Q2 2021 Schneider National Inc Earnings Call

[music].

Greetings and welcome to the Schneider.

The earnings call at this time, all participants are in a listen only mode. If anyone should require operator assistance. During the conference. Please press star zero on the telephone keypad.

As a reminder, this conference is being recorded.

I would now let's turn the call over to your host Steve Bindis director of IR.

Thank you operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer, and Steve profit Executive Vice President and Chief Financial Officer earlier today. The company issued an earnings press release, which is available on the Investor Relations section of our website at Schneider Dotcom.

Our call will include remarks about future expectations forecasts plans and prospects for Schneider, which 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.

Really from current expectations.

The company urges investors to review of the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent 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. A reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release, which includes reconciliations to the most directly comparable GAAP measures now.

Material like to turn the call over to our CEO Mark Rourke Mark.

Thank you, Steve Hello, everyone and thank you for joining the Schneider call today.

I will open up our dialogue with Schneider context, and commentary on our 3 operating segment results for the second quarter as well as what we expect for the second half of 2021 and.

Now I'd next year before.

Before we get to your question, Steve profit will provide some additional insight into our updated full year earnings per share guidance for.

From Capex range expectations and closeout on some brief overall enterprise results commentary.

As you review the second quarter, several things should jump out.

<unk>.

First the truckload intermodal business segments delivered solid sequential margin improvement from the first quarter with both finishing above the top end of our current long term margin target ranges.

Secondly, our balanced portfolio demonstrated its value as logistics revenues grew $200 million over second.

Quarter of a year ago.

Serving as an offset for some of the driver capacity challenges in our network businesses.

This allowed us to provide capacity coverage for our customers, while keeping the freight and the corresponding revenues within the enterprise.

The outcome is consistent with our strategy to leverage our multimodal platform from asset heavy to asset.

Alright.

The serve as an aggregator of free and capacity and supporting the supply chain needs of our shipper community. So.

So let me spend a couple of minutes on each of those and how it serves as a powerful setup for the remainder of 2021 and into 2022 again consistent with our strategy.

In truckload.

Asset linked focuses on multiyear dedicated contract configurations.

Year over year, our average tractor count growth was 265 units in the quarter on 400 units of sales growth, we have experienced less than 1% churn.

Over our portfolio from the second quarter of a year ago.

And we are working to.

Our grid, new startups as well as existing business tractor units fully seeded in what remains a highly constrained class a CDL driver market.

And the network truckload business, we have invested in a series of compensation planned increases over the last year for our professional drivers in terms of pay rates as well as delivering productivity.

Across our solo driver fleets.

We have also reopened several of our Schneider CDL training academies to develop our own new drivers and we will see the benefits of that work beginning in the mid third quarter the expense related to the startup of that process and priming the new CDL driver of pump.

Born in the second.

The quarter.

We are still pushing towards our goal of 5500 tractors in the network as we highlighted on our last quarter update.

We have stayed in front of those investments with the right support from our valued shipper base truckload network revenue per tractor per week improved 9% sequentially from the first quarter and 23% over.

The second quarter of 2020.

All of the revenue per tractor increase was yield related is productivity of the network was flat as companies solid utilization increases.

Were offset by a lower mix of team and owner operator levels.

In the quarter network contract rate improvement in the mid teen double digit percentage was realized.

<unk> with the remaining 25% of the book scheduled to be renewed in the third quarter.

Our capital efficiency was very solid considering the uneven cadence of receiving our new tractor deliveries.

While preparing a high number of units for disposal into a strengthening of used equipment market.

Despite the OEM supply challenges we have received.

The 50% of our full year replacement tractor units at the halfway point of the year.

We have reduced our driver to tractor ratios and a limited held for sale inventory boosting our capital efficiency rates, which we intend to continue going forward.

Next our intermodal segment is grappling with excess demand beyond what we can.

Can successfully move.

Intermodal ecosystem like many areas of the economy are suffering from extended labor challenges.

We can see this in our customer data is our customers' average unload dwell time has increased 70% from the 2019 comparable period.

Additionally, labor shortage Cummings and.

Volumes continued to impact the intermodal ramp congestion in certain critical parts of the network at times, resulting in volume limiting rail allocations.

Finally, we're not fully ceded and company tractor Dray fleet at some of our high volume hubs.

Despite those meaningful challenges intermodal orders improved 5% sequentially from the first.

The framework and 16% over second quarter of a year ago.

Intermodal as expected has achieved low double digit revenue per order increases has nearly 80% of the book has been renewed although not all completely implemented within the second quarter, we intend to bend, our network to give priority to those shippers and <unk> who most of.

Quarterly and of.

<unk> turned our equipment.

So we would expect to increase our container turns in the second half of the year.

Our container count grew 5% of 1000 containers from a year ago. Our goal is the net up after disposals. Another 500 to 3000 containers by year end.

Which is dependent on.

The fishermen.

Our equipment manufacturer of supply chain delivery challenges, which we are trying to help with.

Finally, our logistics segment is thriving and growing across the portfolio of services, including contract logistics Port services with the largest contributor being brokerage.

The segment's revenues climbed to 430.

<unk> million from $230 million, a year ago or 87% growth.

The earnings contribution of the logistics of it kept pace by doubling over the second quarter of last year.

Combination of market conditions, and our continued investments in our people processes and technology platform of freight power for shippers and carriers are driving the volume and earnings.

Earnings growth performance.

Let me stop there and I'll turn it over to Steve before we get to your questions.

Thank you Mark and good morning to everyone on the call I'll begin with an overview of our updated guidance for the full year.

Our original guidance for adjusted EPS was $1.45 to $1.60.

And now our guidance has been raised for the second time and sits at $1.85.2 of $1.95.

At the midpoint of these ranges this represents an increase of 25%.

Inherent in this updated guidance is the expectation for continued strength in market demand coupled with constrained driver capacity.

The city, we expect these conditions throughout the remainder of this year, which also serves as a constructive set up for 2022.

Mark commented on the performance of our service portfolio and I'll add that our asset light segments of intermodal and logistics contributed 60% of second quarter revenue.

And 41% of earnings.

We expect these proportions to be similar in the second half of the year.

I'd also note that we anticipate a relatively even distribution of earnings across the second third and fourth quarters of this year, rather than a seasonal spike in fourth quarter earnings from.

This is.

As of the market strength, that's already in place.

We continue to expect the full year effective tax rate of approximately 25% and are lowering our net capex guidance to a range of $325 million to $350 million and that's down from our prior guide of 3.

75 to $4.25 million.

The primary reason for the lower range as higher anticipated proceeds from equipment sales.

We expect to receive most of the equipment that we planned for this year, although some of the deliveries could spill over into 2022.

Do regarding second quarter results. So I'll just point out of couple of items first our income from operations of $126 million was the most profitable quarter in our history exceeding of the fourth quarter of 2018.

So this is a strong milestone for the team and this achievement reflects the significant amount of effort and coordination.

The commercial and operational teams across the service portfolio and as always the essential services provided by our value professional drivers.

The next item is that our second quarter EPS of <unk> 60, <unk> contained 8 <unk> of mark to market gain from our investment in.

2 simple.

And this gain is reflected in the other income net line of our income statement.

Regarding the balance sheet.

Just a reminder, that we have $100 million in current maturities. That's composed of of $40 million note maturing in November of this year and the <unk>.

<unk> note maturing in March of 2022.

It's our intention to repay both notes at maturity, but have ample flexibility if we choose another path with either note.

So with that we'll open the call for your questions.

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1 moment, please while we poll for questions.

The question of our first question is from Chris Wetherbee with Citi. Please.

Please proceed.

Yeah.

Hi, Thanks, Good morning, guys.

Great.

If we could touch on the guidance the updated guidance for the back half of the year, Steve I. Appreciate the comment about sort of flattish type of earnings progression from <unk> through the end of the year.

Yes can you maybe help us a little bit with what your expectations are for the fleet and then may be the rate environment, particularly for the for hire segment, but also just sort of generally when you think of that revenue per tractor per week. If you can kind of break out some of the inputs to that that would be helpful.

Yes, Chris this is mark and Steve and Al.

Year.

Maybe both comment on your question.

Yes.

Our fairly.

Through the book renewal activity contractually.

Our intermodal and our.

For hire section, but all of it is and implemented yet so.

For instance.

We will have or 80% through the book and intermodal, but we have about 25% of that is implemented very late in the quarter and so we have that all in front of US. In addition to the third quarter renewal trucks, a little 5 or 6% better than that.

So we still believe we have.

And we know we have price appreciation.

We still still in front of us contractually.

And while we're talking about full year guidance I will go ahead and.

You didn't specifically ask this but I imagine it's a question for for some.

About full year guidance and the.

The 2 simple gain and whether it's included.

<unk> not included in how we think about all of that so I'll just go ahead and tackle that upfront.

We're looking at of full year here, when we're providing this earnings per share guidance and.

The 2 simple in particular being of newly public company.

Would expect some volatility in their valuation and.

That's not surprising.

So who knows it's anyone's guess as to whether there.

There is a meaningful gain to be had over the course of the full year or not for what that amount would be so our full year guidance.

Is not dependent or does not rely upon a gain from either 2 simple or.

Any of the other strategic equity investments that we've made so I just wanted to clarify that aspect of it.

Okay.

That actually was going to be 1 of my follow ups I. Appreciate you tackle the that right upfront that's very helpful.

And then maybe just commenting on the fleet or are we going to be able to see some stabilization in the free.

Particularly.

Particularly on the for hire side or is that just something that's too difficult to do with where the driver wages or availability is at this point.

Yes, Chris This is mark I would expect the debt and we are seeing some stability there, particularly on the solo side and we're starting to build back encouragingly in the quarter on the team side.

Some of the challenges we had last year with Covid and the impact of the team configuration. So we've still got a ways to build back there but the.

The first step is to see some positive.

Number of growth and we saw that in the second quarter for.

For the other item that.

Perhaps is a little different for us is starting up in several parts of the country are.

The academy's for non CDL holders.

And so that process took place largely in the second quarter and we'll start to see some benefit to that and that is primarily <unk>.

Serving our for our network in certain dedicated configurations.

So that.

And another reason why we expect to.

Schneider stabilization, there and we haven't given up on making progress towards our 5500 goal in the network between now and the end of the year.

Okay. That's very helpful. Thanks, so much for the time.

Yes.

Our next question is from Bert Subban with Stifel. Please proceed.

Hey, good morning, and congrats on the quarter.

Good morning Bert.

It seems like truckload intermodal logistics are all performing very well certainly guidance, implying that's the way to continue can you just talk about maybe what some of the headwinds and tailwind Saar for the rest of this year and into next year trying to get a feeling for simple.

Perhaps of what are some of the things to keep you guys up of night, because it seems like youre firing on all cylinders right now.

So the headwinds and tailwind as well the ones that where we've been grappling with.

Are still and we expect to grapple with the rest of the year, which certainly centers around the labor component and we've taken obviously.

I mentioned some actions to try this.

To improve upon that on the driver of professional driver front.

We are seeing some.

The improvement in the intermodal.

The flowing of the business of the big issues on the rail side. The real Big issue is what I mentioned in my opening comments, just trying to get some fluidity into our.

Box count, having a 70% increase in the average dwell time from the comparable period in 2019 has been.

Frustrating issue for us in the standpoint is costing us our ability to serve our customers in a bigger way and put more volume across our.

Network execution, there so again, we're cautiously.

The mystic that that will also start to improve we've taken some actions in our network.

To.

Bring favor and more focus on those who can do it most effectively.

And we've done some things to encourage our customers financially.

Some accessorial approaches to be a bit more judicious with.

Of the Optum sets in so.

But that still is the limiting factor if we can't seem to if we can't get cooperation from our from our customer community there.

And Steve.

Probably on the equipment front, while we feel really good around the property, we were given to get half of our new tractors in here at the first.

Half of the year.

That's still.

An item that we have to stay on top of because it's a very fluid situation and probably of that equipment.

The intermodal container would probably be Steven our judgment the probably the most <unk>.

<unk>, whether we can get to the numbers that we'd like to get to there by year end.

<unk>.

Okay I appreciate that maybe shifting gears for my follow up.

What do you what do you think your logistics business apart from other providers broke brokerage is clearly strong across the industry right now it seems like a few platforms are ultimately going to sort of emerge with the bulk of share maybe.

Maybe what why do you think.

Snyder is going to be 1 of those platforms.

And do you see logistics, becoming your largest item you know at least my revenue over the next couple of years. Thanks for the question.

Thanks for a while we certainly believe the asset light portion of our portfolio the combination between logistics and intermodal as we.

We've been discussing and outlining for the.

A couple of years now will become an increasingly important part of what we do in a larger share of mix of what we do and I think we're demonstrating that along this path the.

Differentiating element of our logistics business, and particularly our brokerage business is that.

For the better part of the decade, we've been building towards.

Something that can be of standalone.

The market and Thats simply be an overflow of our assets so they're very much self sufficient across <unk>.

Virtually every mode of transportation.

Sure.

Taking advantage of and certainly doing is blending those lines a little bit more.

Purposefully and within our strategy.

As we put solutions in front of our customers as we think about the orange box and how to use our drivers and select third parties.

And.

And so while we don't expect it to certainly move to an overflow model, we really like itself.

Of the self capability that we've created over time, there. We do believe we have opportunity and we're seeing it certainly as we played out here in the last couple of quarters to accelerate that even further.

With how we bring this portfolio of asset heavy and asset light together in a way to support the customer and I think that is what is so great about being.

Having a very tech savvy very strong people organization of our logistics, but also being tied to a great platform with assets, both intermodal and over the road is how you bring that leverage together.

I think we're really starting to see the benefits of that and our customers are enjoying it.

Thank you.

Our next question is from Ravi Shanker with Morgan Stanley. Please proceed.

Great Good morning, everyone.

A couple of question of the cycle of Steve I think you said in your comments that youre constructive on the set up into 2022.

Is it too early to get the very first feelers on what 'twenty to 'twenty 2.

Hey thing looks like.

Are you confident that it can be positive year on year of despite having a very difficult comp and also kind of if there is the rest of the cycle do you think it's more likely to be on the demand side or the supply side.

This is Steve I'll start with.

And Mark can finish.

With.

Additional comments, but.

It is a bit early I suppose to provide much color commentary about 2022.

At the same time.

The capacity constraints that we're experiencing in <unk>.

<unk> experience for it.

That I don't think there's any quick solution for those.

And so that would lead me to conclude that it would be of demand driven event, if the market conditions were to change.

At the same time.

Our expectation.

<unk> is that market conditions remain much like they are currently throughout the rest of this year and beginning into next we may.

Begin to experience a bit more seasonality in 2022, that's more typical.

<unk> been in a typical seasonal cycle.

While it feels like 2 years now but.

We may see some of that return in 2022, but outside of that I think the market condition overall remains healthy and strong.

And I would think that would result in a positive rate environment.

<unk> for 2022.

Got it that's the.

The color.

And on the simple Steve just wanted to confirm are you, saying that the guidance does not include the <unk> that you had in <unk> and <unk> and the EPS as well and also maybe.

A bit of a longer term follow up the market and maybe can you kind of share.

What work you're doing with do simple kind of what the strategy is there and kind of how confident you are about being able to rollout of that product and when he for timeframe. Thank you.

Yes. This is Steve on the first part of that in.

Yes, I do.

Echo what I said earlier, our for full year guidance does not rely upon any gains from from.

Any of the equity investments that we've made.

Ravi as it relates to.

The autonomous <unk>.

And technology were very very much on the front end of that.

So.

Our intent of being involved and certainly respect certainly with 2 simple has done to get to this stage and the promise that it holds.

And we're just in the early elements of the engagement.

Learning together about what the.

Potential is and how it business models and how we might apply.

We are.

We don't have a lot to share with you there yet, but I am confident that we have a lot of the ingredients that I think are necessary in the new world whatever that may look like the ability to manage networks to include.

People like to talk a lot about.

The power, but the trailer network and how you manage that is as.

As important.

Some cases, even more important.

And having a distributed and maintenance network and facility network and the things of that it takes to do some things.

To support that type of business model potentially.

Across the country all of those things.

That we can do today I think.

Maybe our services business becomes even more important in the future because of what we can bring to bear there but.

That will develop over time.

I think have more to share in future periods.

Okay.

Our next question is from Todd Fowler with Keybanc capital markets. Please proceed.

Hey, guys. This is actually on for Todd Thanks for taking my questions.

Quick question on the guidance I know it doesn't incorporate any.

Gains related to 2 simple, but in terms of equipment gains of what are you guys expecting for the remainder.

The year and then if I could ask on intermodal.

I know you said pricing is.

The up about our implement of about 8%.

But I guess, how are you guys thinking about margins as we go through the back half of the year here just considering some of the some of the rail cost and some of the distractions of.

The disruptions there thank you.

The first part of the question there regarding.

Regarding equipment gains and so on I would.

Lumped that into the broad category, where we've said we expect current market conditions to persist through the remainder of this year.

So.

Something along the lines of what we've been experiencing recently is inherent in our comments.

On the intermodal front the comment was that we have renewed our contractual book.

Up to about 80% as we finished the quarter.

All of that implemented so we still have.

The full implementation of what we've accomplished plus what gets renewed in the third quarter and we expect some seasonality clearly.

To take place in the fourth quarter retail season, and so we are.

We feel we're really well positioned will feel better.

If we can get our boxes turned faster by our customers and get some additional boxes and in time to take advantage of what we believe.

The market will bear.

Relative to demand and we're executing.

Really well with our Dray fleet, which we think is always a great advantage to us to be in control of our assets on the dray side.

Not all of the north of 90% of the time and so.

Feel very well positioned and feel that the market will support us.

And we will finish the year I think quite strong in the intermodal business.

Okay. That's really helpful. And then just on the driver School front I think you guys said that you bought the cost in the second.

For I guess, what was that in the second quarter and then going forward.

What is what is the cost to run those driver schools I guess, what's the capacity.

Curious to just hear a little bit more color there. Thanks.

Yes, 2 to stand up well with instructors and process.

Change your.

Quoting profile a bit to be more accepting of that type of profile take some adjustments and that really is what occurred in the second quarter and that's an ongoing.

And then you kind of move into the execution phase and the ongoing infrastructure to bring that on.

Non CDL CDL holder through so it's not our full answer is just.

A partial answer but 1 that will give us access to some of the capacity that we have not been tapping into.

Really since about 2009, it's been that long since we started up our academies in any meaningful way like we're talking about here. So.

So it'll be a contributing factor on the.

The driver front in the.

Clear that we did not have in the first half.

Okay.

Thanks, guys.

Our next question is from Ken <unk> with Bank of America. Please proceed.

Hey, great good morning, Mark and Steve.

Half of can you sticking with intermodal for a second maybe talk about the process of getting those extra Mark I think you mentioned the thousand or 1500 boxes in the second half of the year, obviously hearing some difficulty amongst your peers.

<unk> certainly been of great step up in yields. So then just the second question. There is just your thoughts on the rail service.

And.

So and what Youre seeing in fluidity.

Okay, I'm, sorry, I cannot the first part of that question of I'm not sure I captured just just.

I guess dig into some of your cloud you mentioned, we're going to do some things to try to get our boxes here, maybe just walk us through just you know I mean, you've only taken what was of 380 boxes.

The year over year, Youre talking about getting up.

A significant amount in the second half you said, we've got some things we can do to get them over here.

Can you walk us through how you get that sizable step up in box delivery given the tight supply chain, just I don't understand your confidence in it.

A table of the ability to get them.

Yes, we have just about 1000.

Fox is more year over year.

As we as we finished the June.

The the range that I referenced in my opening comments of 500 of 33000, they are built and ready.

So just a matter of how we find space and in the supply chain of that type of box.

Get it.

By the state side.

And time to make an impact on 2021, and so we've got a number of things we're working on and competitively.

I prefer not to share what those are until we get those things all locked in and locked down 10, but we have a reasonable amount of confidence probably more so on the lower.

Lower end of that range than I do on the high end of the range of the 1500 of 3000.

But as we've learned of particularly when youre dealing with international that things can go bump in and so until you get it.

See it on the ground.

It should be a little bit cautious, but feeling reasonably confident on the fifth.

First half of the first half of those.

And the fluidity on the rail service.

Yeah actually since Memorial day.

We have seen improvement.

Particularly in the west on the steady now theres been some.

The weather related and some are.

If the for heat related issues that have had some events that have slowed us down but overall.

Overall, if you look sort of on a on a longer term basis. It is improving.

And.

Similar comments in the east, although it was a little bit of the difficulty in June and Thats a return to.

Around the typical fluidity here as we got into the month of July.

And really in the east where just the <unk>.

More importantly is how well we operate on the street with trade because of this so it's a bigger component of what gets done.

Based upon the length of haul in the east but.

So.

It's an improving but Scott certainly got room for improvement to get back to what we would consider more historical performance.

Okay and then just my final 1 if I can the you mentioned the 5500 target in network and obviously, that's kind of aspirational. If you can get the it sounds like you've got the driver school is up and running what about.

Better on the.

The dedicated side and stability there I mean, obviously you had some nice you mentioned 200 fleet growth sequentially do you still see more coming in there any difficulty in seating and operating there and maybe talk about overall truck utilization.

Yes, Ken we have we have.

Thoughts on out of some challenges there as well on the driver front no doubt about it.

And 1 of the items that our network does serve as a place for opportunities for our drivers of dedicated intermodal too.

Look for transfers that makes sense for them and so our network serves as somewhat of the feeding ground.

<unk>.

If it makes sense geographically for the driver lives. So we want to continue.

Have a career path for our value drivers and so we see some accelerated and we had seen some accelerated transfer activity as we've been successful in adding.

To our to our book in dedicated.

<unk>.

<unk> would expect that we're going to continue to see additional adds every quarter for the remainder of the year.

Both of them, what we've sold and then what we've already sold out we're in the process of seating.

And we're having some success there and obviously it's.

Because of the type of position the the regularity.

For the regularity of the income it's the truck more attractive for the driver community and those type of configurations that we want to make sure. We're.

Making those available to our fleet.

Thanks, Mark I appreciate the time.

Thank you.

Our next question.

For us from Scott Group with Wolfe Research. Please proceed.

Hey, Thanks, Good morning, Steve I, just wanted to go back to the guidance I just want to make sure I understand that so when you talk about an even distribution of.

The segments in 2 Q3 Q4, Youre just talking about like the percentage of earnings.

Of the World, that's truckload versus intermodal, that's logistics and that Youre expecting to stay constant is that what you're saying or are you, saying that the absolute level of <unk>.

Truckload intermodal and logistics earnings.

Stay what they were in the rest of the year.

Yeah.

What im.

Speaking to.

Is the seasonality dimension that I.

<unk> talked about a little bit earlier on the call.

If there was such a thing as the normal year again.

First quarter would be the weakest for us from an enterprise earnings standpoint, second and third quarters look pretty similar to each other most of the time Inc.

Earnings of.

Earnings in the EPS and then the fourth quarter is significantly stronger.

Given the.

The frothiness in an ongoing market strength that we expect that we incurred in the second quarter and we expect to continue throughout the year.

That's.

The gating some of those seasonal factors that we normally experience.

It's like it's for the fourth quarter kind of.

Playing itself out in multiple quarters in a row.

So if that helps add some context to what.

In terms of.

Convey.

Hi, guys I apologize I just want to make sure I'm understanding sort of are you talking I'm talking about operating earnings I'm forgetting about the 60 cents of EPS you did with the 2 simple gain that turns into a mark to market loss in the third quarter to some of them.

Trucking intermodal operating earnings.

<unk> do those get better as the full impact of pricing.

It shows up in the back half of the year.

I think there is a.

Certainly room for sequential improvement in earnings.

Nothing I've said has anything to do with 2 simple so.

So let that go.

This is all about.

Our operating segments.

I think maybe Scott.

I'll take the Cracker I think what you are pushing on we would expect.

Our segment operating performance to have lifting.

Operating performance in earnings in the second.

In the year.

Proportionately, we don't believe it'll be as dramatically different fourth quarter as is typical because of the.

Current condition of the market and the capability of what we have available on intermodal boxes in all of the other but we will see and expect to see sequential improvement from.

Half of that that makes a lot more sense. Thank you.

And then just last thing when I look at the the for hire trucking business and the revenue per tractor up.

The 23% year over year are you guys seeing some improvement in utilization.

Right now would you expect that to continue.

From here, Yes, we are seeing.

5 and 6 year highs and utilization in our solo fleet.

Which is the predominant portion there, but when you put the mix component of having less teams and less.

Owner operators, who generally are.

More often than the company.

From time at home standpoint, our mix has actually in the absolute metric itself.

Flattish.

But on the solo side, we are absolutely seeing.

As strong of utilization that we've seen in the as I mentioned last 5 or 6 years.

Okay.

Well, thank you guys very much.

Drivers of next question is from Brian Awesome day with Jpmorgan. Please proceed.

Hey, good morning, Thanks for taking the question.

Brian Mark.

Good morning, 1 for you Mark.

We've seen some of your peers.

Kind of diversify the business as Dave.

As everybody.

He has had trouble keeping drivers in the seats in the sort of environment, but you've always had the free.

The segments as you mentioned the Standalone diversified operating at scale.

The tech overlay. So just wanted to get your thoughts on you know the.

The multiyear progression here, you've highlighted more earnings growth and revenue contribution from asset light.

How do you feel about the general portfolio.

Absent the cycle right now maybe in the longer term perspective, what you'd be looking potentially to add more or to grow from here.

Yes, Brian.

Thanks for the thanks for the question.

No I think there are some very good headwinds.

As we get to a quote unquote whatever.

The more normal time.

Particularly with our ability to execute.

This portfolio and so but on trend we do believe more of our revenue and earnings contribution over time will come from intermodal and logistics.

And our primary focus on the truck side.

On growth will be on those configurations that I think our most defensible over cycles, which is dedicated and some of our specialty services.

On the truck side, so it doesn't deemphasize truckload just puts the growth more proportionately coming from the asset.

Net life and the asset.

Non asset part of our portfolio.

And as mentioned, we will continue to look for those ways to bring synergies across with the orange box to 2 to blend the.

Those things effectively for our customers.

But when you look at the trends of ESG and the things that are environmentally.

We are still very very bullish on intermodal growth pattern. We think we can double that business over the next.

8 or 9 years, and that's our intention so youll see that progressively play out in our view over over time.

And we.

We have great momentum in our third party offerings in logistics and we would expect.

To continue particularly with.

The advent of bringing the orange box in the power only configuration of where it makes sense for customers carriers in our network.

And.

And that's really what we've been talking about for the last several years and it's starting to really show up in our numbers.

So it sounds like more.

More of the focal points are.

You already are right now as opposed to May.

Maybe expanding the reach into the different mood or where material deviation from the current capabilities.

Okay.

Yeah, I think we have lots of runway ahead of us so.

As we think about the aggregation.

Okay, the freight aggregation of demand both of our assets and others.

I think we have lots of runway in our current approach.

Great and if you don't mind, just providing a quick update on free power I think you've launched the shipper side.

Last quarter, so maybe some progress update on.

On that in 1 of the stats of metrics you can share. Thank you.

Yes, Brian we launched in the brokerage.

Third party business as you mentioned this quarter were a more mature on the carrier side I think we have over 30000 downloads in.

We've got some great metrics relative to the stickiness of that.

Which probably won't share on this call but.

And then as mentioned we started on the shipper side and just I believe this week. We've started now on the van side on the shipper for our network business side. So we will continue to.

Rollout.

Free power for shippers, particularly focused.

Of long tail shipper across our remaining asset offerings between now and early first quarter.

And so we're just a bit more mature on the carrier side of that but early returns I get it.

See every morning, we're booking freight with customers that we've never done business with on the asset side of the business.

Focus on that was absolutely the intent.

Okay. Thank you for the time Mark I appreciate it.

Thank you.

Our next question comes from Jon Chappell with Evercore. Please proceed.

Thank you good morning.

Mark just starting.

With the truck delivery schedule no. If we look at network for starters, it's not about 600 since the end of the year.

I recall, you, saying you're kind of halfway through your the deliveries for the year. So how do we get back the 55.

By the end of the year, if its already shrunk by 600, and you've already taken delivery of.

And does that mean that maybe youre not as big of a seller.

In the market. So there's kind of no net reductions in every truck the deliveries as incremental positive.

Yes, but my reference on the.

On the trucks was half of a replacement value of replacement units.

Which we.

We still have the capability on the growth side.

As to your comments have been more prevalent for us and dedicated than it has been.

In network.

So we have the capability relative to.

Get to where we want to get too from the power stamp.

Standpoint.

Not a concern we have some levers that we can.

Reasonably pull there to do that what we're trying to focus is on the capacity of the driver side of that equation.

Particularly on the network side so.

Part of the reason to broaden our reach into the non CDL.

<unk> out of pool so.

I'm, certainly not going to be an easy task, but we have seen stabilization and we would expect to start to chip away at that and I've been really and also encouraged.

By the improvement of the team configuration, which is also a very much of a focus.

A because it provides great value of the customer.

The drive it it's the high productivity deliver of value back to the business.

Okay.

Okay. Thanks, and then on the intermodal side the lives.

Kind of in the weird month.

What sort of suspensions and metering and massive congestion and chassis issues et cetera et cetera.

How's the July kind.

<unk>, we cannot I mean, do you have kind of preferred status with the NCS ex that.

It kind of helps you be immune to some of the challenges that are happening throughout the supply chain are you seeing an impact as well in July of any kind of hopeful of the catch up.

As you go through those for the quarter.

Yeah, I wouldn't characterize us.

As being of immune but we also find the value of what we do.

By aligning our spend primarily with 1 and the last 1 of the east does give us.

Advantages over.

Others.

And our ability.

To be of really good partner of the rail which is what we focus on a great deal in the.

Kind of shape factor, we are within the ramps.

And with all of the street so that.

We are doing everything in our power to be.

Effective for them so they can be effective for us and.

We certainly leverage of what we do to try to get that type of arrangement with them. So so.

Thats, all I feel pretty good.

Not immune to some of the things that you mentioned, there, but we're seeing some improvement and.

Okay.

Still very bullish on the quarter.

Okay. I mean, that's what I'm just kind of asked I mean are you exiting July the kind of better service levels than the then you enter July.

We are.

Okay, great. Thank you Mark.

Our next question is from Jack Atkins with Stephens. Please proceed.

Great. Good morning, and thank you for taking my questions.

Mark and Steve I appreciate your comments around the.

Seasonality of the business this year.

But mark I'd I'd be curious to get your sort of feedback from what youre hearing from from your customer base around their preparations for for peak season.

We've kind of heard some different things around peak this year just given.

The low inventory levels and just obviously the volatility of the supply chain what what are your.

The customers telling you around are there plans for peak this year, if you wouldn't mind sort of sharing some high level thoughts there.

Sure Jack Thanks, Thanks for the question and it's as you mentioned it is a little bit of different time relative to their confidence maybe of having certain promotional activity that they've made typically have because.

Because of.

The reliability of the supply chain.

So we know some of our customers are thinking differently about that we also know some of our customers of <unk>.

The have maybe some improvement in inventory, but it's in the wrong places and maybe it's not all of the right things because they've been given some marching orders to their buyers to.

What they can when they can get it.

Even outside of the typical seasonality.

Type.

While the products and then get them they will get it in where they can get it in which means at times, even though there might be some inventory here, it's not in the right places and I think you're seeing we're seeing some of that manifests itself in.

The higher propensity for many bids in.

And.

Of those type of reactions to having inventory in the wrong places and so it's a customer by customer thing, but it certainly doesn't feel.

Typical or normal.

And we're going to I think fight through many of the same things we've been fighting.

Getting through here.

Between now and the end of the year.

Okay that makes sense and I appreciate that commentary I guess for my follow up question.

On the intermodal box turns.

I appreciate your comments there throughout the call around fluidity, but I guess I'm more interested maybe longer term with.

It just changes to rail networks with precision scheduled railroading over the last several years, what do you think of the right sort of long term way to think about box turns on a on a monthly basis or however, you want to think about it relative to maybe 2018 of 2017.

We're running.

Below those historical levels.

Just curious if you think we can get back to that if that's the reasonable over the course of the next couple of years.

Yeah, Jack I think it's the reasonable and Thats something that we should be striving for I would tell you of our dislocation of the boxes.

And certainly there is the rail impact here on reliability no doubt about it.

But as.

As a larger percentage of our impact has been just on the dwell time, when it's been in trailer pools at our customer.

And that is.

Any standard deviation of.

Any statistical.

<unk> you want to do relative to what we've experienced here and certainly are experiencing presently so I think.

For the gating feature for us.

Net debt.

The rails can't get better, but precision scheduled railroading doesn't get in our way in our view there.

If we can get reliable service it.

And regardless of almost what that transit is but we can get at that consistently.

That's the we can set our customer up we can set our network up and we can set up our execution around Dre.

To be pretty darn efficient with the precision scheduled railroading, we just got out of customers to get in a position where they can get fluid in their pools.

That sounds great. Thanks again Mark.

Our next question is from Thomas while the words with UBS. Please proceed.

Yes, good morning.

Wanted to ask you about you know it seems like a lot of things are kind of going back to the labor market and it's not that clear, what's going to resolve or improve the situation.

I think.

The thing that could have an impact.

On the margin would be the federal bonus the unemployment payments and I'm just wondering if you've seen any impact in the states that have taken the earlier approach of of you know just continuing those payments in late June July are you seeing any more kind of response.

1 of the notes or interest in your programs in the states or is it kind of too early to tell on that.

Yeah, Tom I don't know if we have exceptional.

Inside of data to share with you there we do know from.

Some of our trade partners, particularly.

Sponsor of the for profit and public school programs.

We will certainly their.

Their opinion of that is certainly has the impact.

And that they may have seen some improvement when that's over with.

Do here.

Some of the recruiting discussions that we're in with folks that they'll call us back in September.

When this is expires and so we have some <unk>.

Some data on that.

But that's how I would characterize that too that's more anecdotal than.

That I'd be confident to give you any other insight, but we certainly hear it there is no doubt about that.

So your view admittedly I'm kind of limited data would be.

Circular there.

Probably will be an impact that's helpful.

You know.

The there's couple of months and then after the early September when it's fully rolled off.

You know the reason of the reason I don't have a great deal of confidence there as you know, we don't see that from from our associate base or driver base.

That's.

More and more on the recruiting hotline than it is on what we see with the <unk>.

The broad geographic dispersion of art.

Our professional staff across the country. So.

That's why he kind of get those anecdotes.

Well I wouldn't put too much into it.

Yes, okay.

And then wanted to ask you a kind of the.

It's just part of it the cycle of question part of it is a shipper you know.

Perspective, I don't know if shippers are looking out a lots of 'twenty 'twenty 2 at this point, but.

What's your best read on the kind of the potential for.

<unk> modal shifts in 2022.

I you know do you think that there will be the opportunity for intermodal to take share from truck and a more meaningful way.

Sippers wanted to do that or you know have some of the intermodal challenges then.

You know kind of a debt for.

For that and I guess, you know, we generally hear people say its going to be strong through Chinese new year or through the peak, but it seems like theres not tons of visibility to what happens after that so just the I guess youre kind of opinion on a cycle of maybe shipper behavior.

We go into 2022.

For men.

Kind of let me maybe tackle the first part of of the question.

We would.

We would surmise through our experience and our discussions with shippers that we are seeing presently and have seen here for a good portion of the sheer more conversion.

Jim.

From intermodal to over the road.

Because of box availability or if theres any level of <unk>.

Sensitivity on.

Transit Theres been more biased towards.

Going earlier to intermodal or excuse me from intermodal to truck and so we think theres some natural.

When that stabilizes for.

Typical freight to come back to intermodal it would be 1 element for the <unk>.

Second element are.

Our sustainability efforts and outreach and discussion with customers in the last 6 months without strip anything we've done in the prior 5 years realm.

Relative to.

Sure all of us from shippers to understand.

How to calculate the value of <unk>.

Going from.

Truck the intermodal.

Because of what their organizations have laid out as their plans on cotr reduction or whatever their objectives are and so again on trend.

Those 2 items I think would suggest that we have some.

Sustainable and systemic opportunity for more over the road conversion to intermodal.

Right. Okay. So the best you can tell it you'd be pretty bullish on intermodal volumes or the potential for that to be strong.

The entrance too.

I do.

I do.

Particularly if some of the challenges that we're experiencing today kind of.

Kind of get through the system and then as it relates to the back end of your question I probably don't have.

Any.

The material.

Broad based assessment of obviously using some conversation with customers as they are.

Thinking about.

22, but I think you know folks certainly through the first half.

R R.

Are pretty confident and feel good about the economy of the consumer in.

And again.

Echo Steves comment I think we have to take some shock to the system shock to the.

Economy on the demand side for fruit for those sentiments to change.

Right. Okay. Thank you for the time of the perspective appreciate it.

The next question is from vascular majors with Susquehanna Financial group.

Please proceed.

Yeah. Good morning, Thanks for taking my question, just 1 housekeeping item on the guidance here in the last time, you had a really strong year. The other operating segment was a big drag on earnings and I believe the explanation was was because of Goodyear and corporate incentive comp.

Comp was was driver of that but you know this year. That's been you know of slight contributor I'm curious what else is running through there what's different and any thoughts on where that might shake out for the year based on what you're writing today. Thank you, yes sure. That's a fair question, Steve here and.

So couple of things 1 of which is that R.

Our leasing company is.

Is in that other segment and Theyre, having a nice year and so yes that incentive compensation is.

Amounting to be a similar similar figure as it was in 2018, but it is being largely offset year to date.

By the performance of our leasing company.

So those of the 2 biggest factors within that other segment, there's plenty of other cats and dogs in there, but that's that's the main theme.

Team of what's going on in there.

Thank you for that and in that leasing business any thoughts or.

Then you can share with us on duration or whether that's more transactional just trying to think about how much of that is cyclical and how much of it is structural work you've done there. Thank you.

Yeah I suppose there is elements of both the I think the team has done a great job.

Leveraging the environment the environment itself would lift.

It a bit but I think the team's response to it has.

Put an extra edge on their performance this year so.

I think that we offer of solid.

The program of support and services to the owner operator community and we'll continue to do.

Do so so I think it's up.

Good.

Supplier of capacity and.

<unk>.

It's a good part of our business.

Thank you.

Alright.

Ladies.

And gentlemen, we have reached the end of the question the answer session and this will end today's conference. Thank you very much for your participation and have a great day.

Yes.

Yeah.