ArcBest Corporation Stock

Good morning. I'm here today with Seth Runser, our President and CEO; and Matt Beasley, our Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session.

Before we begin, please note that some of the comments we make today will include forward-looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward-looking statements section of our earnings release and SEC filings.

To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional information section of the presentation slides. You can access the conference call slide deck on our website at arcb.com in our 8-K filed earlier this morning or follow along on the webcast.

And now I will turn the call over to Seth.

Thank you, Amy, and good morning, everyone.

Before we begin, I would like to recognize the talented ArcBest team. Throughout the quarter, our people executed with discipline as conditions continue to evolve. I'm grateful for their dedication and proud of the way they continue to serve our customers and support one another.

I'm pleased to report ArcBest grew earnings and improved operating margin in the third quarter. The organizational changes we made in July continued to lower our costs, and we also had help from a freight market that was tighter than a year ago. In today's dynamic environment, customers place a premium on reliable execution, responsive service and partners who understand their business. Those are areas where we continue to earn our customers' trust and where ArcBest continues to differentiate itself.

In the third quarter, we benefited from initiatives that we had underway for several years. This includes our integrated service offering, investments in our network, equipment and technology platforms and our refined commercial approach, which all continue to provide our customers with greater flexibility as their transportation needs evolve.

Our team is focused on improving how we operate, and we continue to execute against our 3 strategic pillars of accelerating profitable growth, increasing efficiency and driving innovation. With that broader perspective, let me turn to our progress by segment.

In Asset-Based, our focus remains on profitable growth. Daily tonnage increased, primarily reflecting higher weight per shipment, while shipment counts declined modestly. Revenue per shipment also increased, supported by disciplined pricing, higher fuel surcharge revenue and the heavier freight moving through our network.

Over the past year, our dynamic quote pool has continued to expand, and we are taking a more intentional approach to the freight we select to help us align demand with the strengths of our network, support the service our customers expect and optimize profitability.

Contract renewals were another highlight of the quarter, averaging a 5.1% increase, which is a strong result and reflects how customers view the quality of our service.

We continue to pursue new business opportunities that generate appropriate returns and strengthen relationships with new and existing customers who value our service, reliability and flexibility.

Our commitment to an excellent customer experience is clear. In this year's Mastio survey, ABF showed one of the largest service improvements among national carriers with gains across nearly every category that customers rated.

ArcBest was recently recognized as a 2026 Great Supply Chain Partner by Supply Chain Brain, earned 3 Quest for Quality Awards from Logistics Management and was once again named a top 100 trucker by inbound logistics. These recognitions reinforce the progress we're making and how our team show up for customers every day. When customers trust us, they bring us more of their freight. That's how a great customer experience turns into growth.

In Asset-Light, we delivered another strong quarter, including another record quarter for Managed Logistics. Profitability improved through disciplined pricing, more effective carrier procurement and lower cost to serve. Our teams are pairing market expertise with better tools and processes to serve customers and carrier partners more effectively.

That's what lets us scale without adding costs at the same pace, and it's why Asset-Light earned $13 million more this quarter than it did a year ago. That same practical focus guides our portfolio of technology and AI projects. We're simplifying work for our people so they can make faster, better informed decisions and improve the customer experience.

We see AI as a major tailwind in our industry, and we are utilizing it across ArcBest to drive greater productivity and profitable growth. One example is our new Asset-Light Transportation Operations Management System, or ATOM. We began the rollout during the third quarter, starting with our expedite solution, and we expect additional service lines to move on to the platform over time.

Developed in-house, ATOM brings together the experience of teams across ArcBest to reduce manual work and create more connected processes. It helps our people match freight with available capacity more quickly and work with more consistent information. That means more time to solve customers' challenges and deliver an even better experience.

We firmly believe these capabilities will strengthen customer relationships and support growth across our Asset-Light business. We continue to expand and enhance ArcBest View, our unified platform for shipment execution and visibility, which has grown to more than 3,600 monthly users since launching in May and integrates AI tools to drive a more elevated customer experience.

We recently introduced new capabilities that help customers simplify everyday shipping tasks, including improved shipment visibility, streamlined freight classification and expanded cargo protection options. We also added features that provide customers with more actionable information throughout the shipment life cycle. Our goal is straightforward, to make transportation easier to manage, reduce friction in our customers' operation and give them greater confidence in their supply chain decisions.

Another encouraging development this quarter was the successful renewal of our insurance program. We maintained our overall coverage limits while reducing our base premium, an outcome we're pleased with given the focus on the insurance environment across the transportation industry. Our objective was not simply to minimize premium expense, but to appropriately balance retained risk, cost, coverage limits, insurer quality and protection against significant losses.

To that end, we added a structured component to excess layer that provides greater premium certainty over the next 3 years in exchange for modestly higher retained risk. Overall, the renewal strikes the right balance and reflects our favorable claims experience and continued focus on safety and risk management.

As I look ahead, I'm encouraged by what I'm seeing across the company. Our network is performing well, Asset-Light performance continues to improve, and we're operating with greater focus and efficiency. We've always believed in taking a longer-term view and continuing to invest in our business through every cycle.

That approach has put us in a stronger position today and gives me confidence in where we're headed. But what gives me the most confidence is our people. I see it every day, how hard they work, how much they care about our customers and how committed they are to moving our company forward. I'm incredibly grateful for everything they do.

We remain focused on executing consistently and investing thoughtfully in the business. And as the market continues to strengthen, we believe we are well positioned to build upon our improving operating performance and capitalize on the opportunities ahead to create long-term value for our customers, our people, the communities we serve and our shareholders.

With that, I'll turn the call over to Matt to review the financial results.

Thanks, Seth, and good morning, everyone.

Our third quarter improvement was broad-based. Higher tonnage and disciplined pricing supported Asset-Based results, while continued progress in Asset-Light and savings from our organizational changes contributed to stronger earnings and margins.

At the same time, we invested in the business and returned capital to shareholders. These results build on the progress we've made over the past year and represent another step toward achieving the long-term targets we outlined at Investor Day.

Turning to our consolidated results. Third quarter revenue was $1.2 billion, up 15% year-over-year. Non-GAAP operating income increased to $85 million from $50 million in the prior year period, and adjusted earnings per share rose to $2.62 from $1.46.

At the segment level, Asset-Based non-GAAP operating income improved by $22 million year-over-year, while Asset-Light delivered non-GAAP operating income of $14 million, a $13 million improvement from last year. In the Asset-Based segment, third quarter revenue was $799 million, up 10% on a per day basis.

ABF's adjusted operating ratio was 90.4%, an improvement of 210 basis points year-over-year and consistent with our strong second quarter performance. Daily tonnage increased 10% year-over-year, driven by a 13% increase in weight per shipment, partially offset by a 3% decrease in shipments per day.

Billed revenue per shipment increased 14% year-over-year, primarily reflecting a heavier freight profile and a 1% increase in revenue per hundredweight. The increase in revenue per hundredweight was attributable to higher fuel surcharge revenue. Operating expenses increased year-over-year, primarily due to contractual increases in union wage and benefit rates, higher fuel prices and increased purchase transportation expense.

In October, Asset-Based daily tonnage increased approximately 15% year-over-year, driven by a 14% increase in weight per shipment and a 1% increase in shipments per day. The increases in weight per shipment we have seen this year reflect the expansion of our dynamic quote pool and the intentional approach to freight selection that Seth discussed.

As we move through the fourth quarter, we expect year-over-year growth in weight per shipment to moderate as we begin to lap the benefits of these initiatives. That reflects a stronger prior year comparison, not a change in our approach.

October billed revenue per shipment increased 18% year-over-year, driven by the heavier freight profile and a 4% increase in billed revenue per hundredweight. Excluding fuel surcharge, revenue per hundredweight declined in the low single digits, primarily reflecting the heavier freight profile.

Historically, excluding years with significant market disruptions, ABF's non-GAAP operating ratio has increased by approximately 180 basis points on average from the third quarter to the fourth quarter. Based on current trends, we expect ABF's fourth quarter 2026 non-GAAP operating ratio to increase sequentially by approximately 50 to 150 basis points. This outlook reflects our continued focus on yield discipline, cost management and productivity and the impact of higher fuel prices.

Turning to Asset-Light. Third quarter revenue was $446 million, up 25% year-over-year on a daily basis. Shipments per day increased 1%, led by growth in Managed Logistics. Revenue per shipment increased 24%, reflecting higher rates in a tightening capacity environment and higher fuel costs.

Employee productivity measured by shipments per person per day increased 8% year-over-year. Selling, general and administrative expense per shipment declined 2%, driven by our productivity initiatives and a higher mix of Managed Logistics business, which has a lower cost to serve.

These improvements in revenue, yield and productivity contributed to Asset-Light non-GAAP operating income of $14 million for the third quarter, up $13 million year-over-year.

In October, Asset-Light daily revenue increased approximately 27% year-over-year, driven by an 18% increase in revenue per shipment and an 8% increase in shipments per day. Higher revenue per shipment reflected a higher pricing environment, including higher fuel prices and tighter truckload capacity, while shipment growth was led by Managed Logistics.

For the fourth quarter, we expect Asset-Light non-GAAP operating income of approximately $7 million to $10 million, reflecting normal seasonal volume trends, current pricing trends and continued progress on productivity.

We continue to allocate capital with a focus on attractive long-term returns while maintaining a strong balance sheet. Consistent with that approach, we repurchased $26 million of shares during the third quarter and an additional $14 million in October. Overall, we remain confident in our strategy and focused on achieving our long-term targets.

With that, operator, we are ready to open the call for questions.

[Operator Instructions] Your first question comes from the line of Jordan Alliger of Goldman Sachs.

Just curious, looking at the tonnage obviously strong, a lot of things you're doing from a freight profile mix standpoint. But maybe is there a way to sort of assess how -- pulling that back, how you're thinking about the core demand and what you're seeing in the industry from an underlying demand standpoint?

Jordan, this is Seth. Thanks for the question. We're really encouraged by what we're seeing as we move through the fourth quarter. The environment is obviously still mixed, but there's more positive indicators today, and we're seeing some of those early green shoots across our business.

So if you look in October, Asset-Based tonnage increased approximately 15% year-over-year. Shipments increased 1%. And then the weight per shipment Matt mentioned in his prepared remarks, we continue to benefit from that heavier dynamic tonnage, which we expect to normalize as we lap some of that history. But we've continued to maintain a strong posture on yield.

That's tempered some of the shipment growth somewhat, but we believe those are the right decisions to make. So our focus has really been on having our book of business in a very healthy position and pricing appropriately for the value that we provide.

So we're seeing some encouraging activity across several of our verticals, building materials, automotive, food service, 3PL. But what gives me a lot of confidence is we're creating some of this momentum ourselves through just better service to our customers, stronger customer relationships and improved commercial execution.

So our pipeline remains strong across all of our solutions. The changes we made with our commercial organization are supporting that effort. We stood up a dedicated acquisition sales team. They have a greater focus on landing new customers, while our account teams can concentrate on retention and cross-selling, and we're seeing some early wins there. So as we look forward to 2027, we're not assuming a significant freight recovery, but we're seeing some early signs that are encouraging.

The next question is from the line of Ken Hoexter of Bank of America.

Maybe thoughts a little bit more on that, Seth, on the weight per shipment. Is that -- maybe delve back into the history. Is this just truckload spillover? Is this the dynamic pool shifting? Maybe talk about what's going to drive that. And then given your expectation for the moderation in weight per shipment, should revenue per hundredweight ex fuel flip positive in the fourth quarter? I know you mentioned it was down low single digits. Just thinking about timing of when we should see that flip if we're looking at moderation.

Thanks, Ken. This is Seth. So as you know, as weight per shipment increases, heavier shipments generally have a lower freight class and have an effect on revenue per hundredweight.

So we've seen that. But we are seeing some improvements in our weight per shipment on our core business. But the majority of the increase that we've seen throughout this year is really around the dynamic shipments being heavier, and that's because of the expansion of our quote pool. That's really allowed us to be more selective in real time to help us optimize yield and productivity in the Asset-Based network.

So in October, the year-over-year weight per shipment, it continues to be impacted by that. But as we move through the fourth quarter, we really expect that year-over-year growth in weight per shipment to moderate compared to when we started all these initiatives last year.

So -- this is a comparison really against a stronger base, not a change in our approach. Our approach with dynamic as we move through the fourth quarter is going to look a lot like the first, second and third quarter and what we did. So really, we've seen some of that truckload spillover. I think we're still early stages into that, but we are seeing that continue.

So really, what I always go back to is customers are ultimately looking for a partner that they can trust that offers multiple solutions in one place, and that's really what the commercial team has brought, and we feel very encouraged by what they've been able to accomplish throughout the third quarter and what we're going to see for the remainder of the year.

The next question is from the line of Ravi Shanker of Morgan Stanley.

This is Nancy hopped on for Ravi. It would be helpful to hear a bit more about Asset-light following the Montgomery litigation. How are you thinking about implications for Asset-Light heading into '27? And then beyond the insurance renewals you mentioned, do you see any elevated litigation or liability risk there?

Thanks, Nancy. This is Seth. Well, I thought it was important in my prepared remarks to cover how our insurance renewals went because we just finalized those. But despite the challenging insurance market, we did achieve a favorable liability insurance renewal with a reduction in base premium while maintaining our overall coverage.

Now as part of that renewal, we incorporated an additional structured component in one of our excess layers of our program, and that helps us get greater premium certainty over the 3-year period. And in exchange for that, we assume some additional risk within that portion of the program, but that layer has only been impacted by 2 claims over the past 25 years. And based on that historical loss experience, we really believe that trade-off is appropriate.

So we really focused on the appropriate balance between retained risk, premium expense, insurer quality and the protections against significant loss. So we really believe that the long-standing focus on safety, compliance, disciplined carrier qualification positions us well in the current environment.

And Nancy, this is Matt. I'll just comment on the outlook. I mean, certainly feel very good about the Asset-Light business, where that performance is, the trajectory that we're on. I mean if you look at year-to-date, we reported around $24 million of operating income through the third quarter, certainly a substantial improvement year-over-year.

We feel pleased about the outlook for the fourth quarter of $7 million to $10 million. You take that together, you're looking at a year probably in the low $30 million for that business.

And then looking ahead to 2027, certainly, we expect continued shipment growth in that business, continue to be pleased with how that Managed Logistics solution continues to grow for us, continue to see a lot of benefit from the productivity initiatives, the technology initiatives, some of which that Seth talked about in his opening comments and then just expect continued benefits from some of the restructuring actions and savings from what we did in July.

The next question is from the line of Scott Group of Wolfe Research.

This is Cole on for Scott. You alluded to how the comparisons in November and December swing around a bunch. Can you expand on what we should assume for tonnage, yields ex fuel or weight per shipment in 4Q as well as maybe your diesel assumption? And can you also talk about maybe how much fuel is helping margins right now?

Yes. Thanks, Cole. This is Seth. So I think about it in terms of sequentially and what we're seeing. So sequentially from September to October, tonnage generally decreases about 3.4%. We're ahead of that. We're down only about 1%. Shipments per day generally decreased about 3%. We're slightly ahead of that being down 2%. And then weight per shipment generally decreases about 0.4%, and we're ahead of that by about 1%.

So if you look at that on a go-forward basis, that's really what you'll see. What we're trying to highlight is you'll start to see some year-over-year changes in weight per shipment in November and December as those initiatives took hold last year. Not a change in strategy. We're going to continue to do what we've been doing in the first, second and third quarter, but we just wanted to highlight that.

When you think about fuel, it's an important component of our overall pricing model, but customers ultimately make the decision based on the total value of the service we provide and fuel surcharge is just one element of a broader pricing discussion. So it's designed to offset the fuel charges that we have.

We operate in the same manner with all of our competition that's just on a weekly basis. But a reminder, our costs go up as well. So the price of fuel, propane for our forklifts, we have 240 facilities. So utilities think of all those things. So really, what we focus on is the larger consideration for us isn't fuel surcharge itself. It's just what happens to demand, and we're paying close attention to that, but we're also encouraged by what our pipeline is seeing.

So the greater focus over the long term for us is remaining disciplined on price, delivering that premium service, making sure that we're efficient with our resources because that's going to have a greater long-term impact than short-term fuel volatility.

The next question is from the line of Brian Ossenbeck of JPMorgan.

Maybe just 2 follow-ups for you guys. On the weight per shipment, I know U-Pack has been a unique situation for you guys and it's obviously housing market is not in great shape. Is that pretty much troughed out in terms of the impact on your comps from a weight per shipment perspective?

And then, Seth, maybe just to go back to the premium statement a little bit more. It sounds like lower premiums a bit different risk profile, but it sounds like you're with that trade-off given the history there. And also, is there an auto liability, I guess, from a contingent perspective, like do you have to do any of the actuarial reviews here?

Maybe that's a question for Matt, just remind us when that starts to come to the balance sheet potentially if you guys do that before the end of the year.

Yes. Brian, it's Matt. So on your first question on U-Pack, you're right. I mean those shipments are generally substantially heavier shipments and do impact our overall weight per shipment. But in terms of the change there, really volume levels are relatively consistent. So not expecting any significant impacts year-over-year.

On the renewal, like Seth said, we do feel really good about where we ended up there. We certainly really leveraged our strong performance that we've had, strong safety record, our good relationships with our carriers. We have some talent that we brought on in the risk group that has really helped us in that area.

And so overall, we were able to achieve some savings. We did, as Seth mentioned, add a little bit of structure to one of the layers, but felt really good about the trade-off there, had some savings in the low single-digit millions for some trade-offs in a layer where we've only seen a couple of claims impact that layer in our history and feel good about the trade-off.

Really, it's assuming that we have performance in line with what we have seen historically, I wouldn't expect any additional impact there. The most that we could see in a particular year would be low single-digit millions and felt that, that was very reasonable for the trade-off that we got in premiums overall for the program.

You mentioned the accruals and how we think about the auto and general liability program. Certainly, we look at that throughout the year, but we do take a deeper look at that with our actuaries in October, and so that will be coming up here in the fourth quarter.

The next question is from the line of Chris Wetherbee from Wells Fargo.

Maybe we could talk a little bit about the outperformance sequentially. So kind of curious, maybe, Seth, if you could break down how much you think is what you guys are doing specifically with the initiatives in the dynamic business and then maybe what the market is, I guess, maybe trying to sort of decouple demand and kind of company-specific actions?

And then maybe just a broader kind of commentary on the pricing environment. So do you feel like things are kind of the same as what we've seen before or sort of the opportunity getting a little bit better in the LTL market broadly around pricing? So kind of 2 questions there.

Yes. Thanks, Chris. I'll start out, and then I'll pass the pricing question over to Eddie to fill you in with stats and what we're seeing in the business.

So really, when I think about the outperformance in the third quarter, it's really a combination of multiple things, and it's really tied to our 3 strategic pillars of growth, efficiency and innovation. So we've been pleased with our pipeline and what we've been able to see there. We talked at our Investor Day about how expanding the quote pool gives us more optionality, and we've seen that come to life throughout the year.

We've been able to be more selective with the freight we've brought on. We've been disciplined with our price to make sure that our customers are seeing the value that we deliver. So I'm really encouraged by the 5.1% increase that we were able to achieve in the third quarter, which builds upon what we've been doing throughout the year.

From an efficiency standpoint, both in Asset-Based and Asset-Light, I continue to be encouraged by the results we've seen, record load average numbers, historically low claim statistics. Just when you look across the board, we continue to accelerate those technology initiatives, which ultimately drive benefit to our bottom line.

And then on the innovation side, there's just a lot going on in AI. We have over 30 AI agents working at our company and doing tasks that our people don't have to do so they can focus on higher value work. So at the end of the day, that gives us more opportunities to grow, improve our cost to serve and think about what we want the future to look like from a tech perspective. So we spent a lot of time throughout the third quarter.

And what I'm most proud of the team about is that we've invested through this entire cycle. We have one of the newest fleets on the road. We've continued to invest in technology. We've built out over 800 doors in the network. So as volume starts to inflect positively, we're well positioned to take advantage of that. I'm so proud of the team and what they've been able to accomplish throughout the entire year. I just -- I feel so good about the management team, our team in the field. Everyone continues to execute at a high level.

So I'll turn it over to Eddie to talk about pricing.

Chris, from a market standpoint, pricing still is very rational. I would say it's -- I would see signs of improvement from earlier this year and definitely compared to last year. From a -- if you look at what we've been trying to accomplish really starting at the end of last year to improve our account mix, our yield metrics, I've seen a lot of success. And so a lot of hard work with our sales and pricing teams with support from our operational teams to give us a great product to sell.

So we've been successful. We talked about our renewal increase being at 5.1% for the quarter. That's a really strong number. It's a different account mix in third quarter than it was in second quarter, but we're really confident that we got the most out of those negotiations we could. We still with an emphasis on retaining good profitable business for the system.

We have been on a journey to improve our mix. So some of our pricing action has resulted in loss of business. But again, it was really meant to improve our overall profit for the company. And I think we've been very successful doing that. You can see it in our weight per shipment numbers with that improvement in weight per shipment for our core LTL business.

We did target some lower revenue business, which is generally tied to lower weight business. And so that's helping us really achieve a higher weight per shipment, higher revenue per shipment and ultimately a higher profit per shipment.

So a lot of what we're doing is resonating with customers. And when we do run into situations, we have a great option with Managed Logistics to still meet what the customer is looking for, improve our margins and then provide a solution that helps our customers be successful.

The next question is from the line of Thomas Wadewitz of UBS.

This is Mike Triano on for Tom. So I wanted to ask on Dynamic. So I imagine the tightness in the truckload market has led to more opportunities this year within Dynamic and the quote pool you mentioned continues to increase. So you're just wondering how much Dynamic has contributed to tonnage growth this year and where the yield profile in Dynamic sits today relative to the core LTL freight?

Yes. This is Seth. I'll take that question. So we've talked about Dynamic in the past many different times. And really, what I want to remind everybody of is our business is primarily core and transactional business and Dynamic helps us maintain consistency in the network and allows us to adapt to what's going on in the market.

So we feel great about our pipeline. We're seeing new core we saw our weight per shipment increase 1%, like I said earlier. So we're going to continue to focus on profitable growth, mix management and delivering that great service to our customers.

So what's really important, and I've said this on previous calls to just understand about what we do at Dynamic is we optimize our mix on a daily basis, and it's based on profit maximization based on current market prices and available capacity in our network.

So -- but what the expansion of this quote pool has allowed us to do is it's continued to get larger, it's really increased the visibility and optionality -- and since launching the Dynamic quoting pool since 2019 when we launched that product, our revenue per shipment has increased by 70% because we need approximately the same number of shipments, but you're just doing it on a larger quote pool base, which ends up improving profitability of the overall result.

So hopefully, everybody has seen the improvements in our results over the long term, the investments in our tool set. This was really about reaching a customer base that we didn't have access to in the past. We gave them a new channel, and it's continued to produce positive benefits for us.

The next question is from the line of Jeff Kauffman of Citizens Bank.

Congratulations on the quarter. You talked about the changes you made to the asset -- to the customer asset profile in LTL more or less subsiding in future quarters as you anniversary that. But can you talk about kind of the next step of customer base or freight profile dynamics as we're looking forward maybe next 12, 18 months and not only Asset-based, but also maybe talk about some of the changes you're looking at with the consolidation in Asset-Light.

Yes. So from an LTL standpoint, we did -- as we looked at -- we saw some growth in 2025 -- and that growth, even though it was profitable, it did come with a different profile. So really, the last 4 quarters, we've really been focused on driving a more profitable profile into the LTL network. That emphasis on larger weight shipments has kind of coincided with truckload tightening, which has given us some opportunities to really kind of both from a transactional standpoint and a core standpoint to go after the business that we think produces the most profit for our system.

One of the things we look at when you look at over the next few quarters and really maybe even next year, all this is really without a demand -- change in demand. So if you see a change in demand, there's an expectation that generally our weight per shipment, the amount of freight that our customers are shipping would coincide with that. So we would see continued improvements in that metric, which should produce our ability to continue to improve yield at an even better pace.

I think we obviously are well positioned now with the profitability of our core book of business that if that demand change occurs, we're going to be in a great position to take advantage of that.

Yes. And Jeff, I'll mention on the Asset-Light side of things. I'm really proud of the team for delivering $14 million in non-GAAP operating income in the third quarter, especially when you consider just the year-over-year where we were at last year, only delivering $1.5 million for all of 2025. So that's just a meaningful step-up change.

So really what's driving some of the shipment growth is really around that managed Logistics that Eddie mentioned before. We highlighted this at our Investor Day, and it continues to hold true. We've been on a 40% growth rate on a combined annual basis since 2017, and this quarter was another record for manage.

So really, what we tried to do with some of the changes in July was simplify how we operate, make it easier for our customers to do business with us and better position ArcBest to grow over the long term. And that's exactly what we've accomplished in the third quarter, and we're looking forward to the future.

But Managed continues to be a good success story. But ultimately, it's about finding ways to say yes to the customer supply chain because there's so much uncertainty and things going on in the world. If we can position ourselves in a way that says yes to the customer, we've seen that as we cross-sell business, it improves revenue, profit and retention, and that's exactly a position we want to be in.

The next question is from the line of Ari Rosa of Citi.

So it seems like a lot of nice progress here, and you spoke about something of an improving macro backdrop. I'm curious to get your updated thoughts on how you're thinking about mid-cycle margin potential across both Asset-Based and Asset-Light. And if you could speak about that ideally in the context of your long-term targets and just kind of progress getting there and confidence levels that those targets are achievable, feasible and kind of where we stand on that progression.

Ari, this is Seth. I'll start out with my comments and then turn it over to Matt Beasley.

But we're really confident in our long-term strategy and the earnings potential of the business. And I feel like we made meaningful progress against many of those objectives throughout the quarter. So in all parts of our business, both Asset-Based and Asset-Light, we really work to build a scalable operation where we can take full advantage of operating leverage and the investments that we've made throughout this cycle have really positioned us well.

So I'll turn it over to Matt to give his thoughts as well.

Yes, Ari. So very pleased with the 2026 result. I mean, like I talked about early on Asset-Light, just a great story there, great trajectory, look to be in the low $30 million for the year in op income. Asset-Based, great result as well. I mean, if you look at our guide for the fourth quarter and our results for the first 3 quarters of the year, that would put you around a 92% OR for the year.

We are in the process of putting our plan together for 2027 to discuss with our Board. So I don't want to get too far ahead of that. But I think based on what we see today, we expect 2027 to be another year of improvement, a good step towards our 2028 targets.

Certainly, we'll have some of just the normal inflationary items that we see each year, but feel great about the growth that we continue to expect to see in the Asset-Light business, the continued work on pricing that Eddie has talked about in the Asset-Based business, just all the work that we're doing across both segments with technology and productivity and expect to see that full run rate from the restructuring savings starting in the first quarter as well, and that's the $10 million a quarter that we disclosed a few months ago.

So really feel good about the way things are shaping up for 2027. And again, we do believe that, that's going to represent another meaningful step towards the 2028 targets.

The next question is from the line of Bruce Chan of Stifel.

I think there's been some focus on labor costs this earnings season. And Seth, you mentioned that you're seeing inflation in the business as I'm sure everyone else is. But maybe just specific to that line item, can you give us a sense of what your experience has been like there with the union on the ABS side? And are you seeing any, call it, relative benefits in terms of hiring pressure and cost trends? And then I know you've got some runway, but maybe just remind us when you start thinking about negotiations ahead of the next contract.

Yes. Perfect, Bruce. This is Seth. I'll start, and then I'll turn it over to Matt Godfrey to answer a little bit that.

But obviously, we've seen cost inflation across different areas of our business. Really, what we outlined at Investor Day is ensuring that our revenue per shipment is ahead of our cost per shipment by 80 basis points, and that's what we're going to continue to focus on.

If you think about our contract rates throughout 2026, really the all-in rate was around 3.2%. And those went into effect from a wage standpoint in July and then from a health welfare and pension in August. So those are in our -- in some of our third quarter and also in our fourth quarter outlook. And then we also have the 2027 wage and benefit increases, which are already pre-negotiated, which gives us a lot of certainty about where our labor inflation is going to end up. So we feel good about that.

I'll let Matt comment on the actual recruiting side of things. So I'll turn it over to him.

Thanks, Seth. Appreciate it. And you mentioned the way we look at capacity earlier when we talked about it, but physical capacity in our network to serve our customers it is a mix of our door capacity, which we've grown significantly over the last 5 years, equipment capacity, which we've continued to invest in, as we talked about, and obviously, manpower.

And so we take a very analytical approach to manpower planning. And so that provides insights not only at the system level, but at the location level, so we can project our current and future hiring needs based on business needs, projected attrition with employees and what we see coming in the pipeline.

And so those models have really evolved over time. We're not only looking at the long range, 3, 6 months out to a year, but we're providing enhanced tools to our frontline leaders to hit weekly targets that are matching our labor to the business levels to ensure we provide an efficient, reliable and premium service to our customers. So we're consistently focused on building that flex capacity in our network with all 3 legs of the capacity that we talked about in that way we can flex up or down as needed to serve our customers.

When you think about our great union workforce, generally a higher tenure, lower turnover. And what that means for our customers is better service through productivity and improved freight handling. And so what that means in our operation is we can be more strategic with our resource deployment while meeting our customers' needs.

And we look at hiring overall -- we're on track to hire slightly less than we did last year, more than 2024. But for us, using those models, our needs around recruiting and hiring expense has scaled with the employees that we need to hire. So really pleased with the process we've made there and the way we've been able to service our customers throughout the year.

The next question is from the line of Stephanie Moore of Jefferies.

So at your Investor Day, I think you spent a good amount of time outlining just a number of technology-enabled productivity initiatives. I mean, I think route optimization, dock management, labor planning. You touched on a lot of those maybe already. But I would love if you could just give us an update on where you are in the rollout of some of those tools, what you're seeing in terms of kind of early measurable productivity benefits and what this can mean as we get into 2027 from some of those initiatives?

Stephanie, this is Seth. Yes, we outlined a lot of technology initiatives at Investor Day, and I've been continue to be proud of what our team has been able to accomplish. So it was interesting.

A few weeks ago, we actually had an AI expert come in and talk to our leadership team, and he made a comment that really stuck with me, and it was "Automation is not transformation." And that's really what we're focused on in our business is how can we transform our business because we operate in markets with over $400 billion worth of opportunity. So we're trying to think about ways that we can upskill our people to focus on growth, efficiency, ways to improve our cost to serve while improving the customer and employee experience.

So we really try to create differentiation with our technology, enhance the customer experience and really ArcBest view and what we announced in the middle of this quarter and when we announced the platform, that's a technology with AI built into it, and it's improving the customer experience. We've received incredible feedback with over 3,600 people signed up for that so far.

So when I think about the most impactful areas, obviously, we've talked about city route optimization before. We've seen over $15 million in benefit from that initiative. When I think about appointment optimization, we have a lot of people making appointments on a day-to-day basis. So we're focused on enhancing their visibility, communication to customers, texting customers, all those different type of things around appointments.

Matt Godfrey mentioned our suite of manpower planning tools. And that's just an analytical approach to day-to-day operations, which has really improved our Asset-Based productivity. I mentioned AI agents, 60% of our truckload shipments are now digitally augmented, which really just allows our team to focus more time on the customer experience and complex problems.

So we're still focused on automating the quote-to-cash cycle. We're making good progress across the board there. And I just feel really good about the technology road map. I feel like we're in probably the third inning of that. And I'm super proud of the team and what we've been able to execute because technology can get you a lot of benefits. But at the end of the day, it's people that make it happen. And I love the expertise of our team and how we partner with customers to build these tools. that ultimately drives value for our customers, our people and our shareholders.

The next question is from the line of Bascome Majors of Stephens.

On the asset side of the business over the last few years, it's been more about optimization than just growth for growth's sake. If an opportunity were to come up to consolidate and grow more significantly, is that something that you guys would consider?

Bascome, this is Seth. Yes, when I think about the ways we try to grow our business, it's really through the lens of capital allocation in a way.

So when we look at the way we allocate capital, we take a pretty balanced approach to that. We have organic investments that we make in the business, which I've mentioned a lot of those throughout this call already. We look at M&A and where can it accelerate a strategic gap we have, a customer need.

We -- ultimately, it comes down to what value is it going to provide, and that's either a technology value, a scale value, a solution we might not offer. So we really think about it through that lens. And then obviously, how we return capital to shareholders, whether through our dividend or share repurchases.

So we really are attacking it from all lenses and really where I think about where we want to invest our time and resources and effort is where are we going to see the most value for our customers because we're a customer-led organization. If we continue to invest in solutions that resonate with them that provide differentiated value, I feel like that's going to win over the long term. So we're focused on both, and we feel confident in our approach, and we'll continue to evaluate opportunities as they come up.

There are no further questions at this time. We've reached the end of the Q&A session. I will now turn the call back to Amy Mendenhall for closing remarks.

Thank you to everyone who joined us today. I certainly appreciate your interest in ArcBest, and hope everyone has a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

Good morning, and thank you for standing by. Welcome to the ArcBest Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I will now turn it over to Amy Mendenhall, Vice President, Treasury and Investor Relations. Please go ahead.

Good morning. I'm here today with Seth Runser, our President and CEO; and Matt Beasley, our Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session. Before we begin, please note that some of the comments we make today will include forward-looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward-looking statements section of our earnings release and SEC filing. To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional information section of the presentation slides. You can access the conference call slide deck on our website at arcb.com in our 8-K filed earlier this morning or follow along on the webcast.

And now I will turn the call over to Seth.

Thank you, Amy, and good morning, everyone. I'm pleased to report a strong second quarter with meaningful improvement in both earnings and operating margin. These results demonstrate the progress we are making across ArcBest as we execute our strategy, improve the customer experience and operate with greater efficiency and discipline. Our performance reflects disciplined pricing, growth in tonnage from a heavier freight profile and efficiency gains. Just as important, we continue to advance the strategic priorities that will strengthen ArcBest for the long term from simplifying how we go to market and operate to expanding our digital capabilities and investing in the service and expertise our customers value. Matt will walk you through the financial results in a moment.

But before he does, I want to provide you some perspective on the market environment and highlight the actions we are taking to build on this momentum. Industry capacity has continued to tighten as truckload supply exits the market. Truckload spillover into LTL contributed to modest volume gains and higher fuel prices increased revenue across the industry. We have not yet seen a broad-based inflection in industrial demand. However, recent manufacturing indicators have been encouraging with PMI readings remaining in expansion territory.

Taken together these dynamics point to an environment that is gradually improving. And while conditions can shift quickly, we are optimistic about the direction of the market, while remaining disciplined in how we manage our business and allocate capital. Against this backdrop, we continue to prioritize growing profitably, maintaining yield discipline, improving productivity, enhancing the customer experience and advancing our technology road map. These efforts are contributing to our results today and reinforcing our confidence in the long-term targets we outlined at Investor Day.

None of this progress would be possible without the dedication of our employees. Throughout the quarter, our teams delivered the reliable service, responsiveness and expertise our customers depend on. Their focus and consistent execution helped customers navigate an evolving environment and reinforce the trust ArcBest has earned over more than a century. I want to thank each of them for their continued commitment to our customers and to one another. That commitment to customer experience and execution is central to our strategy, and it shaped how we designed and built ArcBest View. Launched during the quarter, ArcBest View is our new digital logistics platform, bringing quoting, booking, shipment visibility and reporting together in one intuitive experience.

The platform gives customers a streamlined, modern way to manage their logistics needs with access to our supply chain experts when those needs become more complex. Customer engagement continues to grow, reinforcing our belief that ArcBest View can improve the customer experience, increase digital adoption and enhance productivity for both customers and our teams. The same focus on customer experience and execution is also shaping how we operate internally. Earlier this month, we announced organizational changes designed to simplify how we go to market, strengthen coordination across the company and align our teams more closely around customer needs and operational effectiveness.

As part of these changes, we are consolidating our brand structure, streamlining our organizational structure and closing select service centers in smaller markets. The affected facilities represent approximately 1% of total doors in the ABF Freight network and their operations will be consolidated into nearby locations. Collectively, the organizational changes are expected to generate approximately $40 million in annualized cost savings, while improving our ability to serve customers and scale for future growth. These were difficult decisions, particularly where employees and communities are affected, but they are necessary to create a simpler, more efficient and more competitive ArcBest for the long term.

Taken together, these changes strengthen how we go to market, how we operate and how we serve our customers. Along with the launch of ArcBest View and the continued execution of our strategy, they position ArcBest to grow profitably, deliver premium experiences and build on more than a century of trusted service. I want to emphasize that these actions do not represent a change in our strategy or our long-term financial targets. Rather, they reflect the next step in delivering on them.

Now let me highlight the progress we made during the quarter against our key strategic priorities. In our Asset-Based business, we continue to execute with discipline, balancing service, freight selection, pricing and network efficiency to support profitable growth. Improving market conditions contributed to tonnage growth, while our teams remain focused on moving freight through the network more efficiently and delivering the reliable service our customers expect.

Technology and data are strengthening that execution. The continued expansion of our dynamic quote pool gives us greater visibility into demand and enables faster, more informed pricing and shipment decisions. This capability helps us be more selective about the freight entering our network, improve freight mix and align available capacity with the opportunities that create the most value. We also maintained strong pricing discipline during the quarter. Our general rate increase and negotiated customer renewals reflect the value of our service and our continued focus on revenue quality.

Importantly, pricing remained resilient despite higher weight per shipment, which typically places pressure on revenue per hundred weight. Managed Solutions delivered another exceptional quarter with daily shipments reaching a record high. Its performance reflects a strong pipeline, expanding customer relationships and growing demand for tailored integrated logistics support. Managed Solutions continues to differentiate ArcBest in the marketplace and represents an important source of growth across our portfolio. We are also making meaningful progress against our technology road map with AI playing an increasingly important role in how we operate and serve customers. Our approach is deliberate and closely aligned with our strategic priorities.

We are focused on practical applications that create differentiation, improve the customer experience and enable our people to accomplish more. Initiatives such as city route optimization and AI-enabled capacity sourcing are already delivering productivity benefit. As we expand these capabilities, we will continue to apply AI where it can strengthen our people and processes, improve decision-making and support profitable growth. As we move forward, we remain committed to making ArcBest simpler, faster and easier to do business with. That means continuously reducing complexity, improving how our teams work together and aligning resources around the priorities that will matter most to our customers. These actions are sharpening our execution today and enabling us to build a more agile, more scalable organization, one that is well positioned to deliver long-term shareholder value.

With that, I'll turn the call over to Matt to walk through the financial results.

Thanks, Seth, and good morning, everyone. Our second quarter results reflect an improving operating environment and disciplined execution of our strategy. Stronger pricing, higher weight per shipment, continued growth in managed solutions and efficiency gains drove meaningful sequential improvement in operating performance and reinforced our confidence in the long-term financial targets outlined at Investor Day. Higher fuel prices also benefited the quarter, although we view that as a near-term factor rather than a contributor to our long-term targets.

Before reviewing our operating results, I want to provide additional financial context on the actions Seth outlined to simplify our organization, improve our cost structure and strengthen our operating model. These actions include organizational and facility changes, consolidation of our brands and the discontinuation of the Vaux freight movement system. Collectively, we expect the action to generate approximately $40 million in annualized run rate cost savings. In connection with these actions, our second quarter GAAP results include $76.5 million of noncash impairment charges related to the Panther trade name and Vaux equipment and other assets.

Separately, GAAP results included an $8.8 million noncash impairment related to office space in our Asset-Light segment. We also expect to incur approximately $6 million to $7 million of cash costs primarily for severance and employee benefits and the disposal of Vaux equipment, with most of that expected to be recognized in the third quarter. These impairment charges and other related costs are excluded from the non-GAAP results I will discuss today.

Turning to our consolidated results. Second quarter revenue was $1.2 billion, up 16% year-over-year. Non-GAAP operating income was $74 million compared to $45 million in the prior year period, and adjusted earnings per share were $2.38 compared to $1.36 in the second quarter of 2025. At the segment level, Asset-Based non-GAAP operating income improved by $21 million year-over-year, while Asset-Light generated non-GAAP operating income of $6 million, a $5 million improvement from last year.

In the Asset-Based segment, second quarter revenue was $784 million, up 10% on a per day basis. ABF's adjusted operating ratio improved to 90.8%, 200 basis points better than the prior year period and 650 basis points better sequentially. Daily tonnage increased 5% year-over-year, reflecting an 8% increase in weight per shipment, offset in part by a 3% decrease in shipments per day. As Seth mentioned, the continued expansion of our digital quote pool is enabling greater selectivity in the freight we bring into our network, supporting higher weight, operationally efficient shipments that contribute meaningfully to profitability.

We are also seeing a modest increase in truckload-rated shipments, which is further contributing to the higher weight per shipment during the quarter. Billed revenue per shipment increased 13% year-over-year, supported by the heavier freight profile and a 4% increase in revenue per hundredweight, which primarily reflects higher fuel surcharge revenue. On the cost side, operating expenses increased for several reasons, including annual contract increases in union wage rates, higher fuel prices and purchase transportation expense and increased depreciation expense associated with our equipment investments.

In July, Asset-Based daily tonnage increased 8% year-over-year, driven by an 11% increase in weight per shipment and partially offset by a 3% decrease in shipments per day. The higher weight per shipment continues to reflect changes in freight profile. Billed revenue per shipment increased 10% year-over-year, primarily reflecting the heavier freight profile, partially offset by a 1% decrease in billed revenue per hundredweight. Excluding fuel surcharge, revenue per hundredweight declined in the low single digits, primarily due to changes in freight profile. Historically, ABF's adjusted operating ratio has, on average, remained relatively consistent from the second quarter to the third quarter, excluding periods affected by the COVID-19 pandemic and the bankruptcy of a large LTL competitor.

Based on current trends, we expect ABF's third quarter 2026 adjusted operating ratio to be generally in line with the second quarter. Our outlook assumes lower fuel surcharge revenue, partially offset by expected savings from the restructuring actions.

Turning to Asset-Light. Second quarter revenue was $439 million, up 28% on a daily basis year-over-year. Shipments per day increased 15% as strong growth in Managed Solutions continued. Revenue per shipment improved 12%, reflecting higher rates associated with tightening capacity and increased fuel costs. We also made meaningful progress on productivity and costs. Selling, general and administrative expense per shipment declined 12%, driven by productivity initiatives and the higher mix of managed business, which carries a lower cost to serve.

Employee productivity reached another record with shipments per person per day increasing 35%. Together, the improvements in revenue, yield and productivity resulted in Asset-Light non-GAAP operating income of $6 million for the quarter, a $5 million improvement from the prior year period. In July, Asset-light daily revenue increased approximately 28% year-over-year, driven by a 19% increase in revenue per shipment and a 7% increase in shipments per day. Higher revenue per shipment reflects a stronger pricing environment, including the effects of higher fuel surcharge revenue and tightening truckload market capacity. Shipment growth was led by the Managed Solutions business.

Looking ahead, we expect third quarter non-GAAP operating income of approximately $6 million to $8 million. This outlook reflects continued pricing discipline, productivity improvements and anticipated cost savings from our restructuring actions.

Turning to capital allocation. Our priorities remain unchanged. We will continue to invest selectively in opportunities that support profitable growth and attractive long-term returns, while maintaining a strong balance sheet and financial flexibility. Returning capital to the shareholders also remains an important part of our balanced approach. Overall, our second quarter performance demonstrates the progress we can make as market conditions improve and we execute with greater efficiency and discipline. We are encouraged by the improvement in industry fundamentals, the progress across both operating segments and the actions underway to improve our cost structure. Combined with our strong balance sheet, these factors reinforce our confidence in our ability to drive profitable growth and make continued progress towards the financial targets outlined at Investor Day.

With that, operator, we are ready to open the call for questions.

So your first question comes from the line of Brian Ossenbeck of JPMorgan.

Just a quick clarification first for Matt. I know the fuel impact is transitory, but what was the impact in the quarter for ABS OR? And sort of where do you expect that to be in 3Q? Has that sort of wash itself out? And then just stepping back, looking at the trends into July, it seems like they're accelerating across the board for ABS. So it doesn't sound like you're seeing or expecting a big inflection or getting a lot of truckload spillover just yet. So what do you think is causing that? And how do you feel about your ability, capacity to continue to grow here while maintaining service or even improving it?

Yes. Thanks, Brian. I'll get started on your second question and then turn it over to Matt on fuel to answer some of that. So the way I think about July and just our third quarter outlook is really we look at our historical trends and tonnage generally sequentially from June to July decreases about 4.6%. We're down only about 1%. Shipments generally decreased less than 0.5%, right around 0.5%. We're in line with that. Weight per shipment generally goes down about 4.1% in our history, and we're down about 1%. So that's all good signs that we're seeing improvement in the sequential trends versus history.

When we look at our dynamic shipments, they are trending a little heavier, which is contributing to that stronger tonnage. A lot of that has to do with the mix that we've seen as we've expanded that quote pool like we talked about at Investor Day. So, we really expect ABF's third quarter adjusted OR to be generally in line with the second quarter, which aligns with history. And like we said in our prepared remarks, that outlook really reflects lower fuel surcharge revenue. We have unionized wage increases in HWP in July. We have some nonunion increases going in as well. So -- but it also reflects the savings from those restructuring changes that we talked about. Really, the reason that we did the restructuring changes is to simplify how we operate, make it easier for customers to do business with and ultimately accelerate that profitable growth and the cross-sell opportunities that we have.

When I look at our pipeline, it continues to be strong. When we see PMI and the different indexes, it's showing some underlying positive things, but we just haven't seen that demand show up yet. But really, the way I look at it is we focus on things in our control, and we're positioned to take advantage in any environment. So I'll turn it over to Matt to talk about fuel.

Yes. Hey, Brian, so just thinking about the first quarter to the second quarter sequential change, just looking back at continued history, we always see meaningful improvement from the first quarter to the second quarter, about a 350 basis point improvement on average. Certainly, with the dramatic rise in diesel prices during the second quarter, that did have an impact on our revenue, but certainly also had an impact on our cost structure as well. And it does impact items even above and beyond the -- just the cost of fuel certainly carries over to purchase transportation, other maintenance costs that we're seeing. There were also other nice drivers for the quarter, including the improvement in weight per shipment that we talked about on the call, certainly pleased to see that trend. The nice pricing performance that we saw for the quarter was also an impact.

And then just saw continued improvements on the productivity side, if you look on a sequential basis from the first quarter to the second quarter, which is generally what you see just as we move out of weather impacts in the first quarter and see just more shipment density in the second quarter. So a number of different contributions for the quarter that I would highlight, but fuel was definitely one of them.

And sorry, how should we think about that in 3Q? Just kind of a similar factor just going the opposite direction where fuel maybe becomes a bit of a headwind, but you still have all these other tailwinds. So, just thinking it more holistically.

Yes. So we're always looking at the outlook for fuel prices. So we look at the short-term energy outlook from the Department of Energy. We also look at futures prices just to get an idea of where the market is headed. Certainly, that has moved back and forth here over the last couple of months. Just based on our latest read as we were setting guidance, it looked like we're going to be down a little bit in the third quarter on prices versus what we realized in the second quarter. We did bake that into our outlook. But even when you take that into account, we still feel comfortable with the flat guide that we gave for flat sequential performance for the Asset-Based business.

Your next question comes from the line of Ravi Shanker.

This maybe a 2-parter as well. Seth, first for you, can you just unpack the trigger for the action -- the restructuring actions right now on the cusp of the cycle and especially focus on the Vaux retirement because I know that was a big initiative for you guys. And kind of Matt, as a follow-up, just with the PL talking about the potential for getting the biggest rate increases ever, what do you think is the opportunity for you guys to kind of push on yield? Do you think you can get maybe pushing double-digit rate increases kind of going in the next bid cycle?

Hey, Ravi, thanks for the question. This is Seth. So the organizational changes that we announced a few weeks ago, really, they were designed to simplify ArcBest improve efficiency, enhance the customer experience and really allow us to deliver on long-term profitable growth. So, I said it in my prepared remarks, it's not a change in strategy. It's really an acceleration of what we outlined at Investor Day and really reflects that next phase in building a more integrated, scalable and efficient company. So, over our history and throughout this entire freight recession, we've continued to invest in technology, process improvement, commercial transformation and our people alike. So these recent actions really allow us to capture the full value of those investments by simplifying how we go to market, and we believe it's also going to improve the customer experience.

We're bringing the brands together like we talked about. We're also streamlining portions of our organizational structure really to reduce duplication, improve decision-making, standardize some of those best practices and really better align our resources around the highest value opportunities. So, when you look at the actions that we took, we think it's going to improve customer experience and efficiency, like I said. And then the action on the ABF side, where we reduced about 1% of total doors, we still have 8% more doors than we had in 2021. So we believe we're still positioned for growth as the market starts to inflect positively. So we really believe these actions are about just creating a simpler ArcBest, improving customer experience, increasing efficiency and really positioning the company to deliver long-term sustainable growth and long-term shareholder value creation and it really enhances what we outlined at our 2028 Investor Day target.

So then Matt, I'll turn it over to you.

Yes. So Ravi, looking on the truckload rate side, I would say your comment about double-digit increases. I'd say that's generally in line with our near-term expectations, low double-digit increases. Certainly, we're very pleased with the Asset-Light performance that we saw for the quarter with over $6 million of operating income, a $5 million year-over-year improvement. We are seeing some of those benefits from higher truckload rates, accruing to the benefit of expedite. Certainly, that tightening capacity is really helping demand for expedite services, the margins that we're seeing in that business. We are seeing those prices coming up in our truckload business and seeing some of the impacts there, particularly as it relates to our contractual business. And then just the continued growth in Managed Solutions has been a big help in that business as well.

Your next question comes from the line of Chris Wetherbee of Wells Fargo.

Maybe if you could touch on the pricing environment a little bit. I know, I guess, yields ex fuel are down a bit, but clearly, different freight profile, weight per shipment up significantly, and we're seeing some of the volume dynamics maybe come in a bit better than seasonality as you noted for the month of July. So can you talk about sort of pricing and how you think about the direction here? Are we seeing a degree of improvement? I know contractual rate increases is one measure to look at. So how do you think about broadly pricing?

Yes. Hey, Chris, this is Eddie. Yes, I mean, we're really happy with where we are from a pricing standpoint. If you think about where we were last year and how we really started to focus on improving our LTL margins, we started seeing that show up in the first quarter. And as we went into the second quarter, really excited to see that 5.8% annual negotiation increase number. We also implemented a general rate increase on June 22nd of 5.9%, and that's holding very well. You did point out that when you look at revenue per hundredweight, it shows slightly down, and that's really just a story of business mix and a heavier profile that's showing up in our system. Obviously, we do feel like we can continue the momentum that we have right now, and that's really our expectation as we go into the third quarter.

And your next question comes from the line of Jason Seidl of TD Cowen.

I want to go back to the spillover business from the truckload side. If we look back, how much in terms of tonnage growth do you think you lost over the last couple of years, just so we can sort of try to conceptualize what there is the gain going forward? And then the other question I have is related to sort of the historical MoLo business. What changes have you guys made sort of post the Scottish Montgomery decision? And how should we think about insurance costs going forward?

Hey, Jason, this is Seth. I'll take both of those questions. When we think about the truckload migration to LTL, we're seeing modest improvements there where that freight is coming over. It's hard to give you an exact gauge of what the total or historically what that's going to be. Generally, we look in the shipments that weigh heavier than 10,000 pounds, and that's where we're seeing some improvement in that space. But as truckload capacity continues to exit the market as carriers continue to be pressured by margins, the Montgomery case, elevated fuel prices, all the things that you just mentioned, we believe a lot of those certain heavier, more complex shipments that historically have moved in an LTL network will start to shift back, and we're seeing the early signs of that.

When you think about truckload multi-stops, that's just not in their wheelhouse, especially when freight rates improve. So I'm really pleased that we've continued to invest in our network, our fleet, our service capabilities throughout this entire cycle, which I think really positions us great for when the freight patterns start to normalize and those opportunities really do start to shift back to us. So while it's still early, we believe the combination of that tightening truckload capacity and just improving freight fundamentals overall is going to make it so it's going to shift that freight back over to us.

In terms of Montgomery and everything that's going on there, it's obviously an evolving situation. Really, to me, the Supreme Court decision provides just that additional clarity around the legal framework for broker carrier selection and claims and reinforces the importance of strong safety, freight compliance, carrier oversight practices across the industry. We think that's going to take some time to develop as insurance providers and shippers and carriers and brokers, everybody just evaluates the ruling and determines whether any changes to requirements, contracts, things like that are necessary. But safety and disciplined carrier selection has always been a part of ArcBest and how we operate.

We maintain really a structured risk-based approach to third-party carrier onboarding and qualifications. We have ongoing monitoring to make sure that everything is on the up and up. And we believe those are important capabilities when we partner with our customers in managing our risk and their risk. So, when you think about over time, it's really going to favor organizations that have well-established processes like ArcBest, have scale, have technology and dedicated risk management teams, which we have all of those things. So there's going to be continuing discussions around insurance costs and litigation trends, and I think we're still a little early there. But we've been doing it the right way for a long time with strict processes around carrier vetting. So at this time, we don't expect any change in our outlook and what we're doing. We're going to continue to monitor as the landscape evolves.

Your next question comes from the line of Jordan Alliger of Goldman Sachs.

I'm not sure if you discussed this fully. But on the restructuring plan, can you talk about the expected pacing of the realization timing? Is there a spread of that $40 million between Asset-Light and the less than truckload that you could talk about? And then is this augmentative to your longer-term targets from the Investor Day?

Hey, Jordan. It's Matt. So yes, I'll walk you through that at a high level. So in terms of the realization, we realized about $2 million of that cost savings in the second quarter. We expect to recognize about $6 million of that in the third quarter. And then we expect to be at that full run rate of $10 million a quarter or $40 million a year by the first quarter of 2027. And then just thinking about how that breaks down across the business of the $40 million, about 75% of that is associated with our asset-based business. Then on that remaining 25%, about 80% of that is associated with the Asset-Light business and then a small amount around $2 million is associated with our Vaux operation. And as you probably recall, those are expenses that we have historically removed from earnings on a non-GAAP basis. And so just thinking about non-GAAP impact, the non-GAAP impacts -- full impact is going to be around $38 million with the majority of that again concentrated in the Asset-Based business.

And then when you think about our long-term targets, I would say these actions that we're taking really just further our view on the achievability of those targets and they're really more in support of them than something that we're viewing as incremental to them.

Your next question comes from the line of Scott Group of Wolfe Research.

So, I wanted to get your perspective on the revenue trend, right? So April was up 11% and then plus 9%, plus 8%, July up plus 7%. So decelerating a little bit. Is the fuel dynamic at play? Maybe like can you talk to this like revenue per day trend ex fuel? I don't know, just any color or thoughts on the trend?

Hey, Jordan, hey, Scott, sorry about that. Yes, when I look at revenue per day, I really try to go back to my customer conversations that I've had and what we're hearing from them. And really, we're not hearing as much about tariff action or all that different stuff. It's really around oil and diesel prices, manufacturing, inflationary impacts housing construction continues to be weak. So, we're seeing customers who are increasing very strong revenue and then some that are declining. So it's kind of a mixed bag as we go out. Overall freight demand continues to be kind of muted, like we said, but we do have a very healthy pipeline, which makes me feel great. As that truckload capacity comes out of the market, we've had more and more customers come to us and talk about our supply chain solutions, which is why we saw incredible growth within our Managed Solutions segment. And that really feeds all of our service lines, whether it be asset-based, truckload, expedite, all those different areas. So there is no change in the dynamic philosophy and what we've gone to market. The percentages are about similar to what we saw in the first and second quarter. But as we've expanded that quote pool, we've ended up having better freight selection. As that quote pool gets bigger, we need the same amount of shipments that ultimately allows us to select the best shipment for the network that's not only the best shipment to fill empty miles, for example, but also the most profitable.

So that's where that mix and the heavier weight is coming from. But as we talk to our customers and as I see the pipeline results continues to strengthen, that's why I was really happy about the ArcBest View launch because that's going to improve the customer experience, digital engagements, all those different things. So really, the way I look at this is we've built the company for any environment. We've invested through the cycle. We continue to invest and that positions us to say yes when the market does inflect, but [ help there ].

Yes. And Scott, maybe I would just add, really not a significant change when you look at the year-over-year from June to July. We were up revenue per day around 7.9% in June, and we were there right at 7% in July. And there were -- there are some dynamics that are moving in different directions. Certainly, fuel is one where we saw that move lower a little bit, particularly earlier in the month, but we're pleased to see that weight per shipment has continued to strengthen. So we were at 8% year-over-year in June. Now we're at 11% year-over-year in July. And so it's nice to see that both on the core business and through the transactional business, some of those heavier weight shipments coming back in, which certainly has been helping our revenue per shipment metrics.

And your next question comes from the line of Bruce Chan of Stifel.

I just wanted to get at some of the mix impact questions from a different angle here. I don't know if you can just remind us of what the dynamic mix looks like versus the core LTL volume and whether there's any target that you want to manage to? And then I don't know if you can share it, but any differences maybe in the volume or pricing trends that you're seeing between those 2 kind of segments of the market?

Thanks, Bruce. This is Seth. Yes, when I look at our percent mix, we don't disclose the exact percentage of what we do dynamic or transactional and then versus core, but the vast majority of our business is core LTL business. And when we look at retention around those customers, it still remains very strong. They just continue to ship a little bit less because of the weaker demand environment. But as that -- as the demand environment starts to improve, we believe that's going to create some outsized operating leverage for us because we still have all those customers at great prices.

When you think about the transactional business, our dynamic business, all those different markets, it's really about helping maintain consistency in the network. We've spent a lot of time making sure that our service levels are at a great place, and we've executed on that in the second quarter. Our service is in an amazing place, and we hear feedback from our customers, our internal NPS continues to improve. So, it's really about maintaining that consistency in the network with Dynamic. But what's really important to understand, and we've said this before is, we optimize our mix on a daily basis, and it's based on profit maximization based on what the current market has given us and also available capacity there. So as we expand that quote pool, we can be more selective in real time, which in turn improves profitability like we've talked about. So you've seen the improvements that we've made over the long term, and these investments in our tools really give us greater flexibility, especially as the market turns. But we have some of the best visibility into our network that we've ever had in our history with all the tech investments we've made, and I expect further improvements as we continue to expand those capabilities.

Your next question comes from the line of Ken Hoexter of Bank of America.

So I understand you're closing some facilities, 10 LTL facilities as part of the restructuring. I get it's 1% doors. I think you said you're still up 8%. Maybe thoughts on where you think excess capacity is today? How should we see your ability to flex up into the up cycle, both across not just doors, but labor, physical doors and equipment? And then it seems that -- I'm going to ask 2 at the same time, but tons per day are outpacing seasonal norms into July. Maybe thoughts on why that shouldn't support an above seasonal asset-based margin. Is it simply fuel? Or is there anything else there?

Hey, Ken, this is Seth. I'll start with that -- the capacity questions that you had. And then if Matt Godfrey has anything to chime in, he can. But we've said in the past that we really bucket capacity into 3 different areas: people, equipment and facilities. So the people side, we feel like we're in a great spot there. We can add people as needed. We have the most attractive wage and benefit package in the entire industry. So we haven't seen really any recruiting challenges. On the equipment, we've invested over the long term throughout this cycle, have one of the youngest fleets on the road, and that allows us to flex the fleet up or down based off of the demand and what the customer demand is.

So on the real estate side, we worked on a long-term plan that we've discussed over the last 4 or 5 years, starting around 2020, 2021, and we've added over 800 doors to the network. We continuously optimize that network day in and day out. And we did a full review of the network and determined that these 10 facilities were not needed because we could service them at nearby facilities and not actually change the service that we're delivering to our customers. So we've still added about 8% doors in strategic markets where we see growth, service or efficiency opportunities. So I would estimate our capacity is around 15% to 20% excess capacity, and that allows us to flex up or down based off of what the demand is given to us.

So Matt, I don't know if you have anything to add there?

Thanks, Seth. And yes, as you said, there's 3 legs to capacity. We look at it from an equipment, door and a people perspective. We've invested in modeling around each of those areas. So we continue to leverage our total cost of ownership model, and we understand all of our needs from an equipment basis by equipment type and by location. And so we have great relationships with our OEM partners and feel really good about where our equipment is at, our ability to secure our equipment that we desire and keep that within our projected CapEx guidance.

In a similar way, we've invested in manpower planning models, enable us to forecast our labor needs at the system and location level. And Seth already talked about what we've done with real estate, but it's a continuous daily evaluation of our network. And really, when you roll all those things up, the reason we invest in those so heavily is that it enables us to service our customers with excellence, provide that premium experience, give us opportunities for profitable growth as we work towards achieving our long-term targets.

Ken, this is Matt Beasley. Maybe just to follow up on your question about the sequential OR in the Asset-Based business. So like we highlighted, we're expecting performance generally in line with what we've seen in history. You exclude the 2023 quarter where we had just a significant impact from the LTL competitor bankruptcy and you exclude the COVID impacted third quarter in 2020. So we're generally in line. There certainly are going to be some puts and takes there. As we looked at fuel, like I said, just kind of looking at the short-term energy outlook, looking at futures prices, look like that was going to step down a little bit. So we baked that into our guide. We also -- we're going to have some offsets expecting some continued strong performance on the productivity side as we move to the third quarter.

And then we did see the continued strength in weight per shipment in July. We see that moderating a little bit as we move through the balance of the quarter. But certainly, I would say, some potential for upside if for some reason, fuel came in above kind of where we've been seeing it over the last few days or we did see just continued strengthening in those weight per shipment trends.

And your next question comes from the line of Stephanie Moore of Jefferies.

I guess I did want to circle back to a prior question and commentary on the Asset-Light side of the business. I do think we kind of lumped both MoLo and Expedited together. But maybe as we think about what's just evolving over time in the brokerage industry and certainly from a liability standpoint that might be coming post the Scottish ruling, is there anything we should be thinking about as we think about maybe the different components within your Asset-Light business and especially as you kind of address beddings or what's being -- or what processes you already have in place. So I wanted to follow up there. And then I do have a follow-up to that.

Hey, Stephanie, this is Seth. I'll start on that. And then if anyone on the team has anything to add, they can chime in after I get done talking. But I'm really proud of the team for delivering $6.3 million in non-GAAP operating income in the second quarter, especially when you consider we only made $1.5 million in all of 2025. So that's a meaningful change, and it reflects a lot of that strategic action that we've been taking. So as you mentioned, we're really encouraged by the continued truckload capacity tightening. We did hear from a lot of our customers, enterprise shippers have been responding to us positively because we have great service within the truckload side. So, we continue to see a shift towards kind of shorter-term rate increases, mini bids, things like that. So that's been interesting. But a lot of customers are really trying to mitigate their spot exposure, while protecting that strong service that they're used to.

So demand has still been relatively stable. So that's been a good thing, but tender rejections continue to be up quite a bit. So we're encouraged by all those things, but we also saw strong shipment growth really led by managed like we talk about. And a lot of that really comes from all the disruption that we've experienced really over the last 5 years, but that business had another record quarter. And when managed ends up doing what they did, it improves productivity at Asset-Light. But I'd say that improvement in Asset-Light was across the board, whether it's our truckloads solution, our expedite solution managed, productivity was up 35% year-over-year, which is just such a meaningful change. So, I'm also really excited about a lot of the things we have coming up in the future around Asset-Light. The organizational changes that we already discussed is really going to simplify how we operate, improve productivity and improve our growth. We continue to improve productivity amongst our employees across each solution, but also making sure that we're looking at the profitability of our account base. So we've been really strategic about what we do there. And then the tech road map that we've been executing on, I feel like we're probably in the second or third inning of that. We've got a long way to go. And adding Mac to the team has been just a tremendous addition to us. He has a wealth of knowledge and experience, and I think he's going to continue to help us accelerate our results.

And your next question comes from the line of Ari Rosa of Citigroup.

This is Adrian dialing in for Ari. In your prepared remarks, you mentioned that you're not yet seeing a broad-based inflection in industrial demand. Can you just help unpack that a little bit? Are you seeing strength in certain regions relative to like weakness in others, maybe some end markets outperforming others? And when you look at the back half of the year, how do you see these dynamics playing out?

Adrian, this is Seth again. Yes, I mentioned some of those comments. When we look across our customers, health care manufacturing type customers, they operate on a multi bid, multiyear bid cycle. So we're currently working with them to work through that as truckload capacity tightens. When you look at apparel and consumer brands, for example, we're just not seeing too much demand there, but construction seems to be one of the positive areas and a lot of that probably relates to the AI build-out, not so much around housing.

So, when you look at recreational vehicles, we have some customers in that space, their demand remains healthy. So it's kind of a mixed bag when you go across the board. So -- but across all these customer conversations, a lot of the conversation has been around how do we navigate this volatility, how can we mitigate cost with the rapid rise in fuel? And what can you do to partner with us because we trust you with 103 years of experience to mitigate all those things. So tariffs really haven't been much of the conversation. But when I think about how all of that translates into 2026 and the remainder of the year, I continue to have confidence in our long-term outlook and those targets we outlined at Investor Day. We don't really operate on 1 month or 1 quarter. We're really focused on our long-term success, and you do that by partnering with customers, building that trust and delivering a premium service to them.

So -- but at the same time, we recognize there's a lot going on around supply side of the market, fuel volatility, inflation, all the different things. But at the end of the day, we are focused on things in our control. We're executing our strategy. We're simplifying the organization, accelerating decision-making, expanding our technology capabilities to improve productivity and strengthening our integrated approach, which we think is going to deliver long-term shareholder value as well as long-term customer value.

And your next question comes from the line of Jeff Kauffman of Citizens Bank.

I just want to go back to Jordan's question. On the Asset-Light, when you gave the original 2028 guidance of $40 million to $70 million in adjusted operating income, were these actions that you're taking now to consolidate the business, consolidate costs anticipated in that number? Is it incremental to the number? And just a follow-up, I guess, one of the other questions, an 8% change in average weight per shipment is pretty significant. What does that look like? Is that just pallets are getting heavier because of freight mix or because demand is increasing? Or are we moving a different kind of freight that just weighs more?

Yes, it's Matt. So thinking about our 2028 target, great to have you back covering stock. So when we think about 2028 targets, particularly around the Asset-Light business, so when we laid those targets out, we did anticipate that we were going to be working on efficiency, our cost structure. We knew we had progress to make there. So that was anticipated. Just kind of looking at the $40 million in savings, about $8 million of that is attributable to the Asset-Light business, $30 million is attributable to the Asset-Based business and then $2 million attributable to the Vaux business. And the $8 million there, that is what we would consider to be baked into the 2028 targets at this point and really feel good about the progress that we've been making in the Asset-Light business, just kind of thinking about where we are year-to-date there, we're up over $9 million for the year in operating income, again, kind of a similar quarter expected for the third quarter and with our outlook of $6 million to $8 million. And then if trends continue, we could see something similar to that in the fourth quarter as well, which certainly makes for a very nice year for the Asset-Light business and certainly just continued improvement and strengthening there.

Yes. I would add to that, too. When we look at each of the segments that we mentioned, whether it's truckload, managed, expedite, all of those areas are on track with what we anticipated in the 2028 targets. And then you had a question about weight per shipment and what's going on, right, with everything. And a lot of that, when we look at weight per shipment, it really is broken down into a few different categories. Our core business, which is the bulk of our LTL shipments, those customers continue to just ship a little bit less. Now we're seeing some good things there, some early signs, but it's still too early to say, hey, demand has flipped on us. But we are seeing some encouraging things. So the bulk of our business is just down because customers are shipping less. But like I said earlier, retention is in a good spot.

Now dynamic shipments, as we've expanded that quote pool, those shipments do look a little bit different because we have more optionality to optimize the network and maximize the profit that we can achieve. So those shipments do look a little bit different. And then something that's different versus history with our business versus others is our U-Pack business is just down because housing continues to be down. Those are generally smaller number of shipments, but heavier shipments. So that continues -- no real change sequentially there. But just when you're looking at historical figures, that is having an impact. So I'd say dynamic mix is changing slightly, but we believe it's a better outcome, but the core business continues to remain pretty consistent.

Okay. And there are no further questions at this time. I will now turn it back to Amy Mendenhall for closing remarks.

Thank you to everyone who joined us today. We certainly appreciate your interest in ArcBest. Hope everyone has a great day.

Ladies and gentlemen, that concludes today's call. Thank you, everyone, for joining. You may now disconnect.

Good morning, and thank you for standing by. Welcome to the ArcBest First Quarter 2026 Earnings Conference Call.

[Operator Instructions] As a reminder, this call is being recorded. I will now turn it over to Amy Mendenhall, Vice President, Treasury and Investor Relations. Please go ahead.

Good morning. I'm here today with Seth Runser, our President and CEO; and Matt Beasley, our Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session. Before we begin, please note that some of the comments we make today will include forward-looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward-looking statements section of our earnings release and SEC filings. To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional Information section of the presentation slides. You can access the conference call slide deck on our website at arcb.com and our 8-K filed earlier this morning or follow along on the webcast. And now I will turn the call over to Seth.

Thank you, Amy, and good morning, everyone. The first quarter brought a challenging operating environment with severe winter weather, higher fuel prices and continued uncertainty. Even so, we remained focused on what we can control, executing our long-term strategy with discipline and advancing initiatives that support profitable growth, efficiency and innovation. I am incredibly proud of how the ArcBest team responded. In a dynamic environment, they stayed disciplined, remained close to our customers and continued delivering flexible, efficient and integrated solutions to meet evolving needs. Customer demand has remained steady, and we continue to see improvement in our pipeline. While the timing and pace of a broader recovery remains difficult to predict, conditions are becoming more constructive. Leading indicators of manufacturing activity have moved into expansion, which is supportive of future freight demand. At the same time, truckload markets are showing early signs of tightening as capacity continues to exit the industry, driven in part by regulatory enforcement and higher operating costs. In our customer conversations, there's an increasing emphasis on execution, reliability and visibility, and those priorities align closely with how ArcBest serves its customers. Against that backdrop, we will launch ArcBest View in May. This platform enables customers to quote, book and track shipments across our logistics solutions through a single intuitive interface. We developed ArcBest View in close partnership with customers, and early feedback has been very encouraging. Combined with our integrated solutions and continued progress in our digital capabilities, this platform enhances our ability to help customers respond quickly, manage complexity and build more resilient supply chains. Importantly, this launch reflects a broader set of capabilities we have been intentionally building over time. Our investments in the network, technology and operating tools have strengthened execution today, while expanding what we can deliver for customers going forward. We continue to advance the initiatives we outlined at Investor Day, and our team remains focused and aligned on achieving our long-term targets. Let me walk you through our progress for the quarter. In the Asset-Based segment, daily shipments increased 2% year-over-year to nearly 20,000 shipments per day. While severe winter weather affected volumes and service earlier in the quarter, service has since normalized and remains at a high level. The investments we've made in our network, equipment and labor planning tools position us to sustain strong, consistent service through the summer months and across the balance of the year. We also remain disciplined on pricing. Deferred price increases averaged 6% in the first quarter, our strongest result since the third quarter of 2022. That reflects our continued focus on revenue quality. In addition, the expansion of our dynamic quote pool has given us greater ability to make real-time pricing decisions, allowing us to be more selective and further optimize yield and profitability. Demand for our managed solutions offering continued to build during the quarter, resulting in another record performance and double-digit growth in daily shipments. This momentum reflects a stronger pipeline, deeper customer engagements and the value our team brings as they help customers manage increasingly complex supply chains. In Truckload, we remain focused on optimizing freight mix and maintaining pricing discipline. Revenue per shipment improved meaningfully both year-over-year and sequentially, driven by a tighter capacity market, higher fuel prices and improved yield quality. Across the business, we continue to make progress on efficiency and innovation initiatives. Continuous improvement training has now been implemented across approximately 75% of the network. Teams are focused on process discipline, safety and adoption of new tools, and that work is producing tangible results.

To date, these efforts have generated $32 million in annualized cost savings, with additional benefits expected as implementation continues through the remainder of the year. We are also making meaningful progress with our city route optimization project and remain on track to complete the latest phases of deployment. This AI-enabled initiative is reducing manual work, improving route planning and increasing asset utilization across the network. Phases 2 and 3 are expected to be fully operational in the coming months.

To date, the program has delivered $15 million in annualized savings while also improving network efficiency and service. The success we are seeing with city route optimization reflects a broader philosophy at ArcBest. We start with strong ideas, test them in the business, learn quickly, refine what works and then scale with discipline. That approach is shaping how we deploy AI and is guiding the next wave of initiatives across our technology road map. Our AI strategy is deliberate and closely aligned with our business priorities. We are deploying AI where it can create meaningful operational and financial impact, and we are embedding AI capabilities into core initiatives across the organization. Just as important, we are not forcing a single solution across a complex business. Instead, we are applying the right tools for the right needs. This approach allows us to move with speed and purpose while maintaining the governance required to ensure these solutions are secure, responsible and scalable. We believe AI delivers the most value when it strengthens our people and enables better decision-making. Our approach is practical and disciplined. We are investing in initiatives with clear return, partnering externally where it accelerates progress in combining advanced technology with the network, processes and expertise that already differentiate ArcBest. Most importantly, our customers remain at the center of this work. Digital tools are helping us serve them better, while the expertise, responsiveness and reliability they expect from ArcBest remain unchanged.

Across our technology road map, including AI-driven initiatives, we are aligning resources, simplifying processes and using data more effectively to help offset inflationary cost pressures, improve decision-making and lower our cost to serve. That work is driving meaningful productivity gains across the business. In Asset-light, for example, we continue to improve how we manage and optimize buy rates, particularly as market conditions shift. Initiatives such as offer collection, automated negotiation and capacity sourcing augmentation are enabling faster, more informed decisions. Taken together, our technology and AI initiatives are strengthening our business.

They are improving how we work, enhancing operational performance and helping our best execute effectively today while building for the long term. Looking ahead, we remain focused on removing barriers and simplifying how work gets done across the organization. That means enabling teams to collaborate more effectively, move faster and stay focused on what matters most to our customers. As we continue to align and streamline our operation, we are strengthening our execution today and building a more agile, scalable ArcBest for the future. With that, I'll turn the call over to Matt to walk through the financial results.

Thank you, Seth, and good morning, everyone. In the first quarter, disciplined execution, operational focus and cost control enabled us to navigate a challenging environment while continuing to position the business for long-term success. On a consolidated basis, first quarter revenue was $1 billion, up 3% year-over-year. Non-GAAP operating income was $13 million compared to $17 million in the prior year period, and adjusted earnings per share were $0.32 compared to $0.51 in the first quarter of 2025. At the segment level, Asset-Based operating income declined by $9 million year-over-year, while Asset-Light generated non-GAAP operating income of $3 million, an improvement of $4 million from last year. Turning to the Asset-Based segment. First quarter revenue was $655 million, up 2% on a per day basis. ABF's operating ratio was 97.3%, which was 140 basis points higher than last year and 110 basis points higher sequentially. Daily tonnage increased 7%, reflecting a 2% increase in shipments per day and a 5% increase in weight per shipment. Our large and growing digital quote pool continues to improve our visibility into demand and expand our options within the network. That has allowed us to target certain heavier shipments that fit well operationally and generate attractive incremental profit contributions. Revenue per shipment increased slightly, supported by the higher weight per shipment, but that was partially offset by a 4% decline in revenue per hundredweight, which primarily reflects the shift in freight profile toward heavier shipments. On the cost side, operating expenses increased for several reasons, including additional labor needed to support shipment growth, annual contract increases in union wage rates, higher fuel prices and increased depreciation expense associated with our equipment investments. Turning to trends so far in April, shipments per day are down 1% year-over-year, while weight per shipment is up 6%, resulting in daily tonnage growth of 5%. We are beginning to see modest improvement in truckload-rated shipments, which, along with other changes in freight profile is contributing to the higher weight per shipment. Revenue per shipment in April has increased 10% year-over-year, driven by the heavier freight profile and a 4% increase in revenue per hundredweight, largely reflecting higher fuel surcharge revenue.

Excluding fuel surcharge, revenue per hundredweight declined in the low single digits, primarily due to changes in freight profile. Sequentially, from March to April, weight per shipment is flat. Shipments per day are up 1% and tonnage per day is also up 1%. Revenue per shipment has improved by about 4% due to a 4% increase in revenue per hundredweight, largely reflecting higher fuel costs. Excluding fuel surcharge revenue, revenue per hundredweight was slightly positive on a sequential basis.

Fuel impacts became more pronounced in April than they were in the first quarter, which included only 1 month of elevated fuel prices. Higher fuel costs increased fuel surcharge revenue, but they also raised operating costs across the network. While our fuel surcharge mechanisms are designed to recover higher fuel costs over time, periods of rapid fuel price movement can create short-term timing differences between when revenue is recognized and when those costs are incurred.

Historically, ABF's non-GAAP operating ratio improved by approximately 350 basis points from the first quarter to the second quarter. Based on current trends, we expect second quarter performance to improve sequentially by approximately 400 to 500 basis points. This outlook reflects continued momentum in our commercial pipeline, disciplined execution on pricing initiatives and the impact of recent fuel price movements. Turning to the Asset-Light segment. First quarter revenue was $378 million, up 7% on a daily basis year-over-year. Shipments per day increased 10% and reached a new first quarter record as strong growth in Managed Solutions more than offset our strategic reduction of less profitable truckload volumes. Revenue per shipment declined 3% as higher rates associated with tightening capacity and increased fuel costs were more than offset by a greater mix of managed business, which typically involves smaller shipment sizes and lower revenue per shipment. We also made meaningful progress on the cost side.

Selling, general and administrative expense per shipment declined 15% to the lowest level on record, driven by productivity initiatives and a higher mix of managed business, which carries a lower cost to serve. Employee productivity also reached a record high with shipments per person per day increasing 26%. As a result, the Asset-Light segment delivered non-GAAP operating income of $3 million in the first quarter. Turning to April trends for Asset-Light. Daily revenue is up approximately 24% year-over-year, driven by 17% shipment growth, led by our managed business. Revenue per shipment has increased 7%, reflecting higher fuel costs and early signs of tightening capacity in the truckload market. Looking ahead, we expect second quarter non-GAAP operating income in Asset-Light to be in the range of approximately $1 million to $3 million. This outlook reflects continued yield discipline, active cost management and improved productivity performance, which together provide a solid foundation for long-term profitable growth. Turning to capital allocation. We continue to take a balanced long-term approach that supports growth while maintaining strong financial discipline.

Many of the network, technology and productivity investments needed to support future growth are already in place. As market conditions improve, we believe the business is well positioned to benefit from improving demand without a meaningful increase in capital requirements, which should support attractive returns on invested capital. Returning capital to shareholders remains an important priority.

In the first quarter of 2026, we returned more than $10 million through a combination of share repurchases and dividends. Looking ahead, we expect to remain opportunistic with repurchases based on share price while continuing to prioritize high-return organic investments and a disciplined approach to leverage. Our balance sheet remains a significant strength. We have ample liquidity and a net debt-to-EBITDA ratio that is well below the S&P 500 average. This financial position provides flexibility to navigate uncertainty, invest where we see attractive returns and respond quickly as opportunities emerge. As Seth said, we are staying focused on what we can control, executing our long-term strategy with discipline and advancing initiatives that support profitable growth, efficiency and innovation. As we look ahead, we remain confident in our strategic direction and in our ability to deliver the long-term targets we outlined at Investor Day. With that, operator, we are ready to open the call for questions.

[Operator Instructions]

The first question comes from the line of Ravi Shanker from Morgan Stanley.

You said at the top of the call that you're seeing conditions becoming more constructive. Can you help unpack that a little bit which end markets, maybe which parts of the country you're seeing that? And do you expect that to be fairly broad-based through the course of the year?

Robbie, it's Seth. Thanks for the question and good morning. We are seeing demand trends that have started to stabilize, though overall levels still remain below mid-cycle norms. Manufacturing/ housing continues to pressure our volumes like we've talked about in the past, and that's particularly around weight per shipment, which really remains below normalized levels for the network. Despite these headwinds, we were able to grow shipments by 2% in Asset-Based year-over-year, and our dynamic shipments are starting to trend heavier as well, and that reflects some improving freight selection that we've had in the network. April tonnage and shipments have also increased sequentially. They've tracked in line with normal seasonality, and that's an encouraging sign as we move through the rest of the year. And really where our focus is, is on pricing discipline, service consistency and cost control while really staying closely engaged with our customers during this volatile time with fuel prices and everything that's going on. Capacity fundamentals continue to move in a more constructive direction, and that really provides the earliest sign of a more balanced market ahead. You've heard about the ongoing truckload carrier exits, just tighter regulatory environment, aging industry fleets, which makes me happy that we've invested in our fleet throughout this cycle. So the timing of the demand inflection still remains uncertain, but the supply rationalization is progressing, which is good. You've seen manufacturing PMI move into expansion territory these past 3 months, and that's just an important directional indicator of where freight demand is going. Housing/ automotive still is constrained, but they could improve as rate cuts and things like that happen, hopefully later in this year. So -- but as conditions normalize, our available network capacity, strong customer relationships and our pipeline position as well to capture incremental demand efficiently and productively. I've spent a lot of time with customers over these last 3 months. And really, what's clear to me is they're gravitating towards partners. They trust organizations that can bring consistency, insight and stability during times like this because it just continued to be a rapid change. And we really view markets like this as an opportunity, and we've made purposeful investments throughout this cycle to ensure we're positioned ahead of the next inflection. So in short, we're investing, listening and executing, delivering value for our customers and shareholders regardless of the broader environment.

Your next question comes from the line of Chris Wetherbee from Wells Fargo.

I guess I wanted to pick up a little bit on some of the comments you made about TL-rated freight and maybe think about the broader truckload market and what it might mean in terms of volume shift back over. It seems like maybe on the margin, you're seeing that. You noted regulatory improvement was kind of moving in your favor there. So I guess as you think about the rest of the year beyond what you've seen so far in April, I guess, what does that opportunity look like? What would you expect to see it in terms of a tailwind from a volume standpoint?

Chris, Seth here again. We'll -- I'll talk through the truckload side and then Eddie can make some comments on just some of that truckload-rated business moving into asset base. But on the truckload side, most enterprise shippers are responding positively and granting increases where needed because they're seeing what's going on with capacity. We've seen a shift in the shorter-term rate increases as well as mini-bids to mitigate our spot exposure while maintaining the service that our customers expect. And like I said in my previous comment, demand is more stable, but those supply constraints continue due to increased costs, the regulatory pressure, all those things that are going on. So spot rates are currently exceeding contract by 15% to 20%. Normalized for fuel, we've seen contract increases in the low to mid-single digits in the first quarter year-over-year. And we expect as we move through second and third quarter, it's probably going to be in the low to mid-double-digit range. This is from the truckload side. So moving forward, we're going to continue to optimize our truckload volumes to bring on profitable new business and shed some business that we can't profitably execute on. But I've been really impressed by the team. If you look at our asset lights in the first quarter, we delivered $3 million in profitability. And all of last year, we only delivered $1.5 million through all of 2025. So really proud of the team and the execution there. And I'll turn it over to Eddie to talk about some of the truckload-rated shipments moving into the Asset-Based network.

Yes, Chris, this is Eddie. Just kind of mentioned this earlier, but we have seen a tighter truckload capacity market that's producing higher spot rates. And then you combine that with higher fuel prices, and we're starting to see some early signs of business push into our integrated logistics solutions and LTL. Really the first signs in our transactional markets, we're up to over 250,000 quotes a day. So we're -- we have an opportunity to get early signs of potential spillover back from truckload to LTL. It's really just given us a great opportunity to find the highest quality revenue that's in those opportunities and then deploy whether it's dynamic pricing or one of our volume quote facilities to kind of capture that business where it makes sense in our network. So I would say it's a robust spillover, but there are some early signs of some of that coming back to the LTL and our integrated logistics offerings.

Your next question comes from the line of Jason Seidl from TD Cowen.

I wanted to talk a little bit about your comment that we're sort of not yet near the mid-cycle. You're clearly getting much better pricing right now, which is pretty impressive. As we move towards the sort of mid-cycle demand stage, where do you see pricing going, all other things being equal in the truckload space?

Yes. Jason, this is Seth again. Good morning, Core LTL pricing continues to improve, and that's really supported by the rational market, the disciplined actions that we've continued to take even despite the softer environment. We expect that discipline to hold as market conditions evolve. You saw in our notes that deferred contract renewals increased 6% in the quarter. That's our strongest result since the third quarter of 2022. And that really reinforces the confidence and durability of those core customer relationships that we had. The customers are still with us, just shipping less as we've talked about throughout the cycle. So as volumes recover and capacity tightens, we expect that pricing discipline to persist and ultimately translate into further rate improvement. And also as volume improves, we expect more core business from our current customers because what I mentioned was the retention stats earlier. Now what Eddie touched on a little bit ago was our strategy for the dynamic quoted freight, it's unchanged, but its effectiveness improves as that quote pool expands like we talked about at our Investor Day. So a larger quote pool gives us more selection within the targeted freight universe, and that allows us to choose what freight fits best in our network to deliver high-quality pricing and profitability. And those shipments have trended a little bit heavier as that quote pool has expanded over the past 6 months, I'd say. As that optionality increases, we get that better pricing. But also as we look at our core pipeline, it continues to be a lot stronger. So as we get new business wins, we get flexibility to optimize mix and maximize incremental profit contribution. So -- we've had a long history of pricing discipline. We evaluate books of business based on how each account performs in the network, not a single pricing metric. And we remain focused on profitable growth, ensuring that we're properly paid for the value that we deliver. And we continue to make targeted investments in service, efficiency, enhancing the customer value proposition while improving our cost structure. And ArcBest View rolling out in May is just another example of that. The feedback has been great from our customers thus far. So we're going to continue to focus on serving our customers efficiently and make sure that we're pricing disciplined as we move through the cycle.

Your next question comes from the line of Scott Group from Wolfe Research.

So with the OR guide for Q2 outperforming seasonality, any way to put some additional color there on what's driving that? How much of that's sort of the flow-through of fuel versus maybe tonnage getting better? Just any thoughts there? And then just one more follow-up on fuel. If I look back at prior periods where we've seen such big increases in diesel costs, we've typically seen a bigger spike in Rev per Shipment trends, Rev per hundredweight trends. Is there anything different about sort of how we should think about fuel for you right now than maybe what we've thought about in the past?

Yes, Scott, it's Matt. So just thinking about some of the sequential trends as we think about first quarter moving to second quarter, really, it's across the board where we're seeing outperformance versus what we would expect. And so that's -- if you look at revenue per day, shipments per day, daily tonnage, weight per shipment, revenue per hundred weight, all of those, as we look to the current projection for the second quarter are outperforming where we see the 10-year history. And so certainly, fuel was a factor in the first quarter, some of the fuel volatility. We still would have been within our guidance range for the quarter even without the fuel changes. The fuel changes are not the primary driver of the outperformance in the second quarter. They are a driver of the performance that we're projecting, but really, it's strength across the business, both on the commercial side and on the yield side that are driving the sequential OR performance. Again, if we look at the 10-year history, we see around 350 basis points of improvement when we move from the first quarter to the second quarter. But when you take into account the strength that we're seeing, again, like I said, across the board across revenue shipments, tonnage, weight per shipment, revenue per hundredweight pricing, take all that together, and that puts us in that 400 to 500 basis points of improvement that we're projecting for the quarter.

Your next question comes from the line of Jordan Alliger from Goldman Sachs.

I just wanted to come back to sort of the weight per shipment. I know you guys have mentioned your change in freight profile and mix is a big part of it. Of course, historically, weight per shipment has often been correlated to improvement in the economy. So I'm just wondering, is some part of this weight per shipment strength that you're seeing even as we go into April related in your mind to the economy? Or is it truly just the mix shift?

Jordan, it's Seth here, and good morning, Our weight per shipment on our core business is still being impacted by just the softer manufacturing economy that can cause shippers just to reduce the shipment size like we've discussed in the past. But as I mentioned, our retention is in a great place. So we're starting to see our core business start to produce more. I mentioned dynamic shipments have been trending heavier. So that's going to impact weight per shipment. And that really is the direct result as we've expanded that quote pool, it's allowed us to be more selective in real time optimizing our yield, our network and our profile and profitability. So that increased visibility and optionality of that larger quote pool really allows us to accept certain heavier shipments that fit well within our network. In April, year-over-year weight per shipment, it's up about 6%, and that's impacted by the heavier dynamic shipments as well as a little bit of those truckload-rated shipments that Eddie mentioned earlier as well. So we're beginning to see modest improvements, but I would say it's still pretty early there. As a reminder, we're impacted a little bit more than others on weight per shipment because of the U-Pack service that we offer. With housing market where it is and interest rates, it's resulted in fewer household good moves, which are generally smaller amount of shipments, but just heavier in nature. And normally, from first to second quarter, we see our U-Pack business start to improve, but it's still below historical norms. So we got a lot of operating leverage there. So we believe that more of this truckload freight is going to move back into the LTL space as capacity normalizes in the truckload space that we've mentioned already as well. And also our pipeline within our managed business continues to grow. And as managed grows, that feeds our other service lines, and we get to select the best freight for the network. And really, we've been through a lot of cycles in our history and -- there's still a lot of uncertainty out there. But what I've been proud of the team is they focused on execution, staying close to our customers and being disciplined with price because we are built for any environment, whether it's up, down anyway, what customers appreciate in these conversations is they're able to partner with us and say, "Hey, my fuel is going up'; or 'This is going on'; or 'I can't find capacity.'; We partner with our customers because we want to say yes. That's really what our strategy is. So we have one of the best teams in the industry, and I'm confident in our ability to execute in the short term and the long term regardless of the environment that's going on.

Your next question comes from the line of Bruce Chan from Stifel.

Just a question here on the Asset-Light business. I know you've been pretty focused on productivity there. It seems like a good chunk of that is coming from the mix of managed business. Assuming that we're kicking off the cycle here, how are you thinking about shipment growth and maybe the need for additional headcount in truck brokerage? And sorry if I missed this in the opening remarks, but maybe you can remind us of what the spot contract mix looks like there, too.

Bruce, Seth again. I'll start out and then if Mac has anything to add, he'll chime in as well. But I'm really proud of the team for delivering $3 million in non-GAAP op income for the first quarter. Like I said earlier, we made $1.5 million in all of 2025. So we started out the year strong there. And we're encouraged by the continued truckload capacity exits that we've seen. We did see strong shipment growth led by Managed who had another record quarter, and that speaks to the investments that we've made throughout this cycle to position managed as a truly integrated logistics company. Operating expenses were lower, and we ended the quarter with record high productivity within asset-light and also record low SG&A cost per shipment, which all contributed to that improved productivity. This is due to the investments that we've made throughout this cycle in technology and trying to grow without having to add the headcount and also what we've done to develop our employees to make sure that they're ready for the next cycle. So shipments and revenue are strengthening in April. So we mentioned our op income range there of $1 million to $3 million in our 8-K, but we continue to take actions to adjust our cost to better align resources to match business levels. But what I'm really excited about is Mac has 3 months under his belt. He's been a huge addition to our team. We continue to work to improve the profitability of our account base. We're focused on improving productivity with technology deployments, and we're in the early stages of a lot of that. So I'll turn it over to Mac to see if he has anything to add.

And Bruce, it's Matt. Maybe just one more thing I'll add. So if you look at the spot versus contract mix that we had over the last year, it's pretty evenly split, roughly 50-50, and that's the level that we saw as we move through the first quarter as well.

Your next question comes from the line of Tom Wadewitz from UBS Financial.

So I wanted to circle back a bit. I know you had some questions on pricing environment in LTL. If we look at it and say, in fuel in 2Q, right, you've got revenue per shipment sounds like it's up pretty nicely in April, but it also sounds like a lot of that is fuel. So when do you think -- like what's the lag we should consider with the stronger the 6% contract renewals and also weight per shipment, if you think of it and say, ex-fuel revenue per shipment, right? Because it sounds like that was maybe kind of flattish if you look at April versus March. So just, I guess, more perspective on when do we see that improvement in pricing drivers flow through to revenue per shipment ex fuel what's the time lag on that?

Yes. Thanks, Tom. This is Seth, and then I'll start and then turn it over to Eddie. So I just wanted to hit on fuel a little bit because fuel surcharge is really just one component of pricing, generally protects us with our fuel surcharge mechanism as fuel price increase and then as it decreased, it protects or helps customers positively. So -- but fuel surcharge, it covers more than just fuel costs, and that's what I wanted to jump in because it's propane forklifts. -- it's rail, it's purchase transportation. It's all those other costs that I wanted to mention. So it's not just on the revenue and the freight we move, we also have additional costs there. So -- and I'll turn it over to Eddie to talk about your other question.

Yes. So I really think about from a yield perspective, this was something we really focused -- started focus on in the second half of last year. So with a really strong result in the first quarter of this year, over 6% with our increases, we're building to, I think, a better overall mix of business in our core LTL. And obviously, with the fuel prices going up, it doesn't just come with higher revenue. There's higher costs and the timing of the fuel surcharge and those costs sometimes makes it a little harder to see the benefit that would come from that situation. But overall, we feel really good about the mix of business we have. The yield discipline is strong. We're committed to continuing to improve on our prices with LTL. And what gives us confidence in that is we've had a strong growth in 2025 that's continuing in 2026. Our sales pipeline is robust and continues to be strong, especially with our managed solutions. [ We've mentioned ] several times now, but expanding flow pool is going to allow us to really further adjust our business mix to get us the most profitable business for our systems and our network. So we feel really good about where we are from a yield perspective. And even with fuel potentially changing up or down, our yield fundamentals are going to continue to stay strong.

Okay. And then if I...

Your next question comes from the line of Brian Ossenbeck from JPMorgan.

A question just on the -- maybe Matt can chime in too, just on the -- all the headlines we've seen in terms of truckload brokerage with the risks of Chameleon carriers with bigger focus coming up with the Montgomery case, of course, and how that safety risk might be extended or liability risk might be extended to truckload brokers. Just want to see if there's anything you're doing with your carrier base based on some of the recent headlines and what's coming down the pipe from potentially regulatory and even from the Supreme Court. And then if that were to go through and the court finds that the liability should be extended to the brokers, what do you think that does for the industry in general? So I know there's a lot of moving parts out there, but clearly, it looks like it's going to be something we talk about for a while. So I'd love to get your thoughts on that.

Yes, Brian, thanks. This is Seth here. So I'll answer your first question just about everything that's been in the news there. Safety has really always been fundamentally how ArcBest operates. And while the recent media attention is really focused on specific situations, we really remain focused on disciplined execution and consistent operating practices that align with the applicable laws and regulations. So we use a structured compliance-based process to select and monitor third-party carriers with ongoing visibility into authority, insurance, safety status and carriers that don't meet those requirements are not eligible to move freight for us. So the FMCSA provides this national regulatory framework for carrier safety. We operate within that, obviously, but we also invest in systems and processes that support a disciplined risk management and operational consistency. So -- at this time, we don't expect these developments to change our outlook or our approach to safety and compliance because it's already embedded in our operation and reflected in how we run the business. So our customers expect us to operate safely and responsibly, and we continue to engage in open and constructive dialogue with our customers to support their long-term growth goals. So as far as truckload capacity and what's going on with all that, when you look at the continued supply chain [ exhibits ] of the truckload factors, that's due to bankruptcies, these regulatory things that you mentioned. There's also a lot of things going on with the Lila's Law, non-domiciled CDLs. There's just a lot going on overall. So really, at the end of the day, what we do is focus on things we can control, partner with customers to navigate this uncertainty, and we believe we're positioned with our service being in a great place to lead with the great opportunities and have great conversations with our customers. So I hope that answers your question, Brian.

Your next question comes from the line of Stephanie Moore from Jefferies.

I wanted to maybe talk about your 2028 targets. Obviously, when you originally gave those targets, the macro or the underlying freight environment was in a different position than it seems to be today. So maybe just talk a bit about progress towards those targets with a bit of a firmer macro or what appears to be a freight environment. Maybe talk a little bit as you think about those targets.

Stephanie, we have confidence in our long-term view and the targets we outlined at Investor Day. We didn't expect a significant freight recovery in 2026 in those targets. So we're [indiscernible] before we anticipated, but we still need to see more consistent demand. We're encouraged by the truckload exits that we mentioned earlier and 3 positive months of PMI reading. Obviously, the war in Iran and corresponding increases in fuel could impact inflation, interest rates. But we are seeing the effects of the supply side and we look -- as we're looking for demand to continue to inflect. Really, when I think about our business across both Asset-Based and Asset-Light, our focus is building a scalable, disciplined operation that can fully capitalize not only on our initiatives, but also the operating leverage that we have within the business. So -- over the past several years, we've invested a lot in our network and technology productivity, remain very disciplined on pricing, as Eddie mentioned earlier. And as the market improves, we expect those investments to translate into greater network density, better utilization of excess capacity, more freight per stop, and that's going to allow incremental volume to flow through resources that are already in place. So at Investor Day, we outlined the earnings potential as the market inflects in our Asset-Based business, we modeled about 100 basis points of non-GAAP operating ratio improvement versus 2024 with an upside of up to 280 basis points if industrial production returns to trend and housing normalizes and truckload spot rates improve. In Asset-Light, we modeled a $10 million improvement in expedite and a $75 of net revenue per shipment per year with upside potential of up to $30 million as expedite manufacturing recovers and truckload rates normalize. And then truckload brokers, we've talked about for every $10 of margin per shipment expansion, it equates to $3.5 million of incremental profit to the bottom line. So as volumes inflect, we expect this incremental margin to improve, and we feel good that we're on pace to achieve our long-term goals that we outlined at Investor Day.

Your next question comes from the line of Ari Rosa from Citigroup.

So the connection wasn't great there, so I may have missed a little bit of that. But Seth, you've now been in the CEO seat for a few months. Obviously, the business isn't new to you, but I'd love to hear your reflections after a few months in that seat and how you're thinking about potentially things differently from how Judy was running the business. Obviously, you have the long-term targets, and we understand there's quite a lot that implies to where we currently stand. But just kind of broaden that out and talk about how you're thinking about managing the business and what your objectives are that might differ from your predecessor?

Perfect. Thanks, Ari.Good morning, Well, I want to start with that I believe in the strategy of our company and also our ability to achieve those long-term targets that we outlined at Investor Day in September. I always go back to the customer and in my customer conversations, our solutions resonate with them. We really differentiate ourselves in the marketplace as a logistics partner with assets -- and that's really different from a lot of what our competition does. And by finding ways to say yes to our customers, we feel that's going to position us well for greater revenue, profit and account retention. So really, what I've been focused on is optimizing our sales resources, putting people in the best position to succeed, win and grow business as well as grow these long-term relationships that we've had. We continue to optimize our cost structure. We've also worked to improve customer experience. And that's why I think when ArcBest View launches in May, it's really going to be differentiated in the marketplace and allow us to give out -- give our customers the information that they're searching for in a self-serve manner. So in my first 3 months in the role, I really believe accelerating our strategy will drive sustained value creation for customers and shareholders. In the environment, it's just been unpredictable really throughout the last 5 or 6 years, but -- but I can tell you why I'm confident in the future. Our strategy is sound. We've navigated this market downturn very well. We're ready for any changes that lie ahead. We have a tremendous amount of operating leverage in the business when the market does turn. This team focuses on things in their control, and we view these times as opportunities. We positioned ourselves for growth with all the investments we've made over the last 5 years as well as margin expansion with the investments in the asset-based network, technology. I just feel like we have so much opportunity in front of us, and we're seeing it through strong pipeline numbers, new business, continued acceleration of our cross-selling efforts. Our tech-enabled initiatives continue to progress at a much faster clip. I've been really proud of the tech team and what they've been able to deliver for our business and our customers. And we continue to win external awards, which to me really validate the strategy and tells me about the value we're bringing to the market is differentiated, and that's going to allow us to win in the short term and long term. So my goal is really to accelerate that progress we've already made. But I can tell you, none of this would be possible without our amazing people. So our people are the heart of our success. I spent a lot of time with our employees. I really couldn't be more prouder of the work they do for our customers day in and day out. So we feel we're positioned to deliver on our long-term targets, deliver value for our customers, which will ultimately translate to shareholder value creation.

Your final question comes from the line of Ken Hoexter from Bank of America.

So just want to talk about the stickiness of the dynamic freight a bit. Maybe in the past, you got caught with too much and you wanted -- as you wanted to switch to capacity, your own freight. Did I hear you have a newer process that enables maybe more fluidity. Maybe you could talk about the thoughts on your excess capacity now. And then I guess, to Stephanie, you mentioned that maybe things were picking up a bit faster. So I just want to understand thoughts on the time frame from the rising ISM to get that shipment growth. And given the competitive environment, I don't know if others are being more competitive and that's the impact on shipments near term. So just maybe a couple of things rolled up in there, but any thoughts?

Yes. Perfect. Thanks, Ken. I appreciate that question. I'll respond and then if any one of my team has any comments, they can chime in as well. But I'll start with Dynamic first. Our business this primarily core. So that's really where we spend a lot of our time is core published business that Eddie mentioned earlier. So the dynamic mix is what's changed a little bit, and that's really because of just the growth in the quote pool. Our actual shipment count that we're targeting is relatively consistent. It's just the mix has changed because we have a bigger quote pool and we can optimize our network. So what's important to understand, and I know I've mentioned this before, is we optimize our mix on a daily basis, and it's based on profit maximization based on current market prices and available capacity. So as capacity starts to go down, we expect our optionality to improve. And the more that we expand that quote pool, the more selective in real time we can be. And that's what I think is really important. So -- we mentioned at Investor Day, but since the inception of Dynamic, that quote pool has grown, our revenue per shipment has improved over 50% as that quote pool has expanded. And I've said this in the past as well, but our peers use 3PLs to make those adjustments, but we are the 3PL. And that's what's important to understand is being a 3PL of assets improves optionality for our customers. So as far as excess capacity and our ability to scale, we really break that into 3 buckets: people, equipment and real estate. On the people side, we've invested a lot in labor planning tools, and we feel like we're positioned to have a strong service summer as well as the remainder of the year. So we feel great about that. Equipment, we have one of the newest fleets on the road because we've been disciplined with our investments through this cycle. And then real estate, we've added over 800 doors to the network with continued enhancements ongoing. So we feel like we're positioned very well. And all these optimization efforts that we talk about as we improve productivity when business volumes do inflect, we're just going to need to recruit less people, which is good because it allows us to say yes to our customers.

That concludes the question-and-answer session. I would now like to turn the call over to Amy Mendenhall for closing remarks.

Just wanted to thank everyone for joining us today. We certainly appreciate your interest in ArcBest, and hope everyone has a great day.

That concludes today's meeting. You may now disconnect.

Good morning, and thank you for standing by. Welcome to the ArcBest Fourth Quarter 2025 Earnings Conference Call.

[Operator Instructions]

As a reminder, this call is being recorded. I will now turn it over to Amy Mendenhall, Vice President, Treasury and Investor Relations. Please go ahead.

Good morning. I'm here today with Seth Runser, our President and CEO; and Matt Beasley, our Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session. Before we begin, please note that some of the comments we make today will be forward-looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward-looking statements section of our earnings release and SEC filings.

To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional Information section of the presentation slides. You can access the conference call slide deck on our website at arcb.com, in our 8-K filed earlier this morning or follow along on the webcast. And now I will turn the call over to Seth.

Thank you, Amy, and good morning, everyone. ArcBest delivered solid fourth quarter and full year results and I want to begin by recognizing the outstanding execution of our entire team. Over the past year, we navigated a prolonged freight recession and ongoing market volatility. Through it all, our people stayed focused and committed to our long-term strategy built around our 3 pillars: growth, efficiency and innovation. Throughout the year, we leaned into our strengths, made disciplined decisions and continued investing in initiatives that set ArcBest apart.

As a result, we delivered premium service to our customers, grew daily LTL shipment volumes, restored asset-light profitability achieved record revenue and shipments in our managed solution and advanced strategic priorities through technology and optimization projects. These accomplishments demonstrate the resilience and dedication of our team and we're confident that the strong foundation we've built positions us for continued success. We are also advancing the initiatives we outlined at our Investor Day in September which are designed to help us achieve our long-term targets and deliver greater value to shareholders. As always, our customer-first mindset remains core to our strategy. We will continue listening to our customers' evolving needs in delivering flexible, efficient and fully integrated solutions that keep them coming back to ArcBest.

With our unique focus on innovation and operational excellence, ArcBest remains a trusted partner, ready to help customers navigate whatever comes next. We're excited to officially welcome Mac Pinkerton as Chief Operating Officer of our asset-light business. Mac brings deep industry expertise and proven leadership. He will help us build on our momentum drive value for our customers and shareholders and further strengthen our competitive position in this important part of our business. And as part of our ongoing assessment of board size and composition and the skills and capabilities needed for effective oversight, we're also pleased to welcome Anne Bordelon and Bobby George as independent directors. They bring financial expertise and proven leadership in digital transformation that will further strengthen our Board. We also want to thank Kathy McElligott and Fredrik Eliasson for their many years of dedicated service. Their guidance and contributions have been invaluable to ArcBest.

Now let's review our results for the quarter. In the fourth quarter, asset-based LTL shipments increased 2% year-over-year averaging about 20,000 shipments per day, while seasonal softness and an unusually weak October across the industry impacted volumes. This year-over-year improvement demonstrates the effectiveness of our refined go-to-market strategy and our intentional focus on expanding our core LTL business. By sharpening our approach we're capturing new opportunities while continuing to deliver strong service and greater value to customers, maintaining solid yield performance remains central to our approach. In the fourth quarter, deferred price increases averaged 5%, up from 4.5 in the third quarter. This improvement reflects the strength of our disciplined pricing approach. We take a rigorous data-driven look at every accountant lane, making adjustments to ensure we're fairly compensated for the service and value we deliver. This discipline supports our long-term financial health and mutually beneficial customer relationships.

Shifting to managed solutions. Demand remains high and we delivered double-digit growth in shipments per day again this quarter. This sustained momentum highlights the value our managed offering brings to our customers, navigating today's complex logistics landscape. Truckload performance was another bright spot. Throughout the quarter, we demonstrated strong pricing discipline. Revenue per ship and increased 11% year-over-year, and gross margins on a per shipment basis improved by 17% over the same period. In addition, we grew our business from SMB customers, which diversifies our portfolio and positions ArcBest for additional growth and profitability. Throughout 2025, we made meaningful progress on efficiency and innovation, 2 pillars of our long-term strategy. Our continuous improvement training program has now been successfully implemented across approximately 60% of the network. Our dedicated team trains employees on process and safety best practices, deploys new technologies and ensures adoption of new tools. These efforts have delivered $24 million in annual cost savings.

In addition, we are actively rolling out Phases 2 and 3 of city route optimization which uses AI to reduce manual tasks, improve route planning and maximize asset utilization. Phase 2 and 3 delivered $2 million in savings last year bringing the total savings from the project of $15 million in 2025. These initiatives reflect our commitment to building a more efficient, innovative ArcBest and help offset cost inflation. 2025 was also a pivotal year for accelerating AI across our organization and advancing on our technology road map. Here are just a few highlights. In truckload, AI-powered process improvements are helping us make better decisions when covering freight and improving buy rates, delivering $2.5 million in operating income benefit last year.

Our truckload carrier portal adoption has reached 32% and more than half of our truckload shipments are digitally augmented. Over 30 AI agents now support document processing, automated protein and shipment booking across multiple channels. AVA, our AI-powered virtual agent is transforming customer service by routing inquiries, resolving common issues instantly and freeing our people to focus on more complex value-added support. Our quote augmentation projects streamlines load building and automated 120,000 e-mail quotes in 2025 and enabling faster and more efficient customer responses. Automated phone options for carriers have cut abandonment rates in half and boosted productivity. Last year, more than 23,000 carriers use our AI phone agent to cover over 7,000 shipments. Through targeted training, 15% to 20% of our office employees now consistently use AI tools in their daily work. And through AI-driven automations, we've eliminated millions of unnecessary e-mails giving teams more time to focus on what matters most.

These efficiency and innovation efforts are delivering tangible results, elevating performance across the organization and helping us counter inflationary pressures. Prioritizing these projects will allow us to grow when the market turns without adding the same level of incremental costs. And while technology is unlocking new levels of productivity, it's our talented people who make these advancements real. Their expertise, creativity and commitment continue to drive our success. As I step into the CEO role, my priorities are clear: sharpen our customer focus raise the bar on operational excellence, leverage technology to amplify productivity and maintain cost discipline that drives profitable growth. I'm excited about the opportunities ahead and honored to lead our team as we continue creating lasting value for our customers, our shareholders and our employees.

Before closing, I want to acknowledge the recent severe winter weather that affected much of the country. These conditions disrupted transportation networks across the industry and created challenging circumstances for many of our teams. I'm extremely proud of our people. They acted quickly and continue to work tirelessly to restore full network operations. Safety is our highest priority and the team has responded. Their dedication ensured we continue serving customers with the reliability they expect from ArcBest even in difficult conditions. I want to extend my sincere thanks to every team member involved in that effort. I'll now turn it over to Matt to walk through the financial results for the quarter.

Thank you, Seth, and good morning, everyone. Despite continued softness across the freight market, ArcBest delivered solid fourth quarter financial results. Our disciplined approach, operational excellence and strong execution helped us navigate a challenging environment while continuing to create long-term value for our shareholders. Let's take a closer look at our fourth quarter performance. Consolidated revenue was $973 million, down 3% year-over-year.

Non-GAAP operating income from continuing operations was $14 million compared to $41 million last year. In our Asset-Based segment, non-GAAP operating income decreased $28 million, while asset light achieved breakeven non-GAAP operating results, an improvement of $6 million over last year. Adjusted our non-GAAP earnings per share were $0.36, down from $1.33 in the fourth quarter of 2024. Turning to our asset-based segment. Fourth quarter revenue was $649 million, which was flat on a per day basis. ABF's operating ratio was 96.2%, a year-over-year increase of 420 basis points. Sequentially, the non-GAAP operating ratio increased 370 basis points due in part to 3 fewer revenue days. Daily shipments increased by 2% year-over-year and weight per shipment increased slightly, resulting in nearly a 3% increase in tons per day. This growth was driven in part by onboarding new core LTL business through the commercial efforts Seth mentioned earlier.

Revenue per hundredweight declined approximately 3% year-over-year, both including and excluding fuel surcharges. This decline was primarily driven by reduced shipment activity in the manufacturing vertical, which continues to experience softness. On the expense side, additional labor to support shipment growth, annual increases in contracted union labor rates and higher equipment depreciation and contributed to increased operating costs. In January, daily shipments increased 3% year-over-year, weight per shipment increased 5% and daily tonnage increased 8%. Both the current year and prior year periods were affected by winter weather. January 2025 saw lower weight per shipment due in part to reduced mix of truckload-rated shipments. This mix shift contributed to the year-over-year increase in tonnage and the associated decline in revenue per hundredweight. Sequentially, from December to January, weight per shipment remained consistent, while shipments per day declined 3% tonnage per day decreased 4%, largely due to winter weather impacts.

Historically, ABF's non-GAAP operating ratio increases by about 260 basis points from the fourth quarter to the first quarter, we currently expect our first quarter operating ratio to increase by approximately 100 to 200 basis points sequentially, an improvement relative to typical seasonality due in part to a softer-than-normal fourth quarter though still reflective of the current industry environment. Now turning to the Asset-Light segment. Fourth quarter revenue was $354 million, a daily decrease of 5% year-over-year. Shipments per day were up slightly as growth in Managed Solutions offset a strategic reduction in less profitable truckload volumes. Revenue per shipment decreased 6%, reflecting both the soft freight market and the higher mix of managed business, which typically has smaller shipment sizes and lower revenue per shipment. On the cost side, SG&A cost per shipment decreased 15%, driven by productivity initiatives and the higher mix of managed business which carries a lower cost to serve. Employee productivity also improved significantly with shipments per person per day, up 19%, and non-GAAP operating results were breakeven for the quarter.

For the full year, asset-light delivered over $1 million in non-GAAP operating profit, achieved record high employee productivity and reached a historic low in SG&A cost per shipment marking a strong turnaround from 2024s $17 million loss. In January, asset-light daily revenue increased 6% year-over-year. Shipment growth of 13% was led by our managed business. However, its smaller average shipment size resulted in a lower overall revenue per shipment. For the first quarter, we expect an operating loss of up to $1 million, reflecting typical seasonality in current market conditions. Despite these near-term pressures, we remain committed to maintaining yield discipline, managing costs, and positioning the segment for sustainable long-term profitability. Looking ahead, we remain confident in our strategic direction and in our ability to deliver on the long-term 2028 targets we shared at Investor Day.

When we set those targets, we did not anticipate a significant freight market recovery in 2026. Our focus remains on what we can control, driving productivity, maintaining cost discipline and positioning ArcBest for sustainable success regardless of external market conditions. Turning to capital allocation. We continue to take a balanced, long-term approach that supports both growth and operational efficiency. From 2022 through 2025, ArcBest made targeted real estate investments as part of our network facility road map, strengthening the foundation for profitable growth. These investments improve productivity enhance service quality and expanding our capacity to meet evolving customer needs. We closed 2025 with $198 million in net capital expenditures, which included $25 million in property sales.

Looking ahead, we expect capital expenditures to be below 5% of revenue, with 2026 net CapEx anticipated in the range of $150 million to $170 million. This reduced spend level reflects fewer real estate purchases and remodels following several years of targeted investments and optimization projects that have made our network more efficient. We also anticipate lower spending on revenue equipment in 2026. Our equipment purchases continue to be guided by a robust total cost of ownership model that evaluates equipment pricing and life cycle economics to determine optimal replacement cycles. With equipment costs trending higher, our analysis points to adjusting the timing of certain replacements as the most cost-effective use of capital while still ensuring reliability.

Importantly, our younger fleet and proactive maintenance program supports performance over an extended horizon even as we optimize investment level. Returning capital to shareholders remains an important priority. In 2025, we returned more than $86 million through share repurchases and dividends. We'll remain opportunistic with repurchases based on share price while continuing to prioritize high-return organic investments and maintaining prudent leverage. ArcBest balance sheet remains strong with approximately $400 million in available liquidity and a net debt-to-EBITDA ratio well below the S&P 500 average. This financial strength allows us to navigate uncertainty and capitalize on opportunities as they arrive. As our industry continues to evolve, ArcBest is well positioned to lead. Our disciplined execution, strong financial foundation and focus on innovation give us confidence in our ability to achieve the long-term targets we set.

And our people are at the heart of our success. Their expertise, resilience and dedication to our customers consistently set ArcBest apart. With that, operator, we're ready to open the call for questions.

[Operator Instructions]

Our first question comes from Ken Hoexter from Bank of America.

Matt, maybe just to follow up on some of the outlook that you set there or maybe even the January guide or targets you said this morning, tonnage up 8%, revenue under down 8%. Maybe talk about what's going on in the mix change there. You mentioned some of the truckload shipments are disappearing, but yet weight was staying the same. That was a little surprised. So maybe just thoughts on how that's adjusting and the impact to first quarter OR that you said?

Ken, this is Seth. So obviously, this past week was impacted by the strong winter storms throughout the country, and when you think sequentially from December to January, we normally see a step down sequentially. But on a year-over-year basis, we are trending slightly ahead of the historical seasonality. So last year, we had a lower mix of the truckload shipments, which really contributed to the year-over-year increase in tonnage and then the associated changes in revenue per hundredweight.

Last January, we had kind of rough weather as well, if you remember, but it was more spaced out throughout the month versus one big storm like we just experienced earlier this week. So our dynamic shipments have been trending a little bit heavier which has contributed to that stronger tonnage level. We're not targeting any more dynamic than we did in the fourth quarter, but it just continued to trend heavier with that mix there. So that kind of aligns with what we talked about at Investor Day is as that pool grows, we expected the mix to change. So our OR normally increases about 260 basis points sequentially from 4Q to 1Q. We're expecting in that 100 to 200 range that we outlined in our prepared comments. That's better than history, but also reflective of just the weakness that we see in the macro.

So we continue to look at our costs and take action to adjust where we can. We want to improve efficiency without inhibiting growth when the market does turn. That's something we've done throughout our entire history. We've invested in labor planning tools that allows us to be very agile and we're focused on the longer term and believe in the strategy and initiatives we outlined at Investor Day. Our pipeline has continued to strengthen. We got to make sure that the business we bring on is profitable. So we're working through those opportunities where we provide the value at the right price.

And really, when I think about our company, we're built for any environment because we stay close to our customers, and that's the way we've built this company is to be responsive and say, yes, regardless of the market conditions. So our customers continue to come with us -- come to us with challenges, and we're really focused on what's in our control. And we have good momentum with our initiatives pipeline and we're ensuring we're positioned for growth now and in the future.

Our next question comes from Jason Seidl from TD Cowen.

Appreciate the time. Talk a little bit about the mix that you guys always seem to have going on. When can we expect that to sort of normalize? So it's more of an apples-to-apples comparison? Or is this the new norm for you guys where you move around more the typical LTL carrier in terms of your mix?

Yes. Jason, this is Eddie. Mix has really been something and you pointed it out, has been something that's been driving our business for several quarters. Really has started when you think about the freight recession we're in our fourth year of that recession. And our business is predominantly manufacturing, industrial production tied to the housing markets. And those 3 verticals have really been impacted. So what we're seeing from an opportunity set is that business does have some softness to it. And that trade out of that business for new business is really what's driving our mix.

We have a very disciplined pricing approach when it comes to really any opportunity, we look at each account one at a time, make the best decision we can for each account . We try to manage the mix to the best we can to produce the most profit for our company, but some of it is really just back to the macro and what we're experiencing in that macro environment. So it's hard to predict when that will stabilize. But we're very committed to get the most out of every opportunity and every piece of business that we have to produce the profit that we want that supports our long-term targets.

Yes, Jason, I would add to that, that our retention has been in a great place, but our customers are just simply producing less because of Eddie mentioned there. So we feel great about our retention staff, but we don't want to lose any customers. So we invested in an onboarding team and a retention team who's focused on keeping these customers on board because the longer-term relationships we have with customers generally the better pricing we achieved with those customers.

And also, the housing market continues to be challenged with our U-Pack business and that impacts weight per shipment no changes there on a year-over-year basis, but just something we're going to continue to watch is how in improves.

Our next question comes from Ravi Shanker from Morgan Stanley.

Maybe just a clarification to kind of when you talk about the Jan trends, are you saying that they are relatively idiosyncratic to you guys just given your comps? Or do you think they're fairly industry-wide? And also maybe kind of broadly for the industry, have you noticed any change in the competitive dynamic, especially with kind of speculation that Amazon is going to potentially open up as a third-party LTL carrier later this year?

Ravi, it's Matt. So on the January dynamic, what I would say, certainly we're feeling the weather impacts that the rest of the industry is feeling, maybe something that's maybe a little bit more specific to us is just that comp for January 2025, where, as Seth mentioned, we had a little bit less of a mix of truckload-rated business in that month. Those tend to be heavier shipments that carry a lower revenue per hundred rate, but obviously a higher revenue per shipment.

And that was really just specific to some dynamics that we're in play in January of 2025 and we're at a more normalized level. In January 2026, don't really expect any changes on a go-forward basis, but it does influence the year-over-year comp. And then Seth, Randy, I don't know if you want to comment?

Yes. On the competitor side of things, we're keeping an eye on what's going on. But really, we focus on what's in our control. And what we continue to hear from customers is they're still facing that general uncertainty around the impacts of tariffs and interest rates and just everything that's going on. So the sentiment out there kind of remains cautious. But what we focus on is what we can control, as I said. And that's our go-to-market approach as an integrated logistics company aligns well with what customers are talking to us about now. And that's why we've seen that double-digit growth in managed solutions.

So we have a lot of opportunities because of the markets we operate in. We have a great potential to expand with our current loyal customer base. So we're paying attention to what's going on in the market. but we have a lot of opportunity within our control that we're focused on.

Our next question comes from Reed [indiscernible] from Stephens.

I know Mac has only been in there for about 25 days at this point, but I'm sure they've been a busy 25 days. I wasn't sure if you shared any -- I wasn't sure if you shared any insights on maybe some priorities for him coming into asset-light, given this is a big part of your guidance that you gave at the Investor Day. So just any insights early insights he has there.

Yes. Mac officially started a few weeks ago, as you mentioned, and he's hit the ground running and he's actually in the room with us today. So I'll let him turn it over to him and give his thoughts on his first few weeks here at the company.

Thanks, Seth, and thanks for the question, Reed. Only a few weeks here in here. And I would tell you right now, I'm more excited today than I was 3 weeks ago. I've had the great pleasure to work for a couple of companies. It's been around over 100 years. And I think we all know how special that is. And what it takes is a company grounded in a fantastic culture, focused on our customers, our employees, founded in innovation and creativity. And that's something that has been absolutely reaffirmed over the last few weeks. The urgency that this team has relative to improving our TSR is possible.

So excited to be a part of that. We've got competitive services and a really strong team I think we all believe the market's going to improve. Regardless of that, we got to continue to perform and grow our business. I'm more confident after the 3 weeks I've been here will meet our Investor Day targets, and I'm looking forward to making the asset-light business more meaningful in these discussions.

Next question comes from Jordan Alliger from Goldman Sachs.

So I understand that things are still soft in the manufacturing economy. But as you think ahead for this year, do you see any signposts, whether it be from customers or your own internal thoughts that perhaps we could be at least on a stable and maybe a footing from an inventory standpoint, et cetera, that could lead to a little bit of freight movement on an industry level, not an idiosyncratic ArcBest issue, what you're doing, but just a broader improved health in the demand environment as we move through the year.

Thanks, Jordan. This is Seth. I'll get a start and let Eddie chime in with any additional thoughts. But I've met with a lot of customers on the back half of last year and then also I'll be meeting with quite a bit next week as well. So in the conversations I've had, our customers still are focused on cost reduction, operational efficiency, process improvement and many customers are taking proactive steps to manage the uncertainty, including inventory repositioning supplier renegotiations, moving their supply chain around.

So some of the bright spots that we've seen in the LTL space, there's been some discretionary retail sectors, food and beverage recreational equipment. We've seen some bright spots there in truckload. We've seen that SMB growth that we talked about, and we continue to see some promise there. Expedite, life science continues to be strong for us and a growth opportunity and then when you think about just information technology and everything that's going on around data centers, that's been another part of strength. So we haven't heard much from a demand standpoint.

In Matt's prepared remarks, he mentioned how our 2026 Investor Day targets didn't expect a great macro standpoint, but that's why we're -- we go to market the way we do is an integrated logistics company. And so we can say yes to our customers, and that's what's allowed our pipeline to be in a great spot. That allows us to be selective about the freight we bring into the network. Our core business is growing. Managed Solutions is up double digits and really the opportunities are right in front of us to somewhat Max said in his previous comments, customers trust us. They look to us to navigate these uncertainties and that's why we've continued to see that growth that we've talked about. Eddie, I don't know if you have anything to add?

No. Seth, you covered this really well. I would probably just emphasize that I don't know if it's really an industrial signpost that's out there, but our success with managed solutions just gives us a lot of confidence that we're going to be able to continue to navigate through whatever the market ends up being this year. We're having great conversations. Our opportunity set is robust and we're being successful, helping our customers meet the demands of their supply chains.

Our next question comes from Chris Wetherbee from Wells Fargo.

Maybe a 2-part question here. So I guess first, maybe broader comments on the competitive pricing environment and how you guys are seeing things shaping out here as we're moving into early 2026. Obviously, industry volumes have been under pressure for a period of time? And then maybe specifically to kind of what you guys are doing from a strategy perspective around mix and volume growth. So 8% increase on the -- in January in terms of volume. I think the guide for the OR in LTL is probably about 200 basis points or so worse on a year-over-year basis.

So I guess -- is there a level of volume at this mix that starts to become more accretive from a margin perspective? I guess, how do you think about kind of refilling up the network after a couple of years of volume declines to get to the point where we're actually seeing positive incremental margins on that business?

Chris, this is Seth. I'll start on the pricing comment and then have Eddie chime in on the volume side of things. But when I look at our deferred contract renewals in the fourth quarter being up 5%, when you think about the third quarter, we were at 4.5% in the second quarter, we were -- we've continued to strengthen our yield metrics. So as we continue to see success in growing core business from those new customers that we talked about all last year, we see how it reacts operationally in our network, and then we make adjustments.

So our strengthening has -- our pricing has continued to strengthen as we've made those adjustments, and that's why you've seen the deferred numbers continue to improve throughout the quarter, and we expect that to continue throughout this year. So we remain disciplined and focused on profitable growth and making sure that we're getting paid for the value that we deliver to our customers. So we're going to continue to stay focused on disciplined pricing. That's what we're seeing in the market right now as well as discipline among our competitors. But I want to point you back to the longer-term goals, and that is that we want to achieve our revenue per shipment growth outpacing cost per shipment growth by 80 basis points per year, and that's what we're striving to do.

So we're making strategic investments to improve the value that we deliver to customers to be able to command those increases. And I'm really excited about ArcBest View launching in the middle of the year because I think that's going to be industry-leading in terms of visibility and ways to navigate your supply chain from that new customer platform. So we're very focused on it and make sure that we want to continue to get that value that we provide. And then Eddie, on the growth side.

Yes. Really on the mix, again, we actively manage our business mix and profile to achieve the best results. We haven't really changed our strategy on the amount of larger LTL shipments or transactional shipments. In fact, it's been very consistent from fourth quarter into the start of January. We did have the issue -- are really the lower volume shipments in January 2025.

I think that's really what you're seeing when you do a comparison to this January and why that really jumps out. But no strategy change. And really, it's our jobs and yield to get the most out of whatever profile business mix that we have, and we're seeing improvements in that as we go early this year and into 2026.

Our next question comes from Bruce Chan from Stifel.

A lot of conversations here about mix and especially the core business versus the dynamic now. Maybe just wondering if you can give us a sense for the mix or what the balance looks like between those 2 products in the network right now? And then maybe just a bit more generally, I don't think we've ever seen the transactional pricing tool as the dynamic pricing tool at work in an up cycle -- just thinking through that scenario, maybe in a hotter market, is there an opportunity to see a pricing tailwind for that business or even prioritize it over for?

Bruce, this is Seth. So our business is primarily core. We don't disclose the specific mix between transactional and core. It fluctuates from time to time. But as Eddie said, there's no strategy change especially when we look at our sequential numbers there. So transactional business really helps us maintain consistency in the network and allows us to be positioned when the market turns.

So our core business continues to increase. We feel great about our pipeline, and we have multiple wins throughout the business. So we're going to continue to focus on that profitable growth and mix management. But what Eddie said, we optimize our mix on a daily basis, and it's based on profit maximization based on the market prices and what available capacity is. So since launching Dynamic, our price per shipment has increased by 50%. We outlined that at Investor Day. So as that pool grows and you need the same amount of shipments in your network, generally, what happens is the price improves.

Now to your point, we have not had dynamic pricing in a good market environment. But what we expect is our core business that we have good retention on, the price will continue to improve on that business as customers just ship more, and then we're able to have the dynamic actually because the market is better, improve the pricing on that side as well. So a majority of our shipments are published. The dynamic mix has been consistent and we think as the market improves, both sides are going to benefit us.

Yes. The only thing I would add, this is Eddie. In an up cycle, we do believe that our core business we would see growth in it, and that growth could come a little choppy at times. It can be big in certain markets, especially driven by certain customers who are experiencing an up cycle faster or harder than others. But the great thing about dynamic is that's going to allow us to really fill in our network where we need, smooth out that choppiness and allow it to really optimize our profit even more. So we would love to have an up cycle with the amount of dynamic quotes that we have today, it would really lead to a more profitable situation for us.

Our next question comes from Brian Ossenbeck from JPMorgan.

Just wanted to see, I guess, Seth how the operations are right now after the big store, I guess, maybe another one coming. But how has the recoverability been just operationally? And do you feel like there's some volume that's lost is not coming back? Or have you seen that start to come through after the disruptions? And then just maybe as well, just to comment for the full year and maybe the next couple of years, when you think about the footprint you have now, obviously, the CapEx is coming down. It seem like that's more or less equipment. But want to see how you're feeling about the door count, the positions you have in different markets and how that might change for this year?

Yes. Thanks, Brian. I'll start with the weather question, then I'll turn it over to Matt to talk about door count and where we're at from a real estate standpoint. But we always have weather every year or natural disasters and our focus is on our people and making sure that they're safe. We communicate with our customers. We work through any potential disruption that we have. We did see more weather events in December than historically and that challenge productivity a little bit, but we navigated those events well and service our customers with excellence.

So the first 3 weeks of January, we were trending actually much better than last year because of the weather events last year. But the storm we saw this week was a very large one. In terms of service center impact, we think it's going to be one of our worst Januaries in terms of service center closures and the FMCSA actually issued a 40-state waiver that waive dollars of service regulations, which speaks to just the size of the storm. So we dynamically adjust our network to optimize freight movement as part of just regular operations and we lean into those abilities during this time of disruption.

We talked a lot about the tools we've invested in. And the past 2 winters, we've been able to use those tools to navigate it better than any point in our history. So the investments we've made in recent years and expanding capacity in the network, optimizing our equipment and our fleet that allows us to navigate these storms much more better. So we continue to communicate with customers to make sure that they know where we stand in terms of restoring full network operations. The OR impact it's baked into our guidance that we provided the cost from that. We still have some potential costs as we're still kind of early stages on the cleanup.

But we get winter weather every year. It's in our historical numbers, and we feel like we can outperform it with the tools we've invested in. I'll turn it over to Matt to talk about the real estate investments and where we sit from a capacity standpoint.

Thanks, Seth. And just before I talk about on the real estate side, I want to echo Seth's comments from earlier and really thank our people for their dedication and efforts during these significant times of disruption. As Seth said, we really prioritize safety and our teams have done a tremendous job over the last week, keeping our people safe communicating with our customers and working to restore normal operations so we can deliver a premium and efficient service for our customers.

So as we've talked about over the last year, we've added nearly 800 doors to our real estate network. And we feel really good about where we're at from a capacity standpoint. I'm excited that we have a couple of projects that are wrapping up here as we move throughout the first quarter. specifically in Denver that will add significant capacity in that market for growth and provide us a better operational standpoint to operate with efficiency in that market. So we've been able to be very strategic over the last few years with our investments, and those have been a mix organic builds and new builds in our network and also taking advantage of real estate opportunities in the market.

And so just to kind of come back to that, we feel really good about the capacity. We feel really good about what that's done to provide opportunities for growth with our customers, allow us to be more efficient. And we'll continue to evaluate opportunities as they arise and be strategic with the investments that we make so that we can put ourselves in position for further growth.

Our next question comes from Stephanie Moore from Jefferies.

Maybe touching a little bit on the AI initiatives and other productivity investments that you've made over the last several years. I just wanted to think about it on both an asset-based and asset-light side. If you how you're thinking about leveraging those investments in a recovery? And are you approaching an up cycle differently based on those actions?

Thanks, Stephanie. This is Seth here. I want to start with mentioning how we have a very talented internal tech team who spend dedicated time research and innovations, testing them to see what's going to have the biggest impact on our business. And customers need us to run our business efficiently, and we see AI as an option to make that happen. So we see tremendous potential around automating processes with human-assisted interactions.

And although technology is important, and we're going to talk about it quite a bit, we've always been a tech-forward company. people are who make it happen. So having our people at the center of everything is really important to me. I mentioned a lot of examples in my prepared remarks of projects that we're working on and potential benefits. We're early stage in a lot of that. I view 2025 more as a foundational year for us as a from an AI perspective, and we're going to continue to evaluate where AI makes the most sense as well as any technology. Ultimately, first, you have to understand the processes. And then if the processes are right, you use AI to improve them. And you also have to make sure your data is in a good spot.

So we invested in our data team back in 2018 and having good data as a strategic advantage for us, and that's why we outlined what we did on our technology road map at Investor Day. So -- and all of our AI initiatives aren't managed separately, they're part of every single initiative that we have. So when you think about everything that we've done for asset-light asset base from an AI perspective, I think that's only going to accelerate. Ultimately, what that does is it allows us to scale without adding the incremental cost when the market does come back. So I feel like we continue to make progress there, but we're still early stages on a lot of this. Many of the examples I gave in my prepared remarks, we're in the pilot stage, and we're looking forward to a full rollout as we move into 2026.

Next question comes from Tom Wadewitz from UBS.

So I guess I'll maybe just give you 2 questions. So one would just be on pricing dynamic in the market. I think you talked about that pricing that you're realizing it's gotten a little bit better in the last couple of quarters, which is great. But do you think competitive environment in LTL is pretty stable, maybe similar to where it was a year ago? Or you think it's getting a little bit tougher as you're later into a downturn?

And then maybe just if it's okay, I'll maybe ask another one of Mac, just whether he has any kind of high-level thoughts on kind of how asset-light competes, how you fit in the market, what might be good leverage for growth?

Tom, this is Eddie. Yes, I mean, from a comparison standpoint, I wouldn't characterize really what we're seeing right now, really any different over the last year. mean pricing discipline remains rational within the market. We actually have seen a little less bid activity from customers which actually to me is a good sign. I think last year, that was pretty robust. And every time a customer went to bid, it did kind of create an open market, which allowed new carriers to come in to go after some business, which usually they're more aggressive than incumbents who are looking to improve price to cover cost increases.

But recent bid data tells us that it's actually slowing down. So that's an encouraging part to me. Obviously, what we're what we try to do from our perspective is really be disciplined with all of our decisions. We evaluate every opportunity on its own merits, and we're looking to get the right price for the value that we're offering to our customers. So from a market standpoint, feel like the market still rational and nothing's really changed there. And I'll let Mac talk about the asset light side.

What I would say just from the outside looking in a 3-week perspective of being here is that, one of the things I recognize is that when you think about our asset-light business, specifically our managed solutions is on a growth trend that's far outpacing the marketplace. And I think this team has done a really nice job over the last number of years to build a strong foundation in this space. So when I think about our managed solutions that is really a fully integrated approach to third-party services in the marketplace. We're outpacing a lot of our competitors. I feel really good about that.

From a services perspective, when I think about LTL brokerage, truckload brokerage, our intermodal business, our Global Forwarding business, we're at different points of journey within each one of those services. Each one of them approaches the market a little bit differently. So it's hard for me to say we're going to have a singular approach to that. But I feel really good about how we're positioned in the market. Over the last year, this team has invested fairly significantly within the SMB space. And year-to-date, we're exceeding our expectations from a per person perspective, from a productivity standpoint and certainly across the team. So when I think about our managed business outpacing in that mid-market area and then the investment of SMB and how that's pacing to achieve breakeven in 2025 gives us a really strong foundation to build upon as we move forward.

Our next question comes from Ari Rosa from Citigroup.

So I'm curious about the longer-term outlook. In the slide deck, you mentioned reaffirming the 2028 financial targets, specifically the EPS of $12 to $15. You mentioned also that 2026 doesn't really anticipate much improvement in the market. So I'm just hoping, obviously, as we look to the back end of 2026, we're going to be closer to 2028, right, only 2 years out. Help us understand like where that inflection comes and where that real acceleration in EPS growth kind of hits and how you see that playing out? What is it that drives that inflection? How much of that is dependent on the macro, how much of it can be achieved kind of through self-help initiatives? And kind of what's the time line for us to start to see that flow through to EPS?

Yes. Thanks, Ari. This is Seth. We have confidence in our long-term view and the targets we outlined in Investor Day. As we mentioned in 2026, we don't see a lot of improvement from a macro standpoint but we didn't expect that in our targets that we set out. So lower interest rates could potentially help us clarity over tariffs, the tax bill, there's a lot of different things going on from the demand standpoint. But also on the supply side, we could see some changes there as well. So we saw sequential increases in PT during the fourth quarter. You've seen all the stories about enforcement actions around ELP and also just what's going on with nondomicile drivers.

But I would say, despite the environment, we're going to continue to focus on what we can control. And the initiatives we outlined in Investor Day around our 3 strategic pillars of growth, efficiency, innovation, we expect to continue to accelerate on those initiatives as we move through. In the Investor Day, we outlined some potential upside if the macro does improve and Matt can chime in on those next after me. But we see a lot of areas of opportunity ahead of us. growth. We continue to see our pipeline improve. We think that's going to translate. Mac just mentioned the double-digit increase in managed. If you remember what we talked about, managed feeds our other service lines as well.

So as managed grows, we grow LTL. We grow our truckload offering, we grow expedite and then as we improve the value we deliver to our customers, that generally allows us to improve price, which speaks to that revenue per shipment outpacing cost per shipment by 80 basis points. then the productivity initiatives that we've mentioned throughout this call and in our prepared remarks, we continue to see benefits asset-light at an all-time high in productivity and a low in SG&A cost per shipment. So we expect to continue to make advancements on our strategy, and we believe in the long term and whether we're going to ultimately end up to achieve these targets.

Yes. Ari, this is Matt. I think Seth covered it well. As we laid out at Investor Day, a lot of our targets were built on things that were in our control, cost, productivity yields. Certainly, you see the results in 2025 on all of those fronts, like we talked about when we were contemplating our 2028 targets, we weren't really looking at a significant macro improvement in 2026 as we were building those models, and we continue to feel good about how we're positioned for 2028. Certainly, a lot of momentum across the business.

I'm excited about how we're leveraging technology, exciting about continuing to accelerate on the asset-light side, certainly very pleased with the result that we saw in the year-over-year improvement in the asset-light business in 2025. A lot of projects ongoing around the asset-based business that are continuing to show great results. And so again, really feel good about executing on everything that's within our control, which was the biggest driver of 2028, and we do expect some macro improvement as we exit 2026 and move forward towards 2028.

Our last question comes from Cole Cousins from Wolfe Research.

Just to hit on 1Q guidance, given the comp dynamic through the quarter, what are the embedded tonnage and yield assumptions in the 100 to 200 basis points of OR deterioration and maybe just remind us what your typical OR seasonality is into 2Q and given the storm dynamic, is it fair to think that we might be able to outperform that this year?

Cole, it's Matt. So as we look at the first quarter and just where we see the projection going, certainly, like we talked about, there are some dynamics that have been in place in January. And so overall, we would expect the tonnage. The tonnage was up 8% in January. I think you're going to see that moderate as we look at the full quarter, still up and still up relative to history. But something lower than the 8%, probably more like the 4% to 5% range.

Overall, we expect to continue to see shipment per day growth on a year-over-year basis as we continue to move through the quarter. Again, just some of the costs back to the fourth quarter are helpful as we're thinking about being able to achieve the 100, 200 basis points guide of OR increase versus the historical around 250, 260 basis points. As we look forward from the first quarter to the second quarter, we feel good about how we're positioned in all of the yield and productivity initiatives continuing to come to bear across the business, but probably too early to be specific about what we're expecting at this point in time.

We have no further questions. I would like to turn the call back over to Amy Mendenhall for closing remarks.

Thanks to everyone for joining us today. We certainly appreciate your interest in ArcBest. Hope everyone has a great day. Thanks.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good morning, and thank you for standing by. Welcome to the ArcBest Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded.

I will now turn it over to Ms. Amy Mendenhall, Vice President, Treasury and Investor Relations. Please go ahead.

Good morning. I'm pleased to be here today with Judy McReynolds, our Chairman and CEO; Seth Runser, our CEO-elect and President; and Matt Beasley, our Chief Financial Officer. Other members of our executive leadership team will also be available during the Q&A session.

Before we begin, please note that some of the comments we make today will be forward-looking statements. These statements are subject to risks and uncertainties, which are detailed in the forward-looking statements section of our earnings release and SEC filings. To provide meaningful comparisons, we'll also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional information section of the presentation slides.

You can access the conference call slide deck on our website at arcb.com in our 8-K filed earlier this morning or follow along on the webcast.

And now I'll turn the call over to Judy.

Thank you, Amy, and good morning, everyone. ArcBest is well positioned to navigate any environment guided by a long-term strategy built on 3 pillars: growth, efficiency and innovation. At the heart of our approach is a deep understanding of our customers. Delivering for them drives our success and enables us to achieve our financial objectives.

Years ago, we recognized that supply chains were becoming more complex, and we took proactive steps to prepare ArcBest for that future. Today, we deliver flexible, efficient and fully integrated solutions designed to meet our customers' evolving needs. By listening closely and solving real-world challenges, our teams position ArcBest as a trusted strategic partner, helping customers succeed not just today, but for the long term.

In late September, we hosted our Investor Day in New York City, and we appreciate everyone who joined us, both in-person and virtually. During the event, we shared ArcBest's strategic vision, showcased key initiatives and introduced long-term financial targets that underscore our disciplined growth-focused approach.

As we execute on our strategy, we are supported by a strong and experienced Board of Directors whose expertise spans transportation and logistics, finance and capital markets and digital transformation. In that spirit, we are pleased to welcome Chris Sultemeier to the ArcBest Board. Chris brings more than 30 years of leadership in logistics, transportation and supply chain operations. His deep industry knowledge will be a tremendous asset as we advance our long-term goals.

I also want to take a moment to recognize Dr. Craig Philip, who will retire from the Board in January after many years of dedicated service. Craig's insights and guidance have been instrumental to ArcBest's success, and we are deeply grateful for his significant contributions.

Today's call is especially meaningful for me because it is my final earnings call as CEO. It has been an incredible honor to lead this organization. Over the last 15 years, I've had the privilege of working alongside some of the most talented and dedicated professionals in the industry. Together, we've embraced change, driven innovation and built a company that is truly unique and differentiated.

I am deeply proud of what we've accomplished and equally excited about what lies ahead. Seth Runser's transition to CEO has been carefully planned, and the Board and I have complete confidence in Seth's ability to lead ArcBest into its next chapter. I've worked closely with Seth for many years. He knows ArcBest inside and out, has a clear strategic vision and demonstrates a genuine commitment to our people and customers. I know he will lead ArcBest with integrity, purpose and passion.

I will always cherish my time as CEO, and I have no doubt that the best is yet to come. ArcBest is built to deliver, and I look forward to watching this company continue to grow and thrive, both as Chairman of the Board and as a committed long-term shareholder.

With that, I'll turn the call over to ArcBest's CEO-elect and President, Seth Runser.

Thank you, Judy, and good morning, everyone. Before we dive into the details of our third quarter performance, I want to take a moment to focus on the bigger picture.

At ArcBest, our strategy is built around creating meaningful value for our customers. Every day we help them navigate complexity, overcome disruption and achieve stronger supply chain outcomes. That's what sets ArcBest apart.

Looking ahead, this commitment will continue to guide us, helping us to anticipate challenges, seize opportunities and lead the industry with innovative, customer-driven solutions. By delivering for our customers, we position ourselves to achieve profitable growth, generate strong free cash flow and create long-term sustainable value for our shareholders. Now let's review the progress we've made on our profitable growth initiatives.

In the third quarter, we averaged 21,000 Asset-Based LTL shipments per day, a 4% increase year-over-year. This growth and market share gain reflect the strength of our refined go-to-market strategy and our intentional focus on expanding our core LTL business.

As we onboarded new business, we faced some service challenges that caused us to fall short of our expectations, higher-than-expected volumes in certain markets, greater intra-month volume changes, conservative hiring earlier in the year due to macro uncertainty, and peak summer vacation season all contributed.

In some locations, increased reliance on Cartage also impacted cost and service. These factors affected on-time pickups and deliveries, which was reflected in our latest Mastio survey results. However, we acted quickly.

Hiring efforts have advanced in key markets, Cartage usage has significantly declined, and service levels have returned to normal. Customer feedback is already reflecting these service improvements. As we grow, we remain committed to delivering the premium service our customers expect.

Pricing discipline remains a cornerstone of our profitable growth strategy. In our Asset-Based business, we continuously evaluate account and lane level performance to ensure we're appropriately compensated for the value we deliver. Our decisions are informed by shipment profile data, lane pairings, shipment density and pickup and delivery requirements.

When freight moves through our network, we monitor performance closely. And if margins don't meet expectations, we partner with customers to identify solutions that balance service quality with sustainable returns. This is an ongoing process, and we are pleased to have achieved a 4.5% average increase on deferred contract pricing renewals during the third quarter.

Turning to Managed Solutions. Shipments per day grew by double digits year-over-year in the third quarter, setting another quarterly record for both revenue and volumes. This performance underscores our ability to help customers adapt to a dynamic freight environment and find cost efficiencies in their supply chains. Even amid the ongoing freight recession, growth in Managed helped us achieve an all-time high for asset-light shipments per day.

Truckload also showed meaningful progress without relying on macro tailwinds. Our pricing discipline during bid season drove a nearly 9% increase in revenue per shipment with corresponding improvements in gross margins.

We're advancing on our strategic initiative to optimize the truckload business mix, focusing on higher-margin SMB customers. We've reorganized sales teams, streamlined processes and leveraged technology to enhance efficiency. As a result, employee productivity in truckload is at its highest level ever.

We've also made meaningful progress on efficiency and innovation, key pillars of our long-term strategy. Our continuous improvement team continues to conduct service center visits, coach employees on process and safety compliance, deploy new technologies and ensure confident adoption of new tools. These efforts have delivered $20 million in year-to-date savings.

Our strategy and optimization team led by Christopher Adkins is focused on delivering measurable value by combining targeted process improvements with advanced technology. These efforts ensure that AI is applied in ways that enhance productivity, streamline operations and reduce cost to serve across the enterprise.

One example is our truckload carrier portal, which includes lane matching and auto offer negotiation. This tool frees up bandwidth for our teams, improves margin and helps reduce fraud. Adoption has grown to 28% and 52% of truckload shipments are now digitally augmented.

These initiatives are improving productivity and helping us mitigate inflationary cost pressures. Looking ahead, we remain focused on disciplined execution and continuing ArcBest's legacy of innovation and service.

We are confident that our approach will drive growth and profitability despite near-term headwinds. As many of you know, we set ambitious but achievable targets for 2028 at our Investor Day. These include improving the non-GAAP operating ratio in our Asset-Based business to 87% to 90%, delivering asset-light non-GAAP operating income of $40 million to $70 million, generating total operating cash flow of $400 million to $500 million and achieving non-GAAP EPS in the range of $12 to $15. We remain well positioned to deliver on these targets.

Before I turn the call over to Matt, I want to thank Judy for her vision, her leadership and the way she has transformed ArcBest. She is an incredible leader, and I am so grateful for her trust and support. I'm glad she's staying on as Chairman and look forward to what the future holds. On behalf of the entire team at ArcBest, we wish Judy and her husband Lance the best in this next chapter.

With that, I'll turn it over to Matt to walk through the financials.

Thank you, Seth, and good morning, everyone. Despite continued softness in the freight environment, ArcBest delivered solid third quarter results that reflect disciplined execution and a continued focus on creating long-term value for our shareholders.

Taking a closer look at our third quarter performance. Consolidated revenue was $1 billion, down slightly year-over-year. Non-GAAP operating income from continuing operations came in at $50 million compared to $55 million last year.

Our Asset-Based segment saw a $10 million decrease in non-GAAP operating income, while the Asset-Light segment delivered $1.6 million of non-GAAP operating income, an improvement of nearly $6 million over last year. Adjusted earnings per share were $1.46, down from $1.64 in the third quarter of 2024.

Turning to our Asset-Based business. Third quarter revenue was $726 million, representing a 2% increase on a per day basis. ABS non-GAAP operating ratio was 92.5%, an increase of 150 basis points over the third quarter of 2024 and an improvement of 30 basis points sequentially.

In the third quarter, daily shipments grew by 4%, while weight per shipment decreased by 2%, resulting in a 2% increase in tons per day compared to last year. This growth was driven in part by onboarding new core LTL business through the commercial initiatives Seth mentioned. However, softness in industrial production and housing continues to pressure weight per shipment, reducing revenue per shipment without corresponding cost decreases.

To support shipment growth, we added labor conservatively and supplemented network capacity with purchase transportation and local Cartage during peak vacation season. Annual increases in contracted union labor rates, combined with higher purchase transportation spending and equipment depreciation drove operating expenses higher.

Despite these headwinds, cost per shipment improved by 1% year-over-year, reflecting ongoing productivity gains. Additionally, Cartage and purchase transportation costs returned to normal levels in September after elevated activity in July and August.

We remain disciplined in our pricing strategy, securing deferred increases averaging 4.5%, a strong outcome in a market where many shippers are focused on cost savings. This underscores the strength of our customer relationships and the differentiated value we provide.

Revenue per hundredweight declined 1% year-over-year, both including and excluding fuel surcharges, impacted in part by fewer shipments in the manufacturing vertical. Looking at October trends, daily shipments grew 1% year-over-year, while weight per shipment decreased 2% and daily tonnage levels declined 1%.

For the fourth quarter, we expect our operating ratio to increase by approximately 400 basis points sequentially, reflecting the softness in the broader freight market that we're seeing across the industry.

Moving on to the Asset-Light segment. Third quarter revenue was $356 million, a daily decrease of 8% year-over-year. Shipments per day reached a record high, up 2.5% from the prior year, driven by double-digit growth in our Managed Solution. Revenue per shipment decreased nearly 11%, reflecting the soft freight market and growth in our Managed business, which has smaller shipment sizes and lower revenue per shipment levels.

SG&A cost per shipment decreased over 13%, reaching the best level in Asset-Light history, driven by productivity initiatives and a higher mix of Managed business with a lower cost to serve. Shipments per person per day also hit an all-time high.

Non-GAAP operating income of $1.6 million was a significant improvement compared to last year's non-GAAP operating loss of $4 million, driven by volume growth, margin improvement and cost reductions. In October, Asset-Light daily revenue was down 9% year-over-year, primarily due to lower revenue per shipment from the soft freight market. Managed continued to show strength, though its smaller shipment sizes contributed to lower revenue per shipment.

Shipment growth, which was strong through the third quarter, has moderated as we entered the fourth quarter. This slowdown is typical for this time of year as the second and third quarters generally represent peak shipping periods for our customers. For the fourth quarter, we anticipate an operating loss in the range of $1 million to $3 million, reflecting seasonality and current market dynamics. We remain focused on managing costs and positioning the segment for long-term profitability.

We continue to take a balanced long-term approach to capital allocation. For 2025, we've updated our net capital expenditure guidance to approximately $200 million, a decrease from the previous range of $225 million to $275 million. This reduction reflects $25 million in net proceeds from real estate sales completed in the third quarter, which generated a pretax gain of approximately $16 million. These properties were replaced by new locations gained through the Yellow auction sites that strengthen our network and enhance our operational footprint.

In the first 9 months of 2025, we returned over $66 million to shareholders through share repurchases and dividends. In September, our Board increased the company's share repurchase authorization to $125 million, a clear sign of confidence in our strategy and long-term outlook. We'll remain opportunistic with repurchases based on share price while prioritizing high-return organic investments and maintaining prudent leverage. Our balance sheet remains strong with approximately $400 million in available liquidity and a net debt-to-EBITDA ratio well below the S&P 500 average.

While external conditions remain dynamic, ArcBest is well positioned for the future. We're focused on what we can control, operating with discipline and making smart strategic decisions that strengthen our business and create long-term value. Before I turn the call back to Judy, I want to recognize her leadership.

Judy has played a pivotal role in shaping ArcBest into the company it is today, and her vision and commitment has set a strong foundation for our future. On behalf of the entire team, thank you, Judy. It's been an honor to work alongside you. Looking ahead, I'm excited to partner with Seth as we build on that foundation and continue driving our strategy forward.

Judy, thank you again. I'll now turn the call back to you.

Thank you, Matt. Before we move to Q&A, I want to leave you with this. ArcBest's greatest strength has always been its ability to adapt and lead through change. That resilience transformed us from a small local freight hauler into the global logistics company we are today, and it will continue to drive our success for years to come.

As I step away from my role as CEO, I do so with complete confidence in our team and in the strategic path we've set. This company is in great hands, and I look forward to watching its next chapter unfold.

To our analysts and shareholders, thank you for your trust and partnership. To our employees, thank you for your dedication and resilience. And to our customers, thank you for choosing ArcBest. It has truly been an honor to serve as CEO.

With that, let's open the call for your questions.

[Operator Instructions] Your first question comes from the line of Jason Seidl with TD Cowen.

Judy, I just wanted to say congratulations just on a great career at ArcBest and I wanted to tell you what a pleasure it was working with you and wish you all the best going forward.

I want to jump a little bit, guys, to sort of the guide in 4Q and then maybe what that means to rolling into '26, because it's obviously a lot weaker than I think I would have expected. Is there anything going on seasonally that you think would be sort of abnormal? Like are you more impacted by the government shutdown than maybe one would think? Or is this something where normal seasonality starts you out a little bit on the year-over-year decline side into '26?

Jason, this is Seth. Thanks for the question. So we did see some softness in October, and that's similar to what our peers have been reporting. We always see that step down sequentially from third quarter to fourth quarter, but it's been below our normal expectations as we move through the month.

So normally, we step down about 3% on shipments. We're seeing closer to about a 5% reduction. And then when you think about the way the calendar falls in November with only 18 business days and the holidays, that just creates some challenges from a top line perspective.

So the weakness in October we really attribute it to multiple factors. You saw PMI was released on Monday, and that continued to be below 50. We heard the stories about inventory pull ahead in July, and that might be a factor. The continued weakness in the market just impacting weight per shipment, which we've been discussing throughout this freight recession. And then there are secondary impacts of the government shutdown.

The only area where we really do a good amount of government business is on the Asset-Light on the expedite side with Panther. So we're seeing that impact on Asset-Light results and the guide we gave there. But we can't point directly to Asset-Based impact, but the government is the largest employer in the United States. So I'd imagine there's some secondary impacts there.

So we're taking action to reduce our costs and align resources with the level of revenue that's given, and we expect that to continue throughout the fourth quarter. That's something we've done through our entire history as we've navigated these cycles.

In Cartage and PT, what we did in September to reduce that cost is a great example. So we're focused on pulling all those levers, but we're also focused on the long term and believe in our strategy and initiatives that we outlined at the beginning of the -- at our Investor Day last month.

We see on the growth side, our core business continues to grow. The pipeline continues to be very strong. We've done a lot on the efficiency front. We're taking more cost actions as we move through the fourth quarter. Really proud of the Asset-Light team improving productivity, 33%. We saw improvements in Asset-Based as well. And we have a robust roadmap of future projects that we're working on, which we think is going to provide some efficiency gains in the future.

So the way we built this company is to say yes to our customers, and we think we're built for any environment. So, whether it's a little bit weaker or busier, we want to say yes to customers, and that's the way we're built. So we've been doing this a long time, over 100 years. And we've navigated this cycle very well, and we'll continue to make adjustments as we move through the rest of the year and as we move into 2026.

Your next question comes from the line of Brady [ Ste ] with Stephens, Inc.

Congrats to Judy on the great career, and we're sad to see you go. Kind of following up on Jason's question. Previously, you have talked about 350 basis points to 400 basis points being the normal 4Q to 1Q OR move. That would imply if you add the 400 basis points to -- from 3Q to 4Q, basically, that would imply you have an unprofitable to breakeven LTL.

If you can talk about how you expect that to progress? And then I guess also just talking on the pricing weakness here in October. I know I'm sure some of that is mix related and some of it is a declining weight per shipment. But if you can just talk about some of the dynamics in there as well.

Yeah, Brady, it's Matt. So you're right. We have talked about the 350 to 400. If you were to look at just a straight 10-year history, it's more like 250 basis points, but there were some strong 4Q to 1Q moves during COVID. And so over the last few years, as we've given the history, we've excluded those.

I think to Seth's point, we certainly are taking a look at costs at a very detailed level in addition to just all of the ongoing efficiency and productivity projects that we've had and have been working on. Certainly, we're pleased with the results that we've seen, as we talked about with the record levels of productivity on the Asset-Light side and just continued improvement on the Asset-Based side as well. And so, we're continuing to make progress, and we're continuing to identify costs and to pull those out.

And so, I think it's a little bit too early to say just given some of the softness that we've seen over the last few weeks. I wouldn't say that we're necessarily expecting that to persist into the first quarter. We're hopeful as we get some resolution on the government shutdown. And as we move into the new year and we see the impact of the recent interest rate moves, we'll get some improvement on the macro.

But I would say we're focused on controlling everything that's within our control on the cost side and again, expect continued progress there and more to come on what the sequential guide will look like as we move from the fourth quarter into the first quarter.

On your question on yield, Eddie, I don't know if there's anything that you might want to add from a pricing standpoint in terms of what we're seeing?

Yes. I mean I actually think it's improving from where we were earlier in the year. There is a lot of noise with our price metrics with account mix changes, profile changes. But we were able to post a 4.5% renewal increase, which was an improvement from second quarter. And really, that increase by month actually improved throughout the quarter. So we're very optimistic we're going to continue that momentum into the fourth quarter and into 2026. So I feel better about where yield is standing right now.

Your next question comes from the line of Jordan Alliger with Goldman Sachs.

Judy, it's been great interacting with you all these years and best of luck going forward. I really appreciate all your time.

Thank you.

So I guess maybe a big picture question then. Obviously, it's still pretty tough out there in the freight world, as denoted by the volumes from you and your peers in October. But pricing seems to be resilient. So I guess my question is, can you perhaps share some thoughts on the capacity setup when we do get to the volume inflection from an industry perspective overall, taking into account the Yellow bankruptcy. Like what are you seeing in terms of terminals sort of going into the next cycle and how it stacks up? And when we do inflect, could the situation lead to what sort of price recovery, if you will?

Jordan, this is Seth. When we think about just excess capacity, there's obviously a lot of that right now in the LTL space and then truckload, obviously, with the way the market has been.

From an LTL perspective, I think is where your question was coming from. Long term, we just have less capacity than we had 5 and even 10 years ago. When you look at how the Yellow auction kind of played out, there's a good chunk of those facilities that left the industry. So we've been strategic with where we've invested, where we see growth, service or efficiency opportunities, and it hasn't added a lot of cost to our actual base.

We've seen the productivity improvements as we've opened new facilities or expanded current facilities. So, we've talked over the long term, we have a long-term network plan, and we've expanded by about 800 doors. And most of that work is done and past us.

So I think when the market actually inflects and we see things start to get busier, that's going to be positive for pricing because there's just less capacity out there. So what I love about our company is we invest throughout cycles. So whether it's a down cycle or up cycle, we're making strategic investments to position ourselves to say yes to customers, whether it's a bad market or a good market, which I already mentioned.

So, I feel like we've been really strategic that we'll be able to take advantage when the market gets better. And the relationships that we have with our customers, 80% of our revenue comes from customers over 10 years. That allows us to improve our price as we deliver on the value that our customers see.

Yes. And Jordan, this is Matt Godfrey. I would just add to build on what Seth said. We've been very strategic throughout our real estate journey with the capacity that we've added over the last few years. The Yellow opportunity through their bankruptcy gave us the opportunity to speed up some of the targets that we had. But we take a continuous evaluation approach to our network. And so, we'll continue that process into the future, but we feel very good about where our capacity is when the market turns and the ability to say yes to our customer base.

Your next question comes from the line of Ravi Shanker with Morgan Stanley.

And Judy, I will also echo congratulations on your retirement here and you'll be missed.

Seth, maybe if we get a sense of the volume decline that you've seen in the last couple of years. And obviously, you pointed out to the ISM being weak, et cetera. But do you guys have a sense of how much of the volume decline may potentially be cyclical versus structural in terms of LTL shift or maybe some of the private guys ramping up and gaining share? And how much of it is structural versus cyclical?

And maybe on that same note, in your opening remarks, you kind of spoke about some of the factors that may have hurt you in Mastio this year. Do you feel like that also is more of a cyclical or a transitory drop and you guys will rebound next year?

Thanks, Ravi. So when I think about what I've done throughout this year, I spend a lot of time with customers and customers are facing just general uncertainty around tariffs and what happens with interest rates and demand and everything that's going on out there. So we've tried to partner with customers if they need to increase inventory or shift where they're sourcing from, and that aligns well with our integrated approach.

So this is more cyclical from our standpoint because our retention stats are really in a good spot. We haven't lost customers. They're simply just shipping less, and that's what we've been talking about for the past few years.

But when we think about the opportunity that we have, we operate in markets with $400 billion worth of opportunity. So that's just a tremendous way to expand with our loyal customer base that we already have. So with the change in strategy and market approach from a sales perspective, we continue to see our core LTL business grow, managed at all-time highs, and we continue to make progress on our SMB strategy within truckload. So I believe that it's more cyclically related than just the demand softness throughout and I believe strongly in what we're doing to execute to see profitable growth into the future.

And then your other question about Mastio, we anticipated that might happen. That's why we disclosed that in our 8-K in August about service challenges. We were really successful with onboarding new business, and we were conservative in our hiring targets earlier in the year. So we just didn't have the staff in place to service that business the way we expect it to.

So I'm really proud of the way the team reacted quickly, solve those service challenges. And when we look at our internal metrics, we've improved substantially since the summer peak vacation. So -- and we expect that to continue because we think the better you service customers, the stronger your pricing power and retention is going to be, and that's the type of company we are delivering a premium service for our customers.

Your next question comes from the line of Ken Hoexter with Bank of America.

Judy, again, congrats on your upcoming retirement.

So, this is the worst OR, I guess, in the fourth quarter forecast here since the first quarter of '20 COVID lows and then going back to the -- if it's the fourth quarter, it's worse since going back to, I guess, to 2017. Matt, you mentioned you continue to make progress, but I'm confused in where the progress is, right?

So you're starting off soft on the volumes, noted a corresponding decreasing or inability to decrease the costs. So what moves are you making to then align those costs? Is it the PT that's staying out of whack? Is it something with the extra hiring you've done? Just maybe trying to contrast if you know that the costs are out of whack, what moves can you take to realign that to get the cost back down?

Yes, Ken. So we have a number of different initiatives that have been ongoing across the Asset-Based organization, including our continuous improvement initiatives and teams have been going out across the footprint. Starting with our largest facilities, we continue to see a lot of runway with that. And certainly, we're continuing to advance our technology initiatives in a number of different ways, including around labor planning, line haul, our city route optimization project, which we talked about the benefits that we're seeing there. And you can see that in the numbers.

I mean we have normal, typical inflation in the business. Certainly, we have seen on the depreciation front as we've replaced our fleet using our total cost of ownership model, just the increased cost that we're seeing on the equipment side has shown up in our depreciation. We know that we've just got normal increases on the ABS side under our union contract.

And again, in the third quarter, we also used a little bit more Cartage and purchase transportation than normal just as we saw that volume surge. But then if you look on a cost per shipment basis, we were down 1% year-over-year on cost per shipment. So not only being able to mitigate the effects of inflation on a year-over-year basis, but also being able to decrease the cost on a per shipment basis.

So I would say, in general, we're focused on what we can control, and we expect to make continued progress on that. As we move through 2026, we certainly are seeing the same macroenvironment that everybody in our industry is seeing. As talked about on their calls, we're seeing show up in industry surveys. And so certainly, that is affecting the guide that we're seeing for the fourth quarter. But we still -- we're seeing the impacts of our commercial initiatives in our results. I mean, you still saw volume growth in October. We're still expecting to see overall volume growth on a shipment per day basis for the fourth quarter.

We're taking a lot of action on the yield side that I would say has not yet fully accrued to results, but we're going to expect to see the results of as we move into the first quarter of next year. So again, certainly, like we talked about, a little bit softer macro backdrop than we were expecting or maybe had seen historically with some of the factors that Seth talked about, including what are likely some secondary impacts from the government shutdown, maybe some pull ahead and just continued weakness in the manufacturing economy. But we still feel good about the targets that we gave at Investor Day, and we're continuing to make progress on those, and we expect that we'll continue to see results.

Your next question comes from the line of Bruce Chan with Stifel.

Judy, certainly been a pleasure working with you over the years, and we're going to miss you, but I wish you all the best here.

There's a glancing reference to the supply dynamics and truckload earlier in the call, so maybe I'll take that one. I know that we've talked about overflow truckload freight in your model in the past. Maybe you can just remind us of what percentage of your business overlaps with that market? And then maybe more broadly, what are your views on that returning? And are you seeing any signs, even if early or having any conversations about that coming back?

Bruce, this is Matt. So you're right. I mean we talked about this a little bit at Investor Day just in terms of the potential that we see for -- back to some of the discussion about cyclicality as we think about where we've been in manufacturing housing and truckload rates. If we see those returning to more normal historical levels, that's where we could see the upside of up to 280 basis points from macro improvement as we move from 2024 through 2028.

As we think about the truckload overlap into our LTL business, we have seen correlation between the higher length of haul, so think about maybe 1,000-plus miles and heavier shipments, so maybe 5,000-plus pounds. And it's not a significant piece of our overall Asset-Based LTL book of business. It's probably low-single digits. But still, we have seen some of those volumes move away.

Of course, those are very strong when you think about how those price out on a revenue per shipment basis, which is why there is some movement back. There has been some movement to the truckload market, just where those truckload prices are. And so I would say as we think about where truckload pricing will be going here over the next year or 2 as we think about capacity dynamics, and then just an improving macro, we would expect for those shipments to make their way back into the LTL network.

Your next question comes from the line of Tom Wadewitz with UBS.

This is Mike Triano on for Tom. And Judy, team UBS here, wishes you all the best in retirement.

So at Investor Day, you mentioned an assumption in the long-term target of revenue per shipment outpacing cost per shipment by 80 basis points a year on average. As we look into '26, do you think you need help from the macro to drive better freight mix and revenue per shipment? Or is there enough that you can do from a cost perspective and just stabilizing the mix that can help you achieve a positive spread in that revenue minus cost per shipment metric?

Mike, this is Seth. So when I think about 2026, obviously, no one has a crystal ball about what's going to happen right now. There's been a lot of changes in these last few years, but we do have confidence in our longer-term view and the targets that we outlined at Investor Day. So when you think about from a demand standpoint, we don't see a lot improving on the demand side right now, but lower interest rates could spur increased homebuilding, manufacturing, auto, all those different things. We saw the tax bill get passed that could drive renewed freight demand, clarity over tariffs and the government shutdown as those issues get resolved, we think that could be a positive impact for us.

So the supply side is something we're looking at, but we haven't seen the impacts from the ELP mandate or the non-CDL enforcement yet, but we're hearing anecdotal stories that could be positive. So if you just look at the cost to operate a truck and where the truckload market pricing is right now, we could continue to see exits on that regard.

But what I will say is despite all the environment and macro noise, like Matt mentioned earlier, we're focused on things in our control, and that's being customer-led, and we're going to focus on managing our costs in the short term as well as being positioned for the long term. And we're taking those actions now, and Cartage and PT is a great example of that. But we have other areas of opportunity that we're looking at.

We continue to invest in service improvements across the board. I look forward to launching ArcBest View next year and having a better service for our customers. And we have a robust pipeline that I already mentioned before.

So we feel confident that we can achieve that revenue per shipment outpacing cost per shipment by the 80 basis points as we move through next year and throughout our entire target window through 2028. So although, we continue to navigate just the challenging macroenvironment, I'm very confident in our team's ability to generate shareholder value over the long term.

Your next question comes from the line of Brian Ossenbeck with JPMorgan.

Judy, congrats again on your upcoming retirement.

Just 2 follow-ups here. First one, just on the September to October trend. It looks like weight per shipment is stabilizing, but pricing per hundredweights not actually increasing. So I'm just trying to understand if you can clarify that a little bit in terms of the comments, I think, Matt made about maybe being able to catch up for some of the costs you incurred ramping up this new volume with price or maybe it's on different shipments. So a little bit more color there would be helpful.

And then also, if you can give us a little more clarity in terms of the productivity per shipment or per person per day rather in Asset-Light setting a new record. Is that driven by some of the mix shift? Or how should we think about how you guys are reaching that?

Brian, this is Eddie. In terms of like the price change from September to October, we do still see a lot of volatility when it comes to our account mix. The macroeconomic environment is still pretty -- is a pretty big headwind for us. So we're not getting a lot of help there on weight per shipment.

And so, we did see some business come into our network that had a different profile, and it's typically been operationally efficient for us, which helps. But it does put some pressure on our -- your typical revenue per hundredweight yield metrics.

But we are very encouraged with the progress we're making with our renewal increases, I mentioned that earlier on the call. But that's momentum going in from the second quarter to third quarter, and we're seeing really good signs going into the fourth quarter as well with those renewal increases. So lot of noise in those typical yield metrics, but I do feel like we're making progress. And Matt mentioned some yield initiatives that we've been taking, and that's having an impact on some of our account mix as well. So progress and there's more to do, and I think you're going to see that in fourth quarter and into 2026.

Yes, Brian, I'll take the Asset-Light productivity question. So we have a lot of initiatives that we're working on at Asset-Light. You saw that 33% productivity improvement that we mentioned. But I still feel like we have a lot of runway to go that will help our people to focus on our customers versus doing manual tasks.

So we also measure service from an internal standpoint. On the Asset-Light side, and we continue to see best-in-class results. on the service side. But what gives me a lot of confidence in the future is some of the projects that we've been working on with Christopher's team and the truckload team and managed around inbound call automation.

We're automating scheduling and booking loads, and that allows the team to focus on more complex work. We started to implement Truckload quote augmentation, which uses AI to load, build, quote and e-mail responses to customers much quicker than a human can do and focus on those more challenging things.

The shipper initiatives on the carrier side, we're doing a lot with third-party load board integrations, routing guide automation, automated offer approvals and then the carrier portal, which I mentioned in my opening comments. We continue to have features like lane matching, auto offer negotiations, which really helps reduce that fraud side of things in the market.

So we're going to continue to invest in this area. Managed saw another record quarter from a growth productivity standpoint. We see a lot of runway there with a $1 billion pipeline, like we mentioned at Investor Day. So I think all of this work ultimately comes down to allow us to position ourselves for growth without having to add the cost when the market does inflect because of these productivity gains.

Yes, Brian, it's Matt. I'll just maybe add on one more comment. So like Seth said, we're very proud of where we've come on the productivity side in the Asset-Light business and the 33% improvement that we saw on a year-over-year basis and where we see that going. And certainly -- so that has been a key driver of the performance. And it's been across our solutions. So truckload on its own reached its highest level of productivity when we look at shipments per employee per day in the third quarter.

And then there are some other impacts just because in our managed solution, we do have higher productivity levels just on a shipment per employee per day basis. And as we continue to grow managed, we do see some impacts as well from there. But a lot of it is -- all of the initiatives that Seth has talked about that we've been working on and we're going to continue to focus on.

Your next question comes from the line of Stephanie Moore with Jefferies.

I wanted to ask maybe a higher-level question. I know that you have pretty good insight into the housing market with your U-Pack business. So I wanted to hear if you had any insight from what your customers are saying as it relates to this overall housing demand and the expectation this could turn the corner in 2026?

Stephanie, yes, we're seeing the continued weakness on the housing front like it's been reported publicly. We hope with interest rate reductions that we're seeing with the Fed right now take action that that's going to spur some demand. We do think there's pent-up demand in the housing market. It's just been too expensive from an affordability standpoint. So I think as those interest rates lower, that's really going to help improve our U-Pack profit, obviously.

When we look at U-Pack in general, we are at a very low point because of just the housing market where it's been over the last 3 or 4 years. So that really does drag on the weight per shipment metrics and some of those profitability metrics. So we think when the market flips, it's going to have kind of an outsized impact for us when the housing market flips.

And also housing drives so much of truckload capacity, which then spills into LTL, obviously. So we think when the housing market strengthens, that's going to be impactful to us. But we don't see it in the near term. We think as the Fed continues to take actions, hopefully, into 2026, we see that demand continue to improve.

Your next question comes from the line of Ari Rosa with Citigroup.

Judy, let me echo others in congratulating you on your retirement. Definitely a nice career, and it's always been a pleasure working with you.

You mentioned in your opening comments market share gains in the LTL space. I'm just curious what you think is driving those market share gains. Given -- I guess it's hard to reconcile with some of the commentary around some of the service challenges. So -- but then also, right, you've talked about pricing discipline and other things. So like what is the process of gaining market share gains? Is that kind of maybe taking on some mix that's less attractive? And if you could just kind of talk about that strategy and how you think about those things? Because again, I'm trying to reconcile it with some of the margin pressure that you're talking about here, given it seems like volumes are actually looking okay relative to others.

Yes, Ari, this is Eddie. Yes, I mean, we've been very proud of our commercial team and what they've been able to achieve this year. We had consolidated our customer-facing groups and our business acquisition teams together under this commercial team. And that alignment has really led to a lot of great results when it comes to getting in front of our customers more, developing opportunities.

And then one of the best things about ArcBest is we're differentiated in the marketplace. We offer a suite of solutions that are different than most of our competitors. We're an integrated logistics company with assets, and that has resonated throughout the year with our customers, and our sellers are taking advantage of that.

From a standpoint of the type of business that's coming in, it's been good for us. It's been profitable. The profile of that business has been different than what our existing business was or is. But that's just because we've acquired that business at still a premium to the market price. If you look at our peers in that space, they have a lower revenue per hundredweight than what our average is.

We are the market leader when it comes to revenue per hundredweight and yield. And so I think it's not bad business for us. But it is different, and it has led to some efficiency gains in our network from an asset base standpoint. But there's always an opportunity to utilize this growth to improve our mix, improve our yield in our company. And that's really what we've been focused on the second half of the year.

Your final question comes from the line of Chris Wetherbee with Wells Fargo.

It's Rob on for Chris. And Judy, we'd like to echo our best wishes as you move on to the next chapter.

With regard to pricing, we saw a slight acceleration in the contract renewals in 3Q and a bigger tailwind from fuel, but revenue per bill declined sequentially in the quarter. Can you talk about the biggest drivers of the underperformance versus your contract renewals? And when you expect revenue per bill to better approximate renewals or GRIs as we're looking out?

Yes. Rob, this is Eddie again. Yes, I mean, the biggest driver of that revenue per shipment is the drop in weight per shipment. And that's been a headwind for us all year. A lot of the new core business, LTL core business we brought on has been heavier weight, but that softness in the manufacturing sector, industrial production and housing has been a pretty -- put some pressure on our weight per shipment metrics and ultimately, our revenue per shipment standpoint.

So that's pretty much the story on that. Again, that profile has been operationally efficient for us. So it's led to some efficiency gains there that's been good for us. And we're just going to constantly look at our book of business. We make good -- we have a strong history of pricing discipline that allows us to really manage this business well. We make account-by-account decisions. And if we run across any business that we don't think is good for us or not contributing, we're taking immediate action on it to improve it.

Your final question comes from Scott Group with Wolfe Research.

Best of luck to you, Judy.

Thanks.

So a couple of things. Maybe can you just talk about the tonnage assumption that you've got within the -- for the OR guide for Q4? Do you assume it gets any sort of better or worse? And then just on the LTL pricing environment, if I look back at the last couple of quarters when the yields have been down a little bit, you've disclosed, hey, we've got growth in lower cost but lower-yielding shipments, and you sort of took that text out and now it's just, hey, yields are flat. Is this -- I know the pricing renewals are getting better, but is this -- like taking that language out, is this indicating that it is, like, tougher pricing environment, and it's not about mix and it's more just sort of underlying price?

Yes. So Scott, this is Matt. I'll talk a little bit just on the sequential view that we have as we move from the third quarter to the fourth quarter and kind of what we're seeing for tonnage overall. I would say as we're moving forward, we expect to see just a slight increase both on a year-over-year basis and a slight increase, maybe low-single digits on a year-over-year basis as we look at the fourth quarter overall from a volume perspective. And so certainly moderating versus what year-over-year volume that we were seeing in the second and third quarter, just as we've seen a little bit softer macroenvironment.

And so I think as we think about big picture on tonnage, we would expect tonnage to moderate as well. Not expecting any significant changes in weight per shipment, but certainly, the overall macro softness could continue to impact weight per shipment as we move through the fourth quarter.

On the pricing side, we continue to feel good about all of the actions that we're taking there. You're right. We have seen early in the year, just some of the new business that we took on was operationally more efficient, and we're still continuing to see that dynamic.

If you look at just the profile of that business, how over dimensioned that business is versus our overall book of business. It just does not, as over dimensioned, doesn't have as many operational requirements, does generally have a lower cost to serve. And so I wouldn't say that there's anything in general that has changed in that overall dynamic.

Yes. The only thing I would add is, I really do believe that the pricing discipline is still right. I think the market is rational when it comes to pricing. I mean we have seen probably in the last couple of quarters just a higher frequency of customer bids, which does kind of create an opportunity for a competitive environment, especially for any carriers who don't have that business.

But in those situations that -- where we've been an incumbent, we just lean into our value and our relationship, and that's typically allowed us to get a fair increase while retaining the business. Or worst case, we've used it as an opportunity to price out of some unprofitable business to achieve better yield results.

So I don't think it's gotten anything worse in terms of the market. And I do feel like a lot of -- there is a lot of noise with our yield metrics just because of account mix and this macroeconomic impact on existing customers that they're just shipping less. And that existing customer base has historically been priced really well for us. And so, there are some headwinds there when that business is down.

That is all the questions we have. I would like to turn it back over to Amy Mendenhall for closing remarks.

Thank you to everyone for joining us today. We certainly appreciate your interest in ArcBest. This concludes today's conference. You may disconnect.