OLD DOMINION FREIGHT LINE, INC. Q1 FY2025 earnings call

• Old Dominion faced softness in the domestic economy, leading to revenue and earnings per diluted share declines, but yields improved and market share remained consistent.
• The company's employees provided best-in-class service with 99% on-time service and a cargo claims ratio below 0.1%.
• Focus on maximizing operating efficiencies, reducing discretionary spending to protect operating ratio. Improved platform and P&D shipments per hour despite a 5% decline in LTL shipments per day.
• Continued execution of long-term strategic plan, including capital expenditures, with $1.5 billion spent over the past 2 fiscal years, but deferring some 2025 projects and reducing equipment purchases.
• Effective tax rate for the first quarter was 24.8%, expected to remain at that level for the second quarter.

Old Dominion's revenue for the first quarter of 2025 totaled $1.37 billion, a 5.8% decrease from the prior year. This was due to a 6.3% decrease in LTL tons per day, partially offset by a 2.2% increase in LTL revenue per hundredweight. On a sequential basis, revenue per day decreased 2.4% from the fourth quarter of 2024, with LTL tons per day down 3.5% and LTL shipments per day down 2.6%. Monthly sequential changes in LTL tons per day showed January down 3.8%, February up 1.9%, and March up 4.8% compared to the prior month. Revenue per day for April is anticipated to decrease approximately 6% plus or minus 50 basis points. Operating ratio increased to 75.4% for the first quarter, impacted by revenue decline deleveraging operating expenses. Capital expenditures for 2025 were reduced to approximately $450 million from an initial plan, with deferrals of certain projects.

• Revenue per day for April is projected to decrease approximately 6% plus or minus 50 basis points, depending on remaining days in April.
• Capital expenditures for 2025 are expected to total approximately $450 million, a $125 million reduction from the initial plan.
• Revenue per hundredweight excluding fuel is expected to be in the 5% to 5.5% range for the full quarter, with normal seasonality potentially pushing it to the upper end of that range.

• Uncertainty in the domestic economy, which could delay full recovery of business trends.
• Impact of tariffs and manufacturing on freight volumes and pricing.
• Potential macroeconomic factors affecting customer investment decisions and thus freight demand.

Q: Could you give color on seasonality and margins given ongoing uncertainty with tariffs and manufacturing?

A: Margin improvement is expected around 100 basis points if revenue per day stays flattish, with salaries, wages, and benefits likely flattish. Revenue per hundredweight excluding fuel is expected 5%-5.5% range.

Q: Comment on the importance of retail customers to LTL overall and competition from UPS?

A: Retail is about 25%-30% of business; Old Dominion sees Amazon's LTL offering as an opportunity. UPS leaning into lower weight freight may not be a major threat. Industrial is still 55%-60% of business, with some sectors performing better than average.

Q: How much of CapEx is related to macro vs idiosyncratic to ODFL?

A: CapEx reduced due to economic uncertainty, deferring projects and reducing equipment purchases. Service center capacity is over 30% and fleet capacity is evaluated to handle potential growth.

Q: Thoughts on pricing and competitive dynamics?

A: Old Dominion continues to get price increases through bids, maintaining market share. Pricing is cost-based, and the company's value proposition supports yield management. Market share has remained relatively consistent at 12.5%-13%.

Q: Impact of potential change in NFC on yields?

A: No major expected impact on yields as Old Dominion shares cost information with customers and prices appropriately based on factors, expecting minimal impact from NFC changes.