Q1 2025 Schneider National Inc Earnings Call
Thank you for standing by and welcome to the Schneider first quarter 2025 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'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question.
Steve: Again press Star one thank you I'd now like to turn the call over to Steve <unk> Director of Investor Relations you may begin.
Yeah.
Speaker Change: Thank you operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer, Darrell Campbell Executive Vice President and Chief Financial Officer, and Jim filter Executive Vice President and group President of transportation and logistics.
Speaker Change: 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.
Speaker Change: Our call will include remarks about future expectations forecasts plans and prospects for Schneider. These constitute forward looking statements for the purposes of the safe Harbor provisions under applicable Federal Securities laws.
Speaker Change: Forward looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations.
Speaker Change: The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent annual report on Form 10-K, and those risks identified in today's earnings release. All forward looking statements are made as of the date of this call and Schneider disclaims any duty to update such statements except as required by.
Speaker Change: A lot.
Speaker Change: 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.
Speaker Change: Now I'd like to turn the call over to our CEO Mark Rourke. Thank you, Steve and Hello, everyone. Thank you for joining the Schneider call today.
Mark Rourke: For our prepared remarks, I will start by providing an update on our commitment to drive ongoing structural changes in our business to restore margins improved freight cycle resiliency enabled growth and enhance financial returns for our shareholders.
Mark Rourke: Within that context, I will share my perspective on the freight market and positioning and performance across our multimodal platform of truckload intermodal and logistics.
Mark Rourke: Darryl will then provide a financial overview of the first quarter results and share our updated 2025 earnings per share and net capital expenditures guidance. Then we will take your questions.
Darryl: Let me start by outlining our actions to structurally improve the business we.
Mark Rourke: We are following a framework based on four equally important tenants.
Mark Rourke: The first tenant is to optimize capital allocation across our strategic growth drivers of dedicated truck intermodal and brokerage and logistics.
Mark Rourke: In December last year, we acquired Cowen systems are dedicated services carrier.
Mark Rourke: The first quarter of 2025 was our first full quarter with Cowen included in our results. Their contributions were immediately accretive and we expect to achieve between $20 million and $30 million of synergies at maturity.
Mark Rourke: Dedicated averaged over 8500 trucks in service in the quarter up 27% from over a year ago.
Mark Rourke: Dedicated represents 70% of truckload segment trucks and 71% of revenue.
Mark Rourke: Truckload earnings improved nearly 70% year over year, and 27% sequentially from the fourth quarter of 2024.
Mark Rourke: Looking forward, we have line of sight in the second and third quarters to elevated churn because of select dedicated operations moving to network based solutions in the current environment and a more competitive landscape.
Mark Rourke: Overall, our dedicated retention rate remains in the low nineties.
Mark Rourke: We will also be taking out trucks as a result of our asset efficiency actions to lower our truck driver ratio even further.
Mark Rourke: Our dedicated new business pipeline is trending to more than replace the churn, but net truck growth is projected to be lower than originally expected.
Mark Rourke: The second tenet is to manage the customer freight allocation process with purpose and discipline.
Mark Rourke: By carefully selecting and managing our freight pool, we can ensure we are serving our customers effectively and profitably.
Mark Rourke: As the quarter concluded we are about one third through the contractual renewal period in both truck network in intermodal.
Mark Rourke: The market remains highly competitive with truck network, achieving low to mid single digit percentage increases.
Mark Rourke: And to maintain price discipline, we are foregoing volume with some shippers.
Mark Rourke: We are seeing an increase in number of shipper many allocation events to address carrier turn backs or performance issues arising from the initial event outcomes.
Mark Rourke: Which gives us confidence in our strategy.
Mark Rourke: The improvement in revenue per truck per week about truck network and dedicated was 2%, which is more than 100% price driven as asset productivity was impacted by first quarter weather events.
Mark Rourke: Turning to intermodal contract renewals, we are pleased with the current trend of increased volume allocations, primarily in geographies, where we have positive differentiation that fits well within our network.
Mark Rourke: Overall intermodal rates remained largely flat year over year.
Mark Rourke: The third tenant is delivering an effortless experience by making it easy for customers to work with us by providing optionality and value across our multimodal platform.
Mark Rourke: We have gained market share with new customer awards by combining elements of our portfolio to sole source facilities and our geographies.
Mark Rourke: This is particularly effective for industry, leading value retail customers as well as those in the food and beverage industry.
Mark Rourke: The sole source awards dramatically lower operational complexity for shippers, while bolstering our network operations through increased freight density.
Mark Rourke: Looking forward there is a bull case based upon generally resilient macroeconomic numbers to date with stable demand and capacity continuing to exit the market.
Mark Rourke: We do note that forward sentiment for customer freight demand in consumer health is less clear, particularly as tariff driven uncertainty builds.
Mark Rourke: As a result, the continued rising momentum on price recovery is also less certain.
Mark Rourke: The last tenant is containing costs across all expense categories.
Mark Rourke: Cost containment is critical to our overall business strategy as it enables us to reinvest in growth initiatives and enhance our competitive position and margins.
Mark Rourke: We have established targets of more than $40 million of additional cost reductions across the enterprise.
Mark Rourke: The cost savings mandate encompasses ongoing investments in AI based digital assistant technologies.
Mark Rourke: And the more transfer made of digital employee models.
Mark Rourke: These advancements enables us to automate routine tasks freeing up associates to focus on more meaningful work higher in the value chain.
Beyond identified cost savings opportunities, we are evaluating the potentially meaningful impacts of tariffs on the original equipment costing.
Mark Rourke: Fair parts availability and cost as well as overall equipment maintenance expense.
Mark Rourke: Switching now to perspectives on the freight market and our positioning and performance of our multimodal platform.
Mark Rourke: Our first quarter results were in line with our expectation despite weather impacts and growing economic uncertainty.
Mark Rourke: Each of our primary segments grew revenue earnings and margins year over year.
Mark Rourke: In truckload, both network and dedicated delivered improved earnings year over year and sequentially driven by cost containment actions and improved freight pricing from second half of 2024 to first quarter of 2025 contractual renewals.
Mark Rourke: We aim to transition to a more variable cost model and network by expanding owner operator relationships to supplement our company driver fleet.
Mark Rourke: This shift is taking longer than expected as operating and financial conditions are prompting more owner operators to exit the industry.
Mark Rourke: Turning to intermodal, we nearly doubled earnings compared to a year ago on 4% order growth driven by increasing shipping activity in the west in Mexico.
Mark Rourke: We have visibility to a portion of our customers taking freight pull ahead actions in the face of tariff uncertainty.
Mark Rourke: Our year to date success in New business Awards is expected to reduce the overall future volume variability due to trade policy.
Mark Rourke: Logistics improved earnings 50% year over year as our freight power for shipper and carrier digital technology allows us to remain nimble to changing market dynamics across both less than truckload and truckload modes.
Mark Rourke: Overall brokerage freight volumes are challenged as shippers continue to favor asset based solutions.
Mark Rourke: Power only grew volumes mid single digits compared to a year ago as shippers and carriers of value the simplicity and access of matching qualified small carriers to large trailer pool shippers.
Mark Rourke: In summary, we are focused on the areas, we control while maximizing our strategic differentiators.
Mark Rourke: Within our locus of control is containing costs.
Mark Rourke: Maintaining price discipline.
Mark Rourke: And outperforming our competition commercially.
Mark Rourke: Our strategic Differentiators are unique across our four dedicated brands of Schneider Midwest.
Mark Rourke: Midwest logistics systems.
Mark Rourke: <unk> transport and now the lightweight equipment solution powerhouse Cowen systems.
Mark Rourke: Our asset based company dray chassis and container intermodal offering combined with our strong rail relationships with the <unk>.
Union Pacific and CP, Casey creates reliable and valued solutions for intermodal shippers.
Mark Rourke: Plus our consistently profitable logistics offering enabled by our freight power platform and market, leading power only capability remains a meaningful asset light strategic contributor to the enterprise.
Mark Rourke: So let me now turn it over to Daryl for his insights on the first quarter and our 2025 guidance Daryl.
Daryl: Thank you Mark and good morning, everyone.
Daryl: I'll review, our enterprise and segment financial results for the first quarter and provide insights on our updated full year 2025, EPS and net capex guidance.
Daryl: Summaries of our financial results and guidance can be found on pages 24 to 30 of our investor presentation available on the Investor Relations section of our website.
Daryl: Starting with our first quarter results.
Daryl: Enterprise revenue was excluding fuel surcharge or one $2 6 billion.
Daryl: Up 8% compared to a year ago.
Daryl: Adjusted income from operations was 44, million% to 4% to 7% increase year over year.
Daryl: Enterprise adjusted operating ratio improved 90 basis points compared to the first quarter of 2024.
Daryl: Adjusted diluted earnings per share for the first quarter was <unk> 16.
Daryl: <unk> to <unk> 11 last year.
Daryl: The combination of our disciplined actions that we've taken on revenue management cost containment and productivity, we delivered year over year improvement in our enterprise results and across all of our reportable segments.
Daryl: From a segment perspective truckload revenues, excluding fuel surcharge were $614 million in the first quarter.
Daryl: 14% above the same period last year.
Daryl: This increase was primarily due to the acquisition of Cowen and hire dedicated of network revenue per truck per week, partially offset by lower network volumes.
Daryl: Truckload operating income was $25 million up nearly 70% year over year due to the same factors achieved revenues.
Daryl: Operating ratio was 95, 9% an improvement of 130 basis points compared to first quarter 2024.
Daryl: Truckload network margins improved year over year for the first time since the first quarter of 2022 due to continued improvements in price and ongoing actions to reduce variable input costs.
Daryl: Intermodal revenues, excluding fuel surcharge were $260 million for the first quarter.
Daryl: 5% above the first quarter of 2024 due to volume growth and increased revenue per order intermodal has grown volumes year over year for four consecutive quarters.
Daryl: Intermodal operating income was $14 million, an increase of 97% compared to the same period last year due to the same factors driving revenues. In addition to enhanced operating leverage from network optimization, great productivity and internal cost reduction actions.
Operating ratio was 94, 7% an improvement of 250 basis points compared to first quarter 2024.
Daryl: Logistics revenues, excluding fuel surcharge were $332 million in the first quarter, 2% above the same period a year ago due.
Daryl: Due to our acquisition of Cowen partially offset by lower revenue per order.
Daryl: Logistics is trend of profitability continued with operating income of $8 million.
Daryl: 50% compared to first quarter 2024.
Daryl: This was primarily due to effective net revenue management and the continued strength of our power only offering.
Daryl: Operating ratio was 97, 6% an improvement of 70 basis points compared to first quarter 2024.
Daryl: As of March 31, 2025, we had $577 million in total debt and finance lease obligations outstanding and cash and cash equivalents of $106 million during.
Daryl: During the quarter, we used the remaining availability under our delayed draw term loan facility executed in November 2024 to repay current debt maturities. Our net debt leverage was <unk> eight times at the end of the quarter.
Daryl: Turning to capital allocation in the first quarter, we paid $17 million in dividends and opportunistically repurchased $8 $3 million of shares.
Daryl: We have $4 million to $6 million remaining on our $150 million share repurchase program that was established in February of 2023.
Daryl: Net capex was $97 million.
Daryl: Compared to $112 million last year due to reduced purchases of transportation equipment on other property and equipment free.
Daryl: Free cash flow increased approximately $9 million compared.
Daryl: Compared to the same period in 2024.
Daryl: We continue to manage our fleet age within our targeted ranges and invest in technology to drive business insights and associate productivity.
Daryl: Moving to our updated full year 2025 guidance.
Daryl: Adjusted earnings per share guidance for the full year 2025 is 75 to $1, which assumes an effective tax rate of 23% to 24%.
Daryl: We also updated our net capex to be in the range of $325 million to $375 million for the full year from $400 million to $450 million previously.
Daryl: In constructing our revised outlook for the full year, we consider the current trade policy and increased economic uncertainty and the result in moderating impact on both price and volume.
Daryl: In addition, we considered our continuous efforts across all of our segments to restore margins through contract renewal improvements asset efficiency efforts ongoing cost containment measures offset by volume and price trends by segment as the quarter progressed.
Daryl: The combination of these factors has tempered our expectations regarding the level of earnings improvement for the remainder of the year.
Daryl: Although lower we expect continued year over year improvement in results through 2025.
Daryl: Our truckload network business, we continued to deliver year over year pricing improvements.
Daryl: Price decline through the first quarter.
Daryl: Due to the current environment, we now expect more moderate pricing improvements for the remainder of the year and lower volumes in capacity growth compared to expectations in our previous guidance.
Daryl: We anticipate continued resilience of our dedicated business.
Speaker Change: This is in line with our previous guidance and while we expect positive net capacity additions in 2025, we have lowered our expectations for fleet growth due to the churn that Mark mentioned.
Speaker Change: Also as a reminder, our focus on asset efficiency, where more tractors and be reflected in our 2025 net tractor growth.
Speaker Change: For our intermodal segment, we expect continued volume growth.
Speaker Change: Pricing improvement for the remainder of the year.
Speaker Change: Our guidance also factors in recent new business wins, which are expected to offset the near term impact of trade policy on freight volume.
Speaker Change: Our logistics segment outlook incorporates continued year over year improvements in net revenue per order.
Speaker Change: And similar to our truckload network business.
Speaker Change: The improvements to be less pronounced for the remainder of the year as spot pricing continues to moderate.
Speaker Change: We also expect lower volumes and more muted seasonality.
Speaker Change: Turning to net Capex, our guidance assumes continued allocation of capital to organic growth in dedicated and intermodal attractive.
Speaker Change: And also reflects alignment of growth Capex with current business and economic expectations.
Speaker Change: In addition to the volume effect on our Capex expectations. The cost of equipment is also impacted by current trade policy.
Currently known cost increases are included within our Capex guidance with a partial offset resulting from improved equipment sale proceeds.
Speaker Change: While not contemplated in our guidance the strength of our balance sheet also positions us to act opportunistically as we continued to explore inorganic growth opportunities.
Speaker Change: In closing we have continued to execute against our plan to structurally positioned our business to demonstrate resiliency and growth in all cycles through our commercial cost asset efficiency and capital allocation actions.
Speaker Change: These efforts have allowed us to deliver through uncertainty and to be in a position to capitalize on our enhanced operating leverage.
Speaker Change: With that we'll open the call for your questions.
Speaker Change: Thank you we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, we ask that you. Please limit yourself to one question and one follow up your first question comes from the line of Brian Austin back from J P. Morgan.
Speaker Change: Your line is open.
Brian Austin: Hey, good morning, Thanks for taking the question.
Speaker Change: So I.
Speaker Change: Yes.
Speaker Change: Maybe if you guys could give us a little bit of context considering here.
Speaker Change: <unk> unique position in the market what are you seeing when it comes to the expected deceleration of.
Speaker Change: Imports, obviously, you don't move international boxes, but that stuff is all connected so.
Speaker Change: Maybe what are you seeing and hearing from customers and what is sort of contemplated in the updated guidance.
Speaker Change: Okay.
Speaker Change: Yes, Brian This is Jim Thanks for the question this morning so.
Speaker Change: It's really important that we're staying close to our customers as we go through this and that we are remaining nimble and offering broad solutions.
Speaker Change: As we look at across our business segments would look at truckload and logistics sectors.
Speaker Change: Primarily North America orientated, so difficult to quantify the impact there.
Speaker Change: When we look at intermodal, it's approximately 15% to 25% of our businesses is tied to imports.
Speaker Change: That's from a variety of different origins. So it's not all related to China.
Speaker Change: And we do expect that there is going to be.
Speaker Change: Some drop off in volume in the intermodal business, but we expect that our new business wins in intermodal that Mark spoke spoke of a largely offset.
Speaker Change: What we are.
Speaker Change: Anticipating from imports declining.
Speaker Change: But we'd also say that we.
Speaker Change: We do believe that the conditions are right for a vote, where it appears that imports may be dropping faster than consumer demand and a low end shipping could be the catalyst that removes additional capacity from the market and if there weren't new trade agreements there could be an abrupt restart to imports with less capacity than.
Speaker Change: There is today and so that's not our our forecast, but that could be the bull case that mark spoke of and so we're.
Speaker Change: We're going to stay focused on two priorities is staying close to our customers being nimble offering those broad solutions.
Speaker Change: The second is focusing on what we control within each one of our sectors.
Speaker Change: For tenants that Mark spoke of.
Daryl: Yes. This is Daryl I guess I'll just add some perspective.
Daryl: On the outlook specific as it relates to intermodal. So we did look at various scenarios similar to what Jim was referring to.
Daryl: Regarding the duration of the trade policy impacts.
And also the magnitude.
Daryl: What happens during that uncertainty and also when the uncertainty clears.
Daryl: From an intermodal perspective, specifically.
Daryl: There was some impact of the tariff policy on.
Daryl: But we have continued to see strength in improvement in volume year over year for the past four quarters now.
Daryl: Any potential impact in the near term so that's built into our guidance as a.
Daryl: As a matter of pricing, we think pricing is going to moderate some at least in the near term and that's factored in.
Daryl: So our guidance, even though we expect year over year improvement.
Daryl: Across the board.
Daryl: Alright. Thanks, Thanks for that maybe it's just the <unk>.
Daryl: Follow up on the new business wins within intermodal, Jim or Mark can you kind of characterize where there is or what type of volume when they ramp up is it something.
Daryl: With the cross border with CP, Casey that seems to be taking off pretty well and then I guess similar question on the dedicated where maybe it's a little bit more competitive.
Daryl: Some of that pressure coming from.
Daryl: And sort of what are you doing to offset that to the extent skin.
Daryl: Thank you.
Brian Austin: Brian I think that's four questions.
Daryl: Yes.
Daryl:
Daryl: We think we had a very first we had a very good first quarter from our view on our commercial success in the market relative to what we call our differentiation.
Daryl: And intermodal with where our strengths really arent fit our network really well now of course awards do not mean freight just yet the customer has to have the freight and the market has to deliver.
Daryl: The volume from those awards and so thats still yet in front of US. So we don't have many of those implemented.
Daryl: Yet, but we would expect to start implementing here in the second quarter in a more meaningful way.
Brian Austin: And it's really across the board, Brian certainly Mexico has been a strength for us.
Brian Austin: And Jim will give maybe some just additional color relative to what's covered with the tariffs and what's not so how durable because that volume be.
But we're we're pleased across the board and.
Jim Filter: Again that gives us some confidence that we can withstand perhaps some of the trade laws, but all come down to a magnitude duration and timing, which is uncertain for us going forward, but we've tried to give our best assessment and best insight into the market based upon what we see today.
Jim Filter: And that would be the intermodal and so maybe just some comment relative to tariffs in Mexico, and Seo strength, we're seeing there yeah two areas, where we in particular have seen nice growth in intermodal, Mexico being one of those and we.
Jim Filter: Feel very good about our the wins that we've had there is virtually all the goods that were shipping cross border are compliant with U S. MCA, which are currently exempt from tariffs and we have a lot of differentiation in that product. It's having the we're aligned to the only railroad that its a single line railroad that brings you up to the both the Midwest and.
Jim Filter: To the southeast U S. That's all asset based and are really excellent execution within within Mexico. So that's been a big differentiator for US and then the second one is really providing broad solutions to customers and mark spoke about in the opening to be able to combine.
And what we do in our our intermodal business, along with our truckload business dedicated and logistics to provide a broad solution because customers understand that there's some variability here and you need to have some different outlets and that's really where we've had a lot of strength.
Jim Filter: Going to your second or fourth part of your question related to dedicated where we've seen the most.
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Jim Filter: Most competitive environment would be in more of the standard type of equipment, where customers may be taking a little bit more of a short term view.
Jim Filter: And so we're really focused on where we have the greatest differentiation, which would be areas like private fleet conversions specialty equipment refrigerated and we see all three of those.
Jim Filter: Pipeline is very strong.
Jim Filter: 53 standard trailer.
Jim Filter: The most competitive.
Jim Filter: Great.
Jim Filter: Alright, Thanks, Mark and Jim I appreciate it.
Jim Filter: Okay.
Speaker Change: Our next question comes from the line of Chris Wetherbee from Wells Fargo. Your line is open.
Chris Wetherbee: Hey, Thanks, good morning, guys.
Speaker Change: Generally Chris noted that I think I caught on the on the guidance conversation you mentioned growth in over the course of the year I don't know if that each one of the quarters and then specific to <unk> do you think that you can get EPS growth on a year over year basis for the entire year quarter by quarter.
Speaker Change: So we typically don't give guidance by quarter.
Speaker Change: The comments that I made were in the context of the remainder of the year. So as it relates to the remainder of the year, we expect to have year over year growth.
Speaker Change: And price and in margin.
Speaker Change: But we don't.
Speaker Change: I'll get to that level in terms of giving quarterly guidance.
Speaker Change: Okay. That's helpful. Just want to make sure I understood clarified what you said there.
Speaker Change: And then I guess when you think about.
Speaker Change: The dedicated churn what you guys were just noting there obviously some parts of the market a little bit more competitive said it might slow down kind of the fleet growth can you give us a sense of maybe what you expect over the course of the next several quarters in terms of that net fleet growth net of the churns as well as some of these new business wins that you guys are going after.
Chris Wetherbee: Yes, Chris So really we've got a few.
Chris Wetherbee: Things that are perhaps moderated from our initial discussion for the full year guidance that we did originally.
Chris Wetherbee: First of that is the insight to some of the churn we still have a very good pipeline, we expect to fully cover.
Chris Wetherbee: Is it churn, but we also know with Cowen was our first full quarter and some of the other actions that we've been able to take within our dedicated portfolio are expected to take that we can drive more efficiency.
Chris Wetherbee: Into.
Chris Wetherbee: Our various account structures, thereby.
Chris Wetherbee: I have more slip seating more tractor sharing a number of things that we think we can drive more efficiency that will come out of the net tractor, but will come out because of efficiency that because.
Chris Wetherbee: Any negative commercial fallout.
Chris Wetherbee: Fallout. So the combination of those two things, we believe will be accretive to growth and off our first quarter numbers as it relates to total.
Chris Wetherbee: Tractor count in dedicated but it won't be as pronounced.
Chris Wetherbee: As our original guidance.
Speaker Change: Okay. That's very helpful. Thanks, very much appreciate it.
Speaker Change: Your next question comes from the line of Jason Seidl from TD Cowen Your line is open.
Jason Seidl: Thanks, operator, good morning, gentlemen, can you talk a little bit on the dedicated side about how we should look at margins I mean, obviously there is some churn going on you're bringing on some new business.
Speaker Change: Business that you're bringing on at better margins than the churn.
Jason Seidl: We have a profile for returns in dedicated.
Jason Seidl: And so we're not necessarily compromising on our expected margin returns there as we've talked in truckload.
Jason Seidl: More than 100% of our earnings are coming out of dedicated in the truckload segment in the short term as we are working to restore profitability in the network side, Jason So.
Jason Seidl: So.
Jason Seidl: Very comparable have very consistent methodology that we use relative to the solutions that we bring on behalf of our customers in dedicated so.
Jason Seidl: We wouldn't consider them necessarily margin eroding or materially margin enhancing its consistent with our profile.
Jason Seidl: Okay that makes sense.
Jason Seidl: And as a follow up on the pricing side I mean, obviously the expectation is to see.
Jason Seidl: Pricing moderate you said before youre getting sort of low to mid single on the truckload side, if that moderates I'm, assuming we're looking at sort of flat to low single digit somewhere and I guess my next question is to get to.
Jason Seidl: A more normalized state and truckload pricing, how many bid cycles will it take now.
Jason Seidl: That we're seeing sort of pricing erosion in your costs still aren't sort of falling off a cliff youre still seeing some increased cost.
Jason Seidl: You look at drivers or whether you look at insurance or anything like that.
Mark Rourke: Sure Jason This is mark.
Mark Rourke: I'll offer my initial thoughts and certainly as it relates to.
Mark Rourke: Of course, we've been very diligent and.
Mark Rourke: Virtually every one of our expense pool, so looking for opportunity and we've made solid progress and we have the teams fully aligned on how we can continue to get after improve cost position that enhances both our margin profile, but also our competitive positioning.
Mark Rourke: We've also seen and I believe we have been through the bottom of the pricing market.
Mark Rourke: Have shown consistent improvement even in our network business now for several quarters.
Mark Rourke: And the uncertainty going forward I think one of the things about tariffs it not only is there some volume uncertainty, but does that start to.
Mark Rourke: Impact pricing in the short term it looks like it may impact spot pricing.
Mark Rourke: Initially and then we will see what transpires from there, but I still think we have pricing opportunity we're going to remain disciplined we've been show we showed it in the first quarter I still think we will.
Mark Rourke: Continue to have progress as we go through the year.
Mark Rourke: Sure.
Mark Rourke: And that's it.
Mark Rourke: Commercially that's what we're focused on this.
Jim Filter: This is Jim just one add on.
Mark Rourke: We are seeing.
Mark Rourke: Additional mini allocation events occurs shortly after we close out other allocation so.
Mark Rourke: It just reinforces the strategy that we're taking as well as.
Mark Rourke: We've found that bottom of the market.
Mark Rourke: There is just not sustainable at rates that are below where we are today.
Speaker Change: And are you guys seeing more carriers come out of the marketplace.
Mark Rourke: Increased capacity.
Mark Rourke: I think.
Mark Rourke: It's been a steady drumbeat and we see it both in the small owner operator, but we also see it.
Mark Rourke: Through our brokerage business and our channel checks relative to the stress of those who are granting credit in this arena. So.
Jason Seidl: Jason if it could be one positive note there can be a positive with all the uncertainty does that drive.
Mark Rourke: Under celebrate the exit but.
Mark Rourke: Yes, we haven't seen any signs of stabilization, it's been a slow trend downwards.
Mark Rourke: I appreciate it and sorry for sneaking an extra one in there.
Mark Rourke: [laughter].
Mark Rourke: Our game this morning on that policing of that yet.
Mark Rourke: Okay.
Speaker Change: Our next question comes from the line of Ravi Shanker from Morgan Stanley. Your line is open.
Ravi Shanker: Great. Thanks, Good morning, I hope the question enforcement doesn't start now but.
Mark Rourke: But maybe just.
Just a follow up on the pricing commentary there.
Speaker Change: How do you even have pricing conversations in an environment like this where we're looking at polar opposite outcomes off a cliff for us as a bullet in the next few quarters I mean, do you need to pull out of the pandemic playbook here and maybe even push out bid season or talking about short term contracts.
Mark Rourke: Yes.
Mark Rourke: Both sides of the table, we're going to be even come together.
Jim Filter: Hey, Ravi this is Jim Thanks for the question, it's really important times like this that we're stating our assumptions with our customers as we're going through an application of event that we're sharing this is the way that we're looking at the market. This is our assumptions. So if we happen to be wrong.
Mark Rourke: We're positioned well to come back and have a further discussion in terms of.
Mark Rourke: How were positioning our organization as well as the customer is able to turn it back to their organization in and explain the actions that they're taking.
Mark Rourke: Got it understood and maybe.
Mark Rourke: The lack of near term clarity potentially could make you look longer term as well.
Mark Rourke: We had <unk> announced this morning that they have started commercial revenue.
Mark Rourke: Our revenue generation with autonomous trucks.
Mark Rourke: On public roads in Texas.
Mark Rourke: Is that something that.
Mark Rourke: Well you've taken a hard look at that kind of is that an important catalyst kind of how do you think about.
Mark Rourke: Potentially taking advantage of this maybe even a little bit of air pocket coming do you think about long term opportunities here.
Mark Rourke: Sure Ravi this is mark Yeah, we have a great deal of respect for the leadership and the capability of that Aurora has built and we've been engaged with them for a number of years now and are currently hauling.
Mark Rourke: A series of lanes in Texas.
Mark Rourke: Presently with safety driver in.
Mark Rourke: But.
Mark Rourke: Yes, that's something that we've continued to stay close to be clear. What we believe are use cases can be there as that technology continues to develop but congratulations to them refine organization.
Mark Rourke: We will continue to look for those opportunities that makes sense for us and our customers.
Mark Rourke: Wonderful thanks, guys.
Speaker Change: Your next question comes from the line of Tom <unk> from UBS. Your line is open.
Speaker Change: Yeah. Good morning so.
Mark Rourke: Thanks, Tom Mark.
Speaker Change: Yes, Hi, I wanted to give some thought I think when you were talking about I'm not sure. If it was dedicated I think it was we were talking about like increasing use of owner operators to make it more asset light.
Speaker Change: I guess I mean, it makes sense and I think my understanding is you guys have a very strong system for building the owner operator base and attracting owner operators.
Speaker Change: I just wonder is that.
Our stable enough sources of capacity it seems to me like when you see the downturn the owner operator capacity is a bit less stable than what you get with the kind of company trucks Your company drivers.
Speaker Change: So I don't know I guess, just thoughts on that and is that something that you know.
Speaker Change: Over time really wanted to swing it in a big way to owner operator capacity just thought that was a topic to drill down a little bit.
Sure sure and Tom the question really is the response there was more on the network side of our business is where we deployed a series of capacity types first we have a very core company driver capacity.
Speaker Change: That sits at the core of our network offering, but as we look at the current returns and the ability to where we want to put our strategic investments we are looking to use.
Speaker Change: More asset light supplement to our core drivers, which are core company drivers, which is not only owner operators, but it's also where our power only offering adds great value to the customer as well, which is small companies.
Coming in support of the network business. So we.
Speaker Change: We have the levers to pull across all three of those and as mentioned in my opening comments that the owner operator.
Speaker Change: The difficulty today I think is just.
Speaker Change: Ah represents where the market is and the difficulty they have presently to.
Speaker Change: Based upon the demand pricing environment et cetera. So what are the advantages coming to a company that has quality customers as quality demand.
Speaker Change: As the trailer fleet and the ability to help with <unk>.
Speaker Change: Cost mitigation around fuel cost mitigation around.
Speaker Change: Around insurance and other Bob tail insurance and some other items and so we think we do have a value proposition, although that part of the market is under a good deal of stress, but it's not all in one category or another it is the complementary nature of company owner operator of power only to serve our network needs.
Speaker Change: Okay, Yes that makes.
Speaker Change: More sense in dedicated.
Speaker Change: Okay. Thank you.
When we think about capacity attrition and I look at some of the results from the big carriers Big really well run carriers.
Like yourself that are now running profitably in network and there are some other big players in the same situation and maybe maybe tougher.
Speaker Change: It does.
Speaker Change: It's surprising some of the resilience of small carriers are broader industry capacity. So.
Speaker Change: Do you think that like the big carrier versus small carrier.
Speaker Change: Dynamic has changed at maybe small carriers have reasons. They can hanging in better than you would think because normally think big carriers have advantages.
Speaker Change: Technology, obviously recruited driver recruiting various things, but it just seemed like.
Speaker Change: Given all the pressure in the big carriers wouldn't you see a lot more capacity attrition with the small guys. So any thoughts on that question. Thank you.
Speaker Change: Yes, I think certainly the the.
Speaker Change: Correction in capacity has been a bit more stubborn this time, but it is occurring and it's occurring just at a slower rate than we are.
Speaker Change: Typically seen terms so.
Speaker Change: I do believe still with the Big carrier has the advantage that you say that you mentioned, there, particularly with the trailer pool networks and the things that we do on behalf of our customer community.
Speaker Change: But also there is there is more technology available more price discovery, there's there's just more.
Speaker Change: The information available to all participants.
Speaker Change: Across the supply chain so.
Speaker Change: And I think that might be one of the changing dynamics, but the fundamentals of having enough revenue to cover your cost base is still.
Speaker Change: Paramount and I think Thats why we continue to see the downward trend in capacity.
Speaker Change: Right. Okay. Thank you.
Speaker Change: Your next question comes from the line of Scott Group from Wolfe Research. Your line is open.
Scott Group: Hey, Thanks. Good morning, So good morning, Scott just one more on price I think what you're saying low to mid single digit on.
Scott Group: Truckload and flattish on intermodal. So I guess why do you think we're seeing that kind of spread.
Scott Group: What has to change to get the two more aligned in and then maybe it's too early because bids aren't really in effect, yet, but given a better outcome at least for shippers with intermodal are you seeing or do you expect to see better compliance with intermodal bids than truckload bids.
Jim Filter: Yes, Scott this is Jim.
Scott Group: I think the reason why youre seeing a little bit of DVA.
Scott Group: Deviation there is probably what we've seen over the last few years that the.
Scott Group: Network bids had had.
Scott Group: <unk> had dropped faster than intermodal intermodal was more resilient through.
Scott Group: The downturn than what we had seen in one way network rates and now they are coming back into a little bit more of a alignment there.
Scott Group: Intermodal a little bit more attractive going forward.
Scott Group: Okay.
Scott Group: Okay.
Scott Group: And then on the can you just talk about the Capex cut in.
Scott Group: Is this.
Scott Group: Just what you are planning to do with the fleet in tractors in and if there's any consideration of.
Scott Group: We're doing anything with the trailer fleet as well.
Scott Group: And in the interim.
Scott Group: Fleet as well.
Scott Group: Yes. This is Daryl so I'll start.
Mark Rourke: Mark will add some color.
Mark Rourke: So the strategy that we're implementing for the first quarter and the rest of the year is really consistent with what we've been doing for the past several quarters I would say.
Mark Rourke: We are dedicated we are dedicating our capital too.
Mark Rourke: Areas of strategic growth, alright, so intermodal tractors and dedicated tractors.
Mark Rourke: That's not going to change throughout the cycle.
Mark Rourke: Some of the commentary made around network and the fact that it's not investable given current returns.
Mark Rourke: We're just affirming that our capital allocation reflects that.
Mark Rourke: As volumes have <unk>.
Mark Rourke: Moderated are expected to moderate our Capex plan reflects that.
Mark Rourke: It also reflects the fact that the cost per equipment.
Mark Rourke: Our units of equipment has gone up in some cases as it really is attractive because of the tariffs.
Mark Rourke: But there's a flip side to that which is.
Mark Rourke: That used equipment.
Mark Rourke: <unk> are expected to improve and we've seen some of that so our capex guidance does.
Mark Rourke: Contemplate.
Mark Rourke: Increased proceeds, which we also see come into gain.
Mark Rourke: On sale assumptions, but as it relates to our strategy our strategy is still clear.
Mark Rourke: Our strategic areas of growth will continue to get capital.
Mark Rourke: We're going to continue to invest in technology, but to the extent that there is not a commensurate return we will not invest.
Scott Group: Volume growth and growth Scott as it relates to the trailing equipment, we're largely in the replacement cycle. There. So we don't outside specialty equipment and dedicated that comes with some new business awards that will be mostly on the trailing side.
Scott Group: Plenish meant and we believe we're well positioned.
Scott Group: Intermodal front, although as we continue to grow in Mexico, there there could be.
Scott Group: Needs over time to to invest further in intermodal container growth, but we think 2025 will be largely stable with replacement.
Speaker Change: John can you just real quickly how much you've changed your gains on sale assumption.
Speaker Change: Not material I would say.
Speaker Change: Couple of pennies a few pennies a couple things.
Speaker Change: Thank you guys appreciate it.
Speaker Change: Your next question comes from Al <unk>.
Speaker Change: David Hicks from Raymond James Your line is open.
David Hicks: Great. Good morning, Thanks for the question.
David Hicks: Just wanted to ask about the designated growth kind of runway is now 7% of the truckload fleet post the <unk> deal.
David Hicks: I know one of your peers is targeting that 70% range is that mix approaching kind of a natural ceiling given kind of the competitiveness in that market.
David Hicks: Current customer demand.
David Hicks: Network constraints.
David Hicks: Or is there still meaningful.
David Hicks: Room for expansion.
David Hicks: On the mix side of things for dedicated.
Speaker Change: Great. Yes. Thank you for the question as it relates to mix.
We've said, we don't really have any magic number relative to mix of dedicated versus.
Speaker Change: Network, we really look at this from a return hurdle standpoint, what adds value to the customer and the durability that we see long term and the attractiveness of deeper relations with our customer and dedicated.
Speaker Change: What I would note is that there is value of the network, helping support dedicated with.
Speaker Change: Ebbs and flows of demand across our various.
Speaker Change: Cost structure is in verticals that occur within your dedicated portfolio. So there is.
Speaker Change: Some synergies that we gain.
Speaker Change: Back and forth through that alignment.
Speaker Change: I would also say that our focus in our cider dedicated or our legacy dedicated increasingly is in that specialty equipment space private fleet replacement as you look at the recent Calvin had very much a lightweight model.
Speaker Change: That attracts shippers that are looking to have additional payload based upon their approach.
Speaker Change: Two to their equipment spec we have.
Speaker Change: A multi stop with Eminem and very demanding service requirements.
Speaker Change: Requirements, and then MLS as this terrific relay network that fit so well within the automotive sector. So we have some specialty capability within each of these that have broadened our reach in the various markets that we serve and we would consider all of those growth potentials and don't feel that we're sitting here because of a competitive situation that we cant continue to.
Speaker Change: Take advantage of those various platforms.
Jim Filter: And David just a couple of other comments. This is Jim is that.
There's a long runway still on dedicated this $400 billion market. We are a very small percentage of that went back just a handful of years ago about.
Jim Filter: About 50% of this market was private fleets that has grown to 57% and as we're talking to all of our customers that have private fleets.
Jim Filter: None of them have it.
Jim Filter: And the intention of growing their private fleets at this point and we've seen a number of them really start to change course and pivot to.
Jim Filter: Common carriers here in outsourcing so see a lot of opportunities continue to grow dedicated over the coming years.
Speaker Change: Great. Thanks, Marc and Jim and then just on the follow up you kind of outlined $40 million targeted cost reductions.
Jim Filter: Digital tools automation et cetera.
Jim Filter: Much of that is kind of been realized at this point.
Jim Filter: Would that be kind of a linear fashion throughout.
Jim Filter: Throughout the year or is it more back half weighted.
Jim Filter: Yes.
Jim Filter: Yes, I think you outlined some of.
Jim Filter: The things that we're looking at what we're looking at essentially every cost category I think in Mark's remarks.
Jim Filter: You just highlighted a few of the things that we're seeing.
Jim Filter: Just to reiterate for the past several quarters actually four quarters in a row, we have been able to manage our variable cost within a very tight band.
Jim Filter: And that is just a manifestation of the bold actions that we've taken.
Jim Filter: Kind of hard to give guidance in terms of linear versus not but the $40 million is the full year annualized impact.
Jim Filter: Given the seasonality trends of our business.
Jim Filter: Cost would not be exactly linear.
Jim Filter: And again, we don't give quarterly guidance, but the $40 million, we think is achievable including.
Jim Filter: Some of the productivity actions that we have taken.
Jim Filter: The addition of Cohen, the synergistic effects, there of bringing that into the portfolio.
Jim Filter: Those are all the things that are in the mix.
Jim Filter: Yes.
Jim Filter: With a $40 million, but we're not going to break it down by quarter.
Speaker Change: Great. Thanks, Daryl and I appreciate the time.
Jim Filter: Yes.
Speaker Change: Your next question comes from the line of Ken <unk> from Bank of America. Your line is open.
Ken <unk>: Hey, good morning, that's a new one it's kind of extra good morning, Mark Darrell.
Speaker Change: Just if I could follow up on that one might start.
Speaker Change: Yes.
Speaker Change: We're not gonna make that Wednesday.
Speaker Change: So.
Speaker Change: Maybe to follow up on Chris's timing question that I get it's early you're not going to give us quarterly guidance, but to understand near term maybe talk to seasonality in <unk> given timing of it sounds like you've got some timing of loss contracts, you've got startups that offset that do they balance each other talk about taking trucks out to improve utilization there is the <unk>.
Speaker Change: Normal seasonality versus the air pocket of this huge air pocket of tariff volumes coming maybe.
Speaker Change: If you step back from that I'd love some guidance on the <unk>, but if you could frame that bull bear case of the 75 to one dollar.
Speaker Change: Outlook.
Speaker Change: <unk>.
Okay.
Speaker Change: No Ken we're going to satisfy your request on.
Speaker Change: On various key.
Speaker Change: <unk> guidance, but.
Speaker Change: Again, we recognize there is uncertainty we recognize that.
Speaker Change: Theres a lot obviously in a business of our size and the services that we provide across those segments that there are various moving parts, but we've tried to be thoughtful relative to various scenarios.
Speaker Change: We've tried to take into account.
Speaker Change: Those scenarios on magnitude the timings.
Speaker Change: When they could occur we've looked at our allocation season to date here now that we're three of my almost four months into the year.
Speaker Change: You see the guidance of the range being a little bit wider to recognize I think some of that uncertainty.
Speaker Change: And we've done a number of things on the structural front relative to our costs.
Speaker Change: Where we sit with renewals our asset efficiency efforts all the things that we've kind of just talked about and we've tried to be thoughtful to give our best insight to what we could see and know today and recognize that that could change based upon.
Speaker Change: The macro the things that are most in our control we have obviously, the most confidence in that and the things that kind of sit outside that.
Speaker Change: Whether that'd be trade policy consumer health settings.
Speaker Change: Could ultimately end up driving the demand and supply and pricing equation is a bit more cloudy, but thats.
Speaker Change: The timing magnitude and duration depths gets us on the lower end of that and things that are.
Speaker Change: As Jim mentioned things can change rapidly that could give us a little bit of a bathtub effect of those who stop and start supply chain. So they have to restart generally puts chaos into the market and that can be a more favorable scenario, but.
Speaker Change: So as we sit here today, we tried to take all of that door count.
Speaker Change: And <unk>.
Speaker Change: Providing providing that range.
Speaker Change: Knowing that in the near term, where there'll be an air pocket, possibly here.
Speaker Change: Particularly on the intermodal import area.
Speaker Change: Could happen absolutely based upon what you see sailings and the question is how does our new business timing and magnitude of new business startups.
Speaker Change: I'll cover some of that volatility so.
Speaker Change: <unk>.
Speaker Change: That was our approach and Thats, what we tried to do with that guidance range.
Speaker Change: Awesome.
Speaker Change: Thanks for the insight.
Speaker Change: The.
Speaker Change: How do you think about the.
Speaker Change: A lot of this is about supply demand right trying to find that balance over a long term J B Hunt was talking about having 30% excess capacity on intermodal how do you sit there and look at your fleet and the ability or desire to.
Speaker Change: Keep the fleet shrink the fleet what do you think on an intermodal to drive improved performance profitability utilization.
Speaker Change: Utilization.
Speaker Change: Yes.
Speaker Change: This is Jim.
Speaker Change: We look at our trailing fleet there.
Speaker Change: We're able to adjust and make some adjustments by stacking equipment right now, there's a little less than 10% that we have on stack.
Speaker Change: We would say that's easily we could grow 25% without adding any trailing equipment.
Speaker Change: I look back to our previous high points in terms of container returns, we'd be able to grow up to 35%.
Speaker Change: So theres still plenty of opportunities there, but it's.
Speaker Change: As we're looking at growth we are staying disciplined in growing where we have areas of differentiation locations that we can take cost out of our network and just continuing to improve that business.
Speaker Change: So I mean, so with 40, so and just to put that math together right, 25% excess capacity grow 35% and turns I don't know, 50% excess capacity to get rid of <unk>.
Speaker Change: Boxes, or I mean, it doesn't that extend the downturn and constrained our ability to get pricing.
Speaker Change: We are very very long life and.
Speaker Change: And obviously, Ken there is a mix implication there whether where you are growing.
Speaker Change: Length of haul.
Speaker Change: We feel that.
Speaker Change: The work that we've done to put together.
Speaker Change: Our capability relative to how we execute on the street, but also the partners that we've chosen have chosen us.
Speaker Change: But between the <unk> and the C PKC gives us.
Speaker Change: US differentiation in a very difficult place at times to get differentiation.
Speaker Change: And we're going to exploit those strengths and where.
Speaker Change: And so I don't think we need to eliminate boxes to get margins we have to.
Speaker Change: Read into our differentiation and on trend I think we're still very very favorably positioned.
Speaker Change: To performed very well in this market.
Speaker Change: Overtime.
Speaker Change: Some difficult periods presently but.
Speaker Change: It doesn't shake our confidence going forward.
Speaker Change: Great. Thanks, Mark Thanks, Sam.
Speaker Change: I appreciate it.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Jon Chapelle from Evercore ISI. Your line is open.
Jon Chapelle: Thank you good afternoon, sorry, good morning.
Speaker Change: Mark.
Speaker Change: Correct me, if I'm wrong, but did you did you insinuate that maybe there's some business you're walking away from now during this many bid process and.
Speaker Change: Some of the price pressure and if Thats. The case are you doing more maybe partial truckload.
Speaker Change: Which plays a role in the efficiency of the network fleet.
Jonathan: Great Jonathan Thank you for the question.
Jonathan: I think my in my prepared remarks, I mentioned that.
Jonathan: Staying disciplined on price means in certain situations that we.
Jonathan: We will.
Jonathan: Take less volume under those circumstances with an individual shipper.
Jonathan: And whats reinforcing that strategy across the network is that we're seeing.
Jonathan: On a regular basis more and more many allocation events that come back out after the fact, because there's something not working right on behalf of the customer new business or whatever's going on relative to the customer's network and by not committing our capacity at rates that we believe.
Jonathan: <unk> recognized the value, we're providing or whats the commensurate.
Jonathan: Return.
Jonathan: Allows us then to say, yes to these newer opportunities that.
Jonathan: Are more attractive.
Jonathan: So thats.
Jonathan: The discipline that I was referencing in that was mostly in the network business there mostly in the truck network business.
Jonathan: Even more so than than intermodal.
Jonathan: Okay got it and then is it.
Jonathan: Follow up to try to simplify coders question, partially because I just want this holder things stick.
Jonathan: Yeah.
Jonathan: Yeah.
Jonathan: This is Greg.
Jonathan: You're at the tail end of earnings season, and I think we've seen a bunch of guidance revisions for obvious reasons and I think some of the implemented temporary seasonality, which is may is better than April June better than may but not at the typical magnitude and I think some have incorporated kind of flat bridges.
Jonathan: A weak March to the second half of the uncertainty that's incorporated in the second half would you considered years more of the former the temporary seasonality or just kind of almost writing off the second quarter. At this flatline March April and then the second half is kind of a per our interpretation.
Speaker Change: But I think if I understand your question correctly, Jonathan I think Darryl laid out is recognizing kind of where we came out of the second out of the first quarter and there was a temporary certainly seasonality wise at the end of the quarter.
Speaker Change: And taking into account some more tempered expectations on price and volume.
Speaker Change: Going forward.
Speaker Change: Vis vis our prior our prior guidance. So however that as defined in the way you describe those two conditions.
Speaker Change: Is what we tried to communicate there.
Speaker Change: Okay. Thanks Mark.
Speaker Change: Your next question comes from the line of Daniel <unk> from Stephens. Your line is open.
Speaker Change: Yeah, Hey, good morning, guys. Thanks, taking the question.
Speaker Change: Maybe to follow up on an earlier conversation around the intermodal and intermodal pricing I'm, just curious I think rates on a per load basis, we're up a little bit year over year, I'm guessing that positive mix coming out of Mexico, but can you talk about where youre seeing that strength in intermodal pricing and then how are you seeing price developed through bid season, we've heard others. They bid these.
Speaker Change: Getting into more competitive I'm, just curious how bid season is progressing on the pricing side.
Speaker Change: Yes, Daniel this is Jim so as we've gone through and what Mark sure obviously, it's been flattish.
Speaker Change: Flattish is the way we would describe it as we've gone through the bid season and Thats true.
Speaker Change: Core renewables.
Speaker Change: As you look at rate per order, you're correct, it's been three quarters.
Speaker Change: In a row that we've seen improvement in our revenue per order.
As we're looking going forward, though do anticipate that there are going to be some mix changes here.
Speaker Change: As we go through the remainder of the year, so it's difficult to just align.
Speaker Change: What we're seeing in our core renewals to actually enter rate per order.
Speaker Change: Okay.
Speaker Change: And then that was the intermodal and truck side low to mid single digits.
Speaker Change: Have been our experience through the.
First part of the allocation season, this year, but again building upon that those.
Speaker Change: Those increases that we've had really since the second half of 2024.
Speaker Change: Got it helpful. And then maybe a follow up on the previous discussion around intermodal capacity I think you said net of that probably 40%, 50% excess capacity in the network I guess, if we're in a five 3% margin now your long term target 10% to 14.
Speaker Change: Are we really just multiple pricing cycle. The way it was kind of trying to figure out what needs to happen other than obviously the industry tightening from a demand side to actually get back towards high singles or into your long term margin range.
Speaker Change: Just curious kind of what therefore building blocks are to get there.
Speaker Change: Yes, okay.
Speaker Change: Jim and I are fighting for clarity here.
Speaker Change: Sure.
Speaker Change: If we take everything again mixed dependent longer length of haul Mexico, all have more box consumption, depending upon your mix, but we have stated and still believe that we have that 20% to 25% ability through our efficiency actions relative to our dray, how well the railroads are performing our.
Speaker Change: <unk> or unloading the container and get it there is lots of inputs to that that we could.
Speaker Change: ROE our order volume in that 20% to 25% without investing in additional <unk>.
Speaker Change: Box is a chassis.
Speaker Change: To get back to what we target our long term range as all of the things I've, just said, there, but certainly <unk>.
Speaker Change: Price is part of that equation in the truck alternative as that becomes.
Speaker Change: More favorable that brings more pricing case.
Speaker Change: Capability back into the intermodal arena as well so it's kind of an all of the above and not one single thing that will drive that but the.
Speaker Change: The underlying execution of our.
Speaker Change: Capability and the railroads capability.
Speaker Change: It gives us confidence that we can get back to that particularly through the asset efficiency of our boxes.
Speaker Change: This is Jim just to clarify that we're talking about we see 25% is the opportunity to grow what I was.
Speaker Change: <unk> added Seth in terms of what I was discussing getting back to long term.
Speaker Change: <unk>.
Speaker Change: Container turns that was from our current point to our long term would be 35% and then just one other key point I think on restoring profitability. It is it's growing it's growing in areas, where we have differentiation and then our dray capacity.
Speaker Change: So we did use a little bit more third party.
Speaker Change: Capacity here in the quarter than what we typically do so we have an opportunity through these bids to we've been able to optimize our dray capacity and that'll be a big part of getting ourselves back to our long term margin.
Speaker Change: Got it but no change in where you think the margin can get to even with the excess capacity in the industry.
Greg: That's correct Greg.
Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Due to time constraints, we ask that you. Please limit yourself to one question only your next question comes from the line of Bruce Chan from Stifel. Your line is open.
Bruce Chan: Alright, good morning, Gents, I hate to kind of flat that right off the bat here, but I've got a kind of a two parter on intermodal versus truckload.
And then just on the shorter term you talked about the volume strengthen Brazilians in intermodal.
Bruce Chan: I'm wondering if it's fair to say that there has been maybe less of an inventory pause there versus truckload due to that.
Bruce Chan: Less elasticity or maybe more consumer non discretionary exposure there.
Bruce Chan: End markets, and then kind of big picture and maybe asking what's been discussed in a different way.
Bruce Chan: The past five years since the pandemic have been very let's call it dynamic.
Bruce Chan: If I think about the original road to rail conversion thesis and what's happened.
Bruce Chan: With relative pricing and service disruption and maybe less of a mandate from ESG do you still feel as confident in that conversion thesis as you did and maybe say 2018 or 2019.
Jay: Yes. This is Jay.
Bruce Chan: Bruce.
Bruce Chan: Sure, Matt and to.
Speaker Change: To answer that yes, we do we're still confident of that thesis of conversion from over the road to intermodal really the what's really changed over the last couple of years that has driven more conversions from the rail to over the road has been the pricing dynamic that we were we were speaking about and as we were talking about just.
Bruce Chan: What we're seeing going through this bid season that.
Bruce Chan: Our over the road rates that we're seeing that work with us in the industry have been rising a little bit faster.
Bruce Chan: Intermodal and that's really what it's going to take to get back to that long term mix between over the road in intermodal.
Bruce Chan: And Bruce.
Bruce Chan: Hate to say, but I think I forgot the first part of your question.
Bruce Chan: Yes. It was just trying to identify where the relative volume strength in intermodal is coming from and maybe that's just been less about inventory pause.
Bruce Chan: Yeah, I think overall sentiment going forward is has moderated and if you look at the current freight environment, we've experienced in the fourth quarter through the first quarter.
Bruce Chan: I think we would characterize that as being.
Bruce Chan: A more stable and it's been the forward looking sentiment whether that be.
Bruce Chan: Because of tariffs or consumer or the forward looking that hasnt, we havent really felt yet as ware.
Bruce Chan: The concern or the uncertainty lies in so maybe thats.
Bruce Chan: <unk>.
Bruce Chan: What you're referencing there is that overall, it's been the consumer has been fairly resilient to this date.
Bruce Chan: Supply chains have been fairly stable to this date and so the business has been stable as a result, so we'll have to see what the future quarters unfold, but.
Bruce Chan: We wouldn't say we felt a great deal we did see a little bit of a temporary certainly this at the end of March but not but not dramatic we haven't seen any of these dramatic shifts that feel like.
Bruce Chan: And some quarters are some experts feel is ahead of us.
Speaker Change: And we have reached the end of our question and answer period. This does conclude today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: [music].