We're going to get going with our next session with Schneider National. I'm really happy to have Mark Rourke, President and CEO, and Daryl Campbell, CFO. This is going to be certainly Mark's last appearance at our conference, but maybe one of his last appearances at the conference where Mark's going to become Executive Chairman. So I appreciate you making the trip, and good to see you, Daryl, as well. so there's you know you guys touch truck intermodal logistics there's a lot to talk about sort of you know in all three of the businesses you know we had a lot of trucking companies here earlier in the week brokers here earlier in the week and you know clearly you know you know the positivity around rate you know It was tremendous, right? So, I don't know, just help us, you know, sort of open-ended, high-level question, sort of frame the environment that we're in, and, you know, as you see it across the three different businesses, and then we'll get into all the specifics.
Yeah, yeah, Scott, you're absolutely right. Obviously, we're exposed across, really, three platforms, truck, asset-based, intermodal, and then, I know, a billion and a half or so on the brokerage logistics front. There's lots of news across, really, all three of those. But I think obviously it starts with what we've been talking about for several quarters, the capacity levels, the shadow capacity that really explain now that we get more visibility to really the depth of that, what it really explained a three or four year, quote unquote, freight recession. And, you know, a great credit to the administration who has really dug in around public safety and through a very talented team with a very clear mandate and an aggressive agenda to get after that whole public safety piece. And we're certainly seeing the effects of the capacity coming out, and we're seeing that benefit not only on the truckload side, but ultimately over time, the best benefit for our intermodal business is a tighter and more robust truck market. And so we think more conversions in front of us, which we feel really good about the intermodal platform. And then on a logistics front, in the short term, you've got some net revenue compression because you're dealing with some rising carrier costs. but overall i think we're handling that really well relative to what we expose ourselves in the spot in the contract market and so also all of our services will operate separately because we have different value proposition a lot of collaboration internally around how to best address the market and serve our customers but there is a lot going on and our customers are kind of dealing with this transition as well and we're in the heaviest part of our allocation season which is right here in the second quarter and so we'll have a really good feel of where that it looks like as we come out of early the end of June.
So one of the things that we've been focused on the last couple of days is trying to figure out how much of this is supply relative to demand, and I think the overwhelming consensus has been it's largely supply, so maybe I would ask it this way. Do you have an estimate of how much capacity has already come out because of what the initiatives with the government, how much incremental capacity could come out and then have we seen you know how much demand improvement have we seen or is that you know still you know potentially on the come yeah it's always in our industry because it's so fragmented how do you put all that together we certainly try to triangulate that to the best of our ability and some of that you know we had a few hundred of our own non-domicile cdl holders all legally all trained all going through our process and but i think what you're also going
of seeing this scots some of those folks get caught up in this wash even though people were here legally well trained coming through a legitimate school coming through our finishing school so we would take what's our experience with that population looking and also how we deal with our third parties we we would estimate we're probably 40% through whatever that looks like can I cut you off ones at 40% of Schneider going through their non domicile or 40% of like the industry going through this yeah so we're trying to project the industry but we're using kind of multiple data points to try to to make that a little bit data uh database so it's maybe going a little faster than we would have anticipated if it would be just you know this steady drum beat a third a third a third as as as those work permits uh expire so i think we're still got some ways to go there and i think the other item that that i would expect to be the next shoe to fall and i think you're hearing the administration talk about it is the eld non-compliant elds which was a big part of what they were out gathering data with during road check and so that will get after i think another element of capacity that's perhaps not operating under the same rules as as intended so so we still have runway to go on the non-domicile cdls and we got some other things in front of us and the other question is what's going to happen to minimum insurance levels will that be the kind of the next thing that gets looked at it and attack so I think we're in the early innings maybe the fourth inning of this drawdown in capacity based upon the enforcement much needed and rightfully based and how do you how do you think about the demand side you know if it's it's in my view it's been incredibly resilient considering all the stresses on the kind of the macro global basis on the on the demand front and the resiliency of the consumer so I would say most all of this is it to date has been on the supply side I think the industrial markets are in markets are starting to awaken which is good we haven't seen that over the last three or four years so we really like when the manufacturing health gets healthier because there's intermediate moves right we have raw materials we have intermediate then we have end moves versus it just being imported through the port so that's the one one we're watching because that could give us a little bit more momentum on the demand front assuming that the consumer can stay resilient through fuel and all the other kind of stresses on the on the consumer and then help us think about what happens in a world post Montgomery does that is that incremental capacity that comes out I'm guessing there's some sort of like Venn diagram analysis of some of the non-DOMO cell fit into this bucket I don't know
but um probably over represented right what are you doing like what changes in your logistics business what's your view about large carrier or carrier large carrier small carrier large broker small broker you know yeah I think there's under any kind of assessment this is a landmark decision.
It's going to have implications. I think certainly those who have scale that can have access to insurance markets that have the tools and the processes necessary to vet and do the things that really that Montgomery ruling suggests need to be done. As you look at that internally to Schneider, we've reduced our carrier and our brokerage business by 76% since COVID on this whole focus on security and safety. I don't know if you can have several hundred thousand contractual approved carriers and say that you have a strong vetting process. But we believe we're up to continue to lean into that. What are other ways that we can vet to make sure that we can do everything possible because data has to be available to make those assessments and that's at least in our judgment the most challenging part of that ruling. But I do believe it can be a catalyst for consolidation. I do believe the large broker or the large asset-based broker even more preferable to a shipper can be the winner in the end here now I guess from a you've already meaning I think we talked after Q1 what's the number of the the number of third-party carriers that you've cut out of your system on the logistics so we've went from 60,000 to 14,000 so a fairly significant drop and and still you know I think there's more cuts or Well, we have to, how do we look, how do we assess even further, but we think we've done a lot of really reasonable care, which is really the standard here, reasonable care things to make sure that, hey, our company is protected, our customers are protected, and still be able to have a profitable and thriving logistics business, which we do.
Right. Okay. And then you also said this could be a catalyst for consolidation in the asset-based industry.
And brokerage.
I want to understand the idea of consolidation, the asset-based, because if that's going to be the case, then you need to go out and buy 5,000, 10,000, 20,000 more trucks. If the guys with one truck, five trucks, 10 trucks don't exist anymore, is that what you're suggesting is how this plays out?
Well, I'm not suggesting we're buying 5,000 to 10,000 or 20,000 trucks at this juncture.
How does the industry consolidate if, you know what I mean?
My comments were more on the brokerage maybe at first, right, because, you know, the small, A, can you get the insurance, B, are you going to be able to do the things that's suggested there? Because we have to develop a number of internal tools combined with external tools, and I think that benefits scale to do that.
So you think, and the shipping community is going to increasingly say, if we're going to use a broker, it's got to be a big scale broker.
Yeah, I think what we really saw in 2025 and probably amping here in 2026 is less brokerage in total. How do I get more asset coverage? And then asset coverage, when you come to a Schneider, you have not only brokerage, but you have power only. So you have some other elements of the Schneider brand that can, I think, give more comfort in this environment. But certainly, I think the most impacted over time here is going to be the smaller, less capable broker.
I think that makes sense. You mentioned you're sort of in the thick of the allocation season. Can you give us an update on, is it high singles, low doubles? I don't know. Tell me.
Yeah, at this juncture, we probably wouldn't change anything that we've said. Coming off our last earnings call, Scott, that we expected mid to high single digits in the network side, probably a little bit of lag on the intermodal, which is traditional. However, when you start looking at the spreads now between truck and intermodal and fuel and more capability that we're bringing to market like the CP, KC, CSX to the south, we have more tools to sell that maybe we can see some amping of or shrinking, I guess I would say, of that lag. But we'll be more instructive as we come out of that second quarter.
Where do you see that lag now? I'm sorry. Where do you see that delta between intermodal all-in price and truck price? And where should it be?
Yeah, it's lane-specific, obviously. But it's as wide probably as it's been in the last five or six years. And you have an underlying rail partner network that's servicing the business really, really well. So I think the good news is we're not in customer conversations. we're having to defend service reliability with with the intermodal product right so and and if you're sitting here with a budget constraint issue i don't think anyone's going to hit their fuel surcharge budget as they put together one of the best hedges against that is how do i lower let me convert more to intermodal so maybe to that point you know i i've said this sort of a bunch like it it feels like it's the perfect environment for intermodal conversion right we've got rising truck rates high fuel right rail service feels strong stable right this should be like and we heard this we had
shipper panel yesterday really really big intermodal shippers saying we want to do big increases more in intermodal right so I think that do you agree with is that the question then is you know intermodal price always lags truckload price right are we just in like that normal lag period or is there some reason why right it's gonna be a longer or more pronounced lag right maybe rail service is too good and so the service product is too good to tell the customer we need more price maybe because of mergers or whatever you know do you think where we need to think about a longer lag or is it just work right at like the normal lag that we always see. And so it feels like it's different, but it's actually just gonna be the same old lag.
Maybe just some context. If you look at where truck rates went on that recession, how far they, particularly on the network business, intermodal didn't have any near that level of change, right? So it's coming from a different place, right? So will the lag still be there? I think it will, and I would still characterize it at a couple of quarters but we'll see right there's other pressures going on in the marketplace that you just suggested and how customers are thinking about it so i think we have the opportunity and we have certainly we have the capability we have the resources and we have the underlying service to really uh maybe change history okay too early to call okay now when you talk about changing history um one thing and it's a little hard to tell with the way you report because we don't get price and utilization we just get revenue per truck but certainly if I look at the industry you know that we where we can tell she didn't say network
and dedicated this time so go ahead okay historically the industry has struggled to get price and utilization at the same time right you guys in q1 right I think had your first time ever in a q1 right rev per truck improve sequentially right I think you said it's mostly utilization right is there can we sort of deviate from history and get price and utilization at the same time the cycle yeah what are we doing differently to get there yeah absolutely and I think we were seven percent year over year and think two percent to your to your point sequentially and so it's a huge internal
initiative right and I think what we've really signaled we're gonna measure our success at least here in the short term more on what's our revenue per truck margin recovery pace than absolute truck count right some of that it's internal initiatives to tighten up our ratios to be even more efficient with how many trucks we have per driver some of it is how we're changing our load acceptance Our schedules with drivers, a lot of those are internal initiatives that can help us drive more productivity. It's the best way and most efficient way we can give drivers pay increases is give them more utility every day. And that's a huge focus. We absolutely need that, but we also need rate. And so I do think we can do both. The market's going to be more challenging on drivers as you would get into this type of cycle. because not only are these enforcement activities certainly taking capacity out of the market on existing, it's also having some impact at the top of the funnel, which, again, is healthy for the industry overall. And our work configuration, if you look at really, Scott, how our business has changed over the last five years, intermodal tray, 8,500 dedicated trucks, those are the more the positions that drivers want to have versus the more irregular route, random one-way network. So we think we're well positioned. We think it's going to be a battle. It's always a battle, And it's not going to be probably any different as we go through this cycle. But I believe absolutely we need rate recovery, and we can really lead into our initiatives on cost and productivity. So I think we can do both. Because if we roll that forward and we have – There's a lot of operating leverage there when you can do both.
Well, if we can get positive utilization and start getting high single, low, double-digit pricing, rev per truck starts growing over 10%. And I guess your point is if you're giving the driver more miles, you may not have to do as much of, you'll have to do some wage increases, I'm sure, but maybe it doesn't have to be as much. So then you sort of, to your point.
Yeah, the market will determine what the driver market pay condition is. But certainly we want to do everything we can to take friction away, make them productive as our first line of defense to cost. and then secondly have our customers fund the the wage whatever that ends up having to be over the next couple of years what are you seeing from a driver standpoint it's more difficult there's no doubt there's no doubt and uh our truck driving schools if you kind of uh we don't have our own schools we'd have a finishing school but we deal with a number would also say that the top of their funnel is under stress right whether it's in the public arena or gosh darn i thought i turned that off in the public arena or the for-profit schools so so there's stress there which
suggests that we're in a turning condition and we'd much rather be there than having drivers flush and maybe it's way too early right but like I'm guessing there are some good drivers maybe at carriers that might not be that might not have might not have FMCSA ratings might not have great up like do you think that starts to sort of does that ease the driver market a little bit for for a carrier like yourself yeah flight to quality is usually one of our our our levers uh both in the owner operator world as well as the company driver world and what's the work that you have to offer right is it something that's predictable do i get home
on a regular basis that whole combination of the value proposition we think we compete well but we're not going to suggest it's going to be easy just you know I didn't think about it from that perspective I would think that like the pitch of like come be an owner operator at Schneider where you still get a little bit of like the eat what you kill but you know you're still part of now a bigger platform I would think that could be and particularly one that could help deal with the fuel condition too right so our our programs how we can help protect them a bit more on fuel than and being out there on the open market is a real sell point.
Okay, Darrell, maybe just a numbers question. I know you're not changing your guidance here, obviously, but just as we think, no, I wouldn't even try to ask that. You do have a rate, 70 cents to a dollar, like Q1 was obviously good, right? Didn't change it, fine, it's one quarter in, but just help us think about what are the assumptions, the midpoint, the high end, and things like that.
Yep, I think a lot of what we saw in Q1 confirmed what our guidance was that we initially you know communicated in January so we did talk about an expectation of capacity leaving the market we did talk about our 40 million dollars of cost savings which was on top of the 40 million dollars that we delivered last year so in the first quarter we did see the benefits of you know productivity which you saw through revenue per truck per week we did see a capacity leaving the market probably more accelerated in terms of the pace and we also did see our ability to recover you know from weather disruption and also fuel so looking ahead because we obviously guide to the full year there is some uncertain a lot of us do that by the way yeah there's some incremental uncertainty from a macro perspective particularly as it relates to you know the impact on the consumer so we're balancing the probably more accelerated attrition on the supply side with some incremental demand risk and then any sort of near-term thoughts about how to think about you know we typically see I don't know truck margins improve two to three points Q1 to Q2 I don't know any any sort of high-level thoughts about how to do we just think normal seasonality feels like an environment could be better than normal I don't know I mean what we tried to do at least in January you know talk about normalized demand conditions and a normalized seasonality so we use the first half of 2025 was more of a reference point to what we would expect now where we ended q1 if you compare you know that proportion of our guide the remainder of the year it would imply that the second half would have to be stronger so to your point there would be some incremental you know improvement in margin in order for us to kind of hit 70 70 cents to a Okay.
And then, Mark, I want to come back to the just capacity discussion for a minute. One thing we didn't touch on, Delilah's law, I don't know if you have any insight. I'm guessing you do a lot of sort of work in Washington. Do you have any degree of confidence that this is happening? How important is this to the capacity of these? Or is there still a lot that can be done even without this?
Well, I think the good news is, you know, bipartisanship isn't the easiest thing, obviously, in D.C., but you saw with the cargo security recent passage of additional penalties and additional focus on, you know, the agencies working together on cargo security can be done. And I think the administration, particularly the DOT under Sean Duffy, has done a terrific job of focusing on the public safety arena. And if you believe in that public safety, that's very much a bipartisan issue. And so I wouldn't say it's easy. I don't really have a percentage, but I was encouraged by the fact that the cargo security got everybody's attention. And we've been really, as an industry, educating Congress on that over the last 18 months. The strategic, organized stuff going on for our shippers and certainly through the supply chain. And so on top of that, getting all of that education and understanding, I think that helps with the Delilah law. But I still think it will be a challenge.
Okay. We had the rails here.
Which would accelerate capacity coming out, is your point.
We had the rails here over the last couple of days. Obviously, a lot of talk about mergers. Have you guys taken a stance on the merger? And then one of the obvious sort of questions I think is related to Schneider specifically is, right, you've got UP in the West. uh csx in the east seems like if a merger happens a little bit of a mismatch like it seems logical likely to me that you'd have to sort of make some changes in channel partners i don't i don't know what you can say yeah we've chosen to to really reflect and analyze we know we've been to your point we've been through a change from the bn to the up we've been through a change with the cpkc so we're capable and have processes and a very experienced team to kind of assess through that.
We're really happy with the CSX in the East. I mean, a terrific executor, a great partner in the market. That being said, we're deep in discussions with everyone, and we'll have to make that decision. And now that the data is a little bit more available, how both the UP and NS is thinking about things and certainly how the CSX is, you know, very serious about our business as well, we'll be in a position to make a really solid decision for our customers and our business and more to come on that. But we're deep in, we're now just not talking concepts, we're really deep in the analysis.
And then you mentioned in your opening comments, logistics facing a little bit of a squeeze, which it did in Q1.
Are we at the point now where spot volume is picking up, pricing is catching up, where logistics starts to get unsqueezed, or is there still a little bit more of that squeeze to feel yeah we um we really don't try to have lost leaders we're very nimble in that business we're at least at 50 of the spot market regardless of the market on our our brokerage business we saw the squeeze more in our power only because that's more contractual that's about 90 contractual coming out of trailer pools so we're getting a chance to address that obviously through this allocation season and if it wasn't working for us we just lowered our acceptance level of those type of power only moves so we're gonna work to get the squeeze behind us
but that was more of a fourth quarter thing it started to get more relief in the first quarter and I expect we'll get more relief of that the second quarter you know you mentioned power only I know we've talked about that a bunch in the past and was that a contributing factor and maybe not your say sky look you were dead wrong was all just these sort of add try never say you're dead wrong sky I can take it. Was power only dependent on some of this sort of bad capacity? Is power only going to be the same sort of growth engine, this up cycle, as it was in the last up cycle?
Or is it going to have to be more just like a pure Schneider offering? well we have the same vetting process and approval process for uh brokerage care that we do for power only so we didn't you know obviously we strive very hard not to have any of those bad actors uh kind of in our ecosystem so but we do think and i guess some of the questions around what's our truck count we know we have our network truck count we have our owner operators but we also have power only serve that network customer so it's still an important part of what we do i don't believe it was the material contributor to the capacity problem as an industry if you look at the overall size of not only our power operation but many of a couple of our other large competitors so i think it's going to continue to be an important part of what we do and it's certainly going to be valued by our customer and um i'm jumping around a little bit apologize um so in a world where dedicated where truck well in a world where truck uh one way is starting to get some good pricing network what's dedicated rep per truck was flat and q1 how quickly does that start to reaccelerate yeah similar to my comments on intermodal when you look at what changed from cycle to cycle it was very little change in the rate structures and dedicated which is one of the reasons we're so attracted to it on its consistent returns consistent revenue consistent consistent volumes that being said we have about a third of our book come up every year because our average contract is three years, and we'll continue to work through and deal with our inflationary costs if they didn't get fully covered in our indexing that we do throughout that contract. So I think there's room on price, clearly. And we've said very publicly that we have a very strong pipeline, but we'd rather take underperforming books of the business. No matter where you're at, you've got a bottom 10%. So how do you take those assets and redeploy them for higher higher return which will come both to the price line the revenue per truck line and certainly our margin line do you think it just given that lag is is dedicated price cost positive this year price cost positive margin positive i don't know as in growth in margin or just yeah yeah yeah we really happy with our dedicated business we could always obviously lead in and do better and we're working on those individual opportunities but yeah it's it's a So, as we've said, more than 100 percent contributor to our overall network or our truckload segment.
Okay. And just last couple minutes, just maybe talk about what are you doing with the fleet? Are you doing any pre-buy ahead of EPA 27? How do you think about growth organically, acquisitions?
Yeah, we're on a very steady replacement cycle for our units. And so, A, I don't think there's going to be a lot of truck OEM capacity to do major pre-buys anyways. But we'll probably play around the fringes a little bit in that fourth quarter and make sure that we can avoid whatever may be the more costly engine that's coming at us in 2027. But it'll be around the edges. And so, our guidance relative to our capex is more on the replacement side. And what will get us from the high end to the low end is how much we want to put into dedicated from an intermodal dray from a tractor count. So that'll be a kind of our wild card low to high end of the CapEx range.
There's also the benefit of productivity in terms of what our CapEx plan is, right? So we talked about tightening those truck to driver ratios. So we're focused on productivity first, not just focused on truck counts that comes up in our CapEx plan. Interesting.
We had a autonomous truck panel yesterday.
Rush was here saying like you know what like I've been poo pooing this for a long time and all of a sudden the technology feels like it's getting there and what are what are you doing with or how are you thinking about autonomous yeah we're we're running a few lanes today and we have been with two two major of our providers which is Aurora and Torque which is kind of a line line with Domler I think what's still to be determined what's the the whole economic model that makes sense, right? I think what you're seeing, at least publicly recognized, I think more recently with the autonomous players is that if you have to do a driver on the front end stage, a driver on the back end stage, it really does cut into what other economics and value that gets created by the autonomous move. And so I think you're hearing more, I gotta go end to end point, right? And I think that is really what's necessary, at least in our view, for that to be more than just around the fringes, right? So the technology is advancing. I'm not sure the legal and the liability structures are advancing at that same pace. And I think there's a lot of things in Congress now relative to this most recent bill that perhaps will bring some clarity to that as a federal program versus a state by state. We'll see how all that plays out and what makes it to the end. But the technology is there. But we've got to get this business operating model. How does it best fit?
So your point is, if it's ramp to ramp, the economics are really hard. It's got to be door to door, right? That would be our system. Is it, can you do it door to door?
Well, we have to do it at scale, right? And how does, and I think the real benefit here is can you run that truck 20, 24 hours a day? And how does the freight move? It's incredibly, you think there's so much density, but when you think when you really have to tie all those things together, it's a bigger challenge. customers have to change behavior shipping times and be in and leveling will have to change so there's a number of things on the supply chain to take advantage that I believe the customer has to own and participate in to really get after kind of maximum value do you ever thought of like when this could be a hundred trucks in your fleet a thousand trucks in your fleet or is it still yeah it's it's not thousand trucks is probably a little farther out there But we'll be playing. And we are doing so today, particularly in Texas. And it's got to move out of the Sun Belt eventually. And there's a number of other things that need to occur, but it'll start to get traction. OK.
And just last thing as we wrap up, the other like sort of topical thing that's been in the news sort of over the last month or so is the Amazon supply chain. I don't know what in your mind was new from that. Where do you see risk from that opportunity from that? I don't know.
Yeah, well, obviously we respect Amazon and would not try to certainly underestimate whatever they are capable of. But they've been doing a number of these things that I think came out for years now. And we're used to customers that are both give us freight and we compete against them. We see that in a number of parts of our portfolio. So it's not an uncommon characteristic or unfamiliar characteristic, probably better said. But, you know, we'll see how it all plays out. Probably, at least initially, maybe more of the small to midsize shipper, but we'll see.
Mark, Damon, we've got to wrap. Thanks so much. Really appreciate it.