Financial Data and Key Metrics Changes - Consolidated freight revenue increased by 4% year-over-year, amounting to approximately $268.9 million, which is an increase of about $10.2 million [3] - Consolidated adjusted operating income decreased by 22.5% to $15 million, primarily due to increases in the combined truckload segment [3] - Net indebtedness as of September 30 increased by $48.6 million to $268.3 million compared to December 31, 2024, resulting in an adjusted leverage ratio of approximately 2.1x and a debt-to-capital ratio of 38.8% [3] - Return on average invested capital on an adjusted basis was 6.9%, down from 8.1% in the prior year [3] Business Segment Performance - The expedited segment had an adjusted operating ratio of 93.6%, which was below expectations but improved by 160 basis points year-over-year [4] - The dedicated segment's adjusted operating ratio was 94.7%, also falling short of both prior year and long-term expectations, despite a fleet growth of 136 tractors, or approximately 9.6% [5] - Managed freight exceeded both revenue and adjusted operating income compared to the prior year but saw a sequential decline due to the loss of a short-term customer [6] - The warehousing segment experienced slightly lower freight revenue and adjusted operating income compared to the prior year, with an adjusted operating ratio of 92.1% [7] Market Data and Key Metrics Changes - The company anticipates a challenging fourth quarter due to a soft freight market and company-specific factors, including increased claims accruals and the impact of the U.S. government shutdown on volumes for the Department of Defense [8][9] - The company expects that as capacity exits the market accelerate, the cost to procure transportation will likely constrain margins in the managed freight segment [9] Company Strategy and Industry Competition - The long-term strategy focuses on growing and diversifying the managed freight segment, with an acceptable return on capital expected from mid-single-digit operating margins [7] - The company plans to exit less profitable business and invest in high-service niches within the dedicated segment [5] - Management expressed optimism about the freight market's recovery pace, driven by government policies affecting driver regulations and capacity exits [9][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the fourth quarter is expected to be unseasonably soft, with challenges from increased claims, government shutdown impacts, and customer bankruptcies [8] - There is a belief that consumer demand will improve with monetary easing and the resolution of trade tensions, which could positively impact the freight market [9] - Management is optimistic about the potential for rate increases after years of stagnation, with recent bids showing increases of 2.5%-4% [23] Other Important Information - The average age of tractors increased to 23 months from 20 months a year ago due to share repurchase programs and acquisition-related payments [3] - The minority investment in TEL contributed a pre-tax net income of $3.6 million for the quarter, down from $4 million in the prior year [7] Q&A Session Summary Question: What is the capacity backdrop and its impact on national spot rates? - Management discussed the complexities of capacity exits and the regional variations in spot rates, noting that some areas are experiencing tighter conditions while national rates have not yet reflected this [12][15] Question: How does the government shutdown affect the Department of Defense business? - Management indicated that about half of the Department of Defense business would be lost due to the shutdown, with some freight potentially returning once operations resume [61] Question: What are the expectations for pricing and bid activity in 2026? - Management noted that low single-digit increases are expected, but significant inflation in costs necessitates higher rates [48] Question: How is the company managing costs in the current environment? - The company has focused on aligning headcount with freight volumes and has implemented cost-cutting measures to manage overhead effectively [74][75] Question: What is the outlook for share repurchases given current valuations? - Management acknowledged that shares are undervalued and indicated that while there is potential for share repurchases, no commitments were made at this time [82][84]