Arcbest Corp (ARCB) Q3 2026 Earnings Call Transcript

Those are areas where we continue to earn our customers' trust and where ArcBest continues to differentiate itself. In the third quarter, we benefited from initiatives that we had underway for several years. This includes our integrated service offering, investments in our network, equipment, and technology platforms, and our refined commercial approach, which all continue to provide our customers with greater flexibility as their transportation needs evolve. Our team is focused on improving how we operate, and we continue to execute against our three strategic pillars of accelerating profitable growth, increasing efficiency, and driving innovation. With that broader perspective, let me turn to our progress by segment. In asset-based, our focus remains on profitable growth. Daily tonnage increased, primarily reflecting higher weight per shipment, while shipment counts declined modestly. Revenue per shipment also increased, supported by disciplined pricing, higher fuel surcharge revenue, and the heavier freight moving through our network. Over the past year, our dynamic quote pool has continued to expand, and we are taking a more intentional approach to the freight we select to help us align demand with the strengths of our network, support the service our customers expect, and optimize profitability. Contract renewals were another highlight of the quarter, averaging a 5.1% increase, which is a strong result and reflects how customers view the quality of our service. We continue to pursue new business opportunities that generate appropriate returns and strengthen relationships with new and existing customers who value our service, reliability, and flexibility. Our commitment to an excellent customer experience is clear. In this year's Mastio survey, ABF showed one of the largest service improvements among national carriers, with gains across nearly every category that customers rated. ArcBest was recently recognized as a 2026 Great Supply Chain Partner by Supply Chain Brain, earned three Quest for Quality awards from Logistics Management, and was once again named a Top 100 Trucker by Inbound Logistics. These recognitions reinforce the progress we're making and how our teams show up for customers every day. When customers trust us, they bring us more of their freight. That's how a great customer experience turns into growth. In AssetLite, we delivered another strong quarter, including another record quarter for managed logistics. Profitability improved through disciplined pricing, more effective carrier procurement, and lower cost to serve. Our teams are pairing market expertise with better tools and processes to serve customers and carrier partners more effectively. That's what lets us scale without adding costs at the same pace, and it's why AssetLite earned $13 million more this quarter than it did a year ago. That same practical focus guides our portfolio of technology and AI projects. We're simplifying work for our people so they can make faster, better informed decisions and improve the customer experience. We see AI as a major tailwind in our industry, and we're utilizing it across our best to drive greater productivity and profitable growth. One example is our new Asset Light Transportation Operations Management System, or ATOM. We began the rollout during the third quarter, starting with our Expedite solution. And we expect additional service lines to move on to the platform over time. Developed in-house, Adam brings together the experience of teams across ArcVest to reduce manual work and create more connected processes. It helps our people match freight with available capacity more quickly and work with more consistent information. That means more time to solve customers' challenges and deliver an even better experience. We firmly believe these capabilities will strengthen customer relationships and support growth across our AssetLite business. We continue to expand and enhance ArcVestView, our unified platform for shipment execution and visibility, which has grown to more than 3,600 monthly users since launching in May and integrates AI tools to drive a more elevated customer experience. We recently introduced new capabilities that help customers simplify everyday shipping tasks, including improved ship and visibility, streamlined freight classification, and expanded cargo protection options. We also added features that provide customers with more actionable information throughout the ship and lifecycle. Our goal is straightforward. To make transportation easier to manage, reduce friction in our customers' operation, and give them greater confidence in their supply chain decisions. Another encouraging development this quarter was the successful renewal of our insurance program. We maintained our overall coverage limits while reducing our base premium, an outcome we're pleased with given the focus on the insurance environment across the transportation industry. Our objective was not simply to minimize premium expense, but to appropriately balance retained risk, cost, coverage limits, insurer quality, and protection against significant losses. To that end, we added a structured component to one excess layer that provides greater premium certainty over the next three years in exchange for modestly higher retained risk. Overall, the renewal strikes the right balance and reflects our favorable claims experience and continued focus on safety and risk management. As I look ahead, I'm encouraged by what I'm seeing across the company. Our network is performing well, asset light performance continues to improve, and we're operating with greater focus and efficiency. We've always believed in taking a longer-term view and continuing to invest in our business through every cycle. That approach has put us in a stronger position today and gives me confidence in where we're headed. But what gives me the most confidence is our people. I see it every day, how hard they work, how much they care about our customers, and how committed they are to moving our company forward. I'm incredibly grateful for everything they do. We remain focused on executing consistently and investing thoughtfully in the business, and as the market continues to strengthen, we believe we are well-positioned to build upon our improving operating performance and capitalize on the opportunities ahead to create long-term value for our customers, our people, the communities we serve, and our shareholders. With that, I'll turn the call over to Matt to review the financial results. Thanks, Seth, and good morning, everyone.

Our third quarter improvement was broad-based. Higher tonnage and disciplined pricing supported asset-based results, while continued progress in asset life and savings from our organizational changes contributed to stronger earnings and margins. At the same time, we invested in the business and returned capital to shareholders. These results build on the progress we've made over the past year and represent another step toward achieving the long-term targets we outlined at Investor Day. Turning to our consolidated results, third quarter revenue was $1.2 billion, up 15% year-over-year. Non-GAAP operating income increased to $85 million from $50 million in the prior year period. And adjusted earnings per share rose to $2.62 from $1.46. At the segment level, asset-based non-GAAP operating income improved by $22 million year-over-year. While AssetLite delivered non-GAAP operating income of $14 million, a $13 million improvement from last year. In the asset-based segment, third-quarter revenue was $799 million, up 10% on a per-day basis. ABS adjusted operating ratio was 90.4%, an improvement of 210 basis points year-over-year and consistent with their strong second-quarter performance. Daily tonnage increased 10% year-over-year, driven by a 13% increase in weight per shipment, partially offset by a 3% decrease in shipments per day. Builds revenue per shipment increased 14% year-over-year, primarily reflecting a heavier freight profile and a 1% increase in revenue per hundredweight. The increase in revenue per hundredweight was attributable to higher fuel surcharge revenue. Operating expenses increased year-over-year, primarily due to contractual increases in union wage and benefit rates, higher fuel prices, and increased purchase transportation expense. In October, asset-based daily tonnage increased approximately 15% year-over-year, driven by a 14% increase in weight per shipment and a 1% increase in shipments per day. The increases in weight per shipment we have seen this year reflect the expansion of our dynamic quote pool. And the intentional approach to freight selection that Seth discussed. As we move through the fourth quarter, we expect year-over-year growth in weight per shipment to moderate as we begin to lap the benefits of these initiatives. That reflects a stronger prior year comparison, not a change in our approach. October billed revenue per shipment increased 18% year-over-year, driven by the heavier freight profile and a 4% increase in billed revenue per hundredweight. Excluding fuel surcharge, revenue per hundredweight declined in the low single digits, primarily reflecting the heavier freight profile. Historically, excluding years with significant market disruptions, ABF's non-GAAP operating ratio has increased by approximately 180 basis points on average from the third quarter to the fourth quarter. Based on current trends, we expect ABF's fourth quarter 2026 non-GAAP operating ratio to increase sequentially by approximately 50 to 150 basis points. This outlook reflects our continued focus on yield discipline, cost management, and productivity, and the impact of higher fuel prices. Turning to asset light, third quarter revenue was $446 million, up 25% year-over-year on a daily basis. Shipments per day increased 1%, led by growth in managed logistics. Revenue per shipment increased 24%, reflecting higher rates in a tightening capacity environment and higher fuel costs. Employee productivity, measured by shipments per person per day, increased 8% year-over-year. Selling, general, and administrative expense per shipment declined 2%, driven by our productivity initiatives and a higher mix of managed logistics business, which has a lower cost to serve. These improvements in revenue, yield, and productivity contributed to asset-light non-GAAP operating income of $14 million for the third quarter, up $13 million year-over-year. In October, asset-like daily revenue increased approximately 27% year-over-year, driven by an 18% increase in revenue per shipment and an 8% increase in shipments per day. Higher revenue per shipment reflected a higher pricing environment, including higher fuel prices and tighter truckload capacity, while shipment growth was led by managed logistics. For the fourth quarter, we expect asset-life non-GAAP operating income of approximately $7 million to $10 million, reflecting normal seasonal volume trends, current pricing trends, and continued progress on productivity. We continue to allocate capital with a focus on attractive long-term returns while maintaining a strong balance sheet. Consistent with that approach, we repurchased $26 million of shares during the third quarter and an additional $14 million in October. Overall, we remain confident in our strategy and focused on achieving our long-term targets. With that operator, we are ready to open the call for questions.

We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. If you would like to submit a question on the webcast, you may do so by clicking on the Q&A button in the bottom right corner of your screen. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jordan Allager of Goldman Sachs. Your line is open. Please go ahead.

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

Hey, Jordan, this is Seth. Thanks for the question. We're really encouraged by what we're seeing as we move through the fourth quarter. The environment's obviously still mixed, but there's more positive indicators today, and we're seeing some of those early green shoots across our business. So if you look in October, asset-based tonnage increased approximately 15% year-over-year. Shipments increased 1%. And then the weight per shipment Matt mentioned in his prepared remarks, we continue to benefit from that heavier dynamic tonnage, which we expect to normalize as we lap some of that history. But we've continued to maintain a strong posture on yield. That's tempered some of the shipment growth somewhat. But we believe those are the right decisions to make. So our focus has really been on having our book of business in a very healthy position and pricing appropriately for the value that we provide. So we're seeing some encouraging activity across several of our verticals, building materials, automotive, food service, 3PL. But what gives me a lot of confidence is we're creating some of this momentum ourselves through just better service to our customers, stronger customer relationships, and improved commercial execution. So our pipeline remains strong across all of our solutions. The changes we made with our commercial organization are supporting that effort. We stood up a dedicated acquisition sales team. They have a greater focus on landing new customers, while our account teams can concentrate on retention and cross-selling, and we're seeing some early wins there. So, as we look forward to 2027, we're not assuming a significant freight recovery, but we're seeing some early signs that are encouraging.

The next question is from the line of Ken Hexter of Bank of America. Your line is open. Please go ahead. Hey, great.

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

Thanks, Ken. This is Seth. So, as you know, as weight per shipment increases, heavier shipments generally have a lower freight class and have an effect on revenue per hundred weight, so we've seen that. But we are seeing some improvements in our weight per shipment on our core business, but the majority of the increase that we've seen throughout this year is really around the dynamic shipments being heavier, and that's because of the expansion of our quote pool. That's really allowed us to be more selective in real time. To help us optimize yield and productivity in the asset-based network. So in October, the year-over-year wait per shipment, it continues to be impacted by that. But as we move through the fourth quarter, we really expect that year-over-year growth and wait per shipment to moderate compared to when we started all these initiatives last year. This is a comparison really against a stronger base, not a change in our approach. Our approach with dynamic, as we move through the fourth quarter, is going to look a lot like the first, second, and third quarter in what we did. So, really, we've seen some of that truckload spillover. I think we're still early stages into that, but we are seeing that continue. So really what I always go back to is customers are ultimately looking for a partner that they can trust, that offers multiple solutions in one place, and that's really what the commercial team has brought. And we feel very encouraged by what they've been able to accomplish throughout the third quarter and what we're going to see for the remainder of the year.

The next question is from the line of Ravi Shankar of Morgan Stanley. Your line is open. Please go ahead.

Hi, this is Nancy. Thanks for taking my question. It would be helpful to hear a bit more about Asset Light following the Montgomery litigation. How are you thinking about implications for Asset Light heading into 27? And then beyond the insurance renewals you mentioned, do you see any elevated litigation or liability risk there?

Thanks, Nancy. This is Seth. Well, I thought it was important in my prepared remarks to cover how our insurance renewals went because we just finalized those. But despite the challenging insurance market, we did achieve a favorable liability insurance renewal with the reduction in base premium while maintaining our overall coverage. Now, as part of that renewal, we incorporated an additional structured component in one of our excess layers of our program, and that helps us get greater premium certainty over the three-year period. And in exchange for that, we assume some additional risk within that portion of the program, but that layer has only been impacted by two claims over the past 25 years. And based on that historical loss experience, we really believe that tradeoff is appropriate. So we really focused on the appropriate balance between retained risk, premium expense, insurer quality, and the protections against significant loss. So we really believe that the longstanding focus on safety, compliance, discipline, carry qualification positions as well in the current environment.

And, Nancy, this is Matt. I'll just comment on the outlook. I mean, certainly feel very good about the asset life business, where that performance is, the trajectory that we're on. I mean, if you look at year to date, we've reported around $24 million of operating income through the third quarter, certainly substantial improvement year over year. Feel pleased about the outlook for the fourth quarter of $7 to $10 million. You take that together, you know, you're looking at a year probably in the low $30 million for that business. And then looking ahead to 2027, certainly we expect continued shipment growth in that business, continue to be pleased with how that managed logistic solution continues to grow for us, continue to see a lot of benefit from the productivity initiative, the technology initiative, some of which that Seth talked about in his opening comments, and then just expect continued benefits from some of the restructuring actions and savings from what we did in July.

The next question is from the line of Scott Grew of Wolf Research. Your line is open. Please go ahead.

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

Yeah, thanks, Cole. This is Seth. So I think about it in terms of sequentially and what we're seeing. So sequentially from September to October, tonnage generally decreases about 3.4%. We're ahead of that. We're down only about 1%. Shipments per day generally decrease about 3%. We're slightly ahead of that being down 2%. And then weight per shipment generally decreases about 0.4%, and we're ahead of that by about 1%. So if you look at that on a go-forward basis, that's really what you'll see. What we're trying to highlight is you'll start to see some year-over-year changes in weight per shipment in November and December as those initiatives took hold last year. Not a change in strategy. We're going to continue to do what we've been doing in the first, second, and third quarter, but we just wanted to highlight that. When you think about fuel, it's an important component of our overall pricing model, but customers ultimately make the decision based on the total value of the service we provide, And fuel surcharge is just one element of a broader pricing discussion. So it's designed to offset the fuel charges that we have. We operate in the same manner with all of our competition. It's just on a weekly basis. But a reminder, our costs go up as well. So the price of fuel, propane for our forklifts. We have 240 facilities. So utilities, think of all those things. So really what we focus on is the larger. Our consideration for us isn't fuel surcharge itself. It's just what happens to demand, and we're paying close attention to that, but we're also encouraged by what our pipeline is seeing. So the greater focus over the long term for us is remaining disciplined on price, delivering that premium service, making sure that we're efficient with our resources, because that's going to have a greater long-term impact than short-term fuel volatility.

The next question is from the line of Brian Ossenbeck of JPMorgan. Your line is open. Please go ahead.

Hey, good morning. Thanks for taking the question. Maybe just two follow-ups for you guys. On the wait for shipment, I know UPAC has been a unique situation for you guys, and it's obviously housing market. Great shape. Is that pretty much troughed out in terms of impact on your comps from a weight procurement perspective? And then, Seth, maybe just to go back to the premium statement a little bit more. It sounds like lower premiums, but a bit different risk profile, but it sounds like you're okay with that trade-off, given the history there. And also, is there an auto liability, I guess, from Contingent perspective, like do you have to do any of the actuarial reviews here? Maybe it's a question for Matt, like just remind us when that starts to come to the balance sheet, potentially, if you guys do that before the end of the year. Thanks very much.

Yeah. Hey, Brian, it's Matt. So on your first question on UPAC, you're right. I mean, those shipments are generally substantially heavier shipments and do impact our overall weight per shipment. But in terms of the change there, really volume levels are relatively consistent. So not expecting any significant impacts year over year. On the renewal, like Seth said, we do feel really good about where we ended up there. We certainly really leveraged our strong performance that we've had, strong safety record, our good relationships with our carriers. We have some talent that we brought on in the risk group that has really helped us in that area. And so, you know, overall, we were able to achieve some savings. We did, as Seth mentioned, add a little bit of structure to one of the layers, but felt really good about the tradeoff there. You know, had some savings in the low single-digit millions for some tradeoffs in a layer where we've only seen a couple of claims impact that layer in our history and, you know, feel good about the tradeoff. Really, it's assuming that we have performance in line with what we have seen historically, wouldn't expect any additional impact there. The most that we could see in a particular year would be low single-digit millions and felt that that was very reasonable for the tradeoff that we got in premiums overall for the program. You know, you mentioned the accruals and how we think about the auto and general liability program. Certainly, we look at that throughout the year, but we do take a deeper look at that with our actuaries in October, and so that'll be coming up here in the fourth quarter.

The next question is from the line of Chris Weatherby from Wells Fargo. Your line is open. Please go ahead.

Hey, thanks. Good morning, guys. Gordon, maybe we can talk a little bit about the outperformance sequentially. So I'm kind of curious, maybe, Seth, if you could break down how much you think is what you guys are doing specifically with the initiatives and the dynamic business, and then maybe what the market is, I guess, maybe trying to sort of decouple demand and kind of company-specific actions, and then maybe just some broader, you know, kind of commentary on the pricing environment. So do you feel like things are, you know, kind of the same as what we've seen before or sort of the opportunity getting a little bit better, you know, in the LTL market broadly around pricing? So come to questions here. Thank you.

Yeah, thanks, Chris. I'll start out, and then I'll pass the pricing question over to Eddie to fill you in with stats and what we're seeing in the business. So really, when I think about the outperformance in the third quarter, it's really a combination of multiple things, and it's really tied to our three strategic pillars of growth, efficiency, and innovation. So, we've been pleased with our pipeline and what we've been able to see there. We talked at our investor day about how expanding the quote pool gives us more optionality, and we've seen that come to life throughout the year. We've been able to be more selective with the freight we've brought on. We've been disciplined with our price. to make sure that our customers are seeing the value that we deliver. So I'm really encouraged by the 5.1% increase that we were able to achieve in the third quarter, which builds upon what we've been doing throughout the year. From an efficiency standpoint, both in asset-based and asset-light, I continue to be encouraged by the results we've seen, record load average numbers, historically low claim statistics. Just when you look across the board, we continue to accelerate those technology initiatives, which ultimately drive benefit to our bottom line. And then on the innovation side, there's just a lot going on in AI. We have over 30 AI agents working at our company and doing tasks that our people don't have to do so they can focus on higher value work. So at the end of the day, that gives us more opportunities to grow, improve our cost to serve, and think about what we want the future to look like from a tech perspective. So we spent a lot of time throughout the third quarter. And what I'm most proud of the team about is we've invested through this entire cycle. We have one of the newest fleets on the road. We've continued to invest in technology. We've built out over 800 doors in the network. So as volume starts to inflect positively, we're well positioned to take advantage of that. I'm so proud of the team and what they've been able to accomplish throughout the entire year. I just, I feel so good about the management team, our team in the field. Everyone continues to execute at a high level. So I'll turn it over to Eddie to talk about pricing.

Yeah, good morning, Chris. You know, from a market standpoint, pricing still is very rational. You know, I would say it's, you know, I would see signs of improvement from earlier this year and definitely compared to last year. You know, if you look at what we've been trying to accomplish really starting at the end of last year to improve our count mix, our yield metrics, I've seen a lot of success. And so a lot of hard work with our sales and pricing teams with support from our operational teams to give us a great product to sell. So we've been successful. You know, we talked about our renewal increase being at 5.1 percent for the quarter. You know, that's a really strong number. You know, it's a different account mix in third quarter than it was in second quarter. But we're really confident that we got the most out of those negotiations we could. We're still with an emphasis on retaining good profitable business for the system. You know, we have been on a journey to improve our mix. So, you know, some of our pricing action has. Resulted in loss of business. But again, it is really meant to improve our overall profit for the company. And I think we've been very successful doing that. You can see it in our weight per shipment numbers with that improvement and weight per shipment for our core LTL business. We did target some lower revenue business, which is generally tied to lower weight business. And so that's helping us really achieve a higher weight for shipment, higher revenue for shipment, and ultimately a higher profit for shipment. So, you know, a lot of what we're doing is resonating with customers. And when we do run into situations, we have a great option with managed logistics to still meet what the customer is looking for, improve our margins, and then provide a solution that helps our customers be successful.

The next question is from the line of Thomas Wadwitz of UBS. Your line is open. Please go ahead.

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

Yeah, this is Seth. I'll take that question. So, we've talked about dynamic in the past many different times, and really what I want to remind everybody of is our business is primarily core, and transactional business and dynamic helps us maintain consistency in the network and allows us to adapt to what's going on in the market. So, we feel great about our pipeline. We're seeing new core. Then we saw our weight per shipment increase 1%, like I said earlier. So we're going to continue to focus on profitable growth, mix management, and delivering that great service to our customers. So what's really important, I've said this on previous calls, to just understand about what we do at Dynamic is we optimize our mix on a daily basis, and it's based on profit maximization, based on current market prices, and available capacity in our network. But what the expansion of this quote pool has allowed us to do is it's continued to get larger. It's really increased the visibility and optionality. And since launching the dynamic quoting pool since 2019, when we launched that product, our revenue per shipment has increased by 70% because we need approximately the same number of shipments, but you're just doing it on a larger quote pool base, which ends up improving profitability of the overall result. So hopefully everybody has seen the improvements in our results over the long term, the investments in our tool set. This was really about reaching a customer base that we didn't have access to in the past. We gave them a new channel, and it's continued to produce positive benefits for us.

The next question is from the line of Jeff Kaufman of Citizens Bank. Your line is open. Please go ahead.

Thank you very much, and congratulations on the quarter. Thank you, Jeff. You got it. You talked about the changes you made to the asset, to the customer asset profile in LTL, more or less subsiding in future quarters as you anniversary that, but can you talk about kind of the next step of Customer base or freight profile dynamics as we're looking forward maybe next 12, 18 months, and not only asset base, but also maybe talk about some of the changes you're looking at with the consolidation and asset life.

Yeah, good morning. So, from an LTL standpoint, you know, we did, as we looked at, you know, we saw some growth in 2025, and that growth, even though it was profitable, it did come with a different profile. So really, the last, you know, four quarters, we've really been focusing on driving a more profitable profile into the LTL network. That emphasis on larger weight shipments has kind of coincided with, you know, truckload tightening, which has given us some opportunities to really kind of both from a transactional standpoint and a core standpoint to go after the business that we think produces the most profit for our system. One of the things we look at when you look at over the next few quarters and really maybe even next year, all this is really without a change in demand. So if you see a change in demand, there's an expectation that generally our wait for shipment, the amount of freight that our customers are shipping would coincide with that. So, we would see continued improvements in that metric, which should produce our ability to continue to improve yield at an even better pace. You know, I think we obviously are well positioned now with the profitability of our core book of business, that if that demand change occurs, we're going to be in a great position to take advantage of that.

Yeah, and Jeff, I'll mention on the asset light side of things, I'm really proud of the team for delivering $14 million in non-GAAP operating income in the third quarter, especially when you consider just the year-over-year where we were at last year, only delivering 1.5 for all of 2025. So that's just a meaningful step-up change. So really what's driving some of the shipment growth is really around that managed logistics that Eddie mentioned before. We highlighted this as our investor day, and it continues to hold true. We've been on a 40% growth rate on a combined annual basis since 2017, and this quarter was another record for Manage. So really what we tried to do with some of the changes in July was simplify how we operate, make it easier for our customers to do business with us, and better position our best to grow over the long term. And that's exactly what we've accomplished in the third quarter, and we're looking forward to the future. Manage continues to be a good success story, but ultimately, it's about finding ways to say yes to the customer supply chain because there's so much uncertainty and things going on in the world. If we can position ourselves in a way that says yes to the customer, we've seen that as we cross-sell business, it improves revenue, profit, and retention, and that's exactly a position we want to be in.

The next question is from the line of Ari Rosa of Citi. Your line is open. Please go ahead.

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

Hey, Ari, this is Seth. I'll start out with my comments and then turn it over to Matt Beasley. But we're really confident in our long-term strategy and the earnings potential of a business. And I feel like we made meaningful progress against many of those objectives throughout the quarter. So in all parts of our business, both asset-based and asset-light, we really work to build a scalable operation where we can take full advantage of operating leverage. And the investments that we've made throughout this cycle have really positioned us well. So I'll turn it over to Matt to give his thoughts as well.

Yeah. Hey, Ari. So I'm very pleased with the 2026 result. I mean, like I talked about early on, Asset Light, just a great story there, great trajectory, looked to be in the low $30 million for the year in op income. Asset-based, great result as well. I mean, if you look at our guide for the fourth quarter and our results for the first three quarters of the year, you know, that would put you around a 92 OR for the year. We are in the process of putting our plan together for 2027 to discuss with our board, so I don't want to get too far ahead of that. But I think, you know, based on what we see today, we expect 2027 to be another year of improvement, a good step towards our 2028 targets. Certainly, we'll have some of just the normal inflationary items that we see each year, but, you know, feel great about the growth that we continue to expect to see in the asset-like business, The continued work on pricing that Eddie has talked about in the asset-based business, just all the work that we're doing across both segments with technology and productivity, and expect to see that full run rate from the restructuring savings starting in the first quarter as well, and that's the $10 million a quarter that we disclosed a few months ago. So, you know, really feel good about the way things are shaping up for 2027, and again, we do believe that that's going to represent another meaningful step towards the 2028 targets.

The next question is from the line of Bruce Chan of Stiffel. Your line is open. Please go ahead.

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

Yeah, perfect, Bruce. This is Seth. I'll start, and then I'll turn it over to Matt Godfrey to answer a little bit of that. But obviously, we've seen cost inflation across different areas of our business. Really, what we outlined at Investor Day is ensuring that our revenue per shipment is ahead of our cost per shipment by 80 basis points, and that's what we're going to continue to focus on. If you think about our contract rates, Throughout 2026, really, the all-in rate was around 3.2%. Those went into effect from a wage standpoint in July and then from a health, welfare, and pension in August. So those are in some of our third quarter and also in our fourth quarter outlook. And then we also have the 2027 wage and benefit increases, which are already pre-negotiated, which gives us a lot of certainty about where our labor inflation is going to end up. So we feel good about that. I'll have Matt comment on the actual recruiting side of things, so I'll turn it over to him.

Thanks, Seth. Appreciate it. And, you know, you mentioned the way we look at capacity earlier when we talked about it, but physical capacity in our network to serve our customers is a mix of our door capacity, which we've grown significantly over the last five years, equipment capacity, which we've continued to invest in, as we talked about, and obviously manpower. And so we take a very analytical approach to manpower planning, and so that provides insights not only at the system level, but at the location level, so we can project our current and future hiring needs based on business needs, projected attrition with employees, and what we see coming in the pipeline. And so those models have really evolved over time. We're not only looking at the long range, three, six months out to a year, but we're providing enhanced tools to our frontline leaders to hit weekly targets that are matching our labor. To the business levels to ensure we provide an efficient, reliable, and premium service to our customers. So we're consistently focused on building that flex capacity in our network with all three legs of the capacity that we talked about, and that way we can flex up or down as needed to serve our customers. When you think about our great Union workforce, generally a higher tenure, lower turnover. And what that means for our customers is better service through productivity and improved rate handling. And so what that means in our operation is we can be more strategic with our resource deployment while meeting our customers' needs. And we look at hiring overall. We're on track to hire slightly less than we did last year, more than 2024. But for us, using those models, our needs around recruiting and hiring expense has scaled with the employees that we need to hire. So really pleased with the process we've made there and the way we've been able to service our customers throughout the year.

The next question is from the line of Stephanie Moore of Jefferies. Your line is open. Please go ahead.

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

Hey, Stephanie. Good morning. This is Seth. Yeah, we outlined a lot of technology initiatives at Investor Day, and I've continued to be proud of what our team has been able to accomplish. So it was interesting. A few weeks ago, we actually had an AI expert come in and talk to our leadership team, and he made a comment that really stuck with me, and it was automation is not transformation. And that's really what we're focused on in our business is how can we transform our business because we operate in markets with over $400 billion worth of opportunity. So we're trying to think about ways that we can upskill our people to focus on growth, efficiency, ways to improve our cost to serve while improving the customer and employee experience. So we really try to create differentiation with our technology, enhance the customer experience, and really. Arc Best View and what we announced in the middle of this quarter and when we announced the platform, that's a technology with AI built into it, and it's improving the customer experience. We've received incredible feedback with over 3,600 people signed up for that so far. So when I think about the most impactful areas, obviously, we've talked about city route optimization before. We've seen over $15 million in benefit from that initiative. When I think about appointment optimization, we have a lot of people making appointments on a day-to-day basis. So we're focused on enhancing their visibility, communication to customers, texting customers, all those different types of things around appointments. Matt Godfrey mentioned our suite of manpower planning tools, and that's just an analytical approach to day-to-day operations, which has really improved our asset-based productivity. I mentioned AI agents. 60% of our truckload shipments are now digitally augmented, which really just allows our team to focus more time on the customer experience and complex problems. So we're still focused on automating the quote-to-cash cycle. We're making good progress across the board there, and I just feel really good about the technology roadmap. I feel like we're in probably the third inning of that. And I'm super proud of the team and what we've been able to execute because technology can get you a lot of benefits, but at the end of the day, it's people that make it happen. And I love the expertise of our team and how we partner with customers to build these tools. That ultimately drives value for our customers, our people, and our shareholders.

The next question is from the line of Bascom Majors of Stephens. Your line is open. Please go ahead.

Good morning, and thanks for taking my questions. You know, in the asset side of the business over the last few years, it seems like it's been more about optimization and just growth for growth's sake. If an opportunity were to come up to consolidate and grow more significantly, is that something that you guys would consider? Thank you.

Hey, Bascom. This is Seth. Yeah. When I think about the ways we try to grow our business, it's really through the lens of capital allocation in a way. So when we look at the way we allocate capital, we take a pretty balanced approach to that. We have organic investments that we make in the business, which I've mentioned a lot of those throughout this call already. We look at M&A and where can it accelerate a strategic gap we have, a customer need. Ultimately, it comes down to what value is it going to provide, and that's either a technology value, a scale value, a solution we might not offer. So we really think about it through that lens, and then obviously how we return capital to shareholders, whether through our dividend or share repurchases. So we really are attacking it from all lenses, and really where I think about where we want to invest our time and resources and effort is where are we going to see the most value for our customers? Because we're a customer-led organization, and if we continue to invest in solutions that resonate with them, that provide differentiated value, I feel like that's going to win over the long term. So we're focused on both, and we feel confident in our approach, and we'll continue to evaluate opportunities as they come up.

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

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

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