Old Dominion Freight Line, Inc. (NASDAQ:ODFL) Q3 2023 Earnings Call Transcript

Adam Satterfield: Sure. It’s – when we laid out the goal to have a sub-70 annual operating ratio, we didn’t put a timeframe per se on that because we felt like we might go through – and a macro environment that’s a little bit weaker, and we didn’t want to be beholden to some artificial timeline and do things that were more short-term focused versus long-term. And I think when you look at this year, in particular, to have a capital expenditure plan of $720 million in an environment where at one point, we were – our tonnage was down double digits shows the focus that we try to take on looking out in the long-term and being ready for future growth. And that comes at a cost, and we’ve seen that increase in the operating ratio this year as a result.

And again, the depreciation is probably the biggest drag that we have right now, but that’s something that when you look at it on the other hand, when volumes come back, that’s where we get leverage. And I’ve been pleased with the cost performance on the direct cost side. In the third quarter, our direct costs were 51% to 51.5% of overall revenue while our overhead came in at about 19.5% of revenue, and that compares to last year, our overhead was 16.5% to 17%, so deterioration there. But once we get back to the volume environment, we should be able to leverage that completely and get right back to improving our operating ratio, so we’re already closed. We’ve done a couple of quarters with the second and third quarters of last year with 69 something operating ratio.

And typically, when we look back through prior years, when we’ve gone through an environment where volumes have been down, revenue was down, we’ve lost a little bit on the operating ratio because of that leverage opportunity, we’ve been able to recover any OR loss in the subsequent year when we’ve had revenue recovery. And I think that’s certainly what we’re focused on and believe can happen. So we’ll see where that gets us by the time we get to the end of 2024, but we will continue to perform on the direct cost side and continue to look for areas of opportunity as we can drive efficiency within our operations. But trying to get some leverage there on the overhead side, potentially not having to invest as much in 2024, and if we can get some revenue growth going along with that, could potentially produce a beautiful thing when you start looking at that OR.

Stephanie Moore: Great. Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks.

Kevin Freeman: Thank you all today for your participation. We appreciate your questions, and please feel free to give us a call later if you have anything further. Hope you all have a great day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.