Schneider National, Inc. Class B Aktie

Ladies and gentlemen, thank you for joining us, and welcome to Schneider National Third Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Christyne McGarvey, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Joining me on the call today are Jim Filter, President and Chief Executive Officer; and Darrell Campbell, Executive Vice President and Chief Financial Officer. Earlier today, the company issued an earnings press release. The press release and investor presentation are available on the Investor Relations section of our website at schneider.com.

Our call will include remarks about future expectations, forecast plans and prospects for Schneider. 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-K 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, reconciliation of non-GAAP financial measures referenced during today's call can be found directly in our earnings release and investor presentation, which includes reconciliations to the most directly comparable GAAP measures.

Now I'd like to turn the call over to our CEO, Jim Filter.

Thank you, Christyne, and good afternoon, everyone. Thank you for joining the Schneider National earnings call today. I will begin by sharing my perspective on the freight market, our new partnership with the Norfolk Southern and our performance in the third quarter. I will then turn it over to Darrell to review our financial results and outlook for the remainder of 2026. After that, we will open the call for questions.

As we look at our third quarter performance, we remain confident in Schneider's strategy. We are focused on profitable organic growth through differentiation across our multimodal platform, building an efficient low-cost operating model and maintaining a returns-focused approach to investment. Those strategic priorities have not changed, but how we execute against them continues to evolve with changes in the marketplace. This is how we win. That agility is increasingly translating into earnings and margin improvement as the market recovers.

Across the enterprise, our revenue management strategy is combining a disciplined approach to pricing with data-driven, profit-focused freight selection to extract the most out of improving market conditions. Traction on our $40 million cost savings target is driving productivity gains and cost reduction, which is enhancing our operating leverage as revenue improves. As customer needs, capacity conditions and opportunities develop, our diversified multimodal platform is positioning us to respond rapidly.

Finally, strong returns guide our investment decisions. The combination of productivity and price is funding targeted investments to meet customer demand. At the same time, we continue to strengthen Schneider's long-term competitive positioning. To that end, this afternoon, we announced that Schneider has entered into an agreement with Norfolk Southern to serve as the primary rail provider for our Eastern Intermodal network beginning January 1, 2027. Norfolk Southern's broader Eastern network expands Schneider's reach and creates additional opportunities to grow with existing customers, pursue new freight and convert Truckload shipments to Intermodal.

By leveraging Schneider's 100% company-owned containers and chassis, which are complemented by our company-operated dray fleet, we expect this agreement to strengthen service, enhance network reach and support our long-term growth strategy. A potential combination of Norfolk Southern and Union Pacific could provide additional upside through new single-line services and improved connectivity, but those benefits are not assumed in our current expectations. Still, the growth we have seen in Mexico following the combination that created the CPKC only reinforces our view of the long-term opportunities that an effective single-line rail network can provide.

A combination of Norfolk Southern and Union Pacific stands to see similar benefits to speed and reliability on a broader scale while also introducing new Intermodal lanes. We see compelling value from positioning Schneider to be the only fully asset-based provider on the first single-line transcontinental railroad in the United States.

Turning to the third quarter. The enterprise delivered strong year-over-year earnings growth and results were largely consistent with what we anticipated as we brought momentum from successful price recovery across the portfolio and our $40 million cost savings program. While operating earnings declined sequentially, this reflects the typical seasonal patterns of our business as well as the loss of a large dedicated customer and the moderation of certain project business as anticipated.

The quarter also saw impacts from higher claims costs in Logistics that was a result of a confidential claim settlement, but this was largely offset within net income by a positive impact from the favorable development of a separate settlement. Darrell will discuss this in more detail shortly.

Importantly, our constructive view of the broader cycle has not changed. Looking at the freight environment, the supply thesis remains intact. Though capacity attrition occurred at a more measured pace than what we experienced in the first half of the year, we are continuing to see an overall constrained supply picture despite spot rates now having moved higher for nearly a year. Capacity has remained hampered by driver availability, elevated operating costs and increased barriers to entry.

Further, we continue to see several factors that should support additional rationalization going forward. Regulatory enforcement efforts are ongoing in areas such as entry-level driver training and electronic logging devices. These actions should improve driver qualification and hours of service compliance and make it more difficult for irrational capacity to enter or remain in the market.

At the same time, fuel costs have increased meaningfully. Driver wages are on the rise and smaller carriers are facing increasing economic pressure. Together, these dynamics are limiting the ability of supply to respond to improving pricing conditions and with noncompliant capacity exiting the market, we continue to expect supply to behave rationally as we move further through this up cycle. While supply dynamics remain constructive, freight activity saw a modest step back versus second quarter, a reflection of anticipated seasonal patterns coming out of the 4th of July holiday.

Consumer spending remained resilient overall, though this varied by category. Higher interest rates and affordability constraints continue to weigh on certain key end markets such as housing and automotive. Altogether, we believe third quarter freight volume activity reflected typical seasonality and some normalization of inventory patterns rather than a deterioration of underlying demand trends, which remain stable.

As a result, spot rates also moderated during the quarter. While the decline was greater than traditional seasonal patterns, particularly in August, it came following the significant strength in late spring and early summer. Year-over-year growth remained strong through the quarter and spot rates began to improve again in September. At the same time, contract pricing continued to advance. In fact, we are seeing growing recognition from customers of the need for safe, compliant and reliable capacity across our multimodal platform, which is further reinforcing our view that pricing recovery remains intact. As such, we expect additional rate recovery as customers continue to adjust to the higher underlying cost of dependable capacity.

Industry operating costs have increased by over 30% over the last 5 years, while contract pricing is only approaching parity. Continued pricing progress is needed, not only to recover this cost inflation, but to support the service levels, capacity investments and returns required for durable growth. Against that backdrop, our commercial execution was strong in the third quarter, though there remains additional runway for rates to move higher. Proof points are evident across the enterprise as pricing actions accelerate while customer retention remained healthy.

In network, average renewals reached nearly 20% in the quarter with retention and win rates improving sequentially. Dedicated customers are increasingly receptive to the pricing adjustments required to secure capacity in a rapidly evolving driver market. Intermodal renewal pricing reached its strongest level since the pandemic and mini bid activity is also increasing.

In Logistics, we are capitalizing on spot opportunities while repricing contract business, driving double-digit year-over-year growth in net revenue per order. These results reflect a combination of tightening market conditions, the value of Schneider's service offerings and the execution of our revenue management strategy.

Turning to our businesses in more detail. Truckload revenue was relatively stable year-over-year, while earnings more than doubled. Results benefit from the work we have done over the last several years to improve productivity, enhance asset efficiency and execute disciplined pricing actions. Revenue per truck per week grew meaningfully across both Dedicated and network and more than offset lower tractor counts. The latter continues to be constrained by driver availability, though this was compounded by the previously announced loss of a large customer in Dedicated.

In Dedicated, growth opportunities remain attractive over the long term, but we also remain focused on profitability and returns, not simply truck count. Proactive pricing actions continued throughout the quarter, and we made progress on ensuring returns appropriately reflect increasing driver and operating costs. At the same time, we continue to see encouraging activity in our pipeline, including opportunities within specialty Dedicated solutions where our differentiation remains strongest. Year-to-date, we have sold nearly 850 trucks across all our brands, which reinforces our confidence in continuing to address underperforming accounts.

Network benefited from strong pricing gains, improved freight selection and enhanced productivity, which drove double-digit improvement in revenue per truck per week year-over-year. While industry spot activity moderated from the elevated levels seen in the second quarter, our performance was supported by premium freight opportunities. We are encouraged by the progress we have made, but also believe there remains meaningful opportunity ahead as pricing continues to recover.

Execution on our commercial strategy is funding additional targeted investments in driver capacity. To strengthen retention while protecting returns, our compensation approach recognizes driver productivity and performance. We are also taking focused steps to expand the driver pipeline in our most constrained markets, including additional recruiting resources, broader use of AI-enabled tools and selective utilization of pay increases and sign-on bonuses.

Intermodal delivered solid earnings growth. After high single-digit growth last year, volumes declined modestly, which also reflected some moderation in import activity. Revenue per order grew sequentially and year-over-year, and earnings benefited from pricing execution, continued cost control and an ongoing focus on profitable growth where we have differentiation.

In the quarter, offered volume continued to climb, but disciplined freight selection enabled us to optimize profitability. Pricing gains are already translating into improvements in capacity, which is supporting additional growth. We believe the combination of increasing contract rates, strong service and continued over-the-road conversion opportunities positions the business well from here.

Further, as noted earlier, the partnership with the Norfolk Southern only extends our differentiation in the marketplace, setting us up for long-term success. Schneider has established a dedicated transition team and comprehensive implementation plan to manage the conversion. Drawing on our experience executing prior rail transitions, we are confident in our ability to complete the transition while maintaining the high level of service our customers expect.

In Logistics, underlying operating performance continued to strengthen. Revenue management actions drove double-digit percentage increases in net revenue per order, which was supported by continued strength in premium freight and effective freight selection. Power Only also saw momentum in volume and profitability, benefiting from the proactive actions we have taken to reset pricing amid improving market conditions. Project business moderated versus second quarter as expected, but we are encouraged by the opportunities we see in the fourth quarter. We continue to expect our expertise and proven service in new verticals will be a powerful growth engine for Logistics.

Altogether, we continue to believe we are in the early stages of rebuilding pricing and returns after several years of irrational industry dynamics. The pace of improvement may not be linear and demand remains an important swing factor, but constrained supply and continued rate recovery support our conviction that market fundamentals are moving in the right direction. Our multimodal portfolio allows us to adapt as customer needs and freight flows change, direct capacity to the best opportunities and deliver reliable service. Combined with proactive revenue management, technology investments and our low-cost operating model, this flexibility helps us translate market improvement into stronger margins and returns.

Our exceptionally strong balance sheet gives us the capacity to invest decisively in differentiated organic growth, pursue accretive M&A and return capital to shareholders, all while retaining the ability to capitalize on new opportunities as they emerge.

Now I'll turn it over to Darrell.

Thank you, Jim, and good afternoon, everyone. I'll review our third quarter financial results, capital deployment activities and our outlook for the remainder of 2026. Summaries of our financial results and guidance can be found in the investor presentation available on the Investor Relations section of our website.

Starting with third quarter results. Enterprise revenues, excluding fuel surcharge, were $1.35 billion, an increase of approximately 3% year-over-year. Adjusted income from operations was $63.8 million, up 66% versus the third quarter of 2025. Enterprise adjusted operating ratio improved 170 basis points year-over-year to 95.3%. Adjusted diluted earnings per share were $0.29 compared to $0.12 in the prior year period.

Earnings improved significantly compared to last year, supported by pricing gains, productivity improvement and ongoing execution against our cost initiatives. We remain on track to deliver against our $40 million target with significant traction in areas such as nondriver headcount, third-party spend, network driver productivity and synergies related to our acquisition of Cowan Systems.

From a segment perspective, Truckload revenues, excluding fuel surcharge, were $625 million, essentially flat year-over-year. Revenue per truck per week grew approximately 8% year-over-year and offset lower tractor count. Network strength accelerated with revenue per truck per week increasing more than 20% year-over-year, reflecting both improved pricing and productivity, which grew high single digits.

Truckload operating income was $44 million, more than double the prior year period. Operating ratio improved 380 basis points year-over-year to 93%. Sequentially, earnings moderated from the second quarter, primarily due to seasonality, friction costs related to churn in Dedicated, including the loss of a large customer and capacity constraints. Despite those factors, Truckload delivered meaningful year-over-year margin expansion.

Network delivered its first positive quarterly earnings result in over 3 years, supported by the ongoing pricing and productivity actions mentioned earlier as well as stronger gain on sale. Intermodal revenues, excluding fuel surcharge, were $288 million, up approximately 2% from the prior year. After 9 consecutive quarters of volume growth, volumes were down modestly year-over-year, reflecting difficult comparisons, some moderation in import activity and a continued focus on growing where we have commensurate returns in the backdrop of increasing third-party dray costs.

However, proactive actions on pricing and mix drove revenue per order up approximately 3% year-over-year and nearly 4% sequentially despite shorter length of haul.

Intermodal operating income was $23 million, an increase of 35% versus last year. Operating ratio improved 190 basis points year-over-year to 92.1%. Results benefited from improved revenue per order, freight mix and continued cost discipline, which more than offset the volume decline. We remain encouraged by the earnings momentum in the business and the progress we're making on profitable growth.

Logistics revenues, excluding fuel surcharge, totaled $373 million, up more than 12% year-over-year. However, income from operations was approximately breakeven compared to $6 million in the prior year period. Operating ratio was 100% compared to 98.1% last year. As discussed previously, several factors affected Logistics results during the quarter. Project-based activity moderated sequentially, partially offsetting continued improvement in the underlying business. Earnings declined $12 million from the second quarter, primarily reflecting the confidential claim settlement mentioned earlier.

Absent additional regulatory reform following the Montgomery decision, higher [ C-related ] costs are likely to remain a structural consideration for the brokerage industry in the near term. However, the impact recognized this quarter should not be viewed as representative of an ongoing run rate for our Logistics segment. We continue to believe our asset-based model, investments in safety and robust carrier vetting processes and controls leave us well positioned as the industry adjusts to a new economic and insurance paradigm.

The claim impact in Logistics was largely offset at the net income level by a $7 million benefit from the reversal of interest accruals following the favorable settlement of a separate claim. This separate claim is a noncash item that increased adjusted diluted earnings per share by approximately $0.03 and the impact will not persist in the fourth quarter.

Turning to our balance sheet and capital allocation. Schneider remains in a position of strength. In the third quarter, net capital expenditures were $80 million compared to $108 million last year, primarily reflecting higher proceeds from equipment sales and the timing of purchases of transportation equipment. Year-to-date, free cash flow was $195 million, which is roughly in line with prior year. We've returned $52 million to shareholders in the form of dividends year-to-date.

As of September 30, we had $394 million in debt and finance lease obligations and $326 million in cash and cash equivalents. As a result, our net debt leverage was approximately 0.1x at the end of the quarter.

Looking forward, our capital allocation priorities remain unchanged, and we'll continue to focus on disciplined deployment across organic growth, accretive M&A and shareholder returns. During the quarter, we renewed and expanded our credit facilities, including a $350 million revolving credit facility maturing in 2031 and a $400 million receivables facility maturing in 2029. Together, these facilities provide an additional $300 million of available capacity. This additional dry powder and the strength of our balance sheet will allow us to remain nimble and execute across all 3 capital allocation priorities.

For the full year, we now expect net capital expenditures to be in the range of $325 million to $350 million, down from our prior guidance range, reflecting stronger equipment sale proceeds, but ahead of prior year of $289 million.

Looking ahead to the remainder of the year, the operating environment remains constructive. Supply conditions continue to support increased pricing, while demand remains stable, though uneven across customers and end markets. Taken together, we expect the recovery to continue. Based on our year-to-date performance and expectations for the fourth quarter, we're updating our full year 2026 adjusted diluted earnings per share guidance to a range of $1 to $1.10.

Our outlook assumes continued pricing improvement as well as additional benefits from our productivity and cost initiatives. The new low end and the high end of our range account for the risks and opportunities around holiday demand as well as capacity conditions as we close the year. Raising the low end of our guidance reflects the progress we've made on our strategic initiatives, including margin recovery.

As Jim noted, we believe the industry remains in the early stages of rebuilding returns after several years of unsustainable economics. Rising capacity constraints and improving pricing reinforce our confidence that the market is moving in the right direction and that Schneider is well positioned to benefit as the recovery progresses. Against that backdrop, we remain confident in the actions we're taking across the enterprise.

Progress on pricing, cost management, productivity and resource allocation is strengthening the business and supporting enhanced operating leverage. Our differentiated multimodal platform provides customers with flexible capacity solutions as market conditions and supply chain needs evolve.

With that, we'll open the call for questions.

[Operator Instructions] Your first question comes from the line of Ravi Shanker with Morgan Stanley.

[indiscernible]

I'm sorry, Ravi, I'm not hearing your question.

Sorry, I think there was an issue with the line. Would love to get your views on -- early views on 2027, especially related to what early bid season looks like and how that shapes up, whether demand does show up or not given current supply conditions?

Yes. Thanks, Ravi. I said in my opening here that industry costs are 30% above where they were 5 years ago. And we're seeing that contract rates are just approaching parity. So there's a long ways to go here. But I also understand we're not going to get all of that back in 1 year. It's not all coming back in 2027. So to us, it's really important that as we're working through this, we are going to see that there are opportunities to take price, not just through allocation events, but it's also going to be through order selection, and we're going to be strategic as we go through this.

And so obviously, early to put a number against that, but just know that we feel like there's a lot of runway out there in front of us that so far that this has all been supply driven. And we see that supply and demand are relatively close. So it's a bit of a fragile market. Any blip in demand would be something that would cause us to move a little bit faster.

Understood. That's really helpful. And maybe nearer term, I think in the press release, you said that peak season remains a variable for the guidance at the end of the year. What do you know so far? What is the optionality? What kind of visibility do you have on volume versus price and the potential emergence of late season peak projects going into peak season?

Yes, Ravi, as it relates to peak season, I'll just kind of take a step back and look at third quarter. Early on in third quarter, there was a little bit of moderation, but that was kind of the typical post July. We also believe that there's a little bit of a pull ahead that occurred in the second quarter. But here as we're looking at where we're at right now, it's been a decade since we have what I would say has been a normal peak season, but this is one that so far really looks like what I would call a kind of normal peak season demand patterns. We talked early on about having programs with all of our customers. Our guidance is really aligned to the midpoint of that guidance.

But I think this market remains fragile. And so -- and customers understand that risk. That's why they were very eager to put these programs in place. I think what's changed though in the last decade is the importance of e-commerce. And that is an important swing factor when you look at our guidance, especially in the back half of it because the quarter starts to become more about e-commerce, which is driven by actual customer demand as you move later into the quarter. And so that would be the factor that would cause us to move up or down from that midpoint.

Your next question comes from the line of Dan Moore with Baird.

Just a couple of things I was hoping to address. First off, obviously, the announcement with NS. Obviously, we've got a pending merger and a desire to convert a lot of loads, assuming that transaction closes. Just curious with the horse trading that's obviously occurred, how disruptive has that been? How do you feel about this new deal in terms of positioning in the market and the opportunities for growth going forward? And then I have actually 2 follow-ups, but they'll be fairly quick. So, thank you.

Yes. Thanks, Dan. I know there's a lot of other people with questions. So I'll start with the Norfolk Southern announcement, and then we'll take one more of yours. But this is something we spent a lot of time analyzing the 2 options that we had, and we compare that to not only all the freight that we currently have under management, but we have a really good view of all the freight that gets moved in this country, where we think Intermodal could play. And as we were comparing all of the freight available to the options that we had, it became obvious to us that we had a better opportunity in our competitive positioning to put ourselves on the Norfolk Southern.

And as you think about the merger, that's really just the icing on the cake for us that this agreement on its own stands -- it's economically and strategically beneficial for our organization. But when we looked at what we've done with in Mexico, when that converted to a single-line service, we had tried every single option available and really struggled to grow that Intermodal business until we moved to the CPKC because we -- they were so effective in improving service, both speed, reliability, cost. And now we've grown 19 consecutive quarters.

And so that's why we're so excited about the benefits that this brings if the merger does go through that you see that type of reliability on a much bigger scale when we talk about Transcontinental U.S. And then further, there's a big part of the center of this country that just isn't served by Intermodal because you have 2 railroads that make very short hauls and then have to have a rubber tire or steel wheel crosstown that are going to be very difficult. This opens up a big chunk of the country. And so we're really excited about that.

In terms of the competitors that are on there, we feel really good about how we're able to differentiate. The fact that we have 100% owned containers, chassis, high percentage of our company drivers. It's our history. We've been doing this for a long time. We've been doing this for 35 years, and customers are looking at that, our history, our ability to execute and financial stability as a real differentiator. So we're excited about this right now and what this could mean for us in the future.

Yes. No, I appreciate the context. And then just a P&L-related question here. So I noticed insurance costs were up sequentially quite a bit. I was wondering, and maybe I missed that, you may have already addressed it in your comments earlier. And then interest expense, fairly significant change in interest expense from 2Q to 3Q. I was wondering if you could address both of those P&L-related items? I appreciate the time.

Sure. Yes, this is Darrell. So there are 2 separate claims-related matters that are within the P&L, and they explain both of the questions that you have. So in my prepared remarks, I talked about a confidential settlement that we had for brokerage-related claim that's recorded in Logistics. We also had a separate claim that related to a prior period activity that we had previously disclosed where we're appealing a verdict. And in the meantime, we've been accruing interest. We got a favorable outcome in terms of a settlement of that claim. So we reversed the interest in this quarter. So that's the $7 million that you're seeing going all the way in terms of interest expense.

So from a net income perspective, those 2 separate items are largely offset. But as we know, claims don't develop in a linear fashion. So the brokerage claim that we're talking about developed in a lumpy way, but not all claims develop adversely. We do see cases where claims develop favorably, which we did see with that older claim. So the brokerage claim is by no means expected to be the run rate going forward. And we acknowledge in a post-Montgomery environment, there's going to be some inflationary impact in the near term, but we think we're well positioned as a large asset-based provider.

Your next question comes from the line of Brian Ossenbeck with JPMorgan.

I'll just give the 2 upfront. So First off with the Norfolk Southern deal, I mean, you already work with Union Pacific. I don't know if there's anything related in there in terms of concessions or changes to that agreement? Or is the deal with Norfolk separate from that?

And then, Jim, maybe you can talk a little bit about the SMX service. And I guess, more broadly, we know you're talking about this being your primary partner in the East. So I don't know if it's -- you can talk about if it's exclusive or if there's things like SMX that you're still working with CSX and CPKC on, that would be helpful?

Yes. Thanks, Brian. Well, our rail agreements are long term. They're confidential agreements. And so a lot of those details I can't get into and especially things with the Union Pacific -- in terms of the -- what we do with the CPKC, we're still excited about that. It's -- we've had 19 consecutive quarters of growth. I don't see an impact in terms of our ability to continue to execute that freight. And so we're excited to continue to provide that service. That's not going away.

Sorry, is that the SMX though? Or is that the M&A?

Yes. We're still going to be able to -- yes, I'm not going to get into the details on the second half of how we're moving that freight, but we're going to continue to provide service from Mexico into the Southeast and Northeast.

Your next question comes from the line of Ari Rosa with Citi.

So I'm curious, a number of your peers talked about just the particularly difficult driver hiring environment. I was hoping you could speak to that and what kind of inflationary cost pressures you might be seeing there? It seems like, Dare I say, you're navigating that slightly better than others.

Is there anything different that you're doing? And just how do you see that as kind of an inhibitor to growth or maybe an enabler of growth for Schneider specifically as we look forward?

Yes. Thanks for the question. So it really is a focus on discipline. Our way is to remain disciplined. We align pay increases to rate recovery. And so this ensures everyone, customers, our customer-facing associates, recruiting, operations and most importantly, our drivers, we all have a common goal, which is to grow safe, reliable capacity. That's our way. And so I'm encouraged that we're seeing the trajectory of the market improvement, but we're making very specific surgical increases into driver pay where the returns are commensurate.

We're not just throwing money at everything. I'd also say is you just don't solve this by money alone. You have to focus on the driver experience. And so that comes from freight selection, work configurations, treatment of the drivers, how do we use AI to respond faster to the drivers.

And you're seeing some of that evidence within the results as well. If you look at Intermodal, our truck count is already growing sequentially because that's a place where we think we bring a really differentiated experience. And so you just can't throw money on it. It's important to see an improvement in the market condition, but that can't be the only way that you grow your capacity.

Got it. That's helpful. And then just as a follow-up, if we could kind of continue on this line of questioning around the NS partnership. We heard an impassioned case against the rail merger last night from one of your Intermodal partners. I'm just curious to what extent, if any, you kind of see a realignment that might be necessary among your kind of rail partners?

Is there any concern that this could, I don't know, ruffle some feathers among some of those partnerships and maybe change alignments around? Or just how do we get comfort, I guess, that the path forward doesn't involve kind of a realignment of some of those rail partners?

Yes. And CPKC is a very important customer to us. And I've assured them that this doesn't impact what we do with them. We're really excited. But every railroad that you operate with, you're probably using a competing railroad in someplace else. And so it's not that unusual that you might have places where you work together on, but you're competing in some place else. I think that's always been the case. I mean, if you look at the UP today, we're using the CPKC out of Mexico despite the fact that they have a service.

And so -- and they continue to operate with us and love everything that we're doing with them, but they understand there's a place that we don't use them. And so it's not that unusual that you're going to go with one provider for everything. And we have a lot of support for this, by the way. And you look at other developed countries in the world, I think we're the only one where you can't hop on one train and take it all the way to the other coast. So it's very unusual that every other country, you have this ability to do that yet here, you have to go to one place and then remove that, go over to someplace else and then move the rest away across the country. And I think it puts the country at a strategic disadvantage. And so I think it's really important that this is something that gets done just to improve supply chains across the country.

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

Sticking on the NS deal, I guess maybe if we could bring it back to your P&L to some degree and get a sense of maybe how you see the opportunity playing out? Happy to keep it kind of big picture or directed however you want, whether it be the opportunity for volume growth, that kind of seems relatively clear from what you're talking about, maybe pricing, maybe profitability of this business, anything meaningfully changing as we go forward? Or maybe just kind of help us sort of understand how you're thinking about the opportunity here?

Yes. The way we're thinking about the opportunity is how do we put ourselves in a position where we can convert over-the-road freight and position ourselves relative to others that are providing that service. And when we look at the number of terminals, where they're operating at, where the population centers are in the U.S. and where we're moving towards, the NS gives us a really great option there going forward.

And then on top of that, if you layer this new opportunity for Transcontinental railroad, I think that's the one that unleashes absolutely the most growth. And we're never going to look at growth and say we're going to do that just to grow. We're always going to remain disciplined as we're going through and growing in terms of where do we want to grow in our network as well as which specific customers we want to add on to that service.

I think there's a great opportunity when you start providing higher levels of service to extract more value and have a little bit of a smaller discount relative to Truckload. And so I think there's a lot of opportunities to be gained here going forward.

Okay. Okay. That's super helpful. I appreciate that. And then maybe just coming back to the issue of settlements and insurance broadly, and I know this was in the Logistics segment, but I guess we can take it a little bit bigger than that. But how do you think about the potential pressure you might see as we go forward?

It's obviously something that's come up quite a bit over the course of the last couple of days, but also a couple of months. So can you give us some perspective on how we may be thinking about that for the Logistics business in '27?

Yes. Thanks. And there's some near-term dynamics here as this industry is adjusting to new costs and insurance paradigm. And it's a combination of it's safety, it's insurance costs, even that ability to access insurance, it's going to remain a brokerage industry consideration. I think it reinforces the value of an asset-based model and carrier vetting that we've been talking about for several quarters here, what we've done specifically having a program where we've moved from about 65,000 carriers down to 14,000 carriers as we implemented some tools that were set outside of Schneider. And now we're continuing to invest in some additional ones that are making us more effective as an asset-based carrier.

But on a net, I see this as a positive for Schneider. There has been a diseconomy of scale for a number of years due to the cost of claims. Post-Montgomery, that diseconomy of scale is being reduced, but the cost of claims aren't being absorbed by the small carrier. They're being absorbed by somewhere else in the supply chain, namely brokers and shippers. Now not all brokers and shippers are considering safety at this point. But the ones that are, they're considering insurance levels, investment in safety and they're willing to pay premiums.

And so the job of people that are in supply chains are changing. In the past, they've always looked at service and cost. Now they need to look at those things still to understand value, but also consider the impact of safety because they also could be liable. And so I think this is something that it's a really big change in the industry and on that, it's a positive for Schneider.

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

Can you give us some directional color? What percentage of your Intermodal volume is impacted by this sort of change? And is it all moving right away in January? Or are you waiting to find out if the merger gets approved? Is it going to be gradual? Just any thoughts?

Yes. Thanks, Scott. So it is January 1, 2027, is the official implementation. We don't break down how much we're doing by railroad or specific ramps. But we've obviously spent some time putting this together. We have a dedicated transition team that's a combination of Schneider and Norfolk Southern. And while we've been -- we announced it today, those teams have been putting the work together for a long time. And we have a proven playbook. We've done this before, so as Norfolk Southern. They've also been making some investments in facilities, getting things set up for us. There's been some track adjustments as well, having -- making sure that we have the lift capacity. We've gone through all of those checks similar to what we did as we move to the Union Pacific as an example, where we get very granular going through that work, and we feel really good about their ability to execute.

And so when we made our last transition, we did that primarily over the last month of the year. In this one, we are going to start here already in November, making that transition as we will start to move freight over to the NS and execute there.

I mean I guess what I was trying to figure out like roughly like what percentage of your volume is local East or transcon, the eastern part of transcon? That was like my first question.

And then my second question, I guess, is this year, like bid season, clearly, Truckload got a lot more price than Intermodal. Do you think that's a similar outcome as you think about '27? Or do you think they're more aligned in terms of increases?

Yes. And let me just get into the price increases for Intermodal. So we are starting to see some improvement there, comfortably in the mid-single-digit range, but nowhere near what you saw for the Truckload and specifically Truckload network type business.

At the same time, Scott, you look back at the decreases that we saw in the network business, they were significantly larger. And so I wouldn't expect that we're going to be talking about nearly 20% type increases in the Intermodal because they just didn't take the same type of decrease.

And ultimately, it gets down to the competitiveness between the 2. So I'm encouraged that we're starting to see increase in Intermodal. And I'd expect with service levels, we should start to see some of the gap between Truckload and Intermodal pricing get reduced. But I don't know that we're talking about the same level of increases as we go through next year for Intermodal.

Your next question comes from the line of Ken Hoexter with Bank of America.

Jim, just to follow up on the Norfolk subject, right? So you've done this before, right, when you moved from Burlington to UP. Maybe just talk a bit about that experience. How long until you got to normalization in your service levels? Can you talk about any scale of customer losses in your past experience or how long it took you to do that?

And then the contract, do you talk about how long -- is this like a decade or a 5-year type of deal? And do you add new lanes? Is it -- I guess, just any more parameters would be great?

Sure. Thanks, Ken. Yes. So we don't discuss the details of the actual contract. But the biggest thing that as we approach these is we're thinking about the impact of both customers and drivers. And so we had this playbook that we used last time. We learned a few things as we went through this last time, and that's what gives us a lot more confidence as we go through this one. I think last time when we went through this, there was someone that had made a change on the UP 1 year before us. They stumbled, and I think customers expected us to stumble, but we didn't. The customer reaction as we went through the UP transaction was -- or transition was extremely favorable.

Same thing from drivers. As we spent time with our drivers, we showed them the work that we had done in advance so that they were going to have a really great experience. We are prepared that we might have some drivers that this wouldn't be the best opportunity. We didn't lose drivers as we make that transition either.

And so we took those learnings. We've applied them here. And I believe that customers should be very confident. We have a number of them here in Green Bay today. Tonight, we have a Packer game, and they're getting this information, spending time with the railroads. So giving them a great deal of confidence that, hey, we're really aligned, working together, and we're going to make this a great experience for them. We wouldn't do anything that would harm our customer or driver experience.

All right. Great. And then just a follow-up on the trucking side. Dedicated fleet was down 5%, your network down 13.5% year-over-year or 3% and 5% sequentially, pretty big declines. I guess, is that going back to the customer loss Darrell talked about? Or is there something else you're aiming to do with the fleet size?

Yes. So part of it is the large dedicated customer that we had a loss. We had anticipated that. We had talked about it. But also, we see that this market is the trajectory of improvement, it has been the time to go out there and address price. And that's where we had an impact here with that one large customer. But it's also been a situation that we needed to go through and work through those deals. The vast majority of customers have been -- we've had very constructive discussions. They want to make sure that they have safe, reliable capacity, and we're able to get the price that we need to be able to reinvest back in our drivers.

But where we're not getting the price or not moving quick enough, it's -- that is a little bit of a headwind to be able to maintain the capacity. Now the fact that we are getting price, both in our network and in our Dedicated, we're getting to a spot where we're seeing some moderation in that decline and beginning to see a flattening out of that curve.

Your next question comes from the line of Jordan Alliger with Goldman Sachs.

This is Andrzej on for Jordan. Just curious on the revenue per truck per week within for-hire, it was up 21% year-over-year, up 16% last quarter. Are you able to speak to the miles per tractor improvement versus the revenue per mile there? Just trying to get a sense for productivity versus rate per mile.

And then relatedly, are you able to talk about bid season, whether contracts -- are those being signed sort of in the double-digit range or a comment on how that's looking for 2027?

Yes. Thanks, Andrzej. So yes, the revenue per truck per week being up 21%, obviously, a really big number. And I think we even talked about it a little bit in the opening that our productivity improvement was up high single digits, and we're able to get that through better freight selection in terms of what loads we're putting our drivers on, but also going back to our assets as well. We've been really focused on how do we sweat our assets. And I'd say going forward, I think we've taken productivity out -- we've seen the productivity improvement and expect that to continue.

Now it needs to be more from price because we've got to be able to get additional revenue per truck per week to get to a spot where we can reinvest back further into our -- to grow our capacity.

And so difficult to say specifically what 2027 will hold as you go through bid season. There are shippers that think very strategically and they say, I want to make sure that I have some reliable capacity that's going to last through the course of the year. There's others that say, you know what, based off of what you expect the prices are right now and then come back to me later. And we're comfortable with both of those approaches. We just want to make sure that we're giving our customers what they want, and we're getting what we need in return to make a really fair value exchange.

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

Congratulations on the new deal with Norfolk Southern. It sounds like that's going to create some interesting opportunity, and it obviously has strategic value that's meaningful assuming the merger gets approved. How do you think about, I guess, the impact to kind of volumes while you go through the transition? I know you referred to kind of learnings from the UP transition over to UP a couple of years ago, whenever that was. I mean, does this kind of put on hold like volume growth for a period of time where there'll be some probably not big hiccups, but a little bit of uncertainty as you transition over.

So -- and that's taking place kind of in the midst of the bid season or early part of the bid season. So is that something that's kind of realistic to say, way, maybe volumes on -- volume growth is on hold, but we'll get a lot better on a multiyear basis. So how do you think about that kind of I guess, impact to the way Intermodal does at Schneider in 2027?

Yes. Thanks, Tom. For a long time, the questions we've taken on Intermodal growth has been focused on a number of containers out there. And my response has always been the constraint for Intermodal growth is dray capacity for anyone that prioritizes profitable growth, which is us. And so I'd say that hasn't changed. We went through this transition before. And every box is going to get brought -- it goes from a customer into a railroad. It's just going into a different railroad it's going to land at a different one.

We actually have a pretty good process to make that work. And so there's no slowdown, no laying off. Matter of fact, our focus here is how do we extract enough price so that we're able to reinvest back into that dray fleet. We're starting to make some of those surgical investments there. So yes, I -- we won't be coming back and using the NS transition -- transaction as an excuse for lack of volume growth.

Right. Okay. So you're going to continue to focus on profitability and price. Obviously, that has an effect on what you do on volume. But you don't -- I mean, I guess it's good to do the transition in a tight market, right? Then customers have -- just gives you more stickiness with customers.

So I apologize if I missed this, but you gave some comments on the market. Kind of where do you think we're at in Truckload in terms of regulatory initiatives? And impact on capacity. It sounds like maybe less impact from those initiatives in 3Q. But I think when you look to '27, you're still the mindset that there's a lot more impact to go.

But how do you put the pieces together and say, okay, this is what we think is going to have a big impact looking forward, a particular initiative. And just overall, what -- I don't know, how much is already -- of the capacity reduction has already been affected?

Yes. Yes. So as you look at capacity, I'll just start with the fundamentals here is that capacity is still constrained. You're not seeing growth of long-haul truck drivers despite the fact that spot rates have been increasing over the course for almost a full year at this point. And the biggest factor right now is the entry-level driver training as I look at that because during '21 and 2022, that's when we saw about 50,000 long-haul drivers enter the marketplace. And they were entering in a lot of cases with training that was less than a week to become a CDL and at very low price points.

Now we have standards for CDL training. And the standards are -- put you at 5 or 6 weeks to be able to get trained and at a higher expense. So back in '21 and '22, when those 50,000 drivers enter, companies like Schneider couldn't touch a driver that was entering a school that -- where you only had 1 week of training. We'd say you're not a safe driver. And so now when we do start to see growth in capacity, which we would expect at some point, prices will support that. We believe that we're going to be able to participate in that this time, which is a little bit different than last time.

In my technical view of the duration of the cycle, I talked a little bit about industry cost versus price, but also typically, up cycles mirror the prior down cycle. And this last down cycle, it took 4 years and it was very deep. I think it's going to take us a while because you're not going to recover the amount of price that was given up over the last 4 years in one cycle nor through one channel. And so it's going to take some time before we get all the way through that. So I believe it's very durable.

So okay. So you think it's the funnel. So you think it's really that capacity doesn't grow from here as opposed to further reduction?

Yes. I would say that I'm not sure there may be a little bit more reduction, but it's probably a little bit of flattening out. And eventually, when capacity does enter, I think that's an opportunity for companies like Schneider to be able to start participating in any industry growth.

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

Jim, maybe just want to come back to a comment you made around leaning more into specialty Dedicated. I think that makes sense given your focus on price and value add here. But maybe you could just give us a sense for what end markets you're going to be focused on and what that kind of process entails from an investment standpoint?

Yes. Thanks, Bruce. So there's actually a fairly broad set of end markets. Obviously, there's some that are very well known when we talk about things that require lift gates that are within retail. There's items within automotive where we have specialty equipment. But outside of that, it is an extremely broad range, everything from garbage to lumber. It's an amazing mix. And right now, what we're starting to hear from more shippers, they're starting to have some concerns about capacity. There's also more that are starting to ask questions related to Montgomery.

And so we want to make sure that we're finding those right opportunities and making those investments. And a lot of times, it's just us sitting down with a shipper, understanding their supply chain, where we could bring value, and those are the ones that we want to focus on.

So it's more important that there's a problem that we're trying to solve that we think our organization can bring differentiation rather than picking a specific end market that we circle and say it has to be that one.

We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.

Saving the best for last on day 1, we have Schneider and very happy to welcome back President and CEO, Jim Filter. Jim, welcome to Laguna. CFO, Darrell Campbell; and Vice President of Investor Relations and Corporate Finance, Christyne McGarvey.

Gentlemen, thanks so much for being here.

Obviously, focus has been very much on the cycle and the goods and bads that come with it, and we have seen both sides of that today. So maybe just at a high level, I'll have you start with just what are you seeing out there? And kind of when you consider all these moving parts, kind of, is that a net good or a net bad for you?

Yes, yes. So I'll start out with a little bit on demand, which has been stable. There's some pockets where we're seeing some areas of strength. But the huge drivers of auto and homes really not a lot of activity, but it's not falling backwards either. But all the activity that we've seen has been in capacity. And we've been talking about this for multiple years that we saw 50,000 drivers come into the long-haul truck market in a short period of time at a time that we have been talking about, people aren't generally moving into this industry, and they were coming in at a cost point that was far below what we saw was as rational. And so we knew some things were not playing by the same rules as everybody else. We didn't precisely know it early on. But after -- and this is probably 2 years ago, we were starting to see some things already that we understood there was no standard for entry-level driver training.

And so it's really easy to go to a country where you could claim asylum, bring drivers in, train them in a couple of hours, train them in a classroom. Yes, exactly. And then put them on the road. And what we've seen more recently that we've uncovered are ELDs, which have been in place since 2017. They were installed to make sure that drivers weren't cheating on their log books. But prior to 2017, it was very difficult for a driver to cheat on their log books because you still need to be able to line times up from a waybill to your log book to bill of lading.

But one thing that -- we saw all of these ELDs are self-certified. And there was over 1,000 of them here in the U.S., only about 40 in Canada where they're certified by the government. And what you're able to do with the ELD, some of these ELDs that were self-certified improperly is have someone in a back office manipulate your hours of service. And specifically, we're hearing about more companies that had their dispatchers in Eastern Europe where you couldn't be extradited. Even if you -- so if you coerced a driver, you push them, said, I want you to work 18 hours a day here in this country and you do that, and there's a crash, you are liable. And so that's the one that's still very much in front of us. They're making progress on the schools. So we're saying we knew that typically July and August, you see a decrease in demand. And it was no different this year, maybe a little bit sharper, but that's coming off a higher point as well. But then we're still seeing capacity excess. And we'd expect as you go through the fall, that's typically when we'll start to see demand recover further.

Got it. So very helpful baseline. A few things to unpack there. Just starting with the seasonality point because there has been a bunch of incoming that we've got late summer saying, hey, is this normal seasonality? Is this worse? Is this something to be concerned about? Is this going to be concerned about? Or do you think it's just normal?

I think this is normal seasonality. We've seen this. There's been some differences in the last few years. If there's a pull ahead or not a pull ahead, tariffs have had a lot of impacts. You strip all of that out, this looks very much like normal seasonality that there's a run-up up until 4th of July, then a little bit of decrease through July, August, September begins the next ramp up.

Got it. And now it's a good time for our annual Schneider Laguna tradition, which started with Stephen Bruffett, which is peak season watch because you guys usually were the first ones to tell us what peak season would look like. So do you have a sense of what that's going right now?

Yes. We're having discussions with customers. We have -- the programs were put in place very early this year, similar to last year. And that was specifically because we are concerned that some customers might be starting their peak season a little bit earlier. And it's really about making sure that our costs are being covered as we work through those types of programs. A little bit difficult to know precisely what we're going to see this year because I believe what we're looking at is, peak is going to be driven by consumer demand this year that customers are going to start pulling in materials a little bit faster if they need to restock. But at this point, it's a little bit gray.

Got it. I'm going to come back to truckload in a second because I have a ton of questions there. But can we just quickly touch on Intermodal because we just heard from one of your peers kind of talking about obviously, big tailwinds in the Intermodal space, especially with $6 diesel, but at the same time, a bunch of costs as well potentially being a headwind in the third quarter. How are you guys seeing that pull and push between the positives and negatives?

Yes. The market setup is stellar. We really say it's the trifecta because you have high fuel, improving truckload rates and really good rail service. All 3 items are in place, but we also want to grow in a very disciplined manner. If you start growing faster than your dray fleet, if you start growing and breaking your network constantly, you're not going to be able to grow your earnings. And I think we were able to prove that out in Q2, where we are more disciplined in our growth and grew our earnings in Intermodal double digits. And we're going to do the same thing going forward just because there's a lot of opportunities, it doesn't mean you should rush out there and put every box into place and need to make sure that we have the right dray network as well.

Got it. So you're not seeing any outsized headwinds on the cost side in Intermodal that would give you concern?

Well, I think that's a factor of being disciplined that we're taking actions to make sure that we're not absorbing those additional costs. Maybe just talk about cost overall.

Yes, sure. So not all growth is good, right? So we're measuring success based on earnings improvement. So dray capacity is always going to be kind of the signal. And as capacity is constrained, we have to make decisions to make sure if we're moving the load that there's a commensurate return. So in the short term, there could be some pain as it relates to the cost. But over a longer period of time, I think that will benefit raising prices in Intermodal.

Got it. So it sounds like no breaking news from you guys today, which is no breaking news and good news. But just kind of staying on this topic here, again, $6 diesel environment, how much of an issue is that for the truckload side of the business? And how much of that will kind of immediately translate into tailwinds to the Intermodal side of the business?

Yes. Well, our fuel surcharge programs are effective and being able to mitigate the cost increases. Of course, when there's very steep increases, there's always a lag. And so it kind of depends on where is the end of the month, end of the quarter land to be able to understand that. And then this is the value of having the broad portfolio because there's parts of the portfolio that are going to be negatively impacted by high diesel prices and then other parts that are going to be beneficiaries. Of course, the volatility can have impacts in either direction. But over a long enough period of time, it washes out. And so going back to Q1, we didn't call it out as a separate impact just because we said we're not going to claim as a headwind in one market and then a tailwind in another over the long term, it balances out.

I would agree.

And I sort of asked your peer as well kind of just how quickly does customer behavior change in this environment? Kind of, do you get paying phone calls at midnight? Or are they like, hey, this is the world we live in, we'll just revisit it when -- especially given the drivers of it, which still seem very transitory, although seem that way for 6 months. Are they like, hey, we'll deal with this next peak season? Or are you seeing changes of behavior right now?

No, we're getting calls. I'm even getting calls -- this capacity. I'm getting calls from customers that are concerned about our ability to get their freight covered that they're saying, hey, we have challenges for certain carriers. They have some concerns with this changing environment, want to make sure that they're going to be protected in their most important season. And so there's been a lot of mini bids activity going on as shippers want to take care of that type of activity before you get into October. And so there's been a lot of cleanup work just trying to stay ahead of that curve.

Got it. So we spoke about diesel prices, which impact both truckload and Intermodal at the same time, maybe in opposite directions. Another factor that impacts truckload and logistics at the same time, maybe in the opposite direction is the impact of the Montgomery case. So what are you seeing so far? What do you think happens here? Kind of you clearly highlighted the immigration regulations and ELDs as a catalyst for capacity. Where does Montgomery fit in that picture?

Yes. I'll start and Darrell, you hop on in here. So obviously, for our truckload business and asset-based business, this is a tailwind because there's been a diseconomy of scale for a long time if you're a large carrier -- that a large carrier, you're going to be held responsible as we should be for these types of cases. Unfortunately, the outcomes have been disproportionate with the actual impact. And so that's the part that a large company has had to bear, but others have not.

Now with this Montgomery case, what you're going to see is that others are going to face that same type of safety cost, either premiums or claims going forward. And it might not be borne just by that small trucking company, but others in the supply chain, could be a broker, could be a customer that are going to have that impact. So from the asset-based side, I believe that this will be very much a positive. It may take some time before we see that full impact work through the supply chain.

On the logistics side, we started making changes. And I think even last year, we were talking about this in the spirit of cargo theft that we went from 60,000 carriers in our logistics business, our brokerage business, all the way down to 14,000. It was substantial. And it was -- we had to go much further than just saying, are you authorized to haul freight. And we obviously start with some of the obvious things. You have a conditional or unsatisfactory rating, you can't haul for us. But we realized that wasn't enough. We had to start taking a lot of other actions, and we took very broad actions to be able to reduce our carrier base to make sure that we're protecting our customers' freight. Some of those same actions, some of those same players are likely some of these carriers that would put us most at risk. That's not to say that we're -- we don't see challenges in this space, specifically with the cost of claims, cost of insurance.

Yes. So I think our position is that anything that removes capacity from the market has a potential benefit, at least as really surprised. And when you think about a large asset-based truckload provider, we think that we're well positioned because we're used to investing in safety, investing in technology, qualifying drivers. So we think that the standard is going to change, but the gap between where the new standard is and where large asset-based carriers are, we think that's smaller than some of the smaller players in the segment. So we think capacity will leave. We think that the broker qualification process that they go through for carriers will be more stringent. We think that we have a good process, not to say it wouldn't tweak. And we think that shipper behavior will change, right?

So to the extent that shippers are looking at brokers becoming potentially liable, maybe the next show that falls would be that shippers could become liable and they would gravitate towards a large asset-based carriers such as ourselves. We think that the cost of insurance will go up, not just in the form of premiums, right? So as minimum insurance requirements go up and as the carrier qualification standard changes, underwriters' behaviors are going to change. And we think that it could be a situation where insurance is not even available for certain carriers, right? We're not going to be in that position. So that's another thing that benefits us, we think.

Long term, there is a place for brokers in the industry, moving about 30% of the freight because there's a long tail of shipments. There's places there is high variability. So customers and carriers look to brokerage, but we're not going to indemnify everyone out there, not every carrier.

But in the short term, the cost of a claim could go up.

Got it. Not to make you answer for your peers, but that -- the magnitude of the carrier base reduction that you saw, do you think some of your large peers will have to undergo something similar or even more than that? It feels like an industry-wide issue.

Yes, I believe. And everybody is going to have a little bit different number. I can tell you that there aren't 100,000 carriers out there that I think any of us would be able to look at and say 100,000 carriers are safe and should be out there on the road. And so I'd say there are some pretty big numbers that probably should be exiting this marketplace.

So we do think tort reform is necessary because there's uncertainty as to what reasonable care is, right, in this -- if it's litigated on a state-by-state basis, some clarity would be helpful.

Got it. So maybe to go back to the TL side here. So obviously, lots of tailwinds on the supply side. Any particular signs of life on the demand side? Obviously, we have seen -- again, the theme of this conference so far appears to be things are fine, but not amazing, right, I think you would agree with. Do you need it to be more than that for demand to pick up? Is the industrial side looking better on the consumer side? And what's the view of non-peak season demand?

Yes. Well, with the amount of supply that has exited, it's created enough demand for our services. We don't necessarily need more demand. It really is a matter of what can we do to be able to add more capacity. And that's -- we're taking a number of actions there. The #1 was to -- what can we do to improve our driver productivity. It helps the drivers, provides more capacity. Then after that, we're looking at where do we smartly start to make some investments into our driver force, drivers that are more productive, how do we attract the right drivers and continue to invest there.

Got it. And so I think like others, you should be getting into '27 bid season fairly shortly. Any expectations on, kind of, what rates might look like? I mean, obviously, year-over-year basis, you have a much tougher comp. But obviously, with everything else going out there, kind of, it feels like you guys can still name your price.

Yes. I think there's a fairly large gap between spot and contract that we weren't going to close all of that gap this year. But as we're going through this year, I think we're -- you're going to look at more areas where that gap has to close because I'm not sure that spot rates are fully done increasing because if our costs are increasing and the capacity is not going to grow, that will continue to grow along with the impacts of the Montgomery case.

Yes. I mean I think all the things that you mentioned before, too, is the entry-level driver training focus on the ELDs that will continue to push capacity out of the market even into 2027.

So in that environment, kind of how do we think about what the margin trajectory could look like, both in the short term and the long term? Again, do you feel like this is structural that your mid-cycle margin goals can potentially move higher as well? Or are you looking to kind of strike the iron is hot and kind of maximize for now and then we'll see where the industry ends up?

Yes. I mean if the question is on 2027, I don't think we would say -- would proclaim today that 2027 is kind of normal cycle because we've gone through 4 years of a down cycle and typically, the down cycle mirrors the up cycle. So we're kind of in year 1 of recovery.

So you think it extends to '28?

I think it extends potentially beyond 2027. However, we've reshaped the portfolio during the downturn. So our truckload business looks different than it did 4 years ago, right? We're more heavily focused in dedicated, which is we think is more resilient. We've taken a lot of cost out of the business. So $40 million last year, we have another $40 million this year. We've shown at least sequentially from the first quarter to the second quarter of this year, what happens when I get a bit of price in terms of our operating leverage.

So with all that said, looking ahead, with supply still exiting and all the self-help actions still in place, we think there's line of sight to get to, kind of, mid-cycle margins. Now in Q2, for Truckload, we're at 8% margin, right? And I think we'd all agree that there's probably more price to be extracted and demand is only stable, has inflected. Intermodal, we're at 7%, right, with essentially no price. And then for logistics, we're already within our long-term margin range because we've been opportunistic in terms of executing on specific project work. So all that momentum, we're carrying into next year, and we should have some tailwinds from price.

Got it. But your cycle aside, idiosyncratically, can you remind us the 2Q to 3Q margin walk? I think there were a few items there, kind of anything to keep in mind versus...

Yes. So there are a couple of things that we mentioned. We talked about in our Logistics segment, we capitalized on some premium project work. Some of that project work, a lot of it ended, not to say that there's not more that's in the pipeline, but that's just something to kind of keep track of. We also said that for Dedicated, there was one large customer that we lost, but we also said that we had a very strong pipeline. So it would be visible in terms of our truck counts, at least in the near term. But as those implementations kind of get in place, that would all normalize. So we talked about those things, but we also talked about peak and what happens in peak, primarily in the fourth that we're ready to execute, right? But has to show up.

Yes. And as we changed our portfolio, we start growing with a lot more seasonal customers we're -- food and beverage, home improvement are stronger in the second quarter.

Understood. What is the right size for Dedicated within your portfolio? Kind of is this it? Or are you looking to kind of make that a bigger...

Yes, there is no defined number that it should only be a certain size. We are going to move capital to where we can get the best return. That might even mean that we move some trucks from Dedicated into network if we have a better option there as well. And so our goal is to be able to deploy capital to wherever we can get returns that are commensurate with our expectations.

Got it. I wanted to switch gears a little bit and kind of focus on the long term here. And I know that you guys are a very tech-focused company going back to Quest at the time of your IPO, kind of, which was an industry-leading platform at the time. So obviously, the focus of this conference has been on autonomous. I think I've brought it up at every fireside. I believe it's come up in every single meeting investors have had. I know you guys obviously are a leader here. You've done pilots. You're working with the autonomous technology companies. So a few questions on that front. Maybe I'll just let you free wheel at the start first. How do you see autonomous today? What works? What still needs work to work? And kind of where do you see this going in the short term?

Yes. Well, I believe we're very close that we'll start to see autonomous trucks with the driver out, not a driver, we're getting past that point. So now we're moving from just concepts moving into actually deploying this as a form of capacity. And when I think about that, and a lot of people compare this to Intermodal. In a lot of ways, I believe that, that is very true that what's important in an Intermodal network, and like there's very few intermodal companies that generate a return on capital that's higher than their weighted average cost of capital. And so we're very proud of that. But the way you do that is being very disciplined as well. Some we were talking about Intermodal. So you have to be disciplined in creating a network that has balance and not just the hub to hub, but also the dray networks around them because we do believe that we're still going to have drivers on both ends that are making final deliveries.

The other part of making this work is the maintenance and the operations of that line haul truck. A truck after it has -- it's been gone 700,000 miles, 800,000 miles, the maintenance expense is about 5x higher than your first year. It also spends more -- has more downtime. This -- for the economics of this to work, that truck has to run 24/7 nonstop. And if it's breaking down, you have a lot of cost on your hands that you're not able to deploy. And so as we're thinking about this, where we think we will be successful is building very dense networks, and you have to have a lot of liable parties. And this where having a brokerage business, a truckload business, Intermodal really is helpful. And then I believe our ability to build the dray networks. We will -- I believe we'll have more drivers in the future when we have autonomous trucks than what we have today. But more and more of them will be going home every single day, enjoying the types of jobs that they have, and we'll be able to grow that much faster. So I believe we're very close to that point, excited about the opportunities there.

Got it. So is it fair to say that you guys feel like you have an amazing recipe for this great dish? It just isn't this slow cooker and kind of needs to -- the ingredients need to come together and get it done? Or do you think we are still at an early stage where there are still things we need to figure out that we don't have answers to.

Yes. I believe that I have this great opportunity. And by the way, I don't believe this really competes with Intermodal, even though I say it's similar to Intermodal. Intermodal has a very different price point than over the road. And so -- and different fuel consumption. So Intermodal is still going to compete very well. But I think about even long-haul trucking, Intermodal is, maybe 5% to 7% of those kind of lanes. It's all of that other freight is where I believe you will see this impact. But we're very close to it. At the same time, I think the caution is you can clear every single technical hurdle, but you have other hurdles that -- the adaptive issues.

And so the one thing that has us excited about us being on the precipice of this going forward is the BUILD America 250 Act, which will create a nationwide framework for EVs. That same bill also has a provision that mandates 2-person crews inside of the train on a track with positive train control that even if both people fell asleep, the train is going to slow down. And so I mean, there are an awful lot of truck drivers in this country, and I'm sure concern make sure that they're getting these good paying jobs as well. And so we're going to be watching adaptive issues. And we want to support this and show people you're still going to have a job. We're going to have jobs where you get home more frequently. We want to help people through that. But that's going to be the key part of this. So you have to do this at an appropriate pace as well.

Got it. Sorry, just a couple of more questions on this topic. We see 4 stakeholders here, which is the autonomous technology companies, the truck OEMs, yourselves as fleet operators and the shippers. Whose court do you think the autonomous ball is in right now? Like, who has the next -- the burden of execution, the burden of proof for the next phase until we get to commercial?

Yes. I think it's getting to the carriers because we are at that spot where the trucks aren't available yet at a level of scale, but we're getting very close. So I would say that the OEMs do have to create the trucks with duplicative systems. So there is a little bit of work there. I believe by next year, we'll start to see those trucks be available. So I guess it's really in their court but for a short period of time, followed by a little bit with the AVs, but very quickly, it will be sitting in our hands and our opportunity to prove that we can create a really dense network that can provide a cost-effective and high service solution for our customers.

Got it. Last question on this topic. To whatever level of detail you want, kind of, what actual work are you doing on this today? Kind of, what pilots are you running? Are you talking to multiple OEMs and multiple providers, kind of just give us a sense.

Yes. We're working with 2 providers. We think Aurora is very good on the technology. But at the same time, they're not an OEM. So we're working with Torc who is aligned to our primary OEM as well. And so we want to be able to work with both models. I think both have applications. We want to be able to test both, and we'll continue to do that. And we've worked with others in the past. We've narrowed it down just to these 2. We think they're both have the opportunity to be winners. Now there might be some other winners as well. So we're focused on that.

In terms of running a truck and doing one single load, we really don't learn anything new anytime we do that. There's -- we can do that, but you're not learning anything new by doing that. The rest of the work is identifying where do you want to operate? Do you have the facilities and other pieces starting to be put in place. We're a little bit early for that, but we do this type of work all the time with our modeling tools and Intermodal. There's times where we've added new locations, we've taken them away. We have a very good process for be able to identifying those and then also building into our pricing tools. So I think we're prepared.

Sorry, I lied. One more. I can get keeping -- I can get keeping time here. What are your conversations like with your shipper customers on this? Kind of is there a demand pull from their side because they know what's going on with drivers? You can't just have a driverless truck show up at a Walmart location, like we're not supposed to do this. So are you having those conversations now? Or does that happen in the future?

Yes. There's -- customers are asking about this. They want to make sure that we're leaning into it that there's an opportunity. We're assuring them we are when this is available. We're going to be able to do that. They want to make sure that if there's an opportunity to take cost out of our supply chain that Schneider is going to be there leading the way, and we're assuring them that we will.

Got it. I am done now. I want to open up to the audience to see if anyone has questions. We have one here.

Can you talk to kind of initiatives you have, wage increases with the drivers and just kind of how you're retaining talent here, just given none, all these initiatives here to bring [ into supply ].

Yes. So for retention, first of all, starting off, it was really important that we are focused on productivity. One, your drivers are making more money. But when drivers are productive, they're not out there looking at what should go and do something else. And so we saw high single digits improvements in both Q1 and Q2. And following that, we are already starting to look at some places that we need to start to increase some driver pay back in Q2. Primarily, our focus is on the retention side. How do we take care of our most productive drivers and raise then the pay scales as well. So that's an ongoing exercise because we have to make sure that our customers are funding it. And so it is a little bit iterative as we're focused on specific opportunities where customers are looking for capacity if they're funding it, a portion of that is flowing back to our drivers.

I know you talked about earlier how the supply side regulations are driving enough demand to you. Is that mostly on the One-Way side? Or is that able to help offset maybe some of the churn you've seen in Dedicated as well?

Yes. It's primarily in One-Way to include within logistics. It doesn't necessarily drive Dedicated because within Dedicated, we want to make sure the opportunities we're pursuing are truly dedicated. They're not a network type solution that's going to fall apart in the future. And so we spend a lot of time there. Same time, when that type of activity drives spot rates, and we're always looking for backhaul to feed into the Dedicated business. So it does have an impact on Dedicated, but not necessarily to grow the fleet.

Yes, there's an indirect impact, especially we talked about a lot of these actions on the supply side we think are durable. So they're going to extend beyond 2026 and 2027. So spot rates obviously have an impact on contract rates. And we usually see a lag between Intermodal rates and truck rates. So there's some impact, we think, on Intermodal, right, as we're kind of repricing some of those. And then Dedicated, obviously, is contract-based. Not all the book comes up every year, right? Essentially 1/3 or so of the book comes up every year. So depending on where spot rates are, that's instructive to contract as well.

Maybe a couple more take us home here. I badgered you with autonomous questions. So I'll slightly shift gears, let's stick with the technology team and talk about AI because that was a huge focus for investors, kind of, maybe 6 months ago, it sort of died down a little bit, which is probably good, healthy, normal as the technology, kind of, matures a little bit. I know you guys have a number of initiatives there. Talk about what that means for the logistics business and indeed for the entire organization, kind of, what you've put in place and what the maybe margin opportunities over time?

Yes, I'd start with creating a structure for the organization because we want to make sure that as we're taking actions, we're doing this and protecting the enterprise, making sure that our entire team is AI literate to understand what the opportunities are. And then we're going out and building and understanding what is truly our sovereignty, the pieces of our business that we want to protect and we don't want to make available to others and also understanding where are those places where it really is a commodity and we should be working with partners. And so as we're doing that, we're looking at a number of domains and where we can deliver value back to the organization.

And so we've had a number of those, and we've been very public on the logistics side because there's been some really great improvement in productivity multiple years in a row. The bots are negotiating rates and talking to carriers. They do a lot of back-office type work. But it was also really important that we didn't just go and build this to be efficient. We focus on effectiveness first, having decision science tools that we can trust so that you can allow that productivity to really go out and run. We are starting to take more of this now, and it's moving more towards the asset side, the work with our drivers. And so we've started this in our Intermodal business, where we have some Agentic AI that's helping our drivers out, be able to respond much faster. We're starting to apply that to other businesses. We're applying this into our recruiting business, make sure that we take every single call right now and actually proactively reach back out to candidates as they're moving through the process. We want to make sure that we keep touching them. And so we think we're not just investing because we see something that we think looks pretty cool or we have a capability, but we can generate a positive return.

Got it. Maybe Darrell, to close out. Just 2 questions on capital use. How are we thinking about CapEx, the fleet renewal versus growth here and also maybe M&A opportunities? And do you see anything out there?

Yes. So we -- similar to the theme, when we're talking about Intermodal and even Dedicated, we're focused on earnings growth and productivity. So that productivity translates into what we do in terms of our fleet. So if you look at our revenue per truck per week in truck, we've increased efficiency there. So that has the impact of allowing us to purchase less in terms of CapEx. But we're still focused on replacement CapEx because we want to protect our agent fleet.

Now if there are opportunities to invest in growth that has a commensurate return, we're proven that we'll continue to do that. We're also very focused on equipment ratios. So we had scaled back on trailing CapEx because we want to make sure that our trailer to tractor ratios are tight.

Just in terms of capital use in general, right, so we're focused on organic growth where necessary replacement CapEx, shareholder returns, but also M&A. We have a very successful playbook that we've used 3 successful acquisitions in the last 5 years. So we're looking at quality targets, accretive targets, not fixed or upwards, places where we can use our scale to grow those targets. And the proof is in the pudding we've seen that the 3 acquisitions that we've done are larger today than when we acquired them. So we're going to stick to that formula. And we said every 12 to 18 months was our targeted cadence, but we're not going to force something if it doesn't make sense. But we have a robust pipeline that we are always looking at targets and we're with 0.2x leverage or less, I think we have the ability to execute.

Yes. Any particular rank order of segments, Logistics, Dedicated, Intermodal, One-Way?

Yes. So we don't close the funnel necessarily. But in terms of our One-Way network, just based on where margins have been and returns have been, I don't think it will be the best use of capital to invest there, right? So Dedicated, the playbook has worked, and we're continuing to look at those targets. Intermodal, based on the concentration of the intermodal providers, the opportunity hasn't created itself or appeared, but that's a configuration that's in our strategic priority list that if something were to come up, we'd look at it. And then on the Logistics side, it's really looking at the multiple that we'd have to pay and figuring out how the multiple kind of correlates to our enterprise multiple, and that math hasn't worked. And obviously, there are other pieces to consider in terms of the cost, at least in the short term. So we haven't really looked at that right now.

Got it. Gentlemen, with that, we are unfortunately out of time, but that was very insightful. Tons going on. So a very exciting time as well. But thank you for being here at Laguna.

Thank you. Appreciate it.

Ladies and gentlemen, thank you for joining us, and welcome to Schneider National's Second Quarter 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Christyne McGarvey, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. Joining me on the call today are Jim Filter, President and Chief Executive Officer; and Darrell Campbell, Executive Vice President and Chief Financial Officer. Earlier today, the company issued an earnings press release. This release and investor presentation are available on the Investor Relations section of our website at schneider.com. Our call will include remarks about future expectations, forecast plans and prospects for Schneider, 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-K 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, reconciliation of non-GAAP financial measures referenced during today's call can be found directly in our earnings release and investor presentation, which includes reconciliations to the most directly comparable GAAP measures. Now I'd like to turn the call over to our CEO, Jim Filter.

Thank you, Christyne. Hello, everyone. Thank you for joining us on our national call today. I will start by offering my perspective on the freight cycle and how we are positioning the enterprise for success in this dynamic market. I will then turn it over to Darrell for his commentary on second quarter results, capital deployment and our full year earnings per share guidance. After that, we'll open up the call for questions. .

Looking at our performance in the quarter, we believe we are seeing the initial benefits of the actions we took to structurally improve enterprise and position us to quickly and effectively capitalize on better market fundamentals. This includes effective revenue management, enhancements to asset efficiency and productivity, execution on our $40 million cost savings program and our differentiated multimodal model. We continue to see meaningful opportunity ahead but we want to thank our associates, especially our professional drivers for their hard work, which helped drive earnings to more than double sequentially, representing the strongest quarter-over-quarter improvement in the last decade. Many cycle indicators that showed signs of life in the first quarter gained momentum through the second quarter.

Spot rates are already testing prior cycle highs, turndowns remain elevated, and utilization has increased meaningfully Underlying demand trends were largely stable with some modest seasonal activity. As a result, we believe the market improvement to date has been supply led. Regulatory action and enforcement on noncompliant supply, including in areas such as nondomiciled CDL usage, English language proficiency, illegal cabotage entry-level driver training and ELD tampering, all gained traction through the second quarter. Supply attrition has been faster than we initially expected and is removing the most irrational capacity from the marketplace.

We will now categorize the market as driver constrained. The long-haul driver population in the U.S. sits well below long-term averages and near the lowest levels seen over the last decade. However, we believe roughly half of the noncompliant capacity is left with the remaining impact of supply expected to exit through next year. Against that backdrop, we believe we are only in the early stages of rate recovery and are maintaining a discerning approach to customer allocation events. We are balancing customer commitments with the need for rates that will support our strong service recouped multiple years of significant cost inflation and drive returns back to a level that is supportive of growth.

Importantly, spot rates now exceed contract rates at a level that has historically preceded more meaningful contract rate improvement. While the pace of supply attrition and is supporting price increases, it is also creating challenges in driver recruiting and retention, which is putting upward pressure on the cost of capacity. We remain an employer of choice, and we will be disciplined in investments to add capacity, focusing on where we see clear demand, strong productivity and returns that meet our expectations. We have aligned our pay structure to reward our hardest working drivers to support retention, while surgically reinforcing recruiting efforts, including growing the number of recruiters, expanding our AI capabilities and enhancing starting driver pay in the most constrained geographies.

Altogether, our second quarter results underscore the importance of price and productivity. Changing supply conditions are most acute in the over-the-road segment of the market where irrational capacity has persisted. This, in turn, is creating the strongest initial opportunities in our network and logistics solutions and we have responded rapidly. In the second quarter, these segments captured premium opportunities as we support customers through a quickly tightening marketplace. We expect Dedicated and interval to see increasing benefits as we move further into the up cycle through contract renewals and freight allocation events. This flexibility is the benefit of offering a scaled, sophisticated multimodal portfolio.

Digging into our business segments in more detail. In truckload, we more than doubled earnings sequentially on 2% revenue growth, only possible through the organization's hard work on executing price, productivity and cost reductions. Network price grew high-single digits year-over-year in the quarter. We are quickly leveraging all our tools to extract price, including historically high spot exposure, advanced freight selection and acceptance technology and a growing number of mini bids, among others.

Spot rates became increasingly accretive through the quarter and June saw levels of contribution that were on par with March of 2021. Network price renewals also accelerated with average price increases in the quarter, up double digits, which we achieved while also improving incumbent retention. Tractor count was impacted by driver availability, but we were able to more than offset the reduction with improved productivity, which grew high-single digits year-over-year. Tacit efficiency gains we have made are now being compounded by better freight selection, and we actively manage truck count in the quarter to reduce unseated tractors.

Turning to our Dedicated business. We saw modest year-over-year price improvement in the quarter, supported by our self-help actions on portfolio quality. We remain disciplined in adding durable dedicated solutions with returns in our targeted ranges as that discipline is what drives earnings resiliency through the entire cycle, proactively addressing pricing knowledge, allowing us to get ahead of the increased cost of capacity and position the portfolio for higher quality growth. As we highlighted on our last call, these actions are creating some near-term churn. While productivity gains also contributed to the year-over-year tractor count decline they helped drive margins higher in the quarter.

Dedicated remains a key pillar of our long-term growth strategy and the consistency and resiliency of earnings is a feature, not a defect. We continue to advance our sales initiatives with more than 500 new trucks sold year-to-date in 2026. We believe constrained driver supply, inflationary pressure in areas such as insurance, and emerging liability concerns all support long-term dedicated growth. We are also increasingly confident in our focus on specialty equipment where our retention remains highest.

At the same time, the benefit of our diverse portfolio of solutions is that it gives us flexibility to meet customer needs as they evolve. As cycle conditions shift, network will be most responsive to market improvement especially in an up cycle that remains primarily driven by supply attrition in the over-the-road segment of the market. As a result, in the near term, we may shift some capacity into our network configuration. However, we do expect dedicated to benefit as those conditions translate through contract renewals and customer allocation decisions.

As improvement accelerates, we will have the line of sight and capability to quickly return that capacity to capture these opportunities. This is the multimodal strategy working as intended. In intermodal, second quarter results underscore the efforts we have made and continue to make to prioritize profitable growth. Over the road conversion opportunities expanded in the quarter, but as expected, Drayage has become the primary constraint, realizing 9 consecutive quarters of volume growth, we remain disciplined in the second quarter. We elected not to chase growth that would have required expensive third-party dray when pricing was not yet supportive of the incremental cost.

We are growing in areas where returns are commensurate with our service and cost, as evidenced by the strong growth in Mexico and in the East where they are the most significant over-the-road conversion opportunities, and we have clear differentiation. Altogether, the segment delivered earnings growth despite some revenue pressure, reflecting our differentiators and lanes and service, containers and chassis asset control, effective network and revenue management and the optimization of third-party costs.

Looking forward, we have seen success with select targeted investments in company dray capacity, which netted up through the quarter. At the same time, pricing renewals accelerated in intermodal. Importantly, we are seeing even stronger out-of-cycle increases, a signal that the market is beginning to turn faster. We expect these efforts to gain traction through the third quarter, positioning us to profitably capitalize on the trifecta over-the-road conversion tailwinds as we move forward, including elevated fuel costs, rising truckload prices and strong rail service. We are pleased with our performance in this allocation season, which we expect to translate into volume growth in the second half.

In logistics, we extended the momentum from the first quarter, delivering double-digit year-over-year growth in both revenue and earnings. Brokerage net revenue per order improved both year-over-year and sequentially, supported by revenue management and premium project business. While we are addressing out-of-market contractual pricing, we are also leaning into expanded spot opportunities. Our spot exposure increased year-over-year and sequentially, Revenue management actions were amplified by productivity initiatives, especially those supported by our ongoing technology investment and leadership in Agentic AI solutions. The projects that began in the first quarter extended through much of the second quarter, though have now largely concluded.

We expect the expertise we have built into these new verticals to remain a meaningful growth driver for logistics even as the project-based nature of the work may create some quarter-to-quarter variability. Altogether, we are encouraged by how the business has responded to the early innings of supply normalization and market improvement. Darrell will provide more detail on our earnings expectations shortly, and we are confident that 2026 will be a year of meaningful earnings growth supported by an improving rate backdrop and our enhanced ability to drive operating leverage. With that, I'll hand the call over to Darrell to discuss our results and guidance in more detail. Darrell?

Thank you, Jim, and good afternoon, everyone. I'll review our enterprise and segment financial results for the second quarter and provide insights into our full year 2026 earnings per share and net CapEx guidance. Summaries of our financial results and guidance can be found in our investor presentation available on the Investor Relations section of our website. Starting with the second quarter results. Enterprise revenues, excluding fuel surcharge, were $1.3 billion, up 4% compared to a year ago. Adjusted income from operations was $73 million, a 29% increase year-over-year. Enterprise adjusted operating ratio improved 110 basis points compared to second quarter 2025. Adjusted diluted earnings per share for the second quarter was $0.29 compared to $0.21 for the second quarter of 2025.

Earnings grew year-over-year across each of our business segments, supported by continued progress in the strategic initiatives Jim outlined earlier, and execution against our $40 million cost savings target, where we remain on track. We're seeing meaningful progress from our ongoing technology initiatives, which are helping automate and streamline workflows, reduce head count, improve driver productivity and lower third-party spend.

From a segment perspective, truckload revenues, excluding fuel surcharge, were $628 million in the second quarter, up 1% year-over-year. This growth was driven by improvements in revenue per week, which grew 5% year-over-year and more than offset lower truck count, which have been impacted by a more constrained driver environment. Network revenues, excluding fuel surcharge, grew 8% year-over-year, driven by productivity and price with revenue per truck per week, up 16% year-over-year. Dedicated revenue per truck per week was up modestly year-over-year, reflecting ongoing portfolio upgrade actions. Truckload operating income was $51 million, a 28% increase year-over-year.

Operating ratio was 91.8%, an improvement of 180 basis points compared to last year. This marks the strongest profitability for our Truckload segment since the second quarter of 2023. Earnings were positively impacted by our revenue management efforts that were supported by an improved truckload backdrop. We're also seeing the benefits from our cost savings program where we're gaining traction in areas such as head count and trailing asset efficiency. Intermodal revenues, excluding fuel surcharge, were $262 million for the second quarter, down 1% year-over-year. Revenue per order declined 2%, reflecting mix changes that drove a lower length of haul. Volumes grew modestly year-over-year, marking the ninth consecutive quarter of order growth. Intermodal operating income was $18 million, a 14% increase compared to the same period last year and a strong sequential improvement supported by head count actions and gains in tractor asset efficiency.

Operating ratio was 93%, 90 basis points improved compared to last year. Logistics revenue, excluding fuel surcharge, totaled $376 million in the second quarter, up 11% from the same period a year ago. We saw improvement in price, supported in part by opportunistic premium project business. Logistics income from operations was $12 million, up $4 million year-over-year. Operating ratio was 96.8% and an improvement of 90 basis points from last year due to top line growth noted earlier and effective management of net revenue per order, including capitalizing on spot opportunities. Productivity gains, including those from reduced head count and power-only trailer efficiency improvements also contributed to strong performance.

Turning to our balance sheet and capital allocation. Net CapEx in the quarter was $84 million compared to $53 million last year, primarily reflecting our efforts to improve the age of tractor fleet. As a result, free cash flow declined $35 million year-over-year in the quarter. Year-to-date, we've delivered nearly $35 million back to our shareholders in the form of dividends. Looking forward, our strategic priorities for capital are unchanged, and we remain focused on disciplined deployment, including supporting organic growth that's aligned with our areas of differentiation, accretive M&A and robust shareholder returns. The strength of our balance sheet allows us to be nimble and execute on all 3.

As of June 30, we had $397 million in debt and lease obligations and $293 million in cash and cash equivalents. As a result, our net debt leverage was 0.2x at the end of the quarter. For 2026, we're revising our net CapEx guidance to the range of $350 million to $400 million, down from $400 million to $450 million. As noted earlier, our plan continues to reflect the use of CapEx to improve our Asia fleet. The reduction from our previous outlook is driven by a lower need for trailing equipment and consistent with our ongoing focus on asset efficiency. Our areas of investment will continue to support growth across intermodal, especially dray capacity and in dedicated, particularly in specialty equipment. We're raising our 2026 earnings per share guidance to $0.90 to $1.10 from our previous range of $0.70 to $1.

Our guidance assumes an effective tax rate of approximately 24%. Second quarter results reinforce our confidence that the actions we've taken to lower cost to serve, enhance productivity and prepare for this up cycle are delivering meaningful operating leverage. Based on our year-to-date performance, we're raising the top and bottom end of the full year earnings per share guidance to reflect the progress we are seeing across the business. Our outlook continues to assume that supply attrition remains supportive of freight conditions for the advance of the year and that we continue to make progress against our $40 million cost savings target.

At the same time, our guidance incorporates a range of outcomes for demand and the availability of driver capacity in the second half of the year. Demand has tracked largely in line with our base case to date. Looking forward, stronger demand could drive additional upside while softer demand may moderate some of the benefits from supply rationalization. As we think about the remainder of 2026, we're bringing momentum from contract implementations and successful allocation events. It is important to note that we're anticipating a loss of a large dedicated customer, which will be more evident in the second half of the year. Additionally, our business mix has evolved over the past several years, including the addition of 3 dedicated acquisitions and greater exposure to food and beverage and home improvement end markets.

As a result, seasonal demand is typically stronger in the second quarter than in the third. Altogether, we expect earnings to grow meaningfully year-over-year at every point in our updated guidance range. Now I'll turn the call over to Jim for closing remarks. Jim?

Thanks, Darrell. Before we open the call for questions, I want to reinforce why we're encouraged by the direction of the business. we are a stronger, more efficient company than we were in the last up cycle with a more resilient dedicated solution, differentiated intermodal service and scalable capacity across network and logistics. These improvements are being further supported by technology innovation, our cost savings program and a proven acquisition playbook. Second quarter results show that the actions we have taken to structurally improve the enterprise are working. The freight backdrop is improving, capacity rationalization is progressing and pricing momentum is building.

Across the portfolio, we are seeing benefits from revenue management actions, productivity gains, lower cost to serve in a multimodal platform that helps us methodically capture opportunities. While uncertainty remains, particularly around demand and driver capacity, our confidence in the earnings trajectory has strengthened. We are maintaining a strong balance sheet, investing where we see clear returns and continuing to execute against an unchanged strategy, earn customer loyalty through consistent execution, grow profitably where we create differentiation, improve on our low-cost operating model and maintain disciplined capital allocation. With that, we will open the call for questions.

[Operator Instructions] Your first question comes from the line of Jordan Alliger with Goldman Sachs.

I was wondering, obviously, the supply side has been the big factor here. I was wondering if you gave a little more color on what you're hearing, seeing from your customer base, their thoughts on perhaps demand looking ahead? And maybe a little bit on the fleet. Interesting on perhaps moving some more trucks into network. But can you maybe talk about your thoughts for fleet growth as we look ahead over the next year or so?

Yes. Thanks, Jordan. I think you've got a few questions in there for us to start. So let me just start with what we're hearing from customers related to demand and what we're seeing really macro there, and then I'll touch a little bit on what we're thinking about here for fleet growth as well. And so first of all, as it relates to demand, demand is playing largely as expected. Underlying demand is largely stable. We saw a little bit of seasonal activity in the quarter related to both summer holidays in the World Cup. And so our customers that are in areas like food and beverage, definitely saw a little bit of a lift up. But -- and looking forward, what we're hearing is the consumer has been resilient through all the macro noise that's been going out there, but there are some risks that are not completely behind us.

There's inflationary pressure, primarily due to higher energy costs. Interest rates are continuing to weigh on some of the key end markets and places like housing. And that's why we're really focused on a broad portfolio of customers that provides us a bit of a cushion here. And the reality of the market that we're in here, though, is that this is really being driven by supply. And even with just a little bit of a ripple in demand, it was enough to make a market move here. And there's just no excess supply and our customers recognize that the market has changed that there isn't excess supply out there and if there's any disruption, it will result in a really rapid change in the market because there's no way to absorb the shock.

That being said, as we're looking at our fleet, the way we're looking at it, we're excited about the supply exiting the driver market tightening. In Dedicated, we already highlighted that we're continuing to see strong sales of 500 year-to-date offset by a little bit of churn in the near term. But at the same time, this is a great opportunity for us to be able to continue and restore profitability in that area. And then as it relates to the network, we haven't been satisfied with our performance in network. And we know we need to restore some margins there. That's our first priority before we start to look at growing that driver fleet again.

Your next question comes from the line of Bascome Majors with Stephens. Please go ahead.

And if we look at the public data that we can follow, 2Q was a sea of frenetic activity and spot rates and tender rejection rates escalating at pretty much unprecedented levels despite the stable demand drop you talked about. But since then, at least the day that we can follow, it's been kind of sideways and maybe even walk back a bit. And I just want you guys' perspective from looking at your own internal metrics, whether it's turndown rates or what you're hearing from customers? Is the market leveling out and even cooling off a bit -- or is this just the sign of seasonality that's kind of consolidating after a pretty challenging period.

Yes. Thanks, Bascome. We looked at this very similar last year. I think we have the same discussion that when you get late into July, you see spot rates change a little bit. And I would say this really mirrors what we saw a year ago. So very similar seasonality here, and it hasn't changed what we're seeing out there in the marketplace. And it's not just spot rates aren't the only way that we're able to extract price. It's 1 of those areas. And even though it's moving sideways, we would still say spot rates are still about 15% higher than contract price. And so that enables us to have a number of ways to go out there and extract price. And the #1 area, obviously, is through normal allocation events. But outside those events, we're seeing post allocation opportunities that are growing.

We're also improving price through freight selection. And even though spot is moving a little bit sideways, still positive opportunities there. And our customers are increasingly realizing that this is not a temporary situation. When you see a little bit of a sideways move it here. And so we've been really comfortable staying with elevated spot exposure because there's that 15% delta between spot and contract. And we continue to think we're still in the early innings of a rate recovery with overall, it's elevated spot exposure, and we'll keep that elevated spot exposure until the book closes between the gap between spot and contract.

And just to follow up on 1 point...

[Operator Instructions] Our next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Jim, just on IM, obviously, you're a significant player in both asset-based trucking as well as IM, and we're seeing a significant rotation from TL to IM at the moment. Do you get a sense that this is sort of a permanent structural move? Or do you think this is kind of opportunistic for the moment, given that volumes aren't there yet and TL pricing is high and share might shift back to TL? Or do you think this is like the new normal for IM?

Yes. Thanks, Ravi. Appreciate the question here because definitely, you're absolutely right. We're seeing that trifecta of opportunities here between fuel, seeing the impact with underlying truckload rates. But also, I think what's structurally different right now is the rail service. It's giving us an opportunity to get into more opportunities and customers are seeing those benefits. I think the other part is, as you look at where our growth is coming, we now have 17 consecutive quarters of growth in Mexico and customers have wanted to make a change there for a long time. And it really took that change of us operating with the CPKC to unlock that.

We're also growing the local East with over-the-road conversion, partly that's being driven by what you're seeing with truckload rates with fuel, but also the service is really good and customers are understanding that. But they also -- when they make that change to use Schneider and Local East part of the reason why they're doing that is because of our multimodal strategy because they know that we have other capacity options, whether it's with one of our trucks or it's using one of our logistics solutions to make sure that we have them covered through it. So yes, I do believe that we're going to -- we have opportunities to continue to grow. And this has been 2 years, 9 quarters of growth. So we've been able to grow through some relatively weak times.

That's helpful. Maybe as a follow-up here. I'm sorry if I missed the detail here, but I think you mentioned a large upcoming dedicated loss. Can you shed some more light on that? Just maybe quantify how much an impact could be, so we know what the net guide increase looked like? And also maybe some color around that loss. .

Yes. And overall, Ravi, way to think about that, that's contemplated and what we're expecting going forward. And dedicated, like I said earlier, it's designed to be more consistent and resilient. And over the 4-year down cycle, Dedicated has remained remarkably resilient. But at the same time, performance isn't where it needs to be. And as the conditions are improving, that is giving us the opportunity to proactively address the bottom-performing agreements in the portfolio and reallocate those resources towards higher-performing opportunities. Obviously, as a byproduct of those actions, it can create some near-term churn, which is what we've been experiencing in the last couple of quarters. And so our focus here is the revenue per truck per week improvement.

It's our priority at this point in the cycle and expect you're going to start seeing more pronounced improvement in that metric going forward because of the momentum we're seeing in contract renewals and productivity actions. And then after we've worked through these, then there's an opportunity to begin growing with deals that are durable. We feel really good about our ability to go out there and sell trucks in this area. that's giving us the confidence to restore margins.

And Ravi, this is Darren. The only thing I'd add is our pipeline is robust, right? So one of the reasons that we have a pipeline can absorb shocks. The reason why we kind of highlighted that on the call or in our prepared remarks is really that in the third quarter, it's going to be more evident as we implement some of those wins.

Your next question from the line of Jonathan Chappell with Evercore ISI.

A little surprising to see Logistics EBIT almost doubling sequentially, up over 50% year-over-year in a quarter where it feels like most logistics companies were squeezed by paravalve in spot pricing. So is this Schneider specific cost? Is this your power only model? Is there something special that went into this kind of quarter where it seemed to be one of the worst laggards for most peers.

Yes. Thanks for the question, and we talked a little bit about this last quarter because we were already seeing some of the benefits in logistics come through last quarter. And once again, it's shining through. And we're no different than the rest of the industry. In the second quarter, we still had some impact from rising third-party carrier costs that weighed on our contract rate of business, including power only, which you mentioned, -- but there's just been really strong execution on the premium project business. We had that in the first quarter. We developed trust with our customer and that created additional wins in the second quarter. But it wasn't just the project business.

We continue focusing our revenue management efforts to address net revenue pressures, including leading into our spot opportunities. And so we had to address some out-of-market contract rates. And at this point, right now, we're about 60-40 contract versus -- I'm sorry, 60-40 spot versus contract. -- a year ago. And historically, we run at about 50-50. And it's not just all of those commercial actions and there's some cost actions here. We've been working on developing AI, especially in this area. And those tech investments have resulted in our frontline productivity improving 17% year-over-year in the second quarter, which is also enabling great results here. So it's really all the way through from commercial activity, how we're managing revenue management and then how we're executing the loads.

Got it. And then just quickly, you specifically called out gains on equipment sales in both the truckload and the Intermodal EBIT in the press release. It feels like those might have been a bit more outside than normal? Is there any way to quantify that, especially as it helps us kind of consider the 2Q to 3Q bridge? .

Yes. So this is Darrell. So in the second quarter, we did see a bit more in terms of gain on sale. We did see pricing improvements in terms of those sales, and we did also sell more units. Nothing that's that material, but there's definitely a step-up from the first quarter to the second quarter. For the remainder of the year, we do expect some robustness in the market to remain as it relates to the price.

Your next question from the line of Bruce Chan with Stifel.

Maybe just a question here on the intermodal revenue per order pressure. Jim, I think you talked about the mix impact there, which makes a lot of sense with the local conversion. But wanted to maybe get a sense for what core yields look like there? And I know you generally don't comment on what the number looks like by region, but just maybe directionally, how should we think about that yield trajectory on the shorter haul versus the longer haul lanes.

Yes. Thanks, Bruce. And you're right. We don't comment on pricing by region here, but I can give you some color that I think will be helpful to help you think about this going forward. So you're right. In second quarter, the rate per order impacts were really just a matter of length of haul and mix because our contract renewals have been increasing in each of the last 4 quarters. And we had expected that Intermodal truckload, but we are seeing tightness now in the drayage market. And really, we've been talking about this for quite a while that the catalyst and intermodal to move price is that drayage market. And so our contract renewals were low single digits in the second quarter, and now we're trending towards mid-single digits, which is what we really need to be able to invest in growing gray or utilizing third-party capacity, which is at a higher price point than company drivers.

And so what we are focused on here is getting to a price point where we could start to accept more loads. And as we're getting to that pricing that we're beginning to see that's going to enable us to start growing, not just in the East and Mexico, but really throughout all of our markets.

Your next question comes from Ken Hoexter with Bank of America.

Great. So Jim, congrats, first of all, on your first call leading here. we've also gotten the driver ads in Westchester. So it's clearly working. But looking at your guide and your outlook. Look, my wife looks at me every time they come on the radio. So looking at your guide and your outlook, thoughts on progress, Darrell, I don't know if you want to -- if you can walk through, I know you don't do quarterly forecasting, but is 2Q the strongest is fuel going to aid more into 3Q. I don't know if there's delay real time, if you want to talk about that, you throw out thoughts on driver pay. Is there anything we should think about costs coming into play. So just maybe give us some parameters as you raise the range.

Yes. Sure. You hit on a lot of the things that we're considering. But I think let's just start with framing the guide. So we've said that the guy will assume that we have more supply attrition, right? We said that in January, we said that 3 months ago, and we're continuing to expect supply to exit the market. We've also talked about all the things that are within our control, including our cost savings initiatives, our productivity actions, our revenue management actions. And with 2 quarters behind us, we're seeing the signs of all of those efforts kind of come to fruition. So -- we've also seen driver capacity exiting faster than we initially thought. And year-over-year, all of our segments grew, which is remarkable.

We're taking up the bottom end to the top end of our guidance based on all those facts -- but it's not only the year-over-year growth that we've seen, we've seen very, very strong sequential growth. So quarter-over-quarter from the first quarter to the second quarter, we saw a doubling of our earnings -- and that does not happen by accident, right? Those are all the things that are within our control with a little bit of help on the market. But as we go into the second half of the year, we're bringing all that momentum that we've seen, not only as it relates to price, -- so logistics, for example, in network, those are the areas where most of the irrational capacity came in, and that's where we're seeing it come out the fastest. So we're seeing the more ready impact in terms of pricing there. But in areas such as dedicated and intermodal, which are more contact based, we expect there to be a benefit in the second half as a result of all that.

Now -- we have 2 quarters left in the year. So we're thinking about things that are balancing that optimism, and I think you hit on some of them. So as capacity has exited the market, which is good for price, there are certainly kind of strength on driver capacity, right? So in terms of our scenarios, we're putting in scenarios that release to drive cost and availability. And we've talked about demand or demand being a swing factor. We think that's particularly important as it relates to peak and what happens in the fourth quarter. But obviously, we have a lot of confidence that based on our preparedness, we were ready to execute once -- if and when that freight becomes available. Now you asked a question as it relates to momentum and progress there.

In my opening remarks I talked about seasonality. So our business has evolved over time. We've made 3 very significant acquisitions over the last 5 years. And with that comes a shift in the portfolio. So we talked about exposure to food and beverage end markets, home improvement end markets, and that's driving more seasonality into the second quarter as opposed to the third. We've seen that over the past several years, and that's something that we kind of continue -- expect to continue kind of going forward. There are some other things that are unique in our guide kind of going forward. There was a question on logistics and the performance of our logistics business relative to the market. We've been very focused on developing our eras of strength in terms of specialty project business that came through in the first half of the year, very evident in the second quarter. We think that in the third quarter, even though we're going to have some project business, it's not going to be as pronounced as it was in the second quarter for logistics. And then we did talk about the loss of the large dedicated customer which will also impact what the third quarter looks like. So all those things are in the mix in terms of kind of how we develop the guide for the rest of the year.

Great. Very helpful. If I just follow up, you mentioned in the prepared remarks, moving trucks back and forth. I think it was from dedicated to network if I've got that right. And so maybe can you talk scale, capacity time frame? I don't know, any kind of parameters you can put on that to see if we can scale that in our model.

Yes, yes. So the way that we're thinking about that, Ken, is where we have the best market opportunities. And so that's the value of having this multimodal approach is that we're able to move drivers from 1 opportunity to another. And so it's not that I'm being evasive. There's just we're going to take that opportunity as it plays out. Right now, what we're seeing with price in the market would suggest that there's just going to be more opportunities there in network that we might want to move some trucks over. .

Your next question comes from the line of Brian Ossenbeck with JPMorgan.

Maybe Jim, start with you. Can you just clarify the comment on the dray drivers. It sounded like you're getting to the point where maybe pricing is sport enough to be able to expand capacity or maybe showing some of the gaps you might have in the network or want to add to the network. So maybe you can clarify those comments for me. And then it also sounded like you're getting more out of bids -- out-of-cycle bids, rather allocations in intermodal, if I heard you correctly. So you can put some context around that would be helpful, like do you have absolute terms how to compare it? Or maybe it's better compared to like a prior cycle in terms of what strength of activity you're seeing there?

Yes. Thanks, Brian. So just to start on our dray capacity. And what we're seeing is we had opportunities to grow much faster if we had wanted to in the quarter, but we remain disciplined and specifically because we want to look at some of the opportunities that were coming in were noncommitted freight that would have driven our network out of balance or required third-party capacity. And even though we would have moved more freight would not have been accretive. And so we're -- at the same time, we want to be able to take advantage of these opportunities. And so or leaning in to grow our dray capacity. And we've already had some success here. But most of that growth in our dray capacity occurred at the end of the quarter and we're continuing to grow that capacity now that we're seeing some improvement in market rates.

And that's the second part is going back to customers and -- because they understand they need to be able to fund our ability to grow capacity or to be able to use third-party capacity. And so we're seeing both of those take place right now and gives us some confidence that we can continue to grow from there. And you're right, customers when they're seeing some turndown activities, they're willing to sit down and have some discussions, and that's where we're seeing some out-of-cycle activity.

Understood. As a quick follow-up to comments on the B1 and the cabotage. It seems like there's some pretty significant activity. Have you seen that translate to any sort of opportunity in your network?

Yes, absolutely, Brian, as we think about what's going on with capacity. And just take a step back before I jump into just specifically Cabotage that this has been a matter of public safety. And if you go back to -- since 2016, the number of trucks involved in injury crashes has increased 18%. At the same time, companies like Schneider have been investing in safety and reducing accident frequency yet crashes are growing because not all companies are following these existing regulations. You mentioned Cabotage, and we're starting to see some impact there, and you can see it on specific lanes because we've all seen the data that there's approximately 30,000 drivers whose bases were revoked, not enabling for them to even cross the border and commit Cabotage, that has an impact. .

Same thing with a number of other activities, nondomicile drivers, the entry-level driver training is starting to be impacted. At the same time, we'd say all of these factors that are going on. And while Cabotage was much faster than we expected, non-CDL drivers was much faster than we expected. -- there's still about half of the capacity we're expecting to leave hasn't been impacted yet. And we know that capacity is exited because even that real modest increase in seasonal demand triggered a market correction here in the quarter. And so when we look forward, we know that there's still about 1/3 of the nondomicile drivers remaining that we would expect to be removed.

The first 2/3 came up faster than we anticipated, but Delia's law is enacted, we could see that capacity exit abruptly. And now we have the end of the broker preemption, that may remove some carriers with unsatisfactory conditional ratings. That's a few percent of capacity. And then ELD enforcement is another action that I'd say, is largely in front of us. And it's also the one that I believe would have the biggest impact on public safety because there's a lot of ELDs out there that were improperly certified and with those, it's tampering as a feature, not a bug. And they're using offshore back-office staff that enable and core drivers to exceed 11-hour rules. And so the current highway bill is seeking to address that as well. And so when you take not just what's behind us, but what's in front of us, it's going to be a dramatic change, and this also changed the top of the funnel. And so it's structurally different than what it was in the past. And so capacity won't grow as fast as it did after the pandemic, and that's why this recovery could last longer than other recoveries.

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

Yes. You had pretty strong growth in revenue per truck per week in network. I'm just wondering how -- do you think like -- how big a move can you see in 3Q? Or did you kind of -- I mean, you already saw a good move, but I would assume you didn't get everything repriced and so there's more to go. So just maybe highlight how we could -- how much further gain we could see revenue per truck per week in 3Q in network. And then in Dedicated, I know, obviously, it's a different business with multiyear contract. But how might we think about the relationship across the cycle? So if network rates were to go up 15%, 20% across 2 years, pretty strong cycle. That -- would that translate to kind of half of that gain in Dedicated? Or how would you think maybe about that relationship? Just so we can kind of contemplate what to put in the model as you look out and dedicated.

Yes. Thanks, Tom, for those questions. So let me just start with the network revenue per truck per week, the 16% growth year-over-year. really strong performance, and that's why network has just always been a part of our multimodal approach. Even though we weren't pleased of the performance during the down cycle, and we didn't sit around during the downturn and wait for the market improvement. But our improvements were primarily on productivity and cost, and those were all being masked by price. And now that price is starting to move, I think it's just more apparent of what we've been working on. And so -- and now that we're getting price, we're just ready more than ever to take advantage of the cycle shift and you're starting to see that in the second quarter.

So let me just talk about some of those factors here. we don't get price just through allocation events. We're seeing that through elevated spot exposure, mini bids, freight acceptance. And that's why we're already seeing high single-digit price improvement hit this business. But also productivity is also a high-single-digit improvement and that's being driven by a combination of asset efficiency, removing unseated tractors and then higher driver utilization from both freight selection and then optimization. And so -- and then the cost reductions that we've been talking about across this entire enterprise for multiple years. This is the first time that you're able to look at a business and say, "Oh, I can see that coming through the business." And so we're always optimizing for earnings. And in tougher markets, you just have more leverage with productivity and cost.

And now as the market turns, we have opportunities across not just productivity and cost, but also price and that's where that leverage is starting to come through. In terms of price between network and dedicated and -- it's a little bit difficult. There isn't necessarily a number you can map to be able to say, well, this is going to change during this cycle because I think it would have been different we're going to be focused on having margins in Dedicated that are going to be resilient. You sign a contract for multiple years. And we're looking to look for a price that's going to be fair for both sides and be durable. And so -- that is the plan now, I'd say, over the last couple of years, especially you got later into the cycle. There was a little bit of pressure on dedicated and some of those contracts are the ones that needed to be renewed.

So I mean, maybe just on timing, like when do you think we'll start to see the strength in revenue per truck effectively in price show up as that starts to show up in 3Q? Or there's a little longer lag on it? .

Yes. I think in Dedicated, we're expecting that we should start seeing improvement in revenue per truck per week and Dedicated immediately here already in third quarter.

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

So Darrell, I guess just maybe to be a little bit more direct. You said a lot about the third quarter and the difference between 3Q and 2Q seasonality. I guess I'm just a little cut want to make sure I understand, can 3Q earnings or however you want to sort of measure the profitability of the business to be higher than 2Q? Or should we assume that 2Q is higher than 3Q?

Yes. Good question, and I guess, unsurprising. So we tried to give a little bit more color to clarify, we don't guide by quarter, just trying to be helpful. So I think the seasonality point was just to kind of underpin some of the thoughts that we've seen. So if you just look at history over the last 5 years and kind of how our seasonality has shifted -- just wanted to make a point that given the transformation of our business, typically in the recent past, more seasonality has shifted into the second -- we also talked about just the dynamic of the logistics, specialty project business and the loss of the dedicated customer. I mean with all that said, where I did lead off is that we're seeing a lot of momentum. -- going into the second half of the year.

So all the things that I mentioned as it relates to capacity exiting the market and the impact on price, you've seen what price and productivity together can do just even in network as an example. So we do expect that, that momentum carries forward. And then Jim mentioned the gap between contract and spot. We do believe that not only in network and logistics but also in Dedicated and intermodal, we are going to get the benefit of price, and that's also going to come through in the second half, right? So it's not as if -- we don't think that there's improvement actually at every point in our guide -- if you look on a year-over-year basis, we do expect to see improvement in our segments.

Okay. Okay. Appreciate the clarification there. And then maybe just a bigger picture on here as we're thinking about some of the dynamics going on with drivers and in particular, what's happening here in a post Montgomery world around the brokerage businesses. I guess, can you maybe sort of refresh us on how you guys think about carrier vetting, -- have you made any changes post Montgomery to the way you think about it probably going to be maybe on the higher tier of carrier betting discipline in the industry. But I just want to get a sense of some thoughts around that and how it might impact available capacity and how you see sort of the potential opportunity for you in logistics going forward?

Yes. Yes. I'll start by talking about the capacity impacts I'll dive in a little bit into our brokerage business. And right, I think it's likely to further constrain capacity from a couple of aspects. First, there's many brokers that are likely to avoid carriers that have conditional or unsatisfactory ratings from that MCSA. That's probably a few percentage of the market. And while the drivers might go to work for another carrier likely that they're going to be held to a higher safety standards. So even transfers to a new company potentially reduces capacity. And then you have brokers like Schneider that have some standards that go beyond the carrier safety rating -- and within Schneider, we only qualify approximately 60% of the carriers that apply. Now don't interpret that as 40% of the carriers on the road are unsafe. .

Some of these carriers are Camelian carriers, so we might disqualify them many times. And there are also carriers that are safe, but lack enough time in the industry to meet our standards. But I also believe this creates an opportunity for our logistics segment. We're already seeing some shippers that are pivoting away from the small or medium-sized brokers and there are some shippers that require minimum insurance levels that are well out of reach for most pure-play brokers and even for some small asset-based companies. And so our position, the standards that we put in, we implemented these several years ago, and we moved our carrier count from 60,000 to less than 14,000 carriers. And we did that primarily under the ban of improving cargo security, but many of the filters that we apply to cargo security also apply to safety.

And so overall, I think this is an opportunity for Schneider but I also believe that litigation is a risk to supply chain. We're investing heavily in safety, training, technology, compliance and it's resulting in reducing accident frequency, but accidents still happen and we believe that companies that do the right thing should be held accountable based on the facts and not exposed to disproportionate outcomes driven by the current litigation environment. And that's why we believe [indiscernible] is really important, not to avoid responsibility but to ensure that the outcomes are fair, they're predictable and aligned with actual conduct. And so I believe that this is a big impact to the overall industry.

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

Two questions. We're at the hour, so I'll just lump into one. So you talked about, Jim, the trifecta for intermodal conversion. Volumes were flat in the quarter, like where you think like the growth goes. And then Darrell, there's been a lot of talk about like the seasonality of the mix of the business like 2Q, 3Q, like -- maybe more importantly, does like the mix in -- the changing mix of the business like change ultimately like where the annual margins can go, meaning if this was an 85, 86 OR last cycle, does that change because you have more dedicated or more food and beverage? Or does that not change? Is this just a seasonal shift within quarters?

Yes, Scott, I'll start and then Darrell jump in on the long-term margin questions here. So first of all, on intermodal volumes, I think I talked a little bit about this earlier. We could have grown double digits if we wanted to, but we wouldn't have made any more money. And so that's why we're a little bit more discerning about what orders we're accepting and you're able to do that when you've grown 9 consecutive quarters, and we've had some really big growth in certain areas. As we said, we don't have to go out there and take every sale opportunity.

And so now that we are starting to grow that dray capacity, we're getting price that will enable us to use some third party in certain area. We set up our peak season programs with shippers very early on because we're seeing those opportunities as well. That enables us to use third party a little bit more today. So we expect that there's opportunities to start growing really in high-single digits.

Yes this is Darrell. So the seasonality commentary was really just to frame the guide, right? It doesn't change anything that we think about our business in the long term. And actually, the actions that we've taken have been purposeful. So we purposely targeted the 3 targets that we acquired over the last few years. And we knew what came with that and we welcome what came with that. So we've been taking actions to structurally improve the business during the downturn, right? We've not been wasting time. The dedicated portfolio, our truckload is more dedicated skewed Jim talked about our differentiation in intermodal, in network and logistics, we've invested in being scalable and flexible.

We've been investing in technology to all of those things make us stronger today as we're pumping out of the downturn. And we're already seeing that, right? So if you just look at our year-over-year improvement, you look at our sequential improvement in earnings, it's all a result of all the things that we've done -- but when we think about our long-term margin targets, Truckload 12% to 16%, intermodal, 10% to 14%, logistics 3% to 5%. Those are meant to be in normal market conditions, right?

So we think everybody would know got that we have not been in a normal situation. So as capacity has exited, we're seeing the benefit, and we're seeing it initially in those segments of our business that were most impacted. But we expect to see improvement across the board, including in our contract rated businesses. So the pricing improvement that we saw in logistics and network, I think that's just the beginning. Jim talked about where we are in terms of all the capacity actions that are being taken. So when we sit here today at the end of the second quarter, truckload margin is already intermodal than 7%. Logistics is already within our long-term ranges. So we have line of sight to get to our longer-term margin ranges. -- and the evidence of all the actions that we've taken, prove that.

All right. And we appreciate everybody joining the call today. Have a great day. .

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

Thank you very much. Welcome back from lunch. We had a great session with Senator Manchin. So appreciate everybody joining that. I thought it was super informative and interesting to kind of dig through the political dynamic.

We have a return to the transportation track this afternoon and specifically on the trucking side, and we are very pleased to be joined by the gentlemen from Schneider National. We have Darrell Campbell all the way down, EVP and Chief Financial Officer; and Jim Filter, EVP, Group President of Transportation and Logistics. Gentlemen, thanks so much for joining. Appreciate it.

I think the way we've started most of these is to kind of just do a bit of an overview of what you guys are seeing so far in the market. The second quarter has been pretty dynamic. It seems like maybe we're beginning to add a little bit more demand to the market and certainly, capacity is getting tighter. So maybe I'll turn it over to you for a couple of comments there, and we'll sort of dig into the business.

Yes. Yes. Well, I'd say demand, while there's some pockets of strength, certainly, especially in what we're seeing with production picking up a little bit. Generally, it's been stable is the way I would characterize it, demand. But what we've seen the most activity is capacity exiting the market.

If you think about it, one thing that we keep talking to customers about, we've been discussing this for a long time that over the last decade, truck accidents are up almost 20%. And despite the fact that large trucking companies like Schneider have been making a lot of investments are actually improving crash frequency, the overall market has been growing -- overall number of crashes has been growing. Certainly, part of that is a more distracted public, but we knew that something else was going on here. And we do applaud the administration saying, look, that's enough. We've got to address this.

And there are so many different facets that they're addressing here, whether it's -- I'm taking a group of drivers from another part of the world that don't understand what's like to drive here. I'm going to skip the normal type of certification, the normal type of training. I'm not following ELDs. There's so many different steps that they've been avoiding is really what's resulted in crashes increasing at this rate. And that is starting to come out and it's exiting very quickly. But we'd still say there's probably half that capacity is still out there in the marketplace that's still ahead of us. So as much as we've seen so far, I believe that there's still more room to run there.

And so what about the second quarter has been so dynamic for the spot rates? Is it really -- is it more just the demand side -- excuse me, the capacity side where we are starting to see those exits? I think it was notable the May FMCSA carrier authorization numbers did take a more meaningful step down than we had seen in the previous couple of months.

I know, obviously, we had road checks, so maybe there's some of those factors kind of playing in. So maybe talk a little bit about what the sort of maybe specific catalysts of the spring have been.

Yes. So every year, the last 3 years, we've seen this with road check followed by Memorial Day. That is also a good indicator that the people that are not operating legally we're looking for a place to hide, and we're coming out every single year. So not surprising there that we're seeing those type of factors. This year was no different in terms of seeing that type of impact as well as when we're talking about the capacity that is exiting, it's the most irrational capacity. They're not playing by the same rules as everybody else that have been governed.

That's really why I believe that this down cycle has lasted so long as the capacity that was added right after the pandemic. They weren't playing by the same rules. It took them a long time to come out, and we're just starting to see the front end of that.

Yes. Okay. No, that makes sense. And let's touch a bit on the demand side. I think you said stable. If we could kind of think about it, whether it's the -- obviously, housing has been sort of the piece that's been largely absent from any of the discussion. The consumer has probably been fairly resilient over the last couple of years. I think there's optimism that maybe industrial is getting better. We've seen ISM improve. But maybe that's not really flowing through yet. So how would you sort of think about those big buckets of demand?

Yes, seeing ISM is favorable. We're seeing those buckets are starting to flow through. What we haven't seen is with interest rates, we came into the year expecting that we could see a couple of interest rate cuts. At this point, we're probably just as likely to see an interest rate increase as a cut. And so those parts of our portfolio, homebuilding, everything that goes into a new home being created as well as automotive, perhaps not as strong as what it could be had we seen a rate decrease.

Okay. All right. That's helpful. And then I think as we're sitting here, we're getting to the tail end of what is the traditional bid season with a lot of implementation of these contracts coming in and then flowing into the second half of the year. I guess maybe if you could give us a lay of the land of how you think it's been progressing so far.

Yes. So as we talked about on our call, what we had seen was mid- to high single digits, but there were shippers that took much larger decreases over the last year or so. Those shippers were seeing double-digit increases. At the same time, allocation events aren't the only way that prices start to move for this industry. That's one factor. And those shippers that aren't making as much movement as it relates to those allocation events.

As a shipper, they don't have to guarantee that they're going to have the freight for us as a carrier, we don't have to promise that we're going to have a driver available. And so there's an opportunity here of what freight we're actually accepting. Are there additional opportunities out there in the market that we're able to move. Of course, there's also opportunity within the spot market to be able to capture price.

And so I guess as you think about that, we've begun to hear a little bit more discussion of double-digit rates. I think you noted that some of the shippers that maybe had gotten lower ones are beginning to get that. I guess, how would the mechanics work in the back half of the year if the rate environment continues to draft higher?

So obviously, we think traditionally about a lot of the work being done in the first half of the year, but there is going to be some flow-through if things continue to sort of percolate. So is it mini bid activity kind of picks up, and we'll see sort of that flow in? Obviously, you guys have some spot exposure, not obviously an enormous amount relative to the size of the business. But let's talk about how that could play through.

Yes. We -- certainly, we saw that back in 2022. There were allocation events. Shippers completed one of those, they start falling apart, do a mini bid, another mini bid and some of those things were just coming so quickly because at the same time, if shippers are trying to get more capacity, we're going to have to be more aggressive in terms of bringing capacity into our business, and we're going to need to be able to get that rate.

So generally, we're looking for something that's more durable, sustainable, but this is probably going to take a couple of allocation events to get back to recovering the price that has been lost over the last couple of years.

Yes. And then I guess maybe thinking about it from like the actual Truckload business versus Dedicated. And then I do want to talk about Intermodal and Logistics. You have a lot of different pieces of the business that you have exposure to in the cycle here. But I guess we're probably talking more in the context of the One-Way Truckload business. I guess, how do things kind of play on the dedicated side of your network?

Dedicated, absolutely more stable, multiyear contracts. At the same time, within Dedicated, there are opportunities as we're looking for backhaul, there's more backhaul opportunities that you're able to identify. There's also spot priced freight that you're able to pull into that dedicated fleet as a backhaul. So it's not completely distinct.

Yes.

Yes. And I would just add, in Dedicated, we've been very focused on productivity, right? So I've said that revenue per truck per week is the metric that we use to kind of measure how successful we've been during the down cycle. So we're not necessarily adding trucks or looking at truck count as a metric. So it's not just price, but productivity as well.

And how do you think about utilization across the truck business? I guess that's one of the things that we're trying to understand a little bit more is the opportunity, particularly for the big fleets, if we do see this consolidation event here, will there be opportunity, like you said, maybe not necessarily in just fleet count itself, but more productivity? Is that something you can get on both sides, network as well as the dedicated side?

Yes. So in Q1, we saw our revenue per truck per week in network go up by 7%. Most of that was utilization. Most of that was productivity. So we're continuing to lean into that. That's really just a matter of, hey, there's more opportunities out there. Do you get the right mix of freight. So part of it isn't always do you get the highest paying freight, but what works best for your network to better utilize the drivers. And the real reason for that is that's an opportunity to also pay your drivers more because they're receiving all of that themselves in terms of the productivity benefit.

And I guess the guide for the year, I guess it's probably helpful to talk about that, right? Maybe we can think about the bookends. So the $0.70, the dollar, can we kind of talk a little bit about what you need to see. Hopefully, the $0.70 is largely off the table. I don't know. But if we're thinking about what the optionality could be, what would drive upside to the guide?

Yes. So I mean, just to level set, we are 1 quarter in, right, at least in terms of what we've announced publicly. So there's still 3 quarters to go, and we're one of the few that's actually guides for a full year, right?

And we give you credit for that. Not a lot of your peers are doing the same.

Yes. So -- but what we saw in the first quarter was very encouraging, right? So we did see capacity exiting probably more rapidly than we initially anticipated, which is a good thing. We saw the benefits of our cost and our productivity actions come through as well. So we had weather disruption. We had higher fuel prices that impacted us in the first half of the quarter, and we're able to rebound largely because of all the actions that we took in terms of productivity and cost.

At the same time, I think as Jim said, there's a balance to that in terms of demand. So demand has been stable. What we've said is to get to the high end of our guidance, we need demand to inflect, right? So whether that's -- initially, there was some expectation of rate cuts, as Jim said, there was expectation of inflation normalizing. There's some recognition that at least from an energy/fuel standpoint, there is risk of higher inflation. So we're balancing what we've seen in terms of supply tightening and our cost and productivity actions with the fact that to get to the high end, you need more demand to inflect.

So depending on what happens on the balance of the year, the cadence of kind of the improvement and the amplitude of the improvement will be largely driven by demand.

Okay. And then one thing that's come up a couple of times so far over the course of the day has been the early discussions around peak season. So I think it's probably being driven to some extent, we're beginning to see ocean rates move up. Some of it is fuel, but there's also demand on relatively lower capacity.

Have you started to have any of those conversations? It sort of strikes us as last fall, really after Thanksgiving, we saw spot rates really inflect meaningfully higher, and that was partly driven by the fact that capacity was coming out and there was a bit of a peak season. So is this something that's kind of coming into customer conversations yet?

Yes. So we always -- especially in our intermodal business where this is most prevalent, we're always having that discussion as we go through an allocation event because we want to make sure from both sides, there's a clear understanding of what are you getting at this price point. how much demand increase are you expecting that we're going to be able to cover. So with a large retail shipper, we would always have that discussion. This year is really no different for us. Perhaps there's more potential demand out there. I don't know, but it's clear that it's top of mind for shippers as well.

And are shippers generally sort of receptive to the idea they've gotten away from that the first part of the year was driven by weather and nothing else really. Are they starting to get more receptive to the idea that something might be shifting a bit more structurally in the capacity environment of trucking?

Yes. I think there's -- the other thing that is on the mind of shippers, they've seen that, first of all, over the last few years, they've known that something was irrational, that there was pricing that really didn't exist. So there were shippers that came to us and said, "Hey, you should be able to make this transit in a day." And we said, well, that's more than 11 hours. And we said, well, somebody else is driving that. Well, that's illegal.

They've talked to us about do illegal cabotage, that's not legal. So they've known that some of the things that they've been doing really weren't safe and needed to be adjusted. So they understand that there's a big difference there. I think the big change here is the Montgomery case in the last couple of weeks. So in the past, if you said, well, they're doing that, but I don't really care. Well, now they have to care because now they're owning that liability. And so I think that's the big change in the marketplace that today, if it's a small carrier, they have $750,000 of insurance level. They might be doing this by a broker that only has $75,000 bond. And it's just this thought, well, that -- all of that liability rests with them.

Now they're saying, Wait a minute, I own that. And so I want to make sure that I need to be asking these questions about safety. Are you -- what is your rating with the FMCSA as well as how much insurance are you carrying because I'm carrying all of the excess above that level. So it's starting to matter to shippers.

So I guess let's talk a little bit about Montgomery because obviously, it's -- the potential -- it seems to be pretty meaningful. And I guess maybe thinking about it from sheer from a capacity standpoint. I don't know if you have a sense of how much capacity you think probably is less employable in the world of Montgomery. And I guess I also wonder how brokers are going to approach this, whether they're just going to be willing to take on more liability risk themselves or actually make some changes by carrying more insurance.

So maybe let's start with the carrier piece. What do you think sort of gets impacted here? Because clearly, we don't have safety scores on the vast majority of the market today.

I don't have safety scores, you have other information available. And so for us, back in 2022, we would publicize that we had 60,000 carriers that we worked with in our brokerage business. It's now less than 14,000. And specifically, what we were targeting or the reason we are targeting was because of cargo security. And we are starting to understand, wait a minute, there's a lot of chameleon carriers out there, individual people that had multiple motor carrier authorities and what they were doing was switching and using that to be able to steal.

But likely, if they were willing to do that, they were willing to skirt some other laws in this country. And so when we look at the Venn diagram of all the different regulation that's out there, the people that are violating are often violating multiple rules. As we've gone -- the reason why we went through is to be able to get down that group of carriers that we said, "Hey, look, we vetted these. We are comfortable with them." I would tell you, based on our experience, there aren't 50,000 carriers in this country that you could and say that they're safe. And so when there's a broker or someone saying, I use more than that. I know they're using carriers that are unsafe. And so I think there's a lot of this industry that is going to have to go through a different vetting process to get down that level.

So I think we've heard this from other people in your position as a larger, more credible player in the market that I think some of your bigger changes around carrier vetting occurred in the past. Have you done anything incremental since the Montgomery ruling came out?

We haven't changed anything since the Montgomery. The other changes we've already made have put us in a position to be able to understand here's the carriers we want to operate with. I do believe that there's going to be additional data sources that we're going to be able to use and perhaps get a little bit further than just the rating system perhaps using some of the basics going forward. just as people start building additional tools.

Yes. So we think that brokers are going to get more selective in terms of the qualification criteria that they use, not only initially but on an ongoing basis in terms of monitoring. We also believe that insurance carriers are going to get more selective in terms of the risk that they underwrite. So I think the combination of those 2 things could have a significant impact.

So we've seen the pool of brokers continue to get smaller over the last couple of years. I think it peaked in the immediate aftermath of COVID has been sort of steadily moving down here. I mean, is your expectation then that you'd expect as we go through the rest of '26 to continue to see the same sort of pace? Does it get a little bit faster? I guess we're trying to get a sense of how much of a consolidation opportunity there really is in brokerage? And does it take some time to play out because you need insurance cycles to reset or something like that?

Yes. I think there's a couple of factors here. So number one is exactly what we're talking about in terms of the reliability, credibility of the brokers that you'd expect that there's some consolidation because, at the same time, the number of brokers exploded up to 25,000. There's -- just through normal competitive dynamics, you would expect a little bit of consolidation here. The other side is in terms of the use of AI. And we've been using AI for a number of years. And what I'd tell you is there are some companies that have gone out there really focused on the efficiency I can get with AI.

I can tell you that's probably the fastest way to go bankrupt in this industry. You have to work on becoming effective. And the long history we've had in this industry, the fact that we operate an asset-based business, we're able to understand how rates move to be able to make sure that we're not just efficient, but we're really effective at the same time. So I think that's the other thing that starts to draw a little bit of consolidation in this industry.

Yes. And I guess maybe as we think about like gross margin dynamics, do you think that there's risk to gross margins over time? One of the brokers that we talked about noted that 50% of their volume is flowing into sort of the bottom 20% cohort of the carrier market, which would suggest maybe easier or better buy rates for them down there. Is that something that structurally changes going forward, do you think?

Yes. I think we talked about -- we felt really good about our performance in the first quarter in our logistics business felt it was a differentiator because there are a lot of companies in the space that were getting compressed. What we're really focused on that business is differentiation.

How do we lock on to a vertical where we have really good understanding of that business and then be able to provide additional value-added services. And sometimes that's within our logistics business. Sometimes it reaches back into our asset-based business. And so all of our owner operators have visibility to all of our brokerage freight, have an opportunity to move it. We have opportunity to move it with our intermodal business, our Truckload business and just gives us a little bit different competitive dynamic with those customers as well.

Okay. That's helpful. And then maybe wrapping up this conversation as we think about it, a lot of -- obviously, what's happening here, the most obvious sort of potential impact could be rising driver pay. So how do you think about your ability to source drivers in the market today?

Yes. So a few different things. Number one, the best way we want to be able to take care of our drivers was with productivity. Get your drivers more miles, they're happy. The business is very happy as well. We also have to be able to restore the margin for our organization. Eventually, price has to be able to flow back into increasing driver wages as well, but those have to take place. We feel really good about our position to be able to attract and retain drivers. We have a hire to retire mentality. We bring a lot of drivers into this industry.

Often they start in our network business where you get a feel for it, spend weeks at a time out on the road, really be able to have that freedom as their life starts to change, start wanting to get home a little bit more frequently. We have jobs like intermodal and dedicated where you're getting home every day or every -- at least every week or every few days changes their lifestyle. And then there's a point where they start saying, "Hey, I'm really comfortable with this. I want another challenge." We have more complex jobs like bulk. And now I need to understand how pumps work and different types of chemicals. And then there's a point where drivers say, I'd like to own my own truck. And so we have a leasing arm that helps drivers go out there and buy their own truck and continue to be part of the Schneider organization.

Okay. And then let's talk a little bit about intermodal. I think intermodal is an interesting dynamic as it stands right now because we're having all of the capacity tightness, obviously, rising fuel prices, all of which would seem to be pushing volume your way from an intermodal perspective. Can you give us an update on how you're thinking about that, sort of the volume environment there? Is demand a little bit better than it would be seen on sort of the truck side? How do you think about it?

Yes, it's the right environment for intermodal when you think about it's truck pricing, it's fuel and really just good service from every one of the railroads right now that would inspire a shipper to start to convert. At the same time, we're going to be disciplined on the way that we do this, that we're going to find opportunities that are accretive to our business, understanding that -- if you're just going and grabbing volume, sometimes you can find yourself using third-party dray capacity and that incremental load is not generating incremental earnings for the organization. So we're going to do that in a disciplined manner and think there'll be more opportunities ahead of us.

And I guess, how would you think about the relationship on the pricing side or the contractual bid season from Intermodal relative to Truckload? Typically, there's a lag here. Do you expect it to be the "normal lag". Will we see maybe a little bit more pricing later this year and obviously a lot more in 2027? How do you think about that?

Yes. 2 pieces to think about. First of all, Truckload rates dropped a lot faster than Intermodal rates. Intermodal rates are more durable through the cycle. So I can't expect the same amplitude of a change as the market starts to increase as well. But what we haven't necessarily gotten to a spot of where we're going to need third-party capacity to be able to execute orders. That's usually what really trips this market. It's not necessarily using the trailing -- utilizing all the trailing capacity, but it's when do intermodal carriers start to get to that spot that you have to use third-party capacity.

Now there's a great deal of the intermodal market that is non-asset-based IMCs. They're already in that spot where they have to go and use third-party dray cost. And as that starts to push upwards, that's where we would expect to see more volume lift, but also a pricing lift.

Okay. And anything from a competitive dynamic perspective, I mean, we have one IMC that's not providing much information into the market right now and obviously, others that are. So I don't know if there's anything that you've noted that's different from a competitive landscape today.

Yes. One not reporting any information, one that just went through a bankruptcy, one that's losing money. So -- and then you have all the non-asset-based IMCs. So that's -- that's the competitive dynamic. We're not interested in joining them in that side of the market. We feel -- we're not satisfied with where our margin is in that business. But relatively speaking, we should feel pretty good. We're focused on us and getting back to our long-term margin.

And we touched on peak in the previous conversation, but obviously, you noted Intermodal is a big part of that piece. We have heard about peak season surcharges from one of the other big IMCs. Is that something you'll be implementing? Is it already in place? I guess how would that work? So...

Every single year, even years where we didn't have that impact, we had processes in place. Just because you don't want a shipper that suddenly you weren't receiving volume all year and oh, here's a whole bunch of orders and you're going to be taking away from somebody else. So we always have those plans in place. Whether shippers will execute on those, you really don't know until you get to that spot. So not being coy, but difficult for us to understand how many shipments each shipper is actually going to have.

Okay. But presumably, if you start to get out of bounds to the above where the limit is.

Boundaries for every agreement, and that's why we talk about peak programs as we're going through allocation events because we want to set here's where the guardrail is given the price that we landed at.

Okay. And then I wanted to ask a couple of questions about margins and sort of the pace of recovery because you're not alone in this industry of having dealt with some meaningful headwinds and obviously some margin compression over the course of the last couple of years. So I think one of the big questions I get a lot is how quickly can we see what is obviously happening in the spot market, we can all look at our Bloomberg and see how things have ripped to how does that translate into your numbers?

So as we think about the -- is it -- how much comes in 2Q? Is this really more of a 3Q, 4Q dynamic? I'm not specifically looking for numbers, I'm just trying to think about how it flows through your business mechanically, so when we know when to expect it.

Yes. I think I would just start with an acknowledgment that what we've seen over the last 4 years has not been normal, right? So a lot of the difficulty that people have sometimes is applying normal rationale to a cycle that has been abnormal. So when we think about cycles, we usually think about cycles in terms of 18 months, so 18 months up, 18 months down, thereabout. We are beyond 3 years going into 4 years of kind of a down cycle. So now we know a lot of the reasons why that was irrational capacity being a big part of that.

So as capacity has begun to leave the market and at a more accelerated pace, we've started to see the benefits of that in terms of spot pricing, as I said. Ultimately, spot pricing improvements will lead to contract renewal improvements, which we're also expecting. But if you're going through multiple years of kind of an irrational market, it's fair to think that you're going to need more than one allocation event to get back to what's normal. So we think that we're on a good path in terms of where pricing is. But we're not waiting for pricing, right?

So one of the reasons that we initiated a [ $400 million ] cost savings program that we achieved last year and that we doubled down on is that we know that there are self-help items that will get us on that path. So if you kind of think about our 3 segments, Truckload, our normal cycle margin targets are 12% to 16%. Dedicated, we can obviously see where that's feasible. Network, we're very optimistic. But for the past 4 years, we've been operating in a tough cycle just because primarily most of that irrational capacity has been in network. So as that continues to leave, we expect more of a benefit in network, and we expect network to inflect the most. Once network inflects positive, we think we'll be on a clear path back to kind of that segment target of 12% to 16%.

Intermodal, I think that's a very great story where we haven't seen price over the last several years, but we've grown our volumes 8 consecutive quarters. We've improved earnings without any price. So if you kind of think about the lag that Jim talked about, as intermodal pricing improves, it's not hard to think that once you get some pricing, 10% to 14% margin target is achievable. And then on the logistics side, we've been able to weather the storm and actually have positive earnings when a lot of our competitors haven't.

So if we're hovering around 2% in a down market with some pricing improvement with all the productivity and cost initiatives, a lot of the AI investments are in logistics. We think we can easily get to 3% to 5% in a normal cycle. So that's kind of what we're thinking there.

So probably a couple of allocations and the biggest swing factor is going to be the network business, and that's like I said, it's going to take a couple of allocation seasons to get back there.

We think a lot of what benefits network will benefit logistics as well in terms of pricing.

Okay. And can we touch a little bit on the cost side? You noted you have $40 million last year, $40 million this year. Where -- what do you get in 1Q? Where are we in the process towards achieving that $40 million? And is this the kind of thing with technology we should think is sort of you'll get something on a year in, year out basis. I don't know if it's $40 million, but something like that.

I would say I'm never satisfied. We're never satisfied, right? So we -- this is not a 1-year program. It's a multiyear program that we started several years ago. We've probably been more vocal in terms of the things that we've been doing. A lot of it is non-driver headcount, and we're kind of stressing nondriver because the drivers are important, especially in this cycle. So we took 7% of our non-driver heads out in 2025. We think that we're on a path to at least equal that, if not exceeded for 2026. But that's just one piece of what we're doing.

AI is a big part of being able to take out non-driver headcount. But it's not only removing heads, it's reallocating work to more profitable work in terms of value-add work for our associates. We're very focused on asset efficiency. Asset efficiency has multiple benefits. It has benefits in terms of revenue per truck per week, but it also has benefits in terms of cost. And we're very focused on third-party spend. So the things that we're doing, we're very focused on making sure that as the cycle inflects, those costs don't come back.

And then I wanted to come back to Intermodal for a minute because I did want to talk about sort of the rail environment. So service, I think, generally speaking, has probably been fairly good. Would love to hear your characterization of the intermodal service environment, and then we can talk a little bit more deeply about your rail relationships.

Yes. So overall, like you said, service has been very good. But specifically, I believe it's structural. You look at the changes that the railroads have made over the last 5 years or so, really since PSR came back to the U.S., just the way that they're operating looks a lot more like a trucking company in terms of understanding their capital, where they're allocating, where they're making their investments, how do they think about train schedules day in, day out. And so I believe that even with some growth, they have an opportunity to maintain that level of service.

And then I guess as you think one of the topics you guys get asked a lot, and I'm going to ask it too, is sort of your thoughts relative to the potential for Transcontinental merger in the rail space. Obviously, you're not aligned directly with the 2 carriers merging. So I guess how do you think about how that can play out for you? What are the opportunities you'd be looking at as you're thinking out over a multiyear period and your relationships with the various rails?

Yes. And as you know, over the last 5 years, we've made 2 major shifts that -- so we understand how to go through this evaluation process. We're engaged with all 4 of the major railroads here in the U.S. just to investigate and understand their capabilities, both today and the future. And the ones I'm talking about, obviously, switch from the BNSF to the Union Pacific.

And right on the heels of that, we switched our Mexico business to the CPKC. And what we saw the benefits from the CPKC having a single line railroad, and we spent a lot of time understanding how they were going to operate that train. We had a lot of confidence in their ability to execute that. And so we made that choice even before their launch to switch over to that as we saw it was the best opportunity for us. So -- we'll continue to investigate this. I think we're going to be looking at this for at least another year, maybe 2 years even as they go through this process. But if there is a better opportunity, we are willing to listen and consider other opportunities.

Okay. That's a good characterization. I guess maybe the last question I have is just how you're thinking about capital allocation. I think we're hopefully going to be on a path to margin repair in the industry broadly. And so I do think it begs the question over time, how you think about the opportunities and what you think you can do with the business. You've done some M&A. I think Cowan was probably the last one. How do you think about the opportunities going forward?

Yes. Well, I'll start and add in. So number one is organic growth, opportunities with each one of our business units as long as we're within our long-term margin bands to continue to grow. And we think some of those opportunities are out there ahead of us.

You mentioned acquisitions. We're absolutely interested in acquisitions going forward. But we're going to be disciplined. We're not looking at doing fixer uppers. We've had 3 large ones in the last few years that we'd say all of them were successful. And I don't think there's too many or too many carriers that can say that each one of their acquisitions has grown since the point that they made the acquisition. I think it's actually been the opposite that quite often they shrink. And then we look at returning money back to the shareholder, too.

Yes. So I think we've done a really good job of controlling our leverage, right? So even when we've done acquisitions, we've delevered pretty quickly. So we acquired Cowan in December 2024. Our leverage was 0.7x, 0.8x. As of today, we're back down to 0.3x. So that means we don't need to choose necessarily between organic and inorganic growth. We can do everything that we want to do. So focused on where we have differentiation organically, as Jim said, M&A, but also a robust dividend program that we continue to fund. And then we re-upped our share authorization in January for another $150 million. So we have the luxury of being able to do everything that we believe has a commensurate return.

Do you think there'll be more opportunity, more potential targets, particularly on the fleet side, if we see Montgomery and some of these driver restrictions, regulatory changes, pressure those folks a bit more than average. Is that going to be something where you'd see midsized fleets potentially coming up more often?

Well, we're not interested in a fixer upper or that's running illegally, and then we're -- that's where we're going to step in. So I don't think that's necessarily going to change, but we are still eager to flex our muscles there because we think we've created a really good process for acquiring companies.

That sounds great. Well, we are out of time, but I appreciate both of you guys spending some time with us chatting today. Thank you very much.

Thank you.

All right.

Right. We're going to get going with our next session with Schneider National. Really happy to have Mark Rourke, President and CEO; and Darrell Campbell, CFO. This is going to be certainly Mark's last appearance at our conference, but maybe one of his last appearances at the conference where Mark is going to become Executive Chairman. So I appreciate you making the trip and good to see you, Darrell., as well. So there's -- you guys touch truck, Intermodal, Logistics. There's a lot to talk about sort of in all three of the businesses. We had a lot of trucking companies here earlier in the week, brokers here earlier in the week. And clearly, the positivity around rate is tremendous, right?

So I don't know, just help us sort of open-ended, high-level question, sort of frame the environment that we're in and as you see it across the three different businesses, then we'll get into all the specifics.

Yes. Yes, Scott, you're absolutely right. Obviously, we're exposed across really three platforms: truck, asset-based Intermodal and then $1.5 billion or so on the brokerage and logistics front. There's lots of news across really all three of those. But I think obviously, it starts with what we've been talking about for several quarters, the capacity levels, the shadow capacity that really explain now that we get more visibility to really the depth of that, what it really explained a 3- or 4-year "freight recession". And a great credit to the administration who has really dug in around public safety. And through a very talented team with a very clear mandate and an aggressive agenda to get after that whole public safety piece. And we're certainly seeing the effects of the capacity coming out, and we're seeing that benefit not only on the truckload side, but ultimately, over time, the best benefit for our Intermodal business is a tighter and more robust truck market. And so we think more conversions in front of us, which we feel really good about the Intermodal platform.

And then on the logistics front, in the short term, you got some net revenue compression because you're dealing with some rising carrier costs. But overall, I think we're handling that really well relative to what we expose ourselves in the spot in the contract market. And so all of our services while operate separately because we have different value proposition, a lot of collaboration internally around how we best address the market and serve our customers. But there is a lot going on and our customers are kind of dealing with this transition as well. And we're in the heaviest part of our allocation season, which is right here in the second quarter. And so we'll have a really good feel of where that looks like as we come out of really the end of June.

Okay. So one of the things that we've been focused on the last couple of days is trying to figure out like how much of this is supply relative to demand, right? And I think the overwhelming consensus has been it's largely supply. So maybe I would ask it this way. Do you have an estimate, right, of how much capacity has already come out, right, because of what the initiatives with the government, right? How much incremental capacity could come out? And then have we seen -- how much demand improvement have we seen? Or is that still potentially on the come?

It's always in our industry because it's so fragmented, how do you put all that together. We certainly try to triangulate that to the best of our ability. And some of that -- we had a few hundred of our own non-domicile CDL holders, all legally, all trained, all going through our process. But I think what you're also going to see in this, Scott, some of those folks get caught up in this wash, even though people were legally, well trained, coming through a legitimate school, coming through our finishing school.

So we would take what's our experience with that population, looking at also how we deal with our third parties. And we would estimate we're probably 40% through whatever that looks like.

Can I cut you off 40% of Schneider going through their non-domicile or 40% of like the industry going through this?

Yes. So we're trying to project the industry, but we're using kind of multiple data points to try to make that a little bit database. So it's maybe going a little faster than we would have anticipated if it would be just this steady drumbeat 1/3, 1/3, 1/3 as those work permits expire. So I think we've still got some ways to go there. And I think the other item that I would expect to be the next shoe to fall, and I think you're hearing the administration talk about it is the ELD noncompliant ELDs, which was a big part of what they were out gathering data with during road check. And so that will get after, I think, another element of capacity that's perhaps not operating under the same rules as intended. So we still have runway to go on the non-domicile CDLs, and then we've got some other things in front of us. And the other question is what's going to happen to minimum insurance levels. So that be the kind of the next thing that gets looked at and attacked. So I think we're in the early innings, maybe the fourth inning of this drawdown in capacity based upon the enforcement, much needed and rightfully based.

And how do you think about the demand side?

It's -- in my view, it's been incredibly resilient considering all the stresses on the kind of the macro global basis on the demand front and the resiliency of the consumer. So I would say most all of this is to date has been on the supply side. I think the industrial markets, our end markets are starting to awaken, which is good.

We haven't seen that over the last 3 or 4 years. So we really like when the manufacturing health gets healthier because there's intermediate moves. We have raw materials, we have intermediate and then we have end moves versus just being imported through the port. So that's the one we're watching because that could give us a little bit more momentum on the demand front, assuming that the consumer can stay resilient through fuel and all the other kind of stresses on the consumer.

And then help us think about what happens in a world post Montgomery? Does that -- is that incremental capacity that comes out? I'm guessing there's some sort of like then diagram analysis of some of the non-domicil fit into this bucket. I don't know, but...

Probably overrepresented.

Yes. What are you doing -- like what changes in your Logistics business? What's your view about large carrier or carrier -- large carrier, small carrier, large broker, small broker.

Yes. Scott, I think there's under any kind of assessment, this is a landmark decision. It's going to have implications. I think certainly, those who have scale that can have access to insurance markets that have the tools and the processes necessary to vet and do the things that really that Montgomery ruling suggests and need to be done. As you look at that internally to Schneider, we've reduced our carrier and our brokerage business by 76% since COVID on this whole focus on security and safety.

I don't know if you can have several hundred thousand contractual approved carriers and say that you have a strong vetting process. But -- we believe we have to continue to lean into that. What are other ways that we can vet to make sure that we can do everything possible because data has to be available to make those assessments, and that's at least in our judgment, the most challenging part of that ruling. But I do believe it can be a catalyst for consolidation. I do believe the large broker or the large asset-based broker, even more preferable to a shipper can be the winner in the end here.

I guess from a -- you've already meaning -- I think we talked after Q1, what's the number of third-party carriers that you've cut out of your system on the logistics side.

We went from 60,000 to 14,000. So a fairly significant drop and still...

I think there's more cuts...

Well, we have to -- kind of how do we assess even further, but we think we've done a lot of really reasonable care, which is really the standard here, reasonable care of things to make sure that, hey, our company is protected, our customers are protected and still be able to have a profitable and thriving logistics business, which we do.

Right. Okay. And then you also said this could be a catalyst for consolidation in the asset-based industry...

In brokerage.

Right. I want to understand the idea of consolidation in the asset base because if that's going to be the case, right? Then you need to go out and buy 5,000, 10,000, 20,000 more trucks, right? If the guys with 1 truck, 5 trucks, 10 trucks don't exist anymore. Like is that what you're suggesting is how this plays out?

Well, I am not suggesting we're buying 5,000-to-10,000 or 20,000 trucks at this juncture.

How does the industry consolidated -- you know what I mean?

My comments were more on the brokerage be the first, right? Because the small, A, can you get the insurance? B, are you going to be able to do the things that suggested there? Because we have to develop a number of internal tools combined with external tools. And I think that's -- I think that benefits scale to do that.

So -- and the shipping community is going to increasingly say, if we're going to use a broker, it's got to be a big scale broker.

I think what we really saw in 2025 and probably amping here in 2026 is less brokerage in total, try how do I get more asset coverage. And then asset coverage, you come to Schneider, you have not only brokerage, but you have Power Only. So you have some other elements of the Schneider brand that can, I think, give more comfort in this environment. But certainly, I think the most impacted over time here is going to be the smaller, less capable broker.

Okay. I think that makes sense. You mentioned you're sort of in the thick of the allocation season. Can you give us an update on -- is it high singles, low doubles? I don't know. Tell me.

Yes. At this juncture, we probably wouldn't change anything that we've said. coming off our last earnings call, Scott, that we expected mid- to -high single digits in the network side, probably a little bit of lag on the Intermodal, which is traditional.

However, when you start looking at the spreads now between truck and Intermodal and fuel and more capability that we're bringing to market like the CPKC, CSX, we have more tools to sell that maybe we can see some amping of -- or shrinking, I guess, I would say, of that lag. But we'll be more instructive as we come out of that second quarter.

Where do you see that lag now -- sorry, where do you see that delta between Intermodal all-in price and truck price? And what should it be?

Yes, it's lane specific, obviously. But it's as wide probably as it's been in the last 5 or 6 years. So I think -- and you have an underlying rail partner network that's servicing the business really, really well. So I think the good news is we're not in customer conversations we're having to defend service reliability with the Intermodal product, right? So -- and if you're sitting here with a budget constrained issue, I don't think anyone is going to hit their fuel surcharge budget as they put together, one of the best hedges against that is how do I lower -- let me convert more to Intermodal.

So maybe to that point, I've said this sort of a bunch, like it feels like it's the perfect environment for Intermodal conversion, right? We've got rising truck rates, high fuel, right? Rail service feels strong, stable, right? This should be like -- and we heard this, we had a shipper pounding us really, really big Intermodal shippers saying we want to do big increases more in Intermodal, right? So I think that -- do you agree with that?

100%.

The question then is Intermodal price always lags truckload price, right? Are we just in like that normal lag period? Or is there some reason why, right, it's going to be a longer or more pronounced lag, right? Maybe rail service is too good. And so the service product is too good to tell the customer, we need more price maybe because of mergers or whatever. Do you think we're -- we need to think about a longer lag? Or is it just we're right at like the normal lag that we always see. And so it feels like it's different, but it's actually just going to be the same.

Maybe just some context. Yes, please -- if you look at where truck rates went on that recession, how far they -- particularly on the network business, Intermodal didn't have any near that level of change, right? So it's coming from a different place, right? So will the lag still be there? I think it will. And I would still characterize it at a couple of quarters, but we'll see, right? There's other pressures going on in the marketplace that you just suggested and how customers are thinking about it. So I think we have the opportunity and we have -- certainly, we have the capability, we have the resources and we have the underlying service to really maybe change history. Too early to call.

Okay. Now when you talk about changing history, one thing and it's a little hard to tell with the way you report because we don't get price and utilization. We just get revenue per truck. But certainly, if I look at the industry that where we tell.

You didn't say network and dedicated this time, so go ahead.

Okay. Historically, the industry has struggled to get price and utilization at the same time, right? You guys in Q1, right, I think had your first time ever in a Q1, rev per truck improved sequentially, right? I think you said it's mostly utilization, right? Is there -- can we sort of deviate from history and get price and utilization at the same time this cycle? What are we doing differently to get there?

Yes, absolutely. And I think we were 7% year-over-year, I think 2% to your point, sequentially. And so it's a huge internal initiative, right? And I think what we've really signaled, we're going to measure our success, at least here in the short term, more on what's our revenue per truck margin recovery pace than absolute truck count, right? Some of that is internal initiatives to tighten up our ratios to be even more efficient with how many trucks we have per driver.

Some of it is how we're changing our load acceptance, our schedules with drivers. A lot of those are internal initiatives that can help us drive more productivity. That's the best way we -- and most efficient way we can give drivers pay increases is give them more utility every day, and that's a huge focus. We absolutely need that, but we also need rate. And so I do think we can do both. I think the market is going to be more challenging on drivers as you would get into this type of cycle because not only are these enforcement activities certainly taking capacity out of the market on existing, it's also having some impact at the top of the funnel, which again, is healthy for the industry overall.

And our work configuration, if you look at really how our business has changed over the last 5 years, Intermodal dray, 8,500 dedicated trucks, those are the more of the positions that drivers want to have versus the more irregular route random one-way network. So we think we're well positioned. We think it's going to be a battle. It's always a battle, and it's not going to be probably any different as we go through this cycle. But I believe absolutely, we can -- we need rate recovery, and we can really lean into our initiatives on cost and productivity. So I think we can do both.

Because if we roll that forward...

There's a lot of operating leverage there when you can do both.

Well, if we can get positive utilization and start getting high single, low double-digit pricing, rev per truck starts growing over 10%. And I guess your point is if you're giving the driver more miles, you may not have to do as much of -- you have to do some wage increases, I'm sure, but maybe it doesn't have to be as much, right? So then you sort of -- to your point.

Yes, the market will determine what the driver market pay condition is. But certainly, we want to do everything we can to take friction away, make them productive as our first line of defense to cost. And then secondly, have our customers fund the wage or whatever that ends up happen to be over the next couple of years.

What are you seeing from a driver standpoint?

It's more difficult. There's no doubt. There's no doubt. And our truck driving schools, if you kind of -- we don't have our own schools. We have a finishing school, but we deal with a number. I would also say that the top of their funnel is under stress, right, whether it's in the public arena or I thought I'd turn that on in the public arena or the for-profit schools. So there's stress there, which suggests that we're in a turning condition, and we'd much rather be there than having drivers flush.

And maybe it's way too early, right? But like I'm guessing there are some good drivers maybe at carriers that might not be -- that might not have FMCSA ratings, might not have great -- like do you think that starts to sort of -- does that ease the driver market a little bit for a carrier like yourself?

Flight to quality is usually one of our levers, both in the owner-operator world as well as the company driver world. And what's the work that you have to offer, right? Is it something that's predictable? Do I get home on a regular basis? That whole combination of the value proposition, we think we compete well, but we're not going to suggest it's going to be easy.

Just I didn't think about it from that perspective. I would think that like the pitch of like come be an owner-operator at Schneider where you still get a little bit of like the eat what you kill, but you're still part of now a bigger platform. I would think that could be...

And particularly one that could help deal with the fuel condition, too, right? So our programs, how we can help protect them a bit more on fuel than being out there on the open market is a real sell point.

Okay. Darrell, maybe just a numbers question. I know you're not going to -- you're not changing your guidance here, obviously, but just as we think about no, I wouldn't even try to ask that. Like you do have a $0.70 to $1, like Q1 was obviously good, right? It didn't change at fine one quarter end. But just help us think about like what are the assumptions, the midpoint, the high end and things like that.

Yes. I think a lot of what we saw in Q1 confirmed what our guidance was that we initially communicated in January. So we did talk about an expectation of capacity leaving the market. We did talk about our $40 million of cost savings which was on top of the $40 million that we delivered last year. So in the first quarter, we did see the benefits of productivity, which you saw through revenue per truck per week. We did see capacity leaving the market, probably more accelerated in terms of the pace. And we also did see our ability to recover from weather disruption and also fuel. So looking ahead because we obviously guide to the full year, there is some uncertainty.

And a lot of us do that, by the way. Right?

Right. There's some incremental uncertainty from a macro perspective, particularly as it relates to the impact on the consumer. So we're balancing the probably more accelerated attrition on the supply side with some incremental demand risk.

And then, Darrell any sort of near-term thoughts about how to think of -- we typically see, I don't know, truck margins improve 2 to 3 points Q1 to Q2. I don't know, any sort of high-level thoughts about how -- should we just think normal seasonality feels like an environment could be better than normal? I don't know.

Yes. I mean what we tried to do, at least in January, talk about normalized demand conditions and normalized seasonality. So we use the first half of 2025 was more of a reference point to what we would expect. Now where we ended Q1, if you compare that proportion of our guide for the remainder of the year, it would imply that the second half would have to be stronger. So to your point, there would be some incremental improvement in margin in order for us to kind of hit $0.70 to $1.

Okay. And then Mark, I want to come back to the -- just capacity discussion for a minute. One thing we didn't touch on the Dalilah's law. I don't know if you have any insight, I'm guessing you do a lot of sort of work in Washington. Do you have any degree of confidence that this is happening? How important is this to the capacity? Or is there still a lot that can be done even without this?

Well, I think the good news is bipartisanship isn't the easiest thing, obviously, in D.C. But you saw with the cargo security recent passage of additional penalties and additional focus on the agencies working together on cargo security can be done. And I think the administration, particularly the DOT under Sean Duffy has done a terrific job of focusing on the public safety arena. And if you believe in that public safety, that's very much a bipartisan issue. And so I wouldn't say it's easy.

I don't really have a percentage, but I was encouraged by the fact that the cargo security got everybody's attention, and we've been really, as an industry, educating Congress on that over the last 18 months, the strategic organized stuff going on for our shippers and certainly through the supply chain. So on top of that, getting all of that education and understanding, I think that helps with the Dalilah law, but I still think it will be a challenge.

Okay. We had the rails here.

Which would accelerate capacity coming out is your point.

We have the rails here over the last couple of days. Obviously, a lot of talk about mergers. Have you guys taken a stance on the merger? And then one of the obvious sort of questions, I think, as it relates to Schneider specifically is, you've got UP in the West, CSX in the East. It seems like if a merger happens, a little bit of a mismatch, like it seems logical, likely to me that you'd have to sort of make some changes in channel partners. I don't know what you can say?

Yes. We've chosen to really reflect and analyze it. to your point, we've been through a change from the BN to the UP. We've been through a change to the CPKC. So we're capable and have processes and a very experienced team to kind of assess through that. We're really happy with the CSX in the East. I mean, a terrific executor, a great partner in the market. That being said, we're deep in discussions with everyone, and we'll have to make that decision. And now that the data is a little bit more available, how both the UP and NS is thinking about things and certainly how the CSX is very serious about our business as well.

We'll be in a position to make a really solid decision for our customers and our business and more to come on that. But we're deep in -- we're not just not talking concepts. We're really deep in the analysis.

And then you mentioned in your opening comments, logistics facing a little bit of a squeeze, which you did in Q1. Are we at the point now where spot volumes picking up, pricing is catching up where like logistics starts to get unsqueezed? Or is there still a little bit more of that squeeze to feel?

Yes. We really don't try to have loss leaders. We're very nimble in that business. We're at least in 50% of the spot market regardless of the market on our brokerage business. We saw the squeeze more in our Power Only because that's more contractual. That's about 90% contractual coming out of trailer pools. So we're getting a chance to address that, obviously, through this allocation season. And if it wasn't working for us, we just lowered our acceptance level of those type of Power Only moves. So we're going to work to get the squeeze behind us, but that was more of a fourth quarter thing. It started to get more relief in the first quarter, and I expect we'll get more relief for that in the second quarter.

You mentioned Power Only. I know we've talked about that a bunch in the past and was that a contributing factor? And maybe not say, Scott, look, you were dead wrong. It was all just these sort of bad.

I never say you're dead wrong, Scott.

I can take it. Do you -- was that -- was Power -- only dependent on some of this sort of bad capacity? Is Power -- only going to be the same sort of growth engine this up cycle as it was in the last up cycle? Or is it going to be -- have to be more just like a pure Schneider offering?

Well, we have the same vetting process and approval process for brokerage care that we have for Power Only. So we didn't Obviously, we strive very hard not to have any of those bad actors kind of in our ecosystem. So -- but we do think -- and I guess, some of the questions around what's our truck count.

We have our network truck count. We have our owner operators, but we also have Power Only serve that network customer. So it's still an important part of what we do. I don't believe it was a material contributor to the capacity problem as an industry, if you look at the overall size of not only our Power operation, but many of -- a couple of our other large competitors. So I think it's going to continue to be an important part of what we do, and it's certainly going to be valued by our customer.

And I'm jumping around a little bit, I apologize. So in a world where dedicated -- well, in a world where truck one way is starting to get some good pricing network, what's -- dedicated rev per truck was flat in Q1. How quickly does that start to reaccelerate?

Yes. Similar to my comments on Intermodal, when you look at what changed from cycle to cycle, it was very little change in the rate structures in Dedicated, which is one of the reasons we're so attracted to it on its consistent returns, consistent revenue, consistent volumes. That being said, we have about 1/3 of our book come up every year because our average contract is 3 years, and we'll continue to work through and deal with our inflationary costs if they didn't get fully covered in our indexing that we do throughout that contract. So I think there's room on price, clearly. And we've said very publicly that we have a very strong pipeline, but we'd rather take underperforming books of the business -- no matter where you're at, you got a bottom 10%. So how do you take those assets and redeploy them for higher return, which will come both to the price line, the revenue per truck line and certainly our margin line.

Do you think -- just given that lag, is dedicated price cost positive this year?

Price cost positive?

Margin positive, I don't know.

As in growth in margin or just.....

Yes.

Yes. We're really happy with our dedicated business. We could always obviously lean in and do better, and we're working on those individual opportunities. But yes, it's -- as we said, more than 100% contributor to our overall network or our Truckload segment.

Okay. And just last couple of minutes, just maybe talk about what are you doing with the fleet? Are you doing any prebuy ahead of EPI 27? How you think about growth organically, acquisitions?

Yes. We're on a very steady replacement cycle for our units. So we're -- I don't think there's going to be a lot of truck OEM capacity to do major prebuys anyways, but we'll probably play around the fringes a little bit in that fourth quarter and make sure that we can avoid whatever may be a more costly engine that's coming at us in 2027, but it will be around the edges. And so our guidance relative to our CapEx is more on the replacement side and what will get us from the high end to the low end is how much we want to put into dedicated from an Intermodal dray from a tractor count. So that will be kind of our wildcard low to high end of the CapEx range.

There's also the benefit of productivity in terms of what our CapEx plan is, right? So we talked about tightening those truck-to-driver ratios. So we're focused on productivity first, not just focused on truck count that comes up in our CapEx plan.

Interesting. We had a autonomous truck panel yesterday, Rush was here saying like, you know what, I've been pulling this for a long time and all of a sudden, the technology feels like it's getting there. And what are you doing with? Or how are you thinking about autonomous?

Yes. We're running a few lanes today, and we have been with two major of our providers, which is Aurora and Torque, which is kind of aligned with Daimler. I think what's still to be determined, what's the whole economic model that makes sense, right? I think what you're seeing, at least publicly recognized, I think, more recently with the autonomous players is that if you have to do a driver on the front-end stage, a driver on the back-end stage, it really does cut into what other economics and value that gets created by the autonomous move. And so I think you're hearing more, I got to go end to end point, right? And I think that is really what's necessary, at least in our view, for that to be more than just around the fringes, right? So the technology is advancing.

I'm not sure the legal and the liability structures that are advancing at that same pace. And I think there's a lot of things in Congress now relative to this most recent bill that perhaps will bring some clarity to that as a federal program versus a state by state. We'll see how all that plays out and what makes it to the end. But the technology is there, but we got to get this business operating model, how does it best fit.

So your point is, if it's ramp to ramp, the economics is really hard. It's got to be door-to-door.

That would be ...

Is it easy? Can you do it door-to-door?

Well, we have to do it at scale, right? And how does -- and I think the real benefit here is can you run that truck 20, 24 hours a day? And how does the freight move? It's incredibly -- you think there's so much density, but when you think when you really have to tie all those things together, it's a bigger challenge.

Customers have to change behavior, shipping times and leveling will have to change. So there's a number of things on the supply chain to take advantage that I believe the customer has to own and participate in to really get after kind of maximum value.

Do you have a thought of like when this could be 100 trucks in your fleet, 1,000 trucks in your fleet? Or is this still...

Yes.

It's not 1,000 trucks is probably a little farther out there, but we'll be playing. And we are doing so today, particularly in Texas, and it's got to move out of the Sunbelt eventually. And there's a number of other things that need to occur, but it will start to get traction.

Okay. And just last thing as we wrap up, the other like sort of topical thing that's been in the news sort of over the last month or so is the Amazon supply chain. I don't know what in your mind was new from that? Where do you see risk from that, opportunity from that? I don't know.

Yes. Well, obviously, we have -- we respect Amazon and would not try to certainly underestimate whatever they are capable of. But they've been doing a number of these things that I think came out for years now. And we're used to customers that are both give us freight and we compete against them. We see that in a number of parts of our portfolio. So it's not an uncommon characteristic or unfamiliar characteristic, probably better said. But we'll see how it all plays out, probably at least initially, maybe more of the small to midsize shipper, but we'll see.

Okay. Mark, Darrell, we got to wrap. Thanks so much. Really appreciate it.

Thank you for standing by, and welcome to the Schneider National First Quarter 2026 Earnings Conference Call. [Operator Instructions]

I'd now like to turn the call over to Christyne McGarvey, Vice President of Investor Relations. You may begin.

Thank you, operator, and good afternoon, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer; Darrell Campbell, Executive Vice President and Chief Financial Officer; and Jim Filter, Executive Vice President and Group President of Transportation and Logistics.

Earlier today, the company issued an earnings press release. This release and investor presentation are available on the Investor Relations section of our website at schneider.com. Our call will include remarks about future expectations, forecast plans and prospects for Schneider. These constitute forward-looking statements for the purpose 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-K 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, reconciliation of any non-GAAP financial measures referenced during today's call can be found directly in our earnings release and investor presentation, which includes reconciliations to the most directly comparable GAAP measures.

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

Thank you, Christyne. Hello, everyone. Thank you for joining the Schneider call today. First, I want to thank our associates, especially our professional drivers, for their hard work navigating a dynamic quarter and safely supporting our customers.

The stress in the market over the last several months is a direct reflection of structural supply rationalization, and we believe this up cycle has now gained its foothold. While we experienced headwinds from challenging weather and fuel volatility in the quarter, we were ultimately able to mitigate the impact of these factors because of the proactive actions we have taken to position the business to capitalize on improved conditions. This includes execution on our cost and productivity initiatives, investment in differentiated services and capabilities, and a disciplined approach to customer allocation events.

In a moment, Jim will share more perspective on the freight market before Darrell provides a more detailed financial overview of the first quarter results and our 2026 guidance. Then I will share my view on the actions we are taking to position the enterprise for near- and long-term success. After, we'll answer your questions.

With that, I will hand it over to Jim.

Thank you, Mark. As we look at the freight market, the momentum we saw as we exited 2025 grew in 2026. As Mark highlighted, the quarter was negatively impacted by unusually disruptive weather in parts of the country where we have significant operations and in areas that are less equipped to manage winter storms. While weather contributed to initial supply chain disruption, we believe that tighter market conditions that followed are a function of capacity attrition we have seen over the last several quarters.

The attrition is the culmination of the DOT's actions to improve public safety by addressing noncompliant capacity, including curtailing nondomicile CDLs, enforcing English language proficiency, removing] [CEL ] mills and targeting ELDs that enable tampering. Based on developments to date, we expect this rationalization to occur rapidly as the mere threat of enforcement and proactive actions in certain states are driving more capacity out of the market sooner. We do not believe we have yet reached a new normal for supply, so we expect additional capacity to [ lead ] the market from here. [ Fill ] cost inflation, which is outpacing rate recovery for the long-tailed carriers and upcoming road check are likely to be catalysts for additional drivers to permanently exit.

We believe that we will see more supply exit in totality than what was removed by the 2017 ELD mandate while also restricting the funnel of new entrants. We continue to expect that the removal of this capacity will restore the market to more normal conditions after several years of rational supply dynamics.

With regards to demand, realized volume in the first quarter was a tale of 2 halves, with adverse weather impacts in the first half, giving way to increase volume in the second half as we support customers who are dealing with stress in their supply chains. Looking at underlying trends, we saw a resilient consumer and signs of life in our industrial end markets, mirrored by what we saw in ISM PMI.

However, overall macro uncertainty has also increased amid rising inflation expectations and diminished prospects for additional rate cuts, which adds demand risk for the balance of the year. While we have not seen any adverse impact to date, we will be monitoring changes closely.

Altogether, the market is seeing increasingly reduced capacity at a time when spot prices are recovering. As a result, many cycle indicators such as tender rejections, spot contract spreads and fleet utilization [ flashed green ] in the first quarter with some of these signals at levels last seen during the pandemic. The encouraging trends seen in March have persisted into April with continued strength in the spot market, traction in rate recovery and volume retention in our allocation events, and indications of moderate customer restocking and seasonal volume activity.

With that, I will turn it over to Darrell to share additional observations on first quarter performance. Darrell?

Thank you, Jim, and good afternoon, everyone. I'll review our enterprise and segment financial results for the first quarter and provide insights on the full year 2026 EPS and net CapEx guidance. Summaries of our financial results and guidance can be found in our investor presentation available on the Investor Relations section of our website.

Starting with the first quarter results. Enterprise revenues, excluding fuel surcharge, were $1.2 billion, down 1% compared to a year ago. Adjusted income from operations was $35 million, a 21% decrease year-over-year. Enterprise adjusted operating ratio increased 70 basis points compared to the first quarter of 2025. Adjusted diluted earnings per share for the first quarter was $0.12, compared to $0.16 for the first quarter of 2025.

First quarter results reflected strong execution across the portfolio as well as effectively capitalizing on commercial opportunities. This enabled us to mitigate headwinds from significant storms and fuel volatility. Our actions included traction on our $40 million cost savings initiatives where we're able to implement additional headcount actions and disciplined execution on our Common Systems integration synergies.

From a segment perspective, Truckload revenues, excluding fuel surcharge, were $618 million in the first quarter, up 1% year-over-year. This growth was driven by improvements in revenue per truck per week.

Network revenues grew 4% year-over-year, driven by productivity and price, with revenue per truck per week up 7% year-over-year and even up 2% sequentially, which is atypical for the first quarter. This more than offset [ headcount ] declines, which reflects a combination of asset efficiency efforts and growing driver scarcity. Dedicated revenue per truck per week was up modestly year-over-year, reflecting our focus on productivity as we take action on assets where we see opportunity to improve returns.

Truckload operating income was $20 million, a 20% decline year-over-year. Operating ratio was 96.7%, an increase of 80 basis points compared to last year. Earnings were negatively impacted by cost headwinds in maintenance and fuel that were exacerbated by the challenges referenced earlier as well as lower gain on sale due to delayed equipment disposal.

Intermodal revenues, excluding fuel surcharge, were $254 million for the first quarter, down 3% year-over-year. Revenue per order declined 4% and included impacts from lower length of haul. Volumes grew year-over-year despite a challenging comp related to last year's inventory pull-forward that we referenced on our previous earnings call, marking the eighth consecutive quarter of load growth.

Intermodal operating income was $11 million, a 21% decrease compared to the same period last year but in line with our expectations, as weather disruptions impacted maintenance costs, but this was offset by cost saving actions, including lower [ rail ] repositioning costs and realizing the benefits of AI-driven headcount actions. Operating ratio was 95.7%, compared to 94.7% last year.

Logistics revenues, excluding fuel surcharge, totaled $312 million in the first quarter, down 6% from the same period a year ago, with lower volumes partially offset by higher revenue per order. Logistics income from operations was $7 million, down $2 million year-over-year. Operating ratio was 97.9%, an increase of 30 basis points, primarily due to the impact of lower volumes. This was partially offset by improved net revenue per order, which reflected strong spot and premium project business as well as productivity gains.

Turning to our balance sheet and capital allocation. As of March 31, we had $399 million in debt and lease obligations and $228 million in cash and cash equivalents. Our net debt leverage was 0.3x at the end of the quarter. The strength of our balance sheet leaves us ample dry powder to maintain an investment-grade profile and complete additional accretive acquisitions if the right target becomes available. We're confident in our proven playbook to select quality accretive targets by delivering synergies and enhancing those brands' ability to grow profitably.

We'll also continue to prioritize robust shareholder returns. In the first quarter, we returned over $22 million to shareholders in the form of dividends, which we recently raised by 5%, and opportunistic repurchases of shares under a newly authorized share repurchase program.

Net CapEx was $45 million, compared to $97 million last year, due to timing of equipment purchases. As a result, free cash flow increased by $54 million year-over-year. Looking forward, our CapEx guidance for 2026 remains unchanged and is expected to be in the range of $400 million to $450 million. This primarily encompasses the replacement CapEx needed to protect our Asia fleet.

As we move through 2026, our priorities are unchanged, and we remain focused on capital and resource efficiency as we believe we have runway for growth with our existing equipment. Our containers can support double-digit Intermodal growth, and we continue to see positive trends in Truckload productivity. Additionally, we continue to support scaling our power-only and owner-operator capacity to help extract incremental growth over the medium and long term in a capital-efficient way.

As we think about our guidance, since our last update, our confidence in executing our cost program and the realization of supply attrition has grown based on the progress delivered to date. That said, macro uncertainty has increased in the form of higher inflation expectations, softer consumer sentiment and diminished likelihood of additional rate cuts. These factors push more demand risk to the right. Even so, we also see a constructive demand scenario supported by a resilient consumer, continued improvement in industrial end markets, and support from fiscal policy. As a result, we're maintaining our 2026 EPS guidance of $0.70 to $1, which assumes an effective tax rate of approximately 24%.

I'll turn it over to Mark for more detail on our enterprise outlook.

Thank you, Darrell. As freight fundamentals continue to move back to more rational conditions, we expect the benefits of the actions we took to structurally improve the business will be increasingly evident. These actions include building on our nimble, multi-modal portfolio, investments and differentiated service capabilities, a disciplined approach to prior allocation events and $40 million and growing in cost savings actions.

As cycle dynamics shift, we are already rolling out our early cycle playbook to capitalize on improving trends. This includes dynamically shifting our capacity to meet changing customer needs, quickly enacting yield management actions and extracting returns on our cost and productivity efforts, all of which will lead to enhanced operating leverage across our segments.

In Truckload, we were deliberate in how we manage customer allocations through the down cycle, knowing rates have not been where they need to be. In doing so, our spot exposure grew to nearly double its historical levels in Network. This has the dual benefit of allowing Network business to immediately take advantage of improved spot rates and it creates latent capacity to add more accretive contract rated business.

While we remain predominantly contractual in our asset businesses, we must balance our customer commitments with the need for improved rates to support our investments in service, several years of cost inflation and the growing cost of securing capacity.

We saw meaningful traction in the first quarter as spot rates were accretive to overall Network rate in February and March, with strength outpacing normal seasonal patterns. This is the benefit of operating a scale network solution, which was able to capture premium opportunities and help shippers navigate supply chain disruptions whether from storms or broader routing guide breakdowns.

Network will continue to support our customers as cycle conditions shift and the value of our assets become more apparent. Price renewals are now at the highest level since 2021 and shippers are increasingly recognizing that the tightness is not simply winter weather.

A growing number of shippers who have completed their allocation season are returning to us as some carrier rates agreed upon earlier are no longer holding. We expect Network 2026 rate renewals to be in the mid to high single digits for the full year, and we are acting decisively with the most transactional customers where there is more ground to make up and rate recovery. In these instances, we expect to see double-digit increases.

As conditions improve, the focus on doing more with less by tightening our equipment ratios will drive even greater operating leverage. Though there is more to come, we are encouraged by the improvement in Network productivity in the first quarter. We showed strong improvement year-over-year, especially in March. Excluding peak holiday periods, March Network productivity was the strongest it's been since 2023.

In Dedicated, rate improved year-over-year [indiscernible] fourth quarter as we continue to scrutinize our portfolio and ensure assets are being deployed to their highest and best use. Looking forward, we will continue to evaluate performance across our portfolio, enabling further rate improvement, while also benefiting from more accretive dedicated backhaul as spot rates move higher.

As we look at our Dedicated fleet, in the first quarter, we continued to ramp up new accounts that were sold in the back half of 2025. In 2026 to date, we have sold over 150 new trucks, and we're seeing a growing number of our customers asking us to expand their existing fleets. However, in the near term, this will be offset by some incremental churn. We are focused on productivity and portfolio management actions where success will be measured in revenue per truck per week improvements rather than just truck count.

Driver capacity will be a constraint as supply tightens, which we believe will generate incremental Dedicated demand. We remain focused on adding durable dedicated solutions.

In Intermodal, Mexico growth continued its momentum, growing double digits. This helped to offset softer Transcon volume and the impact from lapping last year's inventory pull-forward. Looking forward, Intermodal rate traditionally lags the Truckload market, which we anticipate will remain the case. Still we see significant opportunities in 2026 to continue to drive volume and share gains as we lean into our asset-based model, build on the launch of Fast Track and our differentiated Mexico offering while taking advantage of growing over-the-road conversion opportunities amid elevated fuel and rising truckload rates.

We are already seeing over-the-road conversion with customers, and we feel well positioned to capture this growth at high incremental margins given our prior investments in trailing capacity and our ability to effectively recruit and retain company dray drivers.

In Logistics, the earnings recovery from fourth quarter reflects our ability to leverage the complementary nature of being an asset-based provider as the cost of capacity continues to rise. In the first quarter, we were able to positively manage our net revenue per order after experiencing significant squeeze in the fourth quarter. We became increasingly discerning on what contractual volume was accepted, including in our power-only offering, which is primarily contract rated. This was effective and profitable as we were able to support power-only customers through our Network offering while contractual brokerage volume was backfilled by greater spot opportunities and by project business and specialty verticals that we have cultivated.

In closing, we are encouraged by how the business was able to navigate a dynamic operating environment that included challenges from fuel and weather. Our results are not where they need to be, clearly. Early signals in both the market and our performance gives us greater confidence in our trajectory from here. As freight fundamentals continue to normalize and capacity rationalization progresses, we are more ready than ever to benefit from improving cycle dynamics.

Our methodical approach to pricing, cost control and capital allocation, combined with the flexibility of our diversified multimodal portfolio, allows us to position the enterprise for strong operating leverage.

With that, thank you for your continued interest in Schneider, and we will now open the line for your questions.

[Operator Instructions] Your first question comes from the line of Tom Wadewitz from UBS.

Yes. And it's great to hear a number of these positive conference calls on momentum in the business, right, and see it for Schneider as well. I wanted to ask, Mark or Jim, if you could just give a sense, I think your revenue per load was pretty favorable in Network. You're talking about like mid- to high single-digit contract increases. Is there a chance that you end up being stronger than that? It would seem like just what you got in the first quarter would point to something that maybe could be a bit higher than that.

And then I guess the second question would just be like on Dedicated. How do we think about how that business can move up in an elevating truckload pricing cycle and how quickly that can happen? And maybe what are the levers within that, that you can push so that you get some quick responsiveness on Dedicated as well?

Yes, Tom, this is Jim. So I'll start with a question on Network and price. And so we gave a little bit of background in terms of what we're seeing through allocation season. But there's a number of ways that we can extract rate. Obviously, there's normal allocation events, there's turnbacks, there's load acceptance and spot. And we're seeing positive trends with each one of those. And so let me give a little bit of color on each one of those.

First of all, with those normal allocation events, what we just shared was we're expecting the renewals in Network to be mid to high single digits for the full year, but we are seeing some signs of momentum building. And those shippers that drove the largest price decreases are experiencing double-digit increases and knowing that they're going to have to make the largest changes.

Then on turnbacks, we're seeing an increase in cost allocation activity. And it's true across the board, but in particular, it's with those most transactional customers again. They're feeling the impact of what they've seen in spot prices. They're trying to avoid that. And so they're going right back out to looking for opportunities to contract that freight.

And then with acceptance, we're seeing more and more shippers that are prioritizing acceptance in their metrics. And that really is a telltale sign that they're not happy with what they're seeing with acceptance, and therefore, willing to take some strategic actions to drive some changes.

And then in spot, our Network spot rate was accretive really for the majority of the quarter. So there's opportunities to continue to lean in on that, to drive pricing up to a different level. But really, for us, the 7% increase in revenue per truck per week in Network, price was only a small part of that. An awful lot of what we experienced there was really in productivity. And that's really been our focus. We want to be able to help our drivers. Number one place that we can help our drivers, our customers and our business is to improve our driver productivity. So I'm really thrilled with the activities that took place there to drive productivity because that's just creating leverage for our organization.

I still believe we have more opportunities to drive productivity. We're in the kind of early stages of implementing AI that's going to help remove some friction for our drivers, that will help us improve their productivity. So I think that there's still some more room to run as it relates to Network there.

Let me jump into Dedicated and hit in terms of the opportunities out there. And again, the focus is that we want to make sure that our Dedicated business is durable through cycles. And so really leaning into our areas of differentiation, especially where it's Specialty Dedicated. And we're executing that early cycle playbook. So the focus in the short term in Dedicated is productivity that's going to drive the most success to earnings growth. And so the focus is measuring on improving our revenue per truck per week rather than just the total truck count.

Now we're not slowing down. We just said that we sold over 150 trucks. We're also seeing customers come back to us and saying that they would like us to increase their fleets after several quarters of shrinkage. We're going to be really disciplined about that because we want to make sure that this is truly a dedicated opportunity, including additional opportunities that are coming in the door. So we feel good about the prospects there, as well as just when the market improves in total, that gives us opportunity for more backhaul, whether it's contracted backhaul or in the spot. And so I'd expect that we'll continue to improve there as well.

Do you have a quick thought on timing of that? Is that like you see the revenue per truck per week higher in Network and you waited a couple of quarters? Then you see that same dynamic in Dedicated, or is it quicker than that?

I think it's a little bit quicker than that, but we'll see opportunities to be able to fill that in.

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

So Jim, we've got an environment with rising truck rates, high fuel, seemingly still good rail service. It feels like it should be a very good sort of setup for Intermodal. I'm guessing, what are you hearing from customers on that front? And I guess my one real question is do you think -- do we need to be concerned about a longer lag between truck rates and intermodal rates this time? Or do you think it will be similar with what we've seen in the past?

Yes, Scott. You're absolutely correct in terms of the way customers are starting to look at this, especially the most strategic customers that have moved into acceptance, that there really has been a change in the market condition. They're looking to take control of their supply chain and how they can react. And so that we're seeing increased demand in terms of how they're thinking about intermodal, what they can allocate to intermodal because the current fuel cost is making a difference as well as their anticipation of what capacity will look like later this year.

And you're absolutely right, we're seeing really great service levels from the railroads. I think the most strategic customers also start to look at this and say, while there's plenty of box capacity, the real constraint in this industry is always dray capacity. And they're looking at who is going to be able to support those opportunities with their own dray. And so we feel really good about that opportunity out there.

In terms of pricing, I think the other thing you have to watch here is that the over-the-road market dropped much further than what Intermodal did. And so in terms of the degree of change, I'm not expecting that we're going to necessarily need to see the same degree of change in Intermodal as over-the-road. But in terms of the timing, typically, we say about 2 quarters. And from what we can say, we'd say pretty consistent with that, but just not to the same magnitude.

Okay. And then just second question, your point about utilization in one way was interesting because I think in prior markets -- prior periods of tightening markets, we typically see unseated tractors go up and utilization goes down. It sounds like you think you can get price annualization this time. Just what's different to let you do that? Because if you can do it, I think it's -- be pretty powerful.

Yes, you're right, that is a powerful lever when you can get both of those. And specifically initially here, some of the opportunities for utilization was just better freight availability. Having this -- our Network business is split between company drivers, owner-operators, power-only. That gives us more opportunities to take freight and prioritize with our company drivers, and then owner-operators, making sure that we're driving the best mix of freight over to them.

The other thing that's a little bit different is just our access back into our brokerage business to go and find better opportunities to utilize our company drivers, and then really some of the AI that is still really ahead of us. We've had some opportunities, we've utilized this in our Intermodal business, it's removed some of the friction for our drivers, and that's helped out as well. But you bring those together, you're right, Scott, that's a powerful combination.

Yes, Scott, it's Mark. I think the place we feel most favorable about is we were able to increase the productivity, particularly sequentially and certainly year-over-year, and did so with a pretty disruptive market for us from a weather standpoint where we lost more time than we would typically lose in a winter season, because of the depth of the storms and the location of the storms.

So it gives us encouragement that leaning into those actions that we have will be even more powerful, more operating leverage going forward when we have less -- even in Green Bay, we expect to have less snow going forward.

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

Darrell, I hear you on still there being uncertainties on macro, et cetera. But I reckon your commentary on this call has probably been the most constructive we've heard from anyone so far this earnings season, and yet, you didn't raise the guide. So I'm just wondering kind of what more you need to see kind of when you will get the confidence that the kind of idiosyncratic tailwinds in the trucking industry are outweighing what may be uncertainty in macro?

Yes. Good question, Ravi. This is Darrell. So as you mentioned and as I mentioned in my remarks, we expected that supply would exit. And I think what you're referring to is that we did see the supply exiting even at a more rapid pace, which is encouraging. Mark alluded to our cost and productivity initiatives and the fact that we're doubling down on some of those initiatives and those things came through, especially in the face of disruption. So positives coming through Q1, but we're one of the very few of that guide and especially guide for a full year. So we're 1 quarter in, we have a whole lot of year left. So while we're encouraged by what we saw in the first quarter, we have to balance that with the rest of the year. And there is some demand risk that was introduced just based on the macro environment.

So as it relates to just inflation and the risk there, expectations on rate cuts and uncertainty there, it's more balancing the fact that there's 3 quarters left and we have to see more of what we saw in the first quarter persist.

Understood. Then maybe as a follow-up. Jim, you referred to things you're doing on the AI and tech side a couple of times in the last couple of responses. Can you just elaborate on that a little bit more? Kind of what are you doing? Give us some specific examples of tools or functions that you're particularly excited about? And when we may be able to see some of that kind of drop through to the bottom line and kind of maybe quantify that?

Yes, Ravi, it's Mark. And AI and just looking for opportunities to reduce friction in our business, particularly around those places that are facing our driver community and our customer community. Our thought process here is to look where the leverage is from an overall value standpoint. And what we're seeing certainly in the early innings of this is that when you can face those communities and do so by removing queues, so you're getting to information much faster and be able to prioritize -- so let's take an example of a breakdown over the road versus somebody having a radio not working, AI can help us triage through those calls and communication with drivers and get to the right -- our people to the right and most impactful situations first and foremost.

And so that, A, helps improve our service performance. B, it certainly improves the experience of our drivers. And third, it allows us to make better decisions around cost. And so we're looking at that.

I think brokerage gets a lot of play because there's a lot of great use cases. But I will tell you, we are as excited, maybe even more so, into the core businesses of our assets in both Intermodal, and we're doing that across multiple fronts and prioritizing, as I mentioned, on those high-impact areas.

And so that's a combination of our own in-house developed, which is our primary use of AI, but also using some outside capability, particularly around voice, that's really getting our people inside the building pretty excited because it really allows them to be more effective in their job because they're getting to the right work at the right time. So early innings, but highly encouraged. And we're going to continue to lean in and invest throughout 2026. And so we will -- we are seeing it in our business results and we will see more operating leverage going forward.

Your next question comes from the line of Daniel Moore from Baird.

Yes. Mark, it occurred to me you're going to retire in July. This is probably your last call. It has been great working with you on both sides of the fence, as both an investor as well as a sell-side analyst. And I just wanted to wish you very best in your retirement.

Appreciate those kind remarks, Dan.

Absolutely. So maybe just a couple of quick questions here, kind of the dovetail on Tom and Scott -- some of Tom and Scott's questions, I was hoping to maybe get some context around the cadence of rate repair. And so as we look at Network and Dedicated, and Intermodal, all 3, if maybe -- I don't know if this is a Mark question or a Darrell question or Jim question, but -- or a Christyne question, but maybe if you could just kind of kind of walk us through how we should be thinking about the percentage of each of those divisions working through the renewal process as we calibrate our models? And then that's question number one, many parts.

Question number two is what was the impact from fuel and weather in the first quarter?

Great, Dan. I'll kick off and I'll let some others chime in here. This is Mark. Clearly, as we look at the allocation events, rate recovery is an incredibly important aspect of what needs to get done as our industry and us as a company have experienced inflation that we haven't fully recovered from over the last couple of years. So first and foremost, really leaning into that.

As you look at the various sectors and segments that we operate in, our Network business, particularly in truck, have a change of rate most pronounced either up or down just because of some of the options that Jim was talking about, how we can kind of play our portfolio. So we would expect the Network businesses and truck to be the most responsive to the change as it's the most valued capacity in some respects as you go through the kind of the up cycle piece. So encouraged by where we've seen in the first quarter, but we also have a big second quarter as it relates to those type of events, and we expect to get through that successfully.

Dedicated, generally, we're operating under longer-term contracts there, but also have the ability through indexing and other items to get increases based upon kind of where you are in the calendar across that contract. But I would also focus on that there is a great opportunity here because we -- in most all of our circumstances outside of really, really specialty-type services, we have the opportunity to share in backhaul opportunities with our customer, bringing them value, and we can get after yield activities in our Dedicated business by having a better pool of freight to choose from to share with our customers.

And then when they have more demand and more demand gets into the mix of our Dedicated fleets and the productivity elements that we're so focused on, also adds additional leverage. So not all of it is rate recovery. It is throughput. And that's why we are really steering towards our success will be seen, first and foremost, in our revenue per truck per week metrics.

And then Jim I think commented on Intermodal, that we still expect to see some lag there. But again, we focus on leading into our key differentiators there, which we're bringing premium products to market, of Fast Track and also our mousetrap that we have, which we see is the absolute best coming in and out of Mexico and the broadening services that we're seeing in other parts of the geography out of Mexico, can influence our revenue per order there.

So Jim, any other kind of comment? And then I guess, the fuel kind of weather impact, I'll turn it over to Darrell.

You covered it a..

Yes. So this is Darrell. So on the question on weather and fuel, based on each of our industry, we go through these types of events every year, I would admit that this past quarter was more impactful, at least in the short term. But there's positives and negatives that go along with it.

So in the negative column, as it relates to short term, we did see some increased maintenance costs, we did see some loss of productivity. But on the flip side, when you have weather events, especially when they're disruptive, it can serve as a catalyst, right? So as we got into March, we did see some recovery and some opportunities that we capitalized on. So kind of longer-term positives that could come out of that stress.

From a fuel standpoint, we did see volatility, some sharp movements in fuel, particularly in the first half of March. A lot of that moderated. So by the time we got to the end of March, most of that was behind us.

Yes. In short term, negative, but to Darrell's point, it also creates catalyst in the combination of tighter capacity and disruption generally has a longer benefit than just the short-term impact of weather and fuel.

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

I guess I wanted to come back to the guidance for a moment. And maybe you could just sort of help us sort of book in either side of the guidance. When you issued it a quarter ago, sort of there was hope with kind of different environment that where we feel like we're in with some more constructive progress made to date. So I guess, how do we think about that? What do we need to see to sort of be a little bit more confident towards the high end of the range? I guess we're beginning to see some of the contract pricing begin to move in the direction. But is it really demand that's the biggest sort of variable that we think about that $0.70 to $1? So just any thoughts around how you think about the upside and downside there?

Sure. This is Darrell. So you -- I think you nailed it with your last comment there in terms of demand, and we're very, very precise when we gave that guidance 3 months ago that demand was -- is a swing factor. So what we expected to play out in terms of capacity and our self-help actions, including cost productivity. A lot of what Jim talked about in terms of the way that we allocate freight and our revenue management strategies, all of those things played out as we expected, although supply did come out probably at a more rapid pace.

But we always said that to get to the higher end of the range, we needed to see some inflection in demand. So our demand was stable in the first quarter. There is some more risk that was introduced. So the balance is -- balancing the optimism from the first quarter was the fact that there is incremental demand risk, which on balance gets us back to our range.

We zoom out a little bit, I was wondering if you guys wanted to kind of comment [indiscernible] the opportunity for [indiscernible] the course of how this cycle is beginning to shape out. It's a little bit of a different one...

I'm sorry, Chris, you cut out on us halfway through your question there.

Sorry. Can you guys hear me now?

We can.

Great. So I was just kind of curious, as you think about the margin opportunity for the business in the context of the cycle that's more sort of supply driven at least for now, how do you think about the opportunity for the truck business? Mid-cycle margins, what can we kind of get back to? And does it take 2 years of this to get there? Any timing help would be great.

Yes. This is Darrell. I'll start. I'm sure Mark and others will chime in, Jim. So when we set our long-term margin target ranges, we're assuming normal conditions or normalized conditions. And I think everyone would acknowledge that over the past several years, we have not been in a normal environment. So there's been excess capacity and we know it's irrational. We know why there's been that capacity. But we're seeing signs of that capacity exiting based on a lot of the regulatory actions that are going on. So we believe that we're on a path to getting back to some more normalized earnings, but it's going to take more than one allocation event.

So we do need rate and we do need rate for more than 1 year. But we're also being balanced that we're not waiting for the market in order to execute on our priorities. So we've seen in the first quarter the benefits of our actions even coming out of the weather disruptions, how we're able to rebound. And that gives us optimism that if we continue to follow the playbook as it relates to cost and productivity and rate discipline, that we'll be on that path or continue on that path.

From a Network standpoint, I think we would all acknowledge that Network has the most ground to cover, but also the inflection opportunities, especially in this cycle, are most, I guess, readily apparent there, especially that's where most of the rational capacity has been. So Dedicated, Intermodal, Logistics, we'd say are all within striking range of our long-term guidance or target ranges, and Network definitely has an upside based on what we've been doing.

Yes. And this is Jim, just to chime in on the network business. This is where that we've been most impacted by that irrational capacity as well as some of the noise that we saw specifically within this quarter early on. So we're executing that early cycle playbook. But I'm really encouraged by what we saw in productivity and price metrics. And we've talked about that. Gaining this type of productivity, even though that we lost some days during the quarter, I felt really good that that action is still underway. We still have room to grow. And we obviously still have room to grow on price that will get us back to our long-term range.

Your next question comes from the line of Jordan Alliger from Goldman Sachs.

I just wanted to come back to revenue per truck per week in the network business. I think it was up about 7% in the first quarter. And I know you've talked a fair bit about productivity. But can you maybe talk about the components of that, the miles per truck per week versus revenue per mile? And how do you see that developing from here?

And then secondarily, can you talk a bit more about your current spot exposure? And is there an optimal target level in a more -- in a stronger Truckload environment?

Yes. Jordan, this is Jim. So on revenue per truck per week, that improvement of 7%. A small amount of that was priced here in Q1. That's the side of it that we say has more opportunity going forward. The majority of the improvement was in productivity. And there's a number of the actions that we've already talked about here earlier in terms of what we're doing to give more freight options to our company drivers to all of our trucks to be able to be more efficient.

I'd say what's still ahead of us here as opportunity to get a little bit leaner on trucks. And so I think we still have opportunities to drive that further from efficiency with trucks as well as with price and productivity. So all 3 of those combined give us a little bit of opportunity to grow that.

Our spot exposure, we started talking about this last year, where we were at to come into the low double digits, where previously we were kind of in the mid-single digits. In terms of the ideal place to be, it really depends on where the market is, and we're -- we want to handle this dynamically, be able to have good customer relationships. But there's got to be mutual value created here for both us and for our customers. And so we will pivot from time to time to be able to get the best mix.

Yes. I think certainly, as we've come into the year and went through the allocation events last year, we purposefully put more of our network capacity in spot. We're getting some benefit of that, and we would expect at this point to continue on that path as one of the levers to improve our yields that we mentioned across, whether it's allocation, spot, acceptance. There's multiple levers that we can pull. And so we're optimizing across all of those, but spot is one. And we're encouraged, where that came in the first quarter, we're actually encouraged where we are here in the month of April. And we would expect to use that as a lever going forward.

Your next question comes from the line of Jonathan Chappell from Evercore ISI.

I want to ask about the Logistics side, I think I asked about this last quarter from the context of the margin was pretty close to 0. And now you turned it around pretty quickly in 1 quarter in a backdrop that, at least conceptually, was more difficult for traditional brokerage. So is this -- was that quarterly improvement more structural, more kind of cost and productivity even though revenue is down? And as we think about the starting point, like Logistics is usually a tougher margin in 1Q, do you just continue to get margin improvement if volume starts to pick up throughout the rest of the year?

Yes. I appreciate the discussion on Logistics because we're really proud of our Logistics business and the differentiation we've created there. And we don't often get to dive into that segment, so I really appreciate that. This is -- and you're right, across the industry, there's rising third-party carrier cost, which really can weigh on your contract rate business, which is a significant portion especially of our power-only business. So the recovery in earnings is really just a reflection of our strategy there.

And there's really 3 parts. First of all, we want to make sure that we're a trusted partner for our customers. So we've made some investments in new capabilities and verticals that have been expanding rapidly. And then when you do that, that differentiation has enabled us to become a sole-source provider in those areas. And because we're a sole-source provider, we've been able to sell some additional value-added services.

And then second, we're seeing some of the early benefits to productivity based on some of the AI enhancements that we've talked about already. That's going to enable us to capture some incremental volume at very low costs. We've structurally lowered that cost to serve.

And then third, it's the complementary nature of being an asset-based provider as in the cost of capacity continues to rise or there's uncertainty ahead enables us to pivot quicker. It gives customers more confidence to utilize our Logistics solution over a non-asset solution.

So we believe this is a strategy that's -- we have a strong footing and that's going to enable us going forward. Mark?

Yes, we certainly had the net revenue per order squeeze in the fourth quarter. I would also tell you, Jonathan, we were more discerning in the first quarter as it related to acceptance of contract business, particularly for those transactional shippers, so that we could put and go after more spot business. So we're still -- do a good portion of nearly half our business in Logistics is still under the contract phase. But we were able to be a bit more nimble around the edges, and that really came through in the net revenue per order recovery.

And our tools and technology investments, particularly around pricing and acceptance, when there's disruption in the market or inflection in the market, like we saw in the first quarter, we can be very nimble, and the team took advantage and continue to add value to our customer, but do so in a bit smarter way for our bottom line.

Great. That's all super helpful. And then in the context of the guide, each quarter in '25, the margin kind of deteriorated sequentially, troughed in the fourth quarter. Now you're starting at a basically the same point, but would you say that the anticipation is each quarter is going to improve sequentially and that's how you kind of get to the midpoint as it relates to logistics contribution?

Yes. Jonathan, I think certainly, as you look at our guide, there's improvement to be had here from the first quarter, and we would expect that to occur. And again, as we've discussed broadly, the range from the bottom to the top, in our view, we feel very good about where we are in our controllables, particularly around the cost management, the number of things that Jim has led very effectively within the business around our productivity initiatives.

And so the swing factor, and we have not seen it to date, so admittedly, this is not a current condition, but the swing factor that we stated when we originally gave the guidance and where we sit here today is the demand factor. We've had an incredibly resilient consumer. We are watching consumer sentiment and the impact of fuel on the pocket books. Our customers are very -- watching that very closely and are concerned about it.

On the balance though, we're also seeing and being encouraged a bit more on the industrial side with the investments in the manufacturing sector here in the country. So there could be some off balancing, but overall, we just have to make sure that, because we guide for the full year, that we're being balanced towards the gives and takes there.

I understand. I was speaking more to the logistics margin specifically, but...

I moved to the enterprise on you, but my bad.

Mark's comments kind of covered it. We did mention in January and also this past guidance update that our guidance was second half weighted. So if you -- we do believe that there will be some seasonality, and seasonality would indicate more earnings in the second half.

Our next question comes from the line of Ariel Rosa from Citigroup.

This is Ben Moore on for Ari. Just adding to Tom's and Dan's question, can you remind us the average length of your dedicated contracts and how your dedicated contract renewals are bucketed by percentage each quarter, so we can kind of model out the shape of that lift to dedicated rates throughout the year?

Yes. Our general range -- good question. Our general range in Dedicated is 3 to 5 years, with the most -- if you would take the median, is 3. And because of the long tail that we have and the size and scope of our Dedicated at 8,500 trucks, generally, that is fairly evenly distributed. It's not perfectly distributed, but by quarter, by year, on an average of 3 years, it's 1/3 of the book is in renewal at -- in that calendar year.

But as we also talked, we have greater than 92%, 93% retention rate of our Dedicated businesses -- or Dedicated contracts, I should say.

Great. And you mentioned the 150 trucks you sold, I think you didn't have many bid conversations in 4Q that could have supported 1Q with implementations. But you expect those to pick up in 2Q and beyond. How are those trending? And how many gross trucks were added in 1Q? And how many are expected to be added in 2Q, 3Q and 4Q?

Yes. So what we're -- what I want to focus on, our focus here on especially the early cycle is that our focus is going to be on productivity, not just the number of trucks that we have. And so on net, our focus isn't on that metric as much as revenue per truck per week in the Dedicated business, because we see some opportunities to actually pull some trucks out of some existing customers, improve our efficiency there. And so for us, that's the key metric that we're going to be focused on going forward.

And that concludes our question-and-answer session. I will now turn the call back over to Mark Rourke for closing remarks.

Thank you, operator. So once again, I just want to recognize our professional drivers, maintenance technicians and the entire Schneider associate team for their commitment to safely supporting our customers during a quarter that was marked by significant disruptions. As we discussed here today, we're optimistic that the much anticipated freight recovery, driven by substantial supply reductions, has finally taken hold. And our versatile multimodal platform is built to provide us and our customers with flexible freight coverage options.

And this optionality, along with our diligent efforts to manage costs, invest wisely in technology, and prioritize people and asset productivity positions us to achieve strong operating leverage and advance towards our long-term margin goals in the midterm.

And as Dan mentioned and on a personal note, this does mark my 36th and final Schneider earnings call before Jim Filter's transition to President and CEO in July and my move to Executive Chairman. I want to express my heartfelt gratitude to this group and to our shareholders for your steadfast support and thoughtful engagement throughout each of those quarters. It's been both a privilege and a joy.

I also know that with Jim, Darrell and Christyne, you are in great hands moving forward. And as always, we thank you for your interest in the Schneider call.

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

Why don't we kick off our next session. So here joining us we have Schneider National, obviously, Prominent trucking company, but a number of other areas of business as well that we'll be digging into. And we have Mark Rourke, CEO; and Darrell Campbell, relatively new CFO. Darrell, how long have you been?

2.5 years.

Okay. All right.

I can't use the new card anymore.

Yes. Okay. Fair enough. It's like fair. I guess, yes, we've bounced around a couple of...

[indiscernible] like dog years.

Yes. Exactly. That's -- and it's been a tough market. So you may be experiencing the upswing there.

So there have been a lot of interesting signals in the market. I think a lot of folks in the room are going to care about what are you seeing in the broader market, right? We've seen some strength of better than normal seasonality, I think, in first quarter some of that related to storms, but speak about those dynamics and what you're seeing in the marketplace from a supply-demand standpoint.

Yes. Actually, a lot is going on for sure, right? And we've been talking about the capacity levels for several quarters and some of what we were calling shadow capacity. And then when you see some enforcement activity going on to get after some of those issues, which we can talk about, and you couple that with a little bit of demand. I think it really demonstrated that the supply-demand equilibrium is maybe a little closer than people were expecting. And certainly, weather highlighted that. But here we are pretty well removed from the weather, and we're still seeing spot pricing being very attractive, particularly in the Midwestern northeastern geographies. And so the staying power of that, I think, is a very good signal.

And I also think we have an administration and regulatory body that is serious about public safety, taking the actions necessary around the areas of CDL qualifications, school qualifications, ELD providers and compliance and then certainly combine that with the things like non-domiciled CDL, ELP, all of those, I think, are starting to have that effect that we all expected, and it's not going to be like a big bang, maybe like we experienced with the ELD implementation way back in '16 or '17.

But I think we've just seen a steady and consistent attrition of capacity and because most of that activity is on the side of -- for higher carriers. If you think of 3.2 million or 3.5 million CDL holders, half of that is on the private fleet. Half of that is on the for hire. It's actually in our view, most of that change is happening in the for-hire space. So it's almost going to get doubling effect when you see the numbers. And so that and maybe some encouragement a little bit on the industrial side, which we've been lagging for a few years now with some of the fiscal policy, some of the tax bills and you saw the ISM pop for the first time in a long time, all those things are, in our view, just a much more constructive setup that we came into 2025 with relative to our discussions with customers and where we are in the beginning of the allocation season.

So a lot going on. I think a lot of people try to sift through what does all that mean. I think from our view, from a pricing and from how we think about commitments I think we have a much more constructive environment.

One of the things that's been interesting to me, Mark, when we go out and talk to carriers, it sounds like there's a lot of optimism on the supply constraints, some of the government enforcement actions. But it sounds like the demand environment is still a little uncertain. What's your sense on that? You mentioned some of these initiatives, the legislation coming around, retail inventories maybe looking a little bit more balanced. What's your sense on what the demand picture looks like independent of the supply considerations?

Yes. I think the demand picture has probably been surprising people because it's been very steady. The consumer has been very resilient. We haven't seen a lot of ups and downs relative to demand, I would consider it in the last 5, 6 quarters, very, very stable. You're right. I do think the inventory levels have been addressed. So we don't talk to many customers that are sitting there and thinking they've got more inventory work to do. It's either at or below kind of where they would be historically. So I think that's again, another one of those constructive elements.

And then as you mentioned, we have to see maybe a wait-and-see story on the industrial side a little bit. But any level of activity there is very friendly to trucking particularly when we get into the manufacturing health here because not only it's the finished good move, which we get on a finished product that may come to the port or come through -- up through Mexico, an industrial recovery gives us the intermediate moves, the raw materials, the intermediate steps. So it's a very healthy development for trucking. The fact that we haven't had that in 3 years, I think is a very good sign if we can see some continued momentum there.

So are you actively seeing a more supportive demand environment in terms of the customer conversations that you're having? Or you're just saying some of these things are -- there's potential?

Yes. I think those are probably a little bit more forward-looking statements. I think our customers are trying to get what's real and what's not in their world, right? Everybody has been under the same pressure to get inventories right. And I think the fact that we're not carrying that inventory, I think, can be a catalyst for a replenishment cycle, not calling that just yet. But I think all those signs are much more positive, I think back to a year ago, right? We were still dealing with more of the capacity overhang. And I think that's what's probably first and foremost on the mind of the shipper is what do I have at risk? I think the brokers are the first ones to feel that. I think you're seeing them come under tremendous stress on the contract business. We're seeing a lot more mini bids, things that suggest that customers are trying to get things back up in the contract world that are holding together as much as perhaps we would have been a year ago.

Got it. So let's talk about the supply side now. Some of the government enforcement actions, maybe give some parameters around the impact that you think it's having? I know there have been a lot of estimates out there, 5% to 10% of capacity potentially being vulnerable to being removed from. Do you see that as a realistic target? Do you think it could be upside to that? And you mentioned and I like that delineation within the for-hire market, it probably has an outsized impact. So how do you see that kind of impact flowing through?

Yes, absolutely. And first of all, we've had the pleasure of being with the regulators a few times as they're listening to the industry and trying to understand from the industry's perspective what's going on. And there are some very, very competent people at the DOT and Sean Duffy and crew have done a terrific job, and they give them the mandate and the resources to do it.

So sometimes when we think about government, are they as effective as their programs? And I would tell you, in this case, it is a very competent staff with a mission to accomplish. And you're seeing it in a consistent drumbeat week-over-week, whether it's the ELDs that are being that are not compliant, being pulled, whether it's self-certification of truck driving schools being pulled, the actions are -- and the enforcement is backing up the words. And so I think that's why we're actually feeling it in the marketplace because even the threat of enforcement has some self-selection that people make.

And I think one of the underappreciated elements of this, we talk a lot about what's capacity in the industry, but it's also impacting the top of the funnel on the replacement capacity, if you really hone in on the school networks, they're in a much different condition this year relative to number of people available, what's coming through, where the funding is at. So we're seeing pressure on both the school at the top of the funnel of the CDL creators and the folks that are in the industry coming out. So that's a pretty powerful combination in our view. And I would not be surprised if the 10% number is not where we ultimately land.

Wow, that's -- it's quite a statement. It will be definitely a different world than what we've been in for the last 3 or so years. Talk about how that flows through, right? So we're seeing higher spot rates, how does that flow through the different parts of Schneider's business? And obviously, again, we spoke about, obviously, you have the network business, the dedicated business, the intermodal business. Where should we see that impact? And how much of an uplift could we see in terms of rates?

Well, as we've talked about, we have more in the spot market because we've been disciplined relative to contract renewals last year. So even in a not entirely constructive market, we were getting mid-single-digit increases. And if we needed to, we would put more trucks in the short term out in the spot market.

In network.

In network, which is now more beneficial than it was a year ago because we have better pricing and above contract pricing in the spot world. So very constructive, and that's pretty immediate, right? We're able to -- how do we upgrade and how we do that immediately. I also think it gives us confidence to go into the allocation season with getting paid for our value and starting to work our way back to what we need to cover for all the inflationary impacts. So it affects how we think about our going-forward position.

In Dedicated, people think, "Oh gosh, you're not going to be able to get as much recovery there because it's more stable." and true, which is really our intent of having a more consistent earnings stream by putting more of our assets and long-term sticky contracts. But almost everything we do, we have some level of backhaul, some level of opportunity to help the customer lower their entire expense, and we get to keep a great deal of that. So that's -- enhanced pricing helps our dedicated margins as well.

Then ultimately, truck is the biggest competition, as Keith was saying before us relative to intermodal. So as that hardens, then that puts the equation to conversion, and we're indifferent. We love work to be on the train. We love it to be on our trucks. We've tried to present the value to the customer and let them decide where the value is best served.

In terms of the customer conversations that you're having, do you feel like they understand these pressures that could be coming on rates? And to what extent are they feeling it? Because it's interesting, like you hear divergent opinions on this where some carriers say, customers still think this is all a blip, it's just weather, it's whatever versus in some cases, it's maybe leading to some more constructive rate discussions. Give us some color around that? And then what can we look for in terms of price?

Well, there's no such thing as an average customer, people are in different parts across that spectrum area. But if you think about what I think is the consistent theme is I think there is recognition of the capacity situation and the state of transition. I think there's a lot of hope, though, that this has been exasperated by the weather, and this is going to go back, and we have another year of fair stability relative to what their pricing objectives are. I think that's maybe wishful thinking. And I can understand that position.

I think what I look for is what's happening, particularly the more price-sensitive shipper, what's going on in their world, right? And so where is their reject rates, where is their [ mini ] bid activity, and we can certainly see on that cadre of shipper that they're feeling the distress first, which is very consistent with what you would expect when things start to get to a more hardened state.

So way too early to call it. We've been through some head fakes. So I'm not here to tell you that happy days are totally here, but the environment feels -- I think our customers are understanding. Last year, they went less brokers and more assets. I think that will be another strategy this year. I think intermodal gets more in favor because it is a hedge against truck but I think we're going to have a more constructive and -- really, we've got to sit down and talk about what makes sense with our customers.

You're saying more of a shift towards asset-based carriers and that momentum continues?

Yes, for sure.

You had mentioned a moment ago, I think you said you were getting kind of mid-single-digit contractual rate increases. Do you see upside to that number if some of these -- if this proves durable, if this tightness proves sustainable?

Yes. We certainly at Schneider, and I think as an industry, we have not recovered from the inflationary impacts coming out of COVID, right? So getting more disciplined and certainly what we did a year ago was necessary. And we will not be lagging where the opportunities arise, whether that be in a spot market or contract. And so I go back to my opening statement, we've got a more constructive market, so I think that's very much in the cards. We've got to see it. It's got to be durable. All the other things that you put there is a caveat I would agree with, but it's certainly more constructive.

All fair. Let's discuss the ability to grow, right? For years, I know I've been interacting with Schneider and there's always been this ambition to grow, right? How quickly can you add to the fleet on the network side, on the dedicated side. How should we think about available capacity on the intermodal side?

Yes. So I guess if we start with dedicated, what we've said publicly, at least over the last several quarters is we see that we're focused on earnings growth as opposed to just truck growth, right? So there's an ability to be more productive with assets that we have. So we've shown that even keeping our truck count flat, we can grow earnings.

There's -- inherently in every business or every portfolio you have top-performing accounts and you have other accounts that there's an opportunity to improve. So we're focused on improving the bottom percentage of our portfolio that's underperforming, but also just doing more with less. So most of our CapEx growth that you see for next year or for 2026, I should say, is replacement really to protect our [ age of ] fleet. So that's kind of the dedicated story.

Network, similar, we're restoring margins, but we have to see it before we're putting more investments in terms of growth capital. Intermodal similar story. If you think about our trailing assets, our trailing assets we could probably grow earnings 20%, 25% without adding anything in terms of containers and chassis. So the growth will be in terms of -- in dray tractors as opposed to the trailing equipment. So we're very focused on being more productive with assets that we have first. And then once we've maximized that productivity then we'd be looking to add equipment.

So Darrell, you said how much -- what's the level of kind of available capacity that you think of in the network right now?

Sorry. That quote was really intermodal. So somewhere we can grow 20% to 25% without adding any trailing equipment. So the growth would be very attractive.

So very attractive incremental margins. We're not making any additional capital investment there.

So in a nutshell it's easier to be more productive with assets that we have. Once we get to that level of optimize productivity, then we'll add more assets.

One of the concerns that I think a lot of investors rightly have is that if we see this constraint on driver availability, it pushes up driver wages. How do you think about how much of the rate increases that you might be able to secure ultimately are going to have to get passed on to drivers? Do you think you're going to have a pool of available drivers that are desirable and that kind of meet your needs in order to grow in order to expand? We're certainly coming off of a really difficult margin period. How much of a headwind does that represent to getting back to kind of where you've been historically from a margin standpoint?

Yes. From my perspective, we are in the margin recovery first. And at some point, certainly, there'll be a sharing of that with the driver community. But that's not going to be on the front end of the process. We've got recovery work to do. What we're focusing on our driver community is that we can give them a raise with asset utilization and asset improvement, better throughput, reducing friction, all the things we're investing in AI. There's lots of things that we can do to be self-help, to help increase driver wages out and changing the scale. And at some point, we'll have to adjust the market, whatever that market is, and we'll be there. Nothing is more satisfying to me than when our driver recruiting team is helping and really after trying to find -- that's our best sweet spot that when the pressure is there. So I don't see that being a 2026 concern. And our goal is to get each of our drivers more money in 2026, but do it through how we utilize them and sweating our assets and improving our overall book of business to achieve that.

So you've been proactive, I think even before we started our session, we were talking about some of the Mexico opportunity. You've been proactive in developing partnerships, especially for your intermodal network. Talk about what kind of growth opportunities that's opened up, how much more runway is there to go? And especially in the context of a tightening truckload market, it's really attractive, obviously, to be able to go to customers and have this intermodal offering, how do you see the opportunity there to grow?

Yes. First of all, we're really happy with our underlying rail partners, the UP and the West CSX and the East are performing well. Keith and team are just doing outstanding relative to taking advantage of our strengths in Mexico. So from an overall service and fluidity standpoint, we don't -- we're not operating at any barriers with our customers relative to reliability particularly with our model where we own the trailer, we own the container, and we own 90-plus percent of the dray. So we think we have the best mousetrap, and we have really great underlying partners. And we've done that without a lot of help from the truck market to hedge for conversion.

So our whole goal really from intermodal is where is our differentiation, right? We're differentiated out of Mexico. We just launched Fast Track, which will allow shippers that have time sensitivity and reliability sensitivity on the rail to be able to take advantage on a number of lanes throughout the network. And we also try to differentiate with who we align with. And there's a lot going on in the alignment world, as you know, relative to being an asset-based intermodal provider, but having the UP, CSX and the CPKC combination. And so we go to our customers with, hey, this is where we're differentiated. This is where we have the best -- we're probably not as strong here, and that's what you should consider with the other guy, but be very clear about what we can provide to you from overall differentiation. And that's really 7 consecutive quarters of growth and intermodal and certainly, those differentiators is what's behind our success. We've been leading share growth, and we would expect we're going to be able to continue to do that.

What do you see as those differentiators? And if you don't mind, what are the areas of weakness or where you might go to a customer and say, maybe we're not the best provider for you?

Yes. So as we look at a customers' book of business, we can really go through and analyze based upon our tools, based upon transit, based upon reliability, based upon cost, based upon perhaps location and closeness to the hub or the terminal so that we have the best road solution based upon where our ramps are vis-a-vis our competitors. And we can be very clear about what those differentiators look like from those combination of factors.

There are some places that Amazingly, we win business that we don't think we are the best option on because of some of those factors that we don't think is in our favor as perhaps someone else, but they like the fact that we're concentrated or they like what we do in some other places, they give us some other opportunities. But we go in being very clear with the customer where the best use of the Schneider intermodal network is based upon underlying partners and based upon our performance. And I think that's been behind the success of 7 consecutive quarters of growth on an order count basis, despite not having a lot of, as we said, truck conversion push behind us. And if that's coming which we think it is, that bodes very well for intermodal.

Yes. I appreciate that level of candor. I'm sure customers do too in terms of building that long-term relationship. You have your cost-out initiative that was rolled out really when some of -- when the market forces were a little bit different than what they are today. Maybe talk about some of those cost-out initiatives, how much momentum there is, how much more opportunity, I guess, there is? Is there any scenario where maybe we pull back on some of those things if the growth opportunities materialize in a little bit more robust way than expected? Give us some color around what's underway in that regard.

Yes. Good question. So I think our cost initiatives started before 2025. We probably were more vocal about those initiatives this past year. So we look at those initiatives that's ongoing, and we're looking at things that are structural. So we've been talking about productivity actions, productivity actions have dual benefit in terms of revenue per truck per week, but also a benefit in terms of cost. So a lot of the actions that we're looking at are asset-based productivity and people-based productivity.

From a head count standpoint, nondriver head count for 2025 was down 7%. We believe that there is more that can be done going forward, and it's not a case where we start to grow and all these people come back, right? We're very thoughtful in terms of where we're kind of taking those costs out.

We're also looking at third-party costs across the board. Intermodal is a good example. I think Mark mentioned, 90% of dray moves are done with our company assets. There's some third-party drays who are very disciplined in terms of those costs. Facilities cost across the board, we're looking -- we've been looking at the footprint. So we've been talking about structural actions. And to your point, when we start to grow, we expect to see leverage as opposed to cost returning.

Let's talk about some of the cost headwinds or areas where you're seeing inflation. I think you spoke to in first quarter, I guess, for 2026, right, seeing some inflationary headwinds around health care costs. We talked about some kind of unplanned auto shutdowns or extended auto shutdowns that represent a little bit of a headwind. And then, of course, on the logistics side, anytime you see the trucking rates start to move higher, that tends to squeeze margins. How should we think about how much of a headwind that represents for first quarter? You have your target out there for the full year EPS. How should we think about the cadence of kind of earnings through the year in the context of some of those cost headwinds?

Yes. I think most of the costs -- we had a $40 million cost and productivity savings target in 2025. We doubled down on that for 2026. It's another $40 million. I think there's a recognition that we are in an inflationary environment, even though it's more stable. So we're mitigating much of that inflation, but it's not all $40 million goes to the bottom line, if you know what I mean.

Most of it is second half weighted. So some of the costs that you mentioned, we don't see them as ongoing. So the health care headwinds that we saw in the fourth quarter, for example, there are some specific reasons why we think usage went up in that period of time. We don't expect that to persist. In the third quarter, we had some auto liability claims expense, some of that normalized in the fourth quarter. So these are not ongoing headwinds, if you will.

You also mentioned the carrier cost on the logistics side. That's short-term pain, we think, for long-term benefit. When you see spot prices elevate and impact carrier costs, we think that's a precursor to contract rates recovering. So we saw some of that inflection going into the back half of the fourth quarter persisting into the first quarter, but to the extent that those costs remain elevated, we believe that contract rates will also increase.

But if you go back in time to kind of the COVID years, there are certain costs that are compounding, right, which we've mitigating. So you think about equipment cost with Paris, for example, that's a headwind that obviously kind of carries forward. There are certain maintenance costs that are higher because of tariffs driver costs that you mentioned and Mark kind of talked about the strategy there. So there are certain costs that just given the magnitude of the P&L that have an impact. We're doing things to address those costs. But then most of the costs that you mentioned, we think are more transitory in nature.

Thanks for that color, Darrell because I think it's really important to understand that some of these headwinds are temporary and then start to fade over time as you start to get perhaps the pricing that you'd like to see and hopefully, that flows through.

So you have an outlook for 2026 adjusted EPS of $0.70 to $1. To what extent should we see in that -- I don't want to force you guys into saying anything that you don't want to say. But to what extent should we see that as a conservative target if we get a more supportive rate environment? And how quickly can we start to see that flow through to margins to earnings?

Yes. I think we acknowledge, at least, at the bottom end of the range was -- had some conservatism in it. So we ended the year at $0.63, as you know, adjusted EPS, bottom end is at $0.70. In construction, the guidance, we said that the $0.70 implies that what we saw in terms of conditions and the back half of 2025 persist. The expectation is if we have more rate recovery, capacity treats more demand in flex that would prove to be more of a conservative view.

But we're also focused on the things that are within our control, right? So to get from the bottom end of the range and the midpoint of the range. Most of the actions that Mark talked about in terms of where is our differentiation. So intermodal, that's very clear. In Dedicated, we have a very clear strategy on a pipeline as it relates to specialty. We have a very clear productivity set of targets for network. We also have contractual rate renewal targets for network.

So there are a multitude of things that are within our control, in addition to cost initiatives that get us to the midpoint from the midpoint to the high end of the range, that's where some of the macro forces, if you will, in terms of demand has the ability to get us even beyond $0.85.

Got it. So we understand, of course, look, again, as transport analyst, we live it every day, and we see how difficult the operating environment has been, but we're excited for kind of a cyclical upturn. Let's talk about what some of the opportunity could look like in an upturn.

Your truckload operating margin was 3.8% last year. That's against a long-term target of 12% to 16% if memory serves correctly. Intermodal operating margin, 6.7% versus long-term target of 10% to 14%. And then logistics margin was 0.8% versus long-term target of 3% to 5%. What's your level of confidence in being able to get back towards those long-term targets in an up cycle? What's the process by which it would happen? And if you don't mind me asking, where do you feel the most confident versus least confident in the ability to kind of hit those targets?

Yes. I guess we should probably described that as getting to a normal cycle, not just an up cycle that we think we're capable of doing that. And so if you look at where we are coming through this downturn, we reconstructed our truckload business to be 70% presently in a dedicated configuration, 30% and in a network, and that's by design. We want to get after a more durable and consistent earnings stream relative to longer-term stickier contracts.

We sold 950 units last year. We also had a higher turn and churn year than we typically do as customers may have looked for a one-way solution to save money here, strategy, change, a plant shutdown, other items that just hit a little bit harder relative to the churn factor and some that we directed and so the ability of the pipeline to get after the new business that we want to get after to upgrade our portfolio where we can and where it's needed. We feel really good about it and really gets us very close to at least the bottom end of the range without a big market recovery.

The drag for us has been on the network side. And you've seen a lot of stress, not only us but with our competitors as well relative to the network side of the business, which we haven't got in the black for a couple of years now. And that really -- we just need to get into the mid-single-digit range on the margin targets in network, and we're really on our way to really where kind of we've laid out is our goal.

I feel really good about intermodal as well because we've had no price in two years, and we still are able to start to move margins based upon our cost disciplines, our differentiators. So getting a little bit of price, giving a little bit of volume on some of this conversion is a great deal of a flywheel for intermodal business. And we're not all that far off on the bottom end of the target. And then our logistics business really in the second half of the year took the margin hit. And so with our power-only offering, a more normalized balance market that allows for differentiation between our assets and how we can feed our logistics business, 3% doesn't seem out of bounds for us and maybe even one allocation cycle change. It probably takes us a couple of allocation seasons to get our network business totally back, at least contributing to the level that gets us in that range. But dedicated is our wild card because we have a terrific balance sheet. We're going to really focus on earnings improvement and earnings maximization, but we also -- success in the market, we can really put our balance sheet to use both organically and acquisitively. We made 3 really solid dedicated acquisitions in the last 36 to 40 months and have an appetite to do more.

Can you give us any indication on what the margin profile looks like between network and dedicated?

Well, right now, there's not a margin profile in network. So that's what we're working on. But in a normalized market, they could be very, very similar. And typically, if you would take us back to the COVID era, pro-COVID, very, very -- you can play similar to just the network side becomes more volatile, more upside, more downside with the dedicated, we really take the top and the bottom part of those markets off, which is what's attracted us plus it's what our drivers like to do, right? If you think about labor, if you think about choice that they have, whether the market tightens, where is our driver community, in general, want to be something like intermodal, where it's very predictable. I'm home virtually every day in the market more dedicated where I know what I'm doing every day. Those are the two things that labor most wants to get after, and that's the strength of our portfolio.

So I think we're a little more going to be resilient when the market does get tougher because of what we have to offer and the network is really the hardest, most irregular route, most irregular schedule business. And so that's why you get paid so much on the market as well, and that's what gets really punished when the market goes the other direction.

And we've seen encouraging signs even in softer market conditions. So as Mark mentioned, in intermodal, we have no price. Pricing is flat, but we've grown earnings even in the fourth quarter. Revenues were down, margins were up, right? A lot of that is the self-help items that we've been implementing. Network is the similar story. We had some significant headwinds, some of those onetime items that you mentioned, even with those headwinds we grew earnings year-over-year, right? So with some help from the market, it's not unfathomable that we get to those longer-term targets, what is going to take a couple of cycles.

One of the challenges that we have as transports analyst, and I think transports investors face sometimes especially for the truckload carriers, we're used to cycles. We understand cycles are part of life. But historically, carriers, and it's not even a Schneider-specific comment, but carriers have kind of struggled to compound earnings over time, right, to show that you can kind of have higher highs and higher lows through the cycle. What's being done differently and maybe it's the cost-cutting initiatives, maybe it's more of a focus on Dedicated. Maybe it's some of these partnerships on intermodal and focusing on load growth. But how do we get comfortable with the idea that Schneider can kind of compound earnings through the cycle?

Yes, absolutely what we're focused on. We have a number of initiatives, particularly around technology where we can ramp our business without having to grow the people count to the same degree as well as historical level would be. And we just we've never had the influx of a nondomiciled CDL holder to the degree that's really recked the capitalism structure of trucking on a recovery basis, right? So as we get through that, and I think we're seeing evidence that we're getting through that and the structural changes we made in our business, the dedicated concentration, our differentials in intermodal. And each of those have different asset intensities and margin profiles, right? Where most asset-intensive truck, less so in intermodal and virtually no capital outside of technology on the logistics side.

So we're focused on return on invested capital, how does that mix play out. That's all a function of our mix. But I think we're structurally different. And if you talk about a frustration, we've done some really good things in our dedicated business, the acquisitions and our network businesses masked it all because of the really once -- I would consider I've been in this industry for 38 years. I've never seen a 4-year cycle and now we're just getting the total evidence of why that was.

Yes. A remarkably deep down cycle. It's remarkable. We have been talking about rail M&A a bit. And as you know, Keith and team were here just -- I was a little while ago.

The guy was a [indiscernible].

Yes, yes. I mean, Keith, is great. How do you think about Schneider's role in the rail M&A debate, right? Talk about what where you plan to weigh in or where you think you could weigh in, how you see your positioning for a world that might have a future UPNS, how do you think it's going to shape the North American rail network and how Schneider benefits or maybe in some cases, might be vulnerable.

Yes, obviously, we're coming strictly from an intermodal view and not some of the other lines that the railroads operate in. But first and foremost, we're really, as I said, happy with where we are today and our linkages, our integrations with our 3 primary partners. And we've had the experience and the muscle to change railroads when we needed to. We've done that recently with [ BN to the UP ]. We did that with the CPKC. So we're not concerned about changing our ability to execute and protect our customers and do all the things that we need to do to be a great operator regardless of where the landscape ends. That being said, we want to make sure we have the best differentiation we can and the best intermodal network that we can and that may involve a change and it may not involve a change. And part of what we're in discussions with lots of folks presently around how we want to ultimately weigh in on what our ultimate position will be.

There are some really exciting things that are kind of laid out perhaps in the UPNS relative to what are those payers, what is the concessions, how does that all play together? We don't have all the details yet to really kind of weigh in and make a definitive statement. We've been one of the ones who have been silent waiting for that. We don't think it made any sense without the knowledge that we don't presently have to come out and take a position, but very confident in our ability to deal with it. And not that -- it's not a big deal. It is a big deal. We're taking it seriously, but we're going to be very confident in the end that we're going to be able to be stronger going out of it than we came into it.

Certainly being flexible, and I think it works to your advantage. I'll check if there are any questions in the audience. But in the meantime, I'll ask -- on the logistics side, I'm curious because there's been a lot of talk about how technology is changing that -- the competitive dynamics in that industry. Maybe give us your thoughts on how Schneider's positioned? And if we could broaden it out even a little bit to kind of how technology is impacting the broader industry? Should we expect consolidation there? And how does Schneider maybe position itself to continue to win in that space?

Yes. I think the revolutions that we've been through from a technology -- over time I think, benefits those with scale, right? I think the most vulnerable, the smaller, maybe too big to be nimble and not big enough to have scale is maybe the most difficult place in the market to be that mid-tier. And so I think that plays to advantages like ourselves because we have the scale to go ahead and invest in AI to do the things necessary to look at your cost to serve, take friction out of the business and improve the service experience and we are probably in this bottom of the second inning on that relative to the AI work, and I continue I try not to be surprised every day, but I'm surprised every day how effective it can be, how our people embrace it and say, "Hey, this allows me by doing this to get to a higher level in the value chain with the customer or with the business and not fighting." this because it looks like it's a disruptive force for the people. So, really, really encouraged. And I think 2026 will be a very interesting year in our development and across really all aspects, our shared services all the way through our service offering. So by being already tech-forward company, it just kind of comes natural. And I think this gives us the confidence to accelerate in places just because of the early returns that we've seen. So very excited about that. And I think, ultimately, that allows us to compete more effectively because it lowers our cost to serve. Don Schneider said 50 years ago, low-cost position wins in the end. And I think these technologies are going to allow us to do that.

I think Schneider is certainly well positioned to continue to be a winner in the market. Let's go to questions in the audience.

With your '25 wins going into '26. Can you talk about the cadence of your truck adds versus start-up costs throughout the 4 quarters?

Yes. So a question for those who are gonna use -- it's about dedicated and their kind of your carry forward from 2025, I mentioned that we sold 950 or so units of new business. We had substantive start-up activity in the fourth quarter, particularly around 3 larger opportunities that we believe largely get through in the first quarter and early first quarter on 2 of them have some lingering because of the size and scale on the third. So those are all very good things. And again, as we think about the 2026 period, other wins, we'll look at how do we raise the returns of the portfolio first before we kind of add capital. So our pipeline suggests that we're off to another solid year in dedicated, a bit more skewed to the stickier things that we're targeting, which is specialty equipment that doesn't get as easily disrupted by network solutions or standard 53-foot trailing equipment.

So a little bit of hangover here in the first quarter. Obviously, the weather was pretty significant in January, a little bit of carryover into February that we'll have to get through. I think the team did a terrific job of dealing with that disruption to try to keep costs as reasonable as we could. But I don't know if I -- I've been around a long time, but having facilities close from Dallas, Texas through Carlisle, PA on the same snowstorm is a pretty unique experience.

So I feel really good about that. So we're not after a magical number of 70-30 between dedicated and network. And obviously, we have a balance sheet to put if we can get everything moving and where the direction we move to include acquisition.

That's great. So Mark, I see we're effectively at time, but let me see if there are any closing comments or closing thoughts, you might want to leave us with. And I'll phrase it particularly in this context. What do you think is kind of the most misunderstood thing about Schneider and kind of where is the opportunity that you're most excited about?

Yes. Well, first of all, thanks for having us. And I think you did a great job covering the basis for the industry today. We're very proud of our truckload history. There's no question that Schneider has been known for a long time for the trucking side of the business. We really maybe misunderstood is how multi-mobile we really are when we're talking $2.5 billion in truck, over $1 billion in intermodal and $1 billion in logistics and how we can play and help our customers with a whole series of solutions to grow our business. I don't have to have a driver and a truck in every one of those locations because of some of these non-asset services that we can bring to bear. So we love our trucking heritage, but we're probably a little bit more than just a trucker these days.

All right. Great. Well, we're excited to see what you folks can do in the up cycle and hopefully, we have a little bit of macro tailwind ahead of us. Mark, Darrell, thank you both for your time and a fascinating conversation.

Thank you.

Thank you for standing by. My name is Joe, and I will be your conference operator today. At this time, I would like to welcome everyone to the Schneider National Fourth Quarter 2025 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to Christyne McGarvey, Vice President of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer; Darrell Campbell, Executive Vice President and Chief Financial Officer; and Jim Filter, Executive Vice President and Group President of Transportation and 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, forecast plans and prospects for Schneider. These constitute forward-looking statements for the purpose 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-K 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, 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.

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

Thank you, Christyne. Hello, everyone, and thank you for joining the Schneider call today. I want to begin by acknowledging that the fourth quarter results fell short of our expectations. When we provided our update last quarter, October results and market conditions were supportive of finishing 2025 at approximately $0.70 of earnings per share. However, November and much of December were materially more challenged than our guidance had contemplated, reflecting a very truncated peak season and poor weather conditions throughout the Midwest.

We saw momentum as we exited the year, which we believe is a direct result of supply attrition in our industry in the last several months. We believe we're in the early innings of normalizing market conditions, in part due to the various regulatory actions being taken. Importantly, these actions are only driving capacity to exit the market at an accelerated rate, but the ability to backfill new entrants is also increasingly diminished. We expect the full impact will likely be measured in quarters, not months.

Still, the last several years have proved to be a challenging backdrop, and we are not satisfied with our results. During this downturn, we made strides in lowering our cost to serve in Network, changes that are structural and will improve our operating leverage going forward. At the same time, we have grown our Dedicated offerings to nearly 70% of our fleet, increasing the durability and resilience of our Truckload segment. We've created true differentiation and value in the marketplace in our Intermodal offering and scaled our flexible asset-light tech-enabled solutions, all of which have been supplemented with our accretive acquisitions. We recognize that an improvement in market conditions as needed for the full benefit of these investments to be evident, but we believe we will exit this down cycle more ready than ever to meet a market correction.

We are not simply waiting for improved cycle dynamics. We enter 2026 with more conviction in the importance of continuing to execute our strategic initiatives to drive structural improvement in our business. We are carrying momentum from our cost savings program, including ramping synergies in our acquired companies, leading Intermodal growth, including the recent launch of our Intermodal Fast Track service, heavy Dedicated start-up activity and Network earnings improvement into this year.

I will provide more commentary on our outlook and expectations for 2026. But first, I'm going to hand the call over to Darrell, who will provide more comprehensive overview of fourth quarter results. Darrell?

Thank you, Mark, and good afternoon, everyone. I'll review our enterprise and segment financial results for the fourth quarter, along with our year-to-date cash flow trends and provide a capital allocation update. Summaries of our financial results and guidance can be found on Pages 21 through 26 of our investor presentation available on our Investor Relations website. In the fourth quarter, revenues, excluding fuel surcharge, were $1.3 billion, up 4% year-over-year. Our fourth quarter adjusted income from operations was $38 million, a decline of 15% compared to a year ago. Adjusted diluted earnings per share for the fourth quarter was $0.13 and $0.20 a year ago.

As Mark referenced, fourth quarter results reflect more challenging market conditions than we previously anticipated in our guidance. October saw steady demand with elements of seasonality, though more subdued than is typical. Our guidance had assumed that trend would persist through the balance of the year, but demand turned sluggish in November, reflecting minimal peak activity as shippers work down inventory, which created a significant volume shortfall versus our expectations. This is exacerbated by the poor weather in the Midwest that brought volume and cost headwinds. However, the sharp reaction of spot rates to the weather disruption demonstrates how the excess of capacity in recent months has brought the market closer to balance.

Volumes remained fairly muted until the back end of December when shippers began to feel the inventory drawdown and more actively sought out additional capacity as routing guys became stressed. This enabled us to realize some premium project business. Still, the strength exiting the year was compressed and not enough to offset the tempered demand that characterized much of the quarter. These more challenged market conditions were also compounded by extended and unplanned auto production shutdowns with certain customers in Dedicated, spiking third-party capacity costs in logistics and heightened health care costs. Market dynamics in the quarter have masked our continued progress on our strategic efforts, including those related to improving asset efficiency and lowering our cost to serve.

We achieved our targeted $40 million of cost savings, including synergies from the Common Systems acquisition. Our momentum will continue in 2026 with an additional $40 million of cost savings, which Mark will detail in his remarks. From a segment perspective, Truckload revenue, excluding fuel surcharge, was $610 million in the fourth quarter, up 9% year-over-year. Truckload operating income was $23 million, a 16% increase year-over-year. Operating ratio was 96.2%, an improvement of 30 basis points compared to last year. The impact of the market was most evident in network, which remained unprofitable. Restoring profitability in network remains a key focus and fourth quarter did see modest year-over-year improvement as our ongoing cost and productivity actions at least partially offset softer conditions and elevated health care costs.

These actions include efforts to improve equipment ratios, rationalize nondriver headcount and increase bill miles per tractor. As market conditions improved, we did see momentum in December in both productivity and realized price. Dedicated operating income grew year-over-year, benefiting from an additional 2 months of Cowan versus 2024, but volumes were not immune to market conditions, and we also saw adverse impact from unplanned auto production shutdowns with select customers. After 2 quarters of elevated churn, this moderated in the fourth quarter as expected. Start-ups also picked up as new business wins remain elevated versus the first half of the year, and we finished 2025 with approximately 950 trucks sold.

Our fleet count was roughly flat quarter-over-quarter as productivity enabled us to utilize our existing equipment for implementations. However, start-up activity drove greater-than-expected headwinds to tractor productivity and costs, particularly in driver recruiting. Intermodal revenues, excluding fuel surcharge, were $268 million for the fourth quarter, a 3% decline year-over-year. This reflected volume growth of 3%, which was more than offset by mix-related declines in revenue per order. Despite last year's tariff-related pull forward creating a more difficult comp, volumes grew for the seventh quarter in a row. We also continue to outperform the broader market with strength led by Mexico, which grew over 50% year-over-year. However, demand slowed in December, reflecting an earlier end to peak season after some additional pull forward in the third quarter.

Intermodal operating income was $18 million, a 5% increase compared to the same period last year, driven by a solid conversion of our volume growth and the benefit of our cost initiatives, which drove operating ratio to 93.3% or a 50 basis points improvement versus last year. Logistics revenue, excluding fuel surcharge, totaled $329 million in the fourth quarter, up 2% from the same period a year ago, driven by the Cowan acquisition and an increase in gross revenue per order, offsetting ongoing volume pressure. Logistics income from operations was $3 million, down from $9 million last year, while operating ratio was 99.2%, an increase of 180 basis points. While gross revenue benefited from the spike in spot rates in December, we also saw a disproportionate spike in our purchase transportation, especially in certain geographies such as California, which we believe was exacerbated by regulatory pressure on capacity.

This resulted in significant compression in the net revenue per order on our contract-rated business, including power only, even as we're able to leverage our spot exposure to accept and serve the higher spot rated business. Some project-related business materialized late in the quarter, but this only partially offset the net revenue margin compression. Turning to our balance sheet and capital allocation. As of December 31, 2025, we had $403 million in debt and lease obligations and $202 million of cash and cash equivalents. Our net debt leverage was 0.3x at the end of the quarter, an improvement from 0.5x at the end of the third quarter because of the paydown of $120 million in debt. This also marks continued deleveraging from 0.7x at the end of 2024, enabled by a strong cash flow generation even in a difficult backdrop as we prioritize capital discipline.

The strength of our balance sheet gives us ample dry powder to complete additional accretive acquisitions if the right target becomes available while still maintaining an investment-grade profile. In the fourth quarter, we paid $17 million in dividends and $67 million for the year. During the quarter, we opportunistically repurchased approximately 284,000 shares. On January 26, 2026, the Board of Directors authorized a new stock repurchase program under which $150 million of the company's outstanding common stock may be acquired over the next few years. Under the previous program, we repurchased 4.4 million shares for $110 million. Net CapEx in 2025 was $289 million compared to our guidance of approximately $300 million, primarily due to timing of certain payments.

Free cash flow improved 14% year-over-year. We expect net CapEx for 2026 to be in the range of $400 million to $450 million. This primarily encompasses the replacement CapEx needed to protect our Asia fleet. We head into 2026 with a continued focus on growing earnings by prioritizing asset efficiency gains over outright equipment growth. Our adjusted earnings per share guidance for the full year 2026 is $0.70 to $1, which assumes an effective tax rate of approximately 24%. We expect to see supply-driven market improvement and the benefits of our incremental $40 million in cost savings built through 2026. As a result, we anticipate a stronger second half of the year. However, we remain in an environment that's characterized by both inflationary cost pressure and demand uncertainty.

The midpoint of our guidance assumes demand is consistent with what we saw for the first half of 2025 with elements of seasonality but no acceleration. Moving from the low end to the high end of our guide assumes varying degrees of demand with the low end assuming modest softening, especially in the consumer sector and the high end reflecting a slight overall pickup in economic activity. I will now turn the call back to Mark to share more perspective on 2026 expectations and outlook. Mark?

Thank you, Darrell. I want to start with my perspective on the freight market as we move into 2026. As outlined earlier, results were marked by conditions that were softer than expected for much of the quarter, though we did experience material tightening in December. The volume follow-through from our customers came primarily towards the very tail end of the quarter. The capacity crunch at year-end caused some of our most transactional customers to push freight into the early days of January. As the month progressed, conditions reverted to more normal seasonal patterns with spot rates moderating from recent highs.

The end of the month also saw severe weather conditions across much of the country, which caused disruption to our operations. However, customers are also feeling the impact and have large backlogs. We are beginning to see premium opportunities to help them work through the disruption. As we look forward, the industry is already feeling the impact of supply rationalization related to regulatory actions in areas such as non-domiciled CDLs, English language proficiency and driver school certifications. These actions are both removing capacity outright and importantly, restricting the funnel of new entrants. As a result, we expect capacity attrition to continue to ramp, and we continue to believe the impact is likely to be greater than what we saw from the electronic logging mandate in 2017.

From here, demand is the largest swing factor in how the cycle evolves. The trajectory of consumer spending, impacts from the big beautiful Bill and interest rate policy all have the potential to significantly influence the timing and magnitude of improvement in market conditions. We closed 2025 with contract price renewals in our expected ranges. We are far from finished and more progress needs to be made on rate restoration across our service offerings. We are very early in the freight allocation season, but it is clear that customers are increasingly cognizant of the growing supply side risk. While network is a smaller portion of our business today than our history, our spot rate exposure is also at historical highs, which will enable us to quickly capitalize when conditions improve.

Our spot exposure will stay elevated in the near term and potentially even beyond 2026 if we feel rates have continued upside amid a significant shift in capacity. Beyond network, we also expect improved cycle dynamics to drive outperformance in rate and volume in our traditional brokerage, along with backhaul gains in Dedicated and stronger over-the-road conversion in intermodal. We look forward to transitioning to a more supportive market. We also enter 2026 equally as eager to build on the progress we have made in our efforts to drive structural improvement in the business. We will continue to drive growth through differentiation and maintain a disciplined focus on doing more with less. Beginning with our strategic growth initiatives in truckload, network remains a key part of our service offering, but we have made significant progress over the last several years to pivot the portfolio to more of a dedicated configuration.

While we are not targeting a specific mix, we will continue to lean into dedicated earnings growth, particularly with specialty equipment solutions, which is now a majority of our pipeline. We are seeing strength in food and beverage, home improvement and automotive verticals. Our specialty configurations typically have unique equipment or value-added actions by the driver or often both that are not easily replicated, creating durability in the business. We are seeing strong momentum in building the early stages of our pipeline, creating a wide funnel to support continued growth even as new implementations ramped up in the second half of 2025. In Intermodal, while we will not be immune to market conditions, we believe we can continue to drive share gains by leaning into our most differentiated lanes, a direct reflection of our ability to drive win-wins for our customers and for Schneider. We expect Mexico to continue its growth leadership.

The launch of our Fast Track offering, where our service reliability is exceptional will drive incremental growth, and we are already seeing customer interest and conversion. Despite the strong growth in 2025, we see a long runway for over-the-road conversion amid more greenfield market opportunities. This includes opportunities from the changing rail landscape, where we remain engaged with both Eastern railroads. Finally, we'll continue to leverage our multimodal offering to meet our customer needs, however they manifest. In 2026, we will optimize volumes between our network and logistics offering based upon market conditions. In the near term, more volumes will flow toward network, but as conditions strengthen, logistics will enable us to meet increased demand and scale revenue while maximizing network profitability.

As we continue to execute our growth plans, we will remain disciplined in our approach, focusing on growing earnings through operational efficiency regardless of market backdrop. As Darrell mentioned, we achieved our 2025 cost savings program. This was comprised of Cowan synergies, which continued to ramp in the fourth quarter and broader productivity-led cost reductions. We expect these to be structural even as we enter a more robust market. We have reduced our nondriver headcount by 7%, which was primarily achieved in the second half of the year, bringing momentum into 2026. In 2026, we expect to deliver another $40 million in cost savings as we continue to execute our ongoing initiatives, including incremental benefits from reductions in headcount, further tightening of equipment ratios and additional in-sourcing of third-party spend, including maintenance and drayage expenses. We also continue to roll out Agentic AI throughout all our service offerings in a variety of support functions.

We're already seeing enthusiastic adoption across the enterprise and early payoffs in improving service levels and in lowering our cost to serve. This discipline will also be reflected in our capital spending as we prioritize growing earnings through asset productivity. In Intermodal, even with our market-leading growth in 2025, we believe we can grow up to 20% to 25% without having to add containers. We may add some dray capacity over time, but this will enable us to in-source even more of our drayage capacity, improving productivity and reducing third-party spend. Within Dedicated, we believe we can accommodate much of our growth plans through increased productivity and by reallocating resources away from lower-performing accounts. We have identified our lowest returning assets and the actions needed to improve them. In many instances, we will work with our customers to drive a win-win. But in instances where we are not, the strength of our new business wins enable us to put our assets to a better and higher use.

These actions are already underway, and we expect to have the majority implemented by the second quarter of the year. Taken together, as we noted earlier, we believe the full course of supply rationalization is likely to occur over several quarters and through more than one bid cycle. We believe 2026 will mark only the beginning of capacity normalization and cyclical recovery, but not in its full breadth. Realizing that full impact as well as the continued execution of our strategy and a more sustained demand inflection marks a clear path to stronger mid-cycle returns beyond 2026. Finally, as you likely saw yesterday, we announced leadership changes. Beginning July 1 of this year, I will assume the role of Executive Chairman of the Board of Directors, and I am pleased Jim Filter will be appointed Schneider's next President and Chief Executive Officer.

I am confident in Jim's ability to position the company for its next phase of growth as he brings nearly 3 decades of Schneider experience and deep operational expertise. He's been integral in executing our commercial and operational strategies. And now I'd like to turn the call over to Jim for his remarks. Jim?

Thank you, Mark, and thank you to the entire Board of Directors for their trust and support. I am honored to take the helm at Schneider. Despite a challenging market in 2025, our actions throughout the year have strengthened our foundation and positioned us to benefit as conditions continue to improve. We are already seeing early signs of improving market conditions as supply rationalization is underway. We remain disciplined, focused and well aligned to capture the upside of a recovering cycle. With a strong balance sheet, a resilient portfolio and momentum in our strategic initiatives, we are optimistic about the opportunities ahead and confident in our ability to drive earnings and returns higher.

As I look forward to stepping into this role, I'm focused on leading Schneider through this next chapter and driving long-term value for our shareholders.

Thank you, Jim. And with that, we will open it up for your questions.

[Operator Instructions] Your first question comes from the line of Ravi Shanker of Morgan Stanley.

CEO change at Schneider is not something that happens very often. So I just want to recognize the moment. Mark and Jim, congratulations on the next phases of your career. Maybe kick off with the questions. I think, Mark gave us a sense of what you thought of 2026 so far. Just in your guide, kind of what bid season is kind of priced in at the midpoint and high end? I think you said expected ranges of pricing. What does that look like? And also, I think, Darrell, you walked through some of the demand side moving parts in the guide. What are the supply side assumptions that underpin your guide?

Thank you, Ravi. This is Mark. So maybe we'll just tackle the guide a little bit relative to -- I think your first part of that was price. As we came out of 2025 and really if you break across the portfolio in our network business, even in less constructive, in my view, environment, we were able to get to mid- to low single-digit contract renewals, even if that meant placing some additional capacity in the spot market for the short term. And so we would expect that we're going to continue to lean into price because price recovery is part of what needs to occur to get back to our mid-cycle earnings targets. We also would expect that increasingly, we need to see some of that in the truckload space as we normally do before we start to see that transpire in Intermodal.

And what I'm really proud about the Intermodal group is that we're growing volumes even with different mixes -- mix relative to the revenue per order, a little higher backhaul, a little shorter length of haul, and we're still able to translate that additional volume into incremental margins into the business. And so I think we have a solid path to continue to lead intermodal growth, focusing on our key differentiation markets and remain very bullish there. But maybe, again, a little more time before we see a price catch up to what we expect in truckload.

And then, Ravi, as it relates to the supply side, so a pretty wide range, which reflects the uncertainty in the market. But in all points in our guidance, we're expecting supply to continue to exit. There's a lot of momentum as it relates to regulatory enforcement that's driving supply out. We've seen that in 2025, and we expect that to continue into 2026. So one of our baseline assumptions is that capacity will continue to exit. Now the degree at which and the pace at which that supply exits will determine how we move along from the low end to the high end of the range. From a demand standpoint, at the low end of the range at $0.70. Just as a reminder, we finished the year at $0.63 of EPS. There is an admission that there is some conservatism that's embedded in $0.70. We're assuming that demand conditions at $0.70 are comparable to what we saw towards the end of 2025, the second half.

So softer market conditions. But as we kind of move up the range, we expect more constructive -- more constructive demand picture. So as it relates to the midpoint of the range, we're focused on a lot of things that are within our control. So all the initiatives that Mark outlined in terms of cost, we completed $40 million of cost savings in 2025. We expect to continue and sign up for another $40 million in 2026. So that's embedded within the midpoint of our range. We're also focused on growing where we have differentiation, intermodal, specialty dedicated. So midpoint assumes that. We also faced some headwinds towards the end of the year, the unplanned auto shutdowns, the heightened health care costs. We don't expect any of those to recur. So that's all built into our midpoint assumptions.

Your next question comes from the line of Jonathan Chappell of Evercore ISI.

Mark, I wanted to talk about the dedicated revenue per truck per week for a second. If we look at the sequential move from 3Q to 4Q, it looks like it's the lightest it had been in at least 10 years and minus almost 4% year-over-year. So it just seemed kind of counter seasonal. And I know our models certainly don't line up the years all the time, but it looks like the biggest area of the shortfall in 4Q EPS. So I know there's start-up costs that hit OR, but maybe help explain the dedicated revenue per truck per week and why that may be lagged so much in 4Q.

Sure, Jonathan. Thank you for the question. One of the things that are embedded in there is the automotive shutdowns that occurred because of componentry issues, namely around chips, which really affected Dedicated specifically, but also some of our intermodal business coming in and out of Mexico. And so that was unplanned. That was not forecasted well, and our OEMs had to adapt and adjust to that. And that predominantly hit in the month of November, but it hit most of the month. So unfortunately, that was most prominent in our metrics within Dedicated. And I also mentioned we have 3 large start-ups, which we anticipated in our guidance relative to the fourth quarter.

We have some additional cost issues there relative to capacity and some of the difficulty getting all of that sourced, which also had some impact. So those were the items. Again, we don't think those are long term in nature. We always have levels of start-up activity, particularly when you sell 950 units throughout the year, but we have 3 larger start-ups in the fourth quarter.

So Darrell. The other thing that is the health care costs that we saw that were heightened in the fourth quarter. Most of that was in Truckload, and the majority of the Truckload wasn't Dedicated.

Just as a follow-up, going back to that $40 million of costs that you're targeting again this year, how much of that is volume/revenue dependent? Because if we just add $40 million to kind of the adjusted net income from '25, you get pretty close to the midpoint of the '26 guide. So is that like $40 million if the fundamentals of the business kind of track as you're expecting and maybe something less than that if we're closer to the low end of the range from a volume or a pricing perspective?

Yes. So I think as I mentioned -- this is Darrell, sorry. As I mentioned in the prepared remarks, the $40 million of cost savings, a lot of it is productivity based. So as volume increases, some of those will be more evident. Especially because they're structural. So as volume returns, the costs aren't going to return at the same pace. There is an acknowledgment at least that we're still in an inflationary environment. So while we do expect that the cost savings will offset much of that, it won't offset all of the inflationary pressure, so that's another factor to consider. So, I'm not sure if that answered the question.

Your next question comes from the line of Brian Ossenbeck of JPMorgan.

Now that the merger application has been filed and I guess, will be refiled, I just wanted to see if you could give some comments if you had some time to digest what maybe some of the domestic intermodal commentary within there might mean for Schneider and how you're kind of viewing that? Also one of your peers filed for Chapter 11. So maybe just some broader comments about the land in domestic intermodal with those 2 big factors out there.

Yes, Brian, thanks. This is Jim. So obviously, all the way through this process, we've been engaged in collaborating with each one of the rails and especially the 2 Eastern providers. We're very happy with our current provider in the East, but we're continuing to understand information as it emerges. -- there really wasn't any significant new information in the submission. But everything that has come out just reinforces our confidence in that -- our intermodal team, their ability to assess new services, help us navigate through any opportunities that emerge. And in terms of the overall competitive dynamic in intermodal, we feel very good about our position.

We've had 7 quarters in a row where we've been able to grow, and we're growing into areas of differentiation. And there's a lot of those. So you think about in Mexico, we're delivering service that's 1 to 3 days faster, 99.98% claims free. It's really -- that's a big advantage, not just to other intermodal carriers, but over the road as well. And now we're leveraging some of our differentiation with Fast Track with shippers that have really high service expectations. So we feel really good relative to all of our competitors. And so we're not immune to market conditions, but I feel like we continue to outperform in our intermodal business.

Darrell, maybe a quick follow-up on CapEx. It looks like it's going up a reasonably decent amount next year. So they're subject to market conditions, perhaps, but maybe you can give a little bit more color in terms of what's in there? It sounded like maybe some of that was equipment. Is that for purely replacement? Or is some growth in there?

Yes, sure. Good question. So as it relates to CapEx for the past several quarters, we've been talking about just focusing on growing earnings as opposed to truck count. And we've seen that across Dedicated, Network, Intermodal across the board. So we're focused on doing more with less. In Dedicated, for example, we're reallocating equipment to higher-yielding business. So our CapEx plan for 2026 is mostly replacement based, just given our focus on keeping our fleet count flat. So we're protecting our age of fleet, and primarily all of the CapEx is replacement.

Brian, we also had a little less CapEx this year as we were looking for tariff clarity. That has emerged and clear. And we also had a little bit of timing in the fourth quarter to the first quarter just based upon availability, one facility and some equipment. So that's really the step-up, and it's all, to Daryl's point, virtually in the replacement cycle.

Your next question comes from the line of Ken Hoexter of Bank of America.

Great. I'll start off with the same. Mark and Jim, congrats as you each move on to the next phase, well deserved. The auto plant shutdowns, I mean, it seems like such a major differentiation for your business alone. Given that scale, and I guess the last conference you did was in November, was there any thoughts to doing a pre-release or since it's such a change of magnitude to your thoughts on your outcome? And then I guess, as you look forward to the operating ratio, right? So typically, you deteriorate about 220 basis points into the first quarter at Truckload. And I know you don't do quarterly rollout, but maybe just given the couple of things you threw out there, Darrell, on the timing of cost savings or as the $40 million rolls in, anything you want to kind of talk about differentiation from normal given where we're leaving off and the different dynamics here?

Yes, let me take the first one as it related to the automotive. And certainly, one of the items that we've leaned into and diversification of our revenue base is looking for new growth opportunities. Manufacturing was one of those that we had targeted and production part automotive is playing a bigger role in our portfolio, which in many conditions is a very good thing. And there was a lot of uncertainty. Our OEMs didn't know exactly all was going to happen there when that problem occurred. And so we didn't have full understanding clarity as our customers were working through that. But our -- one of our acquisitions and certainly our organic dedicated growth has had success in the production automotive parts.

And so in 2026, that's a development that's a bit more of our story, which we think in the long term is a very good thing, particularly as we continue to leverage our strengths in and out of Mexico and the importance of the automotive industry relative to the Mexico base. So -- we would have liked to have clear visibility to that in a whole host of ways, but that was an emerging issue that a number of our OEMs had to work through, and they worked through that to varying degrees of success to keep production up. So that's really what occurred there and from a transparency standpoint, and then we will follow up on his other question.

Yes. The other question on just timing of cost and cost savings. So a lot of the cost savings, again, are structural, but also relate to productivity. The expectation is that the second half of the year shows more improvement, and that follows through also with cost, similar to what we saw in 2025, where there was a ramp throughout the year. Some of the initiatives are going to be consistent throughout the year, such as the nondriver FTE reductions, but anything productivity based would be more back half weighted.

Okay. And then as it relates to Intermodal. We're off to a very interesting start, obviously, with the weather conditions and the disruption that we're feeling, but also our customers are feeling. And so we believe there is a backlog of significance across the supply chain just because of the entire breadth of the weather, it looks like we may have another coming at us this weekend.

So I think that comes with opportunity, and it comes with depth of our portfolio that we're going to be able to respond. And I think we'll be able to leverage how we help customers deal with that and be paid reference to the value that we're going to create. And so we're seeing some of that emerge already, Ken, but I think it will come down to what is -- how does that whole quarter play out from the cost, the recovery and the demand catch up. So the company -- and we are poised to take advantage and be there for our customers and -- and it's just -- but it's a really, really disruptive time just based upon the extent of the storm and the impact.

Yes. If I could just get one clarification, right? So it seemed like the Cowan fleet total stayed fairly consistent through the year. It didn't look like the fleet dropped off. But Intermodal, your loads really dropped off -- had big load wins in second and third quarter, upper single digits that tailed off in fourth quarter. Is that the same thing in the auto business on intermodal that you're talking about on the truck rates to John just before?

It feels like a sneaky third question, but we're going to go ahead and let that 1 go. Go ahead.

Okay. Thanks, Mark. Really, in -- if you look back at the comps for last year and fourth quarter of last year is when we really started seeing across the industry a pickup in demand. And now there was the threat of tariffs, and then that really carried into the first half of 2025, the pull ahead. And so we continue to grow year-over-year, which actually is much better than the overall industry. So from our lens, we really didn't see a drop off. It was really just a matter of tougher comp year-over-year.

Your next question comes from the line of Jordan Alliger of Goldman Sachs.

Just wanted to come back to demand a little bit. Obviously, you alluded to it a few times, but there's been a lot of puts and takes this past '25 with tariffs pull forward, et cetera. There were some indications that we had seen perhaps that inventory at wholesale and retail had drawn down quite a bit and maybe this dovetails a little bit with your comments on the pickup in demand in December. So do you have any context from customers or what have you, how they're feeling about inventory levels as we move into this year? And is there some sense of optimism perhaps that maybe with the various stimulatory effects, we could see a restock type of event for freight?

Yes, Jordan, this is Jim. I'll take that one. And so you're absolutely right. As we're going through November, early part of December, we believe end market consumer demand remains stable, but we are seeing customers starting to work down inventory, and that really changed the last 2 weeks of December. And so there were some restocking activity that was attempting to take place in the last couple of weeks of December. So there were some shippers that were scrambling for capacity and some of that pushed into January, and we are working through some of that backlog with some shippers that had some freight carryover. And I'd say that it was really the most transactional shippers that had that carryover, as Mark was talking about, also generating some premiums and also some additional cost to ship drivers around.

We are still working through that when winter Storm Ford came through. And initially, that created some cost for us as we are getting equipment back up. We've been operating through that. We're not completely clear, and now we have another storm coming through. And so I think some of this carryover is going to continue for a few more weeks as we look out there. And so we have some of those activities taking place. I'd say that impact is going to be disproportionately negative for the most transactional customers. And historically, when we look at these things, the spot rates, it's not just a quick event. It goes up higher over multiple weeks, and it starts in the area that's immediately impacted, but then expands beyond that as capacity is dislocated. And then if we look further out on the horizon, there's a lot of positive catalysts that we see out there, whether it's from capital investments as a result of the One Big Beautiful Bill Act, some strong tax refunds, interest rate cuts that search us for home investment again.

And so positives out there. But that being said, we've seen some headaches before. And while we are absolutely seeing supply come out of the market already, we're still waiting a little bit for those demand catalysts to convert before we completely underwrite it.

Maybe just to put a bow on that, Jordan, as you look at the Logistics Manager Index, you really did see a precipitous drop in inventories at the latter part of the year, particularly in December, which feels consistent with what our experience was in the month of November. which we saw a drop off really in most demand categories and then it really started to bounce back, as Jim said, late in the year when capacity was tight and it's really carried that concept through here through the first several weeks of January. So absolutely, I think that could lead to a more intense replacement or replenishment cycle. We'll have to see. But we think that's lining up more probability in that direction.

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

Mark and Jim I also want to add my congratulations to both of you. Mark, certainly a pleasure working with you over the years and wish you the best. And likewise, Jim, I'm sure you'll do a great job in the new leading position. Let's see. So I wanted to get your thoughts on if we don't see improvement in demand, how much rate you think you can get from just the supply side, right? Like you seem pretty optimistic on supply with good reasons, supply reduction. Can you get kind of mid-single digits rate on that with, say, truckload contract rates if you don't get help from demand? Or you think that's going to be -- is that maybe too high a bar?

Yes, Tom, thanks. This is Jim. So let me just maybe clarify a little bit on capacity and our position on that, and then I'll step into rates. So generally, we subscribe to the fact that this is an efficient market. And when it's working properly, you see an up cycle that lasts about 18 months, followed by a down cycle that lasts about 18 months. And here we are 4 years into a down cycle. So something is different, not normal. We've been talking about shadow capacity for quite a while. And that's coming from non-documented workers that are able to get CDLs, CDL mills graduating students without the investment to become safe drivers, drivers that don't meet the English language proficiency, D1 committing cabotage and ELDs that are self-certified improperly.

So the step-up in enforcement that we're starting to see -- that's not only removing capacity, but that's starting to constrict the top of the funnel with new drivers entering. And in particular, the most irrational capacity is what's exiting. And that's what's we believe, creating a condition that will enable the market to adjust. And we're starting to see that when you have a little bit of tightness out there. We also see it in our own business. We see that in our driver recruiting volume moderating and we've had some buyers of our tractors canceling purchases because of their driver pool shrinking. And we've seen a sharp contraction in our brokerage carrier count, particularly in regions where non-domicile exposure was outsized in places like California.

But it's not an event-based situation. There is no cliff. It's going to take time to play out. So we expect that capacity is going to continue to decline even well after the market reaches equilibrium. And so it's going to take quarters for us to get there, but this cycle might last longer. And so as we're talking to shippers, I think they're starting to understand that as well because what I've been hearing from shippers more recently is they're focused on the supply risk. They're looking for rate assurance. And they saw this in December. They're seeing it through these storms. So we have more shippers asking us for multiyear deals. We're seeing that, and they're coming with more mini bids, which tells us there's some disruption. As we talk to the most strategic shippers, they understand our cost and the nature of this industry. So they look at the same my data that we do that says our costs are up about 25% since the -- before the pandemic.

Meanwhile, rates haven't moved very much. And 2019 was a pretty low base. And so this is something that's going to take some time and perhaps it's going to take several bid cycles to play out, but that could also mean that there's a potential for several years of upside.

Right. Okay. Yes. I guess given your framework of how you think it plays out, where you -- where are you most optimistic on improvement? I guess, from a margin perspective in 2026, like do you think Brokerage could really kind of move beyond the squeeze and do really well? Do you think Intermodal like shippers start to really kind of give you more volume? Or is it all about rate and truck? Just how do you think about where you might see a stronger opportunity for improvement in '26?

Yes. Thanks, Tom. So the first place that I would expect that we're going to see that improvement is going to be in our Network business. That's where we have an outsized exposure to the spot market today, higher than what we normally have. So I think there's opportunities to see that move very quickly. I mentioned Intermodal. I do believe that we're well positioned to capture some additional upside when that Truckload market improves and inventory levels are starting to be replenished that we'll be able to take opportunities there.

And then our Logistics business is very nimble. And so I think there -- when there's disruptions out there in the marketplace and customers are looking for a broad portfolio to solve problems, they really become that glue that jumps in and can provide great service to the customer, but also returns back to the enterprise.

And Thomas, I'd also add on Dedicated, I think one of the underappreciated facts about Dedicated is the value that you can provide as a multimodal platform that we have relative to backhaul efficiencies. With 8,500 trucks operating in various configurations, there is opportunities to drive value back to the shipper, but also to ourselves relative to margin enhancement. And this is one of the really great places of using Agentic AI to talk to other agent AI to garner efficient volumes on our backhauls that can -- it's a very high incremental margin play for us. And so we're really leaning into that. The scale that we have in Dedicated allows us to really take advantage of that.

And it's also one of the values of having a logistics offering and a network business is because we can leverage those various channels to achieve that. So I'm very bullish as well that with what we have available to us in Dedicated that we can still drive self-help margin improvement on a whole series of approaches and backhaul being one of them.

So do you think you'll see good responsiveness in Dedicated too, I guess, as freight picks up?

Yes, I do. Because you look at a couple of things. We had a terrific year of selling 950 units of new business. We didn't see all that obviously translate into the count of the fleet. And that's because we have opportunity now to drive efficiency because some of that churn we experienced last year wasn't true lost business. It was current customers not having as much demand and that brought a correction in the number of units that we placed against those contracts. So if there's demand improvement, there's automatic improvement in our account structures because of what kind of went backwards a bit in 2025 when they didn't have the demand and plus the margin-enhancing opportunities I'm talking about here with backhaul.

Your next question comes from the line of Bruce Chan of Stifel.

This is Andrew on for Bruce. I just wanted to discuss consolidation in Dedicated and how you guys are thinking that's going to affect the competitive dynamic. And what's your expectations for the trend of more consolidation in the industry? And maybe what's you guys' appetite for Dedicated M&A at this juncture versus other capital allocation priorities?

Yes. We -- from a capital allocation standpoint, obviously, organic growth is our #1 objective there. But we've been a player in the Dedicated consolidation with 3 primary Dedicated acquisitions over the last 3 years. Our balance sheet and our deleveraging even further has allowed us ample opportunity and consider something larger than what we've done to date.

So yes, we have not lost appetite. Each of those acquisitions have done very, very well for us. We've really gained our stride relative to getting after synergies, how to assess those things. And so we're not going to take a stretch and a reach for something just to put something on the board. But we have the ability to leverage what we have in our strengths.

And so very much, we're constantly reviewing. We're leaning in and really more than just Dedicated, but Dedicated has been the place that we saw a really target-rich environment to continue to advance what we believe is a long-term value for our enterprise and long-term value for our shareholders.

Agreed. If I can follow up maybe with one on the intermodal side. I wanted to know how you guys are thinking about the FMC probe. Would you guys think that an adverse ruling here would negatively affect fluidity, service and potentially the road to rail conversion thesis?

I'm not sure we caught that front end of that question. Can you do that again, please?

Sure. Yes, we -- it's about the FMC probe. We're just wondering if an adverse effect -- adverse ruling there would affect fluidity and service?

Yes. I think primarily what that impact would be on the ocean side rather than the -- for domestic carriers.

Domestic intermodal.

Yes, for domestic intermodal.

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

Congrats, Mark, and congrats, Jim. Best of luck to you guys. I guess I wanted to ask about network profitability. So I guess, what do you think the steps are or maybe what do you need to see from a market perspective, whether it be pricing, demand, some combination of that to get network back to profitability? And I guess maybe in the range, $0.70 to $1, kind of how do you sort of bookend that at the low end? Is sort of network gotten back to profitability at the high end, it is? I guess I'm trying to get a sense of how to think about that within the range as well.

Yes, Chris, thank you. And certainly, network has been most impacted by the cycle here and the overcapacity of the market. And there's really 2 things that we think are paramount for us is what we're working relative to how do we put additional productivity across our assets. In fact, one of the benefits of having just a little bit of recovery in the month of December, we had a multiyear high relative to our billed miles per truck and actually had -- it didn't really make up for the whole quarter of the tepid demand, but just that whole tightening of capacity really led and the demand picture led us to a very solid result there in addition to some price capture, which is really the second thing.

We have not adequately recovered in that market, particularly the cost inflation that has occurred that Jim referenced just a couple of minutes ago. So it's a combination of those 2 levers predominantly. We like the size of the business where it's at. We're not after a particular mix. And the other thing that we're looking to do to help it recover here is leverage our logistics capability alongside our network business to optimize across power-only brokerage and our assets. And we believe in an increasingly increasing demand market, we'll be able to take care of the assets first and then leverage some of these other opportunities that we have to scale our business and take additional volume without putting additional capital in, but really focusing on the margin recovery of network. But it's going to take both productivity and some price recovery.

And this is Jim. Just to add on to that, what encourages me is that when we saw spot prices increase here multiple times over the last 6 weeks, we've increased our exposure to spot to take advantage of those opportunities. And to me, that's the start of driving change into that business.

Okay. And any thoughts around the range and how to think about Network profitability for '26?

Yes, this is Darrell. What I would say is that even -- just to add on to Jim's point, even in a softer backdrop in 2025 and even in the fourth quarter of the year, we did see improvement in earnings in network without the benefit of price, right, or significant benefit of price. So as we get more productive and as volume comes through, as Mark said, we do believe that there's an outsized leverage that we'll see, first of all, in network. As it relates to specific guidance, we don't give guidance by sector, but there's an expectation of meaningful improvement given the initiatives that we're after.

Okay. And then just a quick follow-up on the Intermodal side, just the pricing in the fourth quarter. Any, I guess, maybe yield in the fourth quarter, maybe any comment about how you're thinking about bid season might start to be developing as you think about 2026?

Yes. Thanks. This is Jim. So as we look at last year, our contract renewals remained flat. But by leaning into our areas of differentiation through the allocation season, we're able to continue to grow and grow off of a base where we're already growing, including in a market that has some pretty difficult comps. And so in terms of pricing, there is a little bit of pressure that was driven by doing more backhaul. It's a little bit more mix related. Also, there were fewer instances of premium opportunities in the fourth quarter, given the shorter and earlier peak season that we talked about in the third quarter, so we didn't have that benefit. As we're looking going forward, I expect that we're going to continue to lean into those areas of differentiation and be able to grow through the allocation season.

Yes. So the improvement in Intermodal did not come with -- in an improving market of premiums or a project work in this fourth quarter.

Yes. Just to tack on to that, for the year, we delivered nearly 20% operating income growth for Intermodal with a little help in the market, and that's really because of growing in areas of differentiation.

Your next question comes from the line of Ari Rosa of Citigroup.

So I wanted to ask -- get your thoughts on how you think about normalized mid-cycle earnings potential. There's a lot of moving pieces, obviously, with the cost-cutting initiatives and the acquisitions that you've done that you referenced, especially as I think it was Mark who mentioned it might take a couple of bid cycles to get back there. Just how are you thinking about what mid-cycle earnings could look like for the business? And if it -- if it takes a couple of bid seasons or bid cycles, does that mean we're talking about something beyond '27? Is it really kind of '28 or '29 before we start to see that type of performance from the business?

Great. Thank you for the question, Ari. Yes, we think -- certainly, we're not guiding out to '28 and '29, but we think we can certainly get traction -- meaningful traction towards our long-term targets across our various sectors. We don't think we'll probably get all the way there, obviously, through one cycle in the 2026 season, but I certainly don't -- I wouldn't want to leave the impression that it's going to take the '28 to '29. We'll provide more updates as we get through the year on how we're progressing in the business. But we think this market, and I always like to look what's different now than what maybe you came into last year's condition.

There's just, in our view, more favorability certainly on the supply side. There appear to be more catalysts on the demand side, and we're experiencing just in these most recent events, the really fragile nature of what happens when you get demand and capacity a little bit closer. And so again, how well those things and the speed from which that demand and the capacity hits, I think, will be -- will dictate the speed from which we get back to the mid-cycle returns. We have a lot of self-help items that we have that we can get there and make material improvement without it being just what's going on in the broader market.

Thank you. We've run out of time. That concludes our Q&A session. This does conclude today's conference call. You may now disconnect.

Good afternoon, everyone. Hopefully, everybody got something to eat for lunch. My name is Dan Moore. I'm the senior transportation analyst at Baird. I got the pleasure of having a meaningful portion of the executive team of Schneider here with us today. I don't think we're doing a presentation, correct? No slides or anything. Just going to...

No.

Okay. Wanted to -- I have made that mistake a few times in the last 24 hours. So I wanted to make sure I didn't miss anything. I'll go through a list of questions, also save a little bit of time at the end for Q&A to the extent anybody has any questions.

If it's helpful, I can maybe just a little overview, Dan if...

Sure. Absolutely, go right ahead, Mark.

I know you've got a great industrial conference here,, everybody maybe not be transportation. So Schneider is a transportation logistics, asset-based transportation logistics provider across really 3 platforms most -- largest of $2.5 billion in size truckload. We've been through a process of recasting our truckload business to more of a dedicated focus. So 7 out of 10 of door trucks now are operating in some type of dedicated configuration, which from our standpoint, much longer contracts, revenue and earnings streams that you're getting much deeper with your customer. Doesn't mean that the network business, the remaining 30% isn't important. It's the most challenged presently, but still has great synergies with our dedicated business.

Our second platform is intermodal. So we're an asset-based intermodal, meaning, we own our own chassis, containers, do our own dray about 90%. And in today's world, everybody wants to know who you're aligned with. So we're the Union Pacific in the West, CSX in the East and then we're the anchor on the CPKC, which I call the bullet service coming into and out of Mexico, which has been a great addition to our mix.

And then third and finally, that's about $1.2 billion, $1.3 billion. And then on the logistics side, a pretty diversified contract logistics, brokerage, and our newest offering there is power only, which ties a little bit to our asset business by bringing our orange trailer into a trailer pool shipper on behalf of the shipper and bring small carriers to extend our reach into that customer share of wallet. So that's also about $1 billion, $1.2 billion in size. But more asset-centric, a lot of collaboration across those 3 platforms commercially with the customer, but really operate uniquely and separately and perform different functions. And they all have a little slightly different asset intensity and margin profile. Obviously, our truck business is more asset intensive, Intermodal, a little lighter and then our Brokerage and Logistics very much almost non-asset outside that use of that trailer in certain applications.

So this is our 90th year of celebration for this year, which only means that we have to keep reinventing ourselves to be relevant, and that's really what we've been going through and changing our rail relationships, recasting our truckload business and obviously investing in new services and logistics like power only. So that's my 3-minute update.

It's perfect Update. Mark, Darrell, thank you both for being here again. Maybe to just pivot off of that, we like to start every session with a brief state of freight. It's been a pretty dynamic environment. Government shutdown certainly had some near-term influence in the broader freight market. Fourth quarter comparisons were always difficult. Maybe just to spend a minute, if you will, on what you're seeing in the market right now, how peak is developing. Any other observations in a macro sense you think is relevant?

Yes, you're right. It's been a moving target, lots of influences. As we came out of the -- talked about our third quarter, we felt coming out of July, last couple of weeks, we had seen some momentum, certainly in the demand picture, it felt maybe over seasonal, which was encouraging. And as we got through the quarter, that didn't really hold and became what we would consider August and September to be sub-seasonal. As we got into October, I think certainly, demand has been stable, particularly in our Network business and our Intermodal business. Seasonality is there, it's just not as typical as you would think, going into a more typical market peak season, but still we could consider a stable.

And actually, even in the Intermodal space, we thought maybe we'll see at some point if we did some pull aheads, particularly imports that Intermodal would feel that first, and that still may occur as we get out through the end of the season. But as we sit here presently hanging in there pretty good. So I guess more of the same, Dan, is how I kind of described that, not getting dramatically better, but certainly not getting worse. As we've talked to our customers, particularly what you talked about on the government shutdown phase, from our view, it's interesting because we saw in our dedicated business, some of our existing customers on consumer products and food and beverage have less volume, which isn't necessarily typical.

And as we talk to those customers, what they're really suggesting is with some of the uncertainty in the government, people are spending down their pantry and using everything they have in the house before they're going out in certain segments of the population and rebuy. Obviously, that can't go on forever, and they'll have to come out and replenish, but they're certainly felt in their brands and in their segments that people were being very cautious in spending down what they already had in the house.

Right. Right. Well, certainly, there's the initial impact with respect to the millions of people that are government employees that aren't receiving checks. But then in addition to that, you have the second and third-order consequences of companies that have government contracts, and so you I know there's a lot to process there. Maybe to pivot off of that and talk a little bit about the macro environment, but in context of the regulatory backdrop, rate environment, it's been weak for an extended period of time. We're starting to see some changes with respect to regulation, English language proficiency, non-domiciled CDLs, certainly been some development in that area.

Curious what your views are around industry supply. I don't know that -- typically, supply narratives haven't been really present subject, not the sort of thing that drives the cycle, but this feels a little different and has the potential to be different as we look out in the '26 given the way things have been framed. I know there's a stay currently that seems more of an administrative stay than anything, procedural stay, maybe said that differently. What are your thoughts on regulation?

Yes. We've been talking what we were labeling shadow capacity because one of the questions we often get is how can we haven't had the supply rationalization like we've had in other periods. And our belief is just the oversupply and both immigration and through the pandemic, there was a lot of coming into the market and not all of that operating in the ways that we suggest that our ways that should be operated. And I think that's starting to play out. And while the rules and the regulations aren't being -- aren't different, they are being enforced differently. So the one that you didn't mention, the B1 Mexican driving program as well having some pressure at the border for those who are not exactly following all the cabotage laws.

And then the other element is the -- not replenishing trucks in the subcycle as it relates to new truck orders. So we put kind of all of that together. I think all of that is real. All of that is meaningful. The question is, can we get to a cycle change with just the supply side? Because traditionally, to your point, it's been also required a demand change. I think we can have a little bit of both, a little bit of supply and a little bit of demand, I think, can really change. And all of these things are different going into 2026 than we came into 2025. So I think it's a much more constructive environment. Certainly, our customers are aware of the issues and aware of the concerns. And so if we can eke out some small gains contractually last year without all these effects, I'm more optimistic as we head into 2026.

And I guess, ELDs as well, people aren't talking about ELD enforcement or compliance...

Toggling and things like that. Maybe explain that for a minute for those that aren't familiar with that term.

So most of the manufacturers of the electronic logging devices, this is hours of service are within the U.S., but they're also Canadian manufacturers of the equipment. And their workarounds that some bad behavior -- bad players in the industry have found in terms of toggling or kind of switching around devices. And there's more of a focus in terms of administration on the manufacturers of those devices that are subject to manipulation. So there are already a few that have been disqualified from being compliant...

I think there are 90 or more in the United States today. Maybe more? Yes. I mean it's a tremendous number...

They're more, yes...

[indiscernible] 43 in Canada, but several hundred here in the U.S.

Right, right.

I guess the more focus there is on the compliance of those devices, less opportunity for bad players to do bad things.

And there's some overlap there, some of the same capacity that could be in the non-domicile utilizing some of those techniques as well. So...

Idea being that you have hours of service, that device is supposed to keep and monitor people for those hours. And essentially, they're able to.

To game the system...

Game the system...

More hours...

Yes, that's amazing.

Level the playing field...

Yes. I'm getting it from every end possible. The Intermodal market. Maybe I'll spend a few minutes on Intermodal. Certainly, a lot going on in the U.S. rail complex. We've got a pending merger between Union Pacific and Norfolk Southern. You mentioned earlier, you guys certainly have some exposure to this. Your partner in the East is CSX, partner in the West is UP. Our sense is competitive environment, certainly in the East has ratcheted up. I get the sense that there's some horse trading of accounts and assets potentially occurring. I think BN is certainly pushing some of the changes that are occurring across networks, forcing some of that. Could you talk to what you're seeing in the market today? What you think the implications of a merger like this are specifically for Schneider?

Yes. Maybe just kind of back up. I mean certainly, we have very good performance on a consistent basis over an extended period of time now with the rails. And...

Which is a change...

Even when we've had the influx of demand earlier in the year and maybe some of that pull ahead, the performance has been very, very solid. And so most of our customer conversations isn't about service reliability, it's about transit and what can we do to plan more thoughtfully towards the future. So that's encouraging. We grew 10% year-over-year in the third quarter when most of our competitors went the other way, which is, I think, a testament to our preparation through the allocation season, the differentiation because we really -- with our change to the UP of a few years ago with our change to the CPKC and out of Mexico, our strategy has been to be as differentiated and distinct as we can vis-a-vis our other competitors.

And going through now our second -- our third allocation with the UP, the second allocation season with the CPKC, we're kind of proven in that regard, and that results really showed up for us in the third quarter. And so feel good about where we are positioned there. We have experienced changing railroads, which we talked about with the UP change. We haven't came out in our position on the merger. We're big fans of the UP and the CSX clearly. But we think details matter here, Dan. What are we going to see on the service design, what concessions are made? Is there going to be a 2-railroad solution for us? One solution we like to really put our effort and lean into a single railroad where we can, where we can get great integration of technology. We get very tight commercially so that we can jointly sell in the marketplace. That's generally been our strategy.

We'll just have to see what our strategy will be once we see the design. That's coming soon, according to Mr. Veince. So we're really excited about that because anything that takes friction, takes waste out, allows us to have new origin destination pairs that can compete with truck is going to be good for our Intermodal business. And if everything lays out as prescribed, we think this is going to be a net-net positive for us and for our intermodal business for sure.

Right. Well, service has certainly improved a lot. And hopefully, as we get into '26, that -- it seems to be an intense focus, at least on the part of CN and CSX and NS and UP and really all the rail partners at this point to grow domestic Intermodal particularly. So -- which is a big change. So...

I think that's where the growth market is.

Finally, after years of battling cold. So dedicated, obviously, an area that you have a lot of exposure to, an area that you've grown through acquisition, an area that a lot of irregular carriers find themselves trying to pursue by virtue of the fact that the economics and the one-way market are not what they once were. Can you talk a little bit about the dynamics that are shaping dedicated today? What you're seeing from a customer standpoint, pipeline, development, things of that nature?

Yes. I think there's a lot going on there. Our focus in the dedicated market is predominantly in the specialty equipment. We're doing something besides moving a 53-foot box from A to B that can be -- at certain parts of the market, be more attractive on the network side, more attractive dedicated when it gets tight. That to us isn't really durable. We all have some level generally of exposure to that, but that's not the predominance of our portfolio nor any of our focus as we move forward. And each of those acquisitions, 3 in the last 3 years, had a specialty component, either lightweight equipment, relay networks or very high-touch, multi-stop retail type configuration that in a geography that's hard to serve. And so each of those have very defensible -- and that's what we're really looking for in our dedicated portfolio is a very defensible 3- to 5-year contracts that allow us to get deep with our customer.

We do believe that scale does matter here, while if you may have a desire to get into dedicated. You have generally -- if you don't have the scale to bring your balance sheet to specialty equipment, the things, the technology, you generally have a limitation to how fast and how large you can grow, which is what happened on these acquisitions, that kind of stymied themselves after a few large customers. So I feel really good about that. What's transpired over the last couple of years, though, is that the private fleets had grown disproportionately as compared to for hire. I think pre-COVID, it would be 50-50. I think you got 45% for hire in the market, 55% private fleet. Our pipeline and our discussions would suggest that we're starting to see a correction to that. Part of that is capital. Part of that is insurance getting adequately represented that they can't just be under the general portfolio of the company they work with, they have to be risked. The insurance companies are risk profiling the fleet, which changes the dynamic.

So very encouraged by what we're seeing there so that you understand probably why it happened more control, couldn't get capacity, made some decisions that I don't think are as prevalent today. And I think that will benefit us in other large-scale dedicated providers here. And certainly, our pipeline in the second half -- excuse me, in the third quarter, it was 3x the amount of closures that we had in the first half of the year. And that's continued here in the fourth. So we have a very good pipeline, and it's also converting, which is a good sign towards us going into 2026.

And it's skewed towards specialty.

Yes.

I'm curious, given this is probably the most difficult dedicated environment I've seen in my career. I'm assuming you'd probably say the same. I won't put words in your mouth, but are you seeing deal flow in Dedicated? Or is there enough risk around not knowing the durability of customer contracts and that sort of thing? And there's enough to work on as it is given just the overall state of freight in the goods economy that you prefer to maybe just focus more internally than pursue growth opportunities externally as you think about...

Yes, Dan maybe quite -- I have a little different view there. It's been a very good market. Our pipeline is at any level of our history would say you're in the growth mode when you have your pipe here, particularly because of what we're focused on in the specialty...

I think you guys have weathered it much better than everyone else, though, candidly.

Perhaps.

You and...

And so based upon that, we feel really good position. We would like to do an acquisition, if we can find something every 18 months or 12 months since the last one with Cowen and the lightweight that may or may not be able to keep that pace. But the demands keep getting higher and higher, and you can't always do that in a network configuration, particularly when you're doing something beyond just moving something A to B and doing some other value-added service within that supply chain for the customer. And so very bullish.

And we also have improved opportunity to improve the bottom of the portfolio and redeploy equipment to raise margin and raise returns without just always just growing the truck count. How do we get more efficient with the trucks that we have? And how do we change our ratios and do a number of things that can just drop to the bottom line versus just adding the number of trucks on top? So we got a lot going on in that space. But I would tell you, I think we weathered the storm well and looking forward to leaning in further.

Sure. And I guess, at any point, we have a robust pipeline of targets that we're looking at in terms of acquisitions. And again, this environment also -- there's opportunities to be opportunistic, right? So you did see that with the last transaction that we did kind of with more carriers struggling, there is an opportunity.

Yes. One would think. '26, it's almost here.

Yes, so went fast.

Thank God. Pain hurts.

It's a big year for you. Yes.

So [indiscernible] there. The backdrop for '26 million, we stated this numerous times so far, but we finally have some semblance of fiscal and monetary stimulus that seems to be directionally favoring a domestic manufacturing recovery. I think the Fed certainly needs to be more active going forward, needs to continue to be active in terms of their efforts to ease financial conditions and improve liquidity. Shortening of the curve is likely to come down. The tax bill certainly has some stimulative measures to it. Comparisons, I think, are probably pretty easy. We already mentioned the supply story. It's always hard to call the bottom, but it feels pretty bad. How are you thinking about '26 given that framing? Expecting things incrementally better? How would you characterize '26 base on what you know today?

Yes. I think you hit a really important topic there because while the consumer side of the economy has been fairly stable, what's been contracting and not contributing nearly as much to the freight conditions, the industrial side of the economy. And certainly, the Big Beautiful Bill, Fed cuts, we've been in a 3-year dearth of residential home construction, which is nothing more correlated to our business because it draws labor into the trades out of the trucking, it draws local positions to fulfill the build and it creates demand, right? And so all of those things are positive for the supply-demand conditions that we're dealing with.

So we're we're optimistic that there's some things in that bill and the environment that creates a bit more momentum in the industrial side of the economy. And then all things that we've talked about, I always like to tell our folks, hey, what's different as we sit here today than we sat here a year ago. We beat the heck out of the supply side pieces. But the other thing you mentioned there is what some of the stimulus activities that can help, and we've been missing all of that. So all in balance, I think it's just a much more constructive setup as we get -- because we -- really March before we get into the heavy lift of the allocation season start to see where things are shaking out. But if we could eke out mid- to low single-digit increases contractually in 2025, I'm hard-pressed to think that the environment isn't more constructive going into 2026.

Right, right.

And I guess during this cycle, we've been focused on cost to serve, right? So we're actually going into 2026 in a much better position as it relates to leverage across all of our segments. So from a truckload perspective, we've been focusing on headcount reductions. I think, Mark, in your remarks in our earnings call, we talked about 6% reduction in headcount -- non-driver headcount, and there's more to come as it relates to reducing unbilled miles, being more productive in terms of our assets and our people. We've seen in Intermodal that with no price, we're still able to grow earnings and margin. So that bodes well for the future where there is some price improvement and continued.

Yes, a little bit of price. There's a lot of leverage for us there. Right.

The whole network has been out of balance, too, with so much West Coast demand. Hopefully, we'll see some balance return to the intermodal market. Productivity efficiency kind of dovetailing off some of those cost initiatives. Automation is a buzzword. We've been hearing about it for some time. I think it's been really present this year across a variety of industries. Technology is creating opportunities to cost out in ways that might not have been possible. Previously, you guys have your own cost initiatives ongoing, Darrell, you just mentioned, you just highlighted. To what extent is increased automation providing you with opportunities to incrementally improve cost structure, landed cost, that sort of thing?

So we're in 24 minutes in, and we didn't have venture AI yet. So there's...

I didn't want to...

You are a void. I could tell you...

Automation. I prefer automation.

Yes. very, very promising and part of the -- I would consider ourselves in the AI world, which we're doing -- we call our own Malton, which is our own products, and there's also -- we're using others to help us, particularly on the voice side of things. And part of the 6% is getting after some of those low-value tasks that are necessary in this industry that don't add a lot of value to the supply chain. But very bullish. The technology works. We're now even telling our driver community care career. We're going to use this. They're going to -- Wally is going to be talking to you. The Wally is a robot, but if you get a better, faster service, no queuing with a robot, like we do 1,000 at a time.

And if you get a better experience, a faster experience, I think what we're finding is -- I don't know if it doesn't really matter if it's a person talking to me or if it's a robot talking to me if I got what I needed at a faster cycle clip, that's what I'm after. And so it will be a big part of our future. We believe we can get at least what we got this year on people efficiency. And that is all self-help, right? We don't need Mr. Market to help us with that. Those are the things that we can do ourselves. And that will be the focus of our tech spend is how do we harness that? How do we do that in the way that's productive, but we don't get ourselves -- because bad actors find ways to do bad things, more you do some automation. And so we've learned a lot through the brokerage cargo theft world. So how we do that smartly, but it's incredibly fast. The cycle time is incredibly fast. It doesn't have to be all tech resources. There's a lot of benefits that you can move at a pace much different than typical technology. And for us, leaning into that very, very hard.

So -- sorry, just to round that out. We did set a $40 million annual savings target goal, including synergies from Cowen. And I'm pleased to say that as of today, we're past $40 million for the year, but we're not happy with that. We're going to keep going. So...

I'm happy with that. We just went too far, yes...

We're happy with what's coming too. So every time we hit our target, we re-up. So for the remainder of the year and going into 2026, there is momentum that the things that we've done are effective, and we can continue to build on that.

Maybe to just touch on CapEx, capital budgeting. It's November. I'm sure you guys are in the middle of your capital budgeting cycle right now. You've got some increased hands in that effort, which I think many of us are excited about. Could you just talk a little bit about how you're thinking about capital deployment at a very high level for '26, what your priorities are that sort of thing?

Yes. So organic growth is always going to be our #1. So Mark kind of touched on in his overview, our areas of differentiation. So we're leaning into those. So dedicated, obviously, is a big deal. We have a pipeline that's coming. We're going to deploy assets to support that pipeline. Obviously, we're going to redeploy into higher yielding to the extent that makes sense, but we're in growth Mode as well. So our capital is going to go there first, Intermodal. We've been growing very fast as it relates to volume. So keeping up with the dray capacity, so we're moving more that on our trucks.

And then the tech investments that are not only in the brokerage space, but across organizations. Organic growth, number one. We're also looking at the pipeline of acquisition targets. So the beauty of our balance sheet is around 0.4x lever -- levered as of the end of September. We don't need to choose, right? So we can satisfy our organic growth priorities and focus on inorganic growth and return value to our shareholders.

Yes. Share repurchases, I mean, it's where you get an opportunity. You have a cyclical downturn when the best-in-class carriers in the space are all generating profits and returns that are close to breakeven, in some cases are just marginally above or in some cases actually below. How are you thinking about share repurchase?

So we think that there's an opportunity to -- at least in this part of the cycle given where our stock price is, we think it's undervalued. So we are leaning into that for the quarter.

Just the other thing, Dan, a little more clarity now on tariffs as it relates to trucks. That's been another area that's been a little bit foggy. We didn't buy as much during the fourth quarter. We kind of signaled that third quarter call so we got some clarity where the tariffs are going to come in, which is another headwind to the industry relative to the replenishment cycle that's already below industry replenishment. But at least we got enough clarity now, we'll be able to kind of make our final adjustments and tweaks as we head into 2026, pending no other changes, which sometimes [indiscernible]. So that's been, I think, a little bit of a lift that will help us as we come out and tell you in January where we are at.

To the extent we have any questions from anybody in the audience, certainly happy to entertain 1 or 2 of those. If not, I would just like to say thank you, for being here. Really appreciate the opportunity to visit and ask some questions. And hope you have a good rest of the conference and safe travel to home. Look forward to catching up with the quarter. Thanks.

Thanks.

Thank you for standing by, and welcome to the Schneider's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Christyne McGarvey, Vice President of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer; Darrell Campbell, Executive Vice President and Chief Financial Officer; and Jim Filter, Executive Vice President and Group President of Transportation and 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 includes remarks about forward expectations, forecast plans and prospects for Schneider. 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-K 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, 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.

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

Thank you, Christyne. Hello, everyone. Before Darrell provides a financial overview of the third quarter results and shares our updated 2025 guidance, I will start by sharing my perspective on the freight market as well as the ongoing structural improvements we are making in the business. After we'll answer your questions.

One item I'd like to address before I turn to the broader market is claims-related costs. During the third quarter, we recorded roughly $16 million more in these costs than we had previously expected. This was also higher than we had incorporated into our previous guidance even at the low end. This was driven primarily by unfavorable developments on 3 claims from the 2021 and 2023 policy years. We do not expect the costs associated with these developments to repeat in the fourth quarter.

Now with regard to the freight market. When we updated our expectations for the second half during our last earnings call, we experienced a solid uptick in market conditions in the back half of July that gave us some cause for optimism as we moved further into 2025. However, that strength faded as the quarter progressed with August and September market trends largely sub-seasonal. This was evident through pockets of softer volumes with existing customers, retreating spot rates, modest peak activity to date and an overall softer September versus typical patterns that would see strength into quarter end.

Looking forward, these conditions are likely to persist into the balance of the year. Despite this, we continue to see traction in several of our key initiatives, which I will discuss in more detail shortly. Though this down cycle has been extended, several new dynamics have been introduced over the last few months that are definitive catalysts for the removal of excess capacity after several years of expecting, but not seeing more significant supply rationalization.

This includes dynamics such as English language proficiency enforcement and the impact of non-domicile CDL renewals. But importantly, it also reflects self-regulation driven by the mere threat of enforcement. At the same time, we are seeing a pickup in carrier bankruptcies and the industry is now approaching a year of Class 8 production below replacement levels, a trend that may accelerate given tariff dynamics.

Collectively, we believe these have the potential to drive more supply rationalization than the impact we saw in 2017 from requiring electronic logging devices for hours of service enforcement. Against this backdrop, we continue to press on our efforts to drive structural improvements in our business, especially in 3 main areas: First, when it comes to our revenue strategy, we saw further traction on our continued efforts to lean into our areas of differentiation.

Second, we are also continuing to execute on our productivity actions, which are driving asset efficiency and lowering our cost to serve in any cycle dynamic. Relatedly and, third, capital discipline is driving our focus on doing more with less, which leaves us well positioned for strategic investment and the ability to act opportunistically on ways to add shareholder value.

I'll provide a bit more detail about each of these efforts, starting with the progress we have made on our revenue strategy by leaning into our areas of strength. In doing so, we are creating growth opportunities and it has the added benefit of enabling us to stay more broadly disciplined. More specifically, Dedicated experienced some sub-seasonal demand in select areas such as consumer products and food and beverage, which weighed on volumes.

However, wins from new and existing customers were realized at a rate 3x the level we've seen in the first half of the year. We ended the quarter with our fleet count in line with the end of the second quarter as implementations are ongoing, and we continue to see productivity gains. Looking forward, our dedicated pipeline remains robust with a strong skew to our targeted areas of specialty equipment, which has historically been sticky and required a high level of execution and equipment capability.

The strength of this pipeline will add accretive business in the coming quarters, and we plan to leverage this growth into upgrading the overall portfolio by moving away from select lower-yielding operations as the new start-ups come online. This shift plus continued traction on our productivity efforts will be reflected primarily in revenue per truck per week gains as opposed to just fleet growth, and it will contribute to our efforts to restore truckload margins.

Within Network, while we finished the bid season achieving low to mid-single-digit contractual rate increases, we continue to believe the rates are not yet at a level that supports the service we deliver and the cost needed to achieve it. As a result, our spot exposure remains elevated to historical norms. While this was a headwind to our mix, having continued price discipline will position us to maximize our leverage as market trends improve.

We continue to see a wide range of approaches to the market from our customers, but retention rates of incumbent business jumped 10 points quarter-over-quarter. In Intermodal, the strength of our win rates throughout 2025 is translating to market share gains, which was a driving force behind our 10% volume growth in the quarter, several times the industry rate. In Mexico, a solid track record for our service offering that is 1 to 3 days faster than our competitors continues to resonate with customers.

Third quarter volumes grew over 50% in the region, and we've also seen the highest growth rate in the East since 2022. This volume strength allows us to effectively navigate the choppiness of the environment in the third quarter. Rate renewals were flat in the quarter with revenue per order negatively impacted by mix. The mix reflected softer outbound volumes from the West Coast, shorter length of haul and relatedly more modest peak surcharges.

This was intentional as we chose not to chase incremental transcon volume when rates were not commensurate for the service. By continuing to lean into areas of differentiation, we were able to grow operating income and even modestly improve margins while overcoming select cost headwinds, which I will discuss shortly.

In Logistics, Power Only revenues grew for the sixth quarter in a row, driven by resilient volumes, which remain at 98% of peak levels. Net revenue per order also showed high single-digit percentage improvement year-over-year, and this strength is helping to offset continued pressure in our traditional brokerage volumes as shippers remain inclined towards asset-based solutions as they anticipate a cycle turn.

While we look forward to transitioning to a more supportive market, we are, as I mentioned, continuing to press on productivity actions, which will improve asset efficiency and lower our cost to serve. These actions will help drive the enterprise back to our long-term margin targets faster and in a wider range of market conditions.

Third quarter saw progress on our established cost reduction target of over $40 million, including synergies from Cowan Systems, which will continue to ramp into 2026. Beyond synergies, the bulk of our savings will be driven by productivity enhancements. This includes targeted headcount reductions, though the full benefit is likely to be more pronounced next year as the run rate builds. Since the start of the year, we have reduced nondriver headcount by 6%.

In Truckload, we saw Cowan margins improve even with revenues remaining roughly flat as synergies continue to ramp. Network represents the bulk of our productivity initiatives. These include reducing unbilled miles and improving tractor-to-driver ratios. The majority of headcount actions to date were concentrated in Truckload. The quarter saw short-term noise related to the timing gap associated with the previously highlighted Dedicated churns and start-ups.

For Intermodal, third quarter saw impact from aforementioned claims-related costs and headwinds in third-party maintenance costs associated with trailing equipment. As it relates to the latter, actions are already underway to address this, and these challenges were combated by ongoing efforts to balance the network and reduce repositioning costs. Logistics has a long history of being testing ground for our latest technology applications and AI is no exception.

For example, our overall orders per day per broker in the third quarter were up double digits from levels seen in 2023. And in areas where we have more actively deployed our AI tools, productivity is several times better. This technology is helping our brokers move away from routine less fruitful workloads and enabling them to spend more time on value-added activities.

As we have seen success in our logistics offerings, we are also rolling out Agentic AI to all of our other service offerings in a variety of support functions. These efforts dovetail the ongoing use of our decision science platform, which has been deployed for some time, which enables automated decision-making and enhanced productivity while effectively balancing customer and network needs.

Finally, we will remain disciplined but nimble in our capital allocations as we look forward. Darrell will discuss in more detail in a moment, but I'll say that our continued efforts to do more with less, the strength of our balance sheet and the tactical decisions we have made related to our fleet equipment leave us with ample firepower to execute our strategic initiatives.

Let's now turn it over to Darrell for his insights on the third quarter and our 2025 guidance. Darrell?

Thank you, Mark, and good morning, everyone. I'll review our enterprise and segment financial results for the third quarter and provide insights on our updated full year 2025 EPS and net CapEx guidance. Summaries 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 third quarter results. Enterprise revenues, excluding fuel surcharge, were $1.3 billion, up 10% compared to a year ago. Adjusted income from operations was $38 million, a 13% decrease year-over-year. Enterprise adjusted operating ratio increased 80 basis points compared to the third quarter of 2024. Adjusted diluted earnings per share for the third quarter was $0.12 compared to $0.18 for the third quarter of 2024.

Third quarter results also include the impact of claims-related costs that were $16 million more than anticipated, which, as Mark referenced, was primarily as a result of unfavorable developments of 3 prior year claims. Regardless, we remain committed to our ongoing investments in safety performance, including recently enhancing the camera technology we deployed with AI-enabled features, not just because frequency remains a lever most in our control to combat these costs, but also because it's the right thing to do.

We previously announced a $40 million structural cost savings target, which will continue to build in the fourth quarter, and we're focused on pursuing additional opportunities that will structurally lower our cost to serve to improve our performance in all stages of the cycle going forward.

From a segment perspective, Truckload revenue, excluding fuel surcharge, was $625 million in the third quarter, up 17% year-over-year. This growth was primarily due to the Cowan acquisition as well as modest growth in network truck count, partially offset by dedicated churn and network spot rate headwinds. Truckload operating income was $20 million, a 16% decline year-over-year. Operating ratio was 96.8%, an increase of 130 basis points compared to last year.

The majority of claims-related costs discussed earlier were reflected in our Truckload segment. Restoring profitability in Network remains a key focus of our cost initiatives, including efforts to improve equipment ratios, consolidate facilities, streamline nondriver headcount and reduce unbilled miles. Dedicated operating income benefited from the addition of Cowan, but was also adversely impacted by the claims-related costs as well as churn that was highlighted in the second quarter.

The latter dynamic was exacerbated in the short term as a result of retaining equipment in areas where we had line of sight to new start-ups, though this was partially offset for the segment as a whole by deploying some equipment into network. Intermodal revenues, excluding fuel surcharge, were $281 million for the third quarter, up 6% year-over-year. This reflected volume growth of 10%, which more than offset the mix impact in revenue per order.

The third quarter marks the 6th consecutive quarter of year-over-year volume growth in the segment. Intermodal operating income was $17 million, a 7% increase compared to the same period last year, reflecting the strong volume growth, which more than offset headwinds from claims-related costs and maintenance expense. Operating ratio was 94%, an improvement compared to the third quarter of 2024.

Logistics revenue, excluding fuel surcharge, totaled $332 million in the third quarter, up 6% from the same period a year ago, driven by Cowan acquisition and growth in Power Only. Logistics income from operations was $6 million, down 16% year-over-year. Operating ratio was 98.1%, an increase of 50 basis points, primarily due to lower brokerage volumes, partially offset by productivity gains.

Turning to our balance sheet and capital allocation. As of September 30, 2025, we had $522 million in debt and lease obligations and $194 million of cash and cash equivalents. Our net debt leverage was 0.5x at the end of the quarter, an improvement from 0.6x at the end of the second quarter. In the third quarter, we paid $17 million in dividends and $50 million for the year.

Net CapEx was $108 million compared to $93 million last year due to the timing of purchases of transportation equipment. As a result, free cash flow declined in the quarter. As we continue to grapple with macro uncertainty, disciplined capital allocation remains our focus. Our organic growth aligned with our strategic initiatives is our first priority, but our asset productivity efforts enables us to execute on this growth in a capital-efficient way.

In Dedicated, we have the bandwidth to meet new demand by leveraging our productivity initiatives and reallocating resources away from lower-performing operations. In Intermodal, our investments to date have left us well positioned to grow up to 25% with our current trailing equipment. We now expect net CapEx to be approximately $300 million for the full year compared to $325 million to $375 million previously.

The reduction was primarily related to our decision to pause tractor orders originally planned for November and December builds, which had been included in our previous capital plans. This decision was driven by the actions we outlined related to productivity and asset efficiency, and it allowed the enterprise to manage the impact of new tariffs as we reevaluate our total cost of ownership model.

This will drive higher free cash flow without placing an undue burden on our fleet age. We continue to be well positioned to act opportunistically to enhance shareholder value, including through accretive acquisitions and share repurchases.

Moving to our updated full year 2025 guidance. Our adjusted earnings per share guidance for the full year 2025 is now approximately $0.70, which assumes an effective tax rate of approximately 24%. The new guidance incorporates the impact of higher-than-expected claims-related costs in the third quarter, the majority of which we assume will not repeat in the fourth quarter, though insurance remains inflationary overall.

As such, excluding this impact, the new guidance is aligned with the low end of our previous range, which had assumed more tempered seasonality in the second half of the year. For our Truckload network business, we expect volume trends to remain sub-seasonal and spot rate conditions will be an important swing factor. Dedicated earnings are expected to benefit from the pickup in new business implementations, though start-up friction costs will be felt as they ramp up.

For our Intermodal segment, we continue to expect roughly flat pricing for the remainder of the year, which assumes minimal peak surcharges. Similarly, we believe there was some degree of pull forward in the third quarter, which could drive an earlier end to peak season than is typical, but we continue to expect our volume growth to be above market. Our Logistics segment outlook reflects continued pressure on Truckload volumes, which is likely to continue to weigh on operating income despite solid execution in managing net revenue per order.

In closing, while market conditions have yet to materially improve, there are clear catalysts on the supply side that have emerged, which have the potential to significantly shift market dynamics. Regardless, we're not standing idly by. We're offsetting certain areas of tepid market conditions by leaning into our areas of strength, which is helping to drive incremental volume opportunity and enabling us to remain disciplined on our broader strategies.

At the same time, we continue to execute on our acquisition synergies while looking to do more with less across the enterprise, a reflection of capital discipline and our efforts to lower cost to serve in any market condition.

With that, we'll open the call for your questions.

[Operator Instructions] Your first question today comes from the line of Jordan Alliger from Goldman Sachs.

I wanted to ask about Dedicated. You said that the win rate, I think, had accelerated 3x or considerably versus the first half. And I'm just sort of curious, would you say those wins are sort of Schneider-specific taking business from other carriers? Or is it more industry-driven demand, such as private fleets deciding they want to move back to Dedicated et cetera?

Jordan, thank you for the question. The vast majority of those wins were in our pipeline. And so our pipeline started to convert at a more accelerated rate in the second half, which we're really pleased about because it really does set us up well against our strategic intent, which is to grow predominantly in the Specialty segment, which is what we consider to be our most favored target because of its characteristics of durability and unique special services that we can bring with the strength of our dedicated offering, our balance sheet, et cetera.

It's where we can really offer our most differentiation. So we're pleased. Now of course, when you have some churn that we outlined in the second quarter and when you have the new start-ups, you have some friction that goes on because all those things don't perfectly sync up between some accounts that are going away and the new ones that are coming onboarded.

And we expect that we'll still have some of that in the fourth quarter, but are looking at least at this juncture that we'll have that largely behind us as we go into 2026. But our pipeline remains strong. We expect that we'll still have a great opportunity to continue our momentum in Dedicated, which is at the heart of our truckload strategy.

Yes. And then just a follow-up. The friction you mentioned in the start-up costs, it sounds like that will be behind you, I guess, you just said in '26, but is there a sense for timing? I know you've mentioned also you'll start to see gains in revenue per truck per week. Can you maybe talk about the timing of the friction easing and the ramping?

When you're growing Dedicated, Jordan, you're always having some element of start-up and friction associated with that. And we also have identified how we can best serve our margin restoration actions, which will also include working on some of our lower operating performing margin accounts. And our primary objective there is to work with the customer to come up with a collaborative way for both organizations to win.

But when that's not possible either because the business changed or strategy changed or it's just not possible, then we're going to look to upgrade and use that capital to redeploy to more favorable margin profile business, which is what's in our pipeline. So we'll always have some level of that.

We just had an extraordinary amount in the third quarter just because of the magnitude of the new business start-up and the timing sometimes of when you exactly expect the timing of the startup and exactly expect the ramp down is not always perfectly predictable, but we had an inordinate amount of that in the third quarter.

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

So let's see. I guess one quick follow-up on the Dedicated and then I wanted to ask you about kind of broader truckload market view. Mark, I think you mentioned...

You're followup is going to be qualified on Jordan's question, Tom?

No.

Just kidding, go ahead.

So on specialized, so I guess, I think, like trailers being specialized and maybe some of you got what you got from Cowan that is -- it's like sticky. How do you think -- and you highlighted that, right, like the sticky Dedicated business. How much of the current book of Dedicated is specialized trailing equipment or whatever other kind of dimensions you would use to say, oh, it's really specialized. Can you give us a sense of just how much of that is in the kind of stickier category? And I don't know if that evolves over time or just how you think about that?

Yes. Well, certainly, that's our focus around our pipeline and the things that we're most targeted towards, Tom. But we do and we always think that standard equipment will have a place in our portfolio. Some of it is not only our standard equipment, but it might be what the customer brings to bear. So there's a spectrum of Dedicated solutions across the board, and they're all important.

But what we're really focused on is we want over time more percentage of our book, which we believe is, again, more sticky and the renewal rates are much, much higher because you're getting into more specialty services beyond just delivering products from point A to point B. So our new business and our portfolio is skewed to specialty equipment, but we still have and we will always have standard equipment solutions as well, particularly around the retail support, DC to store and some of those operations that are critical to our customer base.

And Tom, this is Jim. Just one add-on to that as we've made acquisitions, specifically, we've been focusing in on our growth there and acquiring companies that have more of a specialty lens, something that they are able to help us differentiate out there in the market, and it's just become a larger percentage of our total pipeline.

So if you say skewed, I guess it implies maybe over half would be specialty, something like that. I don't know. I don't want to parse words too much, but...

Yes, well over half. Well over half, yes.

Well over half. Okay. And just on broader truckload market, I mean, I think this topic has been coming up across for the different providers, and you obviously have a great look -- a broad look on the market. The regulatory actions seem like they could have a really large impact, right? And so you've got that, but then you got kind of October freight seems poor, worse than normal seasonality. You said August, September sub-seasonal. So it's like you got 2 factors to supply/demand and which is the more visible or more dominant driver when you look into '26?

So I don't know how you kind of set those up. If you get 200,000 trucks out of the market and freight demand is still poor, is the market a lot tighter? Or how do you think about those pieces and kind of how much we should focus on one or the other when we look at the truckload market in '26?

Sure, Tom. Won't have full discussion about 2026 just yet, but I guess I would look at where we're going to finish this year, and let's maybe look back a year ago to this time. We do believe that the supply picture is much more constructive going into 2026 for all the notes that you just related there. We can see obvious impacts in our Power Only business. We can see obvious impacts to non-domiciled CDL in some of our brokerage carriers. We can see it really across the spectrum, and it's real, and it's having an impact now.

And we only think that, that's going to continue to ramp. So the constructive nature of the supply side going into next year is, in our view, much different than what came into 2025, which also wasn't necessarily overly robust demand environment. So I think we have different factors at play. You throw in the lack of new Class 8 builds, the pipeline there, the tariff impacts that are yet to come and be felt. I just think all of that puts more pressure on the supply side. So a dynamic that we really haven't had for a number of years, which I think is going to be quite constructive.

Of course, the wildcard is the demand side, harder to predict that. But I think I'm confident that Schneider is going to be able to better handle those dynamics across our portfolio with our optionality of offering and services. And I think that's going to be a more positive setup for the Schneiders of the world heading into 2026.

And Mark, just -- this is Jim. Just one add on to that. This is something our customers are already talking to us about this because they are concerned about the mix of carriers that they're running with running -- coming into this changing marketplace and seeking to get ahead of this.

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

Great. Thanks for the comments on the supply side here. How is that influencing your bid rate conversations for 2026, the early conversations you're having? Kind of if customers are concerned, kind of can you try to be opportunistic here and maybe go for mid- to high single digits?

Thanks, Ravi. Thanks for the question. As you look at 2025, even without some of those factors, we were able to achieve mid- to low single-digit increases in our network business -- truck business in 2025. And so we do believe we need to have and the industry needs to have more rate recovery in 2026.

At this juncture with customers, we're predominantly just in the kind of the strategy phase of the allocation season for 2026. So we're in a series of discussions, just where their priorities are, what their strategies are and how we might best align with those. And so I don't have a lot to report yet on what 2026 renewals look like. But we do believe that the environment, as I mentioned, because of the supply side is more constructive as we go into next year.