Tom Wadewitz: Yeah. You made a couple of comments on the volume that you’re recapturing, and I just want to make sure I understand it. I guess, it’s an important point. So, I think, Carol, you said 600,000 pieces a day have been recaptured. But then, Brian, you said kind of last year, the August to October was 1.5 million and it’s 2.7 million increase this year. So that implies, I guess 1.2 million increase. So, I just wondered if you could give a little more perspective of kind of where we’re at in October, and how much of that loss business has been recaptured, and then, I guess, another way you framed it was December. You were going to get back to flat volumes before. I think it was a prior comment. Do you still think you can do that, or are we thinking December volumes are down? Thank you.
Brian Newman: Yeah, Tom. So, to frame it up for you, we were trying to get December back to flat versus prior year. I think the guide now implies from a low-single-digit to a mid-single-digit in the month of December, and that’s pending some of the backdrop I just talked about in terms of the retail outlook. So, from a momentum perspective, I gave in August to an October number, but as Carol mentioned, we lost 1.5 million or we had diverted 1.5 million pieces. We’ve seen 40% of that, roughly 600,000 pieces already come back to the system. We’re also pushing forward with new business that Carol referenced as well.
Tom Wadewitz: Okay, thank you.
Brian Newman: Thanks.
Operator: Our next question will come from the line of Stephanie Moore of Jefferies. Please go ahead.
Joe Hafling: Hi. Good morning. Thank you for the questions. This is Joe Hafling on for Stephanie Moore. I had maybe a conceptual question on sort of the recapture, looking at the near term. Given its peak season, and customers are focused on their own execution right now, does this limit your ability to win back volumes in the near term, and shippers don’t want to disrupt any of the plans that they’ve already got in place? Obviously, you’ve highlighted the capture rates sort of September-October, but just wondering if that slows down as we kind of get into November-December, just as shippers don’t want to disrupt their own operations right now?
Carol Tome: Actually, it’s accelerating. Customers want to come back into our network before peak because of our superior service that we’ve exhibited over the past five years.
Joe Hafling: Got you. Thank you so much and helpful.
Operator: Our next question will come from the line of Ken Hoexter of Bank of America. Please go ahead.
Ken Hoexter: Hey. Great. Good morning. If I could just clarify one thing on the step-up, I think to Allison, do you say you’re not using increasing pricing as you get towards the tail end of that volume gain? And then, my question is on international, right. You’re looking, I guess, Brian, to really snapback closer back to that 20% range. Is that kind of what you are still looking at in terms of margins at international as we move into the fourth quarter? I just want to understand the shift from peak versus belly space coming back on, and the impacts to margin there?
Brian Newman: Yeah. On the first question, Ken, obviously, you’ve got volume and pricing. I was talking to with Allison about the volume component. We have announced a 6% to 7% peak season surcharge. So that’s, obviously, flowing through from a revenue standpoint in the fourth quarter as well.
Carol Tome: I think Allison’s question was, are there costs associated with winning back volume. And as I responded, not meaningful. Ken, from time to time, we have found customers who diverted, and they entered into longer-term contracts, and we might help them to exit those longer-term contracts, but it’s not a meaningful discount. It’s just we might help them. It’s nothing measurable.
Operator: Our next question will come from the line of Scott Group of Wolfe Research. Please go ahead.
Scott Group: Hey, thanks. Good morning. So, hey, Brian, one of the earlier questions about the bridge from Q3 to Q4, you answered it sort of how do we get to the low end. So, should we think that the low end of the range is more of your base case? I just want to understand sort of that answer. And then, can you just maybe, more explicitly, just talk about what your — the margin expectations are for each of the segments in Q4? Just — I wasn’t sure what you were — what you’re thinking for each business. Margin or profit, however you want to answer, yeah.
Brian Newman: I have a walk in front of me for the high end and the low end, so I can give it to either range, and I think it’s retail backdrop uncertainty that drives the delta in volume, which drives the delta in profit. So, it’s the same levers. It’s the volume and the revenue quality, really driving the majority at a higher component, at the high end versus the $800 million I referenced at the lower end. So net-net, I think from a margin shape standpoint, we finished Q3 mid-single-digit in the US. Obviously, that’s a very low watermark, driven by the volumes we saw in the quarter. We’re looking in the fourth quarter to step back up into that high-single-digit, low-double-digit range. And so, getting back to the trajectory, and then from an international perspective, we were at 15.8% in the third quarter.
I think Kate and the team have planned largely through controlling what we can control, whether it’s block hours, whether it’s headcount. Taking that and they’ve done a good job of demonstrating that Q1 was 18% margin International, Q2 was a 20%, so we’re probably in the middle of that range for the fourth quarter. Hopefully that helps.
Scott Group: Thank you.
Brian Newman: Yeah.
Operator: Our next question will come from the line of Amit Mehrotra of Deutsche Bank. Please go ahead.
Amit Mehrotra: Thank you, operator. Hi, everybody. I guess maybe just a very simple question, I guess, is when do we return to margin expansion in domestic? I mean RPP, CPP spread was really negatively wide in the third quarter. I assume it’s still negative, albeit less so in the fourth quarter. Can we get to a situation where we get back to year-on-year margin expansion in early next year or do we have to wait until August when the labor really — inflation really steps down?
Carol Tome: Well, maybe just an observation on the US margin in the third quarter. Recall that we had $500 million of expense related to our Teamster contract in the third quarter. If we back that out, the US margin would have been 8.5%. 8.5% on volume down a 11% is not a bad margin. So, we’ve got a bit of pressure on the margin that we shared with you because of our new contract. The contract is front-end loaded. We’re bearing the pain of that front-end load. For a five-year contract that’s very attractive. The compounded annual growth rate on the five years is 3.3%. So once we get through this first front-end load with 46% of the cost in the first year, once we get through that, the margin is going to grow. It’s going to grow in a big way. So hopefully, that’s helpful.
Amit Mehrotra: I mean, it kind of is helpful, but I mean, I guess, the question is that, are we stuck in this return profile through the first half of next year, and then we see a step function improvement, or can we see improvement as you guys maybe rip off some of the — rip out some of those seasonal costs in the first quarter, and we can get back to year-on-year growth in the first quarter even?
Carol Tome: No again — absolutely fair question, Amit. Let us finish this year. Then, we will give you guidance for 2024, and we can break it down by quarter, if that’s going to be helpful.
Amit Mehrotra: Okay. Thank you.
Carol Tome: Yep.
Operator: Our next question will come from the line of Ravi Shanker of Morgan Stanley. Please go ahead.
Christyne McGarvey: Hey, guys. Good morning. This is Christyne McGarvey on for Ravi. I wanted to take a step back and ask about kind of the path to some of the longer-term targets that you set out at your previous Investor Day particularly just on some of the macro assumptions that you think you’ll need to get there. You’ve seen definitely muted consumer spending in the last 18 months, but not a collapse. So how much of an uptick in consumer spending do you need to get there or maybe said another way, kind of how much do you feel is in — directly in your control?
