Title

Presentation

Old Dominion Freight Line, Inc. beats earnings expectations. Reported EPS is $1.19, expectations were $1.14.

Operator: Good day, and welcome to the Old Dominion Freight Line First Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Finance and Investor Relations. Please go ahead.

Jack Atkins: Thank you, Nick, and good morning, everyone. Welcome to the First Quarter 2025 Conference Call for Old Dominion Freight Line. Today’s call is being recorded and will be available for replay beginning today and through April 30, 2025, by dialing 1-877-344-7529, Access code 3942957. 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. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. As a final note before we begin, we welcome your questions today, but ask that you limit yourself to just one question at a time before returning to the queue.

At this time, for opening remarks, I’d like to turn the conference over to our President and Chief Executive Officer, Marty Freeman. Marty, please go ahead, sir.

Kevin Freeman: Good morning all, and welcome to our first quarter conference call. With me on the call today is Adam Satterfield, our CFO. After some brief remarks, we will be more than happy to take your questions. Old Dominion’s first quarter financial results reflect continued softness in the domestic economy and our revenue and earnings per diluted share both declined as a result. We are pleased, however, that our yields continue to improve, and our market share remained relatively consistent. In addition, our OD family of employees continue to provide our customers with best-in-class service while also operating efficiently. While we have discussed softness in the domestic economy, along with a challenging operating environment on these calls for the past couple of years, we have continued to affirm our team’s commitment to executing on the fundamental elements of our long-term strategic plan.

While that absolutely continues to be the case, we want you to understand that our team also continues to focus on maximizing our operating efficiencies and reducing our discretionary spending in an effort to protect our operating ratio. Improving the operating efficiency in our network is very difficult to achieve when a reduction in density is experienced. That is why I’m proud that we improved our platform shipments per hour and P&D shipments per hour in the first quarter despite the 5% decline in our LTL shipments per day. Our team did this while also maintaining the highest level of customer service. We are pleased to once again provide 99% on-time service performance and a cargo claims ratio below 0.1%. We have strengthened our customer relationship over time by consistently providing superior service at a fair price, which has added value to our business.

Importantly, our service performance also continues to support our disciplined cost-based approach to yield management. One doesn’t happen without the other, and we believe our unmatched value proposition will support our ability to win market share over the long term. As we win share, our operating density will improve and create the leverage that should help drive improvement in our operating ratio. We continue to believe that the path to long-term profitable growth and operating ratio improvement is the balance between operating density and yield management. Both of these initiatives generally require the support of a favorable economic environment. We entered this year with a degree of cautious optimism based on customer feedback and improving macroeconomic data points.

Our SIP was that increased clarity around taxes and regulation will lead to greater business confidence, investment and ultimately, increased freight volumes. We were encouraged to see signs of improved demand for our service in the first quarter, and our LTL tons per day in both February and March tracked in line with normal seasonality. That said, there continues to be uncertainty with the economy, which can mean that a full recovery in our business trends might take additional time. While we can’t control the macro environment, we will remain focused on controlling those things that we can by consistently executing on our long-term strategic plan. Our team’s dedication to our customers and commitment to excellence has allowed us to win more market share than any other carrier over the past decade.

We continue to believe that providing superior service, maintaining our disciplined approach to yield management… [Technical Difficulty]

Operator: Ladies and gentlemen, it appears we have lost connection to our speaker line. Please stand by while we reconnect. Thank you for your patience. Pardon me, this is the operator. We have reconnected the speakers and will continue. Please proceed.

Kevin Freeman: Good morning. I’m sorry for the technical difficulties. We had some phone issues here, but I’ll continue where I left off, but what I meant for you to hear is while we can’t control the macroeconomic environment, we will remain focused on controlling those things that we actually can, and that’s by consistently executing on our long-term strategic plan. Our team’s dedication to our customers and commitment to excellence has allowed us to win more market share than any other carrier over the past decade. We continue to believe that providing superior service, maintaining our discipline as it is the yield management, controlling our expenses and consistently investing in our team and our network, we also are uniquely positioned to respond to an improving economy.

There have been plenty changes in our industry over the past couple of years, but nothing has changed our long-term outlook for additional market share opportunities or our belief that we can win more market share over the long term than any of our competitors. As a result, we remain confident in our ability to produce long-term profitable growth and increased value for our shareholders. I appreciate you joining us this morning. And now I’ll turn it over to Adam for the first quarter in greater detail.

Adam Satterfield: Thank you, Marty, and good morning. Old Dominion’s revenue totaled $1.37 billion for the first quarter of 2025, which was a 5.8% decrease from the prior year. Our revenue results reflect a 6.3% decrease in LTL tons per day that was partially offset by a 2.2% increase in LTL revenue per hundredweight. We also had one less workday than the first quarter of last year. On a sequential basis, our revenue per day for the first quarter decreased 2.4% when compared to the fourth quarter 2024 with the LTL tons per day decreasing 3.5% and LTL shipments per day decreasing 2.6%. For comparison, the 10-year average sequential change for these metrics includes a decrease of 2.1% in revenue per day, a decrease of 1.6% in LTL tons per day and a decrease of 0.9% in LTL shipments per day.

The monthly sequential changes in LTL tons per day during the first quarter were as follows: January decreased 3.8% as compared to December, February increased 1.9% as compared to January and March increased 4.8% as compared to February. The 10-year average change for these respective months is a decrease of 0.4% in January, an increase of 1.4% in February, and an increase of 4.9% in March. While there are still several workdays that remain in April, our month-to-date revenue per day has decreased 7% on a year-over-year basis, although we note that this is impacted by the timing of the Good Friday holiday. The holiday was in April of this year, but it was included in March of last year. We anticipate that our revenue per day for the full month of April will decrease approximately 6%, plus or minus 50 basis points.

This obviously depends upon our revenue performance for the remaining days of this month. As usual, though, we will provide the actual revenue-related details for April in our first quarter Form 10-Q. Our operating ratio increased 190 basis points to 75.4% for the first quarter of 2025 as the decrease in our revenue had a deleveraging effect on many of our operating expenses. This contributed to the 130 basis point increase in our overhead cost as a percent of revenue. Within our overhead costs, our depreciation as a percent of revenue increased by 70 basis points as we have also continued to execute our long-term capital expenditure plan. While this strategy has created short-term headwinds for our margins, we believe that investing through the economic cycle is a critical differentiator between us and our competition.

History has proved that this strategy has supported our ability to win significant market share when the economy is at its strongest. As a result, and based on the confidence that we have in future market share opportunities, we have spent $1.5 billion on capital expenditures over the past 2 fiscal years. We have plenty of capacity within our service center network to accommodate future growth due to these ongoing investments. As a result, we recently reevaluated each project on our 2025 capital expenditure plan and elected to defer certain projects to future periods. In addition, we reduced the amount of new equipment that we plan to purchase this year. We now expect our capital expenditures will total approximately $450 million in 2025, which is a $125 million reduction from our initial plan.

Our direct operating cost also increased as a percent of revenue in the first quarter due primarily to an increase in costs associated with our group health and dental plans. This resulted in our total employee benefit cost increasing to 38.2% of salaries and wages from 35.6% in the first quarter of 2024. Overall, we continue to be pleased with our team’s efforts to control the cost that we can control, while also maintaining a focus on doing what is best for our business over the long term. Old Dominion’s cash flow from operations totaled $336.5 million for the first quarter of 2025 while capital expenditures were $88.1 million. We utilized $201.1 million in cash for our share repurchase program during the first quarter, while our cash dividends totaled $59.5 million.

Our effective tax rate for the first quarter of 2025 was 24.8% as compared to 25.6% in the first quarter of 2024. We currently expect our effective tax rate will be 24.8% for the second quarter of 2025. This concludes our prepared remarks this morning. Operator, we’ll be happy to open the floor for questions at this time.

Operator: [Operator Instructions] And your first question today will come from Jordan Alliger with Goldman Sachs.

Jordan Alliger: I was wondering if you could give a little bit of color given all the uncertainty that’s going on with tariffs and manufacturing, is a way to think about seasonality as we go from first quarter to second quarter and then just sort of maybe involved with that. Given we’ve been in a 2-year freight recession, already if we did have ongoing slowdown or a recession, would the impact be more muted since we’ve already been in a downturn? Or is that difficult to say?

Adam Satterfield: Jordan, are you talking about seasonality with respect to revenue or…

Jordan Alliger: For margins. Yes. I guess, margins and revenue, I mean, both will be asked, I’m sure.

Adam Satterfield: Yes. I guess I’ll start with the margin and save the revenue discussion for later, although a lot of the margin discussion depends upon the revenue. But our 10-year average is 300 to 350 basis point sequential increase from the first to the second quarter, but that’s typically based on our revenue growing about 8% from the first to the second quarter, which I don’t know that we’re anticipating that based on what we’ve seen so far in April and just the general uncertainty with the macro. I think kind of the way to look at it is if revenue per day kind of stays flattish with where we’ve been thus far in April, I think that we would expect to see an improvement in the first or the second quarter, somewhere around 100 basis points, plus or minus, obviously, whatever happens on the top line.

And I would expect that our salaries, wages and benefits will probably be flattish with the first quarter, and that’s what we’ve seen in the last couple of years where we’ve had — we’ve lacked that revenue growth from the first to second quarter and typically, that’s where we get a lot of that 300 to 350 basis points, on average, about 200 of that sequential benefit is on the salary, wages and benefits line. So obviously, that’s revenue dependent. We’re expecting a little pressure in our operating supplies and expenses. Some of that is probably going to be a tariff impact on parts and repairs. Our overhead costs, which are more fixed in nature, those have been running about $300 million, $305 million in total each quarter. And so I think that’s where a lot of the plus/minus that we might see might come in just depending on what the revenue does because that total is going to be there just depends on what the top line will look like.

So I think just the biggest variable that we’re contending with once again is what the revenue is going to look like.

Operator: Your next question today will come from Jonathan Chappell with Evercore ISI.

Jonathan Chappell: Adam, thanks for the April to date revenue per day. If you could just provide the breakdown of that on tonnage and yield ex fuel understanding there’s a few days left. And as it relates to that latter part on the revenue ex fuel, have you seen any change in the pricing environment as the tonnage headwinds are maintained a lot longer than I think many expected.

Adam Satterfield: Yes, right now, because we just had Good Friday last week, I intentionally didn’t give that breakdown for that reason, really, the numbers are a little bit skewed. But I think just trying to look through and forecasting out what we might end up seeing. Our weight per shipment has dropped as we have come from March into April. So sequentially, there a little bit more than what we typically see, but we saw an acceleration in March that was above what we would normally see. So if you just kind of take February and roll it forward with normal seasonality, we’re about where we are, which is around 1,470 pounds so far in the month of April. So that’s given a little boost to our revenue per hundredweight. I think just looking at where we are right now, the revenue per hundredweight and hoping that we’ll see a little bit of acceleration for the remainder of the period.

I would think for the full quarter, we’re probably looking at that rev per hundredweight excluding fuel being somewhere in that 5% to 5.5% range. So a little acceleration versus what we just had in the first quarter. And normal seasonality would put us at the top of that range I just gave. But again, we’ll just look at the balance of what continues to happen from an underlying mix standpoint. But overall, with respect to the yield environment, I can’t report obviously on what the other carriers are doing. But I’ve been really pleased that we’ve been able to successfully get increases as we’ve gone through bids and it’s not only what we’ve done in the first quarter and so far in the month of April, but it’s really what we’ve done over the last couple of years.

And we’re fully committed to our long-term yield management strategy and being consistent and fair in that regard. And I think it’s proven to be its worth when you look over the long term and the financial results that we’ve been able to produce. And our costs aren’t decreasing. Our costs continue to go up. And so that’s why we’ve got to continue to ask for increases. And the encouraging thing, though, we talked about this from a demand standpoint is — one, we’ve maintained our market share through this period, somewhere in that 12% to 13% range. But we were starting to see a reacceleration in our business. We had 2 months of tonnage that was at seasonality. And so we’re winning share. We’re starting to win share and doing it at our prices.

And that’s encouraging to see. And obviously, we’ve had a little disruption here like everyone else has so far in April. But hopefully, once that gets resolved, we’ll see the reacceleration in the macro environment that we were really hoping for and starting to see early signs of the February and March trend.

Operator: Your next question today will come from Ravi Shanker with Morgan Stanley.

Ravi Shanker: So just on the CapEx, can you help us understand kind of how much of the CapEx got is just purely related to macro versus maybe idiosyncratic to ODFL, given your own investment pace, as you mentioned, or maybe even a function of what you’re seeing out there kind of broadly in the LTL space.

Adam Satterfield: Yes. I think that, like we mentioned on the earlier and we may have to increase our CapEx budget for a new phone system. So we’ll contemplate that afterwards. But I think that we’ve talked the last couple of quarters about how we’ve continued to invest in our system. And look, we sit down from a real estate standpoint and look at where we think we’re going to be long term from a market share standpoint. And we always want to stay ahead of the growth curve. And we’ve continued to invest pretty significantly the last couple of years when we haven’t had growth in shipments per day, but we are comfortable in those long-term opportunities and confident that we’ll achieve those initiatives. And so that’s why we’ve continued to invest.

But within the real estate network, which is usually what we comment on, we’ve got north of 30% capacity. And so we went through each and every project and I just talked about it, is it the right thing to do now versus just waiting until a later period. Those projects that we’ve got. And we reduced the CapEx for, they aren’t going to go away. They’re just going to be done at a later time. So we felt like that would help us given the continued uncertainty with the economy to prevent a little bit of depreciation continuing to come on the books because that’s how depreciation has been a big driver in the inflation that we’ve seen in our overhead cost as a percent of revenue over the last couple of years. And then the fleet was something similar.

Just looking at kind of where our fleet stands right now. We’ve invested in the last couple of years. We had some deferred CapEx really when you think about going all the way back to the pandemic all the growth that we had in ’21 and ’22 and trying to keep pace holding on to older equipment, OEMs having challenges. So we had some deferred CapEx in the system, but just going through and kind of looking at where our power fleet in particular, stands and what we felt like we’ve got capacity to be able to handle if our business continue to grow. And if we saw some reacceleration in the trends like we did in February and March, if those continued through September, where we might be and what we might be able to handle. So we feel like we’ve got all 3 phases of the capacity gain covered with what we have today.

And that’s service center capacity, our fleet capacity, and most importantly, on the people side. And our team is in a great position to handle the business that we have, but to handle additional growth that we hope we’ll start seeing this year.

Operator: And your next question today will come from Tom Wadewitz with UBS.

Tom Wadewitz: Yes. Wanted to see if you could comment on how you think about the importance of retail customers to LTL overall, I think maybe you have a little more exposure than others, but LTL is primarily levered to industrial. The reason I ask is it seems like you — at least on the margin, there might be more competition for those type of customers. I suppose the Amazon question, if can they do anything in LTL? Will they — if they do? It seems like that would be in retail and kind of inbounded their fulfillment centers. So maybe it’s not your business, you don’t care, but also, I guess, UPS doing a little more of their hundredweight product. I don’t know there, maybe that’s a little on the margin. I know there might be other players.

But just wondering how you think about that. And also, I suppose if there is some impact from imports maybe that would come through more on the retail side. So just how important is retail demand and competition in the overall LTL market.

Kevin Freeman: Yes. We really don’t see Amazon’s LTL offering as a threat to the LTL industry, especially Old Dominion. As I understand it, it’s mainly geared towards their own suppliers. And I actually see it as an opportunity for us to help them with their logistics needs. If their suppliers need to pick up the same day, we certainly cover all 48 states and we’re able to help them out with that. So I don’t really see that as a material threat to us, more of an opportunity, in my opinion.

Adam Satterfield: Yes, you had a lot of questions baked into that, but just to add a little bit more. Retail is about 25% to 30% of our business overall. So obviously, we still see and have a lot of exposure to the industrial environment. And — but I think that the retail opportunity will continue to be a tailwind for the LTL industry. And as more and more the retail world moves to e-commerce, we’ve seen it developing over time that — that’s an opportunity for shipment sizes to become smaller and to be moved through an LTL network, and those retailers can leverage our network as part of their supply chain. And so I think that, that will continue to play out. The good thing about many of those large retailers that many of them have on time and in full programs in place.

And it puts the burden on the vendor that’s controlling the freight charges and choosing the carrier to select a carrier that can help them meet those on-time in full metrics and avoid fines and chargebacks. And there’s no one with better service than Old Dominion despite what maybe some other carriers might tell you, and I think it was proven by last year’s Mastio results where we won for the 15th straight year, but 99% on-time service, the claims ratio that would round down to 0 if we reported it out. And so we’ve got the best on-time claims-free service and can help those that are delivering into that retail world and add value to their supply chain. So I think that’s something that we’ll continue to see as an opportunity of growth for the industry, but an even bigger opportunity for Old Dominion.

Tom Wadewitz: Do you think it’s right to say that retail is more import levered and a little more risk to tariffs?

Adam Satterfield: Well, I think obviously, that’s there. There’s a lot of imported products. But I think that again, it’s looking for the opportunities that exist. And that’s what our sales team they’ll do. They stay in front of our customers and talk about how we can help them add value and ultimately save money within their supply chain by choosing Old Dominion. So that’s the sale that we’ll continue to make, and I don’t think there’s anyone with a better value proposition in our industry than what we can offer. So we’ll continue to drive that home. And with some of these other changes, we’ve talked about the other long-term opportunity for the LTL industry will be near shoring and reshoring. So if we see increased manufacturing activity in North America, I would say, I think that creates a tremendous opportunity for us as well, both inbound product, raw materials and so forth going into those plants, but as well as us being able to get the finished good out the back door.

And like I mentioned earlier, just leveraging our network as part of our customer supply chains to get product moved throughout the U.S. and more and more of that product has got to be staged closer to the consumer to be delivering in the shortest window possible. And in those fulfillment centers, they want to maximize the number of SKUs they can have, and those are very minimal inventory quantities typically to do so, which is why they want to make sure when they make an order that is delivered on time and without damage. So again, I think that’s the ongoing opportunity for us. And those 2 components there will continue to be tailwinds for the industry, where I think we can be the biggest beneficiary.

Operator: Your next question today will come from Scott Group with Wolfe Research.

Scott Group: Adam, the OR commentary you gave for Q2. I missed what the revenue assumption was. Were you saying that that’s if revenue is basically flat from Q1 to Q2? I just want to understand that. And then maybe just more broadly, if you could just talk about pricing and the competitive dynamic and if you’re still able to get like the 1 to 2 points of price above inflation or if it’s getting any harder, more competitive, just some high-level thoughts there.

Adam Satterfield: Yes. So that guidance was based on the revenue per day that we’re seeing, if it just kind of stays flattish with what we’ve seen so far in April. And ignoring Good Friday. Good Friday is typically about 60% of a normal workday. So kind of take that day out of the mix. But if we followed a long kind of flattish per day, didn’t see any acceleration in the business, that would put us with revenue in total for the quarter of about $1.4 billion. So that would be 5% down compared to the second quarter of last year. If we got on the optimistic side, if some of these things get settled, and we can see some reacceleration in the business, probably the most optimistic would be if we can get back to normal seasonality and I’m not expecting this right now, but normal seasonality in May and June would put us at about $1.5 billion.

So we’re getting back to closer to flattish with last year on an overall revenue standpoint. And I don’t want to give the pessimistic side, but because I think we’re seeing pretty consistent trends overall as we’ve gone really through the month of April. So but we’ll obviously continue to give our statistics as we go through the period. We’ll give the full April and our 10-Q and then we’ll give our mid-quarter update to talk about what the May trend is looking like. But kind of that midpoint of just assuming flatness would give us that 100 basis points of improvement. And then I think you just kind of got to go up or down from there based on what the revenue performance might look like.

Scott Group: And then any pricing thoughts?

Adam Satterfield: Well, we talked a little bit about that earlier. And regardless of what the other carriers are doing, we’re continuing to get our increases. And that’s what was so encouraging is we’ve been consistent through this last couple of years because our costs have only increased as well. And so we’ve been consistent in our ask and I think that’s sort of getting back to this is a relationship business. We always want to be consistent with our customers, and we would continue to do so when the environment is accelerating. We look at things from a cost-based mindset, and we look at each account on its own operating merits and what their operating ratio is going to be. And we want to be cost plus because that plus helps us continue to invest in new capacity from a service center and real estate standpoint as well as continuing to invest in new technologies.

So obviously, we continue to have success with our yield management initiatives in the first quarter, and that’s continuing into the second as well. And it was looking like we were having that acceleration in the business given the sequential increases that we saw in February and March. So I think, obviously, at some point, there’s got to be an inflection in the macro, and I think we’re better positioned than we’ve ever been in the sense of the discipline that we’ve shown over the last couple of years. And when things really start to accelerate, that’s when the OD model shines the brightest. And I think we’ve got the ability to put a significant amount of volumes into our system. That’s going to create a significant amount of leverage. And I think it puts us right back on track with being able to achieve the long-term operating ratio improvement that we’re looking for.

We still maintain that we want to achieve a sub-70 OR goal. I think we’ve controlled what we can control during these last couple of years. If I go back to 2022, that was our best operating ratio from an annual standpoint, of 70.6%. Our direct and variable cost as a percent of revenue are about the same in the first quarter as they were then at about 53% of revenue, but our overhead costs are at 22% of revenue versus 17% for the full year in 2022. So once we start growing again, our network is built for more shipments per day than what we’re handling right now, but it’s going to create tremendous leverage there on those overhead costs. And we’ll get leverage on our variable cost as well, but that’s what’s going to allow us to continue to drive this operating ratio lower over time.

Operator: And your next question today will come from Brandon Oglenski with Barclays.

Brandon Oglenski: So maybe following that line there, Adam, or even Marty, I guess — I mean, I know we like to call it a freight recession in the last 2.5 years, but volumes have been down versus an up economy, even if the industrial side has been soft and we understand that. But at some point, we just got to call a spade a spade, right? Like LTL is definitely pricing modal substitution here. So at what point do you need to think strategically if the market is going to continue to remain down, is that just what you want to track or do you need to start thinking differently about this longer term?

Adam Satterfield: Well, I think obviously, LTL is a market into itself. And there’s — at the fringe, some modal consolidation opportunities that we’ve seen where the truckload market has been so weak that customers have been able to consolidate some heavier loads into one. But at the end of the day, when shippers are moving 1,500, 1,600 pound loads and loads that have got specific appointment times when you got delivery, the need to leverage the real estate network that us and other LTL providers have built. Truckload carriers can’t really solve that need. And obviously, we’ve got to keep cost in mind as we go, and that’s what we do every day. We’re thinking every day about how do we manage and keep our cost inflation in check.

And I’m pleased when we look over the last 10, 15 years, we’ve been able to keep our cost per shipment inflation in the 3.5% to 4% range. And obviously, we target trying to achieve 100 to 150 basis points of positive spread above that. But when you look at our industry, we’re down about 15% tonnage relative to 2021. And while GDP has been positive, I think that us and other carriers have felt the brunt of the overall volume environment being down. And so we’ve not seen anything that would change from a big picture standpoint. Obviously, this downturn has lasted a lot longer. But the continuous conversations that our teams have with our customers, we’re thinking and planning out what we think this environment is going to look like on the other side and those conversations with customers are really why we were confident in investing in capital expenditures like we have over the last couple of years.

We don’t make those decisions lightly and on a win, they’re grounded in multiple conversations with our customers. And so I think that’s what we just got to continue is stay in front of our customers and continue to work towards what the environment is going to look like on the other side. I don’t think you see anyone else from a — when you look across the industry that’s really doing anything a lot different. So if our market share was decreasing, for example, then that might be a point to try to reevaluate things. But right now, we’ve maintained our market share. We’ve done everything that we say we’ll do. It’s just in a slow environment, maintaining market share, maintaining discipline with respect to yield management and continuing to build out incremental capacity to prepare for the other side of growth, and we’ve done all those things while maintaining an operating ratio.

We don’t like to see our operating ratio up, but we’re still, I think, about 1,200 basis points better than our competition. So we’re going to continue to do all those things, but continue to stay in front of our customers and do right things right by them. And I think we’ll come out of this on the other side a lot stronger, a lot better, get back to growth. We’ve got a lot of ambitions in terms of what we think our market share can grow to. And so you just got to do the day-to-day and month-to-month and quarter-to-quarter and year-to-year execution to make sure that we’re going to be prepared for those better days, but we’re confident that they’re ahead.

Operator: And your next question today will come from Bruce Chan with Stifel.

Bruce Chan: Maybe just to pick up on that pricing conversation a little bit. I don’t know if I missed it, but did you talk about what you’re seeing in terms of renewals and then any customers that may be pulling bids forward or, I don’t know, even pushing them back or any pushback on increases? And then just a quick follow-up. We’ve got potentially a change in the NFC coming up. Any kind of thoughts on what the impact might be on yields there and any potential disruption from that change in framework?

Adam Satterfield: Yes. We — just the general yield commentary, we obviously have got renewals and bids that are happening every day. And a lot of times, that bid activity increases when the environment is weak, and we’ve had a weak operating environment now for a couple of years, unfortunately. But we go through those and just sit in front of our customers and talk about ways that we can continue to win together and the need that we have from a yield standpoint and the reasons why, but there’s sometimes ways that you can achieve yield improvement that’s not always by price. And those are the conversations that we have with our customers as well. And it could be looking at all the cost base data that we have and figuring out ways that we can help us save money, be more efficient with our customers that may help prevent as much of a price increase.

And so those are what we try to achieve as we go through those. But I think we’ve been fairly consistent in terms of what we’ve been able to get from a yield increase standpoint overall for the last couple of years, and that’s certainly continuing as we progress through 2025. So not to say it’s not ever challenging. It always is. I mean we’re generally more expensive than our competition. And so that’s why we’ve got to go in and it’s why it’s so important that our sales team talks about the value proposition and what we can offer and ways that we can help our customers save money in their supply chain, not just looking at an invoice to invoice cost comparison. But the second part of your question, the change that’s coming, obviously, there’s going to be a lot of change for customers.

But overall, I don’t see that as being anything that should change the yields overall. I think that, for us, one of the advantages that I believe we have is we understand our cost. We share that cost and information with the customer, and we try to price appropriately based on those factors. And so while the classifications might change and so forth, if we’ve done everything right, it should be minimal impact to the customer. But I don’t think the customer, if they change their classification would think that their pricing will go up or down materially one way or the other just because of that change. And so for us, we just want to make sure that it’s basically revenue and income neutral for whatever change might happen.

Operator: And your next question today will come from Bascome Majors with Susquehanna.

Bascome Majors: I wanted to follow up on Tom’s discussion from earlier. With the UPS leaning more into the lower weight kind of tweener freight parcel shipments, is that business that you or any of your peers are really that interested in that kind of 150 to 300-pound weight retail to start with? And do you think that will have a competitive landscape on the industry? And just zooming out the sort of competitive landscape discussion broader, I mean, you talked about retail a lot earlier. Any thoughts on any shifting in the 3PL environment or specific to direct industrial customers would be helpful.

Adam Satterfield: Yes. Let me see if I can try to remember all those. But on the industrial, maybe to just start there, it’s still 55% to 60% of our business, and industrial outperformed our retail intercompany average in the first quarter, which is not a surprise given that we had seen the acceleration in ISM, and we were above 50 there in January and February. Unfortunately, went below 50 in March, and my guess would be below 50 again for April, but we’ve seen pretty steady performance there in the industrial world. From a 3PL standpoint, that’s been pretty consistent as well. We’ve started seeing some improvement late last year with our 3PL customers and the business that we manage that have got 3PL involvement. That performed a little bit better than the company average in the first quarter as well.

And that’s something that we’ll continue to watch and felt like we had started seeing some trends of the weight per shipment in the 3PL world starting to increase. A lot of the 3PLs have got mode consolidation types of tools and software and so forth. And we feel like some of that load consolidation that had happened and moved into the truckload world. We feel like that’s going to swing back into LTL eventually. And that’s probably going to be the first place that we see that movement coming back. Because at the end of the day, like I was saying earlier, 5000 to 10,000-pound shipments really aren’t made to move by truckload. And the truckload carriers don’t like doing it. They only do it when the environment is weak, and they’re trying to get some payload on the truck and that will go away, we believe, and normalize eventually as demand does overall.

So that will be something to continue to watch. But while that’s kind of at the fringe as well, I mean, that truckload market is obviously much bigger and can have a little bit more impact on the LTL carriers. But I think the mode consolidation there LTL to truckload is probably a little bit greater than what happens on the lower end of the scale and moving shipments that are 100, a couple of hundred pounds it’s tough to make money on those. And when you compare that to our 1,500, 1,600 pound average weight per shipment, we just don’t have a lot of that. And I don’t think that it’s probably that big for the industry either. And I think what’s happening with the change with the UPS, I believe that kind of goes with hand-in-hand with the TFI and separating those businesses and them initially marketing that service is what I understand.

So may just be that moving back into UPS’ house. But I just don’t see that as a needle mover and not even to the same level that we see shipments moving back and forth between us and truckload.

Operator: And your next question today will come from Ken Hoexter with Bank of America Merrill Lynch.

Ken Hoexter: Adam and Marty, you hit on a lot. So I just want to clarify maybe a few things. You talked about accelerating in the revenue a hundredweight up to 5%, 5.5%. Maybe just talk about what’s driving that, given it looks like you decelerated in the upper 3s on growth. Growth rate in March, if I just look at the deceleration you had through the quarter. And then your April data, is that implying tonnage is down 10% from down 5% in March. So is that just the timing of Good Friday and thus, you’re trending straight through it at kind of an upper single digit that you’ve been at earlier in the year? Or is there something maybe leading to the deceleration.

Adam Satterfield: I think so just to kind of start with those numbers, and this is where mix can have a big impact. So in February, our weight per shipment in general, was 1,476 pounds on average for February this year, and then that accelerated to 1,495 pounds in March. So that had a little bit of a driver of the growth in our revenue per hundredweight from a month-to-month standpoint there. Now thus far into April, we’re down to 1,470 pounds. So the weight per shipment has come back down a little bit. And obviously, that generally yields a higher revenue per hundredweight. So I think that that’s why we’re seeing that metric right now a little bit higher. It’s my hope that we’ll see that weight per shipment continue to rise a bit and the revenue per hundredweight sort of normalize.

But I think big picture, what we always talk about and want to see is that we’re seeing consistent and sequential increases in just reported revenue per hundredweight taking any type of mix change out, and that’s what we would hope to see if we’re going through bids, and we do on a day-by-day basis that we’re negotiating an increase and ultimately, that metric is going to be reported higher. So right now, it looks like it’s a little bit stronger than what we just achieved in the first quarter, but it’s getting a little bit of a boost optically by the lower weight per shipment. And just with respect to the metric overall, I mean that’s why I had mentioned earlier that didn’t even really want to get into the details of that breakdown. There’s just still some uncertainty out there with respect to how the month finishes and where we think we’ll end up being.

But I think that when you just take that Good Friday, that obviously is going to impact revenue and your weight and shipment per day type of metrics when you only have 60% of a normal day. But we think that, that overall revenue, if you just think about it broadly, right now, we’re down — we’re projecting to be down about 6%, plus or minus for April. And then I gave a couple of bigger picture metrics where if we stay kind of flattish revenue per day from here out through the remainder of the quarter, we’d be down about 5% for the full quarter compared to the second quarter of last year. And could be up, could be down just depending on how each month comes in. But I would just think broader brush looking at what the overall revenue is going to do and then let you kind of fill in the gaps from an allocation of weight versus yield.

Ken Hoexter: And sorry, just a follow-up there. The weight coming down, you mentioned ISM being down again. Is that something you’d expect to continue on that trend, just given where — whatever tariff impact and pressure on economics? Or is that something that just fluctuates on the weight just based on whatever is moving?

Adam Satterfield: No, I don’t know that Nostradamus could answer that question, Ken. But I think there’s so much uncertainty out there right now that it’s hard to really say. Obviously, we’re seeing consistent trends overall from just a revenue per day standpoint. And that’s kind of coming in. When we started out this month of April, we saw a surge through the month of March. And really going back to February, though, we saw good performance week-by-week through February, a really strong finish to that month that was really encouraging. And then we saw consistent performance week by week through the month of March as well. And similarly, we had a really strong close to that month. Now we started — some of that could have just been pulling forward of freight and that helped boost the March numbers a bit.

We did see a little bit of a drop off that first week of April, but it’s come back pretty consistently with what we would expect since that time. So I’ve been pleased with our week-by-week trends. And hopefully, we’ll see that continue on. But I just think that when we’ve pulled our sales team. And obviously, they’re staying in front of our customers every day. And most of the feedback that we’re getting from the field is customers are reporting uncertainty as it relates to tariffs. And so that’s just something that us and each one of our customers are having to deal with right now and how they make investment decisions. And ultimately, that’s going to impact freight volumes. But I am pleased to see the consistency on a day-by-day basis of our revenue per day.

So would like to think that we stay at least there at that consistent level and not see another leg down.

Operator: Your next question today will come from Chris Wetherbee with Wells Fargo.

Chris Wetherbee: Just maybe a follow-up. So it sounds like April, maybe if there’s softness in April, it was more concentrated earlier in the month and then things have maybe kind of stabilized or potentially improved. I guess I just wanted to make sure I understood that comment, Adam. And then I guess, when you think about the normal seasonality for the revenue per hundredweight ex fuel, which I think you said was 5% to 5.5%, maybe a little bit at the high end of that. Is there — what is the sort of weight per shipment underlying that? Do you see normal sequential improvement from this April 14 [indiscernible] to something maybe a little bit more meaningfully higher than that? Just trying to get a sense of maybe all the moving parts here.

Adam Satterfield: Yes. The weight per shipment, typically, it’s a little bit softer in April anyways. But we’re looking like we’re down 1.5% to 2% sequentially. The longer-term average is down like 0.5% to 1%. And then it kind of stays flattish from that point forward. So typically, you’d get — we typically would see a little bit lower weight per shipment that gives a little bit of boost to that number. But again, we’re down a little bit more. I’m hoping that we’ll see some recovery there in that weight per shipment number as we progress through the period. And it’s kind of reverted back to average. It was a little bit lighter earlier in the period. We’ve seen probably a little bit more activity when I look at the weighting of our national account versus local field accounts.

A little bit higher percentage of national account, which typically has a higher weight per shipment. But that’s where we’re seeing more of a decrease. So I think each account is different. When I look through our top 50 accounts, we’ve got some that have gotten double-digit increases and weight per shipment. We’ve got some that have got double-digit decreases in weight per shipment. And the account business may be flat or up slightly. So I mean, each one has got their own thing going on, and it’s been challenging to kind of figure this out. But I think some of that, like I mentioned, really, if you go back to February and just kind of roll things forward, we’d be in around that 1,470 pound threshold if we just followed normal seasonality. It was my hope is we were seeing business levels increase and the ISM above 50, I felt like, okay, now we’re going to start seeing that positive bounce in weight per shipment.

It usually is correlated with an improving economy. And so that was pleasing to see. The March weight per shipment was right under 1,500 pounds. And — but what we’d like to see is not just seasonality. We want to get back to where we’re seeing that sustained increase in weight per shipment that is going to be correlated with an improved economy and then that turned into multiple shipments coming from the same shippers that’s when you see the wave of freight that starts coming at us when we hit that inflection point in the economy, that’s when everything starts turning and how we start building that density and getting really strong incremental margins on revenue growth, but we’ve got to get back to a period of having revenue growth to achieve those incremental margins.

Chris Wetherbee: Got it. I appreciate that. That’s really helpful color. And just a real quick follow-up. The April dynamic was, it was a little softer earlier in the month. Was that what you were saying?

Adam Satterfield: Yes, that first week or so just really dropped off from the end of March, more so than what we would typically expect. But it’s kind of comeback nicely from there. But that’s some of what we see in these periods. And you may see a little bit more — like when I look over the last couple of years, you missed out a little bit on things drop off a little bit more at the first of the month or you don’t see the acceleration into the last week of the month. Typically, your first week is always going to be a little bit softer and then you accelerate throughout the month. And when you get those really strong periods, if we go back to 2018 and 2021 environments like that, you’re not seeing as much drop off at the beginning of the month and then just a real acceleration into the end of the period.

And frankly, some of that comes by way of issues with competitors, and we were starting to hear some of that in February and March. And that’s part of the value proposition is always having equipment and personnel that can be available to help our customers when they need us the most. And you get to the end of the month or end of a quarter, and I think that helped some of that surge in March, where customers demanding more trailers to be dropped at their facility. And if that competitor doesn’t have it, guess who they can call, Old Dominion will be there. And so again, that’s part of why we want to consistently invest through the cycle like we do. And so I think as long as we can see some resolution here soon on what’s going on with trade, I think we can get right back to an environment where things can accelerate again.

But I think that’s a big if to hang out there. But I feel good about how we’re positioned. I feel really good about the improvement that we’ve seen in our service metrics and we feel like we’re better positioned than we’ve ever been. We just need some help from the economy to achieve what we want. And — but again, I think when you look over time, the acceleration in our ability to outgrow the competition, it really comes when that economy is reflecting and getting really strong and our ability to add people to add equipment to take advantage of all that spare capacity that we have in the system. That puts us in a really strong position to be able to grow, produce strong profitable growth, and that leads to increased shareholder value.

Operator: Your next question today will come from Stephanie Moore with Jefferies.

Stephanie Moore: Maybe — I think a lot of my questions have been answered at this point. But maybe if there’s any commentary you can provide about some end market performance by sector or subsector if you saw any particular strength within the industrial vertical or you called out a 3PL and retail a little bit. But whether it’s autos or building materials or the likes. Any color there would be helpful.

Adam Satterfield: Yes. We don’t normally get that granular, Stephanie, within like all of our SIC codes. I feel really good about the diversification that we have in our business and probably 5 of our top 10 customers or many of them are 3PLs that have got diversification underneath. And so I think that’s always the good thing about Old Dominion is any time we get into a period where there may be weakness in one market, there’s strength or at least stability within a different commodity code. So — but overall, we generally just collapse them into those bigger broad buckets of industrial versus retail and like I said earlier, I think we’ve seen some good performance better than average performance within the industrial world.

And typically, the ISM is highly correlated with industry volumes. And so we were seeing that. And I mean, I think that was the driver of some of the acceleration that we were seeing in February and March for us. So hopefully, that, like I said earlier, that if we can get some clarity within the markets and really it’s the clarity for our customers so they have confidence to start reinvesting in their business and building inventories again, doing all those things that create freight opportunities that’s when we’re going to be able to take advantage to come in and help those customers and add our capacity and add our industry-leading service. And I think that we’ll get right back to winning market share like we have over the long term.

Operator: And your next question today will come from Richa Harnain with Deutsche Bank.

Richa Harnain: Thank you, operator, and nice to meet you all. Thanks for welcoming me on to the call. So First, I’d hate to beat a dead horse, but just to clarify on the April commentary. How much of that down 6% plus or minus, compared to normal seasonality? I’m just trying to understand how much we felt maybe below seasonality in April or what you’re forecasting and what we’re assuming for the full quarter, i.e., that down 5% year-over-year in revenue. And basically, what I’m trying to get at is how much contingency, if you will, is in that revenue guide and that only 100 bps of sequential OR improvement. And then secondly, I think it’s pretty impressive that you’re continuing to get your price increases despite the competitive pricing environment across the freight market.

I would think that a tight capacity dynamic supports that. So maybe you can comment there. How tight is capacity? Is it still down versus what it was pre yellow? And I’m also asking — I know you answered that UPS question, but — should we think about that whatever UPS is doing is additive capacity in the market or no?

Adam Satterfield: Yes. I think we’ll go back to trying to just let one question be asked and one that we haven’t really discussed is just overall capacity. And so I think that’s something that we’ve talked about, we believe capacity has been reduced in our industry and given yellow’s closure and even with the reallocation of some of those properties, we’ve looked at least at the publicly traded carriers. And from the 10-year period of 2014 to 2024, the number of service centers in operation for the 6 carriers, and that includes yellow in the 2014 period is down overall 23%. And we’re obviously up, and I’m not including us in that bucket. We’re up. We’ve added almost 40 service centers over that period of time and have increased our network 15% to 20%, just number of service centers even more if you account for the doors that we’ve added as well to existing facilities.

But when you look at shipments per day, it’s for at least those publicly traded companies, and again, including yellow there, they’re down in aggregate, about 30%. So we’re up about 30% over that period of time, reflecting the market share that we’ve won there. And — but that’s something that we have said before that we felt like when all was said and done, that there would be less capacity as we go forward. Yellow was the third largest company. They have, I think, only reallocated or repurposed about 60% of the facilities that they had in operation before. So what was a capacity-constrained industry in 2022 will likely be even more capacity constrained going forward. And in the LTL world, you’ve got to have service centers and really you got to have doors to be able to process the freight.

And I think that’s going to continue to be a differentiator for Old Dominion. We continue to invest ahead of the curve to make sure that our network is never a limiting factor to our growth potential. And we feel strongly that we’ve got a long runway of growth ahead of us, and that’s why we’ve invested as much as we have over the last couple of years in particular, but we’ve just invested consistently year after year. And that’s why we could grow at the rate that we did back in 2021 when — our tonnage was up 16% in such a strong environment, the other carriers on average, were up 4%. And it’s that type of outperformance from a growth standpoint that’s only made possible if you’ve got the service centers to start with, that you’ve got the fleet capacity, and you got to have a team that can prepare drivers to take on those increased workloads.

We’ve got an internal truck driving school that we’ve created 1/3 of our drivers, but we’ve got an HR infrastructure and safety team that can onboard drivers rapidly and make sure that we’re not just getting a driver, but someone that comes in that loves and appreciates our culture and the OD family spirit that we have, the commitment to excellence that we have, all those things, our baseline requirements that every individual at this company adheres to, and it’s why our service is so much better than our competition. We’re a company, we take care of our employees, we motivate and reward our employees to take care of our customers and that’s how we win at the end of the day. And so we’re going to continue to execute on those same values as we go forward.

And I think you can’t put in a spreadsheet, but culture is really the differentiator of why Old Dominion is so much better than our competition.

Operator: Your next question today will come from Daniel Imbro with Stephens.

Daniel Imbro: Marty, you and Adam both mentioned, I think your market share was relatively stable. I guess on the margin, if share is shifting away in the cycle. Is it just being one with price? Or are there certain pockets of better service out there? And then, Adam, you just touched on capacity, but have your thoughts changed at all around what actual cycle-to-cycle growth is for the LTL industry. I guess how should you or how should we think about actual growth once we do exit this downturn for the industry?

Adam Satterfield: Yes. Well, I think I mentioned earlier that volumes for the industry, the data that we get, and this is the entire industry, public and private, is down about 15% versus 2021. And so obviously, we’ve got some ground to make up. And I think that when the industry will and obviously, we feel strongly that we’ll grow beyond where we were back in ’21 and ’22, hence, the continued investments in our network. But I think that when you look at that before we entered this downturn, back to the prior conversation, if carriers weren’t investing in capacity, capacity was constrained in the industry, there was lack of ability to be able to grow. And I think that whatever the strategic rationale, we saw more of our competition that we’re reducing the number of service centers they had in operation leading up in, I would say, through year-end of 2022.

So that has been part of our strategic advantage. We’ve talked about the tailwinds we feel like that and opportunities that are out there for our industry, and we’ve been able to win significant market share over the past 10, 15 years by taking advantage of those. And it’s also been the consistent investment in service that has put us ahead of the game for the past 15 years when in the Mastio Quality Award is something that we don’t take lightly. We want to make sure that we’re improving our service. And ultimately, that adds value, we feel like, to our customer supply chains. And at the end of the day, to win market share requires service and value. And that’s the only way to win, having capacity, having real estate, having tractors and trailers, that just gives you opportunity to be able to add volumes.

But if you can’t add value, you can’t really grow. And that’s what I think we’ve been able to deliver for our customers. And while we’ve been able to build our company up like we have, and it’s why we’ve got so much confidence that we can continue to grow our revenues and improve our operating ratio as a result.

Kevin Freeman: Daniel, as it relates to your question about market share, as Adam stated earlier, our market share runs between 12.5% to a little over 13% and I think that’s a product of mode shift. We’ve heard from many of our customers in 3PLs that much of this freight has gone over to full truckload carriers with stop-off charges and so I think that’s why it moves up and down during a slow economy. As soon as the capacity tightens in the truckload sector, I think you’ll see those stop-offs come back to the LTL industry because you’ll gain better service, and you’ll also gain a little bit more better rate. So anyway, that’s what we’re seeing as it relates to that subject.

Operator: Your next question today will come from Jason Seidl with TD Cowen.

Jason Seidl: Two quick things. One, you mentioned a little that you’re seeing a little bit of a pull forward. I was wondering if you could put some numbers behind that. And two, on the CapEx side, if you exclude some of your project work, what percent is that sort of equipment purchases down on a year-over-year basis?

Adam Satterfield: Yes. So — I don’t know that I can say that there was any pull forward per se, but my point was that, that acceleration that we saw really throughout the month of March. I mean that’s to grow our tons 4.8%, that’s sequential acceleration. That’s been a strong performance that we’ve had on a month-over-month basis, really since when yellow closed their doors, but going back for really the early part of 2022. And so I think that just given the overall macro and some conversation and then a little bit of that drop off that we saw the first week of April. Just maybe think that there may have been some acceleration into that end of the period that kind of helped with that growth there. But — so nothing scientific necessarily to put behind the number or whatnot, just thinking through some of the bigger kind of broad factors, if you will.

Jason Seidl: Was there any more strength on the consumer side in March versus industrial?

Adam Satterfield: No. I think like I said, we saw better activity overall through the quarter with industrial versus retail.

Jason Seidl: And the CapEx?

Adam Satterfield: Yes. We spent, I think, about $750 million last year. So pretty — we had already planned to spend less this year when we started the year and the initial plan was $575 million, but just cutting that back to $450 million is hadn’t run the math, but pretty sizable decrease versus what we just spent last year and a little bit lower than — we typically spend 10% to 15% of our revenue on capital expenditures every year. And we’ve had some periods before where we’ve been below that threshold, but should be below that for this year.

Jason Seidl: And out of that $450 million, how much is equipment?

Adam Satterfield: I’m sorry?

Jason Seidl: How much is equipment?

Adam Satterfield: So we’ve got $210 million in total for real estate of that $450 million now and $190 million is for equipment, and that was previously $225 million and most of that is just power equipment, like I mentioned earlier, and then continuing to spend $50 million on IT and other assets.

Operator: This will conclude our question-and-answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks.

Kevin Freeman: 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. Thank you, and have a great day.

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