Q2 2026 Schneider National Inc Earnings Call

July 30, 2026

Operator 3: Ladies and gentlemen, thank you for joining us, and welcome to Schneider National's Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Christyne McGarvey, Vice President of Investor Relations. Please go ahead.

Operator: Ladies and gentlemen, thank you for joining us, and welcome to Schneider National's Q2 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Christyne McGarvey, Vice President of Investor Relations. Please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Christyne McGarvey, Vice President of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Jim Filter, President and Chief Executive Officer, and Darrell Campbell, Executive Vice President and Chief Financial Officer.

Christyne McGarvey: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Jim Filter, President and Chief Executive Officer, and Darrell Campbell, Executive Vice President and Chief Financial Officer. Earlier today, the company issued an earnings press release. This release and investor presentation are available on the investor relations section of our website at schneider.com. Our call will include remarks about future expectations, forecast lines 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.

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

Speaker #2: Our call will include remarks about future expectations, forecasts, plans, and prospects for Schneider. These constitute forward-looking statements for the purposes of the Safe Harbor provisions under applicable federal securities laws.

Speaker #2: Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent annual report on Form 10-K.

Speaker #2: 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.

Christyne McGarvey: All forward-looking statements are made as of the date of this call, Schneider disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, reconciliation of non-GAAP financial measures referenced during today's call can be found directly 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, Jim Filter.

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

Speaker #2: Now, I'd like to turn the call over to our CEO, Jim Filter.

Speaker #3: Thank you, Christyne. Hello, everyone. Thank you for joining the Schneider National call today. I will start by offering my perspective on the freight cycle and how we are positioning the enterprise for success in this dynamic market.

Jim Filter: Thank you, Christyne. Hello, everyone. Thank you for joining this Schneider National call today. I will start by offering my perspective on the freight cycle and how we are positioning the enterprise for success in this dynamic market. I will then turn it over to Darrell for his commentary on Q2 results, capital deployment, and our full-year earnings per share guidance. After that, we will open up the call for questions. Looking at our performance in the quarter, we believe we are seeing the initial benefits of the actions we took to structurally improve the enterprise and position us to quickly and effectively capitalize on better market fundamentals. This includes effective revenue management, enhancements to asset efficiency and productivity, execution on our $40 million cost savings program, and our differentiated multimodal model.

Speaker #3: I will then turn it over to Darrell for his commentary on second quarter results, capital deployment, and our full-year earnings per share guidance. After that, we'll open up the call for questions.

Speaker #3: Looking at our performance in the quarter, we believe we are seeing the initial benefits of the actions we took to structurally improve the enterprise and position us to quickly and effectively capitalize on better market fundamentals.

Speaker #3: This includes effective revenue management, enhancements to asset efficiency and productivity, execution on our $40 million cost savings program, and our differentiated multimodal model. We continue to see meaningful opportunity ahead but we want to thank our associates, especially our professional drivers, for their hard work, which helped drive earnings to more than double sequentially, representing the strongest quarter-over-quarter improvement in the last decade.

Jim Filter: We continue to see meaningful opportunity ahead, we want to thank our associates, especially our professional drivers, for their hard work, which helped drive earnings to more than double sequentially, representing the strongest quarter-over-quarter improvement in the last decade. Many cycle indicators that showed signs of life in Q1 gained momentum through Q2. Spot rates are already testing prior cycle highs, turndowns remain elevated, and utilization has increased meaningfully. Underlying demand trends were largely stable, with some modest seasonal activity. As a result, we believe the market improvement to date has been supply-led. Regulatory action and enforcement on non-compliant supply, including in areas such as non-domicile CDL usage, English language proficiency, illegal cabotage, entry-level driver training, and ELD tampering all gained traction through Q2. Supply attrition has been faster than we initially expected and is removing the most irrational capacity from the marketplace.

Speaker #3: Many cycle indicators that showed signs of life in the first quarter gained momentum through the second quarter. Spot rates are already testing prior cycle highs, turndowns remain elevated, and utilization has increased meaningfully.

Speaker #3: Underlying demand trends were largely stable, with some modest seasonal activity. As a result, we believe the market improvement to date has been supply-led. Regulatory action and enforcement on non-compliant supply, including in areas such as non-domicile CDL usage, English language proficiency, illegal cabotage, entry-level driver training, and ELD tampering, all gained traction through the second quarter.

Speaker #3: Supply attrition has been faster than we initially expected, and is removing the most irrational capacity from the marketplace. We would now categorize the market as driver constrained.

Jim Filter: We would now categorize the market as driver constrained. The long-haul driver population in the US sits well below long-term averages and near the lowest levels seen over the last decade. However, we believe roughly half of the non-compliant capacity is left, with the remaining impacted supply expected to exit through next year. Against that backdrop, we believe we are only in the early stages of rate recovery and are maintaining a discerning approach to customer allocation events. We are balancing customer commitments with the need for rates that will support our strong service, recoup multiple years of significant cost inflation, and drive returns back to a level that is supportive of growth. Importantly, spot rates now exceed contract rates at a level that has historically preceded more meaningful contract rate improvement.

Speaker #3: The long-haul driver population in the U.S. sits well below long-term averages and near the lowest levels seen over the last decade. However, we believe roughly half of the non-compliant capacity is left, with the remaining impacted supply expected to exit through next year.

Speaker #3: Against that backdrop, we believe we are only in the early stages of rate recovery and are maintaining a discerning approach to customer allocation events.

Speaker #3: We are balancing customer commitments with the need for rates that will support our strong service, recoup multiple years of significant cost inflation, and drive returns back to a level that is supportive of growth.

Speaker #3: Importantly, spot rates now exceed contract rates at a level that has historically preceded more meaningful contract rate improvement. While the pace of supply attrition is supporting price increases, it is also creating challenges in driver recruiting and retention, which is putting upward pressure on the cost of capacity.

Jim Filter: While the pace of supply attrition is supporting price increases, it is also creating challenges in driver recruiting and retention, which is putting upward pressure on the cost of capacity. We remain an employer of choice, and we will be disciplined in investments to add capacity, focusing on where we see clear demand, strong productivity, and returns that meet our expectations. We have aligned our pay structure to reward our hardest-working drivers to support retention while surgically reinforcing recruiting efforts, including growing the number of recruiters, expanding our AI capabilities, and enhancing starting driver pay in the most constrained geographies. Altogether, Q2 results underscore the importance of price and productivity. Changing supply conditions are most acute in the over-the-road segment of the market, where irrational capacity has persisted. This, in turn, is creating the strongest initial opportunities in our network and Logistics solutions, and we have responded rapidly.

Speaker #3: We remain an employer of choice, and we will be disciplined in our investments to add capacity, focusing on where we see clear demand, strong productivity, and returns that meet our expectations.

Speaker #3: We have aligned our pay structure to reward our hardest-working drivers to support retention, while surgically reinforcing recruiting efforts, including growing the number of recruiters, expanding our AI capabilities, and enhancing starting driver pay in the most constrained geographies.

Speaker #3: Altogether, our second quarter results underscored the importance of price and productivity. Changing supply conditions are most acute in the over-the-road segment of the market, where irrational capacity has persisted.

Speaker #3: This in turn is creating the strongest initial opportunities in our network and logistics solutions, and we have responded rapidly. In the second quarter, these segments captured premium opportunities as we supported customers through a quickly tightening marketplace.

Jim Filter: In Q2, these segments captured premium opportunities as we supported customers through a quickly tightening marketplace. We expect Dedicated and Intermodal to see increasing benefit as we move further into the up cycle through contract renewals and freight allocation events. This flexibility is the benefit of operating a scaled, sophisticated, multimodal portfolio. Digging into our business segments in more detail. In Truckload, we more than doubled earnings sequentially on 2% revenue growth, only possible through the organization's hard work on executing price, productivity, and cost reductions. Network price grew high single digits year-over-year in the quarter. We are quickly leveraging all our tools to extract price, including historically high spot exposure, advanced freight selection and acceptance technology, and a growing number of mini bids, among others.

Speaker #3: We expect dedicated and intermodal to see increasing benefit as we move further into the upcycle through contract renewals and freight allocation events. This flexibility is the benefit of operating a scaled, sophisticated multimodal portfolio.

Speaker #3: Digging into our business segments in more detail, in Truckload we more than doubled earnings sequentially on 2% revenue growth. This was only possible through the organization’s hard work on executing price, productivity, and cost reductions.

Speaker #3: Network price grew high single digits year over year in the quarter. We are quickly leveraging all our tools to extract price. Including historically high spot exposure, advanced freight selection, and acceptance technology, and a growing number of minibids among others, spot rates became increasingly accretive through the quarter, and June saw levels of contribution that were on par with March of 2021.

Jim Filter: Spot rates became increasingly accretive through the quarter, and June saw levels of contribution that were on par with March 2021. Network price renewals also accelerated with average price increases in the quarter up double digits, which we achieved while also improving incumbent retention. Tractor count was impacted by driver availability, but we were able to more than offset the reduction with improved productivity, which grew high single digits year-over-year. The asset efficiency gains we have made are now being compounded by better freight selection, and we actively managed truck count in the quarter to reduce unseated tractors. Turning to our Dedicated business. We saw modest year-over-year price improvement in the quarter, supported by our self-help actions on portfolio quality. We remain disciplined in adding durable, Dedicated solutions with returns in our targeted ranges, as that discipline is what drives earnings resiliency through the entire cycle.

Speaker #3: Network price renewals also accelerated, with average price increases in the quarter up double digits, which we achieved while also improving incumbent retention. Tractor count was impacted by driver availability, but we were able to more than offset the reduction with improved productivity, which grew high single digits year over year.

Speaker #3: The asset efficiency gains we have made are now being compounded by better freight selection, and we actively managed truck count in the quarter to reduce unseated tractors.

Speaker #3: Turning to our dedicated business, we saw modest year-over-year price improvement in the quarter supported by our self-help actions on portfolio quality. We remain disciplined in adding durable dedicated solutions with returns in our targeted ranges as that discipline is what drives earnings resiliency through the entire cycle.

Jim Filter: Proactively addressing pricing now is allowing us to get ahead of the increased cost of capacity and position the portfolio for higher quality growth. As we highlighted on our last call, these actions are creating some near-term churn. While productivity gains also contribute to the year-over-year tractor count decline, they help drive margins higher in the quarter. Dedicated remains a key pillar of our long-term growth strategy, and the consistency and resiliency of earnings is a feature, not a defect. We continue to advance our sales initiatives with more than 500 new trucks sold year to date in 2026. We believe constrained driver supply, inflationary pressure in areas such as insurance, and emerging liability concerns all support long-term Dedicated growth. We are also increasingly confident in our focus on specialty equipment where our retention remains highest.

Speaker #3: Proactively addressing pricing now is allowing us to get ahead of the increased cost of capacity and position the portfolio for higher-quality growth.

Speaker #3: As we highlighted on our last call, these actions are creating some near-term churn. While productivity gains also contribute to the year-over-year tractor count decline, they help drive margins higher in the quarter.

Speaker #3: Dedicated remains a key pillar of our long-term growth strategy, and the consistency and resiliency of earnings is a feature, not a defect. We continue to advance our sales initiatives, with more than 500 new trucks sold year to date in 2026.

Speaker #3: We believe constrained driver supply, inflationary pressures in areas such as insurance, and emerging liability concerns all support long-term dedicated growth. We are also increasingly confident in our focus on specialty equipment, where our retention remains highest.

Speaker #3: At the same time, the benefit of our diverse portfolio of solutions is that it gives us flexibility to meet customer needs as they evolve, as cycle conditions shift, network will be most responsive to market improvement, especially in an upcycle that remains primarily driven by supply attrition in the over-the-road segment of the market.

Jim Filter: At the same time, the benefit of our diverse portfolio of solutions is that it gives us flexibility to meet customer needs as they evolve. As cycle conditions shift, Network will be most responsive to market improvement, especially in an upcycle that remains primarily driven by supply attrition in the over-the-road segment of the market. As a result, in the near term, we may shift some capacity into our Network configuration. However, we do expect Dedicated to benefit as those conditions translate through contract renewals and customer allocation decisions. As improvement accelerates, we will have the line of sight and capability to quickly return that capacity to capture these opportunities. This is the multimodal strategy working as intended. In Intermodal, Q2 results underscore the efforts we have made and continue to make to prioritize profitable growth.

Speaker #3: As a result, in the near term, we may shift some capacity into our network configuration. However, we do expect dedicated to benefit as those conditions translate through contract renewals and customer allocation decisions.

Speaker #3: As improvement accelerates, we will have the line of sight and capability to quickly return that capacity to capture these opportunities. This is the multimodal strategy working as intended.

Speaker #3: In Intermodal, second quarter results underscore the efforts we have made and continue to make to prioritize profitable growth. Over-the-road conversion opportunities expanded in the quarter, but as expected, drayage has become the primary constraint.

Jim Filter: Over-the-road conversion opportunities expanded this quarter, but as expected, drayage has become the primary constraint. Realizing nine consecutive quarters of volume growth, we remain disciplined in Q2. We elected not to chase growth that would have required expensive third-party dray when pricing was not yet supportive of the incremental cost. We are growing in areas where returns are commensurate with our service and cost, as evidenced by the strong growth in Mexico and in the East, where there are the most significant over-the-road conversion opportunities and we have clear differentiation. Altogether, the segment delivered earnings growth despite some revenue pressure, reflecting our differentiators in lanes and service, containers and chassis asset control, effective Network and revenue management, and the optimization of third-party costs. Looking forward, we have seen success with select targeted investments in company dray capacity, which net up through the quarter.

Speaker #3: Realizing nine consecutive quarters of volume growth, we remained disciplined in the second quarter. We elected not to chase growth that would have required expensive third-party dray when pricing was not yet supportive of the incremental cost.

Speaker #3: We are growing in areas where returns are commensurate with our service and cost as evidenced by the strong growth in Mexico and in the east, where there are the most significant over-the-road conversion opportunities, and we have clear differentiation.

Speaker #3: Altogether, the segment delivered earnings growth despite some revenue pressure, reflecting our differentiators and strengths in service, containers and chassis asset control, effective network and revenue management, and the optimization of third-party costs.

Speaker #3: Looking forward, we have seen success with select targeted investments in company dray capacity, which netted up through the quarter. At the same time, pricing renewals accelerated in intermodal, importantly, we are seeing even stronger out-of-cycle increases, a signal that the market is beginning to turn faster.

Jim Filter: At the same time, pricing renewals accelerated in Intermodal. Importantly, we are seeing even stronger out-of-cycle increases, a signal that the market is beginning to turn faster. We expect these efforts to gain traction through Q3, positioning us to profitably capitalize on the trifecta of over-the-road conversion tailwinds as we move forward, including elevated fuel costs, rising Truckload prices, and strong rail service. We are pleased with our performance in this allocation season, which we expect to translate into volume growth in H2. In Logistics, we extend the momentum from Q1, delivering double-digit year-over-year growth in both revenue and earnings. Brokerage net revenue per order improved both year-over-year and sequentially, supported by revenue management and premium project business. While we are addressing out-of-market contractual pricing, we are also leaning into expanded spot opportunities. Our spot exposure increased year-over-year and sequentially.

Speaker #3: We expect these efforts to gain traction through the third quarter, positioning us to profitably capitalize on the trifecta of over-the-road conversion tailwinds as we move forward, including elevated fuel costs, rising truckload prices, and strong rail service.

Speaker #3: We are pleased with our performance in this allocation season, which we expect to translate into volume growth in the second half. In Logistics, we extended the momentum from the first quarter, delivering double-digit year-over-year growth in both revenue and earnings.

Speaker #3: Brokerage net revenue per order improved both year-over-year and sequentially, supported by revenue management and premium project business. While we are addressing out-of-market contractual pricing, we are also leaning into expanded spot opportunities.

Speaker #3: Our spot exposure increased year-over-year and sequentially. Revenue management actions were amplified by productivity initiatives, especially those supported by our ongoing technology investment and leadership in agentic AI solutions.

Jim Filter: Revenue management actions were amplified by productivity initiatives, especially those supported by our ongoing technology investment and leadership in agentic AI solutions. The projects that began Q1 extended through much of Q2, though have now largely concluded. We expect the expertise we have built into these new verticals to remain a meaningful growth driver for Logistics, even as the project-based nature of the work may create some quarter-to-quarter variability. Altogether, we are encouraged by how the business has responded to the early innings of supply normalization and market improvement. Darrell will provide more detail on our earnings expectations shortly, and we are confident that 2026 will be a year of meaningful earnings growth, supported by an improving rate backdrop and our enhanced ability to drive operating leverage. With that, I'll hand the call over to Darrell to discuss our results and guidance in more detail. Darrell?

Speaker #3: The projects that began in the first quarter extended through much of the second quarter, though they have now largely concluded. We expect the expertise we have built into these new verticals to remain a meaningful growth driver for logistics, even as the project-based nature of the work may create some quarter-to-quarter variability.

Speaker #3: Altogether, we are encouraged by how the business has responded to the early innings of supply normalization and market improvement. Darrell will provide more detail on our earnings expectations shortly, and we are confident that 2026 will be a year of meaningful earnings growth, supported by an improving rate backdrop and our enhanced ability to drive operating leverage.

Speaker #3: With that, I'll hand the call over to Darrell to discuss our results and guidance in more detail. Darrell?

Speaker #2: Thank you, Jim, and good afternoon, everyone. I'll review our enterprise and segment financial results for the second quarter, and provide insights into our full-year 2026 earnings per share and net capex guidance.

Darrell Campbell: Thank you, Jim. Good afternoon, everyone. I will review our enterprise and segment financial results for Q2 and provide insights into our full year 2026 earnings per share and net CapEx guidance. Summaries of our financial results and guidance can be found in our investor presentation, available on the investor relations section of our website. Starting with the Q2 results, enterprise revenues, excluding fuel surcharge, were $1.3 billion, up 4% compared to a year ago. Adjusted income from operations was $73 million, a 29% increase year-over-year. Enterprise adjusted operating ratio improved 110 basis points compared to Q2 2025. Adjusted diluted earnings per share for Q2 was $0.29, compared to $0.21 for Q2 2025.

Speaker #2: Summaries of our financial results and guidance can be found in our investor presentation available on the Investor Relations section of our website. Starting with the second quarter results, enterprise revenues, excluding fuel surcharge, were 1.3 billion dollars, up 4% compared to a year ago.

Speaker #2: Adjusted income from operations was $73 million, a 29% increase year-over-year. Enterprise adjusted operating ratio improved 110 basis points compared to the second quarter of 2025.

Speaker #2: Adjusted diluted earnings per share for the second quarter was $0.29, compared to $0.21 for the second quarter of 2025. Earnings grew year-over-year across each of our business segments, supported by continued progress in the strategic initiatives Jim outlined earlier and execution against our $40 million cost-savings target, where we remain on track.

Darrell Campbell: Earnings grew year-over-year across each of our business segments, supported by continued progress on the strategic initiatives Jim outlined earlier and execution against our $40 million cost savings target, where we remain on track. We are seeing meaningful progress from our ongoing technology initiatives, which are helping automate and streamline workflows, reduce headcounts, improve driver productivity, and lower third-party spend. From a segment perspective, Truckload revenues, excluding fuel surcharge, were $628 million in Q2, up 1% year-over-year. This growth was driven by improvements in revenue per truck per week, which grew 5% year-over-year and more than offset lower truck count, which have been impacted by a more constrained driver environment. Network revenues, excluding fuel surcharge, grew 8% year-over-year, driven by productivity and price, with revenue per truck per week up 16% year-over-year. Dedicated revenue per truck per week was up modestly year-over-year, reflecting ongoing portfolio upgrade actions.

Speaker #2: We're seeing meaningful progress from our ongoing technology initiatives, which are helping automate and streamline workflows, reduce headcounts, improve driver productivity, and lower third-party spend.

Speaker #2: From a segment perspective, truckload revenues excluding fuel surcharge were $628 million in the second quarter, up 1% year-over-year. This growth was driven by improvements in revenue per truck per week, which grew 5% year-over-year and more than offset lower truck count, which has been impacted by a more constrained driver environment.

Speaker #2: Network revenues, excluding fuel surcharge, grew 8% year-over-year, driven by productivity and price, with revenue per truck per week up 16% year-over-year. Dedicated revenue per truck per week was up modestly year-over-year, reflecting ongoing portfolio upgrade actions.

Speaker #2: Truckload operating income was 51 million dollars, at 28% increase year-over-year. Operating ratio was 91.8% and improvement of 180 basis points compared to last year.

Darrell Campbell: Truckload operating income was $51 million, a 28% increase year-over-year. Operating ratio was 91.8%, an improvement of 180 basis points compared to last year. This marks the strongest profitability for our Truckload segment since Q2 2023. Earnings were positively impacted by our revenue management efforts that were supported by an improved Truckload backdrop. We are also seeing the benefits from our cost savings program, where we are gaining traction in areas such as headcount and trailing asset efficiency. Intermodal revenues, excluding fuel surcharge, were $262 million for Q2, down 1% year-over-year. Revenue per order declined 2%, reflecting mixed changes that drove a lower length of haul. Volumes grew modestly year-over-year, marking the ninth consecutive quarter of order growth.

Speaker #2: This marks the strongest profitability for our truckload segment since the second quarter of 2023. Earnings were positively impacted by a revenue management efforts that were supported by an improved truckload backdrop.

Speaker #2: We're also seeing the benefits from our cost savings program, where we're gaining traction in areas such as headcount and trailing asset efficiency. Intermodal revenues excluding fuel surcharge were 262 million dollars for the second quarter, down 1% year-over-year.

Speaker #2: Revenue per order declined 2%, reflecting mix changes that drove a lower length of haul. Volumes grew modestly year over year, marking the ninth consecutive quarter of order growth.

Darrell Campbell: Intermodal operating income was $18 million, a 14% increase compared to the same period last year, and a strong sequential improvement supported by headcount actions and gains in tractor asset efficiency. Operating ratio was 93%, 90 basis points improved compared to last year. Logistics revenue, excluding fuel surcharge, totaled $376 million in Q2, up 11% from the same period a year ago. We saw improvement in price, supported in part by opportunistic premium project business. Logistics income from operations was $12 million, up $4 million year-over-year. Operating ratio was 96.8%, an improvement of 90 basis points from last year due to top line growth noted earlier and effective management of net revenue per order, including capitalizing on spot opportunities. Productivity gains, including those from reduced headcounts and power-only trailer efficiency improvements, also contributed to strong performance. Turning to our balance sheet and capital allocation.

Speaker #2: Intermodal operating income was $18 million, up 14% compared to the same period last year, and a strong sequential improvement supported by headcount actions and gains in tractor asset efficiency.

Speaker #2: Operating ratio was 93%, 90 basis points improved compared to last year. Logistics revenue excluding fuel surcharge totaled $376 million in the second quarter, up 11% from the same period a year ago.

Speaker #2: We saw improvement in price, supported in part by opportunistic premium project business. Logistics income from operations was $12 million, up $4 million year-over-year.

Speaker #2: Operating ratio was 96.8% and improvement of 90 basis points from last year, due to top-line growth noted earlier, and effective management of net revenue per order including capitalizing on spot opportunities.

Speaker #2: Productivity gains including those from reduced headcount and power-only trailer efficiency improvements also contributed to strong performance. Turning to our balance sheet and capital allocation, net capex in the quarter was 84 million dollars, compared to 53 million dollars last year, primarily reflecting our efforts to improve the age of tractor fleet.

Darrell Campbell: Net CapEx in the quarter was $84 million compared to $53 million last year, primarily reflecting our efforts to improve the age of tractor fleet. As a result, free cash flow declined $35 million year-over-year in the quarter. Year-to-date, we have delivered nearly $35 million back to our shareholders in the form of dividends. Looking forward, our strategic priorities for capital are unchanged, and we remain focused on disciplined deployment, including supporting organic growth that's aligned with our areas of differentiation, accretive M&A, and robust shareholder returns. The strength of our balance sheet allows us to be nimble and execute on all three. As of 30 June, we had $397 million in debt and lease obligations and $293 million in cash and cash equivalents. As a result, our net debt leverage was 0.2 times at the end of the quarter.

Speaker #2: As a result, free cash flow declined 35 million dollars year-over-year in the quarter. Year-to-date, we've delivered nearly 35 million dollars back to our shareholders in the form of dividends.

Speaker #2: Looking forward, our strategic priorities for capital are unchanged, and we remain focused on disciplined deployment, including supporting organic growth that's aligned with our areas of differentiation, accretive M&A, and robust shareholder returns.

Speaker #2: The strength of our balance sheet allows us to be nimble and execute on all three. As of June 30th, we had $397 million in debt and lease obligations, and $293 million in cash and cash equivalents.

Speaker #2: As a result, our net debt leverage was 0.2 times at the end of the quarter. For 2026, we're revising our net capex guidance to the range of $350 million to $400 million, down from $400 million to $450 million.

Darrell Campbell: For 2026, we're revising our net CapEx guidance to the range of $350 million to $400 million, down from $400 million to $450 million. As noted earlier, our plan continues to reflect the use of CapEx to improve our age of fleet. The reduction from our previous outlook is driven by a lower need for trailing equipment and consistent with our ongoing focus on asset efficiency. Our areas of investment will continue to support growth across Intermodal, especially dray capacity, and in Dedicated, particularly in specialty equipment. We're raising our 2026 earnings per share guidance to $0.90 to $1.10 from our previous range of $0.70 to $1.00. Our guidance assumes an effective tax rate of approximately 24%. Q2 results reinforce our confidence that the actions we've taken to lower cost to serve, enhance productivity and prepare for this upcycle are delivering meaningful operating leverage.

Speaker #2: As noted earlier, our plan continues to reflect the use of capex to improve our age of fleet. The reduction from our previous outlook is driven by a lower need for trailing equipment and is consistent with our ongoing focus on asset efficiency.

Speaker #2: Our areas of investment will continue to support growth across Intermodal, especially dray capacity, and in Dedicated, particularly in specialty equipment. We're raising our 2026 earnings per share guidance to $0.90 to $1.10, from our previous range of $0.70 to $1.00. Our guidance assumes an effective tax rate of approximately 24%.

Speaker #2: Second quarter results reinforce our confidence that the actions we've taken to lower cost to serve, enhance productivity, and prepare for this upcycle are delivering meaningful operating leverage.

Speaker #2: Based on our year-to-date performance, we're raising both the top and bottom end of our full-year earnings per share guidance to reflect the progress we're seeing across the business.

Darrell Campbell: Based on our year-to-date performance, we're raising the top and bottom end of the full year earnings per share guidance to reflect the progress we're seeing across the business. Our outlook continues to assume that supply attrition remains supportive of freight conditions for the balance of the year, and that we continue to make progress against our $40 million cost savings target. At the same time, our guidance incorporates a range of outcomes for demand and the availability of driver capacity in the H2. Demand has tracked largely in line with our base case to date. Looking forward, stronger demand could drive additional upside, while softer demand may moderate some of the benefits from supply rationalization. As we think about the remainder of 2026, we're bringing momentum from contract implementations and successful allocation events.

Speaker #2: Our outlook continues to assume that supply attrition remains supportive of freight conditions for the balance of the year, and that we continue to make progress against our $40 million cost savings target.

Speaker #2: At the same time, our guidance incorporates a range of outcomes for demand and the availability of driver capacity in the second half of the year.

Speaker #2: Demand has tracked large in line with our base case to date. Looking forward, stronger demand could drive additional upside while softer demand may moderate some of the benefits from supply rationalization.

Speaker #2: As we think about the remainder of 2026, we're bringing momentum from contract implementations and successful allocation events. It's important to note that we're anticipating the loss of a large dedicated customer which will be more evident in the second half of the year.

Darrell Campbell: It's important to note that we're anticipating the loss of a large Dedicated customer, which will be more evident in the H2. Additionally, our business mix has evolved over the past several years, including the addition of three Dedicated acquisitions and greater exposure to food and beverage and home improvement end markets. As a result, seasonal demand is typically stronger in the Q2 than in the Q3. Altogether, we expect earnings to grow meaningfully year-over-year at every point in our updated guidance range. Now I'll turn the call over to Jim for closing remarks. Jim?

Speaker #2: Additionally, our business mix has evolved over the past several years, including the addition of three dedicated acquisitions and greater exposure to food and beverage and home improvement end markets.

Speaker #2: As a result, seasonal demand is typically stronger in the second half. Altogether, we expect earnings to grow meaningfully year-over-year at every point in our updated guidance range.

Speaker #2: Now, I'll turn the call over to Jim for closing remarks. Jim?

Speaker #3: Thanks, Darrell. Before we open the call for questions, I want to reinforce why we're encouraged by the direction of the business. We are a stronger, more efficient company than we were in the last upcycle, with a more resilient, dedicated solution, differentiated intermodal service, and scalable capacity across network and logistics.

Jim Filter: Thanks, Darrell. Before we open the call for questions, I want to reinforce why we are encouraged by the direction of the business. We are a stronger, more efficient company than we were in the last upcycle, with a more resilient, Dedicated solution, differentiated Intermodal service, and scalable capacity across the network and Logistics. These improvements are being further supported by technology innovation, our cost savings program, and a proven acquisition playbook. Q2 results show that the actions we have taken to structurally improve the enterprise are working. The freight backdrop is improving, capacity rationalization is progressing, and pricing momentum is building. Across the portfolio, we are seeing benefits from revenue management actions, productivity gains, a lower cost to serve, and a multimodal platform that helps us methodically capture opportunities. While uncertainty remains, particularly around demand and driver capacity, our confidence in the earnings trajectory has strengthened.

Speaker #3: These improvements are being further supported by technology innovation, our cost savings program, and a proven acquisition playbook. Second quarter results show that the actions we have taken are structurally improved the enterprise are working, the freight backdrop is improving, capacity rationalization is progressing, and pricing momentum is building.

Speaker #3: Across the portfolio, we are seeing benefits from revenue management actions, productivity gains, a lower cost to serve, and a multimodal platform that helps us methodically capture opportunities.

Speaker #3: While uncertainty remains, particularly around demand and driver capacity, our confidence in the earnings trajectory has strengthened. We are maintaining a strong balance sheet, investing where we see clear returns, and continuing to execute against an unchanged strategy.

Jim Filter: We are maintaining a strong balance sheet, investing where we see clear returns, continuing to execute against an unchanged strategy. Earn customer loyalty through consistent execution, grow profitably where we create differentiation, improve on our low-cost operating model, maintain disciplined capital allocation. With that, we will open the call for questions.

Speaker #3: Earned customer loyalty through consistent execution. Grow profitably where we create differentiation. Improve on our low-cost operating model and maintain disciplined capital allocation. With that, we will open the call for questions.

Speaker #1: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator 3: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jordan Alliger with Goldman Sachs. Your line is open. Go ahead.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jordan Alliger with Goldman Sachs. Your line is open. Go ahead.

Speaker #1: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #1: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jordan Aliger with Goldman Sachs.

Speaker #1: Your line is open. Go ahead.

Jordan Alliger: Yeah. Hi. Yeah, I was wondering, obviously the supply side has been the big factor here. I was wondering if you have a little more color on what you are hearing, seeing from your customer base, their thoughts on perhaps demand looking ahead, maybe a little bit on the fleet. Interesting on perhaps moving some more trucks into network, can you maybe talk about your thoughts for fleet growth as we look ahead over the next year or so? Thanks.

Speaker #2: Yeah, hi. I was wondering—obviously, the supply side has been the big factor here. I was wondering if you have a little more color on what you're hearing or seeing from your customer base, their thoughts on perhaps demand looking ahead.

Speaker #2: And maybe a little bit on the fleet. Interesting on perhaps moving some more trucks into the network, but can you maybe talk about your thoughts for fleet growth as we look ahead over the next year or so?

Speaker #2: Thanks.

Speaker #3: Yeah, thanks, Jordan. I think you've got a few questions in there for us to start, so let me just start with what we're hearing from customers related to demand and what we're seeing really macro there and then I'll touch a little bit on what we're thinking about here for fleet growth as well.

Jim Filter: Yeah. Thanks, Jordan. I think you've got a few questions in there for us to start. Let me just start with what we're hearing from customers related to demand and what we're seeing really macro there, then I'll touch a little bit on what we're thinking about here for fleet growth as well. First of all, as it relates to demand is playing out largely as expected. Underlying demand is largely stable. We saw a little bit of seasonal activity in the quarter related to both summer holidays and the World Cup. Our customers that are in areas like food and beverage definitely saw a little bit of a lift up.

Speaker #3: And so, first of all, as it relates to demand, demand is playing out largely as expected. Underlying demand is largely stable. We saw a little bit of seasonal activity in the quarter related to both summer holidays and the World Cup.

Speaker #3: And so our customers that are in areas like food and beverage definitely saw a little bit of a lift up. But looking forward, what we're hearing is the consumer has been resilient through all the macro noise that's been going on out there, but there are some risks that are not completely behind us.

Jim Filter: Looking forward, what we're hearing is the consumer has been resilient through all the macro noise that's been going out there, but there are some risks that are not completely behind us. There's inflationary pressure primarily due to higher energy costs. Interest rates are continuing to weigh on some of the key end markets in places like housing. That's why we're really focused on a broad portfolio of customers that provides us a bit of a cushion here. The reality of the market that we're in here, though, is that this is really being driven by supply. Even with just a little bit of a ripple in demand, it was enough to make a market move here.

Speaker #3: There's inflationary pressure primarily due to higher energy costs. Interest rates are continuing to weigh on some of the key end markets, in places like housing, and that's why we're really focused on a broad folio of customers that provides us a bit of a cushion here.

Speaker #3: And the reality of the market that we're in here, though, is that this is really being driven by supply. And even with just a little bit of a ripple in demand, it was enough to make a market move here.

Jim Filter: There's just no excess supply, and our customers recognize that the market has changed, that there isn't excess supply out there, and if there's any disruption, it'll result in a really rapid change to the market because there's no way to absorb the shocks. That being said, as we're looking at our fleet, the way we're looking at it, we're excited about the supply exiting, the driver market tightening. In Dedicated, we already highlighted that we're continuing to see strong sales at 500 year to date, offset by a little bit of churn in the near term. At the same time, this is a great opportunity for us to be able to continue and restore profitability in that area. As it relates to the network, we haven't been satisfied with our performance in the network, and we know we need to restore some margins there.

Speaker #3: And there's just no excess supply, and our customers recognize that the market has changed—that there isn't excess supply out there. And if there's any disruption, it'll result in a really rapid change in the market because there's no way to absorb the shocks.

Speaker #3: That being said, as we're looking at our fleet, the way we're looking at it, we're excited about the supply exiting—the driver market tightening.

Speaker #3: And dedicated, we already highlighted that we're continuing to see strong sales at 500 year-to-date. Offset by a little bit of churn in the near term.

Speaker #3: But at the same time, this is a great opportunity for us to be able to continue and restore profitability in that area. And then, as it relates to the network, we haven't been satisfied with our performance in the network.

Speaker #3: And we know we need to restore some margins there. That's our first priority before we start to look at growing that driver fleet again.

Jim Filter: That's our first priority before we start to look at growing that driver fleet again.

Speaker #2: Thank you.

Jordan Alliger: Thank you.

Jim Filter: Okay.

Speaker #3: Okay. You bet.

Speaker #1: Your next question comes from the line of Bascom Majors with Stevens. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Bascom Majors with Stephens. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Bascom Majors with Stephens. Your line is open. Please go ahead.

Bascom Majors: If we look at the public data that we can follow, Q2 was a sea of frenetic activity and spot rates and tender rejection rates escalating at pretty much unprecedented levels despite the stable demand drop you talked about. Since then, at least in the data we can follow, it's been kind of sideways and maybe even walked back a bit. I just want you guys' perspective from looking at your own internal metrics, whether it's turndown rates or what you're hearing from customers. Is the market leveling out and even cooling off a bit, or is this just the sign of seasonality that's kind of consolidating after a pretty challenging period? Thank you.

Speaker #4: And if we look at the public data that we can follow, Q2 was a quarter of frenetic activity, with spot rates and tender rejection rates escalating at pretty much unprecedented levels, despite the stable demand drop you talked about.

Bascome Majors: If we look at the public data that we can follow, Q2 was a sea of frenetic activity and spot rates and tender rejection rates escalating at pretty much unprecedented levels despite the stable demand drop you talked about. Since then, at least in the data we can follow, it's been kind of sideways and maybe even walked back a bit. I just want you guys' perspective from looking at your own internal metrics, whether it's turndown rates or what you're hearing from customers. Is the market leveling out and even cooling off a bit, or is this just the sign of seasonality that's kind of consolidating after a pretty challenging period? Thank you.

Speaker #4: But since then, at least in the data that we can follow, it's been kind of sideways, and maybe even walked back a bit. I just want your perspective, from looking at your own internal metrics—whether it's turndown rates or what you're hearing from customers—is the market leveling out and even cooling off a bit?

Speaker #4: Or is this just the sign of seasonality that is kind of consolidating after a pretty challenging period? Thank you.

Jim Filter: Yeah. Thanks, Bascom. We looked at this very similar last year. I think we had the same discussion that when you get late into July, you see spot rates change a little bit, and I would say this really mirrors what we saw a year ago. Very similar seasonality here. It hasn't changed what we're seeing out there in the marketplace. Spot rates aren't the only way that we're able to extract price. It's one of those areas, and even though it's moving sideways, we would still say spot rates are still about 15% higher than contract price. That enables us to have a number of ways to go out there and extract price. The number one area, obviously, is through normal allocation events. Outside those events, we're seeing post-allocation opportunities that are growing. We're also improving price through freight selection.

Speaker #3: Yeah, thanks, Bascom. We looked at this very similarly last year. I think we had the same discussion—that when you get late into July, you see spot rates change a little bit, and I would say this really mirrors what we saw a year ago.

Speaker #3: So, very similar seasonality here, and it hasn't changed what we're seeing out there in the marketplace. And it's not just spot rates; they aren't the only way that we're able to extract price.

Speaker #3: It's one of those areas. And even though it's moving sideways, we would still say spot rates are still above 15% higher than contract price.

Speaker #3: And so that enables us to have a number of ways to go out there and extract price. And the number one area, obviously, is through normal allocation events.

Speaker #3: But outside those events, we're seeing post-allocation opportunities that are growing. We're also improving price through freight selection, and even though spot is moving a little bit sideways, there are still positive opportunities there.

Jim Filter: Even though spot is moving a little bit sideways, still positive opportunities there. Our customers are increasingly realizing that this is not a temporary situation when you see a little bit of a sideways movement here. We've been really comfortable staying with elevated spot exposure because there's that 15% delta between spot and contract, and we continue to think we're still in the early innings of a rate recovery with overall its elevated spot exposure, and we'll keep that elevated spot exposure until the book closes between the gap between spot and contract.

Speaker #3: And our customers are increasingly realizing that this is not a temporary situation. You see a little bit of a sideways move here, and so we've been really comfortable staying with elevated spot exposure because there's that 15% delta between spot and contract.

Speaker #3: And we continue to think we're still in the early innings of a rate recovery. Overall, it's elevated spot exposure, and we'll keep that elevated spot exposure until the book closes the gap between spot and contract.

Speaker #4: And thank you for that. And just to follow up on one point.

Bascom Majors: Thank you for that. Just to follow up on one point-

Bascome Majors: Thank you for that. Just to follow up on one point-

Speaker #3: Yeah.

Jim Filter: Bascom, I think we're missing you here.

Jim Filter: Bascome, I think we're missing you here.

Speaker #4: Bascom, I think we're missing you here.

Operator 3: We will move on to the next analyst. A reminder, if you'd like to rejoin the line, you can press star one to raise your hand again. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open. Please go ahead.

Operator: We will move on to the next analyst. A reminder, if you'd like to rejoin the line, you can press star one to raise your hand again. Our next question comes from the line of Ravi Shanker with Morgan Stanley. Your line is open. Please go ahead.

Speaker #1: We will move on to the next analyst. A reminder: if you'd like to rejoin the line, you can press star one to raise your hand again.

Speaker #1: Our next question comes from the line of Ravi Shankar with Morgan Stanley. Your line is open. Please go ahead.

Speaker #5: Oh, great. Thanks. Good afternoon, everyone. Jim, just on IM—obviously, you're a significant player in both asset-based trucking as well as IM, and we're seeing significant rotation from TL to IM at the moment.

Ravi Shanker: Great. Thanks. Good afternoon, everyone. Jim, just on IM, obviously, you're a significant player in both asset-based trucking as well as IM, and we're seeing significant rotation from TL to IM at the moment. Do you get the sense that this is sort of a permanent structural move, or do you think this is kind of opportunistic for the moment, given that volumes aren't there yet and TL pricing is high and share might shift back to TL? Do you think this is the new normal for IM?

Speaker #5: Do you get a sense that this is a sort of permanent structural move, or do you think this is kind of opportunistic for the moment, given that volumes aren't there yet and TL pricing is high—and share might shift back to TL?

Speaker #5: Or do you think this is the new normal for IM?

Speaker #3: Yeah, thanks, Ravi. Appreciate the question here, because definitely, you’re absolutely right. We’re seeing that trifecta of opportunities here between fuel, seeing the impact with underlying truckload rates, but also, I think what’s structurally different right now is the rail service.

Jim Filter: Yeah. Thanks, Ravi. Appreciate the question here. Definitely, you're absolutely right. We're seeing that trifecta of opportunities here between fuel. We're seeing the impact with underlying truckload rates. Also, I think what's structurally different right now is the rail service. It's giving us an opportunity to get into more opportunities, and customers are seeing those benefits. I think the other part is as you look at where our growth is coming. We now have 17 consecutive quarters of growth in Mexico. Our customers have wanted to make a change there for a long time, and it really took that change of us operating with the CPKC to unlock that. We're also growing the local east with over-the-road conversion. Partly that's being driven by what you're seeing with truckload rates with fuel. Also, the service is really good, and customers are understanding that.

Speaker #3: It's giving us an opportunity to get into more opportunities and customer are seeing those benefits. I think the other part is as you look at where our growth is coming, we're now have 17 consecutive quarters of growth in Mexico.

Speaker #3: And customers have wanted to make a change there for a long time, and it really took that change of us operating with the CPKC to unlock that.

Speaker #3: We're also growing the local East with over-the-road conversion. Partly that's being driven by what you're seeing with truckload rates, with fuel, but also the service is really good and customers are understanding that. But also, when they make that change to use Schneider and local East, I believe part of the reason why they're doing that is because of our multimodal strategy.

Jim Filter: They also, when they make that change to use Schneider in local east, believe part of the reason why they're doing that is because of our multimodal strategy. They know that we have other capacity options, whether it's with one of our trucks or it's using one of our logistics solutions to make sure that we have them covered through it. Yes, I do believe that we have opportunities to continue to grow. This has been two years, nine quarters of growth. We've been able to grow through some relatively weak times.

Speaker #3: Because they know that we have other capacity options whether it's with one of our trucks or it's using one of our logistics solutions to make sure that we haven't covered through it.

Speaker #3: So yes, I do believe that we're going to we have opportunities to continue to grow and this has been two years. Nine quarters of growth.

Speaker #3: So we've been able to grow through some relatively weak times.

Speaker #5: That's helpful. Maybe as a follow-up here—I'm sorry if I missed a detail, but I think you mentioned a large upcoming dedicated loss.

Ravi Shanker: That's helpful. Maybe as a follow-up here. I'm sorry if I missed the detail here. I think you mentioned a large upcoming Dedicated loss. Can you shed some more light on that? Just maybe quantify how much an impact could be so we know what the net guide increase looked like. Also, maybe some color around that loss.

Speaker #5: Can you shed some more light on that? Just maybe quantify how much an impact could be so we know what the net guide increase looked like and also maybe some color around that loss?

Speaker #3: Yeah. And overall, Ravi, a way to think about that, that's contemplated and what we're expecting going forward. And dedicated, like we said earlier, it's designed to be more consistent and resilient.

Jim Filter: Yeah. Overall, Ravi, a way to think about that's contemplated in what we're expecting going forward. Dedicated, like we said earlier, it's designed to be more consistent and resilient. Over the four-year down cycle, dedicated has remained remarkably resilient. At the same time, performance isn't where it needs to be. As the conditions are improving, that is giving us the opportunity to proactively address the bottom-performing agreements in the portfolio and reallocate those resources towards higher-performing opportunities. Obviously, as a byproduct of those actions, it can create some near-term churn, which is what we've been experiencing the last couple of quarters. Our focus here is the revenue per truck per week improvement.

Speaker #3: And over the four-year down cycle, Dedicated has remained remarkably resilient. But at the same time, performance isn't where it needs to be. And as conditions are improving, that is giving us the opportunity to proactively address the bottom-performing agreements in the portfolio and reallocate those resources toward higher-performing opportunities.

Speaker #3: Obviously, as a buy product of those actions, it can create some near-term churn, which is what we've been experiencing the last couple of quarters.

Speaker #3: And so our focus here is the revenue per truck per week improvement—it's our priority. At this point in the cycle, we expect you're going to start seeing more pronounced improvement in that metric going forward because of the momentum we're seeing in contract renewals and productivity actions.

Jim Filter: It's our priority at this point in the cycle. Expect you're going to start seeing more pronounced improvement in that metric going forward because of the momentum we're seeing in contract renewals and productivity actions. After we've worked through these, there's an opportunity to begin growing with deals that are durable. Feel really good about our ability to go out there and sell trucks in this area. That's giving us the confidence to restore margins.

Speaker #3: And then, after we've worked through these, there's an opportunity to begin growing with deals that are durable. We feel really good about our ability to go out there and sell trucks in this area.

Speaker #3: That's giving us the confidence to restore margins.

Darrell Campbell: Ravi, this is Darrell. The only thing I'll add is our pipeline is robust. Right? One of the reasons that we have a pipeline is it can absorb shocks. The reason why we kind of highlight that on the call or in our prepared remark is really that in Q3, it's going to be more evident as we implement some of those wins.

Speaker #2: And Ravi, this is Darrell. The only thing I would add is our pipeline is robust, right? So one of the reasons that we have a pipeline is can absorb shocks.

Speaker #2: The reason why we kind of highlight that on the call or prepare to mark is really that in the third quarter, it's going to be more evident as we implement some of those wins.

Ravi Shanker: Understood. Thanks very much.

Speaker #5: Understood. Thanks very much.

Jim Filter: Welcome.

Speaker #3: You're welcome.

Speaker #1: Your next question comes from the line of Jonathan Chappell with Evercore ISI. Your line is open. Please go ahead.

Operator 3: Your next question from the line of Jonathan Chappell with Evercore ISI. Your line is open. Please go ahead.

Operator: Your next question from the line of Jonathan Chappell with Evercore ISI. Your line is open. Please go ahead.

Speaker #6: Thank you. Good afternoon. Jim, a little surprising to see Logistics EBIT almost doubling sequentially, up over 50% year over year, in a quarter where it feels like most logistics companies were squeezed by a paradox move in spot pricing.

Jonathan Chappell: Thank you. Good afternoon. Jim, a little surprising to see Logistics EBIT almost doubling sequentially up over 50% year-over-year in a quarter where it feels like most logistics companies were squeezed by a parabolic move in spot pricing. Is this Schneider specific cost? Is this your power only model? Is there something special that went into this in a quarter where it seemed to be one of the worst laggards for most peers?

Speaker #6: So, is this a Schneider-specific cost? Is this your power-only model? Is there something special that went into this in a quarter where it seemed to be one of the worst laggards for most peers?

Speaker #3: Yeah. Thanks for the question. And we talked a little bit about this last quarter because we're already seeing some of the benefits in logistics come through last quarter.

Jim Filter: Yeah. Thanks for the question. We talked a little bit about this last quarter because we were already seeing some of the benefits in Logistics come through last quarter, and once again, it's shining through. We're no different than the rest of the industry. In Q2, we still had some impact from rising third-party carrier costs that weighed on our contract rated business, including power only, which you mentioned. There's just been really strong execution on the premium project business. We had that in Q1. We developed trust with our customer, and that created additional wins in Q2. It wasn't just the project business. We continued focusing on revenue management efforts to address net revenue pressures, including leading into our spot opportunities. We had to address some out of market contract rates.

Speaker #3: And once again, it's shining through. And we're no different than the rest of the industry. And the second quarter, we still had some impact from rising third-party carrier costs that weighed on our contract-rated business, including power-only, which you mentioned.

Speaker #3: But there's just been really strong execution on the premium project business. We had that in the first quarter. We developed trust with our customer.

Speaker #3: And that created additional wins in the second quarter. But it wasn't just the project business. We continued focusing on our revenue management efforts to address net revenue pressures, including leading into our spot opportunities.

Speaker #3: And so we had to address some out-of-market contract rates. And at this point, right now, we're about 60/40 contract versus I'm sorry, 60/40 spot versus contract.

Jim Filter: At this point, right now we're about 60/40 contract versus, I'm sorry, 60/40 spot versus contract. A year ago, and historically, we run at about 50/50. It's not just all of those commercial actions. There's some cost actions here. We've been working on developing AI, especially in this area. Those tech investments have resulted in our frontline productivity improving 17% year-over-year in Q2, which is also enabling great results here. It's really all the way through from commercial activity, how we're managing revenue management, and then how we're executing the loads.

Speaker #3: A year ago, and historically, we run at about 50/50. And it's not just all of those commercial actions—there are some cost actions here as well.

Speaker #3: We've been working on developing AI, especially in this area. And those tech investments have resulted in our frontline productivity improving 17% year over year in the second quarter, which is also enabling great results here.

Speaker #3: So it's really all the way through, from commercial activity, how we're managing revenue management, and then how we're executing the loads.

Jonathan Chappell: Got it. Just quickly, you specifically called out gains on equipment sales in both the Truckload and the Intermodal EBIT in the press release. It feels like those might have been a bit more outside the normal. Is there any way to quantify that, especially as it helps us kind of consider the two Q3, Q bridge?

Speaker #6: Got it. And then just quickly, you specifically called out gains on equipment sales in both the truckload and the intermodal EBIT in the press release.

Speaker #6: It feels like those might have been a bit more outside the normal. Is there any way to quantify that, especially as it helps us kind of consider the Q2 to Q3 bridge?

Speaker #2: Yep. So this is Darrell. So in the second quarter, we did see a bit more in terms of gain on sale. We did see pricing improvements in terms of those sales, and we did also sell more units.

Darrell Campbell: Yep. This is Darrell. In the Q2, we did see a bit more in terms of gain on sale. We did see pricing improvements in terms of those sales, and we did also sell more units. Nothing that's that material, but there's definitely a step up from the Q1 to the Q2. For the remainder of the year, we do expect some robustness in the market to remain as it relates to the price.

Speaker #2: Nothing that's that material, but there's definitely a step up from the first quarter to the second quarter. For the remainder of the year, we do expect some robustness in the market to remain as it relates to the price.

Jonathan Chappell: Got it. Thank you.

Speaker #6: Got it. Thank you.

Speaker #1: Your next question from the line of Bruce Chan with Steeple. Your line is open. Please go ahead.

Operator 3: Your next question from the line of Bruce Chan with Stifel. Your line is open. Please go ahead.

Operator: Your next question from the line of Bruce Chan with Stifel. Your line is open. Please go ahead.

Speaker #5: Yeah. Thanks. And good afternoon, everyone. Maybe just a question here on the intermodal revenue per order pressure. Jim, I think you talked about the mixed impact there, which makes a lot of sense with the local conversion.

Bruce Chan: Yeah, thanks. Good afternoon, everyone. Maybe just a question here on the Intermodal revenue per order pressure. Jim, I think you talked about the mix impact there, which makes a lot of sense with the local conversion. Wanted to maybe get a sense for what core yields look like there. I know you generally don't comment on what the number looks like by region. Just maybe directionally, how should we think about that yield trajectory on the shorter haul versus the longer haul lanes? Thank you.

Speaker #5: But I wanted to maybe get a sense for what core yields look like there and I know you generally don't comment on what the number looks like by region, but just maybe directionally, how should we think about that yield trajectory on the shorter haul versus the longer haul lanes?

Speaker #5: Thank you.

Speaker #3: Yeah, thanks, Bruce. And you're right, we don't comment on pricing by region here, but I can give you some color that I think will be helpful to help you think about this going forward.

Jim Filter: Yeah. Thanks, Bruce. You're right, we don't comment on pricing by region here. I can give you some color that I think will be helpful to help you think about this going forward. You're right. In Q2, the rate per order impacts were really just a matter of length of haul and mix because our contract renewals have been increasing each of the last 4 quarters. We had expected that Intermodal would lag Truckload. We are seeing tightness now in the drayage market. Really, we've been talking about this for quite a while, that the catalyst in the Intermodal to move price is that drayage market.

Speaker #3: So you're right. In the second quarter, the rate per order impacts were really just a matter of length of haul and mix, because our contract renewals have been increasing each of the last four quarters.

Speaker #3: And we had expected that intermodal would lag truckload, but we are seeing tightness now in the drayage market. And really, we've been talking about this for quite a while—that the catalyst in intermodal to move price is that drayage market.

Jim Filter: Our contract renewals were low single digits in Q2. Now we're trending towards mid single digits, which is what we really need to be able to invest in growing dray or utilizing third-party capacity, which is at a higher price point than company drivers. What we are focused on here is getting to a price point where we could start to accept more loads. As we're getting to that pricing that we're beginning to see, that's going to enable us to start growing, not just in the East and Mexico. Really throughout all of our markets.

Speaker #3: And so our contract renewals were low single digits in the second quarter, and now we're trending towards mid-single digits. Which is what we really need to be able to invest in growing dray or utilizing third-party capacity, which is at a higher price point than company drivers.

Speaker #3: And so what we were focused on here is getting to a price point where we could start to accept more loads. And as we're getting to that pricing that we're beginning to see, that's going to enable us to start growing not just in the east and Mexico, but really throughout all of our markets.

Bruce Chan: Great. Super helpful. Thank you.

Speaker #5: Great. Super helpful.

Speaker #3: Yeah. Great.

Jim Filter: Yeah. Great.

Speaker #1: Your next question comes from Ken Hoekster with Bank of America. Your line is open. Please go ahead.

Operator 3: Your next question comes from Ken Hoexter with Bank of America. Your line is open. Please go ahead.

Operator: Your next question comes from Ken Hoexter with Bank of America. Your line is open. Please go ahead.

Ken Hoexter: Great. Good afternoon, Jim and team and Darrell. Jim, congrats first of all on your first call leading here. We've also gotten the driver ads in Westchester, so it's clearly working. Looking at your guide and your outlook

Speaker #5: Great. Good afternoon, Jim and team. And Darrell, so Jim, congrats, first of all, on your first call leading here. We've also gotten the driver ads in Westchester.

Speaker #5: So it's clearly working. But looking at your guide and your outlook, yeah. My wife looks at me every time they come on the radio.

Jim Filter: Thanks, Ken.

Ken Hoexter: Yeah. My wife looks at me every time they come on the radio. Looking at your guide and your outlook, thoughts on progress, Darrell? I do not know if you can walk through. I know you do not do quarterly forecasting, but is Q2 the strongest? Is fuel going to aid more into Q3? I do not know if there is delay real time, if you want to talk about that. You threw out thoughts on driver pay. Is there anything we should think about cost coming into play? Just maybe give us some parameters as you raise the range. Thanks.

Speaker #5: So looking at your guide and your outlook, thoughts on progress, Darrell? I don't know if you want to if you can walk through. I know you don't do quarterly forecasting, but is Q2 the strongest?

Speaker #5: Is fuel going to aid more into Q3? I don't know if there's a delay, real-time, if you want to talk about that. You threw out thoughts on driver pay.

Speaker #5: Is there anything we should think about costs coming into play? So just maybe give us some parameters as you raise the range. Thanks.

Speaker #2: Yeah, sure. Thank you. You hit on a lot of the things that we're considering, but I think let's just start with framing the guide.

Darrell Campbell: Yeah, sure. I think you hit on a lot of the things that we are considering. I think, let us just start with framing the guide. We have said that the guide will assume that we have more supply attrition, right? We have said that in January. We have said that three months ago, and we are continuing to expect supply to exit the market. We have also talked about all the things that are within our control, including our cost savings initiatives, our productivity actions, our revenue management actions, and with two quarters behind us, we are seeing the signs of all of those efforts kind of come to fruition. We are also seeing driver capacity exiting faster than we initially thought, and year-over-year, all of our segments grew, which is remarkable. We are taking up the bottom end and the top end of our guidance based on all those facts.

Speaker #2: So, we've said that the guide will assume that we have more supply attrition, right? We said that in January. We said that three months ago.

Speaker #2: And we're continuing to expect supply to exit the market. We've also talked about all the things that are within our control, including our cost savings initiatives, our productivity actions, and our revenue management actions.

Speaker #2: And with two quarters behind us, we're seeing the signs of all of those efforts kind of come to fruition. We've also seen driver capacity exiting faster than we initially thought.

Speaker #2: And year over year, all of our segments grew, which is remarkable. We're taking up the bottom end and the top end of our guidance based on all those facts.

Speaker #2: But it's not only the year-over-year growth that we've seen. We've seen very, very strong sequential growth. So quarter over quarter from the first quarter to the second quarter, we saw a doubling of our earnings.

Darrell Campbell: It is not only the year-over-year growth that we have seen. We have seen very strong sequential growth. Quarter-over-quarter, from Q1 to Q2, we saw a doubling of our earnings, and that does not happen by accident, right? Those are all the things that are within our control with a little bit of help on the market. As we go into H2 of the year, we are bringing all that momentum that we have seen, not only as it relates to price. Logistics, for example, and network, those are the areas where most of the irrational capacity came in, and that is where we are seeing it come out the fastest. We are seeing the more ready impact in terms of pricing there.

Speaker #2: And that does not happen by accident, right? Those are all the things that are within our control with a little bit of help from the market.

Speaker #2: But as we go into the second half of the year, we're bringing all that momentum that we've seen, not only as it relates to price, but also logistics, for example, and network. Those are the areas where most of the irrational capacity came in.

Speaker #2: And that's where we're seeing it come out the fastest. So we're seeing the more immediate impact in terms of pricing there. But in areas such as Dedicated and Intermodal, which are more contract-based, we expect there to be a benefit in the second half as a result of all that.

Darrell Campbell: Areas such as Dedicated and Intermodal, which are more contract based, we expect there to be a benefit in H2 as a result of all that. Now, we have two quarters left in the year. We are thinking about things that are balancing that optimism, and I think you hit on some of them. As capacity has exited the market, which is good for price, there are certainly constraints on driver capacity, right? In terms of our scenarios, we are putting in scenarios as it relates to driver cost and availability, and we have talked about demand, right? Demand being a swing factor. We think that is particularly important as it relates to peak and what happens in Q4. Obviously, we have a lot of confidence that based on our preparedness, we are ready to execute if and when that freight becomes available.

Speaker #2: Now, we have two quarters left in the year, so we're thinking about things that are balancing that optimism, and I think you hit on some of them.

Speaker #2: So as capacity has exited the market, which is good for price, there are certainly constraints on driver capacity, right? So in terms of our scenarios, we're putting in scenarios as it relates to driver cost and availability.

Speaker #2: And we've talked about demand, right? Demand being a strong factor. We think that's particularly important as it relates to peak and what happens in the fourth quarter. But obviously, we have a lot of confidence that, based on our preparedness, we're ready to execute once, if and when that freight becomes available.

Speaker #2: Now, you asked the question as it relates to momentum and progress throughout the year. In my opening remarks, I talked about seasonality. So, our business has evolved over time.

Darrell Campbell: You asked a question as it relates to momentum and progress throughout the year. In my opening remarks, I talked about seasonality. Our business has evolved over time. We've made three very significant acquisitions over the last five years, and with that comes a shift in the portfolio. We talked about exposure to food and beverage end markets, home improvement end markets, and that's driving more seasonality into Q2 as opposed to Q3. We've seen that over the past several years, and that's something that we kind of expect to continue going forward. There's some other things that are unique in our guide going forward. There was a question on Logistics and the performance of our Logistics business relative to the market. We've been very focused on developing our areas of strength in terms of specialty project business.

Speaker #2: We've made three very significant acquisitions over the last five years. And with that comes a shift in the portfolio. So we talked about exposure to food and beverage and markets, home improvement and markets, and that's driving more seasonality into the second quarter as opposed to the third.

Speaker #2: We've seen that over the past several years. And that's something that we kind of continue expect to continue kind of going forward. There's some other things that are unique in our guide kind of going forward.

Speaker #2: There was a question on logistics and the performance of our logistics business relative to the market. We've been very focused on developing our areas of strength in terms of specialty project business.

Speaker #2: That came through in the first half of the year, very evident in the second quarter. We think that in the third quarter, even though we're going to have some project business, it's not going to be as pronounced as it was in the second quarter for logistics.

Darrell Campbell: That came through in H1 of the year, very evident in Q2. We think that in Q3, even though we're going to have some project business, it's not going to be as pronounced as it was in Q2 for Logistics. We did talk about the loss of the large Dedicated customer, which will also impact what Q3 looks like. All those things are in the mix in terms of how we develop a guide for the rest of the year.

Speaker #2: And then we did talk about the loss of the large, dedicated customer, which will also impact what the third quarter looks like. So all those things are in the mix.

Speaker #2: In terms of how we develop a guide for the rest of the year.

Ken Hoexter: Great. Very helpful. Thanks. Darrell, if I just follow up, you mentioned in the prepared remarks, moving trucks back and forth. I think it was from Dedicated to network, if I've got that right. Maybe can you talk scale, capacity, timeframe? I don't know, any kind of parameters you can put on that to see if we can scale that in our models. Thanks.

Speaker #5: Great. Very helpful, thanks. Darrell, if I could just follow up—you mentioned in the prepared remarks moving trucks back and forth. I think it was from Dedicated to Network, if I've got that right.

Speaker #5: And so maybe can you talk scale, capacity, timeframe, I don't know, any kind of parameters you can put on that to see if we can scale that in our models?

Speaker #5: Thanks.

Speaker #3: Yeah, yeah. So the way that we're thinking about that, Ken, is where we have the best market opportunities. And so that's the value of having this multimodal approach, is that we're able to move drivers from one opportunity to another.

Jim Filter: Yeah. The way that we're thinking about that, Ken, is where we have the best market opportunities. That's the value of having this multimodal approach, is that we're able to move drivers from one opportunity to another. It's not that I'm being evasive. We're going to take that opportunity as it plays out. Right now, what we're seeing with price in the market would suggest that there's just going to be more opportunities there in network that we might want to move some trucks over.

Speaker #3: And so it's not that I'm being evasive. We're just going to take that opportunity as it plays out. Right now, what we're seeing with price in the market suggests that there are just going to be more opportunities there, in network, that we might want to move some trucks over to.

Speaker #5: Understood. Thanks, Jim. Thanks, Darrell.

Ken Hoexter: Understood. Thanks, Jim. Thanks, Darrell.

Speaker #3: You bet. You bet.

Speaker #1: Your next question comes from the line of Brian Ossenbeck with JP Morgan. Your line is open. Please go ahead.

Operator 3: You bet.

Operator: You bet.

Operator 3: Your next question comes from the line of Brian Ossenbeck with J.P. Morgan. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Brian Ossenbeck with JPMorgan. Your line is open. Please go ahead.

Speaker #6: All right, thanks for taking the question. Hey Jim, I'll start with you. Can you just clarify the comment on the dray drivers? It sounded like you're getting to the point where maybe pricing is supportive enough to be able to expand capacity, or maybe fill in some of the gaps you might have in the network, or want to add to the network.

Brian Ossenbeck: All right. Thanks for taking the question. Hey, Jim, start with you. Can you just clarify the comment on the dray drivers? It sounded like you are getting to the point where maybe pricing is support enough to be able to expand capacity or maybe fill in some of the gaps you might have in the network or want to add to the network. Maybe you can clarify those comments for me. It also sounded like you are getting more out of cycle bids rather allocations in Intermodal, if I heard you correctly. If you can put some context around that, be helpful, like give absolute terms, how to compare it or maybe it is better compared to a prior cycle in terms of what strength or activity you are seeing there.

Speaker #6: So maybe you can clarify those comments for me. And then it also sounded like you're getting more out of bids out of cycle bids rather, allocations.

Speaker #6: And intermodal, if I heard you correctly. So you can put some context around that. It'd be helpful. Do you have absolute terms how to compare it?

Speaker #6: Or maybe it's better compared to a prior cycle in terms of what strength or activity you're seeing there?

Speaker #3: Yeah, thanks, Brian. So, just to start on our dray capacity and what we're seeing is we had opportunities to grow much faster if we had wanted to in the quarter.

Jim Filter: Thanks, Brian. Just to start on our dray capacity and what we're seeing is we had opportunities to grow much faster if we had wanted to in the quarter, but we remained disciplined and specifically because we want to look at some of the opportunities that were coming in, were non-committed freight that would have driven our network out of balance or required third-party capacity. Even though we would have moved more freight, it would not have been accretive. At the same time, we want to be able to take advantage of these opportunities. We're leaning in to grow our dray capacity. We've already had some success here. Most of that growth in our dray capacity occurred at the end of the quarter, and we're continuing to grow that capacity now that we're seeing some improvement in market rates.

Speaker #3: But we remain disciplined, specifically because we want to look at some of the opportunities that were coming in. These were non-committed freight opportunities that would have driven our network out of balance or required third-party capacity.

Speaker #3: And even though we would have moved more freight, it would not have been accretive. And so we're at the same time, we want to be able to take advantage of these opportunities.

Speaker #3: And so we're leaning into grow our Dray capacity. And we've already had some success here. But most of that growth in our Dray capacity occurred at the end of the quarter.

Speaker #3: And we're continuing to grow that capacity now that we're seeing some improvement in market rates. And that's the second part is going back to customers and because they understand they need to be able to fund our ability to grow capacity or to be able to use third-party capacity.

Jim Filter: That's the second part is going back to customers, because they understand they need to be able to fund our ability to grow capacity or to be able to use third-party capacity. We're seeing both of those take place right now. It gives us some confidence that we can continue to grow from there. You're right, customers, when they're seeing some turndown activities, they're willing to sit down and have some discussions, and that's where we're seeing some out-of-cycle activity.

Speaker #3: And so we're seeing both of those take place right now. It gives us some confidence that we can continue to grow from there. And you're right.

Speaker #3: Customers, when they're seeing some turndown activities, they're willing to sit down and have some discussions. And that's where we're seeing some out-of-cycle activity.

Brian Ossenbeck: Understood. As a quick follow-up to comments on the B-1 and the cabotage, it seems like there's some pretty significant activity. Have you seen that translate to any sort of opportunity in your network? Thanks.

Speaker #6: Understood. Here's a quick follow-up. The comments on the B1 and the cabotage seem like there's some pretty significant activity. Have you seen that translate to any sort of opportunity in your network?

Speaker #6: Thanks.

Jim Filter: Yeah, absolutely. Brian, as we think about what's going on with capacity, let me just take a step back before I jump into just specifically cabotage, that this has been a matter of public safety. If you go back to since 2016, the number of trucks involved in injury crashes has increased 18%. At the same time, companies like Schneider have been investing in safety and reducing accident frequency, yet crashes are growing because not all companies are following these existing regulations. You mentioned cabotage, and we're starting to see some impact there. You can see it on specific lanes because we've all seen the data that there's approximately 30,000 drivers whose visas were revoked, not enabling them to even cross the border and commit cabotage. That has an impact. Same thing with a number of other activities.

Speaker #3: Yeah, absolutely. Brian, as we think about what's going on with capacity—if we just take a step back before I jump into specifically cabotage—this has been a matter of public safety.

Speaker #3: And if you go back to since 2016, the number of trucks involved in injury crashes has increased 18%. At the same time, companies like Schneider have been investing in safety and reducing accident frequency.

Speaker #3: Yet crashes are growing because not all companies are following these existing regulations. And you mentioned cabotage, and we're starting to see some impact there.

Speaker #3: And you can see it on specific lanes because we've all seen the data that there's approximately 30,000 drivers whose visas were revoked, not enabling them to even cross the border and commit cabotage.

Speaker #3: That has an impact. And same thing with a number of other activities. Non-domicile drivers, the entry-level driver training is starting to be impacted. At the same time, we'd say all these factors that are going on, and while cabotage was much faster than we expected, non-CDL drivers was much faster than we expected.

Jim Filter: Non-domiciled drivers, the entry-level driver training is starting to be impacted. At the same time, we'd say all these factors that are going on, while cabotage was much faster than we expected, non-CDL drivers was much faster than we expected. There's still about half of the capacity we're expecting to leave hasn't been impacted yet. We know that capacity is exited because even that real modest increase in seasonal demand triggered a market correction here in the quarter. When we look forward, we know that there's still about a third of non-domiciled drivers remaining that we would expect to be removed. The first two-thirds came up faster than we anticipated. If Dalilah's Law is enacted, we could see that capacity exit abruptly. Now we have the end of the broker preemption. That may remove some carriers with unsatisfactory conditional ratings.

Speaker #3: There's still about half of the capacity we're expecting to leave hasn't been impacted yet. And we know that capacity is excellent because even that real modest increase in seasonal demand triggered a market correction here in the quarter.

Speaker #3: And so when we look forward, we know that there's still about a third of the non-domicile drivers remaining that we would expect to be removed.

Speaker #3: The first two-thirds came up faster than we anticipated. But if Delilah's Law is enacted, we could see that capacity exit abruptly. And now we have the end of the broker preemption.

Speaker #3: That may remove some carriers with unsatisfactory or conditional ratings. That's a few percent of capacity. And then ELD enforcement is another action that I'd say is largely in front of us.

Jim Filter: That's a few percent of capacity. ELD enforcement is another action that I'd say is largely in front of us. It's also the one that I believe would have the biggest impact on public safety, because there's a lot of ELDs out there that were improperly certified. With those, tampering is a feature, not a bug, and they're using offshore back office staffs that enable and coerce drivers to exceed the 11-hour rules. The current highway bills is seeking to address that as well. When you take not just what's behind us, but what's in front of us, it's going to be a dramatic change, and this also changed the top of the funnel. It's structurally different than what it was in the past.

Speaker #3: And it's also the one that I believe would have the biggest impact on public safety because there's a lot of ELDs out there that were improperly certified.

Speaker #3: And with those, tampering is a feature, not a bug. They're using offshore back-office staffs that enable and coerce drivers to exceed the 11-hour rules.

Speaker #3: And so the current highway bills are seeking to address that as well. And so when you take not just what's behind us, but what's in front of us, it's going to be a dramatic change.

Speaker #3: And this also changed the top of the funnel, and so it's structurally different than what it was in the past. So, capacity won't grow as fast as it did after the pandemic.

Jim Filter: Capacity won't grow as fast as it did after the pandemic, and that's why this recovery could last longer than other recoveries.

Speaker #3: And that's why this recovery could last longer than other recoveries.

Brian Ossenbeck: All right. Thanks, Jim. Appreciate the perspectives.

Speaker #6: All right. Thanks, Tim. I appreciate the perspectives.

Jim Filter: You bet. Thanks, Brian.

Speaker #3: You bet. Thanks, Brian.

Operator 3: Your next question comes from the line of Tom Wadewitz with UBS. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Tom Wadewitz with UBS. Your line is open. Please go ahead.

Speaker #1: Your next question. Comes from the line of Tom Wadewitz with UBS. Your line is open. Please go ahead.

Speaker #7: Oh, yeah. Good afternoon. You had pretty strong growth in revenue per truck per week in network. I'm just wondering how do you think how big a move can you see in 3Q?

Tom Wadewitz: Yeah, good afternoon. You had pretty strong growth in revenue per truck per week in network. I'm just wondering, how big a move can you see in Q3? I mean, you already saw a good move, but I would assume you didn't get everything repriced, and so there's more to go. Just maybe a high-level thought how much further gain we could see revenue per truck per week in Q3 in network. And then in Dedicated, I know obviously it's a different business with multi-year contract, but how might we think about the relationship across the cycle? If network rates were to go up 15% to 20% across 2 years, pretty strong cycle. Would that translate to half of that gain in Dedicated?

Speaker #7: Or did you kind of—I mean, you already saw a good move, but I would assume you didn't get everything repriced, and so there's more to go.

Speaker #7: So just maybe a high-level thought, how much further gain we could see revenue per truck per week in 3Q in network? And then in dedicated, I know obviously it's a different business with multi-year contract, but how might we think about the relationship across the cycle?

Speaker #7: So if network rates were to go up 15, 20 percent across two years—a pretty strong cycle—would that translate to kind of half of that gain in Dedicated?

Speaker #7: Or how would you think, maybe, about that relationship, just so we can kind of contemplate what to put in the model as you look out and dedicate?

Tom Wadewitz: How would you think maybe about that relationship, just so we can contemplate what to put in the model as you look out in Dedicated? Thank you.

Speaker #7: Thank you.

Speaker #3: Yeah. Thanks, Tom, for those questions. So let me just start with network revenue per truck per week. 16% growth year over year. Really strong performance.

Jim Filter: Thanks, Tom, for those questions. Let me just start with the network revenue per truck per week. The 16% growth year over year, really strong performance, that's why network has just always been a part of our multimodal approach. Even though we weren't pleased of the performance during the down cycle, we didn't sit around during the downturn and wait for the market improvement. Our improvements were primarily on productivity and cost, those were all being masked by price. Now that price is starting to move, I think it's just more apparent of what we've been working on. Now that we're getting priced, we're just ready more than ever to take advantage of the cycle shift, and you're starting to see that in Q2. Let me just talk about some of those factors here.

Speaker #3: And that's why network has just always been a part of our multimodal approach. Even though we weren't pleased with the performance during the down cycle, we didn't sit around during the downturn and wait for market improvement.

Speaker #3: But our improvements were primarily on productivity and cost, and those were all being masked by price. Now that price is starting to move, I think it's just more apparent what we've been working on.

Speaker #3: And so now that we're getting priced, we're just more ready than ever to take advantage of the cycle shift. And you're starting to see that in the second quarter.

Speaker #3: So let me just talk about some of those factors here. We don't get priced just through allocation events; we're seeing that through elevated spot exposure, mini bids, freight acceptance, and that's why we're already seeing high single-digit price improvement hit this business.

Jim Filter: We don't get priced just through allocation events. We're seeing that through elevated spot exposure, many bids, freight acceptance, that's why we're already seeing high single-digit price improvement hit this business. Also productivity is also a high single-digit improvement. That's being driven by a combination of asset efficiency, removing unseated tractors, higher driver utilization from both freight selection and optimization. The cost reductions that we've been talking about across this entire enterprise for multiple years, this is the first time that you're able to look at a business and say, "I can see that coming through the business." We're always optimizing for earnings and in tougher markets, you just have more leverage with productivity and cost. Now as the market turns, we have opportunities across not just productivity and cost, but also price.

Speaker #3: But also productivity is also a high single-digit improvement. And that's being driven by a combination of asset efficiency, removing unseeded tractors, and then higher driver utilization from both freight selection and then optimization.

Speaker #3: And so, the cost reductions that we've been talking about across this entire enterprise for multiple years—this is the first time that you're able to look at a business and say, "Oh, I can see that coming through the business." And so, we're always optimizing for earnings.

Speaker #3: And tougher markets, you just have more leverage with productivity and cost. And now as the market turns, we have opportunities across not just productivity and cost, but also price.

Speaker #3: And that's where that leverage is starting to come through. In terms of price between network and dedicated, and it's a little bit difficult. There isn't necessarily a number you can map to to be able to say, "Well, this is going to change during this cycle because I think it would have been different." We're going to be focused on having margins in dedicated that are going to be resilient.

Jim Filter: That's where that leverage is starting to come through. In terms of price between network and Dedicated, it's a little bit difficult. There isn't necessarily a number you can map to be able to say, "Well, this is going to change during this cycle," because I think it would have been different. We're going to be focused on having margins in Dedicated that are going to be resilient. You sign a contract for multiple years, we're looking to look for a price that's going to be fair for both sides and be durable. That is the plan now. I'd say over the last couple of years, especially you got later into the cycle, there was a little bit of pressure on Dedicated and some of those contracts are the ones that needed to be renewed. Thanks, Tom.

Speaker #3: You sign a contract for multiple years. And we're looking to look for a price that's going to be fair for both sides. And be durable.

Speaker #3: And so that is the plan now, I'd say, over the last couple of years, especially you got later into the cycle. There was a little bit of pressure on dedicated.

Speaker #3: And some of those contracts are the ones that needed to be renewed. Thanks, Tom.

Tom Wadewitz: Maybe just on timing, when do you think we'll start to see the strength in revenue per truck effectively in price show up? Does that start to show up in 3Q or there's a little longer lag on it?

Speaker #7: So, I mean, maybe just on timing: when do you think we'll start to see the strength in revenue per truck—effectively in price—show up?

Speaker #7: Does that start to show up in Q3, or is there a little longer lag on it?

Speaker #3: Yeah, I think in Dedicated, we're expecting that we should start seeing improvement in revenue per truck per week in Dedicated immediately, here already in the third quarter.

Jim Filter: Yeah, I think in Dedicated, we're expecting that we should start seeing improvement in revenue per truck per week in Dedicated immediately here already in Q3.

Speaker #7: Yeah. Okay. Thank you.

Tom Wadewitz: Yeah. Okay. Thank you.

Jim Filter: Yeah. All right. Thanks, Tom.

Speaker #3: All right. Thanks, Tom.

Speaker #1: Your next question comes from the line of Chris Wetherby with Wells Fargo. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open. Please go ahead.

Speaker #5: Yeah, hey, thanks. Good afternoon, guys. So, Darrell, I guess just to be a little bit more direct, you said a lot about the third quarter and the difference between Q3 and Q2 seasonality.

Chris Wetherbee: Yeah, hey. Thanks. Good afternoon, guys. Darrell, I guess just maybe to be a little bit more direct, you said a lot about Q3 and the difference between Q3 and Q2 seasonality. I guess I'm just a little confused. I want to make sure I understand. Can Q3 earnings or however you want to sort of measure the profitability of the business be higher than Q2 or should we assume that Q2 is higher than Q3?

Speaker #5: I guess I'm just a little confused. I want to make sure I understand. Can Q3 earnings, or however you want to sort of measure the profitability of the business, be higher than Q2?

Speaker #5: Or should we assume that Q2 is higher than Q3?

Speaker #6: Yeah, good question, and I guess that's unsurprising. So we tried to give a little bit more color to clarify. We don't guide by quarter, but just trying to be helpful.

Darrell Campbell: Yeah. Good question and I guess unsurprising. We tried to give a little bit more color to clarify. We don't guide by quarter, but just trying to be helpful. I think the seasonality point was just to kind of underpin some of the thoughts that we've seen. If you just look at history over the last 5 years, and kind of how our seasonality has shifted, just wanted to make the point that given the transformation of our business, typically in the recent past, more seasonality has shifted into Q2. We also talked about just the dynamic of the Logistics specialty project business and the loss of the Dedicated customer. With all that said, where I did lead off is that we're seeing a lot of momentum going into H2.

Speaker #6: So I think the seasonality point was just to kind of underpin some of the thoughts that we've seen. So if you just look at history, over the last five years, and kind of how our seasonality has shifted, I just wanted to make the point that given the transformation of our business, typically in the recent past, more seasonality has shifted into the second quarter.

Speaker #6: We also talked about just the dynamic of the logistics specialty project business and the loss of the dedicated customer. I mean, with all that said, where I did lead off is that we're seeing a lot of momentum going into the second half of the year.

Darrell Campbell: All the things that I mentioned as it relates to capacity exiting the market and the impact on price, you've seen what price and productivity together can do, just even in network as an example. We do expect that that momentum carries forward. Jim mentioned the gap between contract and spot. We do believe that not only in network and Logistics, but also in Dedicated and in motor, we are going to get the benefit of price, and that's also going to come through in H2, right? It's not as if we don't think that there's improvement. Actually, at every point in our guide, if you look on a year-over-year basis, we do expect to see improvement in our segments.

Speaker #6: So all the things that I mentioned as it relates to capacity exit in the market and the impact on price, you've seen what price and productivity together can do just even in network as an example.

Speaker #6: So we do expect that that momentum carries forward. And then Jim mentioned the gap between contract and spot. We do believe that not only in network and logistics, but also in dedicated and intermodal, we are going to get the benefit of price.

Speaker #6: And that's also going to come through in the second half, right? So it's not as if we don't think that there's improvement. Actually, at every point in our guide, if you look on a year-over-year basis, we do expect to see improvement in our segments.

Speaker #5: Okay. Okay. Appreciate the clarification there. And then maybe just a bigger picture one here is we're thinking about some of the dynamics going on with drivers and in particular, what's happening here in a post-Montgomery world around the brokerage businesses.

Chris Wetherbee: Okay. Appreciate the clarification there. Maybe just a bigger picture one here as we're thinking about some of the dynamics going on with drivers and in particular, what's happening here in a post Montgomery world around the Brokerage businesses. I guess, can you maybe sort of refresh us on how you guys think about carrier vetting? Have you made any changes post Montgomery? The way you think about it probably going to be maybe on the higher tier of carrier vetting discipline in the industry. Just want to get a sense of some thoughts around that and how it might impact available capacity and how you see sort of the potential opportunity for you in Logistics going forward.

Speaker #5: I guess, can you maybe sort of refresh us on how you guys think about carrier vetting? Have you made any changes post-Montgomery to the way you think about it?

Speaker #5: It's probably going to be on the higher tier of carrier vetting discipline in the industry, but I just want to get a sense of some thoughts around that and how it might impact available capacity—and how you see the potential opportunity for you in logistics going forward.

Speaker #3: Yeah. Yeah. Thanks, Chris here. I'll start by talking about the capacity impacts, and I'll dive in a little bit into our brokerage business. And you're right.

Jim Filter: Yeah. Thanks. Chris here. I'll start by talking about the capacity impacts, then I'll dive in a little bit into our Brokerage business. You're right. I think it's likely to further constrain capacity from a couple aspects. First, there's many brokers that are likely to avoid carriers that have conditional or unsatisfactory ratings from the FMCSA. That's probably a few percentage of the market. While the drivers might go to work for another carrier, it's likely that they're going to be held to a higher safety standard. Even transfers to a new company potentially reduces capacity. Then, you have brokers like Schneider that have some standards that go beyond a carrier safety rating. Within Schneider, we only qualify approximately 60% of the carriers that apply. Now, don't interpret that as 40% of the carriers on the road are unsafe.

Speaker #3: I think it's likely to further constrain capacity from a couple of aspects. First, there are many brokers that are likely to avoid carriers that have conditional or unsatisfactory ratings from the FMCSA.

Speaker #3: That's probably a few percent of the market. And while the drivers might go to work for another carrier, it's likely that they're going to be held to a higher safety standard.

Speaker #3: So even transfers to a new company potentially reduce capacity. And then you have brokers like Schneider that have some standards that go beyond a carrier safety rating.

Speaker #3: And within Schneider, we only qualify approximately 60% of the carriers that apply. Now, don't interpret that as 40% of the carriers on the road are unsafe.

Speaker #3: Some of these carriers are chameleon carriers, so we might disqualify them many times. And there are also carriers that are safe, but lack enough time in the industry to meet our standards.

Jim Filter: Some of these carriers are chameleon carriers, so we might disqualify them many times, and there are also carriers that are safe but lack enough time in the industry to meet our standards. I also believe this creates an opportunity for our Logistics segment. We're already seeing some shippers that are pivoting away from the small or medium-sized brokers, and there are some shippers that require minimum insurance levels that are well out of reach for most pure-play brokers, and even for some small asset-based companies. Our position, the standards that we put in, we implemented these several years ago, we've moved our carrier count from 60,000 to less than 14,000 carriers. We did that primarily under the bane of improving cargo security, but many of the filters that we applied to cargo security also apply to safety.

Speaker #3: ...opportunity for our Logistics segment. We're already seeing some shippers that are pivoting away from the smaller, medium-sized brokers. And there are some shippers that require minimum insurance levels that are well out of reach for most pure-play brokers.

Speaker #3: And even for some small asset-based companies. And so, our position, the standards that we put in—we implemented these several years ago. And we've moved our carrier count from 60,000 to less than 14,000 carriers.

Speaker #3: And we did that primarily under the banner of improving cargo security, but many of the filters that we apply to cargo security also apply to safety.

Speaker #3: And so overall, I think this is an opportunity for Schneider. But I also believe that litigation is a risk to supply chains. We're investing heavily in safety, training, technology, compliance.

Jim Filter: Overall, I think this is an opportunity for Schneider, but I also believe that litigation is a risk to supply chains. We're investing heavily in safety, training, technology, compliance, and it's resulting in reducing accident frequency, but accidents still happen. We believe that companies that do the right thing should be held accountable based on the facts and not exposed to disproportionate outcomes driven by the current litigation environment. That's why we believe tort reform is really important, not to avoid responsibility, but to ensure that the outcomes are fair, they're predictable, and aligned with actual conduct. Believe that this is a big impact to the overall industry.

Speaker #3: And it's resulting in reducing accident frequency. But accidents still happen. And we believe that companies that do the right thing should be held accountable based on the facts and not exposed to disproportionate outcomes driven by the current litigation environment.

Speaker #3: And that's why we believe tort reform is really important, not to avoid responsibility, but to ensure that the outcomes are fair, they're predictable, and aligned with actual conduct.

Speaker #3: And so I believe that this is a big impact to the overall industry.

Speaker #5: Helpful perspective. Appreciate it. Thank you.

Chris Wetherbee: Helpful perspective. Appreciate it. Thank you.

Jim Filter: Beth, thank you.

Speaker #3: Yeah. Thank you.

Speaker #1: Your next question comes from the line of Scott Group with Wolf Research. Your line is open. Please go ahead.

Operator 3: Your next question comes from the line of Scott Group with Wolfe Research. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Scott Group with Wolfe Research. Your line is open. Please go ahead.

Scott Group: Hey, thanks. Two questions. We're at the hour, I'll just lump it into one. You talked about, Jim, the trifecta for Intermodal conversion. Volumes were flat in the quarter. Where you think the growth goes?

Speaker #7: Hey, thanks. Two questions worth the hour, so I'll just lump it into one. You talked about, Jim, the trifecta for intermodal conversion. Volumes were flat in the quarter—where do you think the growth goes?

Speaker #7: And then Darrell, there's been a lot of talk about the seasonality of the mix of the business, like Q2, Q3, Q4. Maybe more importantly, does the mixing, the changing mix of the business, change ultimately where the annual margins can go?

Scott Group: Darrell, there's been a lot of talk about the seasonality of the mix of the business, like Q2, Q3. Maybe more importantly, does the changing mix of the business change ultimately where the annual margins can go? Meaning if this was an 85, 86 OR last cycle, does that change because you have more Dedicated or more food and beverage, or does that not change it? Is this just a seasonal shift within quarters?

Speaker #7: Meaning if this was an 85, 86 OR last cycle, does that change? Because you have more dedicated or more food and beverage or does that not change?

Speaker #7: Is this just a seasonal shift within quarters?

Speaker #3: Yeah, Scott. I'll start, and then Darrell will jump in on the long-term margin questions here. So, first of all, on intermodal volumes, I think I talked a little bit about this earlier.

Jim Filter: Scott, I'll start, and then Darrell will jump in on the long-term margin questions here. First of all, on Intermodal volumes, I think I talked a little bit about this earlier. We could have grown double-digits if we wanted to, but we wouldn't have made any more money. That's why we're a little bit more discerning about which orders we're accepting. You're able to do that when you've grown nine consecutive quarters, and we've had some really big growth in certain areas that we said, we don't have to go out there and take every single opportunity. Now that we are starting to grow that dray capacity, we're getting price that will enable us to use some third-party in certain areas. We set up our peak season programs with shippers very early on because we're seeing those opportunities as well.

Speaker #3: We could have grown double digits if we wanted to, but we wouldn't have made any more money. And so that's why we're a little bit more discerning about what orders we're accepting.

Speaker #3: And you're able to do that when you've grown nine consecutive quarters, and we've had some really big growth in certain areas. And we said we don't have to go out there and take every single opportunity.

Speaker #3: And so now that we are starting to grow that dray capacity, we're getting priced that will enable us to use some third-party in certain area.

Speaker #3: We set up our peak season programs with shippers very early on because we're seeing those opportunities as well. That enables us to use third party a little bit more today.

Jim Filter: That enables us to use third-party a little bit more today. We expect that there's opportunities to start growing really in high single-digits. Darrell?

Speaker #3: So, we expect that there are opportunities to start growing, really, in high single digits.

Speaker #7: Yes. This is Darrell. The seasonality commentary was really just to frame the guide, right? It doesn't change anything in terms of how we think about our business in the long term.

Darrell Campbell: This is Darrell. The seasonality commentary was really just to frame the guide, right? It doesn't change anything that we think about our business in the long term. Actually, the actions that we've taken have been purposeful. We purposely targeted the three targets that we acquired over the last few years. We knew what came with that, and we welcomed what came with that. We've been taking actions to structurally improve the business during the downturn, right? We've not been wasting time. The Dedicated portfolio, our Truckload is more Dedicated-skewed. Jim talked about our differentiation in Intermodal. In Network and Logistics, we've invested in being scalable and flexible. We've been investing in technology. All of those things make us stronger today as we're coming out of the downturn, and we're already seeing that, right?

Speaker #7: And actually, the actions that we've taken have been purposeful. So, we purposely targeted the three targets that we acquired over the last few years.

Speaker #7: And we knew what came with that, and we welcomed what came with that. So we've been taking actions to structurally improve the business during the downturn, right?

Speaker #7: We've not been wasting time. The dedicated portfolio—our truckload is more dedicated, skewed. Jim talked about our differentiation in a modal, in network, and logistics.

Speaker #7: We've invested in being scalable and flexible. We've been investing in technology to all of those things, make us stronger today as we're coming out of the downturn.

Speaker #7: And we're already seeing that, right? So, if you just look at our year-over-year improvement, you look at our sequential improvement in earnings, it's all a result of all the things that we've done. But when we think about our long-term margin targets—Truckload 12 to 16 percent, Intermodal 10 to 14 percent, Logistics 3 to 5 percent—those are meant to be in normal market conditions, right?

Darrell Campbell: If you just look at our year-over-year improvement, you look at our sequential improvement in earnings, it's all a result of all the things that we've done. When we think about our long-term margin targets, Truckload 12% to 16%, Intermodal 10% to 14%, Logistics 3% to 5%, those are meant to be in normal market conditions, right? We think everybody would acknowledge, Scott, that we have not been in a normal situation. As capacity has exited, we're seeing the benefit, and we're seeing it initially in those segments of our business that were most impacted. We expect to see improvement across the board, including in our contract rated businesses. The pricing improvement that we saw in Logistics and Network, I think that's just the beginning. Jim talked about where we are in terms of all the capacity actions that are being taken.

Speaker #7: So we think everybody would acknowledge, Scott, that we have not been in a normal situation. So as capacity, as exited, we're seeing the benefit and we're seeing it initially in those segments of our business that we're most impacted.

Speaker #7: But we expect to see improvement across the board, including in our contract-rated businesses. So the pricing improvement that we saw in Logistics and Network—I think that's just the beginning.

Speaker #7: Jim talked about where we are in terms of all the capacity actions that are being taken. So, when we sit here today at the end of the second quarter, truckload margin is already at 80%.

Darrell Campbell: When we sit here today at the end of Q2, Truckload margin is already at 80%. Intermodal is at 7%. Logistics is already within our long-term ranges. We have line of sight to get to our longer-term margin ranges. The evidence of all the actions that we've taken prove that.

Speaker #7: Intermodal is at 7%. Logistics is already within our long-term ranges. So we have line of sight to get to our longer-term margin ranges. And the evidence of all the actions that we've taken prove that.

Speaker #7: All right. Thank you.

Scott Group: All right. Thank you.

Speaker #3: Thank you, Scott. All right. We appreciate everybody joining the call today. Have a great day.

Jim Filter: Thank you, Scott. All right. We appreciate everybody joining the call today. Have a great day.

Operator 3: This concludes today's call. Thank you for attending. You may now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Speaker #1: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 1: This event has now concluded. Access the Schneider National Incorporated IR website for more information. This line will now disconnect.

Operator: This event has now concluded. Access the Schneider National Incorporated IR website for more information. This line will now disconnect.

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