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Yellow Corp (YELL 1.83%)
Q3 2021 Earnings Call
Nov 03, 2021, 5:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good afternoon, everyone, and welcome to Yellow Corporation's third quarter 2021 earnings call. All participants will be in a listen-only mode. After today's presentation, there will be a question-and-answer session. Please also note, today's event is being recorded.
At this time, I'd like to turn the conference call over to Tony Carina, vice president of investor relations. Sir, please go ahead.
Tony Carreno -- Vice President, Investor Relations
Thank you, operator, and good afternoon, everyone. Welcome to Yellow Corporation's third quarter 2021 earnings conference call. Joining us on the call today are Darren Hawkins, chief executive officer; Dan Olivier, chief financial officer; and Darrel Harris, president. During this call, we may make some forward-looking statements within the meaning of federal securities law.
These forward-looking statements and all other statements that might be made on this call, which are not historical facts, are subject to uncertainty and a number of risks and therefore actual results may differ materially. The format of this call does not allow us to fully discuss all of these risk factors. For a full discussion of the risk factors that could cause the results to differ, please refer to this afternoon's earnings release and our most recent SEC filings, including our Forms 10-K and 10-Q. These items are also available on our website at myyellow.com.
Additionally, please see today's release for a reconciliation of net income or loss to adjusted EBITDA. In conjunction with today's earnings release, we issued a presentation, which may be referenced during the call. The presentation was filed in an 8-K, along with the earnings release, and is available on our website. I will now turn the call over to Darren.
Darren Hawkins -- Chief Executive Officer
Thanks, Tony, and good afternoon, everyone. Thank you for joining our call. Before I discuss Q3, I would like to recognize and thank our nearly 30,000 employees. Truckers are heroes, and they continue to rise to the challenge and provide essential freight transportation services to the customers and communities we serve.
Our employees are an essential piece of the U.S. supply chain, and I am grateful for their efforts. Turning to Q3. We reported adjusted EBITDA of 94.4 million, a greater than 50% increase compared to a year ago. We are executing our yield strategy that is not only benefiting the company by improving the quality and profitability of the freight flowing through our more than 300 terminals but it is also helping us manage through the industrywide shortage of qualified drivers and dockworkers in addition to purchase transportation headwinds.
The strong pricing trends that we saw in Q2 gained momentum during Q3 and led to a year-over-year increase in LTL revenue per hundredweight, including fuel of 20.7%. Favorable year-over-year pricing trends have carried into Q4. For the month of October, Yellow average between 9% and 10% on contract negotiations. The freight backdrop remains strong, driven by continued consumer and business demand in addition to a limited ability to expand capacity across the supply chain. As we look ahead, demand for the valuable capacity and services we provide to the U.S.
economy is poised to remain at an elevated level into 2022. Although our year-over-year LTL tonnage per day decreased in Q3, let me be clear that our long-term strategy is to grow the business. This incredibly strong freight cycle is a tailwind as we expedite the culling of less profitable freight from the network and simultaneously execute a multiyear transformation to One Yellow. We remain on schedule to have all of our companies on a single operating system across the network, which is the technology linchpin for One Yellow. During Q3, Reddaway was converted and is now operating on the One Yellow technology platform, joining YRC Freight and New Penn. We also expect to convert Holland around the end of this year.
When completed, this will be the cornerstone of our fully integrated network, and it will allow us to continue streamlining our operations. Effective Tuesday of next week, we will rebrand HNRY Logistics as Yellow Logistics to align with the journey to One Yellow. The change is customer-focused and will allow them to ultimately work with one brand across all of our extensive core LTL resources, capabilities, and multimode logistics solutions. Through the end of Q3, we have acquired a majority of the equipment expected in our 2021 capital expenditures plan. We placed the orders for much of the new equipment in 2020, which minimize significant delays in deliveries this year.
During the first three quarters of 2021, we have acquired more than 2,100 tractors, 2,300 trailers, and 600 containers. Not only are these investments having a positive impact on the age of our fleet but, over time, we expect them to mitigate maintenance expense and help our sustainability efforts to enhance safety and improve fuel efficiency. I will now turn the call over to Dan who will share additional details about the quarter.
Dan Olivier -- Chief Financial Officer
Thank you, Darren, and good afternoon, everyone. For third quarter 2021, operating revenue was 1.3 billion, an increase of 10%, compared to 1.18 billion in 2020. Operating income was 48.4 million, compared to 19.4 million in the prior year. Adjusted EBITDA for the third quarter 2021 was 94.4 million, compared to 62 million in the third quarter 2020.
Adjusted EBITDA for the last 12 months was 248.4 million as of the end of the third quarter. Our revenue growth of 10% in the third quarter reflected a year-over-year LTL tonnage per day decline of 9.4%, driven by a 6.8% decrease in LTL shipments per day and a 2.8% decrease in LCL weight per shipment. Sequential LTL tonnage per day trends compared to the prior year were as follows: July down 5.7%, August down 8.5%, and September down 13.4%. On a preliminary basis, October LTL tonnage per workday was down around 10%. Including fuel surcharge, third quarter LTL revenue per hundredweight was up 20.7%, and LTL revenue per shipment was up 17.3%, compared to the prior year. Excluding fuel surcharge, LTL revenue per hundredweight was up 15.6%, and LTL revenue per shipment was up 12.4%. Our near-term focus on prioritizing yield over volume, along with the execution of targeted pricing strategies to address unprofitable freight in our network and to mitigate our highest cost purchase transportation expenses, were key to our improved performance in Q3.
PT expenses as a percentage of revenue has decreased from 16.7% in Q1 to 16% in Q2, and were 15.4% in Q3. During the quarter, we saw a sequential improvement in adjusted EBITDA, operating income, and operating ratio, culminating in September being the best performing months during the quarter and thus far in 2021. Total liquidity at the end of the third quarter was 409 million, compared to 454 million at the end of the third quarter 2020. And total capital expenditures for the third quarter were 97 million, compared to 17 million a year ago. Year-to-date, capital expenditures through the third quarter were 443 million. And we still expect total capital expenditures for 2021 to be in the range of 480 million to 530 million.
Also pertaining to liquidity, during 2020, we deferred payment of $85.6 million for certain payroll taxes under provisions of the CARES Act. As a reminder, half of that deferral, 42.8 million, comes due and will be paid in December of 2021, and the other half will be due in December of 2022. With that, I will turn the call over to Darrel.
Darrel Harris -- President
Thank you, Dan, and good afternoon, everyone. Since the beginning of the year, we have worked to reduce the reliance on purchase transportation expense, in particular, the use of local cartridge and over-the-road PT. Additional actions we've taken include purging the network of short-term rentals as we acquired newer equipment and adjusting our line home network to minimize the use of more expensive purchase transportation in certain lanes. As you heard from Dan, these efforts have allowed us to reduce PT spend as a percentage of revenue even as we continue to experience strong demand and a backlog U.S. supply chain.
PT is our second-largest expense category outside of salaries and wages, and we will continue to closely manage to choose. Another area of emphasis has been the enhancement of our hiring and retention strategies. We remain committed to our long-term strategy to grow our own safe drivers. Our 16 Driver Academy sites were fully utilized in Q3 with a record number of participants in the program. In addition, we have held 127 hiring events and 14 job fairs across the country year to date.
And starting this winter, we are launching an exciting new recruiting effort called drive for diversity where we will focus our efforts on job seekers in underserved communities. With the growing need for skilled labor in our country, we intend to be on the forefront to attract talented individuals that may have never worked in trucking, including women, minorities, and younger people. As you heard from Darren, we are executing on our transformation strategy as we unite our companies to become One Yellow. As we combine them, we are automating, centralizing, and standardizing our operations across the business. We are well on our way to becoming a super-regional carrier that will enhance the value proposition for our customers by getting faster, creating more next-day lanes, and offering regional service in new locations. When the journey is complete, we will go to market as One Yellow, a super-regional carrier, laser-focused on enhancing the customer experience and growing our business. In closing, we are making progress, and our team of over 30,000 freight professionals is moving the company in the right direction.
We are in one of the most unique and challenging supply chain environments that we have ever seen. Yet, our employees remain focused on meeting the needs of our customers while maintaining steady progress on our journey to One Yellow. I will now turn the call back over to Darren for some closing comments.
Darren Hawkins -- Chief Executive Officer
Thank you, Darrel. I am proud of the progress we made in Q3. And I am confident that the transformation to One Yellow positions us for continued operational and financial improvement in the future. We have the right team at Yellow to operate a super-regional LTL network that safely meets our customers' needs with speed, reliability, and quality.
Thanks for your time this afternoon. We would now be happy to answer any questions that you may have.
Questions & Answers:
Operator
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Our first question today comes from Jack Atkins from Stephens. Please go ahead with your question.
Jack Atkins -- Stephens Inc. -- Analyst
OK, great. Darren, Darrel, Dan, congratulations on a great quarter. Good afternoon.
Darren Hawkins -- Chief Executive Officer
Thank you, Jack. Good afternoon to you.
Dan Olivier -- Chief Financial Officer
Afternoon Jack.
Jack Atkins -- Stephens Inc. -- Analyst
All right. Well, I guess maybe if I could start, you know, Darren or Darrel, whoever would like to take this, and maybe you'd both like to address it. But, you know, obviously, as we sort of look out here over the next, you know, several quarters, it feels like there's a lot more to come with One Yellow and that One Yellow initiative as you guys combined, you know, your operating entities on the asset base side. You know, I would be curious if you could maybe talk about sort of what inning are you in, in terms of implementing One Yellow? I know you have one more operating company to go by the end of the year, but how much of the improved performance that you've seen over the last several quarters is related to that initiative may be beginning to take hold? And, you know, is it really sort of more 2022 that you think you're going to start seeing the efficiencies from that begin to show up in the P&L?
Darren Hawkins -- Chief Executive Officer
Jack, I'll start with that and then allow Darrel to wrap it up. I would say, we're in the sixth inning. The longest and most difficult part of One Yellow is the technology transition. You know, we started that several years ago. And working through that, I made the commitment that we would not allow our customers to have any negative impact through that process.
So, we've been very stable, focused, and paced as we moved each company over to the Yellow technology. That has gone very well. I'm proud to say that we're right at the end of that process as we're doing Holland as we speak, and we'll wrap that at the end of the year. When I say it's the linchpins for the entire One Yellow piece, that's very accurate because that one-technology base allows us to operate the network as one as well. So, this journey including -- included launching an individual brand that was Yellow and is Yellow for all of the operating companies moving forward.
It also required us moving the sales force, the pricing teams, all that into a combined entity that we've been able to do. When you talked about how much of the improvement in 2021 came from that, naturally yield has been king. The work that our pricing teams have done, and synchronizing all of our pricing across all of these companies has really shown through and also contributed greatly to our improved performance and that staircase of financial improvement that I've been talking about for the last several quarters. So, we got a lot of this still in front of us. The opportunity certainly lies within our network changes. Darrel and his team are starting the ZIP code changes, which will allow us to launch into removing the redundancies in our network.
And I'll let Darrel pick it up there and talk a little bit about what's coming.
Darrel Harris -- President
Thanks, Darren, and good afternoon, Jack. Good to speak with you again. To add to what Darren is saying, I think our team is super excited about the fact that we're on schedule, but the technology transformation, that piece is key, as Darren has already mentioned. But when we look forward into '22, we get excited about the opportunity to leverage that platform to drive better asset utilization. When you think about our employees, our dockworkers, our drivers, but also our facilities and equipment, a lot of the things that drive cost in a capital-intensive environment that we live in, we get very excited when we think about those synergies that can be created. And so, we are spending a lot of time, as we speak, focusing on exactly how that will roll out because it really is about aligning our line haul network to gain those synergies when we began to streamline the network as one consolidated company.
But then, the additional pickup and delivery operations that we'll also be streamlined going forward, there's a tremendous amount of opportunity that lies ahead.
Darren Hawkins -- Chief Executive Officer
And in that process, Jack, I'll close it with, we're not giving up any geography, we're not giving up any capacity. From a physical plant footprint, we're currently at 317 terminals, and the ones that we could operate together, we've already made those changes. So, we're in a good position for the setup and also driving the customer experience that started this process from the beginning.
Jack Atkins -- Stephens Inc. -- Analyst
OK. No, that's all really helpful. I guess maybe for a follow-up question then. I guess maybe to direct this to Dan if he'd like to take it.
But, you know, Dan, I guess, just trying to think through, you guys have been able to outperform normal seasonality certainly in up --in the third quarter. You know, as you think about the operational changes that had been made here, the pricing and yield momentum in the business, you know, how do you think about all that in the context of normal seasonal operating ratio progression? I know seasonality sometimes it's kind of hard to overcome, you know, within a business, so can you maybe talk about that you feel like this, all this momentum in the business can help you outperform normal seasonality from the third quarter to the fourth quarter, how are you thinking about that?
Dan Olivier -- Chief Financial Officer
Well, yeah, thanks, Jack, for the question. Of course, we don't give any specific guidance or targets around that. But, you know, first, let me say that I'm pleased that we were able to outperform our historical sequential trend from Q2 to Q3, as you pointed out, you know, really, by a couple of percentage points. Historically, our operating ratio has deteriorated from Q2 to Q3 by roughly 50 basis points in this year.
It actually improved by 170 basis points. And I've mentioned in my opening comments that that was largely driven, you know, by executing our strategy of prioritizing yield over volume and focusing on our account-level profitability. Now, when I think about margins moving from Q3 to Q4, and you call it out, it's pretty tricky, especially the seasonality of weather and everything else. But, you know, we historically see sequential or degradation of around 200 basis points, and that's driven mostly by the seasonal volume declines, specifically in the month of December. So, even though we saw a nice beat versus our historical sequential trends from Q2 to Q3, I really would expect that in Q4, we would -- with all of the challenges that come with Q4 that are always there, I would expect us to follow that historical sequential change from Q3 to Q4.
Jack Atkins -- Stephens Inc. -- Analyst
OK. No, that helps. Thank you for that, Dan. I guess maybe the last question before turning it over.
You know, we're getting toward the end of earnings season and a major topic of discussion, I think, on almost every single conference call, has been the vaccine mandate and the potential impact that could have on capacity within the transportation markets more broadly. You know, Darren, as you sort of think about -- I know it's a little bit of a touchy subject, but I would be curious if you had any thoughts on that? And, you know, I know we're still waiting on a formal rule from OSHA, but would just be curious on your views there.
Darren Hawkins -- Chief Executive Officer
Certainly, Jack. Correct, Yellow is waiting for guidance from OSHA on the emergency transportation standard. We're communicating with our employees daily, encouraging vaccination, but certainly not mandating at this point. We are collecting the vaccination status of our employees on a centralized repository as part of our preparedness for compliance.
Additionally, at Yellow, we've got a long-standing COVID-19 internal task force coordinator that's been in place and he oversees all of our compliance efforts. And then lastly, the federal contractor guidance from the Safer Federal Workforce Task Force is also being reviewed closely by us. And right now, that compliance provision is triggered by federal agency contract renewals, which we have not had any. So, like many of the others that have spoken publicly on this, we are anxiously awaiting and also concerned around the implementation period. So, we're hoping for certainly some time to comply with that.
But we will comply with the federal government directions at the appropriate time and when we have clarification.
Jack Atkins -- Stephens Inc. -- Analyst
Any sense for the impact that could maybe have on your capacity, and maybe any contingency plans on how you would deal with that? I know there are a lot of uncertainties around it.
Darren Hawkins -- Chief Executive Officer
Well, we have -- with what I've seen so far, and also the unofficial pieces that we've seen in the media and others, I think it comes down to whether there's a testing component or whether it's a mandate. With a testing component, you know, certainly, there's going to be costs and other things involved with that. But I believe we can do what we've always done and work through this with our employees in a very straightforward and transparent manner to handle. But we would hope that it comes with the testing piece, and not any mandates that have strict dates to go by that could create issues in the supply chain for the entire United States from my view.
Jack Atkins -- Stephens Inc. -- Analyst
OK. No, that's a really helpful color. Thanks so much for the time.
Darren Hawkins -- Chief Executive Officer
Thank you, Jack.
Operator
Our next question comes from Scott Group from Wolfe Research. Please go ahead with your question.
Scott Group -- Wolfe Research -- Analyst
Hey, thanks. Good afternoon. So, I just want to start -- you talked about some deferred costs from '20 and to '21 and '22. Can you just walk through those numbers again? Is that -- will that be reflected in the EBITDA in Q4?
Darren Hawkins -- Chief Executive Officer
Good afternoon. That's the CARES Act deferral that you're speaking of. I'll let Dan take that.
Dan Olivier -- Chief Financial Officer
Yes, Scott. So, during 2020, the CARES Act allowed companies like us to defer the FICA taxes for about a nine-month period. So, that total amount that we deferred was 85.6 million during 2020. Half of that is due at the end of 2021, which for us is 42.8 million.
And then the other 42.8 million is due at the end of 2022.
Scott Group -- Wolfe Research -- Analyst
And that shows up in salaries costs, and so in EBITDA?
Dan Olivier -- Chief Financial Officer
No, no, we expense it all along the way, so it's sitting on the balance sheet right now as a liability.
Scott Group -- Wolfe Research -- Analyst
OK.
Dan Olivier -- Chief Financial Officer
It's just a cash drain in Q4 this year and next year.
Scott Group -- Wolfe Research -- Analyst
Got you. OK. Perfect. The October tonnage down 10%, can you just talk about the sequential from September to October that you saw? And then, I think you had a comment that September was the best of our best EBIT month of the year so far.
Did you get -- did you see further improvement in October?
Dan Olivier -- Chief Financial Officer
Yeah, the answer is second piece first. We don't have October's final results finished yet, so I'm not going to really talk -- speak to that too much, but I'll go right to your tonnage question. You know, historically LTL tonnage per day from Q2 to Q3, let me start there, decreases by about 2%, and this year decreased by 6.8%. You know, our strategy of prioritizing yield over volume and addressing the unprofitable freight in our network did lead to those higher tonnage declines in our historical average. However, that strategy is exactly what allowed us, as I mentioned, to outperform our historical sequential change in an operating ratio.
So, when I think about volumes for Q4, you know, historically, our LTL tonnage per day declined sequentially by about 4%, from Q3 to Q4. And even though -- as I mentioned in my comments that October's LTL tonnage per day was down 10% year over year on a sequential basis from September to October. That was actually up 3% when historically it goes down between 3% and 4%. So, right now, all in all, you know, one month into the fourth quarter based on what I've seen so far, you know, I would say it's reasonable to expect that our sequential tonnage change from Q3 to Q4 would be in line if not a little bit better than our historical, sequential average.
Scott Group -- Wolfe Research -- Analyst
And why do you think that wouldn't translate into better-than-normal operating ratio?
Dan Olivier -- Chief Financial Officer
It's all of the unknowns that come with Q4 and the things that happen. You know, the lower volumes specifically that we see in December, you know, on a per-day basis that has an impact on profitability. And then, of course, you know, the things that are just come up in Q4, whether it starts to chime in a little bit. Whatever they may be, I just feel like at this point, it's fair to expect that our sequential change in OR would be in line with our historical average.
Scott Group -- Wolfe Research -- Analyst
OK, fair enough. And then, from a -- what's the plan with the GRI? I know some guys are pulling that forward into Q4. And then, where are you in the more broadly -- in this, "We're raising rates, we don't care about tonnage?" When do we start to care more about a balance, or is there a lot more to go on price with that regard to tonnage?
Darren Hawkins -- Chief Executive Officer
Scott, on the GRI, we're taking ours Monday, this coming Monday the 8th at 5.9%. So, that'll be across all the companies. So, Yellow will do a 5.9% on the 8th. On the second part, you know, we're focused on account-level profitability.
And when we look at that and we look at the tonnage declines that we saw in Q3, the reason I'm comfortable with that is it was in a handful of accounts, and those are in our corporate channel, which in the past has been one of our least profit -- has been our least profitable channel, but we're correcting that quickly. As you know, a large part of our annual revenue comes from those contract negotiations, and the most egregious ones we've already handled. But we still got all the ones that we normally do that are evenly spaced each quarter of the year. Those are still in front of us. I feel really good about how those negotiations are going.
I think the tonnage fees levels out, if we're still down, that is OK from the way we're managing the network. You heard Darrel mention the purchase transportation coming down steadily each quarter of the year. I like reducing our exposure to that. But also, we have capacity available for profitable freight. We're the second-largest LTL carrier in North America with 317 terminals.
And we're available for that growth as long as profitable and will be calculated in what we do. But the results in September just prove to me that we're on the right track, we have the right strategy, and I will certainly be very stable in my outlook moving forward on profitability.
Scott Group -- Wolfe Research -- Analyst
OK. And then last one just quickly, terminal count, where you are today, where do you think you're going?
Darren Hawkins -- Chief Executive Officer
We're at 317 terminals right now. As I mentioned earlier, we're talking about One Yellow. The ones that we could put together we've already done. This number will change slightly, but it'll land around 308 to 309 by the end of '22.
So, there's not a lot more change coming in our physical footprint. We're going to protect our capacity and our geography.
Scott Group -- Wolfe Research -- Analyst
Thank you, guys. I appreciate it.
Darren Hawkins -- Chief Executive Officer
Thank you.
Operator
And our next question comes from Jeff Kauffman from Vertical Research Partners. Please go ahead with your question.
Jeff Kauffman -- Vertical Research -- Analyst
Thank you very much, and congratulations, terrific quarter. Thanks. I was just kind of curious in the tonnage decline that you saw, was any of it tied to industries that might be under exceptional pressures, say, for example, automakers, things like that versus say, just general business levels down?
Darren Hawkins -- Chief Executive Officer
No, it's not primarily in one bucket other than being corporate bucket. It is in those larger shippers, and it comes down to lane level. I said account-level profitability, and that's certainly the case. But as you know, the sophistication of our pricing tools now, and especially since we put our pricing teams together, and we're looking at this from a One Yellow lens, we're able to see the business across all facets and all length of hauls, and fine-tune that and make sure that what we're moving is the best right for Yellow.
And, Jeff, as you know, and I've heard you say there is no bad freight, there's just bad pricing, and we're correcting that quickly.
Jeff Kauffman -- Vertical Research -- Analyst
In your 10-Q, you noted that you were able to control labor expense as a combination of an increased pay to employees and then you utilize some furloughs and reductions were necessary. How much growth could you accommodate and bring back people off furlough before you had to go out and add new bodies?
Darren Hawkins -- Chief Executive Officer
We don't have any union employees on furlough. So, we've got the full team in place and we're hiring daily. As Darrel mentioned, our hiring efforts, I'm excited about the 16 Driving Academy and the attention we're putting around that. And my plan is to continue that hiring even through Q4 and Q1 when we normally don't operate all of our stores because any extra labor that we can bring home, we'll use that to reduce our purchase transportation exposure.
Jeff Kauffman -- Vertical Research -- Analyst
OK. Thank you. Just two other quick notes. So, congratulations, you brought in 2,100 tractors, 2,300 trailers and containers.
I know we'd always talked about the idea that this new equipment is replacing some very old equipment in the network, and there should be pretty nice maintenance savings. As a lot of these equipments come on in the last say, you know, six, eight months, how does that maintenance benefits phase-in, and then kind of what inning are we in terms of seeing that benefit?
Darren Hawkins -- Chief Executive Officer
Yeah, Dan?
Dan Olivier -- Chief Financial Officer
Yeah. Jeff, I'll start and then I'll kick it to Darrel for some more commentary. So, in terms of what inning, we've taken delivery of all the new equipment. That's obviously the first piece, and that goes into service right away.
So, the benefit we expect to see from the new tractors, whether that's lower maintenance costs or better fuel efficiency, we start seeing that on day one. And then there's that lag time that we're probably sixth, seventh inning, and of purging all of the old stuff. And along with that comes the cost of getting that to where it needs to be, pulling it out of service, all of those types of things. But, you know, we should be completed with that replacement exercise here in the next three, four, or five months or so. It does take some time to work through that, and there's some cost associated with it. But we absolutely are seeing the financial benefit from running all of the new tractors and trailers.
Jeff Kauffman -- Vertical Research -- Analyst
OK. And similarly, as you finish the Holland integration, how much expense starts to drop off in terms of the One Yellow coordination and integrations?
Darren Hawkins -- Chief Executive Officer
Jeff, I haven't given any guidance around that. But the exciting piece about having the technology complete at the end of this year is that gives us the visibility to really do the network pieces that we want to do. As you know, we've already made the contractual changes in our labor agreements to accommodate that. So, the only thing in our way was the technology piece and having the visibility of all companies through one lens.
We've got that as of the end of the year. So, we get to start doing the ZIP code rationalization. And where we've got two facilities in the same city, we're able to run those as north, south, east, west. We will not be sending two drivers, two tractors, two trailers to the same customer on a daily basis. And then, not only frees up the asset utilization that Darrel spoke to.
It takes the most important piece of our network, and that's our drivers, and makes them more productive and available. So, this is a great opportunity for us. We're excited about it. And when I have spoken about on the financial side of the house, is that it's a staircase of financial improvement along the way. I think the last two quarters, we've shown math, and that's what I want to continue to demonstrate and communicate, and be as transparent as I can along that way.
But we're -- it's a show-me story and we're trying to prove that each quarter as we move along.
Jeff Kauffman -- Vertical Research -- Analyst
All right, thank you. And last one, you mentioned you've taken most of the equipment a little bit more coming into the fourth quarter. We're now at that time of year where we're capital budgeting for the new year. How do you think about going forward cap spend now that this big, you know, bubble has come through over the past year and a half? Do we think about it as "I want to bring in X percent of equipment?" Do we think about it as "I want to spend X amount of dollars?" How should we think about your capital budget as we move forward?
Darren Hawkins -- Chief Executive Officer
Yes. This is Darren and I love trucks. I'll just start by saying that. But I'll let my CFO give you the -- our thought process for 2022.
Jeff Kauffman -- Vertical Research -- Analyst
Thank you.
Dan Olivier -- Chief Financial Officer
Yeah, Jeff. So, we haven't finalized our 2022 capex plans quite yet. But as we have discussed before, you know, 2021 elevated capex levels that were supported by the U.S. Treasury trust fee funds allowed us to make almost two years worth of equipment refresh inside of a 12-month period.
So, going forward, as we think about, you know, we plan on reverting back to what a more normalized equipment refresh cycle would be. So, it's reasonable -- even though we're not given the dollar guidance quite yet, it's reasonable to expect that our capex for 2022 would be significantly lower than 2021.
Jeff Kauffman -- Vertical Research -- Analyst
OK. Well, congratulations and thank you.
Darren Hawkins -- Chief Executive Officer
Thank you.
Operator
And ladies and gentlemen, at this time, we'll end today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks.
Darren Hawkins -- Chief Executive Officer
Thank you, operator. And thanks again to everyone for joining us today. Please contact Tony with any additional questions that you may have. This concludes our call. And operator, I'm turning the call back to you.
Operator
[Operator signoff]
Duration: 37 minutes
Call participants:
Tony Carreno -- Vice President, Investor Relations
Darren Hawkins -- Chief Executive Officer
Dan Olivier -- Chief Financial Officer
Darrel Harris -- President
Jack Atkins -- Stephens Inc. -- Analyst
Scott Group -- Wolfe Research -- Analyst
Jeff Kauffman -- Vertical Research -- Analyst
