Schneider National, Inc.

Greetings and welcome to Schneider's first quarter 2021 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. It is now my pleasure to introduce your host, Steve Bendis, Director of Investor Relations. Thank you. You may begin.

Thank you, operator. And good morning, everyone. Joining me on the call today are Mark Rourke, 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, trends, 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 material 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 identified in today's earnings press 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 press release, which includes reconciliations to the most directly comparable GAAP measures. Now I'd like to turn the call over to our CEO, Mark Rourke. Mark? Thank you, Steve.

Hello, everyone, and thank you for joining the Schneider call today. I will open with company context for 2021 trends and expectations and with commentary on our segment results for the first quarter. Before we get to your questions, Steve Bruffett will provide some additional insight on our updated full-year 2021 earnings per share guidance, affirm CapEx range expectations, and close out on some brief overall enterprise result commentary. First of all, the freight market catalysts that were evident in the second half of 2020, in our view, have only intensified in early 2021. And as a result, we expect a constrained capacity supply and excess freight demand condition to persist at least through the remainder of the year. The freight market catalysts of supply chain bottlenecks, particularly those involving internationally sourced freight flows, healthy consumer spending, fresh government stimulus, record low sales to inventory levels, and especially a heavily constrained professional driver market provide optimism for the current upcycle continuing. We see this market condition further accelerating a full load industry consolidation toward companies that efficiently capture and aggregate freight and capacity across multiple modes of transportation. Our growth strategy of scaled offerings, and mode mix across our truckload intermodal logistics segments is anchored on that trend, and by addressing the varying needs of the large, medium, and increasingly now, the micro shipper and carrier communities. Each of our segments offers varying degrees of asset and capital intensity, margin return profiles, and professional driver requirements. truckload being the most Schneider driver and asset centric, with the logistics requiring minimal Schneider driver and capital assets, and intermodal falling in between the two ends of the asset intensity spectrum. We believe this aggregation execution capability will demonstrate increasing value for our shareholders. Let's start with how the strategy played out in the first quarter. The overall contract and spot pricing environment are running slightly ahead of our original expectations. On the contract front, we are solidly into the low to mid-double digit percentage range territory with renewals in our truckload network business and high single digit percentages in intermodal. We would expect intermodal to climb further by the end of the second quarter renewals. We finished the first quarter with slightly less than 40% of our book renewed in both the truckload and intermodal network segments. Also running ahead of our expectations are the cost impacts of the professional driver condition. We grew driver counts year over year and sequentially in the company driver positions that possess the most desirable driver configuration, specifically in dedicated and intermodal dray. Irregular route network is the most challenging due to the combination of less predictable daily schedules, and the opportunity to transfer into, for many, the more desirable, dedicated, and intermodal growth opportunities, which we enthusiastically support as a driver satisfier and retention differentiator for Schneider. The net impact of the strong pricing environment, segment business mix implications, in contrast to the heightened inflationary cost realities, is reflected in our increased earnings per share guidance that Steve will cover here momentarily. As it relates to the business mix, again in the first quarter, the logistics segment delivered outstanding results. Logistics 49% year-over-year revenue growth and 279% earnings improvement were both first quarter records. Brokerage benefited from truckload synergies in the quarter to include strong execution in our core services, complemented by the continuing maturation of our power-only offering, where third-party carriers gain access to Schneider's nationwide trailer pools through power-only movements. After the successful launch of freight power for carriers in 2020, we launched freight power for shippers in the first quarter. The initial launch was targeted to the long-tail micro-shipper to digitally automate the quote, book, and track process functionality to more easily serve their freight coverage needs. We are already enjoying several hundred orders per day coming through this frictionless channel and brokerage, and as the year progresses, we will be introducing freight power for shippers to other elements of our service offering portfolio. Also during the quarter, the above-normal weather impacts in February were extraordinary, not only in their intensity, but also in the expanse of geographies impacted. The industry-wide impacts to rail and intermodal spaces have been well chronicled. However, it should be noted that our truckload segment, both network and dedicated, were highly impacted in some very nontraditional areas, namely Texas and the southwest region of the country. In truckload, Texas represents the highest concentration of Schneider drivers, and freight flows in the country, including support of freight into and out of Mexico. In fact, Texas has two and a half times more Schneider driver activity than our second highest freight activity state. Our strategic growth drivers of dedicated contract services and truckload and intermodal solutions were evident in our first quarter results. Dedicated set a new first quarter company revenue record with 6% growth in average truck including 150 units and early-stage startup in the quarter. Our existing customer growth, strong new business pipeline, gives us confidence in additional full-year growth of several hundred more units in various specialty dedicated configurations. On the topic of truck counts, our stated goal of returning the irregular route truckload network fleet to 6,000 units by year-end does not appear achievable considering the extended capacity market challenges, and the other alternative opportunities for growth. A more appropriate target for year-end now is 5,500 units. Finally, moving to our intermodal segment, we delivered first-quarter records in total orders delivered and revenue per order, despite the mixed change to a higher concentration in the east. For the fourth time in the last five quarters, intermodal volumes in the eastern part of the network grew in the mid-double-digit or higher percentage level. we have targeted adding several thousand intermodal containers in calendar year 2021. New business award levels, confidence in additional over-the-road conversion opportunities, as well as double-digit percentage company trade driver growth support our desire to step up our container count. So I'll stop there. I'll turn it over to Steve, and then we'll get to your questions.