit of acceleration through August and then see some acceleration into September, we were almost at normal seasonality in the June period. And so and the same thing with March, you got to adjust for the Good Friday, but we're about at seasonality in those stronger growth months of the quarter. Speaker 300:44:57So if we can make some progress in August and then see some sense of that strong acceleration through the month of September, I think we'll be okay and we've positioned ourselves well. Whenever we come out of this true economic downturn, we're operating at a 72% essentially and 71.9%, I guess I should take credit for every basis point we have. And in terms of where we've operated and when I look at the breakdown of our operating ratio in the quarter and where we are from an overhead standpoint relative to our direct variable cost, I'm really pleased with the improvement that we've made with our direct cost performance. And that just gets into the day to day management within our operations in the field primarily. And but everyone is contributing to that overall operating ratio and but our overhead costs have increased. Speaker 300:45:54They're 20% to 21% of revenue in the most recent quarter. Those costs have been down to around 17% in the past. So once we get some true density coming back into the network, we've built our network and our system to accommodate more than 60,000, whatever that number is, that's where you'll really see the power of operating density in the model. And you move that scale from 20% to 21% back towards 17 that puts us back in with an OR with a 6 handle on it back where we were in 2022. So it's I think we're in a great spot and have managed through this downturn very well and has certainly put ourselves in a great position to capitalize on the market when we actually start seeing some economic wins that are back. Speaker 1100:46:55Thanks for Speaker 1300:46:55the time, Adam. Appreciate it. Operator00:46:58The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 1100:47:05Hey, good morning. Thanks for taking the question. So Adam, maybe you can elaborate a little bit more on what end markets or maybe customers you're seeing some of that strength at the end of the last two quarters in March June. Is there anything to read into that? Does it give you any sort of forward looking to the back half of the year or next year? Speaker 1100:47:24And then just kind of another follow-up on competition and extra capacity coming online. Are you seeing anything as these new facilities come back online, anything that you would call out from either service being disrupted by some of your competitors Or are they being a little bit more aggressive to maybe fill some of those doors and pricing more to capacity and not necessarily Speaker 200:47:47cost? Good morning. This is Marty. I'm going to answer your customer question. I'm still heavily involved with a lot of our top customers and the feeling out there is not all doom and gloom. Speaker 200:47:59In fact, our top 50 customers are up mid single digits year to date. So we're getting a lot of positive remarks, especially from our larger customers. So we and they as well see some positive things for the rest of the year. So we're very positive often that those things will continue. So and as Adam said earlier, they feel and I feel if we can see some interest rate drops toward the end of the year, I think we'll really accelerate. Speaker 200:48:31So we're looking forward to that and prepared to handle it. So it's not all doom and gloom out there, trust me. Go ahead. Speaker 300:48:38Yes. And on the competitive side, we've not seen, don't think, any material change in the sense of someone has opened one service center in whatever market, any type of real impact. And as you can see in our yield trends, things continue to be consistent with our performance. That's just something we'll continue to manage through and monitor. But given the cost that went into purchasing many of these facilities, We'd be a little surprised to see someone going out and having to be aggressive to try to fill it up. Speaker 300:49:23And the end of the day, those service centers serve the market for a reason. They were in existence. And those particular markets had a customer base that their sales reps called on and there's LTL shipments that are out there. And as I referenced earlier, I mean, the market is down overall, and we estimate that it's down about 15% from back from in 20 21, but that's something that will recover. Those LTL shipments, those customers will continue to have freight that needs to be moved through an LTL network. Speaker 300:50:01And I think that, that will end up creating opportunity for us, for the industry in general to refill those facilities, if you will, once they come online. But to me, it creates maybe even more Speaker 200:50:17130 facilities that haven't been sold. So that's actually less capacity when things pick up than we had when YRC was still in business. Speaker 1100:50:29Okay. Thanks very much, guys. Operator00:50:31The next question is from Stephanie Moore with Jefferies. Please go ahead. Speaker 1400:50:36Hi, good morning. Thank you. I wanted to touch a bit on some of your network investments and maybe some of terminals that have been opened so far this year. So maybe you could give us an update on kind of new terminal openings or door additions year to date thus far and then an update in terms of your plans for maybe the back half of this year, if there's been any kind of maybe postponement or pause just given the state of the underlying macro? Any color there would be helpful. Speaker 1400:51:04Thanks. Speaker 300:51:06Yes. We've opened 3 service centers this year, and we're continuing to execute on our CapEx plan. The current estimate is to spend about $350,000,000 this year, at least on the real estate component of that program. So our plan is we look at the network, we look at the service centers that we feel like need some measure of capacity. And when we look kind of over the next 5 years and what the anticipated growth curve may be and the efficiency of the network comes into play as well, the location of where these facilities are. Speaker 300:51:46And so that kind of goes into the overall plan. And we're a little bit heavy right now, frankly. It's not unusual when we go through a slower economic environment to get a little ahead of the curve. We our long term strategy is we like having 20% to 25% excess capacity in the system. We're at about 30% today. Speaker 300:52:10And that's okay. We're comfortable with that. Now what that may mean is exactly what you said, there may be facilities that are in process today. We will finish those facilities. And if the demand environment doesn't dictate that we go ahead and open them immediately, we'll finish the construction, we'll start the depreciation and so forth of those facilities, but we'll wait until there's stronger demand to really justify the opening and all the incremental overhead cost that goes along with those facilities once they're operational. Speaker 300:52:45Not just the overhead, but there's configurations to the line haul network that has to happen. And generally, that negatively impacts load factors. So that's something that these other carriers that are opening multiple facilities will be facing the incremental cost there, which is another reason why we don't anticipate seeing reductions in pricing or any pressures there. But so that's something that just goes into it and we'll continue to look and evaluate. But overall, continuing to plan and we'll continue to the investments that we make are really just based on what we think the market share opportunities are in each of the respective areas. Speaker 300:53:30And so we feel like we've got tremendous opportunity ahead, and thus, we intend to continue to spend 10% to 15% of our revenues every year on total capital expenditures, the real estate and then obviously on the fleet and the technology side as well to keep pace with our anticipated growth. Speaker 1400:53:51Great. Thank you so much. Operator00:53:53The next question is from Bruce Chan with Stifel. Please go ahead. Speaker 1300:53:59Hey, good morning, everyone. Adam, I wanted to follow-up on the seasonality and the macro comments or certainly Marty, given your discussion with customers. But obviously, there's a lot of moving parts this year with the geopolitical situation and with the election. There's been some talk on the 3PL side about volume pull forward. So maybe just wondering if you've gotten any indication from customers to that effect or if you think the demand and seasonality conversations seem to be pretty clear right now? Speaker 1300:54:29Thank you. Speaker 200:54:30Yes. As I've said before, about a third of our business is 3PL related and those are basically the top customers that I was referring to. And most of those that come in here are giving us new opportunities to go in with them and handle their business. And for the most part, they're super positive. We have a set of 3PLs in here this morning that I've already talked to and they're super positive and they've got growth opportunity. Speaker 200:54:58So I'm positive as well that we'll see some positive results from these customers. So and hopefully next year in the geopolitical environment, if we see some change there, I think it will be even more positive. Speaker 300:55:21Adam? No, I don't really have anything to add. I think that obviously anytime there's an election year that creates uncertainty and usually puts pressure on the overall shipping environment. And we've seen that this year on top of a slower industrial economy in general. So I think that's something that will just be one more measure of uncertainty that will soon be put to bed, whatever direction it goes. Speaker 300:55:50But I think just broadly speaking, if we start having clarity on some of the macro factors that are impacting business owners and the decisions that they make about expanding their businesses and so forth. And we can make changes from an interest rate environment that helps and helps people and the consumer. We're still a consumer driven economy. And so that's something that if we can keep a healthy consumer out there, they're buying things that creates inventory that's got to be replenished and that's the customer call that comes into OD for a shipment to be picked up. So that will be the opportunity created. Speaker 300:56:34So it's something that we'll continue to measure and monitor and so forth. But we're as Marty mentioned, we're seeing improved performance with our 3PL customers right now. We had a little bit stronger retail related performance in the Q2. Industrial was okay, but kind of reflects the industrial environment like the ISM metrics that we talked about earlier. So but all of that, it's called a cycle for a reason. Speaker 300:57:03And it's easy to get caught up when you're in the down part of the cycle. We've managed through that. We've been in the down part of the cycle for a lot longer than I had originally anticipated. But it will turn back to the positive at some point and we're in a great position to capitalize when it does. Speaker 1300:57:24Okay. Thanks for that. Operator00:57:27The next question is from Jason Seidl with TD Cowen. Please go ahead. Speaker 1300:57:32Thank you, operator. Hey, Marty. Hey, Adam. Thanks for squeezing me in here. Just wanted Speaker 100:57:36to follow-up Marty to some Speaker 1300:57:37of your comments. You mentioned that you've been talking to a lot of your big customers and it's not all doom and gloom. I was wondering, sort of what areas those customers are in? Is this spread across the board? Is this more consumer versus industrial? Speaker 1300:57:50And the other one would be, we've heard a lot about some business being pulled forward from peak season into the 2Q and I guess the start of 3Q here. I'm wondering if you guys have seen any impacts from that and how should we look at that going forward? Speaker 200:58:04Well, it's all over the board from a product or commodity standpoint. As you see on the news daily, your hospitality and your opportunities that we have from these 3PLs and other customers, it's just all over the board. Your inventories are all over the board. You hear some that say, we still have a little inventory from last year and others say our inventory is getting low. So we're going to start ordering product, whether that be domestically or overseas. Speaker 200:58:41So it's just all over the board. But like I said earlier, I'm still I'm very positive that things have basically bottomed out and I'm looking forward to better times. Speaker 1300:58:56Okay. In terms of Speaker 300:58:56the pull forward, have you Speaker 1100:58:57seen any impact? Speaker 300:58:59We've not really heard any material discussion pull forward or whatnot at this point. Or at least I've not heard anyone, any of our anyone from our sales team or any customer that we've had here in the office that's really spoken to that. Yeah, me either. Speaker 1300:59:23Okay, perfect. Gentlemen, appreciate the time as always. Speaker 300:59:27Thanks, Operator00:59:28Dave. And the final question today is from Jeff Kaufman with Vertical Research Partners. Please go ahead. Speaker 1500:59:34Thank you very much and thanks for squeezing me in last year. Marty, bigger picture thought question, I'm just curious your view. If I look at the ATA LTL tonnage index, it's down about 8%. And a year ago before yellow, the volumes of the publicly traded LTL carriers were tracking more closely to that. Since yellow happened, the publicly traded group is showing kind of flat to up 2% tonnage, but the ATA tonnage index is still showing down about 8%. Speaker 1501:00:08Is there something going on? Like why would it diverge so much? And is there something going on maybe where the smaller LTL carriers might be struggling a little bit more than you and some of your larger peers? Can you help me kind of bridge this gap? Speaker 201:00:24Well, I think probably what you saw when YRC went out of business is that customers were struggling to find ways to move that freight and some of it went and not a large portion of it, but I would some of it went to your smaller freight forwarders, air freight forwarders, smaller logistic companies. And I think that's where some of that has gone. And those guys basically don't have any assets, they're handling it at a lower rate. And I think some of that business moved to full truckload carriers as the economy started to slow. And as I've said before, when your economy starts to pick back up, your the LTL industry will benefit from that even from the full truckload industry because we saw some of that freight move to those full truckload carriers as it relates to stop offs. Speaker 201:01:27And once those full truckload carriers begin to get busier and their capacity gets tighter, that freight will move back toward the LTL industry. So I think that type the business moved a little bit everywhere based on price. And so that's how I see it. That's the only way I can explain it. Speaker 1501:01:46So the bigger point I'm going for here is, as you mentioned earlier, you got the PMI down in negative territory right now, industrial production is kind of flattish, you're 50%, 60% industrial. When we look at your tonnage growth of 2%, you're not chasing any yellow business, The industry is probably a lot weaker in aggregate than what the 5 or 6 publicly traded truckload companies are reporting that that 2% tonnage growth actually is stronger than the industry appears to be if we look at it through a broader lens and not just the lens of the publicly traded guys? Speaker 501:02:28Yes. Speaker 301:02:32Like you said, I mean, it's hard to know as we don't have access to all the private carriers, if you will. But we think some of that business may have gone there. But I think everyone's just been facing the challenge of the slower economy. And so that business, it's hard to trace through when Yellow did 50,000 shipments per day and you just look at I did the comparison, I'm looking at Q2 'twenty three numbers and most recently compared them to the Q1 'twenty four for the at least the publicly traded carriers, which are 65% to 70% of the industry's revenue. But trying to trace through and figure out where all those shipments went and how they're being handled and and what motor they're being handled by is a tough task. Speaker 301:03:27But the thing that we take away and what I mentioned earlier is, if economically it made sense for those shippers to move their freight within the LTL environment, sharing the cost, leveraging an LTL carrier's network, sharing the cost on smaller shipment sizes with other shippers within the environment, all the benefits of moving freight by LTL that exist, which creates, we think, long term opportunity for our industry, those shipments are going to return and they will be there and available again. And so that's why we continue to believe that our Industry 1 will be increasing. We'll get back to the levels where we were in 2021, and I believe we'll grow further beyond there. And we're in an environment that I think we'll end up with who knows what the final capacity number will be. But at this point, it looks like total industry capacity could be down 10% or maybe even more from where we were at that 2021 period. Speaker 301:04:35So you've got more volumes and less capacity overall that exist and there may still be a little bit of shuffling around with those shipments and ultimately finding a home once the market tightens up and everyone gets really busy again. I think that's when you'll see who's really got the best long term strategy, who has got the best service, the best value, network capacity, people capacity, equipment capacity. I think when you look at all those factors and who delivers the best value, I think the answer is just clearly Old Dominion. And so that's why we're excited about what our long term opportunities are and think that we will continue to win market share and ultimately create incremental shareholder value. Speaker 1501:05:26Thank you for your insight. Operator01:05:29This concludes our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks. Speaker 201:05:36Remarks. Thank you all for your participation today. We appreciate your questions and please feel free to give us a call if you have anything further. And I hope you have a good day and a good rest of your summer. Thanks. Operator01:05:49The conference is now concluded. Thank you for attending today's presentation. You may nowRead morePowered by Key Takeaways Old Dominion reported 6.1% year-over-year revenue growth to $1.5 billion in Q2, driving an operating ratio improvement to 71.9% and an 11.3% increase in EPS to $1.48. The company maintained its service excellence with a 99% on-time delivery rate and a 0.1% cargo claims ratio, earning the top national LTL carrier ranking for 14 consecutive years. Strategic investments have exceeded $2 billion over the past decade and will include an additional $350 million in real estate this year, sustaining approximately 30% excess capacity to accommodate future demand. Strong cash flow generation in Q2 ($387.8 million) funded $551.8 million in share repurchases and $56 million in dividends year-to-date, underscoring disciplined capital allocation. Looking ahead to Q3, revenue per day is expected to rise about 4%–4.5% year-over-year, with a target of a 50-basis-point sequential operating ratio improvement as market conditions normalize. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallOld Dominion Freight Line Q2 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Old Dominion Freight Line Earnings HeadlinesIs Old Dominion Freight Line, Inc. (NASDAQ:ODFL) Worth US$162 Based On Its Intrinsic Value?May 27 at 6:21 PM | finance.yahoo.com1 Top Dividend Stock That Could Soar in a Good EconomyMay 27 at 3:35 AM | fool.comURGENT: Someone's Moving Gold Out of London...People who don’t understand the gold market are about to lose a lot of money. Unfortunately, most so-called “gold analysts” have it all wrong… They tell you to invest in gold ETFs - because the popular mining ETFs will someday catch fire and close the price gap with spot gold. May 29, 2025 | Golden Portfolio (Ad)Is Now An Opportune Moment To Examine Old Dominion Freight Line, Inc. (NASDAQ:ODFL)?May 22, 2025 | finance.yahoo.comOld Dominion Freight Line declares $0.28 dividendMay 22, 2025 | seekingalpha.comOld Dominion Freight Line Announces $0.28 Per Share Quarterly Cash DividendMay 22, 2025 | businesswire.comSee More Old Dominion Freight Line Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Old Dominion Freight Line? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Old Dominion Freight Line and other key companies, straight to your email. Email Address About Old Dominion Freight LineOld Dominion Freight Line (NASDAQ:ODFL) operates as a less-than-truckload motor carrier in the United States and North America. The company offers regional, inter-regional, and national less-than-truckload services, as well as expedited transportation. It also provides various value-added services, including container drayage, truckload brokerage, and supply chain consulting. As of December 31, 2023, it owned and operated 10,791 tractors, 31,233 linehaul trailers, and 15,181 pickup and delivery trailers; 46 fleet maintenance centers; and 257 service centers. Old Dominion Freight Line, Inc. was founded in 1934 and is headquartered in Thomasville, North Carolina.View Old Dominion Freight Line ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles CrowdStrike Stock Slips: Analyst Downgrades Before Earnings Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsAdvance Auto Parts: Did Earnings Defuse Tariff Concerns?Booz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, Upgrades Upcoming Earnings CrowdStrike (6/3/2025)Haleon (6/4/2025)Broadcom (6/5/2025)Oracle (6/10/2025)Adobe (6/12/2025)Accenture (6/20/2025)FedEx (6/24/2025)Micron Technology (6/25/2025)Paychex (6/25/2025)NIKE (6/26/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 16 speakers on the call. Operator00:00:00Good morning, and welcome to the Old Dominion Freight Line Second Quarter 2024 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Investor Relations. Operator00:00:38Please go ahead. Speaker 100:00:40Thank you, Gary, and good morning, everyone, and welcome to the Q2 2024 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through July 31, 2024, by dialing 1-eight seventy seven 344-seven thousand five hundred and twenty nine, access code 9,201,305. 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. Speaker 100:01:30Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to forward looking statements. 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 and in this morning's news release. And 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. Speaker 100:02:14At this time, I would like to turn the conference call over to Mr. Marty Freeman, the company's President and Chief Executive Officer, for opening remarks. Marty, please go ahead, sir. Speaker 200:02:23Good morning, and welcome to our Q2 conference call. With me today on the call is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Old Dominion's 2nd quarter results represent our 3rd consecutive quarter with year over year growth in revenue and earnings per diluted share despite the ongoing sluggish in the domestic economy. These results were made possible by the hard work and dedication of the OD family of employees who continue to execute our long term strategic plan during the Q2. Speaker 200:03:00I'd like to congratulate our outstanding team for maintaining our commitment to providing superior customer service at a fair price as well as our disciplined approach to managing yield, our laser focus on operating efficiencies and controlling our discretionary spending. Delivering superior service at a fair price is the cornerstone of our business model and our unmatched value proposition has continued to differentiate Old Dominion Freight Line from our competition. I'm pleased to report that during the Q2, we once again provided an on time service level of 99% and a cargo claims ratio of 0.1%. Constantly delivering the level of service for our customers regardless of the economic cycle has strengthened our customer relationships over time. We help our customers keep their promises they have made to their customers by delivering their freight on time and damage free, which in turn allows us to continue to help the world keep their promises. Speaker 200:04:03The consistency of our service is also validated by Mastio and Company who has named OD as the number one national LTL carrier for 14 consecutive years. Our strong track record of industry leading service also means our customers view us as a trusted partner, which supports our consistent cost based approach to pricing. Our long term yield management strategy is designed to help offset our cost inflation, while also supporting further investments in the capacity and technology that our customers expect. We have been one of the only LTL carriers to constantly and consistently invest in new capacity over the past 10 years, which has supported our ability to almost double our market share over the same period. We are committed to constantly investing ahead of anticipated growth curve, which is another differentiating quality for Old Dominion and what has been and what we believe will continue to be a capacity constrained industry. Speaker 200:05:05Over the past 10 years, we have invested over $2,000,000,000 in our service center network and we plan to invest another $350,000,000 on real estate this year. These investments have positioned us to grow with our customers over time through the ups and downs of the economic cycle, which hasn't been the case with most of our competitors. Maintaining excess capacity in our service center network, which has approximately 30% at the end of the second quarter, does create some short term cost headwinds during periods with slower demand. But we are confident that the capacity will be critical to support our customers when the economic environment starts to improve and business levels reaccelerate. With all that said, our network investments are not being made simply to handle the overflow during stronger periods of economic activity. Speaker 200:05:58Instead, as we look into the future, we believe demand for service sensitive LTF capacity will continue to grow. We believe that the combination of our best in class service and disciplined investments in network capacity position us to capture even more of the growing market in the years ahead. Over the last decade, Old Dominion Freight Line has won more market share than any other LTL carrier by consistently executing our strategic plan and remaining focused on long term opportunities instead of short term challenges. While we continue to wait on a recovery in the domestic economy, we believe the investments in our network, our technology and most importantly, our people will continue to drive value to our customers. As a result, we believe we are the best positioned carrier in our industry to win market share over the long term, while further enhancing shareholder value. Speaker 200:06:56Thank you today for joining us this morning. And now Adam will discuss our Q2 financial results in greater detail. Adam? Speaker 300:07:04Thank you, Marty, and good morning. Ultomillions revenue for the 2nd quarter of 2024 of $1,500,000,000 was a 6.1% increase from the prior year. The increase in revenue was due to a 4.4% increase in LTL revenue per hundredweight and a 1.9% increase in LTL tons per day. Our operating ratio improved to 71.9%, which contributed to the 11.3% increase in earnings per diluted share to $1.48 for the quarter. On a sequential basis, our revenue per day for the 2nd quarter increased 2 point 6% when compared to the Q1 of 2024, with LTL tons per day increasing 3 point 3% and LTL shipments per day increasing 3.2%. Speaker 300:07:57For comparison, the 10 year average sequential change for these metrics includes an increase of 8.7 percent in revenue per day, an increase of 5.8% in tons per day an increase of 5.8% in tons per day and an increase of 6.5% in shipments per day. The monthly sequential changes in LTL tons per day during the Q2 were as follows: April increased 0.4% as compared to March May increased 0.1% as compared to April, and June increased 1.9% as compared to May. The 10 year average change for these respective months is a decrease of 0.4% in April, an increase of 2.7% in May and an increase of 2.3% in June. I would like to note, however, that in years when Good Friday occurs in March, as it did this year, the average sequential change in the LTL tons per day from March to April is a 2.6% increase. For July, we expect our revenue per day will increase by approximately 4% to 4.5% when compared to July of 2023, assuming the remaining days of the month follow normal historical trends. Speaker 300:09:20The growth rate in our revenue per day through the first half of July was relatively consistent with the Q2. The comparisons have now become a little more difficult, however, as the final week of July last year was when we began to see freight diversion from a large competitor that ultimately filed for bankruptcy. We will provide the actual revenue related details for July and our 2nd quarter Form 10 Q. Our operating ratio improved 40 basis points to 71.9 percent for the Q2 of 2024, due primarily to the quality of our revenue growth and continued focus on operating efficiencies. Our team continued to do a great job of managing our direct variable costs during the Q2, which allowed us to improve these costs as a percent of revenue. Speaker 300:10:11Our overhead costs, however, continued to increase as a percent of revenue despite our best efforts to minimize discretionary spending. As we have often said before, the 2 main ingredients to long term operating ratio improvement are the combination of density and yield, both of which generally require a favorable macroeconomic environment. While we continue to execute on our yield management initiatives, it will likely take an improvement in the domestic economy before we see sustained momentum in shipping demand that generally leads to incremental market opportunities and operating density. We remain confident that once we have both of these elements working again in our favor, our team can produce further improvement in our operating ratio and make progress towards our goal of achieving a sub-seventy percent annual OR. Old Dominion's cash flow from operations totaled $387,800,000 $811,700,000 for the Q2 and first half of twenty twenty four, respectively, while capital expenditures were $238,100,000 $357,600,000 for those same periods. Speaker 300:11:28We utilized $551,800,000 $637,100,000 of cash for our share repurchase program during the 2nd quarter and first half of twenty twenty four, respectively, while cash dividends totaled $56,000,000 112 point $1,000,000 for the same periods. This year to date total for share repurchases includes $40,000,000 that is deferred until the final settlement occurs on our current accelerated share repurchase agreement, which would be no later than November of 2024. Our effective tax rate for the Q2 of 2024 was 24.5%, which was lower than originally expected due to the benefit of certain discrete tax items. The effective tax rate for the Q2 of 2023 was 25.4%. We currently anticipate our effective tax rate to be 25.0 percent for the Q3. Speaker 300:12:30This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time. Operator00:12:37We will now begin the question and answer session. Our first question today is from Jordan Alliger with Goldman Sachs. Please go ahead. Speaker 400:13:08Yes, hi, morning. Thanks for the update. I wonder as you often do, is it possible to get some sense for given the context of revenue per day and what you're seeing in the economy, how things could look seasonally 2Q to 3Q in terms of the operating ratio? Thanks. Speaker 300:13:28Yes, sure. Unfortunately, we're still dealing with an economy that's not contributing too much to us right now with 55% to 60% of our revenue being industrial related. The ISM continues to be below 50%, and I think 19 out of the past 20 months. So it's hard to say what will happen from a top line basis. And as you know, the revenue will dictate a lot of the performance, at least when we go sequentially. Speaker 300:13:57But I feel like some things, if there have been some bright spots to look at in terms of the trend that we saw through June and so far this month in July from a revenue and a volume standpoint. So we'll see how that continues to play out as we progress through the quarter. And as we always do, we will give our mid quarter update with the August performance once that is finished. But based on kind of where we are today, normal seasonality is typically about a 50 basis point increase sequentially from the 2nd to the 3rd quarter. And I think that's achievable. Speaker 300:14:38It's certainly what the goal would be. And I think that regardless of which way the revenue goes, if we stay kind of flattish like we've seen from a quarter to quarter standpoint, Typically, the average sequential change in revenue is about a 3.5% increase from the 2nd to the 3rd quarter. So where we follow along that spectrum from the top line basis, I still think that something along the lines of that 50 basis point sequential increase, plus or minus, of course, we generally give ourselves kind of plus or minus 20 basis points. But I think that's something that's certainly very achievable for the Q3. Speaker 400:15:21And just as a quick follow-up, if I could. Just on the demand. You mentioned the sub-fifty ISM and new orders index as well. I mean, as you sort of look ahead and talk to customers, I mean, do you feel that there could be finally some change in that as we move through the year? Or is it tough to tell Speaker 300:15:42still? Well, I think it's still tough to tell. I mean, we're I feel like things are starting to fall a little bit. Again, I felt like we had a good performance through June. We finally had some good sequential increase there from a volume standpoint. Speaker 300:16:01And so a little bit of acceleration and somewhat similar to what we had in the final month of the Q1 with March there, but a nice increase from the May to June period. So something that we'll continue to watch. We've got the Q3 here and then we typically go through the seasonally slower Q4 and Q1. But hopefully, some things are building. I think when you look at some of the macroeconomic factors, it would suggest that maybe some of the things that the Fed would watch would indicate that we may be closer to the interest rate environment, maybe improving a little bit and seeing some cuts out there that certainly helped from a business standpoint. Speaker 300:16:44So it seems like we're coming close to the end of a long slow cycle and we'll just have to continue to watch and see what's presented to us. But it certainly feels like we're seeing a little bit more opportunity out there than what we have been seeing. Speaker 400:17:02Thank you so much. Operator00:17:04The next question is from Daniel Imbro with Stephens Inc. Please go ahead. Speaker 500:17:10Hey, good morning guys. Thanks for taking our questions. Maybe Adam, I wanted to ask one on the pricing side. I think the mid quarter update suggested pricing was stable. June actually seemed to improve a bit. Speaker 500:17:21I guess how is pricing continuing into July? Are we seeing any changes? And stepping back just from an industry standpoint, demand remains tepid to your point. Can the industry support further GRIs and other rate increases in the back half of this year as comparisons get more difficult? Thanks. Speaker 300:17:37Yes, I think what we've seen is just a continuation of executing on our long term yield management philosophy. And we continue to target increases that offset our cost inflation and support the continued investment and capacities that our customers expect from us. And our yield trend in June what we're seeing thus far in July is pretty similar. From a year over year standpoint, if you just sort of look at normal seasonality and revenue per hundredweight, at least excluding fuel, normal sequential would imply that for the full quarter, it would be up 4% to 4.5%, that metric. And some of that will be some mix change will go through more so in August September. Speaker 300:18:29If you think last year following the disruption to the industry, our weight per shipment decreased quite a bit as we move through August September last year. Overall, for the Q3 of 'twenty 3, it was down about £30 versus the Q2 of 'twenty three. So had that reduction in weight per shipment. And I would like to see that at least our weight per shipment has been stable. If that continues to increase further in a reflection if there is any improvement in the economy, then that just becomes more challenging from a mix standpoint. Speaker 300:19:08But so far, what we've seen in July is pretty consistent with where we were in the Q2 in June in particular. So we'll continue to see how that plays out. Speaker 500:19:21Thanks so much. Best of luck, guys. Operator00:19:24The next question is from Chris Wetherbee with Wells Fargo. Please go ahead. Speaker 600:19:29Yes, hey, thanks. Good morning. Maybe Adam, if you could talk a little bit about weight per shipment trends, it's pretty flattish the last couple of quarters and certainly sequentially from 1Q to 2Q. Just kind of your general thoughts on how you see that playing out. Obviously, that could be part of just a sluggish economy as we're moving forward here. Speaker 600:19:47But you're going to get a sense of maybe what you're seeing in July, if there's any change in that? Speaker 300:19:52Yes, no real change in July. It's still kind of continuing to bounce around that 1500 pounds mark. And to me, I think that's what we've seen. Obviously, we saw the unique change that happened last year right at the end of July going into August and that took our weight down quite a bit like I just mentioned. But it just feels like we've been bouncing along the bottom and I think that's an indicator really where the industrial economy has been as well. Speaker 300:20:25So I think that should be one of the first signs and early indicators if we start seeing some incremental weight on each shipment that we're picking up that orders might be picking up and that would obviously be good for a lot of measurements. We can get more weight per shipment. Generally, that's going to lead to improvement in operating efficiencies. And generally, that leads into improved volumes in general, if the underlying economy truly is improving. So all things that we are very prepared for in terms of the capacity in our service center network, the capacity of our people and our fleet, we are primed and in position to respond whenever the market does in fact inflect to the positive. Operator00:21:15Got it. Thank you. The next question is from Scott Group with Wolfe Research. Please go ahead. Speaker 700:21:23Hey, thanks. Adam, just a couple of follow ups if I can first. The 4% to 4.5% revenue, any sense of breaking that down between tonnage and then yield? And then I just want to make sure I'm understanding your commentary about the 50 basis points worse, which is normal, are you saying even if we don't get the full typical 3.5% sequential revenue increase, we can still stay with the normal OR degradation and it's not worse. Is that the message that you're giving? Speaker 300:21:58Yes. I think to answer that question first, yes, I think that we're going to go with the 50 basis points being the target. And again, keep in mind, just like we said last quarter, put a plus or minus around that, not being that specific, anything can happen. But I think that our team is continuing to do a great job with managing cost in this lower volume environment, and we will continue to do so as we progress through the Q3. And so obviously, it's a little bit easier if we've got some revenue contribution. Speaker 300:22:33We typically have an increase in certain cost elements as we progress through the quarter. We're continuing to execute on our CapEx plan, so that we will have incremental depreciation dollars in the Q3 versus the second. We have a wage increase that will go out the 1st September as well, as it always does. So you get 1 month of that. And so we'll continue to monitor and measure operating efficiencies, and we've been seeing some improvements there and have some other offsets as well, continue to manage every discretionary dollar that's going out the door and managing to the business levels that we're seeing. Speaker 300:23:15So we'll continue to do all those things, but certainly hope that we'll see a little bit of incremental revenue improvement and that will make things easier, obviously. But we're going to continue to manage and have that hanging out there is our goal to achieve. Speaker 700:23:34And then any just quick thoughts, record buyback in the quarter, is this a change in sort of capital returns? Is this a new sort of run rate to think about going forward? Speaker 300:23:48No, it's no change. I think it's similar. It was a record level, as you say, but you go back a couple of years ago and when our stock performed similar to the big drop that we saw during the Q2. If you give back to 2022, we spent $1,300,000,000 in total that year. So had some pretty hefty quarters, it was just spread more through the year. Speaker 300:24:13But our stock was off 20%, 25% from 52 week highs going back to last quarter's phone call and earnings call. And so as we've done in the past, we stepped in and we're more aggressive with our repurchases and now the stock price has recovered a bit. And so going back more so to kind of our normalized grid based approach to repurchasing shares. But we just stepped in a little bit more aggressively with the cash that we had on the balance sheet and purchase more during the Q2, including an accelerated share repurchase agreement as well, which we still have got a little bit of about $40,000,000 that was deferred on that agreement that should settle sometime late Q3, early in the Q4. Speaker 700:25:08Thank you, guys. Appreciate the time. Operator00:25:11The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Speaker 800:25:17Thanks. Good morning, everyone. So this is probably the first upcycle in a while, maybe ever, where it's not just you who has the excess capacity, but a lot of your peers do as well. I think you kind of alluded to that in your prepared remarks as well. Do you have a sense that their approach to having this excess capacity and dealing with the drag on incremental margins is similar to your own? Speaker 800:25:40Or do you feel that they may be kind of looking to deploy that capacity a little bit earlier than you guys? Speaker 300:25:47Yes. It's I can't answer for what they're going to do with any measure of any excess capacity any individual carrier has. But with respect to just looking at the industry broadly, I feel like that we're going to be a more capacity constrained industry than we were previously. If you go back, we estimate that shipping volumes are down about 15% from kind of the peak back in 2021. And when you look at the number of service centers that have settled from that bankruptcy proceeding, not all are in operation yet, but probably at least 10% and maybe more capacity will be coming out of the market. Speaker 300:26:35So all those shipments that were being picked up and delivered by that carrier, they are LTL shipments. They will come back to the market and our market will recover to the levels where it was previously, and I believe we'll continue to increase further. So that's why we continue to believe and continue to invest ahead of our anticipated growth curve. We don't see anything that has changed with the look for high quality service carriers, inventory management continues to be an operating focus, especially in a higher interest rate environment. I think it puts the burden on shippers to select high quality carriers and there's none better than Old Dominion. Speaker 300:27:25So we look at the market generally and believe we've got strong an opportunity that we've ever had, and we think we're better positioned than any other carrier to capitalize on an improving industry. Speaker 800:27:40Understood. Thank you. Operator00:27:43The next question is from Tom Wadewitz with UBS. Please go ahead. Speaker 500:27:49Yes, good morning. So Adam, I wanted to see if you could give us I apologize if I missed this, but I think just like the July tonnage and shipments, I think you talked about revenue terms, but not the tonnage and shipments. I don't know if you want to give us like normal seasonality July versus June or year over year, but some kind of framework for thinking about shipments and tonnage in July? Speaker 300:28:13Yes. The breakdown, if you will, of the revenue, it's definitely in flux. I mean, like I mentioned, we were in the 1st part of this month, we were growing at a similar rate from a revenue per day standpoint is where we were for the Q2 and kind of that 6% range. And obviously, the comps have changed pretty considerably, mainly starting this week in particular. And so it's going to cause a little disruption to what the tonnage numbers look, what we're seeing today, we can extrapolate out, and we do, where we think we'll finish. Speaker 300:28:52But I think there's going to be a little flux with respect to what those final volume numbers and yield numbers might look like, given the drastic change in business levels and mix that we saw in that last part of the month of July. But at this point, I would say that 4% to 4.5%, I would say that the volumes are probably about flattish and that could be plus or minus one way around that and that flatness. And then from a yield standpoint, again, pretty consistent with what we just saw in the second quarter. And right now, it's looking a little bit stronger, but we'll see where those final numbers land. And of course, we'll put the final details out there. Speaker 300:29:41But just from a pure revenue standpoint, though, and just looking at revenue per day, July October are the months that we see decreases and as we go month to month progress through the year. And what we're seeing from a pure revenue today standpoint is pretty consistent with what normal seasonality would otherwise be, which is a drop off somewhere in kind of the 2.5% type of range. And that's pretty consistent with what our 5 year average has been there. So we'll look to see that we get some recovery back in August, which is normal. And then September, as you know, is pretty much our strongest month of the year. Speaker 300:30:25So can we see stronger acceleration going into the end of the quarter? I would hope so. We saw strong performance in March, strong performance in June. And if that can repeat, we'll see where we land. But that's kind of the lay of the land and what things are looking like at the moment. Speaker 300:30:45And of course, we'll update, as I mentioned earlier, with the final July and then the mid quarter update with our August trends. Speaker 500:30:54Okay. Yes. Thank you for that. Just one other quick one. On headcount, how are you thinking about headcount sequentially? Speaker 500:31:00Are you in kind of a flattish volume environment? Are we modeling headcount down a little bit sequentially? Are you kind of keeping it flat and keeping some capacity for when the volume improves? Speaker 300:31:11Well, I think we're in a good spot from an overall headcount standpoint. We're at the end of June, we're 150 to 200 people ahead of where we were in September of last year when we were handling 51,000 shipments per day. So we're in a good spot there. It drifted down just normal attrition kind of taking place through the Q2. And if that continues to occur as we go through the second half of the year, we're always balancing the changes and so forth, generally in alignment with what our shipment counts are and how they're changing. Speaker 300:31:54So it will be something that we continue to watch and deal with. But at this point, we're getting closer to where you generally have the seasonally slower parts of the year once we get into 4Q and 1Q, but we're keeping our eye out for what 2025 might look like. And you don't wait until it's coming at you. You got to get ahead of the curve, if you will. That's why this year, we invested so much and we always are investing in our people and restarted our truck driving schools and so forth and have continued to increase the number of employees with their CDLs to be ready for when our customers call on us and they need capacity, we want to be in a position to be able to respond with a yes, we can help you versus trying to play catch up and be reactive. Speaker 500:32:46Great. Thank you for the Operator00:32:49time. The next question is from Jon Chappell with Evercore ISI. Please go ahead. Speaker 900:32:55Thank you. Good morning. Adam, you know as well as anybody the bare thesis about capacity coming online, whether it's the other terminals that were auctioned or the organic growth by some of your peers and what that may be to pricing. It sounds like early stages of 3Q pricing has been relatively consistent. But as we think about the anniversarying the yellow bankruptcy starting in 4Q, most especially from a yield perspective, is there any reason why you wouldn't see typical seasonal trends in yield beyond this summer, whether that relates to capacity or any other factors in the market? Speaker 300:33:31Like I said earlier, maybe to just elaborate on that, but we're continuing to see good yield performance and that's what we expect. I mean, this is something that we work on day by day. Our sales team and our pricing and costing teams are all working together and working with our customers to ultimately provide value to their supply chains. But our yield management philosophy is to attain increases that not necessarily are market driven in a sense of the markets in our favor or not. It's what's our cost inflation looking like and then what are the continuing needs of our business. Speaker 300:34:12And that's been a long term philosophy that is consistent and has worked for us. And so that's what we would continue to expect as we move forward as well. And we're negotiating and working every day and would expect that as any contracts are coming due that we will work through and need to obtain increases on those. So regardless of what other carriers and specific issues or areas or whatnot may be going on, we expect that we'll continue to see disciplined environment in the industry and that's what we've seen thus far. So we'll just continue to manage through that and keep sort of focusing on what we do and what we can deliver and continue to add value to our customer supply chains. Speaker 900:35:08Okay. Thank you, Adam. Operator00:35:11The next question is from Eric Morgan with Barclays. Please go ahead. Speaker 1000:35:16Hey, good morning. Thanks for asking or for taking my question. I wanted to ask one on cost inflation. Your comp per employee has been up maybe mid single digits or so for about a year now. Just wondering as you think about another wage increase later this quarter and as broader inflation measures are trending down a little bit, should we start to see that moderate? Speaker 1000:35:40And maybe how does that factor into the sequential OR outlook for 3Q? Thanks. Speaker 300:35:46Well, generally speaking, when you look over the longer term, when you look at our cost per shipment, if you will, wage cost per shipment is generally going up about 3% to 3.5 percent and more in line with what the wage increase that we give every year has been. There has been inflation that we've seen in our benefit cost, though, and we experienced some of that as well in the Q2. And those fringe benefit costs include multiple factors, some of which are improvements to the overall comp program that we offer to employees and things like paid time off benefits that we've improved over the years and the quality of our group health and dental programs as well. So I mean those are incremental changes that we're always having to manage. And maybe there's a little bit more variability in terms of when you're self insured on the health program, you can have changes in 1 quarter versus the next that aren't necessarily going into alignment with what shipment volumes may be changing. Speaker 300:36:56But looking over time, that's just something that we would expect will continue to change and reflect the improvements in terms of the benefit program and comp program that we offer employees. But 65% of our costs are salaries, wages and benefits. So that's generally been the biggest driver of our total cost per shipment inflation that's averaged 3.5% to 4% over the long term as well. So that all goes into it. We've had a lot of other incremental inflationary items, things like the cost of our equipment, maintenance costs that have been up double digits on a per mile basis the last few years, insurance costs that is a problem for the industry that have been up double digits for multiple years in a row. Speaker 300:37:45All of those things we continue with and that's why there's got to be an ongoing focus on operating efficiency and discretionary spending. And we're managing our costs day by day in good times and bad. If you wait until it's too late, if you wait until they're bad times, you got to have that focus going every day or you may not even know where to start. So that's something that we're always looking at, how can we offset all those other costs to basically keep our cost inflation in check. And then as you know, the yield management philosophy is we try to achieve 100 to 150 points of positive spread over top of that cost inflation metric. Speaker 300:38:26So that keeps our pricing levels in check with the rest of the industry as well. So it all kind of goes into it, but it's a day by day fight to try to keep our cost inflation minimized as best as we can. Speaker 1100:38:44Appreciate it. Operator00:38:47The next question is from Bascome Majors with Susquehanna. Please go ahead. Speaker 1200:38:53Adam, it's encouraging to hear that some signs of seasonality have stuck with you through July so far and appreciate the framing of typical 3Q seasonality about the top line and the margin side. Can we look ahead to 4Q without necessarily blessing whether the market suggests will be above or below? But how do you frame seasonality for your business into 4Q, both on top line and a margin basis looking back historically as we try to level set our views? Thank you. Speaker 300:39:24Yes. So as I've said a couple of times, the 4th quarter and the first quarter are seasonally slower periods, if you will. The 4th quarter from just a pure revenue per day standpoint, it's just a slight drop off. And then you go into the Q1 and revenue is down, maybe down in the 4th quarter, 0.5% sequentially versus the 3rd quarter and then you drop on average about 1.5% going into the 1st quarter. From an operating ratio standpoint, the 4th quarter is typically about 200 basis points to 2 50 basis points higher than the third. Speaker 300:40:05And a lot of that is the revenue level softening a little bit. We've got 3 months of that wage increase. And that normal change, if you remember from last year, we always have actuarial assessment of our insurance reserves in the 4th quarter, and those adjustments can go one way or the other. I generally view those as a reconciling item to whatever that normal change is. And last year was an unfavorable adjustment to the insurance and claims line, but few years prior, they had been favorable adjustment. Speaker 300:40:38So kind of throw that out of the window when just looking at what is that normal cost progression change. Speaker 900:40:48Thank you. Operator00:40:51The next question is from Ken Hoexter with Bank of America. Please go ahead. Speaker 600:40:56Great. Thanks and good morning. I guess maybe I need to check numbers a little bit. I think we've got a 10 year average in Q2 or the Q3 of a 10 basis point improvement, not a 50 basis point decrease. So I just wanted to double check that. Speaker 600:41:10And then as you start to lap the yellow freight data, last year you went from down upper teens on revenue per day and mid teens tons per day to kind of much smaller losses. I guess given that backdrop, how should we think about the market kind of tonnage per day growth? I know you've talked a lot about revenue per day, but how do we think about the tons per day shift as we move into the 3rd quarter or into the back half of the third quarter and into the 4th quarter? Speaker 300:41:41Yes. And I'll come back to that. Let me just address that, the second quarter to third quarter change. You're right, the pure math is more about a 10 basis point change, but there are a couple of years in there that skew that And 'twenty three last year, obviously, we had a major acceleration in revenue that allowed us to improve the operating ratio of 170 basis points from the 2Q to 3Q. And then 2020 was similar, where you had the COVID cliff that happened and then the reacceleration of business levels. Speaker 300:42:17So when I just look at more of a normalized kind of progression, that's typically what we'd expect unless you've got something unusual going on that would drive some change there. With respect to the tonnage question and shipments, I mean, obviously, as you said, we're we had the acceleration that was meaningfully happening last year. If you recall, we were at 47,000 shipments per day really from December of 'twenty two through July of 'twenty three and immediately stepped up to about $50,000 in August and then accelerated further to 51,000 in September. So step function change that would be well above anything that was really happening with the underlying economy, if you will. So if we can see some type of normal acceleration, if you will, just like from a tonnage standpoint, Our 10 year average from July to August is 0.6% increase there and then about 3.5% increase in September. Speaker 300:43:33So we'll see how that goes. But right now, even if you hit those, it would look like you would have negative change in those volumes. But overall, I think it's just as we look at things sequentially, maybe more so than just the year over year, given that challenge is what can we achieve relative to what normal seasonality would be and what we've seen at least so far through July. From a tons per day standpoint, just from a pure quarter, we're typically up about 1%. And when we gave the numbers earlier, but in the Q2, that average is just, call it, 6%, and we were up 3% just sort of rounding numbers. Speaker 300:44:20So we were up kind of half of what normal seasonality would suggest. So we've got to make up some ground. Like I said earlier, we always lose a little bit of business in July, and that's normal. And so if we can have kind of a little bit of acceleration through August and then see some acceleration into September, we were almost at normal seasonality in the June period. And so and the same thing with March, you got to adjust for the Good Friday, but we're about at seasonality in those stronger growth months of the quarter. Speaker 300:44:57So if we can make some progress in August and then see some sense of that strong acceleration through the month of September, I think we'll be okay and we've positioned ourselves well. Whenever we come out of this true economic downturn, we're operating at a 72% essentially and 71.9%, I guess I should take credit for every basis point we have. And in terms of where we've operated and when I look at the breakdown of our operating ratio in the quarter and where we are from an overhead standpoint relative to our direct variable cost, I'm really pleased with the improvement that we've made with our direct cost performance. And that just gets into the day to day management within our operations in the field primarily. And but everyone is contributing to that overall operating ratio and but our overhead costs have increased. Speaker 300:45:54They're 20% to 21% of revenue in the most recent quarter. Those costs have been down to around 17% in the past. So once we get some true density coming back into the network, we've built our network and our system to accommodate more than 60,000, whatever that number is, that's where you'll really see the power of operating density in the model. And you move that scale from 20% to 21% back towards 17 that puts us back in with an OR with a 6 handle on it back where we were in 2022. So it's I think we're in a great spot and have managed through this downturn very well and has certainly put ourselves in a great position to capitalize on the market when we actually start seeing some economic wins that are back. Speaker 1100:46:55Thanks for Speaker 1300:46:55the time, Adam. Appreciate it. Operator00:46:58The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 1100:47:05Hey, good morning. Thanks for taking the question. So Adam, maybe you can elaborate a little bit more on what end markets or maybe customers you're seeing some of that strength at the end of the last two quarters in March June. Is there anything to read into that? Does it give you any sort of forward looking to the back half of the year or next year? Speaker 1100:47:24And then just kind of another follow-up on competition and extra capacity coming online. Are you seeing anything as these new facilities come back online, anything that you would call out from either service being disrupted by some of your competitors Or are they being a little bit more aggressive to maybe fill some of those doors and pricing more to capacity and not necessarily Speaker 200:47:47cost? Good morning. This is Marty. I'm going to answer your customer question. I'm still heavily involved with a lot of our top customers and the feeling out there is not all doom and gloom. Speaker 200:47:59In fact, our top 50 customers are up mid single digits year to date. So we're getting a lot of positive remarks, especially from our larger customers. So we and they as well see some positive things for the rest of the year. So we're very positive often that those things will continue. So and as Adam said earlier, they feel and I feel if we can see some interest rate drops toward the end of the year, I think we'll really accelerate. Speaker 200:48:31So we're looking forward to that and prepared to handle it. So it's not all doom and gloom out there, trust me. Go ahead. Speaker 300:48:38Yes. And on the competitive side, we've not seen, don't think, any material change in the sense of someone has opened one service center in whatever market, any type of real impact. And as you can see in our yield trends, things continue to be consistent with our performance. That's just something we'll continue to manage through and monitor. But given the cost that went into purchasing many of these facilities, We'd be a little surprised to see someone going out and having to be aggressive to try to fill it up. Speaker 300:49:23And the end of the day, those service centers serve the market for a reason. They were in existence. And those particular markets had a customer base that their sales reps called on and there's LTL shipments that are out there. And as I referenced earlier, I mean, the market is down overall, and we estimate that it's down about 15% from back from in 20 21, but that's something that will recover. Those LTL shipments, those customers will continue to have freight that needs to be moved through an LTL network. Speaker 300:50:01And I think that, that will end up creating opportunity for us, for the industry in general to refill those facilities, if you will, once they come online. But to me, it creates maybe even more Speaker 200:50:17130 facilities that haven't been sold. So that's actually less capacity when things pick up than we had when YRC was still in business. Speaker 1100:50:29Okay. Thanks very much, guys. Operator00:50:31The next question is from Stephanie Moore with Jefferies. Please go ahead. Speaker 1400:50:36Hi, good morning. Thank you. I wanted to touch a bit on some of your network investments and maybe some of terminals that have been opened so far this year. So maybe you could give us an update on kind of new terminal openings or door additions year to date thus far and then an update in terms of your plans for maybe the back half of this year, if there's been any kind of maybe postponement or pause just given the state of the underlying macro? Any color there would be helpful. Speaker 1400:51:04Thanks. Speaker 300:51:06Yes. We've opened 3 service centers this year, and we're continuing to execute on our CapEx plan. The current estimate is to spend about $350,000,000 this year, at least on the real estate component of that program. So our plan is we look at the network, we look at the service centers that we feel like need some measure of capacity. And when we look kind of over the next 5 years and what the anticipated growth curve may be and the efficiency of the network comes into play as well, the location of where these facilities are. Speaker 300:51:46And so that kind of goes into the overall plan. And we're a little bit heavy right now, frankly. It's not unusual when we go through a slower economic environment to get a little ahead of the curve. We our long term strategy is we like having 20% to 25% excess capacity in the system. We're at about 30% today. Speaker 300:52:10And that's okay. We're comfortable with that. Now what that may mean is exactly what you said, there may be facilities that are in process today. We will finish those facilities. And if the demand environment doesn't dictate that we go ahead and open them immediately, we'll finish the construction, we'll start the depreciation and so forth of those facilities, but we'll wait until there's stronger demand to really justify the opening and all the incremental overhead cost that goes along with those facilities once they're operational. Speaker 300:52:45Not just the overhead, but there's configurations to the line haul network that has to happen. And generally, that negatively impacts load factors. So that's something that these other carriers that are opening multiple facilities will be facing the incremental cost there, which is another reason why we don't anticipate seeing reductions in pricing or any pressures there. But so that's something that just goes into it and we'll continue to look and evaluate. But overall, continuing to plan and we'll continue to the investments that we make are really just based on what we think the market share opportunities are in each of the respective areas. Speaker 300:53:30And so we feel like we've got tremendous opportunity ahead, and thus, we intend to continue to spend 10% to 15% of our revenues every year on total capital expenditures, the real estate and then obviously on the fleet and the technology side as well to keep pace with our anticipated growth. Speaker 1400:53:51Great. Thank you so much. Operator00:53:53The next question is from Bruce Chan with Stifel. Please go ahead. Speaker 1300:53:59Hey, good morning, everyone. Adam, I wanted to follow-up on the seasonality and the macro comments or certainly Marty, given your discussion with customers. But obviously, there's a lot of moving parts this year with the geopolitical situation and with the election. There's been some talk on the 3PL side about volume pull forward. So maybe just wondering if you've gotten any indication from customers to that effect or if you think the demand and seasonality conversations seem to be pretty clear right now? Speaker 1300:54:29Thank you. Speaker 200:54:30Yes. As I've said before, about a third of our business is 3PL related and those are basically the top customers that I was referring to. And most of those that come in here are giving us new opportunities to go in with them and handle their business. And for the most part, they're super positive. We have a set of 3PLs in here this morning that I've already talked to and they're super positive and they've got growth opportunity. Speaker 200:54:58So I'm positive as well that we'll see some positive results from these customers. So and hopefully next year in the geopolitical environment, if we see some change there, I think it will be even more positive. Speaker 300:55:21Adam? No, I don't really have anything to add. I think that obviously anytime there's an election year that creates uncertainty and usually puts pressure on the overall shipping environment. And we've seen that this year on top of a slower industrial economy in general. So I think that's something that will just be one more measure of uncertainty that will soon be put to bed, whatever direction it goes. Speaker 300:55:50But I think just broadly speaking, if we start having clarity on some of the macro factors that are impacting business owners and the decisions that they make about expanding their businesses and so forth. And we can make changes from an interest rate environment that helps and helps people and the consumer. We're still a consumer driven economy. And so that's something that if we can keep a healthy consumer out there, they're buying things that creates inventory that's got to be replenished and that's the customer call that comes into OD for a shipment to be picked up. So that will be the opportunity created. Speaker 300:56:34So it's something that we'll continue to measure and monitor and so forth. But we're as Marty mentioned, we're seeing improved performance with our 3PL customers right now. We had a little bit stronger retail related performance in the Q2. Industrial was okay, but kind of reflects the industrial environment like the ISM metrics that we talked about earlier. So but all of that, it's called a cycle for a reason. Speaker 300:57:03And it's easy to get caught up when you're in the down part of the cycle. We've managed through that. We've been in the down part of the cycle for a lot longer than I had originally anticipated. But it will turn back to the positive at some point and we're in a great position to capitalize when it does. Speaker 1300:57:24Okay. Thanks for that. Operator00:57:27The next question is from Jason Seidl with TD Cowen. Please go ahead. Speaker 1300:57:32Thank you, operator. Hey, Marty. Hey, Adam. Thanks for squeezing me in here. Just wanted Speaker 100:57:36to follow-up Marty to some Speaker 1300:57:37of your comments. You mentioned that you've been talking to a lot of your big customers and it's not all doom and gloom. I was wondering, sort of what areas those customers are in? Is this spread across the board? Is this more consumer versus industrial? Speaker 1300:57:50And the other one would be, we've heard a lot about some business being pulled forward from peak season into the 2Q and I guess the start of 3Q here. I'm wondering if you guys have seen any impacts from that and how should we look at that going forward? Speaker 200:58:04Well, it's all over the board from a product or commodity standpoint. As you see on the news daily, your hospitality and your opportunities that we have from these 3PLs and other customers, it's just all over the board. Your inventories are all over the board. You hear some that say, we still have a little inventory from last year and others say our inventory is getting low. So we're going to start ordering product, whether that be domestically or overseas. Speaker 200:58:41So it's just all over the board. But like I said earlier, I'm still I'm very positive that things have basically bottomed out and I'm looking forward to better times. Speaker 1300:58:56Okay. In terms of Speaker 300:58:56the pull forward, have you Speaker 1100:58:57seen any impact? Speaker 300:58:59We've not really heard any material discussion pull forward or whatnot at this point. Or at least I've not heard anyone, any of our anyone from our sales team or any customer that we've had here in the office that's really spoken to that. Yeah, me either. Speaker 1300:59:23Okay, perfect. Gentlemen, appreciate the time as always. Speaker 300:59:27Thanks, Operator00:59:28Dave. And the final question today is from Jeff Kaufman with Vertical Research Partners. Please go ahead. Speaker 1500:59:34Thank you very much and thanks for squeezing me in last year. Marty, bigger picture thought question, I'm just curious your view. If I look at the ATA LTL tonnage index, it's down about 8%. And a year ago before yellow, the volumes of the publicly traded LTL carriers were tracking more closely to that. Since yellow happened, the publicly traded group is showing kind of flat to up 2% tonnage, but the ATA tonnage index is still showing down about 8%. Speaker 1501:00:08Is there something going on? Like why would it diverge so much? And is there something going on maybe where the smaller LTL carriers might be struggling a little bit more than you and some of your larger peers? Can you help me kind of bridge this gap? Speaker 201:00:24Well, I think probably what you saw when YRC went out of business is that customers were struggling to find ways to move that freight and some of it went and not a large portion of it, but I would some of it went to your smaller freight forwarders, air freight forwarders, smaller logistic companies. And I think that's where some of that has gone. And those guys basically don't have any assets, they're handling it at a lower rate. And I think some of that business moved to full truckload carriers as the economy started to slow. And as I've said before, when your economy starts to pick back up, your the LTL industry will benefit from that even from the full truckload industry because we saw some of that freight move to those full truckload carriers as it relates to stop offs. Speaker 201:01:27And once those full truckload carriers begin to get busier and their capacity gets tighter, that freight will move back toward the LTL industry. So I think that type the business moved a little bit everywhere based on price. And so that's how I see it. That's the only way I can explain it. Speaker 1501:01:46So the bigger point I'm going for here is, as you mentioned earlier, you got the PMI down in negative territory right now, industrial production is kind of flattish, you're 50%, 60% industrial. When we look at your tonnage growth of 2%, you're not chasing any yellow business, The industry is probably a lot weaker in aggregate than what the 5 or 6 publicly traded truckload companies are reporting that that 2% tonnage growth actually is stronger than the industry appears to be if we look at it through a broader lens and not just the lens of the publicly traded guys? Speaker 501:02:28Yes. Speaker 301:02:32Like you said, I mean, it's hard to know as we don't have access to all the private carriers, if you will. But we think some of that business may have gone there. But I think everyone's just been facing the challenge of the slower economy. And so that business, it's hard to trace through when Yellow did 50,000 shipments per day and you just look at I did the comparison, I'm looking at Q2 'twenty three numbers and most recently compared them to the Q1 'twenty four for the at least the publicly traded carriers, which are 65% to 70% of the industry's revenue. But trying to trace through and figure out where all those shipments went and how they're being handled and and what motor they're being handled by is a tough task. Speaker 301:03:27But the thing that we take away and what I mentioned earlier is, if economically it made sense for those shippers to move their freight within the LTL environment, sharing the cost, leveraging an LTL carrier's network, sharing the cost on smaller shipment sizes with other shippers within the environment, all the benefits of moving freight by LTL that exist, which creates, we think, long term opportunity for our industry, those shipments are going to return and they will be there and available again. And so that's why we continue to believe that our Industry 1 will be increasing. We'll get back to the levels where we were in 2021, and I believe we'll grow further beyond there. And we're in an environment that I think we'll end up with who knows what the final capacity number will be. But at this point, it looks like total industry capacity could be down 10% or maybe even more from where we were at that 2021 period. Speaker 301:04:35So you've got more volumes and less capacity overall that exist and there may still be a little bit of shuffling around with those shipments and ultimately finding a home once the market tightens up and everyone gets really busy again. I think that's when you'll see who's really got the best long term strategy, who has got the best service, the best value, network capacity, people capacity, equipment capacity. I think when you look at all those factors and who delivers the best value, I think the answer is just clearly Old Dominion. And so that's why we're excited about what our long term opportunities are and think that we will continue to win market share and ultimately create incremental shareholder value. Speaker 1501:05:26Thank you for your insight. Operator01:05:29This concludes our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks. Speaker 201:05:36Remarks. Thank you all for your participation today. We appreciate your questions and please feel free to give us a call if you have anything further. And I hope you have a good day and a good rest of your summer. Thanks. Operator01:05:49The conference is now concluded. Thank you for attending today's presentation. You may nowRead morePowered by