Proficient Auto Logistics Aktie

Hello, and thank you so much for standing by. My name is Ethian, I will be your conference operator today.

At this time, I would like to welcome everyone to the Proficient Auto Logistics' first quarter financial information. [Operator Instructions] Thank you.

And I would like now to turn the call over to Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thank you for joining us for Proficient's First Quarter 2026 Earnings Call.

Earlier this afternoon, we issued our earnings release, which provides comparative financial information for the first quarter of 2026 to the first quarter of 2025 for the company. It can be found under the Investor Relations section of our website at proficientautologistics.com. Our 10-Q when filed will also be found under the Investor Relations section of our website.

During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by the forward-looking statements. Further information can be found in our SEC filings.

During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer.

We will provide a company update as well as an overview of the company's combined results for the first quarter of 2026.

After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question and one follow-up, and you can get back into the queue if you have additional questions.

Now I'll turn the call over to Rick O'Dell, who will provide the company update.

Thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the first quarter and some trends that provide insight into our expectations for future quarters.

As we announced in early March, the first 2 months of the quarter were affected by extended automotive plant shutdowns, weaker-than-expected industry SAAR, severe winter weather and a slow recovery of the rail and sea transportation pipelines that feed our network. These factors constrained volumes and resulted in revenue levels below the comparable periods of 2025 and below comparably higher fixed cost coverage levels with the Brothers acquisition reflected in our 2026 expense base.

While revenue and volume trends improved in March, the revenue gap for the full quarter finished less than 2% below Q1 of 2025. Meaningfully higher diesel fuel prices and the timing lag to associated higher fuel surcharge recoveries created a material unplanned cost and margin headwind in the month of March versus our expectations. Combination of these factors materially impacted our reported bottom line results and profitability, and muted underlying cost control and efficiency improvements in the quarter. We're clearly not satisfied with the outcome, and our focus remains on execution and resilience in challenging market conditions.

Looking to the second quarter, recent trends indicate more stable volume levels, supported by seasonal strengthening, improved weather, dealer inventory and strong tax refunds. While automotive SAAR comparisons year-over-year are challenged by peak levels seen last year with tariff demand pull forward, April SAAR is expected to finish at 16.1 million units, marking 2 consecutive months above 16 million following March's 16.3 million result.

The rebound in volumes in March and April made capacity tightening more evident, exposing underlying supply loss that had previously been less visible. Supply losses appear to be driven by a combination of factors, including financial pressure from low volume, compounded by relatively weaker rates, increased relative scrutiny or regulatory scrutiny and driver migration towards other forms of trucking as the broader trucking rates have improved.

At the same time, supply conditions have increased spot market opportunities. When spot opportunities increase, but supply is constrained, third-party capacity is drawn away from participation in contracted freight, particularly with the Subhauler population, which shifts towards higher paying rates. As a result, we are observing contracts having been awarded at below market rates over the last 6 to 12 months, that have struggled to secure consistent capacity when seasonal volume return and in several instances leading to a redistribution at market level economics. So this is clearly a turning point in the auto haul market.

Equally important, automotive OEM financial performance is improving as tariff impacts are cycling or in some cases, reversed, which should help ease some of the cost pressures the OEMs have been managing. When combined with the capacity dynamics, this should contribute to a more balanced pricing market environment and OEMs attempting to hold rates below prevailing market levels may experience reduced fulfillment or need to rebid lanes at the higher market levels.

We continue to show discipline in our pursuit of new business and retention of incumbent business to ensure that our portfolio allows for sustainable profitability and reinvestment. While we're not immune to the driver supply challenges, we're hiring aggressively to fill open trucks and are confident that we can be successful in achieving growth over time despite the complexities in the market.

The company has a strong balance sheet position. We will advance our strategic objectives for continued margin expansion, market share gains and acquisitions.

I'll now turn it back to Brad to cover some key financial highlights.

Thank you, Rick. To reiterate a few high-level financial statistics. Total operating revenue for the first quarter of 2026 of $93.7 million was a decrease of 1.6% versus Q1 of 2025.

Total units delivered during the first quarter totaled 501,850, which was an increase of 1.5% compared to the same quarter of 2025.

With SAAR down approximately 5% versus the first quarter of '25, this implies continued market share gains during the quarter.

Adjusted EBITDA for the first quarter was $4.5 million versus $7.8 million in the first quarter of 2025.

As mentioned in our earnings press release, we continue to pay down our debt balances during the quarter, reducing total debt by $5.3 million. The combination of higher fuel costs and rising purchase transportation costs in advance of related customer payments near the end of the quarter, reduced ending cash balances, however, resulting in a net debt leverage ratio of 1.6x compared to 1.5x at the end of 2025. As fuel surcharge index adjustments and customer payment cycles normalize to reflect rising Q2 volumes, we expect cash and receivables to return to historical ranges, while leverage will continue to decline.

Regarding the second quarter of 2026, we are now forecasting total operating revenue between $105 million and $110 million, which reflects a meaningful sequential increase, however, it reflects a decline versus the second quarter of 2025, ranging from 4% to 9%.

The second quarter of last year included our highest revenue month to date as PAL, reflecting last April's elevated sales volume as consumers pulled forward purchases in anticipation of rising prices from announced tariffs.

Adjusted operating ratio is expected to be similar to last year's second quarter despite a lower revenue base.

Adjusted EBITDA margin for Q2 of this year should be similar to last year's reported results between 8% and 10%.

Given the year-over-year softness in market conditions and available capacity within our existing fleet, we expect equipment CapEx spending for 2026 to be less than $10 million compared to $10.2 million for the full year 2025. This evaluation will be ongoing as the year progresses and the revenue opportunity becomes better defined and compared against our available capacity.

Total common shares outstanding on March 31 were 27.8 million, down less than 1% from year-end 2025. As previously disclosed, we repurchased 82,877 shares at an average price of $6.25 during the first quarter, under a buyback program authorized by our Board of Directors on March 2, 2026.

Operator, we're now ready to take questions.

[Operator Instructions] Your first question comes from the line of Bruce Chan with Stifel.

I want to focus in first on some of what you mentioned in the opening remarks around the supply pressure. Certainly welcome news. But wanted to see how you're thinking about that in terms of spot, what you're seeing in terms of spot pricing pressure in the market right now? And then maybe also how that's affecting the population in auto hauling? I mean is this more driver attrition? Is this regulatory impact? Any ideas on how much direct regulatory impact there might be? So I would love to hear any color on any of that.

Sure. Hi Bruce. In terms of the spot environment in Q1, it was an absolute flat line during the month of January and February, as you would expect. And in March, when volume levels returned and the supply exit became more visible, there was a market increase in spot opportunity, but there was lack of availability to participate in those spot opportunities on a widespread basis.

So what we experienced was a couple of percentage point increase in our participation in the spot market at rate levels of premiums that were frankly better than what we've seen in the last couple of quarters, but still immaterial on an overall sort of revenue basis compared to the overall portfolio.

So for [ next ] question -- [indiscernible] what's driving the supply components, I think a lot of it initially was financial pressure. The low level of volume in January and February was really such that a number of smaller carriers, in particular, could not afford to continue participation in the market and exited. And then even in March, while the volume opportunity improved, a lot of third-party carriers do not have the opportunity to recover fuel surcharge and the increase in fuel cost for that carrier base at market rates where they currently are, again, pushed a lot of those carriers out of the market.

So I think some of it is attrition based in the third-party carrier space. We are seeing attrition in the Company Drivers space. Again, the volume levels of January and February made it very challenging for drivers to make a good living. And as pricing has recovered very quickly in the general trucking market, it has compressed the premium of rates in auto haul to rates in general trucking in a way that causes some drivers to trade down or trade into other segments of transportation.

Lastly, from a regulatory perspective, just last comment, the non-domiciled CDL final rule just went into effect and was not stayed in the appeals process this week. So we do expect that to be an ongoing pressure point for supply in the driver space broadly and in the automotive market as well.

Great. Yes, super helpful, Amy. Just to follow up-quickly, as you think about all of that, maybe where is your spot mix today? And then as you move into second quarter and second half, how are you thinking about those spot opportunities and spot pricing trends for the rest of the year?

Spot in the first quarter was less than 5% of the portfolio across new car traffic and secondary market. So it continues to be a very small portion of the portfolio. In terms of how we think about it for the future, as we've said consistently, we've made long-term commitments in the contract business, and we expect to service that volume through our best capability where we have opportunity to participate in the spot market and we can put capacity up against it. We will certainly be opportunistic and seek to increase the amount that we participate there, but not to the exclusion of serving our contract customers well.

Your next question comes from the line of Ryan Merkel with William Blair.

First topic is the fuel impact. Can you talk about how much fuel hurt your profit in 1Q? And then how should we think about 2Q?

So in Q1, fuel started to increase markedly in March. And because the indexes that set the fuel surcharge don't reset until the beginning of April, we were paying out real-time fuel costs during the month of March that didn't have a comparable increase in the reimbursement. We think that, that had about $1 million impact on profitability in Q1. In Q2, the index will catch up to the rate that we're paying. And so it should be less of an impact in that quarter than it was at the end of Q1.

Got it. Okay. Good to hear.

And then I just wanted to ask about volume trends. So in the first quarter, volume was down about 4%. How did it look in March and April in terms of volumes? I'm just trying to understand if underlying demand is stabilizing at this point?

Yes, I'll take that one. So we have to keep in mind some of the pieces of business that are cycling as well. So you'll recall mid-quarter in the first quarter of 2025, we had a sizable market share gain. So we cycled that in early to mid-February this year, half quarter benefit in the first quarter, but the benefit of that on a year-over-year basis was gone for March and for April.

The Brothers acquisition closed on April 1 last year. So we had the full year-over-year benefit of Brothers in the quarter in March and not in the comparable prior quarter or prior period. Again, in April, we've cycled that. So what we now see is truly kind of what the underlying year-over-year market looks like, and we are consistently seeing the underlying market is down, which tracks with SAAR. Again, we are down less than the SAAR level, which seems to indicate that from a relative share perspective, we are holding in or gaining, but in a weak market.

Your next question comes from the line of David Hicks with Raymond James.

Can you just talk about kind of the sharp kind of divergence in your company deliveries in the quarter versus last quarter and a kind of flattish unit environment? Is that something that we should kind of extrapolate out in the future or more just kind of a 1Q issue?

Can you repeat that? I'm not sure I followed the first part.

David, did you ask about the company -- the increase in company delivery relative to Subhaulers question?

Yes. Yes, especially because you pretty much printed flattish volumes overall, but the company really shot up relative to Subhaulers. I'm just wondering if that you can continue to expect that going forward?

Yes. So there's a lot going on there, actually. But I mean, the fact is as -- when volumes are down in general, we're looking to keep our company drivers active in all environments. And so you're going to see a flex up in the company relative to Subhaulers because the Subhaulers is kind of for excess volume. And so as that volume declines, Subhaulers will likewise decline. So that's part of the issue.

And then a lot of it also kind of depends on where we see volumes increasing in our network across the country and with which lanes and which OEMs, and some of those are kind of natural company driver areas as opposed to Subhaulers or not. And so there are several factors, but certainly, overall volume as it declines is going to favor company delivery.

Got you. Makes sense. And then now that we just have all 7 operating companies on a single TMS unified accounting, is there a specific kind of KPIs that you guys are targeting to improve first? Kind of like what's the order that you're targeting and kind of what financial returns should we see from those initiatives down the road?

Well, I think, first and foremost, again, to the same point of the previous question, we're looking to utilize our Company Drivers segment to its fullest extent. And so we track very closely the revenue -- the average revenue generated by a given driver, and we continue to push that number higher. Likewise, we're looking at a number of cost factors, capturing the expense, the procurement efforts that we've made across fuel, in particular, because it is a large cost and then also bringing down truck expenses as we've -- since the merger, we have continued to work through the fleet and to upgrade where need be. And those are also areas where we'll continue to push costs down. But I think key among those KPIs are just utilization and driving revenue per driver higher where we can.

I'd add one comment to that, which is we've talked consistently about the sort of ceiling of fixed cost coverage in our portfolio. And so what we know to be true is top line drives bottom line for us and maximizing operating productivity and flexibility to be able to capture as much volume as is available in times of larger inventories is our best path to larger revenue.

We can only move what is available to us. And what we tend to see in the automotive space is we saw some very low lows in January and February and then some pretty big peaking in March and April. And so to the extent that we can be very productive, very flexible with drivers across geographies to meet varying demand levels in various locations, it helps us put up the best top line that we can in a market that is down year-over-year.

That will conclude our question-and-answer session. And I will now turn the call back to Rick O'Dell for closing remarks. Please go ahead.

Thank you for your interest in Proficient Auto Logistics. We're clearly very disappointed in the first quarter results and certainly pleased to see the market stabilizing, particularly with the supply coming out and feel strongly that it will lead to a better rate environment and some increased efficiencies on Proficient's part. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, everyone. Welcome to the Proficient Auto Logistics, Inc. 2026 Annual Stockholders Meeting. [Operator Instructions] Please note that in the interest of all stockholders, we will only address those questions that are pertinent to the business of the meeting.

At this time, I would like to introduce Mr. Rick O'Dell, Chair of the Provision Board and Chief Executive Officer, to commence the meeting.

Thank you, and good morning, everyone. My pleasure on behalf of the Board of Directors and officers of Proficient to extend you a welcome, and thank you for attending our second Annual Stockholders Meeting. I will begin with a few introductions of persons here with me today.

Amy Rice, Amy is our President and Chief Operating Officer; Brad Wright, Brad is our Chief Financial Officer; Brad will act as the Secretary of today's meeting. Matt Warren. Grant Jordan, LLP, the company's outside auditors. Maria box of Continental Stock Transfer and Trust has been appointed inspector of the election. The business of this meeting is to elect 8 directors to hold office until the 2027 Annual Stockholders Meeting.

To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ended December 31, 2026, and to approve the amendment of the company's third amended and restated certificate of incorporation.

I will now turn things over to Brad for a secretary's report.

Thank you, Rick. I have a signed affidavit from our transfer agent, Continental Stock Transfer and Trust stating that the notice of the meeting has been provided to each stockholder of record as required under our bylaws. The list of the stockholders of record as of March 10, 2026, who are entitled to vote showing their respective name and the number of shares held by each is available at this meeting for inspection by stockholders. According to Continent stock, there were 27,808,191 shares entitled to vote as of March 10, 2026, the record date. There are 24,899,266 shares present by proxy.

Thank you, Brad. Based on the report of the Secretary and the Inspector of the Election, I find that proper notice has been given and that a quorum is present. Accordingly, this meeting has properly been convened. Since no stockholder nominations or stockholder proposals were properly filed in advance of this meeting, our business is limited to the 3 matters on the agenda.

Brad, can you summarize these 3 matters and the voting procedures?

Sure. The first proposal we will consider is the election of 8 directors. The Board has nominated Richard O'Dell, Charles Alluto, Douglas Cole, Brenda Frank, James Gattoni, Rohit Lal, Stephen Lux and John Shrodenbach to each serve as directors until the 2027 Annual Stockholders Meeting and until their successor is duly elected and qualified or until their earlier resignation, removal in capacity or down.

No nominations may be made at this meeting. Therefore, I declare the nominations to be closed. The second proposal relates to the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026.

Matt Warren, representing Grant Thornton is present and available to answer appropriate questions. The third proposal relates to the amendment of the company's third amended and restated Certificate of Incorporation, eliminating the supermajority stockholder vote requirement to amend certain provisions of our charter and bylaws. If you have previously voted by proxy, it is not necessary to vote during the meeting. Only stockholders who have not voted or those who wish to change their vote on their proxy should vote during the meeting.

Any stockholder who desires to vote during the meeting, please do so now by clicking the Click here link at the bottom of your screen under annual meeting voting. The voting will be closing shortly.

[Voting]

Thank you, Brad. Given the fact that most stockholders previously voted by proxy and all the attending stockholders have now had adequate time to vote, voting is closed. While the votes and proxies are being tallied, I'd like to introduce the members of our Board of Directors, Charles Alluto, Doug Cole, Brenda Frank, James Gattoni, Rohit Lal, Stephen Lux and John Shrodenbach.

Information concerning their principal occupations, their service with Proficient and other matters which maybe of interest are contained in the proxy statement. On behalf of everyone here at Proficient, I thank you, our stockholders for your support.

Brad, would you now present your report on the vote.

Yes, not less than 15,531,094 shares or more than 55.9% of Proficient stock represented at this meeting have been voted for the election of each of Mr. O'Dell, Alutto, Cole, Gattoni, Lal, Lux and Shrodenbach; and Ms. Frank as Directors of the company. Not less than 24,893,308 shares or more than 89.5% of Proficient stock represented at this meeting have been voted for the ratification of the appointment of Grant Thornton LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2026.

Not less than 1,805,077 shares or more than 64.8% of Proficient stock outstanding have been voted for the amendment of the company's third amended and restated certificate of incorporation. Accordingly, each of the items voted upon today as listed in the proxy statement have been approved by the company's stockholders other than proposal 3, which required the affirmative vote of the holders of 66% [indiscernible] of the outstanding shares.

I'll now turn it back to Rick to conduct the Q&A and for some final remarks.

Thank you, Brad. We'll take any questions. There are no questions were submitted. I want to thank everyone for attending today's meeting and for your interest in and support of Proficient. As we have no further business, this meeting is now adjourned.

Good day, and thank you for standing by. Welcome to the Perficient Auto Logistics Fourth Quarter Financial Information Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Perficient Auto Logistics. Thank you for joining us on Perficient's Fourth Quarter 2025 Earnings Call. Under SEC rules, our Form 10-K covering the 3- and 12-month periods ending December 31, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Perficient Auto Transport and the successor entity, Perficient Auto Logistics, Inc. We're not required to provide and the Form 10-K will not contain pro forma financial data for the combined companies. Our earnings release provides comparative summary financial information for the fourth quarter and for the 12 months ended 2025 to the same periods of 2024 for the combined companies. Note that these results are preliminary as our financial audit for 2025 is not yet complete. Our earnings release can be found under the Investor Relations section of our website at proficientautologistics.com. Our 10-K when filed, can also be found under the Investor Relations section of our website.

During this call, we'll be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by the forward-looking statements. Further information can be found in our SEC filings. During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Perficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the full year and for the fourth quarter of 2025. After our prepared remarks, we will open the call to questions. During Q&A, please limit yourself to one follow-up. You may get back into the queue if you have additional questions.

Now I would like to introduce Rick O'Dell, who will provide the company update.

Thank you, Brad, and good afternoon, everyone. I'd like to start by thanking our team members for their dedicated efforts in 2025. Together, we delivered over 2.3 million vehicles in 2025 and grew our business to over $430 million in revenue, up 11% versus 2024. Our team responded quickly and effectively to significant changes in the market throughout the year to meet customer needs of reliable quality service.

Reflecting on 2025, the automotive market peaked in March and April ahead of tariff impacts and the remainder of the year was weaker than our expectations. As we discussed in our last earnings call, the fourth quarter started out at a slower pace with October SAAR at 15.3 million units. And while November and December volumes improved modestly, the full quarter saw our results finished lower year-over-year and lacked a more typical seasonal year-end volume push. Despite this trend, our fourth quarter revenue and unit volumes each increased over 11% year-over-year as a full quarter of the Brothers acquisition and new business wins more than offset the weaker core market.

With regard to profitability, adjusted operating ratio for the fourth quarter was modestly better than the prior year. Results for the quarter were unfavorably impacted by a reduction in operating leverage due to the core market volume decline. as well as higher-than-usual insurance claims expense from the recognition of a major claim in the quarter under the higher retention levels of our new insurance program. Importantly, these factors muted underlying cost control and efficiency improvements for the quarter. We remain confident in continued momentum in the operating ratio reduction from the foundational improvements achieved over the course of 2025 and additional opportunities ahead of us.

Closing out the quarter as part of our annual goodwill impairment review, we recorded a noncash goodwill impairment charge of $27.8 million during the quarter. This charge represents an updated fair value based on a discounted cash flow analysis and primarily reflects downward changes in market conditions since the time of our initial public offering. Importantly, this charge is noncash and does not impact our liquidity, cash flow or the underlying operations of our business. As we look ahead to this year, January SAAR finished lower than forecasted and while still being finalized, may be the lowest monthly SAAR in several years as severe winter weather across multiple regions disrupted dealership operations and delayed consumer purchase decisions.

As weather impacts ease, we expect healthy dealer inventory levels, continued sales incentives and a stronger tax refund season to support improved consumer demand over the coming months. We continue to see underlying resiliency in the automotive market as replacement demand and aging vehicle fleet and lower interest rates support a stable demand environment. While automotive OEMs continue to face cost pressure and the pricing environment is not as strong as we'd like to see, [ POL ] provides highly reliable quality service and is critical infrastructure in the automotive transportation supply chain. We continue to show discipline in our pursuit of new business and in the retention of incumbent business to ensure sustainable profitability and reinvestment.

Our financial performance in automotive trucking is not universally healthy in this market, we are well positioned to improve our performance in a down market, generate strong cash flow and respond quickly and efficiently to customer needs as the market improves. The company has an increasingly stronger balance sheet position, and we will advance our strategic objectives for continued margin expansion and market share gains.

Now I'll turn it back over to Brad to cover key financial highlights.

Thank you, Rick. First, to reiterate a few high-level financial statistics. Total operating revenue for the full year 2025 of $430.4 million was an increase of 10.7% versus 2024. Operating revenue for the fourth quarter of 2025, $105.4 million was an increase of 11.5% over the fourth quarter of 2024. Adjusted EBITDA of $40.2 million for the full year 2025 was essentially unchanged from the combined 2024 result.

However, recall that the first quarter of 2024 was pre-IPO -- first half, I'm sorry, of 2024 was pre-IPO with different financial and market characteristics in the second half of 2025 as compared to the second half of '24 was meaningfully improved. To that point, fourth quarter 2025 adjusted EBITDA of $9.2 million was an increase of 32% over the same quarter of 2024. Total units delivered during 2025 of more than 2.3 million autos represented an increase of 16.2% from 2024, although revenue per unit was lower in 2025 by about 6%, reflecting the market shift away from spot traffic opportunities, which we have now fully cycled. Provision continues to refine its operations and position for higher profitability even in the current market, which will be amplified through operating leverage when volumes improve. Our healthy cash flow characteristics have allowed for a meaningfully improved leverage position.

Over the past 3 quarters, net debt to trailing 12-month adjusted EBITDA has gone from 2.2x as of June 30 to 1.7x September 30 and finished at 1.5x on December 30, 2025. While the June 30 level of debt was not outsized and well within our covenants, the current position enhances our flexibility for future capital structure decisions. In 2025, the vast majority of our growth came from market share gains and an acquisition as with the exception of the pre-tariff momentum early in 2025, the underlying new vehicle market did not grow. In 2026, the forecast for SAAR is lower than 2025 actual, and this forecast has weakened since we last reported, reflecting a Q4 that lacked the typical seasonal peaking.

Therefore, any growth in our 2026 revenue and related profitability improvement is expected to be a result of our internal initiatives, essentially unaided by the general market. At this time, we are confident that we can achieve year-over-year growth in revenue for the full year, and we reiterate our objective of 150 basis points of full year improvement in our adjusted operating ratio. That said, we will fully cycle the larger share gains from early in 2025 as well as the Brothers acquisition as of the first quarter. While we have gained new business in bid processes and expect that to continue, the competitiveness of the pricing environment is such that we're forced to bow out of certain incumbent pieces of business when the price point moves below a level where we can attract and retain drivers and produce an acceptable return. While we have not experienced material gains or losses, we are seeing both gains and losses in this environment, and we're prioritizing profitability above the pursuit of top line growth alone.

Regarding the first quarter of '26, as I mentioned, we have year-over-year improvement from last year's market share gains in the Brothers portfolio. However, recall that the first quarter is seasonally the lowest quarter of the year. Thus far in 2026, we have seen extended plant shutdowns and significant weather interference. We expect Q1 revenue to be higher than the first quarter of 2025, but lower sequentially from Q4 of 2025. Expect modest improvement in adjusted operating ratio due to our restructuring initiatives producing results and an expected normalizing of claims performance relative to last quarter.

Absent improvement in market conditions, we expect CapEx spending to be relatively light again in 2026. Total equipment CapEx was approximately $10.2 million in 2025 and expected maintenance CapEx of between $10 million to $15 million in 2026 would maintain our fleet average life between 5 and 6 years. Trailing 12-month adjusted EBITDA less CapEx was approximately $30 million for 2025. When compared to our market capitalization, even in light of a share price increase of over 60% in the last 3 months, this level of net cash flow to total market capitalization equates to an 11% yield. Finally, total common shares outstanding ended the year at 27.8 million, essentially unchanged from the end of the previous quarter.

Operator, we'll now take questions.

[Operator Instructions]

Our first question comes from the line of Tyler Brown with Raymond James.

Brad, you threw out a few numbers there. On Q1, I just want to make sure I have it. You're expecting revenues to be down sequentially and the OR to improve sequentially or year-over-year?

We expect modest improvement sequentially, Tyler.

Okay. Sequentially. Okay. Perfect. Very helpful. Okay. And then, Rick, there's been a lot of talk out there about tightening capacity, obviously, across the whole space. But I'm just curious what you guys are seeing in the auto hauling market specifically. Do you think that auto hauling has any unique exposure to non-domiciled CDLs? Is it more or less of an issue than the broader complex? Just curious if you have any thoughts anecdotally.

Sure. I think the non-domiciled issue is becoming a current issue. The final rule -- the interim final rule is now sitting with the OMB. And as a result of state audits and states changing policies prospective to a final rule, we are starting to see more enforcement action in more places. So that impacts both somewhat of a current driver population, but I think it meaningfully impacts the recruiting of new drivers because that entire population of would be drivers is precluded from entering the market.

For auto haul, we are lightly insulated there because we generally -- we don't hire drivers who are new CDL recipients. We require drivers that have experience driving a large truck before they move into auto haul as it's specialized. So we are somewhat insulated. But yes, I do think it is taking capacity out of the market. It's not being felt in terms of pricing characteristics and whatnot in our space because the volume level is so low right now that you don't see all that capacity exit.

Okay. Yes, that's helpful. So from a company-owned perspective, it's not an issue, but are you seeing a decline in motor carrier numbers in your active subhaul population? Because there's been a number of out-of-service placements. I'm just curious if you're seeing that at a deeper level.

We wouldn't see it as actively because what happens in a down market, the third-party carriers that we're using are those who choose to participate in our freight very regularly. The folks who choose to participate in our freight more episodically wouldn't have opportunities for dispatch in this volume environment. So to the extent that some of those bridge players may be exiting the market, not only for us, but in general, in the aha space, that will be felt when there's a surge and a need for capacity that is no longer there.

Okay. And maybe this is a question for all 3 of you, but do you think that rates will be up in '26 ex fuel?

So you're asking about revenue per unit. I think we should be stable, largely stable on a revenue per unit basis. We had significant volatility in our RPU over the course of the last, call it, 12 to 16 months as we were cycling the reduction in spot traffic and dedicated traffic, the level where we are now, we're very stable from an RPU perspective.

Okay. And then my last one, just real quick. Brad, obviously, it sounds like cash flow should still be good into '26. How should we think about prioritizing capital allocation between M&A, debt paydown and even repurchases? Is that even a possibility?

Yes, Tyler, I think the priorities will be largely as they have been, which is to continue paying down debt. Now we've made significant progress there, as I highlighted, over the last year, particularly the last 3 quarters. And so that does give us some flexibility and some dry powder to the extent that an M&A opportunity came along, for example, we've got a lot of flexibility to use cash or to take on additional leverage or however we might choose to approach that. But I think just on a recurring quarter in, quarter out basis, I would expect us to continue to strengthen the balance sheet first. And again, we never rule out share repurchases, but that's probably at the lower end of the priority list at this point.

Our next question comes from the line of Bruce Chan with Stifel.

Maybe just to focus a little bit more on the revenue mix and the pricing. You all mentioned a couple of things at work there with the absence of spot opportunity in the competitive market. I guess, first on the spot side, Rick, you mentioned a few of the kind of points of optimism this year just around the age of the consumer fleet, any kind of tax rebates, refunds. How do those kind of factors play out through the spot versus contract opportunity? How much are you kind of embedding in your outlook for flat revenue per unit? And then maybe on the competitive front, just to address that, I guess I'm a little surprised that given the cost trajectory in the business, carriers are still pricing so aggressively. So maybe any more detail on what you're seeing in that competitive environment there?

Yes. So on your first question with respect to what our expectations are for the spot market or what it would take to see the spot market recovery. I mean I think if the market tightens and inventories tighten, then you see there's more of a sense of urgency for delivery of vehicles that get maybe presold or if inventories get low and demand is high, then you see more spot moves. So we would just take a healthier demand environment to kind of get a recovery in the spot market.

Rick, from my perspective, at this point, any spot opportunity is upside relative to where we have been over largely the last year. So there is very little spot opportunity in the current market. I don't expect there to be a meaningful amount of spot opportunity in the market that we foresee in the near term. But to Rick's point, any tightening that would introduce that opportunity would represent upside.

Or driver shortages for other competitors that have contracts, right? If they can't handle their contract business, then it goes to the spot market.

And then to your question on OEM pricing, what we are seeing is there's an impact on the OEM side of that equation and there's an impact on the carrier side of the equation. On the OEM side, as we've seen in recent earnings releases, taking large impairment charges around EV investments and coming off of a year where they bore a significant portion of tariff expense, the OEMs are looking to improve their performance in 2026. And so they've got really stringent cost mandates in place for their procurement departments. And that's what we are seeing in the OEM environment.

On the carrier side of things, we're seeing a lot of carriers with underutilized capacity or the amount of volume that they're carrying is lesser than they would like to be carrying and it's resulting in carrier bidding at rates that, in many cases, are below a threshold that we think represents healthy reinvestment. And so we're having to show discipline about what we're willing to pursue, what we're willing to defend and when we walk away because we don't think that, that rate level is sustainable in the market over a, call it, 3-year price term.

Okay. Great. That's super helpful. And then maybe just for a final question here. You mentioned the in-sourcing and the cost control programs. I think we're a little more than 1.5 years or so post IPO. Any updates that you can share with us on progress there or any new opportunities that you may have identified?

Well, some of the big ones that have now gotten a lot of traction or that will kick in, in the first quarter, the consolidation of all of our health care programs that will kick in or did kick in January 1, 2026. Consolidation of our insurance programs, liability and cargo damage, et cetera, in August of last year is also something that we expect to see result in cost savings during 2026. The early on stuff has now kind of cycled at this point, the oil and the gas programs, the spare parts, that kind of stuff. And we continue to push on that, and we'll see marginal improvements there as well. But I think it's the insurance and benefits that will kick in the largest portion of the savings in '26.

One other comment I would make there, Bruce, is as we move into new vendors and new programs, there's a sort of flushing out of old contracts and prior expense. And so there is some doubling up in the system during that transitional period. And as we move forward, we do see opportunity to just take what I would describe as transitional and integration costs out of the system over time.

Yes. And I guess the other thing that I failed to mention is we did some restructuring late in the year last year that reduced some headcount and also got us out of one physical location that will actually create additional savings in '26.

Our next question comes from the line of Alex Paris with Barrington Research.

So I have just a couple of questions. First, I think a point of clarification. The market share gains and the Brothers acquisition, we still have one more quarter of a benefit before it cycled through. Did I get that right?

For Brothers, yes. On the market share gains, that was during the first quarter, so less of an impact there.

Okay. Got you. And then on the organic front, and then I'm going to finish with M&A. On the organic front, you had said last quarter that there were still a number of OEM contracts that were awaiting awards. And at that time, just like this time, you said that some contracts you walked away from due to pricing and so on. I was just wondering if we can get a little update on the color of contract awards either during the fourth quarter or prospectively.

Sure. Alex, it's Amy. We did see several open bids sort of matriculate to the award stage over the last couple of months. And what I would describe as puts and takes. We did pick up some new locations in a number of customer accounts. We also lost some incumbent locations in those same customer accounts, again, by virtue of rate dynamics and where the late stages of negotiations went with respect to rates and profitability. So net-net, we are pleased with where we ended up. But in a more disciplined environment, we'd like to retain our business as well as gain new markets. In the current environment, we are having to make some hard choices with respect to incumbent business as we pick up some new markets.

As we look ahead, there are a number of what I would describe, they're not national and headlining bids, but there are a number of active bids just in the ordinary course of the business that will play out here over the first and second quarter. So we continue to see opportunity to bid on new traffic and our customers are still acclimating to our broader network and capability. And we're having much more meaningful discussion with customers about what we can do across a wider swath of their network. So we are encouraged and optimistic about our opportunity to pick up some new business.

Great. That's helpful. Then two, anecdotally and without mentioning the OEM, I had heard a fairly large contract was awarded last year, and you stepped away due to pricing. But I've heard that, that same OEM is coming back and rebidding some lanes because some of these smaller carriers that bid real low are having service issues. Have we been seeing those kind of things this year? I know you said earlier that it will usually end up in spot, but the absolute rebidding of certain lanes seems to have happened much sooner than they typically do.

So you bring up an interesting point, and it's one that we think about, right? So as we get into the late stages of the negotiation, you ask yourself, would I rather be the carrier that wins this business at a rate that I'm not entirely confident I can deliver? Or would I rather be the carrier waiting in the wing if the guy who wins it can't entirely deliver. And we've made some of the latter in terms of our choices. So to your point, we do think that there's some business that has been awarded that may ultimately come back to market. And we've tried to position ourselves in a way that our customers know we've got capacity, we've got interest, and we are available to support in the event that they have service disruption.

Great. That's helpful. And then my final question, I'll finish on M&A, as I said I would. Given the weak market, given the weak SAAR given pricing pressures and service delivery challenges, would you -- maybe you can give us a little update on the M&A pipeline? And do you expect to make acquisitions in 2026?

Yes, we continue to develop a pipeline. We have one that we're actively engaged on. So we'll -- I would expect that we still would expect to maybe do 1 to 2 acquisitions a year.

Great, which is in line with what you had said at the IPO time, and it's actually what you've delivered over the last 12 months or so? Correct.

[Operator Instructions] Our next question comes from the line of Ryan Merkel with William Blair.

I want to start on 4Q. The OR missed, I think, your expectations. And I just want to be clear on why that happened. It sounds like it was the core revenue was a little bit weaker than you thought. What was the core revenue in 4Q? And was the weakness just the November and December seasonality didn't come back as you thought?

Yes. So on the revenue front, when we guided at the last quarter, we kind of gave a range of where we thought 4Q would end up. In the end, it ended up a few million shy of what we had anticipated that reflects in November and December that didn't come to fruition the way seasonally it typically does. So yes, we saw some weaker volume and general revenue there that would have been contributory from an OR perspective, but there were some specific drivers in the quarter, which Brad to talk about.

Yes. So we referenced in our commentary that we had elevated claims expense. So when we consolidated our insurance programs, we got significant reduction of premium, but we also took on a little more retention or self-insurance. And as a result, we do expect that there'll be a little more volatility or we're subject to it anyway. And we had one accident in the fourth quarter where we did have to basically reserve up to our full retention amount. And so that had an impact on OR for the quarter, and we would not expect that to recur in Q1.

How big was that, Brad?

Well, the full retention that we have on our liability is $0.5 million, and we reserved all of that.

Okay. All right. And then the '26 guide, let's start with revenue. I just want to make sure I heard it right. So I think you said you don't expect any help from the market. So talk about what do you expect from the market? I think you'll have 1 point of M&A that will carry over. You said flat pricing. So you're thinking a couple of points of volume. Am I understanding that right?

You're kind of breaking up a little bit, but I think the point is we don't expect general core market volumes to be higher than 2025. and pretty flattish revenue per unit as well. So -- but we do still expect that we will be able to generate some increase in our overall full year revenue through market share gains. As Rick mentioned, we will always be looking at strategic additions as well. But we do think that we've got some optimism around market share gains that would push our revenue up organically anyway.

Okay. So it sounds like mid-single-digit revenue in '26 is in the ballpark.

Well, just from the organic market, I would say you're probably a little high, but that's -- it's hard to say this early in the year.

Yes. I get it. Okay. And then on the OR improvement, 150 basis points, is that just all cost saves? And can you tell us how much in dollars you have for cost saves in '26?

Yes. So I think most of that would be -- most of it is cost savings, of course, to the extent that we push revenue higher, we get some fixed cost leverage as well.

And a meaningful portion of that, Ryan, as well is the ongoing initiative to shift more of our revenue base from the subhaul segment into the company driver segment. We get better asset utilization of our fleet. And we think that on an apples-to-apples basis, the OR on a company-delivered move is as much as 300 to 400 basis points better than on a move. So we do expect to see progress there, which, on the one hand, is cost driven, but on the other hand, is how we operate.

This concludes the question-and-answer session. I would now like to hand the call back over to Rick O'Dell for closing remarks.

Well, obviously, the market environment was challenging in 2025. Like I said in my opening comments, certainly pleased with the execution of our employees dedicated to providing quality service to our customers in a challenging environment. And I think I think what we did demonstrate in 2025 is that our collective network is attractive to our customer base. We grew revenue at 11%. And as we continue to mature our network and focus on our cost initiatives, we've got a high level of confidence in our ability to improve our operating margins.

In the meantime, cash flow is strong, balance sheet is improving. And we like where we're positioned in the marketplace, but we just need the marketplace to be a little bit better. And I think there's some -- there are some sort of green shoots out there that could indicate that certainly the second half of 2026 can be better. So we're looking forward to that.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, everyone, and welcome to Proficient Auto Logistics Third Quarter Financial information. [Operator Instructions] Please note that this conference is being recorded. Now it's my pleasure to turn the call over to the Chief Financial Officer, Brad Wright. Please proceed.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thanks for joining us on Proficient's Third Quarter 2025 Earnings Call. Under SEC rules, our Form 10-Q covering the 3- and 9-month periods ending September 30, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Proficient Auto Transport and the successor entity Proficient Auto Logistics, Inc. We are not required to provide and the Form 10-Q will not contain pro forma financial data for the combined companies.

Our earnings release provides comparative summary financial information for the third quarter of 2025 to the third quarter of 2024 for the company. It can be found under the Investor Relations section of our website at proficientautogistics.com. Our 10-Q when filed can also be found under the Investor Relations section of our website. During this call, we will be discussing certain forward-looking information. This information is based on our current expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by our forward-looking statements. Further information can be found in our SEC filings.

During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures, such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the third quarter. After our prepared remarks, we will open the call to questions. During the Q&A, please limit yourself to one question plus one follow-up. You may then get back into the queue if you have additional questions. Now I would like to introduce Rick O'Dell, who will provide the company update.

Well, thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the third quarter and some trends that provide insight into our expectations for the remainder of this year. First, as it relates to the third quarter, as we discussed in our last earnings call, July auto sales and deliveries were stronger than had been expected with SAAR finishing at 16.4 million units and while sequentially lower, consistent with seasonality. August and September SAAR were stronger year-over-year at an average of 16.3 million units driven in part by a surge in EV purchases ahead of the expiration of federal tax credits. Company revenue and unit volumes in the quarter largely followed these trends and were further bolstered by market share gains and the Brothers acquisition, finished up 21% and 25%, respectively, year-over-year for the quarter.

The combined results nearly matched the revenue produced in the second quarter of this year and again, improved profitability sequentially and improved 250 basis points year-over-year, demonstrating continued momentum and operational improvements and strategic execution. From a market perspective, volatility in automotive manufacturing and purchase levels continues reflecting production disruption due to supply chain issues and economic impacts of the expiring EV tax credit, interest rate adjustments and tariffs. While automotive OEMs continue to face cost pressure from tariffs as widely reported in their Q3 earnings releases, PAL continues to provide critical infrastructure in the transportation supply chain and we have the ability to be nimble to serve customer needs as they make necessary shifts. The pricing environment is not as strong as we'd like to see, however, we continue to show discipline in our pursuit of new business and retention of incumbent business to ensure that our portfolio allows for sustainable profitability and reinvestment.

We're confident that we can be successful in achieving growth and margin expansion despite complexities in the market. Looking to the fourth quarter, October SAAR slowed to 15.3 million, and we are feeling this softness on volumes. SAAR forecasts are for high 15 million to low 16 million range for the balance of this year and into next year with dealer inventory levels healthy, along with a favorable tax policy for qualifying car loan interest deductions, a high likelihood of continued interest rate reductions and average vehicle age above historical norms for replacement and a typical seasonal increase in buying at the end of the year, we're hopeful that volumes strengthened through the balance of the fourth quarter, but we expect a modestly lower revenue outcome than the third quarter, and we expect to achieve similar adjusted operating ratio and cash flow.

With regard to profitability, as I referenced in the second quarter earnings call, we remain focused on controlling costs and advancing targeted cost savings initiatives and operating efficiencies that produce sustainable benefits. In the third quarter, we recognized a $1.9 million restructuring charge, representing approximately $0.06 per share which is primarily composed of onetime headcount and facility consolidation resulting from organizational realignment as well as fees associated with the consolidation of causality insurance coverage for all operating companies. In total, we expect to realize over $3 million in annual savings from the combined restructuring actions going forward though much of this begins in 2026. Note that under our new insurance program, we have a larger retention consistent with the company of our size, and there may be greater quarter-to-quarter volatility in the insurance and claims expense line going forward reflecting frequency and severity of any accidents and injuries that do occur.

That being said, we do anticipate annual savings in our annual insurance expense. In addition to these items, we continue to leverage our national scale to drive cost synergies through our procurement efforts. While our now unified accounting and transportation management systems are increasingly providing visibility and actionable insights into our customer base, operational efficiency opportunities and profitability. As evidence of this continued progress sister hauls or load sharing between the merged companies grew to 11% of revenue in the quarter from 9% in the prior quarter, reducing empty miles and contributing to improved asset utilization.

As we look ahead, we're well positioned to operate profitably with strong cash flow in the current environment and to respond quickly and efficiently when the market improves. The company will continue to protect its strong balance sheet position and advance our strategic objectives for continued margin expansion, market share gains and acquisitions. I'll now turn it back over to Brad to cover key financial highlights.

Thank you, Rick. First, a few summary statistics and note that the contributions from ATG and Brothers are only reflected in periods since their acquisition by Proficient. Operating revenue of $114.3 million in the third quarter was 24.9% higher than in the third quarter of 2024. The adjusted operating ratio for the third quarter was 96.3%, an improvement of 250 basis points from the comparable quarter in 2024, which was 98.8%. Units delivered during the third quarter totaled 605,341, which is an increase of 21% compared to third quarter 2024. Revenue per unit excluding fuel surcharge, was approximately $173, up approximately 3% from the third quarter of 2024. Company deliveries were 36% of revenue this quarter, down slightly from 37% in the same quarter last year when revenue was much lower, which diminished the volume available for allocation to sub haulers.

Our OEM contract business generated approximately 93% of total transportation revenue in the quarter, which is essentially unchanged from last quarter and reflects a continued lack of spot volume opportunities. Likewise, our dedicated fleet business generated $4.2 million of third quarter revenue, consistent with our expected run rate for the full year 2025. Building on Rick's comments about our expectations for fourth quarter revenue, we now foresee full year top line growth in a range of 10% to 12% compared to the combined company's 2024 total.

The company has approximately $14.5 million in cash and equivalents on September 30, 2025, up from $13.6 million at the end of last quarter. Aggregate debt balances at the quarter end were approximately $79.2 million down $11 million from $90.2 million at the end of the second quarter. The resulting net debt of $64.7 million on September 30 of this year equates to 1.7x trailing 12 months adjusted EBITDA versus 2.2x at the end of last quarter. Free cash flow from operations represented by adjusted EBITDA less CapEx was approximately $11.5 million during the quarter, which allows for this meaningful reduction in our debt balances.

While CapEx was light during the past quarter, we can reiterate our expectations stated in last quarter's earnings call that full year equipment CapEx will be approximately $10 million for 2025. Maintenance CapEx will likely grow from this level as our fleet expands. However, even with expected CapEx increases, we expect free cash flow yields of mid-teens to 20% return against our current market capitalization. Total common shares outstanding ended the quarter at 27.8 million, up slightly from 27.7 million last quarter as a result of vesting share grants. Operator, we will now take questions.

[Operator Instructions] Our first question is from Tyler Brown with Raymond James.

Brad, just some clarification just real quick. So you said revenues up 10% to 12% for the full year. Brad, is that on a $389 million pro forma base? Basically, is it about a little over $430 million for -- using the midpoint for 2025?

Yes. It's off of the $388.8 million.

$388.8 million. Okay. Perfect. And then flattish OR, is that what you said, Rick, sequentially.

Yes.

Into Q4. Okay. Okay. Perfect. And then I was hoping, could we get a quick update on where we are on systems. I think that you guys had made the full conversion on the accounting system, but are we fully transitioned on the TMS across all the 7 opcos?

Yes, we are.

You are. And then how is that unified operating platform? Can you talk about how that visibility is helping with those sister hauls? I think you said it was 11% of revenue, up from 9%. But just big picture, Amy, I mean, where can that number go longer term?

We see that number continuing to rise. In the early stages, we're using that largely as a proxy for filling empty miles. But as our assets become more fluid and flexible across the network, I would expect that sister haul volume to rise, whether it's representing filling empty miles or not. So that the additional visibility in the system is very helpful to being able to act more quickly and there's opportunity for additional technology overlay for dispatch optimization and some of those capabilities as we look forward.

Okay. And then just real quick here. Just -- sorry, just a couple of other ones. But just, Rick, you mentioned last quarter that there were a number of OEM contracts that have been -- that were coming up this quarter. I'm just curious how you fared in those RFPs.

Yes, go ahead, Amy.

Yes. We still have a number of OEM contracts that are awaiting awards and sort of in the process of being resolved. We've not made any results that are material to overall revenues, and we commit to share anything that is of a materiality threshold. There is, as we've shared with pricing, we will work to retain profitable volume only to the point that it makes sense for our portfolio. So we have had some experience of letting some volume go to price points that are not attractive to us. We are, however, continuing to pick up some new lanes and new opportunities in some of these contracts, but they've been smaller more recently.

Okay. And just my last one, I promise. But -- and I know '26 is a ways away. But -- there are a few moving pieces that roll into '26. I mean I think you've got some old Jack Cooper business that kind of is still incremental. Brothers, I believe, is incremental. But Brad, is there a reason that assuming that SAAR is flat into '26 that revenue couldn't be up maybe high single digits. Is that a crazy assumption?

I don't think that's a crazy assumption, Tyler. We will pick up, as you point out, some incremental revenue for a full year of Brothers. And so that helps. It's -- we're still in the process of doing our 2026 plan, and we'll give you some more specifics on our next call. But I think that's not a crazy assumption.

Tyler, I would just add to that while, again, we're still in our '26 planning progress, we do -- we have kind of established a target to improve our operating ratio by at least 150 basis points in 2026 over the 2025 results.

Our next question comes from Ryan Merkel with William Blair.

I wanted to ask on October just to get a little more specific what was the year-over-year increase in revenue for October? And then just clarify, it sounded like you thought November and December, the growth could pick up a bit from October. Did I hear that right?

Yes. So for October, I'll give you the pieces in there. We had Brothers this year, we had the incremental market share gains this year, neither of which were in the comps from last year. And then on just the base market, I would say it was slightly improved from where October was last year. In terms of November and December, typically, seasonally, there is an end of year purchase pattern and pushing up inventory to clear out the 2025 model and bring in 2026 inventory. We're seeing a bit of sluggishness in the current market as it stands in early November. So we are still, as we said, hopeful that we see that uptick seasonally, but we are not experiencing it in the current market.

Got it. Okay. And then the ARPU was still down year-over-year for the company deliveries, so -- and then in the press release, you mentioned there's still excess supply. I realize that's a near-term problem. But how should we think about pricing in the next couple of quarters? Do you think we've bottomed here? Or might there still be a little more pressure?

So I'll take that in 2 ways, Ryan. One is how we are experiencing pricing on bids that are coming up for renewal. The other is really the RPU trends quarter-to-quarter and how that may change. As we shared pricing dynamics on new contracts are pretty weak right now. We would like to see a more constructive market for pricing with supply and demand a bit more imbalanced. From an RPU perspective, though, we would expect largely stable RPU. The big changes that we saw in some of the quarters previously, we're cycling the declines in the dedicated product cycling the declines in the spot market. So those 2 things had a really material impact on RPU year-over-year. We are stabilizing now, and you should expect to see more consistent RPU year-over-year just with any impact from mix change within the portfolio.

Got it. Okay. That's helpful. And I'll slip in one more. Rick, you said that the dealer inventory was healthy so should I take that to mean that they're fairly lean levels, you feel comfortable? And I realize it's a moving target, but is that something you feel good about as you enter 4Q?

Yes. Yes, we don't perceive the inventories to be in excess. SAAR has been strong.

Our next question comes from Alex Paris with Barrington Research.

Congrats on a strong quarter. Just to be clear on the Q4 guide, so to speak. You said 10% to 12% Brad, I think, for the full year, that would suggest Q4 revenues of somewhere between $103 million and $110 million or so. Still strong growth year-over-year, like the -- maybe not quite as high as Q3 year-over-year. But I'm wondering where is the strength coming from? I think last quarter, you talked about several buckets. The acquisitions of Brothers, Jack Cooper market share gains, organic growth, how would you allocate the importance of those buckets to the revenue growth of 25% in the quarter just ended and the unit growth of 21%?

Well, I think it's not unlike the second quarter. We still are having the same benefit, roughly the same amount of revenue from both of those 2 components, the Brothers and the new GM revenue. And with revenue essentially flat quarter-over-quarter, I think you could apply the same metrics.

Got you. And then just a follow-up question on free cash flow. You said it was adjusted EBITDA minus CapEx, $11.5 million in the quarter. And I think you said on the last call, $30 million to $40 million of free cash flow for the full year. Is that still a reasonable target? Or it seems like it's running a little hotter than that right now.

It is. If you -- I was using kind of a run rate last quarter, certainly annualizing this one gets you a little -- get you a higher, probably closer to $35 million.

Okay. And then on that basis, by far, you generate on a free cash flow yield basis more than any other company in the group, whether truckload or LTL. And a free cash flow yield approaching 20% when the next closest is 5% or 6%, which would support a significantly higher stock price. And that's enabling you to reduce debt at a pretty aggressive rate. Is it just a matter of you're a new company, you're a small company? What's it going to take to get the market to recognize this free cash flow characteristic.

Well, listen, when we talk to a lot of investors, and I think most of them appreciate the fact that the business is kind of an outsized cash flow return. When we start working off some of these other depreciation levels, amortization and that starts coming through as GAAP operating earnings, maybe that wakes other people up. But I don't know, Alex, it's -- we're as flummoxed by it as you are.

And then I guess last one, m&A pipeline. It seems that you have the 7 companies fully integrated. Is there more cost takeout potential there? And then what does the new M&A pipeline look like? Are you still pretty active there, particularly with this free cash flow generation.

Yes. I mean we're always pursuing incremental efficiencies. And I think we've demonstrated or we're in the process of demonstrating kind of a cadence of regular improvements, validating our execution and our strategy and that strategy does include a combination of organic growth opportunities, supplemented by selective tuck-in acquisitions. And we have a pretty robust pipeline of opportunities. And obviously, with our strong cash flow, we've got the capability to fund that. And we would expect to continue on our target of 1 to 2 tuck-in type acquisitions a year as we proceed in 2026.

Our last question comes from the line of Bruce Chan with Stifel.

This is Andrew Cox on for Bruce. Building upon the cash generation discussion prior. Just kind of wanted to talk a little bit about CapEx and cash flow expectations moving through the end of the year and into 2025. You guys said in the prepared remarks that you do expect CapEx to move higher after this year and really appreciate the full year reiteration of the CapEx guide. But kind of wanted to get an expectation of your CapEx into 2026 and beyond. Is -- are there any additional CapEx needs to meet higher volumes if they should come sometime next year. And how do you plan to deploy free cash flow beyond CapEx next year?

Thanks, Andrew. I think, look, CapEx at $10 million is probably kind of at the bottom of the range. But having said that, we've got fleet capacity that could support this kind of a market absent big gains in contract share. And so we'll have to kind of adjust as we go through the year. But the comment in the prepared remarks was just that we do expect that as our fleet grows, we intend to keep the average age at around 5 years. And that's just going to mean that CapEx by definition, has to go up a little bit.

And so maybe $15 million a year might be more normal or even as high as $20 million as we continue to grow. But with the cash flow generation that we've been talking about, that still yields a mid- to high teens return on market cap, at least at today's market cap. So I wouldn't expect -- we're still working on the CapEx plan along with our full budget for 2026, but I wouldn't expect a much higher commitment to CapEx during '26 unless as again, the market changes, and we see big needs for addressing some contract gains.

Okay. That's really helpful. Every trucking executive team this earnings season has been asked a question about the changes to whether it be non-domiciled CDLs or the enforcement of the English language proficiency. Just kind of wanted to see if you guys have any sense on the impact of maybe these supply changes could have on the auto hauler capacity. Anything on the regulatory side? We would expect that it would have much less impact than dry van, but just any insight you guys have to help us try to model that in would be really helpful.

Sure. So I mean, of course, we saw today that the interim rule was stayed for now on the non-domiciled CDL front. So we will continue to watch and see how that plays out through the appellate process. But assuming that interim rule does go forward in something substantially similar to what has been proposed, we do think there's a pretty material impact on trucking overall. It is not a material impact that we would expect to Proficient per se as our company's driver population is not impacted in a large way. But we would think for the auto hauler segment, that would hit more closely for smaller carriers potentially sub haulers and there are some niche players in the industry that have a driver composition that it's more likely heavily and/or majority impacted by the non-domiciled CDL interim rule proposed. It is certainly more of an impact on that front than the English language proficiency front.

Okay. Amy, that's really helpful as well. If I can sneak one more in here. Just kind of double-clicking on the mix benefit or just benefit at all that you had from the potential pull forward of EV demand prior to the expiration of the tax credits this quarter. Maybe it might be best if you guys have this offhand or if you guys can help us understand like what percentage of the units in 3Q were electric vehicles, maybe compare that to the year prior or the quarter prior. Just trying to understand what sort of impact this pull forward may have had on the quarterly results.

Yes. So I'll come at that in a slightly different way. We don't actually track our volume on the basis of internal combustion engine versus EV vehicles. But the impact to us is that the EV vehicles are a heavier weight so you can get fewer of them on a given truck. So where you'd expect to see some impact is potentially a lower load factor per truck, but that's often and we seek to ensure compensation around EVs so that the lower load factor is offset in higher revenue on those units.

Right. Okay. I just -- I mean should we believe that the revenue per unit impact this quarter, was it at all impacted by mix changes to the EV side?

I don't think so.

Minimally.

Yes. Minimally.

We have a follow-up from the line of Tyler Brown with Raymond James.

I appreciate you guys actually answered my follow-up on non-domiciled. That was very helpful, Amy. But since I've got you, real quick, I think, Brad, you mentioned last quarter that 3 of the 7 opcos were running 90 or better. Can you chalk up 1 or 2 more this quarter? And then on the opcos, the other ones that are not running at 90 or better, they've got to be running just mathematically, call it, 100 or more. And if you were to build the bridge between where they're operating and some of the 90 or better opcos, what are the kind of 2 or 3 key things that really differentiate there on the P&L?

So several things there, Tyler. One, the count on those at 90 or better hasn't really changed this quarter versus last quarter. But I would say more generally that there has been a pretty broad improvement across almost all of the opcos, and that has come on constant revenue. So we are seeing incremental gains even if small, but on flat revenue. In terms of your observation that others would have to be over 100, we don't have that in a pervasive way, but we've got a couple of opcos with -- that are experiencing lower volumes that are at or a little above 100, and that is mostly a revenue issue.

We have dealt with a lot of the cost issues through this consolidation effort and the reorganization that we talked about. And so I think that will help in the go forward even for those entities and then pushing some extra revenue through whether that's wins on contracts or whatever it may be, we will take care of the difference. That's the path really.

Okay. So it's not a fundamental cost structure issue. It sounds like it's a little bit of price, a little bit of volume would go a long way.

Yes.

Yes.

Okay. And then did you give the spot mix? That's my last question.

We -- I don't know that we did, but similar to last quarter, it was at or a little below 3%.

And with that, ladies and gentlemen, we conclude our Q&A session. I will turn it back to Rick O'Dell for final comments.

Well, thank you for your interest in Proficient Auto Logistics. We're pleased with the progress that we've made in the first 18 months of our endeavor as a public entity. And most importantly, never satisfied with the absolute results and clearly optimistic about our ability to continue to execute and progress our operating margins. Thank you again for your interest.

And ladies and gentlemen, this concludes our conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Proficient Auto Logistics Second Quarter Financial Information Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Wright, Chief Financial Officer. Please go ahead.

Good afternoon, everyone. I'm Brad Wright, Chief Financial Officer of Proficient Auto Logistics. Thank you for joining us on our Second Quarter 2025 Earnings Call. Under SEC rules, our Form 10-Q covering the 3- and 6-month periods ending June 30, 2025 and 2024, will include financial statements for both the predecessor accounting entity, Proficient Auto Transport and the successor entity, Proficient Auto Logistics, Inc. We are not required to provide and the Form 10-Q will not contain pro forma financial data for the combined companies. However, our earnings release provided comparative summary combined financial information for the second quarter 2025 to the 3-month periods ending March 31, 2025, and June 30, 2024 for the combined companies.

Our earnings release can be found under the Investor Relations section of our website at proficientautogistics.com. Our 10-Q when filed can also be found under the Investor Relations section of our website. During this call, we'll be discussing certain forward-looking information. This information is based on our expectations and is not a guarantee of future performance. I encourage you to review the cautionary statement in our earnings release describing factors that could cause actual results to differ from those expressed by the forward-looking statements. Further information can be found in our SEC filings.

During this call, we may also refer to non-GAAP measures that include adjusted operating income, adjusted operating ratio, EBITDA and adjusted EBITDA. Please refer to the portions of our earnings release that provide reconciliations of those profitability measures to GAAP measures such as operating earnings and earnings before income taxes.

Joining me on today's call are Rick O'Dell, Proficient's Chairman and Chief Executive Officer; and Amy Rice, our President and Chief Operating Officer. We will provide a company update as well as an overview of the company's combined results for the second quarter. After our prepared remarks, we'll open the call to questions. During Q&A, please limit yourself to one question plus one follow-up. Then you can get back into the queue if you have additional questions.

Now I would like to introduce Rick O'Dell, who will provide the company update.

Thank you, Brad, and good afternoon, everyone. I'll start with an overview of our operations during the second quarter and some trends that provide insight into our expectations for the back half of 2025. First, as it relates to the second quarter, as we discussed in our last earnings call, the market strength we experienced at the end of Q1 continued into April, producing a record revenue month for the company, with revenue and unit volumes in the month, up 13% and 25%, respectively, year-over-year. While the market decelerated in May and June with auto SAAR slowing to an average around 15.5 million units, and our expectations had been for sequentially decelerating performance in each month of the quarter, our unit volumes were bolstered by market share gains and the Brothers acquisition such that June did not decelerate from May and revenue performance finished above our expectations.

For the combined May and June months, volume finished up 24% year-over-year, while revenue was up nearly 14% versus the same period of 2024. The combined results produced a record revenue quarter for the company and improved profitability sequentially. Notably, the adjusted operating income for the second quarter was greater than the prior 3 quarters combined, demonstrating operational improvements and strategic execution in what has been an uncertain environment.

July auto sales and deliveries were stronger than expected, which was reflected in July SAAR of $16.4 million as compared to industry forecasted expectations that were similar to what we saw in May and June here. While there is typically a seasonal aspect to July in which many OEMs elect to close plants for 1 or 2 weeks, many domestic plants have continued to operate to meet the higher demand for U.S.-based production. We're again pleased with PAL's July volume and revenue performance relative to expected levels. SAAR forecast remain cautious for the balance of the year. However, the economic impacts of tariffs and policy changes both to our customers and the ultimate consumer are becoming clearer with the announcement of trade agreements. We view both the removal of policy uncertainty and averted worst-case high cost outcomes as a relatively positive for the near term go forward.

Prior OEM shipping holds and delays in bid processes have returned to a more normal cadence with tariff policy resolution, which provides a more stable environment for us to go to market and benefits our ability to execute our strategy and achieve further meaningful margins improvements. Additionally, favorable tax policy for qualifying car loan interest deductions, a higher likelihood of interest rate reductions over the balance of the year, healthy dealer inventory levels at an average age above historical norms for replacement represent factors that should support stable consumer demand. Proficient remains focused on our long-term objectives, including continued increases in our market share and the effective integration of our merged operating companies, driving improved efficiency and profitability. From a commercial perspective, there are several OEMs in the midst of scheduled regional or national bid processes with a meaningful amount of new vehicle volume to be decision across the OEM landscape over the remainder of this year, giving line of sight to revenue levels that will allow for ongoing margin expansion efforts.

In the quarter, we successfully retained a number of important OEM contracts at flat to up pricing levels. The precise impact on the revenue of these additions is dependent on the volume ultimately generated by the respective OEMs. But our coverage network and quality service is being further validated in the marketplace. While automotive OEMs face cost pressure as widely reported in their Q2 earnings releases, PAL is an important component in the transportation and supply chain, and we will continue to partner with customers to serve their needs with industry-leading quality.

Our commitment to service excellence was recently recognized by Toyota Logistics services with their 2025 quality award for finished vehicle logistics. I'd like to thank our team and channel partners for their efforts in achieving this award even as we continue to integrate our companies and further strengthen our capabilities.

The integration of Brothers acquired at the beginning of Q2 has gone smoothly and is now largely complete with seamless service for our customers throughout. All operating companies, including Brothers, are now using our common accounting platform and transportation management system, providing key visibility and actionable insights into our customer base, operating efficiency opportunities and profitability.

In the second quarter, we successfully shifted a higher proportion of our volume onto company trucks, which will continue to aid profitability, as the majority of fixed costs support our asset-based business. Sisters haul ir load sharing sharing between the merged companies grew to 9% of revenue in the quarter from 8% in the prior quarter reducing empty miles and further improving our asset utilization. As we look ahead, we have more work to do to control costs in a base market that continues to be weaker than expected coming into 2025, will further optimize new business added to the network as we move beyond the startup phase. While we evaluate our business on a composite and regional basis, we do have 3 of our 7 operating companies already operating at a 90% adjusted OR or better. We're in the process of advancing targeted cost savings initiatives and operating efficiencies that will bring the blended operation to that level over time. while preserving the ability to scale up via share gains and acquisitions.

I'll now turn it back to Brad to cover key financial highlights.

Thank you, Rick. I'll start with a few summary statistics. Prior year comparisons reflect the combined results of the 5 founding companies, but do not include amounts for ATG or Brothers, which were acquired later. Operating revenue of $115.5 million in the second quarter was up 21.4% from last quarter and 8.4% higher than the second quarter of last year. Units delivered of 631,426 represented a 28% increase compared to last quarter and a 24% increase from the second quarter of 2024.

Revenue per unit excluding fuel surcharge, was approximately $171, down approximately 3% from the previous quarter due to customer mix and down approximately 13% from Q2 of last year. reflecting the reduced proportion of spot and dedicated traffic in the quarters beginning in Q3 of last year and after. Company deliveries were 37% of revenue in the quarter, up from 35% last quarter and 32% in the second quarter of last year, consistent with our stated objective to increase the volume we deliver on company assets.

Our OEM contract business generated approximately 93% of total transportation revenue in the quarter, up from 91% last quarter. Our dedicated fleet service generated revenue of $3.8 million this quarter compared to $4.3 million during the first quarter and $7.3 million in the second quarter of 2024. The dedicated fleet business should continue to generate approximately $4 million per quarter in the second half of this year. Revenue from spot opportunities during the quarter comprised only 2.7% of total revenue, continuing a trend that has persisted now for the last 4 quarters.

We expect spot and secondary revenue to remain a relatively small portion of our overall business through the second half of this year. The trend toward a higher percentage of deliveries on company assets continued during the quarter through a combination of moving available assets to geographic regions with higher demand and the addition of Brothers auto transport at the beginning of the second quarter, which operates predominantly through company deliveries.

Utilization improvement was evidenced by a 7% increase in average weekly revenue per company driver in the second quarter compared to the first quarter of 2025. The company had approximately $13.6 million in cash and equivalents on June 30, '25, up from $10.9 million at the end of last quarter. Aggregate debt balances at quarter end were approximately $90.2 million with net debt of $76.6 million. The increase from last quarter reflects our draw on the remainder of our term debt facility when the Brothers acquisitions have closed April 1. Though we did use free cash flow to reduce the balance on our revolving credit line later in the quarter.

Our expected equipment CapEx for the full year 2025 is approximately $10 million most of which was incurred during the first half of the year. Our current annualized run rate for free cash flow from operations will be between $30 million and $35 million after CapEx and which would represent an approximately 20% cash return on our current market cap. Additional CapEx spending could be required in the event of large share gains awarded in the back half of the year, which would, of course, come with commensurate profitable revenue. The strength of our balance sheet, which will allow us to invest with growth is a differentiator in our industry. Total common shares outstanding ended the quarter that $27.7 million, up from $27.1 million at the end of last quarter. The increased share count was a combined result of some shares issued in the Brothers acquisition investing of RSU grants made in connection with our IPO in May of 2024.

Looking to next quarter, the third fiscal quarter is typically characterized by seasonal softness despite a stronger July than originally expected, August is showing the seasonality expected -- the seasonally expected slowdown in revenue, and we expect a sequential revenue decline of between 2% and 5% compared to the quarter just ended. We expect to maintain adjusted operating ratio even on this lower projected revenue. For the full year, we now expect top line growth year-over-year between 5% and 10%.

Operator, we'll now take questions.

[Operator Instructions]

Our first question comes from the line of Bruce Chan with Stifel.

Looks like a really good fundamental execution this quarter despite the still soft auto market. And I think you alluded to this, Rick, in your prepared remarks, it's about controlling costs in the base market. I guess my question here is how much cost have you taken out? How much more can you take out kind of exclusive of the market? And what levers do you have to pull? I know you talked about the sister loads and the opportunity there. You talked about the company truck in sourcing and the unified tech platform. But maybe kind of detail around how much you expect to be able to pull out even if things kind of remain soft here.

Yes, we have some incremental opportunities that are targeted and quite frankly, in process. And they're really focused around procurement, consolidation of facilities, some personnel synergies and then, of course, empty miles over time as well.

It's super helpful. I imagine that sets you up pretty well for when the market does turn as does Jack Cooper. So maybe just for my follow-up, now that you have a full quarter close to a full quarter of that Jack Cooper business under your belt, is your shipping still a little bit maybe -- how do you think about what these volumes could mean for you and some of these cost savings could mean for you, especially as the market normalizes?

We think there's still meaningful opportunity for margin improvements. And again, we have a combination of share gains from organic growth as well as cost reduction opportunities and synergies from our empty mile initiative. And I guess I would just comment with 3 of our operating companies currently operating at much better margins. The markets, the regional markets where there wasn't a concentration of port type business and imported traffic, we saw more stability in the marketplace and our execution and operating margins is much better there. And I think that validates the the magnitude of the opportunity to still be able to operate in the 80s.

So there's a numner of comments to your question there we entered 2 new markets this year, which had some start-up costs and some field overhead to go into new markets, we have the opportunity to continue optimizing in those new markets as we now build around those new sort of anchor points. And we'll pursue business that tie into those new markets that will continue to improve their efficiency and their profitability over time so that we can get more incremental margins on incremental business that come into those new markets as well.

And to the extent we could grow business in our legacy markets, we won't be opening new facilities and hiring new supervisors will be able to leverage the resources that we have in our network.

Okay. Yes, that makes a lot of sense. And then just to put a finer point on that, and then I'll turn it over. Around the roadshow, you all had talked about, I think, a kind of target midterm OR number somewhere in the high 80s. Obviously, there have been some developments in the OEM auto market that probably pushed those out. But if I were to think about a midterm number, however long it takes for the market to normalize and later on some of these additional cost saves and some of these additional levers that you just laid out, do you think that you can now be getting a number better than that?

No. I think our long-term or our midterm objective remains to get to a 90% or better OR to kind of move into the high 80s. And we need to be more aggressive and assertive near term on cost control actions to start that step down in light of the market we're operating in.

Our next question comes from the line of Tyler Brown with Raymond James.

Maybe Brad, Amy, just the volume looked really good, but I am curious about the sequential deterioration in the yields per Venn. Can you just kind of parse out how much of that was core rate weakness versus maybe Brothers because I have a feeling you Brothers put some pressure on ARPU. And then should we think about yields hanging around here for the rest of the year?

Yes. I wouldn't read it that way, Tyler. It really is just portfolio mix, of which customers moved more traffic in the quarter. And if a given customer has a more locally concentrated traffic base, they would have a lower RPU, but maybe just as profitable versus a different customer that may have a higher average length of haul. So we did see just a shift in the top 10 customers in the quarter and the proportion of who was moving. So it's a customer mix issue.

Okay. So length of haul can have a huge influence there. Okay. That's helpful. And then -- so Rick, I want to unpack the bid market. So it sounds like it's strong. It's improving maybe, but I just want to be clear. So the majority of those OEM contracts that you're talking about, that is volume that you currently don't move. So that sounds like a possible market share opportunity. And I don't know if this is the right way to look at it, but given everything just kind of the craziness that's been going on out there, has the bid market been not so normal and maybe there's going to be more go to bid in the market? I'm just curious about what's going on out there? Sorry, that's probably not a very good question, but hopefully, you can get it what I'm getting at.

Yes, I'll take that one. So in a given bid, we typically have both incumbent traffic that we're seeking to renew as well as the opportunity to bid on new traffic. And what is changing a little bit is the degree to which OEMs are either gravitating towards their incumbent carriers for the bid activity versus more open mindedness to share shifts and new carriers in their bid processes. And the current environment is one where our OEM partners are looking to optimize transportation supply chain against a changing sort of production plan, and they're looking to optimize cost and service.

So while we have got to defend on the incumbent side, you're right that there is a lot of market share potential opportunity to be gained, and we're going after that business. So we do see opportunity in this market, even though there is pressure in the OEM space.

I would make one further comment on that just to express confidence in our analytical ability to mine those bid opportunities for network business is a fit for us and will meet our contribution margins.

Okay. Sounds like good opportunity out there. We'll wait and see. Brad, really quickly, if I can squeeze one in. So I just want to be clear on the free cash flow comment. So you're saying that you think that today, based on current EBITDA levels, you could generate somewhere around $40 million to $45 million of operating cash flow, right? I mean you're probably a limited cash taxpayer and a limited cash interest payer. So that's how kind of how we get from EBITDA to operating cash.

Yes. So that was pre CapEx. But so when I take the $10 million out, that's where you get to that number, but you're right.

Our next question comes from the line of Ryan Merkel with William Blair.

I wanted to follow up on the price question. So I have it down kind of 16% for price in Q2. Can you help us with what you're thinking for 3Q and 4Q? Are we going to stay in this range? Or do you think it might get a little better from here?

So I think on a relative basis, if you're looking year-over-year, we should start to see that delta compress. And the reason being, you'll remember when we reported our third quarter earnings last year, that was really when we started to see the softness in the spot market, and the dedicated business came down pretty precipitously and that had a large impact on RPU. We've seen stabilizing since then. And so I think you'll continue to see the RPU stabilize.

Got it. Okay. And then yes, the unit growth, I think it was up 20% year-over-year. That's a pretty good number. I mean, you must be taking a lot of market share. Can you put that plus type unit growth and some context for us?

Yes. So there are really 3 buckets that comprise our volume growth in the quarter, a large portion of it is Brothers. Brothers has performed well in its first quarter in the portfolio, roughly in line with and/or slightly ahead of our expectations. So we're really pleased to have to have them as part of the footprint and the team. The second large component is a full quarter of the new market share gains. And we've continued to see performance there that's in line with the expectations that we guided.

And then the third component there to somewhat of a lesser extent would just be organic and/or share growth in the base markets. And that's where we'd like to see additional growth coming from the market. We've not seen as much as we were hoping for coming into 2025, but there is some lift there, particularly quarter-over-quarter.

That's helpful. Okay. And then just to clean up here. Did you say that you expect the OR in 3Q to be in the same range as 2Q?

Yes.

[Operator Instructions]

Our next question is the follow-up from Bruce Chan with Stifel.

Brad, you talked about the cash position being pretty strong. Balance sheet is within a range of your target, you've had some nice incremental deals in the last year. I know you mentioned the potential for some CapEx acceleration later this year if new bids pan out. But maybe you could just kind of give us an update on how you're thinking about additional M&A philosophically. Is that something that you're still keeping your eye on?

Well, I think as we've said in the past, I mean, we'll always have conversations ongoing and that's something that will be kind of a constant, but I don't know that I would say there's anything imminent. We're looking at, basically, the cash flow is coming from just organic operations. CapEx would only happen if we had big bid gains. And so you're going to see debt balances coming down over second half of the year. And there's nothing in the immediate future that would impact that.

But we do -- we are continuing to mine for the right opportunities in the pipeline.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to Rick O'Dell for closing remarks.

All right. Again, we're pleased with the -- certainly, with the revenue growth and the market share gains that we were able to achieve and obviously some improving execution. We're not satisfied with the cost structure that we currently have in the volatile market, and we're continuing to advance those initiatives aggressively, continue to improve margins kind of regardless of the external environment. Thanks for your interest.

This concludes today's conference call. Thank you for participation. You may now disconnect.

Hello.