Q3 2021 Schneider National Inc Earnings Call
Greetings and welcome to the Schneider National incorporated third quarter 2021 earnings call. At this time, all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host he's been a director of Investor Relations. Thank you you may begin.
Thank you operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer, and Steve <unk> 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 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 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.
Sure.
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 I'd like to turn the call over to our CFO Steve profit.
Thank you, Steve and thanks to each of you joined US on the call. This morning, we appreciate your time and this busy earning season.
I'll open with commentary on our third quarter results and first I want to complement our entire team for their performance, especially our professional drivers field operations and customer service associates.
Operating conditions have lifted the tide for many players in the transportation space, but you have to crisply execute commercially and operationally everyday to deliver results above and beyond what the tight brings.
Our team has done a nice job across the board of doing exactly that because we've successfully navigated the 2021 freight environment.
In addition, our multimodal portfolio and platform operating at scale.
<unk> enables us to compete effectively and to fulfill a growing portion of our customers' needs and profitably grow our business.
Our third quarter EPS of <unk> 62 cents was the strongest in our history exceeding the prior record of 60 cents, which was established last quarter.
Contained within our third quarter results was a pretax net loss of $3 1 million on our equity investments.
We took advantage of the robust used equipment market in the third quarter as we on boarded new equipment, and then utilized our efficient maintenance retail channels to profitably disposed of older equipment.
Enterprise revenues, excluding fuel surcharge of $1 3 billion or 25% above last year.
Each reportable segment of our portfolio delivered record quarterly earnings and contributed meaningfully to the doubling of our year over year adjusted operating income.
Truckload earnings were up 87% intermodal was up 99% and logistics was up 143%.
Our asset light offerings of intermodal and logistics comprised 44% of segment earnings and that's up from 41% a year ago.
I'll now provide some context for our updated EPS guidance.
As noted in this morning's earnings release, we have raised our full year 2021, adjusted EPS guidance.
To a range from $2 13 to $2 17 a share.
Given that our year to date number is $1 53. This range inherently guides to a fourth quarter EPS of 60 to 64 cents, which is in the vicinity of our third quarter EPS of <unk> 62 cents.
We do anticipate selling less equipment in the fourth quarter than we did in the third quarter, and therefore expect lower equipment gains.
At the same time, we expect all other elements of our operations to continue at or above the trajectory of the third quarter.
On a full year basis, we expect revenue, excluding fuel surcharge to exceed $5 billion and for operating income to top $500 million.
Our tax rate guidance remains unchanged at about 25% for the full year.
And our Capex guidance is lowered to about $300 million and the adjustment is due to higher proceeds on equipment sales and some delayed equipment deliveries are expected to spill over into early 2022.
And so with that I'll turn the call over to Mark.
Thank you, Steve and Hello, everyone. Thank you for joining the Schneider call. This morning, I'll offer a summary of our performance across our three primary reportable segments for the third quarter, how that aligns with our enterprise strategy and offer our context on what to expect going forward.
As Steve mentioned each of our three reportable segments were significant contributors to our record revenue and earnings performance in the quarter, demonstrating the value of our scaled and balanced portfolio of services and our strategy to aggregate multi modal capacity options on behalf of our shipper community I'm, especially pleased with the performance of our strategic growth offerings.
A dedicated truck intermodal and brokerage.
First in the quarter dedicated average truck count is up roughly 300 units year over year to 42 40.
Furthermore, we finished the quarter with 252 more dedicated trucks and 280 more dedicated drivers than we started the quarter with our new business startups are maturing as is our success in seeding the dedicated business awards that we have won recently.
Secondly, intermodal battled the challenging macro environment to grow water count 1%.
While improving revenue per order, 20% year over year.
We continue to experiencing increased container dwell times at customer locations and at times congestion at key intermodal gateway locations that impact our ability to turn trailing equipment timely impacting overall volumes.
Our differentiators in container and chassis asset control effective network and revenue management technologies and the minimization of the impact of third party dray costs through our company Dray model overcame the volume challenges to deliver a solid 84, 5% operating ratio in the quarter representing <unk>.
620 basis points of improvement year over year.
Last quarter, we indicated that we expected to add between 1500 and 3000 containers in the second half of the year, which was dependent on overcoming supply chain delivery challenges.
We added 1600 containers in the third quarter of 2021.
We expect to add at least that many in the fourth quarter setting up additional growth opportunities as we head into 2022.
We do not talk about our Asia operations, very often but their efforts in helping us secure dedicated vessel capacity for our intermodal containers are making a real difference.
Finally, our logistics business set another top and Bottomline a record in the quarter as logistics revenue was only $10 million less than our truck segment revenues at $475 million.
Overall volumes in that revenue per order expanded in the quarter and operating ratio improved 150 basis points year over year, and 80 basis points sequentially.
An increasingly larger portion of our truckload network volumes is being successfully executed and the power only configuration of our brokerage business leveraging the value of our extensive orange trailer pool network.
We expect a further catalyst for our power only offering from the conversion onto the mastery logistics mastermind platform power only we the first service to make the conversion beginning here in the fourth quarter.
Therefore, because of the growth and successful performance of our power only offering in serving the truckload network business, our priorities for growth and company drivers are firmly centered on dedicated.
Our modal dray driving positions.
We expect to carry strong momentum in these services into and likely through 2022.
In closing I would also like to thank our team, especially our professional drivers for their commitment and hard work in these disruptive supply chain conditions. Your work is essential to the everyday lives of all Americans. Thank you and with that I'd like to return the call back to the operator for your questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question. Kim You May Press Star two if you would like to turn it over to your question from the queue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
In the interest of time, we ask that participants limit themselves to one question and one follow up.
One moment, please while we poll for questions.
Thank you. Our first question is from Ravi Shanker with Morgan Stanley. Please proceed with your question.
Thank you good morning, gentlemen.
Mark and Steve how.
How do we think about 2022 kind of going into it in terms of pricing dynamics.
Colin.
Wage inflation et cetera, I mean again, you said a good benchmark for us between 'twenty, one how do we think about that flowing into 2022.
Well Ravi I think we have and good morning, I think we have a lot of good momentum on the price line as demonstrated in the quarter that obviously, we will bring into our.
Calendar year 2022.
Feel good about the dedicated.
Growth. So we had a good deal of growth.
Assets and drivers in the third quarter that we didn't get the full benefit of we had the costs more so than we had the revenue based upon timing. So again I think we'll take that momentum.
The fourth and two excuse me 2022 in addition to what we bring it in the fourth quarter.
And I'm also pleased as it relates to our ability to get our boxes on ground here.
More so than I, probably would have thought mid part of the year and we successfully executed it might be a little bit ahead of the plan. So I think that gives us as the networks become more fluid in the rail portion of our business that we have good growth prospects coming.
Add assumed in 2022.
Obviously, we've matured.
So the use of our platform as it relates to third parties to include the recent addition of our power only capabilities. So I put all of those things together.
I certainly think we have some momentum as it relates to the top line and I would expect that we continue to extract and improved price performance to cover the inflationary aspects of the business. So.
I feel we're well positioned as we head into the year.
That's great color any way at all you can put some numbers to that especially around pricing and fleet count do you think.
You would have the trucker lately and the driver maybe to grow the fleet next year in the trucking business and also do you think you can get a double digit price in the contract side.
Well, we'll probably refrain from giving all the exact detail that you may be asking those questions questions Ravi but.
<unk>.
I do believe we have.
Some excellent carryover work all the work that we've done this year.
And very cognizant of what it's going to take relative to the labor condition. I am pleased that all of our truck load network business does not have to completely come from our assets based upon what we did with the power only.
Gross and so I think that combination together it gives us growth opportunities within our network. So we're not backing away from that but certainly our strategic growth drivers we continue.
To lean in most heavily on his dedicated.
Intermodal and our logistics brokerage business.
Thank you. Our next question is from Todd Fowler with Keybanc capital markets. Please proceed with your question.
Hey, great, Thanks, and good morning, and congratulations on the quarter.
Mark I guess, just starting with the operating ratio in the truckload segment, you know very very strong here this quarter better than kind of what your longer term targets are as you think about that moving into next year, what would be some of the reasons why you can't sustain the the or where the truckload business is right now over the next.
Several quarters or longer for that matter.
Yeah. This is Steve Todd good morning, and.
I think the.
The margin range for our truckload segment in particular is one that we are evaluating and.
By that I mean, if anything it would be elevated from its current levels, but we havent exactly landed on on what that.
New range might be and we will likely provide an update on that is on our next call as we provide some perspective on our initial EPS guidance for 2022, and so on if that helps provide some context.
The other part of your question of what would prevent us from maintaining this type of level of performance as we go forward I do think that we have made some step function progress as we've moved through 2021.
And <unk>.
Pertaining to our margin performance within the truckload segment and I think a substantial portion of that should remain intact as we contemplate a.
What's ahead of us in 2022.
Yeah, no that makes sense and I understand you're kind of response, there and then the directional comments so.
For my follow up I know, it's still early but would you care to share just kind of your thoughts on pricing expectations for for truck and intermodal going into next year. It seems like the environment is strong it seems like there's a lot of contracts that probably need to reset that were priced earlier in the year. They are probably still below market. So how are you thinking about.
<unk> expectations for truckload and intermodal into 2022.
Yeah, Todd I think we're still building there certainly as you look at our contract renewals in the third quarter.
As compared.
To the second quarter in both our network dedicated and intermodal business those are all <unk>.
Continuing to go north and improving we would expect similar results for the limited amount. We have left here to do in the fourth quarter, which again gets back to my comments thinking that we have a very constructive set up as we head into 2022.
Thank you. Our next question is from Jon Chappell with Evercore ISI. Please proceed with your question.
Thank you good morning.
Steve or Mark just going on the back of Todd's question. There in the second quarter call you'd said that 80% of the intermodal book had been renewed and it was pricing up in the high single digits and then you'll get the huge move in the third quarter revenue per load.
Do we think about as kind of marking to market. The intermodal book is that a very heavy first first half time.
Timeframe and then there is a big step up then since the first half of this year was only kind of high single digits versus the momentum that you've seen in the third quarter and conceivably into the fourth.
Yeah, each year generally has its own nuances there.
But generally speaking the first half of the year is a more robust renewal period in the second half of the year.
But as we.
While we still have some work to do because of some renewals in going back and addressing some market issues, particularly around the inflationary costs with.
Drivers in recruiting that we went back and had some additional discussions and what we really would suggest to you is.
<unk>.
Low double digit range of increases early in the year became upper teen double digit increases as we progress through the year and that is still.
Where we see.
What's remaining to be executed against here in the fourth quarter.
That's helpful. And then power only has obviously been a huge boon for you in the logistics space and you mentioned Mark at the very end there you're transitioning now onto our converting into the master lease logistics platform. When you think about the opportunity there and using that technology is there any.
Kind of line of sight on the long term logistics, 4% to 6% margin moving higher as you scale that platform.
Yeah, absolutely and.
In fact, secondly, the second part of our business that we expect to go beyond power only onto the platform will be our.
Our brokerage business and and we would expect obviously with more investment that we do in the capital and the power only those performed at superior margins too.
What is considered traditional brokerage when the carriers bring both their power and their trailer assets. So we expect to see a return for the trailer portion that we get on an incremental basis.
And because I think what we're really excited about here is how we blend our solution to the customer so that we could take a larger share of wallet as it relates to bringing solutions well beyond what's necessarily just our power reach with our assets and so this just gives us another avenue to do.
That in and certainly this has been a terrific market to be able to demonstrate value to the customer to build that momentum.
Thank you. Our next question is from Bert Steuben with Stifel. Please proceed with your question.
Hey, good morning, and congratulations on the quarter.
Oh good morning, following up to Robbie's question on the 'twenty two momentum side of things what gives you confidence on the demand side or is it purely that the supply situation. So challenge that rates just should continue to rise.
Yeah.
Yeah, you know it's difficult to have obviously, a perfect view into that but certainly I think it's on both sides of the equation supply and demand that gives us a degree of confidence that we have a constructive market.
Well into 2022.
Equipment is going to continue to be difficult to come by relative to <unk>.
New equipment based upon supply chain concerns inventory sales ratio still has plenty of room to go.
And we still have by all measures a very healthy consumer and all of our channel checks are relative to our customer base for the most part are still quite bullish as we head into next year. So we try to look at all of that and.
And come to our assessment to think that we have some staying power here on both the supply constricted side.
As well as the demand equation.
No. That's helpful. Just just as a follow up on the logistics side as that business continues to take off how much of your growth do you attribute to market share capture versus just a growing addressable market I assume it's probably a bit of both.
Yeah, I'm trying to think about how to frame that for you certainly we have the benefit.
All the things are going on in the marketplace and I think that does give benefit to a multimodal platform companies like ourselves we can.
Through our technologies at the front end of the funnel.
Capture and provide more options to the customer on the front end, which allows us then.
That original point of tender to find a way to say, yes, more often and and look across the intermodal look across truck look across our third party.
Offerings to now include power only and so.
I think it's just leveraging those relationships and leveraging that initial point.
To capture as much volume as we can profitably.
Thank you. Our next question is from Brian <unk> with Jpmorgan. Please proceed with your question.
Hi, Good morning, Thank you for taking the question.
Mark maybe just follow up on that last comment you made there I think you referred to is the blending blending of the Orange This multimodal platform idea.
What else do you feel like you need to add or maybe potentially get bigger and when it comes to the suite of services or capabilities that are your customers asking for now or do you think they will.
Look for more in the future and if you could add some comments on that.
The free power.
<unk> platform is well within logistics that'd be helpful.
Yeah, Brian I would I would really tie my answer to your question.
All of those.
Pieces together.
Traditionally we've done a very good job as a company and our asset centric services to include intermodal on the large shipper community across the wide swath of the economy.
Well, we've done really well on the brokerage and logistics side is getting after the longer tail of smaller shipper.
And what I'm excited about with what were seeing on freight power is how we can do that.
And find ways to grow with the smaller shipper across all of our services.
Making it easier for them via freight power to connect with us and easier for us to reach them because it can't do that all with just salespeople on the street and so.
That's that's where we're starting to see value. Obviously, we started first with our brokerage offering and now we've expanded into all of the rest of our offerings.
Both on the carrier support side and now on the shipper side. So we're in the early innings of that.
But early returns and were more mature on the carrier third party carrier side of freight power and ramping up on the shipper side and so to US. It just an extended reach into a market segment, particularly for our assets that.
Traditionally has been a bit more challenging for us to reach economically and that's what this whole blending in our view does it just allows us to.
It's more of the addressable market more effectively.
Alright, Thanks for that and then just to follow up can you give some comments on potential.
Potential vaccine mandate, which I guess it depends on who you ask is coming out.
Before too long the industry and the a T has been pretty vocal about it.
An exemption and I think it would be pretty counterproductive.
Trucking it didn't again exemption, but where we're not quite sure if that's going to happen. So.
Maybe you can just talk about your view on that and how you're preparing schneider for potential mandate with all the associated testing that they might have to go with that thank.
Thank you.
Yeah, Great question Brian.
Certainly you know start to start with we are.
I strongly encourage all of our associate base to get vaccinated taken a series of steps over the last.
18 months to make that as easy.
As possible and and.
And educate to the best that we can how that.
Makes sense.
It helps us both on the personal side, but also on the business side.
But that being said.
We think and I am pleased with how well the industry has responded to educate the policymakers and we really do caution the policymakers.
To be thoughtful here, because we already have a very fragile supply chain.
In a volatile situation.
We think would be very detrimental.
We did not get an exemption, but again I think the industry has responded well the customers that we've got involved have responded well to make sure that at least those voices and understanding how it got into the process and we don't know obviously yet.
What the ultimate decision will be there but.
But it'll be problematic, particularly as we would estimate between 40 and 55% of our drivers are vaccinated and I think that is a number that we see pretty predominantly across the.
The spectrum.
So we're putting a series of.
Steps together too.
Kind of put some scenarios and how we would deal with various elements.
Of.
What a rule could look like.
But.
All of it is going to be difficult to execute this is gonna be costly to execute and I think it's going to be disruptive to execute so well.
We continue to lean into that and awaiting further guidance from the policymakers.
Okay.
Thank you. Our next question is from Jason Seidl with Cowen. Please proceed with your question.
Thank you operator, Steve wanted to talk about sort of use of proceeds going forward on the cash side, we ended the quarter.
With over $500 million in cash based upon your outlook.
Outlook for <unk>, it looks like you're going to generate some more.
Let's talk about the potential usage as you guys seen between now and the end of the year.
Sure Jason Good morning.
It's a pretty consistent messaging from us so as far as use of cash goes I think we are continuing to be interested in the inorganic.
Opportunities that we might see.
Dedicated or specialty configuration and continue to evaluate opportunities there.
At the same time primary focus is on organic growth in our strategic areas of dedicated and intermodal as well as the technology investments to grow our.
Digital platform and capabilities.
Mark has mentioned.
It's really important for us to continue to look for those opportunities to create seamless customer experiences and remove.
And automate things as much as possible as we move forward and I think that's an important part of what we're trying to accomplish here is standardization and automation.
Capabilities so.
We've continued to invest in those things so that would be our primary use is to.
One grow our strategic areas organically.
To continue to improve the age of fleet in our truckload segment.
And three look for inorganic growth opportunities that fit with our strategy and our portfolio.
Okay I appreciate that and my follow up you guys talked a little bit about so really trying to get a hiring on the dedicated and drayage side in terms of drivers.
Can you compare and contrast sort of the different challenges in both markets I mean I'm sure. They are both challenged like everyone else's on the truckload side.
However, as one far more difficult than the other right.
Yeah.
Well certainly as you look across our portfolio. The network businesses are the most challenged because of.
A little less certainty as it relates to the work.
And the time at home component and that's why.
We've been had and continue to have more success.
And sourcing in seating and retaining in our dedicated configurations and intermodal and one of the things that is probably not as evident in the public metrics.
Those two configurations in particular.
We have started to get back to some more of the efficiency measures around tractor sharing particularly in our intermodal business, where we did successfully grow drivers in the third quarter.
And we successfully took some units out because we got back to some of our more standard practices as it relates to how we can run efficiently multi shifts with the same power unit not fully back to pre COVID-19, but starting.
In certain parts of the network to do that so.
But clearly intermodal and dedicated are the most attractive options for drivers and that's what Fortunately, we have that as a key part of our strategy.
A quick follow up what percent of your own dray Deane covered now and what's the sort of longer term goal.
Yeah, we have consistently been between 90 and 93% of our own dray there'll be certain times of the year based upon demand so that could go a little bit north of that or a little bit south of that.
But that's how we're performing and performing consistently today.
Thank you. Our next question comes from basketball majors with Susquehanna. Please proceed with your question.
Yes, thanks for taking my questions.
As you speak with your customers and work with them on their planning into next year is is anything changing in the nature of of how truckload and intermodal services are being procured I'm just I'm curious if things like you know firmer volume commitments with penalties for both sides are being thrown out there or if you're just seeing shorter.
Term arrangements to get through some of this volatility or or.
Or anything strange were multi year capacity commitments. Just just just really anything that may have changed from the normal kind of cadence it would be interesting. Thank you.
Yes terrific question what we've.
Continue to advocate for which we believe is in the best interest of all parties is to have less of this annual procurement event that puts.
Everything out up to bid and changing carrier to carrier.
And the disruption for both parties it that causes and we're seeing more and more.
Particularly around their core carrier thought process to do things just like that to have those discussions and advance to <unk>.
Plan for that.
Forward periods, and perhaps not have everything be in that kind of traditional annual process.
To make sure that incumbency can bring value and benefit to.
So both sides of the equation and so I think on trend that is continuing and I would expect that to be more of the trend.
As a.
As people see the benefit of that particularly in these type of environments.
From the outside looking in and trying to track and understand and model your business I mean is that.
Is that meaningful enough to have any changes to the normal cadence of.
Pricing hitting midyear just trying to think about what about if that's meaningful from a financial standpoint at this point.
Yeah, I think it's meaningful and it might be.
More as we think about networks.
And stability and planning that we can do.
And so I think the events still occur, but there might be just less.
Of the freight that finds itself in those type of events. So maybe the less.
Dense lanes maybe.
Different strategies that change because they've had some changes in the network is what finds itself in those as opposed to the repetitive.
And the base business so.
From an operating standpoint from an efficiency standpoint.
From where you want to have your drivers in your equipment there is great benefit.
I think for both sides to do that.
I think it will ever get to 100% that way because of how much change does go on within individual sourcing and networks, but I think we can get smarter collectively than traditionally has been the approach in the industry.
Thank you. Our next question is Scott group with Wolfe Research. Please proceed with your question.
Hey, Thanks, good morning, guys.
Steve can you share with us what's in the guidance for gains in the fourth quarter and then if I look excluding gains.
<unk> segment earnings were down a bit from the second quarter. It sounds like maybe there's a good amount of startup costs or inefficiencies and dedicated is there any way to quantify that.
Sure I'll tackle the first part of that and maybe Mark can weigh in on the last part but regarding this as equipment gains that we're talking about here and in our <unk>.
Fourth quarter guidance I mentioned in the opening comments that we expected sell less equipment in that that amount is probably less than half of the equipment that we sold in the third quarter.
We'll have to see a lot of what drives our dispositions is the the receipt of new equipment coming in and that's not always completely predictable. It has certainly been lumpy it's been lumpy.
Exactly yeah.
Kind of what's driving.
Some of the gain behavior that you see working through our income statement.
So.
Again to repeat what I said earlier, we expect.
Quite a bit less gains in the fourth quarter, but still expect to put as much operating income on the board as we did in the third so that's an indication that we think everything else is working really well.
And Scott maybe just you.
You hit on one of the major elements of.
Kind of a cost drag in the third quarter on truck was certainly.
A very robust startup period within dedicated.
More back end loaded relative to when we have the revenue that we got a chance to book much more of the cost in the earlier part of the quarter as we were preparing for that.
Probably the second area that we.
I think we've got into some level of maturity now is at five.
Apprenticeship academies that we have open from a new driver CDL standpoint.
Started out in the second quarter we.
Got those fully ramped up through the third quarter and are now starting to see some of the benefit of that channel.
To address some of the capacity gap that we're all chasing right now in the marketplace.
I think those two from a cost standpoint were probably the biggest contributors that we didn't get the full benefit in the quarter, but we expect to see in some of the out periods obviously.
Okay and then just my last question Mark maybe just some thoughts what are you seeing in terms of the spread between intermodal and trucking rates.
Ill tie inventories tight.
Intermodal has got a lot of accessorial charges, right now, whereas the spread and heading into 'twenty two what our shippers telling you in terms of are they looking to favor one versus the other.
Yeah, Scott I would tell you today, we're still seeing more conversion that things that should go on the train or being pushed onto the road.
Just because of some of the difficulty in the fluidity issues and the congestion issues on the rail I think the good news there is that we've seen much less of that here to start in October.
But.
So frustratingly we have much more we can do relative to intermodal based upon what we have available and how we believe we can execute across the network and we've been able to seize.
Certainly the increased container count will help with that but so just getting some of these heart attack events that we've been dealing with on a.
Kind of a reoccurring basis I don't have a heart attack and reoccurring is the right way to frame that but.
Now if we can get that behind us we can get some more confidence in the customer and convert more of what should be moving on the train.
As far as price movement, there has been some compressed.
Compression I think we've moved a little bit faster in the third quarter on some catch up in intermodal.
The contract pricing range.
But there is still a good economic value for the customer between over the road and intermodal, particularly depending on where they place.
Environmental concerns as part of that equation.
Thank you. Our next question comes from Chris Wetherbee with Citi. Please proceed with your question.
Hey, Thanks, good morning, guys.
Maybe if you could talk a little bit about what your expectations are for the fleet book combined for hire and dedicated in the fourth quarter and then.
Maybe taking a step back and think more conceptually obviously, it's been a very very challenging driver environment and certainly that's led I'm sure at least in part to the contraction in the fleet over the course of the last several years.
I guess, if you were to look out a few years down. The road do you think there is a point where you'd like to pivot back into sort of market share growth.
The broader over the road truck fleet, maybe thats more of a dedicated comment that there's a for hire comment but wanted to get your perspective on that bigger picture dynamics, where you think schneider should be in terms of fleet and the broader sort of nationwide industry.
Okay.
Yes Kristina.
A lot there too.
To unwind in many ways.
So we.
We strongly believe that a healthy and vibrant.
Network business in truck is very good for our enterprise It gives us great optionality.
As we go to market too.
Bring multiple services together and that's always a key attraction element for our customer base we.
Set all of these difficulties that we've had but we're still putting 5000 trucks a day out there.
In the network, which is still a very very sizable.
Fair to believe in this industry and so we still have great offering will be like to have more certainly, but we also have to be cognizant of the labor condition and the driver desires and the driver experience and some of the other configurations right now.
Are more attractive and.
Fortunately they match up well with what the customer value proposition is getting out of as well so.
But.
We're not strategically stepping back.
From.
The network side of the business, but we also don't want to just.
Blindly chase it.
From an overall cost standpoint to achieve kind of that outcome and so we're trying to use the leverage of our portfolio, which is great and one of our advantages is all the optionality that we have and certainly from a customer standpoint, the power only.
Capability that we've developed has stepped into that vacuum in the short term here to help us serve customers.
Grow our our third party business by using that Orange trailer and so.
As your question gets to the fourth quarter I think that is probably more what will.
<unk> continue into the fourth quarter, I think youll see growth in.
<unk>.
Those key strategic areas of dedicated and.
Intermodal dray and we're going to work like heck to get stability into that network portion of the fleet.
But over time, absolutely I could see us looking to grow both of those.
Network and dedicated side.
So we just want to do it when it makes more sense for us to do it.
Okay. That's really helpful color I appreciate that perspective, and then maybe as a quick follow up on the intermodal side can you just talk a little bit about container additions next couple of quarters, and then maybe a little bit about how.
How we should think about utilization from a rail service perspective in <unk>.
Yeah.
Yes, I mentioned that I believe will get at least another 15 1600 containers delivered here in the fourth quarter, we may not get a chance to use them a great deal.
Because of our.
Kind of when they hit but I think that puts us in a solid position next year.
Solidifying and we'll give you more guidance as we get to the next call, but we will anticipate another year of growth of our container and chassis fleet based upon the opportunities that we see in front of us in 2022 as well.
And right now as you try to think about the volumes in this business were about evenly split between just the dwell time, that's impacting our volumes at the customer location.
And some of the.
Gateway congestion and fluidity issues that we've had with the rail network.
Don't want to obviously declare victory here, but we're seeing a little bit better improvement in the fluidity of the rail network, we have not yet seen any material movement or improvement as it relates to the customer side is they are dealing with not only increase volumes, but also their own labor challenges to get those things turned rapidly. So I think that one is still going to be with us for a week.
And we would expect we're going to carry some of those burdens into 2022.
Okay.
Thank you. Our next question comes from Tom <unk> with UBS. Please proceed with your question.
Yeah, good morning, maybe foot.
On that topic, just a little bit more.
Mark are you.
Do you feel like you have visibility or are you optimistic that some of those constraints you just mentioned.
Are likely to improve it seems like there's a lot of appetite for intermodal volume growth in 2022, but you know capacity is a is a constraint.
Yeah, I mean, do you think that.
You have visibility to the labor side.
With customers and warehouses are with rails or.
It gets drayage in general that that would really allow you to have substantial intermodal volume growth.
'twenty two.
Yes.
Yes, Tom So we're I feel confident is in our dray performance, our dray opportunities to continue to put.
More productive.
Driver jobs in the market to support our dray business I feel good about our container build I feel really good about our execution.
Certain parts of our network, particularly in the east where dray matters more and our execution is where we're seeing the growth.
Good solid fluidity there from the.
The rail side.
So we really haven't taken a backseat at all in the eastern part of the network has been more of those intermediate routes in the western side through the poor state so well documented.
So I think that portion is going to be here, a while and.
The customer issues have not subsided.
There's a lot of obviously they've leaned into that quite heavily they tried to do a number of things differently, but we just haven't seen collectively.
Enough of a move there so.
So what we have is just more.
Delay on the customer side, and certainly I would have it.
Anticipated.
This far into the cycle, but it's going to be with us I believe.
So does that imply we ought to look for growth maybe in.
Kind of gradually ramping up obviously, there's seasonality in the business.
I don't know if comps are a lot different but is that the right way to look at it that your intermodal volume growth would kind of gradually ramp up street 22 or are you more optimistic in kind of a step up.
Yeah, I'd like to be more optimistic.
I think because we know how much more could convert and then has converted so.
It's great to be in the position that the market is has more desire then.
You know the providers can provide right now and so I.
I think ultimately things will start to get more fluid things will start to work its way through.
And that should bode well and it's just a matter when I just don't think that's going to be a real short term issue here in the fourth quarter, Tom, but I think certainly as 2022 progresses I think that's a very reasonable expectation and were confident that that will continue to.
Improve.
Okay. Just a quick second one if I can add on I wanted to see if you could provide a little more color on brokerage me had great results in brokerage continuing a positive momentum there how much of the mix was power only and how maybe if you could give a little more perspective on how important that capability is.
Two.
So the growth that youre seeing in that business. Thank you.
Yes, you know I look at it what I can try to ascertain as industry statistics on this I don't think anybody is moving more power. Only then we are I think we're kind of leading the charge on that from an overall volume standpoint, but we're also growing our volumes across the more traditional lanes.
Excuse me the traditional traditional channels of live live within our brokerage offering and that is still the dominant portion of what we do there and the dominant portion of even the growth of what we do there Tom but but.
Increasingly power only.
Is gaining share, but it's still the smallest portion of it.
Thank you. Our next question is intense Hoaxer with Bank of America. Please proceed with your question.
Hey, good morning.
Mark and Steve Hey, So just you've hit on a lot of stuff in terms of kind of what's going on with the market. So I guess just to clarify Steve or Mark on your thoughts on fourth quarter, just given your large outlook. So if you've got less gains we've got similar momentum on pricing.
Does that mean, we're not seeing additional wage ramp up needed to sustain kind of the labor labor in this market given the battle that's going on I just want understand that you were talking about labor wage rates before but maybe just talk about kind of what youre seeing in terms of on the cost side isn't going into the fourth quarter.
Sure I think we would anticipate.
Full quarter effects of actions that have been taken across our recent past in the fourth quarter. So some a bit of continued our COO.
Cost inflation in there and it's not just in rate per mile. It's in.
Work configurations and driver friendly step.
Steps that we're taking outside of the rate per mile itself. So so there is some of that inherent.
What we see happening in the fourth quarter at the same time.
The price momentum.
Believe should more than adequately cover that dynamic.
As we move through the fourth quarter.
Our statement about we.
Setting gains aside we expect to make more money in the fourth quarter than third.
<unk>.
Particularly in truck and intermodal.
Yeah. Thanks, Steve I guess, what I was asking is.
You don't see another wave of rate increases given the target of labor in this environment, where just the demand on the drivers that that's what it sounds like you're saying you've got that built in it nothing new particularly in the fourth quarter as planned if that's your specific question, yes, we get into 2022.
A different.
Dynamic and thought process, probably but for the fourth quarter I think it's just more about full quarter effects of things that have already been done.
And Mark just to follow up on the brokerage side you were just referring about in terms of the ramp up.
The scaling of the relationship of mastery is that something that's going to kind of accelerate that that deployment and capabilities or is that more gradual just trying to understand the cadence of what we should expect that a brokerage.
Yes, we have a very specific.
Onboarding plan.
Sequence from which we will do that power only being the first thing that starts and that starts to ramp as I mentioned, Canada in the fourth quarter, but we would.
As we come out of next year.
Timing.
At this juncture suggests that we will.
B and the conversion of our larger segment of our entire logistics offering, namely the brokerage business in calendar 2022.
Thank you there are no further questions at this time.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
Okay.