Ladies and gentlemen, good morning, and thank you for standing by. Welcome to the ArcBest Second Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. And I will now turn it over to Ms. 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 Runser, 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 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 Judy.

Thank you, Amy, and good morning, everyone. I'd like to begin by expressing my sincere appreciation to our employees. Your unwavering commitment to our customers, your pursuit of excellence and your ability to lead through change continue to distinguish ArcBest in a dynamic and competitive industry. Before we dive into the quarter's results, I want to take a moment to reflect on how we think about our business and how we lead through uncertainty. We are now three years into a soft rate environment. When I compare today's challenges to those of 2008, a time many of us remember well, the strength and resilience of ArcBest's strategy are clear. Our forward-thinking, customer-centric approach, combined with disciplined execution, is delivering results. We remain focused on growth, efficiency, and innovation. These priorities guide our decisions and investments, enabling us to build agility into our operations and drive meaningful productivity gains. Every dollar we invest, whether in technology, talent, or infrastructure, is aligned with our strategy and aimed at creating long-term value for our customers, our employees, and our shareholders. This strong foundation has positioned us well to navigate continued headwinds. In the second quarter, the freight environment remained challenging with softness in manufacturing, a sluggish housing market, and added uncertainty around the future path of interest rates and tariffs. Despite these pressures, ArcBest executed with discipline and served our customers with excellence through our integrated logistics solutions. We generated just over $1 billion in revenue and $45 million in non-GAAP operating income for the quarter. Our investments in innovation and technology continue to pay off. For example, in our ABF business, we're leveraging AI and predictive analytics to optimize labor planning, delivery routing, and dock operations in real time. These tools are reducing costs, improving service, and enhancing flexibility across our network. As a result, the second quarter marked our most productive quarter since 2021. That same proactive mindset guided our response to the recent NMFTA classification update. We anticipated potential disruption and took early strategic action, collaborating with the NMFTA, engaging with customers, and applying our costing expertise and freight dimensioning tools to help them navigate the changes with confidence. Many customers also turned to our packaging engineers who are experts in optimizing freight to reduce damage, improve efficiency, and lower costs. Shifting gears, I'd like to update you on two recent changes to our Board of Directors. We're pleased to welcome Thom Albrecht to the Board. Thom brings over 35 years of transportation and logistics industry experience and currently serves as the Chief Revenue Officer at Reliance Partners. His deep expertise in finance, capital allocation, strategy, and insurance, as well as his recognition as a seven-time Wall Street Journal All-Star will be a tremendous asset as we continue to execute our long-term strategy and deliver value to our shareholders. Also, after 14 years of dedicated service, Steve Spinner will retire from the ArcBest Board following our October meeting. Steve has been a valued advisor, serving as our Lead Independent Director and a member of the Audit Committee, and I have thoroughly enjoyed working closely with him. His experience leading companies through transformational growth has been especially helpful as ArcBest has transformed into an integrated logistics company. On behalf of ArcBest and the Board, I want to thank Steve for his service, leadership, and commitment. We continually assess our Board size, composition, and balance of skills and characteristics to drive long-term shareholder value. We expect to announce additional updates in the coming months. Finally, as I recently announced, I plan to retire as CEO at the end of the year. Seth Runser will succeed me as ArcBest's next CEO. Seth and I have worked closely together for many years. He is a values-driven leader who consistently delivers results, and I have full confidence in his ability to lead ArcBest into the future. I'll continue to support him and the company as Chairman of the ArcBest Board. And with that, I'll turn the call over to our CEO-elect and President of ArcBest, Seth Runser, who will share more about our progress and priorities for 2025.

Thanks, Judy, and good morning, everyone. I'm honored to lead this incredible company and deeply grateful to Judy for her visionary leadership and to the Board for their trust in me. Having been with ArcBest for nearly 18 years, I know this business and this industry well. My time as ABF President gave me a front-row seat to the power of our strategy. And now, as ArcBest President, after spending time with our customers and teams across the organization, my conviction in that strategy has only grown stronger. As we've emphasized throughout the year, our 2025 priorities are clear: driving profitable growth, advancing our premium service for customers, and focusing on optimization and efficiency. We're making meaningful progress on all fronts. Earlier this year, we realigned resources to better serve our customers and invested in our sales teams, particularly across LTL, Truckload, and Managed Solutions. These changes are already delivering results. Our pipeline is stronger with half of the opportunities tied to LTL and significant growth in both managed and truckload. Despite ongoing market headwinds, these internal efforts drove year-over-year shipment growth in our Asset-Based segment in the second quarter. We averaged 21,000 ABF shipments per day, a 6% increase. We added over 100 new core LTL accounts, positioning us well for future upside as the economy improves. In Truckload, while shipment volumes declined year-over-year, we delivered stronger margins and improved profitability. This reflects deliberate strategic choices to focus on small and midsized business customers and reduce lower-margin freight. We're reallocating capacity towards more attractive opportunities, and it's paying off. Our Managed business continues to gain momentum with double-digit growth in both shipments and revenue. Second quarter Managed revenue reached an all-time high. This success stems from our ability to help customers adapt quickly, whether by shifting distribution strategies, optimizing modes, or leveraging our technology and expertise. And because Managed feeds LTL, Truckload, and other services, it strengthens the entire ArcBest network. This is the power of our integrated model. We're also expanding our digital quote pool, a key enabler of our dynamic pricing strategy. With deeper integrations across TMS providers and 3PLs, we've grown daily quote volume to over 200,000 quotes per day. That gives us more opportunities to match the right freight with the right capacity at the right price, sharpening our pricing intelligence and driving incremental profit even in a soft freight environment. Together, these results underscore the strength of our strategy, one built for margin expansion and sustainable profitable growth. We're also driving measurable value through innovation and efficiency. Our city route optimization platform, now in Phase 2 and active in over half of our service centers, uses AI and historical data to dynamically optimize routes. Planners can now adjust routes with a single click when conditions change, maximizing resource utilization and improving service consistency. Phase 3, now underway in a dozen locations, introduces real-time pickup optimization using AI to predict demand and position drivers where they're needed most. We're also rolling out our dock management system built on Box Technology. This platform enhances visibility into dock operations with real-time dashboards and prioritization tools, streamlining workflows and improving both speed and accuracy. As shipment volumes increased in the second quarter, our manpower planning tools helped us respond with agility, aligning labor with demand while improving operational efficiency. These innovations are part of a broader ecosystem of proprietary tools that support data-driven decision-making from workforce planning to customer service automation. We're embedding intelligence into every layer of our operation. We're also seeing strong returns from our investments in people. In the first half of the year, our compliance training teams visited 18 service centers, delivering targeted support that's already driving results. These efforts have contributed to $14 million in cost savings through better process adherence, smarter use of technology, and enhanced safety practices. Over 230 software installations were paired with in-person training to ensure employees are equipped to succeed. This reflects our broader strategy; invest in people to unlock value. By embedding best practices and ensuring consistent execution, we're building a safer, more efficient operation that supports both service reliability and long-term growth. Our strategy and optimization team, led by Christopher Adkins, continues to drive high-impact improvements. In the second quarter, the team performed a deep dive on Truckload operations, where they identified inefficiencies tied to external load boards. While these boards improve buy rates, they also generate low-value inbound calls. To address this, we enhanced our automated call routing system using AI, prioritizing high-value inquiries and improving carrier support. This boosts productivity and is scalable across the business. And importantly, our integrated approach to efficiency is amplifying the capabilities of our people, especially new hires. With intuitive platforms, embedded training, and guided workflows, they're ramping up faster and contributing sooner. As these tools continue to scale, we will see even greater opportunity ahead. Looking forward, we remain focused on disciplined execution, delivering long-term value for our customers, our people, and our shareholders. I'm excited to build on the strong foundation Judy laid and continue ArcBest's legacy of innovation and service. With that, I'll turn it over to Matt to walk through the financials in more detail.

Thank you, Seth, and good morning, everyone. Despite ongoing softness in the freight environment, ArcBest delivered solid second quarter results. We saw a sequential improvement in our asset-based operating ratio that was consistent with historical trends and achieved quarterly non-GAAP operating income in the Asset-Light segment for the first time since the second quarter of 2023. These results reflect our disciplined execution and focus on long-term value creation. Taking a closer look at our second quarter performance. Consolidated revenue was $1 billion, down 5% year-over-year. Non-GAAP operating income from continuing operations was $45 million compared to $64 million in the prior year. Our Asset-Based segment saw a $22 million decrease in operating income, while the Asset-Light segment's non-GAAP operating income of $1 million was an improvement of nearly $4 million over last year. Adjusted earnings per share were $1.36, down from $1.98 in the second quarter of 2024. Now let's discuss our two segments in more detail. Starting with our Asset-Based business. Second-quarter revenue was $713 million, a per day increase of 1%. ABS operating ratio was 92.8%, an increase of 300 basis points over the second quarter of 2024. ABS operating ratio improved 310 basis points sequentially within the historical range of the 300 to 400 basis point improvement. In the second quarter, daily shipments grew by 6%, while weight per shipment decreased by 1%, resulting in a 4% increase in tons per day compared to the previous year. This growth was driven in part by onboarding new core LTL customers through the commercial initiatives Seth mentioned. However, softness in industrial production and housing continues to pressure weight per shipment and profitability. To support shipment growth, we proactively added labor and strategically used purchase transportation and local cartage to supplement network capacity during peak vacation season. Annual increases in contracted rates for union labor and purchased transportation also contributed to higher operating costs. Still, productivity gains allowed us to onboard new business efficiently and serve our customers with excellence. Despite increased costs, cost per shipment improved both year-over-year and sequentially. We remain disciplined in our pricing strategy, securing deferred increases averaging 4%, a strong outcome in a market where many shippers are focused on cost savings. This speaks to the strength of our customer relationships and the differentiated value we provide. Even as customers evaluate options, we're retaining business and winning new opportunities at rates that support long-term profitability. Revenue per hundredweight declined 3% year-over-year. Excluding fuel surcharges, the decrease was in the low single digits. This was driven by growth in easier-to-handle freight from core customers, which typically has a lower revenue per hundredweight profile but is operationally more efficient. Additionally, yields were impacted by fewer shipments in the manufacturing vertical and continued softness in household goods moves due to economic and interest rate conditions. Turning to July 2025 trends in our Asset-Based business. Daily shipments grew by 2% year-over-year, highlighting continued success in capturing new core business opportunities. The market backdrop drove a 2% decrease in weight per shipment, leading to flat daily tonnage levels compared to the same period last year. On July 14, we announced a general rate increase of 5.9% effective August 4. Historically, ABF's non-GAAP operating ratio improved by about 70 basis points from the second quarter to the third quarter, and we expect third quarter performance to generally align with that trend. Moving on to the Asset-Light segment. Second quarter revenue was $342 million, a daily decrease of 13% year-over-year. Shipments per day were down 7% as we strategically reduced less profitable Truckload volumes, offsetting double-digit growth in our Managed Solutions. 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. Our non-GAAP operating income of $1 million was an improvement compared to last year's non-GAAP operating loss of $2.5 million. This improvement was driven by our focus on improving margins while reducing our operating costs. In July, Asset-light daily revenue was down 7% 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. Overall, volume trends have stabilized with July 2025 shipment counts holding steady year-over-year compared to July 2024. Given current conditions, we expect non-GAAP operating income to range from breakeven to $1 million in profit for the third quarter. We continue to take a balanced long-term approach to capital allocation. Our 2025 capital expenditure guidance of $225 million to $275 million reflects maintenance spending to optimize total cost of ownership and strategic investments that enhance service, efficiency, and growth. We currently expect to be at the lower end of that range. In the first half of 2025, we returned over $47 million to shareholders through share repurchases and dividends. We'll remain opportunistic with repurchases based on share price while prioritizing high-returning organic investments and maintaining prudent leverage. Our balance sheet remains strong with approximately $400 million in available liquidity. While external conditions remain dynamic, ArcBest is well positioned for the future. We're focused on what we can control, delivering exceptional service, operating with discipline, and making smart strategic decisions that strengthen our business and create long-term value. I'll now hand the call back to Judy.

Thank you, Matt. I was recently asked what makes ArcBest truly stand out. There are many things that make this company special, but one defining trait rises above the rest: our ability to turn challenges into opportunities. 'We'll find a way' is more than our motto; it's a mindset that drives how we operate, especially in uncertain times. In the softer freight market, we've leaned into that mindset by making strategic investments that position us for long-term success. We've enhanced our facilities to support future growth. We've accelerated innovation to improve efficiency and service quality. And most importantly, we've invested in our people, equipping them with the skills, tools, and support they need to deliver exceptional value to our customers. These actions not only strengthen our business, they create meaningful returns for our shareholders. Before we wrap up, I'm pleased to share an exciting milestone. ArcBest will host its first Investor Day in a decade on September 29. This event will offer a deeper look into our strategic priorities, innovation roadmap, and long-term financial targets that will guide our next phase of growth. We're eager to showcase how ArcBest is delivering value today and building for tomorrow. That concludes our prepared remarks. I'll now turn it over to the operator for questions.

Our first question comes from Jordan Alliger with Goldman Sachs.

One question. So I believe you have some easier comps coming up in your trends year-over-year for August and September revenue per day, tons per day, etc. I'm just curious, do you think that could lead to sort of a step-up in the trend line on a year-over-year basis as we move past July and the trends we're seeing there? I mean, could we even see some inflection on revenue per day?

Yes. Jordan, this is Matt. So the trends that we saw when we moved from the first quarter to the second quarter, we certainly were ahead of history when we look at shipments per day versus the 10-year historical trend. I think, as we look from the second quarter to the third quarter, in large part, just due to the commercial efforts that we have ongoing and the success that we've seen there, I do think that there's some potential to outperform a little bit compared to what historical seasonality has been on shipments per day.

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

First of all, Seth, congratulations. And then also, I should probably give a shout out to Thom. I think he's a great addition to your Board. I wanted to look at, sort of, the push into the SMBs. We've heard that from a lot of other LTL carriers. I was just wondering, is there becoming more price aggression in that area? Or is that just sort of a market that is not as price-sensitive as some of maybe the other larger national accounts? And then also sticking on that, is the freight profile different among the SMB customers? And how should we think about that in the model?

Yes, I mean, we are remaining focused, especially with our field sales force on that SMB market, and that really kind of includes the middle market as well. I wouldn't say that there's a different price point with that. Every customer is unique in terms of their business, their location, and the competitors in those markets. We like that business because we can build long-term lasting relationships. It's stickier for us. What we excel in from a sales perspective is those relationships. And so that's part of the focus. I mean, historically, SMB middle market, it is less price-sensitive than what you would consider with big enterprise customers, especially in the retail space. So we like it from that perspective. Profile really is a mixed bag with those customers. And you can imagine there's a lot of verticals that are represented in the SMB and middle market spaces. So for us, it's just good business that we feel like we have a value proposition for those customers that will allow us to excel.

And our next question comes from the line of Chris Wetherbee with Wells Fargo.

Congrats to Seth and Judy. I wanted to ask about sort of your ability to kind of outgrow the industry. It's been, I think, several months now where you've been able to tap into this pool of freight that appears to be coming at a little bit of a different mix and sort of revenue per shipment dynamic, but it is driving outperformance relative to some of the volume numbers that we're seeing from the peers. So maybe you could talk a little bit about, sort of, what the freight kind of looks like, where you're getting it from, how deep the pool you think it is and, sort of, how sustainable kind of this outperformance can be over the next couple of quarters? That would be helpful.

Yes. Thanks, Chris. This is Seth here. When we look at our active accounts and cross-sold accounts, they continue to grow, and that's great to see. I continue to have conversations with customers, and they're looking for more solutions. So I think we'll grow across the board in a lot of the areas because our strategy is really based on finding ways to say yes to customers. So when I think about the dynamic mix, we mentioned last quarter, we were over 200,000 quotes per day. We really haven't changed our strategy there on how much we're bringing into the network. What you saw in the second quarter is what you're going to see in the third and fourth quarter as well. Really where we're seeing the outperformance is on the core business mix. We've added over 100 new accounts, and we feel like that's just going to continue to improve as we move forward because the pipeline is strong, and we just continue to have success by providing that value that Eddie just talked about to our customers. So we remain disciplined on profitable growth and improving efficiency to help improve our margin. And that really starts with the service we provide our customers, and we feel like we've made progress there as well. And we think when we look longer-term ahead, we think as demand grows and capacity tightens, we'll be well-positioned to improve even more with further rate increases and just the business we're bringing in. But we're not waiting on the market to turn. There's just a lot of noise out there, but we're focused on our initiatives, and we're seeing success around all those three pillars that we mentioned in our prepared remarks around growth, efficiency, and innovation. So we're positioning ourselves to service our customers with excellence, and we think that's going to continue to lead to growth opportunities.

And our next question comes from the line of Daniel Imbro with Stephens.

Seth, congrats on the promotion. And Judy, congrats on retirement. Maybe a follow-up on the LTL pricing side. So you announced the 5.9% GRI a couple of weeks ago. Can you talk about the strategy of maybe why implement that a month earlier this year? What has early customer feedback been since it has been a couple of weeks? And then how much of your business does this GRI cover? Can you just remind us?

Yes. Daniel, this is Eddie again. Yes, this is kind of our typical cycle for general rate increases. I think if you go back far enough, there was a general idea that it would happen every year. But on average, it's 10 to 11 months that this cycle is happening. We really do believe that the timing is right for this increase. We're providing exceptional service and value to our customers. Obviously, costs continue to go up, and we have to get better increases to cover those inflationary costs. We feel like we're well-positioned with our customers through the solutions we provide them to meet really any of the challenges that they're facing. So we anticipate this will go off pretty much as our history has shown to be pretty successful.

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

Allow me to chime in. Judy, end of an era. We will see you at the Investor Day, but congratulations, and Seth, congrats to you as well. Just kind of, on that same point, if I may, kind of, just in your conversations with your customers, do these volumes you're picking up right now, do they feel sticky? Do they feel transitory and kind of somewhat opportunistic? And also, I suspect your competitors are not going to be sitting back waiting for you to take more share from them. So are you seeing them potentially loosen the purse strings on price and maybe try and come up with some of these volumes as well?

Ravi, it's Seth. I appreciate the kind words there. And there's no doubt the macro remains challenging, and there's a lot of uncertainty out there, but we feel confident in our ability to grow and provide that service to our customers. We feel we're better positioned with our multiple solutions to respond in any environment, and that's exactly what we're seeing in these customer conversations. We act as a strategic adviser, navigating those uncertain times, and that's really what differentiates us from the competition. So what we're seeing in our pipeline numbers and the continued growth, like Eddie mentioned, not every opportunity makes sense for us to bring on. We need to focus on the right price to provide value over the long term. But I've spent a lot of time with customers throughout this year, and it's apparent that they're looking for companies they can trust and partner with to navigate all these challenges. So I do think a lot of this business is sticky. A lot of what they're talking to us about as well is cost efficiency and supply chain stability, and that's really what we bring to the table with our solution set. So I've been encouraged that we've been adding new business across all solutions, not just LTL, and our customers have had confidence in our service offering. So we view markets like this as opportunities. We think as we provide value to customers, it's going to be sticky over the long term.

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

Maybe just, can you expand a little bit more on kind of your service levels and performance tying into the receptivity and stickiness of some of this new freight growth in the GRI that just came out. And then also, Judy, I think, made a few comments on the MSPA transition with some disruptions and perhaps some other issues that you were anticipating. It would be great if you could give a little bit more color on that. Obviously, we saw the larger competitors kind of push out the compliance is not the right word, but at least the implementation of that. So it would be interesting to hear your further thoughts on that and its impact for you guys and also the industry.

Brian, this is Matt Godfrey. I'll start on the service side. And we have a long history of being resilient regardless of the macro. As Judy talked about earlier, we look to turn challenges into opportunities. And you've seen that with the results we had around efficiency and service in the second quarter. And it's really a collaborative effort, not only internally. Our leaders visit our field locations. We hear from our teams on the tools they need, how they can be more efficient, and how we can service our customers better. But it's also collaborative with our customers. I just heard a story this week where we had a customer site visit, walked through a situation they were experiencing. A suggestion was made, and the customer is looking to implement that, and it's really going to be a win-win for all parties. And so that's the approach we take on the collaborative side. And then, we're also continuing to invest in our optimization initiatives around manpower planning, network visibility. We continue to deploy our teams of operational experts around the company, and we've seen savings with that group in 2024. We've built on that with over $14 million in savings in 2025. So we have our robust portfolio. We mentioned some of those initiatives earlier around city route optimization. I'm very excited about what Phase 3 will bring on the pickup side, giving our frontline leaders better tools to service our customers. And so the dock software is a big step forward for us, and we're very excited as we continue to roll these out in 2025.

Brian, this is Seth. On the NMFC change, really, we view this as a positive for the industry. When you condense commodity codes, that will give us the shipments' actual characteristics, and that's going to provide our customers with more accurate freight rates upfront. So we already dimensioned about 98% of our freight, and we really saw this coming. So throughout the first half of this year, we partnered with our customers, talked about the change, made changes to pricing or whatever we needed to do to make sure. So when the change was implemented, I believe it was last weekend on July 19, our customers weren't surprised. So we saw this change coming years ago. That's why we started developing Box Vision because that allows us to dimension freight in real time, and also why we did space-based pricing a long time ago as well. We view the industry continuing to go towards this route. So as far as the actual implementation, we have minor hiccups, but nothing that I would call material in any way, mostly just old bill ladings that weren't updated with the new NMFC. But really, it's been a non-event because of the way we prepared our customers.

And our next question comes from the line of Scott Group with Wolfe Research.

Congratulations, Seth, Judy, and Thom. Could you provide context on the 5% sequential decrease in tonnage in July compared to what is typical? Additionally, regarding the General Rate Increase, there are two months of it in Q3 this year, while last year it was just one month, and this has not typically happened in Q3. How much does this impact margins this year in comparison to usual seasonality? Is this factor included in your margin outlook for Q3, and are there any other considerations we should take into account about margins relative to standard seasonality?

Yes. So Scott, this is Matt. On the sequential move, if we look just versus history in July, I would say that what we are seeing is generally in line with the historical performance, maybe just slightly ahead of it. And then I'll let Seth take the next part.

Yes. And I would say, Scott, when you think about just what happened throughout the second quarter, there was a lot more variability in the daily business volumes than normal. So we saw surges at certain points in the quarter and then the kind of lighter weeks following that. So we're confident, hopefully, if all the trade policies go smoothly, like we've seen some of the announcements recently that we'll see some of that stuff settle down. So as we move into the rest of this quarter, we believe that it's going to be more normalized to match some of those statistics that Matt just said. So we want to make sure that we're evaluating our mix and our labor and make sure that we're in line to move with those freight flows. But we see a more normal seasonal pattern as we move into the third quarter as some of those trade policies start to get resolved.

Yes. And this is Eddie. The timing of the GRI, again, as I kind of mentioned earlier on the call, this is part of our normal cycle of when we take it. I mean, obviously, the timing of it in the third quarter with historical freight volumes increasing due to peak. I mean, it's a good time to take it. But ultimately, it's because we're providing the value to our customers that we believe they're willing to pay for that. In terms of the impact to the quarter, it's again, our volume of our business subject to GRI is not as great as it was in previous years. So we don't think the impact will be overly great. But obviously, it's needed from a deflationary cost standpoint.

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

Congrats to the entire team here. Maybe on the Asset-Light side, it's good to see you back in the black. I know you've been working hard, and you gave us some good color on some of the measures you're taking. I guess my question is, where do you think we are in that process in terms of innings? And can you continue with the double-digit growth numbers that you're seeing in that shipments per employee per day metric? And then, we don't have as much clarity on the historical kind of quarter-to-quarter trends in this business given the changes. So maybe some color on OR trajectory in the business in the back half would be helpful as well.

Yes. This is Seth, Bruce. Well, when you think about what's going on with Asset-Light, we continue to be affected by the soft freight market and just the excess Truckload capacity, and we've talked about that in the past. We have been encouraged with our Managed business. Now it's continued to hit all-time highs for revenue and shipments, and that is operationally good for us and also producing operating income. But we continue to act to strategically reduce some of those less profitable lanes within our Truckload segment. We think most of that work is done, but it's going to be a continual optimization process that we go through. And we saw improved margins, reduced employee costs, and we improved productivity by almost 15% within Asset-Light. We think there's a lot of opportunity ahead as well. Sequentially, it's a lot of the same story with what's going on with the market conditions as we see moving into the third quarter. We think it's going to be just continued excess capacity, but we're going to be focused on what we can control, and that's why we're happy to be back in the black, but we're nowhere near satisfied with where we're at. So we've got a lot of different things that we're working on to improve profitability, not only the account base but also our mix. We talked about the SMB space earlier. I know Eddie was referencing LTL, but we're also attacking that within the Truckload segment. We've added a lot of sellers in the SMB space within Truckload, and we're seeing them hit their ramp and actually exceed expectations, but we're kind of early innings there. And then really around productivity, we've got a lot of different things going on around productivity with AI and optimizing some of the less valuable calls and categorizing emails. There's just a lot of different things. So I think we're still in the early stages on productivity improvements, and I feel like we can make even greater strides. And then if you fast forward to January, a little bit longer term, I'm excited about Matt coming on because he just has a perspective and the experience leading the largest brokerage in the United States. I think that's going to benefit us to have that experience on board to take it even further.

And Bruce, it's Matt. I'll just chime in as well. So like Seth said, we're very proud of the team and the execution in the second quarter, the operating income result. The forward look that we put out today is we expect to be generally in line with that result in the third quarter as well. We put out a range on a non-GAAP basis for operating income for that business from flat to $1 million in operating income for the third quarter.

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

Good to hear from everyone, and I'm looking forward to seeing you all in September. Judy, I want to wish you a great journey. I wanted to discuss the factors affecting costs in the second quarter. I understand it has been a continuous effort in improving efficiency with tools related to manpower planning. Additionally, there was an increase in daily shipments. I’m curious about how you are handling staffing in this situation. What are your thoughts on labor costs as we move into the third quarter? I am asking because while the operating ratio improved significantly, it was slightly on the lower end of the expected range. I would like to go over those factors again and any insights from the second quarter that may be valuable for the third quarter.

Stephanie, this is Matt Godfrey. And as we've talked about a little bit, as part of our normal cadence of operations, we manage the use of our internal labor along with outside resources to make sure we optimize service and efficiency for our customers. So as we said, we really like the growth we are seeing, especially with our core LTL customers, and we'll continue to align our resources to service that business at a high level. So on the network side, we're using our mix management tools, and we make dynamic changes within our operational network to meet those targets. And we've been able to improve our cost per shipment operationally, both year-over-year and sequentially in the Asset-Based network. In addition to that, we continue to invest in those optimization tools. We've talked a lot about our hiring strategy to build flexibility within our network, the ability to flex up to say yes to customers. When they approach us, we hire in line with that. We've already talked about city route optimization, Phase 2, kind of giving one-click optimization tools to our planners so they can deal with real-time conditions. Phase 3 focused on the pickups. And again, working to make our planners better, make their jobs easier, augment their decision-making process while servicing our customers at a high level. So we saw our productivity metrics continue to achieve multiyear highs with the second quarter of 2025 being our best quarter since 2021. And we've made a lot of progress. We know we have more work to do, which is why I continue to be excited about the portfolio of optimization projects we have coming in the pipeline.

And Stephanie, this is Matt. I'll just chime in. Matt Beasley, I guess I should say. That was Matt Godfrey. So definitely proud of the ABF team and the execution there, the continued work on the compliance campaigns and the optimization projects. It's great that we've been able to highlight some of that this year, just all the different work including the technology projects that we've been doing there. I would say, certainly, we did see a nice step-up in shipments as a result of our commercial efforts that was well executed efficiently on the ABF side. We laid that out in the presentation. You can see that just visually how that's trended over time. And certainly, good performance, but just as you would expect with the step-up in shipments, we've, of course, had a step-up in cost to serve. But on a cost per shipment basis, that performance was great. And then just one other note, we did have approximately a $3 million year-over-year increase in workers' comp costs as well that impacted costs in the second quarter.

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

Congratulations to Judy, Seth, and Thom on your next phase. I want to revisit the messaging a bit. There was a significant drop in tons per day in June, slowing to 2.8%. Now it's flat in July against relatively easy comparisons from last year when volumes were down double-digit percentages. Are you suggesting that the market is becoming more competitive? Seth, we've noticed a shift where you've taken on dynamic freight and have moved to unloaded. How do you see the balance between dynamic freight and core freight? And Matt, you mentioned earlier that volumes are performing well and you’re achieving yields earlier. Why aren't we seeing the margins reflect that performance?

Yes. So Ken, it's Matt. I'll address the first parts of your question. Regarding the quarterly development, you're correct. Overall, we experienced an increase compared to historical seasonality on a sequential basis, both in tonnage and daily shipments. In April and May, much of the outperformance resulted from our performance during those months. Looking at June, it's a peak vacation month, and we prioritized network service as part of our regular business operations while also considering yield and account profitability. We made some decisions that affected shipments, but we believe they were justified in terms of overall yield and profitability. Additionally, given the current state of the housing market, we did not experience the usual increase in U-Pack shipments for June due to the ongoing softness.

Ken, this is Seth. I want to clarify that the majority of our business is focused on our core LTL operations. In managing the transactional business, including U-Pack and volume loads, we aim to maintain consistency in the network, filling empty capacity and positioning ourselves well for market changes. As our core business begins to grow, and we are optimistic about our pipeline, our focus remains on profitable growth and effective mix management. The dynamic performance you've observed in the second quarter reflects what we've consistently done for the last year and a half, and we anticipate this approach will continue. It's crucial to note that our dynamic strategy involves optimizing our mix daily, prioritizing profit maximization based on market prices and the available capacity that is operational rather than empty. While our peers typically rely on third-party logistics providers for these adjustments, we act as our own third-party logistics provider. We believe this strategy is our competitive advantage.

Yes. Regarding your question on pricing, we are confident in our pricing strategy. We have a longstanding commitment to pricing intelligence and discipline, and this focus continues. The 4% increase in contract and deferred revenue for the quarter was a positive result given the current market conditions. We believe that moving forward with a 5.9% general rate increase was the right decision based on our market assessment. We are seeing some market impacts, particularly in the manufacturing sector, which usually contributes higher revenue per hundredweight and constitutes a significant part of our business. Although that market has softened this year with the PMI dropping below 50, we are successfully adding profitable new business to our network. Some of this business generates higher revenue per hundredweight, and we maintain our top metrics in revenue per hundredweight and revenue per shipment. We are also managing costs effectively.

And our next question comes from Tom Wadewitz with UBS.

Yes, and congratulations to Judy, Seth, and Thom. I wanted to ask about the demand situation. I know it has been challenging to gauge and remains soft. Are you receiving any more optimistic feedback from customers, perhaps related to trade deals or increased stability regarding tariffs and tax bill savings? I'm curious if you're hearing any positive sentiment from industrial or retail customers, or if this is something you wouldn't expect to hear.

Yes, we've been engaging with our customers about the challenges they are encountering, such as tariffs and the uncertainty surrounding interest rates and investments. The situation remains quite mixed. Some customers are still facing disruptions in their industries and must invest significant time and resources to gauge the effects of tariffs. Common themes include ongoing softness and uncertainty. On the tariff front, many are assessing whether to move their operations to different countries. Some have even needed to cancel orders due to tariffs. It's crucial for these customers to remain flexible, and we provide solutions that help them navigate this environment on a daily basis. Regarding the long-term outlook following the recent legislation, customers seem to adopt a wait-and-see approach, uncertain about when investments and tax benefits will materialize, and the timing of these effects remains unclear.

And I do think that there is good potential in terms of stimulus from the impacts of the bill. I'll just highlight what we're seeing. So if we look at the first six months of the year and the capital spend that we've had from mid-January through the end of the second quarter and then some of the benefits that are going to flow through on some immediate expensing of R&D, which will have the impacts both on capitalized software and some of the spending that we have in the box area. We see potential cash tax savings from just the first 6 months of the year of around $25 million. And so certainly, we're encouraged about where those changes, where the bonus depreciation may drive spending and then, of course, the knock-on freight impacts from that as well.

And that concludes our question-and-answer session. I'll now turn the conference back over to Ms. Amy Mendenhall for closing remarks.

I just wanted to thank everyone for joining us today. We certainly appreciate your interest in ArcBest. Have a great day.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.