Old Dominion Freight Line 2026 Q3 Earnings Call

Good morning, everyone, and welcome to the third quarter 2026 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today through November 4, 2026 by dialing 1-855-669-9658, access code 1955363. 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. 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 would like to turn the conference over to our President and Chief Executive Officer, Marty Freeman.

Marty, please go ahead. Good morning, everyone, and welcome to our third 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 strong financial results in the third quarter that include a 13.1% increase in revenue and a 28.9% increase in earnings per diluted share. In addition, our operating ratio improved by 280 basis points to a 71.5%. While the underlying macroeconomic environment remained stable, demand for our service continued to improve during the quarter, and our LTL tons per day increased on a year-over-year basis in September. The strength of our third quarter results is due to hard work and dedication of our OD family of employees who continue to execute on the fundamental aspects of our long-term strategic plan.

I want to thank our outstanding team for their dedication and commitment to our customers and our company. Our ongoing focus on providing our customers with superior service at a fair price is the cornerstone of our long-term strategic plan. Our ability to consistently deliver the highest standard of service through the ups and downs of the economic cycle has created an unmatched value proposition in our industry, and this is something that we take tremendous pride in. As a result, in the third quarter, we were pleased to once again provide our customers with on-time service of 99% and a cargo claims ratio of 0.1%. That said, we also know that there is much more to providing best-in-class service to our customers than simply picking up and delivering freight on time and without damages.

During its annual survey of shippers and logistic professionals, Mastio & Company measures 28 different service and value-oriented attributes. We were honored earlier this month to be named the number one national LTL provider for the 17th consecutive year. In addition, we finished first in 24 of the 28 categories that Mastio evaluates, and we increased our already sizable advantage against our competition. Our teams remain highly motivated to continue delivering superior customer service every single day. We know that the strength and consistency of our service drives value for our customers and differentiates us from our competitors. It also supports our long-term pricing initiatives. Our disciplined approach to yield management, which focuses on individual account level profitability, is designed to offset our cost inflation over the long term, while also supporting our ability to make strategic investments back into our business.

Our ability to take a long-term approach to the investments in our network, our people, and our technology provides us with significant flexibility to respond quickly to changes in the operating environment. This flexibility allows us to support our customers with the capacity that they require while also continuing to effectively manage our cost. As a result, we once again generated strong operating leverage on our incremental revenue this quarter. We produced strong third quarter results by remaining focused on executing our long-term strategic plan. Due to our disciplined execution and consistent investment, we have all the necessary elements of capacity in place to effectively handle incremental volume opportunities while also continuing to operate efficiently. In addition, our business model contains significant operating leverage, which will allow us to further improve our profits as we regain density in our network.

As a result, we continue to believe that we are uniquely positioned within our industry to win market share, generate profitable revenue growth, and increase shareholder value over the long term. Thank you for joining us this morning, and now I will turn it over to Adam Satterfield to discuss our third quarter in greater detail.

Thank you, Marty, and good morning. Old Dominion's revenue increased 13.1% to $1.59 billion for the third quarter of 2026, while our operating ratio improved to 71.5%. The combination of these factors resulted in a 28.9% increase in our earnings per diluted share to $1.65. The improvement in our revenue for the quarter was primarily due to a 13.3% increase in LTL revenue per hundredweight. While our LTL tons per day decreased 0.1% for the third quarter, we were pleased with the continued improvement in demand for our service that contributed to a 1.6% year-over-year increase in our LTL tons per day for the month of September. On a sequential basis, our revenue per day for the third quarter increased 2.4% when compared to the second quarter of 2026, with LTL tons per day increasing 1.2% and LTL shipments per day increasing 2.4%.

For comparison, the 10-year average sequential change for these metrics includes an increase of 2.4% in revenue per day, a decrease of 0.2% in LTL tons per day, and an increase of 1.2% in LTL shipments per day. The monthly sequential changes in LTL tons per day during the third quarter were as follows. July decreased 0.5% as compared to June. August decreased 1.6% as compared to July. September increased 3.9% as compared to August. The comparative 10-year average change for these respective months is a decrease of 3.0% in July, flat in August, and an increase of 3.1% in September. While there are still a few workdays remaining in October, our month-to-date revenue per day has increased by approximately 22% when compared to October 2025. This includes an increase in our LTL revenue per hundredweight, as well as an increase in our LTL tons per day of 1.6%.

Based on these results, I currently anticipate revenue of $1.54 billion-$1.58 billion for the fourth quarter, which would be above our normal seasonality. As usual, we will provide the actual revenue-related details for October in our third quarter Form 10-Q. Our operating ratio improved 280 basis points to 71.5% for the third quarter of 2026, with improvements in both our direct operating costs and our overhead expenses as a percent of revenue. Within our direct operating costs, improvement in our salaries, wages, and benefits as a percent of revenue more than offset an increase in our operating supplies and expenses. Our team has continued to leverage the quality of our revenue growth while also operating very efficiently to support this improvement.

The increase in our operating supplies and expenses as a percent of revenue was primarily due to the increase in the cost of diesel fuel and other petroleum-based products. The improvement in our overhead costs as a percent of revenue was primarily due to the overall decrease in our depreciation expense that is attributable to the decrease in the size of our fleet as compared to last year. With that said, we are confident that we continue to have plenty of service center and equipment capacity to accommodate additional growth opportunities. The improvement in our overhead costs also reflects the leverage gained from our revenue growth, as well as a continued focus on controlling our discretionary spending.

Old Dominion's cash flow from operations totaled $469.5 million for the third quarter and $1.1 billion for the first nine months of 2026, respectively, while capital expenditures were $67.1 million and $206.7 million for those same periods. We utilized $160.9 million and $400.6 million of cash for our share repurchase program during the third quarter and the first nine months of 2026, respectively, while our cash dividends totaled $60.0 million and $180.7 million for those same periods. Our effective tax rate for the third quarter of 2026 was 24.5% as compared to 24.8% in the third quarter of 2025. We currently expect our effective tax rate to be 24.8% for the fourth quarter of 2026. This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time.