FedEx Freight Holding Company, Inc. (FDXF) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the FedEx Freight Conference Call. My name is Ryan, and I'll be coordinating the call today. [Operator Instructions] I will now hand the call over to Mary Rose, Head of Investor Relations to begin. Mary, please go ahead.

Good afternoon, and welcome to FedEx Freight's earnings conference call to discuss our results for the 4-month transition period ended September 30, 2026. The accompanying earnings release and investor presentation are on our website at ir.fedexfreight.com, and this call is also being streamed from our website. Joining us today are John Smith, President and Chief Executive Officer of FedEx Freight; and Marshall Witt, our Executive Vice President and Chief Financial Officer. Following prepared remarks, John and Marshall will both be available to answer questions. [Operator Instructions] During the call, certain statements may be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995 and are subject to factors that could cause actual results to differ materially from those expressed or implied. For additional information as well as reconciliations of the non-GAAP measures discussed today to the most directly comparable GAAP measures please visit our website and refer to our press release and SEC filings. With that, I'd like to turn the call over to John for opening remarks.

Thanks, Mary, and good afternoon, everyone. Today marks an important milestone for FedEx Freight as we report our first operating and financial results as a stand-alone company. Leveraging the strength of North America's largest LTL network and the dedication of our talented team, we delivered a solid quarter marked by disciplined execution across the organization and early progress against the strategic priorities we outlined at Investor Day. While we remain in the preliminary stages of our journey as an independent company, our first 4 months reinforce our confidence that the actions we're taking are strengthening the business and laying the foundation for long-term profitable growth as well as cash generation. Beyond our operational and financial performance, we continue to make steady progress on what remains our most important priority, and that is safety above all. So far this calendar year, we have delivered positive trends across all key safety metrics, including accountable injuries, lost time injuries, preventable accidents and [ DOT ] preventable accidents. These improvements are a reflection of the commitment and accountability of our team and highlight our focus on operating a safer, stronger business. And we have a lot of ground to cover today. And in addition to discussing our quarterly results, we will provide an update on the progress we've made since the separation, we will highlight key accomplishments across our operational, commercial and technology initiatives and share our expectations for the upcoming quarter. And as we look forward, we remain laser-focused on executing our clear and consistent strategy, strengthening our business and creating long-term value for all our stakeholders. To achieve this, our objective is straightforward for each and every quarter, deliver for our team, deliver for our customers and in doing so, deliver profit for our shareholders. Starting with our team, FedEx Freight once again earned top honors at the transportation industry's premier driver and technician competitions, reinforcing our culture of operational excellence. In total, our drivers and technicians captured 10 podium finishes. This includes 2 national championships and 7 top-3 finishes at the National Truck Driving Championships. While our technicians earn the TMC Supertech Grand Champion title and swept all the top 3 overall spots. Also during the quarter, 2 FedEx Freight drivers were selected to the Women and Trucking Image team, further recognizing the best-in-class team members we have at FedEx Freight. These achievements are about more than awards, they're about recognizing the exceptional people who help differentiate FedEx Freight each and every day. Also during the quarter, we launched our employee stock purchase plan in August, designed to drive collective ownership and responsibility across our organization. Participation has already exceeded our expectations, with nearly 14,000 eligible employees electing to become owners of this company. And finally, we further aligned our organization by bringing our technology and commercial teams together under Mike Rodgers. His focus will be on creating an integrated, customer-focused organization while maintaining our commercial momentum. Turning now to our customers. We delivered for our customers with 98% pick-up reliability and on-time service during the quarter. In addition to improving dependability, we continue to deliver better service quality with our claims ratio improving to just 0.43% during the quarter, and our claims filing frequency declining to 0.27%, both record lows. Customer feedback remains one of the most important measures of our progress. And the annual Mastio survey, which was released earlier this month, provides important perspective into how customers view our service. While our Net Promoter Store improved 150 basis points year-over-year, we recognize there is still substantial work to do. Despite significant transformation across the organization, this year's Mastio results demonstrate that we maintained a strong and reliable network and continue to make progress with customers. However, the survey also supports our belief that our greatest opportunity lies in further improving the customer experience. Building customer confidence and preference is a multiyear journey for us, not a 4-month effort, and we remain committed to making steady progress in the areas that matter most to our customers. Now the momentum we're seeing across our customer, service and operational metrics is important because these are the leading indicators of long-term financial performance and profit for our shareholders. During the 4-month period, volume and base yield trends continued to stabilize, reflecting a significant moderation from prior-year declines earlier in 2026. While broader freight conditions have shown signs of improvement, we are also encouraged that our commercial service and customer experience initiatives are also beginning to contribute positively to underlying performance. Additionally, the pricing actions we're taking should support future performance. Since June 1, we have successfully renewed approximately 25% of our contractual portfolio and achieved our strongest renewal pricing performance in recent years. Given that approximately 2/3 of our revenue is generated under negotiated customer pricing agreements, we believe our contractual renewal performance provides a meaningful support for future yield improvement. Separately, in September, we announced a 6.9% general rate increase, or GRI. That will become effective January 8 and apply to approximately 1/3 of our revenue base, and it is intended to appropriately align our pricing with the value of the service we provide all while supporting continued investment in the business and our long-term growth objectives. Taken together, we generated $3.3 billion in revenue, up 9% year-over-year, and $510 million in adjusted operating income, which is an increase of 16% versus the prior year. This translated into an adjusted operating margin of 15.5% for the 4-month period ended September 30. We also delivered adjusted earnings per share of $2.15 and generated approximately $239 million of free cash flow during this period. Now before Marshall walks through our operational and financial results, I'd like to share an update on our progress and discuss several early indicators that demonstrate the impact of our strategic initiatives. At our April Investor Day, we outlined a road map to enhance the customer experience, improve profitability and unlock significant opportunities we see across the business. As a reminder, our strategy is centered on 4 key priorities: optimizing our network, strengthening our commercial offering, advancing our technology capabilities and driving financial value creation. Collectively, these initiatives are intended to strengthen our market position, improve long-term profitability and create durable value for all stakeholders. So beginning with the first pillar of our framework, our network. While our status as a stand-alone public company is new, the strengths that underpinned our business are not. We entered this next chapter as the largest LTL carrier in North America, supported by the industry's fastest published transit times and most dense network. We also have a highly experienced workforce and a proven operating model built over decades. And since becoming an independent company, our operations teams have been executing with a renewed focus on high-quality, efficient and profitable service. One area where the focus is particularly evident is claims performance. As I noted earlier, we've made strong progress on improving our claims ratio. Since 2022, our claims ratio and claims filing frequency have each improved by approximately 20 basis points, reaching record performance levels of 0.43% and 0.27%, respectively. These improvements reflect continued gains in freight handling and operational execution, particularly when you consider the high value and mission-critical freight, our customers entrust with us every day. Importantly, our claims metrics are not adjust providing a transparent view of the quality, consistency and reliability of our service offering. Additionally, we continue to deliver strong service performance, achieving 98% pick-up reliability and on-time service. These results reflect disciplined operational execution across the network and reinforce our commitment to delivering the dependable experience that our customers expect from us. While we're pleased with these outcomes, we recognize there is more work to be done and see additional opportunity to further strengthen our performance over time. Another area of focus has been driving network efficiency. During the quarter, [ cube ] utilization improved more than 3% year-over-year, reflecting our continued progress with improving asset productivity. A key enabler of this effort is our dim and motion technology which captures dimensional data for more than 90% of the freight moving through our network. This capability allows us to manage operations not only based on weight, but also on capacity within our trailers. And as I'll touch on shortly, our technology modernization journey is embedding a more data-driven approach to all aspects of our operations, helping us make smarter productivity and capacity decisions across the business and ultimately unlock even greater network efficiency. The second pillar of our framework is delivering a leading commercial offering. And this is an area where we're increasingly encouraged by the opportunities ahead now that we have full control of our strategy. One of the most meaningful indicators of progress in this area is customer retention. During our first 4 months as a stand-alone company, we improved monthly net revenue churn compared to 2025, both with and without fuel. Now that's a significant accomplishment, particularly given the scale and complexity of the separation. Our customers not only stayed with us through a complex transition but did so at a higher rate, reflecting the strength of our service, network and the actions we've taken to better serve their needs. While we saw pockets of early commercial momentum during the quarter, our priority was retaining customers, maintaining service levels and successfully guiding customers through the separation. We view that effort as a necessary step and one that positions us well to pursue deeper penetration of attractive verticals and customer segments in the periods ahead. With the regional deployment of our sales organization now in place, and greater control over our commercial strategy as a stand-alone company, we are increasingly focused on expanding in higher-value customer segments where our network capabilities and unique offerings are especially differentiated. Another valuable marker for progress comes from the annual Mastio survey released earlier this month. While we still have work ahead of us, we are encouraged to see year-over-year improvement in 17 of the 28 attributes measured. In particular, we saw improvement in areas such as transit time consistency and competitiveness, billing accuracy and trustworthiness. These results provide early external validation that our customer experience initiatives are gaining traction and that the investments we're making are beginning to be recognized by our customers. What we find especially promising is that these improvements occurred during a period of significant change for our organization. The ability to maintain service levels, execute a successful separation and make measurable progress in key customer metrics simultaneously speaks to the dedication of our nearly 40,000 team members. At the same time, we're approaching these results with an appropriate sense of urgency. So I want to be clear, we view this year's Mastio results as an important benchmark, not a destination. The third pillar of our framework is advancing our technology capabilities. Our focus is deploying tools and solutions that improve the customer experience, enhance productivity and generate measurable returns on investments. One example of that progress is invoice accuracy. Looking at the most recent complete and comparable period, we delivered a roughly 200 basis point improvement in our first-time invoice accuracy over the prior-year period, driven primarily by process and structural simplification. Better invoice accuracy reduces friction, improves confidence in doing business with us and lower administrative cost and rework across the organization. We're also seeing encouraging results across our customer support function. First-call resolution significantly improved to 92%, meaning more customers having their issues resolved on the first interaction. This improvement has been driven by several actions, including enhanced agent readiness, simplified call routing, streamlined processes, improved tools and our transition to a dedicated nearshore support model. As a stand-alone company, our teams are now focused on a much more targeted customer base across 3 countries rather than supporting a global network. This focus allows us to provide LTL-specific support, better aligned with our customers' operating schedules and ultimately deliver a simpler and more responsive service experience. Looking ahead, we're equally excited about the opportunities technology creates across our operations. This month, we entered into a strategic alliance with Palantir, a leading provider of artificial intelligence and advanced analytics. This relationship is expected to expand our ability to leverage data and AI across our operations. Our goal is straightforward: significantly improved customer experience, make even better informed decisions, further improve productivity and enhanced network efficiency. Importantly, working with proven technology leaders allows us to accelerate deployment while reducing development risk. Rather than building every capability internally, we're leveraging best-in-class platforms to speed up our modernization efforts and position FedEx Freight to capitalize on the rapid advancements occurring in AI and analytics. While we are still in the early stages of these initiatives, we believe these investments gives us the opportunity not only to further modernize our technology stack, but to take meaningful steps forward in how we operate the business, serve our customers and drive long-term productivity improvements. Our fourth pillar is financial value creation, where the benefits of our operational, commercial and technology initiatives ultimately come together. To cover this, I'll turn the call over to Marshall, our Chief Financial Officer. He will discuss how these efforts are shaping our financial profile, review our quarterly performance in greater detail and provide our outlook for the fourth quarter and beyond. So Marshall, over to you.

Thank you, John, and good afternoon, everyone. The operational, commercial and technology progress that John discussed today is not occurring in isolation. Our objective is to translate those initiatives into stronger financial performance and ultimately, greater long-term value for our shareholders. During the period, we generated $239 million of free cash flow, demonstrating the strong cash-generating capabilities of the business in our first 4 months as an independent company. This cash generation provides us with flexibility and a strong financial position and puts us on a path to begin deleveraging sooner than originally anticipated. And with cash generated by the business, we reduced debt by $100 million during the quarter, bringing our gross leverage ratio to 2.8x. This action reflects our disciplined approach to capital allocation and demonstrates our commitment to maintaining a strong balance sheet and investment-grade financial profile. As a result, we remain firmly on track to achieve our goal of approximately 2.5x gross leverage within 12 months of the separation, as outlined at Investor Day in April. In addition, we continue to invest thoughtfully in our network and expect to complete the conversion of 3 service centers from leased to owned facilities in the coming days. These transactions will increase our ownership of strategic assets in important markets, which provides greater control over our network and enhance our long-term operating flexibility all while maintaining a disciplined approach to capital deployment. Looking ahead, we continue to build toward the introduction of a dividend and broader capital return framework in 2027, subject to Board approval. And we look forward to sharing more about our capital return priorities over time and how we intend to return cash to shareholders. Now before diving into the quarterly results, I'd like to make a few comments on the way we're presenting our performance. And as you know, this is a unique period as we transition to a calendar year reporting cycle. The results we're discussing today include the month of June, plus the quarter ended September 30, creating a onetime or a month transition period. To make comparisons easier, we've published both an 8-K and a stat book on our website that provide calendarized historical results, giving you a consistent view of our quarterly performance across 2024, 2025 and now 2026. We believe this provides a clearer basis for evaluating the business going forward. Now turning to the results. During our first 4 months as an independent company, and excluding the impact of fuel, our operating and financial performance was largely in line with the guidance and seasonality expectations we provided in June. From a revenue perspective, we were encouraged by several underlying trends. Average daily shipments were down only 1% from the prior year, reflecting continued improvement in demand trends and keeping us on the trajectory we previously outlined. In addition, revenue per shipment increased more than 10% year-over-year, benefiting from sustained higher fuel prices and modest improvements in both weight per shipment and base yield, providing further evidence of a stabilizing pricing and operating environment. As a reminder, changes in diesel prices can have a meaningful impact on our reported financial results. In periods of rising fuel prices, our fuel surcharge mechanisms generally provide a benefit to earnings and revenue. Now turning to adjusted operating income. Strong revenue growth was partially offset by 2 key factors. First, approximately $50 million related to performance-based compensation for our people, and second, nearly $30 million from ongoing transition services agreements. Turning to our outlook for the rest of the year. Our view of the underlying business remains broadly consistent with the framework and expectations we established following the separation. That said, we are raising our expectations relative to the adjusted outlook issued on June 25, reflecting solid performance over the last 4 months and a handful of tailwinds that I'll touch on next. For the fourth quarter, we expect revenue in the range of $2.3 billion to $2.37 billion, reflecting a year-over-year growth rate of 13% at the midpoint and modestly above the expectations we provided in June due to the dynamic fuel environment and slightly higher volume. The majority of anticipated revenue growth is expected to come from yield, supported by sustained higher fuel prices, stronger pricing strategies and focused sales efforts as a stand-alone company. Taking this revenue outlook into account, we expect to generate between $185 million and $205 million of adjusted operating income during the fourth quarter of the calendar year, implying an adjusted operating margin of approximately 8.4% at the midpoint, both significantly above our expectations provided in June. Higher yield is expected to contribute approximately 425 basis points, driven largely by fuel and, to a lesser extent, early benefits from pricing improvements. We also anticipate a modest volume-related tailwind of approximately 25 basis points relative to prior year, keeping us on track to finish the year slightly higher. These gains are expected to be partially offset by several factors. First, we expect an approximate 270 basis point headwind related to performance-based compensation for our people. And second, we anticipate an approximately 85 basis point headwind from ongoing transition services agreements. As we think about the trajectory of the business for calendar year 2027, it's important to recognize that we continue to work through several moving pieces associated with becoming an independent company during a dynamic period for the LTL industry. These include the fuel price and related demand environment, our exits of TSAs, the productivity and efficiency initiatives that John spoke about and offset by acceleration of stand-alone costs to support the business after TSA exits. Taking these factors together, we currently expect both revenue growth and adjusted operating margins in 2027 to remain broadly consistent with the medium-term framework we outlined at Investor Day. That means that our 2027 results would contribute positively to our 4% to 6% revenue CAGR and our 10% to 12% adjusted operating income CAGR, while remaining on track to achieve greater than $1 billion of free cash flow by 2029. We are finishing the review of our 2027 business plan and intend to quantify in greater detail when we discuss our thoughts regarding 2027 in January. And now let me turn it back to John for closing remarks, and then we'll be happy to take your questions.

Thanks, Marshall. As we conclude our first earnings call reporting our results as an independent company, I'd like to take a moment to reflect on how far we come in a relatively short period of time. Our strategy is not complicated. We are focused on delivering a superior customer experience, leveraging the scale and density of the industry's largest LTL network and translating those advantages into stronger growth, enhanced margins and attractive returns for shareholders. Since outlining that strategy, we've made modest but meaningful progress across our operational, commercial and technology initiatives. And we believe the foundation we're building today positions us well for the future. At the same time, we recognize there is significant opportunity still ahead of us, and we're focused on building momentum and executing with speed and discipline. So thank you to the employees of FedEx Freight for your continued dedication and hard work. We are excited about the opportunities ahead and remain confident that the best of FedEx Freight is yet to come. I want to thank you all for joining us today. Operator, please open the line for questions.

[Operator Instructions] Our first question will come from Brian Ossenbeck with JPMorgan.

Maybe just to touch on price and yield to start, kind of a 2-parter. Just to make sure, Marshall, I understood, we were talking about net yields going up 425 basis points in the fourth quarter. That sounded like it was mostly fuel. I wanted to make sure that was like a net impact and not just top line. It seems like it is. And then maybe, John, just a big picture on how you're pricing to the value of the service, which looks like it's improving now that we've got the historical data here. But if we look at Slide 6, it looks like yields have been on a downward trajectory and under pressure ex fuel for a little while, and I don't think that's related to the weight per shipment. So maybe you can give a little bit more context around that and why it should start to inflect more positively here.

Thanks, Brian. I'll take the first part there. Brian, when you look at the chart that we put in the investor deck on the yield improvement, the majority of that is fuel related. We also have expectations that our weight per shipment will contribute to that as well as base revenue or [indiscernible] growth. But the vast majority of that improvement is fuel related.

And Brian, when you think about why we feel good about the trajectory and how we're going up from a yield perspective, it goes back to the LTL-dedicated sales force. And I want to remind everybody, as we were going through and coming up to the spin, a lot of the time and effort was based on cultivating and making sure that we kept the business that we did have. And now we have transitioned into a hunting phase. And the other piece that we can talk more about it is the verticals that we are going after that we've never really focused on from a sales perspective from an LTL freight company. We're excited about the opportunity that we have in those verticals. So we feel like that now that we've repriced about 25% or so of our contracted business, we're already starting to see the progress from a yield perspective.

Our next question will come from Scott Group with Wolfe Research.

So a couple of things for you, Marshall. Raised the adjusted operating income and margin guidance but lowered the GAAP margin and EBIT guidance. Maybe just what's going on there? Is there any sort of shifting of costs between GAAP and adjusted? And then I just want to understand your comments about '27 being sort of in line with the long-term framework of double-digit sort of operating income growth. I know that's not like a hard guide. But like just like -- what exactly you're trying to sort of say about that point? And can you just maybe, just so we're all on the same page, like give us like a baseline based on the Q4 guide? Like what is the base operating income for calendar '26, just so we can all work off that.

Sure. No problem. I'll try and best address those. So in terms of the first question on adjusted OI to GAAP, the primary difference there is that we saw more IT-related expense that was not forecasted. So there's a forecast precision piece to that, that widened that gap. And also we have some additional acceleration of IT costs to accelerate our exiting of the TSAs. The combination of those leads to that difference in that widening of margin or op income between non-GAAP and GAAP. In regards to the question you have on 2027 in my prepared remarks, there. Let me just give you a little bit of color on what we were thinking there. And currently, as I said, we do expect revenue growth and adjusted op margins in 2027 to remain broadly consistent with our medium-term framework that we did lay out at Investor Day. So what does that mean? It means that we think 2027 will positively contribute towards reaching our medium-term guide that we gave, which is that 2029 perspective. We think there's going to be stronger operating leverage supported by continued pricing discipline and business mix. I think that's important with the leaning in of our highly efficient, dedicated local sales teams. We think that business mix of expanding the small medium space, which currently we're under-indexed on, will continue to yield good results in terms of yield improvement and also operating margin improvement. Quite a bit of productivity assumptions are in place, touching on some of the things John mentioned around the investments we're making there. And then the overall improvement in growing and leveraging the improved customer experience and enhancements with that and the stickiness and benefits that will come from that. So one of the things we did say as we were given our medium-term guide that you probably remember me saying is that we have an assumption of a fall-through rate of roughly 30%. We expect right now that we're going to be at or slightly better than that in 2027. So hopefully, that gives you a little bit of sense of where we're at there. And finally, just baseline, if you think about Q4 guide, and it's difficult to remove fuel from the equation because it just has so much interplay with the entire P&L that it's really difficult to isolate that and look at overall performance. But what we can say is that the momentum that we experienced in quarter 3, we expect to actually see that expand in quarter 4, which means continued growth in volume, continued profitability growth and volume and an expansion of revenue per [indiscernible] weight without fuel.

Our next question will come from Ken Hoexter with Bank of America.

John and Marshall and team, welcome to the public markets. You're at the start of your public life. John, I think in the prepared remarks, you mentioned some headwind on volumes at flat tonnage, slight decline in shipments per day. If you were priced 25% of the business and now there's still more to go, maybe talk about your view on what happens to volumes here. A lot of noise on fuel. I don't know if Marshall, if you want to [ pass ] in the thoughts on profitability of fuel and normalized pricing.

Okay, I'll start it out and Again, I'll go back to why we feel good about our momentum from an ADS perspective. When we talk about the LTL sales force that we have out there, and the -- when we think about all of the opportunities that we talked about in these verticals that we really haven't sold over the years, and as we get into this, we're already starting to see traction in some of these verticals. We're also seeing new business. And even though we're 4 months into the hunting phase, we feel really good about the opportunity to continue the momentum that we started building these first 4 months into the fourth quarter and beyond. And with that, I'll turn it over to Marshall.

Just one thing before I jump on the response to the last question you had there, Ken. It's important to note that our network is the best and the biggest in North America. And we're seeing quite a bit of traction and interest in what that means and can do for customers that are leveraging their supply chain and utilizing the backbone of our network to improve what they do for their customers. We think that we can actually see not only yield growth, but volume that comes with it. As you've heard us say, we are about generating profitable growth. And right now, that medium-term thought is that's going to be yield-based growth expectation. The volume is going to come with it. So we're not banking on significant volume to play in the equation to get where we need to go. But we're starting to see green shoots of customer wins where they're bringing in a significant amount of their supplier base into our portfolio. And with that does come potential incremental ADS. To your question around fuel and its profitability, again, really difficult to try to separate that. We did call out in our prepared remarks, so you can see in the investor deck that we're really pleased to be able to pass back to our workers and our hourly workers, about 95% of our variable comp increase driven primarily by this higher fuel is being passed and returned back to our employees. We think that's really important because you think about the overall market today, the capacity constraints, the ability to retain and attract and grow our employees and having this be one reason that allows them to continue to be recognized for the work they're doing. And then to also piggyback that with what John said, the [ CSPP ] program is fantastic, having over 14,000 employees sign up. That's 40% of our workforce, having employees that actually are owners of the company, to us, is just a great combination for the organization.

Our next question will come from David Vernon with Bernstein.

So John, I appreciate the commentary around the strong pricing renewals. But when we look kind of at the numbers kind of ex revenue per hundredweight, it only increased like 40 bps or so. When you think about kind of what's going on underlying there, the weight or mix, when do you think the strong renewals you're seeing in the field are going to show up actually in the reported results?

Well, thanks for the question, David. When you think about the timing, and I'll go back, we're 4 months into this thing after the June 1 span, and again, we are talking about the opportunities that we have in these verticals like retail, technology, industrial, aerospace, automotive and data center-related businesses, that's where we feel like that we're just getting our toe in the door and starting to penetrate these verticals that we told you we were going to go after. Also, I think what's very important too is the small and medium business, which is our most profitable group that we haul, we're underpenetrated there. And we feel like that we've got a lot of opportunity there as well. So I feel like that we've built some momentum in the short amount of time in the third quarter, but we'll see that continue to improve as we go through the fourth and into 2027.

And David, I would just highlight to you on Page 6 of our investor deck, there's a really good slide on the right-hand side that shows, I'll call it, the demise of where we had been from a yield perspective from 2024 through 2026, and there's a slow decline of yield. So it took a while for us to lose it. It's going to take a while for us to gain it. We're back in the positive ground. It's just will take some time to get that back. The other thing that I'll just touch on that John mentioned is our GRI is coming out in January. There's something a little bit different this year, and that is that we've got a sales team that's embedded within the regions. And a lot of times, the stickiness of GRI is when you have the interaction with the customer and the sales rep, that begins that ability to have a conversation. We understand that the GRI doesn't completely stick, and it kind of -- you lose traction over the period of months. But having that stickiness and ability to use that sales relationship to allow there to be a conversation to hold some of that yield for longer periods of time, I think, is going to be a benefit and does help further add to our confidence in the yield growth in '27.

Our next question will come from Stephanie Moore with Jefferies.