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DATE
Wednesday, Nov. 5, 2025 at 9:30 a.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Judy R. McReynolds
President and Chief Operating Officer — Seth K. Runser
Chief Financial Officer — J. Matthew Beasley
Chief Commercial Officer — Eddie Sorg
Chief Customer Solutions Officer — Matthew R. Godfrey
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RISKS
Management stated, "For the fourth quarter, we anticipate an operating loss in the range of $1 million to $3 million," reflecting expected seasonality and current market dynamics in the Asset-Light segment.
J. Matthew Beasley said, "a little bit softer macro backdrop, than we were expecting or maybe had seen historically," linking this to continued softness in manufacturing and secondary impacts from the government shutdown.
Sequential shipment declines in October were steeper than historical averages, with Seth K. Runser noting, "normally, we step down about 3% on shipments. We are seeing closer to about a 5% reduction."
TAKEAWAYS
Consolidated Revenue -- Consolidated revenue was $1 billion for Q3 2025.
Non-GAAP Operating Income -- Non-GAAP operating income from continuing operations was $50 million, down from $55 million last year, with the Asset-Based segment and Asset-Light segment due to volume growth, margin improvement, and cost reductions.
Adjusted Earnings Per Share (EPS) -- Adjusted earnings per share were $1.46.
Asset-Based Segment Revenue -- $726 million in revenue for the Asset-Based segment, up 2% on a per-day basis.
Asset-Based Non-GAAP Operating Ratio -- 92.5% non-GAAP operating ratio for the Asset-Based segment, worsening by 150 basis points year over year but improving 30 basis points sequentially (non-GAAP).
Daily Shipments (Asset-Based) -- Increased 4% compared to last year, while weight per shipment fell 2%, yielding a 2% rise in daily tons.
Cost Per Shipment (Asset-Based) -- Reflecting ongoing productivity gains.
Cartage and Purchased Transportation Costs -- Returned to normal in September after above-average July and August activity.
Deferred Pricing Increases -- Achieved average contract renewals of 4.5%, cited as "a strong outcome" according to J. Matthew Beasley despite customer focus on cost reduction.
Revenue per Hundredweight -- Affected by mix and weak manufacturing shipment volumes.
October Shipments Trends (Asset-Based) -- weight per shipment decreased 2%, and daily tonnage declined 1%.
Asset-Light Segment Operating Income -- $1.6 million of non-GAAP operating income, reversing a $4 million non-GAAP operating loss in the prior year due to volume growth, margin improvement, and cost reductions.
Asset-Light Shipments per Day -- Set a record high, with lower revenue per shipment due to smaller sizes and managed business mix.
SG&A Cost per Shipment (Asset-Light) -- Representing the lowest level in segment history.
October Asset-Light Revenue -- Daily revenue declined 9% year over year, primarily from lower revenue per shipment in a weak freight market.
Asset-Light Productivity -- Achieved a record 33% improvement in shipments per person per day.
Q4 2025 Asset-Light Guidance -- Management anticipates an operating loss of $1 million to $3 million, based on seasonal and macro conditions.
Capital Expenditure Guidance -- Revised 2025 net capex target to $200 million, down from $225 million-$275 million, driven by $25 million in real estate sale proceeds and $16 million gain in Q3.
Shareholder Returns -- Returned more than $66 million via repurchases and dividends in the first nine months, with share repurchase authorization raised to $125 million in September.
Liquidity Position -- Approximately $400 million in available liquidity.
SUMMARY
ArcBest (ARCB +0.32%) reported softening year-over-year financial metrics, with management emphasizing strong cost controls, deferred pricing increases, and productivity improvements across both segments despite macro and demand headwinds. Strategic capital deployment included real estate optimization, a lower capex outlook, and increased share repurchase authorization, reflecting a disciplined approach in a volatile freight environment. Looking ahead, leadership transition and implementation of advanced productivity initiatives underpin management’s confidence in long-term profitability and flexibility to navigate continued industry cyclicality without reliance on near-term demand recovery.
Management highlighted ongoing cost actions and network efficiency projects, specifically referencing advancements in technology, labor planning, and route optimization as levers to offset inflation and persistent softness in weight per shipment.
Direct comments confirmed that new core LTL business was onboarded as part of targeted commercial initiatives, contributing to volume gains but with a changing business profile impacting revenue per shipment and operational cost structure.
Asset-Light improvements were tied to a higher proportion of managed business, progress in automation, and successful adoption of AI for key workflows; productivity reached a new segment record, but management cautioned that the 9% year-over-year decline in October Asset-Light daily revenue signals ongoing market weakness.
The company’s capacity footprint expanded through site acquisitions related to the Yellow Corporation bankruptcy, aimed at enhancing operational reach without materially increasing base costs.
Executives stated that lower housing demand and manufacturing softness continue to drag on weight per shipment, but normalized cartage and transportation costs and renewal pricing increases are expected to support results as market conditions eventually stabilize.
INDUSTRY GLOSSARY
LTL (Less-Than-Truckload): Freight service handling shipments that do not require a full truck, allowing multiple shippers' goods to share trailer space and reduce costs.
Operating Ratio (OR): A key efficiency metric in transportation, calculated as operating expenses divided by operating revenues; lower ratios indicate greater profitability.
Revenue per Hundredweight: Average revenue earned for every 100 pounds of freight, commonly used to track yield trends in LTL freight markets.
SG&A: Selling, General, and Administrative expenses, measuring overhead and corporate costs outside of direct operating expenses.
Managed Business: Logistics services in which the company oversees and coordinates supply chain activities for shippers, often under long-term contracts.
Full Conference Call Transcript
J. Matthew Beasley: Consolidated revenue was $1 billion, down slightly year over year. Non-GAAP operating income from continuing operations came in at $50 million compared to $55 million last year. Our Asset-Based segment saw a $10 million decrease in non-GAAP operating income, while the Asset-Light segment delivered $1.6 million of non-GAAP operating income, an improvement of nearly $6 million over last year. Adjusted earnings per share were $1.46, down from $1.64 in 2024. Turning to our Asset-Based business, third-quarter revenue was $726 million, representing a 2% increase on a per-day basis. ABS non-GAAP operating ratio was 92.5%, an increase of 150 basis points over 2024 and an improvement of 30 basis points sequentially.
In the third quarter, daily shipments grew by 4%, while weight per shipment decreased by 2%, resulting in a 2% increase in tons per day compared to last year. This growth was driven in part by onboarding new core LTL business through the commercial initiatives Seth mentioned. However, softness in industrial production and housing continues to pressure weight per shipment, reducing revenue per shipment without corresponding cost decreases. To support shipment growth, we added labor conservatively and supplemented network capacity with purchased transportation and local cartage during peak vacation season. Annual increases in contracted union labor rates combined with higher purchase transportation spending and equipment depreciation drove operating expenses higher.
Despite these headwinds, cost per shipment improved by 1% year over year, reflecting ongoing productivity gains. Additionally, cartage and purchased transportation costs returned to normal levels in September after elevated activity in July and August. We remain disciplined in our pricing strategy, securing deferred increases averaging 4.5%, a strong outcome in a market where many shippers are focused on cost savings. This underscores the strength of our customer relationships and the differentiated value we provide. Revenue per hundredweight declined 1% year over year, both including and excluding fuel surcharges, impacted in part by fewer shipments in the manufacturing vertical.
Looking at October trends, daily shipments grew 1% year over year, while weight per shipment decreased 2%, and daily tonnage levels declined 1%, approximately 400 basis points sequentially. Moving on to the Asset-Light segment, shipments per day reached a record high, up 2.5% from the prior year, which has smaller shipment sizes and lower revenue per shipment levels. SG&A cost per shipment decreased over 13%, reaching the best level in Asset-Light history, driven by productivity initiatives and a higher mix of managed business with a lower cost to serve. Shipments per person per day also hit an all-time high.
Non-GAAP operating income of $1.6 million was a significant improvement compared to last year's non-GAAP operating loss of $4 million, driven by volume growth, margin improvement, and cost reductions. In October, Asset-Light daily revenue was down 9% year over year, primarily due to lower revenue per shipment from the soft freight market. Managed continued to show strength, though its smaller shipment sizes contributed to lower revenue per shipment. Shipment growth was strong through the third quarter. This slowdown is typical for this time of year, as the second and third quarters generally represent peak shipping periods for our customers.
For the fourth quarter, we anticipate an operating loss in the range of $1 million to $3 million, reflecting seasonality and current market dynamics. We remain focused on managing costs and positioning the segment for long-term profitability. We continue to take a balanced long-term approach to capital allocation. For 2025, we have updated our net capital expenditure guidance to approximately $200 million, a decrease from the previous range of $225 million to $275 million. This reduction reflects $25 million in net proceeds from real estate sales completed in the third quarter, which generated a pretax gain of approximately $16 million.
These properties were replaced by new locations gained through the yellow option, sites that strengthen our network and enhance our operational footprint. In the first nine months of 2025, we returned over $66 million to shareholders through share repurchases and dividends. In September, our Board increased the company's share repurchase authorization to $125 million, a clear sign of confidence in our strategy and long-term outlook. We will remain opportunistic with repurchases based on share price while prioritizing high-return organic investments and maintaining prudent leverage. Our balance sheet remains strong, with approximately $400 million in available liquidity and a net debt to EBITDA ratio well below the S&P 500 average. While external conditions remain dynamic, ArcBest is well-positioned for the future.
We are focused on what we can control, operating with discipline, and making smart strategic decisions to strengthen our business and create long-term value. Before I turn the call back to Judy, I want to recognize her leadership. Judy has played a pivotal role in shaping ArcBest into the company it is today, and her vision and commitment have set a strong foundation for our future. On behalf of the entire team, thank you, Judy. It has been an honor to work alongside you. Looking ahead, I am excited to partner with Seth as we build on that foundation and continue driving our strategy forward. Judy, thank you again. I will now turn the call back to you.
Judy R. McReynolds: Thank you, Matt. Before we move to Q&A, I want to leave you with this. ArcBest's greatest strength has always been its ability to adapt and lead through change. That resilience transformed us from a small local freight hauler into the global logistics company we are today, and it will continue to drive our success for years to come. As I step away from my role as CEO, I do so with complete confidence in our team and in the strategic path we have set. This company is in great hands, and I look forward to watching its next chapter unfold. To our analysts and shareholders, thank you for your trust and partnership.
To our employees, thank you for your dedication and resilience. And to our customers, thank you for choosing ArcBest. It has truly been an honor to serve as CEO. With that, let us open the call for your questions. At this time, I would like to remind everyone to limit yourself to one question per person. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jason Seidl with TD Cowen. You may go ahead.
Jason Seidl: Judy, just wanted to say congratulations on a great career at ArcBest.
Judy R. McReynolds: Thank you, Jason.
Jason Seidl: And wanted to tell you what a pleasure it was working with you and wish you all the best going forward. I want to jump a little bit, guys, to sort of the guide in 4Q and then maybe what that means to rolling into '20 because it is obviously a lot weaker than I think I would have expected. Is there anything going on seasonally that you think would be sort of abnormal? Like, are you more impacted by the government shutdown than maybe one would think? Or is this something where normal seasonality starts you out a little bit on the year-over-year decline side in the '26?
Seth K. Runser: Hey, Jason. This is Seth. Thanks for the question. So we did see some softness in October, and that is similar to what our peers have been reporting. We always see that step down sequentially from the third quarter to the fourth quarter, but it has been below our normal expectations. As we move through the month, normally, we step down about 3% on shipments. We are seeing closer to about a 5% reduction. Then when you think about the way the calendar falls in November with only 18 business days and the holidays, that just creates some challenges from a top-line perspective. The weakness in October we really attribute to multiple factors.
You saw PMI was released on Monday that continued to be below fifty. We heard the stories about inventory pull-ahead in July, and that might be a factor. The continued weakness in the market just impacting weight per shipment, which we have been discussing throughout this freight recession. And then there are secondary impacts of the government shutdown. The only area where we really do a good amount of government business is on the asset light, on the side with Panther. So we are seeing that impact on asset light results in the guide we gave there. But we cannot point directly to asset-based impact.
But the government is the largest employer in The United States, so I would imagine there are some secondary impacts there. So we are taking action to reduce our costs and align resources with the level of revenue that is given. We expect that to continue throughout the fourth quarter. That is something we have done through our entire history as we have navigated these cycles. Cartagena PT, what we did in September to reduce that cost is a great example. So we are focused on pulling all those levers, but we are also focused on the long term and believe in our strategy and initiatives that we outlined at the beginning of the at our Investor Day last month.
We see on the growth side our core business continues to grow, the pipeline continues to be very strong. We have done a lot on the efficiency front. We are taking more cost actions as we move through the fourth quarter. Really proud of the Asset Light team and proven productivity 33%. We saw improvements in Asset Based as well. And we have a robust roadmap of future projects that we are working on, which we think is going to provide some efficiency gains in the future. So the way we built this company is to say yes to our customers, and we think we are built for any environment.
So whether it is a little bit weaker or busier, we want to say yes to customers, and that is the way we are built. So we have been doing this a long time, over one hundred years, and we have navigated this cycle very well. And we will continue to make adjustments as we move through the rest of the year and as we move into 2026.
Reed Stae: Your next question comes from the line of Reed Stae with Stephens Inc. You may go ahead.
Reed Stae: Hey, guys, thanks for taking my question and congrats, Judy, on the great career, and we are excited to see you go. Kind of following up on Jason's question, previously, you have talked about 350 basis points to 400 basis points being the normal 4Q to 1Q OR move. That would imply if you add the 400 basis points to from 3Q to 4Q, basically, that would imply you have unprofitable to breakeven LTL. If you can talk about how you expect that to progress. And then I guess also just talking on the pricing weakness here in October. I know I am sure some of that is mix-related and some of it is a declining weight per shipment.
But if you can just talk about some of the dynamics in there as well.
J. Matthew Beasley: Yeah, Reed. Hey. It is Matt. So you are right. We have talked about the 350 to 400. You know, if you were to look at just a straight ten-year history, it is more like 250 basis points, but there were some strong 4Q to 1Q moves during COVID. And so, you know, over the last few years as we have given the history, we have excluded those. I think, you know, to Seth's point, we certainly are taking a look at costs, you know, at a very detailed level. In addition to just all of the ongoing efficiency and productivity projects that we have had and have been working on.
Certainly, we are pleased with results that we have seen as we talked about with the record levels of productivity on the asset light side, just continued improvement on the asset-based side as well. And so, you know, we are continuing to make progress, and we are continuing to, you know, to identify costs and to pull those out. And so I think it is a little bit too early to say just given some of the softness that we have seen over the last few weeks. I would not say that we are necessarily expecting that to persist into the first quarter. You know, we are hopeful as we get some resolution on the government shutdown.
And as we move into the New Year and we see the impact of the recent interest rate moves, you know, we will get some improvement. On the macro. But I would say we are focused on controlling everything that is within our control on the cost side and again expect continued progress there. And more to come on what the sequential guide will look like as we move from the fourth quarter into the first quarter. Know, on your question on yield, you know, Eddie, I do not know if there is anything that you might want to add from a pricing standpoint in terms of what we are seeing.
Eddie Sorg: Yeah. I mean, that is I actually think it is improving from where we were earlier in the year. There is a lot of noise with our price metrics. You know, with account mix changes, profile changes. But, you know, we were able to, you know, post a 4.5% renewal increase, which was an improvement from the second quarter. And, really, that increase by month actually improved throughout the quarter. So we are very optimistic. We are going to continue that momentum into the fourth quarter and into 2026. So I feel better about where yield is standing right now.
Jordan Alliger: Your next question comes from the line of Jordan Alliger with Goldman Sachs. You may go ahead.
Jordan Alliger: Judy, it has been great interacting with you all these years, and best of luck going forward. I really appreciate all your time.
Judy R. McReynolds: Thank you.
Jordan Alliger: So I guess maybe a big picture question then. Obviously, it is still pretty tough out there in the freight world, as denoted by the volumes from you and your peers in October. But pricing seems to be resilient. So I guess my question is can you perhaps share some thoughts on the capacity setup when we do get to the volume inflection? From an industry perspective overall? Taking into account the yellow bankruptcy, like what are you seeing in terms of terminals sort of going into the next cycle and how it stacks up? And when we do inflect, you know, could the situation lead to, you know, what sort of price recovery if you will?
Seth K. Runser: Yes. Hey, Jordan, this is Seth. When we think about just excess capacity, there is obviously a lot of that right now in the LTL space and then truckload, with the way the market has been. From an LTL perspective, I think is where your question was coming from. Long term, we just have less capacity than we had five and even ten years ago. You look at how the yellow auction kind of played out, there is a good chunk of those facilities that left the industry. So we have been strategic with where we have invested, where we see growth, service, or efficiency opportunities. And it has not added a lot of cost to our actual base.
We have seen the productivity improvements as we have opened new facilities or expanded current facilities. So we have talked over the long term. We have a long-term network plan we have expanded by about 800 doors. And most of that work is done in the past us. So I think when the market actually inflects and we see things start to get busier, that is going to be positive for pricing because there is less capacity out there. So what I love about our company is we invest throughout cycles. So whether it is a down or up cycle, we are making strategic investments.
To position ourselves to say yes to customers, whether it is a bad market or a good market, I already mentioned. So I feel like we have been really strategic that we will be able to take advantage when the market gets better. And the relationships that we have with our customers, 80% of our revenue comes from customers over ten years. That allows us to improve our prices we deliver on the value that our customers see.
Matthew R. Godfrey: Yeah. And Jordan, this is Matt Godfrey. I would just add to build on what Seth said. We have been very strategic throughout our real estate journey with the capacity that we have added over the last few years. The yellow opportunity through their bankruptcy gave us the opportunity to speed up some of the targets that we had, but we take a continuous value.
Ravi Shanker: Your next question comes from the line of Ravi Shanker with Morgan Stanley. You may go ahead.
Ravi Shanker: Great. Thanks, everyone, and Judy. I will also echo congratulations on your retirement here, and you will be missed. Seth, maybe if you get a sense of the volume decline it is last couple of years and obviously you pointed out to the ISM being weak, etcetera. But do you guys have a sense of how much of the volume decline may potentially be cyclical versus structural in terms of LTL to TL shift or maybe some of the private guys ramping up and getting share?
And so how much of it is a structural versus cyclical maybe on that same note, in your opening remarks, you kind of spoke about of the factors that may have occurred to you in Masstio this year. Do you feel like that also is more of a cyclical or a transitory drop and you guys will rebound next year? Thank you.
Seth K. Runser: Thanks, Ravi. So when I think about what I have done throughout this year, I have spent a lot of time with customers and customers are facing just general uncertainty around tariffs and happens with interest rates and demand and everything that is going on out there. So we have tried to partner with customers if they need to increase inventory or shift where they are sourcing from. And that aligns well with our integrated approach. So this is more cyclical from our standpoint because our retention stats are really in a good spot. We have not lost customers. They are simply just shipping less, and that is what we have been talking about for the past few years.
So when we think about the opportunity that we have, we operate in markets with $400 billion worth of opportunity. So that is just a tremendous way to expand with our loyal customer base that we already have. So with the change in strategy and market approach, from a sales perspective, we continue to see our core LTL business grow managed at all-time highs we continue to make progress on our SMB strategy within truckload. So I believe that it is more cyclically related and just the demand softness throughout. And I believe strongly in what we are doing to execute to see profitable growth into the future. Then your other question about Mastio, we anticipated that might happen.
That is why we disclosed that in eight ks in August about service challenges. We were really successful with onboarding new business and we were conservative in our hiring targets. Earlier in the year. So we just did not have the staff in place to service that business the way we expected to. So I am really proud of the way the team reacted quickly. Solved those service challenges. And when we look at our internal metrics, we have improved substantially since the summer peak vacation. So and we expect that to continue because we think the better you service customers, the stronger your pricing power and retention is going to be.
And that is the type of company we are delivering a premium service for our customers.
Ken Hoexter: Your next question comes from the line of Ken Hoexter with Bank of America. You may go ahead.
Ken Hoexter: Hey, great. Good morning. Judy, again, congrats on your upcoming retirement. So this is the worst OR, I guess, the fourth quarter forecast year since the 2020 COVID lows and then going back to the if it is the fourth quarter, it is worse since going back to, I guess, the 2017. Matt, you mentioned you continue to make progress, but I am confused in the progress is. Right? So you are starting off soft on the volumes, noted a corresponding decreasing and or inability to decrease the costs. So what moves are you making to then align those costs? Is it the PP that is staying out of whack? Is it something with the extra hiring you have done?
I would just maybe try to contrast if you know that the costs are out of whack what moves can you take realign that to get the cost back down?
J. Matthew Beasley: Yes, Ken. So you know, we have a number of different initiatives that have been ongoing across the asset base. Organization, our continuous improvement initiatives and teams that have been going out across the footprint. Starting with our largest facilities, we continue to see a lot of runway with that. And certainly, we are continuing to advance our technology initiatives in a number of different ways, including around labor planning, line haul, about the benefits that we are seeing there. Our city route optimization project, which we talked. And you can see that in the numbers. I mean, we have normal typical inflation in the business.
Certainly, have seen on the depreciation front as we have replaced our fleet using our total cost of ownership model, just the increased cost that we are seeing on the equipment side has shown up in our depreciation. We know that we have just got normal increases. I on the ABS side under our union contract. And in the third quarter, we also used a little bit more cartridge and purchase transportation than normal just as we saw that volume surge. But then if you look on a cost shipment basis, we were down 1% year over year on cost per shipment.
So not only being able to mitigate the inflect effects of inflation on a year-over-year basis, but also being able to decrease the cost on a per shipment basis. So I would say, in general, we are focused on what we can control, and we expect to make continued progress on that. As we move through 2026. We certainly are seeing the same macro environment that everybody in our industry is seeing, has talked about on their calls. We are seeing show up in industry surveys. And so, certainly, that is affecting the guide that we are seeing for the fourth quarter, but know, we still you are seeing the impacts of our commercial initiatives in our results.
I mean, you still saw volume growth in October. We are still expecting to see overall volume growth on a shipment per day basis for the fourth quarter. We are taking a lot of action on the yield side that I would say has not yet fully accrued to results, we are going to expect to see the results of as we move into the first quarter of next year. So again, certainly, like we talked about, a little bit softer macro backdrop, than we were expecting or maybe had seen historically with some of the factors that Seth talked about.
Including what are likely some secondary impacts from the government shutdown, maybe some pull ahead, and just continued weakness in the manufacturing economy.
Bruce Chan: Your next question comes from the line of Bruce Chan with Stifel.
Bruce Chan: Hey, good morning, everybody. Judy, certainly been a pleasure working with you over the years and we are going to miss you, but wish you all the best here. There is a glancing reference to the supply dynamics in truckload earlier in call. So maybe I will take that one. I know that we have talked about overflow truckload in your model in the past. Maybe you can just remind us of what percentage of your business overlaps with that market? Then maybe more broadly, what are your views on that returning? And are you seeing any signs, even if early or having any conversations about that coming back?
J. Matthew Beasley: Hey, Bruce. This is Matt. So you are right. I mean, we talked about this a little bit in Investor Day just in terms of the potential that we see for back to some of the discussion about cyclicality as we think about where we have been in manufacturing housing and truckload rates. Of up to 280 basis points from macro improvement as we move from 2024 through 2028. As we think about the truckload overlap into our LTL business, we have seen correlation between the higher length of haul, so think about maybe a thousand plus miles in heavier shipments, so maybe 5,000 plus pounds.
And, you know, it is not a significant piece of our overall, asset-based LTL book of business. It is probably low single digits. But still, we have seen some of those volumes move away. Of course, those are very strong when you think about how those price out. On a revenue per shipment basis, which is why there is some movement back. There has been some movement to the truckload market just where those truckload prices are.
And so I would say as we think about where truckload pricing will be going here over the next year or two as we think about capacity dynamics and then just an improving macro, we would expect for those shipments to make their way back into the LTL network.
Tom Wadewitz: Your next question comes from the line of Tom Wadewitz with UBS. You may go ahead.
Mike Triano: Hi. Good morning. This is Mike Triano on for Tom. And, Judy, team UBS here wishes you all the best in retirement. So at Investor Day, you mentioned an assumption in the long-term targets of revenue per shipment outpacing cost per shipment by 80 basis points a year on average? As we look into 2026, do you need help from the macro to drive better freight mix? And revenue per shipment? Or is there enough that you can do from a cost perspective? And just stabilizing the mix that can help you achieve a positive spread in that revenue minus cost per shipment metric?
Seth K. Runser: Mike. This is Seth. So when I think about 2026, obviously, no one has a crystal ball about, you know, what is going to happen right now. There have been a lot of changes in these last few years, but we do have confidence in our longer-term view and the targets that we outlined in Investor Day. So when you think about from a demand standpoint, we do not see a lot improving on the demand side right now. But over interest rates could spur increased homebuilding, manufacturing, auto. Clarity over tariffs and the government shutdown as those issues get resolved. We think that could be a positive impact for us.
So the supply side is something we are looking at, but we have not seen the impacts from the mandate or the non-CDL enforcement yet, but we are hearing anecdotal stories that could be positive. So you just look at the cost to operate a truck and where the truckload market pricing is right now, we could continue to see exits on that regard.
So but what I will say is despite all the environment and macro noise like Matt mentioned earlier, we are focused on things in our control and that is being customer-led and we are going to focus on managing our costs in the short term as well as being positioned for the long term and we are taking those actions now and Cartagena PT is a great example of that. But we have other areas of opportunity that we are looking at. We continue to invest in service improvements across the board. I look forward to launching ArcBestView next year and having a better service for our customers. And we have a robust pipeline that I already mentioned before.
So we feel confident that we can achieve that revenue per shipment outpacing cost per shipment by the 80 basis points as we move through next year and throughout our entire target window through 2028. So although we continue to navigate just the challenging macro environment, I am very confident in our team's ability to generate shareholder value over the long term.
Brian Ossenbeck: Your next question comes from the line of Brian Ossenbeck with JPMorgan. You may go ahead.
Brian Ossenbeck: The questions. And Judy, congrats again on your upcoming retirement. Just two follow-ups here. First one, just on the September to October trend, it looks like we shipment stabilizing, but pricing per hundredweights not actually increasing. So I am just trying to understand if you can clarify that a little bit in terms of the comments I think Matt made about maybe being able to catch up for some of the costs you incurred ramping up this new volume with price? Or maybe it is on different shipments? A little bit more color there would be helpful. And then also, if you can give us a little more clarity in terms of the productivity per shipment.
Or per person per day rather in Asset Light. Setting a new record. Is that driven by some of the mix shift how should we think about how you guys are reaching that? Thank you.
Eddie Sorg: Hey, Brian. This is Eddie. You know, in terms of, like, the price, change from, you know, September to October, we do still see a lot of volatility when it comes to our account mix. The macroeconomic environment is still pretty is a pretty big headwind for us. We are not getting a lot of help there on weight per shipment. And so we did see some business come into our network that had a different profile. And it is typically been operationally efficient for us. Which helps. But it does put some pressure on our, you know, year typical revenue per underweight yield metrics. But we are very encouraged with the progress we are making with our renewal increases.
I mentioned that earlier on the call, but, you know, that is momentum going in, you know, from the second quarter to third quarter. And we are seeing really good signs going into the fourth quarter as well with those renewal increases. So a lot of noise in those typical yield metrics, but I do feel like we are making progress. And Matt mentioned some yield initiatives that we have been taking, and that is having an impact on some of our account mix as well. So progress and there is more to do and I think you are going to see that in the fourth quarter as and into 2026.
Seth K. Runser: Yeah. Brian, I will take the asset light productivity question. So we have a lot of initiatives that we are working on at Asset Light. You saw that 33% productivity improvement that we mentioned. But I still feel like we have a lot of runway to go that will help our people to focus on our versus doing manual tasks. So we also measure, service from an internal standpoint on the asset light side, and we continue to see best-in-class results on the service side. But what gives me a lot of confidence in the future is some of the projects that we have been working on with Christopher's team and the truckload team and managed around inbound call automation.
We are automating scheduling and booking loads and that allows the team to focus on more complex work. We started to implement truckload quote augmentation which uses AI to load, build, quote, and email responses to customers. Much quicker than a human can do and focus on those more challenging things. The shipper initiatives on the carrier side we are doing a lot with third-party load board integrations, routing guide automation, automated offer approvals, and then the carrier portal, which I mentioned in my opening comments. We continue to have features like lane matching, auto offer negotiations, which really helps reduce that fraud side of things in the market. So we are going to continue to invest in this area.
Manage saw another record quarter from a growth productivity standpoint. We see a lot of runway there with a billion-dollar pipeline. Like we mentioned at Investor Day. So I think all of this work ultimately comes down to allow us to position ourselves for growth without having to add the cost when the market does inflect because of these productivity gains.
J. Matthew Beasley: Yes. Brian, it is Matt. I will just maybe add on one more comment. So like Seth said, we are very proud of we have come on the productivity side in the asset light business and the 33% improvement that we saw on a year-over-year basis and where we see that going. And certainly, so that has been a key driver of the performance. And it has been across our solutions, so truckload, on its own reached its highest level of productivity when we look at just because in our managed solution, we do have higher productivity levels just on a shipment per employee per day basis.
And as we continue to grow manage, we do see some impacts as well from there. But a lot of it is all of the initiatives that Seth has talked about that we have been working on and we are going to continue to focus on.
Stephanie Moore: Your next question comes from the line of Stephanie Moore with Jefferies. Hi. Good morning. Thank you very much. I wanted to ask maybe a higher-level question. You know, I know that you have pretty good insight into the housing market with your UPack business. So wanted to hear if you had any insight from what your customers are saying as it relates to this overall housing demand and any expectation this could turn the corner in 2026?
Seth K. Runser: Hey, Stephanie. Yeah. We are seeing the continued weakness on the housing front like it has been reported publicly. We hope with interest rate reductions that we are seeing with the Fed right now take action that is going to spur some demand. We do think there is pent-up demand in the housing market. It is just been too expensive from an affordability standpoint. So I think as those interest rates lower, that is really going to help improve our UPack profit obviously. When we look at UPack in general, we are at a very low point because of just the housing market where it has been over the last three or four years.
So that really does drag on the weight per shipment metrics and some of those profitability. So we think when the market flips, going to have kind of an outsized impact for us when the housing market flips. And also housing drives so much of truckload capacity, which then spills into LTL, obviously. So we think when the housing market strengthens, that is going to be, you know, impactful to us. But what we do not see it in the near term, we think as the Fed continues to take actions, hopefully into 2026, see that demand continue to improve.
Ari Rosa: Your next question comes from the line of Ari Rosa with Citigroup.
Ari Rosa: Hi, good morning. Judy, let me echo others in congratulating you on your retirement. Definitely a nice career, and it is always been a pleasure working with you. You mentioned in your opening comments market share gains in the LTL space. I am just curious what you think is driving those market share gains. Given I guess it is hard to reconcile with some of the commentary around some of the service challenges. So but then also, right, you have talked about pricing discipline and other things. So like, what is the process of gaining market share gains? Is that kind of maybe taking on some mix that is less attractive?
And if you could just kind of talk about that strategy and how you think about those things? Because again, I am trying to reconcile it with some of the margin pressure that you are talking about here. Given it seems like volumes are actually looking okay? Relative to others?
Eddie Sorg: Yeah. Ari, this is Eddie. Yeah. I mean, we have been very proud of our commercial team. And what they have been able to achieve this year. You know, we had consolidated our customer-facing groups and our business acquisition teams together under this commercial team. And that alignment has really led to a lot of great results when it comes to getting in front of our customers more, developing opportunities. And then one of the best things about ArcBest is, you know, we are differentiated in the marketplace. We offer a suite of solutions that are different than most of our competitors. We are an integrated logistics company with assets.
And that has resonated throughout the year, with our customers and our sellers are taking advantage of that. From the standpoint of know, how the type of business that is coming in, it has been good for us. It is been profitable. The profile of that business has been different than what our existing business was or is. But that is just because we have acquired that business at still a premium to the market price. If you look at our peers in that space, they have a lower revenue per underweight than what our average is. We are the market leader when it comes to revenue per underweight and yield.
And so I think it is not bad business for us. But it is different and it has led to some efficiency gains in our network from an asset-based standpoint. And, you know, but there is always an opportunity to utilize this growth to improve our mix, improve our yield in our company. And that is really what we have been focused on in the second half of the year.
Chris Wetherbee: Your final question comes from the line of Chris Wetherbee with Wells Fargo. You may go ahead.
Rob: Good morning. It is Rob on for Chris. And Judy, we would like to echo our best wishes as you move on to the next chapter. With regard to pricing, we saw a slight acceleration in the contract renewals in 3Q. And a bigger tailwind from fuel but revenue per bill declined sequentially in the quarter. Can you talk about the biggest drivers of the underperformance versus your contract renewals? And when you expect revenue per bill to better approximate renewals or GRIs as we are looking out?
Eddie Sorg: Yeah. Hey, Rob. This is Eddie again. Yes. I mean the biggest driver of that revenue per shipment is the drop in weight per shipment. And that is been a headwind for us all year. A lot of the new core business, LTL core business we brought on it has been heavier weight but that softness in our manufacturing sector, industrial production, and housing has been a pretty put some pressure on our weight per shipment metrics. Ultimately our revenue per shipment standpoint. So that is pretty much the story on that. Again, that profile has been operationally efficient for us. So it is led to some efficiency gains there that is been good for us.
And we are just going to constantly look at our book of business. We make good. We have a strong history of pricing discipline. That allows us to really manage this business well. We make account by account decisions. And if we run across any business that we do not think is good for us or not contributing, we are taking immediate action on it to improve it.
Scott Group: Your final question comes from Scott Group with Wolfe Research. You may go ahead.
Scott Group: Hey, thanks. Sorry, I forgot to hit star one. I was so focused on it. Tribute for Judy. Thank best of luck to you, Judy.
Judy R. McReynolds: Thank you.
Scott Group: So couple of things. Can you just talk about the tonnage assumption that you have got within the for the OR guide for Q4? Do you assume it gets any sort of better or worse? And then just on the LTL pricing environment, if I look back at the last couple of quarters when the yields have been down a little bit, you have disclosed, hey, we have got growth in lower cost, but lower yielding shipments and you sort of took that taxed out and now it is just, hey, yields are flat, is this the is I know the pricing renewals are getting better, but is this, like, taking that language out?
Is this indicating that it that it is a tougher pricing environment and it is not about mix and it is more just sort of underlying price?
J. Matthew Beasley: Yes. So Scott, this is Matt. I will talk a little bit just on the sequential view that we have as we move from the third quarter to the fourth quarter and kind of what we are seeing for tonnage overall. I would say as we are moving forward, you know, we expect to see just a slight increase both on a year-over-year basis and yeah, slight increase, maybe low single digits on a year-over-year basis as we look at the fourth quarter overall from a volume perspective. And so certainly, moderating versus what year-over-year volume that we were seeing in the second and third quarter just as we have seen a little bit softer macro environment.
And so I think as we about big picture on tonnage, you know, we would expect tonnage to moderate as well. Not expecting any significant changes in weight per shipment, but certainly, the overall macro softness could continue to impact weight per shipment. As we move through the fourth quarter. On the pricing side, we continue to feel good about all of the actions that we are taking there. You are right. We have seen early in the year just some of the new business that we took on was operationally more efficient, and, you know, we are still continuing to see that dynamic.
If you look at just the profile of that business, how over business is versus our overall book of business. It is just is not as over dimension does not have as many operational requirements does generally have a lower cost to serve. And so I would not say that there is anything in general that has changed in that overall dynamic.
Eddie Sorg: Yeah. The only thing I would add is, you know, I really do believe the pricing discipline is still right. You know, I think the market is rational when it comes to pricing. I mean, we have seen probably in the last couple of quarters just, you know, a higher frequency of customer bids. Which does kind of create an opportunity for, you know, a competitive environment especially for, you know, any carriers who do not have that business. But in those situations that where we have been an incumbent, we just leaned into our value and our relationship. And that is typically allowed us to get a fair increase while retaining the business.
Or worst case, we have used it as an opportunity to price out some unprofitable business. To achieve better yield results. So I do not think it is gotten anything worse in terms of the market. And I do feel like a lot of there is a lot of noise with our yield metrics just because of account mix, and this macroeconomic impact on existing customers. That they are just shipping less. And that existing customer base has historically been priced really well for us. And so there are some headwinds there when that business is down.
Operator: That is all the questions we have. I would like to turn it back over to Amy Mendenhall for closing remarks.
Amy Mendenhall: Thank you to everyone for joining us today. We certainly appreciate your interest in ArcBest.
Operator: This concludes today's conference. You may disconnect.