Arcbest Corp: Form 10-Q for the period ended Mar 31, 2025

General

ArcBest Corporation™ (together with its subsidiaries, the “Company,” “ArcBest®,” “we,” “us,” and “our”) is a multibillion-dollar integrated logistics company that leverages technology and a full suite of solutions to meet our customers’ supply chain needs. Our operations are conducted through two reportable operating segments: Asset-Based, which consists of ABF Freight System, Inc. and certain other subsidiaries (“ABF Freight”); and Asset-Light, which includes MoLo Solutions, LLC (“MoLo”), Panther Premium Logistics®, and certain other subsidiaries. References to the Company, including “we,” “us,” and “our,” in this Quarterly Report on Form 10-Q, are primarily to the Company and its subsidiaries on a consolidated basis.

On February 28, 2023, the Company sold FleetNet America, Inc. (“FleetNet”), a wholly owned subsidiary of the Company. Following the sale, FleetNet® was reported as discontinued operations. As such, historical results of FleetNet have been excluded from both continuing operations and segment results for all periods presented. Unless otherwise indicated, all amounts in this Quarterly Report on Form 10-Q refer to continuing operations, including comparisons to the prior year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided to assist readers in understanding our financial performance during the periods presented and significant trends which may impact our future performance, including the principal factors affecting our results of operations, liquidity and capital resources, and critical accounting policies. This discussion should be read in conjunction with the accompanying quarterly unaudited consolidated financial statements and the related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2024. Our 2024 Annual Report on Form 10-K includes additional information about significant accounting policies, practices, and the transactions that underlie our financial results, as well as a detailed discussion of the most significant risks and uncertainties to which our financial and operating results are subject.

Results of Operations

Consolidated Results

The following table reflects the Company’s consolidated results, including segment revenues and operating income (loss) from continuing operations:

(in thousands, except per share data)

(1) The 2024 period includes the reversal of an employee-related contingent liability that expired one year after the sale of FleetNet.

(2) Earnings per common share is calculated in total and may not equal the sum of earnings per common share from continuing operations and discontinued operations due to rounding.

Our consolidated revenues decreased 6.7% for the three months ended March 31, 2025, compared to the same prior-year period. The revenue decline is primarily attributable to lower market rates and shipment levels for our Asset-Light shipping and logistics services in a soft market environment and a decrease in our Asset-Based daily tonnage levels. The decrease in tonnage levels is primarily due to lower weight per shipment and fewer daily shipments compared to the prior-year period. The year-over-year decrease in consolidated revenues for the three months ended March 31, 2025 reflects a decrease in our Asset-Based revenues of 3.7% and a decrease in our Asset-Light revenues of 10.2%. The elimination of revenues reported in the “Other and eliminations” line of consolidated revenues increased 12.2% for the three months ended March 31, 2025, compared to the same period of 2024, reflecting year-over-year changes in intersegment business levels among our operating segments.

Our Asset-Based revenue decline reflects a decrease in tonnage per day for the three months ended March 31, 2025, compared to the same period of 2024, partially offset by an increase in billed revenue per hundredweight, including fuel surcharges. The decrease in tonnage per day is a result of a softer market environment driven in part by a weaker manufacturing sector. The increase in total billed revenue per hundredweight, including fuel surcharges, was driven by lower weight per shipment, a general rate increase implemented in third quarter 2024, increases to deferred pricing agreements, and fewer volume-sized shipments that exceed standard LTL dimensions but do not require a full truckload, partially offset by a decrease in fuel surcharge revenue associated with lower fuel prices.

The decrease in revenues of our Asset-Light segment for the three months ended March 31, 2025, compared to the same prior-year period, was impacted by a decline in revenue per shipment associated with soft market conditions, changes in business mix, and a decline in shipments per day versus the same prior-year period. Our Asset-Light segment generated approximately 36% and 37% of our total revenues before other revenues and intercompany eliminations for the three months ended March 31, 2025 and 2024, respectively.

Consolidated operating income declined year-over-year, reflecting the decrease in revenues, partially offset by a decrease in operating expenses from lower purchased transportation expense and lower employee costs in our Asset-Light segment. The year-over-year comparison of consolidated operating income was also impacted by the prior year increase in the contingent earnout consideration with no such remeasurement adjustment in the first quarter of 2025. Segment operating expenses are further described in the Asset-Based Segment Results and Asset-Light Segment Results sections of Results of Operations. In addition to the results of our operating segments, the year-over-year comparison of consolidated operating income was also impacted by items described in the following paragraphs.

Innovative technology costs impacted our consolidated operating results for the three months ended March 31, 2025 and 2024, including costs associated with Vaux™ – the innovative suite of hardware and software which modernizes and transforms how freight is loaded, unloaded, and transferred in warehouse and dock operations and combines autonomous mobile robot forklifts and reach trucks, intelligent software, and remote teleoperation capability to independently handle materials movement within warehouses, distribution centers, and manufacturing facilities, while being monitored by humans. Certain costs related to our growing number of Vaux pilot programs in customer test locations and other initiatives to optimize performance through technological innovation are reported in the “Other and eliminations” line of consolidated operating income. Our innovative technology costs decreased consolidated operating results by a total of $7.5 million (pre-tax), or $5.7 million (after-tax) and $0.25 per diluted share, for first quarter 2025, compared to $9.7 million (pre-tax), or $7.4 million (after-tax) and $0.31 per diluted share, for first quarter 2024.

The liability for contingent earnout consideration recorded for the MoLo® acquisition is evaluated at each quarterly reporting date, and any change in fair value as a result of the recurring assessments is recognized in operating income. Consolidated operating results were not impacted for first quarter 2025 as the fair value of the contingent earnout consideration liability was not adjusted from the December 31, 2024 balance of $2.7 million. For first quarter 2024, consolidated operating results decreased by $7.3 million (pre-tax), or $5.5 million (after-tax) and $0.23 per diluted share, due to quarterly remeasurement which resulted in a higher liability of the contingent earnout consideration. Remeasurement of the contingent earnout consideration is further described within Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

For the three months ended March 31, 2024, consolidated net loss and earnings per share were impacted by a one-time, noncash impairment charge of $28.7 million (pre-tax), or $21.6 million (after-tax) and $0.90 per diluted share, to write off our equity investment in Phantom Auto, a provider of human-centered remote operation software, which ceased operations during the first quarter of 2024. This charge was recognized in “Other, net” within “Other income (costs).” The write-off of our equity investment is further described within Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In addition to the above items, the year-over-year changes in consolidated net income (loss) and earnings per share were impacted by changes in the cash surrender value of variable life insurance policies, tax benefits from the vesting of share-based compensation awards, and other changes in the effective tax rate as described within the Income Taxes section of MD&A. A portion of our variable life insurance policies have investments, through separate accounts, in equity and fixed income securities and, therefore, are subject to market volatility. Changes in the cash surrender value of life insurance policies, which are reported below the operating income line in the consolidated statements of operations, decreased consolidated net income by $0.7 million, or $0.03 per diluted share, for the first quarter 2025, compared to an increase in net loss of $1.2 million, or $0.05 per diluted share, for the same prior-year period.

Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”)

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance. These measures provide meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of our operating performance, because it excludes amortization of acquired intangibles and software of the Asset-Light segment, changes in the fair value of contingent earnout consideration and our equity investment, which are significant expenses or gains resulting from strategic decisions or other factors rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Fourth Amended and Restated Credit Agreement (see Note F to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q). Other companies may calculate Adjusted EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Adjusted EBITDA should not be construed as a better measurement than operating income, net income (loss), or earnings per share, as determined under GAAP. The following table presents a reconciliation of Adjusted EBITDA to our net income (loss) from continuing operations, which is the most directly comparable GAAP measure for the periods presented.

Consolidated Adjusted EBITDA from Continuing Operations

(in thousands)

(1) Includes amortization of intangibles associated with acquired businesses.

(2) Represents change in fair value of the contingent earnout consideration recorded for the MoLo acquisition, as previously discussed.

(3) Represents a noncash impairment charge to write off our equity investment in Phantom Auto, as previously discussed.

Asset-Based Operations

Asset-Based Segment Overview

The Asset-Based segment consists of ABF Freight System, Inc., a wholly owned subsidiary of ArcBest Corporation, and certain other subsidiaries. Our Asset-Based segment provides freight transportation services through one of North America’s largest less-than-truckload (“LTL”) carriers. Our customers trust the LTL solutions ABF Freight has provided for over a century and rely on our unwavering commitment to quality, safety, and customer service to solve their transportation challenges through market disruptions and rapidly changing economic conditions. We are strategically investing in our Asset-Based operations to utilize technology to drive efficiency and productivity. We are also committed to our deepening customer relationships to navigate challenges now and in the future.

Our Asset-Based operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2024 Annual Report on

Form 10-K. See Note I to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of the Asset-Based segment and additional segment information, including revenues, operating expenses, and operating income for the three months ended March 31, 2025 and 2024.

The key indicators necessary to understand the operating results of our Asset-Based segment are described in the Asset-Based Segment Overview within the Asset-Based Operations section of Results of Operations in Item 7 (MD&A) of Part II of our 2024 Annual Report on Form 10-K. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Based segment. We quantify certain key indicators using key operating statistics, which are important measures in analyzing segment operating results from period to period.

Other companies within our industry may present different key performance indicators or operating statistics, or they may calculate their measures differently; therefore, our key performance indicators or operating statistics may not be comparable to similarly titled measures of other companies. Key performance indicators or operating statistics should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators or operating statistics should not be construed as better measurements of our results than operating income, operating cash flow, net income (loss), or earnings per share, as determined under GAAP.

As of March 2025, approximately 81% of our Asset-Based segment’s employees were covered under the ABF National Master Freight Agreement (“2023 ABF NMFA”), the collective bargaining agreement with the International Brotherhood of Teamsters (“IBT”), which will remain in effect through June 30, 2028. The terms of the 2023 ABF NMFA continue to provide some of the best wages and benefits in the industry to our contractual employees. The combined contractual wage and benefits top hourly rate is estimated to increase approximately 4.2% on a compounded annual basis over the term of the agreement, with potential profit-sharing bonuses representing additional costs under the 2023 ABF NMFA. The contractual wage rate under the 2023 ABF NMFA increased effective July 1, 2024, and the health, welfare, and pension benefit contribution rate increased effective, primarily on August 1, 2024, resulting in a combined contractual wage and benefits top hourly rate increase of approximately 2.7%.

Asset-Based Segment Results

The following table sets forth a summary of operating expenses and operating income as a percentage of revenue for the Asset-Based segment:

The following table provides a comparison of key operating statistics for the Asset-Based segment, as previously defined in the 2024 Form 10-K Asset-Based Segment Overview section:

(1) Workdays represent the number of operating days during the period after adjusting for holidays and weekends.

Asset-Based Revenues

Asset-Based segment revenues for the three months ended March 31, 2025, totaled $646.3 million, compared to $671.5 million, for the same period of 2024. The decrease in revenues, compared to the prior-year period, primarily reflects a decrease in tonnage per day and weight per shipment. Billed revenue decreased 2.7% on a per-day basis for the three months ended March 31, 2025 compared to the same period of 2024, primarily reflecting a 4.3% decrease in tonnage per day, partially offset by a 1.7% increase in billed revenue per hundredweight, including fuel surcharges. The number of workdays was fewer by half of a day in the first quarter of 2025, versus the first quarter of 2024.

The decrease in tonnage per day for the three months ended March 31, 2025, compared to the same prior-year period, is primarily related to the soft market environment related to prolonged weakness in industrial production, which has resulted in lower average weight per shipment levels, while daily shipment levels decreased 0.4% for the three months ended March 31, 2025, on a per-day basis, impacted by changes in the Asset-Based business mix, as well as the softer freight environment. Some higher-weight LTL shipments have also shifted to the truckload market with its continued low rates and excess capacity.

The increase in total billed revenue per hundredweight, including fuel surcharges, for the three months ended March 31, 2025, compared to the same period of 2024, was driven by lower weight per shipment, which generally increases revenue per hundredweight, and pricing increases, offset partially by lower fuel surcharge revenue associated with lower fuel prices, compared to the prior-year period. The pricing environment continues to be rational. Excluding the impact of fuel surcharges, the percentage increase in billed revenue per hundredweight was in the low- to mid-single digits for the three months ended March 31, 2025, compared to the same period of 2024. Prices on accounts subject to deferred pricing agreements and annually negotiated contracts which were renewed during the three months ended March 31, 2025, increased an average of 4.9%, compared to the same period of 2024. The Asset-Based segment implemented nominal general rate increases on its LTL base rate tariffs of 5.9% effective on September 9, 2024, although the rate changes vary by lane and shipment characteristics.

The Asset-Based segment’s average nominal fuel surcharge rate decreased by approximately 2 percentage points in the three-month period ended March 31, 2025, compared to the same period of 2024. During periods of changing diesel fuel prices, the fuel surcharge and associated direct diesel fuel costs also vary by differing degrees. Depending upon the rates of these changes and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. Whether fuel prices fluctuate or remain constant, operating results may be adversely affected if competitive pressures limit our ability to recover fuel surcharges. In periods of declining fuel prices, fuel surcharge percentages also decrease, which negatively impacts the total billed revenue per hundredweight measure and, consequently, revenues. The revenue decline may be disproportionate to the change in our fuel costs. The segment’s operating results will continue to be impacted by further changes in fuel prices and related fuel surcharges.

Asset-Based Operating Income

The Asset-Based segment generated operating income of $26.4 million for the three months ended March 31, 2025, compared to $53.5 million, for the same period of 2024. Compared to the prior-year period, the Asset-Based segment’s operating ratio was impacted by the decline in revenues while total operating expenses remained fairly consistent between periods.

Asset-Based Operating Expenses

Labor costs, which are reported in operating expenses as salaries, wages, and benefits, amounted to 53.2% of Asset-Based segment revenues for the three-month period ended March 31, 2025, compared to 51.4%, for the same period of 2024. Salaries, wages, and benefits decreased $0.9 million for the three months ended March 31, 2025, compared to the same period of 2024, primarily reflecting lower accruals of annual incentives in the first quarter of 2025, compared to the first quarter of 2024, due to a higher operating ratio. The decrease in labor costs were also impacted by improved productivity, as measured by shipments per DSY hour, a decrease in headcount to align with lower shipment levels, and by higher utilization of purchased transportation as discussed later in this section. These productivity improvements were partially offset by contract rate increases under the 2023 ABF NMFA, as previously discussed in the Asset-Based Revenues section, including a 2.5% wage rates increase on July 1, 2024, and a 2.9% health, welfare and benefits rates increase on August 1, 2024, for a blended increase of 2.7% in 2024.

The Asset-Based segment manages costs with shipment levels; however, a number of factors impact DSY productivity, including the effect of freight profile and mix changes, utilization of local delivery agents, and efficiency of personnel. Shipments per DSY hour improved for the first quarter of 2025, compared to the same period of 2024, primarily due to continued investments in technology and network and ongoing training and development at certain key locations as the ABF Freight process compliance team continues to reinforce operational best practices throughout the Asset-Based network. For the three months ended March 31, 2025, the year-over-year decrease in pounds per mile of 1.3% reflects lower weight per shipment and an increase in the average length of haul, partially offset by an improvement in linehaul productivity.

Insurance as a percentage of revenue increased 0.7 percentage point during the three months ended March 31, 2025, compared to the same period of 2024, primarily due to an increase in the severity of third-party casualty claims in recent years and higher retention limits.

Rents and purchased transportation as a percentage of revenue increased 0.6 percentage point for the three months ended March 31, 2025, compared to the same period of 2024, primarily due to increased rent expense for new service centers, and higher utilization of rail, partially offset by rail fuel surcharge cost per mile and focused reduction in the utilization of local delivery agents and linehaul purchased transportation. Rail miles increased approximately 5% for the three months ended March 31, 2025, compared to the same prior-year period.

Depreciation and amortization as a percentage of revenue increased 0.7 percentage point for the three months ended March 31, 2025, compared to the same period of 2024, primarily due to increases in revenue equipment depreciation expense per unit as a result of increased equipment costs and due to recent service center renovations.

Asset-Light Operations

Asset-Light Segment Overview

Our Asset-Light segment is a key component of our strategy to offer a single source of integrated logistics solutions, designed to satisfy customers’ complex supply chain needs and unique shipping requirements. We are focused on growing and making strategic investments in our Asset-Light segment that enhance our service offerings and strengthen our customer relationships. Throughout our operations, we are seeking opportunities to expand our revenues by deepening existing customer relationships, securing new customers, and adding capacity options for our customers.

As supply chains become more complex, most shippers use a mix of modes to keep their supply chains moving, and our managed transportation solutions seamlessly connect these modes to build better supply chains. We continue to develop our managed transportation solutions as part of our strategic efforts to cross-sell our service offerings and meet the demand for services that increase operational efficiencies, reduce costs, and provide better supply chain visibility. We expect to benefit from this and other strategic initiatives as we continue to deliver innovative solutions to customers.

Our Asset-Light operations are affected by general economic conditions, as well as several other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2024 Annual Report on Form 10-K. See Note I to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for descriptions of the Asset-Light segment and additional segment information, including revenues, operating expenses, and operating loss for the three months ended March 31, 2025 and 2024.

Key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Light segment. The key indicators necessary to understand our Asset-Light segment operating results are outlined in the Asset-Light Segment Overview within the Asset-Light Operations section of Results of Operations in Item 7 (MD&A) of Part II of our 2024 Annual Report on Form 10-K. We quantify certain key indicators using key operating statistics which are important measures in analyzing segment operating results from period to period.

Other companies within our industry may present different key performance indicators or they may calculate their key performance indicators differently; therefore, our key performance indicators may not be comparable to similarly titled measures of other companies. Key performance indicators should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators should not be construed as better measurements of our results than operating income, operating cash flow, net income (loss), or earnings per share, as determined under GAAP.

Asset-Light Segment Results

The following table sets forth a summary of operating expenses and operating loss as a percentage of revenue for the Asset-Light segment:

(1) Includes amortization of intangibles associated with acquired businesses.

(2) Represents the change in fair value of the contingent earnout consideration recorded for the MoLo acquisition, as further discussed in Asset-Light Operating Expenses below.

The following table provides a comparison of key operating statistics for the Asset-Light segment, as previously defined in the 2024 Form 10-K Asset-Light Segment Overview section:

Asset-Light Revenues

Asset-Light segment revenues decreased 10.2% to $356.0 million for the three months ended March 31, 2025, compared to $396.4 million for the same respective period of 2024. Current year results have been impacted by lower average revenue per shipment associated with a soft market environment, a higher mix of managed transportation business which has smaller shipment sizes and lower revenue per shipment metrics, and a decrease in average daily shipments due to a strategic reduction in less profitable truckload volumes, for the three months ended March 31, 2025. Many of our Asset-Light service lines achieved a year-over-year increase in market pricing during the three months ended March 31, 2025, compared to the same period 2024, despite the continued soft freight environment and excess capacity in the truckload market which continues to impact spot market rates resulting in an overall lower revenue per shipment for our Asset-Light segment.

Asset-Light Operating Loss

The Asset-Light segment operating loss totaled $4.4 million for the three months ended March 31, 2025, compared to an operating loss of $15.3 million for the same period of 2024. The year-over-year improvement in operating results reflects decreases in operating expenses, discussed in the paragraphs below, including the impact of the prior year increase in the contingent earnout consideration liability with no such quarterly remeasurement adjustment in first quarter 2025, partially offset by lower revenues.

Asset-Light Operating Expenses

Operating expenses decreased $51.2 million during the three months ended March 31, 2025, compared to the same prior-year period, and decreased as a percentage of revenue by 2.6 percentage points in the same respective period.

Purchased transportation costs as a percentage of revenue decreased 1.2 percentage points for the three months ended March 31, 2025, compared to the same prior-year period, reflecting a $39.5 million reduction of purchased transportation costs during the first quarter of 2025. Changes in market capacity impact the cost of purchased transportation and may not correspond to the timing of revisions to customer pricing and revenue per shipment. There can be no assurance that we will be able to secure prices from our customers that will allow us to maintain or improve our margins on the cost of sourcing carrier capacity.

Contingent earnout consideration, as previously described in the Consolidated Results section of Results of Operations, decreased as a percentage of revenue by 1.8 percentage points for the three months ended March 31, 2025, compared to the same prior-year period. The contingent earnout consideration is discussed further in Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Salaries, wages, and benefits decreased $4.8 million, and as a percentage of revenue, decreased 0.4 percentage point, for the three months ended March 31, 2025, compared to the same prior-year period, as the segment continued efforts to align resources with business levels. Shipments per employee per day improved 23.6% for the three months ended March 31, 2025, compared to the same prior-year period, as a result of these efforts, combined with changes in business mix and technology advancements from the digital roadmap initiatives.

Shared services as a percentage of revenue increased 0.9 percentage point for the three months ended March 31, 2025, compared to the same prior-year period, primarily reflecting the impact of lower revenues during the first quarter of 2025.

Asset-Light Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Asset-Light Adjusted EBITDA”)

We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP performance measures and ratios, such as Asset-Light Adjusted EBITDA, which is utilized for internal analysis, provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance and provides meaningful comparisons between current and prior period results, as well as important information regarding performance trends. The use of certain non-GAAP measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Asset-Light Adjusted EBITDA as a key measure of performance and for business planning. This measure is particularly meaningful for analysis of our Asset-Light segment, because it excludes amortization of acquired intangibles and software and changes in the fair value of contingent earnout consideration, which are significant expenses or gains resulting from strategic decisions or other factors rather than core daily operations. Management also believes Asset-Light Adjusted EBITDA to be relevant and useful information, as EBITDA is a standard measure commonly reported and widely used by analysts, investors, and others to measure financial performance of asset-light businesses and the ability to service debt obligations. Other companies may calculate adjusted EBITDA differently; therefore, our calculation of Asset-Light Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Asset-Light Adjusted EBITDA should not be construed as a better measurement than operating loss, as determined under GAAP.

Asset-Light Adjusted EBITDA

(in thousands)

(1) The calculation of Asset-Light Adjusted EBITDA as presented in this table begins with operating loss as the most directly comparable GAAP measure. Other income (costs), income taxes, and net income are reported at the consolidated level and not included in the operating segment financial information evaluated by management to make operating decisions. Consolidated Adjusted EBITDA is reconciled to consolidated net income (loss) from continuing operations in the Consolidated Results section of Results of Operations.

(2) Includes amortization of intangibles associated with acquired businesses. Amortization of acquired intangibles totaled $3.2 million for both the three-month periods ended March 31, 2025 and 2024 and is expected to total approximately $13.0 million for full-year 2025, consistent with 2024.

(3) Represents the change in fair value of the contingent earnout consideration recorded for the MoLo acquisition. The liability for contingent consideration is evaluated at each quarterly reporting date, and any change in fair value as a result of the recurring assessments is recognized in operating income. See Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current Economic Conditions

Recent trade and tariff policies have increased market uncertainty during the first quarter of 2025, as trade and tariff disputes have weighed heavily on business confidence. Geopolitical instability continues to negatively impact the global economy and threaten the availability of raw materials. Macroeconomic conditions continue to be challenged by higher interest rates, above target-level inflation, supply chain disruptions and a slowing labor market, contributing to stock market volatility. Recession risk is considered to have increased during the first quarter of 2025. Although the housing market, which is another near-term recession indicator, has stabilized, it remains at low levels. Dramatic swings in the 10‑year treasury yield due to elevated economic uncertainty have limited the predictability of near-term mortgage rates, one of the biggest factors influencing the housing market.

Although inflation is easing, the manufacturing sector, as measured by the Purchasing Managers’ Index (“PMI”), contracted in March 2025. The contraction follows two months of growth after a period of continuous contraction since November 2023, except for a brief expansion in March 2024. This trend has contributed to a decrease in freight volumes. In the first quarter of 2025, the economy contracted as measured by U.S. real gross domestic product (“real GDP”), with the first quarter 2025 annual real GDP rate decrease being primarily driven by decreased government spending.

Although we implemented a general rate increase and secured increases on deferred pricing agreements and annually negotiated contracts during the three months ended March 31, 2025, the Asset-Based segment has seen lower tonnage levels as a result of the soft market environment and lower shipment levels as a result of changes in the Asset-Based business mix. There can be no assurance that the economic environment, including the impact of interest rates on consumer demand, will be favorable for our freight services in future periods.

Given the uncertainties of current economic conditions, there can be no assurance that our estimates and assumptions regarding the pricing environment and economic conditions, which are made for purposes of impairment tests related to operating assets and deferred tax assets, will prove to be accurate. Extended periods of economic disruption and resulting declines in industrial production and manufacturing and consumer spending could negatively impact demand for our services and have an adverse effect on our results of operations, financial condition, and cash flows. The soft freight environment and increased mix of managed transportation shipments contributed to a year-over-year decline in revenue per shipment for our Asset-Light segment during the three months ended March 31, 2025, compared to the first quarter of 2024. There can be no assurance that we will be able to secure adequate prices from new business or from our existing customers to maintain or improve our operating results. Significant declines in our business levels or other changes in cash flow assumptions or other factors that negatively impact the fair value of the operations of our reporting units could result in impairment and a resulting noncash write-off of a significant portion of the goodwill and intangible assets of our Asset-Light segment, which would have an adverse effect on our financial condition and operating results.

Effects of Inflation

Inflation remains above the Federal Reserve’s long-term target inflation rate of 2%. Global supply chain volatility and labor and energy shortages, in addition to the impact of federal monetary policy, have elevated costs higher across a broad array of consumer goods. The consumer price index (“CPI”) increased 2.4%, before seasonal adjustment, year-over-year in March 2025 despite decreasing 0.1% from February 2025. While CPI has declined from the level reached in June 2022 due to market response to the Federal Reserve’s tighter monetary policy implemented in March 2022, recent CPI readings continue to indicate an ongoing challenge in achieving the Federal Reserve’s target inflation rate. Inflation is impacted by energy prices, including petroleum products; and insurance services, which have decreased in recent months. Inflation is also impacted by housing prices, which as previously noted remain elevated while showing signs of slowing growth. Most of our expenses are affected by inflation, which generally results in increased operating costs. As such, there can be no assurances of the potential impact of inflationary conditions on our business, including demand for our transportation services.

Generally, inflationary increases in labor and fuel costs as they relate to our Asset-Based operations have historically been mostly offset through price increases and fuel surcharges. In periods of increasing fuel prices, the effect of higher associated fuel surcharges on the overall price to the customer influences our ability to obtain increases in base freight rates. In addition, certain nonstandard arrangements with some of our customers have limited the amount of fuel surcharge recovered. Our Asset-Based segment’s ability to fully offset inflationary and contractual cost increases can be challenging during periods of recessionary and uncertain economic conditions.

Generally, inflationary increases in labor and operating costs related to our Asset-Light operations have historically been offset through price increases. The pricing environment, however, generally becomes more competitive during economic downturns, which may, as it has in the past, affect the ability to obtain price increases from customers both during and following such periods. The pricing environment remains competitive, and we believe that Asset-Light pricing has stabilized at the bottom of the truckload market cycle. The impact of excess capacity in the truckload market continued in early 2025, however, carriers are slowly exiting the market.

The market continues to adjust to the impact of supply chain disruptions and recent trade and tariff policy changes. The prices for our revenue equipment (tractors and trailers) used in our business operations have increased partly as a result of inflationary pressures, and will likely continue to be replaced at higher per-unit costs, which could result in higher depreciation charges on a per-unit basis. We consider these costs in setting our pricing policies, although the overall freight rate structure is governed by market forces. In addition to general effects of inflation, the motor carrier freight transportation industry faces rising costs related to insurance claims, compliance with government regulations on safety, equipment design and maintenance, driver utilization, emissions, and fuel economy.

Environmental and Legal Matters

We are subject to federal, state, and local environmental laws and regulations relating to, among other things: emissions control, transportation or handling of hazardous materials, underground and aboveground storage tanks, stormwater pollution prevention, contingency planning for spills of petroleum products, and disposal of waste oil. We may transport or arrange for the transportation of hazardous materials and explosives, and we operate in industrial areas where truck service centers and other industrial activities are located and where groundwater or other forms of environmental contamination could occur.

Physical effects from climate change, including more frequent and severe weather events, have the potential to adversely impact our business levels and employee working conditions, cause shipping delays or disruption to our operations, increase our operating costs, and cause damage to our property and equipment. Due to the uncertainty of these matters, we cannot estimate the impact of climate-related developments on our operations or financial condition at this time. These and other matters related to climate change and the related risks to our business are further discussed in Part I, Item 1 (Business) and Part I, Item 1A (Risk Factors) of our 2024 Annual Report on Form 10-K. We continue our commitment to advance sustainability issues that are critical to our business and our customers’ businesses by investing in innovative technologies, developing our employees, and enhancing our capabilities and services for customers.

We are involved in various legal actions, the majority of which arise in the ordinary course of business. We maintain liability insurance against certain risks arising out of the normal course of our business, subject to certain self-insured retention limits. We routinely establish and review the adequacy of reserves for estimated legal, environmental, and self-insurance exposures. While management believes that amounts accrued in the consolidated financial statements are adequate, estimates of these liabilities may change as circumstances develop. Considering amounts recorded, routine legal matters are not expected to have a material adverse effect on our financial condition, results of operations, or cash flows. See Note J to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q for further discussion of the legal matters in which we are currently involved.

Liquidity and Capital Resources

Our primary sources of liquidity are cash, cash equivalents and short-term investments; cash generated by continuing operations; and borrowing capacity under our revolving credit facility or our accounts receivable securitization program.

Cash Flow and Short-Term Investments

Components of cash and cash equivalents and short-term investments, which are further described in Note B to our consolidated financial statements included in Part I, Item 1 of the Quarterly Report on Form 10-Q, were as follows:

(in thousands)

Cash, cash equivalents and short-term investments decreased $58.5 million from December 31, 2024 to March 31, 2025, due to lower business levels from seasonal demand fluctuations in addition to the prolonged freight recession; the payment of expenses accrued at year-end, including wage-related incentives and previously disclosed legal settlements; continued efforts to return capital to shareholders through share repurchases and dividends; planned capital expenditures, net of financings; and the assumption of two lease agreements, which included lease buyout payments during the quarter.

Cash used in operating activities during the three months ended March 31, 2025 was $22.3 million, compared to $6.5 million of cash provided by operating activities in the same prior-year period. Changes in operating assets and liabilities, excluding income taxes, increased cash used in operating activities by $69.4 million during the three months ended March 31, 2025 and decreased cash provided by operating activities by $46.6 million during the same period of 2024. The year-over-year increase in accounts receivable and the year-over-year decreases in accounts payable and accrued expenses contributed to the increase of cash used in operating activities. The remainder of the change in operating assets and liabilities was primarily related to lease buyouts during the first quarter of 2025, compared to a single lease buyout during the first quarter of 2024.

Cash used in investing activities during the three-month periods ended March 31, 2025 and 2024 were impacted by $11.2 million and $53.8 million, respectively, on capital expenditures, net of proceeds from asset sales and financings, including property purchases and the renovation of properties for our Asset-Based network. See Capital Expenditures below for estimated annual expenditure amounts for 2025.

Cash used to fund promissory note payments of $17.3 million, during the three months ended March 31, 2025, was offset by borrowings under the Credit Facility of $25.0 million. During the three months ended March 31, 2025, we repurchased 258,765 shares of our common stock under our share repurchase program for an aggregate cost of $22.0 million. We also continued to return capital to our shareholders with our quarterly dividend payments, which totaled $2.8 million during the three months ended March 31, 2025. Our dividends and share repurchase program are further discussed in Other Liquidity below.

Financing Arrangements

We financed the purchase of $17.4 million of revenue equipment through notes payable during the three months ended March 31, 2025. Future payments due under our notes payable totaled $233.1 million, including interest, as of March 31, 2025, for an increase of $27.6 million from December 31, 2024.

During the first quarter of 2025, we borrowed $25.0 million on the Credit Facility, reducing our borrowing availability to $225.0 million.

We have an accounts receivable securitization program, which matures on July 1, 2025. As of March 31, 2025, standby letters of credit of $23.7 million have been issued under the program which reduced our available borrowing capacity to $26.3 million.

Our financing arrangements and the scheduled maturities of our long-term debt obligations, are disclosed in Note F to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Contractual Obligations

We have purchase obligations, consisting of authorizations to purchase and binding agreements with vendors, relating to revenue equipment used in our Asset-Based operations, other equipment, facility improvements, software, service contracts, and other items for which amounts were not accrued in the consolidated balance sheet as of March 31, 2025. These purchase obligations totaled $195.3 million as of March 31, 2025, with $180.4 million expected to be paid within the next year, provided that vendors complete their commitments to us. As of March 31, 2025, the amount of our purchase obligations decreased $0.5 million from December 31, 2024.

As of March 31, 2025, contractual obligations for operating lease liabilities, primarily related to our Asset-Based service centers, totaled $307.4 million, including imputed interest, for an increase of $39.8 million from December 31, 2024. The scheduled maturities of our operating lease liabilities as of March 31, 2025 are disclosed in Note E to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. There have been no other material changes in the contractual obligations disclosed in our 2024 Annual Report on Form 10-K during the three months ended March 31, 2025. We have no investments, loans, or any other known contractual arrangements with unconsolidated special-purpose entities, variable interest entities, or financial partnerships, and we have no outstanding loans with executive officers or directors.

Capital Expenditures

For 2025, our total capital expenditures, including amounts financed, are estimated to range from $225.0 million to $275.0 million, net of asset sales. These 2025 estimated net capital expenditures include revenue equipment purchases of $130.0 million to $140.0 million, primarily for our Asset-Based operations. Our 2025 expected capital expenditures also include $60.0 million to $80.0 million of investments in real estate and facility upgrades to support our growth plans, as well as other investments across the enterprise, such as technology-related items and miscellaneous dock equipment upgrades and enhancements. We have the flexibility to adjust certain planned 2025 capital expenditures as business levels dictate. Depreciation and amortization expense, excluding amortization of intangibles, is estimated to be approximately $164.0 million in 2025. The amortization of intangible assets is estimated to be approximately $13.0 million in 2025, primarily related to purchase accounting amortization associated with the MoLo acquisition.

Other Liquidity Information

General economic conditions and the related impact on our business (primarily tonnage and shipment levels and the pricing that we receive for our services in future periods) could affect our ability to generate cash from operating activities and maintain cash, cash equivalents, and short-term investments on hand. Our Credit Facility and A/R Securitization provide available sources of liquidity with flexible borrowing and payment options. We believe these agreements provide borrowing capacity necessary for growth of our business. During the next twelve months and for the foreseeable future, we believe existing cash, cash equivalents, short-term investments, cash generated by operating activities, and amounts available under our Credit Facility will be sufficient to finance our operating expenses; fund our ongoing initiatives to grow our business, including investments in technology; repay amounts due under our financing arrangements; and pay contingent earnout consideration related to the MoLo acquisition if it is earned. We also have borrowing capacity available under our A/R securitization until maturity on July 1, 2025. Notes payable, finance leases, and other secured financing may also be used to fund capital expenditures, provided that such arrangements are available and the terms are acceptable to us.

We continue to take actions to return capital to shareholders with our quarterly dividend payments and treasury stock purchases. On April 25, 2025, we announced our Board of Directors declared a dividend of $0.12 per share payable to stockholders of record as of May 9, 2025. We expect to continue to pay quarterly dividends on our common stock in the foreseeable future, although there can be no assurance in this regard since future dividends will be at the discretion of the Board of Directors and are dependent upon our future earnings, capital requirements, and financial condition; contractual restrictions applying to the payment of dividends under our Credit Facility; and other factors.

During the three months ended March 31, 2025, we purchased 258,765 shares of our common stock for an aggregate cost of $22.0 million, including shares purchased under Rule 10b5‑1 plans. As of March 31, 2025, $34.6 million remained available under the share repurchase program (see Note G to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Balance Sheet Changes

Other Accounts Receivable

Other accounts receivable decreased $11.0 million from December 31, 2024 to March 31, 2025, reflecting the settlement by insurers of the previously disclosed auto accident legal matter involving a MoLo carrier, which is further discussed in our 2024 Annual Report on Form 10‑K.

Operating Right of Use Assets and Operating Lease Liabilities

The increase in operating right-of-use assets of $35.9 million and in operating lease liabilities, including current portion, of $24.3 million from December 31, 2024 to March 31, 2025, was primarily due to the assumption of two lease agreements, which included upfront lease buyout payments, and lease renewals during the first quarter of 2025.

Accrued Expenses

Accrued expenses decreased $42.0 million from December 31, 2024 to March 31, 2025, primarily due to the payment by insurers of the auto accident legal matter involving a MoLo carrier and payment of the Fair Labor Standards Act legal settlement, which are further discussed in our 2024 Annual Report on Form 10-K, and payments made during first quarter 2025 for certain performance-based incentive plans and contributions to our defined contribution plan which were accrued at December 31, 2024, offset partially by increase in accrued wages due to timing of payments and higher third-party casualty reserves due to an increase in average claims costs and increased retention levels.

Long-term Debt

The $25.1 million increase in long-term debt, including current portion, from December 31, 2024 to March 31, 2025 is primarily due to the $25.0 million borrowing on the Credit Facility during first quarter 2025 as $17.4 million of equipment financed was offset by payments on notes payable of $17.3 million.

Income Taxes

For continuing operations, our effective tax rate was 25.0% for the three months ended March 31, 2025, compared to an effective tax benefit rate of 37.7% for the same period of 2024. The federal statutory tax rate is 21.0% and the average state tax rate, net of the associated federal deduction, is approximately 5%. However, various factors and changes in nondeductible expenses and the cash surrender value of life insurance may cause the full-year 2025 tax rate to vary significantly from the statutory rate.

Reconciliation between the effective income tax rate for continuing operations, as computed on income before income taxes, and the statutory federal income tax rate is presented in the following table:

(in thousands, except percentages)

(1) The federal alternative fuel tax credit expired at December 31, 2024.

(2) For 2024, certain reclassifications have been made to conform to the current year presentation, including combining immaterial amounts into "Other" and breaking out non-deductible compensation under IRC Section 162(m), which was previously reported in "Non-deductible expenses."

At March 31, 2025, we had $70.0 million of net deferred tax liabilities after valuation allowances. We evaluated the need for a valuation allowance for deferred tax assets at March 31, 2025 by considering the future reversal of existing taxable temporary differences, future taxable income, and available tax planning strategies. Valuation allowances for deferred tax assets totaled $1.7 million at both March 31, 2025 and December 31, 2024. As of March 31, 2025, deferred tax liabilities which will reverse in future years exceeded deferred tax assets.

Financial reporting income may differ significantly from taxable income because of items such as vacation pay, workers’ compensation and third-party casualty claims and other liabilities, and payments for legal settlement and lease buy‑outs, which, for tax purposes, are generally deductible only when paid. For the three months ended March 31, 2025, financial reporting income exceeded income determined under income tax law. For the three months ended March 31, 2024, there is income determined under income tax law, but a loss for financial reporting.

During the three months ended March 31, 2025, we made state and foreign tax payments of $0.8 million. Management does not expect the cash outlays for income taxes will materially exceed reported income tax expense for the foreseeable future.

Our total effective tax rate was 25.0% for the three months ended March 31, 2025, compared to a total effective tax benefit rate of 40.3% for the same period of 2024, including discontinued operations in 2024. Income tax expense reflected in discontinued operations, which primarily consisted of federal and state income taxes on the gain on the sale of FleetNet, was $0.2 million, or an effective tax rate of 25.5% for the three months ended March 31, 2024.

Critical Accounting Policies

The accounting policies that are “critical,” or the most important, to understand our financial condition and results of operations and that require management to make the most difficult judgments are described in our 2024 Annual Report on Form 10-K. There have been no updates to our critical accounting policies during three months ended March 31, 2025. Management believes that there is no new accounting guidance issued but not yet effective that will impact our critical accounting policies.

Forward-Looking Statements

Certain statements and information in this report may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements regarding (i) our expectations about our intrinsic value or our prospects for growth and value creation and (ii) our financial outlook, position, strategies, goals, and expectations. Terms such as “anticipate,” “believe,” “could,” “designed,” “estimate,” “expect,” “forecast,” “foresee,” “intend,” “likely,” “may,” “plan,” “predict,” “project,” “scheduled,” “seek,” “should,” “would,” and similar expressions and the negatives of such terms are intended to identify forward-looking statements. These statements are based on management’s beliefs, assumptions, and expectations based on currently available information, are not guarantees of future performance, and involve certain risks and uncertainties (some of which are beyond our control). Although we believe that the expectations reflected in these forward-looking statements are reasonable as and when made, we cannot provide assurance that our expectations will prove to be correct and caution the reader not to place undue reliance on our forward-looking statements. Actual outcomes and results could materially differ from what is expressed, implied, or forecasted in these statements due to a number of factors, including, but not limited to: data privacy breaches, cybersecurity incidents, and/or failures of our information systems, including disruptions or failures of services essential to our operations or upon which our information technology platforms rely; interruption or failure of third-party software or information technology systems, including but not limited to licensed software; untimely or ineffective development and implementation of, or failure to realize the potential benefits associated with, new or enhanced technology or processes; the loss or reduction of business from large customers or an overall reduction in our customer base; the timing and performance of growth initiatives and the ability to manage our cost structure; the cost, integration, and performance of acquisitions and the inability to realize the anticipated benefits of the acquisition within the expected time period or at all; unsolicited takeover proposals, proxy contests, and other proposals or actions by activist investors; maintaining our corporate reputation and intellectual property rights; establishing and maintaining adequate internal controls financial reporting; nationwide or global disruption in the supply chain resulting in increased volatility in freight volumes; competitive initiatives and pricing pressures; increased prices for and decreased availability of equipment, including new revenue equipment, and higher costs of equipment-related operating expenses such as maintenance, fuel, and related taxes; availability of fuel, the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates, and the inability to collect fuel surcharges; relationships with employees, including unions, and our ability to attract, retain, and upskill employees; unfavorable terms of, or the inability to reach agreement on, future collective bargaining agreements or a workforce stoppage by our employees covered under ABF Freight’s collective bargaining agreement; union employee wages and benefits, including changes in required contributions to multiemployer plans; availability and cost of reliable third-party services; our ability to secure independent owner-operators and/or operational or regulatory issues related to our use of their services; litigation or claims asserted against us; the effects, costs and potential liabilities related to changes in and compliance with, or violation of, existing or future governmental laws and regulations, including, but not limited to, environmental laws and regulations, such as emissions-control regulations and fuel efficiency regulations; default on covenants of financing arrangements and the availability and terms of future financing arrangements; our ability to generate sufficient cash from operations to support significant ongoing capital expenditure requirements and other business initiatives; self-insurance claims, insurance premium costs, and loss of our ability to self-insure; potential impairment of long-lived assets and goodwill and intangible assets; the effects of a widespread outbreak of an illness or disease or any other public health crisis, as well as regulatory measures implemented in response to such events; external events which may adversely affect us or the third parties who provide services for us, for which our business continuity plans may not adequately prepare us, including, but not limited to, the occurrence of natural disasters, health epidemics, geopolitical conflicts, acts of war, cybersecurity incidents, or trade restrictions; general economic conditions and related shifts in market demand that impact the performance and needs of industries we serve and/or limit our customers’ access to adequate financial resources; seasonal fluctuations, adverse weather conditions, natural disasters, and climate change; and other financial, operational, and legal risks and uncertainties detailed from time to time in ArcBest Corporation’s public filings with the Securities and Exchange Commission (“SEC”).

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise.

Our primary market risk results from fluctuations in interest rates primarily resulting from our debt portfolio. Our debt portfolio includes notes payable with a fixed rate of interest, which mitigates the impact of fluctuations in interest rates. Future issuances of long-term debt could be impacted by increases in interest rates, which could result in higher interest costs. Borrowings under our revolving credit facility and accounts receivable securitization program are at a variable interest rate and expose us to the risk of increasing interest rates. See Note F to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of our interest rates.

Discussion of current economic conditions and related impact on our business can be found in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Quarterly Report on Form 10-Q.

There have been no other significant changes in the Company’s market risks as reported in the Company’s 2024 Annual Report on Form 10-K since December 31, 2024.

As of the end of the period covered by this report, an evaluation was performed with the participation of the Company’s management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2025.

There were no changes in the Company’s internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II.

OTHER INFORMATION

ARCBEST CORPORATION

The Company’s risk factors are fully described in the Company’s 2024 Annual Report on Form 10-K. No material changes to the Company’s risk factors have occurred since the Company filed its 2024 Annual Report on Form 10-K.