Old Dominion Freight Line Q2 2025 Earnings Report

Old Dominion Freight Line EPS Results

• Actual EPS: $1.27
• Consensus EPS: $1.29
• Beat/Miss: Missed by -$0.02
• One Year Ago EPS: $1.48

Old Dominion Freight Line Revenue Results

• Actual Revenue: $1.41 billion
• Expected Revenue: $1.43 billion
• Beat/Miss: Missed by -$19.62 million
• YoY Revenue Growth: -6.10%

Old Dominion Freight Line Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 10:00AM ET

Old Dominion Freight Line (NASDAQ:ODFL) is a leading less-than-truckload (LTL) freight carrier based in Thomasville, North Carolina. Founded in 1934, the company initially operated as a regional freight hauler and has since grown into one of the most comprehensive network carriers in the United States. Over its history, Old Dominion has expanded its service footprint through strategic facility investments, technological enhancements, and a focus on operational efficiency, positioning itself as a reliable partner for shippers of varying sizes and industries.

The company’s core service offerings center on LTL transportation, which enables customers to ship smaller freight loads without the need for full-truckload commitment. In addition to standard LTL services, Old Dominion provides expedited delivery options, time-definite shipping, and guaranteed services for critical shipments. Beyond traditional freight hauling, the company also offers value-added solutions such as supply chain optimization, cross-border logistics into Canada and Mexico, and managed transportation through its network of regional and multi-regional service centers.

Old Dominion Freight Line operates an extensive network of service centers, terminals, and distribution hubs across the continental United States, complemented by cross-border capabilities that support international freight movements. Under the leadership of President and Chief Executive Officer Greg C. Gantt and Chief Operating Officer John C. “Jack” Holmes, the company emphasizes continuous improvement, safety, and customer satisfaction. With a commitment to innovation and disciplined growth, Old Dominion Freight Line maintains a reputation for reliable transit times, low claim rates, and high service quality in the competitive LTL sector.

Old Dominion Freight Line Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Revenue fell 6.1% year‐over‐year to $1.41 billion in Q2 as LTL tons per day dropped 9.3%, partially offset by a 3.4% increase in revenue per hundredweight.
• Negative Sentiment: The operating ratio worsened by 270 basis points to 74.6% driven by lower volumes that deleveraged fixed costs and higher overhead and depreciation expenses.
• Positive Sentiment: Despite the downturn, Old Dominion delivered 99% on‐time performance and a 0.1% cargo claims ratio while reinforcing investments in its network and technology to capture future demand recovery.
• Positive Sentiment: In Q2 the company generated $285.9 million of operating cash flow, spent $187.2 million on capital expenditures, repurchased $223.5 million of shares and paid $59 million in dividends.
• Negative Sentiment: For Q3 management expects the operating ratio to increase by 80–120 basis points, revenue per day to decline roughly 1.5%–4% year‐over‐year, and yields ex‐fuel to rise about 4%–4.5%.

Presentation

[Operator]

Good morning, and welcome to the Old Dominion Freight Line Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jack Atkins, Director of Investor Relations. Please go ahead.

[Jack Atkins, Director - IR at Old Dominion Freight Line]

Thank you, Wyatt. Good morning, everyone, and welcome to the second quarter twenty twenty five conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through 08/06/2025, by dialing 704-0529, access code 800-6479. The replay of the webcast may also be accessed for thirty days at the company's website. This conference call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance.

[Jack Atkins, Director - IR at Old Dominion Freight Line]

For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward looking statements. You are cautioned that these statements may be affected by the important factors among others set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release. And consequently, actual operations and results may differ materially from the results discussed in the forward looking statements. The company undertakes no obligation to publicly update any forward looking statements whether as a result of new information, future events or otherwise.

[Jack Atkins, Director - IR at Old Dominion Freight Line]

As a final note before we begin, we welcome your questions today, but ask that you limit yourself to just one question at a time before returning to the queue. At this time, for opening remarks, I would like to turn the conference over to Old Dominion's President and Chief Executive Officer, Marty Freeman. Marty, please go ahead.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

Good morning, and welcome to our second quarter conference call. With me on the call today is Adam Satterfield, our CFO. After some brief remarks, we will be glad to take your questions. Old Dominion's second quarter financial results reflect continued softness in the domestic economy. Although our revenue decreased in the quarter due to a decline in our volumes, our yields improved as our best in class service continues to support our disciplined approach to pricing.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

I want to thank our outstanding team for their unwavering dedication to our customers and continued commitment to executing the core elements of our long term strategic plan. Although the challenging economic environment has persisted for longer than we anticipated, we have remained focused on what we can control as we work to ensure Old Dominion continues to deliver superior service to our customers while also operating efficiently. In addition, our ongoing investments in our network, technology and our OD family of employees puts us in an unparalleled position to respond to an inflection in demand when it materializes. Delivering superior service at a fair price to our customers is the cornerstone of our strategic plan and has been central to our success for many, many years. Doing so consistently through the ups and downs of the economic cycle has strengthened our customer relationships over time and allowed us to keep our market share relatively consistent over the extended period of slower economic activity.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

As a result, we were pleased to once again provide our customers with 99% on time performance and a cargo claims ratio of 0.1% in the second quarter. This consistency of our execution and our commitment to creating value for our customers doesn't happen by accident. It is a product of our unique culture and the result of hard work of the OD family of employees. Across our company, our team is focused every day on adding value for our customers. By keeping our promises to our customers, we help them create value for their own customers.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

Our commitment to service excellence continues to support our long term yield management initiatives. With a focus on individual account level profitability, our approach to pricing is designed to offset cost inflation and support our ongoing investments in our network, our fleet and our people. Although these investments have created headwinds to our profitability in the short term, we are confident that our consistent reinvestment back into our business for growth is the right long term approach. We know that having available capacity to grow with our customers and support them during periods of stronger demand is an important component of our value proposition. We also believe that these investments are critical to stay ahead of what we expect to be favorable long term demand trends for our industry.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

I'm very proud of our team and how they continue to find ways to reduce cost and operate as efficiently as possible during the period of uncertain demand. Given that our first priority is to uphold our commitment to delivering superior service to our customers, it can lead to increased operating costs due to the loss of operating density when volumes do decrease. While that was the case in the second quarter, we continue to believe that our business model contains meaningful operating leverage, and we remain confident in our ability to improve our operating ratio over the long term. We expect this to become more apparent as the demand environment improves and we are able to leverage our investments in our fleet, our service network and our technology. Over time, our customers have recognized the value of our service by giving us more of their business, which has allowed us to win more market share over the last decade than any other LTL carrier.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

Looking forward, we believe that the consistency of our execution, unique culture and our team's daily commitment to excellence will allow us to be the biggest market share winner over the next decade as well. Our position is as strong as ever to respond to an improvement in the demand environment. As a result, we are confident in our ability to produce profitable revenue growth and drive increased shareholder value over the long term. Thank you very much for joining us this morning. And now Adam will discuss our second quarter in greater detail.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Thank you, Marty, and good morning. Old Dominion's revenue totaled $1,410,000,000 for the 2025, which was a 6.1% decrease from the prior year. Our revenue results reflect a 9.3% decrease in LTL tons per day that was partially offset by a 3.4% increase in LTL revenue per hundredweight. On a sequential basis, our revenue per day for the second quarter increased 0.8% when compared to the 2025, with LTL tons per day increasing 0.1% and LTL shipments per day increasing 0.8%. For comparison, the ten year average sequential change for these metrics includes an increase of 8.2% in revenue per day, an increase of 5.3% in LTL tons per day and an increase of 6% in LTL shipments per day.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

The monthly sequential changes in LTL tons per day during the second quarter were as follows: April decreased 3.7% as compared to March. May increased 0.5% as compared to April. And June decreased 0.6% as compared to May. The ten year average change for these respective months is a decrease of 0.7% in April, an increase of 2.5% in May and an increase of 2.1% in June. For July, our current month to date revenue per day is down 5.1% when compared to July 2024, with a decrease of 8.5% in our LTL tons per day.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

As usual, we will provide the actual revenue related details for July in our second quarter Form 10 Q. Our operating ratio increased two seventy basis points to 74.6 for the 2025 as the decrease in our revenue had a deleveraging effect on many of our operating expenses. This contributed to the 160 basis point increase in our overhead cost as a percent of revenue. Within our overhead cost, depreciation as a percent of revenue increased 80 basis points, while our miscellaneous expenses increased 40 basis points. The increase in depreciation cost as a percent of revenue reflects the ongoing execution of our long term capital expenditure program, which we believe will support our ability to grow with customers in the years ahead.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Our direct operating cost also increased as a percent of revenue despite our team's best efforts to manage these variable costs. The 110 basis point increase in these costs was primarily due to higher expenses associated with our group health and dental plans. As a result, our employee benefit cost increased to 39.5% of salaries and wages during the 2025 from 37.2% in the same period of the prior year. Overall, we continue to be pleased with how our team has remained focused on controlling what we can until the demand environment improves. The OD team has continued to deliver best in class service while operating very efficiently, we've also managed our discretionary spending.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We will, however, continue to make the investments that we believe are necessary to ensure that our business remains well positioned for the long term. Old Dominion's cash flow from operations totaled $285,900,000 for the second quarter and $622,400,000 for the first six months of twenty twenty five, respectively, while capital expenditures were $187,200,000 and $275,300,000 for those same periods. We utilized $223,500,000 and $424,600,000 of cash for our share repurchase program during the second quarter and 2025, respectively, while our cash dividends totaled $59,000,000 and $118,500,000 for those same periods. Our effective tax rate for the 2025 was 24.8% as compared to 24.5% in the 2024. We currently expect our effective tax rate will be 24.8% for the third quarter.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for questions at this time.

[Operator]

Thank you. We will now begin the question and answer session. Our first question will come from Chris Wetherbee with Wells Fargo. Please go ahead.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Hey, thanks. Good morning, guys. Appreciate the comments. Maybe we could just start with your thoughts around operating ratio. Obviously, it's a challenging environment from a tonnage perspective, at least year over year.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Kind of how do you think about sort of the normal progression from 2Q to 3Q on the OR? And maybe kind of how you feel like you can fare given the circumstances we're in from a macro backdrop?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Sure. Yes. The ten year average is, for us, is typically flat to up 50 basis points from the second quarter to the third. But that's typically based on sequential revenue growth of about 3%, which is what we typically see. So obviously, given the demand environment, like you just said, we've not really seen that positive inflection yet, unfortunately, with our revenue this year.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But so I'm kind of thinking that revenue per day, if it continues to stay flattish on a per day basis, pretty much what we saw in the second quarter, if that continues into the third, But we'll probably see an increase in the operating ratio somewhere in the 80 to 120 basis point type range. So a little worse than what our normal sequential change would be. But just a couple of things to point out for that. I'm expecting that we'll see an increase in our salary wages and benefits line. And some of that, as you know, we give a wage increase that's the September 1 every year.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So that's always in there, but we typically have that revenue that offsets a little bit. But I'm also expecting that we'll see continued pressure with our fringe benefit costs. So I'm thinking that, that will be part of the driver. I also think that we'll see our operating supplies and expenses will probably tick up a little bit. And our overhead costs, that was something they were higher in the second quarter than what I initially expected.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And we talk about that a lot, but I'm expecting that our overhead cost in aggregate will be up a little bit further in the third quarter. They were about $310,000,000 in the second quarter. We've been running about $3.00 5 So I'm expecting that we'll see those tick up even further in the third quarter. Probably some pressure in the miscellaneous expenses line will continue. But obviously, the overhead cost is revenue dependent.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

I'm anticipating if it's flattish revenue, then those costs will tick up a little bit further. But if we can see some revenue start to come in a little bit better, and obviously, we'll continue to give our mid quarter update, then that's something that eventually over time we'll get leverage on.

[Operator]

Thank you. Our next question will come from Eric Morgan with Barclays. Please go ahead.

[Eric Morgan, Equity Research Analyst at Barclays Capital]

Hey, good morning. Thanks for taking my question. I wanted to ask about the market share commentary. Just if we look at the ATA's shipment index, it actually turned positive in the past couple of months, at least for April and May. So I don't know if that's kind of the best data to use, but it's what we have.

[Eric Morgan, Equity Research Analyst at Barclays Capital]

And obviously, it's a bit different from what we're seeing from you as well as your publicly traded peers. So I guess just curious if you have any thoughts on what's happening among the private carriers where we have kind of less real time insight, how they've been responding to this downturn, if that's changed at all in recent months and just how you view your competitive positioning here?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. The best data that we probably get from an industry standpoint that includes the private carriers is really from transport topics. And so that's the data that you'll see most typically quote in the 10 ks about the size of the industry and so forth. And so you really only get an annual read on some of those carriers without the month to month trend. And the ATA is good, but I think it typically has always had a much higher report of revenue for the entire industry and it includes, I believe, some ground business from some of the other parcel carriers.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So that's why we typically have used Transport Topics. But I think when we look at that information, Transport Topics just published recently and we saw a pretty consistent trend from market share for us. And we've got granular level detail that we get through a proprietary database that's out there as well. And overall, I'd like to think that our market share, when you look through this downturn, our strategy is that we want to maintain market share in periods of economic weakness while also getting increases in our yields. And I think when we go back and look at kind of where things were in 'twenty one, 'twenty two, that's effectively what's happened.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And it always moves up or down a little bit here and there. But the key will be continuing to execute our strategy like we've done in the past and then May K while the sun is shining. I mean that's what our model is based on. And I still feel like we're in a better position than anyone else when the demand environment does eventually inflect back to the positive. And I think we're probably better positioned than we've ever been.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But if you think back to the cycle increases that we saw in 2014, 2015, same thing with 'seventeen and 'eighteen, we've been able to outperform the market from a tonnage growth standpoint anywhere from 1,000 to 1,200 basis points. So we just need a little help from the economy to get back to where we really see that demand environment inflecting back to the positive. And obviously, macro factors are starting to settle a little bit with respect to the tax bill trade. Hopefully, at some point soon, we'll get an interest rate decrease. I think once some of those measures of certainty come back into the market, it will create opportunities for our customers, that will create opportunities for us to start growing our volumes again.

[Operator]

Thank you. Our next question will come from Jonathan Chappell with Evercore ISI. Please go ahead.

[Jonathan Chappell, Senior MD at Evercore ISI]

Thank you. Good morning.

[Jonathan Chappell, Senior MD at Evercore ISI]

Adam, one of the things response to Chris' question was you expect pressure on operating supplies and expenses. You said the same thing in April and operating supplies and expenses actually improved by 80 basis points as a percentage of revenue in 2Q. So did something happen in 2Q that really help you on that cost line item that you expect to reverse in 3Q? Or how do we kind of match up the pretty big sequential improvement in 2Q to ongoing pressure expected in 3Q?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I would say that we continue to see really good performance from our repairs and maintenance. Our team has done a great job, I think, with managing those costs. And I had the expectation that we would see some pressures there from 1Q to 2Q, anticipating that some of our part cost might be increasing due to the impact of tariffs and so forth. But I think what we've seen is just some continued changes with our fleet.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We've continued to take some of our older equipment out that would have had really high repair cost, if you will. And so we've continued to pare back some of our fleet in that example. And then just in general, our cost per mile, we've seen improvement this year. And if you go back the last few years, we were up double digits from a cost per mile standpoint 2022 and 2023. So I think that was some of the better sequential performance that we had, if you will, from 1Q to 2Q.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But I'd say part of that driver is that I'm thinking from 2Q to 3Q. Right now or at least in the second quarter, our average price per gallon for fuel was like $3.56 and we're seeing that elevated right now. I think that's something where those costs as a percent of revenue if fuel kind of continues to hold at about the range where we are now. Fuel is obviously a big driver in that operating supplies and expense line. Historically, what you see and probably the comment of why I wanted to give both those together, we always talk about as fuel changes, usually you'll see corresponding increase.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

I like to look at our direct cost in total and how we manage through those. So in the short term, if you see if the fuel surcharge goes up, our fuel expenses as a percent of revenue might also go up, but you would see the direct labor cost in particular kind of an offsetting decrease there. And typically the second quarter to third quarter too, that's where you kind of see those costs all in or kind of flattish if you will. But I'm expecting to see some continued pressure there in the salary wages and benefits line. Somewhat like I mentioned, we've got the wage increase.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We'll get one month of that for the full quarter. Typically, we have a little bit of sequential revenue growth that will help offset that. And we may still have that for this coming quarter. But if we've got flattish revenue growth, then that puts a little pressure on that line item. But we've also seen higher fringe benefit costs for the past few quarters, and I'm expecting that trend to continue and to probably be even a little bit higher in the third quarter than what we just saw in the second.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So those couple of factors and as well as the miscellaneous expenses, some of the miscellaneous expenses back to kind of making changes on the fleet. As we've been selling off some of this older equipment, we've had some losses and that goes into that line item. So I think we may see some more losses, if you will, coming through on that line item in the third quarter to put a little bit more pressure overall, I would say, in that big bucket of overhead cost.

[Operator]

Thank you. Our next question will come from Jordan Alliger with Goldman Sachs. Please go ahead. Hello, Aleker, line may be muted.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Can you hear me?

[Operator]

Go ahead.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

Sorry. So just sort of curious, sort of you gave some color and commentary around the OR revenue per day sort of flattish. I mean given the easy comps I think that are coming up both in terms of tonnage per day and revenue per day.

[Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs]

I'm assuming as we look forward from July those trends on a year over year basis, I would think have the opportunity to get quite a bit better. But just curious your thoughts on the latter half of this quarter against those comps?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes, they would, Jordan. So in the second quarter for the full quarter, we were down, just call it six percent, 6.1%. Right now, I would say July, just call it, we're down 5%. So it's already getting a little bit better. If we stay the second quarter per day average was about $22,000,000 revenue per day.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So if we stay in that same ballpark, then we'd be down a little over 4%. If you just sort of held revenue at that $1,400,000,000 that we just did in the second quarter, if you say that was exactly the same, that's kind of what the trend would be. Now I'll say that the July performance so far, when I look at kind of where our tons are and just the revenue per day level, July is normally a weak month. From a tons per day standpoint, we're usually down about 3% versus June. We're trending down about a little over 2% right now.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So we're a little bit better than what our normal sequential trend is. Now I'm not ready to make a call to say that things will turn around and we'll get the acceleration that we typically would see in August and September. But I think that gives us a little bit sense of cautious optimism to say, it's outperformance kind of on the downside, will we see some of that acceleration come through? I think that remains the question. And I think it will get answered as we go through the quarter and we give our mid quarter updates and so forth.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So if we were to perform at normal seasonality, and I think that's a big if right now, I'm not saying that that would be the case, then that number would come back more in comparison to revenue with the third quarter last year. I think at full seasonality, we'd be down about 1.5%. So we'll just continue to monitor it and maybe we'll be somewhere in that 1.5% to 4% just depending upon how things continue to materialize as we make our way through the quarter.

[Operator]

Thank you. Our next question will come from Tom Wadewitz with UBS. Please go ahead.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Group]

Yes. So wanted to see if you could offer a little more perspective just on pricing and kind of how you think about revenue per 100 weight ex fuel in 3Q? And just whether the pricing, I mean, your commentary is pretty consistent over time that you see stability and discipline in the market. But is anything changing on that front? Is there any kind of areas where you see increased competition as the downturn extends? Thanks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I would say overall, just really we've got to go by whatever one reported in the first quarter. But I think most carriers, their reported yields have continued to be positive overall. And I mean, obviously, we continue to execute on our plan. And I think our plan is different.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We look at things from a cost base standpoint and we want to be consistent through the cycle And feel like getting those consistent cost base increases are obviously important to the long term operating ratio improvement that we've had. So right now for the third quarter, I'm kind of looking at I think that number will probably be the yield ex fuel will probably be up in the 4% to 4.5% range. And that's about where we are in July. So I think we'd expect to see consistent sequential increase in that reported number, but it will probably come in a little bit. And that's not a reflection on any kind of change or anything like that.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

It's just a function of kind of where we were last year and but we continue to expect to see increases and we're getting increases when we go through renewals. And that's one of the things that's been tough about this environment back to thinking about that market share question from earlier. But as we're going through our renewals, we're continuing to win business. We get reporting for our national accounts that business that we won or business that we've lost. And we're continuing to keep customers and get increases on those accounts that we're keeping.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But we're also winning some new business. Overall, obviously, the volumes are down. But I think that, that lends itself to maybe a quick turnaround, if you will, when we do see that volume environment inflect back to the positive. And I think a lot of people believe that that's coming sooner than later. And obviously, we felt like it was coming before and we've had a few head fakes from an economic standpoint.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But now that some of the bigger picture things are being resolved from a macro standpoint, feel like some of the optimism that we saw late last year and kind of saw it in the improvement in ISM in the early part of this year, we hope to see kind of that turn back around and that optimism come back to the market and lend itself to increased freight opportunities. But I think that's part of our value proposition is having capacity. And while capacity is not at a premium right now, just given how weak demand has been for so long, we have heard commentary from customers about some competitors that aren't able to make pickups consistently in some markets, and they're increasingly calling us. And so I feel like when you have true demand recovery, those inbound calls will likely accelerate, and that's what we've seen in the past. And I referenced some of those periods earlier, but you go back to 2014 when we grew tons at 17%, the market's up 5%.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

In 2018, we're up 10%, the market's up 1.5%. And you know what we did through the 2021 and 2022 cycle, where we put 2,000,000,000 of cumulative revenue growth on the books then. So we feel like we're sitting in a great position to capitalize. We just need a little bit of help from the economy right now.

[Operator]

And our next question will come from Daniel Imbro with Stephens Inc. Please go ahead.

[Daniel Imbro, Managing Director at Stephens Inc]

Yes. Hey, good morning. Marty, Adam, Jack, hope you're doing well. Adam, maybe following up on that last discussion just on competition out there. I mean, you guys specifically have been a leader in a lot of the high service parts of the industry, whether it's SMB or grocery, kind of anything with the must arrive by date.

[Daniel Imbro, Managing Director at Stephens Inc]

But a lot of your peers are talking about trying to grow here. So I guess, are you seeing the better offerings from some of your peers making any encroachment on your business as you go to market? And I guess if not, what do you think the public markets underappreciate about why that will be harder for others to take from you guys being the leader there? Thanks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

I think that any customer that we have, obviously, we've got a target on our backs, if you will. And but we're competing with every account. We're competing with the other carriers, and we have been for years. So I don't think anything has changed with that. I think there's this perception that we've got some secret segment of the market that the other carriers haven't figured out until now, that's just not the case.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

I mean, we're competing with all the other national carriers in some markets with the regional carriers as well. So our service product, when you think about the fifteen years of Masstio wins, there's more to service than just being able to pick up and deliver on time and without damages. And we do those core things better than anyone else, but it's continuing to figure out ways that we can add value to our customers. And ultimately, that's the business that we're in, is how do we work with our customers, create win win scenarios where we can help each other and add value. And I think those are the things that we'll continue to look at and leverage.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We've got about 12% market share and there's a tremendous amount of share opportunity out there within an industry that we think continues to have tailwinds for it. We continue to believe that e commerce effect on supply chains will continue to shrink shipment sizes and have truckload to LTL conversion. I think if near shoring and reshoring opportunities continue to play out that creates inbound and outbound opportunities for us as well. And just supply chain sophistication with the interest rates higher today, there's a cost of carrying inventory. And so that's a value add that we can have where our customers know they can rely on our own time and claims free service.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So it's figuring out how to go into each and every customer account, figuring out the problems that they're having and delivering a solution for that customer. That's what we I think we do better than anyone else. And that's why we're so confident in what our long term market share opportunities are.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

Daniel, as you referenced in the retail industry, including grocery, there's a penalty if the freight is not on the shelf on time and in full. They're called fines. And many of our competitors, they can go out and talk about meeting those expectations with fancy marketing material and so forth. But until they can stop those fines in our customers' pocketbooks, nothing's going to change. And we figured out how to do that many, many years ago, especially in the grocery industry.

[Kevin Freeman, President & CEO at Old Dominion Freight Line]

So we don't see anybody getting close to what we can offer from a service standpoint in the retail industry.

[Operator]

Thank you. Our next question will come from Ken Hoexter with Bank of America. Please go ahead.

[Ken Hoexter, Managing Director at Bank of America]

Great. Good morning, Marty, Adam, Jack. Just want to understand maybe a little bit more on the backdrop here. The stock's down about 8%. Easier comps are coming up, right?

[Ken Hoexter, Managing Director at Bank of America]

Revs are down 5% in July. Do you expect to get that to maybe flat for the quarter? Others reported a deceleration in tons and pricing despite easier comps. Peer mentioned this morning they're implementing an early GRI. So think you mentioned deceleration in yields at 4% to 4.5%.

[Ken Hoexter, Managing Director at Bank of America]

So that's also a deceleration versus history. Are we getting a more competitive environment that just consistently is beating this market while we're in a decelerating market? Just want to understand your view of the backdrop. And then the holding share, I'm still confused by that one because every public carrier reported stronger percentage gains. Does that mean we're looking at just the private guys?

[Ken Hoexter, Managing Director at Bank of America]

I want to revisit that question earlier. Is it just the private guys that are losing relative share? Maybe if you can just expand a little more on that.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

I think that, one, with the with respect to the yields, I think what we're looking at will be a continued increase sequentially. And so if we are kind of in the middle of that 4% to 4.5% range, that'd be up 1.5% to 2% sequentially. In the last few years, when you look at the ten year average, the sequential increase there from 2Q to 3Q is a little bit stronger. But when you look at kind of the last five years, that really skews that average, so to speak. So if you kind of looked at a ten year average sort of pre COVID, it was more in that kind of 1.5% range about where we are thinking about being.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So we're not seeing any change with respect to what our thinking is from an overall yield management standpoint. And I think that when you think about the industry as well, I think most carriers have kind of figured out that yields are important. Those that when you go back over the last ten, fifteen years that when they've taken the focus off yield, it's had pretty negative impacts on their overall profitability. And so I think that's why we've seen such consistency in the industry over this last three years where demand has been soft overall. From a market share standpoint, I think that since really Yellow closed their doors, I think there's been a lot of choppiness in terms of figuring out where share is.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And we obviously report that and report it by region overall in our deck that's out on our Investor Relations website. And so you can kind of see how share maybe be changing in one region versus the next. But it's something that when we look at the overall market, again, kind of factoring in what I just said about using the data out of transport topics, it looks like our share is relatively consistent with where we've been really over the last couple of years. And it's not to say that when we've gone through periods in the past of slow markets that we're flat or could be down slightly, whatever, it's about the same. We've continued to execute a plan.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

We've continued to manage our costs. Our service has gotten better. And I think we're in a really strong position. It's just overall change that we sort of look at. And so we feel good about where we are, but feel better about what the opportunities looking forward will be.

[Operator]

And our next question will come from Scott Group with Wolfe Research. Please go ahead.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Hey, thanks. Good morning. This is a big picture question and maybe it's similar with what you just sort of answered. But if you look at the numbers, you're one of the leaders on yields right now. You're the biggest laggard on tonnage, at least among the public guys.

[Scott Group, MD & Senior Analyst at Wolfe Research]

And I guess you might say, hey, that's very normal in a more softer market that gets a little bit more competitive. We stay more disciplined on price than anybody. But I guess what feels different is just like the duration of this environment. Like we're three years into this, we're now we still have tonnage down high single digits. Does that does the duration of this change your thoughts at all in any way?

[Scott Group, MD & Senior Analyst at Wolfe Research]

Or is it, hey, we're just going to do it, we keep doing, and we'll wait this out and eventually the cycle will come? Or because the cycle is lasting so much longer, do you think about it any differently?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I mean, it's been we talk about these numbers from a quarterly perspective, annual perspective. There's a lot of day to day that's going on behind the scenes that doesn't get discussed. I mean, day, we're working with customers and figuring out ways to identify new opportunities. And it's been a tough few years going through this soft demand initially.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And then you had industry event that happened. And so the flux of being down, being up short lived and then being down again, there's been a lot to try to manage through. And I'd love for revenue to be higher and I'd love for this cycle to turn. There have been a couple of times that we felt like it was turning. And I think back to late twenty twenty three, we had started reinvesting, running our truck driving schools and hiring folks to be prepared for what we thought was going to be sustained improvement there and then kind of hit another roadblock from a demand standpoint.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But overall, when I think about our model and how important revenue is, I mean, you just look at the sequential performance through the second quarter, we don't normally talk about sequential incremental margins. But the reality is that little bit of revenue that we put on the books between the first and second quarter, we had about 60% incremental margins on that business. So it shows, I think, the power of the model once we start getting revenue on the books, but we don't feel like we need to go out and try to chase bad revenue that doesn't fit in our thinking for the long term. And so I think that's what we've done. We've also continued to manage our costs very well.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

When I talk about splitting our operating ratio apart, the 74.6% that we just did in the second quarter, about between 5253% of revenue were our direct variable cost. That's pretty much the same where we were in the 2022 when we did a sub-seventy percent operating ratio. And so we've been able to control what we can control. Our team has done a phenomenal job, I think, of protecting service, managing our costs in a very weak environment. And that's hard to do when you don't have density in the network.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So I'm really pleased with that. Our overhead costs really are what's accelerated, and we just need a bigger revenue base to get leverage on those costs again. But that's part of our model and our strategy too. We like to invest through the cycle and we've got more capacity than we probably have ever had right now from a service center network standpoint. And so yes, we're carrying a lot of excess costs.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Our overhead costs as a percent of revenue were about 22% here in the second quarter. Back in 2022, they were about 17%. Therein lies the leverage for the model once we get back to a strong demand environment. So I'm pleased with everything we've done. Obviously, we'd love to be able to flip a switch and see the demand environment improve.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But I think from where we sit when we look at what the other carriers are doing and kind of how revenue has trended for some of the others, we're hanging in there. We've not seen any true variance in our volumes relative to what the entire industry has done. If I look and see the industry is down about 15% from where we were in 2022, our performance is pretty much right in alignment with what the industry has done overall on a net net basis.

[Operator]

Our next question will come from Jason Seidl with TD Cowen. Please go ahead.

[Jason Seidl, Managing Director at TD Cowen]

You, operator. Marty, Adam, Jack, good morning, gentlemen. One clarification. I think you guys mentioned you expect losses on asset sales. Did I catch that correct?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes, Jason. We've been trying to reduce the size of our fleet a little bit just in coordination with where freight volumes are trending. And so we had some losses in the second quarter. That was part of the reason why you may have seen our miscellaneous expenses ticked up a little bit higher. Normally, costs are about 50 basis points or so.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And so we saw those costs trend a little bit higher in the second quarter. They were up to 90. And I'm thinking that we'll see some continued pressure in the third quarter on those.

[Jason Seidl, Managing Director at TD Cowen]

I was just a little confused because I know other carriers are actually reporting gains on sale. And so maybe you could walk us through the difference between you and them?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Well, a lot of in many cases, we're selling a tractor on average. We use a tractor for ten years. So there's probably not as much demand for that may be more of a truckload thing, but there's not as for much a ten year old million mile single axle day cab tractor.

[Jason Seidl, Managing Director at TD Cowen]

I guess when you mentioned the sequential move between June and July being slightly better than the historical average, is any of this due to maybe some pull forward when people were worried about the tariffs potentially resetting again in August? Clearly, we're getting through some of these or some deals, but did you get that feedback from any of your shippers that that was occurring?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. There may be some of that. We've not heard material feedback on that. But like when I look at it by region, it's not like we saw a big change in like outbound business out of California for example. Most of our regions are trending in about the same kind of range from a revenue performance standpoint.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So there's I don't know that there's a big outlier that may be driving that.

[Operator]

Thank you, Mr. Seidl. Our next question will come from Bruce Chan with Stifel. Please go ahead.

[J. Bruce Chan, Director at Stifel Financial Corp]

Yes. Thanks, operator, and good morning, everybody. Maybe another bigger picture question here. We've been hearing pretty regularly in the past couple of quarters from some of the other carriers about AI and dynamic routing. I know that the OD style has always been to kind of quietly implement those things as part of the overall playbook, in many cases, much earlier than peers.

[J. Bruce Chan, Director at Stifel Financial Corp]

But maybe just helpful to get an update on any optimization projects that you've got going on right now. And generally, how you're feeling about the various systems in your tech stack, anything incremental that we should be thinking about as an opportunity?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I think, like you said, I mean, we're always looking at technology. It's a key part of our business and I think has been to help us with our operating ratio. And just to kind of keep reminding, our operating ratio is about 1,500 basis points better than the company average or industry average, I should say. So regardless of what the other carriers have got as opportunities, we're still materially outperforming there.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And I think that technology has been a key part of that. And you're right, I mean, we don't normally try to announce everything and give totally our playbook away. But we're looking at ways to keep getting better. Continuous improvement is a key component for our foundation And we've always got to look at ways that we can make investments that are really going to drive change from a service standpoint ultimately or add value through the lens of driving operational efficiencies.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And you mentioned line haul optimization. That's kind of been the Holy Grail and the buzzword for the twenty one years I've been in this industry. But that's something that we continue to look and we've got some tools that we've continued to implement and try to refine to drive some optimization there. Same thing within our pickup delivery operations and on the dock. And I think our increased use of some of those technologies is part of the reason why we've been able to keep those direct costs.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And those direct costs are the primarily variable costs, but the direct costs associated with moving freight. And to think that we've been able to manage those costs basically consistent with where we were when our business was running extremely at its optimal state at the time back in 2022 with a sub-seventy operating ratio, I think is pretty astounding when you think about the loss of density in our network now versus what we had in the network then. And it's not just one thing to point to, but I think we've got a great team in the field. And I think we've got a great group in our technology team that's always looking for ways to get better to work with their business, to work with our customers. Another key part of the technology investment is how can we do things differently and add value and add stickiness with our customer base as well that differentiate us from our competition.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

All of those things I think will continue to be strategic advantages for us and will be part of the story of how we get our operating ratio back towards that 70% threshold, but continue marching forward and drive long term improvement there in the operating ratio, while we continue to improve density and yield.

[Operator]

Thank you, Mr. Chan. Our next question will come from Bascome Majors with Susquehanna. Please go ahead.

[Bascome Majors, Senior Equity Research Analyst at Susquehanna International Group]

Thanks. Good morning. Just as a housekeeping item, can you remind us of typical revenue and margin seasonality for the fourth quarter? And Adam, if you look at longer term, not necessarily calling when the cycle will turn, but just thinking about what you think the business will respond like when it does. Can you update us on sort of the incremental margin or really other sort of profile you think you can deliver when we actually get some tonnage to flow through all the cost adjustment work that you've done over the last couple of years? Thank you.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. So typically, our revenue per day, the ten year average is a decrease of 0.3%, so 03% decrease in revenue per day. And then our operating ratio is typically up 200 basis to two fifty basis points. And obviously, that we always have we do an annual actuarial study. So there could be changes plus and minus on that insurance and claims line in the fourth quarter.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Last year, we had a pretty big unfavorable adjustment that we had to take there. But nevertheless, we kind of exclude that from the averages, if you will. So that's what the normal performance is. And I think from just kind of looking forward in terms of what we can do from an incremental margin, I just mentioned that sequential incremental margin, I don't expect 60% to be the norm. But just thinking about our cost structure and what I just laid out from a direct cost versus overhead cost, and overhead is mainly fixed, but there are some variable costs in there.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Overall, about 70% of our cost or so right now are variable. And that's how we've been able to protect our margins through this downturn is continuing to manage those. But anyways, the 53% of revenue being our direct variable cost and you kind of do the math, that's how we've been able to do sort of 35% to 40% incrementals when we're coming out of kind of on the early side of that demand inflection. And then eventually, you kind of get back to the point where you've got to add more equipment, you've got to add more people and so forth, and it starts compressing back. Our longer term average incremental has been 35%.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And so I think that still seems reasonable, and that would continue to imply that if you run that out for several years of a recovery in revenue growth that we would get back to that sub-seventy type of threshold.

[Operator]

Thank you. Our next question will come from Ravi Shanker with Morgan Stanley. Please go ahead.

[Ravi Shanker, Managing Director at Morgan Stanley]

Hey guys, thanks for the time. I know this topic has been discussed a fair bit, but if I can just hit it again in a slightly different way. You guys have been masters of calling the cycle over the years and have shown your operating prowess as well. But to kind of Scott's point, it's been three years of a downturn. And even now, I think some of the TLs and rails actually sounding a little bit better on volumes in the cycle even though nobody is kind of high fighting here.

[Ravi Shanker, Managing Director at Morgan Stanley]

How can you guys tell if there is something bigger and more structural going on with the LTL space here rather than just a cycle? Maybe some more permanent share shift to TL, maybe insourcing by shippers, changing supply chains. Are your customers telling you that they will defendably be back with the same level of volumes or higher in up cycle?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. What you just said there at the end is the confidence that we have in our long term market share really is just driven by those customer conversations and how we think supply chains will continue to trend over time. We've seen some market share shift, I think, from LTL to truckload through this cycle. And when you look at some statistics in the truckload industry in terms of what they're charging revenue per mile versus cost per mile, it's they're willing to operate at breakeven or worse. And I think that's what you're seeing with some of the operating ratios that have been published as well.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

So but I think that's some of the trend that we've got to continue to watch is as that business starts picking back up, they get busier, the rates start going back up. I think that's when you'll start seeing some of this unwinding effect in some of those truckload carriers that they don't really want to move multiple shipments on the back of their truck and make multiple stops. That's not their preference. And they don't have the network that's set up to really handle it. They only do it when times are tough and they need some payload to make a truck payment.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And so I think you'll see that business move back into LTL. And then we'll continue to see kind of our customers that are continuing to if we go through a customer, we're seeing a lot of wins, like I mentioned, from just a customer specific standpoint. And customers are continuing to award us the same lanes of business that they've had before, but their overall business levels might be down. And whether that's just the demand for their product, some we know are taking advantage of this truckload opportunity. It's kind of going to be multiple items that I think are driving the increase in demand.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And I think we'll see more of that share shift back than probably what we've seen in prior cycles. So we feel like we're ahead of it though from a capacity standpoint. I mentioned the network capacity from a service center standpoint. But I feel like we're in really good shape in regards to our fleet. We're probably heavy there in all honesty.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But I feel like from a people capacity standpoint as well, we've got a team that's in position and ready. And that's the best incremental margin you can get is when we've got a driver that's already making a stop at our customer. And now instead of picking up one shipment, they're picking up three. And that's typically what we've seen in cycles past and how our volumes can accelerate so quickly on the front end of the inflecting economy. And that's what we'd expect to see whenever this economy does eventually inflect back to the positive.

[Operator]

Our next question will come from Ritu Harnane with Deutsche Bank. Please go ahead.

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

Hey, Thanks for the time. So, I appreciated all the color around your positioning being as strong as it's ever been to respond to an improving environment. And the OD model really makes hay when the sun is shining. So maybe you can talk to us I get that we're a little reticent to speak to some of the green shoots given all the head fakes we've had. But just customer conversations, you talked about maybe fatigue on the tariff side, reactions to the recent bill that passed in Washington to spur growth, interest rate cuts, like what are shippers telling you about their appetite to give you more business in the future?

[Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank]

And then if you can maybe parse out kind of what industries you're maybe more optimistic about versus industries where you're really seeing more malaise set in or more negative trends? Thanks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I think that it's been the uncertainty that's been hanging out there over the economy that I think has resulted in just the lack of freight volumes overall. Again, I mentioned industry volumes are down about 15 from where we were back in 2021, 2022. So it's something that everyone's had to contend with. But I think we saw kind of going back to the fall of last year, we saw some initial optimism with respect to the industrial economy.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And 55 to 60% of our revenue is industrial related, so that's important to us. And we saw that acceleration in the ISM in December and then it was positive for a couple of months. But then all the tariff conversation started and then that just created more uncertainty that seemed to kind of throw cold water on what was developing at the time. It's hard from a pure manufacturer, for example, to figure out what the cost structure is going to be when you don't really know what the final tariff cost might be. And so I think that's something that we've had a lot of customers trying to figure out and solve for.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And in some cases, you just try to wait things out. And so that's why we've got a little cautious optimism now that we've seen the tax bill be finalized and the bonus depreciation is something that I think can spur some further investment here. If we start seeing some trade deals come to fruition, that will be something that provides a little bit more confidence for customers. And I think the final piece will be do we get some relief on interest rates. And so customers that are going through all of their financials and figuring out do they invest or not and what kind of return can they expect on their investment.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

All those once you get clarity on those big picture items, I think that's what it's going to take to really kind of spur the economy forward. So we feel like we're closer to that now that we're getting clarity on some of these items. And but we want to turn that feeling into true freight and see it coming on board. And I mentioned that we're seeing a little bit better performance right now in July. And we'll just continue to watch and see does that really manifest into seeing some sequential improvement versus just what our business has been like for the last three years of kind of flattish to down month over month.

[Operator]

Thank you. Our next question will come from Stephanie Moore with Jefferies. Please go ahead.

[Stephanie Moore, SVP - Equity Research at Jefferies]

Hi, good morning. Thanks guys. Just one real quick here. Look, any thoughts on where the LTL industry fits in, in general with this potential transcontinental railroad or potentially two? Obviously, most are talking about these deals or deal impacting long haul truckload, but where does LTL sit here at all? Would love your perspective. Thanks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I don't know that I would expect to see any material impact on LTL overall. I mean, it's something that it could be ultimately downstream and something we'll continue to watch and engage with customers on. But I think that's kind of on the other end of the supply chain and not necessarily seeing changes with respect to the rail industry kind of filter down to where we can find a correlation to any changes in our business levels.

[Operator]

Thank you. Our next question will come from Ari Rosa with Citigroup. Please go ahead.

[Ari Rosa, Senior Analyst at Citigroup]

Hey, good morning gentlemen. So I know in reference to Bascome's question, you mentioned the normal seasonal trends from third quarter to fourth quarter. I was just wondering, it's been such a weird year. We've obviously seen some abnormal seasonal trends so far year to date. I'm wondering how you think about your ability to outperform normal sequential trends, I guess, we move into the back half of the year, especially in the fourth quarter?

[Ari Rosa, Senior Analyst at Citigroup]

And then also how the wage increases play into that and kind of how much discretion you have around that? And what's kind of plan? How much pressure that puts on the OR? Thanks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

Yes. I mean, obviously, our costs will be going up with respect to the wage increase. That's part of what we normally see that 200 to two fifty basis point deterioration from the third to the fourth quarters. You get one month of it in third quarter and then you've got the full quarter effect in 4Q, but that's it's usually a point, a point and a half type of increase. If you look at that two fifty change.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

That's going to be a big driver there. And but to keep sounding like a broken record, I think it's just going to be revenue dependent. The fourth quarter, if we can kind of continue to maintain our revenue per shipment or not revenue per shipment, but just revenue per day rather in the same realm of where we are, We'll continue to manage our costs like we have. And I think by the fourth quarter, I would hope to see some of this increase that we've had in overall cost overhead cost rather start to come in a little bit. And so those are some other things that can help.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But it's just continuing to manage our costs, manage our operating efficiencies, which our team is doing a great job. I kind of mentioned before, we're controlling our variable costs. We've got to continue to do that. And typically, you see volumes a little bit softer in 4Q. So it just presents even more of a challenge to our ops team.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

But we just got to continue to stay disciplined really throughout all areas of the operation. And everybody's got to participate, and we got to continue to manage our discretionary spending and think through. We're spending $1 what is the purpose behind it? And is it going to improve customer service? Is it going to help us over the long term?

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And those types of investments we're willing to make. Even though we're trying to protect the short term, we've really got to think and we do think bigger picture and longer term for what's going to be to the best benefit of Old Dominion over the long run. And that's why you've continued to see us make investments and continue to execute on our CapEx program. And I've mentioned this three year down cycle. By the end of this year, we'll have spent probably close to $2,000,000,000 on capital expenditures.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

And to do so in a soft environment, that's created its fair share of cost headwinds, but it's something that we've managed through. And I think we'll be happy that we've done these when we get on the other side of this economy. And you'll see the leverage that can come through just like what we saw in the second quarter for that short term benefit.

[Operator]

Thank you, Mr. Rosa. Will conclude our question and answer session. I would like to turn the conference back over to Marty Freeman for any closing remarks.

[Adam Satterfield, EVP, CFO & Assistant Secretary at Old Dominion Freight Line]

All right. Well, thank you all for participating today. We appreciate your questions. And feel free to call us if you have anything further. Thanks, and have a great day.

[Operator]

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

Participants

Executives

• Jack Atkins, Director - IR
• Kevin Freeman, President & CEO
• Adam Satterfield, EVP, CFO & Assistant Secretary

Analysts

• Chris Wetherbee, Senior Analyst at Wells Fargo
• Eric Morgan, Equity Research Analyst at Barclays Capital
• Jonathan Chappell, Senior MD at Evercore ISI
• Jordan Alliger, VP & Equity Research Analyst at Goldman Sachs
• Tom Wadewitz, Senior Equity Research Analyst at UBS Group
• Daniel Imbro, Managing Director at Stephens Inc
• Ken Hoexter, Managing Director at Bank of America
• Scott Group, MD & Senior Analyst at Wolfe Research
• Jason Seidl, Managing Director at TD Cowen
• J. Bruce Chan, Director at Stifel Financial Corp
• Bascome Majors, Senior Equity Research Analyst at Susquehanna International Group
• Ravi Shanker, Managing Director at Morgan Stanley
• Richa Harnain, Director - Lead Surface Transportation & Airfreight Equity Analyst at Deutsche Bank
• Stephanie Moore, SVP - Equity Research at Jefferies
• Ari Rosa, Senior Analyst at Citigroup