Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the ArcBest 4th Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number 1 on your telephone keypad. To withdraw your question, press star 1 again. We kindly ask that you limit yourself to one question and return to the queue for any follow-up. I would now like to turn the conference over to Amy Mendenhall, Vice President, Treasury and Investor Relations. Please go ahead.

Good morning, everyone. I'm pleased to be here today with Judy McReynolds, our Chairman and CEO, Seth Runzer, our 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 section of our earnings release and SEC filings. To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures. These measures 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 8K filed earlier this morning, or follow along on the webcast. And now I will turn the call over to Judy.

Thank you, Amy, and good morning, everyone. Despite a challenging brain environment in 2024, we remain focused on executing our strategy to create value for our shareholders and customers and ensuring we are well positioned to capture growth when the market turns. At ArcBest, we believe in a win-win approach, providing premium value to our customers, which in turn benefits our business. With our comprehensive suite of integrated services, ArcBest is more than just a transportation provider we are an innovative strategic partner for our customers our decisions are always customer-led and our entire team is dedicated to listening and crafting solutions to meet our customers unique needs supply chains are becoming more complex and most shippers use a mix of modes to keep their supply chains moving Our best-managed transportation solution seamlessly connects these modes to build better supply chains, driving improved customer retention and profitability. As supply chains modernize and customers seek efficiencies, the demand for better shipment visibility is growing. We have invested significantly in this area to provide industry-leading visibility, enhancing trust, and enabling customers to make more informed decisions based on real-time data. Our industry-leading efforts are being recognized, as evidenced by MassDO, ranking ABF number one in the industry for the most useful website and number two in the industry for proactive communications. Additionally, our ongoing service enhancements have reduced customer service requests by 20%, decreasing operating expenses. And we're constantly improving. We look forward to sharing more about a new platform we'll be publicly launching in a few months. Excellence is one of ArcBest's core values. Delivering a premium experience for our customers requires excellent execution from our team every day. In 2024, we upheld this core value by training nearly 5,000 employees on our quality process, deploying operational teams to enhance execution, launching multiple technology projects, and investing in our fleet and facilities. We also lead in innovative value enhancing solutions to improve LTL margins and capacity utilization, including shipment-level cost visibility, dynamic pricing, and space-based pricing. This allows AVF to select the shipments that best leverage the AVF network and is a key reason why we have the strongest asset-based LTL pricing metrics among public competitors. Our full year AVF non-GAAP operating ratio for 2024 was 91.2%, marking a 670 basis point improvement since 2016. I will note our operating ratio includes approximately 600 basis points in union pension costs. Adjusting for those costs, our operating ratio compares very favorably to our peers. While we've made tremendous progress, we recognize there is more to be done. Two weeks ago, we announced a series of leadership and organizational updates across the business, reflecting our commitment to continuous improvement and innovation. I'm confident that we have the right team in place to advance our strategic priorities and drive sustainable long-term growth. Our president, Seth Rensler, will cover those changes in more detail. Before I turn it over to him, I'd like to thank Stephen Leonard, who recently announced his retirement for his 24 years of service. Stephen has been a key part of ArcMeth's transformation into an integrated logistics company. He will be greatly missed when he retires later this year. And now I'll turn it over to Seth to outline our key focus areas for 2025.

Thanks, Judy, and good morning, everyone. As I stepped into my new role, I embarked on a listening tour across our company, engaging with employees to identify barriers to growth and opportunities to streamline our business. This experience has further strengthened my conviction in our strategy. Our people and our customers consistently tell me that ArcBest is uniquely positioned to help navigate disruptions and build better supply chains with our comprehensive suite of integrated solutions. In 2025, our focus is on enhancing execution and driving profitable growth. To start, we recently announced some organizational changes designed to remove barriers to growth, enable faster decision-making, and foster better collaboration across key areas of the business. Eddie Sorg has been named Chief Commercial Officer and will lead an expanded commercial organization, aligning our revenue engine across teams like sales, marketing, yield, and customer solutions all under one leader. Additionally, Christopher Atkins has been appointed Chief Strategy Officer. Under his leadership, we will centralize our strategy management and data science teams. This team will advance our highest priority initiatives and work to further streamline processes and enhance productivity. We are also investing in our sales force to ensure we have the right resources to manage customer relationships and grow new business. We are expanding our presence within the small and middle market segment, which presents a significant growth opportunity. In 2024, we achieved a 55% increase in our overall pipeline, and we have a clear plan in place to accelerate this even further. Moreover, we are enhancing customer service to improve customer attention, including expanding the dedicated teams that support our top customers and developing onboarding teams for new customers. Over 80% of our customers have been doing business with us for over 10 years, and we will continue providing the personalized and exceptional service these customers have come to expect from us. Disciplined execution remains a cornerstone of our approach. We made significant progress on cost improvement in 2024, and we will continue to focus on further improvements in 2025. We reached a multi-year high for employee productivity last year and will drive further improvements through optimization, innovation, and training. We have deployed training and compliance teams to 15 facilities, resulting in $12 million in savings. We plan for this team to visit additional facilities in 2025, with the roadmap extending through mid-2026 to achieve further gains. In 2025, we will accelerate the optimization of our operation by harnessing the power of responsible AI and machine learning to enhance our employees' ability to make quicker, better informed decisions. In 2024, we laid the groundwork with projects like the initial phase of our City Route Optimization Project and AI-assisted appointment scheduling and truckload quote augmentation tools. This year, we will build on that foundation, advancing demand forecasting and route optimization to drive ongoing cost savings and service improvements. Our focus on costs and productivity has helped mitigate inflationary headwinds in areas such as insurance and healthcare, and we continue to review our operations to identify areas where we can streamline processes and enhance productivity. As we accelerate into our next century with excellence, we will achieve success through purposeful collaboration. By driving innovation, moving with urgency, and providing customers with premium service, we will strengthen our financial position and ensure we are well prepared to meet the evolving needs of customers and capitalize on market opportunities. I'll now turn it over to Matt to go through the financials in greater detail.

Thank you, Seth, and good morning, everyone. 2024 was a year marked by a sluggish industrial economy and a challenging truckload market. Despite these headwinds, our team's resilience and our strategic initiatives enabled us to navigate these challenges and deliver solid financial results. I'm pleased to report that in 2024, we achieved our third best revenue and fourth best non-GAAP operating income in company history. Turning to our fourth quarter results, consolidated revenue decreased by 8% from last year's fourth quarter to $1 billion. Non-GAAP operating income from continuing operations was $41 million, compared to $82 million in the prior year. Our asset-based segment saw a $35 million decrease in non-GAAP operating income, while the asset-light segment's non-GAAP operating loss of $6 million was $5 million worse than the prior year. Adjusted earnings per share were $1.33, down from $2.47 in the fourth quarter of 2023. Now, let's discuss our two segments in more detail. Starting with our asset-based business. Fourth quarter revenue was $656 million, a per-day decrease of 8%. ABF's non-GAAP operating ratio was 92%, an increase of 430 basis points over the exceptionally strong performance in the fourth quarter of 2023, which was driven by additional business at higher prices following a cyberattack on a competitor that tightened market capacity. ABF's non-GAAP operating ratio increased 100 basis points sequentially, which was on the lower end of the historical range of a 100 to 200 basis point increase. And with ABF's 2024 operating ratio of 91.2%, our union employees qualified for a 1% profit sharing bonus payout. In the fourth quarter, daily shipment saw a decline of 1% year over year, while wait per shipment decreased by 6%, resulting in a 7% decrease in tons per day compared to the previous year. This decline is primarily due to industrial weakness, as customers are producing less in the current economic environment. Additionally, higher interest rates and low housing inventory have led to fewer household goods moves, which typically involve heavier shipments. Some higher-weight LTO shipments have also shifted to the truckload market, with its continued low rates and excess capacity. Despite lower tonnage levels, the volume of shipments remained relatively stable, which meant that labor costs didn't scale proportionately to tonnage declines. However, improved productivity through technology and training helped mitigate costs while maintaining high service standards. Costs for fuel, repairs, and purchase transportation were all lower on a year-over-year basis, but insurance-related costs increased by $9 million, adding 160 basis points to our operating ratio year-over-year. We secured an average increase of 4.5% on our contract renewals and deferred pricing agreements during the quarter. Revenue per hundredweight increased by less than 1% in the fourth quarter compared to the strong fourth quarter of 2023 when revenue per hundredweight increased 7% as a result of the previously mentioned market disruption. Price improvements have been partially offset by declining fuel costs. Excluding fuel surcharges, revenue per hundredweight increased in the mid-single digits year-over-year. The pricing environment remains rational, and we are focused on using pricing and operational efficiency improvements to outpace rising costs and enhance our margins. In January 2025, ARCBEST's asset-based segment experienced lower tonnage and shipment levels compared to the same period last year. As the freight environment remained soft and truckload prices remained low, we continue to see a reduction in heavier weight LTL shipments and fewer household goods moves, which contribute to a lower weight per shipment but a higher revenue per hundredweight. January was also impacted by winter weather conditions, with ABF experiencing the highest number of service center closures since 2014. Excluding pandemic-affected periods, the average sequential change in ABF's operating ratio from the fourth quarter to the first quarter over the past decade has typically ranged from an increase of 350 to 400 basis points. Even with the winter weather we experienced in January, we expect our first quarter operating ratio increase to stay within this historical range. Moving on to the asset-like segment, fourth quarter revenue was $375 million, a daily decrease of 9% year-over-year. Shipments per day were down 2%, and revenue per shipment decreased by 7% due to the soft freight market and growth in our managed business, which has smaller shipment sizes and lower revenue per shipment levels. While we maintain our focus on reducing costs and improving employee productivity, the non-GAAP operating loss of $6 million shows that our business continues to be impacted by current market conditions. In January 2025, Asset Light year-over-year daily revenue was down 6% due to fewer shipments from winter weather and a strategic reduction in less profitable truckload volumes, which are offsetting the continued strength in managed. Lower revenue per shipment resulted from soft freight market conditions and a higher proportion of managed business with smaller shipment sizes. Given current market conditions, we anticipate a non-GAAP operating loss for the segment between $4 million and $6 million for the first quarter of 2025. Our asset light offerings play an important role in our overall strategy as customers seek long-term logistics partners for all their transportation needs. We continue to better align resources to match business levels, and we are maintaining our pricing discipline. These initiatives are a top priority as we focus on returning the asset-life segment to profitability. I'll now turn to our long-term, balanced approach to capital allocation. In 2024, we invested a net $288 million in capital expenditures, including adding capacity to our network and investing in our fleet. These investments enable growth, improve service, and increase efficiencies across our network. Our 2025 capital expenditures are estimated to range from $225 million to $275 million, primarily for revenue equipment and real estate. We also returned over $85 million to shareholders in 2024 through both share repurchases and dividends. We will act opportunistically on share repurchases based on share price, balancing organic capital investments while maintaining reasonable leverage levels. Our balance sheet remains strong, and we have approximately $450 million in available liquidity. We look forward to building on our momentum in 2025, and we remain focused on delivering strong results. I am confident that the strategic initiatives and leadership changes Seth discussed will drive our continued success and position us well for future growth. I'll now hand the call back to Judy.

Thank you, Matt. Our people are at the heart of our success, and our ongoing investment in them is a key enabler in reaching our goals. We are especially proud to be recognized as one of America's best large employers by Forbes, one of the best companies to work for by U.S. News and World Report, and for the 15th consecutive year, we have been named among the training APEX Award winners. I want to extend my heartfelt thanks to all ArcBest employees for their unwavering commitment to continuous improvement and exceptional customer service. The adaptability and grit our team demonstrates every day makes me incredibly proud.

That concludes our prepared remarks i'll turn it over to the operator for questions at this time i would like to remind everyone in order to ask a question press star then the number one on your telephone keypad we kindly ask that you limit yourself to one question and return to the queue for any follow ups our first question will come from the line of jason seidel with td cowan please go ahead uh thank you operator uh good morning uh judy and team uh real quickly when we're looking at the sequential OR movements that you talked about for the asset-based business, it's nice to see that you're going to stay within the range.

Sort of what are the things that you're doing to offset the weather? And then I have just a quick follow-up.

Yeah. Hey, good morning, Jason. So certainly, you know, we see continued improvements from the productivity and efficiency work that we've been doing, you know, saw some lower purchase transportation expenses as we move sequentially quarter to quarter and then you know we also have annual incentive plans both from our for union and non-union employees we adjust those on a quarterly basis just based on our performance and there was also some impact in the quarter from that as well okay uh and then my quick follow-up here is you know when i look at pricing you guys talked about a rational pricing environment but when i look if i look at your sort of trend here on price increases you know if you go back to

fourth quarter of 23, it's 5.6, then 5.3, then 5.1, then 4.6. Now we're hearing 4.5. Still a decent price increase, but the trend obviously is downward. Can you talk to that? And are you seeing any pressures in the marketplace due to sort of the sluggish freight environment?

Hey, Jason. Good morning. This is Christopher. I would say I would characterize the fourth quarter pricing results as in line with the third quarter. You know, we continue to maintain discipline there, making sure that we're securing increases and working on our efficiency to offset the inflationary pressures that we face from a cost basis. So continue to see, you know, a rational environment there. I wouldn't say we've seen any more pressure in recent months than we have throughout the year. And looking back at the full year of 2024, we achieved a 4.9% increase, which If you compare that to the 20-year period, that's a top five result. So really proud of the team for that result. And if you think about just the freight recession we've been in for the last several years, I think that's a testament to just the service that the ABF team has delivered, that our customers appreciate that value and are willing to pay for it.

That's a helpful response, and I appreciate the time as always, guys. Thank you, Jason.

Our next question comes from the line of Daniel Embro with Stevens.

Please go ahead. hey good morning everybody thanks for taking our questions i want to ask maybe another one on the or seasonality heading into uh into one q here i guess in the fourth quarter i would think you guys probably had a benefit from an unwind of the accrual from the bonus payout i think in the script you mentioned you paid a one percent uh bonus but you were tracking towards the two percent through the third quarter so i guess could you help quantify what that or tailwind was in the fourth quarter if there was one and then that i guess in that context uh i would think if that's tailwind of 4q that makes it a harder comp than to 1q if you start accruing at a two percent rate again so i guess what are the offsets there if you just add any more color around how we should think about you know that bonus impact on the or yeah hey good morning daniel this is matt so you

know like i mentioned we do have a number of different plans you know including executive plans that we adjust on a quarterly basis um and true it up just based on performance including the the operational results and then of course the stock performance over the time period So I don't have an exact number for you. Certainly there was some impact there in the fourth quarter, you know, and then as you look on the, you know, shipment side and just kind of the revenue side, fourth quarter to first quarter, you know, we're encouraged. certainly there were a number of of weather days that we had in January like I mentioned you know the highest number that we've seen since 2014 but on the days that we weren't weather impacted I think we were encouraged by the trends there and so you know we're hopeful that we'll see some improvements sequentially um there on the revenue side versus what our historical seasonality would have normally okay and anyway we're thinking about the bonus accrual into 25 if you paid a one should

we expect that to be a headwind year-over-year?

I mean we just have a typical process that we go through again across all incentive plans on our closed process as we go move on a quarterly basis and so you know we would expect to true all those plans up with expectations you know as we move through the year.

Thanks.

Our next question comes from the line of Jordan Allager with Goldman Sachs. please go ahead yeah hi um just sort of curious how you're thinking about yields i.e revenue per hundred weight you got some tough comps ahead from from 2024 you know do you think that number with fuel can stay positive through the year thanks hey good morning jordan this is christopher yeah that's definitely our our goal is to remain positive there obviously i just want to call back to that's a proxy for price uh there's there's other elements to pricing like we talked about wait for shipment length of haul. There's other factors as well. So as the mix plays out throughout the year, as we have opportunities in our strong pipeline come on board, you know, we're very focused on making sure that new business that we bring on, whether it's from bringing on new logos or whether it's from growing with existing customers, is profitable. Revenue for Hunter Way is just one proxy there, but we really don't manage to that. We manage to the profitable outcome that we're, you know, we're setting out.

Thank you.

Our next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Great. Thanks, Mori, everyone. Maybe just a big picture question. I mean, we've heard from some of the TL companies, kind of, obviously, when a 4Q was a pretty good peak season and maybe some momentum continuing into 1Q, but in the LTL space, it feels like demand fundamentals are much weaker, kind of. Does it Does it feel like demand in the TL and the LTL space are going in opposite directions? Is that just a function of end markets, consumer versus industrial? Is that a seasonality thing? How would you think about that? And also, just a follow up on the price, do you feel like there is still opportunity to push to mid-high single-digit pricing if and when the cycle really picks up in the back of the year?

This is Seth. I appreciate the questions. I'll start out with your first question, then I'll pass it to Christopher on the pricing question. But as far as the freight environment goes, we monitor the markets closely and we acknowledge the macro impact and length of the cycle, something we haven't seen in our history. January hasn't really given us a clear view into the start of the year just because of the weather impact that we mentioned. There's a lot of certainty out there, so that's made it tough to predict with, you know, regulations potentially being reduced and tariffs. So tax savings could impact free cash flow and cause more investment. So we're watching a lot of different things, but regardless of the environment, we're well positioned to handle any of those environments. And we've seen many of these cycles over our 100 years. We navigated the last tariff situation good as well. So we view markets like this as an opportunity, and we feel providing excellent service to our customers is what's going to continue to allow us to grow. So we're focused on things in our control, continue to listen to our customers, help them navigate this challenging time. And we're also optimizing our costs to make sure that we continue to position ourselves when the market turns. Pipeline metrics are strong. We feel good about where demand's at, but we just got to see a few things kind of clear up as we move into the new year to give better guidance on that.

Hey, good morning, Robbie. This is Christopher again. you know just from a from a pricing standpoint that's a that's a discipline that we've had for many decades at this point where we are we have a cycle of renewals for contractual kind of deferred pricing that we're working with our customers most of them to have a 12-month cycle to make sure we're securing increases there so our plan is to secure good increases really regardless of the market because we do recognize that we we face inflationary cost pressures that we have to offset And, again, just drawing back to the service, just really proud of the ABF team there that our customers have valued and appreciated just the premium service that we're providing and understand when we do need to secure increases there. Perfect. Thank you. Thanks, Robbie.

Our next question comes from the line of Tom Wadowitz with UBS. Please go ahead.

Yeah, good morning. So, Judy, I wanted to get your thoughts on how you think the competitive environment, you know, potentially would change in terms of what, you know, what we heard, you know, not that long ago about FedEx moving forward with the intention to spin out. You know, they're going to add a lot of salespeople and focus on, you know, I think that focus on them will be more on SMB. So do you think that that's, you know, good or bad for the market? it. I assume everybody has some overlap with FedEx Freight. Just in, I know, you know, not sure how much you want to comment on competitors, but that's kind of a big event in the space. Thank you.

Yeah, it sure is. I mean, it's a, it's a big noteworthy, you know, event. And what I'd say about them is, you know, just like the other competitors, I think that we have now, you know, across the board are, you know, strong competitors. And, you know, I feel good, as Christopher has articulated a few times here, about the pricing environment. And I feel good about the competitive environment being one that, you know, we can succeed in because we are. You know, we've had a 55% growth in our pipeline this year. We feel like it's within our control, you know, to execute on that pipeline. And we've got a lot of business that's in late stages. And I feel like the multi-solution integrated approach that we go to market with just really is responsive in a time like this because there's so many unknowns. It seems like there's a direct disruption every six months, you know, and we've just gotten proactive about planning for the unexpected. And, you know, that's something that I think our team is excellent at. And I feel like the suite of solutions that we have to offer and the combinations of those is just very responsive. And so I think many of our competitors are coming to market differently from one another, but I like where we are.

What about the kind of part of that, I guess, your approach to the market and like, you know, I don't know if you buy segment by customer size or by certain vertical types, but where you, you know, maybe your sales approach and where you think you, I don't know if there's like more competition in the kind of SMB part where it's a little more sales intensive or just maybe kind of if you see differences in competitive dynamic in different parts of the market or maybe where you resonate more with your approach in certain parts of the market.

Yeah, what's interesting about your question is just our recent, you know, organizational changes, and I think that the chief commercial officer role, you know, that Eddie Sorg is going to be taking, I guess, tomorrow, starting tomorrow. So, Seth, do you want to talk a little bit about that, your thoughts on that?

Hey, Tom, this is Seth. When I think about growth, we have a tremendous opportunity with the markets we operate in, having over $400 billion worth of potential. So we have a lot of potential to expand within our current loyal customer base alone. And we want to make sure we price that that aligns with the value that we provide. So we see a lot of opportunity in front of us, and we just need to do a better job on the execution front. That's why we announced these changes. So, by aligning sales, marketing, yield, CX, all under one leader, we have the opportunity to capitalize on those opportunities that we see. So, we're going to continue to focus on optimizing our mix. We've seen double-digit growth in our managed solution. We expect all these recent changes are going to accelerate not just one particular segment, but all segments across. And that's really why we made this change. and we're we're seeing some some good signs but it's just a little early with the weather and everything that's going on in january but i think this unified approach is going to allow us to capture growth opportunities better than we do today and have an alignment with the sales and yield team i think is going to really strengthen our go-to-market approach great thanks for the time thank you our next question comes from the line of chris weatherby with wells fargo please go ahead hey thanks good morning guys um i wanted to ask about weight per shipment and i understand some of the dynamics of the housing market and obviously moving uh in that context but i guess i'm curious

if we see you know sort of an industrial pickup and maybe tonnage does get a bit better and maybe weights stay a little bit lower, does that impact kind of the incremental margins you think you can put up in this business? I guess maybe a bigger picture question, just zooming out is how do we think about that weight per shipment, what it means and maybe kind of how it might play out over the course of this year, assuming there is some degree of improvement in the demand side.

Sure. So, hey, Chris, this is Christopher. You know, from a weight per shipment standpoint, it's like you said, there's the industrial production, the manufacturing demand has been sluggish and that's been that way for a while. Truckload demand has been soft, and we are seeing and even participating in helping customers move the LTL business from LTL to truckload to help our shippers really take advantage of that market in its current state. And then, like you said, the household goods, that moving business, it continues to be soft, and that has persisted into January just with the interest rates being higher than they have been the last couple of years. So those are some pressures that we experience from a wait-for-shipment standpoint, and any one of those things or all three of us, as that recovers, I think that will be a beneficial outcome for us as it relates to profit. Those are things that we want to happen, but we are well-prepared to manage it, really regardless of the profile that we're given. We have a really strong operations yield sales functions to make sure that we're maximizing the return that we get. And like Seth and Judy have already mentioned, just the strong pipeline that we have generated this year, we think regardless of what the market gives us, we can continue to grow and outpace the market here.

Hey, Chris, this is Seth. I'll add to that. Really, when you think about all parts of our business, both asset-based and asset-light, we work to build a scalable operation where we can take advantage of that operating leverage. So the particulars on incremental margin would really depend on where the business is coming from. And we evaluate each opportunity to ensure that it contributes to our financial targets. We've invested a lot in our network, capacity, productivity, and we've been very disciplined with our pricing actions. And looking at that on an account-by-account basis is beneficial. And as the market turns, it's going to help build density in our network, which will help fill that empty capacity and get more freight per stop with resources we already have deployed. So as always, we expect good incremental margin with the volume that we bring on because we price on value that we bring. So I feel really good about that as the market starts to recover.

Okay.

Appreciate it.

Thanks very much.

Our next question comes from the line of Bruce Chan with Stiefel. Please go ahead.

Yeah. Thanks, operator. And good morning, everybody. Question here on the tech enhancements. specifically on the city route optimization and AVF. I don't know if that's, you know, through Maven or another provider, if it's internal, but, you know, my rudimentary math here tells me that that's maybe worth 50 BIFs of gross savings on the OR. Is that fair?

And, you know, can you maybe give us a rough sense of how much opportunity is left from additional phases of the rollout, you know, again, maybe on the OR side? good morning bruce this is matt godfrey yeah so when we look at the the city route optimization we rolled out the initial uh phase phase one of it throughout 24 and we saw a return of about a million dollars a month from that initial phase and you know when we look at the additional phases of city route optimization uh the second phase focused on enhancing kind of the optimization tools in the initial phase and the third phase focused on enhancing our daily pickup operation. We don't see as much runway as the initial phase from a return standpoint, but we feel positive about the results that we'll get. And we also see a significant benefit to our customers around the third phase, especially as it relates to pickups and the importance of the ranking on the Mascio service there. And so, but when we think about the returns that we get from any of our efficiency projects, it's really a testament to the high levels of execution of our people in the field. And it's listening to our people that led to our investments in optimization. It led to the investments in the training that we referenced before, and it led to the investments in this enhanced tool set. So as we turn the page into 25, yes, we're excited about the additional phases of city route optimization, but we have a robust optimization profile, project profile. And what's really exciting is these projects are starting to build on one another. So we're starting to stack these things on top of each other, both from an efficiency standpoint and from a customer experience standpoint. And as mentioned, we're going to continue to invest in our training team of operational experts, expanding that. And, you know, we know that this improvements in efficiency and reliability, they position us for growth and they support our strong price.

Okay, that's super helpful, Matt. And then just a quick follow-up on the share shift comments to TL and the prepared remarks. You know, I think some of your competitors have discussed in the past that the overlap is actually pretty minimal, you know, maybe low single-digit percentage. I'd imagine maybe that's a little higher for you given your length of haul and maybe your weight per shipment. Is that fair to say? And do you have an estimate of what that overlap looks like?

Yeah, this is Seth. The truckload market still has too much capacity, and we've seen where the rates are at in the truckload space. And that's caused some of the shipments on the fringe, that 7,500 pound to 20,000 pound freight that might traditionally work in an LTO network shift into the truckload space. So I do think as the market recovers in the truckload space, some of that freight fits better in an ltl network and i think we'll see that shift back uh this this is more pronounced than previous shifts just because the market weakness and the truckloads but outside truckload carriers really don't like to do multiple stop run so i think ultimately that freight is going to shift back as far as an actual impact it's hard to quantify that so but it's it's not the bulk of our business so when it does come back we'll we'll be selective on what we bring back into the network based off of demand from our core customers. Got it. Thank you.

Our next question comes from the line of Stephanie Moore with Jeffries. Please go ahead.

Great. Good morning and congrats on the good results. This is Joe Hassling on for Stephanie Moore. Maybe keeping on the macro and wait for shipment question, how can we think about the ABS advantage? Said another way, if housing and construction comes back, how would you frame ABS ability to not just participate, be a particular beneficiary? The competition isn't sitting on their hands. So what would give you guys the confidence to be able to see outsized growth in that positive environment? And also, could you speak to that 55% pipeline growth, what's driving that? Thanks so much.

Yeah, and this is Seth. I think it benefits us quite a bit. When you think about what we've built over the last two years, two, three years over the long term, we've been focused, particularly at ABF, on the service front. You saw that in the Mastio results, and we've seen our own internal stats continue to improve as we've moved into the new year. So I think customers are going to value that service as things start to improve. The efficiency gains allows us to move more freight through the network at a better cost, better velocity. So we feel like all the efficiency gains that we've achieved over the last few years, and then I think all the changes we announced with the organizational structure change, I think is going to allow us to get deals through faster as customers are going to be looking for capacity as the market starts to shift. So we continue to focus on our facilities plan, and we've been on that roadmap for a long time. We're continuously optimizing our network. So I think as things shift, we are positioning ourselves to be there for our customers to make sure that we can respond and make sure that they don't miss a beat so they can see growth in their business. So we're listening to our customers and making sure we're aligned with them. And I think we're going to be positioned for outsized growth when the market does turn.

Great. And then on that 55% pipeline growth, what's driving that?

Yeah, the 55% pipeline growth, a lot of that has to do with our sales team just executing on what we've set out. But keep in mind, not every opportunity that comes through the pipeline makes sense for the business. We got to make sure that we're pricing for the value we deliver. So what that really is telling me, it's a lead indicator to what's to come because that means customers are coming to us asking for solutions so we view it as a lead indicator for future potential so i view it as a very positive thing that means customers are looking for partners in supply chain because they see the disruption going on in the market and they know what we bring to the table in our stability our solutions so i view it as a very positive great thank you so much our next question comes from the line of ken hexter with bank of America.

Please go ahead.

Hey, good morning, Judy and team. You mentioned a couple of things. You mentioned CapEx. You're adding 113 doors. I guess real estate CapEx of 60, 80 million. Are you looking at any remaining auctions from from yellow? And is there any regions you're filling in or does it just remain kind of continued expansion of existing door capacity? And then just a second, I guess, follow up from some of the previous questions. You mentioned the volume is down 11 percent in January. Can you parse what was weather? I guess it sounds like you're sending a little bit more negative kind of feedback on the state of the market than, you know, even kind of the commentary on still too much capacity in the truckload, whereas some of them are mentioning that the capacity is starting to thin out. So just trying to understand kind of the backdrop that we're seeing right now. Thanks.

Hey, Ken, this is, sorry, Ken.

Hey, it's Matt. So on the capital side, you know, the 60 to $80 million of real estate capital, there's a little bit of a mix I mean, there we do have some expansion and a new facility that we're building a new larger service center. And then we've got just some general maintenance on our real estate portfolio that is in that as well. I think it's fair to say we're continuing to follow the yellow process to the extent that there are opportunities that make sense in that process for our business, you know, for the right price. You know, we'll look to to participate there. And then, you know, for the January, I don't think that there was anything negative that we were looking to highlight there, other than, yes, we did have, you know, worse weather. If you look on a historical basis, you know, it was the highest number of service center closures since 2014, as I mentioned in my prepared remarks. And so, you know, that did impact the results. But, you know, the days that weren't weather impacted, you know, were stronger days. And so, you know, definitely no read through that we're trying to give on the macro environment or what we're seeing for the year based on what we saw in January.

Great. Thank you.

Thanks.

Our next question comes from the line of Ari Rosa with Citi. Please go ahead.

Hi, good morning. I just wanted to ask a question about the asset light segment. Maybe you could give some color. We've seen here a couple of quarters in a row where margins have been negative in that segment. Maybe you could give some color on why that is. What's the challenge that's kind of holding that segment back from getting the profitability? I mean, obviously, I understand the macro headwinds and the difficult macro environment, but do we need to see a more supportive macro for that business to be profitable? And is there, effectively, should we think of that business as incapable of achieving profitability in a challenging macro environment? Or are there things that you can do in terms of kind of structural improvements to that business or efficiency savings that can drive profitability? Because we see, obviously, some of the efficiency metrics that you pointed to this quarter look encouraging, but obviously the negative margins continue to be a challenge.

So just help us kind of unpack that. yeah thanks Ari this is Seth and I do feel confident we can get asset light to a better place and achieve profitability regardless of what the market does so we're focused on improving those results and it's been a focus of mine as I moved into this new role so really there's a lot of different things we can do the first is that we improve the profitability of our account base and we've been challenged with the macro environment as you mentioned but we can do a better job with our profitability. So we've been working on identifying accounts and taking some of those costing actions. And I think you'll start to see that come through as we move through the bid season. Second, the mix of our truckload business, it is more heavily weighted towards enterprise business, and that's generally more aggressively priced. So we invested in a team focused on growing the small and medium and middle market. And I think that's going to help us with our mix management because generally the SMB is more profitable for us. The third is really focusing on cost control. We took some cost actions throughout the quarter, and we expect to see progress on those cost actions as we move through the new year. And we're going to continue to focus on making sure our cost is in line with our shipment progression. The fourth really is around growing managed solutions. Managed has continued to be profitable for us even through this cycle. It's continued to grow by double digits. This service resonates with our customers. So we feel good and we've shifted resources with this organizational structure change to continue to accelerate that. And then you mentioned the productivity improvements in Asset Light. That's been a really good story, but I do feel like we're just getting started. We've got a lot more to do there, and I'm excited about the tech roadmap that we have in front of us. And the last is really around our people. I feel really good about our people through those listening sessions. They want to do what's right for our customers, and I feel like that's a winning combination as we look forward to a better 2025 in Asset Light.

Our next question will come from the line of Jeff Kaufman with Vertical Research Partners. Please go ahead.

Thank you very much, and congratulations. So I want to ask another question on Asset Light, if I can, because I feel like the LTL business has been a lot of questions asked. So just listening to your commentary to that last question, so should we think of $1.5 billion in revenue as a break-even in the asset light business and you need to generate growth and you need to do things to make money in asset light? Or maybe a different way to think about it is what type of margin do you think this business should be generating if revenues didn't grow? because I know for a long time the thinking was, you know, let's do acquisitions, let's grow asset light, asset light may one day be more than 50% of revenue. It feels like that momentum stalled a little bit. So maybe think about kind of bigger picture strategy and what asset light should be doing in terms of contribution to the bottom line.

Yeah, thanks, Jeff, for the question. So, you know, certainly we're focused on providing a premium experience for our customers. And we think a key part of that is having a broad suite of solutions that address their logistics challenges and you know so if you look at the progress that we're making there you know certainly we've highlighted on the managed side just how we're able to grow our overall business with that solution it feeds in really across the board including into the asset light solutions and over to the abf solution you know we continue to see the pipeline growth in large part driven by some of the asset light solutions, including managed growing. In terms of a breakeven, I don't think that I would characterize it in terms of any specific revenue number. Certainly margin is an important piece there. We continue to, particularly as we're going through this upcoming bid season on the truckload side, just make sure we're well calibrated on a margin side to be taking on the business that makes sense for us. And certainly we've been looking at productivity, technology, efficiency initiatives to just make sure that the cost structure on that business's scale to, you know, what we're seeing from the revenue side. So we still think that that business is an important piece of the overall solution that we're providing for our customers, and certainly we're very focused this year on returning that business to profitability.

All right.

Our next question comes from the line of Scott Group with Wolf Research. Please go ahead.

Hey, thanks. Good morning. So just because there's been so much monthly volatility in the tonnage and yield trends, I know last quarter you sort of gave some directional revenue guidance, and you said it was going to be down mid-single digits year over year. Any directional thoughts on how to think about the LTL revenue in Q1?

Yeah, so thanks, Scott. I mean, certainly, you know, the first quarter tends to be a softer quarter for us on the asset-based side. You know, I think if you looked at our 10-year history on a sequential basis, we're down, you know, revenue per day is down about 4%, you know, when you move sequentially from the fourth quarter to the first quarter. I do think, you know, just with all the initiatives that we've talked about, you know, unless we see significant weather impacts as we move into February or March, I do think we have some potential to outperform that historical trend.

Okay. And then, you know, you take a step back. Like, last year, I think you had a bigger tonnage decline than anybody. You had a bigger increase in yield than anybody, so just more volatile. The net of it was margined down a little bit. I mean, I guess, what are we trying to manage to in 25, outside of just waiting for the macro to get better? Are we trying to manage to better yield, better tonnage? And realistically, like, when do you think we can start seeing margin improvement again?

Yeah. So, Scott, this is Matt. So I would just say, certainly really across the board, you know, as we look to 25 with the macro backdrop that we're seeing for the year, I mean, we do expect to see a pickup in the industrial economy. We do expect to see just continued progress from all of the customer-facing and revenue initiatives that we're working on. So certainly from a shipment count perspective, we see the opportunity for growth there and then the macro backdrop helping on the tonnage side. And then, you know, we continue to make significant progress on the pricing side as well. And so I think, you know, those three items coming together, the shipment side, the, you know, the tonnage side, just as we see an improving macro backdrop and pricing, I think all that sets up well for 2025.

All right. Thank you.

And that concludes our question and answer session. And I will now turn the call back over to Amy Mendenhall for closing remarks.

Thanks to everyone for joining us today. We certainly appreciate your interest in our best.

Have a great day. everyone that will conclude our call today thank you all for joining you may now disconnect