Q4 2023 Schneider National Inc Earnings Call

Good morning, My name is Krista and I'll be your conference operator today at this time I would like to welcome everyone to the Schneider fourth quarter earnings Conference 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 would like to ask a question.

During this time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question again Press Star one. Thank you I will now turn the conference over to Steve Bender Director of Investor Relations You May begin your conference.

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

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

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

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

The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent annual report on Form 10-K, and those risks identified in today's earnings release. All forward looking statements are made as of the date of this call and Schneider disclaims any duty to update such statements except as required.

Acquired by law.

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

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

Thank you, Steve Hello, everyone and thank you for joining the Schneider call. This morning, let me start by offering our perspective on the current freight cycle by placing that in context for our most recent quarter results and our long term strategic priorities a consistent theme emerged from the discussions we've had with our highly diversified customer base through the back half of 2020.

Three.

While customers still find themselves in a heightened state of uncertainty heading into 2020 for virtually no. One believes the current demand and capacity cycle is a new normal or even that it's durable.

Consistent question is when does it change.

In alignment with that theme at the end of January Schneider's internal truckload freight market index crested 600 days of being below neutral while the prior six cycles from three up and three down have lasted an average of 575 days. Therefore, historically, we are quite long into the cycle and variably macroeconomics.

On the demand and capacity balance environment adapts.

Sometimes at a slow and steady pace.

Sometimes more abruptly due to a capitalist.

Irrespective of the market. We are intently focused on company specific initiatives to return our diversified and scaled operating segments of truckload intermodal and logistics to their long term margin targets let.

Let me recap the important developments in the most recently completed quarter regarding those initiatives first in truckload segment, our average dedicated truck count in the quarter is up 674 units over a year ago and up 283 units sequentially from the third quarter through a combination of organic and acquisitive growth.

Included in those numbers as truck count attrition across dozens of operations, particularly in retail support applications due to less overall demand this fourth quarter versus a year ago. Encouragingly. This serves as a building growth channel with even modest demand improvement.

Revenue per truck per week, and dedicated improved both year over year and sequentially, primarily due to asset productivity improvements as a result of those operations specific truck count adjustments are.

Our dedicated value proposition of strong operating performance combined with a robust new business pipeline gives us visibility into several hundred units of additional organic growth in 2024.

Medicaid is consistent revenue and earnings profile places it at the top of Schneider is a strategic growth priorities alongside intermodal.

Presently the growth and performance impact of dedicated within truckload is muted due to the challenges of generating returns in the network offerings.

Over 100% of truckloads earnings in the quarter were associated with a dedicated offering.

Revenue per truck per week, and network improve sequentially driven by asset productivity aided by volumes improving modestly compared to the third quarter. However at this time there is not a compelling reason to allocate additional capital in network until freight great levels are compensable for the service provided.

Our second strategic imperative is to grow intermodal earnings primarily through accelerating over the road conversion opportunities.

That objective was the driving force behind our new rail partnership alignments with the Union Pacific and the CPE Casey.

We are not gauging success with a U P network conversion off the first four quarter of operations where.

We're playing the long game here, achieving our desired outcomes in the west requires not only service reliability, which the team has urgently and successfully addressed.

But also flexibility in our solution commercially.

2023 was the year, we took a step back and western intermodal order volumes. The corresponding mix change is reflected in the 11% lower year over year revenue per order evenly distributed between the change in mix and a change in price.

That said I am pleased that we are working in a highly collaborative manner with the U P to reverse that trend in the 2020 for allocation season, and I am confident we're going to be successful.

We are also committed to leveraging snyder's considerable strengths in Mexico with the leading intermodal service capability of the CP Casey the.

C Pkc's best in class solution is one that proved its value in the quarter by eliminating handoffs and keeping freight in motion, which is the best way to avoid steps and other disruptions.

However to unlock the full potential of the intermodal conversion opportunity requires changing long held market beliefs.

And experiences on the reliability of intermodal solutions into and out of Mexico.

Again, we're playing the long game here and we expect by the time, we exit 2024, we will be well on our way to realizing that potential.

Thirdly, the logistics and brokerage market our hyper competitive.

I appreciate how our team has nimbly navigated the environment by leveraging its own freight generation capability and the resilient power only model to stay profitable.

I am pleased with the advancement of Schneider freight power and the growth of our digital connections despite market softness the number of orders that we acquired digitally increased approximately 25% over a year ago. This creates significant leverage for Schneider when the market begins to improve.

Before I hand, it over to Daryl for his commentary, let me offer some additional insight into the fourth quarter results, including context, our guidance coming out of the third quarter earnings call.

From a safety performance basis, our operations safety and professional driver teams have reduced the frequency of auto liability incidents by 19% as compared to the pre Covid 2019 baseline that is an important trend line is cutting exposure as a first line of defense.

Against the rising settlement costs.

However, in the quarter, we experienced adverse development, primarily on two accident claims from earlier in the year.

Those two incidents snapped a 16th quarter consecutive period without a significant claim adjustment on the positive side of the ledger, we posted a lower tax rate for the year. The net of the adverse safety developments and lower tax represented a 4% drag on earnings per share from what we contemplated in our prior guidance otherwise the quarter played out near.

Really as we expected in terms of freight yields cost performance and lack of equipment disposal gains encouragingly year over year volumes were up in December for both network truck and intermodal, but overall volumes in the quarter were more tepid than expected, especially around the holiday weeks in November and December.

I'll now turn it over to Daryl for his insights on the most recent quarter and update on our capital allocation expectations and our 2020 for guidance.

Thank you Mark and thanks to each of you for joining us this morning.

I will provide a financial recap of our fourth quarter and full year results and some perspective on our 2024 guidance you can find summaries on pages 20 to 25 of our investor presentation.

Our adjusted earnings for the fourth quarter were down $116 million or 78% from prior year adjusted.

Earnings per share for the fourth quarter of 16 compared to 64 cents in the prior year.

The fourth quarter of 2023 included a loss on the sale of revenue equipment versus a $10 million gain in 2020 tool as mark indicated compared to our most recent guidance fourth quarter earnings per share was negatively impacted by <unk> <unk>.

Weighted to two unexpected items.

Firstly adverse development, primarily related to two accident claims that Mark mentioned.

While higher claim costs were predominantly in truckload all segments were impacted.

Secondly, the favorability in our income tax rate, which related to increases in tax credits from our investments in new electric trucks and research and development activities. In addition to changes in our valuation allowance for losses associated with the sale of our Asia business.

Truckload revenues, excluding fuel surcharge for the fourth quarter of 2023 or slightly above 2022, as the network pricing shortfall was more than offset by revenues from solid organic growth in dedicated and our recent acquisition of eminent transport.

Truckload margins and earnings for the fourth quarter were also lower on a year over year basis, primarily due to network price.

Adverse claims development discussed earlier, our loss on equipment sales and inflationary costs.

In our truckload network business, 2023, and particularly the second half was challenging and we believe that Reits have largely reset.

As we communicated last quarter, our spot exposure was uncharacteristically high.

As we have sought to avoid enter into contracts at rates that are non compensable.

During the fourth quarter, we continued to rebalance our spot to contract mix and saw a marginal or seasonality in pricing.

We believe the pricing and volume stabilization seeing sequentially in the fourth quarter are an indication of the bottoming of the current rate cycle, we expect to build on this momentum and to improve contract rates during 2024.

As Mark mentioned, we remain very encouraged by the performance of our dedicated business as we continue to see solid start up activity in the fourth quarter and new business already awarded in the first quarter of 2024, we're seeing strong organic growth and stellar performance from our recently acquired businesses.

Dedicated revenue per truck per week for the fourth quarter increased 3% from the prior year and 4% sequentially. We remain disciplined on customer acquisitions, which should continue to support our growth and earnings expectations.

As of the end of the year dedicated truck count represented over 60% of the truckload segment total.

As compared to 57% a year ago.

This trend reflects progress on our stated commitment to strategically grow this business organically and through opportunistic acquisitions, turning to intermodal, we continue to see our intermodal business, representing a key structural growth opportunity.

We are well positioned with our existing container and chassis is to grow our business, 5% to 30% without the injection on drilling capital.

For the fourth quarter intermodal revenues, excluding fuel surcharge declined by 17% compared to 2022.

As in the truckload network significant pricing pressures weighed heavily on our results for.

For the quarter volumes decreased 1% compared to 2022. However December marked the first months of the year over year growth since February.

Intermodal earnings were impacted primarily due to price in addition to lower orders year over year and increased empty repositioning and claim costs.

Logistics revenues for the fourth quarter of 2023 declined by 20% versus 2022, primarily due to decreased revenue per quarter.

As well as lower brokerage volumes.

In addition to pricing and volume declines logistics margins and earnings for the fourth quarter were also impacted by the adverse claims mentioned earlier.

Our logistics businesses continue to operate profitably through a challenging freight cycle.

We saw sequential improvements during the quarter in both net revenue per order on orders per day in part due to seasonality.

The asset light nature of these businesses also continues to support our optimism for continued growth and long term return on capital.

Turning to capital allocation for the year. We ended 2023 with net Capex of 574 million just below the top end of our most recent guidance of $575 million.

During the year, we increased our debt balance partially related to the acquisition of Eminem transport in August.

Our net debt leverage was <unk> three times at the end of the year and we generated $680 million in cash from operations. Despite current operating conditions. The strength of our balance sheet gives us the conviction to remain confident and committed to our capital allocation strategy, including returning value to our shareholders.

We paid $6 4 million in dividends during 2023, which was 14% above 2022, and we continue to strategically repurchase shares with total activity of $6 6 million for the year. In addition, we recently announced an increase in our quarterly dividend to $9.05 per quarter or 6%.

Kris from 2023, moving now to our forward looking comments from a macro perspective, while higher inflation and interest rates have pressured consumer demand inflation has been moderating and the federal reserve's indication that interest rates could be lower by the end of 2024 has been a key factor in recent optimism in <unk>.

Humor confidence given.

Given the normalization of inventories, we believe shippers will pivot to restocking in 2024, if consumer confidence persists.

In addition to the actions, we're taking to recover pricing and volume we continue to maintain discipline in managing costs across our business segments and an inflationary environment.

As we do throughout all market conditions, we continue to identify incremental opportunities during 2024.

We expect safety cost to be higher than 2023, primarily because of increases in premiums and the full year impact of Eminem transport.

Despite our ongoing focus on and investments in safety. We're also not immune to increase litigation inflated settlements and elevated insurance premiums, we expect equipment gains to be approximately $30 million lower than we realized in 2023, given the current and expected state of the used equipment market.

Also our 2023 adjusted EPS of $1 37.

Included nine of net equity gains from strategic investments, while our 2024 guidance assumes not as is our usual practice as we record equity gains or losses, we will incorporate them into our guidance throughout the year.

Taking all of these considerations into account our guided adjusted earnings per share for 2024 is $1 15 to $1 30.

This guidance assumes a normalized effective tax rate for 2024 of 24, 5%.

While we believe we are at the bottom of a cycle, both the timing and pace of recovery during 2024 remain uncertain.

Continuing effects of lower contract pricing and our network businesses of truckload and intermodal.

And net revenue compression and logistics are expected to impact our results as we enter 2024, and we expect sequential recovery in the freight market as the year progresses with a heavier weighting towards the second half of 2024.

Finally, I'll provide some guidance on our net Capex plan for full year 2024 during.

During 2023, we made notable progress towards our tractor and trailer Asia III targets as the Oems have recovered from their production constraints.

We also remain confident in our ability to grow intermodal volume without the need to add any containers or chassis in 2024.

We therefore do not expect the same level of Capex investments in 2024.

In addition to continued technology investments, we will invest in growth capital and dedicated and intermodal attractors.

We also anticipate moderating proceeds from equipment sales as compared to 2023.

As a result of these considerations split net capex to be in the range of 400 million to $450 million for the full year 2024 with that we'll open up the call for your questions.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad. Your first question comes from the line of Bruce Chan from Stifel. Please go ahead.

Hey, good morning, everyone and thanks for the time here Daryl welcome to the call and it's always great to have another floridian in the mix, but maybe just a question here on the competitive environment in intermodal.

Bruce Chan: What are you seeing as far as price discipline or maybe lack thereof from your peers right now and given that you and others have quite a bit of capacity, that's kind of waiting to be unleashed. There. How do you expect that competitive environment to trend if and as we see a recovery.

Yes, so the first place when we think about the competitive landscape for intermodal the largest competitor is over the road and so that is the.

Bruce Chan: The number one place that we're looking at where the largest opportunity is.

The competitive landscape Theres a lot of containers that are up on stacks and so there isn't necessarily.

Strong need to put all of those back into service to be able to.

Continue to operate so I think there is discipline in terms of what's needed to take in terms of the stack where that can take containers off the stack for pricing thats not compensable.

Okay. That's really helpful and maybe just a quick follow up to that when I think about.

The discussions with customers in intermodal and maybe in your networks business as well how have those discussions been going contract renewals at a trending positive so far this year.

Any any signs of a turning point.

Well, it's very early in the season, there's a really wide spectrum out there.

So there's not very many that are closed out at this point I'd say, there's a couple of themes here right now.

One that is.

As Daryl mentioned that we're staying disciplined there's just there's no room to take a step back further but also our customers approach that there's customers that are putting a lot of work and effort entities beds and at the same time, we don't expect their bids to hold together through the entire business cycle.

That's really helpful. Thank you.

Your next question comes from the line of.

Ravi Shanker from Morgan Stanley. Please go ahead.

Thank you good morning, everyone.

So EPS guidance is down year over year seems very conservative even with some of those cost headwinds that you mentioned kind of the equity gains and loss on sale et cetera.

Are you guys assuming that current conditions stay stable through the rest of the you're all kind of I know, there's obviously tremendous uncertainty on the timing of inflation, but what exactly is underpinning the guidance.

Yes, Ravi it's Mark I am hesitant to put a label on the guidance beyond what we've kind of communicated there.

As we look at our company specific initiatives as.

As we look at where the market is and our expectations on price and productivity. We think we've given a fairly balanced view towards the range as we currently understand it and can anticipate.

We do believe we are supremely positioned to pivot quickly.

Depending upon where the conditions go, particularly on the upside in our model and our assets will be deployed as well as what we can do with our brokerage business and pivot quickly so but imbalance I think we've taken into account.

Really what we can anticipate at this point and again I would at this juncture, probably avoid putting a label of whether that's conservative or aggressive or.

Anything like that.

Okay got it and maybe a quick follow up can you elaborate a little bit more on the intermodal issue and the kind of the allocation with but you weren't big enough what exactly happened there and why is it going to take 12 months to resolve what it does it right et cetera.

Yes.

Sure.

First of all we're seeing out there in the broader market there is opportunity is.

Mentioned that truckload market Thats, the largest opportunity I think the second opportunity is imports.

As it relates to our rail provider out there in the west that this is our first year with the European I really commend the <unk> for taking this additional on volume improving service, but it was a year for learning for both sides.

I think we have an opportunity that we have they are deals are long term that are market based and competitive.

They are based on normal cycles. So theres times. So we'll go through a little bit of abnormal cycles, and we stick to.

Work, a little bit different way with our rail string those seek out a little bit of flexibility in dealing with this year of learning, we're looking forward to leveraging that for both sides and use them an alignment to move forward.

Great. Thanks, a lot.

Thanks Ravi.

Our next question comes from the line of Jordan <unk> from Goldman Sachs. Please go ahead.

Yeah, Hi, just a question sorry, once again thinking about the guidance for the year.

You talked a little bit about second half being better than the first half, but is there a way to think about.

The shape or the SKU I mean, there's as you're seeing it now is it going to be pretty sharply second half versus first half and is there a difference between your three business segments in terms of how you think about the year progressing in terms of profitability. Thanks.

Hey, Jordan Thanks for the question.

I wouldn't give you any specific shaping comments beyond what we do believe that.

We will be continue to improve as we go through the year.

As you look at our various segments, we think that applies to all three dedicated is a bit more.

It's considerably more consistent quarter to quarter and so our network businesses I believe have the biggest opportunity as we come out of 2023 and coming into 2020 for allocation season, both in truck and intermodal.

So I would characterize the opportunity be in all three segments fairly consistent.

With increasing.

Upside.

Both volume and pricing as the year progresses.

Operator: Good morning. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Schneider Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Thank you.

Your next question comes from the line of Brian Austin back from J P. Morgan. Please go ahead.

Hey, Thanks, good morning.

Just wanted to go back first Jim to your question about some of the customers expecting their bids maybe.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, again, press star 1. Thank you. I will now turn the conference over to Steve Bindas, Director of Investor Relations. You may begin your presentation. Thank you, Operator, and good morning, everyone.

Maybe not to hold through the through the cycle I know how to read into that does that mean, they're expecting an inflection does that mean, they're trying to take one more bite of the Apple in and see what happens in the back half of the year, maybe you can put some context around that.

Yeah. Thanks for the question so as the former debt.

Bruce Chan: Customers expect that theres going to be an inflection at some point and that they may have overreached and trying to.

Steve Bindas: Joining me on the call today are Mark Rourke, President and Chief Executive Officer, Errol Campbell, Executive Vice President and Chief Financial Officer, and Jim Filter, Executive Vice President and Group President of Transportation. Earlier today, the company issued an earnings press release. This release and an investor presentation are available on the investor relations section of our website at schneider.com. Our call will include remarks about future expectations, forecasts, plans, and prospects for Schneider. These constitute forward-looking statements for the purposes of the Safe Harbor Provision under applicable federal securities laws.

To dig as far as they did.

And at some point during the year that these arent going a whole yes.

Yes, I would say.

Broader conversations across the broader spectrum as folks are being in our view much more balanced towards.

The fact that we are long into this cycle.

Same with Jim's referencing there are customers that look.

Based upon there.

Approach to be more aggressive and we think those folks and as we communicate with them. We will take all of that into account and what type of commitments, we will or will not make on behalf of that approach. So.

But I think increasingly those conversations as I opened set in my opening comments.

Steve Bindas: 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 FEC filings, including, but not limited to, our most recent annual report on Form 10-K and those risks identified in today's earnings release. All forward-looking statements are made as of the date of this call, and Schneider disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, 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. Now I'd like to turn the call over to our CEO, Mark Rourke. Thank you, Steve.

No. One believes we're in this condition for the long term, it's just a matter of when and I think youre seeing more balanced thinking going forward than we would've described as we were coming into this juncture in 2023.

Alright, Thanks for clarifying that and then Mark for you can you just talk about how you are.

Positioning the network truck business into this bid cycle, you mentioned hanging onto more spot keeping some of that capacity out.

The market, but it seems like that obviously came with a cost given the performance was lossmaking in the in the fourth quarter. So.

Feel like that's still in our first quarter drag.

Drag is there some permanent capacity that needs to come out or you're still just waiting.

Wait and kind of biding your time until you get to the right rates movies to move this equipment back into the market.

Mark Rourke: Hello, everyone, and thank you for joining the Schneider Call this morning. Let me start by offering our perspective on the current freight cycle by placing that in context with our most recent quarter results and our long-term strategic priorities. A consistent theme emerged from the discussions we had with our highly diversified customer base through the back half of 2023. While customers still find themselves in a heightened state of uncertainty heading into 2024, virtually no one believes the current demand and capacity cycle is a new normal, or even that it's durable. The consistent question is, when will it change?

Yeah.

Speaker Change: Yes, Brian I think what we tried to communicate there is that this is a place presently we're not looking to add capital to.

We also know from our historical practice that the truck network business, both up and down cycle reacts the quickest to change.

And so that's really our focus is to focus on improving the revenue quality well in advance before we think about adding.

Capital to the network. It does play an important role in support of our customers and the dedicated startups. There's a lot of other things that they bring to the party, but we don't need to add additional capital there focuses on margin restoration.

Mark Rourke: In aligning with that theme, at the end of January, Schneider's Internal Truckload Freight Market Index corrected 600 days of being below neutral, while the prior six cycles, three up and three down, have lasted an average of 575 days. Therefore, historically, we are quite long into this cycle; invariably, macroeconomics and a demand-capacity balance environment will adjust. Sometimes at a slow and steady pace and sometimes more abruptly due to a cap.

And then augmenting that network.

Capital that we put into it with our own trucks with increasingly leveraging power only capability.

And third party equipment into that equation.

Okay. Thanks, Mike appreciate it.

Thank you.

Your next question comes from the line of.

Ken <unk> from Bank of America. Please go ahead.

Mark Rourke: Regardless of the market, we are intently focused on company-specific initiatives to return our diversified and scaled operating segments of truckloads, intermodal, and logistics to their long-term margin targets. Let me recap the important developments in the most recently completed quarter regarding those initiatives. First, in the truckload segment, our average dedicated truck count in the quarter is up 674 units over a year ago and up 283 units sequentially from the third quarter through a combination of organic and acquisitive growth. However, included in those numbers is truck count attrition across dozens of operations. Thank you all for joining us today.

Hey, great good morning.

Mark.

If we could just kind of revisit the outlook you in general were talking about with Ravi.

Dollar $15 30, if you eliminate the 10 cents of gains this year.

I guess that gets you that's why it's kind of flattish on the outlook.

But maybe can you talk about puts and takes within that your mix on volumes and pricing.

Sounds like you've got fleet growth based on the Capex. So now is it more of that inflation is going to offset the fleet growth and yield growth I'm just trying to get the puts and takes that are within your your flattish outlook.

Mark Rourke: Revenue per truck per week in Dedicated improved both year-over-year and sequentially, primarily due to asset productivity improvements as a result of those operation-specific truck count adjustments. Our dedicated value proposition of strong operating performance combined with a robust new business pipeline gives us visibility into several hundred units of additional organic growth in 2024. Dedicated's Consistent Revenue and Earnings Profile places it at the top of Schneider's strategic growth priorities alongside Intermodal. However, currently, the growth and performance impact of Dedicated within truckloads is muted due to the challenges of generating returns in the network offering. Over 100% of Truckload's earnings in the quarter were associated with the dedicated offering.

Yes, I'll start I'll turn the mic over to Daryl here momentarily, but what we're looking at on growth first of all our capex.

Guidance range of 450 is down fairly considerably from a year ago because of the catch up with the Oems and the age of fleet. So we feel really well positioned there, but depreciation is up just because of the inflationary cost associated the last couple of years with that new equipment from.

From a growth standpoint, Ken we're really focused on really two areas and that would be dedicated where we've had sustained success organically and we have good visibility into both the first and second quarter of a number of startups that give us confidence that we will continue to have momentum through 2024.

And then on success of growing our intermodal business, while we want to look to put additional container and chassis because we have our ratios where we need them to be we have terrific self help leverage there with growth without adding trailing capacity, but we would look to add and grow the fleet.

Mark Rourke: Revenue per truck per week in the network improved sequentially, driven by asset productivity, aided by volumes improving modestly compared to the third quarter. However, at this time, there is not a compelling reason to allocate additional capital and network capacity until freight rate levels are compensable for the service provided. Our second strategic imperative is to grow intermobile earnings primarily through accelerating over-the-road conversion opportunities. That objective was the driving force behind our new rail partnership alignments with Union Pacific and CPKC. We are not gauging success with the UP network conversion during the first four quarters of operation.

Company Dray fleet. So we have some tractor growth in there we don't really see the need on the trailing equipment either in intermodal or truck outside of dedicated and so that's all reflected in our forward guidance as it relates to capex.

The other thing I would add is in addition to the equity gains that you mentioned that we're not assuming in the model.

Mark Rourke: We are playing the long game here. Achieving our desired outcomes in the West requires not only service reliability, which the UP team has urgently and successfully addressed, but also flexibility in the solution commercial. 2023 was the year we took a step back and left intermodal order volume. Corresponding mix change is reflected in the 11% lower year-over-year revenue per order, evenly distributed between a change in mix and a change in price.

Speaker Change: Increases in our market insurance premiums.

Speaker Change: And then obviously our tax rate, which was at 22% in 2023 is expected to normalize so all those things are headwinds.

Slightly impact some of what mark talked about in terms of growth.

Mark Rourke: That said, I am pleased that we are working in a highly collaborative manner with the U.P. to reverse that trend in the 2024 allocation season, and I am confident we're going to be successful. We are also committed to leveraging Schneider's considerable strength in Mexico with the leading intermodal service capabilities of CPJC. CPJC's best-in-class solution is one that proved its value in the quarter by eliminating handoffs and keeping straight in motion, which is the best way to avoid seth and other disruptions.

Thanks for that.

Speaker Change: Daryl maybe just a couple of numbers follow ups.

You mentioned the asset loss in the quarter I don't think you gave a number or was there a number with that and then intermodal did you say what percent of boxes are still stacked.

Daryl: And then I've got if you let me get one more I'll ask about contract rates, but that's it.

We're going to probably move on after the two timber yeah sorry.

Yes, so I'll get a chance to catch up yeah, no number on the loss.

Jim if you want to jump in so there is about 15% of the containers there on stack.

Mark Rourke: However, to unlock the full potential of the intermodal conversion opportunity requires changing long-held market beliefs and experiences about the reliability of intermodal solutions into and out of Mexico. Again, we're playing the long game here, and we expect by the time we exit 2024, we will be well on our way to realizing that potential. Thirdly, the logistics and brokerage markets are hyper-competitive. I appreciate how our team has nimbly navigated the environment by leveraging its own great generation capability and the resilient power-only model to stay profitable. I am pleased with the advancement of Schneider Freight Power and the growth of our digital connections.

Alright, thanks, guys.

Your next question comes from the line of Jon Chapelle from Evercore ISI. Please go ahead.

Yes. Thank you hate to be so short term focus but it seems like this is going to be one of those years, where it's tougher to make a call with visibility until you get closer to see the way to the <unk>. So as it relates to <unk> typically seasonally weaker but coming off kind of a muted peak season, there's <unk> in basically all of the different.

<unk>.

Daryl: Segment look similar to <unk> or are there some maybe idiosyncratic reasons why <unk> should be better seasonally.

Mark Rourke: Despite market softness, the number of orders that we acquired digitally increased approximately 25% over a year ago. This creates significant leverage for Schneider when the market begins to improve. Before I hand it over to Darryl for his commentary, let me offer some additional insight into fourth-quarter results, including context for our guidance coming out of the third quarter earnings call. From a safety performance standpoint, our operations, safety, and professional driver teams have reduced the frequency of auto liability incidents by 19% as compared to a pre-COVID 2019 baseline. That is an important timeline as cutting exposure is the first line of defense against rising settlement costs. However, in the quarter, we experienced adverse developments primarily on two accident claims from earlier in the year. Those two incidents snapped a 16-quarter consecutive period without a significant claim adjustment.

We look at it sequentially.

Yes.

Speaker Change: Well. Thank you it's low early in the quarter, obviously and what we've been dealing at least initially through the first couple of weeks, we had some adverse weather impacts, particularly in comparison to the last couple of years.

So we'll keep our really thoughts as it relates to the shaping of the year is what we said to this point, we do think it will continue to improve throughout the year and be a bit more robust in the second half, but not offer any more specific guidance yet here in the first quarter.

Speaker Change: Okay understood Jim as it relates to intermodal margin, obviously, there's a lot of optimism about getting volume back.

On the different networks.

Speaker Change: But the margins, obviously taken a pretty significant step back over the last 12 months is that strictly a function of the volume will drive the turns will drive productivity will drive margin improvement or are there. Other things that you can actually do internally to better the cost structure provide more operating leverage.

Darryl: On the positive side of the ledger, we posted a lower tax rate for the year. The net of the adverse AP developments and lower tax represented a forced cent drag on earnings per share from what we contemplated in our prior guidance. Otherwise, the quarter played out nearly as we expected in terms of freight yields, cost performance, and lack of equipment disposal gains. Encouragingly, year-over-year volumes were up in December for both network truck and intermodal, but overall volumes in the quarter were more tepid than expected, especially around the holiday weeks of November and December. Let me now turn it over to Darryl for his insights on the most recent quarter, an update on our capital allocation expectations, and our 2024 guidance. Thank you, Mark, and thanks to each of you for joining us this morning.

Speaker Change: And even have some volume improvement I'm, sorry, some margin improvement before you really get a true volume inflection.

Yes, thanks for the question so.

Obviously during the quarter there were some additional containers that were put on stacks or there are some additional costs that was absorbed.

There is also opportunity just running a more efficient network. So.

It's not just getting volume, but getting the right volume that reduces our empty repositioning costs as well as our driver productivity. So those are all the focus areas to be able to improve margin.

Darryl: I'll provide a financial recap of our fourth quarter and school year results and some perspective on our 2024 guidance. You can find Summers on pages 20-25 of our investor presentation. Our adjusted earnings for the fourth quarter were down $116 million, or 78% from the prior year.

Okay.

Okay. Thanks, Jim Thanks, Mark.

Thank you.

Your next question comes from the line of Jack Atkins from Stephens. Please go ahead.

Okay, great. Thanks for taking my question, So I guess I'm going to go back to the guidance for a second because I think what what folks are confused about is you know when you kind of adjust for the taxes and the.

Darryl: Adjusted earnings per share for the fourth quarter of $0.16 compared to $0.64 in the prior year. The fourth quarter of 2023 included a loss on the sale of revenue equipment versus a $10 million gain in 2022. As Mark indicated, compared to our most recent guidance, fourth quarter earnings per share was negatively impacted by foresight related to two unexpected items. Firstly, adverse developments primarily related to two accident claims that Mark mentioned. While hard claim costs were predominantly in short flows, all segments were in parallel.

Insurance headwind in the.

Fourth quarter, I mean, you're you're kind of exit rate is about $60 65, something like that.

For a kind of a full year exit annualized in the fourth quarter and you're guiding to a $1 15 to $1 30. So I guess, we're just what I'm trying to really kind of get my arms around is what specifically.

Are you assuming for a cycle turn in the second half of the year to kind of get to the bottom end of this guidance range because it would seem like there's a pretty substantial improvement in underlying business trends. There so kind of help us think through that because.

Darryl: Secondly, the favorable change in our income tax rate, which relates to increases in tax credits from our investments in new electric trucks and Research and Development activities, in addition to changes in our valuation allowance for losses associated with the sale of our Asia Bitcoin. Truckload revenues, excluding fuel surcharge for the fourth quarter of 2023, were slightly above 2022 as the network pricing shortfall was more than offset by revenues from solid organic growth and dedicated and a recent acquisition of M&M Crafts. Truckload margins and earnings for the fourth quarter were also lower on a year-over-year basis, primarily due to network prices.

We all hope something's going to happen, but it seems like you're expecting it to happen.

Well thanks for the question, Jack and I'd like to address that in a couple of fronts first.

Speaker Change: We focused in on our company specific objectives.

<unk> of all the good work, we've been doing in dedicated both acquisitive <unk> organically and the prospects that we anticipate.

Many of which we have visibility to from contract closures and startups. So.

No we are leaning into key strategic initiatives that allow us to continue to improve our overall business results on that in our truck business.

Dramatically focuses on dedicated and feel really good about where we're positioned there secondly, we do believe that based upon our alignment with our customers what they looked at.

Darryl: The adverse change development discussed earlier, a loss on equipment sales, and inflationary pressures. In our truckload network business, 2023, and particularly the second half, was tangible, and we believe that rates have largely reset. As we communicated last quarter, our spot exposure was uncharacteristically high, as we sought to avoid entering into contractor rates that are non-compensatory. During the fourth quarter, we continued to rebalance our spot to contract needs from Marginal Fusion Energy and Pricing. We believe the pricing and volume stabilization seen sequentially in the fourth quarter are an indication of the bottoming of the current trade cycle. We expect to build on this momentum and to improve contract rates during 2024. As Mark mentioned, we remain very encouraged by the performance of our dedicated business as we continue to see solid startup activity in the fourth quarter and new business already awarded in the first quarter of 2024. We're seeing strong organic growth and stellar performance from our recently acquired business. Dedicated revenue per truck per week for the fourth quarter increased 3%.

To accomplish relative to intermodal growth and how that fits into what their strategies are that we are.

Our well positioned and we're leaning in hard to to change some of the trajectory we've experienced in that business in 2023 to include.

The really unique opportunities that are emerging in Mexico. So that's to third as you would expect we've been leaning really since the middle of 2022 into our cost structure and how we can become more efficient.

Saw in our results.

Sequentially, the third to the fourth quarter that asset productivity improved without demand are proving a very material way. So again those initiatives that we are leaning into to improve asset turns across everything that we.

Do across our portfolio as things that we think and expect to improve results.

But clearly we believe we are also very long into the cycle, our internal metrics that we look at which is a combination of.

Company specific.

Correlation factors and certain outside elements of data that also over time have correlated to cycles, whereas at the end of this month will surpassed 600 days as I mentioned in my opening comments, which is historically very long in the cycle.

There are some macroeconomic whether it's rate condition inflation consumer confidence, we do believe things will turn to an extent and we'll get back into some level of restocking that's been stubbornly slow and capacity continues and is slow and steady pace to exit the marketplace.

Darryl: We remain disciplined on custom acquisitions, which should continue to support our growth and earnings expertise. And at the end of the year, dedicated truck count represented over 60% of the truckload segment total as compared to 67% a year ago. This trend reflects progress on our stated commitment to strategically grow this business organically and through opportunistic acquisitions. Turning to intermodal, we continue to see our intermodal business as a key structural growth opportunity. We're well-permitted with our existing container and chassis to grow our business 25 to 30 percent without the injection of treating capacity. So the fourth quarter intermodal revenue, excluding full surcharge, declined by 17% compared to 2022. As in the Truffle Network, significant pricing pressures weigh heavily on results. For the quarter, volume decreased 1% compared to 2022.

Speaker Change: And that doesn't include a catalyst that overtime has occurred that can accelerate that so we're taking those company specific things, we're taking a slow and steady.

Capacity exit a restocking again, a slow and steady restocking that will continue that we believe.

Has a highest probability to improve throughout the year and that's what we put into that context, that's what we've put into that guidance range.

Okay. Okay. Mark. Thanks. Thank you. Thank you for that color and then I guess, maybe for my follow up is really on insurance I mean, I think almost everyone. That's reported so far during this earning season has had some sort of insurance.

You know either accrual true up.

You know kind of key topic on all these calls.

As you sort of are thinking about this moving forward could you talk about.

Any sort of inflation that you're expecting in your premium costs in 2024, but.

Would you just expect insurance as a percentage of revenue moving forward. It would just be a higher number it just feels like structurally the market is just hard in some.

Yes, I think the insurance markets, whether you are talking trucking or really any other.

The proportion of the economy is under pressure from a premium standpoint, and certainly we are expecting we feel that.

I think what's really important when we look at at Schneider, specifically, we had a 16th consecutive quarter streak, where we did not have these type of adjustments. So we take first of all safety from a training of technology, what we do every day.

Darryl: However, December marked the first month of year-over-year growth since February. Intermodal earnings were impacted primarily due to price, in addition to lower orders year-over-year and increased entry repositioning and claim costs. Logistics revenues for the fourth quarter of 2023 declined by 20% versus 2022, primarily due to decreased revenue per order, as well as Laura Wilkins-Watt. In addition to pricing and volume declines, logistics margins and earnings for the fourth quarter were also impacted by the adverse claims mentioned earlier. All of these businesses continue to operate profitably through a transient free cycle.

From the core value of the company very seriously and it's reflected in our results and you see it in the incident exposure reduction that I shared with you 19% over the last couple of years.

So all of that is an incredibly important and it's also incredibly important to be realistic about when you have a risk exposure that you have evaluated it correctly and you deal with it in a way.

That it doesn't doesn't escalate unfortunately that 16 consecutive quarters streak.

<unk> on us.

This year with two primarily around two incidents.

And so.

Again, I don't accept the fact that it's.

A continuous issue, but they do happen and this was our time for them to happen. So.

Darryl: We saw sequential improvements in reporting, both net revenue per order and orders per day, in part due to CMAP. The asset-light nature of these businesses also continues to support our optimism for continued growth and long-term return on capital. Turning to capital allocations for the year, we ended 2023 with net capex of $574 million, just below the top end of our most recent guidance of $575 million. During the year, we increased our debt balance partially related to our acquisition of M&M Transport and Authors. Our net debt leverage was 0.3 times at the end of the year, and we generated $680 million in cash from operations.

So Jack so, yes, I think the insurance premium side of that.

There is an external factor that we're going to have to deal with as everybody well, but we are leaning in really hard because nothing we do is worth hurting ourselves or others.

Permeates every part of our organization.

Thank you Mark.

Your next question comes from the line of Tom Waterworks from UBS. Please go ahead.

Yes. Good morning, So I wanted to ask a little bit about the intermodal margin I think there has been this kind of.

Anticipated help on purchase transportation it seems like it just hasnt been visible yet.

Thomas R. Wadewitz: In terms of helping on the margin side is that something that you think will continue to be elusive or.

Darryl: Despite current operating conditions, the strength of our balance sheet gives us the conviction to remain confident and committed to our capital allocation strategy, including returning value to our shareholders. As such, we paid $64 million in dividends in 2023, which was 14% above 2022. And we continue to strategically repurchase shares with total activity of $66 million for the year.

Is it reasonable to think that if you look at whether it's <unk> that you would see sequential improvement in that intermodal margin.

<unk> by that kind of lagged reduction in purchase transportation.

Yeah. Thanks, Tom.

Yes.

We still have our long term margin targets out there and we still believe that those are the right target margins for all three of our segments.

Darryl: In addition, we recently announced an increase in our quarterly dividend to $0.095 per quarter, a 6% increase from 2023. Moving now to our forward-looking, From a macro perspective, while higher inflation and interest rates have pressured consumer demand, inflation has been moderating, and the Federal Reserve's indication that interest rates could be lower by the end of 2024 has been a key factor in recent optimism in consumer confidence.

And believe there will be a point that we get to that spot I Couldnt give you timing of us which quarter do we get back to that but we do anticipate that we'll get back to those long term margin targets.

Tom I think.

Our approach, particularly on intermodal is well positioned to be highly competitive and effective through normal freight and business cycles. I think obviously, we've been through a significant upside now we've seen the backside of that and we're working to become more nimble commercially with our customers, how we partner with our rail provider.

Particularly our newest ones.

To deal with those market abnormality abnormality easy for me to say period.

Darryl: Given the normalization of inventories, we believe shippers will pivot to restocking in 2024 if consumer confidence persists. In addition to the actions we're taking to recover pricing and volume, we continue to maintain discipline in managing costs across our business segments in an integrationary environment, as we do for all market conditions. We continue to identify incremental opportunities during 2020. We expect safety costs to be higher than in 2023, primarily because of increases in premiums and the four-year impact of M&M transfer.

But I think overall, we're positioned well we would continue to expect improvement there operationally.

As service improves and really pleased with how our rail partners have leaned into that to give confidence to our customer base.

And then I think we have some unique capabilities that will continue to pursue and I think we do have the absolute best solution in and out of Mexico, and we've got a great provider, there and really looking forward to exercising that to the degree we can here through this next allocation season. So.

I would I guess.

I would read that is optimistic.

Optimistic and feeling that we're in a good position and it should continue to improve.

Yeah.

Right Okay.

Speaker Change: Mark I wanted to ask you a cycle question too.

Hi.

Look at these results and you alluded to network, losing some money.

Heartlands, losing money other is <unk>.

Darryl: Despite our ongoing focus on and investment in safety, we're also not immune to increased litigation, inflated settlements, and elevated insurance premiums. We expect equipment gains to be approximately $30 million lower than we realized in 2023, given the current and expected state of the used equipment market. Also, our 2023 Adjusted ECF of $1.37 included 9 cents of net equity gains from strategic investment.

Around the market rate and.

I think it's just like I don't recall, a cycle downturn, where it has been such a pronounced pressure on big truckload carriers, you know big well run truckload carriers.

Do you think that.

Results and at some point, maybe a bigger capacity adjustment I'm just trying to figure out how do you whats. The result of this because it does seem like kind of a tougher downturn than we've seen in prior cycles.

Darryl: While our 2024 guidance assumes not. As is our usual practice, as we record equity gains or losses, we will incorporate them into our guidance throughout the year. Taking all these considerations into account, our Guided Adjusted Earnings Per Share for 2024 is $1.15 to $1.30. This guidance assumes a normalized effective tax rate for 2024 of 24.5%.

Speaker Change: Yes, I think we've all been talking about the stubborn.

Exit of capacity I think certainly.

It's occurring would we have expected maybe a bigger exited at a faster rate I think many of us in the industry would have.

Based upon history got there.

Darryl: While we believe we are at the bottom of the cycle, both the timing and pace of recovery during 2024 remain uncertain. The continuing effects of lower contract pricing in our network businesses of front load and intermodal and net revenue compression in logistics are expected to impact our results as we enter 2024, and we expect sequential recovery in the freight market as the year progresses, with a heavier weighting toward the second half of 2020. Finally, I'll provide some guidance on our NEDCAPEX plan for the full year 2026. During 2023, we need to make notable progress towards our factory and trailer agency targets as OEMs have recovered from their production constraints. We also remain confident in our ability to grow intermodal volume without the need to add any containers or chassis in 2024.

Compression, perhaps what youre pushing at Tom is as we went through the so the pandemic driven upside. We also had some inflationary factors play there, particularly in the equipment space the driver wages space and those are a bit more difficult at least in the short term.

To get through year results, particularly on the back side of a correction and so.

And perhaps that is a factor that's a bit more pronounced than may have.

Happened in some prior periods like 2009, and some of the other more pronounced downturn. So.

I think we got a handle on those costs I think we've got an approach to that but but certainly we don't think the rates are compensable for the service provided the cost to serve.

Now you saw the insurance question, we had here just prior that there needs to be and.

We're confident that there will be a market correction on the pricing side to reflect that.

I mean, I guess, we will see what the result is do you agree with the premise that this is maybe the tougher downturn than we've seen.

Speaker Change: Hello memory gets harder as a bit of my number 36 years in the industry I would say this has been at least from my experience. The most challenging on both sides what it was.

Darryl: We therefore do not expect the same number of CapEx investments in 2024. In addition to continued technology investment, we'll invest in gross capital and dedicated and intermodal attractors. We also anticipate moderating proceeds from equipment sales as compared to the 2020 series. As a result of these considerations, Sprint Net CapEx could be in the range of $400 million to $450 million for the full year 2024.

Extremely robust and what those implications were and now as we're sitting here on the backside of that correction I would put this is.

If not it's going to be in the top two.

Speaker Change: Yeah, Okay, great. Thank you for the time.

Your next question comes from the line of Bascom majors from Susquehanna International Group. Please go ahead.

Thanks for taking my questions following up on Tom.

Operator: With that, we'll open up the call for your questions. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Your first question comes from the line of Bruce Chen from Spiegel. Please go ahead. Hey, good morning, everyone.

Good morning, following up on Toms question about the network margin Wood network operated at a loss without the claims charges that you dealt with in the quarter end.

What dedicated is earning now versus what network is and how that's looked at other cycle trough just to understand how different this environment is today and just to extend that.

Bruce Chen: Thanks for your time here. Daryl, welcome to the call. And Zoe Frates has another Floridian in the mix.

Bruce Chen: But just a question here on the competitive environment and intermodal. What are you seeing as far as price discipline or maybe a lack thereof from your peers right now? And given that you and others have quite a bit of capacity that's kind of waiting to be unleashed there, how do you expect that competitive environment to trend, you know, if and as we see a recovery? Yeah, so when we think about the competitive landscape for NML, the largest competitor is over the road. And so that is the number one place we're looking for where the largest opportunity is. Across the competitive landscape, there are a lot of containers that are up on stacks. And so there isn't necessarily a strong need to put all of those back into service to be able to continue to operate.

How necessary is pricing above inflation.

In intermodal and one way to get to your second half objectives. Thank you.

Thanks, Pascal and let me try to unpack that.

Yes.

Safety implication was pronounced much more pronounced in truck in the quarter and certainly reflective in <unk>.

And our network results in.

Who would have been certainly in the black without that so a clear.

Indicator.

This is from a pricing standpoint first of all dedicated we feel is positioned very very well obviously when you are in a growth spurt you have some additional friction costs.

<unk> startups and recruiting and all the things that naturally come with leaning into that portion of the business, but even with that in addition to our acquisitions the gap is material and.

Jim Filter: So I think there's discipline in terms of what's needed to take containers off the stack. We're not going to take containers off the stack for pricing that's not compensable. Okay, that's really helpful.

Yeah.

Because of the volatility associated with the pricing mechanism that plays out in our network business. So we do need to lean into price, we do need to improve our book of business.

Jim Filter: And maybe just a quick follow-up to that, you know, when I think about the discussions with customers and intermodal and, you know, maybe in your network business as well, how have those discussions been going? You know, contract renewals, are they trending positive so far this year? You know, any signs of a turning point? Yeah, well, it's very early in the season. There's a really wide spectrum out there.

Speaker Change: And that's why we're not going to be adding capital Thats priority. One is simply to get after margin restoration and that's a combination of productivity cost.

And rate recovery.

Thank you.

Your next question comes from the line of you de Carnap Parker from TD Cowen. Please go ahead.

Jim Filter: So, there's not very many that have closed out at this point. I'd say there are a couple of themes here right now. Number one, that, you know, as Daryl mentioned, that we're seeing this one. There's no room to take a step back further.

Hi. Thanks. This is are they on for Jason Seidl.

Maybe just a longer one longer term one on intermodal.

I appreciate that this is a fairly distinct possibility at this stage, but with China tariffs are likely be backend into the conversation.

Jim Filter: But also, our customers' approach, that there are customers that are putting a lot of work and effort into these bids and, at the same time, don't expect their bids to hold together through the entire bid cycle. That's really helpful. Thank you. Your next question comes from Ravi Shanker for Morgan Stanley. Please go ahead. Thank you. Good morning, everyone.

Speaker Change: How do you evaluate the volume and pricing dynamics in intermodal if those play out maybe maybe it would be helpful. If you could remind us how the intermodal business adapted to the imposition of gas in 2019 did have any predictable mix implications anything on the cross border and any color there would be appreciated. Thanks.

Ravi Shanker: So, EPS guidance down year over year seems very conservative, even with some of those cost headwinds that you mentioned, kind of the equity gains and the loss on sale, etc. Are you guys assuming that current conditions stay stable through the rest of the year, or kind of, I know there's obviously a tremendous uncertainty on the timing of inflection, but what exactly is underpinning this right now? Yeah, Ravi, it's Mark.

Yes. Thank you for the question and certainly have all of our service offerings. The one that leans and have most heavily towards imports and the effect of imports as our intermodal business.

And the West Coast is a place that we have not maintain the share that we would have typically expected in an important recovery as an important component.

Particularly in the western side of the side of our network, but we also have some real positives on some of the.

Mark Rourke: I'm hesitant to put a label on the guns beyond what we've kind of communicated there. You know, as we look at our company-specific initiatives, as we look at where the market is from, and our expectations for price and productivity, we think we've given a fairly balanced view of the range as we currently understand and can anticipate. We do believe we are supremely positioned to pivot quickly, depending upon where the conditions go, particularly on the upside, and where our model and our assets will be deployed, as well as what we can do with our brokerage business. But in balance, I think we've taken into account clearly what we can anticipate at this point. And again, I would just want to call his voice out putting a label of whether that's conservative or aggressive or anything like that.

In response to those geopolitical which is the near shoring activity, that's going on the investment taking place in Mexico.

Speaker Change: Is the biggest winner here.

Speaker Change: Some of those investments take time to mature in two.

Take hold but clearly the biggest opportunity is how much freight moves over the road on the longer length of hauls that make most sense economically emission wise in and out of Mexico. So while there might be some overtime geopolitical pressures in other part of that network. There was also some winners and other parts that we want to make sure we're well.

Physician to take advantage of.

And we have seen some shifting obviously from port activity to eastern ports in southern ports. In addition to Mexico. So.

Ravi Shanker: Okay, got it. And maybe a quick follow-up. Can you elaborate a little bit more on the intramodal issue and the kind of allocation with UNP? What exactly happened there?

Which are more generally attractive truck.

Speaker Change: As opposed to intermodal overtime, but Jim maybe just other comments is 10019, if I go back to 2019, it did cause a little bit of a short term blip really as some of our customers were finding other sources of deferral.

Jim Filter: Why is it going to take 12 months to resolve? What are the surprises, et cetera? Yeah, yeah. First of all, we're seeing out there in the broader market that there's an opportunity, as I mentioned, the truckload market. That's the largest opportunity. I think the second opportunity is imports.

Deferred products, but when they came back created a surge in demand. So we saw both sides of those and so you have that type of impact right away.

Speaker Change: Most of our customers have been.

They took the lessons learned they have been.

Jim Filter: But as it relates to our rail provider out there in the West, this is our first year with the UP, and I really commend the UP for taking this additional volume, improving service, but it was a year of learning for both sides. And I think we have an opportunity that we have, you know; our deals are long term, they're market-based and competitive, but they're based on normal cycles. So there are times when we go through a little bit of abnormal cycles.

The risking their supply chain using other Asian countries. Other low cost countries. That's why Mexico is so strategic for us because more and more of our customers are looking at Mexico. As there are other low cost option and we have a really great service.

Okay.

Speaker Change: Alright. Thanks, that's really helpful on the historical trends that was my one thanks.

I appreciate it.

Jim Filter: And, you know, we seek to work a little bit differently with our rails during those times, with a little bit of flexibility. And, you know, with this year of learning, we're looking forward to leveraging that for both sides and using that alignment to move forward. Great, thanks both. Your next question comes from the line of Jordan Alliger from Goldman Sachs. Please go ahead.

Speaker Change: Your next question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Hey, Thanks, Good afternoon, good morning, guys.

I wanted to ask on the dedicated side. So we've heard a little bit of I think competitive dynamics on the dedicated side picking up I guess as you would expect where we kind of are in the overall cycle. Here. So just wanted to kind of touch base and get a sense of what the health that you think of that market. Obviously the metrics you guys posted whether it be revenue per truck per week or the addition of trucks.

Jordan Alliger: Yeah, hi, just a question, sir, once again, thinking about the guidance for the year. You talked a little bit about the second half being better than the first half, but is there a way to think about the shape or the skew? I mean, as you're seeing it now, is it going to be pretty sharply different second half versus first half?

Reasonably good in that context, but wanted to get a sense as you think about the guidance and how the outlook for 2024 looks where that fits in as that market stabilizes. It sort of doing what you would expect it to do at this point in the cycle.

Yeah, Chris. Thank you for the question as it relates to dedicated generally has a little longer sales cycle and so.

Mark Rourke: And is there a difference between your three business segments in terms of how you think about the year progressing in terms of profitability? Thanks. Hey Jordan, thanks for the question. Yeah, I wouldn't give you any specific shaping comments beyond what we do believe that it will continue to improve as we go through the year. Certainly, as you look at our various segments, we think that applies to all three. Dedicated is a bit more.

The work that you do.

In the year prior you've got a lot of work under your belt and so you generally have a little better visibility to at least six months out where you expect both year retention levels of your current business, but also as we have been leaning into the extension of our reach here and so that's part and parcel of what you see into <unk> into our <unk>.

Mark Rourke: I guess considerably more consistent quarter to quarter. And so our network businesses, I believe, have the biggest opportunity as we come out of 2023 and enter the 2024 allocation season, both in truck and intermodal. So I would characterize the opportunity to be in all three segments fairly consistent. On the upside, I'll give you both volume and pricing as the year progresses. Thank you. Your next question comes from the line of Brian Ossenbeck from J.P. Morgan. Please go ahead.

Guidance, we would say the market and our pipeline is still very very robust. We have successfully are in the process and not only new business in the fourth quarter, but we have scheduled starts that we have visibility to both in the first and second quarter.

And that is visible yet.

For decision, making out into the third and fourth quarter, but based upon that pipeline and our recent.

Experience and success gives us confidence that that's going to be another really good story for us through calendar year 2024.

Brian P. Ossenbeck: Hey, thanks, good morning. I just want to go back first, Jim, to your question about some of the customers expecting their bid, all link in the description Yeah, thanks for the question. So it is the former that customers expect that there's going to be an inflection at some point and that they may have overreached in trying to, to dig as far as they did, and at some point during the year that these aren't gonna hold. Yeah, I would say. Broader conversations across the broader spectrum as folks are being, in our view, much more balanced towards, The fact that we are long into this cycle, I think what Jim's referencing, there are customers that look, you know, based upon their approach, to be more aggressive, and we think those folks, as we communicate with them, will take that and we'll do the same, All of that into account of what type of commitments we will or will not make on behalf of that approach.

Okay. Okay. That's helpful. And then just maybe one quick one on intermodal just I'm thinking a little bit more big picture I know you have the 2030 goals of doubling the business there I guess.

What are the sort of breakpoint, we should be thinking about in terms of profitability or maybe to ask it utilization, where you start to sort of turn on the growth again, just kind of curious how you think about what you would need to see from our hurdle perspective to get more.

Constructive on bond investment in that business.

Yes, we need to be able to see that we're getting back to the long term margin targets and as we get back to those levels and we see that.

Level of quality demand Thats, where we will be turning that back on an.

Increasing capital.

Yes, we have just such productivity opportunities in front of us.

Not even happen to get back to.

Pre highs as relates to box turns I think the good news is we're seeing our customer base for the most part be very efficient with the container we're getting back to a more normalized turn focus with our customers.

Brian P. Ossenbeck: So, but I think increasingly those conversations, as I said in my opening comments, no one believes we're in this condition for the long term. It's just a matter of when, and I think you're seeing more balanced thinking going forward than we would have described as we were coming into this juncture in 2023. Thanks for clarifying that, and then Mark, if you could just talk about how you're, Mississippi Washington. We've been kind of biding your time until you get the right rate, and move this equipment back. Yeah, Brian, I think what we try to communicate there is that this is a place presently we're not looking to add capital to. We also know from our historical practice that the truck network business, both up and down cycle, reacts the quickest to change.

And this past year, we did some investments in the chassis front to make sure that we could take advantage of that so our ratios are where they need to be there Chris and so.

We like the incremental gross margins that come with not not having to invest in additional capital and cost too to bring things on to get after improved.

Improved volumes so.

So it's not that we're don't want to invest and so we think we have invested now it's time to yield the benefit of those investments.

Okay. That's helpful. Thank you.

And we have no further questions in our queue. At this time I will turn the conference over to Mark Roth for closing remarks.

Thank you operator, and I really appreciate everybody's attention. This morning, we.

Jim Filter: And so that's really our focus, is to focus on improving revenue quality well in advance before we think about adding capital to the network. It does play an important role in support of our customers and the dedicated startups and a lot of other things that they bring to the party, but we don't need to add additional capital there.

We had opportunity to talk about our commitment to advance our strategic growth drivers of dedicated truck our confidence around intermodal conversion and the aggregation of our capacity and demand through our freight power platform and logistics. So.

We do see at least as we get in here to 2024 early that we're in a bit of a transition year with capacity and demand balancing improving as the year progresses and as we've talked about throughout this call a bit more heavily weighted to the second half.

Mark Rourke: It focuses on margin restoration and augmenting that network capital that we put into it with our own trucks, while increasingly leveraging power-only capability and third-party equipment into that equation. Okay. Thanks, Mark. Thank you. Your next session comes from the line of Ken Hoexter from Bank of America. Please go ahead. Hey, great. Good morning.

So thank you for your attention and we look forward.

To engaging here as we get into conference season.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Ken Hoexter: Mark, I guess we could just kind of revisit the outlook you and Daryl were talking about with Ravi. You know, the $1.15, $1.30, if you eliminate the 10 cents of gains this year, I guess that gets you, you know, that's why it's kind of flattish on the outlook. But maybe can you talk about puts and takes within that, you know, your mix of volumes and pricing? You know, it sounds like you've got big growth based on CapEx. So now, is it more that inflation is going to offset the fleet growth and yield growth? Just trying to get the puts and takes that are within your flattish outlook. Yeah, I'll start out. I'll turn the mic over to Daryl here momentarily.

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Mark Rourke: But what we're looking at on growth for our CapEx, the guidance range of 400 to 450 is down fairly considerably from a year ago because of the catch-up with the OEMs and the agent fleet, so we feel really well-positioned there, but depreciation is up just because of the inflationary costs associated with the last couple of years with that new equipment. From a growth standpoint, Ken, we're really focused on two areas, and that would be dedicated to where we've had sustained success organically, and we have good visibility into both the first and second quarters of a number of startups that give us confidence that we will continue to have momentum through 2024. And then on the success of growing our intermodal business, while we won't look to put additional containers in chassis because we have our ratios where we need them to be, we have terrific self-help leverage there with growth without adding trailing capacity, but we would look to add and grow the fleet, the company Dre Fleet, so we have some tractor growth in there.

Mark Rourke: We don't really see the need for the trailing equipment, either intermodal or truck, outside of dedicated, and so that's all reflected in our forward guidance as it relates to CapEx. And the only other thing I would add is, in addition to the equity gains that you mentioned that we're not assuming in the model, there's a lower gain on equipment sale of $30 million, which I've mentioned in my comments, and I also talked about safety costs, which we're expecting to increase primarily due to premium increases in the market for insurance premiums. And then obviously, our tax rate, which is at 22% in 2023, is expected to normalize. So all those things are headwinds that slightly impact some of what Mark talked about in terms of goals. Thanks for that!

Darryl: Daryl, maybe just a couple of numbers, follow-ups. You mentioned asset loss in the quarter. I don't think you have a number.

Darryl: Was there a number with that? And then Intermodal, did you say what percent of boxes are still stacked? And then if you let me get one more, I'll ask about contract rates, but that's it. We're going to probably move on after the two. Yeah, yeah. Sorry. Yes, we'll get a chance to catch up. Yeah, no number on the line.

Darryl: Yeah, so there's about 15% of the containers there on stack. All right, thanks guys. Your next question comes from the line of John Chappell from Evercore ISI. Please go ahead.

Jonathan B. Chappell: Yeah, thank you. I hate to be so short-term focused, but it seems like this is going to be one of those years where it's tough to make a call with visibility until you get closer enough to see the whites of the eyes. So, as it relates to 1Q, typically seasonally weaker, but coming off a kind of a muted peak season, does 1Q in basically all of the different segments look similar to 4Q, or are there some maybe idiosyncratic reasons why 1Q should be better seasonalally as we look at it sequentially? Well, thank you. It's a little early in the quarter, obviously, and we've been dealing, at least initially, through the first couple of weeks; we had some adverse weather impacts, particularly in comparison to the last couple of years. So our early thoughts as it relates to the shaping of the year are what we've said to this point. We do think it'll continue to improve throughout the year and be a bit more robust in the second half, but we won't offer any more specific guidance yet here in the first quarter. Okay.

Mark Rourke: Jim, as it relates to your modal margin, I mean, there's a lot of optimism about getting volume back on the different networks, but the margins have obviously taken a pretty significant step back over the last 12 months. Is this strictly a function of volume will drive terms will drive productivity will drive margin improvement? Or are there other things that you can actually do internally to, you know, improve the cost structure, and provide more operating leverage? So you can even have some volume improvement, I'm sorry, some margin improvement before you really get a true volume inflection. Yeah, thanks for the question.

Jim Filter: So obviously, during the quarter, there were some additional containers that were put on stack for those additional costs that were absorbed. There's also opportunity just running a more efficient network. So it's not just getting volume, but getting the right volume that reduces our empty repositioning costs as well as our driver productivity. So those are all the focus areas to be able to improve margin. Okay. Thanks, Jim. Thanks, Mark. Thank you.

Jack Atkins: Your next question comes from the line of Jack Atkins from Stevens. Please go ahead. Okay, great. Thanks for taking my question. So, I guess I'm going to go back to the guidance for a second because I think what folks are confused about is, you know, when you kind of adjust for the taxes and the insurance headwind in the fourth quarter, your kind of exit rate is about 60, 65 cents, something like that, for kind of a four-year exit, annualized in the fourth quarter, and you're guiding to $1.15 to Because it would seem like there's a pretty substantial improvement in underlying business trends there. So kind of help us think through that because, you know, we all hope something's going to happen, but it seems like you're expecting it to happen.

Mark Rourke: Well, thanks for the question, Jack, and I'd like to address that on a couple of fronts. First, we focus in on our company-specific objectives and the annualization of all the good work we've been doing and focusing both acquisitively and organically, and the prospects that we anticipate, many of which we have visibility into from contract closures and startup. So, you know, we are leaning into key strategic initiatives that allow us to continue to improve our overall business results in our truck business, dramatically focusing on dedication, so really good about where we're positioned there. Secondly, we do believe that based upon our alignment with our customers, what they look to accomplish relative to intermodal growth and how that fits into what their strategies are, that we are well positioned and we're leaning in hard to So that's two.

Mark Rourke: Third, as you would expect, we've been leaning really since the middle of 2022 on a cost structure and how we can become more efficient. Stahl, and our results sequentially occurred to the fourth quarter; asset productivity improved without demand increasing in a very material way. So again, those initiatives that we are leaning into to improve asset turns across everything that we do across our portfolio are things that we think and expect to improve results. But clearly, we believe we're also very late into this cycle. Our internal metrics that we look at, which is a combination of correlation factors and certain outside elements of data that also, over time, have correlated to cycles.

Mark Rourke: We're at the end of this month, well, for the past 600 days, as I mentioned in my opening comments, which is historically very long in the cycle. There are macroeconomic indicators, whether it's rate, condition, inflation, consumer confidence. We do believe things will turn to an extent and we'll get back into some level of restocking that's been stubbornly slow, and capacity continues at a slow and steady pace to exit the marketplace. And that doesn't include a catalyst that has occurred over time that can accelerate that.

Mark Rourke: So we're taking those company-specific things, we're taking a slow and steady approach. Capacity X is a restocking, a slow and steady restocking that will continue, that we believe, has a higher probability of improving throughout the year. And that's what we put into that contact. That's what we put into that guidance frame. Okay. Okay, Mark. Thank you. Thank you for that color.

Jack Atkins: And then I guess maybe for my follow-up, it's really on insurance. I mean, I think almost everyone that's reported so far during this earnings season has had some sort of insurance, either accrual or true-ups. It's been a kind of key topic on all these calls. As you sort of are thinking about this moving forward, could you talk about any sort of inflation that you're expecting in your premium costs in 2024? But would you just expect insurance as a percentage of revenue moving forward to just be a higher number? It just feels like structurally the market's just hardened some. Yeah, I think the insurance markets, whether you're talking tracking or really any other, a portion of the economy is under pressure from a premium standpoint, and certainly we're expecting to feel that. But what's really important when we look at Schneider specifically, we had a 16 consecutive quarter streak where we did not have these type of adjustments.

Mark Rourke: So we take, first of all, safety from training, technology, what we do every day very seriously, and it's reflected in our results. And you see it in the infinite exposure reduction that I shared with you, 19% over the last couple of years. So all of that is incredibly important, and it's also incredibly important to be realistic about when you have a risk exposure, that you have evaluated it correctly, and you deal with it in a way that it doesn't escalate. Unfortunately, that 16th consecutive quarter streak snapped on us this year with two, primarily around two incidents.

Mark Rourke: Again, I don't accept the fact that it's a continuous issue, but they do happen, and this was our time for them to happen. So Jack said, yeah, I think the insurance premium side of that is an external factor that we're going to have to deal with, as everybody will, but we are leaning in really hard because nothing we do is worth hurting ourselves or others, and it permeates every part of our organization. Thank you, Mark. Your next question comes from the line of Tom Wadewitz from UBS. Please go ahead.

Thomas R. Wadewitz: Yes, good morning. So I wanted to ask a little bit about the intermodal margin. I think there's been this kind of, uh... anticipated help on purchase transportation. It seems like it just hasn't been visible yet.

Jim Filter: I really appreciate your time today and I hope to surprise you. Yeah, thanks, Tom. So, yeah, we, you know, we still have our long-term margin targets out there. And we still believe that those are the right target margins for all three of our segments, and there will be a point when we get to that spot. I couldn't give you timing on this, you know, which quarter do we get back to that?

Jim Filter: But we do anticipate that we'll get back to those long-term margin targets. I think, you know, our approach, particularly on intermodal, is well positioned to be highly competitive and effective through normal freight and business cycles. I think, obviously, we've been through a significant upside. Now we've seen the backside of that.

Mark Rourke: And we're working to become more nimble commercially with our customers, how we partner with our rail providers, particularly our newest ones, to deal with those market abnormalities. It's easy for me to say, period. But I think, overall, we're positioned well. We would continue to expect improvement there operationally as service improves, and I'm really pleased with how the Real Partners have leaned into that to give confidence to our customer base. And then I think we have some unique capabilities that we'll continue to pursue, and I think we do have the absolute best solution in and out of Mexico. And we've got a great provider there, and I'm really looking forward to exercising that to the degree we can here through this next allocation season. I would say yes.

Thomas R. Wadewitz: I guess I would read that as optimistic and feeling that we're in a good position and that should continue to improve. Great. Okay. Mark, I wanted to ask you a psycho question too.

Mark Rourke: As I look at these results, and you know, you alluded to the network losing some money, Heartland's losing money, others, you know, there's pressure on the market, right? And I think it's just like, I don't recall a cycle downturn where there's been such pronounced pressure on big truckload carriers, you know, big well-run truckload carriers. Do you think that will result in, at some point, maybe a bigger capacity adjustment?

Thomas R. Wadewitz: I'm just trying to figure out how you know what the result of this is because it does seem like kind of a tougher downturn than we've seen in prior cycles. Yeah, I think we've all been talking about Discover and... Exit of Capacity, I think, certainly. It's happening. We would have expected maybe a bigger exit at a faster rate. I think many of us in the industry would have, based upon history, gotten there.

Mark Rourke: But there are different dynamic market forces at play. I think Compression, perhaps what you're pushing at, Tom, as we went through the pandemic-driven upside, we also had some inflationary factors at play there, particularly in the equipment space, the driver wages space, and those are a bit more difficult, at least in the short term, to get through your results, particularly on the backside of a correction. And so perhaps that is a factor that's a bit more pronounced. It may have happened in some prior periods, like 2009 and some of the other more pronounced downturns.

Mark Rourke: So I think we've got a handle on those costs, and we've got an approach to that, but certainly, we don't think the rates are compensable for the service provided if the costs occur. Now you throw in the insurance question we had here just prior, that there needs to be, and we're confident that there will be, a market correction on the pricing side to reflect that. I mean, I guess we'll see what the result is, but do you agree with the premise that this is maybe a tougher downturn than we've seen?

Thomas R. Wadewitz: Remember, you get harder as the business gets harder. In my 36 years in the industry, I would say this has been, at least from my experience, the most challenging on both sides. If not the most, it's got to be in the top two.

Mark Rourke: Yeah, okay, great. Thank you for your time. Your next question comes from the line of Bascome Majors from Sub-Saharan International Group. Please go ahead. Thanks for taking my questions. Good morning. Following up on Tom's question about the network margin, would Network have operated at a loss without the claims charges that you dealt with in the quarter? And can you give us any historical context on where you are in the gap between?

Bascome Majors: What dedicated is earning now versus what network is and how that's looked at at other cycle troughs just to understand how different this environment is today and just to extend that, how necessary is pricing above inflation in Intermodal and One Way to get to your second half objectives. Thank you. Thanks, folks.

Mark Rourke: Yes. A safety implication was pronounced, much more pronounced than struck in the quarter and certainly reflected in our network results, and we would certainly be in the black without that, a clear indicator. This is from a pricing standpoint. First of all, Dedicated, we feel, is positioned very, very well. Obviously, when you're in a growth spurt, you have some additional friction costs around startup costs and recruiting and all the things that naturally come with leaning into that portion of the business. But even with that, in addition to our acquisitions, the gap is material because of the volatility associated with the pricing mechanism that plays out in our network business. So, we do need to lean into price, we do need to improve our book of business. And that's why we're not going to be adding capital. That's probably one is simply to get after margin restoration, and that's a combination of productivity, cost, and Ray Recovery.

Mark Rourke: Thank you. Your next question comes from the line of Uday Khannaprakar from TD Cowen. Please go ahead.

Jason H. Seidl: Hi, thanks, this is Leon on behalf of Jason Seidl. I appreciate that this is a fairly distinct possibility at this stage, but with China and Canada sort of creeping back into the conversation. How do you evaluate the volume and pricing dynamics in intermodal if those play out? Maybe it would be helpful if you could remind us how the intermodal business adapted to the imposition of gaps in 2019, did it have any predictable mixed implications, anything on the clock order, any colors that would be appropriate? Yeah, thank you for the question.

Mark Rourke: And certainly, of all of our service offerings, the one that leans most heavily toward imports and the effect of imports is our intermodal business. And the West Coast is a place that we have not maintained the share that we would typically expect. And so import recovery is an important component, particularly on the western side of our network. We'll also have some real positives on some of the other, It's the response to those geopolitical issues, the nearshoring activity that's going on, and the investment taking place in Mexico that I think is the biggest winner here. Some of those investments take time to mature and to... Take-Hole, but clearly the biggest opportunity for how much freight moves over the road on the long length of hauls that make the most sense economically and emission-wise in and out of Mexico.

Mark Rourke: So while there might be some, over time, geopolitical pressures on other parts of the network, there are also some winners in other parts that we want to make sure we're well-positioned to take advantage of. And we have seen some shifting, obviously, from port activity to eastern ports and southern ports in addition to Mexico. So, which are more generally attracted to truck as opposed to intermodal over time? But Jim, maybe just a couple of comments on 2019.

Jim Filter: Yeah. If I go back to 2019, it did cause a little bit of a short-term blip, really as some of our customers were finding other sources of different products. But when they came back, it created a surge in demand. So we saw both sides of those, and so you had that type of impact right away.

Jim Filter: And some of our customers have been... They took the lessons learned, and they've been de-risking their supply chain using other Asian countries, other low-cost countries. That's why Mexico is so strategic for us because more and more of our customers are looking at Mexico as their other low-cost option, and we have a really great service to help them. Alright guys, that's really all from me. Sorry to offend.

Jason H. Seidl: That was my one. I appreciate it. Your next question comes from the line of Chris Wetherbee from Citigroup. Please go ahead. Hey, thanks for the good morning guys. So I wanted to ask on the dedicated side too, we've heard a little bit of, I think, competitive dynamics on the Thank you, you are in that overall cycle here, so it's similar to kind of a touch base. Bouw, that market. Obviously, the metrics you guys pose are whether it is revenue for trucks. Sure. You can do it in that context, but one thing it makes sense is what you think about the guidance. Thank you for watching. For more information, go to www.aclu.org.

Chris Wetherbee: We're back; that mark is stabilized. Yeah, Chris, thank you for the question. As it relates to dedicated, it generally has a little longer sales cycle. And so the work that you do in the year prior, you've got a lot of work under your belt. And so you generally have a little better visibility to at least six months out where you expect both your retention levels in your current business, but also, as we have been leaning into the extension of our reach here. And so that's part and parcel of what you see in our guidance. We would say the market and our pipeline are still very, very robust. We are successfully in the process of not only new business in the fourth quarter, but we have scheduled starts that we have visibility on both in the first and second quarter.

Chris Wetherbee: You know, not as visible yet for decision-making in the third and fourth quarters, but based upon that pipeline in our recent... Experience and success give us confidence that that's going to be another really good story for us through calendar year 2024, and Kenneth Hoexter, and then maybe just maybe one quick one on intervals, a little bit more big picture. I know you have the 2030 goal there. I'm aware of this sort of thing, https://TheBusinessProfessor.com, where these are just sort of terminology. How do you think about the more instructive ones?

Mark Rourke: Yeah, we need to be able to see that we're getting back to the long-term margin targets. And as we get back to those levels and we see the level of quality demand, that's when we'll be turning that back on and increasing capital. Yeah, we have just such productivity opportunities in front of us. Now you're going to have to get back to...

Jim Filter: I think the good news is we're seeing our customer base, for the most part, be very efficient with the container. We're getting back to a more normalized turn focus with our customers. In this past year, we did some investments in the chassis front to make sure that we could take advantage of that. So our ratios are where they need to be, Chris. We like the incremental growth margins that come with not having to invest in additional capital and costs to bring things on to get after improved performance and improved volumes. So it's not that we're not going to invest; it's that we think we have invested, and now it's time to yield the benefit of those investments. It's very helpful. Thank you. We have no further questions in our queue at this time.

Mark Rourke: I will turn the conference over to Mark Rourke for closing remarks. Thank you, operator, and I really appreciate everybody's attention this morning. We had an opportunity to talk about our commitment to advance our strategic growth drivers of dedicated trucks, our confidence around intermodal conversion, and the aggregation of our capacity and demand through our freight power platform and logistics. So we do see, at least as we get it here early in 2024, that we're in a bit of a transition year with capacity and demand balance improving as the year progresses, and as we've talked about throughout this call, a bit more heavily weighted to the second half. So thank you for your attention, and we'll look forward to engaging with you here as we get into conference season.