Schneider National, Inc.

Ladies and gentlemen, thank you for standing by. Welcome, everyone, to the Schneider first quarter earnings call. At this time, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the one once again. Thank you. I will now hand the call over to Mr. Steve Bindis of Schneider. You may begin your conference.

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

Thank you, Steve, and hello, everyone. Thank you for joining the Schneider call this morning. In our opening comments, we will cover first quarter results in context with the current freight cycle, the positioning of our multimodal platform, including the ability to quickly pivot with the eventual market recovery, as well as our updated 2024 full-year guidance. Let's start with a recap of the themes we highlighted on our last earnings call. First, we noted that in general, customers entered 2024 with a heightened sense of uncertainty, but they also had the mindset that it's not a matter of if the supply and demand conditions would recalibrate, but when. Second, our internal indices suggested that as we entered the year, the full load freight down cycle surpassed 600 days below neutral, which is long by any historical standard. Third, irrespective of the market, we are focused on company-specific initiatives, including cost reduction actions and asset efficiency improvements, and returning our diversified and scaled operating segments of truckload, intermodal, and logistics on a path toward their long-term margin targets. All of these themes continue to be relevant as we sit here today. In the first quarter, the excess capacity condition persisted. January was especially challenging with sluggish volumes and adverse winter weather, which negatively impacted a large portion of the network. We are assessing signs that market conditions are beginning to moderate. For the first time in six quarters, we experienced positive contract price renewal closures in the low single digits for the truckload network. While this is a promising sign, we have not seen enough to consider the market at an inflection point. In the first quarter, the outcomes of pricing renewals varied across our service offerings. We achieved positive pricing of volume share gains with some large strategic customers as they prepare for the next market phase. We also renewed with certain customers at reduced volumes if retaining volume required contractual price concessions. In the short term, we are prepared to place more of our capacity in other configurations, including dedicated and a spot market if necessary. This approach positioned us to quickly pivot, leveraging our scale across our multimodal platform and to be at an advantage when the market improves. Next, I'd like to provide some insights specific to each of our business segments. In Truck Club Network, revenue per truck per week in the first quarter contracted 10% year-over-year, with most of the change due to depressed rates. The majority of the year-over-year and sequential change in network truck count is centered around the owner-operator community. which highlights the financial strain that small operators are enduring through this extended down cycle. Our company truck count has been steady as we've maintained flexibility to take advantage of an improved market when it materializes, even if that means a higher spot percentage in the short term. And truckload dedicated revenue per truck per week was flat year over year and down 4% sequentially from the fourth quarter with low single-digit utilization impact, primarily due to the severe weather in January. Our commercial and operational teams, along with our professional drivers, are executing with purpose against the dedicated portfolio and are serving as a catalyst for growth. Dedicated will also benefit from an improving network market as improved pricing on backhaul and revenue share arrangements enhance margin performance while adding value back to our customer. Average dedicated truck count grew year over year by 773 units and 80 units sequentially from the fourth quarter. Dedicated now represents 62% of truckload tractors. The pipeline remains strong, and we have successfully closed on a series of second and third quarter new business award implementations, and this gives us further confidence to continue to take action to address below contract threshold accounts. Moving to the intermodal segment, volumes were flat year over year. Growth in the West, Transcon, and Mexico was offset by the East, which is the most competitive region with the truck alternatives. Revenue per order was down 7% compared to the first quarter a year ago. Intermodal margins improved 40 basis points sequentially from the fourth quarter, overcoming typical seasonal declines and more severe weather impacts. The intermodal network is showing modest signs of healing, with new business awards being implemented and dray cost efficiency gains. Intermodal first quarter contractual renewals were largely flat compared to a year ago. I consider this favorable as last year's first quarter renewals were the most constructive of 2023. However, the outcomes of the early renewal season were more volatile than is typical. Pricing and volume gains and losses were higher in their amplitude depending upon customer allocation strategies. Our fully asset-based positioning with the Union Pacific and the CSX Rail Partners differentiates us as we take further advantage of how well they are connected to deliver volume growth and operating efficiencies that enhance our long-term intermodal returns. In addition, we are excited about the opportunity that will be created pending STB approval to allow two of our rail partners, the CPKC and CSX, to provide a new service between Mexico and Texas to the southeast. We are also encouraged by today's announcement that the Union Pacific will reduce transit by two days on the country's largest freight lane from LA to Chicago. In our logistics segment, we have observed that customers, in general, are favoring asset-based solutions. We have seen the favorability for our assets and asset-based brokerages play out in the first quarter as our overall brokerage order volumes contracted only 8% year-over-year, and power-only order volumes grew each month through the quarter and year-over-year. Similar to other segments, brokerage has maintained its pricing discipline, foregoing volume to maintain accretive returns. In the quarter, January's weather impacts were not absorbed as easily in the market as carrier costing and customer spot rates surged. However, the market moderated quickly. Logistics operating margins eroded over 300 basis points compared to the first quarter a year ago, but only 10 basis points sequentially from the fourth quarter. Our power-only offering has proved its value through both extreme up and down cycles. We expect it to play an increasingly larger role in serving our customers' network truckload freight needs when the freight market rebounds. It can grow share of wallet with our customers and earnings to the business at highly efficient capital turns. Despite current market conditions, we are encouraged that margins improved each successive month of the quarter across truckload, intermodal, and logistics, with March experiencing a semblance of seasonality and slight end-of-quarter push. Before I turn it over to Daryl to offer his financial summary insights for the first quarter and our updated guidance for full year 2024, I want to take this opportunity to recognize five amazing Schneider Hall of Fame driver associates who recently surpassed a significant and extremely rare safe driver milestone. I offer congratulations to John, Kurt, Daniel, Wayne, and Michael for achieving 4 million safe driving miles. Everyone at Schneider is looking forward to an event being held in their honor this summer where we will celebrate their accomplishments, commitment to safety, and dedication to providing outstanding service to our customers. They are among the 92 professional driver associates who have earned safe driver awards of 1 million miles or more this year, and we are grateful for them and all the professional drivers at Schneider who live out our core values every day. Now let me turn it over to Daryl.