Schneider National, Inc.

Thank you for standing by and welcome to the Schneider's third quarter 2025 earnings conference call. 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 would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Christine McGarvey, Vice President of Investor Relations. You may begin.

Thank you, Operator, and good morning, everyone. Joining me on the call today are Mark Roark, 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 includes remarks about forward expectations, forecast plans, and prospects for Schneider. These constitute forward-looking statements for the purposes of the safe harbor provisions under applicable federal security 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 date of this call, and Schneider disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release and investor presentation, which includes reconciliation to the most directly comparable GAAP measures. Now, I'd like to turn the call over to our CEO, Mark Work.

Thank you, Christine. Hello, everyone. Before Darrell provides a financial overview of the third quarter results and shares our updated 2025 guidance, I will start by sharing my perspective on the freight market as well as the ongoing structural improvements we are making in the business. After, we'll answer your questions. One item I'd like to address before I turn to the broader market is claims-related costs. During the third quarter, we recorded roughly $16 million more in these costs than we had previously expected. This was also higher than we had incorporated into our previous guidance, even at the low end. This was driven primarily by unfavorable developments on three claims from the 2021 and 2023 policy years. We do not expect the cost associated with these developments to repeat in the fourth quarter. Now with regard to the freight market, when we updated our expectations for the second half during our last earnings call, we experienced a solid uptick in market conditions in the back half of July that gave us some cause for optimism as we moved further into 2025. However, that strength faded as the quarter progressed, with August and September market trends largely sub-seasonal. This was evident through pockets of softer volumes with existing customers, retreating spot rates, modest peak activity to date, and an overall softer September versus typical patterns that would see strength into quarter end. Looking forward, these conditions are likely to persist into the balance of the year. Despite this, we continue to see traction in several of our key initiatives, which I will discuss in more detail shortly. Though this down cycle has been extended, several new dynamics have been introduced over the last few months that are definitive catalysts for the removal of excess capacity after several years of expecting but not seeing more significant supply rationalization. This includes dynamics such as English language proficiency enforcement and the impact of non-domicile CDL renewals But importantly, it also reflects self-regulation driven by the mere threat of enforcement. At the same time, we are seeing a pickup in carrier bankruptcies, and the industry is now approaching a year of Class 8 production below replacement levels, a trend that may accelerate given tariff dynamics. Collectively, we believe these have the potential to drive more supply rationalization than the impact we saw in 2017 from requiring electronic logging devices for hours of service enforcement. against this backdrop we continue to press on our efforts to drive structural improvements in our business especially in three main areas first when it comes to our revenue strategy we saw further traction on our continued efforts to lean into our areas of differentiation second we are also continuing to execute on our productivity actions which are driving asset efficiency and lowering our cost to serve in any cycle dynamic relatedly and third Capital discipline is driving our focus on doing more with less, which leaves us well positioned for strategic investment and the ability to act opportunistically on ways to add shareholder value. I'll provide a bit more detail about each of these efforts, starting with the progress we have made on our revenue strategy by leaning into our areas of strength. In doing so, we are creating growth opportunities that has the added benefit of enabling us to stay more broadly disciplined. More specifically, Dedicated experienced some sub-seasonal demand in select areas such as consumer products and food and beverage, which weighed on volumes. However, wins from new and existing customers were realized at a rate three times the level we've seen in the first half of the year. We ended the quarter with our fleet count in line with the end of the second quarter as implementations are ongoing and we continue to see productivity gains. Looking forward, our Dedicated pipeline remains robust with a strong skew to our targeted areas of specialty equipment, which has historically been sticky and required a high level of execution and equipment capability. The strength of this pipeline will add a creative business in the coming quarters, and we plan to leverage this growth into upgrading the overall portfolio by moving away from select lower yielding operations as the new startups come online. This shift, plus continued traction on our productivity efforts, will be reflected primarily in revenue per truck per week gains as opposed to just fleet growth, and it will contribute to our efforts to restore truckload margins. Within network, while we finished the bid season achieving low to mid single digit contractual rate increases, we continue to believe the rates are not yet at a level that supports the service we deliver and the cost needed to achieve it. As a result, our spot exposure remains elevated to historical norms, While this was a headwind to our mix, having continued price discipline will position us to maximize our leverage as market trends improve. We continue to see a wide range of approaches to the market from our customers, but retention rates of incumbent business jumped 10 points quarter over quarter. In intermodal, the strength of our win rates throughout 2025 is translating to market share gains, which was a driving force behind our 10% volume growth in the quarter, several times the industry rate. In Mexico, a solid track record for our service offering that is one to three days faster than our competitors continues to resonate with customers. Third quarter volumes grew over 50% in the region. We've also seen the highest growth rate in the east since 2022. This volume strength allows us to effectively navigate the choppiness of the environment in the third quarter. Rate renewals were flat in the quarter with revenue per order negatively impacted by mix. The mix reflected softer outbound volumes from the West Coast, shorter length of haul, and relatedly more modest peak surcharges. This was intentional as we chose not to chase incremental transcon volume and rates were not commensurate for the service. By continuing to lean into areas of differentiation, we were able to grow operating income and even modestly improve margins while overcoming select cost headwinds, which I will discuss shortly. In logistics, power-only revenues grew from the sixth quarter in a row, driven by resilient volumes, which remain at 98% of peak levels. Net revenue per order also showed high single-digit percentage improvement year over year, and this strength is helping to offset continued pressure in our traditional brokerage volumes as shippers remain inclined towards asset-based solutions as they anticipate a cycle turn. While we look forward to transitioning to a more supportive market, we are, as I mentioned, continuing to press on productivity actions which will improve asset efficiency and lower our cost to serve. These actions will help drive the enterprise back to our long-term margin targets faster and in a wider range of market conditions. Third quarter saw progress on our established cost reduction target of over $40 million, including synergies from Cowan Systems, which will continue to ramp into 2026. Beyond synergies, the bulk of our savings will be driven by productivity enhancements. This includes targeted headcount reductions, though the full benefit is likely to be more pronounced next year as the run rate builds. Since the start of the year, we have reduced non-driver headcount by 6%. In truckload, we saw Cowan margins improve, even with revenues remaining roughly flat as synergies continue to ramp. Network represents the bulk of our productivity initiatives. These include reducing unbilled miles and improving tractor-to-driver ratios. The majority of headcount actions to date were concentrated in truckload. The quarter saw short-term noise related to the timing gap associated with the previously highlighted dedicated churns and startups. For intermodal, third quarter saw impact from aforementioned claims-related costs and headwinds and third-party maintenance costs associated with trailing equipment. As it relates to the latter, actions are already underway to address this, and these challenges were combated by ongoing efforts to balance the network and reduce repositioning costs. Logistics has a long history of being testing ground for our latest technology applications, and AI is no exception. For example, our overall orders per day per broker in third quarter were up double digits from levels seen in 2023, and in areas where we have more actively deployed our AI tools, productivity is several times better. This technology is helping our brokers move away from routine, less fruitful workloads and enabling them to spend more time on value-added activities. As we have seen success in our logistics offerings, we are also rolling out agentic AI to all of our other service offerings in a variety of support functions. These efforts dovetail their ongoing use of our decision science platform, which has been deployed for some time, which enables automated decision-making and enhanced productivity while effectively balancing customer and network needs. Finally, we will remain disciplined but nimble in our capital allocations as we look forward. Darrell will discuss in more detail in a moment, but I'll say that our continued efforts to do more with less, the strength of our balance sheet, and the tactical decisions we have made related to our fleet equipment leave us with ample firepower to execute our strategic initiatives. Let's now turn over to Darrell for his insights on the third quarter and our 2025 guidance. Daryl.