Prepared remarks
Good morning, and thank you for standing by. Welcome to the ArcBest Second Quarter 2026 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this call is being recorded. I will now turn it over to Amy Mendenhall, vice president treasury and investor relations. Please go ahead.
Good morning. I am here today with Seth Runser, our president and CEO, and J. Matthew Beasley, our chief financial officer. Other members of our executive leadership team will also be available during the Q&A session. Before we begin, please note that some of the comments we make today will include forward-looking statements. These statements are subject to risks and uncertainties which are detailed in the forward-looking statements section of our earnings release and SEC filings. To provide meaningful comparisons, we will also discuss certain non-GAAP financial measures that are outlined and described in the tables of our earnings release. Reconciliations of GAAP to non-GAAP measures are provided in the additional information section of the presentation slide. You can access the conference call slide deck on our website at arcb.com and our 8-Ks filed earlier this morning or follow along on the webcast. And now I will turn the call over to Seth.
Thank you, Amy, and good morning, everyone. I am pleased to report a strong second quarter with meaningful improvement in both earnings and operating margin. These results demonstrate the progress we are making across ArcBest as we execute our strategy, improve the customer experience, and operate with greater efficiency and discipline. Our performance reflects disciplined pricing, growth in tonnage from a heavier freight profile, and efficiency gains. Just as important, we continue to advance the strategic priorities that will strengthen ArcBest for the long term, from simplifying how we go to market and operate to expanding our digital capabilities and investing in the service and expertise our customers value. Matthew will walk you through the financial results in a moment. But before he does, I want to provide you some perspective on the market environment and highlight the actions we are taking to build on this momentum. Industry capacity has continued to tighten as truckload supply exits the market. Truckload spillover into LTL contributed to modest volume gains and higher fuel prices increased revenue across the industry. We have not yet seen a broad-based inflection in industrial demand. However, recent manufacturing indicators have been encouraging with PMI readings remaining in expansion territory. Taken together, these dynamics point to an environment that is gradually improving. And while conditions can shift quickly, we are optimistic about the direction of the market while remaining disciplined in how we manage our business and allocate capital. Against this backdrop, we continue to prioritize growing profitably, maintaining yield discipline, improving productivity, enhancing the customer experience, and advancing our technology roadmap. These efforts are contributing to our results today and reinforcing our confidence in the long-term targets we outlined at Investor Day. None of this progress would be possible without the dedication of our employees. Throughout the quarter, our teams delivered the reliable service, responsiveness, and expertise our customers depend on. Their focus and consistent execution helped customers navigate an evolving environment and reinforced the trust ArcBest has earned over more than a century. I want to thank each of them for their continued commitment to our customers and to one another. That commitment to customer experience and execution is central to our strategy, and it shaped how we designed and built ArcBestView. Launched during the quarter, ArcBestView is our new digital logistics platform bringing quoting, booking, shipment visibility, and reporting together in one intuitive experience. The platform gives customers a streamlined modern way to manage their logistics needs, with access to our supply chain experts when those needs become more complex. Customer engagement continues to grow, reinforcing our belief that ArcBestView can improve the customer experience, increase digital adoption, and enhance productivity for both customers and our teams. The same focus on customer experience and execution is also shaping how we operate internally. Earlier this month, we announced organizational changes designed to simplify how we go to market, strengthen coordination across the company, and align our teams more closely around customer needs and operational effectiveness. As part of these changes, we are consolidating our brand structure, streamlining our organizational structure, and closing select service centers in smaller markets. The affected facilities represent approximately 1% of total doors in the ABF Freight network, and their operations will be consolidated into nearby locations. Collectively, the organizational changes are expected to generate approximately $40 million in annualized cost savings while improving our ability to serve customers, and scale for future growth. These were difficult decisions, particularly where employees and communities are affected. But they are necessary to create a simpler, more efficient, and more competitive ArcBest for the long term. Taken together, these changes strengthen how we go to market, how we operate, and how we serve our customers. Along with the launch of ArcBestView and the continued execution of our strategy, they position ArcBest to grow profitably, deliver premium experiences, and build on more than a century of trusted service. I want to emphasize that these actions do not represent a change in our strategy or our long-term financial targets. Rather, they reflect the next step in delivering on that. Now let me highlight the progress we made during the quarter against our key strategic priorities. In our Asset-Based business, we continue to execute with discipline, balancing service, freight selection, pricing, and network efficiency to support profitable growth. Improving market conditions contributed to tonnage growth while our teams remain focused on moving freight through the network more efficiently and delivering the reliable service our customers expect. Technology and data are strengthening that execution. The continued expansion of our dynamic quote pool gives greater visibility into demand, and enables faster, more informed pricing and shipment decisions. This capability helps us be more selective about the freight entering our network, improve freight mix, and align available capacity with the opportunities that create the most value. We also maintained strong pricing discipline during the quarter. Our general rate increase and negotiated customer renewals reflect the value of our service and our continued focus on revenue quality. Importantly, pricing remained resilient despite higher weight per shipment, which typically places pressure on revenue per hundredweight. Managed solutions delivered another exceptional quarter with daily shipments reaching a record high. Its performance reflects a strong pipeline, expanding customer relationships, and growing demand for tailored integrated logistics support. Managed solutions continues to differentiate ArcBest in the marketplace and represents an important source of growth across our portfolio. We are also making meaningful progress against our technology roadmap, with AI playing an increasingly important role in how we operate and serve customers. Our approach is deliberate, and closely aligned with our strategic priorities. We are focused on practical applications that create differentiation, improve the customer experience, and enable our people to accomplish more. Initiatives such as city route optimization and AI-enabled capacity sourcing are already delivering productivity benefits. As we expand these capabilities, we will continue to apply AI where it can strengthen our people and processes, improve decision making, and support profitable growth. As we move forward, we remain committed to making ArcBest simpler, faster, and easier to do business with. That means continuously reducing complexity, improving how our teams work together, and aligning resources around the priorities that will matter most to our customers. These actions are sharpening our execution today and enabling us to build a more agile, more scalable organization, one that is well positioned to deliver long-term shareholder value. With that, I will turn the call over to Matthew to walk through the financial results.
Thanks, Seth, and good morning, everyone. Our second quarter results reflect an improving operating environment and disciplined execution of our strategy. Stronger pricing, higher weight per shipment, continued growth in managed solutions, and efficiency gains drove meaningful sequential improvement in operating performance and reinforced our confidence in the long-term financial targets outlined at Investor Day. Higher fuel prices also benefited the quarter, although we view that as a near-term factor rather than a contributor to our long-term targets. Before reviewing our operating results, I want to provide additional financial context on the actions Seth outlined to simplify our organization, improve our cost structure, and strengthen our operating model. These actions include organizational and facility changes, consolidation of our brands, and the discontinuation of the U-Pack freight movement system. Collectively, we expect the actions to generate $40 million in annualized run-rate cost savings. In connection with these actions, our second quarter GAAP results include $76.5 million of noncash impairment charges related to the Panther trade name and U-Pack equipment and other assets. Separately, GAAP results included an $8.8 million noncash impairment related to office space in our Asset-Light segment. We also expect to incur approximately $6 million to $7 million of cash costs primarily for severance and employee benefits and the disposal of U-Pack equipment, with most of that expected to be recognized in the third quarter. These impairment charges and other related costs are excluded from the non-GAAP results I will discuss today. Turning to our consolidated results. Second quarter revenue was $1.2 billion, up 16% year-over-year. Non-GAAP operating income was $74 million, compared to $45 million in the prior year period. And adjusted earnings per share were $2.38, compared to $1.36 in the second quarter of 2025. At the segment level, Asset-Based non-GAAP operating income improved by $21 million year-over-year while Asset-Light generated non-GAAP operating income of $6 million, a $5 million improvement from last year. In the Asset-Based segment, second quarter revenue was $784 million, up 10% on a per day basis. ABF's adjusted operating ratio improved to 90.8%, 200 basis points better than the prior year period and 650 basis points better sequentially. Daily tonnage increased 5% year-over-year, reflecting an 8% increase in weight per shipment, offset in part by a 3% decrease in shipments per day. As Seth mentioned, the continued expansion of our digital quote pool is enabling greater selectivity in the freight we bring into our network supporting higher weight, operationally efficient shipments that contribute meaningfully to profitability. We are also seeing a modest increase in truckload rated shipments, which is further contributing to the higher weight per shipment during the quarter. Billed revenue per shipment increased 13% year-over-year, supported by the heavier freight profile and a 4% increase in revenue per hundredweight, which primarily reflects higher fuel surcharge revenue. On the cost side, operating expenses increased for several reasons, including annual contract increases in union wage rates, higher fuel prices and purchase transportation expense, and increased depreciation expense associated with our equipment investments. In July, Asset-Based daily tonnage increased 8% year-over-year, driven by an 11% increase in weight per shipment and partially offset by a 3% decrease in shipments per day. The higher weight per shipment continues to reflect changes in freight profile. Billed revenue per shipment increased 10% year-over-year, primarily reflecting the heavier freight profile, partially offset by a 1% decrease in billed revenue per hundredweight. Excluding fuel surcharge, revenue per hundredweight declined in the low single digits primarily due to changes in freight profile. Historically, ABF's adjusted operating ratio has, on average, remained relatively consistent from the second quarter to the third quarter, excluding periods affected by the COVID-19 pandemic and the bankruptcy of a large LTL competitor. Based on current trends, we expect ABF's third quarter 2026 adjusted operating ratio to be generally in line with the second quarter. Our outlook assumes lower fuel surcharge revenue, partially offset by expected savings from the restructuring actions. Turning to Asset-Light. Second quarter revenue was $439 million, up 28% on a daily basis year-over-year. Shipments per day increased 15% as strong growth in managed solutions continued. Revenue per shipment improved 12% reflecting higher rates associated with tightening capacity and increased fuel costs. We also made meaningful progress on productivity and cost. Selling, general, and administrative expense per shipment declined 12% driven by productivity initiatives and the higher mix of managed business, which carries a lower cost to serve. Employee productivity reached another record with shipments per person per day increasing 35%. Together, the improvements in revenue, yield, and productivity resulted in Asset-Light non-GAAP operating income of $6 million for the quarter, a $5 million improvement from the prior year period. In July, Asset-Light daily revenue increased approximately 28% year-over-year, driven by a 19% increase in revenue per shipment and a 7% increase in shipments per day. Higher revenue per shipment reflects a stronger pricing environment, including the effects of higher fuel surcharge revenue and tightening truckload market capacity. Shipment growth was led by the managed solutions business. Looking ahead, we expect third quarter non-GAAP operating income of approximately $6 million to $8 million. This outlook reflects continued pricing discipline, productivity improvements, and anticipated cost savings from our restructuring actions. Turning to capital allocation. Our priorities remain unchanged. We will continue to invest selectively in opportunities that support profitable growth and attractive long-term returns while maintaining a strong balance sheet and financial flexibility. Returning capital to shareholders remains an important part of our balanced approach. Overall, our second quarter performance demonstrates the progress we can make as market conditions improve and we execute with greater efficiency and discipline. We are encouraged by the improvement in the industry fundamentals, the progress across both operating segments, and the actions underway to improve our cost structure. Combined with our strong balance sheet, these factors reinforce our confidence in our ability to drive profitable growth and make continued progress towards the financial targets outlined at Investor Day. With that, operator, we are ready to open the call for questions.
Questions and answers
Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you would like to withdraw your question, simply press the star one again. When you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. So your first question comes from the line of Brian Ossenbeck of JPMorgan. Please go ahead.
Hey, good morning, everybody. Thanks for taking the question. Just a quick clarification first for Matthew. I know the fuel impact is transitory, but was the impact in the quarter for ABF's OR and sort of what do you expect that to be in third quarter? Does that sort of wash itself out? And then just stepping back looking at the trends into July, seems like they are accelerating across the board for ABF. So does not sound like you are seeing or expecting a big inflection or getting a lot of truckload spillover just yet. So what do you think is causing that, and how do you feel about your ability and capacity to continue to grow here while maintaining service? Or even improving it? Thanks very much.
Thanks, Brian. I will get started on your second question then turn it over to Matthew on fuel to answer some of that. The way I think about July and our third quarter outlook is we look at our historical trends and tonnage generally sequentially from June to July decreases about 4.6%. We are down only about 1%. Shipments generally decrease less than half a percent, right around a half percent. We are in line with that. Weight per shipment generally goes down about 4.1% in our history, and we are down about 1%. So that is all good signs that we are seeing improvement in the sequential trends versus history. When we look at our dynamic shipments, they are trending a little heavier which is contributing to that stronger tonnage. A lot of that has to do with the mix that we have seen as we have expanded that quote pool. We really expect ABF third quarter adjusted OR to be generally in line with the second quarter, which aligns with history. And like we said in our prepared remarks, that outlook really reflects lower fuel surcharge revenue. We have unionized wage increases in HWP in July. We have some nonunion increases going in as well. But it also reflects the savings from those restructuring changes that we talked about. The reason that we did the restructuring changes is to simplify how we operate, make it easier for customers to do business with, and ultimately accelerate profitable growth and the cross-sell opportunities that we have. When I look at our pipeline, it continues to be strong. When we see PMI in the different indexes, it is showing some underlying positive things, but we just have not seen that demand show up yet. We focus on things in our control, and we are positioned to take advantage in any environment. I will turn it over to Matthew to talk about fuel.
Brian, just thinking about the first quarter to the second quarter sequential change, looking back at the 10-year history, we typically see meaningful improvement from the first quarter to the second quarter, about a 350-basis-point improvement on average. With the dramatic rise in diesel prices during the quarter, that did have an impact on our revenue, but it also had an impact on our cost structure. It affects items beyond the cost of fuel and carries over to purchase transportation and other maintenance costs that we are seeing. There were also other positive drivers for the quarter, including the improvement in weight per shipment. The pricing performance for the quarter was also a factor. And we saw continued improvements on the productivity side on a sequential basis from the first quarter to the second quarter, which is generally what you see as we move out of weather impacts in the first quarter and see more shipment density in the second quarter. So a number of different contributions for the quarter that I would highlight, but fuel was definitely one of them.
And sorry. How should we think about that in third quarter? Just kind of the similar factor going the opposite direction where fuel may become a bit of a headwind, but you still have all these other tailwinds. So think of it more holistically.
We are always looking at the outlook for fuel prices. We look at the short-term energy outlook from the Department of Energy and at futures prices to get an idea of where the market is headed. That has moved back and forth over the last couple of months. Based on our latest read as we were setting guidance, it looked like prices would be down a little in the third quarter versus what we realized in the second quarter. We did bake that into our outlook. Even when you take that into account, we still feel comfortable with the flat guide that we gave for flat sequential OR performance for the Asset-Based business.
Your next question comes from the line of Ravi Shanker. Please go ahead.
Great. Thanks. Good morning. Maybe a two-part question as well. Seth, first for you, can you just unpack the trigger for the restructuring actions right now and especially focus on the U-Pack retirement because I know that was a big initiative for you guys. And Matthew as a follow-up, just with the LTLs talking about the potential for getting the biggest rate increases ever, what do you think is the opportunity for you guys to kind of push on yield? Do you think you can get maybe pushing double-digit rate increases going into the next big mid cycle? Thanks.
Ravi, the organizational changes we announced a few weeks ago were designed to simplify our business, improve efficiency, enhance the customer experience, and allow us to deliver on long-term profitable growth. This is not a change in strategy; it is an acceleration of what we outlined at Investor Day and reflects the next phase in building a more integrated, scalable, and efficient company. Over the history of this cycle, we have continued to invest in technology, process improvement, commercial transformation, and our people. These recent actions allow us to capture the full value of those investments by simplifying how we go to market, and we believe this will improve the customer experience. We are bringing the brands together, streamlining portions of our organizational structure to reduce duplication, improve decision making, standardize best practices, and align resources around the highest-value opportunities. We think these actions will improve customer experience and efficiency. On the ABF side, we reduced about 1% of total doors; we still have 8% more doors than we had in 2021, so we believe we are positioned for growth as the market inflects positively. These actions are about creating a simpler ArcBest, improving customer experience, increasing efficiency, and positioning the company to deliver long-term sustainable growth and shareholder value. They enhance what we outlined at our 2028 Investor Day target.
Ravi, on truckload rates, your comment about double-digit increases is generally in line with our near-term expectations; we expect low double-digit increases. We were pleased with the Asset-Light performance in the quarter with approximately $6 million of operating income and a $5 million year-over-year improvement. We are seeing benefits from higher truckload rates, which are helping expedite margins. That tightening capacity is helping demand for expedite services and margins in that business. We are seeing those prices come up in our truckload business, particularly in our contractual business, and the continued growth in managed solutions has been a significant help in that business as well.
Your next question comes from the line of Chris Wetherbee of Wells Fargo. Please go ahead.
Hey, great. Good morning, guys. Maybe if you could touch on the pricing environment a little bit. I know ex fuel revenue per hundredweight is down a bit, but clearly freight profile and weight per shipment are up significantly. We are seeing some of the volume dynamics coming in better than seasonality, as you noted for the month of July. Can you talk about pricing and how you think about the direction here? Are we seeing a degree of improvement? Contractual rate increases is one measure to look at. How do you think about pricing broadly?
Hi, Christopher. This is Eddie. We are very pleased with where we are from a pricing standpoint. If you think about where we were last year and how we started to focus on improving our LTL margins, we started seeing that show up in the first quarter and into the second quarter. We saw a 5.8% annual negotiated increase and implemented a general rate increase on June 22 of 5.9%, which is holding very well. You pointed out that revenue per hundredweight is slightly down; that is largely a story of business mix and the heavier profile showing up in our system. We feel we can continue the momentum we have right now and that is our expectation as we go into the third quarter.
And your next question comes from the line of Jason Seidl of TD Cowen. Please go ahead.
Yeah. Good morning, guys. I want to go back to the spillover business from the truckload side. If we look back how much in terms of tonnage growth do you think you lost over the last couple of years? So we can conceptualize what there is to gain going forward. And then the other question I have is related to the historical MoLo business. What changes have you guys made post the Miller v. C.H. Robinson decision? How should we think about insurance cost going forward? Thank you.
Jason, when we think about the truckload migration to LTL, we are seeing modest improvement where that freight is coming over. It's hard to give an exact gauge of the historical total, but generally we look at shipments that weigh heavier than 10,000 pounds and that is where we are seeing some improvement. As truckload capacity continues to exit the market and carriers remain pressured on margins, we believe many heavier, more complex shipments that historically moved in a truckload environment will start to shift back. We are seeing early signs of that. Truckload multi-stops are not typically in truckload carriers' wheelhouse, especially as freight rates improve. We have continued to invest in our network, fleet, and service capabilities throughout this cycle, which positions us well when freight patterns normalize and those opportunities shift back to us. On the Miller case, the situation is evolving. The Supreme Court decision provides additional clarity around the legal framework for broker-carrier selection and claims, and it reinforces the importance of strong safety, compliance, and carrier oversight practices across the industry. It will take time for insurance providers, shippers, carriers, and brokers to evaluate the ruling and determine whether changes to requirements or contracts are necessary. Safety and disciplined carrier selection have long been a part of ArcBest's operations. We maintain a structured, risk-based approach to third-party carrier onboarding and qualifications with ongoing monitoring. Those processes are important for managing our risk and our customers' risk. Over time, the landscape will reward organizations that have established processes, scale, technology, and dedicated risk management teams — attributes we possess. There will be continued discussions around insurance costs and litigation trends, and we will monitor the situation closely. At this time, we do not expect any change in our approach.
Your next question comes from the line of Jordan Alliger of Goldman Sachs. Please go ahead.
Yeah. Hi. Morning. You discussed this partly, but on the restructuring plan, can you talk about the expected pacing of the realization timing? Is there a spread of that $40 million between Asset-Light and Asset-Based that you could discuss? And then is this augmentative to your longer-term targets from Investor Day? Thanks.
Jordan, at a high level we realized about $2 million of that cost savings in the second quarter. We expect to recognize about $6 million of that in the third quarter, and then reach the full run rate of $10 million a quarter, or $40 million a year, by the first quarter of 2027. Of the $40 million, about 75% is associated with our Asset-Based business. Of the remaining 25% tied to Asset-Light, about 80% of that is associated with Asset-Light, and a small amount around $2 million is associated with our U-Pack operation. Historically, these expenses have been removed from earnings on a non-GAAP basis, so the non-GAAP impact is around $38 million with the majority concentrated in Asset-Based. Regarding our long-term targets, these actions further our view on the achievability of those targets and are in support of them rather than incremental to them.
Thanks. Thanks, Ravi.
Your next question comes from the line of Scott Group of Wolfe Research. Please go ahead.
Hey. Thanks. Good morning. I wanted to get your perspective on the revenue trend. April was up 11%, May plus 9%, June plus 8%, July up 7%. So decelerating a little bit. Is dynamic at play? Can you talk to this trend, perhaps revenue per day ex fuel? Any color or thoughts on the trend?
When I look at revenue per day, I go back to customer conversations and what we are hearing. We are not hearing much around tariff action; it's more about oil and diesel prices, manufacturing, inflationary impacts, and housing construction, which continues to be weak. We are seeing customers that are increasing activity and some that are declining. Overall, freight demand continues to be muted, but we have a very healthy pipeline. As truckload capacity exits the market, more customers come to us to discuss our supply chain solutions, which is why we saw significant growth in managed solutions. That growth feeds across our service lines, whether Asset-Based, truckload, or expedite. There is no change in our dynamic philosophy. As we have expanded the quote pool, we have better freight selection. As that quote pool gets larger, we can select the best shipments for the network — the ones that fill empty miles and are most profitable. That is where the heavier weights are coming from. As we talk to customers and see the pipeline results, things continue to strengthen. The ArcBestView launch should improve the customer experience and digital engagement, and we expect continued improvements as we expand capabilities. We built the company for any environment and invested through the cycle. We continue to invest, which positions us to say yes when the market inflects.
Scott, to add, there was not a significant change year-over-year from June to July. Revenue per day was up about 7.9% in June and right at 7% in July. Some dynamics move in different directions. Fuel moved lower a little earlier in the month, but weight per shipment has continued to strengthen — 8% year-over-year in June and 11% year-over-year in July. It's good to see both the core and transactional businesses seeing heavier shipments, which helps revenue per shipment metrics.
Your next question comes from the line of Bruce Chan of Stifel. Please go ahead.
Yes. Thanks, operator, and good morning, everybody. I wanted to get at some of the mix impact questions from a different angle. Can you remind us what the dynamic mix looks like versus the core LTL volume and whether there is any target you want to manage to? And are there differences in volume or pricing trends between those two segments of the market?
When I look at percent mix, we do not disclose the exact percentage of dynamic versus core LTL. The vast majority of our business is core LTL. Retention for those customers remains strong; they are simply shipping a bit less due to the weaker demand environment. As demand improves, that could create outsized operating leverage because those customers remain at attractive prices. The transactional dynamic business helps maintain consistency in the network. We have worked to ensure service levels are strong; we executed well in the second quarter and customer feedback is positive. We optimize our mix daily based on profit maximization, current market conditions, and available capacity. As we expand the quote pool, we can be more selective in real time, which improves profitability. The investments we've made have given us better visibility into the network, and we expect further improvements as we expand capabilities.
Your next question comes from the line of Kenneth Hoexter of Bank of America. Please go ahead.
Great. Good morning. I understand you are closing 10 LTL facilities as part of the restructuring. I get it is 1% of doors, but you said you are still up 8% versus 2021. Maybe thoughts on where you think excess capacity is today? How should we see your ability to flex up into the upcycle across doors, labor, and equipment? And tonnage is up while tons per day are outpacing seasonal norms into July. Thoughts on why that should not support an above-seasonal Asset-Based margin? Is it simply fuel or anything else? Thanks.
Kenneth, we bucket capacity into three areas: people, equipment, and facilities. On the people side, we feel we are in a strong position. We can add people as needed and offer competitive wages and benefits. On equipment, we have invested over the long term and have one of the youngest fleets on the road, which allows us to flex the fleet up or down based on demand. On real estate, we have worked on a long-term plan since 2020 and 2021 and have added over 800 doors to the network. We continuously optimize the network and determined these 10 facilities could be consolidated into nearby locations without changing service to customers. We still added doors in strategic markets where we see growth, service, or efficiency opportunities. Our investments in people, equipment, and facilities give us flexibility to flex up or down with demand.
Throughout this cycle, we have one of the youngest fleets on the road, which allows us flexibility. We have relationships with OEM partners and plan CapEx to secure desired equipment. We have invested in manpower planning models that enable us to forecast labor needs at the system and location level. Regarding capacity overall, a reasonable estimate is around 15% to 20% excess capacity, which allows us to flex up or down based on demand. The real estate changes involved facilities we judged unnecessary because nearby facilities can service the same customers without changing service levels. We still have added doors in strategic locations over the past several years.
We evaluate capacity from equipment, doors, and people perspectives and use modeling for each area. We leverage our total cost of ownership model to understand equipment needs by type and location. We have strong OEM relationships and feel good about securing needed equipment within CapEx guidance. Our manpower planning models allow us to forecast labor needs at system and location levels. Real estate optimization is a daily activity. The investments enable us to service customers with excellence, provide premium experience, and pursue profitable growth toward our long-term targets.
On the sequential adjusted operating ratio for the Asset-Based business, we expect performance generally in line with historical trends when excluding periods impacted by the 2023 competitor bankruptcy and the COVID-impacted third quarter in 2020. There will be puts and takes. Fuel looked like it was stepping down a little as we set guidance, and we baked that into our outlook. We also expect continued productivity performance as we move into the third quarter and saw continued strength in weight per shipment in July. We see that moderating a little as we move through the balance of the quarter but there is potential for upside if fuel comes in above our expectations or weight per shipment trends continue to strengthen.
Your next question comes from the line of Stephanie Moore of Jefferies. Please go ahead.
Hi. Good morning. Appreciate the time. I wanted to circle back to Asset-Light. We lump expedited and truckload together sometimes, but as brokerage and liability issues evolve post the Supreme Court ruling, is there anything we should be thinking about in different components within Asset-Light? Especially regarding vetting and the processes you have in place. Thank you.
Stephanie, I'm proud of the team for delivering $6.3 million in non-GAAP operating income in the second quarter, especially when you consider $1.5 million in all of 2025. That reflects strategic actions we've taken. We are encouraged by continued truckload capacity tightening. Many enterprise shippers have responded positively because of our strong truckload service. We are seeing shorter-term rate increases and mini bids as customers try to mitigate spot exposure while protecting strong service. Demand has been relatively stable and shipment growth was led by managed solutions. The growth in managed solutions improves productivity across Asset-Light. Productivity was up 35% year-over-year, which is meaningful. We continue to improve productivity across solutions — truckload, expedite, and managed — and we are focused on account profitability. Our technology roadmap is still early, and we have a lot more to do. Adding Mac to the team has been a tremendous asset; his experience will help us accelerate results.
Your next question comes from the line of Ari Rosa of Citigroup. Please go ahead.
Hey, good morning, guys. Thank you for taking our question. Your prepared remarks said you are not yet seeing a broad-based inflection in industrial demand. Can you unpack that? Are you seeing strength in certain regions versus weakness in others? Any end markets outperforming others? How do you see these dynamics playing out in the back half of the year?
Ari, across our customers there is a mixed picture. Healthcare and manufacturing customers often operate on multiyear bid cycles and we are working through those as truckload capacity tightens. Apparel and consumer brands are not showing much demand. Construction and some areas tied to industrial AI buildouts show strength, while housing remains weak, which affects U-Pack and similar businesses. We are seeing healthy demand in certain specialty areas, like recreational vehicles. Customer conversations focus on navigating volatility, mitigating fuel costs, and partnering with a trusted provider. Tariffs have not been a major focus in those discussions. For the remainder of 2026, I continue to have confidence in our long-term outlook and Investor Day targets. We focus on long-term success by partnering with customers, building trust, and delivering premium service, while recognizing supply-side volatility, fuel volatility, and inflation. We are executing our strategy, simplifying the organization, accelerating decision making, expanding technology to improve productivity, and strengthening our integrated approach to deliver long-term shareholder and customer value.
Your next question comes from the line of Jeff Kauffman of Citizens Bank. Please go ahead.
Thank you. I want to go back to Jordan's question about Asset-Light. When you gave the original 2028 guidance of $40 million to $70 million in adjusted operating income, were these restructuring actions anticipated in that number? Is it incremental? And one other question: an 8% change in average weight per shipment is significant. What does that look like? Are pallets getting heavier because of freight mix or demand, or are you moving different freight that just weighs more?
Jeff, when we laid out the 2028 targets, we anticipated working on efficiency and cost structure improvements, so some progress was expected. Of the $40 million in savings, about $8 million is attributable to Asset-Light, $30 million to Asset-Based, and $2 million to Vox. The $8 million for Asset-Light is baked into the 2028 targets. We've made progress year-to-date in Asset-Light, up over $9 million in operating income for the year, with a similar quarter expected for the third quarter and an outlook of $6 million to $8 million. If trends continue, the fourth quarter could be similar, which would make for a strong year in Asset-Light and continued improvement toward the 2028 targets.
On weight per shipment, the change reflects a few factors. Our core business remains the bulk of LTL shipments and those customers generally ship a bit less. We are seeing early signs of improvement but it is too early to call a full inflection. Dynamic shipments from our expanded quote pool look different because we have more optionality to optimize the network and maximize profit, and those shipments are contributing to heavier weights. U-Pack, tied to housing, remains down. Dynamic mix is changing slightly, and we believe it is a better outcome because it allows greater flexibility and profitability for the network.
Okay. Thank you.
And there are no further questions at this time. I will now turn it back to Amy Mendenhall for closing remarks.
Thank you to everyone who joined us today. We certainly appreciate your interest in ArcBest. Hope everyone has a great day.
Ladies and gentlemen, that concludes today's call. Thank you everyone for joining. You may now disconnect.