ArcBest Corporation (NASDAQ:ARCB) Q1 2024 Earnings Call Transcript

ArcBest Corporation (NASDAQ:ARCB) Q1 2024 Earnings Call Transcript April 30, 2024

ArcBest Corporation beats earnings expectations. Reported EPS is $2.47, expectations were $1.54. ArcBest Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the ArcBest First Quarter 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mr. David Humphrey, Vice President of Investor Relations. Please go ahead.

David Humphrey: Thank you for joining us. Today, we’ll provide an update on our business, walk through — walk you through the details of our recent first quarter 2024 results and then answer some questions. Joining me for the prepared remarks are Judy McReynolds, Chairman, President and CEO of ArcBest; Matt Beasley, Chief Financial Officer; and Seth Runser our President of ABF Freight. In addition, Steven Leonard, Chief Commercial Officer and President of Asset Lot Logistics; Dennis Anderson, Chief Strategy Officer; and Christopher Atkins, Vice President, Yield Strategy and management are available to help answer questions. To help you better understand ArcBest in our results, some forward-looking statements could be made during this call.

Forward-looking statements, by their very nature, are subject to uncertainties and risks. For a more complete discussion of factors that could affect ArcBest’s future results, please refer to the forward-looking statements section of our earnings press release and our most recent SEC public filings. To provide meaningful comparisons, certain information discussed in this call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. Reconciliations of the GAAP financial measures to the related non-GAAP measures discussed in this call are also provided in the additional information section of the presentation slides. As a reminder, there is a conference call slide deck that can be found on the ArcBest website, arcb.com and exhibit 99.3 of the 8-K that was filed earlier this morning.

Before I turn the call over to Judy, I want to let you all know that I will be retiring from ArcBest at the end of August. So the second quarter earnings conference call will be the last one I do. It’s been a privilege being a part of this wonderful company for my entire career. I came here right out of college in 1983, and it was the best career decision I could have made. It’s been an honor to have been part of the success story of growing from a $468 million LTL company into a multibillion-dollar integrated logistics company. But as the proud grandfather of 7, I’m looking forward to speaking — to spending more time with my family. I look forward to watching and cheering for ArcBest as it continues to prosper in its second century of business.

With that, I will now turn it over to Judy.

Judy McReynolds: Good morning, everyone. I’d like to begin by expressing my heart felt gratitude to David for his enormous contributions to ArcBest. As he prepares for a well-deserved retirement, we celebrate his remarkable tenure of nearly 41 years with us, 26 of which he spent leading our Investor Relations team. Throughout my time as CEO and even before that, I’ve had the privilege of working closely with David. He has been an outstanding colleague and friend, and his dedication and leadership have been instrumental to our success I am excited to welcome Amy mendenhall as our new Head of Investor Relations. Amy has been with ArcBest for 26 years until recently served as Vice President, Controller for asset-light operations.

Earlier this year, Amy assumed the role of Treasurer and she has been working closely with David to ensure a seamless transition as she adds Investor Relations responsibilities. We believe the core of ArcBest success is our people, and our people rose to the occasion this quarter as we navigated continued market softness and weather events. Despite these challenges, we delivered solid first quarter results, including generating $1 billion in revenue and nearly $43 million in non-GAAP operating income. Our focus remains on efficiently running our business, delivering a high-quality service that our customers value and effectively managing costs. Here are some key highlights from the first quarter that show our continued focus on our 3-point strategy of accelerating growth, increasing efficiency and driving innovation, all while delivering a high-quality service that our customers value and effectively managing costs.

Demand for our services remains strong with a solid pipeline that has grown by 35% since the start of the year as our best continues to act as a trusted adviser to customers, helping them solve their logistics challenges. We have seen positive trends in our core asset-based business with daily shipments and tonnage, both increasing over last year. Our asset-light shipment volume has grown significantly with double-digit growth in the managed transportation solutions. This is a testament to our commitment to helping our customers optimize their supply chains. A large and long-time customer recently told us how much they value our hands-on approach to creating logistics strategies that enhance flexibility in their network, increasing efficiencies and reducing costs.

Despite severe weather conditions in January, we achieved the highest on-time performance and network efficiency since 2021, a testament to our laser focus on operational excellence. We continue to make strategic investments to accelerate growth and increase operational efficiency. For instance, the opening of a new facility in Olathe, Kansas, allowed us to relocate city operations from the Kansas City distribution center, leading to a significant increase in productivity across the facilities. We anticipate similar productivity gains with the upcoming Lithia Springs Georgia facility set to open in June, which will enable us to relocate our Atlanta area city operations from our Atlanta area distribution center. And we remain committed to innovation.

In March, we announced the next step in our Box Suite FOX smart autonomy, which includes forklifts and reach trucks that leverage automation and teleoperations, when needed. This transformational solution empowers customers to unlock supply chain efficiencies across their facilities. Before I pass the call to Matt, I’d like to address the noncash impairment charge related to our best equity investment in Fantom Auto, which resulted in a $22 million reduction in net income. For context, in January of 2022, ArcBest announced a $25 million investment in Fantom Auto as a part of a transformative initiative centered around remote-operated autonomous forklifts developed for use in ArcBest customer locations. Since our March launch of the Box Smart Autonomy solution, we’ve seen significant customer interest, and we currently have pilots underway with key customers.

These pilots are leveraging our own technology solutions for any required teleoperations, instead of the Phantom Auto solution we previously used. Box is just one example of our proud legacy of developing creative solutions and investing in strategic and transformative initiatives. We remain encouraged by our progress and are committed to staying involved in leading-edge innovations to help our customers solve real supply chain challenges. And with that, I’ll turn it over to Matt to take you through the results in more detail.

Matt Beasley: Thank you, Judy, and good morning, everyone. Despite the market backdrop, I’m pleased to report that ArcBest delivered solid financial performance for first quarter 2024. Let me start with an overview of our consolidated results. During the first quarter, we generated $1 billion in revenue, down 6% versus last year. Our non-GAAP operating income from continuing operations was $43 million compared to $52 million last year. Adjusted earnings per share was $1.34, a decrease from $1.58 in the first quarter of 2023. Despite a 3% decrease in revenue per day and additional costs related to a new labor contract, our asset-based business achieved the same level of non-GAAP operating income as the first quarter of last year.

The $9 million decrease in consolidated non-GAAP operating income was primarily driven by our asset-light business, we saw impacts from January’s weather in a softer truckload market. Now, let’s talk about the 2 segments in more detail. Starting with the Asset-Light segment. First quarter revenue was $396 million, a daily decrease of approximately 9% year-over-year. While shipments per day increased 14%, revenue per shipment decreased 20% due to the softer market and growth in our managed business, which has a lower revenue per shipment. The non-GAAP operating loss of $4.7 million for the quarter was largely due to weather in January, which increased purchase transportation costs. However, I’m pleased with the improvements we saw throughout the quarter, with a small loss in February and a slight profit in March on a non-GAAP basis.

We have maintained our focus on reducing operating expenses and improved employee productivity over 27% on a year-over-year basis. Looking at preliminary results for April that were filed in the 8-K this morning, shipments per day are trending higher by 10%, while revenue per shipment is down 18% and revenue per day is down 7% compared to April of last year. While the April numbers are somewhat lower than March, I’m encouraged by the improvement in purchase transportation costs, which helps margins and overall operating results. With our improvements in operating costs and productivity, we are well positioned for the eventual recovery of the truckload brokerage market. Moving on to our asset-based business. First quarter revenue was $672 million, a per day decrease of 3%.

The segment’s non-GAAP operating ratio was 92.0%, an improvement of 30 basis points versus the first quarter of last year and 430 basis points above the fourth quarter of 2023. The sequential performance was generally in line with the past performance we have seen in softer freight environments. As we move from a strong fourth quarter into our first quarter with more muted demand and higher union benefit and profit sharing costs, we optimize our freight mix, maintain pricing discipline, manage costs lower and improve productivity, which all contributed to our results for the quarter. First quarter tonnage per day decreased by 17% and daily shipments were 6% below prior year levels, primarily due to lower transactional volumes and lower tonnage levels more broadly for the industry.

However, our core LTL shipments and tonnage continued to grow, contributing to improved productivity and better financial results. Our year-over-year billed revenue per hundred rate increased over 15% in the first quarter, which was driven by higher prices in our transactional business and a mix shift towards our growing core business at a higher revenue per hundredweight. We secured an average increase of 5.3% on our customer contract renewals and deferred pricing agreements during the quarter demonstrated continued pricing discipline. Preliminary asset-based results for April show lower year-over-year tonnage in shipment levels and higher prices as we continue to manage our mix of business with more core and less transactional shipments, leading to a better productivity and profit outcome.

The average sequential change in the asset-based operating ratio from the first quarter to the second quarter over the last 4 years has been an improvement of approximately 200 to 300 basis points. We are proud of our first quarter performance and our solid financial position. As Judy said, we continue to pursue growth, efficiency and innovation while delivering superior service to our customers and value to our shareholders. Seth will now discuss how ABF continues to advance its proud tradition of excellence.

Seth Runser: Thanks, Matt. Our focus remains on the factors within our control that contribute to operational excellence, our people, productivity and capacity. Let’s start with our people. We pride ourselves on our strong culture. Over the years, we have successfully navigated various freight environments in the spirit of determination, adaptability and excellence continues to thrive among our employees. We invest in our employees, ensuring they are well trained and fully understand our strategy. This empowers them to perform at their best, and we’re proud to have been repeatedly recognized on Training Magazine’s Apex Awards list for our commitment to our employee training and development. This year marks the 40th anniversary of our quality process, a 5-step problem elimination process that empowers our frontline employees to identify and resolve problems, enhancing our productivity and service.

We have a dedicated team of operations experts working closely with our frontline teams in key locations to refine processes and improve operational execution. These efforts have led to double-digit productivity gains at these key locations, expanding capacity and improving operating results. We plan to extend this initiative to more locations throughout the year. Our investments in technology is fueling productivity and yielding tangible benefits. We are developing tools that enhance network visibility and empower our frontline teams to make real-time, data-driven decisions. Here are a few examples of the tools we’ve recently deployed. City optimization, which leverages AI and machine learning to drive efficiencies continues to save us around $1 million each month.

We are currently piloting the next 2 phases of this project at multiple locations. Our new dock software enhances visibility into dock activity. Early results from locations where the software has been installed are promising. We developed in-house labor planning applications for our distribution centers and tools that predict hiring needs based on forecasted demand. These are being rolled out in additional locations. These new tools have enhanced freight visibility and resource management across our network, and we expect them to continue delivering benefits for the years to come. Regarding our network and our facility road map, we operate a mature nationwide network and have a robust process in place to identify where we need to increase capacity to meet customer demand.

Since the end of 2021, we’ve added roughly 500 doors, and we plan to add around 280 doors the rest of this year, including the 4 yellow facilities. Our technology tools and network design strategies are amplifying our capacity. As Judy said, in March, we opened our new facility in Olathe, Kansas, which has already led to a double-digit improvement in productivity at the nearby distribution center. This additional capacity will support future growth. We continue to invest in our fleet, which is one of the newest on the road. This has reduced repairs and lowered operating expenses and positioned us to respond with the reliable capacity our customers expect as market conditions improve. We have a robust pipeline of optimization projects on our road map, all aimed at delivering customer value and positioning us for growth, both in the short term and long term.

In closing, I would like to congratulate our team on some recent external recognitions including the LTL Carrier of the Year award from several companies like Coyote, TQL, American Group and in Express. We were also honored to receive the ATA’s Prestigious Excellence in Security Award last week. A sincere thank you to our people for all you do. I will now turn it back to Judy for some closing remarks.

Judy McReynolds: Thank you, Seth. At ArcBest, we help keep the global supply chain moving. Our commitment to investing in our people, our solutions and our technology is unwavering, and it is this commitment that fuels our growth. Our customers appreciate the depth of knowledge and experience we bring to the table, helping them navigate their most complex challenges. It’s so rewarding when I hear feedback from our customers on the challenges we’ve helped them solve. We are honored to receive external recognition, especially when it highlights performance in key areas. So I was pleased for ArcBest to be recognized by Newsweek and Statista as one of America’s most responsible companies in 2024. ArcBest has a long history of good stewardship and taking intelligent risks on our path to growth. That concludes our prepared remarks, and now I’ll turn it over to David Humphrey. Thank you.

David Humphrey: Okay. Denis, I think we’re ready for some questions.

See also Democrats and Corporate Insiders are Buying These 10 Stocks and 25 Cities with Tallest Buildings in the World.

Q&A Session

Operator: [Operator Instructions]. Your first question is from the line of Ravi Shanker with Morgan Stanley.

Ravi Shanker: David, our best second century will be better than its first, but it won’t be the same without you. Thank you for all the help over the years.

David Humphrey: Thank you.

Ravi Shanker: Judy, maybe absolutely, maybe at a high level, how do you guys think of the balance between price and volumes, especially as we enter an up cycle here? And kind of how do you think about a modeling perspective, operating leverage versus pricing dropping through to the bottom line?

Judy McReynolds: Yes. I’ll let Christopher answer that question. He’s our Head of Yield strategy.

Christopher Adkins: Sure. So really, this is a balancing act between price and volume. We really want both. Obviously, we want growth. We want that top line growth, and we need to be — make sure that we’re compensated in the right way to produce good financial results. So we have a robust activity-based costing system that informs our pricing model. That’s something we’ve invested in for many decades now that’s proprietary to us, something that we own personally and that we maintain just over the time. And that’s something that we rely heavily on for pricing to make sure at an individual shipment level and at a customer level to make sure that the business is operating profitably for us. So in terms of existing business, we’re making sure that we’re securing the increases that we need for that business to be sustainable for us and for new business, we’re able to leverage that costing model to make sure that just reviewing the prospective expenses that, that business would bring on, that is going to operate at the levels that we need to grow.

So really, it’s a bounce act of both, like you said, but we need growth and we need to get the right pricing results for that growth.

Ravi Shanker: But as those volumes come back, will you see higher incremental margins than you have in previous transitions from down cycle, stop cycles?

Matt Beasley: Yes. I mean, Ravi, I would say, across both businesses, we believe that we’ve got a lot of operating leverage. I mean, certainly, a lot of that’s created on the ABF side, but all the efficiency and productivity initiatives that Seth has been talking about, and we remain focused on being able to profitably serve the growth that Christopher is talking about. And I would say the same on the asset light side. I mean a lot of these as the market turns, you’re going to see the vast majority of that revenue increase dropped to the bottom.

Operator: Your next question is from the line of Jason Seidl with TD Cowen.

Jason Seidl: Thank you, operator. David Geez, it’s been almost 3 decades of you helping me. It’s definitely not going to feel the same without you, but well-earned retirement, and I guess some of us might think you’re doing this just to get the truck finally.

David Humphrey: Yes, they won’t give me one either, Jason.

Jason Seidl: Well, come on, you got 7 grandkids. They might want them. A few things here on the tonnage side to help us better understand what’s going on behind the numbers. Could you remind us when we sort of lap that transactional freight disposals? And if we would back that out on the tonnage side, what would that look like? And how would that compare to seasonality?

Christopher Adkins: Yes. Sure. So Jason, it’s Christopher. So really, the tons that you saw a pretty significant change as it relates to the second half of last year. So I think you’re going to see these more dramatic changes that you’re seeing in the first quarter. This quarter and in second quarter, I think you’re going to see those trends persist. And then as we get into the third quarter, I think you’ll see more consistent results there in terms of tonnage and shipment changes from a moving forward basis.

Jason Seidl: And then how would that compare if you back it out right now to seasonality?

Christopher Adkins: Comparing for the first quarter?

Jason Seidl: Yes.

Christopher Adkins: So I think first quarter is from fourth to first operated similar to seasonality from our core business.

Operator: Our next question is from the line of Jordan Alliger with Goldman Sachs.

Jordan Alliger: And David, congrats on your upcoming retirement. We go back a pretty long way. So it’s great, great you’re getting there. So I guess my question is maybe a follow-up thinking about weight per shipment. If maybe we start to normalize a little bit on this transactional versus core in the back half, I mean, can we also expect weight per shipment to start to look a little bit more even keeled and then perhaps more indicative of how well the economy is doing? I know historically, that’s been a key metric to take a look at. And is there a way to get a sense for what proportion of your LTL business is core versus transactional overall?

Matt Beasley: Yes. Thanks, Jordan. So this is Matt. So I would say as we think about weight per shipment, that certainly could turn into a tailwind as we move throughout the year. I’d say really from 2 different aspects that could be created from one just as the truckload market continues to improve. There has been some movement from LTL into truckload — and so that — as that comes back in, that will be a tailwind. And then with an improving manufacturing economy as well, which we’ve seen some initial signs of in the last month, we think that could be an additional tailwind. And we’ve continued to see additional strengthening in our core business. I would say we expect to see that as we move through the quarter into May and June, just looking both at the seasonal trends and then just the opportunity set that we have in front of us.

Operator: Your next question is from the line of Ken Hoexter with Bank of America.

Ken Hoexter: And Dave, obviously, great working with you over these 26 years and good luck into retirement. It’s been a joy working with you, Judy, it’s truly a great teammate. I guess my question…

David Humphrey: Thank you.

Ken Hoexter: You got it Dave. Definitely well deserved. The April data seems like it’s accelerating to the downside on tons per day and yet maybe even an easier comp, if I look at last year, April versus March and yet we’re decelerating on tons per day decelerating on shipments per day. Maybe talk a little bit about the economic backdrop here and kind of what we’re seeing in terms of the core.

Matt Beasley: Yes. So Ken, it’s Matt again. I say for April, we did see a little bit of a deceleration versus March. But again, we’ve done some deep dives into our customers really on a customer-by-customer basis, just looking at what the expectations are over the next couple of months, what their trends have been in the past and particularly some new customers that have been brought on and we’ve added to our core mix there. And so I would say, as we look forward in the quarter into May and into June, we do expect to see some significant increase on that front on the core business side as well as, I would say, just continued acceleration on our operational efficiency metrics. I mean if we look at our load efficiency metrics, our other productivity metrics, those continue to improve in April, and we expect those to continue to improve as we move through the quarter.

Ken Hoexter: I guess I’m a little confused by the strengthening in core business commentary, but you deteriorate. I just want to understand the backdrop, is the economy getting up? Or is it just a transaction versus a mix issue?

Matt Beasley: I guess, that it continues to be — the core business continues to be in a very strong place, and particularly if you’re looking at year-over-year comparisons. I guess what I was saying is if you’re looking more on an absolute basis, there was a little bit of a decrease at least numbers that we were seeing as we moved through the first part of April, but we expect that to turn around and move into an increasing level of core business as we continue to move through the quarter. So it really depends on your comparison point.

Ken Hoexter: Got it. And then my just follow-up is… Go ahead, sorry.

Judy McReynolds: Well, Ken, I was just going to add a couple of things. I mean, I think when you look — I mean, the presentation that we put out there illustrates this. But I mean, I feel like we’ve had relative consistency on the core shipment growth, which is helpful. I think one of the things that Matt really thinking about or referencing is just the pipeline of opportunities that we have with our customers. We’ve got a lot of visibility into that, and we have some good LTL opportunities, but also in the truckload and the managed area, we’ve got some good solid opportunities that our sales team has done a good job with. Also something that we haven’t said in this Q&A portion, but I think it’s really important takeaway is that when we’re doing business with our regular customers, that is more predictable and it allows better planning, labor planning, and it also enhances our ability to be productive, which leads itself to better services being given or service, excuse me, being given to our customers.

And I think that, that’s really an important takeaway here. And one that we focused on really since about the third quarter of last year. So — and I think Seth said many things in his prepared comments about different efficiency gains that we’re looking forward to as we move ahead. And many of those will just further enhance the strategy that we’ve been deploying.

Ken Hoexter: David is going to cut me off. I know he’s going to get upset, so I’ll sneak a quick one in. A lot of innovative tech investments that keep going on. Judy, I just want to understand why is that not part of your annual regular tech spending and CapEx, OpEx, they’re ongoing. They’re consistent and then you take a big write-off like the investment. But if their consistent spends and hope for improvement long term, why is it not kind of part of your regular cost.

Judy McReynolds: Well, one main reason is because the customers that we are working with are in pilot stage. We — there’s a lot of different use cases that we’re working through. And because of how long the sales cycle is and that is in a process that we go through with each one, there really isn’t any regularity to it in terms of either the revenue stream or the cost necessarily that are being deployed for those. And so we look forward to having that be the case, and we’ll move those costs and as well as the revenue that goes with them into regular operations when we do. But that’s the difference or the distinction that we’re drawing there is because of the — just the pilot nature. And we’ve got 10-plus active pilots and even more than that under kind of contract review and scoping.

And so it’s an exciting — and you’ve seen some of the, I think, the press on it. Box Smart Autonomy as well as the freight movement system, those are exciting innovations that have real Fortune 50 and Fortune 500 companies that we’re working with. But we’re not to a point of it being regular yet and operational, so to speak, and that’s when we’ll shift it over into our regular earnings.

Operator: Your next question is from the line of Daniel Imbro with Stephens.

Daniel Imbro: Yes. David, congrats on the retirement [indiscernible]. Maybe starting on the EPS side…

David Humphrey: Thanks Imbro.

Daniel Imbro: You mentioned in the release and the comments sequential move in to the last few years, 200 to 300 million points. I think that includes COVID though some pretty weird, great years. I think pre-COVID it was closer to 500 basis points. I guess what are the puts and takes as you guys think about the sequential OR movement here between this year and maybe that pre-COVID normal time if we use that as a beta.

Matt Beasley: Yes, Daniel, it’s Matt. Good question. I think you’d have to think a little bit about the historical context. And so I think if you go back and look at some of those historical periods where you saw the higher move from the first quarter into the second quarter, it was certainly off a higher operating ratio level. And so being at — but if you look over the last 3 or 4 years, I would say that that’s an operating ratio that’s more in the context of the operating ratio that we saw in the first quarter of this year. And so that’s why we provided that more recent historical context.

Daniel Imbro: Okay. That’s helpful. And then on the asset line side, just to follow up on that one. Obviously, a challenge is bouncing on the bottom of the cycle, but I think you mentioned that I actually had a slight non-GAAP profit in March. Just curious how we think about the profit outlook on that side? Is there more you can do from a cost standpoint or operational standpoint to improve that profitability before the cycle starts?

Steven Leonard: Daniel, this is Steven. That’s an area where we continue to make improvements. If you look at first quarter, we saw a significant improvement in productivity on a shipments per employee per day basis. And we have technology road map items, other process items. So we’ll continue to look to make improvement there. That’s — it has to be a top priority for us, along with the opportunity to grow. And obviously, growth in that segment is the top priority that fixes a lot of things, but we also have some opportunity to continue to improve productivity.

Daniel Imbro: Any way to help size up what the opportunity to let is or even the [indiscernible].

Steven Leonard: I’m sorry, can you repeat…

Judy McReynolds: Yes. Repeat it.

Daniel Imbro: Just any way it helps is on maybe what’s left on the self-help or kind of the opportunity to make that business more optimized before the cycle turns, either cost take out or kind of what you see from a profitability standpoint that you can control before the cycle improves?

Steven Leonard: Yes. I mean I don’t have a specific number to provide. I would think of it more as incremental improvement. If you look at what we did in the first quarter, we had a 27% improvement in productivity when you measure it by shipments per employee per day. So we’ve made good strides there. It’s a continued area of focus, and we’ll look to continue to improve, but I will think of it as more incremental improvement.

Operator: Your next question is from the line of Brian Ossenbeck with JPMorgan.

Brian Ossenbeck: David has been great to work with you even over a shorter period of time than most folks. But I really appreciate it and good luck in everything. Just wanted to start off with a quick clarification, maybe for Matt, like the 200 to 300 basis points you’re talking about here, is that the actual guide? Or is that just the benchmark and we’ll kind of see where it goes. Like maybe you can give a little more context in terms of like how we should look at that and then also maybe about the third quarter as well as we’re trying to figure out what sort of normal seasonality and put some of these benchmarks to start off here.

Matt Beasley: Yes. So I mean, I would say that’s more of just some historical context. And like I said, it’s probably historical context. It’s a little bit more relevant than maybe the historical changes that we saw 5 or more years ago. And so I wouldn’t look at it as a specific guide. But like I said, we’ve done a deep dive into our revenue mix and our customer trends. And so we feel good about the acceleration that we expect to see as we move through the quarter. We also, like Seth talked about, continue to advance some significant operational efficiency and productivity efforts on the ABF side. Some of those, like the Kansas City, the opening of the new facility in the Kansas City area, which we’ve seen some significant improvement in productivity on that happened towards the end of the quarter.

So we expect to see a full quarter benefit there. I mean as you look forward as we move through the year. I mean you’ve got to think a little bit about just some of the events that have transpired, particularly over the last year with the yellow related impact as you move from the second quarter to the third quarter. I think we still expect acceleration on both of those areas that I talked about, both on the core business level and on the efficiency and productivity level. And as we get closer to the third quarter, we’ll provide some more details just on the historical context and what we’re seeing.

Brian Ossenbeck: Okay. But it sounds like a similar historical context might be a good enough starting point for the third quarter? Or is it going to get a little different because you have all these moving pieces on the core business and the transactional starting to lap out the comp at that point?