Schneider National Q1 2025 Earnings Report

Schneider National EPS Results

• Actual EPS: $0.16
• Consensus EPS: $0.14
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $0.11

Schneider National Revenue Results

• Actual Revenue: $1.40 billion
• Expected Revenue: $1.43 billion
• Beat/Miss: Missed by -$28.22 million
• YoY Revenue Growth: +6.30%

Schneider National Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 10:30AM ET

Schneider National (NYSE:SNDR), together with its subsidiaries, provides surface transportation and logistics solutions in the United States, Canada, and Mexico. It operates through three segments: Truckload, Intermodal, and Logistics. The Truckload segment offers over the road freight transportation services primarily through dry van, bulk, temperature-controlled, and flat-bed trailers across either network or dedicated configurations. The Intermodal segment provides door-to-door container on flat car services through a combination of rail and dray transportation using company-owned containers, chassis, and trucks. The Logistics segment offers asset-light freight brokerage, supply chain, warehousing, and import/export services to manage and move its customers' freight. The company leases equipment, such as trucks to owner-operators; and provides insurance for the company drivers and owner-operators. Schneider National, Inc. was founded in 1935 and is headquartered in Green Bay, Wisconsin.

Schneider National Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Thank you. I'd now like to turn the call over to Steve Bindis, Director of Investor Relations.

[Operator]

You may begin.

[Steve Bindas, Director of Finance - IR at Schneider National]

Thank you, operator, and good morning, everyone. Joining me on the call today are Mark Wark, President and Chief Executive Officer Daryl Campbell, executive vice president and chief financial officer and Jim Filter, executive vice president and group president of Transportation Logistics. Earlier today, the company issued an earnings press release. This release and an investor presentation are available on the Investor Relations section of our website at schneider.com. Our call will include remarks about future expectations, forecasts, plans and prospects for Schneider.

[Steve Bindas, Director of Finance - IR at Schneider National]

These constitute forward looking statements for the purposes of the Safe Harbor provisions under applicable federal securities laws. Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties discussed in our SEC filings, including, but not limited to, our most recent annual report on Form 10 ks and those risks identified in today's earnings release. All forward looking statements are made as of the date of this call, and Schneider disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, a reconciliation of any non GAAP financial measures referenced during today's call can be found in our earnings release and investor presentation, which includes reconciliations to the most directly comparable GAAP measures.

[Steve Bindas, Director of Finance - IR at Schneider National]

Now I'd like to turn the call over to our CEO, Mark Rourke.

[Mark Rourke, CEO, President & Director at Schneider National]

Thank you, Steve, and hello, everyone. Thank you for joining the Schneider call today. For our prepared remarks, I will start by providing an update on our commitment to drive ongoing structural changes in our business to restore margins, improve freight cycle resiliency, enable growth, and enhance financial returns for our shareholders. Within that context, I will share my perspective on the freight market and positioning and performance across our multimodal platform of truckload, intermodal, and logistics. Daryl will then provide a financial overview of the first quarter results and share our updated 2025 earnings per share and net capital expenditures guidance.

[Mark Rourke, CEO, President & Director at Schneider National]

Then we'll take your questions. Let me start by outlining our actions to structurally improve the business. We are following a framework based on four equally important tenets. The first tenant is to optimize capital allocation across our strategic growth drivers of dedicated truck, intermodal, and brokerage and logistics. In December, we acquired Cowen Systems, a dedicated services carrier.

[Mark Rourke, CEO, President & Director at Schneider National]

The first quarter of twenty twenty five was our first full quarter with Cowen included in our results. Their contributions were immediately accretive, and we expect to achieve between 20,000,000 and 30,000,000 of synergies at maturity. Dedicated averaged over 8,500 trucks in service in the quarter, up 27% from over a year ago. Dedicated represents 70% of truckload segment trucks and 71% of revenue. Truckload earnings improved nearly 70% year over year and 27% sequentially from the fourth quarter of twenty twenty four.

[Mark Rourke, CEO, President & Director at Schneider National]

Looking forward, we have line of sight in the second and third quarters to elevated churn because of select dedicated operations moving to network based solutions in the current environment and a more competitive landscape. Overall, our dedicated retention rate remains in the low nineties. We will also be taking out trucks as a result of our asset efficiency actions to lower our truck to driver ratio even further. Our dedicated new business pipeline is trending to more than replace the churn, but net truck growth is projected to be lower than originally expected. The second tenet is to manage the customer freight allocation process with purpose and discipline.

[Mark Rourke, CEO, President & Director at Schneider National]

By carefully selecting and managing our freight pool, we can ensure we are serving our customers effectively and profitably. As the quarter concluded, we are about one third through the contractual renewal period in both truck network and intermodal. The market remains highly competitive with truck network achieving low to mid single digit percentage increases. And to maintain price discipline, we are foregoing volume with some shippers. We are seeing an increase in number of shipper mini allocation events to address carrier turnbacks or performance issues arising from the initial event outcomes, which gives us confidence in our strategy.

[Mark Rourke, CEO, President & Director at Schneider National]

The improvement in revenue per truck per week in both truck network and dedicated was 2%, which is more than a % price driven as asset productivity was impacted by first quarter weather events. Turning to intermodal contract renewals. We are pleased with the current trend of increased volume allocations, primarily in geographies where we have positive differentiation that fits well within our network. Overall intermodal rates remained largely flat year over year. The third tenant is delivering an effortless experience by making it easy for customers to work with us by providing optionality and value across our multimodal platform.

[Mark Rourke, CEO, President & Director at Schneider National]

We have gained market share with new customer awards by combining elements of our portfolio to sole source facilities and or geographies. This is particularly effective for industry leading value retail customers as well as those in the food and beverage industry. These sole source awards dramatically lower operational complexity for shippers while bolstering our network operations through increased freight density. Looking forward, there is a bull case based upon generally resilient macroeconomic numbers to date with stable demand and capacity continuing to exit the market. We do note that forward sentiment for customer freight demand and consumer health is less clear, particularly as tariff driven uncertainty builds.

[Mark Rourke, CEO, President & Director at Schneider National]

As a result, the continued rising momentum on price recovery is also less certain. The last tenant is containing costs across all expense categories. Cost containment is critical to our overall business strategy as it enables us to reinvest in growth initiatives and enhance our competitive position and margins. We have established targets of more than 40,000,000 of additional cost reductions across the enterprise. The cost savings mandate encompasses ongoing investments in AI based digital assistant technologies and the more transformative digital employee models.

[Mark Rourke, CEO, President & Director at Schneider National]

These advancements enables us to automate routine task, freeing up associates to focus on more meaningful work higher in the value chain. Beyond identified cost savings opportunities, we are evaluating the potentially meaningful impacts of tariffs on the original equipment costing, repair parts availability and cost as well as overall equipment maintenance expense. Switching now to perspectives on the freight market and on positioning and performance of our multimodal platform. Our first quarter results were in line with our expectation despite weather impacts and growing economic uncertainty. Each of our primary segments grew revenue, earnings, and margins year over year.

[Mark Rourke, CEO, President & Director at Schneider National]

In truckload, both network and dedicated delivered improved earnings year over year and sequentially driven by cost containment actions and improved freight pricing from second half of twenty twenty four through first quarter of twenty twenty five contractual renewals. We aim to transition to more variable cost model and network by expanding owner operator relationships to supplement our company driver fleet. This shift is taking longer than expected as operating and financial conditions are prompting more owner operators to exit the industry. Turning to intermodal. We nearly doubled earnings compared to a year ago on 4% order growth driven by increasing shipping activity in the West Of Mexico.

[Mark Rourke, CEO, President & Director at Schneider National]

We have visibility to a portion of our customers taking freight pull ahead actions in the face of tariff uncertainty. Our year to date success in new business awards is expected to reduce the overall future volume variability due to trade policy. Logistics improved earnings 50% year over year as our freight power for shipper and carrier digital technology allows us to remain nimble to changing market dynamics across both less than truckload and truckload modes. Overall, brokerage freight volumes are challenged as shippers continue to favor asset based solutions. Power only grew volumes mid single digits compared to a year ago as shippers and carriers value the simplicity and access of matching qualified small carriers to large trailer pull shippers.

[Mark Rourke, CEO, President & Director at Schneider National]

In summary, we are focused on the areas we control while maximizing our strategic differentiators. Within our locus of control is containing cost, maintaining price discipline, and outperforming our competition commercially. Our strategic differentiators are unique across our four dedicated brands of Schneider, Midwest Logistics Systems, M and M Transport, and now the lightweight equipment solution powerhouse, Cowan Systems. Our asset based company Dre, Chassis, and Container Intermodal offering, combined with our strong rail relationships with the CSX, Union Pacific, and CPKC creates reliable and valued solutions for intermodal shippers. Plus, our consistently profitable logistics offering enabled by our freight power platform and market leading power only capability remains a meaningful asset light strategic contributor to the enterprise.

[Mark Rourke, CEO, President & Director at Schneider National]

So let me now turn it over to Daryl for his insights on the first quarter and our 2025 guidance. Daryl?

[Darrell Campbell, Executive VP & CFO at Schneider National]

Thank you, Mark, and good morning, everyone. I'll review our enterprise and segment financial results for the first quarter and provide insights in our updated full year 2025 EPS and net CapEx guidance. Summers of our financial results and guidance can be found on pages 24 to 30 of our investor presentation available on the Investor Relations section of our website. Starting with the first quarter results, enterprise revenues excluding fuel surcharge were $1,260,000,000 up 8% compared to a year ago. Adjusted income from operations was $44,000,000, a 47% increase year over year.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Enterprise adjusted operating ratio improved 90 basis points compared to the first quarter of twenty twenty four. Adjusted diluted earnings per share for the first quarter was $0.16 compared to $0.11 last year. Through a combination of our disciplined actions that we've taken on revenue management, cost containment, and productivity, we delivered year over year improvement in our enterprise results and across all our reportable segments. From a segment perspective, truckload revenues excluding fuel surcharge were $614,000,000 in the first quarter, '14 percent above the same period last year. This increase was primarily due to the acquisition of Cowen and higher dedicated and network revenue per truck per week, partially offset by lower network volumes.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Truckload operating income was $25,000,000, up nearly 70% year over year due to the same factors that shaped revenues. Operating ratio was 95.9%, an improvement of 130 basis points compared to first quarter twenty twenty four. Truckload network margins improved year over year for the first time since the first quarter of twenty twenty two due to continued improvements in price and ongoing actions to reduce variable input costs. Intermodal revenues excluding fuel surcharge were $260,000,000 for the first quarter, '5 percent above the first quarter of twenty twenty four due to volume growth and increased revenue per order. Intermodal has grown volumes year over year for four consecutive quarters.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Intermodal operating income was $14,000,000, an increase of 97% compared to the same period last year due to the same factors driving revenues in addition to enhanced operating leverage from network optimization, great productivity, and internal cost reduction actions. Operating ratio was 94.7%, an improvement of 250 basis points compared to first quarter twenty twenty four. Logistics revenues, excluding fuel surcharge, were $332,000,000 in the first quarter, '2 percent above the same period a year ago due to our acquisition of Cowen, partially offset by lower revenue per order. Logistics' trend of profitability continued with operating income of $8,000,000, up 50% compared to first quarter twenty twenty four. This was primarily due to effective net revenue management and the continued strength of our power only offering.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Operating ratio was 97.6%, an improvement of 70 basis points compared to first quarter twenty twenty four. As of 03/31/2025, we had $577,000,000 in total debt and finance lease obligations outstanding and cash and cash equivalents of $106,000,000. During the quarter, we used the remaining availability under a delayed draw term loan facility executed in November 2024 to repay current debt maturities. Our net debt leverage was 0.8 times at the end of the quarter. Turning to capital allocation.

[Darrell Campbell, Executive VP & CFO at Schneider National]

In the first quarter, we paid $17,000,000 in dividends and opportunistically repurchased $8,300,000 of shares. We have $46,000,000 remaining on our $150,000,000 share repurchase program that was established in February 2023. Net CapEx was $97,000,000 compared to $112,000,000 last year due to reduced purchases of transportation equipment and other property and equipment. Free cash flow increased approximately $9,000,000 compared to the same period in 2024. We continue to manage our fleet age within our targeted ranges and invest in technology to drive business insights and associate productivity.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Moving to our updated full year 2025 guidance, our adjusted earnings per share guidance for the full year 2025 is $0.75 to $1 which assumes an effective tax rate of 23% to 24. We also updated our net CapEx to be in the range of $325,000,000 to $375,000,000 for the full year from $400,000,000 to $450,000,000 previously. In constructing our revised outlook for the full year, we consider the current trade policy and increased economic uncertainty and the resulting moderating impact on both price and volume. In addition, we considered our continuous efforts across all our segments to restore margins through contract renewal improvements, asset efficiency efforts, ongoing cost containment measures, offset by volume and price trends by segment as the quarter progressed. The combination of these factors has tempered our expectations regarding the level of earnings improvement for the remainder of the year.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Although lower, we expect continued year over year improvement in results through 2025. For our Truckload Network business, we continue to deliver year over year pricing improvements as spot price declined through the first quarter. Due to the current environment, we now expect more moderate pricing improvements for the remainder of the year and lower volumes and capacity growth compared to our expectations in our previous guidance. We anticipate continued resilience of our dedicated business, prices in line with our previous guidance. And while we expect positive net capacity additions in 2025, we have lowered our expectations for fleet growth due to the churn that Mark mentioned.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Also, as a reminder, our focus on asset efficiency will remove tractors and be reflected in our 2025 net tractor growth. For intermodal segments, we expect continued volume growth and moderate pricing improvement for the remainder of the year. Our guidance also factors in recent new business wins, which are expected to offset the near term impact of trade policy on freight volume. Our logistics segment outlook incorporates continued year over year improvements in net revenue per order. And similar to our truckload network business, we expect the improvement to be less pronounced for the remainder of the year as spot pricing continues to moderate.

[Darrell Campbell, Executive VP & CFO at Schneider National]

We also expect lower volumes and more muted seasonality. Turning to net CapEx. Our guidance assumes continued allocation of capital to organic growth in dedicated and intermodal tractors and also reflects alignment of growth CapEx with current business and economic expectations. In addition to the volume effect on our CapEx expectations, the cost of equipment is also impacted by current trade policy. Currently known cost increases are included within our CapEx guidance with a partial offset resulting from improved equipment sale proceeds.

[Darrell Campbell, Executive VP & CFO at Schneider National]

While not contemplated in our guidance, the strength of our balance sheet also positions us to act opportunistically as we continue to explore inorganic growth opportunities. In closing, we've continued to execute against our plan to structurally position our business to demonstrate resiliency and grow in all cycles through our commercial, cost, asset efficiency, and capital allocation actions. These efforts have allowed us to deliver through uncertainty and to be in a position to capitalize on our enhanced operating leverage. With that, we'll open the call for your questions.

[Operator]

Thank you. We will now begin the question and answer session. Your first question comes from the line of Brian Ossenbeck from JPMorgan. Your line is open.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Hey, good morning. Thanks for taking the question. I guess maybe if you guys could give us a little bit of context considering your unique position in the market. What are you seeing when it comes to the expected deceleration of imports? Obviously, don't move international boxes, but that stuff is all connected.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

So maybe what are you seeing and hearing from customers? And what is sort of contemplated in the updated guidance? Thanks.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. Brian, this is Jim. Thanks for the question, this morning. So it's it's it's really important that we're staying close to our customers as we go, through this and that we're remaining nimble and offering broad solutions. You know, as we look at our across our business segments, we look at truckload and logistics sectors, it's primarily North America orientated, so, you know, difficult to quantify the impact there.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

When we look at intermodal, it's approximately 15 to 25% of our businesses is tied to imports. And, you know, that's from a variety of different origins, so it's, not all related to China. And and we do expect that there is going to be, some drop off in volume in the intermodal business, but we expect that our new business wins in intermodal that that Mark spoke of a largely offset, what we're, anticipating from imports, declining. But we'd also say that, you know, we we do believe that the conditions are ripe for a a bullwhip. It appears that imports may be dropping faster than consumer demand, and a lull in shipping could be the catalyst that removes additional capacity from the market.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And if there were new trade agreements, there could be an abrupt restart to imports with less capacity than there is today. And so that's not our our forecast, but that could be the bull case that Mark spoke of. And so, you know, we're we're gonna stay focused on two priorities as, you know, staying close to our customers, being nimble, offering those broad solutions. But the second is focusing on what we control, within each one of our sectors, the the four tenets that Mark spoke of.

[Darrell Campbell, Executive VP & CFO at Schneider National]

And, this is Daryl. I guess I'll just add some perspective, on the outlook, you know, specific as it relates to intermodal. So we we did look at various scenarios, similar to what, you know, Jim was referring to regarding the duration of the, you know, trade policy impacts and also the magnitude, you know, of what happens during that uncertainty and also when uncertainty clears. From an intermodal perspective specifically, there there was some impact, of the tariff policy on the volumes that we saw, but we have continued to see strength and improvement in volume year over year, for the past four quarters now. So even though there is some impact of tariffs and we've con contemplate that within our guidance, the new business wins that we've had are expected to offset any potential impact in the in the near term.

[Darrell Campbell, Executive VP & CFO at Schneider National]

So that's built into our our guidance, as a a matter of pricing, we think pricing, is gonna moderate some at least in the near term and that's factored in, to our guidance even though we expect year over year improvement, across the board.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Alright. Thanks for that. Maybe this is a follow-up on the new business wins within intermodal. Jim and Mark, can you kind of characterize where those are, what type of volume, when they ramp up? Is this something with the cross border with CPKC that seems to be taking off pretty well?

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

And then I guess similar question on the dedicated where maybe it's a little bit more competitive, where some of that pressure coming from? And sort of what are you doing to offset that to the extent you can? Thank you.

[Mark Rourke, CEO, President & Director at Schneider National]

Brian, I think that's four questions maybe and then I

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

would get my money's

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

worth.

[Mark Rourke, CEO, President & Director at Schneider National]

First, you know, we think we had a very first we had a very good first quarter from our view on our commercial success in the market relative to what we call our differentiation in a big in intermodal with where our strengths really are and fit our network really well. Now, of course, awards do not mean freight just yet. The customer has to have the freight, and the the market has to deliver, the volume from those awards. And so that's still yet in front of us.

[Mark Rourke, CEO, President & Director at Schneider National]

So we don't have many of those implemented yet, but, we would expect to start implementing here in the second quarter in a more meaningful way. And, and it's really across the board, Brian. Certainly, Mexico has been a strength for us. And and Jim will give maybe some just additional color relative to what's covered with the tariffs and what's not. So how durable could that volume be?

[Mark Rourke, CEO, President & Director at Schneider National]

But but we're we're pleased across the board. And, again, that gives us some confidence that we can withstand perhaps some of the trade price. But it all come down to magnitude, duration, and timing, which is uncertain for us going forward, but we've tried to give our best assessment and best insight into the market based upon what we see today. And that would be the intermodal. And so, Dijon, maybe just some comment relative to to tariff in Mexico and and some of the strength we're seeing there.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. Two areas where we, in particular, have seen nice growth in intermodal. Mexico being one of those, and and we feel very good about our the wins that we've had. There is virtually all the goods that we're shipping cross border are compliant with USMCA, which are currently exempt from tariffs, and and we have a lot of differentiation in that product. It's having the we're aligned to the only railroad that it's a single line railroad that brings you up to the both the Midwest and to the Southeast US.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

That's all asset based and are really excellent execution within Mexico. So that's been a big differentiator for us. And then the second one is really providing broad solutions customers, and Mark spoke of that in the opening to be able to combine what we do in our our intermodal business along with our truckload business dedicated in logistics, to provide a broad solution because customers understand that know, there's some variability here, and you need to have some different outlets. And and that's really where we've had a lot of strength. Going to your your second or fourth part of your question related to to dedicated where we've seen the most most competitive environment would be in more of the standard type of equipment where customers may be taking a little bit more of a a short term view.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And so we're really focused on where we have the greatest differentiation, would be areas like private fleet conversions, specialty equipment, refrigerated, and we see all three of those pipelines very strong.

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. 53 standard trailer, most

[Mark Rourke, CEO, President & Director at Schneider National]

competitive.

[Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan]

Great. All right. Thanks Mark and Jim. I appreciate it.

[Operator]

Your next question comes from the line of Chris Wetherbee from Wells Fargo. Your line is open.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Hey, thanks. Good morning guys. Daryl, you noted that I think I caught on the guidance conversation. You mentioned growth in over the course of the year. I don't know if that's each one of the quarters and then specific to 2Q.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Do you think that you can get EPS growth on a year over year basis for the entire year quarter by quarter?

[Darrell Campbell, Executive VP & CFO at Schneider National]

So we typically don't give guidance by quarter. So the the comments that I made were in the context of the remainder of the year. So as it relates to remainder of the year, we expect to have year over year growth, in price and in margin. But we don't get to that level in terms of giving quarterly guidance.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Okay. That's helpful. I just wanna make sure I understood and clarified what what you said there. And then I guess when you think about the dedicated churn what you guys were just noting there, obviously some parts of the market a little bit more competitive. You said it might slow down kind of the fleet growth.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Can you give us a sense maybe what you expect over the course of the

[Chris Wetherbee, Senior Analyst at Wells Fargo]

next several quarters in terms of

[Chris Wetherbee, Senior Analyst at Wells Fargo]

that net fleet growth kind of the net of the churns as well as some of these new business wins that you guys are going after?

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah, Chris. So, really, we we got a few few things that are, perhaps moderated from our initial, discussion, for the full year guidance that we did originally. And first of that is the insight to some of the churn. We still have a very good pipeline. We expect to fully cover the churn, but we also now with Cowen with the first full quarter and some of the other actions that we've been able to take within our dedicated portfolio or expected to take, that we can drive more efficiency into our various account structures there by have more slip seating, more tractor sharing, a number of things that we think we can drive more efficiency that'll come out of the the net tractor, but it'll come out because of efficiency, not because of any, you know, negative commercial fallout.

[Mark Rourke, CEO, President & Director at Schneider National]

So the combination of those two things, we believe, will be accretive to growth and and offer our first quarter numbers as it relates to total tractor count in Dedicated, but it won't be as pronounced as our original guidance.

[Chris Wetherbee, Senior Analyst at Wells Fargo]

Okay. That's very helpful. Thanks very much. Appreciate it.

[Operator]

Your next question comes from the line of Jason Seidl from TD Cowen. Your line is open.

[Jason Seidl, Managing Director at TD Cowen]

Thanks, operator. Good morning, gentlemen. Can you talk a little bit on the Dedicated side about how we should look margins? I mean, obviously, there's some churn going on. You're bringing on some new business.

[Jason Seidl, Managing Director at TD Cowen]

Is this new business that you're bringing on at better margins than the churn?

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. We have a profile for returns in dedicated, and so we're we're not necessarily compromising on our expected margin returns there. As we've talked in truckload, more than a % of our earnings are coming out of dedicated in the truckload segment in the short term as we are working to restore profitability in the network side, Jason. So so very comparable. We have very consistent methodology that we use relative to the solutions that we bring on behalf of our customers in Dedicated.

[Mark Rourke, CEO, President & Director at Schneider National]

So we wouldn't consider them necessarily margin eroding or materially margin enhancing. It's consistent with our profile.

[Jason Seidl, Managing Director at TD Cowen]

Okay. That makes sense. As a follow-up on the pricing side, I mean, obviously, the expectation is to see pricing moderate. You said before you're getting sort of low to mid single on the truckload side. If that moderates, I'm assuming we're looking at sort of flat to low single digits somewhere.

[Jason Seidl, Managing Director at TD Cowen]

And I guess my next question is to get to a more normalized state in truckload pricing, how many bid cycles will it take now, that we're seeing sort of pricing erode and, you know, and your costs still aren't sort of falling off a cliff. You're still seeing some increased cost, you know, when you whether you look at, you know, drivers or whether you look at insurance or anything like that.

[Mark Rourke, CEO, President & Director at Schneider National]

Sure, Jason. This is Mark. I'll offer some some initial thoughts. And certainly, as it relates to cost, we've been very diligent and, virtually, every one of our expense pools are looking for opportunity. We've made solid progress, and we have the teams fully aligned on how we can continue to get after improved cost position because it enhances both our margin profile, but also our competitive positioning.

[Mark Rourke, CEO, President & Director at Schneider National]

We've also seen and I believe we have been through the bottom of pricing market and have shown consistent improvement even in our network business now for several quarters. And the uncertainty going forward, I think one of the things about tariffs, not only is there some volume uncertainty, but does that start to, impact pricing in the short term? It looks like it may impact spot pricing initially, and and we'll see what what transpires from there. But I still think we have pricing opportunity. We're gonna remain disciplined.

[Mark Rourke, CEO, President & Director at Schneider National]

We've been shown we showed it in the first quarter. I still think we'll continue to have progress as we go through the year. And that commercially, that's what we're focused on.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And this is Jim. Just one add on. We are seeing a a additional mini allocation events occurs shortly after we close out other allocations. So it just reinforces the strategy that we're taking as well as, you know, we've we've we've found that bottom of the market, and there's it's just not sustainable at rates that are below where we are today.

[Jason Seidl, Managing Director at TD Cowen]

And are are you guys seeing more carriers come out of the marketplace in in any increased capacity?

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. I think, it's been a steady drumbeat. And, you know, we see it both in the small owner operator, but we also see it through our brokerage business and our channel checks relative to the stress of those who are granting credit in this arena. So, Jason, if there could be one pause I don't know if there can be a positive with all the uncertainty. Does that drive and ex Understood.

[Mark Rourke, CEO, President & Director at Schneider National]

Accelerate the exit. But, yeah, we we we haven't seen any signs of stabilization. It's been a slow trend downwards.

[Jason Seidl, Managing Director at TD Cowen]

Appreciate it. And sorry for sneaking an extra one there on you.

[Mark Rourke, CEO, President & Director at Schneider National]

We're off our game this morning on that. Pleased to get that, yes.

[Operator]

Your

[Operator]

next question comes from the line of Ravi Shanker from Morgan Stanley. Your line is open.

[Ravi Shanker, Managing Director at Morgan Stanley]

Great. Thanks. Morning. I hope the question enforcement doesn't start now. But maybe just to follow-up on the pricing commentary there.

[Ravi Shanker, Managing Director at Morgan Stanley]

How do you even have pricing conversations in an environment like this, where we're looking at polar opposite outcomes of a cliff versus a bullwhip in the next few quarters? I mean, do you need to pull out a pandemic playbook here and maybe even push out bid season or talk about short term contracts kind of yes, how do both sides of the

[Ravi Shanker, Managing Director at Morgan Stanley]

table kind of even come together?

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Ravi, this is Jim. Thanks for the question. It's really important times like this that we're stating our assumptions with our customers, as we're going through, an allocation event, that we're we're we're sharing. This is the way that we're looking at the market. This is our assumptions.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

So if if we happen to be wrong, we're positioned well to come back and and have a further discussion in terms of how we're positioning our organization as well as the customer is able to turn back to their organization and and explain the actions that they're taking.

[Ravi Shanker, Managing Director at Morgan Stanley]

Got it. Understood. And maybe, the the lack of near term clarity potentially could make you look longer term as well. We had, Aurora announced this morning that they have started commercial revenue generation with autonomous trucks on public roads in Texas. Is that something that will you take another look at that?

[Ravi Shanker, Managing Director at Morgan Stanley]

Kind of is that an important catalyst? Kind of how do you think about potentially taking advantage of this maybe kind of little bit of air pocket coming to think about long term opportunities here?

[Mark Rourke, CEO, President & Director at Schneider National]

Sure, Ravi. This is Mark. Yeah. Yeah. We have a great deal of respect for the leadership and the capability that Aurora has built.

[Mark Rourke, CEO, President & Director at Schneider National]

And we've been engaged with them for a number of years now and are currently hauling a series of lanes in Texas, presently with safety driver in. But, yeah, that that's something that we've continued to stay close, be clear what we believe our use cases can be there as that technology continues to develop. But congratulations to them. We're fine organization, and and we'll continue to look for those opportunities that make sense for us and our customers.

[Ravi Shanker, Managing Director at Morgan Stanley]

Wonderful. Thanks guys.

[Operator]

Your next question comes from the line of Tom Wadewitz from UBS. Your line is open.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Yes, good morning. So Mark, yes, hi. I wanted to get some thoughts. I think when you were talking about I'm not sure if it was dedicated, I think it was we're talking about like increasing use of owner operators to make it more asset light. I guess I mean, it makes sense, and I I think, you know, my understanding is you guys have a very strong system for, you know, building the owner operator base and and attracting owner operators.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

But I just wonder, is that a stable enough source of capacity? It seems to me like when you see the downturn, the owner operator capacity is a bit less stable than what you get with the kind of company trucks or company drivers. So I don't know, I guess just thoughts on that. And is that something that you, over time, really want to swing it in a big way to owner operator capacity? Just thought that was a topic to drill down on a little bit.

[Mark Rourke, CEO, President & Director at Schneider National]

Sure. Sure. And and, Tom, the the question really the response there was more on the network side of our business is where we deploy a a series of of capacity types. First, we have a very core company driver capacity that sits at the core of our network offering. But as we look at the current returns and the ability to where we want to put our strategic investments, we are looking to use more asset light supplement to our core drivers, which our core company drivers, which is not only owner operators, but it's also where our power only offering adds a great value to the customer as well, which is small companies coming in support of the network business.

[Mark Rourke, CEO, President & Director at Schneider National]

So we have the levers to pull across all three of those. And as mentioned in my opening comments, the owner operator difficulty today, I think, is just a represents where the market is and the difficulty they have presently to based upon the demand, pricing environment, etcetera. So one of the advantages coming to a company that has quality customers, has quality demand, has the trailer fleet and the ability to help with cost mitigation around fuel, cost mitigation around insurance and other about channel insurance and some other items. And so so we think we do have a value proposition, although that part of the market is under a good deal of stress. But it's not all in one category or another.

[Mark Rourke, CEO, President & Director at Schneider National]

It's it's the complementary nature of company owner operator and power only to serve our network needs.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Okay. Yeah. That makes more, more sense than dedicated. Okay. Thank you.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

When we think about capacity attrition and I look at some of the results of the big carriers, you know, big, really well run carriers, you know, like yourself that that are are not running profitably in network, and there's some other big players in the in the same situation and and maybe maybe tougher. It's just it's surprising some of the resilience of small carriers or broader industry capacity. So do do you think that, like, the big carrier versus small carrier, dynamic has changed that maybe small carriers have reasons they can hang in better than you would think? Because you normally think, you know, big carriers have advantages. Technology, obviously, driver recruiting various things.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

But it just seems like given all the pressure in the big carriers, wouldn't you see a lot more capacity attrition with the small guys? So any thoughts on that question? Thank you.

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. I think certainly the the correction in capacity has been a bit more stubborn this time, but it's occurring, and it's occurring just at a slower rate than we have have typically seen, Tom. So, you know, I do believe still with that the big carrier has the advantage that you said that you mentioned there, particularly with the trailer pool networks and the things that we do on behalf of our customer community. But, also, there's there's more technology available, more price discovery. There's there's just more information available to all participants across the supply chain.

[Mark Rourke, CEO, President & Director at Schneider National]

So and I think that might be one of the changing dynamics. But the fundamentals of of having enough revenue to cover your cost base is still paramount, and I think that's why we continue to see the downward trend in capacity.

[Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC]

Right. Okay. Thank you.

[Operator]

Your next question comes from the line of Scott Group from Wolfe Research.

[Scott Group, MD & Senior Analyst at Wolfe Research]

So

[Scott Group, MD & Senior Analyst at Wolfe Research]

just one more on price. I think what you're saying, low to mid single digit on truckload and flattish on intermodal. So I guess, why do you think we're seeing that kind of spread? What has to change to get the two more aligned? And then maybe it's too early because bids aren't really in effect yet.

[Scott Group, MD & Senior Analyst at Wolfe Research]

But given a better outcome, at least for shippers with Intermodal, are you seeing or do you expect to see better compliance with Intermodal bids than truckload bids?

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. Scott, this is Jim. I I I think the the reason why you're seeing a a little bit of deviation there is probably what we've seen over the last few years that the network bids had had dropped faster than Intermodal. Intermodal was more resilient through the the downturn than what we had seen in one way network rates, and now they're coming back into a a little bit more of alignment there, making Intermodal a little bit more attractive going forward.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Okay.

[Scott Group, MD & Senior Analyst at Wolfe Research]

And then on the can you just talk about the CapEx cut? And is this just what you're planning to do with the fleet and tractors? And if there's any consideration of redoing anything with the trailer fleet as well? And then the intermodal truck fleet as well. Yeah.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Yeah. This is Daryl. So so I'll start. Mark would add some color. So the strategy that we're implementing for the first quarter and the rest of the year is really consistent with what we've been doing for the past several quarters, I would say.

[Darrell Campbell, Executive VP & CFO at Schneider National]

So we're we're dedicated you know, we're dedicating our capital to, you know, the areas of strategic growth. Right? So intermodal tractors and dedicated tractors, that's not gonna change, throughout the cycle. Some of the commentary Mark made around network and the fact that it's not investable given current returns, we're just affirming that our capital allocation reflects that. As volumes have moderated or expected to moderate, our our CapEx plan reflects that.

[Darrell Campbell, Executive VP & CFO at Schneider National]

It also reflects the fact that the cost per equipment or or units of equipment has gone up. In some cases, as it relates to tractors because of the tariffs. But there's a flip side to that which is, you know, that used equipment, values, are expected to improve and and we've seen some of that. So our our CapEx guidance does, contemplate increased proceeds, which we also see coming through in in our gain on sale assumptions. But as it relates to our strategy, our strategy is still clear.

[Darrell Campbell, Executive VP & CFO at Schneider National]

You know, our strategic areas of growth will continue to get capital. We're gonna continue to invest in technology. But to the extent that there's not a commensurate return, we will not invest In growth. In in growth.

[Mark Rourke, CEO, President & Director at Schneider National]

Scott, as it relates to the trailing equipment, we're largely in the replacement cycle there. So we don't outside specialty equipment and dedicated that comes with some new business awards that'll be mostly on the trailing side replenishment, and we believe we're well positioned on the intermodal front. Although as we continue to grow in Mexico, there there could be needs over time to to invest further in intermodal container growth, but we think that 2025 will be largely stable with replacement.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Dow, can you just read quickly how how much you've changed your gains on sale assumption?

[Darrell Campbell, Executive VP & CFO at Schneider National]

Not not material. I'd say, you know, couple pennies, few pennies, not couple, few pennies.

[Scott Group, MD & Senior Analyst at Wolfe Research]

Thank you, guys. Appreciate it.

[Operator]

Next question comes from the line of David Hicks from Raymond James. Your line is open.

[David Hicks, Senior Equity Research Analyst at Raymond James Financial]

Great. Good morning. Thanks for the question. Just wanted to ask about the dedicated growth kind of runway. It's now 7% of the truckload fleet post the Cone deal.

[David Hicks, Senior Equity Research Analyst at Raymond James Financial]

I know one of your peers is targeting that 7% range. Is that mix approaching kind of a natural ceiling given kind of the competitiveness in that market, current customer demand and kind of network constraints? Or is there still meaningful kind of room for expansion on the mix side of things for Dedicated?

[Mark Rourke, CEO, President & Director at Schneider National]

Great. Yeah. Thank you for the question. As it relates to mix, we've said we don't really have any magic number relative to mix of of dedicated versus network. We really look at this from a return hurdle standpoint and what adds value to the customer and and the durability that we see long term in the attractiveness of deeper relations with our customer and dedicated.

[Mark Rourke, CEO, President & Director at Schneider National]

What I what I would note is that there is value of the network helping support Dedicated with ebbs and flows of demand across various account structures and verticals that that occur within your Dedicated portfolio. So there is some synergies that we gain back and forth through that alignment. I would also say that our focus in our Schneider dedicated, our legacy dedicated increasingly is in that specialty equipment space, private fleet replacement. As you look at the recent Cal one, a very much a lightweight model, that attracts, shippers that are looking to have additional payload based upon their approach, to to their equipment spec. We have a multi stop with M and M and very demanding service requirements, and then MLS has this terrific relay network that fits so well within the automotive sector.

[Mark Rourke, CEO, President & Director at Schneider National]

So we have some specialty capability within each of these that have broadened our reach in the various markets that we serve, and we would consider all of those growth potentials and don't feel like we're sitting here because of a competitive situation that we can't continue to take advantage of those various platforms.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And, David, just a couple other comments. This is, Jim. Is that, you know, this there's a long runway still in dedicated. This is

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

a $400,000,000,000 market. We are a very small percentage of that. We went back just a handful of years ago. About 50% of this market was private fleets. That has grown to 57%.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And as we're talking to all of our customers that have private fleets, really none of them have any intention of growing their private fleets at this point, and we've seen a number of them really start to change course and pivot to common carriers here and and outsourcing. So see a lot of opportunities continue to grow Dedicated over the coming years.

[David Hicks, Senior Equity Research Analyst at Raymond James Financial]

Great. Thanks, Mark and Jim. And then just as a follow-up, you kind of outlined 40,000,000 targeted cost reductions from, digital tools, automation, etcetera. How much of that has kind of been realized at this point? And and should that be kind of a linear action throughout the year or some more, back half weighted?

[Darrell Campbell, Executive VP & CFO at Schneider National]

Yep. So, yeah, I think you you outlined some of, you know, the things that we're we're looking at, but we're looking at essentially every cost category. I think in Mark's remarks, you know, he just highlighted a few of the things that we're seeing. You know, just to reiterate, for the past several quarters, actually, four quarters in a row, we've been able to manage our variable cost within a very tight band. And that that is just a manifestation of all actions that we've we've taken.

[Darrell Campbell, Executive VP & CFO at Schneider National]

Kinda hard to give guidance in terms of linear versus not, but the the 40,000,000 is, you know, the the full year annualized impact. You know, given the seasonality trends of our business, you know, the cost would not be exactly linear. And, again, we don't give quarterly guidance, but the 40,000,000, we think is achievable, including, you know, some of the productivity actions that we have taken. The addition of Cowen, the synergistic effects there of, bringing that into the portfolio. Those are all the things that are in the mix.

[Darrell Campbell, Executive VP & CFO at Schneider National]

You know, come up with the $40,000,000, but we we're not gonna break it down by quarter.

[David Hicks, Senior Equity Research Analyst at Raymond James Financial]

Great. Thanks, Daryl. I appreciate the time.

[Darrell Campbell, Executive VP & CFO at Schneider National]

You bet.

[Operator]

Your next question comes from the line of Ken Hoeder from Bank of America. Your line is open.

[Ken Hoexter, Managing Director at Bank of America]

Hey, good morning. That's a new one. It's Ken Hoeder. Good morning, Mark, Tim, Daryl. Just if I could follow-up on That one might stick.

[Ken Hoexter, Managing Director at Bank of America]

We're not going to make that one stick. So maybe to follow-up on Chris' timing question, and I get it, Daryl, you're not going to give us quarterly guidance. But to understand near term, maybe talk to seasonality in 2Q given timing of it sounds like you got some timing of lost contracts. You've got startups that offset that. Do they balance each other?

[Ken Hoexter, Managing Director at Bank of America]

Talk about taking trucks out to improve utilization. There's the normal seasonality versus the air pocket of this huge air pocket of tariff volumes coming. Maybe if you step back from I'd love to some guidance on the 2Q, but if you could frame the bull bear case of the $0.75 to $1 outlook. Thanks.

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. I don't know, Ken. We're gonna satisfy your request on on on various, you know, quarterly guidance. But we again, we recognize there's uncertainty. We recognize that we there there's a lot of obviously, in a business of our size and and the services that we provide across those segments that there are various moving parts.

[Mark Rourke, CEO, President & Director at Schneider National]

But we've tried to be thoughtful relative to various scenarios. We've tried to take into account of those scenarios on magnitude, the timing, you know, when they could occur. We've we've looked at our allocation season to date here now that we're three, almost four months into the year. You see the guidance of the range being a little bit wider to recognize, I think, some of that uncertainty. And we've done a number of things on the structural front relative to our costs, where we sit with renewals, our asset efficiency efforts, all the things that we've kind of just talked about, and we've tried to be thoughtful to give our best insight to what we can see and know today and recognize that that could change based upon the macro the the things that are most in our control.

[Mark Rourke, CEO, President & Director at Schneider National]

We have, obviously, the most confidence in that and the things that kinda sit outside that whether that be trade policy or consumer health, things that could ultimately end up driving, the demand and and supply and pricing equation is a bit more cloudy. But that's, you know, the the timing, magnitude, and duration depths gets us on the lower end of that and things that are, as Jim mentioned, things can change rapidly that could give us a little bit of a bathtub effect of those who stop and start supply chains and they have to restart generally puts chaos into the market, and and that could be a more favorable scenario. But so as we sit here today, we tried to take all of that into account in in providing providing that range. Knowing that in the near term, whether there'll be an air pocket possibly here, particularly in the intermodal import area, Could happen absolutely, you know, based upon what you see sailings. And then the question is how does our new business timing and magnitude of new business start ups help cover some

[Mark Rourke, CEO, President & Director at Schneider National]

of that

[Mark Rourke, CEO, President & Director at Schneider National]

volatility. So that was our approach, and that's what we tried to do with that guidance range.

[Ken Hoexter, Managing Director at Bank of America]

Awesome. Thanks for the insight. The how do you think about the a lot of this is about supply demand, right, trying to find that balance over long term. J. B.

[Ken Hoexter, Managing Director at Bank of America]

Hunt was talking about having 30% excess capacity on intermodal. How do you sit there and look at your fleet and the ability or desire to keep the fleet, shrink the fleet? What what do you think on on intermodal to to drive improved performance profitability utilization?

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. Ken, this is Jim. And as we look at our trailing fleet there, you know, we're we're able to adjust and and make some adjustments by stacking equipment. Right now, there's a little less than 10% that we have on stack. We we would say that easily we could grow 25% without adding any trailing equipment.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

And if I look back to our previous high points in terms of container turns, we'd be able to grow up to 35. So there's there's still plenty of opportunities there. But it it's as we're looking at growth, we're we're staying disciplined in growing where we have areas of differentiation, locations that we can take cost out of our our network and just continue to improve that business.

[Ken Hoexter, Managing Director at Bank of America]

So with I mean, so with Ford so just to put that math together, right, 25% excess capacity grow, 35% in turns, I don't know, 50% excess capacity, you get rid of boxes? Or or, I mean, doesn't that extend the downturn and and constrain ability to get pricing? No.

[Mark Rourke, CEO, President & Director at Schneider National]

Listen. They have very they have very, very long life. And and obviously, Ken, there's a a mixed implication there whether where you're growing on length of haul. You know, we we feel that the the work that we've done to put together, our capability relative to how we execute on the street, but also the partners that we've chosen have chosen us. But between the UP, the CSX, and the CPKC gives us differentiation in a very difficult place at times to get differentiation.

[Mark Rourke, CEO, President & Director at Schneider National]

And we're gonna exploit those strengths and we're and so I I don't think we we need to eliminate boxes to get margins. We have to, lean into our differentiation and and on trend. I think we're still very, very favorably positioned to to perform very well in this market over time. Obviously, we're in some difficult periods presently, but it doesn't shake our confidence going forward.

[Operator]

Your next question comes from the line of Jon Chappell from Evercore ISI. Your line is open.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Thank you. Good afternoon. I'm sorry. Good morning.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Mark, correct me

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

if I'm wrong, but did you did you insinuate that, maybe there's some business you're walking away from now, during this mini bid process and, you know, some of the, price pressure? And if that's the case, are you doing more maybe partial truckload, which plays a role in the efficiency of the network fleet?

[Mark Rourke, CEO, President & Director at Schneider National]

Great, Jonathan. Thank you for the question. I think my prepared remarks, I mentioned that staying disciplined on price means in certain situations that we will take less volume under those circumstances with an individual shipper. And what's reinforcing that strategy across the network is that we're seeing, on a regular basis, more and more mini allocation events that come back out after the fact because of something not working right on behalf of the customer or new business or whatever is going on relative to the customer's network. And by not committing our capacity at rates that we believe, don't recognize the value we're providing or what's a commensurate, return, allows us then to say yes to these newer opportunities that are, more attractive.

[Mark Rourke, CEO, President & Director at Schneider National]

And so that's the discipline that I was referencing, and that was mostly up in the network business and mostly in the truck network business, even more so than than Intermodal.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Okay. Got it. And then, as a follow-up to try to simplify Hodur's question, partially because I just want this Hodur thing to stick. At the tail end of of earnings season. I think, you know, we've seen a bunch of, guidance revisions for obvious reasons.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

And I think some have implemented tempered seasonality, which is May is better than April, June is better than May, but not at the typical magnitude. Magnitude. And I think some have incorporated kind of flat bridges from a weak March to the second half and the uncertainty that's incorporating the second half. Would you consider yours more of the the former, the tempered seasonality, Or just kind of almost writing off the second quarter at this flat line March, April, and then the second half is kind of up for our interpretation?

[Mark Rourke, CEO, President & Director at Schneider National]

I think if I understand your question correctly, Jonathan, I think what Daryl laid out is is recognizing kind of where we came out of the second out of the first quarter, and there was a tempering, certainly seasonality wise at the end of the quarter. And taking into account, some more tempered expectations on price and volume going forward. These are prior guidance. So however that is defined in the way you describe those two conditions, is what we try to communicate there.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Okay. Thanks, Mark.

[Operator]

Your next question comes from the line of Daniel Imbro from Stephens. Your line is open.

[Daniel Imbro, Managing Director at Stephens Inc]

Yes. Hey, good morning, guys. Thanks for taking the question. A follow-up on an earlier conversation around intermodal and just intermodal pricing. Just curious, I think rates on a per load basis were up a little bit year over year.

[Daniel Imbro, Managing Director at Stephens Inc]

I'm guessing that's maybe positive mix coming out of Mexico. Can you talk about where you're seeing that strength on intermodal pricing? And then how are you seeing price develop through bid season? We've heard others say bid season is getting a little more competitive. Just curious how bid season's progressed on the pricing side.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. Daniel, this is Jim. So as we've gone through and and what Mark shared, obviously, been flattish as the way we would describe it as we've we've gone through the bid season, and and that's really just the the core renewals. As you're looking at rate per order, you're correct. It's been three quarters in a row that we've seen improvement in our revenue per order.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Just as as we're looking going forward though, I do anticipate that there there are gonna be some mixed changes here as we go through the remainder of the year. So it's difficult to to just align our you know, what we're seeing in our core renewals to actually into rate per order.

[Daniel Imbro, Managing Director at Stephens Inc]

Okay. That's And then

[Mark Rourke, CEO, President & Director at Schneider National]

That was the intermodal truck side. We low to mid single digits have been our experience, through the, first part of the allocation season this year. But, again, building upon the those increases that we've had really, since the second half of twenty twenty four.

[Daniel Imbro, Managing Director at Stephens Inc]

Got it. Helpful. And then maybe a follow-up on the previous discussion around intermodal capacity. I think you said net of that, probably 40%, fifty % excess capacity in the network. I guess, if we're at a 5.3% margin now, your long term target 10% to 14%, are we really just multiple pricing cycles away?

[Daniel Imbro, Managing Director at Stephens Inc]

I'm just trying to figure out what needs to happen other than obviously the industry tightening from the demand side to actually get back towards high singles or into your long term margin range. Just curious kind of what the actual building blocks are to get there.

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. Okay. So they will just Jim and I are fighting for clarity here. You know, if we take everything again, mix dependent, longer length of haul, mix all all have more box consumption depending upon your mix. But we have stated and and still believe that we have that 20 to 25% ability through our efficiency actions relative to our dray, how well the railroads are performing, our customers are unloading the container.

[Mark Rourke, CEO, President & Director at Schneider National]

Again, there's lots of inputs to that that we could grow our order volume in that 20 to 25% without investing in additional boxes and chassis. To get back to what we target our long term ranges, all the things I just said there, but certainly, price is part

[Mark Rourke, CEO, President & Director at Schneider National]

of that equation and the truck alternative, as that becomes more favorable, that brings more pricing capability back into the intermodal arena as well. So it's kind of an all of the above, and not one single thing will drive that. But, the underlying execution of our capability and the railroads capability, gives us confidence that we we can get back to that particularly through, the asset efficiency of our boxes.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. And this this is Jim.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Just to clarify that we're we're talking about we see 25% as the opportunity to grow. What I was, it wasn't additive in terms of what I was discussing getting back to long term, container terms. That was from our current point to our long term would be 35. And then just one other key point, I think, on restoring profitability, it is it's growing. It's growing in areas where we have differentiation and then dray capacity.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

So we we did use a little bit more third party capacity here in the quarter than what we typically do. So we have an opportunity through these bids to we've been able to optimize our our dray capacity, and that'll be a big part of getting ourselves back to our long term margin.

[Daniel Imbro, Managing Director at Stephens Inc]

Got it. But no change in where you think the margin can get to even with this excess capacity in the That's correct.

[Daniel Imbro, Managing Director at Stephens Inc]

Great.

[Daniel Imbro, Managing Director at Stephens Inc]

Thanks so much.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Thank you.

[Operator]

Due to time constraints, we ask that you please limit yourselves to one question only. Your next question comes from the line of Bruce Chan from Stifel. Your line is open.

[J. Bruce Chan, Director at Stifel Financial Corp]

All right. Good morning, gents. I hate to kind of flout that right off

[J. Bruce Chan, Director at Stifel Financial Corp]

the bat here, but I've got a kind of

[J. Bruce Chan, Director at Stifel Financial Corp]

a two parter on intermodal versus truckload. Just on the shorter term, you talked about the volume strength and resiliency in intermodal. Wondering if it's fair to say that there's been maybe less of an inventory pause there versus truckload due to less elasticity or maybe more consumer nondiscretionary exposure there in the end markets. And then kind of big picture, maybe asking what's been discussed, in a different way. The past five years since the pandemic have been very, you know, let's call it dynamic.

[J. Bruce Chan, Director at Stifel Financial Corp]

So if I think about the original, you know, road to rail conversion thesis and what's happened, with relative pricing and service disruption and maybe less of a mandate from ESG. Do you still feel as confident in that conversion thesis as you did in maybe say 2018 or 2019? Thanks.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Yeah. This is this is Jim, Bruce. Thanks for the big question. And and to answer that, yes, we do. We're still confident of that thesis of conversion from over the road to intermodal.

[Jim Filter, Executive VP & Group President of Transportation & Logistics at Schneider National]

Really, the what's really changed over the last couple years that has driven more conversions from the rail to over the road has been the pricing dynamic that we were we were speaking about. And as we were talking about just what we're seeing going through this bid season that, our over the road rates that we're seeing now with us and the industry have been rising a little bit faster, than intermodal. And, that's really what it's gonna take to get back to that long term mix between over the road and intermodal.

[Mark Rourke, CEO, President & Director at Schneider National]

And, Bruce, I hate to say think I forgot the first part of your question.

[J. Bruce Chan, Director at Stifel Financial Corp]

Yeah. It was just, trying to identify where the relative volume strength in intermodal is coming from and, you know, maybe that's just been less of a an inventory pause.

[Mark Rourke, CEO, President & Director at Schneider National]

Yeah. You know, I think overall sentiment going forward is what is moderated. If if you look at the current the freight environment we've experienced from the fourth quarter through the first quarter, you know, I think we would characterize that as being more stable. And it's been the forward looking sentiment, whether that be because of tariffs or consumer or the forward looking, that hasn't haven't really felt yet is where the concern or the uncertainty lies. And so maybe that's, you know, what you're referencing there is that overall, it's been the consumer has been fairly resilient to this date.

[Mark Rourke, CEO, President & Director at Schneider National]

Supply chains have been fairly stable to this date, and so, the business has been stable as a result. So we'll have to see what the future quarters unfold, but, we wouldn't say we felt a great deal. We did see a little bit of tempering certainly at the March, but not dramatic. We haven't seen any of these dramatic shifts that feel like in some quarters or some experts feel is ahead of us.

[Operator]

And we have reached the end of our question and answer period. This does conclude today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Steve Bindas, Director of Finance - IR
• Mark Rourke, CEO, President & Director
• Darrell Campbell, Executive VP & CFO
• Jim Filter, Executive VP & Group President of Transportation & Logistics

Analysts

• Brian Ossenbeck, MD - Senior Analyst, Transportation at JP Morgan
• Chris Wetherbee, Senior Analyst at Wells Fargo
• Jason Seidl, Managing Director at TD Cowen
• Ravi Shanker, Managing Director at Morgan Stanley
• Tom Wadewitz, Senior Equity Research Analyst at UBS Securities LLC
• Scott Group, MD & Senior Analyst at Wolfe Research
• David Hicks, Senior Equity Research Analyst at Raymond James Financial
• Ken Hoexter, Managing Director at Bank of America
• Jonathan Chappell, Senior Managing Director at Evercore ISI
• Daniel Imbro, Managing Director at Stephens Inc
• J. Bruce Chan, Director at Stifel Financial Corp