Adam Miller, Chief Executive Officer Andrew Hess, Chief Financial Officer Brad Stewart, Treasurer and Senior Vice President of Investor Relations. Mr. Stewart, the meeting is now yours.

Thank you, Jillian. Good afternoon, everyone. Thank you for joining our third quarter 2026 earnings call. Today, we plan to discuss topics related to the results of the quarter, current market conditions, and our earnings guidance. We have slides to accompany this call, which are posted on our investor website. The call is scheduled to last one hour. Following our commentary, we will answer questions related to these topics. In order to get to as many participants as possible, we limit the questions to one per participant. If you have a second question, please feel free to get back in the queue. We will answer as many questions as time allows. If we are not able to get to your question due to time restrictions, you may call 602-606-6349. And to begin, I will first refer you to the disclosures on slide two of the presentation and note the following. This conference call and presentation may contain forward-looking statements made by the company that involve risks, assumptions, and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors, or Part 1 of the company's annual report on Form 10-K of the United States SEC for a discussion of the risks that may affect the company's future operating results. Actual results may differ. Now I'll hand the call over to Adam for some opening remarks.

Thanks, Brad, and good afternoon, everyone. I just want to let you know I'm getting over a cold here, so I might have some lingering coughs that come through, so if there's any noise in the background, that would be me. I apologize for that, but wanted to make sure I was available for the call here. So first, I'd like to start by recognizing our team and the progress we've made in each of our distinct brands. We continue to build out our diversified service model and saw solid performance across each of our segments this quarter. In addition, I was very encouraged to see the improvement in our core truckload margins that are finally approaching recognizable territory after such a long and difficult down cycle. We are so grateful for the focus, teamwork, and commitment of our professional drivers and driver support personnel who brought us through the past cycle and whose creativity and collaboration will help us navigate the new one. There is much work yet to be done to return to normal operating levels but the good news is we see many opportunities for improvement to get us there and to help our organization chart new heights moving forward. We truly have an amazing team and I look forward to navigating this next cycle together. Yes, we believe the new cycle still has plenty of gas left in the tank. The truckload freight market continues to remain tight and while broad measures of industry demand have been largely stable, demand for our capacity has been strong. We have more peak season project arrangements in place than at any time since the pandemic and freight tenders have already started under several of these projects. We believe we are well positioned to generate distinctive results for two main reasons. The differentiation in our service mix and in our business model. So regarding service mix, our single largest service is the one-way truckload market. A space experiencing a supply-driven tightening after three-plus years where artificially low pricing drove unusually weak industry margins. During the downturn, many carriers either went out of business, partially liquidated fleet assets, or shifted one-way capacity into dedicated services where there was less competition from non-compliant operators. Because we have remained committed to one-way truckload service, and operate the largest one-way fleet in the industry, we are now seeing consistent opportunities to deliver valuable capacity solutions to our customers in the space experiencing the most supply contraction. We believe this is contributing to our spot rates and low tender rejection rates trending stronger than broad market indicators on these metrics. Also, because one-way service is the most flexible, are industry-leading one-way scale and history of responsive problem-solving means we are often the first call large shippers make when they have an acute need for transportation service. The one-way market also has an active spot market where rates that are highly responsive to the supply contraction not only accelerate our rate recovery, but also have helped provide insightful observations on price discovery, particularly as our spot rates are often much stronger than public spot rate data. Regarding our differentiated business model, there are a few things I would highlight that are already serving us well and which will be the key to delivering industry-leading margins. First would be our market management practices and unique purview on the freight market. We are continually refining our playbook for how we read and respond to signals in the market and how to manage the deployment of capacity in support of service and yield. We couple this with distinctive competitive intelligence provided by our industry-leading scale and combination of multiple truckload brands in the marketplace, which further enhances our ability to read market signals and respond with agility. Related to this area is our intentional practice of engaging in spot-rated transactions and modulating our spot exposure based on the phase of the cycle. This enhances our signal detection and allows for faster price recovery and up cycles. Next would be our large academy network and driver training program through which we source and develop a significant portion of our professional driver base. This is helping to somewhat blunt the negative impacts of the tight driver market on our business and will be key to helping us seat more trucks and increase utilization to capture more opportunities. Next would be our large terminal network and decentralized operating model. This has allowed us to construct a dense freight network that is primarily built on regional freight, which allows us to minimize empty miles and maximize revenue per truck relative to cost. Such a network also supports driver recruiting, retention, and development, as well as internalizing maintenance at advantageous cost. And finally, I would call out our intense culture focus on cost and execution, which allows us to convert opportunities into earnings. Of note lately, our disciplines around fuel procurement, efficiency, and recovery are helping us mitigate the negative impacts of record high diesel as best we can. But to be clear, we're not immune from cost pressures, but we are focused on doing everything we can to mitigate cost impacts and recover inflation through pricing. We remain encouraged by momentum in the market and strong early progress in our core truckload business. We are pleased with the significant progress the team at UF Express has made in improving costs, service, safety, business mix, and pricing, and we look forward to making further progress. We have also significantly reduced our floating interest rate exposure through our 1% convertible bond offering in the spring and are making meaningful progress reducing our acquisition-related leverage, As free cash flow continues to improve, we anticipate being back to our target leverage range not before long and will again have maximum flexibility as we consider opportunities for organic growth, M&A, and share buybacks. With that, I'll turn the call over to Andrew and Brad to review the results and our guidance.

Thanks, Adam. The charts on slide three compare our consolidated third quarter revenue and earning results on a year-over-year basis. Consolidated revenue increased 14.2% and consolidated revenue excluding truckload and LTL fuel surcharge increased 7.7% year-over-year. Operating income grew $128 million or 255.1% year-over-year. Adjusted operating income grew 93 million or 87.4% year-over-year. The improvement in earnings was primarily driven by pricing and network efficiency gains across our asset-based businesses, in addition to gross margin recovery in our logistics business. GAAP earnings per diluted share for the third quarter of 2026 were 72 cents compared to 5 cents in the third quarter of 2025. Adjusted EPS was 83 cents for the third quarter of 2026 versus 32 last year. Our consolidated adjusted operating ratio was 89.3%, a 450 basis point improvement year over year. Slide four illustrates the revenue and adjusted operating income from each of our segments for the quarter. Overall, the relative share of our various service offerings remained largely consistent, Promotel again gained slightly over the previous quarter as it grew revenue 8.4% sequentially. Now we'll discuss each of our segments, starting with our truckload segment on slide five. Our truckload segment is making meaningful progress, restoring margin through disciplined yield management and cost control. After being driven by spot rates in the second quarter, realized revenue per mile accelerated in the third quarter, driven by contract rate changes primarily within our one-way division. This quarter marks the first one in a few years the operating margins for our one-way service exceeded those of our dedicated division. We continue to see opportunities through mini bids, turn back bids while peak season projects have started to move even while conversations on late developing needs continue to surface. We are leveraging collaboration to support our various brands and service lines while providing greater capacity solutions to our customers. There are many reasons to be encouraged and plenty of levers to drive further improvement. One of the biggest priorities across our operation is seeding more trucks and increasing utilization. This will allow us to obtain more opportunities and grow revenue at compelling incremental margins. We are leveraging our academy and training network to navigate driver sourcing challenges into managed cost. We have 12 CDL academies across the U.S. with plans to open a few more in the coming months, plus partner schools operating onsite at seven additional terminals. After graduating from CDL school, the next phase is our finishing program, where we have more than 2,000 qualified mentors who train new CDL holders over the road to ensure their readiness to be safe, productive, and successful. The past two years, we have built a training program at U.S. Express modeled after our legacy program, and student count continues to climb. Our scale is a distinct advantage in dedicated, where startup costs on new fleets can pressure margins because equipment must be positioned and trucks must be staffed before they're fully productive. When we onboard a new dedicated fleet, we can draw upon equipment and drivers from our national one-way network along with our academies program. Only in certain markets are we limited to recruiting experienced drivers at a premium. This helps us manage margin pressure from growth. Recently, we have been having success in growing our dedicated fleet, which has grown approximately 3.5% since mid-Q2. Our dedicated revenue, excluding fuel surcharge, grew nearly 4% sequentially between Q2 and Q3, operating essentially The investments we made in the corridor in recruiting, training, and driver pay have helped us to stabilize our truck count. We are preparing further targeted measures to improve our driver development and enhance utilization, given that our truck load margins are progressing according to plan, and our load rejection rates continue to run at strong levels well ahead of the market. We continue to closely monitor driver market conditions as well as our own metrics around seated tractors utilization and pay as a percentage of revenue to gauge appropriate action and invest where it generates a return. We are balancing the need to restore margins with opportunities for growth. Turning to slide six, I'd like to spend a few minutes on truckload cost. Recently, investors seem to be indicating some level of concern that cost inflation could consume too much or perhaps even all of the rate gains being made in industry. However, our model is generating meaningful margin progress through the combination of our significant exposure to the one-way truckload market, which is benefiting the most from capacity reduction, and our distinctive approach to yield management and cost control, as Adam touched on earlier. Table on the left is the headline. Year-over-year gains in revenue per mile excluding fuel surcharge have accelerated from 2.5% in Q1 to 12.2% in Q3. Over the same period, cost per mile stayed in a tight range between 3.3% and 3.8%. The result is that 68% of our third quarter rate improvement flowed through the margin, up from 50% in the second quarter. Note that while we typically cite rate per loaded mile metrics, these rate gains are stated in terms of rate per total mile in order to make it comparable to cost per total mile figures. It also helps to look at this over the full cycle. From 2019 through 2025, our cost per mile grew at an average annual rate of 4.5%. That period includes the inflation surge of 2021 and 2022. Thereafter, we structurally reduced costs that allowed us to hold cost per mile flat from 2023 through 2025 as pricing and volumes declined. A 3.5% cost per mile increase this year is below that recent average, and much of it reflects deliberate reinvestment now that the rate opportunity supports it. That's clear when you separate our two largest businesses. Dedicated, rate is largely kept face, with modest cost growth, and margins have stayed in a stable range through the cycle. In our one-way business, rates fell sharply from 2022 through 2025, and we responded by taking out costs. With one-way rates rising significantly year over year, our tender rejections running strong, it's time to begin investing again in that business, and we're investing primarily in drivers. So to be clear, we're not immune to inflation. Driver pay and fuel are currently the most acute cost pressures, while insurance and claims may continue to be volatile. Equipment costs continue to rise. However, we're offsetting these specific pressures with cost discipline and efficiency. On driver pay, we're not making broad across the board increases. Pay actions are targeted by market, fleet, and tenure, where they improve retention and seat trucks. On fuel, Operationally, we're focused on fuel procurement, efficiency, and recovery. We help fix costs flat year over year despite higher equipment costs with fewer non-driver roles, real estate rationalization, AI automation, and lower vendor costs. The fleet is also more productive. In the third quarter, miles per seated tractor rose 2.7%, and empty miles fell 170 basis points. To sum up, cost per mile is currently growing at fairly normal inflationary pace below our recent average while rate is accelerating. That combination is why the majority of our rate improvement is now contributing to margin. Now onto slide seven for a discussion of our LPL business. The LPL demand environment was steady with pockets of improvement. Third quarter trends generally followed normal seasonal patterns, so our average daily shipments showed a modest sequential outperformance. Our network and freight mix continue to evolve from the regional roots to a national profile, as seen in further year-over-year growth in length of haul and weight per shipment. After slightly decreasing during July and August, weight per shipment rebounded in September to our highest mark in three years. Continuing this evolution and building greater density and longer haul shipments should facilitate better network efficiencies. Less touch points, better transit, and enhanced service over time. The pricing environment remains steady to slightly improving with renewals at mid-single-digit pace. Our focus continues on optimizing freight mix and network efficiency in efforts to improve margin, protect service, and position us for further growth. We expect that over time, growing into our network investments and maturing freight mix, for improving the network density and continuously refining our operational and cost execution will allow us to drive sustained, methodical improvement in operating margins. Now, I will turn it over to Brad for a discussion of our logistics segment on Flight 8.

Thanks, Andrew. In our logistics segment, we leveraged our efficient model and our disciplined pricing approach to profitability and carrier selection. to drive a nearly 20% year-over-year improvement in adjusted operating income, despite revenue falling 1%. The third quarter adjusted operating income and adjusted operating ratio were the best third quarter marks in three years. This margin recovery was partly driven by our progress in resetting contractual pricing to align with the tighter market conditions, as well as the seasonal easing in spot market capacity costs during the quarter, yielding the first year-over-year improvement in gross margin percentage in four quarters. We anticipate the third-party capacity will seasonally tighten again during the fourth quarter, and we're beginning to see the early stages of this in October. We continue to hear customers express a preference for asset-based providers, and customers are increasingly asking about carrier qualification practices. At this point, we really feel like they're still trying to understand what the evolving broker liability landscape will ultimately mean for their businesses. and with capacity remaining tight, we believe many shippers are not yet hurrying to materially reduce the number of brokerages that they work with. After periodically developing new refinements to our carrier vetting protocols over the past several quarters, we saw our third-party carrier count largely stabilized during the third quarter. Now we will continue to evaluate the feasibility and effectiveness of potential additional refinements moving forward as access to new or improved data elements develops. Our company's longstanding commitment to safety and operational execution extends to our logistics business, and we believe the new risk landscape enhances the value proposition of these principles in the eyes of our customers. Over time, we expect our logistics business to benefit from share gains as shippers become more selective and as brokers with less robust safety or compliance infrastructure are pressured by increased costs from compliance, insurance, and third-party capacity. Now, on slide nine for discussion of our intermodal business, The intermodal segment posted strong year-over-year growth in revenue and load count for a second consecutive quarter, reaching the highest quarterly load count in over five years. Our concerted efforts to improve service and network balance in recent years have run the trust of shippers, allowing us to capture business with new and existing customers, especially as they are more open to intermodal service in the face of tight trucking capacity as well as record high diesel prices. We are cross-selling our intermodal offering to our broad network of truckload customers to help add more value where we cannot allocate more trucks. Our pipeline is strong and supported by many bid and turn-back bid activities, in addition to the modal conversion opportunities. We are encouraged by the potential to drive further improvement in this business. The supportive setup has helped pricing progress notably in recent months. As shown in the 15.2% year-over-year increase in revenue per load, or a 5.5% increase when excluding fuel surcharge revenues. We were able to drive recovery in pricing while meaningfully growing volumes and further addressing network balance in pursuit of sustainable profit improvement. Now, drainage capacity has become tighter in a number of markets around the country, though the fact that we use outside drain for a low single digit percentage of our moves has helped to insulate us somewhat from the cost impact. We anticipate further rate progress in the upcoming bid season given the ongoing pressure on trucking capacity and inflation in the cost space, and we will maintain our focus on service and discipline pricing and cost management to drive profitable growth. Slide 10 illustrates our all other segments. This category includes warehousing activities and support services provided to our customers, independent contractors, and third-party carriers, such as equipment sales and rentals, equipment leasing, insurance, and maintenance. Beginning January 1st of 2026, all other segments also includes the cost of our accounts receivable securitization program that was reported below the line in interest expense in prior years. Now for the quarter, revenue increased 41.8% year over year, reaching the highest mark in three years, driven primarily by growth in warehousing and independent contractor services activities. The past two quarters have been particularly strong for our warehousing business, as new business growth and some project activity have given strong top line and bottom line results. This growth in revenue and our corresponding growth in our facility footprint creates a challenging sequential comparison setup as the activity that drives revenue recognition typically slows down meaningfully in the fourth quarter without a corresponding decline in the now higher fixed cost base. Our independent contractor services have grown as the number of contractors on our platform has grown meaningfully this year. We expect further opportunities to attract more owners to our platform, given the reach and the density of our freight network and the cost structure advantages we can facilitate in support of their businesses. On slide 11, we've outlined our guidance and the key assumptions, which are also stated in the earnings release. Actual results may differ from our expectations. Based on our assumptions, we project our adjusted EPS for the fourth quarter of 2026 will be in the range of 78 cents to 84 cents. Our projections reflect recent trends in volumes, spot rates, bid activity, and driver hiring, as well as expectations for seasonal project activity and truckload. The key assumptions underpinning this guidance are listed on this slide. I won't read through all of these components here, but I do want to highlight the seasonal cadence of some of our business units for the fourth quarter. In summary, we project truckload operating income to meaningfully improve sequentially into the fourth quarter, as driven by further rate realization and seasonal project activity. At the same time, we expect the typical seasonal step down in LTO and all other segments earnings in the fourth quarter. In fact, we anticipate the all other segments will produce an operating loss for the fourth quarter as noted on this slide. In our warehousing business, the majority of our revenue is recognized based on certain activity drivers under our customer contracts. Given the heavy retail mix, our customers prefer to minimize disruption in the holiday shopping period, which means the drivers of revenue decline in the fourth quarter. In addition to the normal seasonal slowdown in revenue recognition, our recent growth in our facility footprint to support growing revenues has increased to fixed cost space. Therefore, costs remain in the fourth quarter without the corresponding revenue. This dynamic is factored into our full-year pricing agreements. and finally all of the segments fourth quarter projection also includes an estimated six and a half million dollars of costs for our air securitization facility that were recorded in interest expense below the line in prior years. So the sequential decline in these two segments is expected to offset the projected ramp up in our truckload profits. This concludes our prepared remarks and before I turn it over for questions I want to remind everyone to please keep it to one question per participant. Thank you. Jillian will now open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. As a reminder, if you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Your first question comes from the line of Chris Weatherby with Wells Fargo. Chris, your line is open. Please go ahead.

Hey, thanks. Good afternoon, guys. I guess maybe we can just hit on sort of the maybe the contractual rate environment. Kind of curious of how that sort of, you know, pending we're sort of post the traditional bid season, but I think there's still rate activity going on. And then, you know, as we think about 27, I think there's an expectation that we need to see the spot rate environment kind of improve seasonally through the peak season to put us in a position where we can kind of achieve maybe that high single digits or maybe even low double digits again in 27. So could Let's sort of hear your perspective on what you're seeing in the environment now from a contract perspective and maybe what the outlook is, the early outlook for 27 is. Thank you.

Yeah, no, I appreciate that, Chris. You know, we've largely gone through the large national bids through the bid season. So there's not a lot of work being done on like a national bid standpoint. There's still a lot of, you know, turn back bids or mini bids, securing capacity bids. for the short term or even medium term. And that can vary widely in terms of where we're at in specific markets and what the need will be from a volume perspective. But certainly, there's still good strength around how we're pricing that business and what that would look like compared to a year ago. I do think there's still a lot of strength Thank you for joining us. and we'll see how the market progresses from here. It's going to be quite dependent on what happens with capacity and if it continues to exit the market given some of the regulatory push, it'll vary based on what happens with demand because I think as everyone's well aware of, the challenges in the market have not been demand driven, it's been more capacity driven, demand's been relatively stable. If we get any type of lift there, I think we could see the contract rate market even improve from low double digits. It'll also depend on when you're addressing the rates. If you have a customer who had their rates renewed further into the bid season this year, then maybe their rates are in a better position when you look at renewing them versus a customer who had their rates renewed earlier in the bid season this year. So it really depends on When you're going into the bid, when you're going to be addressing the rates of the customer, it also depends if you did a mid-cycle adjustment, which we've had to do in many cases where rates just fell short based on where the market had turned to. Again, the easy way to answer that is I think we'll start the bid season with the idea of probably a vote amid double digits and see how it develops from there, Chris.

Perfect. Thanks. We appreciate it.

Your next question comes from the line of Ravi Shankar with Morgan Stanley. Ravi, your line is open. Please go ahead.

Thank you. Good afternoon, everyone. Adam, you did a great job in preparing remarks. I hope you feel better soon. But if I can shoot a question your way, just to follow up on your comments on demand there, potentially record peak season notwithstanding, are you concerned about demand at all and kind of what you're seeing out there? You said it was stable. Should we expect to see better than that? And do you think supply alone can drive an upcycle if demand doesn't show up?

Well, I think Demand alone is already driven enough cycle here, Robbie, and when we look at the peak season opportunities that we're seeing today, many of them will have to see what that demand comes in. You kind of set the pricing and what the search capacity would cost, and then you have to see how demand materializes, but So far, early on in the peak season, we're seeing things develop as expected, largely. I mean, some will be a little bit more, some will be a little bit less, but in discussions with our customers, they are deviating from their forecast. So I feel like even just demand being stable, we're still in a position with where capacity is, what our turndowns have been, what the mini-bid activity has been, where there's still opportunity for rate to to improve. I mean, we could see our margins have improved meaningfully, but still nowhere near where they would be in the midst of an upcycle. So I think there's still a lot of room for that to run. And then if you look at the broader industry, there's some of the private guys, I know we don't see those results, but just with channel checks, they haven't seen the margin improvement yet. We've had some peers report. There's still some room to improve margins. Certainly, I believe from their perspective, in terms of how they've performed, and Upcycle. So I think there's still a lot of room to run there and we're kind of in the early innings on this. So thank you.

Your next question comes from the line of Tom Wadowitz with UBS. Tom, your line is open. Please go ahead.

Yeah, great, Doug. Good afternoon. So Adam, I wanted to get your thoughts on just like You know, you've got kind of a unique backdrop with Montgomery and rising insurance and all these things that could put a lot of pressure on the small carrier. I guess the backdrop is it's been really tough for a big trucker like you to grow organically with the fleet count over time, right? You used to do that in a really big way, but that's been tough for a while. Do you think there's, like, can you actually grow, you know, let's say over the road, Thank you, Tom.

Thank you for joining us today. and I feel like the carriers that really understand how to develop drivers and develop safe quality drivers have a shot at growing next year. Now, it won't be easy and so we're being very mindful about where we're making our investments to position to grow. We've been very targeted and tactical about where we do driver pay and ensuring that we have Thank you for joining us. market-based pricing for owners, which is different than what we've done historically. We've seen some good demand there and some growth in our owner-operator camp the last nine months. We're encouraged with that and are going to continue to invest in that area. I've told our team that over the next 12 months, we'd be somewhat disappointed if all of our growth has come from just rate. We want the growth to come from I would say, look, So we've made some early investments there with really growing our recruiters, and it takes time for that to be trained and started to really contribute the way that we would expect. We've done some things on the driver pay front that we're just kind of testing between different brands on what's the most effective at bringing on new recruits and retaining drivers, and so we're learning from that. Thank you for joining us. Through the holidays and as we lap into 2027, if we still see some momentum there, then I would feel better about saying, yeah, I have confidence in doing this. It just hasn't been anything really the large carriers have done over the last probably decade. And so, you know, we're cautious before calling, hey, a success there. But certainly an area that we're greatly focused on and plan to invest. in the future because we think that's the biggest opportunity for us to show earnings growth is really get the margin through rate but also grow our fleet.

One insight I would add, Tom, is that our view is that broad driver pay wages don't necessarily buy growth. The competitive place for experienced drivers is very high. So when we look at where we deploy our capital from a driver pay perspective or from recruiting, We look at, you know, we're able to test out different areas and their different brands. And we think, you know, our thesis is that we target pay where it improves retention and our student profile. We think that is, from our evidence, from our history, that when we direct resources, where we've seen growth in the past, it's when we direct resources there. So we're going to be opening up new academies, new partner schools. We deployed resources to assist our recruiting teams using AI to help with recruiting, onboarding, retention, training. And like Adam mentioned, we're staffing up our recruiting team. So fourth quarter is tough. It's hard to grow your seated truck count in the fourth quarter. That's what our evidence shows historically. But I think the setup is pretty positive with The fertile ground we have with our academy network, with the very targeted approach we have to our investment, that we stand a good shot of seeing progress in our seated truck count in 2027. Great. Thank you.

Great.

Thanks, Tom.

Your next question comes from the line of Scott Group with Wolf Research. Scott, your line is open. Please go ahead.

Hey, thanks. Afternoon. So I thought that was a really helpful slide on price cost and wanted to get some perspective there. So that, I guess, eight and a half point price cost spread in Q3, how do you see that evolving into next year? Do you think, sounds like you think the price will stay up double digits into next year? Do you think the cost sort of stays in that Thank you for joining us.

when we have margin to do so, right? And so we laid out kind of what historic normal inflation, you know, how that trended over the last, you know, cycle. And we think we can manage costs within that range. I think there's still a lot of question about what equipment pricing is going to be with the new EPA regulation. We're working through that. If we get, you know, make more progress on the dedicated rate, which I do think we'll be able to do that next year, then we'll make some investments in driver pay on the dedicated side. We've just We typically don't do that until we have Ray to support it. So the cost inflation will be somewhat dependent on what we see on the rate front. But we know that we need additional margin expansion, and I think we're pretty vocal about that. Earlier in this year, it might have been the first quarter call where, hey, when we get Ray, it's going to go to margin first because where margins have been are not sustainable, and I think we're finally getting to the point where We're getting to more familiar territory, but still don't feel like we're where we need to be, and that needs to continue. So, yeah, I do expect to see a spread there. I don't know if it's going to be the exact same spread as we saw in the third quarter here. That was pretty healthy, but, hey, coming from an easier perspective from a rate standpoint. But certainly over the next year, if we're able to get rates in the double-digit range, at least starting the bid season, I certainly see an opportunity for that to continue to flow through to the bottom line.

Scott, the way to think about it is we're not going to see in the areas of driver pain recruiting significant pressure Q3 to Q4. Two things I would point out to you that are somewhat variable that can change. One is insurance liability claims, so development on prior claims, new large-cost settlements and new can drive a lot of variability. Bill is going to change one quarter of the next based on time. We think we view that as fairly transitory. So those are going to, in the short term, affect the results. But certainly as we go into 2027, we'll continue to decide what is the right level of investment on drivers for us to make based on where the market is and our view on it. But fundamentally from a perspective, I think the takeaway is that we've got a pretty dialed in way we're managing cost. and we're pretty confident in our ability to manage that from a base inflationary perspective.

Thank you, guys.

Your next question comes from the line of Dan Moore with Baird. Dan, your line is open. Please go ahead.

Good evening, guys. Thanks for the question. Real quick, a lot's already been covered, but one thing I'm curious about, and it's kind of a soft touch item, but in a post-Montgomery world, it strikes me that ordinary care, while that's historically been the standard for hiring a carrier, things like, you know, collision avoidance systems, drug and alcohol testing, established safety cultures and practices, they're probably, you know, Thank you for joining us. are a very limited number of companies that they can go to to presumably get the highest standard driver and capacity in the market. If you could just address that for a minute, that'd be great, and I appreciate all the context.

Yeah, so if I understand your question correctly, it's just how do you, at least the conversation we're having with our customers, how are they viewing the safety of the carriers that are ultimately hauling their freight?

Yeah, and I guess maybe Maybe just to add one piece to it too, and I'm sorry, Adam, but it strikes me the dedicated market has changed a lot in the last six to nine months. We're certainly seeing that with some of your peers. And so it seems like there's a big change that's developing. It certainly hasn't been volume. The housing market's a disaster. Automotive is a disaster. Cost of capital is meaningfully higher. So is fuel prices. So I'll just stop there. Sorry.

Okay. I'll take a stab at answering your questions here. So With our discussions with our customers, I think they're trying to understand what they should be asking or what they should be looking for in terms of trying to understand if a carrier should be viewed as a safe carrier. The challenge is there is limited data out there.

You'll have the ratings through FMCSA.

They're very limited because there's so many carriers out there and there's not enough of the staff to really do proper ratings. You have CSA data that you can look at. It doesn't always correlate perfectly with safety, but it is something that's out there that you could look at. Then there's third-party services that gather information that we would leverage to try to pull together our own algorithm of what we feel like is due care in the carriers that we would hire. We've been sharing our view on that with our customers because We would, I think, have a different view of it because we understand what it takes to have a safe driver in our own fleet. The challenge is you can't have that same type of control with a third party. You have to rely on the information you have readily available and then do whatever diligence you can on the actual driver hauling the load. That's what we've done from our logistics standpoint, which is why we've really limited the carriers that we have access to and why We took the approach of let's maintain profitability with good safe carriers as opposed to chase low count that may expose us to risk or lack of profitability. I think our customers are asking what should they be asking the brokers that they work with to ensure that they have safe carriers and what their criteria is. I think it's a process of learning and it's been evolving really since Montgomery and and I think it'll take some time before you see some of the change really be invoked and that could be from our customers asking brokers to have a certain standard. It could be from insurance companies requiring a certain standard to be covered with the insurance policy. So I think there's some more to become there but we're constantly watching it and involving just as we gather more data and as we just kind of learn from what others are doing and I think our customers are doing the same thing. As it relates to dedicated, Any time you see capacity over the road, one-way capacity become constrained, and then the pricing rises rapidly as it has, you'll see customers start to be a bit more interested in dedicated. Dedicated, the last couple of years, has not been in vogue because it's typically a more expensive proposition because you're paying round trip for the capacity, and you're required to keep it highly utilized. and when over the road capacity is cheap and widely available, you've seen customers kind of move volume away from dedicated to over the road and now you see them shifting potentially some of that back to dedicated if they assume that the rate market is going to be continuing to rise and capacity will continue to be constrained. And we're starting to see that. We talked a little bit about the growth we've seen in dedicated. We're starting to see that from some customers who really even haven't done dedicated in the past just to look to say, hey, can you look at my market? Can you look at my network? Let's see, would dedicated be a fit anywhere? So we're starting to explore that, but I still think it's It's early on in that process. But that's typically how these cycles play out. When over the road gets really tight, dedicated, gets a little bit more popular with our customers. Thank you. So hope I answered your question, Dan.

You did. Thank you.

Your next question comes from the line of Bascom Majors with Stevens Inc. Bascom, your line is open. Please go ahead.

Thanks for taking my questions. Can we go back to the all other and the warehousing and independent contractor services, the trajectory from 3Q to 4Q, and just how to think about that business and the cadence off of the 4Q guidance you gave as we get into next year with some of the investments you're making? Thank you.

Figured that would be a question given the volatility we're expecting for Q3 to Q4. Think about this, particularly on the warehouse business. So it's a business where we're investing in leases to manage warehouses. And generally, the customers that we work with, we bill based on activity. And in the fourth quarter, because of the nature of our customers, there's not as much activity that flows through to not disrupt Anything going into their stores during the holiday seasons. So your cost is fixed throughout the year, so you recognize that evenly through the year, but your revenue can be volatile based on how much activity runs through the warehouses. And so it's priced in for a full year to work really well for us, but you see somewhat of an outsized amount of revenue in the first three quarters, particularly second and third, and then you see the dip in fourth quarter. and as we've grown this business, which we have this year, that means your cost basis grows each quarter, yet you still see the dip in revenue in the fourth quarter. Now there's times in years where we've gotten Projects thrown at us during the fourth quarter that would be something that we wouldn't have anticipated but able to project and that kind of softens the volatility from Q3 to Q4. As of today where we sit, we don't see a line of sight to that. It doesn't mean it couldn't happen. And so we're kind of giving you our best forecast of what we expect to occur, which would be a drop in your normal activity. with a higher cost basis that's impacting Q4.

I'm asking for 2027 until we give guidance. Probably the best assumption is to assume the same quarterly cadence in 2027 as 2026. Not speaking to the amount of revenue and margin, but just the cadence should be roughly similar next year.

Yeah, and one element I would add, Bess, and this is Brad, in terms of making sense of the volume or the activity in our warehousing slowing down in what would be a high activity quarter in the holiday shopping season is that more of what our warehousing business traffic's in is the store infrastructure relative to the store's products on the shelves and so that's why you're seeing less of that activity in the fourth quarter.

Thanks all three of you for giving some color on that. Just a big picture, I think what I'm hearing is that the The fixed cost structure of the business is higher as you've grown it and just the degree of quarter to quarter seasonality is more significant based on the way you recognize revenue there. But the underlying annual earnings potential isn't changing here. Is that a fair assessment without getting the guidance?

Yeah, I would say the annual earnings have improved as we've grown. So it's still a profitable business for us, one that does really well. But yeah, it has this volatility you just have to live with. Thank you.

Your next question comes from the line of Ari Rosa with Citigroup. Ari, your line is open. Please go ahead.

Great, thank you for taking the question. Adam, I was hoping we could stay on the subject of Montgomery and just broaden it out a little bit. I'm curious, kind of two parts. So one, are you seeing shifts in customer behavior and more inbound requests, especially on kind of the asset-based side? And then second, just given how many trucks you're running, It seems to me that accidents are inevitable in this industry. How are you thinking about insulating yourself from that risk? I mean, even the best operators, it seems to me, are vulnerable when nuclear verdicts are being handed out in the kind of magnitude that they are. What steps are you guys taking, or is there anything you're doing differently now versus, say, six months ago? Thanks.

Well, here's what I would say, Ari, is... Unfortunately, the truck guys have been dealing with nuclear verdicts for quite some time. So I think the brokers are now welcome to the party with us. And so we've been thinking about this, trying to mitigate our risk here for years. And so we buy a certain level of insurance. We keep some exposure to ourselves. We've got highly evolved training programs. We have a lot of technology in the truck. We do a lot of coaching with our drivers, and we just try to put ourselves in the best position to defend our driver even if they're in an accident. It can never be perfect. We know that, and so we try to protect ourselves with a certain amount of insurance, but also really it's all about how you can prevent the accident. and so we put a lot of focus on that and so really the changes we've made is ensuring that we have the right criteria for our third-party carriers to ensure that that doesn't expose us any further than what we have on the asset side. But this is not a new topic for us whatsoever. I think a beacon of light has been shone on it because of now the brokers being liable for it and then some of the big verdicts that have been out there. but this has been something top of mind. I think every large carrier would tell you the same thing for probably over a decade now. In terms of shifts from customers, I mean, we're seeing a lot of that and I think it's hard to know if that's driven by changes from wanting to move freight from non-asset to asset and we've heard that from some shippers or could just be capacity is just extremely tight and they're trying to find capacity with a provider who can solve acute problems. And I think we noted in our prepared remarks given our scale, we usually get one of the first calls when there's a project or an acute need because we can typically Do you think it's a net positive to your business? Yeah. No, absolutely. I think any time that Our industry can ensure that we have good, safe capacity on the road. That's a positive to everyone in our industry. And I think this is going to make it difficult for noncompliant carriers who are just entering the market, having gone through proper training, right, and don't care about safety like the large carriers would. Great, thank you.

Your next question comes from the line of Ken Hoekstra with Bank of America. Ken, your line is open. Please go ahead.

Hey, great. Good evening and thanks for squeezing me in here at the end. So great thoughts on the rate versus cost and the all other segments. Thanks for that insight. Really interesting and great to see the rate flow through it intermodal finally. So just jumping over to LTL, maybe thoughts on where you stand, right? Density, progress on if you're doing the Northeast expansion, You noted September weight per shipment rebounded to the highest mark in three years. Maybe what's driving that? And then your thoughts on the operating ratio, you know, fourth quarter into 27. How do we think about this business now as it keeps growing?

Yeah, I'll give you a little cover than Andrew. I know he loves to spout out LTL stats. In terms of our business and how that's progressing, we're still going through this evolution from regional player to a national provider. And it's quite honestly taking a little longer than we probably anticipated, but hey, we've never done this before. But we are seeing a shift from really the lion's share of loads or shipments that we would have hauled two years ago out of one- to two-day transit, and now we're seeing that shift to where we're seeing an elevated percentage of shipments that are moving three to four and some even beyond four days. And so that tells you it's a longer length of haul, a heavier shipment, and it represents more of the kind of national network we want. I think part of the challenge is when you don't have the density quite yet, your line haul is still less efficient on moving that across your network. You have too many touch points along the way. As you build density, you can kind of zone skip and go direct into markets without having to stop at certain locations. And so it introduced a little more cost. to the line haul service while you're making this transition. And we've got great tools that are identifying where that is, and we're building out plans on how we mitigate that and how we go try to address the freight needs that we have to build the density. And so it's been this evolution that we're just still working through. But we're really encouraged with the progress. You know, last year, from the transition from third to fourth, we typically see a little bit of a low in demand. Last year, we saw kind of a healthy step back more than we anticipated. And we're not seeing that to the same extreme this year. We're seeing volumes are much more steady. And I feel like on a year over year basis, we'll see some good volume comparables. And look, we're encouraged about where this business is headed. And really, I think 2027 is set up to where will probably start to organically grow into the Northeast. We've got several locations already picked out that I think would work from a location standpoint. And if the volume continues to hold in and we continue to make progress on managing the cost of that business, we'll start expanding to the Northeast. And we'll be very deliberate. We'll be really focused on managing our costs and the impact of the OR, but but ultimately we want to start growing into that market. Andrew, I don't know if you had anything you wanted to add.

I guess I would add there's some noise in our metrics as we're going through this transition so I would just make maybe three points how we see our results. We view what you should see in your results as steady pricing. I think that's how we view it. Second, Underneath these results, there's a lot of work that Adam referred to to build the efficiency in the network. So it's a situation where there's a lot more going on, and there's a little lag before we start to see the results, but we feel really good about the work that's being done. And then there's volume and momentum building. You saw a little bit of that from Q2 to Q3. We saw our OR progress got better every month of the quarter. And so we feel like there's good momentum. Now we're going to see our normal Q4 seasonality. are more retail-exposed profile of our business, just typically sees Q4 soften up quite a bit. But as I mentioned, we're seeing it better than last year. And so that's a function of this changing mix of customers we're developing, more industrial, and some growth, some new wins that are coming into business. So a lot of foundational things happening that I think set us up to see margin improvement as we move into next year.

And Ken, hey, I want to say thank you for recognizing the intermodal margin. I think our team there has been hard at work, and I think they were very proud to be in the black and, you know, seeing some good momentum on volume and price. And, hey, they're going to continue to push forward to, you know, sustain profitability. But, you know, glad you mentioned that here at the tail end of the call here.

Adam, we picked on it on the other side for long enough, so great to see. Thank you. Thanks for the thoughts.

Okay, well, I think that we're at... Sorry, I was just saying, yeah, I think we wrapped up the call here. Appreciate everyone who's joined us. Again, if you wanted to follow up call, if we didn't answer your questions, you could call us at 602-606-6349, and I'll hand it back to you, Jillian.

This concludes today's call. Thank you all for attending. You may now disconnect.