Q3 2023 Schneider National Inc Earnings Call

Thank you for standing by my name is Bailey and I will be your conference operator today.

Speaker 1: Thank you for standing by. My name is Bailey and I will be your conference operator today.

Speaker 1: At this time, I would like to welcome everyone to the Schneider 3 Q2 023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers are marked, there will be a question and answer session.

At this time I would like to welcome everyone to the Schneider three Q2 thousand 23 earnings call.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

If you limit your questions to one initial and one follow up question.

Speaker 1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one.

I would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question again press Star and one.

Speaker 1: I would now like to turn the call over to Steve Bindas, Director of Investor Relations.

I would now like to turn the call over to Steve Bender director of Investor Relations.

Thank you operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer, Carol Campbell Executive Vice President and Chief Financial Officer, Jim Filter Executive Vice President and group President of transportation and logistics.

Speaker 2: Thank you, operator, and good morning, everyone. Joining me on the call today are Mark War, President and Chief Executive Officer, Darrell Campbell, Executive Vice President and Chief Financial Officer, Jim Filter, Executive Vice President and Group President of Transportation and Logistics, and Steve Broughett, Executive Vice President.

And Steve <unk> Executive Vice President.

Earlier today the company issued an earnings press release this release and an investor presentation are available on the Investor Relations section of our website at <unk> Dot com.

Speaker 2: Earlier today, the company issued an earnings press release. This release and an investor presentation are available on the Investor Relations section of our website at Steiner.com.

Our call will include remarks about future expectations forecasts plans and prospects for Schneider. These constitute forward looking statements for the purposes of the safe Harbor provisions under applicable Federal Securities laws.

Speaker 2: or looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations.

Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations.

The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent annual report on Form 10-K.

Speaker 2: The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent annual report on Form 10K. And those risks identified in today's earnings release.

And those risks identified in today's earnings release.

Speaker 2: All former looking statements are made as of the date of this call and Schneider describes any duty to update such statements except as required by law.

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.

Speaker 2: In addition, pursuant to regulation G, a reconciliation of any non-GAB financial measures referenced during today's call can be found in our earnings release and investor presentation, which includes reconciliation to the most directly comparable GAB measure.

Pursuant to regulation G. A reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release and Investor presentation, which includes reconciliations to the most directly comparable GAAP measures.

Speaker 2: Now I'd like to turn the call over to our CEO Mark Rorp.

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

Speaker 3: Thank you, Steve, and good morning, everyone, and thank you for joining the Schneider call today. I'm going to start with some broader context on the market before getting to our third quarter result.

Thank you, Steve and good morning, everyone and thank you for joining the Schneider call today I'm going to start with some broader context on the market before getting to our third quarter results.

Speaker 3: We are operating in a elongated trough of the current freight cycle. As we've seen for the better part of the year, freight volumes remain muted, and while inventories have normalized, shippers are facing an uncertain macro out.

We are operating in an elongated trough with the current freight cycle as we've seen for the better part of a year freight volumes remain muted and while inventories have normalized shippers are facing an uncertain macro outlook.

Speaker 3: Despite pricing that in some cases are below operating costs, carrier capacity has been slow to rationalize.

Despite pricing that in some cases are below operating cost carrier capacity has been slow to rationalize.

Speaker 3: Last quarter, we shared that we were strongly positioned to capitalize on opportunities as they begin to materialize.

Last quarter, we shared that we were strongly positioned to capitalize on opportunities as they begin to materialize, while we did not see those opportunities in the third quarter recent shutdowns of a few competing brokerage operations reflect the unsustainable nature of current pricing and the expectation of targeted near term pricing improvements.

Speaker 3: While we did not see those opportunities in the third quarter, recent shutdowns of a few competing brokerage operations reflect the unsustainable nature of current pricing and the expectation of targeted near-term pricing improvements.

Speaker 3: We believe rates have fully reset during the third quarter and expect pricing to improve in the new year as the market begins to return to equilibrium.

We believe rates are fully reset during the third quarter.

And expect pricing to improve in the new year as the market begins to return to equilibrium.

Speaker 3: With that backdrop, let me provide context for Schneider's third quarter performance.

With that backdrop, let me provide context for snyder's third quarter performance.

Speaker 3: We expected the quarter to be challenging and it certainly was, as the forceful impacts of pricing resets were realized, especially at our network offerings of truck and in remodel.

We expected the quarter to be challenging and it certainly was as a forceful impacts of pricing resets were realized especially at our network offerings of truck and intermodal.

Speaker 3: The earnings impact of this recent pricing activity was compounded by a handful of cost items.

The earnings impact of this recent pricing activity was compounded by a handful of cost items.

Speaker 3: and the combined result was a sharp decline in our sequential earning.

And the combined result was a sharp decline in our sequential earnings.

At the same time, there is encouraging progress on elements of our portfolio and promising signals emerging in the broader market. So it's helpful to provide additional context to both sides of the equation.

Speaker 3: At the same time, there is encouraging progress in elements of our portfolio and promising signals emerging in the broader market. So it's helpful to write additional context to both sides of the equation.

Regarding the cost items, I, just mentioned rather than a typical quarter, which as a mix of favorable and unfavorable items. There were several areas that all fell in the unfavorable category during the third quarter.

Speaker 3: Regarding the cost items I just mentioned, rather than a typical quarter, which has a mix of favorable and unfavorable items, there were several areas that all fell in the unfavorable category during the third quarter.

Speaker 3: Their cumulative impact contributed to the sequential decline in quarterly earnings.

There are cumulative impact contributed to the sequential decline in quarterly earnings.

Speaker 3: First, we had unfavorable field dynamics during the quarter. We typically do not talk about field. As over the course of time, field has a relatively neutral effect on our earnings.

First we had unfavorable fuel dynamics during the quarter, we typically do not talk about field as over the course of time fuel has a relatively neutral effect on our earnings.

Speaker 3: However, it was a notable negative factor in the third quarter of 23 compared to the prior quarter due to the rapid run up and fuel

However, it was a notable negative factor in the third quarter of 2003 compared to the prior quarter due to the rapid run up in fuel costs.

Next we had expenses for bad debt were much higher than normal as we typically have insignificant amounts of expense in this area.

Speaker 3: Next we had expenses for bad debt that were much higher than normal, as we typically have insignificant amounts of expense in this area. This quarter, the combination of customer bankruptcies and uncollectable receivables resulted in meaningful expense.

This quarter, the combination of customer bankruptcies, and uncollectible receivables resulted in meaningful expenses.

Speaker 3: In fact, more expense in the quarter than we typically experience in a full year.

In fact more expense in the quarter than we typically experience in our full year.

Also equipment gains were lower on a sequential basis due to the softening of the used equipment market.

Speaker 3: Also equipment gains were lower on sequential bases due to the softening of the used equipment marks.

In aggregate these costs represented a headwind of $18 million compared to the second quarter.

Speaker 3: In aggregate, these costs represented a headwind of $18 million compared to the second quarter.

Speaker 3: These items are all in part of the sauce, yet they are outside of the core elements of our business results, such as price, volume, and productivity. So, let's transition.

These items are all in part of the source yet they are outside of the core elements of our business results such as price volume and productivity.

So let's transition to those topics.

Volumes in our truck network business have been steady, but unseasonably tepid, we improved asset utilization, but that benefit was far outpaced by the reset contractual pricing, which was most acute in this part of the business.

Speaker 3: That impact was compounded by low double-digit percentage of loads coming from the depressed spot market.

That impact was compounded by low double digit percentage of loads coming from the depressed spot market.

Speaker 3: In addition, the majority of cost items we called out in the third quarter resided within the truck network.

In addition, the majority of cost items, we called out in the third quarter resided within the truck network.

Speaker 3: Covenation of these factors resulted in a pronounced sequential decline in margin.

Combination of these factors resulted in a pronounced sequential decline in margins and generated a margin profile in this portion of our business that is not sustainable.

Speaker 3: generated a margin profile in this portion of our business that is not sustainable.

We have been proactively addressing our operating costs since the fourth quarter of 2022 have implemented significant cost reduction initiatives that have enabled the maintenance of our variable contribution margins on a year over year basis.

Speaker 3: We have, in proactively addressing our operating costs in the fourth quarter of 2022, have implemented significant cost reduction initiatives that have enabled the maintenance of our variable contribution margins on a year over year-based.

Speaker 3: Yet a growing portion of the network book is not at compensable rates and therefore unsustainable due to the remaining inflationary cost impacts of wages and equipment replenished.

He had a growing portion of the network book is not a compensable rates and therefore unsustainable due to the remaining inflationary cost impacts of wages and equipment replenishment.

We are diligently pursuing targeted price recovery and are prepared to pivot to more compensable freight in the market supply and demand condition Rationalises further.

Speaker 3: We are diligently pursuing targeted price recovery and are prepared to pivot to more compensable freight when the market supply and demand condition rationalizes further.

Speaker 3: On a brighter note, our dedicated business continues to grow and deliver expected results.

On a brighter note our dedicated business continues to grow and deliver expected results.

Speaker 3: We absorbed meaningful new business startup activity in the quarter and excluding a customer bankruptcy impact, we're still able to deliver stable.

We absorbed meaningful new business startup activity in the quarter and excluding a customer bankruptcy impact, we're still able to deliver stable sequential margins.

It's a combination of organic growth and the addition of Midwest logistics systems and now Eminem transport as is exiting the third quarter was 6680 tractors operating in a dedicated contract configuration.

Speaker 3: combination of organic growth and the addition of Midwest logistic systems and now M&M Transport has us exiting the third quarter with 6,680 tractors operating in a dedicated contract configuration.

Speaker 3: We have a line of sight to a series of new business startups in the fourth quarter of 2023 and the first quarter of 2024, giving us confidence that our momentum and dedicated will continue.

We have a line of sight to a series of new business startups in the fourth quarter of 2023, and the first quarter of 2024, giving us confidence that our momentum in dedicated will continue.

Speaker 3: We are growing our dedicated service offering as we enjoy deeper, more enduring relationships with customers. And we leverage our ability to deliver unique solutions that address how our customers deploy their supply stream strategy, deliver differentiation and serving their end market.

We are growing our dedicated service offering as we enjoyed deeper more enduring relationships with customers and we leverage our ability to deliver unique solutions that address our customers deploy their supply strength strategy.

Levered differentiation and serving their end markets.

Also our professional drivers field participate in and enjoy the experience those deeper relationships deliver at the local level.

Speaker 3: Also, our professional drivers feel, participate in, and enjoy the experience those deeper relationships deliver at the local level.

Turning to the intermodal segment, we saw modest tender volume improvement throughout the quarter as we worked to improve the balance into critical important markets, such as southern California, and Mexico to lessen the financial impact of empty container repositioning.

Speaker 3: Turning to the intermodal segment, we saw modest tender volume improvement throughout the quarter as we worked to improve the balance into critical import markets such as Southern California and Mexico to lessen the financial impact of empty container repositioning.

Speaker 3: The work of improving network balance is ongoing, even as we see a more pronounced lift in tender volumes in the month of October .

The work of improving network balances ongoing even as we see a more pronounced lift in tender volumes in the month of October.

Speaker 3: Revenue per order was down 4% sequentially and 16% year over year through a combination of price contraction and a mixed change with a higher percentage of shorter haul regional volumes in both the eastern and western portions of the network.

Revenue per order was down 4% sequentially and 16% year over year through a combination of price contraction and a mix change with a higher percentage of short haul regional volumes in both the eastern and western portions of the network.

Speaker 3: Despite not having the benefit of a meaningful customer allocation season, we have already grown our order count by 20% on the CPKC service into and out of Mexico since its implementation.

Despite not having the benefit of a meaningful customer allocation season, we've already grown our order count by 20% on the CP Casey service into and out of Mexico since its implementation.

Speaker 3: Overall, we continue to believe there is a large opportunity to convert over-the-road freight to intermodal across the entire North American network.

Overall, we continue to believe there is a large opportunity to convert over the road freight to intermodal across the entire North American network.

Encouragingly discussions with several of our largest customer relationships and the consumer products retail and automotive verticals indicate that over the road conversion is aligned with our 2020 for transportation allocation objectives.

Speaker 3: Encouragingly, discussions with several of our largest customer relations.

Speaker 3: Consumer products, retail, and automotive verticals indicate that over-the-road conversion is aligned with their 2024 transportation allocation objective.

We have at least 30% of pent up growth opportunity in intermodal container and chassis asset productivity.

Speaker 3: we have at least 30% of pent-up growth opportunity in intermodal container and chassis asset productivity.

Finally in our logistics segment brokerage volumes and contribution margins are under pressure from intense competition, while challenged our contract logistics and brokerage business remains solidly profitable as we nimbly adapt to the current market realities, while continuing to invest in our freight power for shipper and carrier platform.

Speaker 3: Finally, in the logistics segment, brokerage volumes and contribution margins are under pressure from intense competition.

Speaker 3: While challenged, our contract logistics and brokerage business remains soundly profitable as we nimbly adapt to the current market realities while continuing to invest in our great power for shipper and carrier platform, as well as in growing our power-only capability.

As well as in growing our power only capabilities.

Speaker 3: I will turn it over to Steve Ruffett for a quick wrap-up before we get to your questions. But before I do that, I want to highlight that this will be Steve's final herding season with Schneider.

I will turn it over to Steve Robb It for a quick wrap up before we get to your questions, but before I do that I want to highlight that this will be Steve's final earnings season with Schneider.

Speaker 3: I want to thank and recognize his many contributions over the last five and a half years in advancing the company's multimodal and capital allocation strategy, as well as the modernization of the company's entire financial function.

I want to thank and recognize his many contributions over the last five and a half years and advancing the company's multi modal and capital allocation strategy as well as the modernization of the company's entire financial function.

Speaker 3: I wish him and Susan all the best in retirement 2.0.

I wish him and Susan all the best in retirement 2.0.

Speaker 3: I'm also pleased that Daryl Campbell has taken the chief financial officer baton and he is bringing a rich set of financial leadership experiences to our team and we feel very fortunate to have him. Welcome, Daryl.

I'm also pleased that Darryl Campbell has taken the chief financial Officer, Baton and he is bringing a rich set of financial leadership experience to our team and we feel very fortunate to have welcomed.

Welcome Darryl.

Thanks, Mark I'm thrilled to be on board and part of such a strong team over the past months Stephen have been diligently executing on a well crafted transition plan, which will continue through the end of the year.

Speaker 4: Over the past month, Steve and I have been diligently executing on a well-crafted transition plan, which will continue through the end of the year.

Speaker 4: I've also been actively listening, engaging, and learning while getting integrated into the business.

<unk> also been actively listening engaging and learning while getting integrated into the business.

Speaker 4: I look forward to playing an active role in building on our organizational strengths and executing on our top priorities in 2024 and beyond.

I look forward to playing an active role in building on our organizational strengths and executing on our top priorities in 2024 and beyond.

Speaker 4: I would also like to take a moment to thank Steve for his significant contributions to Schneider during his tenure.

I would also like to take a moment to thank Steve for his significant contributions to Schneider during his tenure.

Yeah.

Speaker 5: Thank you, Daryl. Good morning to everyone on the call.

Thank you Darryl.

Good morning to everyone on the call.

Speaker 5: Mark provided some good color on our third quarter results, and I'll add a few comments from my perspective.

Mark provided some good color on our third quarter results.

A few comments from my perspective.

Speaker 5: Having been in the transportation space since 1992, this was a unique quarter, given the amount of sequential decline in pricing that we experienced from the 2nd quarter to the 3rd expected most, but not all of this decline of all the.

Having been in the transportation space. Since 1992. This was a unique quarter given the amount of sequential decline in pricing that we experienced from the second quarter to the third.

We expected most but not all of this decline.

Of all the freight cycles that have happened over the past 30 years. This one's in the midst of what I would characterize as an over correction to the freight environment of the prior couple of years.

Speaker 5: This one's in the midst of what I would characterize as an over correction to the freight environment of the prior couple.

Speaker 5: As such, the difficult pricing environment, especially in the network businesses, is temporarily masking, otherwise solid execution across our company. What we still have work to do.

As such the difficult pricing environment, especially in the network businesses.

<unk> masking otherwise solid execution across our company.

While we still have work to do to portfolio construction and diversification that we've strategically pursued over the past several years is proving to be beneficial.

Speaker 3: that we've strategically pursued over the past several years is proving to be beneficial.

Speaker 5: The growth in our dedicated business, both organically and through acquisitions, is supporting earnings in our truckload segment, and over 60% of our total trucks are in dedicated configuration.

The growth in our dedicated business, both organically and through acquisitions.

According earnings in our truckload segment and over 60% of our total trucks are in dedicated configurations.

Also our intermodal business is well positioned for strong growth and an even more prominent role in our portfolio mix.

Speaker 5: Also, our intermodal business is well-positioned for strong growth and an even more prominent role in our portfolio mix.

Our logistics businesses, while not immune from a difficult market dynamics are performing well on a relative basis.

Speaker 5: Our logistics businesses, well-known out of immune from the difficult market dynamics are performing well in a relative basis and are a growth engine with compelling return on cap.

Our growth engine with compelling return on capital.

We've also been quite effective at managing variable costs in proportion to our volumes and have improved productivity on a year over year basis.

Speaker 5: We've also been quite effective at managing variable costs and proportion to our volumes and have improved productivity on a year-over-year basis.

Speaker 5: These efforts are being overshadowed by the sheer force of double digit price declines. They are real, and I think our team has done an effective job in these areas.

These efforts are being overshadowed by the sheer force of double digit price declines, but they are real and I think our team has done an effective job in these areas.

Speaker 5: Switching gears to the fourth quarter, we expect the continuation of current market conditions and therefore are assuming little to no seasonal lift from volumes or project act.

Switching gears to the fourth quarter, we expect the continuation of current market conditions, and therefore are assuming little to no seasonal lift from volumes or project activity.

Speaker 5: I would also note that we are now through the repricing activities across our book.

I would also note that we are now through the repricing activities across our book of business and therefore expect no further deterioration in pricing across our operations.

Speaker 5: and therefore expect no further deterioration in pricing across our office.

Speaker 5: Also, we do anticipate that some of the cost items that Mark mentioned will abate in the fourth quarter. For example, we expect fuel to be neutral to slightly positive rather than negatively impacting earnings as it did in the third quarter. And we expect that there will be some bad death.

Also we do anticipate that some of the cost items that Mark mentioned will abate in the fourth quarter. For example, we expect fuel to be neutral to slightly positive rather than negatively impacting earnings as it did in the third quarter.

And we expect that there will be some bad debt expense in the fourth quarter, but not at the elevated level of the third quarter.

Speaker 5: 4th quarter, but not at the elevated level of the 3rd.

Speaker 5: On the other hand, we expect fourth quarter equipment.

On the other hand, we expect fourth quarter equipment gains to continue to be a sequential headwind and be lower than third quarter levels.

Speaker 5: continue to be a sequential headwind and be lower than third quarter level.

Considering these and other factors our updated full year guidance for adjusted EPS is $1 40 to $1 45.

Speaker 5: Considering these and other factors, our updated full year guidance for adjusted EPS is $1.40 to $1.45.

Speaker 5: Given our year-to-date adjusted EPS of $1.20, our fourth quarter is inherently guided to a range of $20 to $25.

Given our year to date adjusted EPS of $1 20, our fourth quarter is inherently guided to a range of 20 to 25.

Speaker 5: So we expect fourth quarter earnings to be even with or modestly above third quarter level.

So we expect fourth quarter earnings to be even with or modestly above third quarter levels.

Speaker 5: We also believe that this period of time from the third quarter of 2023 through the first part of 2024 will define the trough of this freight cycle.

We also believe that this period of time from the third quarter of 2023 through the first part of 2024, well defined the trough of this freight cycle.

Speaker 5: We'll provide more information on our next earnings call, but we're currently viewing 2024 as a transition year with freight market fundamentals slowly but steadily improving. Now it's barring a catalyst that could accelerate the pace of improvement, which could very much have.

We will provide more information on our next earnings call, but we're currently viewing 2024 is a transition year with freight market fundamentals slowly, but steadily improving and thats barring a catalyst that could accelerate the pace of improvement, which could very much Hal.

Speaker 5: Turning now to a quick update on our uses of cash, our guidance for full year 2023 net capex has remained stable throughout the year as OEM production has been more stable and predictable.

Turning now to a quick update on our uses of cash our guidance for full year 2023, net Capex has remained stable throughout the year as OEM production has been more stable and predictable this year.

We updated and narrowed our capex guidance to a range from $5 $50 million to $575 million.

Speaker 5: We updated and narrowed our CapEx guidance to a range from 550 to 575 million.

Speaker 5: And also we've made 51 million in cherry purchases since the May inception of activity under our current $150 million authorization.

And also we've made $51 million in share repurchases since the may inception of activity under our current $150 million authorization.

Speaker 5: In closing, I would like to thank Mark and the Schneider organization for the privilege to serve as CFO since 2018, and I'm proud of our accomplishments over that time.

In closing I would like to thank Mark and the Schneider organization for the privilege to serve as CFO since 2018, I'm proud of our accomplishments over that timeframe.

Speaker 5: It's a great team and a strong organization backed by a rock-solid balance.

It's a great team and a strong organization backed by a rock solid balance sheet.

Speaker 5: Schneider's complimentary services are operating at scale and set up for continued growth and success, which will benefit our assembly.

Nighters complementary services are operating at scale and set up for continued growth and success.

It will benefit our associates and shareholders.

Speaker 5: I'm also pleased to have Daryl on board. He's already adding value and I know that that will only increase as he gets further acclimated. So it's great to have him on the team. And with that, we'll open up.

I'm also pleased to have Darrell onboard he is already adding value and I know that that will only increase as he gets further acclimated. So it's great to have him on the team.

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

At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker 1: At this time, I would like to remind everyone in order to ask a question, press star than the number one on your telephone keypad. Please limit your question to one initial and one follow-up question.

These limit your questions to one initial and one follow up question.

Speaker 1: Your first question comes from the line of Tom Wadewitz with UBS. Your line is open.

Your first question comes from the line of Tom <unk> with UBS. Your line is open.

Speaker 6: Yeah, good morning. And, you know, Steve, a pleasure, you know, working with you, talking with you over the years. And Daryl, congratulations to you on the new position at Schneider. I wanted to ask, obviously, a pretty tough cycle, I think, you know, on the network business. Mark, how should

Hi, Yes, good morning and.

Steve a pleasure working with you talking with you over the years and Daryl like congratulations to you on the new position at Schneider.

I wanted to ask.

Obviously.

A pretty tough cycle I think.

On the network business.

Mark how should we think about I.

Speaker 6: guess what could drive improvement in that business or the time frame and I guess you talk about

I guess, what could drive improvement in that business or the timeframe and I guess you talk about that.

Speaker 6: transition, and clearly price is important. But how do you think about the timing and possible levers for that to improve? I don't know if there's something on the cost side or if it's just really waiting for the market to tighten.

Transition.

And clearly price is important but.

How do you think about the.

The timing and possible levers for that.

To improve I don't know if theres something on the cost side or.

Really waiting for the market to tighten.

Thanks, Tom I think there is opportunities across the board both on the cost arena, which we're leaning into and having success with.

Speaker 3: Thanks Tom. I think there's opportunities across the board, both on the cost arena, which we're leaning into and having success with. Secondly, as we, and others have been monitoring the supply side of this market, it's been stubborn, uncharacteristically so to be this.

Secondly, as we.

And others have been monitoring the supply side of this market, it's been stubborn uncharacteristically soda Venus.

Speaker 3: late in the cycle and not seen more improvement. So we not only look at some of the governmental

Late in the cycle not seen more improvement so we not only look at some of the governmental.

Speaker 3: metrics that get published that have a little bit of a lagging effect. We also look very closely at things that are more contemporary, that we have visibility to such as what we're seeing in our brokerage carrier health, what we're seeing in new driver pipeline into our recruiting function, particularly from the experienced driver.

Metrics that gets published that have a little bit of a lagging effect. We also look very closely at things that are more contemporary that we have visibility to such as.

What we're seeing in our brokerage carrier health, what we're seeing in new driver pipeline into our recruiting function, particularly from the experienced driver.

Speaker 3: And what we look into with least turn-ins and other things to going on in the order operator community and all of those are continuing to trend as if the market is correcting at an accelerated pace on a capacity front. And so I think that first and foremost,

And when we look into with lease term.

<unk> and other things going on in the owner operator community and all of those are continuing to trend as if the market is correcting at an accelerated pace on the capacity front and so I think that first and foremost the.

Speaker 3: tougher the market, the quicker that those things should start to correct. So that's one of the things that we do expect as we get into the new year that will continue to see those trends. Secondly, we do.

Tougher the market the quicker that those things should start to correct. So when and Thats one of the things that we do expect as we get into the new year that we will continue to see those trends.

We do think we have.

Speaker 3: a targeted price improvement opportunities across the book. We identified what we don't believe is sustainable positioning coming through, particularly the second and third quarter renewal season. So we think of revenue quality, we think of cost, and we think of capacity right sizing as our elixir for an improved network business.

Targeted price improvement opportunities across the book.

Identified what we don't believe is sustainable positioning coming through particularly the second and third quarter renewal season. So we think of revenue quality, we think of cost and we think of capacity right.

Right sizing as our elixir for an improved network business.

Great.

Speaker 6: Great, thank you for that. And then I guess a quick fall up on Intermodal. You sound optimistic on potential for volume to improve in 24 that the commonsense ship are interested.

Thank you for that and then I guess, a quick follow up on intermodal you sound optimistic on potential for volume to improve in 'twenty for the comments on shipper interest.

Speaker 6: Is volume improvement, do you think that will help on the the margin side or do you think the pricing that's been locked in is going to keep us kind of stuck at that lower than normal margin level for a while?

It is volume improvement do you think that will help on the margin side or do you think the pricing that's been locked in is going to keep us kind of stuck at that lower than normal margin level for for a while.

Yeah. Thanks, So I think we have a couple of real margin accelerators that.

Speaker 3: Yeah, thanks. I think we have a couple of real margin accelerators that we're leading into. First, we have been encouraged. We've been in a series of discussions in the last month or so with key customers. As we get into the planning session for 2024 and beyond and where their strategies are, where our strategies aren't. How do they align? And we're highly encouraged by the discussion and the objectives that they have.

We're leaning into first.

Have been encouraged we've been in a series of discussions in the last month or so with key customers as we get into the planning session for 2024 and beyond and where their strategies are where our strategies are and how they align and we're highly encouraged by the discussion and the objectives that they have.

Speaker 3: communicated relative to looking to improve the percentage of intermodal volume running through their supply chain. So first and foremost, very...

Communicated relative to looking to improve the percentage of intermodal volume running through their supply chain, So first and foremost very.

Receptive customer community goals. There I think is helpful. Secondly, we're in the toughest part of the cycle as it relates to our cost position within intermodal when we go through a decelerating market while our.

Speaker 3: receptive customer community goals there, I think, is helpful. Secondly, we're in the toughest part of the cycle as it relates to our cost position within Intermodal. When we go through a decelerating market while our...

Speaker 3: purchase transportation costs at just over time to the market.

Purchased transportation costs adjust over time to the market.

Speaker 3: In a deselerating market, that's when we're at the most disfavored portion of the cycle. And so getting to a stable price and an improving price will help us on a cost basis.

In a decelerating market. That's when we are at the most just favorite portion of the cycle and so getting to a stable price and an improving price will help us on a cost basis.

Speaker 3: and therefore help margins. So the combination of those two top, in addition to now having a year under our belt with the UP,

Therefore help margins so the combination of those two Tom in addition to now having a year under our belt with <unk>.

Speaker 3: and working together. The great work that's already taken place with the CPKC into out of Mexico, which gives us another arrow to shoot into our intermodal basket.

And working together.

The great work has already taken place with the CP KC into out of Mexico, which gives us another arrow to shoot into our intermodal basket in.

Speaker 3: and already having a terrific and high performing CSX relationship that's already employees, I think, to see some great improvement in our intermobile business.

And already having a terrific high performing <unk> relationship.

Already employees I think two to.

To see some great improvement in our intermodal business.

Speaker 7: I would just add on that I believe the correction in Intermodal look more like the 2017-2018 correction than what we saw in 2020-2021.

I would just add on that.

And Bloomberg correction of intermodal look more like the 2017 2018 correction than what we saw in 2020 in 2021, meaning that it's more driven by dray capacity than by containers or rail or any other limiting factor.

Speaker 7: Meaning that it's more driven by drain capacity than by containers or rail or any other limiting factor.

Speaker 7: And I say that because during this down cycle, there's been a couple new regulations specifically in the state of California that are poignant capacity, specifically all the trade network. Number one, the injunction against AB5 was lifted during this time period, that removing the ability to have owner operators in the state of California, third parties, third party drain companies largely rely on owner operators as well as

Say that because during this down cycle, there's been a couple new regulation, specifically in the state of California, better polyol capacity, specifically all the Dray network number one the injunction against AB five was lifted during this time period.

Removing the ability of owner operators in the state of California, Our third parties, 33rd party dray companies largely rely on owner operators as well as Acs that is implemented it goes into effect in January so both the last diesel truck that can be added to the <unk>.

Speaker 7: ACF that is implemented it goes into effect in January so the last diesel truck that can be added to the Drey Registry is December 31st of this year. All new vehicles will have to be zero emission vehicles added to that registry really putting up a cap on that.

Great registry as of December 31 of this year, all new vehicles have to be zero emission vehicles added to that registry really putting a cap on that and so what we've done to be able to take advantage of that opportunity. When the market starts to practice that we don't use owner operators in the state of California.

Speaker 7: So what we've done to be able to take advantage of that opportunity when the market starts to correct is that we don't use owner operators in the state of California and of course the both the

And of course the.

<unk>.

Speaker 7: electric vehicles that we purchased, we're up to 92 electric vehicles in Southern California, as well as the charging and destruction that we've built, almost a fake five megawatt charging infrastructure that we'll take advantage of.

Electric vehicles that we purchased were up to 92 electric vehicles in southern California, as well as the charging infrastructure that we've built almost a five megawatt charging infrastructure they will take advantage of that.

Great. Thanks for all the perspective.

Speaker 1: Your next question comes from the line of Jack Atkins with Stevens, your line.

Your next question comes from the line of Jack Atkins with Stephens. Your line is open.

Okay, great. Thank you for taking my questions. I guess first one is on dedicated youre leaning in to the dedicated market for growth Youre not alone. There. Some of your peers are doing the same thing I guess.

Speaker 8: okay great thank you for taking my questions i guess first one is on dedicated your your leaning into the dedicated market for growth uh... you know you're not alone there some of your peers in the same thing i guess you know how are you ensuring that that businesses being priced appropriately given that we're entering into sort of multi-year contracts and a much more competitive part of the cycle for my pricing perspective how are you putting

How are you ensuring that that business is being priced appropriately given that we're entering into sort of multi year contracts and a much more competitive part of the cycle from a pricing perspective, how are you putting.

Speaker 8: safe guards around that to make sure you're not gonna have an issue there down the road.

Safeguards around that to make sure youre not going to have an issue there down the road.

Thanks, Jack and good morning, we don't anticipate having pricing issues and the dedicated business for all the reasons I think you asked the question is these are multi year deals.

Speaker 3: We don't anticipate having pricing issues in the dedicated business for all the reasons. I think you asked the question, is these are multi-year deals.

Speaker 3: You're very integrated with the customer and providing either a very, very high level of service or specialty equipment or other type of configuration that requires protections within how you contract a business and how you price the business.

You are very integrated in with the customer and providing.

Either a very very high level of service or specialty equipment or other type of configuration that.

Requires protections within how you contracted business and how you price the business to include how you over time have escalators.

Speaker 3: to include how you over time have escalators based upon market conditions. And so all of those.

Upon market conditions, and so all of those point to very long term debt.

Speaker 3: point to very long-term benefits for both parties.

Benefits for both parties.

Speaker 3: And that's our approach to that, Jack. We're not looking to play in the dedicated space. That's just masquerading is one way, basically where we are in the cycle. And so our approach to that, we have very strong disciplines as it relates to that within the business. And.

That's our approach to that Jack we're not looking too.

Play in the dedicated space, that's just masquerading as one way based upon where you are in the cycle and so.

Our approach to that and we have very strong disciplines as it relates to that within the in the business.

The performance of the business through this cycle has been quite strong and we will continue to expect it to be.

Speaker 3: The performance of the business through this cycle has been quite strong and we would continue to expect it to be.

Speaker 8: Okay, okay, Mark, thank you for that. And I guess shifting gears to the intermodal segment for a moment, kind of going back to Tom's question there. But, you know,

Okay. Okay, Mark Thank you for that and I guess shifting gears to the intermodal segment for a moment and kind of going back to Tom's question there but.

But if I look at the second quarter to third quarter and kind of progression within intermodal.

Speaker 8: Second quarter, third quarter, and a kind of progression within Intermodal, you know, your revenue per shipment, I think was down 4.3%, but your cost per shipment was up a little over 3% sequentially.

Your revenue per shipment and I think it was down four 3%, but your cost per shipment was up little over 3% sequentially can you maybe walk us through some of the dynamics on the cost side there that are.

Speaker 8: Can you maybe walk us through some of the dynamics on the cost side there that are, is it that the impact of drae? But is it that, you know, maybe your rail cost, but it felt like costs were going up sequentially when revenue was going down.

The impact of dray, but is it that.

Maybe your rail cost, but it felt like costs were going up sequentially when revenue was going down.

Speaker 8: And, you know, were there any kind of unusual dynamics affecting that in the quarter?

And were there any kind of unusual dynamics affecting that in the quarter.

Speaker 3: On the cost by just a couple of dynamics, because the network is not completely where we'd like it to be from a balanced standpoint, we did have higher empty repositioning into some of the head hall markets that I mentioned in my opening comments, Jack, particularly in service of Southern California and Mexico. We think over time we can balance that as has a network and in the actions that we have taken to do that.

On the cost side, just a couple of dynamics because the network is not completely where we'd like it to be from a balance standpoint, we did have higher empty repositioning into some of the head haul markets that I mentioned in my opening comments, Jack, particularly in service of Southern California, and Mexico, We think over time, we can balance.

Balance that as.

As a network and the actions that we've taken to do that.

Speaker 3: But secondly, I think it really just revolves around where we are in the cycle and theMusic goes with one particular listing is the Foundation in commencement times of predova and

But secondly, I think it really just revolves around where we are in the cycle and the effect of win.

Speaker 3: purchase transportation costs adjust based upon market dynamics. And so in a decent

Our purchase transportation costs adjust based upon market dynamics and so.

And the <unk>.

Speaker 3: Clining market that as I mentioned, I think that's the most difficult part of the cycle and that's exactly where we are here in the third quarter So I believe it does get better for us from here Okay, thank you

A declining market as I mentioned I think that's the most difficult part of the cycle and that's exactly where we are here in the third quarter. So I believe it does get better for us from here.

Okay. Thank you very much for the time guys.

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

Speaker 1: The next question comes from the line of John Kaplan, whatever core ISI. Your line...

Speaker 9: Thank you, thank you, you're morning. I wanted to tie a loop on the guide if I could. You pointed out a lot of what I would consider kind of one time costs. Fuel, lower gain equipment sales, some of the other issues in 3Q, yet the 4Q.

Thank you. Thank you good morning, I wanted to tie a loop on the on the guide if I could you pointed out a lot of.

What I would consider kind of one time costs fuel.

Lower gain on equipment sales some of the other issues in <unk> yet the <unk>.

Speaker 9: guide basically assumes a pretty similar, maybe up a few pennies, fourth quarter. So what I'm trying to get at is, is there any continued deterioration in some of the core pricing or margins across the main business lines, or is this strictly that the gain on equipment sale is going to be substantially lower in 4Q, offsetting any of the type of improvement or dedicated tractor growth that you mentioned in the prepared report?

Guide basically assumes a pretty similar maybe up a few pennies.

Fourth quarter, so what I'm trying to get at is is there any continued deterioration in some of the core pricing or margins across the main business lines or is this strictly that the gain on equipment sale is going to be substantially lower than the <unk> offsetting any of the type of improvement or dedicated tractor growth that you mentioned in the prepared remarks.

Speaker 3: Yeah, good question and thank you. But I'll throw some perspective and then let anybody else chime in. As we look at the quarter as, you know, we don't expect a lot of seasonal lift outside of.

Yes, good question and thank you it I'll throw some perspective, and then let anybody else chime in.

As we look at the quarter as we don't expect a lot of seasonal lift outside of.

Speaker 3: of the E-commerce driven part of the supply chain as we...

Perhaps the e-commerce, driven part of the supply chain as we get.

Speaker 3: get through the end of November . We also looked out to what we expect in December , and I think that's really the key for us as we look towards the quarter. We think certainly October , November will be fairly typical, at least based upon current run rate in the month of December , particularly the back half. We're a little cautious of what we believe that could look like. And so that's a little bit of an issue.

Get through this because at the end of November we also looked out to what we expected in December and I think thats really the key for us as we look towards the quarter. We think certainly October November it will be.

Fairly typical at least based upon current run rate run rate in the month of December, particularly the back half, we're a little cautious of what we believe.

That could look like and so that's a little bit of an influence.

Speaker 3: But predominantly what you've described, we don't expect to, again, on sale level sequentially. And we think, as Steve mentioned, that we're pretty much through the pricing reset. And we don't expect any further erosion. And we're only going to be building from here going forward.

But predominantly what you described we don't expect the gain on sale of <unk>.

Level sequentially, and we think as Steve mentioned that were pretty much.

Through the pricing reset and we don't expect any further erosion and we're only going to be building from here.

Going forward.

Okay. Thanks, and then as my follow up where you just left off.

Speaker 9: Okay, thanks. And then, um, as my follow up, where do you just left off?

Speaker 9: Was we think about the beginning of 2024? I mean, obviously, seasonally the first quarter's weaker. We're talking about bottoming and pricing and kind of all different business lines. Without giving any level of guidance, conceptually, should we think that one queue at the very minimum and potentially two queue looks very similar in a lot of the different metrics to the back half of 23 before you start to see more of a reset and contractual pricing or even stop pricing across all three business lines?

As we think about the beginning of 2024, I mean, obviously seasonally the first quarter's weaker we're talking about bottoming in pricing and kind of all the different business lines.

Without giving any level of guidance conceptually should we think that <unk> at the very minimum and potentially <unk> looks very similar in a lot of the different metrics to the back half of 'twenty three before you start to see more of a reset in contractual pricing or even spot pricing across all three business lines.

Yes. This is Steve I think in our earlier comments, we suggested 2020 for being a year of transition and I think that from what we can see sitting here today, there probably would be a sluggish start to the year you never know something.

Speaker 5: Yeah, this is Steve. I think in our earlier comments, we suggested 2024 being a year of transition. And I think that from what we can see sitting here today, there probably would be a sluggish start to the year. You never know something.

Speaker 5: Often happens once you switch from December to January and find yourself in a different

Often happens once you switch from December to January and find yourself in a different.

Speaker 5: arena, but we also mentioned that we are seeing some.

Arena.

But we also mentioned that we are seeing some.

Speaker 5: some signs of shifting of things and targeted opportunities to begin to see some pricing improvements across our book of business. And so, we'll continue to pursue those. But I don't see it just instantly snapping back. So, I think the first quarter itself of 2024 will probably be

Some signs of shifting of things and targeted opportunities to begin to.

See some pricing improvements.

Across our book of business and so we will continue to pursue those.

And.

I don't see it just instantly snapping back so I think the first quarter itself of 2024 will probably be.

Speaker 10: a bit more of the same, but we do believe that there's an upward ramp that begins as we begin to exit that first quarter. Okay.

A bit more of the same but we do believe that there is an upward ramp again.

As we begin to exit the first quarter.

Okay. Thank you Steve Thanks, Mark.

Speaker 1: Your next question comes from the line of Brian Austin Beck with JP Morgan. Your line is...

Your next question comes from the line of Brian <unk> with Jpmorgan. Your line is open.

Speaker 11: Hey, thanks, good morning. I wanted to ask more.

Hey, Thanks, good morning.

Just wanted to ask more.

Okay.

Speaker 11: More about competition this time within Intermodal, there's a lot of boxes stacked up there wanted to see if you give us a sense of how you're treating that within your network. And then as you look at one of the main competitors on the Western Rail, they said that they're gonna tilt a little bit more towards volume growth next year, which implies that the

About competition this time within intermodal theres not a boxes stacked out there wanted to see if you could give us a sense of how you are treating that within your network.

And then as we look at one of the main competitors on the Western rail.

Said that they're going to talk a little bit more towards volume growth next year, which implies at least.

Speaker 5: maybe not pushing as hard in price as it might have been before. Just want to see if you can put that together and give us a sense in terms of how intermodal competition looks and if it's different by any of the quarters around.

Maybe not pushing as hard on price as they might have been before just wanted to see if you can put that together and give us a sense in terms of our intermodal competition.

And if it's different by any of the quarters Ron.

Yes, I'd say that.

So in terms of stack. So I think that was your question there is probably 10% to 15% of industries on stack.

Speaker 7: In terms of stacks, I think that was your question. There's probably 10 to 15% of the industries on stack. But when we look out, the market opportunity here within Intermodal is somewhere between two and three million shipments. And I'm saying that based on getting back to 2017 to 2018 level of mix between over the road and Intermodal.

We look out the market opportunity here within intermodal is somewhere between two and $3 million shipments and I'm, saying that based on getting back to.

Excuse me 2017 to 2018 level of mix between over the road in intermodal.

Speaker 7: I've put it to get back to that level. That's about a million and a half shipments that would convert from over the road to intermodal.

If we were to get back to that level, that's about $1 million in the half shipments that would convert from over the road to intermodal and we are starting to see some other markets that are opening up Mexico is a great example, where that mix between intermodal and over the road has historically done very well and now that we are have a different level of service, we're starting to taken at.

Speaker 7: And, you know, we are starting to see some other markets that are opening up. Mexico is a great example where that mix between Intermodal and over the road has historically been very low. And now that we have a different level of service, we're starting to take advantage of that and find opportunities there. We're also seeing customers that are more willing to make decisions based on sustainability. And that is really just an emerging trend. And that's why we would say in this industry there's opportunities to...

Advantage of that and find opportunities. There. We're also seeing customers that are more willing to make decisions based on sustainability and that is really just an emerging trend. That's how I would say in this industry there is opportunities to for far more growth.

Speaker 7: For far more growth by the number one competitor and Intermodal, it's not another Intermod provider. It is over the road. That's where the three million shipments are potentially coming from. And that's where our folks.

Number one competitor in intermodal.

Not another intermodal provider it is over the road, that's where the 3 million shipments are potentially coming from and Thats, where our focus is.

And any any specific thoughts on competition within.

Speaker 11: and any specific thoughts on competition within

The intermodal space itself is everybody's.

Speaker 11: the intermodal space itself is everybody.

Speaker 11: long unboxes, short on volume at least for...

Long on boxes.

Short on volume at least for the.

Speaker 11: time being and then maybe Mark you can just add on some commentary about pricing and the level of confidence you have with shippers willing to partner or willing to do some of these conversions versus maybe take another bite at the apple on rate as we're still on the...

For the time being and maybe Mark you can just add on some commentary about pricing and the level of confidence you have with shippers willing to partner willing to do some of these conversions.

Versus maybe take another bite at the Apple on rates as were still now it looks like a lower for longer environment.

Yes.

Yes, as Jim mentioned.

Speaker 3: As Jim mentioned, the number one competitor here is over the road alternative. And with the market that's...

Number one competitor here is over the road alternatives.

With the market.

Speaker 3: particularly even some of the head hall markets, which is generally pretty unusual, that there's been a closer competition with truck, and so there's been more choice from the customer standpoint.

Particularly even some of the head haul markets, which is generally pretty unusual that theres been a closer competition with truck and so theres been more choice from the customer standpoint.

Speaker 3: to convert back and forth. But as we look at those discussions we've had, particularly with the large more sophisticated shipper and looking at their total decision tree, which Jim mentions, is increasingly including the emissions reduction part portion of that.

To convert back and forth, but as we look at those discussions we've had particularly with the large more sophisticated shipper and looking at their total decision tree, which as Jim mentioned is increasingly including the emissions reduction part portion of that.

Speaker 3: There's really no better place to go to achieve that in the immediate and short term than over the road conversion to intermodal. And so there's still obviously a healthy gap that you can have between intermodal and over the road that can bring economic value to the shipper. You have fuel savings and now you have the emission piece. And so again, I think...

There's really no better place to go.

To achieve that in the immediate short term than over the road conversion to intermodal and so.

There is still obviously a healthy gap that you can have between intermodal and over the road that can bring economic value to the shipper fuel savings and now you have the emission piece and so.

Again, I think thats why its.

Speaker 9: who grazed and prominence on our customers of planning for 2024, and we intend to help them achieve that.

<unk> raised in prominence on our customers are planning for 2024 and <unk>.

We intend to help them achieve that.

Yes.

Okay. Thanks for your time.

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

Speaker 1: next question comes from the line of Robbie Shanker with Morton Stanley.

Speaker 12: Great, thanks. Good morning, everyone. So, obviously, 3Q was a really difficult quarter for you and pretty much all your peers, and yet you were saying that supply remains a little bit more resilient than you thought, and you aren't quite seeing the exit of capacity in the marketplace. A, are you starting to see that right now? Obviously, we've seen some high-profile bankruptcies and exits, but are you seeing that in the mom-and-pop side as well? And second, why do you think they've been resilient so far, and kind of how do you think that evolves in the...

Great. Thanks, good morning, everyone.

Obviously, <unk> was a really difficult quarter for you and pretty much all your peers and yet you were saying that.

Supply remains a little bit more resilient than you thought and you arent quite seen the exit of <unk>.

Capacity in the marketplace.

You're starting to see that right now obviously, we've seen some high profile bankruptcies and exits but are you seeing that in the mom and pop side as well.

Why do you think they have been resilient, so far and kind of how do you think that evolves in the coming quarters.

Speaker 3: Yeah, Robby, it's been, it's been stubbornly resilient to your question. Part of that could be the buildup that people were able to acquire and retain during the highly unusual pandemic period. But I think any assessment that's been done to look at that would suggest that that has been exhausted.

Yes, Ravi it's Ben.

It's been stubbornly resilient to your question.

Part of that could be the buildup that people were able to acquire and retain during the highly unusual pandemic period, but I think any assessment.

That's been done.

Look at that would suggest that that has been exhausted.

Speaker 9: which is I think why we're seeing the increased, at least from our portfolio, what we have visibility to look into on things like owner operator, at least turn ins, just because of the overall health of that portion of the capacity.

Which is I think why we're seeing the increased at least from our portfolio, where we have visibility to look into on things like.

Owner, operator lease turn ins just because of the overall health of that portion of the capacity.

Speaker 3: Mix. So those things, again, those are more leading indicators as opposed to lagging. And so that's giving us more confidence that we are long in the tooth here.

So those things again those are more leading indicators.

As opposed to lagging and so that's giving us more confidence that we are long in the tooth here.

Speaker 3: But it has taken us longer than any of us I think would have expected at this point. In reference to maybe some of the more high profile.

But it has it has taken us longer than any of US I think what I would've expected at this point in reference to maybe some of the more hub high profile.

Speaker 3: bankruptcies that you referenced there, what we've seen as an outcome of that hasn't been moving from one brokerage to another brokerage, but moving from brokerage solution to more of an asset play, as I think the customers are also sensing that that is something that's probably in their best interest after what we would consider an over-reliance.

Bankruptcies that you referenced there what we've seen.

Outcome of that Hasnt been moving from one brokerage to another brokerage, but moving from brokerage solution to more of an asset play.

As I think the customers are also sensing.

That is something that's probably in their best interest after than what we would consider an overreliance.

And the last year to 18 months on the brokerage.

Speaker 3: in the last year to 18 months on the brokerage.

Speaker 3: industry and so there is I think because of some of those signals are moved back to more asset

Industry and so there is I think because of some of those signals and move back to more asset.

Allocations within those customers and we certainly seen that in a much bigger way coming through the most recent news.

Speaker 3: Allocations within those customers and we certainly seen that in a much bigger way coming through the most recent news

Got it that's helpful and maybe as a follow up kind of a you said that you don't expect a snapback early in 2024.

Speaker 12: Got that helpful and maybe as a follow up kind of you said that you don't expect is not back early in 2024 I'm just trying to figure out kind of is that something that you feel like given how bad the market is right now Or is that what you're hearing from your customers? You're gonna what you're seeing in terms of early moves and early bits cycle the 24

I'm trying to figure out is that something that you feel like given how bad the market is right now or is that what youre hearing from your customers and kind of what youre seeing in terms of already moved in early mid cycle at the 24.

Yes, we're not very much into that.

Speaker 3: of actual events, or I've just yet, we're into more of the discussion phase.

Piece of actual events or IV, just yet we're into more of the discussion phase.

Speaker 3: of, you know, planning and, uh, fourth quarter is a big time just to get together and start planning and discussing kind of each other's kind of goals in the year ahead.

No planning in fourth.

Fourth quarter is a big time, just to get together and start planning and discussing kind of each others kind of goals in the year ahead, and so we haven't got any real data for you on that yet, but I would say customers are at least as they feel this is a general comment that the inventories in the all the actions that they've taken they feel pretty good about where they are.

Speaker 9: So we haven't got any real data for you on that yet.

Speaker 3: But I would say customers are at least as they feel, and this is a general comment that the inventories and all the actions that they've taken, they feel pretty good about where they are there. And there's perhaps just some trepidation of understanding where the consumer is.

And there's perhaps just some trepidation of understanding where the consumer is I think the holiday season here I will give good insight into that as we move in and understand what's inflation and what actual.

Speaker 9: I think the holiday season here I'll give good insight into that as we move and understand what's inflation and what's actual...

Speaker 9: amount of goods that are moving through this holiday period. So I would just consider that the customer may be a bit more cautious, but at least I don't think we're going to take in this inventory overhang issue that.

The amount of goods that are moving through this holiday period. So so I would just consider that the customer may be a bit more cautious.

But at least I don't think we're going to take in this inventory overhang issue that obviously, we took into 2023.

Speaker 5: Obviously we took into 2023. Yeah, and I think I just add onto that mark that, at least from where I sit, the comments I made earlier about entering 2024 were really on a historical basis.

I'd just add onto that mark that.

At least from where I sit there comments I made earlier about entering 2024, we're really on a historical basis volume levels in January and February are typically fairly light.

Speaker 10: volume levels in January and February are typically fairly white. And then once you get to March things begin to pick up. So there was that side of the equation I was referring to. When it comes to the customer renewal and the tone and of those types of conversations, I actually feel more upbeat about those going forward than where we've been over the past week. And I'm absolutely agree with that. So if I separate those two things that are broader.

And then once you get to March things begin to pick up. So there was that side of the equation I was referring to when it comes to the customer renewal.

The tone of those types of conversations I actually.

Feel more upbeat about those going forward than where we've been over the past eight yes, absolutely agree with that so so if I could separate those two things for.

For broader context, as we enter next year.

Speaker 12: Understood. Thanks for the color and Steve. Congratulations and enjoy the retirement.

Understood. Thanks for the color and Steve Congratulations and enjoy the retirement.

Thanks.

Speaker 1: Your next question comes from the Linus.group with Wolf Research. You're learning.

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

Hey, Thanks, good morning, so Scott the industry some of the industry data would suggest there is still a pretty.

Speaker 13: Hey, thanks. Good morning. So nice guy. The industry, some of the industry data would suggest there's still a pretty widespread between spot rate and contract rate. Do you see that in your data? And I guess I'm wondering that in the context of you're talking a lot about price recovery. You know, are we?

Widespread between spot rate and contract rate do you see that in your data and I guess I'm wondering that in the context of Youre talking a lot about price recovery.

Or are we.

Speaker 13: Confident that we're gonna get that in 24 and then maybe just within that like where you more confident You can get it is it is it in truckload or is it in intermodal?

Confident that we're going to get that in 'twenty four and then maybe just within that like where are you more confident you can get it is it is it in truckload or is it in intermodal.

Scott.

Speaker 9: I'll maybe just open with that, I'll let Jim kind of weigh in. Yeah, there is still a particularly between contract, our contract and spot rates. And that's certainly influential in our network business as we had.

Just open with that I'll, let Jim.

Kind of way and yes, there is still a.

Particularly between contracted our contract and spot rates and Thats certainly influential in our network business as we add preserve more of our capacity.

Speaker 9: preserve more of our capacity, looking for more opportunities here than it's actually it arrived in the fourth quarter. And so that's impacting our overall revenue per truck in the network because of that gap. And we're also seeing the gap, but we see it stabilize. It's not getting necessarily any better or any worse, but it's stabilized now for, I'm probably eight to 10 weeks, yeah.

Looking for more opportunities here than it is actually arrived in the fourth quarter and so that's impacting our overall revenue per truck in their network because of that gap and we're also seeing the gap, but we've seen it stabilize it's not getting any necessarily any better or any worse, but it's stabilized now for probably two.

Eight to 10 weeks, yes, so with that I think you have to have stabilization before you can have improvement and I think we have arrived at that location and we know that we have a certain part of our book and this is particularly a network truck Scott more than the other parts of our portfolio.

Speaker 9: So with that, I think you have to have stabilization before you can have improvement. And I think we have arrived at that location. And we know that we have a certain part of our book and this is particularly a network truck, Scott, more than the other parts of our portfolio, that we have opportunity even within this market to

We have opportunity even within this market too.

Speaker 3: reallocate our capacity to more compensable freight. And that's the process we're on presently and having either a price discussions to avoid that or start taking action to move and improve the book. And that's in all hands on deck effort right now.

Kate our capacity to more compensable freight and that's the process, we're on presently and having.

Either a price discussions.

To avoid that or start taking action to move in and improve the book and that's an all hands on deck effort right now.

Speaker 7: Yeah, and we're looking at the same data that you are, Scott, that our internal information would say that's actually very similar to the spread being about 30%. And historically, we have not seen a cycle where the recovery is that contract rates come all the way down to wherever the bottom of the spot market is. Rather, you see things like the recent bankruptcy and causing the flurry of activity for our shippers.

We're looking at the same data that you are Scott Betts and.

Our internal information, we wouldn't say that session very similar to the spreads being about 30% and historically, we have not seen a cycle, where the recovery is that contract rates come all the way down to wherever the bottoms of the spot market is rather you see things like the recent bankruptcy.

Causing the flurry of activity for our shippers and when they go through that what Theyre often find is the rates that you could've gotten locked in at a contract rate just weeks or months before are no longer out there and available. So the longer you get into this cycle shippers start to look for that opportunity of how can I walk into a car.

Speaker 7: And when they go through that, what they're often find is the rates that you could have gotten locked in at a contract rate just weeks or months before are no longer out there and available. So the longer you get into this cycle, shipper starts to look for that opportunity of how can I lock into a contract rate that's durable rather than taking risky opportunities with.

Tracked right, that's durable rather than taking risky opportunities with capacity that might not be available for you or available at that price. So I believe that's what starts to change and thats, where the targeted opportunities reside.

Speaker 7: capacity that might not be available for you or available at that price. So I believe that's what starts to change and that's where the targeted opportunities

Okay, and then just separately.

Speaker 13: And then just separately, you know, it strikes me, you know, the earnings guidance has been coming down throughout the year.

It strikes me that the earnings guidance has been coming down throughout the year and yet you're telling us capex is at the high end of what you thought and I don't think youre alone in that.

Speaker 13: And your tonus, catbacks is at the high end of what you thought. And I don't think you're alone in that dynamic of earnings down and catbacks up a lot. And you've got, you know, pack-ars talking about slots for next year filling up quickly. And so it's just, it's a weird dynamic going on. Just any, any perspective on...

In a dynamic of earnings down in Capex up a lot and you've got Patkars talking about slots for next year filling up quickly and so it's just it's a weird dynamic going on just any any perspective on.

Speaker 13: You know, why this is happening, how you think about CapEx for next year.

Why this is happening how you think about Capex for next year.

It's just it's sort of a puzzling environment just curious how you think this plays out into 2014.

Speaker 13: It's sort of a puzzling environment, just curious how you think this plays out into 24.

Speaker 10: Sure, but I was just going to say it, I think what we're dealing with here is again, the backside of of the market environment for the OEMs over the past couple of years were carriers like us were not able to get all the equipment that we would have otherwise gotten in say 2021 and 2022. So there is a bit of catch up, CapEx in 2023, as we are working toward our target.

Sure.

I was just going to say I think what we're dealing with here is again the back side of Av.

The market environment for the Oems over the past couple of years.

Carriers like us, we're not able to get all of the equipment that we would have otherwise gotten.

In say 2021 and 2022, so there is a bit of catch up capex in 2023 as we are.

Working towards our targeted age of fleet.

Speaker 10: profile. So that is part of the dynamic. It's not that we are.

Profile.

So that is part of the dynamic.

It's not that we are.

Speaker 10: tone deaf to cash flows and how we're deploying our cathode.

Tone deaf to cash flows and how we're deploying our capital.

Yes, we have the other secondary contributor there Scott is our dedicated growth in the couple of the acquisitions that we've picked up that.

Speaker 9: Yeah, and we have the other secondary contributor there, Scott is our dedicated growth and the couple of the acquisitions that we've picked up that we're getting.

We're getting.

Speaker 9: into a place that we think is best and most appropriate. And so we have the customer.

Into a place that we think is best and most appropriate and so we have.

Eric specific.

Speaker 9: Schneider event there as well, but the predominance is just the catch-up and some inflationary impacts of those trucks. The ones that we're buying today certainly have more cost to them than the ones that we're getting out of the fleet.

Schneider event, there as well so but the predominance is just a catch up from some inflationary impacts of those trucks are the ones that were buying today, certainly have more cost than the ones that were.

Getting out of the fleet.

Any early thoughts on Capex for 'twenty four.

We're working on nailing those numbers and we'll provide that guidance on the next call I would expect the net number to be lower than than the.

Speaker 10: We're working on nailing those numbers. I don't know, we'll provide that guidance on the next call. I would expect the net number to be lower than the level of 2023. Thank you.

The level of 2023.

Thank you guys appreciate it and best of luck Steve.

Thank you.

Speaker 1: The next question comes from the line of a kin hoaxer with Bank of America. Your line is open.

Your next question comes from the line of Kenn Hoekstra with Bank of America. Your line is open.

Speaker 9: Hey, great. Good morning. Steve Goodluck in in 2.0 as got to know you at multiple stops through your career and Darryl congrats on the new.

Hey, great good morning.

Steve Good luck and <unk> got to know you had multiple stops through your career and Carol Congrats on the new position.

Speaker 14: I guess I just want to dig into Scott's thoughts there on the well below contract. So if spot is still well below contract, I just want to understand, given that record gap, and I know you don't have contract come all the way down to spot, but would your outlook now still be negative contract pricing if those contracts continue to at least close that record gap, or do you think something changes and you see?

I guess I just wanted to dig into to Scott's thoughts there on the well below contract. So if spot is still well below contract I just want to understand given that record GAAP and I know you don't have contract come all the way down to spot, but what would your outlook now still be.

Negative contract pricing.

If those contracts continued at least close that record GAAP or or do you think.

Nothing changes and you see that that adjust.

Speaker 7: Yeah, I think we're really at the floor for contract pricing that there'll be target opportunities from here on out that to be able to raise that as well as our mix of spot that we have in our business right now. It's higher than what we would like. And so I'd see opportunities to reduce our exposure to spot while it remains lower than country.

Yes, I think we're really at the floor for contract pricing.

That there'll be targeted opportunities from hereon out debt to be able to raise debt as well as our our mix of spot that we have on our business right now it's higher than what we would like.

And so I'd see opportunities to reduce our exposure to spot wallets remains lower than contract.

Speaker 10: And we said earlier basically through our book of business of renewals and So the bites have been taken at the apple and there's no apple left

And we said earlier basically through our book of business of renewals and so the bites have been taken at the Apple and Theres No Apple left.

Yes.

Speaker 14: Yeah, no, I appreciate that out on Steve. The reason I asked is just because you also mentioned that you expected the week.

Yes, no I appreciate that add on Steven the reason I ask is just because you also mentioned that that you expected the weakness this level of weakness to continue and it sounded like if that then goes into bid season that would meet contracts could continue to close that gap down to spot versus spot coming up but I get your answer that.

Speaker 14: this level of weakness to continue and it it sounded like if if that that goes at the big season that would be contract could continue to close that gap down to spot first spot come up but i i get your your answer that

Brian that you through it.

Speaker 14: Um, follow up would be just on on on intermodal, right? So your thoughts on your long term box ads here, obviously you took CapEx up a bit. You just talked about dedicated focus. Um, looks like your turns actually improved, but margins were worst that you've posted since before you were public, I guess back to the first quarter of

Follow up would be just on intermodal right. So your thoughts on your long term box adds here. Obviously, you took capex up a bit you just talked about dedicated focus.

Looks like your turns actually improve margins were worst.

That you've posted since before you were public I guess back to the first quarter of 2016.

Speaker 14: Any thoughts on what's going on on the incremental margin on intermodal and the cost-sided equation that we don't see the detail?

Any thoughts on.

What's going on on the incremental margin on intermodal and the cost side of the equation that we don't see the details too.

Speaker 7: Yeah, so obviously there's still leverage to play out there. Mark also talked about the network dynamics of power operating that we're currently experiencing higher repositioning costs that we need to have better balance within our network. There's opportunities as our PT adjust through this market cycle. And obviously the number one is to be able to start to turn the tide as it relates to the price.

Yes, so on the obviously there is still leverage to play out there Mark also talked about the network dynamics of how we're operating that were currently experiencing higher repositioning costs that we need to have better balance within our network.

There is opportunities as our PT adjust through this market cycle.

And obviously the number one is to be able to start to turn the tide as it relates to price.

So we also can just suggest we could.

Speaker 9: So we also can just suggest we could have at least 30% of opportunity.

Have at least 30% of opportunity.

To drive volume without adding any incremental container and chassis cost and its just pent up capability.

Speaker 9: to drive volume without adding any incremental container and chassis cost and it's just pent up.

Speaker 9: capability. And so as we can think through next year, we also wouldn't anticipate at least that there's early juncture that we'll be adding capacity or excuse me, capital into containers and chases. You might see us do a little bit on the tractor side as volumes return.

And so as we again think through next year. We also witnessed anticipate at least at this early juncture that we'll be adding capacity or excuse me capital into <unk>.

Containers and chassis you might see us do a little bit on the tractor side as volumes return.

Speaker 9: And so there's a lot of self-help in there that we don't have to invest to achieve. And looking to get to that leverage, as Jim mentioned.

And so theres a lot of self help in there that we don't have to invest to achieve it.

Looking to get to that leverage as Jim mentioned.

Great. Thanks for the insight guys.

Speaker 3: Your next question comes from the line of Jason Seidel with TD Cohen. Your line is open. Yeah, thank you, Arpert, or Morning Gentlemen. And Steve, best of luck in the room.

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

Thank you operator.

Morning, gentlemen, and Steve Best of luck in retirement.

Wanted to drill down a little bit on the CP Casey business that you talked about you said it grew 20%. So a couple of questions one sort of how big is this and how big more importantly is the opportunity going forward and how do these early margins compared to the margins in the existing core business.

Yes, so we don't break down the margins within the geographies, but.

Speaker 7: Yeah, so we don't break down the margins within the geographies, but

Speaker 7: It is a really great opportunity for us to be able to grow.

It is a really great opportunity for us to be able to grow. So currently there's opportunities of freight that's currently running over the road.

Speaker 7: So currently there's opportunities of freight that's currently running over the road. And we'd say that there's a few percentage points of difference between penetration between intermodal and over the road in Mexico versus other similar length, long haul freight. And overall it's very.

And we'd say that there is a few percentage points of difference between.

<unk> between intermodal and over the road in Mexico versus other somewhat.

Long haul freight.

And.

Overall, it's very small part of our book.

Speaker 3: the percent of increase is much higher, as well as the overall market growth in Mexico driven by near-shoring. So, you know, the incremental volume is still relatively small, but we'd say that the longer-term opportunity is larger. Okay, Jason, it just opens up some new markets for us as well.

The percent of.

Increase is much higher.

As well as the overall market growth in Mexico, driven by near shoring. So.

Incremental volume is still relatively small, but we'd say that longer term opportunity is larger hey, Jason just opens up some new markets for us as well.

As it relates to the automotive sector as we made a couple of acquisitions now that is more automotive centric we've.

Speaker 3: Uh, as it relates to the automotive sector, as we made a couple of acquisitions now that is more automotive centric, we've, uh, established some deeper, more meaningful relationships there. And, uh, but most importantly is a reliable service product that is truck like in service transit and. Uh, the consistent ability to deliver that, which has always been the difficulty of we've gone through ebbs and starts.

Establish a deeper more meaningful relationships there.

And but most importantly is a reliable service product that is truck like in service transit and.

The consistent ability to deliver that which has always been the difficulty of we've gone through ebbs and starts.

Speaker 9: with growing share of intermodal out of Mexico that we've had difficulty over time sustaining just because of the service reliability. This combination I think has certainly

With growing share of intermodal out of Mexico that we've had difficulty over time sustaining just because of the service reliability.

This combination I think has.

Certainly.

Speaker 3: change that, but it's also, we have a lot of changing of perceptions to do because of all the prior experience of not being so consistent. And so a lot of our efforts jointly are getting after that with a series of customers. And we've been very, very active with that the last several months.

Change that but it's also we have a lot of changing our perceptions to do because of all the prior experience of not being so consistent and so a lot of our efforts jointly.

We're getting after that with a series of customers and we've been very very active with that the last several months.

Speaker 9: because we didn't get a chance to do that in front of the allocation season as much because of the timing of all of this. And so what we also now have is the benefit of some experience and some proof points, as well as now getting in front of the allocation season.

Because we didn't get a chance to do that in front of the allocation season as much because of the timing of all of this and so while we also now have has the benefit of some experience and some proof points as well as now getting in front of the allocation season.

Speaker 9: and a great opportunity. When you can deliver truck-like service where it costs benefit and also the missions benefit, you doesn't get much better than that.

A great opportunity and when you can deliver truck like service for a cost benefit and also with emissions benefit you.

It doesn't get much better than that.

You guys are growing at a double digit clip and the rest of the business is obviously under a lot of pressure are you experiencing at least some upfront cost to reposition equipment.

Speaker 15: a lot of pressure. Are you experiencing at least some upfront costs?

Speaker 3: Yeah, I would say that the two markets, the head hall markets, we would consider Northbound Mexico and particularly Southern Cal is two primary head hall markets that

Yes, I would say that the two markets the head haul markets, we would consider north bound Mexico, and particularly southern Cal has two primary head haul markets.

<unk>.

Speaker 9: We're, because we're priming the pump there. It's a higher percent of costs as we're seeing on empty repositioning, particularly on the West Coast, based upon current rate structures as well. So it's a bit more punitive in the short term, but again, I think we, with balance and with the actions that we've gotten, we can limit that going forward.

Because we are priming the pump there.

Higher percent of costs as we're seeing an empty repositioning, particularly on the west coast based upon current rate structures as well so it's a bit more punitive in the short term but.

I think we with balanced and with the actions that we've got and we can <unk>.

<unk> that going forward.

Speaker 15: My follow up here, Steve, I have to give you one before you retire. Here you talked about CAPEX likely coming down in terms of the direction for container ads.

Okay.

Follow up here, Steve I have to give you one before before you retire or you talked about capex likely coming down in terms of the direction for.

Container adds in the box side, given that you have so much pent up capacity.

Is that one of the directional moves down that we should expect to see in 'twenty four.

Speaker 10: Yeah, that's a good insight there. Jason and we would anticipate very little if any capex needs in 2024 for either container or chassis in our intermodal operations. We can leverage the investments we've made in that business over the past couple of years to position ourselves there.

Yes, that's good.

Good insight there, Jason and we would anticipate very little if any capex needs in 2024 for either container or chassis in our intermodal operations. We can leverage the investments we've made in that business over the past couple of years to position ourselves there.

Speaker 10: Whereas, we did have some CapEx in 2023, particularly for chassis.

Whereas we did have some capex in 2023, particularly for chassis. So.

Speaker 10: That will be part of it and just an overall assessment of things. But to Mark's earlier point, we have a new acquisition in the fold within him and him transport. And so there will be some amount of incremental cat-backs that just comes from the increased size of it.

That will be part of it and just an overall assessment of things, but to Mark's earlier point, we have a new acquisition in the fold with Eminem transport and so there'll be some amount of incremental Capex. This comes from the increased size of the fleet.

Speaker 14: as well as thank you for the dedication. You bet. Thanks, Jason.

It sounds like as well as thank you for the thank you for that.

You bet Thanks, Jason.

Speaker 1: Your next question comes from the line of Chris Weathertool's City Group. Your line is...

Your next question comes from the line of Chris Wetherbee with Citigroup. Your line is open.

Hey, Thanks, good morning, guys.

Speaker 16: Hey, thanks for morning guys. Mark, you had mentioned that you said there were some pockets of maybe better priced freight that you could potentially move some assets around depending...

Mark you had mentioned that you said there were some pockets maybe better.

Better priced freight that you could potentially move some assets around depending on what the market environment was kind of curious as sort of think about what that might look like is that taking assets out of network and potentially putting them in dedicated or is there other.

Speaker 16: dedicated to us or all the types of business out there that you think you can catch.

Other types of business out there that you think you can capture here.

Speaker 16: Yeah, Chris, thanks for the question. And my comment was more intra-network, but we'll be opportunistic as well in looking to put our capital in the best place for return. And if we get even more growth and we anticipated in dedicated, that could be a secondary decision. But my primary comment there was opportunities within the network itself and within the current environment. Okay, but...

Yes, Chris Thanks for the question and my comment was more intra network.

But we will be opportunistic as well and looking to put our capital in the best place for a return and if we get even more growth than we anticipated and dedicated that could be a secondary decision but.

Right.

Primary comment there was opportunities within the network itself and within the.

The current environment.

Okay.

Okay. That's helpful. I appreciate that I guess.

Speaker 16: Maybe that leads to sort of a follow-up question around network sizes. You think about it. Obviously you guys have done work.

Maybe that leads to sort of a follow up question around network side as you think about it. Obviously you guys had done work in acquisitions on the dedicated side to continue to build that as you look out maybe into 2024, you see the mix of of network versus dedicated should look like from a fleet size perspective.

Speaker 16: on the dedicated side to contain the bill that, as you look out maybe in the 2024, anything that makes a network versus dedicated should look like from a sleep side.

Speaker 9: Yeah, we've kind of stopped our thinking of change our thinking on that over time. Chris is that we don't have really upward bounds of where we see dedicated growth either organically or acquisitively, long as it returns hits our return profile and hits our...

Yes, we've kind of <unk>.

<unk> are thinking of or change our thinking on that over time Chris.

Chris is that we don't have really upward bounds of where we see dedicated growth either organically or acquisitive Lee along as it returns.

It's our return profile and hits are.

Speaker 9: contract profile of what we're after for durable dedicated. So from that standpoint, we would be all the wars in the water and growing as.

Contract profile of what we're after for durable dedicated so so from that standpoint, we would be all all oars in the water and growing as.

Speaker 9: has made sense for us. That being said, we do believe over time that we benefit.

As makes sense for us that being said.

We do believe over time that we benefit.

Speaker 9: from having a healthy one-way offering or a network offering. I think increasingly though, we could see that being more trailer centric over time.

From having a healthy one way offering or a network offering.

Increasingly though we could see that being more trailer centric over time.

Speaker 9: We're looking to how we best optimize against our company capacity, owner operator capacity, and other third parties around power only. So as I've mentioned before, you look at our...

We're looking to how we best optimize against our company capacity owner, operator capacity and other third parties around power only and so as I mentioned before you look at our.

Speaker 9: truck count and well what we describe in network is one definition of our network but the other definition gets supported via power only that resides in our brokerage business and that's really how our customers sees it. They see our orange trailer out there in the trailer pool and then we optimize the capacity type and so our network business is larger from a customer view because of that power only component.

Truck count and what we described in network.

As one definition of our network, but the other definition gets supported via power only.

It resides in our brokerage business and Thats really how our customers season, they see our orange trailer out there in the trailer pool, and then we optimize the capacity tight and so our network business as well as larger from a customer view because of that power only component.

Speaker 9: So we're not looking necessarily to shrink our assets that we put into that as long as we can get to the appropriate return. Obviously, we're in a very difficult part of the cycle right now. But it wasn't too long ago, a couple quarters ago, we were quite happy with where we were there. So we just got to get back and get those fundamentals relative to the market recovery getting after the price. And it would be terrific to keep that over the long term about where it's at.

So we're not looking necessarily to shrink our assets that we've put into that as long as we can get to the appropriate return obviously, we're in a very difficult part of the cycle right now.

But it wasn't too long ago, a couple of quarters ago, we were quite happy with where we were there. So we just got to get.

Get back and get those fundamentals relative to the market recovery getting after the price.

And two it.

It would be terrific to keep that over.

Over the long term about where it's at.

Okay, Alright, that's helpful. I appreciate the color and best of luck Steve.

Speaker 16: Okay, all right. That's help blockers hit the color. That's a look thief.

Thank you.

Speaker 1: Your next question comes from Bathcom Majors with Susquehanna, your line is up.

Your next question comes from <unk> majors with Susquehanna. Your line is open.

Thanks for taking my questions just two quick clarifications on the quarter.

Speaker 15: Thanks for taking my questions. Just two quick clarifications on the quarter.

Speaker 7: Even if you add back the 8 cents and uniquely negative items.

Even if you add back the eight cents and uniquely negative items.

Speaker 15: you know, and considering that you were pretty in touch with how the bid season went when you gave us your outlook in August , it feels like what happened was a pretty significant negative surprise to what you expected and certainly seasonality is there.

And considering that you were pretty in touch with how the bid season went when you gave us your outlook.

In August it feels like what happened was a pretty significant negative surprise to what you expected and certainly seasonality is there.

Speaker 15: Is there any way to kind of rank order the biggest surprises to kind of where you were three months ago to today? Knowing what you knew then then outside of the eighths or so in charges that you called out earlier just trying to understand a little better about But what would happen that was unexpected. Thanks

Is there any way to kind of rank order the biggest surprises to kind of where you were three months ago to today.

What you knew that van outside of the eight or so of charges that you called out earlier, just trying to understand a little better about what what happened that was unexpected. Thank you yes.

Speaker 9: Yeah, yeah, I understand the question that's gone by, you know, I think when we certainly expected to see a bit more of seasonality in the business return after not having, um, and particularly as what we were projecting relative to the capacity attrition that, that, uh, we expected to take place in the marketplace. So the lack of seasonality that's.

Yes, I understand the question <unk>.

I think when we certainly expected to see a bit more of seasonality in the business return after not having.

And particularly as what we were projecting relative to the capacity attrition that that.

We expect it to take place in the marketplace. So the lack of seasonality that's.

Speaker 9: Unfortunately continuing now a bit more than we would originally expect even into the fourth quarter is part of that

Unfortunately, continuing now a bit more than we would originally expect even into the fourth quarter as part of that.

Speaker 9: some of the final price negotiations and the book and in our book.

Some of the final price negotiations in the book and in our book I.

Speaker 9: I think we had about 25% of our book renewed in the third quarter.

I think we had about 25% of our book renewed in the third quarter.

Speaker 9: in our truck business, I think 30% might have renewed in our inter-emoral business, vice versa, somebody got that back.

In our truck business, I think 30% might've.

Renewed in our intermodal business and vice versa, I got that backwards, but that's the order of magnitude of the renewals and so those werent quite as favorable as we had initially and planned as those occurred.

Speaker 9: But that's the order of magnitude of the renewals. And so those weren't quite as favorable as we initially had planned it as those occurred. And then...

And then.

Speaker 9: The third element of that is what do you realize out of that? What's the mix of realization that your customers are tendering based upon their business and how they're doing? And so that's also something we try to project. And generally, we're pretty good at, but this market has more variability and more uncertainty on the series of factors to include where our customers are as well.

The third element of that is what you realized out of that and what's the mix of realization that your customers are tendering based upon their business and how they're doing and so that's also something we try to project and generally are pretty good at this.

This market has more variability and more uncertainty on a series of factors to include where our customers are as well.

Thank you for that clarity.

Speaker 10: We kind of hit this in other ways before, but just wanna go back to it. From the dollarish run rate that you're guiding now, even pretty clear that there's not a lot of seasonal opportunity to improve on that in the first quarter, which makes a ton of sense. As we get deeper into the year,

We kind of hit this in other ways before but.

Just wanted to go back to it from the.

Dollar ish run rate that youre guiding now you've been pretty clear that.

Theres not a lot of seasonal opportunity to improve on that in the first quarter, which makes a ton of sense, but.

As we get deeper into the year.

Are there meaningful opportunities besides the price lever to really change that trajectory in the back half.

Speaker 10: Are there meaningful opportunities besides the price lever to really change that trajectory in the back half or anything else about seasonality that may not hold versus where you've looked historically in the first half of next year versus the second half of this year?

Else about seasonality that may not hold versus where you've looked historically in the first half of next year versus the second half of this year. Thank you.

Speaker 9: Trying to, seasonality was the question, first half versus second half. I guess that's kind of how I'd look at it is where are we having the opportunity to continue to improve results? And I think a higher mix of our dedicated offering, which we're continuing to grow and having great momentum, I think is a real positive, not only for 2024, but beyond. We've, I think, articulated the intermodal opportunity

Seasonality was the question first half versus second half I guess, that's how I look at it is where are we having the opportunity to continue to improve results and I think.

Our mix of our dedicated offering which we're continuing to grow and having great momentum I think is a real positive not only for 2024, but beyond.

I think articulated the intermodal opportunity.

As well, which I think can be a real adder to what we're doing in 2024 and then the question always is where do we stand on the network business and that's the one that we are leading most into and have the most improvement opportunity, but I do believe we've got good momentum in two key.

Speaker 9: I think can be a real adder to what we're doing in 2024. And then, you know, the question always is, where do we stand on the network business? And that's the one that we are leading most into and have the most improvement opportunity. But I do believe we've got good momentum in two.

Speaker 9: key strategic growth drivers for us, which is intermodal in our positioning now that we.

Key strategic growth drivers for us, which is intermodal and our positioning now that we.

Speaker 9: are no longer an approved me stage with our new relationships in UP. We're going through an hour full allocation with the UP, with the CPKC, and the high performing CSFAC. But just I think puts us in a better place in the customer mind and our performance and where we are, what we're trying to accomplish as we go into 2024. And some of the uncertainty people felt, I think we performed really well operationally, but there was some uncertainty as we made some of those changes coming into 2023.

Are no longer an approval stage with our new relationships and we're going through now a full allocation with the <unk> with the CP Casey and the high performing <unk>.

I think puts us in a better place and the customer mind, and our performance and where we are and what we're trying to accomplish as we go into 2024 than some of the uncertainty people felt and I think we performed really well operationally, but there was some uncertainty as we made some of those changes coming into 2023.

Thank you.

Speaker 1: And the next question comes from Bruce Chan at Stiefel.

And the next question comes from Bruce Chan at Stifel. Your line is open.

Speaker 17: Hey thanks, good morning everyone. Just one of us. I'm getting into Burtlecridge a little bit more. You all saw maybe a little bit more volume.

Hey, Thanks, Good morning, everyone just wanted to dig into portal bridge, a little bit more.

All saw maybe a little bit more volume pressure than some of the peers out there have been reporting a few of them were actually reported some shipment growth.

Speaker 17: Some of the peers out there have been reporting, a few of them were actually reporting some shipment growth. Any thoughts on what may have driven that difference in experience, if it's something to do with a mix of business or power only, or if it's just probably you being more disciplined on the pricing side?

Any thoughts on what may have driven that different did experience.

<unk> had to do with the mix of business, our power only or if it's just broadly you being more disciplined on the pricing side.

Yes, I think we might get critique there of being very disciplined on.

Speaker 9: Yeah, I think we might get critique there of being very disciplined on our net revenue for order and our targets there. I think our data and our insights both on the ship or pricing and the carrier costs are very good. And we weren't looking to take risk and losses in this environment. And so if we were gonna trade, Bruce, we were gonna trade on volume as opposed to trade on margin.

Our net revenue per order and our targets there I think our data and our insights both on the shipper pricing in the carrier costs are very good.

And we werent looking to take risk and losses in this environment.

If we were going to trade, Bruce where we're going to trade on volume as opposed to trade on margin.

Speaker 17: Okay, that makes sense. And then just follow up here on the dedicated side. You talked about some of the pipeline after.

Okay that makes sense and then just a follow up here on the dedicated side you talked about some of the pipeline opportunities in the visibility there in your opening remarks. Some of your peers have talked about maybe some weaker pipeline conversion are you seeing the same thing and what kind of gives you confidence in your visibility there.

Speaker 17: the visibility there in your opening remarks. Some of your peers have talked about maybe some weaker pipeline conversion. Are you seeing the same thing and what kind of gives you confidence in your visibility there?

Speaker 3: We might be seeing some elongated pipeline decision-making, but when you look at our growth organically and because we've also picked up some acquisitions that are doing quite well in taking some additional share with our current customers and we're introducing them in their specialty to some other customers, that we just have a few more plays in our playbook to get after growth there, Bruce, and it's playing out in our results.

We might be seeing some elongated pipeline decision making.

But when you look at our growth organically and.

Because we've also picked up some acquisitions that are doing quite well and taking some additional share with our current customers and we're introducing them and their specialty into some other customers.

But we just have a few more plays in our playbook to get after growth there Bruce and it's playing out in our results.

Speaker 3: And we have at this juncture really good visibility to fourth quarter obviously and first quarter start up.

We have at this juncture really good visibility into fourth quarter, obviously in first quarter startups and Thats what gives us our momentum we don't have a lot of closed second and third quarter startups, yet, but we've got a good pipeline that we believe the momentum will continue.

Speaker 9: And that's where it gives us our momentum. We don't have a lot of closed, second and third quarter startups yet, but we got a good pipeline that we believe the momentum will continue.

Okay. That's my two I appreciate the time.

Speaker 1: All right. But at this time, I will hand the call back over to Mark.

Alright, a question at this time I will hand, the call back over to Mark Mark.

Well terrific. Thank you everyone for your time and attention. This morning, I'm just going to close if I could buy for you to page 12 to 15 of our updated investor presentation.

Speaker 3: Well, terrific. I think you everyone for your time and attention this morning. I'm just going to close if I could by referring you to page 12 to 15 of our updated investor presentation. As we've talked on this call, we continue to be enthused by our dedicated growth success both organically and through our recent acquisition. The acquisition synergies and the performance are running ahead of our expectations. And it really is just a great credit to the driver's shop and operations team at both of those companies.

As we've talked on this call we continue to be enthused by our dedicated growth success success, both organically and through our recent acquisition.

The acquisition synergies and the performance are running ahead of our expectations and it really is just a great credit to the drivers shop.

And operations team at both of those companies.

Speaker 9: We believe our rail network partners and in relationships we have there are strong and we believe position as very favorably to take advantage of those substantive opportunities to convert over the road movement.

We believe our rail network partners and the relationships. We have there are strong and we believe positioned us very favorably to take advantage of those substantive opportunities to convert over the road movements.

Speaker 3: And we enter the next allocation season, and we have a year now under our belt with both the UP and over six months with the CPKC, in addition to our long-standing alignment with really the best-in-class provider, CSX.

And we enter the next allocation season, and we have a year now under our belt with both the <unk> and over six months with the CP Casey in addition to our longstanding alignment with really the best in class provider <unk>.

We're also addressing our largest improvement opportunity in the network truck business by looking at ways to better optimize our contract and spot market response.

Speaker 9: to price and capacity commitments through how we combine company driver, owner operator, and third party resources, including our power only options. And then finally, our strong balance sheet does give us optionality to enhance shareholder returns through reinvesting in our core business and services, but also by providing attractive dividend yields.

Two pricing capacity commitments through how we combined company driver owner, operator, and third party resources, including our power only options.

And then finally, our strong balance sheet does give us optionality to enhance shareholder returns through reinvesting in our core business and services, but also by providing attractive dividend yields.

Speaker 9: and the pursuit of additional the quisitive opportunities that advance our strategic priorities. And a continued targeted share purchases towards our previously announced 150 million buyback program. So thank you and look forward to our follow-ups. Thank you.

In the pursuit of additional acquisitive opportunities that advance our strategic priorities and.

And a continued targeted share purchases towards our previously announced 150 million <unk>.

Back program.

Thank you and look forward to our follow ups.

This concludes today's conference call you may now disconnect.

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