The third real estate, we’ve been working on our long term real estate plan for the past two or three years. You need to be positioned well ahead of the cycle from a real estate perspective, and we have a mature network, and we believe we’re positioned well in those key markets. This year alone, we’ve opened up a new facility in Campbell, Pennsylvania. We expand our San Antonio site. We moved into a new Phoenix facility. So we’re doing a lot of things on the real estate front. So we feel good about where we are there as well and we got more coming next year as well. And then the fourth really is productivity. So the more productive you are, the more freight you can handle for the same cost. So in my opening comments, I talked about the transformation at ABF and how we’re really focused on technology and optimization to ensure that we’re as efficient as possible.
So we’ve completed a lot of initiatives, but we have a lot more still to do. So with all that said, the investments in network visibility and our optimization tool set, we have capacity for growth and we can flex that up or down based on what the markets do and what opportunities we see in front of us.
Ken Hoexter: If I can squeeze in a follow-up to that, real quick, the tech investments are still broken out as one timers, it seems like those are continuous and ongoing. Should that just be part of ongoing business at some point?
Judy McReynolds: Well, Ken, I think we spoke to that in 8-K with respect to ABF. And to what we’re seeing there is as we’ve moved the team back to conventional operation in Kansas City and in Salt Lake City and we’ve previously done that in Indianapolis. You will as you go forward, it will be all in regular operations because we’re no longer piloting in those other areas. We do continue to have, our innovations costs broken out and continue that same treatment where we’re piloting for new customers with Vaux. We’re doing some things there that are very new and innovative and with our customers just gaining some momentum in pilot type environments. And so, we’re continuing that cost, but at the same time, we’re really excited about the prospects for a new revenue stream, from that business and look forward to telling you more about that as we enter into 2024.
Operator: Our next question comes from Scott Group with Wolfe Research. Please proceed.
Scott Group: So I want to just ask on the OR commentary around Q4. So back to Ken’s point, so you said modest improvement in Q3, you ended up with 400 basis points of improvement. You’re saying modest again. What’s the right range to be thinking about, when you talk about modest sequential improvement? I just want to see if you have any a finer point around that.
Seth Runser: Yes, thanks, Scott. I would say, we were very pleased with the performance in the third quarter, like I mentioned, we’re carrying that momentum into fourth. We didn’t really guide to a specific range, but as I say, we think about modest now we probably think of it in the context of maybe a 100 potentially up to 200 basis point improvement, something in that range.
Scott Group: And then, when I — the pricing renewals improved from 3% to 4%, I think we’re all trying to figure out like how big of a deal is this Yellow bankruptcy? How much is the market really changing? Does 4% feel like that’s the right number? Is that a number that you’d expect to accelerate further as you get into Q4 in 2024? What’s the pricing strategy right now?
Christopher Adkins: Sure. Hey, Scott, it’s Christopher. So really from the third quarter benefit from the disruption was really a mix impact of handling improving the mix of getting more core business which tends to be more profitable business for us and it’s more profitable for many reasons, price is one of those, but also productivity and efficiency, there’s improvement, there are opportunities there for us to do to handle that efficiently. In the 4%, really we think our core business is at a really good place and we want to maintain that long-term and we want to be offering fair prices to our customers for the service that we’re providing. So, we’re really trying to overcome inflation through pricing and through efficiency gains. So, I don’t know that you’ll necessarily see acceleration there in our core business, but we are always optimizing the mix to get the right mix to get the best off income result.
Operator: Our next question comes from Jack Atkins with Stephens. Please proceed.
Jack Atkins: I guess, I just would like to maybe double click a little bit on some of the actions in the third quarter and it’s very encouraging to see it flowing through to the bottom line. But I guess when you think about the improvements that you saw specifically on the purchase transportation side, Judy, both expenses, excuse me, rents and PT were improved pretty significantly sequentially. Can you maybe give us a couple of specific examples of actions you took there to improve those costs?
Judy McReynolds: Sure. I’m going to let Seth answer that question.
Seth Runser: Yes. I would say on the City Cartage side, that’s where our drivers are going out and delivering freight every day, pickup and delivery type drivers. Christopher mentioned that shift in mix and that more consistent published core business gave us greater productivity, but I’ll also point to some of the technology that we’ve used, which is city route optimization, which Judy mentioned in her opening comments. We’ve seen a pretty material return from that using AI machine learning, a lot of our internal tech to optimize those drivers going out full and also coming back. We still have two more phases of that coming. So really when you think about cartage, the more productive you are, the more you can reduce that external cost and that’s going to provide a better service to our customers by getting an ABF driver delivering and picking up their freight.
So we expect that to continue, as we move through the fourth quarter and into the future because we know it is a better option on cost. As far as, just PET over the road, we have a lot of our own drivers where we were able to swap that. But when we look at the mix of business that we were handling in that shift in core that really changed some of the lanes it was moving. So, we were able to optimize the way our road drivers move as well with some of those network visibility tools that I mentioned. So we expect those cost actions to continue throughout the fourth quarter just to how we continue to transform the way we operate.
Jack Atkins: Okay. That’s really encouraging to see. And I guess maybe shifting gears and asking about the asset-light segment for a moment. I know there have been a lot of changes there over the last couple of years, through the acquisition of MoLo. But I think the fact that you guys are generating an operating loss there, and I would imagine that’s probably continues into the fourth quarter. I mean, at what point do we start seeing some more cost out taking place there in an effort to flex down the cost structure? Typically, you think about these Asset-Light businesses having a pretty variable cost structure, and I am just sort of curious, should we see — are there options to maybe take some additional costs out there, just given how challenging the business backdrop is?
