I think if you put all that together and you continue to – and you kind of look forward along that trend line, this is coming closer to balance than people realize. I’m not here to try to predict, especially coming off a quarter like this, the exact date or time that, that will take place. But we’re clearly more encouraged. And then lastly, because it’s very relevant to the conversation. I think you have to take a deeper look at inventories. And what we’re seeing both within our own customer base, there’s some pretty strong statements around their comfort level with their current inventories. But even on the broader inventory levels across the industry, you’re starting to see more and more folks stepping forward and feeling as though that destocking is largely behind them.
So you put all that together and that gives us a sense of encouragement. Of course, the headwind against it is overall consumer confidence and just the strength of the consumer. And so we’re going to just have to see how those lines kind of play out over the next couple of months and quarters. But I do believe we’re certainly much closer to the end than we are to the beginning of this cycle term.
Eric Morgan: Appreciate that. And maybe just a quick follow-up on pricing in One-Way, I know you did a little better than the mid-point in 3Q, 4Q coming a little bit lower. Could you just give us a little bit more context on what’s changing there and specifically any impact that length of hall is having? Because I know it’s been moving down a bit.
Derek Leathers: Yes. In terms of One-Way pricing, I mean you look back over the year, we’ve been down 3.2% in Q1, down 5.2% in Q2, and now here in Q3 reporting 4.8% down. So on a year-to-date basis, it’s down 4.4%. We are relatively pleased with that given what’s out there in the space, but nonetheless, it’s down in an environment where there are significant inflationary cost pressures. So that’s obviously putting a squeeze on the margin side. As we look forward into Q4 and our guidance, that’s now down 9% to down 7%. The reason for the change really is more to do with the prior year increase from Q3 to Q4 than anything’s happening really right now heading from Q3 to Q4. So we expect our One-Way Trucking rate to be flattish to maybe slightly down sequentially.
A couple of reasons for that. You look at we’ve had continued implementation of lower contractual rate renewals on bids on rates that were effective throughout Q3. We’re done with bid season and I think most of the implementations are behind us. But there were some that were implemented in the quarter. In terms of spot exposure, we’ve talked about that spot rates typically increase in Q4, but they’ve been frustratingly low and I don’t know that we expect a whole lot of lift there, although it could improve a little bit with some peak activity. And then the tailwind for us heading into Q4 would be some peak activity. We are expecting some, we’ve already had some and that’ll continue, just not near the rate that it’s been in the past.
So really as we look forward, we’re looking at a flat to slightly down sequential number but on a year-over-year basis it looks a little worse just given the increase we had in 2022 with a little more robust peak pricing. In terms of the length of haul that is down significantly year-over-year. There’s just a couple of things there with regard to mix. We had more churn this year and the bid – throughout the bid season than what we typically do and that just resulted in a little bit lower length of haul. I don’t know that it’s impacted pricing a whole lot, maybe a little bit, but it’s more to do with just the mix with the bid season. We have seen that start to increase a little bit here in the last month or so and would expect that there’d be a little bit of an increase as we finish out the year but nothing really significant to note on that front.
Eric Morgan: Appreciate all the color.
Operator: The next question is from Elliot Alper with TD Cowen. Please go ahead.
Elliot Alper: Great. Thank you. This is Elliot on for Jason. So you discussed the margin pressure in Q4 Logistics, I guess, so if 1.4% adjusted margin in Q3, I guess, could we see Logistics lose money in Q4? I know there are a lot of moving pieces within that. Maybe if you could touch on maybe the magnitude of the truckload brokerage margins that you called out earlier as well. Thanks.
Derek Leathers: Yes. So in Logistics, the margin pressure concern and the reason for signaling is just as this were to start to turn or if we saw suddenly some increased activity from a peak perspective. We could see buy rate pressure in the carrier community that would perhaps outpace the ability to pass that through based on our mix. At this point, we also have been burdened with and it’s the upside of or the downside of growth, I guess. But as we’ve grown Logistics and taken share and seen some of the volume increases that we talked about earlier on the call, it comes with a little bit of settling of each of those accounts so that as you onboard significant amounts of new business, it takes a while to get the carrier roster kind of finalized, to get the right carriers on the lanes in the right way with the most efficient purchasing.
And so that would be the counter to that that as we get better at that, as we get some seasoning and some settling in the carrier base, the opportunity to actually go the other direction. So I’m not trying to be evasive, but I think it’d be inappropriate for me to even try to tell you whether I think it gets better or worse in Q4. I do think what you will see is a significant focus as we go into Q4 and into Q1 on execution, operational excellence, and less on growth from a volume perspective in Logistics as we get this new business digested. Chris?
Chris Wikoff: Yes. Maybe just to add to that, we’re happy with the volume. It’s been a year since we’ve had the Reed acquisition. We’re continuing to grow wallet share and sign on high quality contract customers. But we are mindful in this market of reviewing the portfolio, making sure that we’re not taking on transactional business that’s underperforming, maintaining high contract volume, and we’ll continue to be reviewing the portfolio while also balancing that with winning new business and contracts that can last with us for the future. We’re also – from a margin improvement standpoint, we’re looking forward to having Reed fully integrated from a technology and operational perspective by the end of this year, which will enable us to realize some further synergies and cost savings going into next year.
And then beyond that, there’s also opportunities from a technology perspective growing the small and medium sized business as well as tech-enabled savings within Logistics. So a number of things that we’re excited about but also mindful of and looking for ways that we can improve the margin there going forward.
Elliot Alper: Thanks. And then maybe to follow-up as you move through bid season, are there any early reads on maybe what your customers are telling you and how they’re planning for 2024?
Derek Leathers: It’s really early in bid season right now, I mean, literally, we’re only starting to see the first couple come across. I think that is – it really depends on the positioning of the customer themselves. We’re fortunate to work with some of the best, especially on the retail side, some of the best retailers out there in the retail space. Several of them are actually optimistic about the fact that they’ve been able to recalibrate for this new consumer behavior and they feel like the days ahead of them look a lot that brighter than the ones that in the recent rear view mirror. So volumes being up, reopening or opening new stores and our ability to expand with them. What that all means in price will just really determine will be dependent in some – on the One-Way side in particular on where we’re at from a supply – capacity supply perspective.
