Old Dominion Freight Line Q3 2026 Earnings Call - Revenue Surges 13% as Yield Strength Offsets Macro Stagnation

Dave, Conference Operator: Good day, and welcome to the Old Dominion Freight Line third quarter 2026 earnings conference call. All participants will be in 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 telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Finance and Investor Relations. Please go ahead.

Jack Atkins, Director of Finance and Investor Relations, Old Dominion Freight Line: Thank you, Dave. Good morning, everyone, and welcome to the third quarter 2026 conference call for Old Dominion Freight Line. Today’s call is being recorded and will be available for replay beginning today through November 4, 2026 by dialing 1-855-669-9658, access code 1955363. The replay of the webcast may also be accessed for 30 days at the company’s website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion’s expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion’s filings with the Securities and Exchange Commission and in this morning’s news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. As a final note, before we begin, we welcome your questions today, but ask that you limit yourself to just one question at a time before returning to the queue. At this time for opening remarks, I would like to turn the conference over to our President and Chief Executive Officer, Marty Freeman. Marty, please go ahead.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Good morning, everyone, 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 produced strong financial results in the third quarter that include a 13.1% increase in revenue and a 28.9% increase in earnings per diluted share. In addition, our operating ratio improved by 280 basis points to a 71.5%. While the underlying macroeconomic environment remained stable, demand for our service continued to improve during the quarter, and our LTL tons per day increased on a year-over-year basis in September. The strength of our third quarter results is due to hard work and dedication of our OD family of employees who continue to execute on the fundamental aspects of our long-term strategic plan.

I want to thank our outstanding team for their dedication and commitment to our customers and our company. Our ongoing focus on providing our customers with superior service at a fair price is the cornerstone of our long-term strategic plan. Our ability to consistently deliver the highest standard of service through the ups and downs of the economic cycle has created an unmatched value proposition in our industry, and this is something that we take tremendous pride in. As a result, in the third quarter, we were pleased to once again provide our customers with on-time service of 99% and a cargo claims ratio of 0.1%. That said, we also know that there is much more to providing best-in-class service to our customers than simply picking up and delivering freight on time and without damages.

During its annual survey of shippers and logistic professionals, Mastio & Company measures 28 different service and value-oriented attributes. We were honored earlier this month to be named the number one national LTL provider for the 17th consecutive year. In addition, we finished first in 24 of the 28 categories that Mastio evaluates, and we increased our already sizable advantage against our competition. Our teams remain highly motivated to continue delivering superior customer service every single day. We know that the strength and consistency of our service drives value for our customers and differentiates us from our competitors. It also supports our long-term pricing initiatives. Our disciplined approach to yield management, which focuses on individual account level profitability, is designed to offset our cost inflation over the long term, while also supporting our ability to make strategic investments back into our business.

Our ability to take a long-term approach to the investments in our network, our people, and our technology provides us with significant flexibility to respond quickly to changes in the operating environment. This flexibility allows us to support our customers with the capacity that they require while also continuing to effectively manage our cost. As a result, we once again generated strong operating leverage on our incremental revenue this quarter. We produced strong third quarter results by remaining focused on executing our long-term strategic plan. Due to our disciplined execution and consistent investment, we have all the necessary elements of capacity in place to effectively handle incremental volume opportunities while also continuing to operate efficiently. In addition, our business model contains significant operating leverage, which will allow us to further improve our profits as we regain density in our network.

As a result, we continue to believe that we are uniquely positioned within our industry to win market share, generate profitable revenue growth, and increase shareholder value over the long term. Thank you for joining us this morning, and now I will turn it over to Adam Satterfield to discuss our third quarter in greater detail.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Thank you, Marty, and good morning. Old Dominion’s revenue increased 13.1% to $1.59 billion for the third quarter of 2026, while our operating ratio improved to 71.5%. The combination of these factors resulted in a 28.9% increase in our earnings per diluted share to $1.65. The improvement in our revenue for the quarter was primarily due to a 13.3% increase in LTL revenue per hundredweight. While our LTL tons per day decreased 0.1% for the third quarter, we were pleased with the continued improvement in demand for our service that contributed to a 1.6% year-over-year increase in our LTL tons per day for the month of September. On a sequential basis, our revenue per day for the third quarter increased 2.4% when compared to the second quarter of 2026, with LTL tons per day increasing 1.2% and LTL shipments per day increasing 2.4%.

For comparison, the 10-year average sequential change for these metrics includes an increase of 2.4% in revenue per day, a decrease of 0.2% in LTL tons per day, and an increase of 1.2% in LTL shipments per day. The monthly sequential changes in LTL tons per day during the third quarter were as follows. July decreased 0.5% as compared to June. August decreased 1.6% as compared to July. September increased 3.9% as compared to August. The comparative 10-year average change for these respective months is a decrease of 3.0% in July, flat in August, and an increase of 3.1% in September. While there are still a few workdays remaining in October, our month-to-date revenue per day has increased by approximately 22% when compared to October 2025. This includes an increase in our LTL revenue per hundredweight, as well as an increase in our LTL tons per day of 1.6%.

Based on these results, I currently anticipate revenue of $1.54 billion-$1.58 billion for the fourth quarter, which would be above our normal seasonality. As usual, we will provide the actual revenue-related details for October in our third quarter Form 10-Q. Our operating ratio improved 280 basis points to 71.5% for the third quarter of 2026, with improvements in both our direct operating costs and our overhead expenses as a percent of revenue. Within our direct operating costs, improvement in our salaries, wages, and benefits as a percent of revenue more than offset an increase in our operating supplies and expenses. Our team has continued to leverage the quality of our revenue growth while also operating very efficiently to support this improvement.

The increase in our operating supplies and expenses as a percent of revenue was primarily due to the increase in the cost of diesel fuel and other petroleum-based products. The improvement in our overhead costs as a percent of revenue was primarily due to the overall decrease in our depreciation expense that is attributable to the decrease in the size of our fleet as compared to last year. With that said, we are confident that we continue to have plenty of service center and equipment capacity to accommodate additional growth opportunities. The improvement in our overhead costs also reflects the leverage gained from our revenue growth, as well as a continued focus on controlling our discretionary spending.

Old Dominion’s cash flow from operations totaled $469.5 million for the third quarter and $1.1 billion for the first nine months of 2026, respectively, while capital expenditures were $67.1 million and $206.7 million for those same periods. We utilized $160.9 million and $400.6 million of cash for our share repurchase program during the third quarter and the first nine months of 2026, respectively, while our cash dividends totaled $60.0 million and $180.7 million for those same periods. Our effective tax rate for the third quarter of 2026 was 24.5% as compared to 24.8% in the third quarter of 2025. We currently expect our effective tax rate to be 24.8% for the fourth quarter of 2026. This concludes our prepared remarks this morning. Operator, we’ll be happy to open the floor for questions at this time.

Dave, Conference Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Our first question comes from Chris Wetherbee with Wells Fargo. Please go ahead.

Chris Wetherbee, Analyst, Wells Fargo: Yeah. Hey, thanks, and good morning, guys. I guess maybe we could start off with some thoughts around the maybe operating ratio progression as we think about the fourth quarter in the context of what sounds like is maybe a little bit better than normal seasonality from a revenue standpoint for the fourth quarter. Can maybe just help us sort of bridge that gap.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah, sure. So normally the operating ratio, we have a sequential increase of about 200 to 250 basis points. At least that’s the 10-year average change. That excludes any impact from the annual actuarial analysis that we conduct in the fourth quarter of each year. Always look at that as just a reconciling item to whatever we give for our guidance there. Based on what we’ve seen in October so far, I’m anticipating a few cost headwinds. But I still think that the low end of that normal range is appropriate for a target if our revenue trends continue to hold steady and we continue to outperform seasonality there from a top-line standpoint. So, that would put us at around a 73.5 for the quarter overall. But I would add a plus or minus 20 basis points to maybe give us a little flexibility.

Above seasonality top line and kind of at the low end of our seasonality from an operating ratio standpoint or maybe even slightly better.

Chris Wetherbee, Analyst, Wells Fargo: Okay. That is helpful. I appreciate it. Thank you.

Dave, Conference Operator: The next question comes from Scott Group with Wolfe Research. Please go ahead.

Scott Group, Analyst, Wolfe Research: Hey, thanks. Adam, can you give us a little bit more color on some of the revenue trends? We got tonnage. Can you help us maybe break down the yield trend in October with fuel, without fuel and just the Sounds like revenue is better than normal seasonality. Just give us how is tonnage trending relative to normal as well, if you can.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. Like I said, the tons are up at least month to date, 1.6%. That would imply that the revenue per hundredweight with fuel is right around 20%, without fuel is between 5.5%-6%. Some of that is, it’s still very strong. It’s a little bit below where we were in August, but I think that just slightly. What we’ve seen is a further acceleration in our weight per shipment. To keep that revenue per hundredweight ex fuel pretty steady there, I think shows the continued strength of our pricing philosophy and what we’ve been able to achieve. It also does reflect our general rate increase went into effect at the 1st of October this year versus the 1st of November last year. Continuation of good trends.

Like we said, demand continues to remain stable, and we’ll look for continued revenue growth and the quality revenue growth in the fourth quarter as a result.

Scott Group, Analyst, Wolfe Research: Okay. Thank you.

Dave, Conference Operator: The next question comes from Tom Wadewitz with UBS. Please go ahead.

Tom Wadewitz, Analyst, UBS: Yeah, good morning. Wanted to get your thoughts on comp and benefits expense. I want to see you talk about, Adam, maybe group life and some, I guess, fringe type of pressures, but what did that look like in Q3? And is there an element that is incentive comp or just what are the big pieces that are driving that up? Then how do you look at that kind of Q4 or go forward? Thank you.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. If you just look at the total compensation, salaries, wages, and benefits on a per employee basis, we continue to see that up on a year-over-year basis. The majority of that is related to the increase that we continue to see in our fringe benefit cost. We also have increased performance-based compensation. Obviously, we gave a wage increase that was between 3%-3.5%, and then just our people are working more hours. If you look overall, our average headcount in the third quarter was down 4%, comparing favorably to the 2% decrease in shipments per day. All those factors kind of contribute, but a lot of that increase in the per employee cost is really coming from the fringe benefits.

That was something that we talked about at the end of the second quarter call that we anticipated that that would be further pressure on our cost in the third quarter. They were. They came in actually a little bit higher than what I’d originally anticipated. We generally talk about that fringe benefit as a percent of our salaries and wages. That came in in the third quarter at 42.8%. Third quarter last year was 39.7%. That’s about a full operating point headwind just based on those costs and based on it’s mainly been driven by our health and dental costs, and that’s just something that I think overall, not just us, but the entire medical inflation has been pretty significant the last couple of years.

Based on what I’m seeing in October, we’d expect that that’s going to be potentially a headwind in the fourth quarter as well. But that’s based in or baked into the operating ratio guidance that we gave.

Tom Wadewitz, Analyst, UBS: Okay. But you think the type of pressure you’re seeing, I guess obviously wage is going to be impact, but the magnitude of pressure from fringe and from incentive comp, that’s probably similar in Q4 to what you saw Q3.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: I think so. I think that that’s something that I don’t really see changing much, and especially with respect to the fringe cost. But obviously we continue to manage all of our costs really. But I think looking at the sequential change from Q3 to Q4, a lot of that normal 200 to 250 basis point progression is in salaries, wages, and benefits, and then op supplies and expenses. You may see a little bit of a variance. We’ve obviously got, it looks like based on October, some fuel cost pressure. So you might see that those two line items combined, I expect them to trend about an average, but probably what normally is more of an increase in salaries, wages, and benefits as a percent of revenue, you’re probably going to see that more of an increase in our op supplies and expenses and just the reverse.

The salaries, wages, benefits as a percent of revenue will probably outperform on a similar basis relative to what our 10-year average change would be. That’s all as a percent of revenue.

Tom Wadewitz, Analyst, UBS: Right. Okay, great. Thank you.

Dave, Conference Operator: The next question comes from Jason Seidl with TD Cowen. Please go ahead.

Jason Seidl, Analyst, TD Cowen: Hey, thanks operator. Gentlemen, good morning. Adam, I just want a clarification question and then a question about drivers. You said you have basically plenty of capacity at your service centers. Can you put a number around the excess capacity to sort of give us a feel for the progression? Then two, when you look at the driver market, it’s clear that at least on the truckload side of things, it’s been tightening and tightening for terms of qualified drivers. Now, I know there’s not always a direct overlap, but there’s always an indirect impact on LTL drivers, especially as we think about wages going forward into 2027 and beyond. Maybe you could talk to expectations there.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. Well, first, the spare capacity number that we generally talk about is really just on the real estate side. That number continues to be north of 35%. So we’re in great shape when it comes to real estate capacity. We’re in great shape when it comes to equipment capacity as well. We’ve trimmed the fleet back a little bit, as mentioned earlier, and that’s helped us from an overall depreciation standpoint. The depreciation dollars were down actually on an absolute basis in the third quarter versus third quarter of last year. But we continue to have plenty of power and trailing equipment capacity. From a people capacity standpoint, I think we’re in great shape there as well. Our headcount’s been pretty flat all year, somewhere a little over 20,000 full-time employees.

If you think about where we are from a volume standpoint in the third quarter versus where we were in the first quarter, we’ve been able to keep our headcount steady, and our volumes are up 5%, 6%, if you compare just those two quarterly periods. So we’ve been kind of holding steady all year there. But that’s intentional, and that’s always part of our strategy is we try to keep our people employed and keep as many drivers as we can to make sure when we come out on the other side, we’ve got plenty of capacity there. So hours worked had been trending back a little bit on average, and now you’re starting to see some of those step up. Like I mentioned earlier, that’s why the average wage per employee is up a little bit as we’re just seeing more hours worked on average.

We’ve got plenty of capacity to be able to step up. We’ve got drivers in some cases that are trained to have their CDL, that they’re working on the platform, and we can put them right back in a truck when dictated. We continue to take advantage of our truck driving schools. We produce the majority of our own drivers internally. We train them internally. That’s a big benefit for us. When demand dictates, we can always go to the market. Where we’ve needed to hire, you may have some spotty issues here and there, but overall, given the culture that we have and the quality of wage, generally paying a wage at the top of the industry, we’ve not had any major issues attracting employees when drivers, when we’ve needed them.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Jason, also keep in mind that LTL versus truckload, our turnover ratio is less than 8%.

Jason Seidl, Analyst, TD Cowen: Way lower.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Full truckload, it’s probably in your high 90s to 100% turnover. We’re not having any issues hiring drivers when we need them.

Jason Seidl, Analyst, TD Cowen: That is good to hear. Adam, just to follow up on your comments there about the fleet. If we just have normalized growth into 2027, should we expect an increase in CapEx as we move throughout 2027 for purchases?

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Well, we have not finalized that at this point yet. In a few weeks, we will be going through our annual strategic planning process to really fine-tune what our plan for next year will be. I would anticipate, just like we saw this year, that our total CapEx will likely be lower than the 10%-15% of revenue spend that we typically see, just based on the size of the fleet that we can grow into. Of course, we have a normal replacement cycle that we go through every year. Then we will continue to have and evaluate real estate opportunities that is on the scale that we look at what our growth potential look like, not just next year, but what does our market share look like over the next 10 years.

We have been the biggest market share winner over the past 10 years, and I am confident that we will be the biggest market share winner over the next 10. So it is always about where are the right places to add real estate capacity along that spectrum of growth that we would anticipate seeing. When does it make sense to add it? When do you get the opportunity in some high-demand markets? Evaluating all those things that will go into the real estate strategy when we think about 2027.

Jason Seidl, Analyst, TD Cowen: Gentlemen, that is great color. Appreciate it, and nice job on the quarter.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Thanks, Joe.

Dave, Conference Operator: The next question comes from Jordan Alliger with Goldman Sachs. Please go ahead.

Jordan Alliger, Analyst, Goldman Sachs: Yeah. Hi, morning. I just wanted to come back. I know I think you mentioned demand seems fairly stable. It reflected positive, which is certainly good news. Maybe share some thoughts on the overall tenor of demand, other than maybe comping against easy comps. Is weight per shipment still being positive a couple percent for a few quarters? Are we indicative of that maybe a true firmer market is upon us? Thanks.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. The weight per shipment, that’s continued to be positive. I don’t know if I gave the number, but in October, the weight per shipment is up about 3% compared to October of last year. So we continue to see that flexing up, and that generally is a positive indicator for demand. I think that just based on customer conversations that we’ve had throughout the year, but even recently, we just continue to see stable demand trends and feel like that potential is there. Obviously, there’s a lot going on in the world and with the broad economy that our customers are managing through when they think about inventory trends and whatnot. But that’s something that we just continue to stay in front of.

We feel like we’re seeing some good market share opportunities as we go through bids and seeing some wins, seeing customers asking about multi-year contracts, things that when you read the tea leaves are more indicative of an improving demand environment. Obviously, we continue to see the industrial economy with positive ISM through the year. It’s been in low to mid-50s, but it’s been in expansion territory, so that’s been good. Other macro figures that continue to be positive, but just balancing those with customer conversations. We’ve been above seasonality when you think broadly about it all year, and certainly we’ve seen some months that have, when you look more granular, some months have been above seasonality, some months below.

October tonnage is below what the normal seasonality is, but I fully expect, just based on the broader trend, that we’ll continue to see that up, down, up, down trend that we’ve seen throughout the year and think that as we go through November and December, that we can see that trend being above seasonality.

Jordan Alliger, Analyst, Goldman Sachs: Thank you.

Dave, Conference Operator: The next question comes from Brian Ossenbeck with JPMorgan. Please go ahead.

Brian Ossenbeck, Analyst, JPMorgan: Hey, good morning. Thanks for taking the question. This is kind of a two-parter here. I wanted to hear a little bit more about the GRI stick rate. Obviously, another great year in Mastio with high value for high service. I wanted to see how that’s being accepted, I guess, in the current market. Are you seeing any benefit from truckload spillover? Obviously, rates have been up for a while now, so I would expect that there’s something in there that you might be seeing at this point. Then just to maybe to wrap it all up, just a broader commentary on density in the network, how to think about incremental margins as we start to see hopefully a more continued rate of volume and tonnage and shipment improvement. Thank you.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. There was a lot in there to try to unpack, but maybe I’ll leave the last one for someone else. I would say from a GRI standpoint, we have a pretty simple philosophy of being cost-based. When you think back over time, we generally target getting around a 5% increase, and our GRI has been 4.9%. That’s been pretty consistent year in and year out for about as long as I can remember. I think when you’ve got a simple strategy like that, it’s pretty effective to be able to go in and sit across the table and ask for an increase to help offset the cost inflation that we’re seeing in our business. Frankly, in the third quarter at least, cost inflation, when you look on a per shipment basis, has been trending higher than what we anticipated.

We thought core inflation would be 5%-5.5% this year, and we’ve seen that trending a bit higher. That’s been steady, and I think that supports when you look at our overall revenue for 100 weight, excluding fuel, and the full quarter was at 5.1%. Revenue per shipment, which is really how I think about revenue per shipment and cost per shipment, it’s been trending higher. Some of that reflects the fact that we’re seeing higher weight per shipment. Our length of haul was a little bit higher in the third quarter as well. All of those are favorable and lead ultimately to long-term operating ratio improvement. So those have been good trends to continue to see, and we’d expect to see that same type of consistency as we move forward.

Brian Ossenbeck, Analyst, JPMorgan: Thank you.

Dave, Conference Operator: The next question comes from Eric Morgan with Barclays. Please go ahead.

Eric Morgan, Analyst, Barclays: Hey, good morning. Thanks for taking the question. I guess I will just ask one on fuel. I was curious if there was a lag impact in the third quarter that maybe you could quantify. I do not know if that presents a tailwind sequentially in 4Q. I think the surcharge as a percent of base revenue moved down a little from 2Q, even though I think diesel prices were higher. Just curious how to think about any catch-up in 4Q and if that is baked into the margin guidance.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. Our surcharge program resets every week, so there is always a little bit of a lag effect there, if you will. Certainly that is baked into the guidance that we gave for the fourth quarter, both from a revenue standpoint and a margin standpoint. It looks like it continues to be a Fuel prices continue to be elevated. I think that is something that we need to see come down, and that is what we are hoping for. At some point, we have got to have some resolution on this to help the broad economy. I think that the way we talk about the surcharge is most of our large contractual customers, they give us the fuel scale that we have to build our rates around. The surcharge just becomes a variable component of pricing.

In a perfect world, whether it goes up or it goes down, we have got the same type of profit contribution regardless. I know there is some broad concern about the fuel, and I have given some of these examples before, but for example, from the fourth quarter of 2025 to the first quarter of this year, fuel sequentially went up 10%. Our bill count, our shipments per day, those were consistent between those two quarterly periods, and our profitability was consistent. So it worked in that regard. But I think there is some broad concern that I have read out there about when fuel eventually unwinds. I guess I would point people back to 2015. That is at least in the past 15 years, the last period where we had the biggest change in fuel price per gallon that year was down 29%. We had good tonnage growth that year.

We still produced about 6.5% revenue growth, and our earnings per share were up 15% that year. I think those are a couple of broader examples where the variability in fuel, if we’ve done our job appropriately in terms of how we’ve priced out and built our base rates, we can see that come down and be just fine from an overall profitability standpoint.

Eric Morgan, Analyst, Barclays: Thank you.

Dave, Conference Operator: The next question comes from Jonathan Chappell with Evercore ISI. Please go ahead.

Jonathan Chappell, Analyst, Evercore ISI: Hey, thank you. Adam, just want to go back on something you noted earlier. I know we’ve talked about salaries, wages, and benefits. I know you talked about operating supplies. We’ve even spoken about fuel. But if revenue is going to come in above normal seasonality, yield ex fuel up 5.5%-6%, which is a great number. Like you said, only maybe a smidge worse than August, but otherwise really strong. Why would the OR still be at the low end of the range? You’d mentioned a few cost headwinds you’re expecting in Q4. Is that just fuel, which conceivably should be offset with the fuel surcharge mechanism, or is there something else that’s kind of timing or more just kind of inflationary pressure where the OR shouldn’t also be following the revenue down a path of better than normal seasonality?

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah, I mean, look, we’d love for it to come in better than seasonality. That is one thing. I mean, obviously, we’re going to have overall inflation that we’ll continue to see from fuel prices being higher. Some of that comes through in other things that you don’t just think about. We’ve seen increased prices in practically anything that’s petroleum-based. There are some other costs that are revenue driven more than anything that could be in G&A or miscellaneous expenses and so forth, that will also continue to be elevated because of the overall revenue level. Look, we’re going to continue to work hard and produce the best operating ratio and profits that we can. I think that we’re looking at, with the implied guidance that we gave, incremental margins in about the 45% range.

We think about where our cost structure is. Our cost structure from an overall standpoint, if I look at the third quarter, our direct variable costs were about 51%. You go back to the third quarter of 2022, they were about 52.5% then. We’re about 150 basis points better from a direct variable cost standpoint than we were at a period where we had our best operating ratio ever at a 69.1. We’ve got tremendous leverage that we’ll continue to take advantage of from an overhead cost standpoint as we continue to grow our revenues. We’ve got continued opportunity from a direct variable cost standpoint as well when you think broadly. Just going quarter to quarter, typically, there’s 10-year averages for a reason.

It’s the average type of change, and we’ll see where the weight ultimately lands and the overall revenue and so forth, and how we continue to manage all of those direct costs as a percent of revenue. I can tell you, we’re working hard every day to manage every element of cost that we can to produce the best operating ratio that we can.

Jonathan Chappell, Analyst, Evercore ISI: Thanks, Adam.

Dave, Conference Operator: The next question comes from Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi Shanker, Analyst, Morgan Stanley: Great. Thanks, morning everyone. I just wanted to follow up on your commentary on the fleet and the excess door capacity. It is a little bit contradictory to reduce the size of your fleet when you are sitting on 35% excess doors here, especially when ISM is running in the mid-50s, which most people would say is like a decent, if not gangbusters type environment. Can you just help unpack that and distill the message on what you think happens to demand over the next two or three quarters? Because, if you have that much excess capacity and things are getting better, I am surprised that you are reducing the size of your fleet.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Well, just going back to each of the elements of capacity, if you think about where we are from a shipments per day standpoint, the amount of door capacity that we have, I think we are in really great shape there. I mentioned we have north of 35%. So we can grow into the network that we have from a service center and a door capacity standpoint. That is not to say, and like I mentioned earlier, we are continuing to look at where we are and where we think we can get to when you look over the next five or 10 years and look through the current cycle. Just continue to think big picture where our industry is and where we are within it.

Just looking broadly at the number of tractors that we have, we did not have a major decrease in the size of our fleet, but we have continued to spend pretty aggressively over the last three years that we have been in this freight recession and had built our fleet size up quite a bit, and we have just been selectively reducing it. That is one of the things you do not want to be short-sighted and try to match exactly your tractor count and your trailing equipment count on a pure per shipment handled basis or per service center kind of metric because you could end up over-reducing your fleet and then having to come right back in and purchase even more equipment. Every year we go through the cost of new power equipment, in particular, continues to accelerate pretty aggressively.

We’re not doing anything other than just strategically trimming around the edges, if you will, but making sure that we’ve got plenty of power equipment and trailing equipment in place to accommodate the needs of our customers. We’re not concerned in any way about overdoing it as we manage the fleet and manage the related expenses. Having an extra piece of power equipment is expensive to maintain. You’ve got maintenance on it, you’ve got taxes, efficiencies and so forth and so that’s something that we’re pretty strategic about.

Ravi Shanker, Analyst, Morgan Stanley: Very helpful. Thanks, Adam.

Dave, Conference Operator: The next question comes from Richa Harnain with Deutsche Bank. Please go ahead.

Richa Harnain, Analyst, Deutsche Bank: Hey, gentlemen. Thanks for the time. I wanted to go back on the October tons being up 1.6%. I don’t think it was said, but it was up from a monthly sequential perspective, and if it did underperform, it seems like it might have. What do you think is the likely rationale? I know September was a solid month relative to normal seasonality. I guess, what’s it going to take, do you think, to get us out of this sort of uneven recovery we’ve had so far year-to-date despite ISM manufacturing continuing to be solidly over 50?

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Well, I think that for us, the September change in tons per day was up 3.9%. The 10-year average is 3.1%. In October, the 10-year average is down about 3.5%. Right now we’re trending down about a little over between 5% and 5.5%. What I mentioned earlier in a previous question is month-over-month, we’ve had one month where we’ve outperformed and then the next month that we’ve underperformed. Broadly speaking, if you look for the quarters and even if you just go back to the first of the year, we’ve been exceeding overall seasonality all year. That’s something that I think demonstrates the success within our industrial book of business. Industrial is 55% to 60% of our revenue, so we’ve had good performance there.

We continue to have really strong performance with our retail-related customers as well, and that’s something that our retail has probably outperformed the company average. Some of that reflects some pretty unique market share gains that we’ve had. We’ve had some really significant growth with a few really large accounts as they’ve given us an increased share of their wallet spend on LTL. I think it’s a multitude of factors, and while it’s not come in completely in alignment with what the 10-year average change by month is, broadly speaking, we just continue to see things as positive and try not to get too hung up on what one month relative to the 10-year would be.

The same type of thing happened in April, where we started out about 200 basis points under what seasonality for the month was, and we basically brought the full quarter back to what normal seasonality would be for tons. I think like I mentioned in a previous response is, we continue to get good feedback from customers. We’re seeing success in bids that we’re participating in. We also hear some feedback as well that there continues to be some broad concerns about inflation and the consumer that’s probably holding some things back from just completely taking off like I think they could be.

That’s why we say we continue to think that there’s got to be some improvement in the overall fuel environment to take some of that concern that some shippers have about the consumer away and to where we can really see things take off and have gangbusters type of growth.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: All right. Thank you.

Dave, Conference Operator: The next question comes from Bascome Majors with Stephens Inc. Please go ahead.

Bascome Majors, Analyst, Stephens Inc.: Adam, you talked earlier about seeing some good results in some of your bids. I think you even mentioned multi-year contracts, which I don’t think we’ve heard much about in LTL before. Can you go into that a little more and maybe as part of that, the decision to add to net headcount sequentially after really managing the super seasonality with hours in the first half of the year. How much of that is protecting service in the network today, and how much of that is getting ahead of growth tomorrow? Thank you.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: From a headcount standpoint, really it’s been pretty steady all year. From go back to January through September, you’ll have some months that our full-time headcount can be up or down slightly. But it’s been pretty steady as she goes all year. Some of that, though, could reflect, we’ve got some service centers that are seeing really strong growth. You’ve got to add in some places, and then you’ve always just got to balance the number of hours that are being worked on average for your people in one particular location and knowing and understanding what opportunities that are there at any one of our 261 service centers and to make sure that you’ve got the appropriate number of people to not only accommodate managing what we have today, but what we think may be coming to us tomorrow.

Now, with all that said, I think where our headcount is, I don’t really see any type of material change as we go through the fourth quarter. Seasonally, fourth quarter and 1Q is a little bit slower. I’d expect that we’ll see consistency with our team and no major change there, unless we see a major change coming from an overall demand standpoint. I think we can accommodate what we would see from now through early spring and easily handle that with the number of people that we have in place across the U.S.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Bascom, multi-year contracts have been around for a long time. I think some of your larger customers that we see come in here for negotiations are seeing the future bright, so they want to go ahead and negotiate their rates up front so that when there is an inflection in the economy, you don’t take a 4% rate increase this year and a 10% next year. So they want to negotiate that now, foreseeing that that could happen, the inflection in the economy. It’s really nothing new. It’s been around for a while.

Bascome Majors, Analyst, Stephens Inc.: Just the terms of that typical contract, do they specify pricing and not volume? Is there some flexibility on both? Can you just give us a sense of what you’re committing to and what the customer’s committing to when you do sign up for 2, 3 years at a time?

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Yeah. It’s prevalent for a 2-year contract. Not really beyond that. We don’t like to negotiate beyond a 2 year. It’s basically based on base rate increases, and not really volume increases.

Bascome Majors, Analyst, Stephens Inc.: Thank you, Marty.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Just the contracted terms, Bascom.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Yeah.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: There’s no volume commitments in there, but obviously it’s built around understanding what lanes we’d be awarded and whatnot. But that’s just another indicator point, like Marty said, that another point of positivity, if you want to call it, that people are trying to get ahead of some things that they foresee changing in the space overall and perhaps with competitor behavior and so forth. Thank you.

Dave, Conference Operator: The next question comes from Ari Rosa with Citigroup. Please go ahead.

Ari Rosa, Analyst, Citigroup: Hey, good morning. I wanted to continue on Bascom’s line of questioning, just on this subject of somewhat more constructive customer conversations. I was hoping you could speak to what might have changed in the environment that’s driving that. As we think about taking a step back, volumes have been under pressure now for several years at least. How should we think about the opportunity to get back to growth, get back to that trajectory that we’re used to seeing from OD of taking share. Adam, I think you spoke about a lot of confidence on continuing to win share over a 10-year period, but as we think about the next 1 to 2 years, how should we think about the opportunity to do that in a meaningful way, and what would drive that beyond just a macro inflection. Thanks.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Well, at the end of the day, service is what wins share in our industry, and as indicated by the most recent Mastio analysis, it’s our 17th straight year of winning that award, being the number one national LTL carrier, and the gap is bigger than it’s ever been. I think that’s some of the feedback that we’ve heard this year is that some competitors increasingly have had some service issues. That’s something that I think continues to play in our favor. We’ve got a stronger value proposition than anyone in the space. I think that’s ultimately why we’re confident that we’ll continue to win more market share than anyone. The other piece of that, though, is having capacity.

While capacity is not really been at the forefront of many shippers’ minds perhaps the last couple of years that overall demand has been lackluster, that is something that we’re hearing come into play a little more, especially when it comes to equipment and driver availability. By trying to keep cost as low as they possibly can, I think that’s leading to some competitors that are struggling to make consistent pickups. When customers need to make sure their freight’s picked up and delivered when promised, they know who they can call on for that. Those are the factors that I think will continue to support our ability to win more market share than anyone else. I don’t really foresee that capacity piece when we look at some capacity metrics of shipments per day per service center.

There’s a lot of similarity for where some of our competitors are at the end of 2025, similar to where they were in 2022. We continue to see a capacity-constrained industry, but an industry overall that’s got favorable tailwinds for it. Sitting as the carrier that’s got better service and a tremendous amount of capacity, those are the main factors that support why we believe we’ll be the biggest market share winner over the next 10 years.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Ari, as we said earlier, we’re also seeing an increase in our weight per shipment, and that basically means that customers are putting more widgets on a pallet. We think some of that’s coming from the full truckload industry that’s having capacity constraints at the moment. I think that’s where some of that’s coming from as well.

Ari Rosa, Analyst, Citigroup: Very helpful. Thank you.

Dave, Conference Operator: The next question comes from Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore, Analyst, Jefferies: Great. Good morning. Thank you so much. Maybe if I think about just long term, your strategy as it relates to the 3PL channel, I just think given the capacity you have in the network today, is there an opportunity to maybe be a bit more flexible in using 3PLs? I would love just to get some updated thoughts there. Thank you.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Stephanie, if you are talking about dynamic or transactional type pricing, the answer to that is no. 95% of what we do with 3PLs is basically contract a business per customer so we can look at their handling characteristics and so forth. But yeah, as I said earlier on earlier calls, we have 3PLs in here every week. So far this week, we have had two large ones, and they are in here discussing long-term contractual business, which we like better. It operates better for us as well.

Stephanie Moore, Analyst, Jefferies: Okay. Understood. Thank you so much.

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

Ken Hoexter, Analyst, Bank of America: Hey, great. Good morning. Adam, just to follow up on your last answer to Ari, you gave a balanced econ view, yet you are guiding unseasonable revenue jump, and improving weight per shipment as Marty just mentioned. But hearing that regional capacity pressures, is that popping up as for why the unseasonable revenue jump? Then you mentioned data centers as a driver. Obviously, we hear about that as for ISM. What participation does the sector, the LTL sector play, in terms of data centers? Or is there not much, and given that is really been a big driver, that is why you are not seeing much of the growth flow down to the sector?

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Yeah. Well, a couple things. All year we’ve seen, as we’ve talked about, our volumes be above seasonality, so we want to see continued strong Volume performance as we go through Q4 and October benefits a little bit, that 22% revenue growth that we’re seeing benefits a little bit by having the GRI in there one month earlier than last year. I think just overall reflects the consistency and strength that we’ve continued to see with our pricing this year and continuing to win business. So all of that goes into the revenue guide being above seasonal and from an overall data center and AI infrastructure build-out. It’s hard to put a number on it, but the size and scale of many of those facilities, I think a lot of that freight is maybe ending up on flatbeds and some other sectors.

But a lot of that freight is very high value and it’s something that we can serve and, in some cases, we are serving and being able to handle. Based on the quality of our service and these very high-value goods, that’s something where shippers can trust that we’ll deliver that freight, get it in there. I think a lot of that is very time sensitive as well, not just the security based on the value of the product. That is some incremental opportunity, I think, for us in particular.

Ken Hoexter, Analyst, Bank of America: Thanks.

Dave, Conference Operator: The next question comes from David Vernon with Bernstein. Please go ahead.

David Vernon, Analyst, Bernstein: Hey, good morning, guys. Long time listener, first time caller. I appreciate you taking the question here. As you think about the capacity for the industry in itself, you mentioned earlier, some competitors having trouble making pickups, maybe some volume bleeding in, share take opportunities, things like that. If you just step back and think about the constraints the industry might have dealing with more volume if and when it shows up, does it come down to drivers? Does it come down to dock labor? Does it come down to real estate? Where do you think the real advantage you have in terms of being able to spool up the network is relative to the rest of the LTL industry?

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Really, it is all of the above. I think that service center capacity generally for the industry is tight. It was before Yellow closed their doors in 2023, and I think it remains tight to this day. When you think about the number of service centers that have left the market overall and the overall volume environment, net-net has been down since 2022. But I think that when looking at the allocation of a real estate capacity, I do not see that that would be something that is going to materially change from now going forward. Because I do not know that adding new service centers is incredibly expensive, and we have got returns on invested capital of 25%-30%. So we have done our due diligence from a capital allocation standpoint, where we have added capacity and making sure that we get an appropriate return.

I think the lack of return for some of the other carriers in the industry was probably part of the reason why practically every other carrier had shrunk their service center network overall, in the 10 years leading up to that event in 2023. So I think that will be something that will continue to be more of a longer term advantage for us. But I think the other challenge in the short run is generally more confined by labor capacity. And we are fortunate that we are operating where we are, that we can maintain excess labor capacity, as we discussed earlier. But I think that for some of our competitors, at least the publicly traded competitor group on average, operated in the second quarter at about a 90.

If you are operating at a 90, even with tonnage growth, probably got some other issues, and you are probably trying to manage cost in a little different way. And most carriers, or at least for us, 65% of our total costs are salaries, wages, and benefits. So that becomes the element that you try to trim back as tightly as you can. And so I think that is the reason why you hear of the service disruptions and missed pickups. It is generally a lack of labor capacity in the short run.

David Vernon, Analyst, Bernstein: Has the frequency of those comments from customers changed since the second quarter, or has it just been consistent? You mentioned that you would expect it to pick up a lot if volumes got a little stronger. I am just wondering if that has followed through.

Adam Satterfield, Chief Financial Officer, Old Dominion Freight Line: Well, I think it has been pretty steady all year, but I think that is something that as generally the industry was busier in the third quarter than the second, any incremental shipment is probably putting more pressure on some of those that maybe have labor or equipment constraints. It probably picked up a little bit, and it is probably evidenced, too, in the Mastio results. I think a few of the carriers went backwards, if you will. Some of that all comes into play, the feedback that we might hear through our sales team and from customers directly manifests itself and what those results often look like.

David Vernon, Analyst, Bernstein: All right. Thank you.

Dave, Conference Operator: This concludes our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks.

Marty Freeman, President and Chief Executive Officer, Old Dominion Freight Line: Thank you all today for your participation. We appreciate your questions, and please feel free to give us a call if you have anything further. Thanks, and I hope you have a great day.

Dave, Conference Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.