Matt Beasley: I mean I guess I’d just say that the third quarter of last year was just a little bit of an outlier just given everything that was going on in the market then. And so we saw about a 400 basis point improvement from the second quarter to the third quarter of last year. Now we’ve had the benefit of the capacity coming out of the market and as well continued progress on the operational efficiency side. But a lot of those measures went into effect as we were moving through the third quarter of last year. We saw the impacts there.
Brian Ossenbeck: Okay. One just real quick follow-up. If you can help me think about capacity additions. I know you got the 4 coming on from yellow, but at least the headline tonnage numbers coming down so much in ABF. Does it still make sense to bring on that level of capacity? Is there going to be a bit of — not hiccup, but at least maybe some sort of a gap as you have to wait and to fill this up, like maybe you can walk through that and how the current market fits with the capacity ramp-up plan for the rest of this year.
Seth Runser: Yes, Brian, this is Seth. We really are trying to position ourselves for that longer-term growth that we’ve talked about in our past. As I mentioned in my prepared remarks, we have a mature nationwide network, and we continue to evaluate where we see growth opportunities or efficiency improvements with our real estate plan. So we’ve added the doors, and we talked about a late example already how we saw really great results. I mean double-digit productivity gains. We’ll do that same type of exercise in what the Springs facility opens on June 4. So those are just some examples of what we’re doing. We really evaluate our real estate portfolio, looking at where we see the greatest demand opportunities because our pipeline is strong, like we talked about in our opening comments.
So we feel like we’ll be in good position with our investments there. The 4 coming on from the yellow facilities. Those are really going to be facility moves from where we’re currently at, where we don’t have enough capacity. So I view that’s going to be another improvement in productivity and also position us for future growth. So…
Judy McReynolds: I mean, yes. What I like about our plan there is just the purposeful nature of it. And there’s more than one benefit to what we’re doing. It’s growth oriented, but it’s also efficiency gains and better serving pot.
Operator: Your next question is from the line of Ben Mohr Mok with Deutsche Bank.
Ben Mohr Mok: Dave, congratulations on your retirement. I wanted just to look a little deeper into the runway for your service improvement related to your yield gains. The decrease in your total daily shipments and tonnage in 1Q due to your price increases in your transactional LTL business need your growth in your core business. Is that a direct result of your service improvement from your recent 18-month quality and training initiative and productivity initiatives? And if so, as you continue to improve your service into 2Q into 4Q, can we expect more price increases in transactional LTL business and more growth in core business leading to more of an acceleration in revenue per hundred weight growth and tonnage and shipments declined at better margins. I’m trying to get a sense of sort of May and June trends for yield tonnage and shipments and also for the rest of 3Q and 4Q and how the runway of your service improvements could drive that.
Christopher Adkins: This is Christopher. So I’ll comment from a yield perspective. I think Seth will have some commentary from the service side. So really, the year-over-year change that you’re seeing is like we talked about, just a mix change, less about some abnormal pricing action that we would be taking on our core business and more about as our core business is growing, we’re making room for that business by raising prices on our transactional. And when I say on the transactional business, that business really best from customers that are interacting with us digitally via our website or their TMS platform. So they’re really executing at a shipment level and really we’re offering market-based prices in areas where it makes sense and fills excess capacity in our network.
So we managing that day to day and really at a shipment level decision. And our core business is more regular ongoing business. As Judy mentioned earlier, it tends to be more productive for us as we have better freight density on pickups and deliveries. So on a move-forward basis on May, June, probably more similar to April in terms of what we’re seeing from a revenue per hundred weight. And then as you get into July and beyond, you’re going to see those year-over-year comps come back down to more normal levels based on historical levels. And Seth may have some comments on the service side.
Seth Runser: Yes. I would say that we were able to respond to our customer needs in any environment as an integrated logistics company. So like Christopher stated, as we improve our service, we think that core book of business is going to continue to improve, and we saw that in the fourth quarter as well as the first. And we’ve really always had a commitment to excellence. We’ve invested in service quality, that team experts I mentioned in my prepared remarks, not only are they improving efficiency, but also everywhere they go, we see service improvements as well. Judy mentioned the consistent business volumes allow us to plan for labor better. So with that consistency and better labor planning, we’re also able to stay on cycle, which improves service to our customers.
And it’s nice to get some of these external recognitions carrier the year at multiple different companies have awarded that and then being the only 10-time winner of the ATA Excellence in Security Award just a lot of improvement. So we think as we improve our value to our customers, we’ll continue to see that growth, and that’s really what we’re known for in the market.
Ben Mohr Mok: Great. Appreciate that. And maybe just as a follow-up, if I can go back to the OR guide question that sequential into 2Q improvement of 200 to 300 basis points, which is based on the last 4 years average, that includes a very difficult 2Q ’23 that saw 50 bps of expansion. The pre-COVID average is as high as 500 bps of improvement. Is your guide still based on a very challenged freight environment? And can you discuss the possibility of maybe a better 400 bps of improvement, let’s say, if there’s more volume inflection or maybe worse, flat or only 100 bps of improvement if the freight demand softens.
Seth Runser: Yes, so maybe I would just highlight there, again, we’re just providing some recent historical context. But I think if you go back and look, if you’re talking 5 to 10 years ago, the absolute level of operating ratio that we were achieving on the EBS side in the first quarter was higher than the levels that we’ve achieved in the last few years. And so that impacted the sequential moves that you might have seen historically and is why we felt like that the more recent history was better to provide in terms of historical context.
Operator: Our next question is from the line of Tom Wadewitz with UBS.
Tom Wadewitz: And David, I also want to add my congratulations to you. You’ve been doing a great job for a long time and wish you the best in retirement.
David Humphrey: Thanks a lot, Tom.
Tom Wadewitz: Let’s see. In terms of the — I guess 2 questions, maybe I can just start with a question on the sequential. I know you were talking about it a bit. If we think of absolute tons per day in May and June, I think seasonality would imply you should see some improvement. And then also, I think revenue per shipment, we would expect kind of normal seasonality to see some improvement versus what you’ve seen in April. Is that right? Because I think maybe your comments were on year-over-year when you were talking about May and June before, but just trying to figure that out in terms of like what those absolute numbers might look like in terms of normal seasonality? Or are they just flat in terms of absolute versus April?
Christopher Adkins: Tom, this is Christopher. I think you’re right. From an absolute basis, we would expect historically speaking, versus second quarter, there would be an uptick in demand from a both tonnage perspective and a revenue per day perspective as customers are shipping more as their business picks up. We did not see that. I think we’ve discussed that a few times last year just due to just being in a freight recession that we’ve been talking about ongoing for the last many months. So our expectation is that, that we would see a sequential seasonal uptick from first to second, as you’re describing, that would be different from last year.
Tom Wadewitz: Okay. And so you would see that seasonal uptick May and June versus April?
Christopher Adkins: Typically speaking, yes.
Tom Wadewitz: Okay. And you’re thinking you expect that to be the case this year as well?
Christopher Adkins: Yes. I mean, historically speaking, that’s true, just talking to our customers, there’s kind of a mixed bag. Customers are saying demand is still soft for them. You do have pockets of customers that have a stronger demand than others. But again, just going back to historically speaking, that has been true.
Tom Wadewitz: Yes. Okay. And then, Judy, what do you think happens on the pricing environment and competitive discipline? It seems like maybe it’s tough to ask for as much on rate increases? Or you would think maybe the pricing environment is stable, but with less normal seasonality and with the yellow capacity coming in across other players, maybe with some discipline or maybe kind of coming in gradually. But do you think — just how do you think that pricing and competitive environment develops?
Judy McReynolds: Well, it’s interesting from where we sit because of how we go to market as a logistics company because what we are positioned to be able to do is to say yes to customers. And what that really does for us is it puts us in a position where if the customer is more value-based and service-oriented, we perhaps have one answer. It could be a good opportunity to flow through the ABF network or if it’s a customer that has more price sensitivity and different challenges in their own business. I mean that’s a customer that we potentially could do well with in our managed solution or in our LTL brokerage solution where we access capacity with other LTL providers that perhaps have a different price point than we would at ABF.
And so we’re really positioned well to benefit and navigate our way through any of these situations or challenges, which that’s what we’ve been positioning for a decade here. And it really does make sense. I mean right now, what customers would tell you is that their priorities are supply chain reliability and cost efficiency. And so as we are interacting with them, we’re trying to determine the best solution for them and to fulfill that through the options and the opportunities we have, whether it’s our own assets or third-party assets. So I think to answer your question more specifically, on the pricing, that is involved in the value discussion or the priorities discussion for that customer. So it can be a variety of answers, but one that we can capture and do well with if the customer is going to be a customer of regularity or value-based or that we can get a sense for how we can do well to fulfill their needs operationally.
Tom Wadewitz: I think — I mean you’re characterizing customer behavior? What about competitor behavior?
Judy McReynolds: Well, I mean, again, competitor behavior, if it’s a customer that we’re doing our managed solution with, for instance, the competitor behavior would be embedded in the answer that we get when we place the LTL shipment in their network. So we stand to be in a position to really serve customers well, depending on what their needs are and which places they land in our organization. But what I’ll say about our pricing and our philosophy related to what we run typically through the ABF network is we’re very price disciplined. We’re very value-based. We offer a high level of service, and it’s a part of what works well in that network, and we stay consistent with that, and we have for decades. But we are, I think, understanding more about what the market is providing or giving us as we work through these different answers with managed and LTL brokerage as well.
