Old Dominion Freight Line Inc (ODFL) — Q2 2024 Transcript

Thank you, Gary, and good morning, everyone, and welcome to the second quarter 2024 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through July 31, 2024, by dialing 1 (877) 344-7529, access code 9201305. 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 in this morning's news release. And 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 yourselves to just one question at a time before returning to the queue. At this time, I would like to turn the conference call over to Mr. Marty Freeman, the Company's President and Chief Executive Officer for opening remarks. Marty, please go ahead, sir.

Good morning and welcome to our second quarter conference call. With me today on the call is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Old Dominion's second quarter results represent our third consecutive quarter with year-over-year growth in revenue and earnings per diluted share despite the ongoing sluggishness in the domestic economy. These results were made possible by the hard work and dedication of the OD family of employees who continue to execute our long-term strategic plan during the second quarter. I'd like to congratulate our outstanding team for maintaining our commitment to providing superior customer service at a fair price as well as our disciplined approach to managing yield, our laser focus on operating efficiencies and controlling our discretionary spending. Delivering superior service at a fair price is the cornerstone of our business model, and our unmatched value proposition has continued to differentiate Old Dominion Freight Line from our competition. I'm pleased to report that during the second quarter we once again provided an on-time service level of 99% and a cargo claims ratio of 0.1%. Our strong track record of industry-leading service also means our customers view us as a trusted partner, which supports our consistent cost-based approach to pricing. Our long-term yield management strategy is designed to help offset our cost inflation while also supporting further investments in the capacity and technology that our customers expect. We have been one of the only LTL carriers to constantly and consistently invest in new capacity over the past 10 years, which has supported our ability to almost double our market share over the same period. We are committed to constantly investing ahead of our anticipated growth curve, which is another differentiating quality for Old Dominion, and what has been and what we believe will continue to be a capacity-constrained industry. Over the past 10 years, we have invested over $2 billion in our service center network and we plan to invest another $350 million on real estate this year. These investments have positioned us to grow with our customers over time through the ups and downs of the economic cycle, which hasn't been the case with most of our competitors. Maintaining excess capacity in our service center network, which is approximately 30% at the end of the second quarter, does create some short-term cost headwinds during periods with slower demand, but we are confident that this capacity will be critical to support our customers when the economic environment starts to improve and business levels reaccelerate. With all that said, our network investments are not being made simply to handle the overflow during stronger periods of economic activity. Instead, as we look into the future, we believe demand for service-sensitive LTL capacity will continue to grow. We believe that the combination of our best-in-class service and disciplined investments in network capacity position us to capture even more of the growing market in the years ahead. Over the last decade, Old Dominion Freight Line has won more market share than any other LTL carrier by consistently executing our strategic plan and remaining focused on long-term opportunities instead of short-term challenges. While we continue to wait on a recovery in the domestic economy, we believe the investments in our network, our technology, and most importantly, our people will continue to drive value to our customers. As a result, we believe we are the best positioned carrier in our industry to win market share over the long-term while further enhancing shareholder value. Thank you today for joining us this morning, and now Adam will discuss our second quarter financial results in greater detail. Now, Adam?

Thank you, Marty and good morning. Old Dominion's revenue for the second quarter of 2024 of $1.5 billion was a 6.1% increase from the prior year. The increase in revenue was due to a 4.4% increase in LTL revenue per hundredweight and a 1.9% increase in LTL tons per day. Our operating ratio improved to 71.9%, which contributed to the 11.3% increase in earnings per diluted share to $1.48 for the core. On a sequential basis, our revenue per day for the second quarter increased 2.6% when compared to the first quarter of 2024, with LTL tons per day increasing 3.3% and LTL shipments per day increasing 3.2%. For comparison, the 10-year average sequential change for these metrics includes an increase of 8.7% in revenue per day, an increase of 5.8% in tons per day, and an increase of 6.5% in shipments per day. The monthly sequential changes in LTL tons per day during the second quarter were as follows: April increased 0.4% as compared to March, May increased 0.1% as compared to April, and June increased 1.9% as compared to May. The 10-year average change for these respective months is a decrease of 0.4% in April, an increase of 2.7% in May and an increase of 2.3% in June. I would like to note, however, that in years when Good Friday occurs in March, as it did this year, the average sequential change in LTL tons per day from March to April is a 2.6% increase. For July, we expect our revenue per day will increase by approximately 4% to 4.5% when compared to July of 2023, assuming the remaining days of the month follow normal historical trends. The growth rate in our revenue per day through the first half of July was relatively consistent with the second quarter. The comparisons have now become a little more difficult, however, as the final week of July last year was when we began to see freight diversion from a large competitor that ultimately filed for bankruptcy. We will provide the actual revenue related details for July and our second quarter in Form 10-Q. Our operating ratio improved 40 basis points to 71.9% for the second quarter of 2024 due primarily to the quality of our revenue growth and our continued focus on operating efficiencies. Our team continued to do a great job of managing our direct variable costs during the second quarter, which allowed us to improve these costs as a percent of revenue. Our overhead costs, however, continued to increase as a percent of revenue despite our best efforts to minimize discretionary spending. As we have often said before, the two main ingredients to long-term operating ratio improvement are the combination of density and yield, both of which generally require a favorable macroeconomic environment. While we continue to execute on our yield management initiatives, it will likely take an improvement in the domestic economy before we see sustained momentum in shipping demand that generally leads to incremental market share opportunities and operating density. We remain confident that once we have both of these elements working again in our favor, our team can produce further improvement in our operating ratio and make progress towards our goal of achieving a sub-70 annual OR. Old Dominion's cash flow from operations totaled $387.8 million and $811.7 million for the second quarter and first half of 2024, respectively, while capital expenditures were $238.1 million and $357.6 million for those same periods. We utilized $551.8 million and $637.1 million of cash for our share repurchase program during the second quarter and first half of 2024, respectively, while cash dividends totaled $56.0 million and $112.6 million for the same periods. This year-to-date total for share repurchases includes $40 million that is deferred until the final settlement occurs on our current accelerated share repurchase agreement, which would be no later than November of 2024. Our effective tax rate for the second quarter of 2024 was 24.5%, which was lower than originally expected due to the benefit of certain discrete tax items. The effective tax rate for the second quarter 2023 was 25.4%. We currently anticipate our effective tax rate to be 25% for the third quarter. This concludes our prepared remarks this morning. Operator, we will be happy to open the floor for questions at this time.

Yes hi, good morning. Thanks for the update. Hey, I wonder, as you often do, is it possible to get some sense for, given the context of revenue per day and what you're seeing in the economy, how things could look seasonally, 2Q to 3Q in terms of the operating ratio? Thanks.

Yes, sir. Unfortunately, we're still dealing with an economy that's not contributing too much to us right now with 55% to 60% of our revenue being industrial-related. The ISM continues to be below 50, and I think that's 19 out of the past 20 months. So it's hard to say what will happen from a top line basis and as you know, the revenue will dictate a lot of the performance, especially when we go sequentially. But I feel like there have been some bright spots to look at in terms of the trend that we saw through June and so far this month in July, from a revenue and a volume standpoint. So we'll see how that continues to play out as we progress through the quarter and as we always do, we will give our mid-quarter update with the August performance once that is finished. But based on kind of where we are today, normal seasonality is typically about a 50 basis point increase sequentially from the second to the third quarter, and I think that's achievable. It's certainly what the goal would be, and I think that regardless of which way the revenue goes, if we stay kind of flattish like we've seen from a quarter-to-quarter standpoint, typically the average sequential change in revenue is about a 3.5% increase from the second to the third quarter. So wherever we fall along that spectrum from a top line basis, I still think that something along the lines of that 50 basis point sequential increase plus or minus, of course, we generally give ourselves kind of plus or minus 20 basis points. But I think that's something that's certainly very achievable for the third quarter.

And just as a quick follow up, if I could just on the demand, you mentioned the sub-50 ISM and new orders index as well. I mean, as you sort of look ahead and talk to customers, I mean do you feel that there could be finally some change in that as we move through the year or is it tough to tell still?

Well, I think it's still tough to tell. I mean, I feel like things are starting to thaw a little bit. Again, I felt like we had a good performance through June. We finally had some good sequential increase from a volume standpoint and so a little bit of acceleration and somewhat similar to what we had in the final month of the first quarter with March there, but a nice increase from the May to June period. So it's something that we'll continue to watch. We've got the third quarter here and then we typically go through the seasonally slower fourth quarter and first quarter. But hopefully some things are building. I think when you look at some of the macroeconomic factors it would suggest that maybe some of the things that the Fed would watch would indicate that we may be closer to the interest rate environment may be improving a little bit and seeing some cuts out there that would certainly help from a business standpoint. So it seems like we're coming close to the end of a long, slow cycle, and we'll just have to continue to watch and see what's presented to us. But it certainly feels like we're seeing a little bit more opportunity out there than what we have been seeing.

Yes, good morning, guys. Thanks for taking our questions. Maybe Adam I wanted to ask one on the pricing side. I think the mid-quarter update suggested pricing was stable. June actually seemed to have improved a bit. I guess how has pricing continued into July? Are we seeing any changes? And stepping back just from an industry standpoint, demand remains tepid to your point, can the industry support further GRIs and other rate increases in the back half of this year as comparisons get more difficult? Thanks.

Yes, I think what we've seen is just a continuation of executing on our long-term yield management philosophy, and we continue to target increases that offset our cost inflation and support the continued investment in capacity and technologies that our customers expect from us. And our yield trend in June and what we're seeing thus far in July is pretty similar from a year-over-year standpoint. If you just sort of look at normal seasonality and revenue per hundredweight, at least excluding fuel, normal sequential would imply that for the full quarter it would be up 4% to 4.5%, that metric, and some of that will be some mix change that we'll go through more so in August and September. If you think last year, following the disruption to the industry, our weight for shipment decreased quite a bit as we moved through August and September last year. Overall for the third quarter of 2023, it was down about 30 pounds versus the second quarter of 2023. So had that reduction in weight for shipment, and I would like to see that at least our weight per shipment has been stable. If that continues to increase further and a reflection, if there is any improvement in the economy, then that just becomes more challenging from a mix standpoint. But so far, what we've seen in July is pretty consistent with where we were in the second quarter, in June in particular. So we'll continue to see how that plays out.

Yes. Hey, thanks. Good morning. Maybe, Adam, if you could talk a little bit about weight per shipment trends. It's pretty flattish the last couple of quarters and certainly sequentially from 1Q to 2Q, just kind of your general thoughts on how you see that playing out. Obviously that could be part of just a sluggish economy as we're moving forward here. But if we can get a sense of maybe what you're seeing in July if there's any change in that.

Yes, no real change in July, still kind of continuing to bounce around that 1500 pounds mark. And to me, I think that's what we've seen. Obviously we saw the unique change that happened last year right at the end of July going into August. And that took our weight down quite a bit like I just mentioned. But it just feels like we've been bouncing along the bottom and I think that's an indicator really of where the industrial economy has been as well. So I think that should be one of the first signs and early indicators. If we start seeing some incremental weight on each shipment that we're picking up, that orders might be picking up and that would obviously be good for a lot of measurements. If we can get more weight per shipment, generally that's going to lead to the improvement in operating efficiencies and generally that leads into improved volumes in general if the underlying economy truly is improving. So all things that we are very prepared for in terms of the capacity in our service center network, the capacity of our people and our fleet, we are primed and in position to respond whenever the market does, in fact, inflect to the positive.

Hey, thanks, Adam. Just a couple of follow-ups if I can. First, the 4% to 4.5% revenue, any sense of breaking that down between tonnage and then yield? And then I just want to make sure I'm understanding your commentary about the 50 basis points worse, which is normal. Are you saying even if we don't get the full typical 3.5% sequential revenue increase, we can still stay with the normal or degradation and it's not worse? Is that the message that you're giving?

Yes, I think to answer that question first, yes I think that we're going to go with the 50 basis points being the target. And again, keep in mind, just like we said last quarter, we put a plus or minus around that. I am not being that specific, anything can happen. But I think our team is continuing to do a great job with managing cost in this lower volume environment, and we will continue to do so as we progress through the third quarter. And so obviously it's a little bit easier if we've got some revenue contribution, we typically have an increase in certain cost elements as we progress through the quarter. We're continuing to execute on our CapEx plan. So we will have incremental depreciation dollars in the third quarter versus the second. We have a wage increase that will go out the 1st of September as well as it always does, so you get one month of that. And so we'll continue to monitor and measure operating efficiencies and we've been seeing some improvements there and have some other offsets as well. Continue to manage every discretionary dollar that's going out the door in managing to the business levels that we're seeing. So we'll continue to do all those things, but certainly hope that we'll see a little bit of incremental revenue improvement and that will make things easier, obviously, but we're going to continue to manage and have that hanging out there as our goal to achieve. No, it's no change. I think it's similar. It was a record level, as you say, but you go back a couple of years ago and when our stock performed similar to the big drop that we saw during the second quarter, if you go back to 2022, we spent $1.3 billion in total that year, so had some pretty hefty quarters that were just spread more through the year. But our stock was off 20% to 25% from 52-week highs going back to the last quarter's phone call and earnings call and so as we've done in the past, we stepped in and were more aggressive with our repurchases. Now the stock price has recovered a bit and so be going back more so to kind of our normalized grid based approach to repurchasing shares. But we just stepped in a little bit more aggressively with the cash that we had on the balance sheet and purchased more during that second quarter, including an accelerated share repurchase agreement as well, and which we still got a little bit of about $40 million that was deferred on that agreement, that should settle sometime late third quarter or early in the fourth quarter.

Thanks. Good morning, everyone. This is probably the first up cycle in a while, maybe ever, where it's not just you who has the excess capacity, but a lot of your peers do as well. I think you kind of alluded to that in your prepared remarks as well. Do you get a sense that their approach to having this excess capacity and dealing with the drag on incremental margins is similar to your own or do you feel that they may be going to looking to deploy that capacity a little bit earlier than you guys?

Yes, I can't answer for what they're going to do with any measure of any excess capacity any individual carrier has, but with respect to just looking at the industry broadly, I feel like that we're going to be a more capacity constrained industry than we were previously. If you go back, we estimate that shipping volumes are down about 15% from the peak back in 2021. And when you look at the number of service centers that have settled from that bankruptcy proceeding, not all are in operation yet, but probably at least 10% and maybe more capacity will be coming out of the market. So, all those shipments that were being picked up and delivered by that carrier they are LTL shipments. They will come back to the market and our market will recover to the levels where it was previously and I believe will continue to increase further. So that's why we continue to believe and continue to invest ahead of our anticipated growth curve. We don't see anything that has changed with the opportunities that we have for long-term market share opportunities other than perhaps maybe they've gotten stronger. As more shippers look for high-quality service carriers, inventory management continues to be an operating focus, especially in a higher interest rate environment, I think it puts the burden on shippers to select high-quality carriers and there's none better than Old Dominion. So we look at the market generally and believe we've got as strong an opportunity that we've ever had and we think we're better positioned than any other carrier to capitalize on and improve in the industry.

Yes, good morning. So, Adam, I wanted to see if you could give us, I apologize if I missed this, but I think just like the July tonnage and shipments, I think you talked about revenue terms but not the tonnage and shipments. I don't know if you want to give us like normal seasonality, July versus June or year-over-year, but some kind of framework for thinking about shipments and tonnage in July.

Yes. The breakdown, if you will, of the revenue, it's definitely in flux. I mean, like I mentioned, we were in the first part of this month, we were growing at a similar rate from a revenue per day standpoint is where we were for the second quarter and kind of that 6% range. And obviously the comps have changed pretty considerably, mainly starting this week in particular. And so it's going to cause a little disruption to what the tonnage numbers look, what we're seeing today, we can extrapolate out and we do where we think we'll finish. But I think there's going to be a little flux with respect to what those final volume numbers and yield numbers might look like given the drastic change in business levels and mix that we saw in that last part of the month of July. But at this point, I would say that in that 4% to 4.5%, I would say that the volumes are probably about flattish and that could be plus or minus, one way around that and that flatness. And then from a yield standpoint, again pretty consistent with what we just saw in the second quarter. And right now it's looking a little bit stronger, but we'll see where those final numbers land and of course we'll put the final details out there. But just from a pure revenue standpoint, though, and just looking at revenue per day, July and October are the months that we see decreases in as we go month-to-month and progress through the year. And what we're seeing from a pure revenue per day standpoint is it's pretty consistent with what normal seasonality would otherwise be, which is a drop off somewhere in kind of the 2.5% type of range and that's pretty consistent with what our five-year average has been there. So we'll look to see that we get some recovery back in August, which is normal and then September, as you know, is pretty much our strongest month of the year. So can we see stronger acceleration going into the end of the quarter? I would hope so. We saw strong performance in March, strong performance in June, and if that can repeat, we'll see where we land. But that's kind of the lay of the land and what things are looking like at the moment. And of course, we'll update, as I mentioned earlier, with the final July and then the mid-quarter update with our August trends.

Great, thanks and good morning. I guess maybe I need to check numbers a little bit. I think we've got a 10-year average in second quarter or to third quarter of a 10 basis point improvement, not a 50 basis point decrease, so I just wanted to double check that. And then as you start to lap the Yellow freight data, last year you went from down upper teens on revenue per day and mid-teens tons per day to kind of much smaller losses. I guess given that backdrop, how should we think about the market kind of tonnage per day growth? I know you've talked a lot about revenue per day, but how do we think about the tons per day shift as we move into the third or into the back half of the third quarter and into the fourth quarter?

Yes, and I'll come back to that. Let me just address the second quarter to third quarter change. You're right, the pure math is more about a 10 basis point change, but there are a couple of years in there that skew that. In 2023 last year obviously we had a major acceleration in revenue that allowed us to improve the operating ratio 170 basis points from 2Q to 3Q and then 2020 was similar where you had the COVID cliff that happened and then the reacceleration of business levels. So when I just look at more of a normalized kind of progression, that's typically what we'd expect, unless you've got something unusual going on that would drive some change there. With respect to the tonnage question and shipments, obviously as you said, we had the acceleration that was meaningfully happening last year. If you recall, we were at 47,000 shipments per day, really from December of 2022 through July of 2023, and immediately stepped up to about 50,000 in August and then accelerated further to 51,000 in September. So, step function change that would be well above anything that was really happening with the underlying economy, if you will. So, if we can see some type of normal acceleration, if you will, just like from a tonnage standpoint, our 10-year average from July to August is six-tenths of a percent increase there and then about a 3.5% increase in September. So we'll see how that goes. But right now, even if we hit those, it would look like you would have a negative change in those volumes. But overall, I think it's just as we look at things sequentially, maybe more so than just a year-over-year, given that challenge is what can we achieve relative to what normal seasonality would be and what we've seen at least so far through July. From a tons per day standpoint, just from a pure quarter, we're typically up about 1% when we gave the numbers earlier, but in the second quarter, that average is just call it 6% and we were up 3% just rounding numbers. So we were up kind of half of what normal seasonality would suggest. So we've got to make up some ground. Like I said earlier, we always lose a little bit of business in July, and that's normal. And so if we can have kind of a little bit of acceleration through August and then see some acceleration into September, we were almost at normal seasonality in the June period. And the same thing with March, you've got to adjust for the Good Friday, but we're about at seasonality in those stronger growth months of the quarter. So if we can make some progress in August and then see some sense of that strong acceleration through the month of September, I think we'll be okay. And we've positioned ourselves well, whenever we come out of this true economic downturn, where we're operating at a 72, essentially, and 71.9 I guess I should take credit for every basis point we have in terms of where we've operated. And when I look at the breakdown of our operating ratio in the quarter and where we are from an overhead standpoint relative to our direct variable costs, I'm really pleased with the improvement that we've made with our direct cost performance. And that just gets into the day-to-day management within our operations in the field, primarily. But everyone is contributing to that overall operating ratio. But our overhead costs have increased. They were 20% to 21% of revenue in the most recent quarter. Those costs have been down to around 17% in the past. So once we get some true density coming back into the network, we've built our network and our system to accommodate more than 50,000 shipments a day. So once we get back into 50,000, 55,000, 60,000, whatever that number is, that's where you'll really see the power of operating density in the model. And you move that scale from 20% to 21% back towards 17% that puts us back in with an overall with the 6 handle on it, back where we were in 2022. So I think we're in a great spot and have managed through this downturn very well and has certainly put ourselves in a great position to capitalize on the market when we actually start seeing some economic wins at our back.

Hey, good morning. Thanks for taking the question. So, Adam, maybe you can elaborate a little bit more on what end markets or maybe customers are seeing some of that strength at the end of the last two quarters in March and June. Is there anything to read into that? Does it give you any sort of forward looking to the back half of the year or next year? And then just kind of another follow up on competition and extra capacity coming online are you seeing anything as these new facilities come back online, anything that you would call out from either service being disrupted by some of your competitors or are they being a little bit more aggressive to maybe fill some of those doors and pricing more to capacity and not necessarily cost?

Good morning, this is Marty. I'm going to answer your customer question. I'm still heavily involved with a lot of our top customers and the feeling out there is not all doom and gloom. In fact, our top 50 customers are up mid-single digits year-to-date. So we're getting a lot of positive remarks, especially from our larger customers and they as well see some positive things for the rest of the year. So we're very positive that those things will continue. And as Adam said earlier, they feel, and I feel if we can see some interest rate drops toward the end of the year, I think we'll really accelerate. So we're looking forward to that and prepared to handle it. So it's not all doom and gloom out there, trust me.

Yes. And on the competitive side, we've not seen, I don't think, any material change in the sense of if someone has opened one service center in whatever market, any type of real impact. And as you can see in our yield trends, things continue to be consistent with our performance. That's just something we'll continue to manage through and monitor. But given the cost that went into purchasing many of these facilities, we'd be a little surprised to see someone going out and having to be aggressive to try to fill it up. And at the end of the day, those service centers served the market for a reason. They were in existence. And those particular markets had a customer base that their sales rep called on and there are LTL shipments that are out there. And as I referenced earlier, I mean the market is down overall and we estimate that it's down about 15% from back in 2021, but that's something that will recover. Those LTL shipments, those customers will continue to have freight that needs to be moved through an LTL network. And I think that will end up creating opportunity for us, for the industry in general, to refill those facilities, if you will, once they come online. But to me, it creates maybe even more of an opportunity for Old Dominion specifically.

Hi. Good morning. Thank you. I wanted to touch a bit on some of your network investments and maybe some of the terminals that have been opened so far this year. So may be if you could give us an update on the new terminal openings or door additions year-to-date thus far? And then an update in terms of your plans for maybe the back half of this year, if there's been any kind of maybe postponement or pause, just given the state of the underlying macro, any color there would be helpful? Thanks.

Yes, we have opened three service centers this year and are continuing to implement our capital expenditure plan. We estimate spending around $350 million this year, primarily on the real estate aspect of that program. Our strategy involves evaluating the network and identifying service centers that require increased capacity. Looking ahead to the next five years, we consider the anticipated growth curve and network efficiency, including the locations of these facilities. Currently, we have a bit more capacity than usual, which is not uncommon during slower economic times. Our long-term strategy targets maintaining 20% to 25% excess capacity, and we are operating at about 30% now, which we are comfortable with. This may lead to some facilities being constructed without immediate plans for opening if the demand doesn't support it. We will complete the construction and start depreciation on these facilities, but we will wait for stronger demand to justify their opening and the associated overhead costs. The opening of facilities requires adjustments to the line haul network, which can negatively impact load factors. Other carriers facing similar expansions will incur these additional costs, adding to the reasons we don't expect to see price reductions or downward pressure in that area. We will keep evaluating our plans moving forward and ensure that our investments align with market share opportunities in each region. We believe there are significant opportunities ahead, and we plan to invest 10% to 15% of our revenue each year on total capital expenditures, including real estate, fleet, and technology, to support our anticipated growth.

Hey, good morning everyone. Adam I wanted to follow up on the seasonality and the macro comments or certainly Marty, given your discussion with customers. But obviously there's a lot of moving parts this year with the geopolitical situation and with the election. There has been some talk on the 3PL side about volume pull forward. So maybe just wondering if you've gotten any indication from customers to that effect or if you think the demand and seasonality conversations seem to be pretty clear right now. Thank you.

Yes. As I said before, about a third of our business is 3PL related and those are basically the top customers that I was referring to. And most of those that come in here are giving us new opportunities to go in with them and handle their business and for the most part, they're super positive. We have a set of 3PLs in here this morning that I've already talked to, and they're super positive and they've got growth opportunities. So, I'm positive as well that we'll see some positive results from these customers and hopefully next year in the geopolitical environment, if we see some change there, I think it will be even more positive. Adam?

No, I don't really have anything to add. I think that obviously, anytime there's an election year that creates uncertainty and usually puts pressure on the overall shipping environment, and we've seen that this year on top of a slower industrial economy in general. So, I think that's something that will just be one more measure of uncertainty that will soon be put to bed, whatever direction it goes. But I think just broadly speaking, if we start having clarity on some of the macro factors that are impacting business owners and the decisions that they make about expanding their businesses and so forth, and we can make changes from an interest rate environment that helps and helps people and the consumer. We're still a consumer-driven economy and so that's so that's something that if we can keep a healthy consumer out there, they're buying things, that creates inventory that's got to be replenished. That's the customer call that comes into OD for a shipment to be picked up, so that will be the opportunity created. So it's something that we'll continue to measure and monitor and so forth. But as Marty mentioned, we're seeing improved performance with our 3PL customers right now. We had a little bit stronger retail-related performance in the second quarter. Industrial was okay, but that reflects the industrial economy, like the ISM metrics that we talked about earlier. So, but all of that, it's called a cycle for a reason. It's easy to get called up when you're in the down part of the cycle. We've managed through that. We've been in the down part of the cycle for a lot longer than I had originally anticipated, but it will turn back to the positive at some point and we're in a great position to capitalize when it does.

Thank you, operator. Hey, Marty, hey Adam. Thanks for squeezing me in here. I just wanted to follow up, Marty, to some of your comments. You mentioned that you've been talking to a lot of your big customers and it's not all doom and gloom. I was wondering sort of what areas those customers just spread across the board is this more consumer versus industrial? And the other one would be, we've heard a lot about some business being pulled forward from peak season into the 2Q and I guess the startup 3Q here. I'm wondering if you guys have seen any impacts from that and how should we look at that going forward?

Well, it's all over the board from a product or commodity standpoint. As you see on the news daily, your hospitality and your travel markets are the ones that's really up over the industrial sector. But the commodities and opportunities that we have from these 3PLs and other customers, it's just all over the board. Inventories are all over the board. You hear from some that say, we still have a little inventory from last year and others say our inventory is getting low. So we're going to start ordering product, whether that be domestically or overseas. It's just all over the board. But like I said earlier, I'm still very positive that things have basically bottomed out and I'm looking forward to better times.

Thank you all for your participation today. We appreciate your questions and please feel free to give us a call if you have anything further and I hope you have a good day and a good rest of your summer. Thanks.