ArcBest - Q1 2023
April 28, 2023
Transcript
Operator (participant)
Greetings, and welcome to the ArcBest First Quarter 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded on Friday, April 28, 2023. I would now like to turn the conference over to Mr. David Humphrey, Vice President of Investor Relations. Please go ahead, sir.
David Humphrey (VP of Investor Relations)
Thank you for joining us. On today's call, we will provide an update on our business, walk you through the details of our recent first-quarter 2023 results, and then answer some questions. Joining me today for the prepared remarks are Judy McReynolds, Chairman, President, and CEO of ArcBest, and David Cobb, Chief Financial Officer. In addition, Dennis Anderson, Chief Strategy Officer, Steven Leonard, Chief Commercial Officer, and President of Asset-Light Logistics, and Danny Loe, Chief Yield Officer, are available to help answer questions. To help you better understand ArcBest and our results, some forward-looking statements could be made during this call. Forward-looking statements, by their very nature, are subject to uncertainties and risks. For a more complete discussion of factors that could affect ArcBest's future results, please refer to the Forward-Looking Statements section of our earnings press release and our most recent SEC public filings.
To provide meaningful comparisons, certain information discussed in this call includes non-GAAP financial measures as outlined and described in the tables in our earnings press release. Reconciliations of the GAAP financial measures to the related non-GAAP measures discussed in this call are also provided in the Additional Information section of the presentation slides. As a reminder, there's a conference call slide deck that could be found on the ArcBest website, arcb.com, in Exhibit 99.3 of the 8-K that was filed earlier this morning, or you can follow along on the webcast. We will now begin with Judy.
Judy McReynolds (Chairman, President, and CEO)
Good morning. We appreciate you joining us today. I want to start by thanking our customers for the trust they place in us every day to keep their supply chains running. They are the reason our employees come to work each day to give it everything they have. As you've heard us say many times before, ArcBest is a company that thinks and plans for the future. We're always striving to anticipate the needs of our customers and the market, manage short-term and long-term risk, and execute to the highest level. It is this mentality that has driven our outperformance over the last several years. Nothing has changed as we face a softer economic environment, leading to reduced customer demand industry-wide.
Years ago, we expanded our solutions at ArcBest to better meet our customers' needs. We built our dynamic pricing offering that enhanced our pricing intelligence and has provided us the ability to profitably fill capacity precisely in the locations where we need it. Today, we have much better visibility into demand and costs across our business, which provides the ability to make precise changes that have a meaningful impact versus taking a broad brush approach. As the environment has evolved, we've doubled down on effectively managing personnel, costs, and equipment while continuing to deliver to our customers. The commitment to our growth strategy and disciplined cost management has demonstrated results. We continue to diversify our customer mix across industries. We drove an average 10% increase in our customer base. Retention remains solid across all segments of our business.
While we experienced pressure on truckload spot rates, which decreased from fourth quarter levels, we grew shipments and won new customers despite that trend. This is a testament to the strength of our truckload solution and our ability to balance contract and spot business levels based on the macro environment. In the asset-based business, industry pricing remains rational. ArcBest continues to price appropriately to reflect our high-quality service offering. Our core pricing is strong, with a nearly 10% increase year-over-year. The dynamic pricing tool we built a few years ago enables us to precisely place profitable shipments throughout the asset-based network to fill underutilized capacity. We carefully manage the volume of transactional shipments to supplement our core LTL business based on market dynamics. Having this lever to drive profitable business has enabled us to largely avoid layoffs up to this point.
While we showed resilience in our performance, that has not deterred our focus on working efficiently and driving success through the power of our innovative, integrated solutions. We are continuing to invest in key aspects of our company and strategy to accelerate revenue growth and build on the strong momentum underway. First, we continue to invest in technology. We are capitalizing on the strength of ArcBest's balance sheet, pursuing organic growth through new innovations that strengthen ArcBest's competitive edge. During the quarter, we announced our new freight movement system, Vaux, and it has been incredibly well-received by customers. Vaux, which began as an employee idea, is the first radical change to the freight handling process since the forklift was patented over a century ago.
The industry has long been demanding change, and with Vaux, we delivered. Additionally, in the first quarter, we completed the phase 1 rollout of City Route Optimization, an innovation that has delivered strong returns. These are just a few examples of how our innovative spirit drives ArcBest forward. We continue to use tech to make our people more efficient and effective, like the implementation of a best-in-class CRM tool and other systems that enable our sellers to be more productive in their day-to-day activities. We've also invested in our solutions. We have strengthened our truckload offering, one of the largest areas of growth opportunity and one that is bringing business opportunity to ABF as well. Additionally, ABF Freight was recently awarded the Excellence in Cargo Claims and Loss Prevention Award for a record 10th time.
This is a testament to our ongoing commitment to excellence and the high bar we set for ourselves. Supply chains are complex. ArcBest keeps it simple. We strive to make it easy to do business, knowing this is what our customers expect. Since we began executing on this strategy in 2012, and then further in 2017 with our enhanced market approach, we have doubled the number of customers who are cross-sold, and we continue expanding our relationships with these customers. Importantly, we have invested in our people. Hiring and retaining top talent is the foundation to our company's success. With the origin of Vaux starting as an employee idea being a prime example.
Our culture of workforce training and development is core to who we are and why we have some of the best talent in the industry, enabling our organization to be exceptionally productive, efficient, and agile. We're honored to rank in the top 20 on Training magazine's 2023 APEX Awards list, a global ranking of organizations that excel at training and human capital management for the 7th consecutive year. We do not take this recognition lightly, and we are committed to continuing to invest in our employees' success. During the pandemic, we rapidly contracted our workforce to meet lower business levels at the time. While we still have not refilled all those essential roles, we have successfully kept our trained, experienced, and productive employees in place despite navigating a tougher labor market.
As opposed to more deeply contracting our workforce again, we expect that retaining our talent will enable us to capitalize more quickly when demand rebounds. It also benefits us in the short term by allowing us to better utilize our network resources and personnel to capture future opportunities as core customer needs increase. A win for ArcBest, our customers, and our employees. In short, our objective is to drive sustainable growth, generate strong and resilient cash flow, and deliver superior returns for our investors. Over the past few years, and especially over the course of the pandemic, we've evolved tremendously. ArcBest is more agile than ever, and we've proven that we can deliver results regardless of the economic environment. While we believe these macro challenges are temporary, we are confident that our versatility and breadth of integrated solutions puts us in a strong position to thrive in any environment.
Earlier this month, we announced that effective May 14th, Matt Beasley will be our new CFO. Matt has been with ArcBest since early 2022 and is working closely with David Cobb, who will retire in October to ensure a smooth and seamless transition. We look forward to welcoming Matt to the executive leadership team, we will certainly miss working with David. He is a tremendous member of our team, we wish him and his family the best in the next chapter of his life. Lastly, my most sincere thank you to the people of ArcBest. A century of business is no small feat.
It's the people who show up to work every day, eager to grow with us who have helped us reach this important milestone. I'm grateful for the passion and the dedication of our team, and I thank you for all you do. Now I'll turn it over to David to take you through the quarter in greater detail.
David Cobb (CFO)
Thank you, Judy. Good morning, everyone. Congratulations to Matt, who has already been significantly involved in important areas of our company. I am so appreciative of having served alongside an outstanding leadership team that is focused on long-lasting, important values and the execution of a customer-oriented growth strategy. I'm deeply grateful for the remarkable people in our company, and specifically want to mention my sincere appreciation for our finance and accounting teams across the company. I'll begin by highlighting our consolidated results. The late February 2023 sale of FleetNet America, our fleet maintenance and repair service subsidiary, has been reflected as discontinued operations in our consolidated results, and our commentary will be for the remaining business or continuing operations. First quarter 2023 consolidated revenue from continuing operations was $1.1 billion, a 13% per day decrease compared to last year.
On a non-GAAP basis, consolidated operating income was $52 million, a decrease of 51%. Our adjusted first quarter earnings per diluted share was $1.58 per share. The effective tax rate that was used to calculate our first quarter non-GAAP EPS was 25.5%. Under current tax laws, we expect our 2023 non-GAAP tax rate to range from 26%-26.5%. This may be impacted by discrete items throughout the year. ArcBest cash balance and total liquidity remain at good levels. As of the end of the first quarter, we had net cash of $115 million, an improvement of $54 million since the end of last year. Total liquidity of approximately $600 million remains at a healthy level.
Despite rising rates, the composite interest rate on ArcBest outstanding debt at the end of the recent quarter was 3.0%. Because of the financial strength stemming from our strong balance sheet and the operating cash flow we generate, we are investing in the business through equipment purchases, real estate additions and improvements, and technology innovations, all of which will strengthen our competitive edge and ability to serve customers. We regularly review external growth opportunities and continue to target investment grade credit metrics while prioritizing returning capital to shareholders through share repurchases and the quarterly cash dividend. Following the sale of FleetNet and the corresponding increase in our share repurchase program, we remain in a great position to return capital to shareholders. In mid-March, we entered a 10b5-1 trading program that allowed us to buy back shares during the current closed trading window.
So far this year through yesterday, our settled share repurchases have returned approximately $29 million of capital to shareholders. Based on those share repurchases, $96 million remains available under the current repurchase authorization for future common stock purchases. In all areas of our business, we are focused on effectively managing personnel, equipment, and other network resources to provide effective customer service while controlling cost. In asset-based, we are reducing cartage, purchase transportation, equipment rentals, and other outside resources. In Asset-Light, additional reductions will be implemented in employee related and outside services cost to better align with the reduced business levels we are experiencing. When compared to first quarter 2023, these Asset-Light cost reductions are expected to be in a range of $2 million-$3 million for the second quarter.
Turning to the key metrics in our asset-based business, first quarter revenue was $698 million, a decrease of 2% on a per day basis compared to last year. Asset-based revenue was below last year due to reduced customer demand in our core business related to a soft economy, which impacted customer order quality, quantities and resulting shipment sizes with customer retention solid, as Judy mentioned. We were able to generate measured growth in our asset-based shipments and tonnage. First quarter daily shipments increased by 8% and tonnage per day increased 3%. The 4% decrease in first quarter billed revenue per hundredweight versus last year reflects the change in freight mix resulting from strategically managing consistent business and personnel levels by utilizing our dynamic LTL pricing lever for profitable shipments. These actions are good for our customers and for our company.
Excluding changes in fuel surcharges, first quarter pricing on our core LTL rated business increased nearly 10% versus the same period last year. Pricing on that core business also increased sequentially compared to the fourth quarter. On asset-based customer contract renewals and deferred pricing agreements negotiated during the first quarter, we secured an average of 3.9% increase. While we have increased shipments, revenue per shipment is down from last year. As I mentioned earlier, our cost management efforts continue and we are benefiting from the recently completed phase 1 rollout of our City Route Optimization project. As we look ahead, we are in a strong position to positively respond when the market inflects. The first quarter non-GAAP asset-based operating ratio of 92.3% was a year-over-year increase of 460 basis points.
On a sequential basis versus fourth quarter was an increase of 370 basis points, which is comparable to our prior four Q to one Q periods. As mentioned last quarter, repairs and maintenance have been elevated due to inflationary costs and in part due to delays in receiving replacement equipment. Those costs are in the asset-based line for fuel, supplies and expenses. Also as mentioned last quarter, we were able to make good progress on optimizing our usage of outside resource costs with purchase transportation declining as a % of revenue. As we look at April trends, the slowdown in the general economy and its impact on customer demand and resulting shipment sizes continues to impact our core business levels.
On a preliminary basis and reflecting the inclusion of profitable transactional LTL shipments, our April 2023 asset-based tonnage is flat versus last year and shipments are running up about 4%. For additional details on our April 2023 trends, please refer to our Form 8-K exhibit to the press release. In our Asset-Light business, total first quarter revenue was $438 million, a decrease of 27% on a per day basis versus first quarter 2022 due to the market driven decrease in revenue per shipment during a continued soft environment combined with business mix changes. As we mentioned this time last year, our expedite and international services were strong contributors in first quarter 2022, benefiting from favorable market conditions and project work.
Our first quarter 2023 truckload shipments grew sequentially versus fourth quarter as well as year-over-year and contributed to the segment's 1% increase in total shipments per day compared to first quarter 2022. First quarter Asset-Light non-GAAP operating income was $4 million and first quarter Asset-Light EBITDA was $6 million, both meaningfully below the same period last year. We provided preliminary Asset-Light business trends for April 2023 in the Form 8-K exhibit to the press release filed this morning. Total revenue reflects a year-over-year decrease slightly worse than the first quarter.
Although shipments per day are running slightly higher in April 2023 versus April 2022, due to the challenges in the macro environment, current revenue trends in that business continue to be weak, reflecting the lower demand and declining spot rates. As I mentioned earlier, costs are being closely managed while positioning strategically for long-term growth. As an update on 2023 capital expenditures, we currently expect to achieve our plans for total 2023 net capital expenditures of $300 million-$325 million. In the first quarter, we brought on the remaining revenue equipment that carried over from 2022, and we expect to receive the 2023 equipment by the end of the year.
As we discussed last quarter, real estate investments are ongoing throughout the asset-based network and include new facilities, facility replacements, and upgrades to existing service centers. We remain focused on profitable growth and efficiently capitalizing on business opportunities. Especially during challenging market environments, we are emphasizing cost management to minimize the impact on operating margins. Meeting customer needs remains a priority, and our focus on helping customers navigate their supply chain challenges will benefit our business by preserving long-lasting relationships with them. Now I turn the call back to Judy.
Judy McReynolds (Chairman, President, and CEO)
Thank you, David. As we close, I want to reflect again on our strategy and position. We continue to hear from our customers that our solutions are relevant and our partnership is valuable. This is why we continue to see both shipment and customer growth despite some of the demand decline our industry is experiencing. We have transformed our company in the last decade and have more than doubled our revenue over that period. We are nimble and precise in the way we manage our costs, and as a result, we have made significant improvements in our consolidated operating income and operating ratio. We are proud of our progress, but we are just getting started. We are making data-driven, intelligent decisions using our strategy as our North Star. We look at our company critically.
This is one reason we were able to bring Vaux to market because we saw the opportunity to improve our own way of doing business. It's what enabled us to make the strategic decision to sell FleetNet. We need to stay focused on our core business and be willing to take significant action, which we did and will continue to do. We are ready and well positioned for what's ahead, and we're confident in our growth opportunity with an expanding pipeline of new business engagements that reflect our complete logistics service offering and with our visibility to an expansive volume of shippers' logistics spend. Our capabilities have never been stronger, supported by the investments that we've made to provide multi-mode shipping solutions.
With the cash flow that our business generates and our solid balance sheet, we have also the financial capacity for acquiring strategic assets to enhance our service and drive additional growth. We're committed to keeping the global supply chain moving, delivering on our goals and driving growth as we look forward to our next 100 years. That concludes our prepared remarks. David Humphrey, we can now open the call up to questions.
David Humphrey (VP of Investor Relations)
Okay, Frank, I think we're ready for some questions.
Operator (participant)
Thank you. If you would like to register a question, please press the one four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment please for the first question. Our first question comes from Jack Atkins with Stephens. Please proceed.
Jack Atkins (Managing Director and Senior Research Analyst)
Okay, great. good morning, everyone. You know, David, congratulations on your retirement, and congratulations to Matt on his new role. I guess maybe first thing for me is just a housekeeping item. just a lot of volatility this quarter in terms of the sale of FleetNet, and everything else. You know, I guess what do you guys view consensus for the first quarter? I guess I'm calculating it, I think, at $1.67. I know there are some reports at $1.90. What, what do you guys view consensus earnings as for the first quarter?
David Humphrey (VP of Investor Relations)
Yeah, Jack, I agree. It was $1.67, and, yeah, that was just based on the estimates that we had.
Jack Atkins (Managing Director and Senior Research Analyst)
Okay. Thank you for clearing that up, David.
David Humphrey (VP of Investor Relations)
Appreciate you mentioning that.
Jack Atkins (Managing Director and Senior Research Analyst)
Yeah. Okay. No problem. I just want to make sure that was clear for folks. I guess for my next question here, I'd love to dig into the leadership changes that you guys went through in the first quarter within the asset-light business. Can you maybe talk about that? Why did you make those changes? I guess what's the expected outcome from that, whether it's in terms of profitability or sort of business strategy?
Judy McReynolds (Chairman, President, and CEO)
Well, you know, first of all, Jack, you know, I want to say how excited I am about the asset, you know, asset-light solutions that we have and especially MoLo, relatively recent acquisition, you know, that we made. You know, I made some of the changes that I thought were necessary and, you know, really required as we, as we move forward. You know, just to speak to the leaders that we have in place, I mean, Steven Leonard, as Chief Commercial Officer and President of Asset-Light Logistics, a tremendously experienced leader, one that originally came from our asset-based business, but has spent most of his last years, you know, here with the company in the asset-light solutions, particularly truckload and ground expedite, and then also, as a leader in sales.
You know, really has the ability to bring all of that together, you know, in a powerful way with what we're trying to accomplish in the approach with customers. Excited about that. I'll ask Steven to comment about the MoLo leadership team that reports to him that may be of interest. We'll see what he has to say here.
Danny Loe (Chief Yield Officer)
Yeah, thanks, Judy, and thanks, Jack. We have a great leadership team in place at MoLo that, you know, the folks that are reporting to me are very experienced. All of them have over 10 years of experience in the industry, and they've really grown up in that industry. One of the things that I appreciate about their careers is they started in, you know, customer-facing, carrier-facing, technology-based roles. They're just very well-positioned from an experience perspective. On top of that, you know, we have just came together as a team really well over the last few weeks. We're making tremendous progress. We talked about we continue to add volume. We're adding customers. You know, we've had record numbers of RFPs, we feel great about where we're headed.
You know, the team's in a really good place and we're moving forward. It's exciting. You know, we've talked a lot about it in terms of our strategy and what it brings to the table, that continues to be a priority for us. We're super excited about where we're headed.
Judy McReynolds (Chairman, President, and CEO)
Yeah. I'll say one more thing about, you know, just the excitement. I mean, if you talk to any of our, particularly our best of salespeople, you know, they are just over the moon with the truckload offering that we have and how well the MoLo team executes on that and the business model. Just, I guess we'll leave that there.
Jack Atkins (Managing Director and Senior Research Analyst)
Okay.
Judy McReynolds (Chairman, President, and CEO)
Thank you for the question.
Jack Atkins (Managing Director and Senior Research Analyst)
Yeah. Sure thing. I guess if I could squeeze one more in, it goes towards the dynamic pricing taking place within your asset-based business. You know, that's coming at a much lower revenue per shipment, it seems like. But you have, you know, you have a relatively elevated cost structure on a per shipment basis. I guess how do you convince investors that this is profitable market share that you're taking, when, you know, revenue's down, call it seven and a half million dollars in the quarter, but EBIT's down over $30 million? I guess, how does that work for folks?
Danny Loe (Chief Yield Officer)
Hey, Jack, this is Danny. You know, we've talked about that when we look at it. We're looking at an individual shipment making decisions, and we are confident these shipments are profitable for our network. I think one of the things you mentioned, you know, there's some concern when you talk about revenue per hundredweight and different things and comes to this is market-based price. You know, if you look at the math of revenue per hundredweight for us compared to others, if we match market price on some things, that could have some deterioration of revenue per hundredweight, but that doesn't mean it's the wrong decision. Again, we're looking at the profitability of the shipment, not necessarily just what a revenue per hundredweight metric would be. So we have the mechanisms, we have the model.
We can float up or down. You know, we're very confident that as our core business strengthens, you know, the macro environment's obviously affecting our customers. As those customer shipments increase, we can simply then, at that point, decide to handle those shipments as compared to the dynamic shipments that are in our network. That's just something we've never had in the past to be able to do. In the past, if, you know, if we had laid off people, if the business comes back, we have to go through the process of rehiring, retraining, and getting people productive. We're-- this is not only to us, the best short-term answer, it's the best long-term answer as well.
Jack Atkins (Managing Director and Senior Research Analyst)
Okay. Thank you, Danny. Appreciate it. Thanks, Judy.
Judy McReynolds (Chairman, President, and CEO)
Thank you.
Operator (participant)
Our next question comes from Jordan Alliger with Goldman Sachs. Please proceed.
Jordan Alliger (VP and Senior Equity Research Analyst in Transportation and Logistics)
Yeah. Hi. Morning. Just wondering if you could give some additional thoughts, you know, around demand. I know you gave us the April data, but, you know, thoughts around potential inflections in the overall freight environment. I know you guys are doing things to drive volume in, you know, separate from the economy, but just sort of your thoughts on that. You know, with the flat tonnage or so in April, is that something that. Do you expect normal trends so that you could have a, like, a positive tonnage environment as we go through the entire second quarter? Thanks.
Judy McReynolds (Chairman, President, and CEO)
Well, Jordan, I think, you know, just based on what we saw in the first quarter and into April, we certainly could. You know, one of the things that, I really like about, our visibility on customer opportunity, with these expanded channels, you know, that we do business in, it just gives us the opportunity to see what's there, and as Danny mentioned, look at how well or not, you know, that might work in our network. That's just such a better position to be in. I will say this about, you know, what we characterize as our core business. You know, the, the trends there, for LTL, you know, have been down.
You might, you know, look at the others that have reported and, you know, we're experiencing a similar thing on the core business side. We also see that in our managed group. Whenever we're managing accounts, typically we're managing, you know, LTL business or truckload business, and there's a consistency there with what we're seeing as compared to what we see on the LTL side of the business. Now, inflection, I think that is interesting. I mean, there's always a discussion about that, and perhaps the best place, you know, to see some of that is in our truckload brokerage markets. You know, Steven, I'm gonna ask you to comment about some of the conversations that we've had with the MoLo team about what they're seeing there, because I think that's interesting, too.
Steven Leonard (COO)
Yeah. In terms of where prices are and buy rates, you know, it feels like, you know, we could be near the bottom. I think the question that everyone has that's the most challenging one to answer is how long we're gonna be there. That's kind of where we are on that. Again, we continue to focus on growth and adding the right partnerships that, you know, position us well for when the market does turn back. You know, that's how we're thinking about it right now.
Judy McReynolds (Chairman, President, and CEO)
Yeah, the other thing to add just real quick, Jordan, is when we look at our core business opportunities, we are still seeing good opportunities in our pipeline, and we're pleased with that. We also see good Asset-Light opportunities in our pipeline. Things do take longer, you know, to get through some of these processes to onboard, you know, and that sort of thing. I think there's just more scrutiny or more evaluation, you know, of those critical decisions for shippers. You know, we're still seeing a lot to work on as far as bringing business into this company. We're excited about how we can serve them. Hope that answers your question.
Jordan Alliger (VP and Senior Equity Research Analyst in Transportation and Logistics)
Yeah, I appreciate it. Thanks, everyone.
Judy McReynolds (Chairman, President, and CEO)
Thank you.
Operator (participant)
Our next question comes from Christian Wetherbee with Citigroup. Please proceed.
Christian Wetherbee (Senior Analyst, Managing Director, and Lead Analyst)
Hey. Thanks. Good morning, guys. you know.
Judy McReynolds (Chairman, President, and CEO)
Good morning, Chris.
Christian Wetherbee (Senior Analyst, Managing Director, and Lead Analyst)
Morning. Maybe if you could pick up on the dynamic pricing. It seems like you've done a really good job of sort of keeping that separate from what your core LTL business is doing. I guess, curious about how you're able to sort of, you know, put that wall, if you will, between sort of the businesses and wondering if there's risk that you get some leakage out of your core into what might be more of a transactional market. I'm not sure you necessarily see that much volume kind of moving back between those types of arrangements, transactional versus contractual. You know, how do you guys sort of approach that to sort of ensure that you don't lose volume out of what the better pricing business and have it fall into what is more transactional?
Danny Loe (Chief Yield Officer)
Sure. Sure. Chris, this is Danny again. Yeah, I'll start off, and maybe Steven or Dennis may wanna add in after that. The key to this is we're meeting the customers in the channels they want to transact in. This transactional business that when we say dynamic, we're meeting customers that they're shopping every shipment, making a shipment by shipment routing decision. We don't see that this crossover kind of as you described, because we're not trying to change the customer's behavior. We're just kind of playing the game that the customer is playing there. The ability to separate it is really how that customer interacts and transacts with us. We'll continue to focus on that.
We do believe that we have a very good vision of what our core business is and what our transactional business is and the ability to be agile as we go through different times. It's really a daily type decision that we're making as we look at what the network is, what the network needs, what the market overall is doing, and we're able to adjust really daily to what our network is, what type of shipments and what the price of those shipments are that we're putting in the network.
Christian Wetherbee (Senior Analyst, Managing Director, and Lead Analyst)
Okay. Okay. That's helpful. I appreciate that. Go ahead, Judy.
Judy McReynolds (Chairman, President, and CEO)
Well, I was gonna say, you know, the, what enables all of that, is having a good understanding of your costs and cost visibility. You know, we comment about that, but it really has increased, you know, in the last few years. You know, I think that is a necessary part of this.
Danny Loe (Chief Yield Officer)
Yeah. Chris, one other thing that I just want to mention there is not only is that helping us with the networking capacity, that actually provides protection to our core business. If we were going through this cycle right now without the ability to do that and trying to lower costs that quick, it would put significant pressure on that core business. You know, I don't know that I've ever seen our core business more profitable and healthy than it is right now.
Christian Wetherbee (Senior Analyst, Managing Director, and Lead Analyst)
Okay. That's helpful. I appreciate that color. I guess just when you think about costs, you just wanna kind of touch maybe a little bit on how you're thinking about sort of the year plays out and particularly on sort of the labor cost assumptions that maybe we need to start thinking about for the back half of the year. Anything to sort of think about that in terms of, you know, both headcount maybe and then cost per employee as we think through the rest of the year?
Judy McReynolds (Chairman, President, and CEO)
You know, I think we are, we all know, going through labor contract negotiations. Our current contract expires at the end of June. You know, I think if you don't have all the cost elements on that, we could really cover those with you offline. You know, on the, on the wages and that sort of thing. You know, we are making good progress on particularly in the supplements so far in labor negotiations. We're just at the early stages of the economic terms that we're dealing with there. We'll know a lot more, you know, as we go through the next few weeks and couple of months.
You know, outside of that, I think, you know, the work that we're doing to, you know, again, based on the visibility that we have to better optimize those costs, I think the team at ABF has done a really good job of being able to bring that together. I mean, we mentioned City Route Optimization. We have several different projects, you know, that we either have in place or we're working toward that optimize some of the biggest cost buckets that we have, whether it's city, you know, pickup and delivery, labor costs or line haul. I think you've seen us bring to, you know, bear some of the cost reductions that are needed.
We've hit mostly in the areas of purchase, transportation, cartage, rented equipment, and that sort of thing that were very vital resources and variable resources for us whenever demand was at a higher level. Those are the types of actions that you can take, you know, to really emphasize the workforce that we have that is well-paid, you know, and, you know, allows us to make sure that we have consistency in serving our customers as we move forward. You know, there's a lot to manage there, but I'm proud of the ABF, you know, team, as well as working with Danny and his yield team and sales to really get to the best answer.
David Cobb (CFO)
I'd just add to that, Chris, that, you know, Judy mentioned the big cost areas that have been focused on, but as our employee base continues to get more experience, we're seeing improved productivity. In fact, we saw, you know, along with those cost reductions that Judy mentioned, improvement in our productivity on the dock areas. You know, we're targeting our hiring. We're very, again, visibility about where we have those needs and knowledge of pending retirements. You know, we're replacing as we need. That's, you know, a close eye on all the costs, I think, is how we're managing this. Adding, you know, having these profitable shipments enables us to be more strategic about all these areas.
Ravi Shanker (Managing Director and Senior Equity Research Analyst)
Okay. That's very helpful. Appreciate the time. Congrats to Matt and David.
Operator (participant)
Our next question comes from Scott Group with Wolfe Research. Please proceed.
Scott Group (Managing Director and Senior Analyst)
Hey, thanks. Good morning, and congrats, David. We're in this pretty bad freight environment, and if I look, your tonnage has never been up more sequentially from Q4 to Q1 than we just saw. At the same time, your rev per hundred weight's never been down more from Q4 to Q1. I get it's all transactional. I guess my question is, do you think maybe we've pushed that a little too far, right? When I just think about, like, margins down 5 points in Q1. I think you're guiding, you know, down about 6 points in Q2. Do you think we've pushed the transaction a little too far?
Danny Loe (Chief Yield Officer)
Hey, Scott, this is Danny. I don't think we pushed it too far. I think it's something that we evaluate all the time. I'll tell you know, when I view this, we're not gonna add capacity for this business, but capacity that we have and costs that we have, we want revenue to go against that. You know, we'll continue to balance as we go forward with it. Again, these are incrementally profitable shipments that add to the profitability of the company in the short run with this. It while also allowing us to have a better longer term answer for our customers to have capacity available for them. We would not add capacity for these shipments as we look at it.
Judy McReynolds (Chairman, President, and CEO)
That's right. Scott, I'll just say one more thing, you know, here. You know, obviously, we're gonna watch and see what the economic environment brings to us and how that affects demand and that sort of thing. You know, we are in a different labor market than we've been in. I mean, despite the weakness in demand, we still, it takes time to get to proficiency, as David mentioned, but it also takes time to hire and put in place these replacements. You know, if we see that, you know, we're gonna be in a situation where we're making those drastic changes, like we did, for instance, you know, during the pandemic, you know, we really reduced headcount in, I'd say, March or April, you know, of 2020.
I think it was about 1,000 people at ABF, and we still don't have all of those positions refilled. So, you know, there is a penalty for that action as well. You know, we've got the opportunity as we've described, and we wanna be able to seize on that opportunity when, you know, the time arises. The other thing I'd say is that points to the pandemic. We had this dynamic tool in place back then too, and it really helped us whenever we had that weakness in demand.
Then as we saw business come roaring back in July of 2020, we managed that down and, you know, at an appropriate level. Again, there's several different elements here that we're trying to navigate. One of those being, you know, we wanna get these people that we've hired over the last couple years experienced, proficient, and productive and also ready for growth when things turn.
Scott Group (Managing Director and Senior Analyst)
Okay. That makes sense. Just last, I wanted to ask about the Teamsters. I know you don't wanna talk about costs, but maybe what are some of your key priorities, goals out of this contract? We got pension reform and the government since the last time we've had a contract. I know what are some of the opportunities, and does it matter? I mean, there's a lot with the Teamsters right now. They've got UPS, TFI, now Yellow's getting involved. Like, does that make it? What are the implications of the Teamsters having multiple negotiations on at the same time?
Judy McReynolds (Chairman, President, and CEO)
You know, I mean, I think it probably is a challenging situation. You know, I think for us, we have our schedule. You know, we've been working at it. We've got a good plan together and that sort of thing. I think our goals are to achieve, you know, a market-based contract, one that allows us, you know, to have employees that are compensated as they should be and again, ready to move forward in a productive manner and for us to be positioned to grow. I think those goals would align in a way, you know, that could create a successful outcome.
You know, we've got several different elements to work through. You know, again, we're thankful that we have our schedule. We know what it is, and, you know, we've got some time here to go, but look forward to being able to have a contract, at the end of June, you know, when, the other one expires.
Scott Group (Managing Director and Senior Analyst)
Okay. Thank you.
Operator (participant)
Our next question comes from Ravi Shanker with Morgan Stanley. Please proceed.
Ravi Shanker (Managing Director and Senior Equity Research Analyst)
Thanks. Good morning, everyone. Two big picture questions here. Judy, I want to start with your closing comments, because it does feel like the last three months have been pretty busy for ArcBest. You buy a lot of things. You don't normally sell businesses. The personnel changes that we've discussed earlier, the buyback, it feels like there's a lot going on. Is this just, you know, spring cleaning at a 100-year-old company, kind of sharpening pencils, tightening belts, or is anything structurally changing with your go-to-market strategy, your business model? Is ArcBest gonna look very different three years from now than it does today?
Judy McReynolds (Chairman, President, and CEO)
You know, I want, you know, our company to really be successful in achieving those long-term targets and serving our customers, you know, even better in that 3-year timeframe. To answer the question, I think, you know, about FleetNet. You know, I've been involved with FleetNet since I came to the company back in 1997. I mean, it was a subsidiary of I mean, of the WorldWay. Yeah, you'll probably most remember Carolina Freight that was merged into ABF, it was one of the other subsidiaries. Back then, it was called Carolina Breakdown, we renamed it. Anyway, we have, you know, done a lot with that business over time.
One of the things is just the development of technology and the digital enablement of different parts of that business. You know, what we saw in it was that it needed greater scale. You know, asked ourselves, based on our current priorities, you know, were we willing to further invest in that business to gain that scale, or did we think that there would be a better owner, you know, for FleetNet? It just took, you know, a long time to try to get to, you know, the point of that being a success on both sides, and we really feel like it has.
That's really it. I mean, it, you know, it's a great team. We like that business. It services both ABF and our Panther owner-operators, and has done it well. You know, for them, they needed to be a part of an organization that would provide more scale, in the business that they were in. We just saw it as a win-win.
Ravi Shanker (Managing Director and Senior Equity Research Analyst)
Understood. Maybe as a follow-up from there, kind of you mentioned the long-term target. In light of some of these changes, and maybe a down cycle that may have kind of overextended to the downside compared to what people may be expecting, are those long-term targets kind of still in play? Kind of what do you think normalized mid-cycle EPS is for ArcBest? I think that's the number one question the market has right now.
Judy McReynolds (Chairman, President, and CEO)
Well, you know, I think the way to look at that is to, you know, just focus on those long-term targets. You know, what we would have is a move, if you excluded FleetNet from there, that would put you maybe toward the lower end of that range. It just making the pure adjustment for FleetNet. You know, we still see the growth opportunity that we've been mentioning. You know, we have a pipeline that includes largely our asset-light solutions, but also a healthy asset-based set of opportunities, and we're really working hard, you know, to try to bring those about.
You know, we also, as we're looking at those targets, that have, you know, the longer-term margins in them, you know, the opportunities to create greater efficiency in the business, and we're very focused on that. You know, we feel like if we execute on our strategy, the opportunity that we have in front of us, as well as being open to some M&A if that would be required to add scale in our, really our already existing solutions. You know, we have Vaux that we announced this quarter, and we really expect and anticipate that we're gonna have some success adding revenue there. That could be an important element as well. I hope that answers your question. Thanks.
Ravi Shanker (Managing Director and Senior Equity Research Analyst)
Nope, that's very helpful. Thank you, and also congrats to David and Matt.
David Humphrey (VP of Investor Relations)
Thank you, Ravi.
Operator (participant)
Our next question comes from Ken Hoexter with Bank of America. Please proceed.
Ken Hoexter (Managing Director, Co-Head of Industrials Research, and Senior Equity Research Analyst)
Hey, great. Good morning. Dave, thanks for the discussions over the past 7 years or so, and Matt, congrats on the new position. Can you talk about the % of business that is now transactional and what that looked like a year ago? Then you noted that all-in pricing at the core was up high single digits. I just wanna check, is that a subset that you've always given us the basis on? Was it just on core LTL, or was it always the total company ex fuel? Thanks.
Judy McReynolds (Chairman, President, and CEO)
Well, we've given both. We, you know, I think the core, we've done that for some period of time, don't you think, Dave?
David Cobb (CFO)
Yes, we have.
Judy McReynolds (Chairman, President, and CEO)
Yeah. You know, to discuss with you know, the transactional, and relational or contractual, you know, percentages, they have moved some, you know, but, you know, what I would say is it's, you know, not a material move on the Asset-Light side. You know, the little bit more, than, 50%, you know, is that contract or relational. You know, we have, you know, a spot quote, opportunity there that tends to be around 40-ish% or something like that. You know, that has, expedite, truckload, and dedicated in it. We have seen a move, you know, on the asset-based business, because of the, of the LTL transactional business.
I, you know, I wouldn't get pegged to a specific percentage there because that's something that's moving, you know, every day as we're seeing published business opportunities. So, you know, obviously, it's more than it has been. You know, it's not unusual for us to use transactional as an element for the asset-based business. Our U-Pack business is spot quoted. We have truckload spot quoted business as well as this dynamic LTL business.
David Cobb (CFO)
Just a little more color on that. I mean, just as was stated earlier.
Ken Hoexter (Managing Director, Co-Head of Industrials Research, and Senior Equity Research Analyst)
David, if I can just clarify. I just meant the asset side, right? Just, I just want to understand the big focus here of what's adding on the transactional. I'm just focused on the asset side, what % is now transactional, if you can give us a ballpark, a quarter, a third, anything?
David Cobb (CFO)
Yeah. Yeah, Ken, I was gonna give you a little more color there, is that, you know, when we talked about this earlier, is that our core business is, you know, is down, is weak, and it's similar to what you've seen in other, you know, public company disclosures around those tonnage business level reductions. We've been able to supplement and add, you know, with the transactional. You can think of it in those terms. As Judy mentioned, that's a, you know, a daily, weekly management of those shipments. It's a moving percentage, sort of, so to speak.
Danny Loe (Chief Yield Officer)
You know, one other thing, Ken, this is Danny, is in that transactional, there's a mix element of that as well too. Like Judy mentioned, even in the asset, we have the household goods shipments that are in the ABF network. We have some of the, what I kind of call intermediate volume type, you know, where we're trying to fill some empty backhaul lanes there to go along with the kind of what I think you're calling the dynamic LTL shipments. Even a percentage there may not be accurate because you're gonna have a big mixture change potentially of what makes up that percentage just with the mix of those different types of transactional shipments.
Ken Hoexter (Managing Director, Co-Head of Industrials Research, and Senior Equity Research Analyst)
All right. If I could get a follow-up. TFI noted that it was in discussions about teaming up with you on real estate handoffs. They bought some equity. They sold a little bit of it. Anything you can share coming out of those discussions, potential opportunities you see in sharing any real estate or handoffs?
David Cobb (CFO)
Yeah, Ken, you know, TFI did mention having collaborative discussions with us. Really the best opportunity from those conversations was that we connected our real estate teams to evaluate potential properties that might be sold or leased. That's really something we do in the normal course of business, and we've been doing that with peer companies for decades.
Ken Hoexter (Managing Director, Co-Head of Industrials Research, and Senior Equity Research Analyst)
Okay. Thanks, Dave.
Operator (participant)
Next question comes from Jason Seidl with Cowen. Please proceed.
Jason Seidl (Managing Director and Lead Equity Research Analyst for Industrials Airfreight and Surface Transportation)
Thank you, operator. Hey, Judy and team. First off, David.
Judy McReynolds (Chairman, President, and CEO)
Hi.
Jason Seidl (Managing Director and Lead Equity Research Analyst for Industrials Airfreight and Surface Transportation)
Congratulations on the retirement. Wanted to go towards the pricing side. You know, in your supplement, you said, you know, the new contracts have been signed at 3.9%. Just curious, you know, ahead of the labor agreement and with the other cost inflation sort of, is that level enough? Are we getting close to worrying about the contractual pricing getting too low? Follow-up question, Judy, I think you also said that you haven't had to do any layoffs yet. You have flat tonnage. I mean, was that a comment that you think we might be getting near levels that we have to watch before layoffs come?
Judy McReynolds (Chairman, President, and CEO)
Well, I mean, I think, you know, where we are is, you know, in a position where we're always watching for that. I mean, I don't think that there's anything that, you know, is a trigger there, so to speak. I mean, again, you know, we're thinking long term. We wanna be able to service our customers well and, you know, we're positioned to do that today. You know, as we mentioned, the labor environment is such that you really have to plan ahead. We see in our modeling the attrition, you know, that comes from either turnover or more importantly, retirements that occur.
We've always got to be in motion, you know, replacing those positions or we're gonna end up in a position, you know, that we don't have the resources to serve our customers. It's really about that. Then, you know, I think Danny wanted to comment about the deferred increase.
Danny Loe (Chief Yield Officer)
Right. I think too, Judy, when we think through historically, the first quarter would be the weakest. I mean, the macro is different right now, but that mixture that, you know, the combination of transactional business, you would expect the core, even though we're having pressure from our customers of less shipments from them, that gets better throughout the year. we don't know what the macro is, but typically we'd expect the first quarter to have the most pressure on us in this environment.
Judy McReynolds (Chairman, President, and CEO)
Yeah, what seasonally we get better.
Danny Loe (Chief Yield Officer)
Correct. And on the.
Jason Seidl (Managing Director and Lead Equity Research Analyst for Industrials Airfreight and Surface Transportation)
Okay. We should expect that number to go up then when you report in 2Q, all other things being equal.
Judy McReynolds (Chairman, President, and CEO)
Well, Danny's getting ready to comment on the deferred increase.
Danny Loe (Chief Yield Officer)
On the deferred. Yeah. On the deferred, you know, like I said, our core business is to me in a better shape than it's been. The focus is making sure we secure increases above inflation. That's the focus on that. We'll know more as the contract to do, but, you know, we're confident that we can demonstrate value to our customers and that we can, as we demonstrate value to the customers, we can price our freight accordingly to the value we're presenting to them.
Jason Seidl (Managing Director and Lead Equity Research Analyst for Industrials Airfreight and Surface Transportation)
Giving your outlook, is that 3.9% getting sort of close to your future cost inflation?
Judy McReynolds (Chairman, President, and CEO)
We, you know, I think that remains to be seen. I mean, I think that, you know, inflation has come down, you know, so far this year. We're seeing, you know, for instance, some pretty big drops in the purchase transportation that we use for line haul, in terms of the pricing on that. You know, that's a, that's a big element or, you know, it can be a part of our cost, particularly in second and third quarter, you know. You know, we can see those elements of cost coming down. On the other side is just, you know, we're working through the contract negotiations. We'll know more about that, and we'll see, you know, how all of that comes together.
You know, we have a long history here. I mean, we've been doing this is our 100th anniversary as a company. I've been, you know, in my role, I think 14 years. We, you know, we have navigated through these different circumstances, environments and situations and pricing is a strength of ours. I think all the elements that we bring together really further strengthen that. I'm confident in our ability to really navigate this to a good end, just as Danny was saying.
David Cobb (CFO)
Just to, just to reiterate, you know, this first quarter was our second best first quarter profit in our history. You know, you just think back to weaker environment times in the history of our company. You know, as others have been talking about, comparing back to those weaker environments, you know, if you look at our first quarter of 2019, you know, this OR is 450 basis points better than that time period. As Danny said, the base core of our business is operating so much better, and we are positioned strategically for growth and for the eventual upturn in this environment.
Jason Seidl (Managing Director and Lead Equity Research Analyst for Industrials Airfreight and Surface Transportation)
I appreciate the time as always, everyone.
Judy McReynolds (Chairman, President, and CEO)
Thank you.
Operator (participant)
Our next question comes from Bruce Chan with Stifel. Please proceed.
Bruce Chan (Managing Director and Senior Analyst for Global Logistics and Future Mobility a)
All right. Well, morning, everyone, and congrats on the retirement, David. Maybe if I could, just a parting question for you. You gave us some good color earlier on the projected cost savings for the Asset-Light business next quarter. Do you have a similar target for ABF given some of the PT and, you know, cartage insourcing work that you're doing and, you know, maybe some of the P&D optimization efforts? You mentioned that, you know, 4Q to 1Q sequential OR trends were in line with historical norms. Just given what you've seen in the market, do you expect another kind of normal trend for 1Q into 2Q?
David Cobb (CFO)
Yeah. In our 8-K, we mentioned in the range of an improvement in our OR from first quarter to second quarter in the range of 200 basis points. You know, that's I think a testament to how we're managing moving forward, even in a weaker environment and in managing the cost. You know, you ask about cost. Judy mentioned that many of those larger cost areas that we've been cutting. You know, you think about on the asset-based side, there's a mix of strategy and positioning there. Again, we talked about, you know, in earlier responses around the, you know, our emphasis on the investing in our labor force and how that positions us well.
While we're managing all that very closely, you know, we have a longer-term view about this and the eventual upturn on it. There are many cost areas that we're managing down. You know, rentals, tractor rentals, trailer rentals, cartage, local cartage, you know, and again, targeted hiring, all that's in a very focused effort. You know, I'll just leave it at that. I think we've touched on a lot of those areas already.
Bruce Chan (Managing Director and Senior Analyst for Global Logistics and Future Mobility a)
Okay, great. That's super helpful. Then just one quick follow-up maybe for you, Judy, on Vaux. Very interesting what's going on there. Can you just give us some color on, you know, what the ultimate plan is? Is this, you know, just something that's getting licensed, or do you plan to deploy this in your own dock operations?
Judy McReynolds (Chairman, President, and CEO)
Well, we are piloting, you know, these, I guess the Vaux freight movement system in different locations for ABF. I mean, we have four total, two that are really operational, running every day in a normal operation. We have Kansas City, that's a pilot, and then we just opened Salt Lake City, another pilot. You know, the reason we call them pilots is because we're experimenting with the approach that we use, the floor layout or, you know, the optimization techniques, different elements of that are being, you know, piloted. It's not a steady state operation, although we think and feel like that Kansas City will be moving toward that, you know, as we move through the year. We are using it ourselves.
But yet, what we've seen through the conversations that we've had with customers, even prior to the launch this year, just a lot of excitement about, you know, what the possibilities were for them in their networks. I think the ProMat conference where this was really made most visible, we had lots of customers, really almost 1,000, you know, badge swipes came through, you know, that booth. Really what we find is that the Fortune 100 companies that are in retail manufacturing and the automotive industries, ones that are, you know, larger, that have multiple warehouses and distribution centers probably are the best, you know, to You know, really talk in depth for implementation, but they're all different.
It's a little bit of a longer sales cycle. What's been really fun is to see the customers that come to us with a solution already worked through. They're coming to us and saying, "Here's how we want to use this in our network." You know, we're doing a lot of visits with those customers. We're prioritizing the ones, you know, that have come to us that have an actionable plan because it takes work on both sides to be able to get this accomplished. It's a complex process, but it's one where there's tremendous benefits, you know, when you can, you know, load and unload a trailer in minutes as opposed to nearly an hour. I mean, it just catches people's attention and makes a big difference to them.
You know, we've invested a lot, but we love the fact that we have the ability to utilize this within the ABF network, but, more importantly, more broadly in these customer networks. We just have a good team and a lot going on there and look forward to it being, you know, a way that the industry or our shippers are handling their freight.
Bruce Chan (Managing Director and Senior Analyst for Global Logistics and Future Mobility a)
Okay, that's great color. Thank you.
Judy McReynolds (Chairman, President, and CEO)
Thanks.
David Humphrey (VP of Investor Relations)
Hey, Frank, we've got time for one more. We're running a little over, but I think we've got one more we'd like to take.
Operator (participant)
Our next question comes from Ariel Rosa with Credit Suisse. Please proceed.
Ariel Rosa (VP and Analyst in Transportation Research)
Great, thank you. David and Matt, congratulations. Just staying on the comment on Vaux, if I could, I'm still a little unclear on what it is. I just wanna understand. You're talking about unloading a trailer in a matter of minutes versus previously doing that in hours. Is it automated technology to unload a trailer? Maybe you could give us a little color on what it actually is, and is it something that's proprietary to ArcBest? Thanks.
Judy McReynolds (Chairman, President, and CEO)
Yes. Well, first of all, you know, it's patented. You know, the process is patented and certain elements of the equipment are patented. We can send you a video. In fact, David Humphrey will do that, send you a video that will really be worth a lot, you know, to you in terms of understanding. But it is, it's the utilization of equipment, along with a conventional forklift, and the equipment includes a mobile platform that you can load the freight that would otherwise be conventionally loaded or unloaded from a trailer. You're taking that platform, and putting the shipments on it and loading it within minutes, and then whenever it gets to destination, unloading it within minutes.
Normally, what you're doing as a forklift driver would be in and out of that, trailer, you know, a number of times, and typically it takes 45 minutes to one hour to do that. The video that we have really illustrates that better than I could in the time we have left here. It's, but it's exciting and, something that we worked on for many years.
Ariel Rosa (VP and Analyst in Transportation Research)
Great. That's really helpful, Judy. I'll look forward to the video. Just for my follow-up, kind of last question. It seems like you guys, obviously, with the sale of FleetNet, it seems like there's more of an intention to step up the buyback or be more aggressive on the buyback. I wanna understand, is that management essentially expressing a view that the stock is structurally undervalued? Or why is that the best use of cash, at this moment, especially given kind of the uncertainty on the macro? Maybe you could touch on that for a moment. Thanks.
Judy McReynolds (Chairman, President, and CEO)
Certainly your last comment is right, we are undervalued, and we do feel like that's a good use of cash. It is a part of an overall capital allocation that has a strong element of investment for replacement and growth in an organic way, you know, really in the business. We also, you know, have some innovation spend that's in there, as well as the, you know, the return of capital, both with dividends and with share repurchases. We just, we put this 10b5-1 plan in place so that we could continue to execute on that through, you know, without having to take pauses for open trading windows and that sort of thing.
Ariel Rosa (VP and Analyst in Transportation Research)
Okay, great. Thank you for the time.
Judy McReynolds (Chairman, President, and CEO)
Thanks, Ari.
David Humphrey (VP of Investor Relations)
Okay. Listen, that concludes our call. We appreciate everybody joining us this morning. We hope you have a good day. Thank you.
Operator (participant)
That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day, everyone.