Old Dominion Freight Line Q3 2022 Earnings Call Transcript

Participants

Corporate Executives

• Drew Andersen, Senior Director, Product Management
• Greg C. Gantt, President and Chief Executive Officer
• Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary

Analysts

• Jack Atkins, Jack Atkins
• James Monigan, Wells Fargo & Company
• Jordan Alliger, The Goldman Sachs Group, Inc.
• Scott Group, Wolfe Research
• Chris Wetherbee, Smith Barney Citigroup
• Amit Mehrotra, Deutsche Bank Aktiengesellschaft
• Todd Fowler, KeyBanc Capital Markets
• Ravi Shanker, Morgan Stanley
• Bascome Majors, Susquehanna Bancshares, Inc.
• Matthew Milask, Stifel Nicolaus
• Tom Wadewitz, UBS Group AG
• Jonathan Chappell, Evercore ISI
• Jason Seidl, Cowen Inc
• Ken Hoexter, Bank of America Co.

Presentation

[Operator]

Good day, and welcome to the Old Dominion Freight Line Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Drew Andersen. Please go ahead.

[Drew Andersen, Senior Director, Product Management at Old Dominion Freight Line]

Thank you. Good morning, and welcome to the third quarter 2022 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through November 2, 2022, by dialing 1877-344-7529, access code 3324067. The replay of the webcast may also be accessed for 30 days at the company's website.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements among others regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by the important factors among others set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release 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 we ask in fairness to all that you limit yourselves to just a couple of questions at a time before returning to the queue. Thank you for your cooperation.

At this time, for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Greg Gantt. Please go ahead, sir.

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Good morning, and welcome to our third quarter conference call. With me on the call today is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions.

During the third quarter, the Old Dominion team extended the company's track-record for double-digit growth in revenue and profitability. The third quarter of 2022 is our 7th straight quarter with double-digit revenue growth and the 9th straight quarter of double-digit growth in earnings per diluted share. These financial results reflect the ongoing strength and demand for our services as we continue to deliver value to our customers by providing superior service at a fair price.

Consistently executing on this key element of our long-term strategic plan, it is critical to our continued ability to win long-term market share. We are pleased to provide our customers with 99% on-time service and a cargo claims ratio of 0.2% during the third quarter. Service means much more than just picking-up and delivering our customers freight on-time and damage free. In fact, Mastio & Company conducts a comprehensive industry study each year that most recently measured carriers on 28 service and value-related attributes. We are extremely proud that Mastio recently named OD as the #1 LTL Provider for the 13th straight year. In this latest survey Shippers and Logistics Professionals ranked OD as #1 for 24 of the 28 individual attributes. The consistency of our service performance over many years as validated by Mastio reflects the commitment from each of our team members who works hard every day to go above and beyond for our customers.

Our superior service performance has not only allowed us to win market share over the long-term it has also supported our long-term yield management strategy. This simple strategy focuses on increasing our yields to offset our cost inflation each year, while also supporting our ongoing investments in capacity. We have consistently invested 10% to 15% of our revenue in capital expenditures each year, regardless of the economic environment. Investments in our fleet and technologies have helped us improve our operating efficiency and customer service while the significant investments in our service center network generally support our growth. We have expanded the capacity of our service center network by 50% in the past 10 years, while doubling our market share. And we believe further investments will be necessary to ensure that our network is never a limiting factor to our growth.

We believe a big part of our value proposition is having available capacities when our customers need it the most. The capacity advantage we have in the marketplace was especially critical for customers that dealt various supply chain issues over the past 2 years while industry capacity was generally limited. We increased our revenues by over $2 billion over the past 2 years, which would not have been possible if we have not consistently increased our network capacity.

Our business model continues to prove itself time and again, and we are extremely grateful to our customers for their trust in us. Freight a relationship business and we believe our superior service, available network capacity and consistent approach to pricing have allowed us to strengthen our long-term relationships. We also believe the value offered by carrier is becoming increasingly important to shippers which is why we remain absolutely committed to executing on the fundamental elements of our long-term strategic plan.

As a result, we will continue to focus on providing customers with superior service at a fair price. We will also continue to invest in our OD family of employees, our fleet and our service center network to support our long-term growth initiatives. Old Dominion has the financial strength to make these investments, and as a result, we believe we are better positioned than any carrier to produce long-term profitable growth and increase shareholder value.

Thank you for joining us this morning. And now Adam will discuss our third quarter financial results in greater detail.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Thank you, Greg, and good morning.

Old Dominion's revenue grew 14.5% in the third quarter to, $1.6 billion and our operating ratio improved to 69.1%. The combination of these changes helped produced 36% increase in earnings per diluted share for the quarter. Our revenue growth was due primarily to the 17.4% increase in LTL revenue per hundredweight, which more than offset the 2.6% decrease in our LTL tons. We believe this decrease in LTL tons reflects the overall softness in the domestic economy that has generally caused a decrease in demand for our customers' products, demand for our services remain strong however as customers are continuing to take advantage of our value proposition.

On a sequential basis, revenue per day for the third quarter decreased 3.8% when compared to the second quarter 2022 with LTL tons per day decreasing 4.3% and LTL shipments per day decreasing 3.6%. For comparison, the 10-year average sequential change for these metrics includes an increase of 3.6% in revenue per day, an increase of 1.2% in tons per day and an increase of 2.4% in shipments per day. At this point in October, our revenue per day has increased by approximately 8% when compared to October 2021. This month-to date revenue performance includes a decrease of approximately 7% in our LTL tons per day. As usual, we will provide actual revenue-related details for October in our third quarter Form 10-Q.

Our third quarter operating ratio improved to 69.1% with improvements in both our direct operating cost and overhead cost as a percent of revenue. Many of our cost categories improved as a percent of revenue during the quarter, although our operating supplies and expenses increased 300 basis points due primarily to the rising cost of diesel fuel and other petroleum-based products as well as the increased cost of parts and repairs to maintain our fleet. We more than offset the impact of this increase with the improvement in our salaries, wages and benefits and purchase transportation. The improvement in these expenses as a percent of revenue reflects our best efforts to effectively manage all of our variable costs with current revenue and volume trends.

Old Dominion's cash flow from operations totaled $514.2 million and $1.3 billion for the third quarter and first nine months of 2022, respectively, while capital expenditures were $181.7 million and $504.8 million for the same periods. We noted in our release this morning that our capital expenditures are now estimated to be $720 million for this year. The decrease from our prior estimate is primarily due to the timing of equipment deliveries that we expect to be pushed into next year. We will provide further details about our 2023 capital expenditure plan with our fourth quarter earnings release.

We utilized $345.4 million and $1.1 billion of cash for our share repurchase program during the third quarter and first nine months of 1,022, respectively, while cash dividends totaled $33.4 million and $101.4 million for the same periods. Our effective tax-rate for the third quarter of 2022 was 23.9% as compared to 25.2% in the third quarter of 2021. We currently anticipate our effective tax rate to be 25.6% for the fourth quarter.

This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time.

Questions and Answers

[Operator]

[Operator Instructions] The first question today comes from Jack Atkins with Stephens. Please go ahead.

[Jack Atkins, Analyst at Jack Atkins]

Okay. Great. Good morning and thank you for taking my questions. So, I guess first, Adam, I'd be curious if you could maybe give us the full stats for September in terms of tonnage per day on a year-over-year basis, and was there anything sort of unique kind of going on in September with regard to the end of the quarter with the hurricane? And I guess just kind of wrapping up that September-October commentary, I guess, do you feel like that the sequential trends are the underperformance versus seasonality is maybe accelerating somewhat, and if you could maybe provide some color on sort of what's driving that? So anyway, I know a lot there, but just sort of curious on current trends and if you could provide some additional color there.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Sure. I'll test my memory, I guess, and see if I can remember all of those, but. So, for September, looking at on a year-over-year basis our tonnage was down 5.4% and then shipments, those were, let's see here, shipments per day were down 6.8%. So, we had a little bit of an increase in weight per shipment for the month that was up about 1.5% overall. And so, if you, remember, we've talked before about the weight per shipment trend last year, the third quarter was our low watermark, if you will, where we were at a total of 1,538 pounds. So, we did start seeing a sequential increase from the third quarter to the fourth quarter of last year. So that should somewhat normalize as we transition. Looking at things on a sequential basis for the tonnage, we did have in September about a 0.4% increase versus August, the 10-year average is at 3.9% increase.

So similar, I think what we saw in the third quarter is similar to the second quarter. We did underperform for the total quarter, the average sequential trends in 2Q and we did again, this the third straight quarter of under-performance, if you will, but we started out with a decrease in July, which is pretty typical, we were down 4%. The 10-year average is down 3% and then we dropped a little bit further in August, which is normally about flattish, and then we just didn't see the sizable increase that we typically do in September.

We'll say that so far and obviously there's still days to be finished for October, but it looks like we are trending pretty much right in line with normal seasonality at this point, which I think is an encouraging trend, certainly a lot of work left to do as we go through the fourth quarter. Typically, we would see an increase in November, and then it drops off in December. Normally, overall, you've got a decrease in average for the fourth quarter versus the third. Last year, we did have an increase, which makes the comps quite a bit tougher in the fourth quarter, and we anticipated that really as going into the beginning of this year, really.

So, I think it's just one of those things, like we said in our prepared remarks, that certainly feels like demand for us, the feedback that we're getting from our customers has been positive. We're seeing good trends with our national account reporting, and not losing customers. So, things are all trending favorably in that regard. It's just a matter of the demand, we feel like it's not out there for our customers' products, if you will, just not picking up as much freight from those same customers that we may be making stops every day at their locations.

So, just continuing to kind of work through these challenges, if you will, we certainly made adjustments all year, I think when you look at the operating ratio performance in general and what our service metrics are, we've been making adjustments to this lower than anticipated volume environment that we've been in, but we typically, when we've been in a down cycle we've been in a negative GDP environment this year, a lot of times you'll see 3 to 5 quarters where we kind of underperformed our 10-year average, and I always like to remind everyone that our 10-year average includes doubling the market share, but this, like I said was the third quarter where we underperformed.

We're going into the winter. That's always a little bit seasonally slower anyways, and so We feel like based on what we've been able to do so far this year producing over $900 million of revenue growth, have good solid operating ratio improvement. We'll get through this. And then certainly have been, perhaps we start seeing some buildup once we get into the spring and I'm talking on a sequential basis, start seeing that build out back in the business, once we get into the spring. maybe centers, obviously lots going on with the economy, but that's some of the baseline for what we're thinking right now.

[Jack Atkins, Analyst at Jack Atkins]

Okay. That's very helpful color, Adam. Thank you for that. And you've got all my, all those different questions in there. I guess maybe for my one quick follow-up, was just curious to kind of get your sense for sequential -- how we should be thinking about the sequential change in operating ratio 3Q to 4Q? I know, to your point, typically tonnage is a bit softer sequentially, and there's I'm sure a lot of puts and takes out there. Historically, it's about 200-basis-point degradation 3Q to 4Q. Is that the right way to think about it this year, or just some additional color would be helpful.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Sure. Yes. For one, in the fourth quarter, we usually have an annual actuarial assessment that can impact. If you just look at the overall numbers, the pure average, that's usually about 200 to 250-basis-point sequential deterioration from 3Q to 4Q. And I think probably the appropriate target would be about 400 basis points increase off of 69.1% that we had and just talking through a few of those puts and takes that will go into it. I'd say 400 probably plus or minus a little bit just depending on, in some cases some of these expense items that we talk about, but also the top-line, but obviously we've got -- we had a onetime item that favorably impacted our operating ratio by about 100 basis points in the third quarter. So, kind of adding that back to normalize what our fringe benefit cost have been trending earlier this year, and I think that similar to the 2Q to 3Q change in our general supplies and expenses, we generally see a little bit of an improvement from the third quarter to the fourth quarter, we expect that from a dollar standpoint that should remain somewhat flattish, but as revenue is typically a little bit lower. We would expect that to increase maybe 20 basis points from 3Q to 4Q. Depreciation is another item. We're still taking delivery of equipment, normally kind of have all your depreciation in there, so I'd expect to see that continue to tick up a little bit. And then finally our miscellaneous expenses, those have trended low throughout the year. Those are typically around about 0.5 point, I think we're at 20 basis points, 22% in the third quarter. So, expect that to normalize at some point as well. So, some of those cost items just may create just a little bit of variance versus what the 10-year average might otherwise suggest. But you know us. I mean we're looking at every dollar we can from a discretionary spending standpoint, and we'll be managing productivity in other cost as tightly partly as we can as we continue to adjust to the current topline revenue and volume trends.

[Jack Atkins, Analyst at Jack Atkins]

Okay. Well, Adam, Greg, thanks so much for the time. Really appreciate it.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Thanks Jack.

[Operator]

The next question comes from Allison Poliniak with Wells Fargo. Please go ahead.

[James Monigan, Analyst at Wells Fargo & Company]

Hey, guys. James on for Allison. Actually, I just wanted to get a little bit more color on September and just kind of wanted to understand if there was a mix shift in that month that might have impacted yields? And trying to sort of get a sense of what pricing was independent of sort of that mix shift change and sort of how we should think about that moving forward?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yes, nothing major that we had not already been seeing, certainly that our weight per shipment has been trending higher as I mentioned, at least through the third quarter and then our winter-fall has been a bit lower as well, that's down almost 1%, so both of those metrics putting a little downward pressure on that reported revenue per hundredweight metric, which I think we've talked a little bit about that on the last earnings call. Overall, excluding fuel surcharge, the revenue per hundredweights was up 7%. So, we're still seeing good yield performance overall, and then those yields are mixed metrics, if you will, somewhat reconcile how we got from the growth rate that we were seeing for the second quarter to the third quarter, but overall, as contracts are renewing, we're continuing to look for increases and design with our long-term philosophy as we always are looking to try to increase yields to offset our cost inflation.

I would say core inflation is probably a bit higher than what some of these increases we're getting right now just dealing with this inflationary environment, but we're always looking at things on a long-term basis and so, we're continuing to make progress on those renewals, try to get our cost-plus type pricing to ultimately support the investments that we're making back in the system. We've invested a lot in real estate and capital expenditures. When you look over the last 10 years it's been almost $4 billion of investment in total with about $2 billion coming into our real estate network. So, I think we've certainly done a good job of making sure we're investing ahead of growth, and we don't want the network to be a limiting factor to our ability to grow and so it's been important to building that capacity into the service center network and it certainly makes years like 2021 and the growth that we've seen in revenue this year possible.

[James Monigan, Analyst at Wells Fargo & Company]

Got it. And just to follow up on that, just given the renewals that you're seeing, sort of efficiency in the network, like if tonnage trends continue negatively or even sort of become more negative, do you just -- is just 2023 year that you can still get or expansion sort of at or above 100 basis points? Are you going to start bumping up against fixed costs fairly soon?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, I think the thing that we typically see in the past, I mean you can look at sort of a 2016-2019 as example is when we get into an environment where revenue is flat to down overall that's something where we are going to continue to invest, like Greg mentioned in his comments earlier, we're going to continue to invest for the long-term and so that often creates a little headwind, if you will in the depreciation cost as a percent of revenues, but the overall change that we saw in 2016 and 2019, the slight deterioration in both of those periods was pretty much limited to that change in depreciation cost as a percent of revenue. We certainly are looking to manage all of our variable costs to match what those revenue volume trends are, we'll be looking for productivity and we'll be looking closely at every dollar that we spend. We certainly want to spend dollars when there is an appropriate return that's there and don't want to do anything that might limit the long-term performance, but we just got to be careful when it comes to discretionary spending. So, we generally been able to manage all those other costs flat. Our cost structure is highly variable, more than two-thirds, almost three-fourths of our costs are variable now, so we just continue to work those costs as best we can, look for productivity in any way that we can save money to offset any kind of pressure we may be seeing on the top-line.

[James Monigan, Analyst at Wells Fargo & Company]

Great. Thank you for that.

[Operator]

The next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

[Jordan Alliger, Analyst at The Goldman Sachs Group]

Yeah, just a follow-up maybe on the cost front, looking ahead beyond even in the current quarter, you talked about inflation, is there any relief on the inflation front, whether it be on the wage side, I assume on the purchase transport side, but just sort of your thoughts on sort of the cost inflation environment as we move beyond this what you're seeing today?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, from a core inflation standpoint as we go into next year, I think everybody in this country is probably hoping for seeing some type of relief and really, I think that starts with we've got to have improvement on the energy side. Energy drives inflation overall for this country and we've got to see some type of movement there, and I think that gives -- kind of removes the hurdle of uncertainty for many business owners and our customers because then it should control what the Fed action may be, and so once you get those then I think at least cleared you get reinvestment back in businesses and so forth and hopefully start seeing freight flows once again a little bit stronger and at the levels that we anticipated when we started this year.

But for us in particular salary, wages and benefits are probably 65% of our total costs and we did just give a wage increase the 1st of September this year rewarding our employees for the performance that they've been able to produce over this last year, and so we control that element of inflation. Certainly, on the benefit side, we've seen a little bit higher cost data and some of the medical costs in particular. But as we continue to improve paid time, off benefits and some of those other features that we rewarded employees that with another 15% of our costs that are the operating supplies and expenses, fuel is, obviously a big component. I think our surcharge program has been effective with offsetting the increase there, and we hope that we'll see a decrease as we make our way through 2023 and that should help on some of the parts and other component, tires and so forth that we've taken big increases on this year.

And then certainly on the depreciation side with respect to equipment, we've taken some increases there. We hope some of those moderate as we get into next year as well. We haven't finalized what our equipment orders and what pricing and so forth would look like. But those are some of the biggest elements, we certainly have faced increased insurance premiums like every other carrier over the past several years. And again, it's just we got to keep looking for ways that when you know you've got an increase in one area, you've got to try to find some savings in the other, and the biggest area for us will be to continue to focus on improved productivity with salaries, wages and benefits being our biggest cost driver, but we can offset. We control the inflation, but we can help ourselves by continuing to drive improved performance in those areas.

[Jordan Alliger, Analyst at The Goldman Sachs Group]

Great. Thank you.

[Operator]

The next question comes from Scott Group with Wolfe Research. Please go ahead.

[Scott Group, Analyst at Wolfe Research]

Hey, thanks. Good morning. Adam, I wanted to just follow-up, I thought I heard you say that core inflation is now tracking above some of the recent pricing increases you're getting. That feels like a pretty big change for third quarter rev per shipment ex-fuel is up 9%, so just add a little bit of color or clarity to what you were saying there.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

So, it's just mainly talking about what we've seen in terms of cost on a per shipment basis, and sometimes as per shipment cost increase a little bit more than a year and a little bit softer environment overall. I mean, we've still got a positive spread in terms of when you look at revenue per shipment performance versus as cost per shipment, we certainly think that can continue overall, and that's the focus is always to try to achieve 100 and 250 basis points of positive spread overall, and what we can get on a revenue per shipment basis with the fuel versus what the cost per shipment with fuel can be as well. But just looking at things on a pure cost per shipment basis, certainly trending a lot higher than what I thought, I thought we would see moderation in the back half of this year as we started comping against some of the increased inflationary items that we experienced in the second half of '21, but certainly that moderation has happened. So, we're still seeing some pretty big increases and I think a lot of it is driven by these increased fuel prices that have just remained high throughout the year. We thought we were going to start seeing some relief a few weeks ago on that as it started trending down a little bit the last 2, 3 weeks, I think it's back up about $0.50 lower where we had dropped to a bit prior. But no change in terms of what we're going to be looking for from an increase standpoint and what we think we can achieve, because again, we've got to have cost plus pricing in our business to offset that inflation, but more importantly to keep supporting the reinvestment back in our business.

[Scott Group, Analyst at Wolfe Research]

So, you weren't trying to imply that pricing is solid and not slowing a lot or anything like that?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

No, not at all, and if I've said that I misspoke for sure, that we're really pleased, I think when you look at in terms of the yield trends that we've had all year, they certainly been very positive and that's continuing into October. I mean, we didn't -- gave the number in terms of what we're seeing it from at least as of right now what the tonnage is doing, but certainly that implies that that revenue per hundredweight excluding the fuel is pretty consistent with where we were maybe a touch higher for the third quarter overall, and we said we would certainly expect that as we continue to go through renewals, generally mix has held constant, that number increases sequentially from quarter-to-quarter and certainly that will be the objective as we have increases coming due and will be coming out fairly soon on the general rate increase as well. They will apply to about 25% of our business. But all of those factors, we've not really seen any change in the pricing environment, it's remained steady throughout this year and certainly overall the increases we've been able to get.

[Scott Group, Analyst at Wolfe Research]

Okay. Thank you, guys.

[Operator]

The next question comes from Chris Wetherbee with Citigroup. Please go ahead.

[Chris Wetherbee, Analyst at Smith Barney Citigroup]

Hey, thanks. Good morning. Adam, I just wanted to make sure I understood the sequential cadence in operating ratio from 3Q to 4Q. I think you said it was maybe 400 basis points plus or minus relative to the 69.1%. I just want to make sure that that is right? And then as you think about sort of the potential variables that maybe you could add to that, I guess that would kind of get you closer to flattish overall on a year-over-year basis, I think you are still below it based on the guidance. But wanted to get a sense of conceptually as we start to string out over the next few quarters, what are some of the dynamics that could then start to potentially push a deterioration in the operating ratio?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, I mean obviously the top-line is the biggest element, certainly, when you've got revenue that covers a lot of costs and some of those fixed cost elements that we have, But, yeah, the 400-basis-point plus or minus that was off the 69.1% reported operating ratio, and obviously just the delta versus the normal cadence, the biggest being that 100-basis-point benefit that that was one-time in nature that was recorded in the third quarter. But yes, as we certainly transition into next year typically the first quarter is about 100 basis points worse than the fourth quarter, in the first quarter of 2002 we had a 70-basis-point improvement. So, we know we've got some tougher comparisons coming up from both a top-line standpoint and an operating ratio standpoint just given the phenomenal performance that we've had this year, and it's almost 300 basis points improvement in the operating ratio from a year-to-date standpoint. So, it's been an incredibly strong year coming off of the improvement that we made in 2021, it means, had one $1.2 billion of revenue growth in and we put another $900 million year-to-date on top of that in probably a negative GDP environment.

So, I think we're probably in a stronger position than we've ever been in terms of going through a slower macroenvironment with respect to the relationships that we have with our customers. We mentioned earlier, we've not lost any business that we've got to try to go back and regain, if you will, it's just going to be a function of when our customers have more freight to be able to give to us. And so that's encouraging. I've mentioned that I feel like the October trend is encouraging as well. So just be a function of getting through kind of this winter and seeing where that baseline comes where we finished the fourth quarter of this year from a volume standpoint and then getting through 1Q and like I mentioned seeing if we can start getting some of that seasonal buildup that we would typically see coming to us early next year. But again, a lot of it in terms of the new awards standpoint is it becomes more challenging to get a year-over-year improvement in a flattish or a deal revenue environment.

But like I mentioned before, for us it's, we're going to manage all of our variable costs and then just sort of keep investing so might see some loss there in depreciation line, but that's something that we know once that volume returns to the business, and we say to produce long-term operating ratio improvement takes improvements and density and yields. So, once it starts coming back to us, we've proven what we can do in terms of the model. And so, getting that throughput through the system I think we can start working and trying to achieve the long-term operating ratio goal that we laid out at the end of last year of producing a sub 70 annual operating ratio.

[Chris Wetherbee, Analyst at Smith Barney Citigroup]

Yeah. Okay. That makes sense. And then you guys have done historically a good job of outperforming on a tonnage basis relative to peers, both I think in up cycles as well as down cycles. I guess as you think about this one, maybe with -- maybe more of your competitors leaning in from a growth perspective, I don't know if you would agree with that comment first off, but how do you sort of see that relative performance opportunity for you as you go through what could be a softer period over the course of the next year or so?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

A lot of times our market share has been flatter if you will like again looking at 2016 and 2019 as recent examples, but for the last 3 quarters while we've been still producing really solid volume growth if you back us out at least from the public carrier group volumes have been negative on a year-over-year basis going back to 4Q of last year and really just looking at total tonnage it's kind of on an average basis was flattish pretty much since the first quarter of '21 through second quarter of '22. So, we've certainly significantly increased our market share when you look at the volumes and the revenue trends for us through these last couple of years, but a lot of times, like I said, just it may be a point where we may get to where they were sort of flattish, if you will, with the group.

But right now, it just, it feels a little bit different and that's what I mean by we've not lost, when I look at national account reporting talking to customers, there is more conversations about the value add that how we felt customer supply chains really over these last couple of years as people have dealt with the pandemic and supply chain challenges and what we were able to do in '21 in particular, while there were a lot of capacity issues within the industry and to be able to support our customers and their growth and try to keep their networks and supply chain balanced, I think that's gone a long ways, we've proven our value proposition and so that's why I think we're in a better spot than perhaps we've ever been, so whenever we come out of this slower economic environment to really start building on the market share levels that we currently have in place.

So yeah, that's kind of what we've seen in the past and certainly where we think we might be, but where we've been flattish, we might still see a little positive delta from a share standpoint through the group, certainly we've been in probably 3 straight quarters of negative GDP and when you compare our volume performance versus the other public carriers at least there's probably been a wider spread there than perhaps in other times in the past.

[Chris Wetherbee, Analyst at Smith Barney Citigroup]

Got it. That's really helpful color. I appreciate the time. Thank you.

[Operator]

The next question comes from Amit Mehrotra with Deutsche Bank. Please go ahead.

[Amit Mehrotra, Analyst at Deutsche Bank Aktiengesellschaft]

Thanks, operator. Hi, everyone. Adam, I don't know if you mentioned this before, but you talked about October being a little bit better. Can you just quantify that for us like typically obviously what's the historical shipment volume or tonnage volume from September to October versus what it was? And then less of a nitpicky question, I guess I'm not so worried about Old Dominion's ability to see a positive spread between revenue and cost per shipment. I think you've done it 10, in the last 15 years, because obviously the Mastio data and the service and you guys are just best-in-class there, but I guess the question really is the industry's ability to see positive yield ex-fuel growth next year and some of this is a pricing discipline question for the industry, which I ask every quarter, but I'd just love to get your perspective in terms of what you think the industry's ability to see yield ex-fuel positive pricing next year based on everything you're seeing out there from a pricing perspective?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Sure. Yeah, one, thank you for recognizing the service performance and certainly as we said, service support yields, you can't go into an account renewal if you've had service failures and so forth and had rolling embargoes and missed pickups, late deliveries, damaged shipments, those types of things and to be able to get the consistent increases like we've been able to achieve really going back for many years now. But that is a differentiated quality from us versus the group as well as I think that we look for consistency with our program, it's not necessarily in who's favor the market today versus tomorrow. We just want to build in a fair approach and try to create win-win scenarios for us and for our customers, they know what to -- how to forecast and plan for from an extent sampling, but more importantly, they can recognize the value and there is a difference between price and cost, and I think we're increasingly seeing customers recognize the value that we're able to deliver.

So, we certainly will continue with our initiatives, and I can't comment on what the other carriers will be doing and what their strategies will be going forward. But I think that, like I mentioned, the last 3 quarters the other carriers at least had been negative from a volume standpoint to continue to push pricing. So, it's hard to imagine that that changes and certainly seems like that's been favorable to their financial results. There has been general improvement in the industry dynamics of peers. But our yield philosophy has been different from the group for many years and certainly it's been rewarding for us and has allowed us to do a lot of things in terms of the investment cycle and the dollars that we've been able to put into our system to keep growing and to have the baseline. We've probably got 20%, 25% excess capacity in the system today.

And so, we know we're building up for when that next big leg of growth comes to us and we're confident in what our long-term market share capabilities should be and feel like we can get through the challenges over the short-term and softer economic environment, but it's what you do in those upcycles that really make a difference. And so yes, a lot of encouraging trends, if you will, for us, and just we want to make sure that we stay ahead of the game, and have got the capacity, we've got the people and we've got the fleet to be able to take advantage of the next sub-cycle whenever it starts.

[Amit Mehrotra, Analyst at Deutsche Bank Aktiengesellschaft]

And what about the October versus September data point?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yes, sure. From a tonnage standpoint, and again keep in mind, we typically don't even talk about the details, we just give sort of an average change in the revenue. But just know the sensitivity around this point, but the number will change a little bit as we finish out the final few days of the month, but right now, what we're seeing from a month-to-date standpoint it looks like that we're going to be pretty much right in line with the normal sequential change for October typically. Typically, October decreases about 3.5% sequentially versus September and we're right in that ballpark. And certainly, it can move around a little bit as we finish out the month, but that's really the first time since February of this year that the numbers have pretty much been in alignment. So, we'll look and see, there's not necessarily a positive catalyst coming, if you will, but if we can kind of keep touch and keep pace with normal sequential trends, the positive catalyst meaning in the economy right now, but if we can kind of keep pace with these normal sequential as we go through 4Q and 1Q, then we'll have an idea of what type of buildup we might see sequentially as we start getting into the spring of next year.

[Amit Mehrotra, Analyst at Deutsche Bank Aktiengesellschaft]

Right. Okay, very good. Thank you very much. Appreciate it.

[Operator]

The next question comes from Todd Fowler with KeyBanc Capital Markets. Please go ahead.

[Todd Fowler, Analyst at KeyBanc Capital Markets]

Great. Thanks, and good morning. So, Adam, I think you've touched on this in a couple of different ways on the call here, but I just wanted to kind of square up the comments on the weight per shipment, it was up in the third quarter, it sounds like it's still turning positive, both your comments about the customers seeing less demand, I would think that that would have some impact whether it would just be less freight on each pound. So, can you just talk a little bit about the mix of what's been going on with weight per shipment and it seems like it's in kind of a normalized level, but just want to make sure that that's the right way to think about it right now?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

From a sequential standpoint it decreased about 10 pounds from the second quarter to the third quarter and right now in October it's pretty much about the same as where we were right around 1,560 pounds, if you will. And so yeah if that trend held true through the fourth quarter, then we would be looking at a decrease. We took action last year in terms of getting some of the heavier weighted shipments out of our system, some of those spot quote systems shipments as well, those spot quotes as a total of our business have decreased as a result of what we're doing last year really in an effort to protect capacity for our existing LTL customers and make sure that we can deliver what they needed, but we started seeing an increase sequentially in the fourth quarter of '21 versus that low watermark that we hit in 3Q.

So, it went from 5,138 pounds, up to 1,5 75 in 4Q and then increased further in the first quarter of this year to 1,589 and then since that point it's been declining a bit, but yeah, I mean that support in last year was such a strong fourth quarter in terms of we ended up with an increase in our tons per day. It's typically down about 1.5% and we were actually up almost 2.5% sequentially versus the third quarter, so that strength as we went through 4Q was why we had such high expectations coming into this year and it's just been sort of this flattish environment, if you will, from a volume standpoint all year. But yeah, that's kind of what we've been seeing some from a shipment standpoint.

[Todd Fowler, Analyst at KeyBanc Capital Markets]

Okay. No, that sounds, I mean, tonnage being down a little bit and the weight per shipment holding and it seems like a decent combination all things considered. Just for a follow-up, I'm curious if you have any comments on headcount, it was down sequentially. I guess is that's probably letting a little bit of attrition kind of run its course and I don't think the fourth quarter is a big hiring period, how should we think about the cadence of headcount either sequentially or year-over-year just given the demand trends? Thanks.

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Todd, I think you'll continue to see that trend track our shipments. Right now, like we said, we've been simply letting attrition take care of our needs are move back in the right direction, and we will continue to do that during the first quarter, which is typically our slowest quarter, but we are really hiring or been filling vacancies and whatnot, but not much going on from that standpoint at this point in time.

[Todd Fowler, Analyst at KeyBanc Capital Markets]

Got it. So, you've got a little bit of glide path for the next couple of quarters just on the attrition front?

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Yeah, I think so. But keep in mind we've continued to have driving schools and continue to work those and continuing to get drivers trained because we know this thing will do change at some point in time and will come out on the other side in a better position certainly from a driver standpoint and certainly from a capacity standpoint. So, like we are doing some of the right things today to set the stage for when times do recover and get better as has been in the past in our business you know that time will come, hopefully sooner than later.

[Todd Fowler, Analyst at KeyBanc Capital Markets]

Yeah, understood. Thanks, Greg. Thanks, Adam.

[Operator]

The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

[Ravi Shanker, Analyst at Morgan Stanley]

Thank you. Good morning, everyone. Adam, I just wanted to follow-up on some of the tonnage commentary already specifically if you were to take a little bit of a glass half, full approach here. I think you said at the start of the call that you kind of underperforming on share for like 3 to 4 quarters and already 3 quarters into it. If you historically look at like your tonnage stays negative for like 2 or 3 months maximum you already kind of pretty much all the way into that. You did say that you don't think that there is a positive catalyst on the horizon, but what are you looking for any potential signs of the cycle maybe turning, and we may be kind of in a restock kind of uptick position maybe the next couple of months?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, I mean, the biggest thing is just the conversations that we've had with customers. Like I said earlier, I think that there's just so much uncertainty in the market today and that just gets in the psyche of business owners in terms of the risk that they're going to take for capital. I think there's still a labor issue and supply chain issue that's impacting many customers today and we've heard firsthand that just given the uncertainty out there with the economy that some customers have made the decision to not be as aggressive to fill open positions from a labor standpoint for fear of what may come on the demand side for their business. But I think that we certainly, when you think about, there's 3 big layers of uncertainty that people are facing right now be upcoming mid-term elections, but then after that you've got clarity at least for the next couple of years.

But then comes energy issue that it's got to be dealt with, we've got to see some type of improvement overall in terms of where fuel prices are and the impact it has overall inflation for the domestic economy, and I think that if that riddle gets solved and you get some clarity in terms of the interest rate environment. And so, I think we've got to start knocking some of those down to get back into a growth type of mode. But even when we look back at prior periods, be it even looking as bad as 2009 was we started getting growth -- and the sequential growth that is in the spring of that year. So, we had a really bad 4Q '08 and 1Q from a sequential standpoint like many businesses did, but looking at 2016 another slower environment, same kind of thing where the fourth quarter of 2015 things are slowing down, we kind of missed through the winter. We started getting build up back in the spring. At some point people has got to get some inventory back in the system and there's lots been a lot of conversation about inventories, but frankly we continue to face issues in terms of being parts, many of our customers gave us the same feedback that they don't have the right levels of inventories in the right places.

So that creates freight demand, and we still look at an inventory to sales ratio that's lower than pre-pandemic levels. So, I think there's certainly a lot of factors that have got to be dealt with, but just having those conversations with customers and our sales team to deal with that on a day in, day out basis. We're trying to figure out what their plans are going into next year and we take those from each of our sales account representatives, each of our service center managers at our 255 locations and try to build that into somewhat of a baseline in forecast that we intend to build around from equipment planning standpoint, headcount planning, service center capacity planning, but that's the best feedback. You can read all the economic reports in the world, but the best feedback we get from the ground up to help us plan for our business.

[Ravi Shanker, Analyst at Morgan Stanley]

Great. Thanks for walking us through that. And maybe as a quick follow-up, I apologize if I missed this and you said it, but are you seeing any signs of TL players kind of trying to encroach into the LTL market kind of given how loose things on the TL side?

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Not really, and so reason for that is where that may come into play and has in the past say back in 2018 timeframe would be on some of those spot quote type shipments, before the strategic actions that we took last year, spot quote shipments are like 8 to 10,000 pounds type loads and historically 10,000 pounds somewhat defined the LTL industry. But those heavier shipments, you might have a truckload carrier come in and try to build multiple spots or take one mode, if you will, and that was that spillover type of freight. But the actions that we took last year were designed to try to get some of that freight that wouldn't be as sticky proactively out of our system.

And so, as a result those spot puts shipments that used to average maybe 5% of our total, so a small number overall, it's probably more like 1% to 2% at this point. So, we were fortunate that we proactively tried to flush some of that out of the network really and designed to make sure that we were protecting our consistent LTL shippers and the capacity needs that they had in particular last year and what we thought was going to transpire this year as well. But I don't think looking at that some of our competitors' weight per shipment that I think some other companies took a similar approach. I don't think that's as big of a kind of a challenge to work through, in the past there is that freight would swing back into truckload and create somewhat of a vacuum effect that other carriers would feel. I don't think that risk is out there as much as it has been in prior cycles.

[Ravi Shanker, Analyst at Morgan Stanley]

Very helpful. And thank you.

[Operator]

The next question comes from Bascome Majors with Susquehanna. Please go ahead.

[Bascome Majors, Analyst at Susquehanna Bancshares]

Following up on Todd's headcount question, if I look at your shipments per employee, they are still call it 8% below where they were this quarter in 2019. Can you talk a little bit about maybe a more bottoms up look at productivity and your own metrics. How does productivity compare to history on the dock right now, how does the driver productivity compare? And just, is there an opportunity in some of these tops-down metrics that we can calculate to get back to historic levels in a weaker demand environment or does it make sense to stay a little long headcount in a structurally tighter labor market? Thank you.

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Yeah, I'll answer the last part of your question first Bascome. I think it definitely does make sense to stay a little while from a labor standpoint because as we've talked about it on prior calls, we had to work an awful lot harder in the recent past to ramp up from a driver standpoint, particularly that we have over the years. It's just much more difficult in the market, was a hedging a lot tighter and we did work an awful lot harder than we always had in years forward to ramp up. So, for sure we will be a little more trying to maintain that drive force and keep it at higher levels the cost we can without negatively affecting productivity.

To go back to the general productivity question, we're starting to see some improvements, some marked improvement on the platform, which is a good thing, and it sits pretty typical when we get in this environment, our labor force becomes better trained and more experienced and we start to see the positive and pretty positive change and we are seeing that now. So that's certainly a good thing.

Certainly, we struggle little bit on the P&D side, the pickup and delivery side because we're obviously just not picking up the same number of shipments at each stop that we were doing it when we were really at advanced sites, that's certainly more of a challenge, your miles between stops and that kind of become greater and it's certainly more difficult to keep up from that standpoint. So obviously, we'll continue to focus on those. We always think we have room for improvement both P&D end, and platform end, from a load factor standpoint. So, we're continue to stay laser focused on those kinds of things, and continue to try to drive cost out as much as we can, and where we came in.

[Bascome Majors, Analyst at Susquehanna Bancshares]

Thank you, Greg.

[Operator]

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

[Matthew Milask, Analyst at Stifel Nicolaus]

Hey, good morning team. This is Matt on for Bruce. Thanks for squeezing us in here. Curious to get your current view on net capacity in the industry and maybe how you might expect that to trend over the next couple of years here?

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

Well, certainly I think in this type of environment there's certainly capacity out there, much more so than it was last year back in mid 2021 and prior. But I think we were the only one that maybe wasn't really suffering from a capacity standpoint, certainly we were in better shape than most and as Adam had mentioned before, we spent an awful lot of money to ramp up capacity and I think we've done extremely good job of that. We continue to stay focused on building capacity, like I mentioned before, we will come out of this thing hopefully sooner than later, and we'll be in good shape. But I think there is some capacity obviously out there now, we don't see the same things going on this year that we did last year, carriers were in trouble like setting bargains and various things to limit pickups and whatnot, and certainly we're not seeing or hearing about those of things there. So, there's capacity obviously, but I think the question is what we're doing to try to ramp-up and when the need arises on the other side, you know what we're doing. We've got a large number of capacity increasing projects underway now and we'll keep working on those, and again like in better shape and volumes do change when we start to pick back up. So, feel good about where we are and obviously what the others do there, we can't -- certainly can't control that.

[Matthew Milask, Analyst at Stifel Nicolaus]

Great. Lastly, you guys seeing any changes or differences in underlying demand by specific end-market or geography? Thanks a lot.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

No, we've probably seen a little bit better performance with our industrial-related accounts once again in the most recent quarter. It probably grew a couple of hundred basis points faster than the overall company average revenue growth rate. And on the retail side was probably a couple of hundred basis points below that, but overall, still seeing growth in all segments, if you will, but it's probably a little bit better performance on the industrial side and most of our regions, we've got some growing a little bit more than others when we look at it, but most are staying fairly balanced, which is a good thing. It's helped us be able to effectively reduce our purchase transportation, which was a positive for the third quarter. We're effectively back to pre-Pandemic levels in a sense that we're essentially fully in-sourced again, and that's where we want to be, because we know that improves our service value overall. And so that's been a positive trend, if you will, but if you don't have somewhat consistent growth in all those regions, you can get a little bit out of balance, and we might not have been able to achieve that objective. So that's been a positive development at least to help from a service and a costing standpoint.

[Matthew Milask, Analyst at Stifel Nicolaus]

That's super helpful. Congratulations again on the exceptional performance.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Thank you.

[Operator]

The next question comes from Tom Wadewitz with UBS. Please go ahead.

[Tom Wadewitz, Analyst at UBS Group]

Yes, good morning. It's Tom Wadewitz. Just I think Adam, you gave quite a bit of commentary on September-October, but don't know if you offered what the revenue per hundredweight was kind of trending in October, ex-fuel. Can you give us kind of a sense of that is that kind of stable or where is that at?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yeah, pretty stable Tom, I didn't give a specific number, so to speak, but I just mentioned that it's right in line maybe a little bit better than what we saw the average for the third quarter. We were up 7.2% the revenue per hundredweight in the third quarter excluding fuel surcharge and we're at about that same level in October.

[Tom Wadewitz, Analyst at UBS Group]

So do you think that that's of the kind of level you stabilize at, I mean I guess you talked about inflation being maybe a bit more sticky or higher than you thought. I think we normally think of maybe 4% to 5% is being what's a normal growth in revenue per hundredweight to get a bit more than inflation, but I guess if you're running with higher inflation, you got to get more price, right. So, do you think that's the right level or do you think that in a weaker kind of a weak freight market you're going to see that decelerate a bit further as you go into 2023?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yeah, I think that when you look at our long-term revenue per shipment performance, so a little bit different than the per hundred, but long-term revenue per shipment we've been able to average between 4.5% to 5% is that -- whether you look at it in certain years including fuel or excluding fuel, that's kind of been the goal because long-term our cost per shipment performance has been kind of in that 3% to 3.5% range, mainly the increase is that we get to our employees each year from the wage improvement, but certainly we've faced the increased cost of equipment and insurance premiums and fortunately have been able to offset some of those other inflationary items through improved productivity and efficiencies within our operations, but we certainly will have the same objectives as we go through the rest of this fourth quarter, and as we transition into next year as well.

Looking at the per hundred, certainly we have bigger increases in 2021 so much that we started to take them in the back half of the year when inflation was picking up and this year has been solid increases as well, but the key is just as contracts renew and they renew throughout the year for us is to continue to make improvement. So, we work on continuous improvement cycle whether it's with our yield management, the efficiency of our operations, every department is looking at continuous improvement, and certainly, we've got to continue with our best efforts they are on the yield side. But I mean I think that we'll see core inflation, and we certainly hope that that moderates as we transition into next year. So, we should need as big of an increase perhaps as what we've seen the last 2, but certainly want to see sequential increases from quarter-to-quarter.

[Tom Wadewitz, Analyst at UBS Group]

Right. Okay. Great. Makes sense. Thanks for the time.

[Operator]

The next question comes from Jon Chappell with Evercore ISI. Please go ahead.

[Jonathan Chappell, Analyst at Evercore ISI]

Thank you and good morning, Adam, just 2 quick follow-ups for you. First on the PT brought it up in an answer a couple of questions ago, 2.1% as far as I can tell us about as low as it's ever been in your network. So, as you contemplate keeping maybe more resources from a headcount perspective just because of the challenges in hiring, is there any more room to flex PT or are you kind of at the absolute minimum there and we think about it holistically salaries, wages and benefits plus PT probably stays a little bit elevated for the foreseeable future?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yeah. That level where we are, we effectively in the third quarter didn't use any PT within our domestic linehaul network, that balance that we've historically had generally trends between 2% to 2.5% of revenue, reflects mainly because we have small truckload brokerage operation. So, you've got those carrier costs there and the partners that we have with our Canadian operation is with those purchase transportation cost in that baseline number. So, certainly wouldn't necessarily expect that to go much lower as a percent of revenue unless something is changing with those businesses, which we don't foresee, but nothing really out there. The coal if you will, as it impacts the domestic operations, it certainly flex up as we went through the balance of 2021 primarily using that PT to supplement our workforce and to a degree our fleet where some of what I mentioned earlier, we had some regions that were growing much stronger like coming off the West as we came out of the pandemic was growing incredibly strong and can get your fleet out of balance if you appropriately manage. So that was some of why we were using a little bit of PT as well is just to keep the network overall in balance.

[Jonathan Chappell, Analyst at Evercore ISI]

Okay. That helps. And then also to tie a couple of things together, I mean, it sounded like you're pretty optimistic, I mean maybe optimistic a strong word, but not as pessimistic regarding some of your customer commentary, but in your prepared remarks I wrote down you said directly demand just isn't there for some of your customers' freight. So, do we foresee maybe a late peak season where it's not there today but going into a time that might seasonably be slower you start to see a reversion or a catch-up or do we kind of just write-off the rest of this year as it's going to be weak and maybe things are rightsized by '23 and start to see a pickup then?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yes. For us, we don't have a peak season per se, usually September is our busiest months of the year just from a function of the seasonality in our business and we had pretty consistent seasonal trends year-in and year-out as we progress, whether it's week by week within the month and then month-by-month through the quarters, but nevertheless, I mean, certainly some of the months that we had in the earlier part of the year coming off the strength of how we finished '21, it looks like March will be our busiest month in terms of just the average weight and shipments, if you will, but yeah, just managing through kind of the base levels where we are looking at, I mentioned earlier, that when we get whether it's an upcycle or a downcycle, a lot of times we will have 3 to 5 quarters where we either outperform or underperform normal seasonality and so that the third quarter was the third such quarter of underperformance.

So, we'll just continue to watch the trends, like I mentioned, what we've seen at least through the second and third quarters was just in the months where we see a lot of build out. We didn't see that same type of acceleration, September for example that would normally be up sequentially about 4%, we were up about 0.5%. So, will we get the buildup in November remains to be seen, and then December kind of drops off, but I feel like if we can kind of somewhat stay a little bit closer in touch with our normal sequential trends through 4Q and 1Q of next year then that's kind of looking at getting to the spring and seeing when we start seeing some volumes coming back to the business; 2Q of this year, it's quite a bit different. We're used to seeing volumes increase sequentially about 7.5% for the first quarter to the second quarter and we were up about 7/10 of a percent, so we just haven't had that buildup that we otherwise would see.

But yes, so it's just going to be a function of kind of getting through and watching these developments, but October generally sets the trends when we look back for the fourth quarter and look back at some prior year periods where we were kind of in or going into an economic slowdown, we've had a lot more underperformance, if you will with October versus September. So, that was something that we have been closely watching internally, and it makes us feel a little bit better as we really get into the winter months where we're always going to be a little bit seasonally slower.

So, it's just a function of continuing to execute on the plan, we would be adjusting if need be to what the overall volume environment dictates and then just trying to stay engaged with our customers and figure out where we really see that spring build-up next year or not, and then all the while, we're probably focusing a little bit more on sequential trends now. Certainly, again from a year-over-year standpoint, the fourth quarter was so strong, we kind of do the fourth quarter in the first quarter from a year-over-year standpoint we're going to be much harder comparisons on the volume side. So, that's why we're probably paying a little bit closer attention now to how some of these, the seasonality has played out for us.

[Jonathan Chappell, Analyst at Evercore ISI]

Okay. That's very helpful. Thank you, Adam.

[Operator]

The next question comes from Jason Seidl with Cowen. Please go ahead.

[Jason Seidl, Analyst at Cowen]

Thank you, operator. Gentlemen, thank you for squeezing me in here. Just one question from me, it's sort of been asked in different ways, but how should we think about the industries continued ability to gain pricing above cost inflation with many larger LTL carriers sort of expanding capacity into a downturn. Is that something we should be concerned about or is the fact that we're seeing some much cost inflation across everybody's network that we should remain confident that everyone's going to maintain pricing discipline that we've seen over the last decade?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Yeah. We'd certainly -- like I mentioned the carrier group on average, if you exclude us has seen negative volumes on a year-over-year basis for the last 3 quarters and has continued to increase their yields and so we would anticipate a lot of change in that and with respect to where the capacity is really being added or not remains to be seen. We've not seen really any material additions, some people are talking about it, there has been one of the carriers, I guess, that certainly has increased their service center count, but when you look at the industry at least the public carriers on average over the last 10 years has been a decrease in the industry capacity. So don't really foresee a lot of change in that regard as we move forward, but certainly we'll continue to watch it. But again, we believe the industry will stay disciplined. But we know what our plan is, what we can control and we'll continue to control the elements that we can and what the other carriers say we'll just continue to sort of watch and see, but I think we've got a long-term track record in terms of what we've been able to do over the last 10 years we've averaged growing our revenue 11% a year and we certainly have made improvements to the operating ratio along the way.

And again, it's been through a combination of consistent improvements in yield, and then the density through that the volume throughput in the system that's allowed us to produce this consistent operating ratio improvement and different carriers have had different strategies along the way and certainly in recent periods other carriers been increasing rates faster than us, but we don't control what they do. But we'll continue to certainly watch, but our conversations with customers are what's going on within Old Dominion, what our cost inflation looks like, the investments that we want to make to help support our customers and the growth in their business, and ultimately, what's the value that we can add to our customers supply chains and those are the conversations we had versus trying to compare our price versus someone else's price. It's all about value and that's service values that has won the day for us and it's what will continue to drive unless our ability to win market share in the long-term.

[Jason Seidl, Analyst at Cowen]

Well, clearly your game plan has worked, So, sticking with it is a good thing. Gentlemen, I appreciate the time as always.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Okay.

[Operator]

The next question comes from Ken Hoexter with Bank of America. Please go ahead.

[Ken Hoexter, Analyst at Bank of America]

Hey, Greg. Good morning, Greg and Adam. Adam, just to balance out your last comment there, your 100-basis-point revenue over costs you noted before but also noting higher inflation. I just want to understand you still target the kind of 50 to 100-basis-point operating ratio improvement on a full year going forward or does that change if volumes are weaker here?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, I think we talked a little bit about this earlier, certainly in periods where revenue has been flat or have been down, we've had a little bit of overall degradation generally limited to the depreciation cost as a percent of revenue. And the reason for that is we want to continue to invest for the long-term market share opportunities we believe we have. Certainly, when you look at the second quarter of 2020, we had a big decrease in revenue that year. But we got a lot more aggressive in terms of managing costs and actually improve the operating ratio 10 basis points. But I think that looking more at 2016, 2019 for the general performance and doing some of the things that really protect our long-term opportunities, keeping a little bit inflated headcount like Greg mentioned earlier, continuing with our investment cycle, those are the types of long-term decisions that we want to make that improve our opportunities for out years to get prepared for maybe one of 2024, 2025 looks like versus just trying to focus too closely on the short-term and what the first half of next year might otherwise look like. So certainly, a lot of it depends on the overall revenue environment and what we see, there's a lot of uncertainty out there, but that's 2016 and 2019 are probably better examples to look at in terms of how we try to manage the business, manage all the variable costs flat as best we can or prevent any type of increase in deterioration there in those cost elements, and I just might say that those depreciation cost increasing as a percent of revenue because of the investment driving increased depreciation dollars and then your denominator being potentially flat to down from a revenue standpoint.

[Ken Hoexter, Analyst at Bank of America]

And then the percent of volume you mentioned from the spot board, but how about from the third-party carriers, brokers, does that shift in this kind of a market when things get softer, do you add more, do you keep it steady, how do you think about that strategically?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, I mean we've got good long-term relationships with many 3PLs, they are about a third of our business overall. A lot of times what you'll see in a slower macroenvironment, we're seeing a little bit now is some of those levels of the 3PL driven have kind of flattened out a little bit and so we'll continue to watch that. But certainly feel like that a lot of the big 3PL customers that we have in some ways can help us since demonstrating the value independently to the shippers that potentially help us manage transportation services for and talking through with the different elements of value in terms of our superior service, on-time pickups, on-time deliveries, damages, all those sorts of things that if they're talking to someone that has just been solely focused on price in the past, they can help us talk more about value. So, in some ways they could be beneficial to us in a slower macroenvironment.

[Ken Hoexter, Analyst at Bank of America]

So, are you seeing that increase as a percentage or is it -- stick around that third level up and down in the market, or are you already seeing change?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

No, it's remaining about a third.

[Ken Hoexter, Analyst at Bank of America]

Okay.

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

It's just the growth is flattening out a little bit in terms of looking at the overall revenue with our 3PLs right now.

[Ken Hoexter, Analyst at Bank of America]

And then last for me is the fuel, it seems relatively neutral this quarter in terms of kind of a quarterly impact, I guess, versus a huge lag impact last quarter, does that math sound right to you? And then in your negotiations are customers kind of talking, I mean, I know you keep raising your rates, but the customers pushed back even harder now or is it a bigger struggle as you go through these negotiations given the volume environment?

[Adam N. Satterfield, Senior Vice President - Finance, Chief Financial Officer and Assistant Secretary at Old Dominion Freight Line]

Well, no, there is always conversation about total all-in price, if you will, because that's ultimately to build the customers' pain. But for us certainly there was a slight decrease in average price of fuel in the third quarter versus the second, so that's something we probably talked a little bit about more, in the last call, but like I mentioned earlier, we hope that we see that continue to decrease and I would say looking at the impact, there's been a lot of questions about that, if we were to see a decrease in the impact of fuel surcharge and our philosophy is we want the fuel surcharge is just one element of pricing and the fuel goes up or down we have that's neutral to the bottom-line for us. And probably the best periods to go back and look if we are to get some type of material improvement in fuel prices, 2015, the average price of diesel fuel was down about 30% that year, we are fortunate that we still had some volume growth going in that year to help us have good revenue trends overall and we were able to improve the operating ratio. The fuel dropped another 15% in 2016, that year was a little bit different in terms of the overall top-line environment and a little bit more pressure from a volume standpoint, but we certainly would like to see overall the fuel price continue to drop. And certainly, that would decrease the all-in price that is being paid today.

[Ken Hoexter, Analyst at Bank of America]

Hey, Adam, Greg. thank you very much for the time. Appreciate that.

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

All right. Thanks.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Gantt for any closing remarks.

[Greg C. Gantt, President and Chief Executive Officer at Old Dominion Freight Line]

We 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. Thanks, and have a great day.

[Operator]

[Operator Closing Remarks]