Good morning, and welcome to the Old Dominion Freightline 4th Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Jack Adkins, Director, Investor Relations. Please go ahead.

Thank you, Gary. Good morning, everyone, and welcome to the fourth quarter 2025 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through February 11, 2026, by dialing 1-855-669-9658, access code 9011045. The replay of the webcast may also be accessed for 30 days at the company's website. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects, and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and this morning's news release. Consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. As a final note before we begin, we welcome your questions today, but ask that you limit yourself to just one question at a time before returning to the queue. At this time, for opening remarks, I'd like to turn the conference over to the company's president and chief executive officer, Marty Freeman. Marty, please go ahead. Good morning, and welcome to our fourth quarter

conference call. With me on the call today is Adam Satterfield, our CFO, and after some brief remarks, we will be glad to take your questions. Old Dominion produced solid financial results during the fourth quarter that reflect our ongoing commitment to revenue quality and cost discipline. We once again delivered best-in-class service to our customers and our yield continued to improve. Although our operating ratio increased to a 76.7 for the quarter, we believe our profitability metrics will continue to lead our industry and they reflect our team's ability to operate efficiently despite the challenging environment. I want to thank our OD family of employees for their dedication to our customers and their unwavering commitment to executing our long-term strategic plan. Our team remains focused on controlling what we can control to ensure that we continue to deliver an unmatched value proposition for our customers. The foundation of this value proposition is our ability to deliver superior service at a fair price. Our customers know that they can expect the highest standard of service from Old Dominion every day, which positions them to drive value for their own customers. We are pleased to once again provide 99% on-time service in the fourth quarter and a cargo claims ratio of 0.1%. Our track record of consistently delivering superior service has helped us to win market share over the long term, while also supporting our ongoing commitment to revenue quality. We maintain a disciplined approach to yield management that is designed to offset our cost inflation over the long term, while also allowing us to continue to make strategic investments in our capacity, our technology, and most importantly, our people. While these investments have increased our overhead costs in the short term, we believe they will support our ability to grow with customers in the years ahead. Our consistent investment in capital expenditures throughout this economic cycle has differentiated us from our competitors over time. This is also a fundamental component of our value proposition, which has been critical to our ability to win more market share over the last decade than any other LTL carrier. During the fourth quarter, our team continued to operate efficiently while also managing our discretionary spending. these efforts are reflected by how well we have controlled our variable operating costs over the last few years despite the decline in our overall network density and other inflationary headwinds to put this in context in 2022 when we generated a company record operating ratio of 70.6 our direct operating expenses were approximately 53 percent of revenue in 2025 our direct operating costs as a percent of revenue were also 53% despite the loss of network density associated with the decrease in volumes. Our efforts to enhance productivity have been made possible by key technology investments as well as business process improvements, which we believe will allow us to improve our operating ratio when business levels ultimately improve again. As we begin 2026, we are cautiously optimistic that we will see some recovery in demand within the industry. With the combination of our industry-leading service standards and more network capacity than we've ever had, we are better positioned than any other carrier to capitalize on improving the economy. As a result, we are confident in our ability to win market share, generate profitable revenue growth, and increase shareholder value over the long term. thank you very much for joining us this morning and now adam will discuss our fourth quarter in

greater detail thank you marty and good morning oldenman's revenue totaled 1.31 billion dollars for the fourth quarter of 2025 which was a 5.7 percent decrease from the prior year our revenue results reflect the 10.7 percent decrease in ltl tons per day that was partially offset by a 5.6% increase in our LTL revenue per hundredweight. Excluding fuel surcharges, our LTL revenue per hundredweight increased 4.9% compared to the fourth quarter of 2024. On a sequential basis, our revenue per day for the fourth quarter decreased 4.1% when compared to the third quarter of 2025, with LTL tons per day decreasing 4.8% and LTL shipments per day decreasing 6.5%. For comparison, the 10-year average sequential change for these metrics includes a decrease of 0.3% in revenue per day, a decrease of 1.3% in LTL tons per day, and a decrease of 3.1% in LTL shipments per day. The monthly sequential changes in LTL tons per day during the fourth quarter were as October decreased 5.3% as compared to September, November increased 2.6% as compared to October, and December decreased 4.0% as compared to November. The 10-year average change for these respective months is a decrease of 3.0% in October, an increase of 2.7% in November, and a decrease of 6.8% in December. For January, our revenue per day decreased 6.8% when compared to January 2025 due to to a 9.6 percent decrease in our LTL tons per day that was partially offset by an increase in our LTL revenue per hundredweight. LTL revenue per hundredweight excluding fuel surcharges increased 3.9 percent in January. Our operating ratio increased 80 basis points to 76.7 percent for the fourth quarter 2025. While we continued to operate efficiently and diligently managed our discretionary spending during the quarter, the decrease in our revenue had a deleveraging effect on many of our operating expenses. Our overhead costs, which tend to be more fixed in nature, increased 140 basis points as a percent of revenue due to this effect. The increase in our overhead costs also includes a 70 basis point increase in depreciation as a percent of revenue, which reflects the continued execution of our long-term capital investment plan that Marty just discussed. Our direct operating cost as a percent of revenue improved by 60 basis points as compared to the fourth quarter 2024. This was primarily due to the net impact of adjustments we record in the fourth quarter each year that are related to third-party actuarial reviews of our injury and accident claims. The results of this annual review impact both the salary, wages, and benefits and the insurance and claims line items on our income statement. We were otherwise able to effectively manage our direct variable costs to be consistent with the prior year. Old Dominion's cash flow from operations totaled $310.2 million for the fourth quarter and $1.4 billion for the year, respectively, while capital expenditures were $45.7 million and $415 million for the same periods. We utilized $124.9 million and $730.3 million of cash for our share repurchase program during the fourth quarter and the year, respectively, while our cash dividends totaled $58.4 million and $235.6 million for the same periods. We were pleased that our board of directors approved a quarterly cash dividend of $0.29 per share for the first quarter of 2026, which represents a 3.6% increase compared to the quarterly cash dividend paid in the first quarter of 2025. Our effective tax rate for the fourth quarter of 2025 was 24.8% as compared to 21.5% in the fourth quarter of 2024. We currently expect our effective tax rate to be 25.0% for the first quarter of 2026. This concludes our prepared remarks this morning. Operator will be happy to open the floor for

questions at this time. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Again, please limit yourselves to one question. If you have additional questions, you may rejoin the queue. Our first question today is from Jordan Alliger

with Goldman Sachs. Please go ahead. Yeah, hi. Good morning. I was wondering, might as well ask, can you provide some sort of thoughts and perspective on both, If any indication on demand and what you're seeing and hearing from customers and thoughts around possible better tone to volume as we move through the year, and then maybe it's all in conjunction with that, your thoughts on seasonality as we go from Q4 to Q1 from margins.

Yeah, I'll just start with the demand and let someone, I'm sure, will probably get at that OR question. But I think we've seen some positive signs that we've been really pleased with really over the last couple of months that have been developing. And then the release this week of the ISM was certainly very positive to see and maybe as an indication of hopefully what things will be for the remainder of the year. You know, obviously, over time, we've seen that ISM, it's a leading indicator, and typically a couple months after that inflects positive, we see volumes, you know, somewhat do the same. But just getting back to recent trends for what we've seen, the thing I've been most pleased with is the increase in waper shipment. And, you know, I think we've talked for multiple quarters now when we've been trying to make the call on when is the demand environment going to finally turn. We've talked about looking at that weight for shipment, for example, as really the indicator within our business. That really increased. We were down about 1,450 pounds in kind of September, October timeframe. We saw that increase to 1,489 pounds in November, which is above what our long-term seasonal increase would be for that month. And then we saw it increase further to 1,520 pounds in December. Again, that was about a 2% increase. The 10-year average is about a 1% increase from November to December in weight. We saw it pretty much perform in January. We were right at 1,492 pounds, so a little bit of a decrease, but that was right in line with seasonality and I think somewhat impacted by a little disruption we had to our operations the last week of the month. We'd actually been trending higher than that as we progressed through the month. So, you know, really good to see, you know, when looking at just tonnage per day, the wait for shipment, all those factors leading into the start of this new year and, you know, hopefully finally seeing the turn that we've been predicting for the last couple of years take shape.

Thank you.

The next question is from Chris Weatherby with Wells Fargo. Please go ahead.

Hey, thanks. Good morning, guys. Maybe I'll just pick up on that and ask about the first quarter kind of sequential from an operating ratio perspective, and maybe any thoughts you have on revenue per day for the first quarter as well.

Yeah, obviously the revenue per day is going to lead right into it, and, you know, given the data that we just discussed for January, we're starting out a little bit behind seasonality, again, on a revenue per day standpoint. I feel like we'll close that gap. We've seen good performance since early, but probably a little catch up in business this week where we had the weather disruptions last week. So I think that will normalize. But hopefully we can close the gap with seasonality as we progress through the remaining months of the quarter. Just from a big picture top line standpoint, I feel like our revenue for the full quarter we'll probably come in somewhere between $1.25 and $1.3 billion. The low end of that range would be if we underperformed seasonality at a rate similar to what we just did in the fourth quarter. And then the top end would be normal seasonality. And if you take normal seasonality from January through February to March, that would put us kind of right there in the middle. So we'll see how that continues to take shape. And obviously, we give our mid-quarter updates that will allow for tracking. So with that said, the 10-year average change in the operating ratio is an increase of 100 to 150 basis points from the fourth quarter to the first. And I think we can get to the top end of that range. So, you know, I would say an increase of 150 basis points is probably the target, and then maybe a plus, minus 20 basis points to continue to, you know, allow for some of that revenue uncertainty.

The next question is from Scott Group with Wolf Research. Please go ahead.

Hey, thanks. Morning. So, Adam, why don't you just – you talked about the wait for shipment improving. can you have a do you have a sense of of what's driving that is it are we starting to see some of the truckload stuff spill back is it just underlying industrial um getting better and then maybe just help us i know that the the yield trends decelerate a little bit um into q4 and maybe starting q1 but is that just the weight getting better or is you know any thoughts on just you know how to think about yield trends um as we're going from here thank you yeah the

I think the weight is probably coming from all the above. Looking at our contract customers, weight's up a little bit. Our smaller mom-and-pop customers, which actually we saw a little bit more growth out of, or better performance, I shouldn't say growth, in the fourth quarter, weight for shipment was up as well. And so I think that exactly what you said, as the truckload market is changing, We've talked a lot about the spillover effect and how that's impacted volumes over the last couple of years. I think we're probably in the early innings of some of that starting to normalize. I don't know that we're completely there yet, but just given how there's some supply rationalization there, it certainly feels like that is beginning to happen. And the weight certainly will put a little bit of pressure on our yield metrics, But, you know, our guidance for revenue for 100 weight for the fourth quarter was to be up 5%, and that would have been normal seasonality. So we came in right at 4.9%. Normal seasonality for the first quarter would be about 4.5% increase on a year-over-year basis. I feel like we've probably got at least a 50 basis point headwind, it looks like, right now with the change in weight for shipment. So that's actually a good thing. You know, in January, it kind of came in right at about that 4% threshold. So that's about what I would expect unless we see further increases in the weight that, you know, may put pressure on that revenue per hundredweight metric. But the reality is that's what we're hoping to see. We want to continue to see that weight per shipment going up because the thing that's being missed when we talk about revenue per hundredweight is what's the revenue per shipment? that will continue to go up as the weight increases and that's going to be ultimately what we're looking at for success how are we managing our revenue per shipment and our cost per shipment and you know we obviously the last couple years the operating ratio has gone the other way because we've had more cost and revenue there on a per shipment basis so that weight continues to go up that's going to help us continue to build density in our network It's going to allow for us to have more true yield on a per-shipment basis and hopefully allow us to turn the corner and get right back to produce an improvement in our operating ratio and long-term profitable growth. Thanks, Scott.

The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

Great morning, everyone. So maybe just a bit of a color question here. I think you and your peers have spoken of some level of share shift away from LTL to TL in the down cycle, and you've expected that to come back when the market tightens up. I mean, now that TL rates have been pretty tight for a couple of months, are you starting to see that come back, or what do you think is the cadence of that coming back through the cycle?

Yeah, I think that, you know, it's a natural sort of change that happens. I think that when you look at that truckload environment and a lot of those carriers are barely breaking even or worse, we've seen some capacity rationalization, if you will, in that environment. And I think, you know, that's changed the pricing environment there. And so, you know, hopefully we'll continue to see those trends change at a time where it feels like overall industrial demand is ready to start showing some signs of improvement again. And, you know, again, we say we're cautiously optimistic about all this because we had improvement in the ISM last year at about the same time. And, you know, then we had the event in April that threw cold water on everything. So we're in a great spot to continue to handle any business that comes our way. We've got more capacity than we've ever had in our network. We've got capacity with our equipment and capacity with our people. So we can respond to the inflection as it happens. And I think that's what has differentiated us from our competitors in the past, the ability to be able to take on significant volume growth in the early innings of the cycle is when we've gained the most market share in the past, and that's certainly what we're going to look to as this cycle eventually inflects back to the positive.

Thank you.

The next question is from Ken Hexter with Bank of America. Please go ahead.

Hey, great. Adam, maybe just to follow on that, or Marty, your thoughts on headcount down 6%, shipments down almost 10%. So we're seeing a bit of a decoupling. Is there more opportunity as you think about the cost cycle, or is that more being prepared, as you just mentioned, to capture that? And similar to CapEx, seems like you're aging the fleet a little bit as you reduced it from down to $415 million this year, down another to $265 million next year. So now is there a cost impact on maintenance and the like? So maybe just it's a cost issue, but maybe you're talking about being more prepared for the upcycle.

Yeah, we're definitely prepared for the upcycle. The average age of our fleet actually improved this past year. It's now down to an average of 3.9 years for our tractor fleet. And that's about where we like it, somewhere around four years. We've been below that before, and, you know, we've let it age up a little bit. But, you know, really pleased with our operations team as they've continued to try to right-size the fleet to make sure we've got all the equipment in the places we need. But also managing through our cost inflation from a repairs and maintenance standpoint. You know, when we went through, go back to 2022, 2023, we had cost per mile inflation that was more in the 10 to 20 percent type of range for each of those years. And we've been sort of flattish, just some mild increases, if you will, over the last couple of years. And, you know, I think that's a reflection of the management team's efforts in that area and continuing to right size. But, you know, from an employee count standpoint, you know, I think we continue to manage through. And, you know, at the local level, our service center managers are making sure they've got the right amount of people. And I've got the ability to flex hours up to meet the increased demand from our customers. So, you know, we're in great shape there. We'd anticipated that we would see a little attrition through the fourth quarter. That's about what we saw happen. And so the overall headcount drifted down a little bit throughout the fourth quarter as we somewhat expected. So, you know, I think that will likely be stabilized here. And when you look over the long term, the change in headcount and the change in shipments really kind of match with one another. But what we'd expect to see is when we get into the early phase of this recovery, the number of hours worked by employee will increase on a per-employee basis. We'll be able to step those hours up to meet the increased volume needs as they come. And so you should eventually see the volume growth that's leading any growth in headcount before those two numbers kind of converge again. Thanks, John.

The next question is from Reed C.A. with Stevens. Please go ahead.

Hey, guys. Thanks for taking my question. In the release, you pointed to a pretty low CapEx number relative to what you expected last year coming into 2025 and kind of what you've done historically. Can you talk about maybe what's driving that lower CapEx expense this year and those expectations behind that guidance?

Yeah, it's just a function really of, you know, what the volume environment has been for the last couple, three years. And, you know, we've continued to run our CapEx plan, and that too is something that I think has differentiated us over time from our industry. In fact, we've spent about $2 billion in capital expenditures over the last three years, you know, and the volume environment obviously has not been robust. But, you know, I think we're in a really good spot when you sort of go down the elements of spend from a service center standpoint. We've got some projects that are in flight, and that's a lot of the spend that we've got this year. but we've got a little over 35% capacity in our service center network. You know, we're handling a little over 40,000 shipments per day right now, and our network is built to handle more like 55,000 or even more. We've done more, you know, in certain months back in 21 and 22. So, you know, we've got a lot of flex there to be able to grow. And the same thing with the fleet. Just like I mentioned earlier, we've continued to right-size the fleet. if you will, and take some of the older units out, but we've got some that continue to need to be replaced, and that's the majority of what's in the spend there in that category for this year. So it is lower as a percent of revenue than our typical range being 10% to 15%, but that's really just a function of the consistent investment that we've made over the past three years and kind of where we stand now and just wanting the business to grow into the network that we've got built. And, you know, when that starts happening, you think about our fixed cost, and Marty alluded to this in his comments, you know, our overhead cost. If you go back to that 2022 period, you know, they're up 450, 500 basis points, and that's really the difference in that record operating ratio then versus what we just completed in 2025. But once we start getting leverage on all these assets that we put in place, that overhead cost as a percent of revenue can swing back very, very quickly. And the density will allow us to further improve our direct cost as a percent of revenue as well. So that's what gives us the confidence that when we start seeing growth coming back in our business is that we can get our operating ratio going back to that 70 type of threshold and beyond.

Got it. Thank you, Adam.

The next question is from Jason Seidel with TD Cowan. Please go ahead.

Thank you, operator. Morning, Marty, Adam, and Jack. I want to go back on sort of your employee headcount numbers as well as how should we think about driver pay and dock worker pay as we move throughout the year? If some of your cautious optimism comes true and we start seeing a rebound, do we expect that number to go up a little bit as we move throughout the year?

Well, you know, Jason, we always give an increase to our employees. And when we operate at a 75, we're in the fortunate position to continue to reward our employees first. And, you know, from a stakeholder standpoint, we prioritize our employees and we want to make sure they're rewarded and continue to be motivated to take care of our customers. And when you give 99% on-time service and a cargo claims ratio that's below 0.1%, I think our employees have certainly delivered. So we continue to give healthy raises. We did so on the 1st of September this year. We also made improvements to our benefit plan costs or the benefits to employees. which have increased those costs, and we'd expect to continue to see our fringe benefit costs as a percent of salaries and wages increase. And those finish the year at about 42% of salaries and wages in 25, or at least in the fourth quarter. But we expect that we'll have a little bit of headwind there on those benefit costs, probably be somewhere in the 41% of salaries and wages in 2026. And then, you know, the final piece is the 401K match that we make, and, you know, I think that's what ties everything in together. And, you know, we give a discretionary match every year that's up to 10% of our company's net income. So we continue to put a lot of dollars into our employees' 401K plans to help them and their families prepare for retirement.

That's great, Collar. Should we expect the next sort of raise to be next or this September, or do you think it will be sooner than that?

No, September is usually the timing of our relations.

Yeah, right. Fair enough. Appreciate the time.

The next question is from Jonathan Chappelle with Evercore ISI. Please go ahead.

Thank you. Good morning. Adam, after two years of speaking to subseasonality, it seems like a little bit more cautiously optimistic, as you said, and you laid out a first quarter where the middle of the range is February and March are in line with seasonality, a lot of your peers, even though they haven't reported yet, are talking to a peg of, like, if we do X in volume this year or tonnage, that leads to Y in OR. If you took that February, March midpoint of 1Q and rolled seasonality going forward, where would that put your tonnage on a year-over-year basis? And by association, where would that put your OR improvement for this year?

Yeah, you know, I think we normally just take it one quarter at a time, and, you know, obviously there's a lot of ifs and buts that have got to play out and could play out in that scenario, but, you know, what they say, ifs and buts and beer and nuts, you have a hell of a party, and so I'll let all you guys, you know, sort of go through all those gymnastics. But, you know, if just looking at more in the short run, because I don't want to undersell what the long term could be, you know, we've produced some serious improvement in our operating ratio once we get into those stronger demand environments. You know, when we actually see the script flipped still remains to be seen. But, you know, the second quarter, we've kind of laid the framework out for the first quarter. And the second quarter, typically you see revenue grow sequentially about 7%, and the average operating ratio improvement is sequentially 300 to 350 basis points. So, you know, that would, if we see all of that, if we see the spring surge that typically would happen and lead to that 7% type of sequential increase, then that would put the operating ratio pretty close to being flat on a year-over-year basis in the second quarter. And then we would just have to sort of take it from there. But I still think, you know, we don't want anyone to really get out over their skis necessarily at this point. From an expectation standpoint, you know, it remains to be seen if this really is going to lead into that spring surge that we would typically see. You know, we certainly feel like the stars are coming into alignment. But, you know, we felt that way before, and in particular about February and March of last year. So, you know, that's why we continue to say we're cautiously optimistic about how things, you know, might develop for this year. But, you know, I think that's why you're seeing, you know, some of the pullback in capital expenditures and doing other things that we feel like we needed to do to continue to manage our costs. And we've controlled our variable costs, and I couldn't be more pleased than I am with our operations team. And if you think about the loss of network density, if you go back over the past couple of years, we've added about six service centers, and there's a lot of cost that comes with that, just overhead cost and network line haul cost, pickup delivery with the loss of density. So to be able to manage those costs says a lot to our team, says a lot to the continued investment technology, the tools that we give the team to help kind of manage those costs, and also to the yield discipline. If you weren't disciplined with yields throughout, we wouldn't have been able to keep those costs consistent as well. So, you know, a lot goes into it, and, you know, it's a total team effort from sales, operations, pricing costs, and you name it. It all kind of feeds into how we've been able to continue to produce strong profitable growth over the long term. that, you know, the last 10 years, despite this three-year freight recession, we've still got a 10-year average growth rate of about 15% in our net income. So it just says a lot to what we've done, but, you know, we think about the future. We've got a lot of room for growth ahead and operating ratio improvements. So, you know, I'm happy with what we've done, but more excited about what can come. Great. Thanks, Adam.

The next question is from Eric Morgan with Barclays. Please go ahead.

Hey, good morning. Thanks for taking my question. I wanted to just follow up on the pricing discussion. Sounds like weight per shipment's having a mixed effect in the first quarter. Just curious how we should think about what the cadence might look like looking a little bit further out, you know, especially if that if you do kind of hold that 1500 pound level, you know, I think that'd be a larger increase in 2Q and 3Q from last year. So just curious, you know, how we should think about that impact as well as maybe length of haul a little bit lower here. Should we just kind of naturally see that yield number trend a little bit lower from mix?

Yeah, I think so. I mean, just looking at what normal seasonality would be, you know, we'd be in kind of that 4% to 4.5% type of range. And, you know, again, if we have even more of an increase in weight, it could be lower. You know, when you look back at some of our stronger years from an overall revenue standpoint, volume environment, those types of things, you know, we've had revenue per hundred weight growth that's been more in the 3% range. And that was my point earlier with the comment that, you know, sometimes I think, you know, we get so down in the weeds and thinking about revenue per hundredweight, kind of miss the big picture of what's really the revenue trends doing and what's our revenue per shipment versus cost per shipment. So, you know, I'd love to see our weight for shipment go back up to 1,600 pounds, which is where we've been in stronger demand environments. And, yeah, that might put pressure on that revenue per hundred weight. That's going to do wonderful things for the overall top line revenue as well as what we would be able to do from an operating ratio standpoint. So we'll continue to kind of manage through that, but certainly would hope we see that wait for shipment. And if we're talking about some revenue per hundredweight that might be a little bit lower than what was reported the last couple years, that's probably a good thing in the sense of what's really going on with the demand environment. It's certainly no change with what our yield management philosophy is or how disciplined we continue to be as we manage cost and manage yields.

The next question is from Risha Harnain with Deutsche Bank. Please go ahead.

Thanks, guys. So, Adam, you mentioned that last week you saw some disruption. Maybe just clarify what went into that. Was it just weather and did that weigh on your cost? Should we expect higher costs this quarter, too, in light of that weather? Is that embedded in your 150 basis points change in OR target? Also, another clarification, curious if the government shutdown had any impact on 4Q or potential impact this quarter from that on you or the industry this quarter. And then, so those are, that's a clarification. And then, I guess, just my real question beyond those clarifications is incremental margins. You said, you know, you have more excess capacity than you've ever had in your network. I know you said you're quite excited about what's to come. Do we think that your incremental returns on growth can be higher than we've ever seen? I believe you eclipsed 40% post-COVID, but that was accompanied by really strong revenue growth. So I'm not sure if that's a unique situation.

Yeah, I'll probably spend more time addressing the last real question. But, yeah, the snowstorm last week obviously was disruptive, and that was baked into our revenue and margin guidance and really nothing material to speak of from a government shutdown standpoint. But, yeah, I think just thinking about incremental margins, you know, to me, one, we've got to get back to revenue growth to produce them. But I like to think about that breakdown in our income statement structure. And we talked a lot about our direct variable cost. Those were 53% of revenue in 2025. So if you bring on a dollar a business, you should be able to generate a 47% incremental margin if it just takes variable cost. From that standpoint, just get complete leverage on all your overhead. And typically that is what's happened in the early innings of our recovery. We just see more of that variable cost and, you know, getting that leverage there before you've got to get back into investing in new service center expansion and new equipment and those other assets. But, you know, as you add new service centers, that creates incremental costs. You've got a new service center manager and a team of employees at the facility and the office and salespeople and things like that. So it all kind of ties in together. But, you know, when I think about just where we stand now, 75 operating ratio, we've been at a 70.6. You know, we've talked before about getting to a sub-70 operating ratio. I think that sort of mid-40s makes sense from an incremental margin standpoint, makes sense in the early innings. But then let's just stay focused on getting back to achieving that sub-70 operating ratio. And we certainly can get there. I referenced this earlier, but when you look back at some of our really strong years with revenue growth, we've had operating ratio improvement in the 300 or more basis point range in any given year. So, you know, that's what we'll be focused on. That'll help drive that 75 back to the 70. And, you know, when we get to 70, when we beat that goal, that's when we'll establish the next one and probably give, you know, new incremental margin, longer-term type of goals that we're looking at as well.

I like it.

The next question is from Tom Wadowitz with UBS. Please go ahead.

Yeah, good morning. So, Adam, I think there's, you know, this ISM print was so large that such a big step up that – and some of the commentary wasn't as bullish as the number and the, you know, orders going up a lot, too. What do you hear from customers? Do you hear that much kind of good news and enthusiasm about, you know, improvement in activity? Or how do you kind of look at what your customer feedback is and just kind of thinking maybe relative to such a big ISM number, which I know historically is a really good read for LTL?

Yeah, I think that, you know, obviously we solicit feedback constantly from our customer base and our sales team. In the fourth quarter, we build a bottoms-up forecast, and we marry that with a top-down forecast where we're looking at other macroeconomic indicators. And, you know, things are starting to feel a little bit better. You know, even in the fourth quarter last year, I feel like we've had some really good customer conversations in the sense of what they were anticipating their volumes might look like, the amount of business that they would tender to us, and so forth, that gave us a little sense of optimism. And I just continue to say that that's one month of a print with the ISM, and that's why we want everyone to be cautious with it. We're still looking at volumes that have been down on a year-over-year basis, but we feel like things are getting better, And we're still, you know, talking about revenue that would be down on a year-over-year basis in the first quarter. But, you know, one of the things about our business model is, you know, I feel like when you think about our long-term strategy of giving superior service, allowing that service to support a fair price, you know, pricing targeting 100 to 150 basis points of yield above price or cost rather, you know, that's allowed us to improve our cash from operations. there's a flywheel effect to our business model, and we've got to get that flywheel effect going again. So as we can get into the early innings, those first rotations are a little bit slower. We're just making sure everybody's thinking through all of those factors, and it's not just going to turn around on a dime starting tomorrow because that one economic data point came out. But, you know, if we are in the early stages of this, you know, I think history repeats itself in this industry. And you certainly can see how we've outperformed the other carriers when we get into those early stages of recovery. And we're certainly in position. Our team is in position and ready to roll. So we're ready to put it on the trucks and see revenue growth coming again and the operating ratio improvement will follow.

So you are hearing positive input from customers, but maybe not to the degree of the move up in the ISM number. Is that a fair understanding of what you said?

Yeah, that's fair.

Okay. Thank you.

The next question is from Bruce Chan with Stiefel. Please go ahead.

Thanks, Operator, and good morning, guys. You know, Adam, you talked about 35% spare capacity in the network, And I know, you know, these past couple of years, we've been a little bit more focused on door and facility infrastructure. Just wondering if that number is similar for the fleet and line haul network, especially, you know, with some of the better planning tools that you have. And, you know, maybe how we should think about additional fleet CapEx versus, you know, maybe flexing PT higher if volumes do indeed accelerate.

Yeah, we don't have that much excess capacity in the fleet, if you will. We have been heavy with our fleet, but probably not at that same type of level. We try to keep that a little bit tighter. You always want to have spare capacity, if you will, especially in the trailing equipment. If you've got that much excess power, it just hurts you. It's very punitive from a depreciation per unit standpoint. But part of our CapEx this year, we've got about $105 million that's slated, I think, for equipment. And so that's something that we'll continue to look at replacing where we need to replace. We use a tractor for about 10 years, so we've got some that are at that point of being replaced. But continuing to right-size the equipment pool as well and making sure that we've got equipment in all the right places where we're seeing growth to keep the line haul network in balance. And, you know, we continue to make adjustments to the line haul throughout the year. The team has done a phenomenal job of making sure that we're meeting service standards. We've continued to tighten some of our transit times in certain lanes as well, despite the limited density that's been in the network. So looking forward to getting more freight back in the system. That will make some of that a lot easier, reduce our empty miles, allow us to start running more directs and bypassing some brakes and so forth. And that's what gives me comfort in knowing that those direct costs that we've talked about that are 53% of revenue in 2025, that we can really show some strong improvement in that number once we get density flowing again. Okay, great.

The next question is from Ari Rosa with Citigroup. Please go ahead.

Hey, good morning. So I was hoping you could address competitive dynamics in the industry. Just maybe speak to what your level of confidence is that this cycle will play out like past cycles. And specifically, I'm curious about just the role of Amazon. We've been hearing a lot about their growth ambitions or them looking to expand in the LTL space. And then, obviously, FedEx is planning the separation of its freight business. Just talk about how you feel your position. I know, obviously, the service continues to be exceptional already, but just talk about how you think the cycle could play out this time around.

Yeah, well, you know, all the carriers that are there, top 10 carriers are 80% or so of the industry, and they're all the same, other than yellow that was there before. So, you know, we've been competing against these companies for years, and I feel like capacity within the industry continues to be tight, and maybe more so than what the perception out there is. When you look at the total number of service centers back in 2022 versus what was reported at the end of 2024, you know, we've seen about a 6% decrease in the number of service centers in the industry. And when you look at shipments per day for service center, those two metrics at the end of 22 versus the end of 24 are about the same. So you take an environment that was tight back then, and when you look at the growth numbers for other carriers, despite how strong the volume environment was in 21 and 22, at least for the public carriers, I think the growth in tonnage in 21 was about 4% when we grew 16%. So most of the carriers run their networks a little closer to the full utilization, and I think that's a structural difference that we have. We own the majority of our service centers and about 95% of our doors overall, and so So we're comfortable with continuing to invest through the cycle and having more of that latent capacity out there to grow into, and that asset ownership gives us that ability to do so. So that's why we're confident that when we see the demand environment growing again, I think we'll be able to significantly outgrow the industry, and when we do so, we'll see stronger returns coming in. And, you know, despite the challenging environment that we've had for the last few years, we're still producing returns on invested capital of 25% to 30%. And, you know, when you look at gap numbers, you know, true gap earnings, we've got some competitors that have got net income margins, you know, in the low single digits. And so, you know, I think that'll be the opportunity what we see in past cycles is, you know, that's when other carriers will increase rates more and take advantage of supply and demand and balance. But for us, we want to continue on with just more of a consistent strategy, and that's when we see that big density opportunity, if you will, and that's what we're expecting when we finally see the turn in the cycle. Very helpful.

The next question is from Jeff Kaufman with Vertical Research. Please go ahead.

Thank you very much, and congratulations. A lot of my questions have been answered at this point, so I want to go back to the equipment discussion you were having. You know, some of the truckers I've been talking to have said, listen, we're having trouble quoting our freight liners or our internationals because of the Section 232 tariffs, and people aren't certain what the rebates are going to be. But we've got more fundamental pricing on our domestically produced trucks like our Peeps and Kenworths. I was just kind of curious what you're seeing on the equipment side in terms of quoting activity from the OEs in the wake of some of the tariff changes.

Yeah, I think that there are always challenges that we go through when we look at the cost of equipment and how we plan for equipment and so forth. And, you know, it seems like every engine change and new regulation, you know, it's done nothing but increase the cost of equipment. And, you know, for us, as I just mentioned, we typically will use a tractor for 10 years. So, you know, you think about the per unit price 10 years ago versus today, it's significantly different. That's a big driver of some of our cost inflation when you think about those on a per unit basis. So, you know, that's part of why we, you know, when we look at the number of units we were going to buy this year, you take that all in consideration. But at the end of the day, you know, you need the fleet that you need, and you've got to build the pricing of, you know, those units and every other element of cost that we deal with into our cost model and let that drive the output of what we need. But, you know, let's say, you know, again, that's just one element of cost. If you go up and down our income statement and you look and think about per unit inflation, we've been able to average cost per shipment inflation of about 3.5% to 4% over the last 10 years. You know, each line item has had significant inflation and more so than that number. You know, that's the importance of why we stay so focused on our cost. and managing cost and managing efficiencies and discretionary spending, we're doing all these other things. We're driving operating efficiencies that really minimize the true inflationary impact that we're seeing from things like insurance costs, group health and dental medical costs, the cost of equipment, and so forth and so on. So our team has done a great job leveraging technology, business process improvements to be able to keep our cost inflation low. And then that in turn allows us that when we think about trying to target 4.5% to 5% type of increases that we've generated over the long term in our revenue per shipment, you know, that's that positive 100 to 150 basis points delta that we want to be able to generate those too. But, you know, we can't take our eye off the ball when it comes to managing costs. You've got to think about costs day in and day out in good times and bad, And I think that's what our team has done really over the course of our history, but over the past few years in particular. Thank you.

The next question is from Brian Osenbeck with J.P. Morgan. Please go ahead.

Thanks for taking the question. Maybe, Adam, just to quickly follow up on the cost for shipment. Inflation you're expecting this year, is it still a 3.5% to 4%? You outlined some of the equipment and health care costs. Is that something you still think is reasonable to expect this year? And then maybe just to follow up on the competition side, private companies are obviously getting a bit bigger here as well in the wake of Yellow going out of business. I wanted to see if you thought that had any impact on how the next upcycle might play out for the industry. Thanks.

Yeah, so the cost inflation, I think it's going to probably be a little bit heavier again this year. I'm thinking it's probably going to be more in the 5% to 5.5% range, and that's core inflation, not really thinking about, you know, what fuel might do. And, you know, right now we're looking at fuel prices that have been lower, you know, on a year-over-year basis. So, you know, we'll see how that continues to play out. But, you know, I feel like we've, as I mentioned earlier, We're looking at a little more inflation from an employee benefits standpoint. I think we're going to continue to see some pressures there within our group health and dental costs in particular. And then we've made some continued improvements to our pay time off policies and so forth that I referenced. So I'm anticipating some inflation there, you know, continued inflationary increases, as just mentioned on the equipment. on our insurance programs and other things. So, you know, if we can get some density coming back in the system, you know, I think that is something that could turn that number into maybe seeing some improvement and working it back down. But if you just sort of stay in more of a neutral volume environment, if you will, I'm thinking that we're going to be, you know, more in that 5% to 5.5% range. And remind me again, the second part was just about the impact of yellow being out.

Yeah, just how private companies seem to have taken up some of that extra capacity. That has a meaningful impact on how the industry might play out or the cycle might play out.

Yeah, I think many of those service centers ended up with the private carriers, you know, as it's been reported. But, you know, again, looking at overall capacity for the industry, number of service centers is the best thing we have. You know, that looks to be down versus, you know, about 6%. And there may be, you know, some service centers that were swapped, adding a few more doors. But I think that's a good proxy for capacity that's been removed from the market. So, again, if you had a capacity-constrained industry back in 21 and 22, the number of shipments per day per service center are the same in 2024 with where we were back in that capacity-constrained environment. I think we're going to see capacity constraints when we start coming back into a stronger demand environment. And that's what gives us the confidence that we'll be able to win market share and outperform the other carriers from a volume standpoint in the early stages of that recovery.

Thanks very much, Adam.

The next question is from Stephanie Moore with Jeffries. Please go ahead.

Great. I wanted to maybe circle back to a prior question that was asked where you kind of talked through a bottoms-up analysis of talking with customers and maybe some of the slightly or optimistic conversations you're hearing from them. Is there any way you can parse out the end markets or if there's any concentration of end markets where you're hearing some of that optimism from customers, whether it's within industrial, is it large infrastructure, kind of data center plays? is it within consumer? Any additional insight would be really appreciated. Thank you.

Well, you know, 55 to 60% of our revenue is industrial related, and I think that's similar for the industry. It's why I assume this is so highly correlated with industry volumes. So, you know, kind of hearing it across the board, you know, I think that seeing some improvement there, we've had feedback that inventories have generally been lower. So, you know, We're thinking that we're going to see some inventory replenishment, but, you know, I think it's sort of different factors for different customers, and, you know, our business is so diversified, you know, we move everything, including the kitchen sink, so you've got, if housing starts improving, you know, you'll see things like faucets and so forth that will have increased demand there, and obviously, you know, all of the products that go into someone moving into a new house, But, you know, I think that'll be important to see some continued improvement there, you know, if we continue to see on the industrial side, at the end of the day, you know, what drives it all is a healthy consumer. And so, you know, consumer confidence and consumer strength and buying patterns will drive whether or not we see, you know, sustained improvement in the demand and volume environment. And, you know, so hopefully when people start seeing if tax returns look better and they've got more discretionary income to go spend and then inventory does need to be replenished, you know, those will all be good things that will create freight that will find its way on our trucks. And we're looking forward to it.

Thank you so much.

The next question is from Christopher Kuhn with Benchmark. Please go ahead.

Hey, good morning. Thanks for taking the question at the end of the call. I really appreciate the time you guys are giving today. You guys don't talk about it as much, but are there any AI initiatives that you are kind of undertaking in the next 2026 and beyond that we should be focused on?

Yeah, you know, I would put it in the broader context of technology investments. And, you know, obviously AI is kind of the buzzword of the moment, and, you know, we've got some investment there that's going into some of the tools. But, you know, I think from a bigger picture standpoint, you think about Old Dominion, I think the investment that we've made in technology, you know, it goes back decades, and we've got OD technology is one of our branded products. And so, you know, we've been at the forefront of tech investment, I think, for years and years, and that will be no different going forward. But, you know, there's got to be investment that's going to end up with a return. We don't want to just say we're investing in, you know, machine learning and AI just to be able to say it, you know, where's the proof in the pudding? And I think when you look at our cost performance in 2025, you know, that's kind of the proof. And, you know, we wouldn't have been able to manage our line-all costs like we have if we've not continued to invest in and refine the tools that our teams are using. And, you know, it's the same thing on the dock. It's the same thing within our pickup delivery operations. You know, we've got to continue to make investments in products that are going to have a return associated with them. You don't want to invest in something that's going to cost you more on the technology that you would other what you're going to save potentially. And sometimes that could be the case. But, you know, I think that our focus will continue to be what I just said, investing where it's going to drive operating efficiencies. The other key part, though, will be continue to invest in something that drives a strategic advantage from a customer service standpoint. So if we can continue to try to stay ahead of the game, have systems that drive stickier customer relationships, You know, those are kind of the two big key factors that we think about when we think about the dollars that are invested in tech initiatives year in and year out. Got it. Thanks. Appreciate it, Adam.

This concludes our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks.

Thank you all for your participation today. We appreciate your questions, and please feel free to give us a call later if you have anything further. Thanks, and have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.