Good morning. And welcome to the Old Dominion Freight Line First Quarter 2023 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Drew Andersen. Please go ahead.

Thank you. Good morning, and welcome to the first quarter 2023 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through May 3, 2023, by dialing 1(877) 344-7529, access code 6525435. The replay of the webcast may also be accessed for 30 days at the company's Web site. This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call are not statements of historical fact may be deemed forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in this morning's news release and consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements. The company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. As a final note before we begin, we welcome your questions today, but we do ask in fairness to all that you limit yourselves to one question at a time before returning to the queue. Thank you for your cooperation. At this time, for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. Greg Gantt. Please go ahead, sir.

Good morning, and welcome to our first quarter conference call. With me on the call today is Marty Freeman, our COO; and Adam Satterfield, our CFO. After some brief remarks, we'll be glad to take your questions. The OD team started this year with first quarter financial results that included revenue of $1.4 billion, an operating ratio of 73.4% and earnings per diluted share of $2.58. These numbers were slightly below our first quarter results from 2022 and reflect the ongoing softness in the domestic economy and the challenging operating environment. We are also coming off a record year in 2022 where revenue and profits were at an all-time high. As we started this year, we were cautiously optimistic that our business levels would start to improve late in the first quarter and accelerate further in the second quarter. While our volumes stabilized during January and February as expected, we have not seen the acceleration in volumes that was originally anticipated. Our shipments per day have remained consistent on a daily basis so far this year, but on a year-over-year basis, shipments in April are trending down double digits. Fortunately, our market share has remained relatively consistent and our yield continues to improve. We believe the stability with our market share during the first quarter reflects the value of our service offering and the success of our long term strategic plan. The guiding principles of this plan have been in place for many years and have helped us produce a strong track record for long term profitable growth throughout the economic cycle. This plan is centered on our ability to deliver superior service at a fair price to our customers, and we remain committed to providing on-time service and claims free service as well. We will continue to focus on…

Thank you, Greg, and good morning. I want to, first of all, start by thanking Greg for his leadership and significant contributions to OD over his career, while also recognizing each OD employee for their critical role in our success. Together, we have produced remarkable improvement in our financial and operating results over the long term. And I can assure you that OD's team remains focused on continuing our record of strong profitable growth. With respect to our first quarter, we delivered solid financial results, especially when considering the ongoing softness in the domestic economy and decrease in volumes. Although these factors contributed to the first decrease in quarterly revenue and earnings per diluted share since the second quarter of 2020, our market share has remained relatively consistent. As a result, we believe our decrease in volumes was largely due to some shippers simply having fewer shipments than normal due to the economy. Although there have been others that are beginning to emphasize price versus service and choosing lower priced carriers. The operating environment has become more challenging than we anticipated and the expected acceleration in volumes has obviously not occurred. Despite these factors, we have maintained a commitment to our long term strategic plan. We will continue to focus on providing shippers with superior service to support our ability to maintain our price discipline. Our consistent cost based approach to manage yield and account profitability has been critical to our ability to improve our financial position over time, which has helped us support and continued investments in technology and service center capacity. While capacity is not currently an industry issue due to the weakness in industry volumes, we believe this will once again become a critical differentiator for us when the economy improves. We believe our long term consistent…

Thank you, Marty, and good morning. Old Dominion's revenue decreased 3.7% in the first quarter of 2023 due to an 11.9% decrease in LTL tonnage that was partially offset by 9.2% increase in LTL revenue per hundredweight. The combination of this decrease in revenue and slight deterioration in our operating ratio contributed to the 0.8% decrease in earnings per diluted share to $2.58 for the quarter. On a sequential basis, revenue per day for the first quarter decreased 7.9% when compared to the fourth quarter of 2022 with the LTL tons per day decreasing 4.3% and LTL shipments per day decreasing 3.4%. For comparison, the 10 year average sequential change for these metrics includes a decrease of 0.6% in revenue per day, a 0.5% decrease in tonnes per day and a 0.2% increase in shipments per day. The monthly sequential changes in the LTL tonnes per day during the first quarter were as follows. January decreased 1.0% as compared with December, February decreased 0.2% versus January and March increased 0.7% as compared to February. The 10 year average change for the respective months was an increase of 1.2% in January, an increase of 1.7% in February and an increase of 5.2% in March. Our shipments per day over these same periods were relatively consistent on a sequential basis and increased slightly each month as we progressed through the first quarter. While there are still a few work days remaining in April, our month-to-date revenue per day has decreased by approximately 15% when compared to April of 2022. Our LTL tonnage per day has also decreased by approximately 15%, while revenue per hundredweight has increased approximately 1% when including fuel surcharges and increased approximately 7.5% excluding fuel surcharges. Our revenue and shipment counts on a daily basis have been relatively consistent…

[Operator Instructions] The first question comes from Ravi Shanker with Morgan Stanley.

Maybe just a two parter here, one is the uptick in April that didn't materialize. In your conversations with your customers, do you get a sense that this is just a pause while they figure out what's going on with the banking crisis and other things before they resume and their inventory is in a better situation, or do you think the rebound is kind of completely pushed out maybe to '24? And also maybe as a follow-up, can you help us think about kind of fuel surcharge and how we think about that math through the rest of the year?

Certainly, it's been difficult to read the tea leaves this year, and we felt like we've had a lot of good conversations with customers and continue to have them. But certainly, it seemed like the whole banking issue was a bit of cold water on the economy overall. I think that it just continues to be a challenging overall and people question in some cases the direction of the economy and continue to be somewhat conservative as a result. But I think our business, we obviously have been talking about probably since the third quarter of last year, an expectation that we would start seeing an uptick, and it didn't happen. Things have stabilized, we continue to be consistent. We continue to have good conversations though. And I would say within our direct business, having conversations with customers, we're seeing an increase in some of these accounts. When I look through our top 50 accounts, business that's not with the 3PL, we're seeing a good increase. We actually saw an increase in revenue with those accounts during the first quarter. Some of our business with 3PLs is suffering a little more. Like we said in our prepared comments, we're seeing some shippers that are prioritizing price over service right now, but you've got a lot of others. And I think that's why we're seeing the increase in our direct business that continue to think strategically about their supply chain, understand the value that we're delivering and know that this environment will turn again. And we helped many of these customers through challenging times and the pandemic and then the supply chain crisis that followed. So I think it's a mixed bag across the board but we continue to stay engaged, we're continuing to have favorable conversations. And it's just a matter of when the economy eventually recovers and we're certainly prepared for when that happens. It's just day in and day out. Our shipments per day have just been pretty consistent, pretty much all through the first quarter, and that's continuing into April.

And the fuel surcharge, is there any color that would be great.

Certainly, the fuel surcharge, this is the quarter we talked about. It actually happened in March. In March, the average price per gallon was down about 18%. Right now with fuel being $4.10 somewhere in that range, fuel prices are down about 25%. So certainly, we'll see a bigger decrease on a year-over-year basis of fuel surcharges. That's end of the April number that we put out. Already, fuel in April is down about 20%. And so that's driving some of that 15% decrease that we're seeing in our April revenues on a year-over-year basis. But I think the impact is evident in our yield metrics. We're continuing to see good yield increases. As we're going through bids and whatnot, we're continuing to talk about our cost plus increases that are necessary. But when we look at April and kind of where things are, the revenue per hundredweight continues to be solid. And we would expect to see sequential increase in the second quarter over the first quarter. That number should naturally start to trend back closer to what our longer term averages have been from just a core yield increase standpoint, but the revenue per hundredweight with the fuel is reflecting that change now in fuel prices and the fuel surcharge. So that is starting to flatten out, if you will, just like the numbers that we talked about for what we've seen month-to-date for April.

The next question comes from Jack Atkins with Stephens.

So I guess, I'd love to, Adam, get your thoughts on operating ratio progression sequentially. Obviously, this is not a normal second quarter, at least it's not starting off as a normal second quarter in terms of how April is trending. Any way to kind of help us think about the puts and takes in terms of the OR progression first quarter to second quarter relative to normal seasonality?

This is certainly -- it's definitely not a usual type of quarter, as you said. I mean, with tonnage being down about 15%, it's been since '09, since we've seen that type of change or maybe back to the second quarter of '20 when the pandemic happened and the world shutdown. But it's something that we've been consistently adjusting to. And frankly, we knew the second quarter comparisons were going to be more challenging this year when we looked through the balance of how the quarters would fall. But the buildup in March that we anticipated obviously didn't happen, that's where you start really getting a lot of that growth, really it happened throughout the first quarter. But March is typically a pretty good increase when you look at things on a shipments per day standpoint that should be up 5% or so. Right now, like I mentioned before, we're seeing shipments per day that's just pretty steady on a day in and day out basis coming in at somewhere around 47,000 shipments per day. And granted the April will have the impact, we don't do half day conventions, but we pretty much have about a half a day loss with the Good Friday and the Easter holidays. But if we don't come off of that number -- and I'll tell you, it's not like we're picking up the same 47,000 shipments day in and day out, we're getting increases with some accounts while others were seeing decreases with. It's not as easy as maybe as what that sounds as it's consistent day in and day out. But if we don't see any further growth from there, we should see it in May, just the natural effect of just like the impact of the holidays, recovering from that, a little…

The next question comes from Scott Group with Wolfe Research.

One thing I just want to clarify and then I have my actual question. So Adam, your comment about OR may be flattish 1Q to 2Q, is that -- that's assuming that there's none of the seasonal May and June uptick. Is that -- am I understanding that right?

Well, assuming a little bit just the natural uptick that would happen in the sense of our May volumes should be somewhere -- I mean, where we are today, if they stay at this 47,000 range, it'd be a slight uptick over April just because of April being impacted by that half day that I mentioned for the Good Friday and Easter holidays. But you're correct. Just assuming that we stay in this sort of malaise where we don't see any incremental uptick and frankly, no decline either, but just staying in this flattish on a sequential basis, we certainly hope that there will be an uptick in volumes. We've seen some good trends, good couple of days this week. But I think that we certainly need to be mindful of kind of where we are and the fact that we don't see that positive inflection from an economic standpoint happening. And so I think we do need to talk about kind of where we are today. Obviously, we give our mid-quarter update. So if the inflection happens and we start seeing some growth, we're certainly ready and can handle it. And that's when we can start maybe talking about seeing some incremental improvement, if you will, relative to the first quarter. But right now, it's just things on a day in, day out basis are -- have just been very steady as she goes from a revenue per day and a shipments per day standpoint.

And then when you talk about volume down the most since '09, I guess I just want to understand like the pricing is holding up for you really, really well. At what point does that get tougher, are you seeing any signs of competitive pressure, just given the market continuing to get worse right now from a volume standpoint?

Yes, I mean it's certainly -- one, I think the comparison is a little bit tougher and that should get better as we progress through this year, even if our numbers were to stay flatter, the numbers should start to show a little bit of improvement. But it's still a really soft environment out there. And I think that we've demonstrated a lot of value and that's what we continue to talk about with our customers. And our costs continue to go up and we need increases. We've invested a lot in our network over the years, over the last 10 years, about $4.5 billion of capital expenditures to grow our service center network, to be and have capacity where our customers need us and to have the right fleet and the right team to be able to continue to deliver value to our customers. So we've invested a lot and we intend to continue to invest. So I think that, that doesn't change the conversations that we're having with shippers. But in some cases due to the economy and due to internal pressures, there are some shippers that got to look for cheaper price carriers. And we're a premium carrier, premium service and our price is generally a little bit higher than others. And so oftentimes we'll hear feedback though from shippers that are making that short term decision that they're doing it to meet internal thresholds and intend to give the volume back to us. Like I mentioned, we're seeing a little bit more transactional volume loss within our 3PL book of business right now, that's about a third of our overall revenue in the first quarter. 3PLs were down a little worse than the company average revenue change. So that's something that would continue to be mindful…

[Operator Instructions] The next question comes from Jon Chappell with Evercore ISI.

Marty, you mentioned in your prepared remarks, and Adam, you've kind of addressed it in a couple of your answers as well. But customers choosing price over service, have you seen any kind of significant cracks in the pricing dynamic, given just the complete weakness in the volume side? And how would you compare kind of the pricing environment today versus other periods of recessionary volume backdrop?

I've been through this a few times in my 40 years in transportation. And I think the worst I've ever seen was 2009 and we're nowhere near that. But there is some challenging pricing out there as there always is during low freight levels. Most of it we see is transactional mom-and-pop type shippers and inbound customers. So yes, it can be challenging out there but it's not anything we haven't seen before and it's not anything we can't work through and manage through.

The next question comes from Tom Wadewitz with UBS.

I think I said this on the last call maybe, but if I didn't, congratulations, Greg, on the retirement and the great run you had. I actually want to ask along those lines, I guess, you've seen -- you're retiring, someone on the teams moved to a competitor, there's some degree of change going on, that will take place with the OD team. How do you think that may affect what you're doing at OD, what might be some of the risks around that? Are there risks around that, are there potential things that you say, well, this was my approach obviously tremendously successful, but the next person might tweak things a bit. So I know that's kind of anticipatory. But just thoughts on some of the management things that are -- have taken place or will take place as you retire?

I don't mind addressing that at all. I appreciate the question. But fortunately, Tom, we've got a tremendously strong team here at OD. The folks replacing me have merely as many years in some cases in the industry as I do. They are all 20 plus year veterans, they've been through everything since we started executing this plan many years ago. They've been through the thick and thin and the good times, the bad times, and they know who we are and they know what's made us successful. They understand our plan going forward. And I think we're in a great position to continue to execute on that plan. So Tom, there's always risk. Anytime you lose good people, certainly, there's risk. But I feel extremely good about where we are. We'll make the replacement and continue to move forward. Again, thankfully, we had a plan, a plan to execute on my exit, if you will, and promoted the folks that certainly are capable of continuing to drive our results forward. So again, I feel good about it. I'm not concerned about that far at all. These guys know what to do and, hey, I feel extremely good about it. We got a great team. You can see that in the results. It's not me, it's not just the folks here. But I think everybody truly understands what we're trying to do and how we're supposed to execute and handle customers' business on a daily basis, and that's not going to change just because I'm out the door or any other one person left. Those fundamental things that we know how to do much better than our competitors, that's not going to change any time soon. So I think the basics of blocking and tackling those kind of things without any doubt, we're far superior to all of our competitors, again, that's not going to change. So I think we're in a good spot. And hey, I look forward to a whole lot of success down the road for OD.

The next question comes from Allison Poliniak with Wells Fargo.

Just let me go back to the comment on the top of the accounts. You did say there were actually some that were improving here. I guess any color that we can maybe read through in vertical or such that that's driving some of that improvement? And I guess, along with that, that stabilization when you kind of think of those larger customers, do you at least -- I know we don't have a view on the inflection, but at least the stabilization may hold? Just any color there.

It was pretty consistent performance between our retail and industrial customer base during the quarter. The revenue levels were generally about the same for both. But like I mentioned earlier, it's really a lot of the business that we're seeing, there's probably a little bit worse decline with business that's managed by 3PLs. And so that's fairly typical in a softer environment, if you will, and so not wholly unexpected completely. But yes, we've seen just a consistency day in and day out with business levels in terms of the number of shipments per day that we've seen, it's been trending around 47,000 bills a day and we don't necessarily see that inflection point, if you will, happening. Typically, you would start seeing an increase, you'd see an increase in May of about 2.5% to 3% and then a further increase from May to June of 2%. And certainly, we'd like to think that that might happen. But if you go back to when things really started decreasing, it was last year in April. March of last year was the last month where we had a nice sequential increase. Our business in February of last year was up about 5%. It was up another 3% in March. But then we started dropping off and basically have been flat to down for every month thereafter. And our shipments have been pretty consistent, they've increased very, very slightly, less than 1% each month. So pretty much consistent as we made our way through each month of the first quarter, pretty much had been the same in April, again, other than those two days that we consider full days impacted by the holiday, but that's in our normal number. Typically, April would be up about 0.5% over March. And right now, we're down…

The next question comes from Amit Mehrotra with Deutsche Bank.

Quick question. When was the last time shipments in 2Q were worse than 1Q? I don't know or I don't think there's ever been a time that that's been the case. But if you can just help me with that? And then when does the drawdown on weights abate, we're at 1,550 now. Are we at the point where we stabilize at these levels? So those two points. And then Adam, historically, you've lost lanes in past downturns to high quality regional players or maybe lower cost. I don't think that's happened maybe up until now. I don't know if that's happening now that maybe explain some of the weakness in April. But if you can talk about kind of what the customers are doing from a trade down effect to some of the regional, maybe equally or as high quality players?

From a second quarter to first quarter standpoint, other than the second quarter of '20 when the world shutdown, we've not really seen a decrease in shipments. And that too kind of played into our general thinking, even years like 2009, 2016, 2019, weaker years, we still had some marginal improvement in shipments in the second quarter versus the first. And so right now, that's kind of trending flattish. We'll see how things shake out for the remainder of the period. And like I said, maybe we'll get some growth. And certainly, it will be out there as we put our mid quarter update, we'll put the final April update in our 10-Q. And if we see some continued acceleration this week that will be in the number, but we just don't see a big inflection point happening like we did in, say, 2017 that spurred that growth of '17 through '18 and what we saw in the back part of 2020 that continue to accelerate through '21 like it happened. And so we're still waiting for that point but we don't see it kind of on the near term. And so we just managed to kind of where we are. But yes, that's kind of the challenge in what we're seeing. It's partly why I mentioned earlier that our revenues in the second quarter are typically up 9%, 10% and that's why we always get so much margin improvement in the second quarter as well. And so that becomes the challenge as we manage through this particular period. But with respect to your other question on the customer base, I don't know that we're seeing significant loss other than that's some of what's going on underneath, I think, with some of the 3PL business, that they can leverage their carrier relationships and move some freight, and some of this is transactional as well. But they can take advantage of relationships and see who has capacity and who's got a cheaper price and move some business away. But that's some of the feedback where we've heard customers coming to us and saying, look, I need to do this to meet my own call center objectives, if there's an internal mandate to save X dollars that they've got to try to meet in some way. But generally speaking, that freight comes back to us. If we ever lose freight, it's on price, but we generally always gain it back for service quality and capacity down the road. So we're confident that -- but that trend will continue to play out again and that we'll see any of this freight loss eventually come back to us. It's just a matter of -- it seems like that's being pushed further down the road than the inflection point that we thought would happen beginning with this spring.

What about weight?

Yes, weight per shipment. I guess you've embedded three questions in one, but -- and my memory was short. Yes, our weight per shipment, it's down a little bit further. I think we're getting to the stabilization point. Right now in April, it's about 1,525 pounds. Historically, we would get down in lower periods to about 1,550 pounds or so. But if you recall, we made some strategic decisions in '21 and exited from some of the spot heavier type shipments, these 8,000, 10,000 pound type loads and that had an effect of really lowering our overall weight per shipment. So despite the weakness, we're not going back and trying to bring in freight that we didn't think fit our network for the long term. So just going along with the economy, we've seen a little further deceleration and that weight per shipment being down to 1,525 pounds. So that's a little bit worse. April is always usually down 0.5% or 1% off of March. Some of that is March builds up at the end of the quarter, but we're down a little bit more. But I feel like that's stabilizing that probably our low watermark in a softer economy will be 1,525, 1,530 pounds maybe. But yes, we think that's getting to a stabilization point or so it seems.

The next question comes from Chris Wetherbee with Citi.

Adam, just kind of curious how you think about headcount going forward here? Obviously, a lack of seasonality might influence this, but you've been bringing it down sequentially the last few quarters. Just want to get a sense maybe how much more room you have in terms of rightsizing that labor force? And maybe is there a line where you feel like you don't necessarily want to go beyond?

Yes, it's continued to drift lower on a sequential basis. The average was down about 3.5% in the first quarter versus the fourth quarter. But our peak, if you will, for full time headcount was in May of last year. And through normal attrition and just some places making other decisions, if you will, just balancing our number of employees with the freight volumes that exist, we've had to work through those on a case-by-case basis throughout our 255 locations. But I expect that, that will continue to drift a little bit lower as attrition continues to happen from where we are today through the end of June. And we're getting to a point, I think, that if you kind of compare where we are, if we continue to drift maybe 1% or 2% lower as we progress through the second quarter to where the year-over-year change by the end of June maybe in that 9% to 10% type of range, and then that's coming back into balance. We've always talked about the change in headcount typically reconciles with the overall change in shipment count as well. And so you know if we're looking at that, I think by the end of June, that change in shipments on a month-over-month basis, those two numbers may start coming back into payer team with one another. That is the change in full time employees and the change in our shipments on a year-over-year basis.

The next question comes from Bascome Majors with Susquehanna.

You've been pretty open about some of the share and pricing challenges with 3PL business. Can you walk us through a little bit on how that emerges. Are you seeing larger carriers reduce their rates across the board with 3PLs and losing business that way, or is this more targeted dynamic pricing? And just if that cyclical dynamic, which I'm sure has been around before, if that is evolving any differently this cycle than last cycle, we'd love to hear more about it?

Yes, I think it's hard for us to say. We don't always know the reasons behind. I mean the feedback we get is that someone's cheaper. We don't know necessarily that variance or that reason why. I think that we're obviously one of the first carriers to report and just continue to watch what the others are doing, what their numbers are looking like and hear what the others have to say, I think. Others have said that they've got price discipline but we've seen one carrier's yield flatten out. So I think all we can do is just continue to sort of watch and and see what others are doing, but that doesn't impact what we do. We've got a plan, we stay committed to it, and we know what value we deliver and we just got to stay disciplined, and that's what we'll do. So it's never good to kind of live through it in a moment and we've done this time and time again. But like I said, it's not totally unexpected to see some of that business just given the softness in the economic environment and cost challenges that people are facing in general to be looking at ways they might be able to save on price in the current term. But what we always say is price doesn't equal cost. We deliver value to our customers. And when you consider total cost of transportation, when you deliver 99% on time and have a claims ratio of 0.1% and you save money by shipping with Old Dominion and that's what our position continues to be, demonstrate value. We’ve got to continue to maintain our service metrics, and we will, that is certainly a focus for us, and we'll manage through this. But like we said before and I think it's played out when you look at our numbers and the long term improvement that we've made with respect to our margins and the cash from operations that we generate and are able to reinvest back in our business on behalf of our customers, we've got to maintain our disciplined approach. And I think that it's proven itself out in the long run and is a key difference why our numbers look a lot different from some of the others.

But when you look back to 2019 or 2016, does the rising competitiveness on price and share of the 3PL channel feel different this time? Just curious if this all rhymes or something feels like it's changed here?

No I wouldn't say it…

It's maybe a little bit different basket, but not wholly and completely. And just to add a little color to what Adam said, generally speaking with our 3PLs, we're not losing contractual business. Some of those contractual accounts maybe down just because the general economy is slower, they may possibly be down but that's not where we're losing. And the transactional stuff, as Adam talked about before, that's where we're seeing a deterioration in our revenue with those specific 3PLs. They all have a large piece of business that's transactional, that customers may ship once twice whatever a week, smaller type accounts and that's where we're seeing the losses from our standpoint. So it's just business that they can price on the fly. And we're never going to be the low cost guy on the fly, if you will. So anyway, that's more of what we've seen. It's not losing business by any stretch.

The next question comes from Ken Hoexter with Bank of America.

Greg, good luck in retirement and maybe [West] might be giving you a call soon…

I'm not sure that with me being on this board and that one…

Marty, I just want to clarify, I just want to make sure I heard you right. Did you say this is not abnormal in terms of the part of the cycle on pricing? And then my question for Adam or Greg, I guess, is just the ability to be fluid on cost, right? So you've always talked about more so than peers given the fixed cost structure of the less than truckload market, and OD is focused on keeping people. How do you shift -- how do you think about shifting costs or what moves you make now with volumes down 15%? I know you always want to be prepared and have the 25% capacity available, but what do you think about on the cost and impact OR?

This is not abnormal in this type of environment, economic environment. You have -- some of our competitors, they think offering a more competitive or lower price will keep the customer there. Many times, it does not because the customer will always come back to having their cargo delivered on time and claim free. We've learned that over the years. So it's not abnormal. We choose to tighten our belt and manage our labor. And when the slow times pass, we're in a great position to keep our OR going downwards though. But it's not abnormal to see low prices in any environment with any company. So we've seen it before and it will pass like it always does. And Adam, I'll let you handle the…

I would only say on the call standpoint, I mean, obviously, we've switched to where our variable costs or the majority of our cost base now, probably 70% or more of our costs now are variable in nature. And obviously, we've got a big fixed cost base and we're seeing the loss leverage with the revenue decline there driving some of that. But some of the increase in those overhead costs in the first quarter also comes from the fact that we're on a little bit of a different schedule with respect to our equipment plan. We were taking delivery in the fourth quarter of equipment, taken delivery in the first quarter, which is unusual and that was part of why we had anticipated a sequential increase in those depreciation costs as a percent of revenue. But given all the challenges from a fleet standpoint, that's driving some of our costs. It's also driving some of the maintenance and repair costs, like I mentioned. We're seeing an increase in cost per mile. Some of that is just due to general inflation related to parts and repairs. But some of it, too, just relates to the fact that we're bringing in equipment. We've -- on a different schedule, we've held equipment through '21 and '22 and our average fleet age has increased as a result. We're -- probably our average fleet age is about five and half years now, we like it to be around four years. And so we'll work on balancing that as we take out some of the older equipment from the fleet and adjusting our fleet, if you will, to the lower shipment levels and that will help from a cost and an efficiency standpoint. But 80% of our costs are salaries, wages and benefits and ops…

The last question today will come from Bruce Chan with Stifel.

I just want to come at the volume question from a little bit of a different angle. You've had some competitors that were going through some labor negotiations this year. One is going through a pretty significant change of ops. Do you see any volume coming into the network because of -- or maybe in anticipation of those events? And then, Adam, maybe just a quick housekeeping question, you gave us some good color on the fleet age. How long do you think it's going to be before you're back at that sort of target four years?

I would say that we should make a lot of progress this year. We've got a fair amount of equipment right now that we've got identified that we want to be able to move out of the system, but that takes a fair amount of time to happen. It's not just an overnight thing where you're selling a used car and you posted on a Web site. So it's going to take us a little bit of time to kind of work through that, but we've got a plan. We've met several times recently talking about kind of the needs there and we'll continue to work through it. So I think that we'll make considerable progress this year as we're still bringing on -- we reduced our CapEx for equipment. But we're still going to be bringing on a fair number of new units and more of the progress will be hanging -- or getting rid of some of these older units that we've been hanging on to. And I'll say we're not out of the woods yet when it comes to parts availability and so forth. We're still finding that there are continuing to be supply chain issues out there. And when we've got equipment that has been down for maintenance, equipment has stayed down for longer periods of time. So we're continuing to kind of manage through those challenges while we're also trying to manage cost. But I think we'll end up by the end of this year making pretty steady progress on working that number much lower than where it was at the end of last year, kind of working both ends of the spectrum, if you will.

And then just on the volume side, any discernible share wins from any of those union competitors?

It's kind of hard to say, Bruce. We get reports from our national account folks on a regular basis. And we have wins on business from those folks as well as others. So I don't know that you can really point to contract negotiations or whatever the case as any reason that we're getting business. We haven't really seen that.

This concludes our question-and-answer session. I would like to turn the conference back over to Greg C. Gantt for any closing remarks.

Well, thanks, everybody, for your participation today. We appreciate your questions. Feel free to give us a call if you have anything further. I hope you have a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.