Schneider National, Inc.

Greetings and welcome to Schneider Fourth Quarter's 2020 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Bendis, Director of Investor Relations for Schneider. Thank you. You may begin.

Thank you, Operator, and good morning, everyone. Joining me on the call today are Mark Roark, President and Chief Executive Officer, and Steve Bruffet, Executive Vice President and Chief Financial Officer. Earlier today, the company issued an earnings press release, which is available on the investor relations section of our website at Schneider.com. Our call will include remarks about future expectations, forecasts, plans, and prospects for Schneider, which constitute forward-looking statements for the purposes of the safe harbor provisions under applicable federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties discussed in our SEC filings, including but not limited to our most recent Form 10-K and those risks identified in today's earnings release. All forward-looking statements are made as of the date of this call and Schneider disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, a reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release, which includes reconciliations to the most directly comparable GAAP measures. Now I'd like to turn the call over to our CEO, Mark Roark. Mark?

Thank you, Stephen. Hello, everyone, and thank you for joining the Schneider call today. I'll open with commentary on operating segment results for the fourth quarter and then offer company context for 2021 expectations. But before we get to your questions, I'm going to ask Steve Ruffett to provide some additional insight in the overall enterprise results and then affirm our full year 2021 net capex and earnings per share guidance. The most recently completed quarter, I think, has provided an ideal backdrop for us to leverage the power of our portfolio of services to not only optimize our base volume commitments, but dynamically capture an increasing share of the dislocated freight needs of our shipper community. I think that was best and especially evident in our truck brokerage revenue growth of over 60% year over year. In our truckload network configuration, certainly influenced by the pandemic, we've experienced a meaningful shift in our capacity mix that we deploy in the market daily. Two trends that we don't consider permanent or structural have occurred. The first is a year-over-year drop in the number of non-family team drivers, and teams is our highest utilization capacity type. And the second short-term trend is an increase in owner-operators securing their own operating authority, to pursue the elevated spot market directly. Teams owner-operators run predominantly in our longer length of haul national network versus our now heavier mix of solo company drivers who are operating in the shorter length of haul regional configurations, which our company drivers in general prefer due to the more predictable work and time at home schedules. Our brokerage business, though, did benefit from this mix change as we served an increasing share of the longer length of haul or inter-regional lanes, including team service with third-party carriers. A further accelerant to that success is third-party carriers gaining access to Schneider's nationwide trailer pools through power-only movements. Integrating this power rolling capability into our network truckload offering allows us to serve trailer pull shippers more broadly in both contract and spot configurations, increasing brokerages' top and bottom line performance. All in in the quarter, logistics delivered top line revenue performance of $374 million and earnings contribution in the quarter of over $21 million. Both of those are records. Revenue per truck per week in the truck load network was up a modest 1% year over year as the utilization impacts of the capacity mix change offset the nearly double-digit increase in rate per mile year over year. Sequentially, truck load network improved revenue per truck per week by 12%, with most of that improvement in price. On the driver capacity front, we continue to be encouraged by our improved company driver retention levels across our various driving platforms. And we celebrated our drivers' professionalism and resiliency managing through the pandemic with an additional COVID-inspired performance bonus program on miles and work activity in the months of November and December. And it was well-earned and well-received. Additionally, we took steps in the quarter to bolster our value proposition with our fleet through targeted wage increases. In our network business, we re-rated over 40% of the book in the fourth quarter alone, and we want to thank our shipper community for supporting company driver wage increases. Truck load margins improved 390 basis points sequentially. An important milestone for us in the fourth quarter was our freight power launch, which enables a full digital connection experience for third-party carriers. The freight power technical capability is important for us for really two primary reasons. The first is that our carrier base is underrepresented in the largest portion of the third-party carrier market, the microcarrier, and we define that as having between one and five trucks. We estimate this segment makes up nearly 85% of motor carriers. Our Quest carrier portal-driven technology is best suited to serve the midsize carrier and interacts at the desktop level with carriers, company dispatch, or customer service personnel. The addition of freight power mobility allows us to economically reach this long-tail microcarrier, the one-truck operator, and in combination with our power-only solution, gives us and them an access for a new vehicle for growth. The second important attribute of freight power is it allows us to grow our revenues and order volumes with minimal headcount growth, even in a highly constrained capacity market, by automating elements of the sell portion of the transactions. In Q1 of this year, we will launch Freight Power's digital connection for shippers, easing the quote, book, and track process elements targeting the small shipper community. And in the back half of 2021, and perhaps into 2022, we will intend to connect Freight Power's digital carrier and shipper interfaces with Mastery's Mastermind freight platform. Let's transition a bit here to intermodal. Order volumes increased 3% year-over-year, overcoming, to a degree, the network-wide congestion and rail reliability performance issues that we experienced in the quarter. The intermodal team executed well within the environment as the month of December set a monthly record for orders by growing 10% over December of last year. And in the quarter, we covered more loads with less boxes, driving a 7% improvement in box turns. The substandard rail performance did result in meaningful amount of missed market opportunities. We bore extra costs to adjust to the issues to serve our customers, namely in the third-party drayage usage rates and ramp storage expenses. In the end, our intermodal margin performance was flat sequentially with the third quarter at 9.2%. Our focus in 2021 is profitable growth and market share gains in dedicated contract configurations and truckloads growth and intermodal, and brokerage, including power-only solutions. Our capital allocation will be consistent with that organic growth strategy. We expect the supply and demand balance to remain favorable for 2021, supporting a pricing environment that expands margins across our asset-heavy and asset-light segments, recognizing we're going into an increasingly inflationary driver wage marketplace. Let me stop there and turn it over to Steve and for additional insight into our numbers, and I look forward with our guidance update.