Schneider National, Inc.

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 filing, including but not limited to our most recent annual report on Form 10-K and those risks identified in today's earnings release. All forward-looking statements are made as of the date of this call, and Schneider disclaims any duty to update such statements except as required by 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 presentation, which includes reconciliations to the most directly comparable GAAP measures. Now I'd like to turn the call over to our CEO, Mark Rourke.

thank you steve and hello everyone thank you for joining the call today for our prepared remarks this morning i'll be sharing my perspective on the overall freight market and discuss segment positioning and performance across our multi-modal platform of truckload intermodal and logistics following that daryl will provide a financial overview of third quarter results and share our full year 2024 eps and net capital expenditures guidance then we will be pleased to take your questions Last quarter, we outlined a framework designed to drive ongoing structural improvements in our business, deliver increased enterprise value, and allow us to seize the opportunities ahead, enhancing financial returns as the freight market recovers. The framework includes focusing on the customer by delivering an effortless experience, managing the freight allocation process with purpose and discipline, optimizing our capital allocation across our strategic growth drivers, and managing costs across all expense categories. In the third quarter, the market continued its path toward recovery with seasonality becoming more prevalent, but on trend, not yet proven. When we updated our expectations for the second half of 2024 on our last earnings call, we had experienced a solid quarter end in June from a traditional seasonality standpoint, and our visibility into July at that time suggested more of the same. However, the improved seasonality trends did not sustain mid-August through quarter end and were further impacted by the hurricanes and East Coast port strike in the short term. Let me highlight a few key areas that best illustrate the quarter's framing and the setup going into 2025 by segment, starting with truckload. The network truck business is by far the most challenged from a performance and return standpoint, as more than 100% of the earnings in the truckload segment are currently in the dedicated sector. We are seeing capacity steadily exiting the industry, as our channel checks into the truck lending community are indicating that defaults and repossessions are growing, and in some cases rivaling the financial crisis levels from 2008 and 2009. Carriers are not being adequately compensated for the value provided and the cost to deliver. While we are prepared to pivot quickly, we are minimizing capital allocation to network. Despite the current freight environment, we are not waiting for market correction to improve results. In addition to our cost reduction and productivity actions, there are two other primary focus areas that will drive an improvement in truckload network results. Rate restoration and growth of owner-operator capacity. The first action is rate restoration, where we remain disciplined. At the end of September, we were 85% through our network contract renewals, with third quarter renewal rate improvements in the mid single-digit percentage range. As customers seek to prepare for a market correction and move to asset-based carriers, we anticipate growth opportunities, which in turn creates the ability to address the lowest performing freight in our network. The second self-help opportunity for the truckload network is to grow our owner-operator fleet. While we have seen a number of owner-operators shrinking for Schneider and in the industry, We believe we have an opportunity to change that trajectory. We have recently launched Schneider's Freight Power for Owner-Operators, an updated consumer-grade platform that now provides owner-operators visibility to more freight opportunities across the Schneider portfolio of services. Freight Power provides business owners increased choice and time-saving features while delivering a higher level of service to customers, especially in brokerage. Moving now to dedicated. Average truck count was down 66 sequentially, but we exited the quarter with tractor count 17 units higher as startup and current account growth activity accelerated through the quarter. Overall, our account churn is down 50% from 2023 levels, and we expect this high-level retention to continue in 2025. Finally, two large greenfield startups originally slated for the back half of 2024 have been pushed into 2025 due to customer launch delays. While the exact startup timing for these awards is to be determined, our new business pipeline is strong with several meaningful opportunities in the latter stages. As of the end of September, Dedicated represented 64% of our truckload fleet. We have strategically grown our Dedicated fleet on average by 9% per year since our initial public offering through quality organic new business growth and acquisitions. Our Dedicated offering serves a wide range of customer verticals and creates differentiated supply chain value. We are confident about the opportunities ahead. Moving to the intermodal segment, earnings improved sequentially and grew over 40% compared to last year, mostly through execution and structural internal cost improvement actions. All of our intermodal book has gone through the annual renewal process. Third quarter win rates and incumbent lane retention outcomes improved from the second quarter renewal season as we maintain pricing discipline in a highly competitive environment. with another quarter of contractual pricing remaining flat. Year-over-year, Intermodal grew volume and maintained revenue per order. We experienced double-digit percentage order growth year-over-year in the West and Mexico. However, we experienced offsets in the East and a very competitive truckload in Intermodal market. We remained disciplined in allocation events and used the opportunity to heal the network by improving network flows and balance. Our intermodal offering is differentiated by our asset model, which utilizes owned equipment and company-drained drivers, and our strong relationships with rail providers focused on mutual growth. As the truckload market rationalizes, we will leverage this differentiation. We are pleased with the STP approval and the connection between the CPEKC and CSX, creating service between Mexico and Texas to and from the southeastern United States. We eagerly await the publication and initiation of this new corridor, which will further advance our intermodal offering. Transitioning to our logistics segment, we remain solidly profitable in the very competitive brokerage market by leveraging our differentiated freight power platform for shippers and carriers. We experienced minimal year-over-year volume shrink of just 1% while maintaining effective gross margin management as carrier costs increased through the quarter. In addition, shippers are increasingly favoring asset-based brokerage in this stage in the freight cycle. The brokerage and spot markets move the fastest, and we are well-positioned to pivot across both our traditional live load, live unload brokerage business, as well as our highly adaptable and flexible power-only solution. And I'll turn it over to Daryl for his summary comments on the quarter and a look ahead before we get to your questions. Daryl?

Thank you, Mark, and good morning, everyone. I'll review our enterprise and segment financial results for the third quarter, along with our year-to-date cash flow trends and capital allocation actions. Additionally, I'll provide insights on our updated full-year 2024 EPS and net capex guidance. Summaries of our financial results and guidance can be found on pages 21 to 26 of our investor presentation available on our investor relations section of our website. As the industry navigates ongoing trade market conditions, I want to reiterate our objective of positioning the business for structural resiliency and being advantaged in the freight market correction. While we're actively addressing the short-term, our focus remains on enhancing long-term value. Through all cycles, we remain disciplined on commercial actions, cost management, and resource optimization across our enterprise. We continue to implement margin and capital restorative actions, which are positively impacting every segment of our business, and positioned a multimodal platform of services for resiliency, growth, and long-term value creation. In the third quarter, revenues excluding fuel surcharge were $1.2 billion, essentially a flat year-over-year. Our third quarter adjusted income from operations was $44 million compared to $48 million a year ago. Adjusted diluted earnings per share for the third quarter was 18 cents and 20 cents a year ago. Compared to the third quarter of last year, lower net gains in equipment sales and equity investments in aggregate represented a four cent headwind to earnings per share. Increased auto liability insurance costs year over year were also a four cent headwind. Despite our ongoing investments and favorable safety performance, we continue to operate in an environment of increased litigation, higher settlement costs, and rising insurance premiums. From a segment perspective, truckload revenue including fuel surcharge, were $532 million in the third quarter, 1% below the same period a year ago. This decline was primarily due to lower network volumes, which were mostly offset by growth in our dedicated sector. Truckload operating income was $24 million, down 3% year-over-year, impacted by the same factors that affected revenues, as well as increased insurance costs and lower year-over-year gains in equipment Despite lower network volumes, workload operating ratio was flat to the same period a year ago, as our dedicated business continues to show resiliency. Intermodal revenues, excluding fuel surcharge, were $265 million in the third quarter, 1% higher than third quarter of 2023, primarily due to volume growth. Intermodal operating income was $16 million, a $5 million increase compared to the same period last year. Intermodal operating ratio improved 170 basis points year-over-year, benefiting from volume growth, internal cost actions, network optimization, and enhanced trade performance. The trade improvement was supported by an increase in the percentage of our freight moved with company assets and improvements in trades per day. Logistics revenue excluding fuel surcharge worth $314 million in the third quarter down 4% year over year, primarily due to lower revenue per order. Logistics operating income was $8 million compared to $9 million a year ago, reflecting lower volume and net revenue per order. Third quarter 2024 logistics operating ratio was essentially flat compared to the same period a year ago, showcasing our ability to operate profitably through all market cycles. Turning to capital allocation. Net capex in September was 154 million below the prior year. This reduction is used to enhance asset productivity and improve driver-to-tractor ratio, create network optimization, and ongoing capital allocation discipline. These actions have primarily driven a corresponding 154 million year-to-date improvement in our free cash flow compared to last year. Along with the strength of our balance sheets, this facilitates our continued ability to allocate those dollars So our strategic priorities include organic and inorganic growth opportunities. As we execute actions to improve our free cash flow conversion, we remain prudent in positioning our assets for the future while managing our free-to-age objectives. Our full-year 2024 updated net capex guidance is within our previously communicated range at approximately $330 million. During the quarter, we advanced our share repurchase program with approximately $4 million in opportunistic purchases. At the end of September, we had approximately $54 million remaining on our $150 million share repurchase authorization established in February last year. In September, we also returned $50 million in dividends to our shareholders, which is 5% higher than it came to a year ago. Finally, our net debt leverage stood at 0.15 times at the end of the quarter. As Mark mentioned, after experiencing more typical seasonality in June and July, market conditions were below our expectations in August and September, primarily impacting our truckload network volumes. In addition, the previously mentioned delays in dedicated implementations will impact fourth quarter results. While we continue to operate in uncertain environments, and our expectations regarding the timing of a more sustained freight market improvement have shifted, we've seen signs of economic and freight market stabilization. During the fourth quarter, we expect year-over-year earnings improvements. Our guidance anticipates continued stabilization across most of our businesses, as well as improved seasonality, particularly within truckload network and logistics. Based on these factors, with updated or full-year 2024 adjusted diluted earnings per share guidance, the $0.66 to $0.72, which assumes a full-year effective tax rate of 24%. With that, we'll open the call for your questions.