The paragraph is the introduction to the Old Dominion Freight Line First Quarter 2025 Earnings Call. Jack Atkins, the Director of Finance and Investor Relations, welcomes participants and notes that the call is being recorded and will be accessible for replay. The conference may include forward-looking statements that are subject to risks and uncertainties. These statements are not guarantees of future performance and actual results may differ. The company is not obligated to update these statements. Participants are encouraged to ask questions but are requested to limit themselves to one question at a time.

In the first quarter conference call, Old Dominion's CEO, Marty Freeman, noted a decline in revenue and earnings per share due to continued softness in the domestic economy. Despite these challenges, the company improved its yields and maintained market share. The focus remained on service excellence, operating efficiency, and reducing discretionary spending to protect the operating ratio. Even with a 5% decline in LTL shipments per day, the company improved operational efficiency in platform and P&D shipments per hour while maintaining high standards of customer service, including 99% on-time performance and a low cargo claims ratio. The company's commitment to superior service at a fair price has strengthened customer relationships and added value to the business.

The paragraph discusses the company's strategic focus on balancing operating density and yield management to achieve long-term profitable growth and improve its operating ratio. This approach is supported by the company's strong service performance and value proposition, which are believed to help gain market share over time. Despite optimism from positive customer feedback and macroeconomic indicators at the year's start, there is acknowledgment of ongoing economic uncertainty that could delay business recovery. The company remains committed to executing its strategic plan and maintaining superior service and disciplined yield management to win market share, regardless of economic conditions. A brief technical interruption occurs during the discussion.

In the paragraph, Kevin Freeman discusses his company's focus on executing a long-term strategic plan despite macroeconomic challenges, highlighting their success in gaining market share and commitment to providing superior service. He expresses confidence in the company's ability to achieve long-term growth and value for shareholders. Adam Satterfield then reports on Old Dominion's financial results for the first quarter of 2025, noting a 5.8% decrease in revenue compared to the previous year due to a decline in LTL tons per day, though partially offset by an increase in LTL revenue per hundredweight. The decrease was also influenced by having one less workday than the previous year and a sequential decline in revenue and shipments per day.

The paragraph discusses the company's financial performance and metrics, highlighting a 10-year average decline in revenue per day, LTL tons, and shipments. It notes sequential changes in LTL tons per day for the first quarter, with decreases in January and increases in February and March. April's month-to-date revenue per day declined by 7% year-over-year, influenced by the Good Friday holiday. The full month's revenue per day is projected to decrease by approximately 6%. The operating ratio increased due to reduced revenue, impacting operating expenses and overhead costs, including depreciation. Despite short-term margin pressures, the company continues its capital expenditure strategy, believing it provides a competitive edge during economic upturns.

The paragraph outlines the company's financial activities and adjustments for 2025. Due to investments made over the past two years, the company has ample capacity for future growth, leading to a reassessment of its 2025 capital expenditure plan. Some projects have been deferred, and equipment purchases reduced, lowering capital expenditure expectations to $450 million, a $125 million decrease from the initial plan. Operating costs rose due to increased employee benefit costs, now at 38.2% of salaries and wages. Despite these challenges, the company remains focused on cost control and long-term strategy. Their Q1 2025 cash flow from operations was $336.5 million, with capital expenditures of $88.1 million. $201.1 million was used for share repurchases, and $59.5 million for dividends. The effective tax rate for Q1 2025 was 24.8%, expected to remain the same for Q2 2025. The paragraph concludes by opening the floor for questions from analysts.

In the discussion, Jordan Alliger inquires about the impact of tariffs and manufacturing uncertainties on seasonality from the first to the second quarter, particularly in the context of a prolonged freight recession. Adam Satterfield explains that traditionally, there is a 300 to 350 basis point increase in margins from the first to the second quarter, driven by about an 8% growth in revenue. However, due to current uncertainties and recent performance in April, they do not anticipate this revenue growth. If revenue remains flat, they expect only a 100 basis point improvement. Salaries, wages, and benefits are predicted to remain stable, with the usual margin increase heavily dependent on revenue growth, especially significant in the salary line accounting for about 200 basis points of the improvement.

The paragraph discusses the company's financial outlook, focusing on operating supplies and expenses being impacted by tariffs on parts and repairs. Overhead costs remain steady at about $300-305 million per quarter. The primary concern is the variability in revenue, which affects overall financial performance. In response to Jonathan Chappell's inquiry, Adam Satterfield notes that recent data is skewed due to Good Friday, but they have observed a drop in weight per shipment from March to April, which is normal seasonally. Despite this, an increase in March helped maintain an average of 1,470 pounds per shipment for April, contributing positively to revenue per hundredweight. They anticipate some revenue acceleration for the rest of the period.

The paragraph discusses the company’s revenue per hundredweight, excluding fuel, which is expected to be in the 5% to 5.5% range for the quarter, indicating an acceleration compared to the first quarter. The speaker mentions the positive impact of their long-term yield management strategy, with successful bid increases despite rising costs. The company has maintained a market share of 12% to 13% and is beginning to see a reacceleration in business, winning market share while maintaining pricing. Despite disruptions in April, there is optimism for continued improvement in the macro environment, with positive trends observed in February and March. The paragraph concludes with a transition to a question from Ravi Shanker at Morgan Stanley.

In the paragraph, Adam Satterfield discusses how their company's capital expenditures (CapEx) are being managed, particularly in relation to macroeconomic factors and internal investment strategies. Despite a lack of shipment growth, the company continues to invest in real estate and system upgrades to stay ahead of anticipated market growth. Satterfield mentions reviewing and potentially delaying certain projects to manage depreciation costs amidst economic uncertainty, as these costs have impacted overhead expenses. Decisions around the CapEx related to their fleet have also been made with similar considerations.

The paragraph discusses a company's assessment of its deferred capital expenditures (CapEx) related to keeping up with growth after the pandemic, particularly focusing on their power fleet capacity and service center. They feel confident in handling current business and anticipate additional growth throughout the year. The conversation shifts to Tom Wadewitz from UBS asking about the company's perspective on the importance of retail customers versus industrial ones for Less Than Truckload (LTL) services, considering potential increased competition from companies like Amazon and UPS in retail-related areas. Wadewitz also mentions possible impacts on imports that might affect retail more than industrial sectors.

In the paragraph, Kevin Freeman and Adam Satterfield discuss the impact of retail demand and competition in the Less-Than-Truckload (LTL) market. Freeman acknowledges that Amazon's LTL service is not a threat but rather an opportunity for collaboration, as their logistics services can support Amazon's suppliers. Retail constitutes 25% to 30% of their business, indicating continued exposure to the industrial sector. Satterfield highlights the growth of e-commerce as a positive trend for the LTL industry, leading to smaller shipment sizes suitable for LTL networks. Retailers' on-time in full programs benefit carriers like Old Dominion, known for exceptional service and a strong track record, as proven by their consistent Mastio award wins.

The paragraph discusses Old Dominion's strengths in providing reliable, on-time, and damage-free supply chain services, particularly for the retail sector. It suggests that while retail is vulnerable to tariffs due to its reliance on imported goods, Old Dominion focuses on leveraging opportunities to add value and save money for its customers. The company is poised to benefit from trends like nearshoring and reshoring, which enhance manufacturing activity in North America. These developments increase opportunities for Old Dominion to manage the movement of raw materials and finished goods. The emphasis on efficient delivery to fulfillment centers aligns with the need for minimal inventory and timely, undamaged deliveries, presenting continued growth prospects for Old Dominion.

The paragraph is an exchange between Scott Group from Wolfe Research and Adam Satterfield regarding revenue assumptions and industry trends. Satterfield explains that their guidance is based on the expectation that revenue per day remains consistent with April figures, excluding Good Friday. If trends remain flat, the company anticipates second-quarter revenue of about $1.4 billion, a 5% decrease from the previous year. However, if business accelerates, revenue could reach $1.5 billion, bringing it closer to the previous year's levels. Satterfield also notes that trends in April have been consistent and plans to provide further updates in their 10-Q and at mid-quarter.

The paragraph discusses the company's strategy for pricing and revenue improvement, emphasizing a consistent approach despite rising costs and varying actions by other carriers. The focus is on maintaining strong customer relationships and adopting a cost-plus pricing model to enable investment in service centers, real estate, and technologies. The discussion highlights success in yield management initiatives and notes recent business acceleration as a positive sign. The company believes it is well-positioned to handle macroeconomic changes and increase volumes efficiently, leveraging their disciplined approach to gain an advantage when business conditions improve.

The paragraph discusses a company's goal to achieve a sub-70 operating ratio (OR) for long-term improvement, highlighting past achievements and current challenges. In 2022, the company's annual OR was 70.6%, with direct and variable costs at 53% of revenue. However, overhead costs increased to 22% of revenue from 17% in 2022. They anticipate growth and increased shipments will provide leverage to reduce overhead and variable costs, eventually lowering the OR. During a Q&A, Brandon Oglenski from Barclays questions whether strategic adjustments are needed given the prolonged low volumes and potential market shifts, despite acknowledging the specifics of the LTL (less-than-truckload) market. Adam Satterfield notes that LTL presents unique market dynamics but acknowledges opportunities for modal consolidation in a weak truckload market.

The paragraph discusses the challenges and strategies of LTL carriers, emphasizing the need to manage costs and leverage established real estate networks to meet specific shipping requirements. Despite a 15% drop in tonnage since 2021 and a positive GDP, the industry faces subdued volumes. The company has managed cost inflation well and aims to maintain a positive margin. Continuous client communication informs their investment in capital expenditures, and their market share remains stable, indicating alignment with industry trends.

The paragraph discusses a company's strategy in a slow market environment, focusing on maintaining market share, yield management, and preparing for future growth while managing their operating ratio, which is still better than their competitors. The company is committed to performing well for their customers and is optimistic about returning to growth and expanding market share. Bruce Chan from Stifel asks about pricing, renewals, and bid activities in the current weak operating environment, along with potential impacts of changes in the NFC on yields. Adam Satterfield responds, noting that bid activity often increases in weak markets.

The paragraph discusses the approach of collaborating with customers to enhance yield without solely relying on price increases. It highlights conversations focused on cost efficiency and operational savings to prevent price hikes. Despite being generally pricier than competitors, the emphasis is on demonstrating value and helping customers optimize their supply chain beyond simple cost comparisons. As changes occur, the company's familiarity with its costs and transparent pricing are key, ensuring minimal impact on customer pricing, even if classifications change. Overall, the focus remains on sustaining yield improvements while managing costs effectively.

The paragraph discusses the competitive landscape in the freight and logistics industry, focusing on UPS's interest in lower weight shipments and the company's stance on revenue neutrality amid changes. Bascome Majors asks about the industry's interest in 150 to 300-pound shipments and its competitive landscape. Adam Satterfield responds, noting that the industrial sector remains a significant part of their business, outperforming retail in the first quarter despite fluctuations in the ISM index. The 3PL (third-party logistics) environment has remained consistent, showing improvement, particularly in weight per shipment. He mentions the role of mode consolidation tools in the 3PL sector, which have facilitated some movement into truckload services.

The paragraph discusses the dynamics between less-than-truckload (LTL) and truckload shipping, emphasizing that shipments weighing between 5,000 to 10,000 pounds are better suited for LTL rather than truckload, which is usually preferred only when the market is weak. It suggests that as demand normalizes, these shipments will likely shift back to LTL. The discussion also touches on mode consolidation and the challenges of profitability with smaller shipments. Additionally, the paragraph briefly mentions changes related to UPS and TFI services, suggesting these shifts might not significantly impact the industry compared to the movements between LTL and truckload. Finally, a dialogue transition to Ken Hoexter of Bank of America Merrill Lynch is made, focusing on clarifying revenue growth rates.

In the paragraph, Adam Satterfield discusses the fluctuation in shipment weight and its impact on revenue per hundredweight. In February, the average weight per shipment was 1,476 pounds, which increased to 1,495 pounds in March, thereby boosting revenue per hundredweight. However, by April, the weight per shipment decreased to 1,470 pounds, paradoxically leading to a higher revenue per hundredweight due to mix effects. Satterfield hopes for an increase in weight per shipment to normalize revenue. He emphasizes the goal of consistent and sequential increases in revenue per hundredweight, removing mix changes, and highlights negotiations for rate increases. Despite current revenue appearing stronger due to optical effects, Satterfield is cautious about delving into detailed breakdowns of these metrics.

The paragraph discusses the uncertainty in revenue projections due to factors like Good Friday impacting daily metrics, leading to an anticipated 6% revenue decrease for April. For the full quarter, revenue is expected to be down about 5% compared to last year, though monthly fluctuations could alter this outcome. The discussion also touches on declining weight metrics, possibly due to economic pressures like tariffs, but emphasizes it's difficult to predict long-term trends due to the current uncertainty. Despite challenges, there were strong performances and finishes in February and March.

The paragraph discusses recent trends and observations in freight and revenue. Freight volumes received a boost in March, possibly due to forward-pulling, but experienced a slight drop at the beginning of April before stabilizing. Sales teams report customers' uncertainty related to tariffs, affecting investment decisions and freight volumes. Despite this, revenue per day has remained consistent. In response to a question from Chris Wetherbee of Wells Fargo, Adam Satterfield explains that April saw early softness that has since stabilized. He notes the weight per shipment is typically lower in April, estimating a sequential decline of 1.5% to 2%.

The paragraph discusses fluctuations in the average weight per shipment, which has decreased by about 0.5% to 1% and appears to be stabilizing. There has been an increase in national accounts, typically associated with higher shipment weights, yet a decrease in weight per shipment is observed. While some accounts experienced double-digit increases in weight per shipment, others saw decreases, and overall account business remained flat or slightly up. The hope was that an improving economy and increased business levels would boost weight per shipment, correlating with economic improvements like the ISM index above 50. The weight per shipment in March was just under 1,500 pounds, but the expectation is for improvements beyond seasonal variations.

The paragraph discusses the correlation between freight shipment weight and economic improvement, emphasizing the importance of achieving sustained revenue growth to enhance margins. It highlights that April started softer than expected but recovered, which is a pattern observed over recent years. Typically, shipments drop off at the beginning of the month and accelerate towards the end. In strong economic periods like 2018 and 2021, there was less drop-off early in the month with increased activity later. Some competitive challenges faced early in the year contributed to these fluctuations, and maintaining available equipment and personnel is crucial for meeting customer needs.

The paragraph discusses Old Dominion's strategy of consistently investing in infrastructure to handle increased customer demand, particularly during surges like the one experienced in March when customers needed more trailers. The company attributes its competitive edge to its ability to provide trailers when others can't and highlights its improved service metrics as a strength. However, the company acknowledges the uncertainty in the trade environment and suggests that economic improvements would help them achieve their goals. The emphasis is on the company's readiness to capitalize on opportunities when the economy strengthens, contributing to profitable growth and increasing shareholder value. Following this discussion, an operator introduces a question from Stephanie Moore of Jefferies, who asks for insights into end market performance by sector. Adam Satterfield replies that they typically do not analyze performance at that granular level.

The paragraph discusses Old Dominion's business diversification, emphasizing their strength in having a variety of top customers, including third-party logistics (3PL) companies with diverse interests. This diversification allows them to maintain stability when one market is weak. There's been better-than-average performance in the industrial sector, correlated with ISM measures. The company hopes for market clarity to encourage customer reinvestment, boosting freight opportunities and allowing Old Dominion to leverage its capacity and service, potentially regaining market share. Additionally, Richa Harnain from Deutsche Bank asks for clarification on April's performance, specifically the impact of seasonal fluctuations on the reported 6% decline, seeking insight into the company's forecast for a 5% year-over-year revenue drop for the quarter.

The paragraph discusses the state of capacity in the freight market, highlighting that industry capacity has decreased following the closure of Yellow, one of the largest companies. Despite some reallocation of properties, over a 10-year period from 2014 to 2024, the number of service centers among six major carriers has decreased by 23%. In contrast, the speaker's company has expanded, adding nearly 40 service centers and increasing its network by 15% to 20%. Shipments per day across the publicly traded companies have decreased by about 30%, while the speaker's company has increased its shipments by 30%, reflecting gained market share. Overall, there is an indication of reduced capacity in the market moving forward.

The paragraph discusses Old Dominion's continued investment in expanding their service centers and fleet capacity to avoid capacity constraints and support growth. Despite having reallocated only 60% of their facilities, they emphasize the importance of having sufficient infrastructure for processing freight in the less-than-truckload (LTL) industry. The company credits its significant growth in 2021 to having a robust network, internal training programs for drivers, and a strong company culture focused on employee care and excellence. Old Dominion plans to sustain this growth by adhering to their core values and investing consistently in infrastructure and workforce development.

The paragraph discusses the state of the LTL (Less-Than-Truckload) industry, focusing on Old Dominion's position. Old Dominion attributes its competitive edge to its company culture. While market share remains stable, industry volumes have decreased by 15% compared to 2021, highlighting a need for growth. The company anticipates surpassing previous volume levels from 2021 and 2022, as investments in their network continue and competitors reduce service centers. Old Dominion sees these circumstances as strategic advantages and tailwinds, which have allowed them to gain significant market share over the past decade or more.

The paragraph discusses the company's focus on service and adding value to customer supply chains, which has been critical to their market success and growth over the past 15 years. They emphasize the importance of not just having capacity and equipment but also being able to provide service and value to win market share. Kevin Freeman notes that their market share fluctuates between 12.5% and a little over 13%, partly due to shifts between freight sectors. He suggests that during tighter capacity periods, freight might return to the less-than-truckload (LTL) industry from full truckload carriers. Following this, Jason Seidl from TD Cowen asks about the financial impacts of current strategies, specifically regarding pull forwards and year-over-year capital expenditure on equipment, to which Adam Satterfield is expected to respond.

The paragraph features a conversation about recent business performance and capital expenditures. It begins with a discussion on the sequential acceleration in tons growth, particularly in March, noting it could be attributed to macroeconomic factors and timing, although no scientific explanation is provided. Jason Seidl asks about the strength of consumer versus industrial activity, to which Adam Satterfield responds that industrial activity was stronger. The discussion then shifts to capital expenditures, with Satterfield noting a reduction in planned spending from $750 million last year to $450 million this year, marking a significant decrease from historical spending levels. The conversation concludes with a query about how much of the reduced budget is allocated for equipment, though this question goes unanswered in the provided text.

The paragraph outlines financial allocations for a $450 million budget, with $210 million designated for real estate, $190 million for equipment (down from a previous $225 million) primarily focusing on power equipment, and $50 million for IT and other assets. The question-and-answer session concludes, and participants are thanked and invited to follow up with further inquiries. The conference ends with an invitation to disconnect.

This summary was generated with AI and may contain some inaccuracies.