Operator: The next question comes from Scott Group of Wolfe Research. Please go ahead.
Scott Group: Thanks. Good morning. So Adam, I know we’re at the hour, there have been a lot of questions on price already, but – so some of this may be repetitive. But like obviously, these LTL stocks are getting hit pretty hard today, but the April yield numbers, they are what they are. But I just want to make sure, are you – it doesn’t feel like it. But, are you in any way communicating any kind of change in the underlying pricing environment here, the competitive dynamic? I know you don’t share pricing renewals every quarter like some of the other LTLs but maybe this quarter could be helpful. Are they slowing? Is it – what’s changing in your mind?
Adam Satterfield: Yes. And again, to repeat, nothing is changing with respect to the core contract increases that we’re achieving and that we’re targeting. We continue to target cost plus increases, and we’re getting those. It’s just a little bit difference in the mix of freight that we’re seeing. We’ve seen a little bit of a decrease in length of haul. Some change in increase in weight per shipment, like I mentioned, all those factors kind of lead to a lower revenue per hundredweight. So just looking at things on a pure per hundred weight basis, it’s gone from, just call it, 6.5% growth in the first quarter to 4.5% excluding fuel so far in April. But we’ve said before, 100 weight can move around quickly, and that’s why internally, we focus more on revenue per shipment than anything.
That’s what we pick up every day or shipments, and that’s what we’ve got to figure out what’s the cost to pick up a shipment. What’s the cost of line haul a shipment cross-docket – everything that we do is driven on a per shipment basis. And I mean I think we can get back to having a positive spread of revenue per shipment versus our cost per shipment performance. So that will continue to be the initiative. I don’t see anything changing with respect to the pricing environment and nothing changing that we’ve seen as we’ve gone through renewals and bids and so forth with respect to the other carriers in the industry. And obviously, we’ll see what their reports when they come out. But we’ve not seen anything change in that regard. It’s just some mix changes that are impacting our revenue per hundredweight metrics thus far into April.
Scott Group: But just so I’m clear, I don’t think you guys talked about revenue per shipment accelerating with this mix shift or maybe it is and I just didn’t hear that.
Adam Satterfield: No. But it’s staying consistent with where we were. The rev per shipment performance in April thus far is pretty consistent with what we just had in the first quarter. We were up 3.8% revenue per shipment in the first quarter, excluding the fuel surcharge.
Scott Group: Okay. And then just one more question. You talked about like just the power of leverage. Now if I take what you’re saying about Q2, you’re sort of saying mid-single-digit plus sort of top line growth and flattish OR, right? So historically, we get mid-single-digit top line, and we see real OR improvement. How come – maybe it’s just a timing issue, how come you’re not suggesting we see that the power of that leverage right away in Q2?
Adam Satterfield: Well, I think that that’s something that obviously depending on how much volume growth we actually see in the quarter or not sequentially. We’ve invested significantly in many factors that we detailed earlier that create short-term costs. So if we can see some further improvement and if weight and shipments really accelerate kind of from here forward, obviously, there’s a lot of leverage that would therefore come from that. But that’s something that if we’re — if we continue to grow revenue, it’s kind of a 6% year-over-year rate like we saw in April, then we tried to give a factor of, okay, maybe we only see 150 basis points of sequential improvement, which would still be a year-over-year improvement where we were in the second quarter of last year.
But I think it’s just going to move on a sliding scale, if you will, based on how much revenue comes in. And I mean, typically, like I mentioned, the revenue growth is between 8.5% and 9%, 8.7% from the first quarter to the second quarter. And we’re just not there yet. And hopefully, we see further sequential improvement in May and June. And obviously, we give those – we’ll give the update for May with our mid-quarter update as we go along. But the improvement that we see in the operating ratio is typically 350 to 400 basis points of improvement. A lot of that improvement comes by way of the direct costs. It’s mainly the salaries, wages and benefits and there are op supplies and expenses, and that’s coming from the improvement in operating density and taking advantage of all that incremental freight that’s moving through the system.
So if all those things do develop, then obviously, we can produce further improvement in those direct costs. And like I mentioned earlier, from a head count standpoint, I feel good about where we are. So it’s not like we’ve got to scale up even more in terms of our hiring practices, but we’ll probably be working more hours and doing things like that with the existing workforce. So there’s opportunity to scale there. But like any other period, it’s just going to be top line dependent for how much growth do we see and how much of that incremental growth will be able to put to the bottom line.
Scott Group: Okay. I appreciate that. And sorry, some of that was repetitive. Thanks, guys.
Operator: The next question comes from Jeff Kauffman of Vertical Research Partners. Please go ahead.
Jeff Kauffman: Thank you for squeezing me on. And Jack, congratulations, really looking forward to working with you in this role. A lot’s been asked, so I just want to take a step back. It’s been a weird couple of years, right? We had COVID, big up, big down, inflation. We’ve had inventory destocking. We’ve had the yellow closure. We’ve had a lot of growth in private fleets. All of this, I think, makes it difficult to predict what’s going to happen with business. But eventually, we do anniversary all these impacts and things start to resemble what might be considered a more normal operating environment. When do you think we get back to that? And where is your vision most foggy relative to what it would be without these additives that have occurred?
