Reed Say

Reed Say followed up on the government business, asking if a potential Q4 shutdown could lead to a catch-up of volumes later in the quarter and how the cadence of freight return would look. He also asked about the cost-cutting actions taken in Q3 and any further plans for Q4, especially if demand remains weak in certain business segments like LTL.

Answer

President Paul Bunn reiterated that any catch-up for Department of Defense freight would be partial, not full, due to holiday shutdowns and the nature of the freight. On costs, Mr. Bunn mentioned matching headcount to freight volumes, curbing overhead growth, and managing maintenance costs, describing it as 'blocking and tackling' during the prolonged market downturn. CFO Tripp Grant added that Q3 included 'hard cost-cutting decisions' and that while some equipment-related costs were headwinds earlier in the year, startup costs for shops and new hires in Q3 were strategic investments for long-term efficiency, despite causing some 'clunkiness' in the quarter.

Reed Say from Stephens asked for clarification on the potential catch-up of government business volumes in Q4 following a shutdown, and inquired about cost-cutting actions taken in Q3 and any further plans for Q4 if demand remains weak in certain business segments.

Answer

President Paul Bunn clarified that a full catch-up of Department of Defense volumes is unlikely due to holiday shutdowns, but a partial recovery is possible if the government reopens sooner. Regarding costs, Paul Bunn stated that the company has focused on matching headcount to freight volumes, avoiding frivolous overhead, and managing maintenance costs. CFO Tripp Grant added that while there were some difficult cost-cutting decisions in Q3, the company has been consistently cost-conscious throughout the year. He noted some startup costs in Q3 related to expanding dedicated fleets and new shops, which are expected to drive long-term efficiencies despite short-term clunkiness.