Old Dominion (ODFL) Q3 2025 Earnings Transcript

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DATE

Wednesday, October 29, 2025 at 10 a.m. ET

CALL PARTICIPANTS

President and Chief Executive Officer — Marty Freeman

Chief Financial Officer — Adam Satterfield

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RISKS

Adam Satterfield stated, "Our current month-to-date revenue per day is down approximately 6.5% to 7% compared to October 2024", with a decrease of 11.6% in our LTL tons per day," indicating persistent demand weakness entering fiscal Q4 2025 (period ending Dec. 31, 2025).

Operating ratio increased by 160 basis points to 74.3% in fiscal Q3 2025 (period ending Sept. 30, 2025).

Satterfield indicated further pressure: "And probably go an increase of 250 to 350 basis points," reflecting ongoing margin headwinds if revenue remains weak.

Satterfield said, "with volumes being down double digits, at least at the start with October, that's tough," highlighting continued business level declines and associated operational challenges.

TAKEAWAYS

Revenue -- $1.41 billion, down 4.3% from the prior year, driven primarily by a 9% decrease in less-than-truckload (LTL) tons per day, partially offset by a 4.7% increase in LTL revenue per hundredweight.

Fiscal Q3 Operating Ratio -- Deteriorated by 160 basis points to 74.3% as declining revenue led to deleveraging of fixed overhead costs.

Sequential revenue and volume trends -- Revenue per day fell 0.1% from fiscal Q2 2025; LTL tons per day declined 2.9% in July, compared to the ten-year average sequential change in LTL tons per day, and LTL shipments per day decreased 1.6% sequentially from fiscal Q2 to Q3, versus 10-year averages that show typical Q3 sequential increases.

October start -- Month-to-date revenue per day down approximately 6.5%-7% year-over-year; LTL tons per day down 11.6% year-over-year in October, with management indicating these trends would persist if the environment does not recover.

Yield management -- LTL revenue per hundredweight in October 2025 up approximately 5% excluding fuel, reflecting consistent pricing discipline despite weak demand.

Cost control -- Direct variable costs as a percent of revenue remained flat year-over-year, facilitated by workforce and dock management technologies; headcount declined approximately 6% compared to the same period last year.

Capital expenditures -- $94 million in fiscal Q3; network has over 35% excess capacity as of fiscal Q3, well above the company's target, with several completed service centers held in reserve.

Employee-related expenses -- Annual wage increases implemented September 1, while attrition continued to reduce headcount, with management expecting further gradual declines.

Cash flow and shareholder returns -- Cash flow from operations was $437.5 million in fiscal Q3 2025 and $1.1 billion for the first nine months of 2025; share repurchases totaled $180.8 million in fiscal Q3 2025, with dividends paid of $58.7 million in fiscal Q3 2025.

Service metrics -- Achieved 99% on-time service in fiscal Q3 2025 and a cargo claims ratio of 0.1%, earning the Mastio & Company designation as the #1 national LTL provider for the sixteenth consecutive year.

SUMMARY

Old Dominion Freight Line (NASDAQ:ODFL) directly reported that both revenue and volume remained significantly pressured, citing a 6.5%-7% year-over-year decline in revenue per day in October 2025 and an 11.6% reduction in LTL tons per day in October 2025 compared to October 2024, which set a challenging tone for the upcoming quarter. Management provided clear strategic signals by maintaining a disciplined pricing approach, with yields improved 5% excluding fuel in October 2025 and no relaxation of pricing despite intensifying competitive dynamics and weaker market demand. Increased operating ratio guidance for fiscal Q4 2025—potentially up to 350 basis points sequentially—was explicitly tied to persistently low revenue and underutilized capacity, with margin pressures expected to continue unless volume trends improve.

Satterfield noted, "we're well north of the 30% at this point. And probably even above 35% type of range," highlighting significant operational slack resulting from prolonged demand weakness.

Freeman confirmed retention of industry-leading service levels, stating, we provided our customers with 99% on-time service and a cargo claims ratio of 0.1% in fiscal Q3 2025, emphasizing the focus on customer experience as a core differentiator.

Despite heightened operating risk, management indicated readiness for a cyclical recovery, underscored by large-scale capital investment over the last three years and the flexibility to activate additional service centers as market conditions warrant.

The company attributed ongoing volume and revenue declines in 2025 primarily to macroeconomic factors, including soft ISM readings, ongoing trade and tariff uncertainties, interest rate fluctuations, and weak housing-related demand.

Satterfield directly addressed margin optimization initiatives, pointing to advanced workforce planning, dock management, and line haul optimization technologies that have allowed variable cost ratios to remain consistent as a percent of revenue in 2025 compared to periods of historically higher density, such as 2022.

INDUSTRY GLOSSARY

Operating ratio (OR): A key measure of efficiency in trucking, calculated as operating expenses divided by revenue; lower values indicate better profitability.

LTL (less-than-truckload): Freight mode where shipments from multiple customers are consolidated in one trailer, each representing less than a full truckload.

Mastio & Company Survey: An annual third-party survey ranking LTL carriers on 28 service and value attributes as evaluated by shippers and logistics professionals.

Revenue per hundredweight: Revenue earned on every 100 pounds of freight, a standard LTL yield metric that adjusts for shipment size.

Full Conference Call Transcript

Jack Atkins: Thank you, Jason, and good morning, everyone. Welcome to the third quarter 2025 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today through November 5, 2025, by dialing 704-0529, access code +1 40007806. The replay of the webcast may also be accessed for thirty 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 important factors among others set forth in Old Dominion's filings with the Securities and Exchange and in this morning's news release and consequently actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise.

As a final note before we begin, we welcome your questions today, but ask in fairness to all 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 call over to Marty Freeman, our President and Chief Executive Officer. Marty, please go ahead, sir.

Marty Freeman: Good morning and welcome to our third quarter conference call. With me on the call today is Adam Satterfield, our CFO. And after some brief remarks, we will be glad to take your questions. Old Dominion's third quarter financial results reflect continued softness in the domestic economy. Our revenue declined 4.3% compared to 2024 due primarily to a 9% decrease in our LTL tons per day, which was partially offset by ongoing improvement in our yields. We continued to operate efficiently during the quarter and were able to manage our direct variable cost as a result.

The deleveraging effect from the decrease in revenue, however, drove an increase in our overhead expenses that resulted in the increase in our operating ratio to 74.3%. As we navigate through what continues to be a challenging microenvironment, we remain focused on what we can control. I'm proud of how our team continues to execute the core elements of our long-term strategic plan as we work to ensure that Old Dominion is the best-positioned carrier in our industry to respond to an inflection in the operating environment when it does materialize. As we have said many times before, our long-term strategic plan includes an ongoing focus on delivering superior service at a fair price.

The other key elements of our strategy include investing in new service centers, equipment, technologies, and most importantly, our people. Our past financial results have proved that investing in ourselves through the economic cycle can pay dividends over the long term. An example of how this is happening is we've been able to control our direct variable cost this year despite the lack of network density associated with the decrease in our volumes. In fact, our direct variable cost are relatively consistent as a percent of revenue to when we produced company record operating results back in 2022.

While there are many factors influencing these costs, we have implemented new workforce planning and dockyard management tools as well as P and D and line haul route optimization software which have helped drive improvements in our productivity even as we have faced headwinds from lower density. Importantly, we have done this while maintaining the highest standard of service for our customers. And I'm pleased to report that once again we provided our customers with 99% on-time service and a cargo claims ratio of 0.1% during the third quarter. That said, we also know that providing our customers with superior service is more than simply picking up and delivering the freight on time and without damages.

Mastio and Company measure 28 different service and value-related attributes during its annual survey of shipper and logistic professionals. We were honored earlier this month to be named the number one national LTL provider for the sixteenth consecutive year. In addition, Old Dominion maintained a sizable advantage against our competition. And we finished first in 23 of the 28 categories evaluated by Mastio. I would like to congratulate the OD family of employees on this accomplishment. Every member of the OD family is incredibly proud of this recognition. And we also remain highly motivated to continue providing our customers with best-in-class service every single day. We know that consistency of our service creates value for our customers.

It also differentiates us from the competition. Our customers know that they can count on us to help keep through the ups and downs of the economic cycle, which means they can keep their commitments to their own customers. Importantly, our consistent service also supports our disciplined approach to yield management. Over the years, we have built a unique culture centered on core elements of our strategic plan, the cornerstone of which is providing our customers superior service at a fair price. This has created an unmatched value proposition for our customers and allowed us to win more market share over the past decade than any other LTL carrier.

We will continue to focus on delivering best-in-class service to our customers while also operating efficiently and maintaining our disciplined approach to managing our yields. As a result, we are confident in the ability to win profitable market share and increase shareholder value over the long term. Again, thank you for joining us this morning. And now Adam will discuss our third quarter in greater detail.

Adam Satterfield: Thank you, Marty, and good morning. Old Dominion's revenue totaled $1.41 billion for 2025, which was a 4.3% decrease from the prior year. Our revenue results reflect the 9% decrease in LTL tons per day that was partially offset by a 4.7% increase in LTL revenue per hundredweight. On a sequential basis, our revenue per day for the third quarter decreased 0.1% when compared to the second quarter of 2025, with LTL tons per day decreasing 2.9% and LTL shipments per day decreasing 1.6%.

For comparison, the ten-year average sequential change for these metrics includes an increase of 2.9% in revenue per day, an increase of 0.5% in the LTL tons per day, and an increase of 1.9% in LTL shipments per day. The monthly sequential changes in LTL tons per day during the third quarter were as follows: July decreased 1.9% as compared to June, August decreased 1.8% as compared to July, and September increased 1.3% as compared to August. The ten-year average change for these respective months is a decrease of 2.9% in July, an increase of 0.4% in August, and an increase of 3.3% in September.

For October, our current month-to-date revenue per day is down approximately 6.5% to 7% when compared to October 2024, with a decrease of 11.6% in our LTL tons per day. As usual, we will provide actual revenue-related details for October in our third quarter Form 10-Q. Our operating ratio increased 160 basis points to 74.3% for the third quarter of 2025, as the decrease in revenue had a deleveraging effect on many of our operating expenses. Our overhead costs, which are primarily fixed in nature, increased 160 basis points as a percent of revenue due to this effect and the ongoing execution of our capital expenditure plan.

These factors contributed to the 70 basis point increase in our depreciation cost as a percent of revenue. Miscellaneous expenses as a percent of revenue also increased 40 basis points due primarily to changes in gains and losses on the disposal of property and equipment between the periods compared. While our remaining overhead costs increased as a percent of revenue, these expenses in aggregate were lower than in 2024 as we continue to exercise excellent control over our discretionary spending. Our direct costs as a percent of revenue were flat compared to 2024 due to the improvement in yield and continued focus on operating efficiencies.

We were pleased that our team was able to effectively match our variable costs with current revenue trends during the quarter. I also believe that we will be able to improve these direct costs even further when we return to a growth environment and benefit from the improvement in network density. Old Dominion's cash flow from operations totaled $437.5 million for the third quarter and $1.1 billion for the first nine months of 2025 respectively, while capital expenditures were $94 million and $369.3 million for those same periods.

We utilized $180.8 million and $605.4 million of cash for our share repurchase program during the third quarter and first nine months of 2025 respectively, while our cash dividends totaled $58.7 million and $177.2 million for those same periods. Our effective tax rate for 2025 was 24.8% as compared to 23.4% in 2024. We currently expect our effective tax rate to be 24.8% for 2025. This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time.

Operator: Thank you. We will now begin the question and answer session. The first question comes from Chris Wetherbee from Wells Fargo. Please go ahead.

Chris Wetherbee: Maybe Adam, we could start on sort of the October environment. You mentioned ton down, I think 11.6% is what you said. I'm kind of curious what you're seeing from a demand perspective. Obviously, it seems like there's some softness in October. And then I think you typically give us some help in terms of both top line as well as operating ratio for the forward quarters. So any kind of comments you have just in the context of what we're seeing so far in October around the fourth quarter would be very helpful.

Adam Satterfield: Yes. Maybe I'll just start with that. Obviously, the operating ratio is going to be impacted by what's going on with revenue. But the average change in our operating ratio from the third to the fourth quarter is a sequential increase of 200 to 250 basis points. As a reminder, that excludes any change in the insurance and claims line item. And as you know, that gets impacted by the annual actuarial study that we conduct in the fourth quarter of each year. But basically, current trend with revenue we're starting out. Our tonnage is underperforming seasonality a little bit.

But it looks like with our revenue per day performance, we're really just I'd say it's a similar we continue to trend at this down 6.5% to 7%. That's similar underperformance or would be for the full quarter as what we've seen in the first three quarters of the year. So if we continue at that same revenue per day being down 6.5% to 7% for the full quarter, I'd say that we'd probably expect a sequential increase of about 300 basis points. I would say that we probably ought to put a range on that given the revenue uncertainty. And probably go an increase of 250 to 350 basis points.

I think if we see some revenue recovery, that could help us get to the low end of the range, which would be right there at 250 bps right at the top end of normal, if you will. But I think just given the continued uncertainty on revenue, if things were to get any worse, which we're not seeing at this point, that would give a little flexibility on the top side. But fortunately, after the performance that we just had in the third quarter, we're at a great starting point as we start off with the fourth quarter performance.

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

Jonathan Chappell: Thank you. Good morning, everyone. Adam, as it relates to salaries, wages, and benefits, down sequentially as a percentage of revenue. I'm pretty sure you still put in your annual wage increase on September 1. So was this a function of headcount numbers coming down in any type of material manner? And also as we think about the 3Q to the 4Q transition there, if the wage increase did go into effect on September 1, would we expect the usual kind of uplift on that line item as it relates to the OR?

Adam Satterfield: Yes. We definitely put a wage increase in effect at the September as we always do. As we continue to perform in the or operate in the mid-70s, we think that's very appropriate to continue to reward our employees for the outstanding performance. Not just from an operating ratio standpoint, but as Marty mentioned, continue to be extremely proud of the service metrics that we're offering to our customers, the value and that came through in the sixteenth straight win of Mastio. But so that definitely was in there. We did continue to see our headcount drift down a little bit through the third quarter.

As you know, the decrease overall from a total number of full-time employees was down about 6% compared to the third quarter of last year. With shipments being down almost eight. But we expect that we'll continue to see normal attrition as we go through the fourth quarter and probably that headcount continue to drift down a little bit. But that always is something that's a big driver of that change when I look at the average increase in the operating ratio from the third to the fourth quarter. If you really combine I like to combine the salaries, wages, and benefits and our total operating supplies and expenses on average, those two main components.

They generally increase about 170 basis points. So we continue to have that pressure there. And with revenue pressure, especially, it continues to get harder and harder if you want to give service at the levels that we do to manage those costs. But that's one reason why we think that the operating ratio will be a little bit higher than our normal sequential change. The other thing is just looking at our overhead cost, we've been averaging somewhere around $310 million. So of overhead a quarter. And I think it may be a little bit lower than that, probably in the $305 million to $310 million range in 4Q.

But that creates 150,000,170 or so basis points of pressure as well. So really, I think that 300 just to be clear, I mean, that's when we gave a range of $250 million to $350 million for the operating ratio it's probably $300 million to $350 million but I think we can continue to perform. And if we get some any type of acceleration on the revenue side, obviously, we just outperformed the normal sequential change from 2Q to 3Q even with revenue pressure. And obviously, we're going to continue to manage costs as tightly as we can in this lower revenue environment.

As long as it doesn't jeopardize our ability to be able to respond to a growth environment when that does materialize.

Operator: Our next question comes from Tom Wadewitz from UBS. Please go ahead.

Tom Wadewitz: Yes. Good morning. Wanted to ask you a bit about I guess capacity position. So if you could just let it kind of tell us where you think you're at on terminal capacity. I think you kind of normalize, you like to have 20 to 25. I don't know if your last comments maybe you're more 25 to 30 or even beyond that. But if you think about how much excess but you haven't kind of brought up the terminal. Because you really don't need it. So I guess kind of broader question is really like, well, where do you stand?

But do you go because even though you're long-term focused, you're just kind of so far beyond what would be normal for you.

Adam Satterfield: Yes. We're definitely north of our target is generally to have 20% to 25% excess capacity. I'd say we're well north of the 30% at this point. And probably even above 35% type of range. So, I think it is fair to assume that we'll have lower CapEx for our real estate next year. We haven't flushed all of that out completely at this point. And some of the capital expenditures that we have in some cases repair projects. We've got some projects that are already in the works. Right now that will continue into next year. So that's some that will or some spend rather that will always kind of be out there.

But I think we're in really good shape with the network where it is. We haven't opened any service centers this year. If you go back over the past couple of years of this freight recession that we've been in, I think we've opened six service centers going back to 2022. So we've we definitely have built up some capacity. We do have several service centers that we've completed construction on to your point. When we do that, they're ready to be turned into the operation. And so for that reason, we do start depreciating those facilities.

So that depreciation incremental depreciation expense is already in our numbers and it's part of the carrying cost of having that capacity availability for our customers. And that's a key part of the value proposition is to always be able to say yes to a customer. And while capacity isn't maybe on everybody's mind right now, it hasn't been that long ago when we've seen periods where the environment does turn. It generally turns very quickly in our industry. And I think we'll see customers focus go right back to who has the capacity. Not just on the service center side, but with labor and with equipment and who can really respond to those growth needs.

And I think that is a big part of our value proposition. And while we feel like we're better positioned than anyone to respond when the market does eventually fly back to the positive. But yes, so we have already several service centers in ready reserves, so to speak. We just think it's more appropriate to hold them out versus increasing the number of service centers in operation, which increases line haul expense, weakens your density even further, and puts more pressure on costs. So it's similar to what we've done in prior cycles before. And I think we'll see those turn on whenever we see the growth come back.

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

Jordan Alliger: Yes, hi, morning. Yes, I wanted to come back to demand a little bit. Obviously, things continue to be fairly weak, but can you maybe give some your perspective thinking ahead over the next year or so on inflection timing, what could drive it? Are we getting closer? And what's it going to take to get back to tonnage seasonality on track? Thanks.

Adam Satterfield: Yes. That's a hard one to answer, obviously. We've been ready and waiting for it to turn over the last couple of years. This freight recession. If you look at ISM, being below fifty thirty two of the last thirty five months, I believe, that's obviously put pressure on everyone. And we haven't been immune to the macroeconomic environment. But I'm really pleased with how we've been able to deal with this decrease in network density. In terms of controlling what we can control. And that's the message that we give to the team is control those items, those expenses control our service first and foremost. And we've obviously been able to do that.

And be able to keep our variable cost as a percent of revenue, the direct variable cost that is. Consistent with where we were back in 2022 when we were benefiting significantly from the improvement in the network density. So I think that whenever that inflection happens and we're confident that it will, we stand ready to be able to put on strong profitable growth. I think that's when our model shines the brightest. Think when you look back at an environment like a 2018 or 2021, when that market turns, I feel confident that we're better positioned than anyone else.

And I think going back to the last question about capacity, and again, that's on the service center side, but I think there's a misconception in the market just looking at how the allocation of Yellows service centers have gone since they filed bankruptcy. We just don't see that there's been a material change in many of the public carriers total number of service centers, when we look at the change from 2022 to the change in where they finished in 2024. So I think there's less capacity out there. And obviously, all of the 2022 will be even more capacity constrained when we do eventually get into the up cycle.

So I think those are the reasons why we feel like we're better positioned than ever. To be able to start showing strong profitable growth.

Operator: The next question comes from Eric Morgan from Barclays. Please go ahead.

Eric Morgan: Hey, good morning. Thanks for taking my question. I wanted to, I guess, follow-up on the last one on volumes. Obviously, haven't gotten any help from the macro and appreciate all the comments on how you've responded and are positioned. But can you just speak to the market share dynamics here just because it does feel like the industry is probably not down quite as much, at least from what we can tell. And I don't know, is this something that can stabilize into next year or are we just kind of run rating into another year of down volumes?

Adam Satterfield: Yes. Eric, I think that the challenge that we see is that our numbers are just compared to the remaining public carriers. And many of the comparisons leave out the fact that the third largest carrier went bankrupt. And there was a reallocation of that volume. So if you include that carrier in the mix, going back to 2022, then the industry numbers look a little bit different than our relative comparison to them as well.

So we I think we talked about this on the last quarter, the best way that I feel like looking at market share is I look each year when all the carriers' revenues are published in Transport Topics, and that would include the private carriers as well. And we've been right at 11.8% revenue market share for each of the last three years. And that's our strategy is generally in a weak macro environment. We continue to try to maintain market share, maintain our discipline over yields and discipline over our cost, and usually, we come out much stronger on the other side. So I feel confident about that. When will the market change?

I mean, that's obviously the big question. I've asked Chad GPT that and suggests next year. So who knows, we'll see if AI is right or looking at other economic forecasts will prove to be right. But I think that it seems like as we've gone through every quarter this year, the next quarter has been pushed out to show that we would have a full return to normal seasonality in obviously, we've underperformed seasonality at this throughout each quarter and based on the starting point with October, I think we'll have a similar underperformance from a revenue per day standpoint, at least sequentially.

Typically, the way this would work out was then you start seeing a little increase in demand, you start closing that gap to seasonality, you get back there for a couple of quarters, and then we have significant outperformance. So I'd like to think that when we get into the spring season, next year by then, I think this week, we probably are going to have a good indication of where the macro might go. I mean we get a lot of feedback from customers that continue to have concerns over trade. And the impact of the tariff environment.

And so if some deal was formed, if you can close that uncertainty loop that many of our customers continue to struggle with, perhaps that's when we'll finally start seeing a little bit of recovery. It was obviously there in the first quarter of this year, there was optimism, and those were the couple of months that ISM did go back above 50. So I think that there's that pent-up sort of demand that's hanging out there. But I think we've got to close that trade loop question before we see our customers really get excited about trying to grow their businesses again. But there's puts and takes on all sides with it. I think the tax bill was important.

The accelerated depreciation component of that. Hopefully, we'll start seeing some drive to demand. It seems like there's been a few things recently helping on the supply side within the truckload industry. All of those things should help to bring the supply and demand equation back into balance. And support our ability to start growing again. But if you just roll normal seasonality out from kind of the current trend where we are. Certainly would lend itself that if we don't have a major inflection that we could be looking at continued declines on a year-over-year basis, at least for the first quarter. And then hopefully, we'll start seeing some compression for there and a true spring recovery.

Which is what we normally see in our business.

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

Ravi Shanker: Great. Thanks. Adam, maybe a couple of follow-ups to what you just said. A, just on October itself, obviously, a lot of questions there. But do you have a sense that the kind of big step down from September to October is something transitory maybe related to the government shutdown? And what you see right now, do you think that this continues for the entirety of the fourth quarter? And also, had mentioned the things happening in the TL market. Obviously, we did see a bunch of volume move out of the LTL market to TL. You guys have always been optimistic that will come back to LTL.

Are you starting to see any of that happen at this point in the TL market tightening up a little? Thank you.

Adam Satterfield: Yes. Let me see if I can unpack all that. Remember, every point, but the October, just the focus on tonnage right now, where the trend would be that would have us sequentially down 5% versus September. The ten-year average is a 3% decrease. So again, it's consistent. The September performance, which to point out was an increase, which was nice to see after several months of sequential declines. But that was up 1.3%. So two points, if you will, 200 basis points below the 3.3% average increase. So it's, I think, similar underperformance relative to seasonality at the start. And like I mentioned before, if we continue at the same kind of pace, of being down.

If you carry the 6.5% to 7% decrease throughout the period, that'd really be a similar underperformance, if you will, for the full quarter. Quarter from a revenue perspective. As what we've been seeing through the year. So I don't think anything has gotten worse per se. It just sort of seems like things have continued on. And frankly, that's what we were expecting with our third quarter revenue. We weren't anticipating an increase, normally see an increase there. We thought we would see revenue at $22 million per day. And that continued through the full quarter. So I think the demand is it feels consistent to me.

But obviously, we haven't seen the that we've all been sort of waiting for. And you don't typically see that in the fourth quarter. I mean, obviously, at this point, October is 23 workdays out of a 62 workday quarter. So a lot of the trend that we have in October will carry the quarter. And December is always a weak month. So I think a lot of it will be, can we kind of hold pace to a degree with seasonality from a tonnage standpoint and just sort of keep that current trend consistent through the quarter. And then be in a position to hopefully start seeing some type of movement upwards when we get into the '6.

Which is when you would for the full quarter, our revenue historically is down another 2% in the first quarter. But by the end of that quarter, that's what will be important that we start seeing some improvement there in demand where you see that spring build starting. And so that's just something that unfortunately we continue to kind of wait on.

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

Scott Group: Hey, thanks. Good morning. Just a So you're not seeing with October like a big drop off in government-related activity that was just sort of just a quick follow-up. Then just like bigger picture like how are you balancing like long-term pricing discipline versus what's going on with network density? Are we are you seeing any change in the competitive dynamic, the pricing environment, just big picture, love to get your thoughts on that? Thank you.

Adam Satterfield: Yes, that was one of the pieces of Ravi's questions that I kind of missed. But yes, we don't have any direct government business. I think that again, it seems like demand is consistent, but it's obviously October was a little weaker, especially at the start of the month. The past week has been good. But I think there's probably an indirect effect on the overall economy. That could be pressuring things there as well. From a pricing standpoint, continue to see general discipline out there. And obviously, we continue to move forward with our increases. We're seeing an increase in yields of about 5% in October. And that's ex-fuel.

And that's what the change would be if you kind of think about the full quarter. If we hit normal seasonality, it would be an increase of right at 5%. So that's kind of our baseline thinking as we go through the period. And I think that having those conversations, obviously, we're in a very competitive environment right now. With demand being weak overall for the industry. But we've got a very I think the best sales team in the industry that's out there having conversations every day with our customers about the value that we provide. And we have a lot of conversations about service failures that customers might be dealing with that are using other carriers.

And so it's up to us and to our sales team to make that we can demonstrate value. And I think we've proven that time and time again. And to give the service that we do. Our costs are going up every day. We're having more cost inflation this year than what we were originally anticipating. But we've been consistent with the increases that we've asked for. Across the board. And I think we've been successful there without seeing any major customer loss or anything like that.

But I think when you look at actual performance, our operating ratio our earnings per share and the relative change I think a lot gets missed when you see, at least for the public carriers, a comparison to consensus and things of that nature. But while we don't like seeing our earnings per share being negative like they've been, when I look back at the second quarter and the relative comparison at least for the I'd say, three public carriers that are standalone entities their earnings per share was down by at least double what ours was. And so I think that kind of proves a couple of things, the importance of being disciplined with yields.

But also the cost control that we've been able to display throughout the business and really through the past couple of years that protected our operating ratio, protected our earnings and put us in a great spot to be able to grow when the environment is more conducive to growing.

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

Bascome Majors: Thanks for taking my questions. Really to follow-up on that theme, Adam, if we kind of run seasonality through, it looks like next year could be potentially the fourth consecutive year of tonnage decline. And certainly, you've gotten no help from the market, but that's abnormal in the history of the company. And as you take a step back and I don't know if you have a direct answer to this, but what is the point in this sort of new weaker, more competitive paradigm where you really think about the balance of service, price, and volume growth and if you need to twist some of those knobs to really drive the long-term outcome that benefits your shareholders? Thank you.

Adam Satterfield: Yes. I think that obviously we've had I mean, it's been a very disruptive and challenging period over the last three years. And we've heavily invested for future growth opportunities, and we still feel very confident in what our long-term market share opportunities are. And believe we've got a long runway for growth. And we wish that the market would have already turned, but we'll have spent $2 billion cumulatively over the last three years with volumes being down. To expand our network to continue to keep a fleet replacement cycle. And be prepared for future opportunities. But that comes at a cost as well.

We had a lower CapEx spend this year and very likely that it will be lower overall next year as well. So I think that will continue into to pair the capital expenditure plan back to grow into what we have will take some of the pressure off the overhead cost. And we can continue to manage our variable costs. As much of a fixed cost business that we run, with a network of 261 service centers. Probably two-thirds or more of our costs are variable in nature. And I think we've shown good control there. But this down cycle is obviously lasted a lot longer than I think anyone would have expected.

But And when we go through down cycles, we've been through this multiple times before. And I think a lot of people are ready to write us off and several analysts have through this cycle as well. And I think the growth story is over. But we keep a lot of those old headlines around for bulletin board material, if you will. And look forward to when the market does eventually inflect back to the positive. I think the key thing is, like I mentioned earlier, the value offer to your customers. We are a little bit of a price premium, but with the control that we have over cost, our go-to-market price is not much higher than our competitors.

I would say typically when we get in an up cycle as well, the competitors that don't have as much capacity, that's when you see their prices go higher than ours. And so that price gap will continue to close especially for those carriers that frankly from a GAAP operating standpoint there's six other publicly traded LTLs four of those from a GAAP operating ratio have been operating in the 90s. And so I think that to deliver value to their shareholders, they're going to have to increase prices would be my guess. And so when that happens, that price gap closes that too gives us additional volume opportunity.

I think we'll benefit from the improvement demand the improvement or volume opportunities coming from that churn at competitors. And that's historically what we've done and that's fully what we're expecting. At this point as well. Once we can get back into a demand environment that's more conducive to growth. And not trying to go out and want to win market share. We don't want to go out and try to take it, right?

Operator: The next question comes from Brian Ossenbeck from JPMorgan. Please go ahead.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. Maybe two quick follow-ups for you, Adam. Just length of haul was coming down a good amount here. I don't know if you can put some context around that. Is that a sign of just the demand environment that you're in? Is there some sort of shifting mix in there? And does it have any sort of implications for you operate the network or how the industry responds then just on the pricing side, I want to get your quick thoughts on dynamic pricing. And we've heard a little bit more about it. I don't know if it's really widespread in use.

But just want to get your perspective on how you utilize that if at all? Excuse me. And then what the rest of the industry is doing as well? Thanks.

Adam Satterfield: Yes. On the dynamic pricing side, that's we hear some commentary of that, and I think that's something that's probably used in a small way by some carriers. And I don't think that we've ever seen a whole lot of positive impact from that. That's not really something that we subscribe to. For us. I just feel like it's more important to be consistent. Customers know what to expect from us. We look at how our costs are changing each year. And that drives what we try to ask for from a cost-plus standpoint. To continue to support investments that we make be it in service centers and equipment investments in technologies.

And those investments in technologies we've shown that they help us continue to improve our costs. So in some cases, you invest to drive an improvement in your service product. And customer engagement and customer stickiness. But then we also have plenty of investments that allow us to operate much more efficiently. And we've kind of proven that by our ability to be able to manage our variable cost. But I think that when you look at some of the carriers historically that have done some of these things, can think back to the first half of 2023. I don't think that it's proven it's weighed out in terms of when you look at earnings per share performance.

It just seems like it never really pays to try to be willing to take less of a rate when costs are going up. And I think earnings per share trends for us and other carriers kind of prove that out. I forget, what was the first part of your question again?

Brian Ossenbeck: Just the implications of shifting length of haul. It seems like it's been coming down for a while the market or mix thing and how it impacts the business.

Adam Satterfield: Yes. I think that's something that has been developing over time and we expect that it will likely continue to decrease. I think that shows kind of the regionalism as we continue to expect that we'll see growth especially e-commerce trends that will probably move more and more freight into kind of next day second day lanes. That's about 70% of our revenue today. And in the most recent quarter, we actually our retail business outperformed industrial again. And so that's something that's probably contributing.

But yes, I think the other thing is when there's time in supply chain and, obviously, right now, there's other forms of transportation that can be used for some of the longer lengths of haul at a cheaper price point. And those are some of the things that if you go back to 2021, for example, if freight was hitting the shore, we were picking it up. It was converted to truck as soon as possible in the supply chain. And so we were probably getting some longer lead to fall at that point.

But I think shippers are able to take advantage of time and supply chain right now and getting to us later in the process, if you will. So that's partly some of that change that we're seeing.

Operator: The next question comes from Jason Seidl from TD Cowen. Please go ahead.

Jason Seidl: Thanks, operator, Marty, Adam, Jack, good morning, guys. Wanted to stick on pricing a little bit. You guys obviously announced GRI recently, it was 4.9%, I believe, equal to prior year. But the market feels like it's weaker this time around. How are you guys gauging sort of compliance to the GRI as we move through the fourth quarter right now? Would you think it might be a little bit weaker than last?

Adam Satterfield: You mean the increase or the request from the customers about the increase?

Jason Seidl: The increase that you announced. I think yours takes place November, early November, I believe.

Marty Freeman: Yes, we were eleven months this year. We've done that in the past. Some years, it's twelve months. But we base our general rate increase off of our cost each year. And we're not getting any kickback so to speak. We explain to our customers what our costs are for equipment, real estate, just to generally operate our business. And keep in mind too, this only affects 25% of our customer base. This is a general tariff for non-contract. Our contracts are about 75% of our business and those increases are based on months of the year when they expire. Only affects 25% of our business.

Operator: The next question comes from Reed Hsu from Stephens. Please go ahead.

Reed Hsu: Hey, guys. Thanks for taking my question. You've had a lot of competitors invest in service and in their network and you have a peer about to spin off from their parent maybe getting a little more financial attention. Are you seeing any change in the market from these investments from either your public or private peers or any impacts from your peers? Prepare to spend from the parent company?

Adam Satterfield: Yes. The best information that we can use to compare us versus the others from a service standpoint is all the detailed information that we get from the Mastio study. And we really didn't see a whole lot of movement if you will, when you look at us or any of the other carriers. The gap between us and the competition stayed as wide as it's ever been. As Marty mentioned, we were there's 28 different attributes related to service and value, and we were number one in 23 of those attributes.

But I think when I look at the other logos, there really hadn't been a lot of change in the past or at least on the value map in the past two to three years despite there's we hear more about the service improvements from investors, and I think we it in Mastio or hear from customers. So we continue to focus very intently, though, on that data. Services is more than just being able to pick up and deliver freight on time and without damage. And so those are the things that we work very closely. And we talk about these attributes and how we're performing with every employee throughout the company.

And every person lends a hand to giving service, whether it's an external customer or an internal customer. And so that's what we focus and what we spend a lot of time in money. We're training our employee base to make sure that every experience with Old Dominion is a positive one, we stay best in the game every day. It's not just best in the game on Saturdays ESPN game day. We want to be the best in the game every day.

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

Ken Hoexter: Hey, great. Good morning. So Adam, and Marty, maybe I'm still a bit confused by the comments of demand is consistent, and similar underperformance as you've seen recently that commentary. Knight who reported already said things got worse in the LTL world rapidly to start the quarter. Volumes down 11.5% against last October is down 9% comp, was I think the easiest comp you had as the worst month of the year. So I just want to understand, is it consistent? Is it did something fall off rapidly? I guess, the weight shipment, I don't know if you want to throw some thoughts there.

Is that decrease is that in line with normal shifts or is the economy making that a little bit lighter? And then the flow there of the volumes, guess there's some shipper commentary that you're being more aggressive on pricing. I would presume your answer is going to be you know us, we never change that. I'd just like to hear that from you directly. Is there any change on your pricing moves in the market? Thanks.

Adam Satterfield: Yes. There's no change there. It's you can see our numbers and we continue to be consistent with our approach. And I think our year-over-year change in our yield trends kind of bear that out. So no change there. I would just say with respect to the volumes, I mean, look, obviously, they're down. And with volumes being down double digits, at least at the start with October, that's tough. And that's coming on the heels of we've been down the last couple of years and it's something we continue to manage through.

But I think that my commentary about similar underperformance was, again, just looking at the sequential change and our tonnage relative to kind of what the ten-year average is. And last year we were basically sequential change in October versus September was down 3%. So right now, we're trending down 5%. So that's making that year-over-year change look a little bit worse. And we'll see as things progress through the quarter. Whether that changes or not.

But just looking at the overall revenue per day and looking at kind of how we've whether it's revenue per day or tonnage, if you kind of have similar underperformance relative to our ten-year average sequential change, that's kind of how I come up with the numbers that we have, be it the tonnage would be down I know, about 11.5%, could be a little bit better. And then the revenue sort of being in that same type of basically, it'd be around $1.29 billion if we continue on with this down 6.5%, 7% or if we underperform at a similar rate to what the underperformance has been. This year sequentially that is.

But no major for us, it just feels about like the same from a macro standpoint. And from a customer demand standpoint, the conversations that we continue to have and like I said earlier, I think that we've kind of came into this year or at least I would say in the second quarter thinking that we needed clarity from a tax deal, clarity from an interest rate environment. And then once everything got stirred up with the tariff conversation, we felt like, okay, we got to get this settled. And really it's settled for our customers' sake.

And so we've got a couple of those components checked off the list, if you will, at least the interest rate cut cycle has begun. We'll continue to watch and see if we get further cuts there that should help customers. But like I mentioned earlier, I think the biggest thing is just the overall uncertainty in the environment with respect to if you're trying to make a business decision not knowing what all the cost inputs might be, it's hard to make that decision. And I think that's just got some business owners and managers just kind of paralyzed at this point.

And so if we can start getting some clarity there, then I think we can start seeing some change in activity.

Operator: The next question comes from Jeff Kaufman from Vertical Research Partners. Please go ahead.

Jeff Kaufman: Thank you very much. Hey, Marty. Hey, Adam. And congratulations on another terrific Mastio finish. I wanted to if I could unpack a little bit more visibility into what's your different customer buckets are doing? Because when I think about it, industrial production hasn't really gotten incrementally worse in the last couple of months. The ISM hasn't gotten incrementally worse in the last couple of months. You gave us a little insight that your retail business customers were outperforming your industrial customers, but I was wondering if however you think of bucketing it, whether it's an industry or kind of a customer group, don't think e-commerce is down that much.

Kind of where is it a little weaker to drive the tonnage down the way it is and kind of which buckets performing a little bit better, a little bit stronger in this environment? Just help us give us a little context.

Adam Satterfield: Yes. It's we generally put group or SIC codes into a couple of major buckets. Our industrial revenue is 55% to 60% of revenue. And then the retail is about 25% to 30%. And in the most recent quarter, the revenue per day we were down 4.3% overall for the quarter. The retail wasn't wildly different, but was down about 4% compared to the third quarter last year. And the industrial was obviously a little worse. But not major difference. And part of that goes back to the consistency that we've had in our customer base. And we've talked a lot over the fact that we haven't lost any major customer accounts.

We haven't really lost major lanes or whatnot and awards from existing customers. And so we've had a lot of continuity there, but obviously, demand for our customers' product has been weaker, orders have been weaker. I think that's coming through. With our weight per shipment trends. And that's something that generally is indicative of the macro environment. And we're seeing weight per shipment that's down in October right now about 2.3%. So that's continued to go lower. And is driving that overall change in our tonnage. And obviously, with business levels being down like they are, you have to say, well, what gives if you think you're maintaining market share and not losing customers?

It is those weaker orders I think we continue to hear some customers tell us that they're consolidating shipments within the truckload industry. And with that oversupply that has been there, I think that you've had capacity that's been readily available and that opportunity has existed. We've had some pressure in our 3PL business. That's about a third of our overall revenue. Some of that could be the dynamic pricing that if carriers are out there using that to a small degree and some variability, could be causing some incremental pressure there within the 3PL world. But not seeing it in a major way. It's just some 3PLs are down a little bit more.

And I think historically, what we've noticed is 3PL managed business. They're able to leverage their technologies the carrier connections that they have and help customers consolidate loads into the truckloads. So we feel like more of the pressure is kind of that truckload consolidation on the 3PL world. So it just seems like it's coming in from areas, if you will. What's causing the overall weakness in demand. But I think that historically speaking, ISM has been the highest correlated metric with the industry volumes and with ISM being weak for 32 out of thirty five months, that lends itself to industry volumes being challenged overall. Not just us.

And again, you got to put yellow back in the mix from when all of this started. I'd say the other kind of piece is housing. And the struggles that have been there. I think that we've noticed some correlations between housing economic factors and volumes as well. And while we don't have a lot of direct exposure there, there's a lot of indirect exposure that we get related to people buying new homes, building new homes, some of the components that go in things along those lines. So I think it's just been sort of weakness across the board, some mode shift, etcetera, that's contributed to these unfortunate declines that we've had in our business levels.

Operator: Our next question comes from Richa Harnane from Deutsche Bank. Please go ahead.

Richa Harnane: Hey, everyone. Thanks for squeezing me in. It seems like the theme of the call is sort of this consistency that you talk about. Adam, you mentioned demand feels fairly consistent, not great, but consistent. And really what stood out in this quarter was you controlling what you can control, again, that variable cost item and optimizing your workforce that helped you deliver a nice cost out for the quarter and a better OR than what we see as your normal sequential deterioration. So maybe you can talk to us about like where there's room for further optimization there. I know you're guiding to something that's worse than normal seasonality, but like what can you do?

I think you touched on a few things like the tech-enabled features and things like to drive better cost performance. And I think from like salaries, wages, and benefits as a percentage of revenue, you're operating at something like 44% in the 2022, 2023 timeframe. Could we see a level like that come back? And then just also what prompted these cost savings now? I know your employee count came down a bit, but we've been in a freight recession for some time. Why cut costs three years into the impending down cycle? That's it. Thanks.

Adam Satterfield: Yes. Let's say what prompted is we focus every day on saving cost. And whether you're in a good environment or bad, that's something that you got to be focused on. I had a mentor early in my career that said, if you don't focus on saving cost in the good times, you probably don't even know where to start. When times get difficult. So that's a focus that we have. Every day and it's just part of who we are. And it's part of our continuous improvement cycle as well. That's a key column and our foundation for success is always want to look at ways that we can get better.

Ways that we can invest in technologies, in particular, will drive a return for the business. And I think some of what we've seen in those areas, being able to manage our direct variable cost consistent with levels that we had back in 2022, I think speaks to the importance of that. We obviously we run a tight ship but you got to your people the tools to be able to give service while also operating very efficiently. So that will be a continued focus for us. But as I mentioned in my prepared remarks, the good thing in all of this what's going to drive the long-term improvement there's two key ingredients to long-term operating ratio improvement.

And that's density and yield. And our yield trends have been consistent. Throughout this freight downturn. But density is obviously what we're missing out on. We need density back in the system and it will come again. But that's what's really going to create tremendous leverage for us. And I think the immediate opportunity typically when you see our operating ratio performance when we get into these recovery years, we've got periods where the operating ratio improves 300 or more basis points.

And a lot of that comes on the overhead side when you start getting revenue back in system and you get leverage on all these costs that we've built up when times have been slower, depreciation in particular, I think that's where you see the immediate movement in the operating ratio. And I think we probably got a couple of years of improvement given that the level of excess capacity that we have in the service center network right now. But the long-term improvement in operating ratio that we've seen has really been on the direct variable cost side. And that will be the opportunity that we have going forward.

If we're already at record levels in those costs as a percent of revenue, imagine what happens if we can get double-digit volume growth back in the system which is type of performance that we've seen in prior upcycles. That's where those costs can continue to go much lower as a percent of revenue. But you got to be All of these things work together. We couldn't be disciplined with our yields if we didn't have best-in-class service.

And so it all feeds on one another, but understanding our cost and making sure that we charge appropriately based on the cost to handle freight is what gives us the confidence that we can continue to drive the operating ratio back to where it was and beyond.

Operator: The next question comes from Ariel Rosa from Citigroup. Please go ahead.

Ariel Rosa: Hi, good morning, Adam. Jack, Marty. Thanks for the for the time and for the question. I just wanted to ask you for a bit of color on the nature of the conversations you're having with shippers, with your customers. How are they kind of contextualizing some of this volume weakness? You mentioned some of the uncertainties that they're grappling with. Does it feel like they've gotten more confident, less confident? I guess I'm trying to again, as a lot of others have done contextualize this. Decline that we're seeing in October.

And then is there any dimension in which they've perhaps gotten a little bit more emboldened in pushing back on pricing given whether it's competitive pressures or pressures that they're feeling themselves on their own margins? Thanks.

Marty Freeman: I think the sentiment is pretty much the same as it's been all year from a customer confidence standpoint overall. They're all most of them are waiting for something positive to happen. And I think if you look at the backdrop of what's can be set up for 2026 with lower interest rates, tariffs being consistent, at least consistent. Corporate tax is being decided I think the backdrop is very positive, they talk positively about those things. And as it relates to price, of course, we have customers that want to talk about price, but our salespeople are trying to go out and basically seek business where customers absolutely have to have on-time service with no claims.

Which allows us to charge a premium. So and as Adam said earlier, our customers do have lower weight per shipments. We don't churn a whole lot of customers but the shipments that we are getting are about 20 pounds less per shipment than they were this time last year. So there's some cautious optimism out there and we continue to stay in front of these customers and tap what we can do for them. And we're just waiting on the increase in business.

Operator: The next question comes from Stephanie Moore from Jefferies. Please go ahead.

Joseph Lawrence Hafling: Great. Good morning. This is Joe Hafling on for Stephanie Moore. I wanted to go back to Marty something you had mentioned at the top call. You mentioned a little bit about how you're using technology around workforce planning, dock management, and route planning. We don't often talk about technology in OD. So if we could just unpack what you guys are doing across those main cost buckets, what are the benefits you're already seeing, what inning do you think you're in? What's still to come? Just trying to get a better understanding of everything on the tech and productivity side. Thanks.

Marty Freeman: Yes. We normally don't go in detail. About our AI activities, but I can tell you some of the things that we already have in use today. Some of it being in cybersecurity with email protection platforms, as we get into more bots communications with our customers, we have to learn to manage that better to keep to keep fiber out from an operation safety aspect, we have implemented a line haul plan creation that allows us to study our loads quicker obtain more pounds per truck as we move along. We analyze from a safety standpoint. We analyze our Lytx cameras with videos so that we can coach our drivers more efficiently and increase our safety.

Billing automation, we have AI in our billing automation, which lowers our cost. Content creation for our sales our people for deeper customer engagement. And we also use AI capabilities related to basic application development. But things that we're looking at in the future for that we're currently researching is equipment utilization, predictive equipment maintenance, training from mechanics, just to name a few, weather conditions so we can take better routes during the winter months. And that's just to name a few of some of the things that we're looking at. But all of these things we look at, we expect a return on investment. So we'll talk about them more as we see that happen.

This concludes our question and answer session. Would like to turn the conference back over to Marty Freeman for any closing remarks.

Marty Freeman: Thank you all today for your participation. We appreciate all your questions. And please feel free to give us a call if you have anything further. Thank you, and I hope you have a great day.

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

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