Hello, welcome to the Old Dominion Freight Line second quarter 2023 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, today's event is being recorded. Now let's turn the conference over to your host today, Drew Andersen. Please go ahead. Good morning, and welcome to the second quarter 2023 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through August 2, 2023, by dialing 1-877-344-7529, access code 7609314. 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 do ask, in fairness to all, that you limit yourself to just one question 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. Marty Freeman. Please go ahead, sir. Good morning, welcome to our second 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. The OD team delivered solid financial results for the second quarter, considering the operating challenges associated with the continued softness in the domestic economy and a decrease in our volumes. With a 15.2% decrease in revenue during the quarter, our team was focused on improving our yield, managing our variable costs, and controlling our discretionary spending. As a result, we were pleased to produce a 72.3% operating ratio and earnings per diluted share of $2.65. We achieved these results by continuing to execute our long-term strategic plan, which has guided us for many years throughout many economic cycles. The plan is centered on our ability to deliver superior service, excuse me, at a fair price, which included on-time service performance of 99% and a cargo claims ratio of 0.1% during that second quarter. Providing this level of superior service strengthens both our value proposition and our relationships with our customers. Delivering superior service also supports our ongoing yield management initiatives. We have improved the quality of our revenue over long term by offering a consistent approach to pricing, which is designed to offset our cost inflation and support our ongoing investments in service center capacity and technology. We believe that our ability to consistently offer network capacity differentiates us from the others in our industry, which is an additional element of our value proposition, that we believe will support our long-term market share initiatives. Our market share remained relatively consistent during the second quarter, despite an environment where overall freight demand was subdued. The year-over-year decrease in our volumes, however, resulted in a loss of operating density. We believe that our long-term improvement in our operating ratio requires consistent increases in both density and yield, both of which generally require a favorable macroeconomic environment. With our commitment to providing superior service, as our first priority for our customers, it becomes a challenge to maintain, much less improve our productivity during the periods with reduced density. As evidence of this fact, our linehaul laden load factor decreased 3.1% during the second quarter. We were pleased, however, that our platform shipments per hour increased 6.6% and PMV shipments per hour increased 0.5%. These improvements, as well as other efforts by our team to manage costs, helped us maintain our direct operating cost as a percent of revenue. Our overhead cost, on the other hand, increased as a percent of revenue during the quarter, as most of these cost categories are fixed. We also believe an increase in aggregate depreciation expense due to the ongoing execution of our capital expenditure plan. We believe it is critically important to continue to execute on this plan, regardless of the short-term economic outlook. We currently have approximately 30% excess capacity within our service center network, which is a little higher than our target range of 25%. We are comfortable with the amount of excess capacity as we remain confident in our ability to win market share over the long term. Finding land and building service centers in the right locations can take considerable time. Therefore, we make every effort to stay ahead of our growth curve with these investments. We could not have doubled our market share over the past 10 years without our consistent investment in service center capacity, as well as our regular investments in our fleet, our technology, and training, education, and benefits for our OD family of employees. Our proactive approach to managing all elements of capacity has created a strategic advantage for us in the marketplace, which typically becomes most apparent to shippers in tight capacity environments. We do not always know when an inflection point in the demand environment is going to occur, but we believe we are well positioned to respond to any acceleration in volumes when it happens. Through the disciplined execution of our long-term strategic plan, our team has created one of the strongest records for long-term growth and profitability in the LTL industry. We remain committed to providing superior service at a fair price and maintaining the necessary capacity to support growth, and we believe we are better positioned than any other carrier to produce long-term profitable growth while increasing shareholder value. Thank you for joining us this morning, and now Adam will discuss our second quarter financial results in greater detail. Thank you, Marty, and good morning. Old Dominion's revenue results for the second quarter reflect the 14.1% decrease in LTL tons per day and 1.1% decrease in LTL revenue per hundredweight. Our yield metrics were affected by the significant decrease in the price of diesel fuel during the quarter, as LTL revenue per hundredweight, excluding fuel surcharges, increased 7.6%, reflecting our consistent approach to managing yield. On a sequential basis, revenue per day for the second quarter decreased 2.0% when compared to the first quarter of 2023, with LTL tons per day decreasing 1.8% and LTL shipments per day decreasing 0.3%. For comparison, the 10-year average sequential change for these metrics includes an increase of 9.8% in revenue per day, an increase of 6.8% in tons per day, and an increase of 7.2% in shipments per day. Our shipments per day, on average, have been relatively consistent since December of last year. We had previously communicated our expectation for volumes to remain consistent through the second quarter, despite the sequential growth that we have historically achieved in this period. Our baseline thinking was for volumes to remain consistent through the third quarter as well, although we have noticed an incremental increase in revenue over the past few workdays. The change in our revenue on a week-by-week basis so far in July, has been relatively consistent with historical averages. It appears that sequential change in both revenue and shipments per day for July will be the first time this year where we're more closely aligned with our 10-year average sequential change. While there are still a few workdays remaining in July, our revenue per day has decreased by approximately 15%-16% when compared to July of 2022, although the timing of the July Fourth holiday has skewed this number slightly. If the trend that we've seen over the past few workdays holds steady through the end of the month, we expect revenue per day to finish down approximately 14% to 14.5% and LTL tons per day to finish down approximately 11.5% to 12%. Our LTL revenue per hundredweight is currently down approximately 3% to 3.5%, as this metric continues to be affected by the significant decrease in the price of diesel fuel. LTL revenue per hundredweight, excluding fuel surcharges, has increased approximately 6.5% to 7%. As usual, we will provide the actual revenue-related details for July in our second quarter Form 10-Q. Our second quarter operating ratio increased to 72.3% as our overhead costs increased as a percent of revenue, due primarily to the deleveraging effect associated with the decrease in revenue. We were able to effectively manage our direct operating costs during the quarter, as these costs remained consistent as a percent of revenue with the second quarter of 2022. Within our direct operating costs, our operating supplies and expenses improved 250 basis points, due primarily to the significant decrease in the price of diesel fuel, and our purchased transportation costs improved 60 basis points. These changes more than offset the increase in salaries, wages, and benefits as a% of revenue for our drivers, platform employees, and fleet technicians that are included in our direct costs. Old Dominion's cash flow from operations totaled $287.8 million and $703.2 million for the second quarter and first half of 2023, respectively, while capital expenditures were $244.7 million and $479.4 million for those same periods. We utilized $160.5 million and $302.2 million of cash for our share repurchase program during the second quarter and first half of 2023, respectively, while cash dividends totaled $43.8 million and $87.8 million for the same periods. We announced this morning that our board has approved a new share repurchase program that provides us with the authorization to repurchase up to $3 billion of our outstanding stock. This program will begin after the completion of our existing $2 billion repurchase program that was announced in July of 2021. While we intend to continue our focus of returning excess capital to our shareholders, our first priority for capital spending will continue to be the strategic investments in capital expenditures that support the long-term profitable growth of our business. Our effective tax rate was 25.4% and 26.0% for the second quarter of 2023 and 2022 respectively. We currently expect our annual effective tax rate to be 25.6% for the third quarter of 2023. This concludes our prepared remarks this morning. Operator, we're happy to open the floor for questions at this time. Yes, thank you. At this time, we will begin the question- and- answer session. To ask a question, press star, then one on your touchtone phone. If you are using a speakerphone, please click up the handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble the roster. The first question comes from Jordan Alliger with Goldman Sachs. Hi, good morning. Sorry for that. You know, with, obviously there's a lot of noise in the background now with, you know, one of the major competitors out there. Can you maybe touch a little bit on what, if anything, you're seeing or expecting, either from a diversion, I guess, from a diversion perspective now? Thanks. Sure. Yeah, we don't want to make any comments specifically on one carrier or another, but, you know, like I mentioned, we have seen an uptick in business over the past few days, in particular. Really, I think that over the past few weeks, we have started to start seeing a little bit better trend, if you will. It goes back to maybe beyond that. You know, I think we're at the end of a long, slow cycle, and, you know, we've stayed in front of our customers over the last year and a half, as things have been slower. I guess, really going back to April of last year, typically, when we get to the end of this kind of cycle, we start hearing comments about service issues with other carriers and the need for shippers to start reusing Old Dominion within their supply chain. We've started increasingly having those types of conversations, and certainly, some of that has intensified here over the last few weeks. You know, when we look at things, we look at our success measured over the period of years, over the long term, is the way that we continue to try to manage our business, and we've doubled our market share over the last 10 years. I think when we think about the next 10 years of opportunity, we've got a long runway for growth ahead, and we want to keep winning market share in the right way for us. So we'll continue to stay in front of customers for sure, and talk about the Old Dominion value proposition and how we can deliver value to their supply chain. You know, it has driven a little incremental increase. You know, we had been running at about 47,000 shipments a day. We talked a lot about that on last earning call last quarter. You know, we typically see a little bit of an increase anyways from the beginning of the month to the end of the month. We've been the last few days running closer to 50,000 shipments a day. Now, it's hard to say one factor versus another of what's driving that higher, but it has been a little bit higher than what I had initially forecast probably a month ago. You know, maybe it's picked up at this point 1,000, 1,500, 2,000 shipments per day, more so than what we had initially been forecasting for. I would expect that, you know, we feel like we're getting towards the end of the slow cycle, and would expect to start seeing, you know, business levels start to return to us at the end of the year. Certainly, as we get into the early part of 2024, you know, it feels like underlying demand takes supply in the industry out of the equation, but it feels like demand is starting to improve a little bit. We're having good conversations with customers, just like we've been having all year long. Yeah, it certainly feels like things are starting to turn a little bit. If I could just ask a follow-up. I think you'd mentioned you have about 30% excess capacity in your network now, whether it be demand or competitive problems. I think you also said normally you like about 25%. Would you push that excess capacity lower? I mean, would you run with just 20% or 15% excess capacity, or is it a relatively firm line? Thanks. Yeah, certainly, you know, that's, that 25% is just a target, and we go through periods where, when you look at the system on average, it's been below that. 2021 is a good example, where we had significant sequential growth that year due to the strength of the economy. you know, we look and you look back at our trends, we were 1 of 2 carriers that had a double-digit sequential increase, at least public carriers. from the first to the second quarter of 2021, then we were the only carrier that followed that up with another increase, sequential increase from the second to the third quarter. You know, we've proven in the past that if you've got the right strategies, that we can take on business and pretty significant increases in business because of the way that we try to plan for the long term and build capacity into the system. Certainly, you've always got to be thinking, in our case, we try to think several years ahead and stay ahead of our growth curve. You know, the service center capacity is one element of the overall capacity equation. There's still the people component of it and the equipment piece as well. But we try to stay further ahead of the curve with service centers, and, you know, certain markets, we try to stay even further ahead, if you will. That's always a number that flexes up and down, and each service center is different. We've got some service centers that, you know, have got more capacity than others. That's generally about where we try to stay just from an overall system average. Thank you. Thank you. The next question comes from Allison Poliniak with Wells Fargo. Hey, guys. James Monigan on for Allison. Just wanted to ask about sort of the how we should think about OR in the third quarter, like, about you getting some volume, better pricing trends, presumably as well. How should we think about sort of the potential improvement, and should we essentially see sort of something maybe even above seasonality, given the latent operating leverage? Well, I think the top line is gonna be, you know, the determining factor here. When it comes to the top line, obviously, we've shared a little bit about where we are with July, and we'll continue to give our mid-quarter update, so August will be out there as well. You know, from a baseline standpoint, what I initially was thinking, and I may try to address this in a slightly different manner than what we have in the past. Typically, we see about a 50 basis point increase in the operating ratio from the second to the third quarter. I would expect this third quarter, we are gonna have some increase in some of our From an aggregate dollar standpoint, in some of the overhead categories. I feel like our total overhead expenses dollars-wise, are gonna be higher than where we were. Some of that'll be depreciation. We expect our miscellaneous expenses to be a bit higher, and our general supplies and expenses as well. It will depend on, you know, where that top line comes in. I think that we can manage, continue to manage our direct operating costs, which are more variable in nature, consistent as a% of revenue. We would look to try to keep those costs consistent with where we were last year, and that would be a slight improvement, but fairly constant with where we were in the second quarter. It just becomes the leverage that we get on the overhead. If we've got some dollars higher, if the top line, if the volume environment were to stay flatter, like what our base case scenario previously was, then obviously we would lose a little bit more leverage there. If we get some incremental improvement and further growth from where we are now, I think that's gonna be really the slide, if you will, in terms of where the OR might end up. That baseline thinking, though, because of the increase in overhead expenses, I was thinking that we would be slightly worse than the normal seasonality, somewhere between 50-100 basis points of an increase over what we just did in the second quarter. A lot's just gonna depend on how those overhead costs, as a% of revenue, move around, really dependent on what the top line is doing. Thank you. Thank you. The next question, Jack Atkins with Stephens. Okay, great. Thanks. Good morning. I guess I'd like to ask a question on the pricing environment and I guess more specifically, to go back three months ago, there seemed like there was incremental competition around some of the transactional freight in the marketplace. You know, have you seen anything change there, whether it's over the course of the last few months or, you know, in recent weeks, that would give you some more confidence about, you know, the trajectory of pricing in the marketplace? Just any sort of commentary on that, I think, would be helpful. Yeah, there has been no major changes in the pricing environment. I mean, we're still getting increases from our contract carriers, there's no, there's not anything really crazy going on out there, which is a pleasant surprise in a slower environment. Again, we're not seeing any changes from the first quarter, and we're still getting increases when we need them. I guess, just a quick follow-up on that, Marty, if I could. I mean, are you seeing maybe, just given all the shifting dynamics in the marketplace, maybe a little bit less of a competitive situation going on with the transactional part of the market? Are you seeing some firming in pricing there, I guess, was what I was trying to get at? Yeah, I haven't really seen any changes at all, you know, whatsoever, from a transactional basis. You know, I mean, if we need it, as you know, as I've said before on the last call, you know, we're a cost-plus costing model. That's what we base our pricing on. You know, when we go in to discuss pricing, we basically show our customer what our cost is, and, you know, they understand why we need to increase. We're not having any issues getting it. No, I'm not seeing any crazy pricing adjustments out there since the first quarter. Okay, all right. Thank you very much. You're welcome. Thank you. The next question comes from Jonathan Chappell with Evercore ISI. Thank you. Good morning. Sticking with that transactional theme, you know, Adam, last quarter, you kind of flagged the 3PL business losses as being a bit more outsized. Has that basically run its course, where there's not much more 3PL business to lose? As you talked about this kind of recent uptick in the last few work days, has that been more kind of transactional volume as well, maybe getting some of that 3PL back? Are you actually seeing core LTL freight pick up substantially over the last week or so? Yeah, it's more the core. You know, I would say, looking through our top 50 customers, you know, the 3PL piece of the business really just performed in line with the company average, really. In the second quarter, we still had better performance with our, you know, core contract business, those that have direct contracts with us. You know, but with revenue down 15%, everyone was pretty much down. A lot of that, obviously, you know, there's a big decrease in fuel surcharge revenue that had an impact on the second quarter, with the average price of fuel being down close to 30%. You know, that was certainly a headwind that, you know, we had to contend with. But that's... You know, we go back to we've had consistent conversations with customers really over the last year, and, you know, I think we've been pleased with the trends that we've seen. You know, certainly we'd rather be talking about growth and see pure growth going on. It's been tough to kind of go through the last year or so. You know, I think that we've had, you know, good customer relationships. We've got long-term customer relationships. People that have gone through supply chain challenges realize the value of Old Dominion and are continuing to increase their business with us. You know, the demand environment overall, with the state of the domestic economy, and that has certainly had an impact on our customers' businesses as well. You know, many accounts that we've kept the contract have been awarded the same types of lanes, customers may just not have the same amount of business that they've had before. That's kind of what I was alluding to earlier, where, you know, I feel like we're getting to the end of that kind of process, where it feels like, you know, we're seeing stabilization. I go back to just underlying demand for LTL transportation. I felt like things were kind of getting to the point where we were seeing stabilization. We've had stable trends all year, but I felt like we were getting back to the point where we might start to see our market share. That it's been relatively consistent this year. It's been down, you know, slightly, but I felt like we were kind of getting to that end, where things are going to start turning back in our favor. Some of that just goes to some of the conversations we've had, about others in the industry. You know, we're hearing more, service failures, and that's generally when the business starts coming back to us. You know, feel good about, kind of those underlying trends and getting through the back half of this year and, being ready for 2024. Great. Thank you, Adam. Thank you. The next question comes from Christian Wetherbee of Citigroup. Thanks. Good morning, guys. You know, maybe wanted to come back to pricing for a minute, maybe kind of big picture. If we think about the potential for a capacity event in the industry where we see capacity materially tighten, I think when we've looked at these in the past, we've seen, you know, meaningful pricing opportunities for the carriers in the space. I guess, conceptually, how do you think about that? If we were to see some degree of capacity event, you know, given the strength in pricing over this last cycle, is there still material upside as you think about that? I know volume ultimately will come back, but wanted to get a sense of what you think about the potential future pricing opportunities are, as capacity potentially gets tighter in the industry. Well, I think, you know, for us, it's all about having a consistent process. You know, we talk about that a lot. We're trying to have, as Marty mentioned earlier, we have a cost based process, we talk about our cost inflation with customers and the need to have a price increase that, you know, it's 100-150 basis points above our cost inflation every year to support the significant investments that we're making in service center capacity and technologies. You know, I think that's generally understood and kind of makes sense if you sit across the table and have that conversation. You know, obviously, a lot goes into that for us, managing our cost and trying to keep cost inflation in check. I was pleased that we're starting to see some of the cost per shipment numbers. They're moderating. If you take fuel out of the equation, just our core price inflation is just starting to trend back to closer to what our expectations were for this year. I feel like our team has done a phenomenal job with managing our cost and keeping that inflation in check as best we can in a low volume environment. I mean, to produce a 72.3 in the second quarter with a 14% decrease in tonnage is, you know, pretty remarkable in my opinion. You know, I think that we just got to stay consistent with our approach. You know, I think other carriers, if they start making similar to what was going on in 2021, if other carriers are closing the pricing gap and are trying to use the environment to take even bigger increases, then I think that bodes well for our market share opportunities. You know, we're typically a little bit more expensive than the other carriers on average, and so we'd be pleased to see that gap close, and that would certainly help support our own pricing initiatives as well. The key for us is to focus on us and what we're doing, you know, having those conversations with customers, demonstrating the value that we can add relative to the industry, and just looking at what our needs would be to keep driving the cash from operations and the strength of our balance sheet even stronger to support further investments to keep growing the company. Okay. That's helpful. I appreciate it. Thank you. Thank you. The next question comes from Amit Mehrotra, Deutsche Bank. Hey, thanks. Hi, everyone. Adam, on the 47,000-50,000 uplifted shipments, are there any mix changes there? Because if it is coming from some diversion, obviously, Yellow has significantly lower weight per shipment, and I don't know if there's any mix observations that may bifurcate shipments from tonnage. If we take this kind of new elevated tonnage number for the last, you know, couple of days here, and we assume kind of it holds, what does August look like from a year-over-year perspective? The last question, 3-parter, but 1 question. You know, Yellow is very different than OD, and, you know, obviously, Yellow, there's a... I know you don't want to address Yellow specifically, they're the third largest LTL company, they seem to be on the brink of going out of business. The question is, if Yellow customers are looking to divert, do you think OD is the natural, you know, relief valve there? Because you are kind of the most expensive, best service company out there. I'm just trying to understand, are you the right barometer for that, or maybe you see some of it, but a lot of it goes elsewhere? Yeah. Let me see if I can try to address those in some sense of order. You know, to answer your first question from a mix standpoint, you know, not a lot has changed with mix. Our weight per shipments dropped a little bit. You know, we've gotten down to about a, we've dropped about 10 pounds. We've gotten down to about a 1,525 pound average or so, and it's dropped about 10 pounds or so, you know, here recently. You know, not a lot's changing. I think some of that is we are, seemingly, seems to be picking up some more of the smaller tariff base customers that generally have got a little bit lower weight per shipment. That's been good to see, if you will, overall. You know, whether or not that continues, you know, remains to be seen. Obviously, this is all just kind of developing, but, you know, don't want to get into if we hold this trend steady, hold that trend steady. I mean, generally, August, sequentially is up about 0.5%, up for our shipments per day are up about 0.5% over July. You know, we'd expect that, you know, some of this recent trends, you know, it's possible that if things continue to hold steady like they have, you know, I talked about the impact of July for that, but, you know, obviously, that could carry forward a little bit stronger. You know, we'll just take it one step at a time and keep giving the updates, you know, out there, as they are. You know, we were last year in August, we were at about an average of 51,000 shipments per day. You know, it starts closing the gap, if you will, if we can hold 50,000 steady. You know, keep in mind, and it's what I was alluding to earlier, that there's a natural progression that happens from the beginning of the month to the end of the month, and we were already starting to see some trends. You know, I don't know that you can't just take that gap from where we've been averaging 47,000 shipments a day, really since December of last year and just say, okay, there's this immediate incremental change. There's been change that's been developing, you can't just point to one specific player to say, you know, this is the reason why. It's been a developing trend, it's the way history has played out for us. When we get to the end of the cycle, we start winning business from different carriers. You know, with that said, you know, I think that there may be direct freight opportunities, but indirect freight opportunities as well, that may come out of if there is an industry event. You know, I think that's still an if, and, you know, we don't know any more than anybody else, but, you know, we just are staying engaged with our customers, making sure that they understand the capacity that we have. You know, I think everyone knows the service that we can offer. No different than, I think, 2021, as an example, where freight was obviously coming to us very quickly that year, and we stepped up in a very big way through the 2nd and 3rd quarters. You know, a lot of the conversations that we had with shippers then will be similar conversations that we have now. We protect our existing customers, capacity for them, and that's how we would manage through if we get into another period, where the freight opportunity is accelerating significantly. Thank you very much. Appreciate it. Thank you. The next question comes from Tom Wadewitz with UBS. Yeah, good morning. I wanted to go back to your comment on the capacity in the network. You referred to the 30% being above your, what your target is. I guess if you kind of juxtapose that with there may be opportunity for terminals, you know, related to the discussion we've been having about the, you know, the big industry participants that's under pressure. I'm wondering, would you consider being opportunistic and say: Hey, we've got maybe more capacity than we need in the network, but there's an opportunity to kind of, you know, bring in a bunch of additional terminals that maybe fit well? You know, just how do you think about that and the kind of pace of terminal additions, if you look at, you know, I don't know, next, you know, next 2 years, something like that? Yeah, Tom, we're always looking for opportunities, and, you know, that's why we try to stay so far ahead of the growth curve. We generally are looking at each service center in each region, and projecting out 5 years of potential growth to know where we're going to have facilities that start hitting capacity. Those are the ones that go on our target list for kind of a we roll out internally a 2-year capital expenditure plan to expand service center capacity and, you know, where we need it. Sometimes an opportunity presents itself that, I mean, maybe we don't need, you know, this particular location, but in year 4, for example, but if it's a good facility, then we would go ahead and take advantage of it. Again, it gets back to, you know, we've got our long-term market share initiatives and what we think we can achieve, you know, over a longer period of time. We know we're going to keep growing this network. We've been, you know, one of a few carriers that have been expanding. Many talk about it, but when you look over the last 10 years, and you look at the capacity additions that we've made, the public carriers, in total are actually down in terms of the number of service centers in the industry. You know, we're going to continue to say that's a big part of our value proposition is we're consistently investing dollars to be able to support our customers' growth, and make sure that we can be there when our customers need them, need us the most. When they've got growth potential, but they need an LTL carrier to be able to respond, and not just be able to respond in the middle of the month when things aren't as busy, but at the end of the month, when they're trying to get freight moved off the dock and delivered to their customers, you know, that's when they know they can rely on OD. We'll certainly continue to look for opportunities and we would be opportunistic in adding facilities, if it makes sense within the long-term vision for our network. Okay, great. Thank you. Thank you. The next question comes from Ken Hoexter with Bank of America. Hey, great. Good morning, Marty, Adam. You know, I guess if we look back on the scale of an industry shift like this, right? Where, where, I guess, Consolidated Freightways back in 2002 or New England Motor Freight, right, where you've had big and quick historical, rapid change. You know, maybe talk a little bit about, you know, you talk about customer discussions accelerating. Are these kind of existing customers? Adam, I think you threw out there the top 50 customers, their business was down also. Are you seeing that mainly from internal, or are you having new discussions? I presume not that many, just given, I guess, any user of Yellow was maybe looking for lower cost versus higher quality. Then maybe secondary is your thought on headcount, right? As you make this shift, I know you've got the 30% excess capacity on the facilities. What about what's your thoughts on headcount and capacity there as well? Thanks. Yeah. Yeah, we currently talk to new customers every week. We have over 500 salespeople, and part of their job is to bring on new business. You know, they're out there having discussions about onboarding new customers every week, and as well as existing customers. If the customers have questions about capacity, of course, we answer those. We show them, you know, where we have capacity, our terminal network, and so forth. Those are just ongoing discussions. As far as labor, you know, we have the labor covered. We have a driver training school where we have, we call them combo drivers. If we're not utilizing them during slow periods, they go on the dock, and then we can bring them back onto a truck as our tonnage and shipments increase. We feel like we're pretty covered on labor, and for any increases that might come our way. I feel confident we can take on, you know, whatever comes our way. Then just, I guess, to clarify, Marty, do you, if you mind, just a follow-up here. I know you said Adam or Adam said it was a slow kind of grind here, I just want to understand, in the last 48 hours, has this not been a massive shift? I guess I understand they stopped picking up freight last night. I just want to understand the speed and scale with which we're talking about here. Yeah, you know, we're reading the same thing as you are. You know, we really don't know what's going on. You know, we're talking about it within our senior management team, you know, every day and, you know, and how we're going to put forth our plan, you know, to handle additional business. You know, we're not really seeing any, you know, major business coming out of that. Just like you, we don't, we don't know how that's going to end up. We don't want to speculate at this time. Wonderful. Appreciate the thoughts, Marty. Thank you. Thank you. The next question comes from Bruce Chan with Stifel. Hey, thanks, good morning, everyone. Adam and Marty, I'm not sure if this got captured in some of the previous answers, but I wanted to ask it maybe a little bit more directly. You know, if you think about the potential share wins from, you know, this, I guess, impending competitor exit, would you expect to see outsized share gains given your capacity expansion or maybe slower share gains, given, you know, at a more disciplined yield approach, and, you know, what you mentioned was a higher average price than the market? As you know, we're very disciplined on price, and we're not going to do anything to trash our service by taking on too much freight. You know, we expect if something were to happen, that we would remain disciplined in that manner. You know, like Adam said, we'd look after our existing customers, and, you know, we cost out every piece of business that comes through this truck line, and if it doesn't have the yield that we expect, we just won't take it on. We also expect if there is a major event happens, that, you know, we will gain business probably from other carriers that weren't participating in that event because they may take on too much revenue and trash their service, and we'll benefit from that as well. You know, we've experienced that before and ready for it again. Okay, great. That's helpful. I'll hop back in the queue. Thank you. The next question comes from Eric Morgan with Barclays. Hey, thanks for taking my question. I just had a follow-up on the headcount comment. Marty, you mentioned you're confident from a labor perspective that you can handle some of this incremental freight. Are you saying that, you know, you think you can handle this surge with limited headcount increases from here, or are you just more confident that you'll be able to ramp up, you know, your labor force accordingly if you do see volume tick up? I'm also just curious on cost per employee. Any thoughts there? I know it's been kind of trending roughly flattish, you know, up a little, down a little over the last few quarters. Just curious how this could affect that metric. This is Adam. You know, we've had a decrease in headcount, or we did sequentially through the second quarter. You know, we've seen attrition really going back into the last year through our business. You know, I think that, like I mentioned, there's three elements of capacity, and we certainly, we've got plenty. We talk mostly about our service center piece, but we've got equipment capacity to respond to, you know, the acceleration in business levels. From a people standpoint, we can do the same. We've shown that type of flex in our workforce in the past, and we've got people that I think we can call back as well. Marty mentioned our internal truck driving school, that's created about a third of our drivers, and sometimes drivers come out of that school, but continue to work on the platform, until demand is such that we put them into a full-time driving job. There's multiple opportunities. You know, the other lever that we could pull, and we did this going back to looking at those 2021 sequential trends. You know, as business accelerated really through the second half of 2020, continuing through 2021, as needed, we don't like to do this, but we can use purchased transportation to supplement the capacity of our workforce or our fleet. It just kind of depends on the pace at which volume comes on. We had, you know, those big quarter after quarter sequential increases during those periods back in the end, and that was kind of the final lever to pull. We certainly can have that. We would rather move our line haul 100% with our fleet and with our people, but as necessary, we sometimes have to supplement it, and that's kind of the source that we could go to on a very short-term basis. It would always be with the idea that we get it back 100% in-sourced as soon as possible if we had to go that route. Thank you. Thank you. Next question comes from Scott Group with Wolfe Research. Hey, thanks. Good morning. Adam, you mentioned a couple of times just like the intra-month seasonality of shipments that obviously we just don't know. I wouldn't normally ask such like a short-term question, but it's obviously an unusual time. Maybe if it's possible, can you just share year-over-year tonnage the last couple of days, what that's trending to? We just want to get a sense of run rate very recently. The, I think yield's down 3% or so in July. Any sense what yield ex fuel is doing in July? Thank you. that we had already talked about in the prepared comments, but it's somewhere 6.5%-7%, the revenue per hundredweight, excluding the fuel surcharge. you know, obviously right now we're getting continuing to see fuel that's down. I think July should be the worst. at this point, you know, we continue to average where we are, fuel will be down about 30% again. in the third quarter of last year was when fuel prices started declining, and that continued on. that will be less of a headwind as we go through the second half of this year. You know, we're continuing to get core increases, as Marty mentioned earlier, and, you know, the key will be to continue to look at, whether it's us or others, you know, is there a sequential increase there? That's what we strive. Every day, we've got contracts that are turning over, and if we're going through those contracts and able to negotiate increases, then if mix is relatively constant, you should see sequential increases in those yield metrics. You know, like I mentioned, the last few days, we've been right at around 50,000 shipments per day. Some of that is just the natural growth that happens towards the end of the month. You know, whether it accelerates from there, kind of remains to be seen. I held that 50,000. The numbers that I gave this morning assumed that we kinda held that 50,000 constant for the remaining workdays, today through Friday and then Monday of next week. You know, if there's numbers that when we put them in our queue that are different from what we talked about today, then, you know, you can sort of judge from there where things came in. July of last year was a little over between 51,000 and 52,000 shipments per day. I mentioned August was 50,000-51,000. You know, we're back to where our shipments per day, if this kind of 50 were to hold constant, and I'm not saying that it does, to where, you know, we're closer from a volume standpoint to where we were last year. Just sort of Keep trying to bring us back to the big picture, I think that, you know, it, its success ain't gonna be defined by, you know, what we can do next week and next month or next quarter. It's, you know, what's the market share potential over the long term? We still feel confident about what our long-term market share potential can be, 'cause we still win business by the quality of our service. Our value proposition is delivering superior service at a fair price and always maintaining network capacity to support our customers' growth. I think we continue to win share because the service and capacity advantages that we have in the marketplace, and that will extend beyond what may be happening over the next few weeks. Adam, your point there is that others may get maybe a little bit more of the volume day one, but to the extent that they struggle with this big, you know, surge in volume, you'll then get it on a derivative basis. Maybe it's not day one, but it's weeks or months from now. Is that kind of what you're trying to say? Exactly. Slow and steady generally wins the race. You know, we want to be patient with the things, and certainly we're looking and having conversations with customers and want to help where we can. You know, just like in 2021, you got to be careful about opportunity. You don't want to take on so much so fast that, you end up not being able to deliver on the service value that we offer with 99% on time and, a claims ratio of 0.1%. You know, we wanna be methodical about the way we go through this and make sure that we're protecting service and capacity for our existing shippers, without taking on too much of what opportunity may be out there. You know, I think when you go back and you look in prior trends, like I said, we stepped up in the second quarter, more so than anyone else. When you look at 2021, when you look at that sequential acceleration, and then we continued to follow on from there, where others didn't. It's, it's always just making sure that, you don't overextend yourself in the short term and just keep that eye on the ball for the long-term vision. Thank you, guys. Thank you. The next question comes from Ravi Shanker with Morgan Stanley. Thanks, good morning, everyone. Sorry to stay on this topic, just wanted to kind of basically clean up the commentary on this call, which is, the uptick in volume that you've seen in the last few days, how much of that is because of a cyclical improvement versus flow-through from what's going on at your competitor? Like, you know, is it one of the two of them? Is it both? Kind of can you tell the two of those apart? It's really hard to try to bifurcate and put your finger on, you know, what's driving, you know, any type of acceleration there. You know, as I've mentioned, we would expect to see an increase. We're going into the final full week of the month. You know, we would expect to see a normal type of increase, and it's a little bit above where I'd originally forecast this week to be, at least, you know, when I go back to Friday, was a bit heavier. Monday and Tuesday have been a little bit heavier than what I had originally looked at. You know, is that just because we've got more business from an existing customer that's having a their own end-of-month surge? Yes, that's part of it. Is it freight that's coming in, where, you know, there's been some freight diversion? Yes, that's a part of it. You just can't put your finger on everything when we're doing 50,000 shipments a day. Why did we get this one particular shipment? That's why I wanted to point out that, you know, really, I think this goes back to for several weeks. I feel like we've seen some pretty nice trends. We closed out the month of June strong. I feel like when we go back, even though our number of shipments per day have been around 47,000, you know, we've had some good end of month performance. The trends that, intra-month trends, you know, have been pretty good the last couple months as well. You know, we dropped off some early in the month, which that's typical, too, but maybe dropping off a little bit more so than what a week-by-week average would be. We've made up for it as we've progressed through the month. I've been pleased with our performance so far in July, and, you know, it looks like at least, you know, right now, when we project out and carry that trend forward, of shipments per day, that, you know, we're still down in comparison to June. Some of that is July is a 20-workday month, and the way the July Fourth holiday fell, that Monday, that we were open was probably half of a normal workday. If you kind of adjust for that, we had seen better trends. We had been more in the 48,000 or so shipments per day range, you know, kind of through the month before this recent pickup happened. You know, it's just not. you can't put your finger on what completely is driving the change, other than, you know, you go back and this is somewhat typical to what we would see, at the end of a slow period, like we've been in since April of last year, and then it's just been accelerated, over the last few workdays from there. Very helpful. Super quick follow-up. Did you take any short-term cost savings actions in this quarter that may potentially unwind if tonnage really comes back? We keep our belts tight every day, you know, we're always looking at managing our variable cost and controlling discretionary spending where we can and where it makes sense. You know, that's a philosophy that you can't just sort of take it or leave it. It's a mindset that you have to stay in good times and in bad. If you don't have that mindset in the good times, you're not gonna be able to switch gears when you really need to. You know, I think that we certainly, you know, have been able to trim out some cost and, you know, I was pleased we ended up with a better operating ratio in the second quarter than what we had initially talked about, so that was good to see. You know, I think that I mentioned earlier, we're gonna have some of those overhead cost categories. Overhead costs are about 19.5%-20% of our revenue in total, when you split those out, and our direct costs are 52.5%-53% of revenue. We're gonna have some cost increases. We're continuing to have depreciation dollars that will increase from the second to the third quarter. Our general supplies and expenses should be up in the third quarter over the second. I would expect that our miscellaneous expenses would be up as well. You know, those dollar costs will be there. Whether or not we've got some revenue growth to offset them, kind of remains to be seen, you know, similar to what we were talking about before. Some of those dollars will be increasing from the second to the third. Wonderful. Thank you. Thank you. The next question comes from Jason Seidl with TD Cowen. Thanks, operator. Hey, Marty. Hey, Adam. Good morning, gentlemen. wanted to focus again on what's going on with Yellow, and look out at pricing. I don't think I heard this, but, you know, generally, I wouldn't have expected anybody to try to push the GRI through, excluding what's been happening. Do you think there's a likelihood that this occurs now if there is a bankruptcy in the near future? As I said before, I don't want to speculate what's going to happen with YRC, but I will say that we took our GRI in January, and we don't foresee having to take another one this year as it relates to transactional business. I mean, we're going to manage the same way we would with them, with or without them. I can't speak for the other carriers, but, you know, I would say, you know, maybe some of them do need to firm up their prices a bit, and maybe they'll use that as an opportunity. Who knows? We've got a good handle on our cost, and, you know, we had that before YRC, and we'll have it after. I don't see us considering a GRI on transactional business. Okay, Marty, that makes sense. You're not expecting it, but you wouldn't be surprised if maybe others tried because they're not exactly at your level. Wanted to, Adam, jump on something you mentioned with, you know, sort of slow and steady wins the race and freight coming back, with people not being able to handle it. But even if people handle it, you know, won't there be cases of, you know, freight not being what people think and it just needing to find proper homes within the given network? Typically, that plays out exactly as you described, where it may find a temporary home, but then ultimately. You know, in some cases, people have just got to get their freight moved, and they may go to the next closest carrier from a price standpoint and just to keep their supply chain moving. Ultimately, if they want value in their supply chain, that freight will find its home at Old Dominion. Fair enough. Gentlemen, appreciate the time, as always. Thank you. Thank you. The next question comes from Stephanie Moore with Jefferies. Hi, good morning. Thank you. Good morning. Good morning. I was wondering if you could maybe touch on the performance you've seen, if there's been any differentiating trends between maybe your more retail consumer customers and then, you know, those that are more maybe industrial focused. Then same thing, you know, if you're hearing from your customers, you know, kind of their expectations as they go into the back half of this year, you know, thoughts on inventory levels, where they stand today. Just any kind of bigger picture color would be helpful. Thank you. Yeah, we saw generally, consistent performance in the second quarter with the industrial and our retail related customers. You know, industrial is 55%-60% of our business overall. You know, historically, we look at ISM and industrial production, which ISM has been below 50 or at or below 50, I think, for 9 months now. That generally reconciles with industry volumes and certainly aligns with the second quarter when we were down 14%. Overall, you know, we think that some of the conversations that we've had, that we get the sense that inventory levels are normalizing a bit. you know, it kind of supported my baseline thinking of getting back to, you know, some consistency with volumes, you know, going into the second half of this year, and that would be back in alignment with what our normal sequential trends are with volumes anyways. Typically, in the third quarter, our shipments are up about 1 and a half% to 2% over the second quarter, and then we generally have about a 3 and a half% decrease in the fourth quarter. you know, we've been. There's been a pretty wide gap between our sequential, actual sequential trends relative to the 10-year average for the past few quarters. I felt like we were in a normalized environment, we're gonna get back to closer to those 10-year average trends, and then, you know, hopefully then get back to seeing real growth, you know, once we got into 2024. It seems like some of the tea leaves and some of the conversations, you know, that we've had with customers would suggest this normalization and then freight, actually picking up and moving again, which, you know, was the positive that we were looking at and thinking about and planning for, you know, in terms of the second half of this year in 2024. You know, obviously, we've had some recent developments that have accelerated things a little further here over the last week or so. Great. Really appreciate the cover, color, and I'll leave it at that. Thank you. Thank you. The next question comes from Bascome Majors with Susquehanna. Yeah. As you look back over the last couple of months and, but inclusive of the last few days, can you talk a little bit about the drivers of getting back to that normal sequential trend? And by that, I mean specifically, you know, the like for like shipments from existing customers versus new customer acquisition, versus anything else that you'd like to kind of size up directionally in magnitude as you think about filling that excess capacity over the next several quarters. Thank you. Yeah, like I said earlier, we've talked about this on recent calls. You know, from a core contract customer standpoint, we've actually had good trends. You know, when you look at having a double-digit decrease in volumes, that may seem counterintuitive, but you know, certainly the economy has weighed on many customers and has impacted their trends. When we look at our national account business and the wins that we've had versus losses, we continue to have, you know, the good wins and have not really lost any share to speak of with those larger national accounts, but they've just had reduced volumes. We have lost and have talked about, you know, our business levels with third-party logistics companies has been down in recent quarters, and that was still negative in the second quarter as well. But that's something where I think that, you know, certainly shippers have been looking to save cost, and they've been using the 3PLs to find carriers that had a little cheaper price than us maybe, and divert some freight away for that reason. I think now, just like we've seen in prior cycles, service and capacity are coming squarely back into focus for many shippers. I think that lends itself to how we've won market share over the long term. You know, there's not necessarily any one piece of business that's changing any more than others. You know, we've got a lot of consistency within our largest accounts, and these are long-term, strong relationships that we have between us and our customers. You know, our sales team, our pricing team, they're staying in front of our customers and staying engaged and making sure that they know we're here when they need us. We're increasingly getting those inbound phone calls and being able to take on some incremental business. It's good to see, but, you know, we still would like to see the overall macro environment improving. Would love to see the ISM going back above 50 and really talking about more of a true improvement in the underlying demand environment versus what the supply situation in the industry might be. Thanks for that. Thank you. The next question comes from Christopher Kuhn with Benchmark. Yeah. Hi, good morning. I was just wondering, the West Coast ports had a bit of a pickup in June. Just wondering, I know some of it is indirect, if that benefited some of the volumes that you saw, and then maybe if it picks up as the year progresses, would that help the volumes? Thanks. Yeah, this is Marty. I read the other day that in June, imports from China, to the U.S., fell 24%. Taiwan, it fell 23%, Vietnam, 11, and South Korea, six. We haven't seen, you know, a lot of, you know, energy coming from those ports. As you know, we have a drayage division on the East Coast ports, and those business levels are down there. I think the whole global economy is still rather ill, but, you know, we're prepared to handle that too, if it picks up. We're not seeing any of that movement so far this year in an upward manner. Okay, great. Thanks. Thank you. This concludes the question- and- answer session. I would like to return the floor to Marty Freeman for any closing comments. Yeah. I want to thank you all today for your participation, and we appreciate all the questions. If you have any further questions, please feel free to call us after the call. I hope you guys have a great day and a good rest of your summer. Thank you. The conference has now concluded. 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