But that does represent off the midpoint about a 4.5% increase in Q4 over Q3, so a couple of things. So number one, we did in Q3 have some incentive costs that got reset down lower because of performance of the business. And so with those accruals down on that was a benefit to Q3 that we’re not expecting to repeat Q4 explains a little bit of that. But then maybe more broadly, I just want to reinforce that our productivity initiatives continue. We will — the efforts in the pipeline and work that we have is ongoing, we would expect headcount to be a little lower in Q4 than it was in Q3, so that should be favorable. And then maybe just to reinforce a point made earlier about Q4 is a seasonally lighter quarter for us in terms of volume. So that’s just another point to be made inside of that.
But generally speaking, I think that covers your personal.
Scott Group: Thank you.
Operator: Thank you. Thank you. The next question is coming from Ken Hoexter of Bank of America. Please go ahead.
Ken Hoexter: Good afternoon. Favor, Mike, maybe just to clarify a comment earlier in the LTL. I think you noted that temporary capacity exited the market. Are you then assuming a rebound in that? It sounds like you said you’re assuming a rebounding capacity, trying to understand that commentary on the LTL. And then, Mike, I guess just to follow-up on that. NAST gross margin right down to 12.5%, I guess that’s the same as gross profit per load. With spot rates remaining here, I just want to understand you’re saying that the $450 million of gross revenues. I guess from Convoy that freed up into the market, that’s not easing the capacity constraints on the brokerage squeeze? Does that mean this weak environment? Is it getting worse as you move through the — into peak season? Are you seeing anything that suggests we’re starting to ease off that or maybe just talking about that as we go into holiday season, I guess before the bid season that Jack was talking about?
Mike Zechmeiste: Yeah. So on the second part of that, I think you were talking about Convoy going out of the market? And how does that impact the market? And I’d make a couple of comments on that. So first of all the size of that business doesn’t have a material impact on our results. Now, that being said, certainly that business came available as the announcements were made. We’ve certainly participated in that and where there’s profitable volume to be had, kind of fits with our model. We certainly like the longer loads, and we’ve certainly been participating in winning some of that business. Now a lot of that business is also localized, in short runs multiple runs density around certain geographies. And while we compete for that, that’s not a sweet spot for us in terms of profitable volume, but all that obviously is getting picked up.
But I would say it’s not having an overall impact on the market, just given the size of that business. And then the other one, remind me the other question.
Ken Hoexter: Yeah, LTL, I think you got it.
Mike Zechmeiste: Yeah. LTL the capacity temporarily leaving the market. Yeah. Thanks for picking up on that point. The idea there was well while Yellow went out of business, and that capacity then came out, there is a process there where the assets that are still useful, will be redeployed by new ownership and through the new hubs. And probably come back into the market at some point. So, that was the intent of the word temporary, to the extent that the assets are still viable and useful, they’ll find new owner new home, and probably make their way back into the system.
Ken Hoexter: So, just to clarify, then you would expect them continue pricing pressure in that market, if you’d see capacity sticking around?
Mike Zechmeiste: Yeah, on the LTL side, I think what we’ve seen in the near term has been positive in terms of an increase in AGP per shipment, related to that move, because they were a bigger part of that market in terms of the capacity to serve. And so I think that, unlike the Convoy example, is a more meaningful impact. And it did, we did certainly see it. Now the question, I think longer term is rooted in that word temporary, which is, how long is that capacity out? How long are those hubs out of service? Where do they land? And how? Or if? Or when does that capacity come back into the market? And that will provide additional capacity that I would say will have an opposite effect to some extent.
Ken Hoexter: Thank, Mike. Sorry Mike and I presume that was Chuck squeezing in there. Thanks. Appreciate. Thanks.
Operator: Thank you. The next question is coming from Jon Chapelle of Evercore ISI. Please go ahead.
Jon Chapelle : Thank you, regarding your improvement in shipments per person per day are up to 18%, targets 15%, you’re confident in the 15%? You’re already there? How low could that go? Or how hard could it go? I guess percentage, and what does that equate to? As we think about an operating margin to cycle. What’s the new kind of productivity metric I mean for, I guess, the beginning of the cycle, and then mid cycle as it continues to build?
Arun Rajan: I can start, in terms of productivity improvements, we’re at 18%, year-to-date, and we expect end the year at 15%. Having said that, we feel pretty confident in setting, targets for subsequent years at that at a similar rate. So, we’re working on our 2024 operating plans. And I would expect we target a similar productivity improvement, compounded that’d be over 30% by the end of next year, in terms of productivity improvements. So, I feel pretty good about that. Productivity is in the way I said this in my prepared remarks. Productivity ultimately, is a measure that considers volume, right? So, you ask the question to Dave, what if your volume goes up next year? So, our volume goes up 15%, next year, and our productivity improvements are 15%, then you know, that we wouldn’t have to add any headcount to serve that 15% additional volume.
However, if we grow just 5%, then we’d get the other 10% by way of headcount reduction. So, I think regardless of cycle, we would, we would measure productivity, and we’d adjust it based on volume.
Jon Chapelle : Okay. I appreciate it. Thank you.
Dave Bozeman: Just to add on that and Arun it is the key, there’s — we’re laser focused on driving productivity, as well as growth, whichever one will do it in combination in driving, so that’s super important. And it’s and that laser focus extends to the rebound as well. I can’t express that enough that as we get ready for this market rebound, this will be this is super important, from a productivity perspective than separating that headcount volume broke.
Operator: Thank you. The next question is coming from Bruce Chan of Stifel. Please go ahead.
Bruce Chan: Hey, good afternoon, everyone. Nice to see some of the progress here in a tough market. Wanted to zoom out a little bit, when I think about, some of the cycles and maybe a cycle or two ago. There was talk about structural pressure on AGP as a result of, I don’t know better customer price discovery and digitization trends. Obviously, you’ve had a lot of changes in the industry since then. How are you thinking about a good baseline AGP for the business, through the cycle based on what you’re seeing now? Is there any reason to believe that you shouldn’t be able to get back closer to the mid-teens? Is AGP going to be lower as a result may be if some of these structurally higher capacity costs. But maybe you can make up for that with lower costs of serve, any comments around, the direction of AGP in the future would be great.
