All right, clock was going the wrong way there for a second. All right, we're going to close out the first day or the second day. Sorry, it's been a long week already. Second day of the transports track here at the Industrials Conference with Heartland Express. So happy to have them here as, you know, basically our one and only truckload carrier. You get to speak for the industry here, Chris. Thank you. There you go. We got Chris Strain, the CFO. We have plenty of time to go through a bunch of questions. Folks still have some by the end of today. Feel free to chime in. We will get you a microphone if you want to ask something. I think we will turn it over to Chris to set the table a little bit, see what he is saying, you know, seeing in the market just in general. We have a few questions we can dive into. Thanks a lot for coming, Chris. Yep. Thanks for your perspective. I'll let you kick it off for us. Yeah, thanks for having me, Brian. I told Brian I'd just kind of start off with a big picture of kind of where we see the world today. You know, there's a lot of noise going on in the marketplace. Stories of, you know, every day, every hour seems to be a different story about something or another. Tariffs, you know, world conflict, immigration, government efficiency, DOGE, you know, cutting back on government inefficiency spending, green initiatives. You know, people are starting to throw around the R word. I won't even say it. You know, but all those things considered, the message I want to give today is the one known. And the thing I feel the most convicted about is there's a lot of unknowns. With all that said, and all of those different things going on day to day, we are, I would say, the most optimistic sitting here today than we've been in the last three years. You know, last year at this conference or year before, turndowns are up. We measure turndowns as, you know, freight is offered to us. We turn it down for whatever reason, whether it be a freight, don't have a truck, driver doesn't have availability, whatever it may be. We are on the price scale. We never want to be the cheapest rate. We're not the cheapest rate. We know that. Our model is all centered around service. If we provide good service, we can get a premium on our rate. I'll just use an example of if there's 10 carriers the load is offered to, they're going to start with the cheapest one and work your way up. We're probably number nine or 10 on that list. If a load gets to us, it's already gone through eight or nine carriers. That's our gauge of we track it weekly, monthly. That's our gauge of how much freight is actually moving. A year ago, we were turning down maybe 100 loads a week. That's nothing. That basically means we're begging, borrowing, stealing every load that we can get our hands on. As it progressed through 2024, by the time we hit Q4 of 2024, it was up to probably 700-800 a week. Today we're about 1,100 a week. It doesn't seem like a lot. There's still too much capacity in our industry. We need that number to be closer to probably 5,000+ a week for us to say we've got some equilibrium in supply and demand. Kind of framing all that together with the first quarter, the first quarter is never one that's great by any means, especially January and February. I'm not sure what other people have been talking about, but I'll hit on weather just quickly here. January and February have not been good from a weather perspective. Of the eight weeks of January and February, three weeks for sure have been major disruptions. You throw all the other little ones into effect, it's probably a fourth week. For 50% of our weeks, we've been dealing with weather, major weather events. To put it in perspective, when the weather happens in the Midwest, we're located in Iowa. When it happens across the Midwest, we have the infrastructure, we have the equipment, we can deal with it. You have a major snowstorm, it's usually maybe a one to two day impact. When it starts snowing eight, nine inches in areas around the Gulf Coast on beaches of, you know, eight or nine inches of snow, I mean, it's just total gridlock. It just shuts down. They don't have the equipment, people don't know how to drive. We shut our trucks down for safety, but we're still paying the driver a certain wage. They don't have zero paycheck. All those weather impacts, January and February have not been good at all. The point behind that is that the first quarter is not made by January and February, and the year is not made by the first quarter. When I take 2021, which was probably the best year that we've ever seen, and we may never, ever see it one again, look at turndowns, we were turning down on average the entire year. A weekly average was 9,000 versus, you know, like I said, you know, 1,000 to 1,100 right now. The January and February OR that year was 90.7%, but the entire year was 82.6%. It is a pretty big, pretty big spread. January and February sitting here today, January and February have been much like January, February of last year, but for different reasons. We've made operational improvements year over year, but the weather set us back. All things equal, we're running about through February about where we were last year. That's a step back from where we were in fourth quarter. That doesn't mean March isn't better. I mean, there are signs that March is better. The first quarter doesn't make the entire year. We tell people that it's a marathon. It's not a sprint. A lot of people get hung up on this story today, that story tomorrow, and, you know, start trying to make decisions. We are long-term focused, long-term thinkers. The decisions that we make are not just for tomorrow or a penny for this quarter. It's for the long term. Again, with all that, we're more optimistic sitting here today. Conversations with customers have been better the last two, three years. Conversations with customers have been cut your rate, cut your rate, cut your rate. We historically do not cut our rate. When we don't cut our rate, customers will take volume from us. We don't get thrown out completely, but we could take some haircuts on volume, which we've seen the last couple of years. Those conversations now have turned towards, okay, maybe we'll keep you flat. You'll keep your lanes, we'll keep you flat, maybe 1%. You know, that's a big difference from where we've been the last two to three years in these conversations with customers. That's why we're optimistic. The turndowns have picked up. The conversations with customers are more positive. That's kind of the state of where we sit today. Okay. All right. Thanks very much for that. Yeah, last year was definitely a little more downbeat. I think we got different things to worry about this year, but it does sound like we're getting back to at least we've got seasonality back in the truck market. I think that's helpful. At least it's an improvement versus what we have seen in the last couple of years. From your perspective, just going back to the turndown, because that's a good way to think about it. If you're 1,100 now, you need 5,000 to be a little bit stronger, at least more confident in that. Is there a time that you would expect that to happen just based on normal seasonality? Would that be if you're 1,100 now, then maybe that gives you more confidence into like the seasonal pickup for like home improvement and produce season and all the things that we typically see in the middle of the year? Is that stretching a little too far? It might be a little bit. I would say I want to see what March does. I mean, but they're still climbing the first week or so of March here. January and February, some of those turndowns probably had some noise in there, weather related. You know, when we have weather events like that, the turndowns will spike a little bit. Going into produce season, getting a little more seasonality, I kind of want to see what March and April, kind of how March and April play out. Depending on what we see in March, what we see in April, spring, kind of Q2 can be some seasonality shift. Depending on what we see March, April, May, that probably gives us a pretty good indication of what we're going to see for the rest of the year. It's typically how it plays out. Not to say that something would not happen somewhere down the road, but that is typically a good indicator of what we are going to see for the rest of the year. It is probably a little too early to call that. I am encouraged by what I am seeing right now on a week-to-week basis of what that turndown number is. The weather has obviously come up a lot this quarter and here this week. Is there any way to put some perspective on that? Like for the LTLs, for example, they talk about service center closures. Is there a way to talk about like trucks parked or, you know, put on the side of the road in a way to like quantify how many trucks for how many hours? Because it is, you never want to dismiss it because it's still an outdoor sport and weather comes every year. You know, if it's abnormal like it was snowing in New Orleans, like that's clearly a bit different. Do you have a way to sort of think through that or quantify it? Yeah, I would say weather, load availability, whatever you want to just network disruption in general. Right now we're running about one load per driver per week short of what our capacity would be. Okay, so what does that mean? I mean, our deadhead is higher. I mean, our deadhead's four or five percentage points higher than what we want it to be on a historical basis when our fleet is fully utilized. Okay, one deadhead point equals one OR point. Okay, so there's four or five points right there. Okay, you throw OR in there, you throw loads in there. They kind of offset each other a little bit. We've got some payroll, fixed component of payroll. That's probably a couple OR points where if a driver is sitting, we're still paying them a wage based on some of our pay programs. It has become more of a, there's a certain percentage of fixed cost in there. That's probably a couple percentage points. When I throw everything into the blender and said, if we got a load, that load per driver per week, the OR impact of that is probably somewhere around eight points ish, seven to eight points. If the market starts turning, then rates just on top of that. That's without rate. That's just utilizing the equipment as we have it today. It's just our assets are underutilized. That's because there's still a lot of capacity, overcapacity out in the market that people still have options to have a lot of people cover their freight. When the thing starts to turn and starts to tighten, that's when people start to shift back a little bit towards the asset carriers. We're starting to see that a little bit in some of those customer conversations where they may have went a route with brokers, smaller carriers that maybe had some service failures, maybe somebody went out of business, whatever the issue may be. They've come back to us and said, hey, we like your service. Because all things we do is predicated on service. If you provide service, they know what they're getting, right? But you got to stand behind the service. Our motto is Service for Success. We're starting to see many bids come back around where we got removed from a lane because of price. It wasn't because of service, because of price. Now they're starting to come back where the people that we deal with, we're about 46%-47% retail. Some of these retailers and people that feed into the retail network have a fine system. If you don't deliver the freight on time, the person that's feeding their network gets pretty hefty fines. They'll use us in a lot of those situations so we can protect their service so they don't get the fines on it. We've seen more of the mini bids coming around where people have been coming back basically on service. The fines are the On Time In Full type of programs for the big box. Yep. Yep. Exactly. When you talk to, I guess, people like that, what are, how would you sort of characterize the conversations? I know it's a wide range of different shippers with different needs, but do you feel like there's, can you put them into buckets? Like some are still being aggressive, some are partnering. Of course, it's probably hard to figure out, you know, what they're looking at right now because you still have the tariff uncertainty, which like you said, is the only thing that's certain right now. Yeah. Can you talk through some of the conversations and how tariffs are impacting those with the shippers right now? Yeah, I'll start with that, kind of throwing tariffs off to the side, and I'll put our customer base into two camps. Two camps would be the people that really value service, and that's what we're selling. The other camp is they're just going to get the cheapest rate they can get. There is some kind of somewhere in the middle depending on what lane they have. A lot of people throw the partner term around. We've heard that, you know, over a lot of, you know, handful of years. Some truly mean it, and some just say it. When we're sitting there selling service and we get removed, I would say we have better relationships with some, more so than others. We have a lot of good core customers that we've done business with for a lot of years. When the thing turns, and we've seen it before, you know, they won't pick the phone up. If we call them or whatever, they won't answer your phone today. When the thing turns around, they're the first ones calling us saying, hey, I need a truck, give me a truck. It's like, sorry, don't have a truck for you. You know, when things get tighter, we would much rather give our capacity to our customers that we've worked with over the years in the past where we've, you know, helped them, they've helped us, and we have that long-term relationship. We'd much rather give our equipment to those people with those relationships as opposed to the people that jump in and jump out and just chase the rate. Now you throw tariffs into it. Some are going to be impacted more than others, obviously, but we're seeing things right now like Southeast is pretty decent right now. The South market is pretty good right now. Some of that's probably import. You know, how much of that's coming in ahead of tariffs? You know, some of the tariffs are already in place. Yet to be seen how all that plays out with, you know, I don't know what the story is today. I don't know. Did we say we're going to double down again today or? I don't know. We'll check after this is done. Maybe the story has already settled itself and we'll deal with whatever comes tomorrow. In terms of the, I guess that those buckets of shippers, is there any way to put like relative size on the two camps and if that's changed over time? Or are these sort of the same people? You kind of know what they do each and every time throughout the cycle and throughout these bids? I would say cycles past, the list of true partners was bigger than what it has been this last cycle. I would say this last cycle, that list has probably shrunk for whatever reason. I mean, again, it's not because service, because I mean, we sell service and we deliver on service. For whatever reason, they've made decisions that they've gone a different route. They've cut volumes. I think my own personal perspective is that other players have come in, procurement type groups, call them whatever you want, that's out, that's different from like the transportation management, maybe people. They're looking at all their lanes. They're looking at all the bids that come in, and they're just ranking all this stuff on a spreadsheet. Okay. You can't rank service on a spreadsheet. They're just going down the list on price and say, well, you're going to use this, this, this, or this. Sometimes they find out that, okay, their service is impacted. They come back with a mini bid or something that gets failed on a lane. That's where we gain volume back. All that's predicated on a tighter market, and we're just not there yet. There's still just too much capacity. It's not as tight as we'd like it to be. Right. In terms of the bids that you're seeing now early in, it's not really early anymore. It's March. It sounds like at least from your earlier comment, it's flat to up somewhat. Is that on incumbent lanes? Is there a view that you've got for like the first half for the full year? I mean, what we've heard other people talk about is mid-single digits and increasing. That sounds a little optimistic based on what we've heard here this week, which is basically flat to up a little bit in the first half is sort of where things are trending now. Of course, it could change in either direction, but that seems to be like the temperature, the barometer, if you want to call it that at this point. Is that similar to what you're? If we can go into a bid right now and hold our volume flat and keep the incumbent lanes at a flat rate to maybe up 1%, that's a win. Because in the years past, we don't go backwards on our rates. In years of past, it's not even a discussion. They just take volume from us. That's changed this year. More of them are willing to work with us. They're kind of seeing some of that tightening going on. They're seeing some of the same data we are. They're trying to lock up capacity for going forward. It's anybody's guess of does it take off sharply? Is it more of a gradual? We believe it's probably more of a gradual than just a sharp uptick here. Things are turning is the main point. People are, when things start to turn, they want to make sure their freight is getting covered and they have capacity covered. That is, you know, people that own the assets have assets to give them, and they do not have to go through a broker and hope it gets covered. They can come to us, and we have the asset to provide them. The supply side has been more durable than I think we all would have thought at this point. Do you have any views on where we are in that correction? Is there something needed to accelerate that? Is it just going to take time in the slow recovery, you know, that you're talking about? You know, it does seem like if people were failing, and they're certainly leaving at a slow rate right now, but it doesn't seem like we're on the precipice of some cliff event with a lot of excess, a lot of exodus, rather, in capacity. Yeah. Capacity is still coming out. It's coming out slower than I would have anticipated. I mean, I would have thought there would have been more capacity that would have come out early on in 2024 just because of the length of the cycle. We've historically said the good times don't last longer than 18-24 months, and the bad times don't last longer than 18-24 months. We're going on, we're coming up on three years of a downturn. It is longer than we've ever seen. It's the worst we've ever seen. Worse than 2008 and 2009. When you look at the length of the cycle, also keep in mind we were coming off 2021, which was the best of all years that ever, that we're probably never going to see again. That is coming off of COVID. There's PPP money. There's other loans. The banks were loaning money to, you know, smaller businesses, and there were funds available. They were coming off the highs of all highs. Their runway to stay around has been a lot longer than what the normal cycles we've seen in history. I don't know where that magical cutoff is. I also gauge this on how many times or how many phone calls Mike or I get or emails about people trying to sell a company right now. Right now, there could be all kinds of factors in play, but generally, my perspective is if a company is coming to market and trying to sell their company right now, we're still in the downturn. I mean, this has been going on for three years. That tells me that company is probably in some trouble. It is their, I do not know if it is their last effort to survive or not, but that activity picked up or has picked up the back half of 2024. There was a push, I would say, to try and get stuff done. There always is before the end of a year. There has been a little more activity here in the first quarter, per se. The volume of those calls tells me that there are still people out there. I mean, if we are seeing what we are seeing right now, Legacy Heartland, we are in the 90s from an OR perspective. If we are sitting in the 90s as a core Legacy Heartland, that tells me there are a lot of other players out there that are in a lot of pain. It has been painful. It has been painful for us. It has been painful for everybody. Some of them don't know their cost structure. They don't really know how much it costs them to run a mile of freight. When the customer comes to them and says, "cut your rate," they're willing to cut the rate because they don't know what their cost is. A lot of times, these guys are out running freight that's costing them more than what they're getting. We call that trucking for exercise. We don't truck for exercise. All you're doing is putting a bunch of miles on your equipment that you're going to have to replace down the road. It's going to cost you more to replace that piece of equipment down the road than when you bought it. You don't have anything to show for it. People are willing to do that because some people in our industry feel like if I'm not putting miles on the truck, I'm not making money, when in all actuality, by putting miles on the truck, they're losing money. I mean, it's a pretty broad general statement, but it's kind of some perspective of the industry. If we're seeing what we're seeing, we're not in a silo. I mean, that's what the industry is seeing. There's a lot of pain. You look at all the public carriers, their ORs in 2024, they all went up. Ours went up a little bit more than because of our acquisitions and Smith and CFI and not having them fully integrated into our operations today. We're still doing things behind the scenes with those companies. Not all of it's reflected in our numbers yet, but we haven't had any market help to help their network, help get new customers involved and they're introduced to them. We're sharing some of the freight at Heartland with them to get them introduced and hopefully get their, you know, get them introduced to the customer. They got to service the freight. It's all predicated on service. When you think about possibilities coming out of Mexico with tariffs and counter tariffs and all the other stuff that comes with that, I guess the two questions I had, you have a bit of a cross-border business now, I guess more than you used to, still not. Didn't have any before CFI, so. More than zero. It's more. Still not huge, but are you seeing anything interesting within that business just based on all the volatility and uncertainty? Maybe more specific to the core of the business, when you think about trucks and tariffs on trucks that are built in Mexico, is that something you guys are considering pre-staging? Have you already done that? Is it just you got enough and the fleet age is good enough and you're just going to kind of hold off? Is that something you can do strategically maybe with the OEMs to try to get ahead of that? Yeah, I'll start with Mexico. Before we bought CFI in 2022, we had zero exposure to Mexico. They were one of the premier kind of first ones to do truckload in and out of Mexico back in the 1980s. That was one of the drawing points for us to CFI when we bought them, was that exposure to Mexico. Now, grand scheme of things, 5%-10% of our total business is that. It's not a huge amount. With the tariffs looming, you know, that activity has slowed a little bit. You know, the shippers in Mexico are kind of sitting and waiting to see what happens. Some of them tried to push some of it out sooner rather than later, but it's kind of, we're starting to see it slow down a little bit till the whole tariff thing gets worked out. When you look at trucks and tariffs, whether the truck is assembled in Canada, Mexico, or the U.S., it does not really matter because there are parts coming from Canada, there are parts coming from Mexico, there are parts coming from the U.S.. It could get assembled in the U.S., but there are parts coming from Canada and there are parts coming from the U.S.. Somewhere in there, all these trucks that are getting manufactured in some way, shape, or form, whether it is where the truck is physically being built or a trailer is physically being built or the parts that are going into those trucks, are probably subject to some tariffs somewhere along the supply chain. It is yet to be seen how the OEMs are going to treat, you know, those tariffs when implemented and how that impacts the overall price of the truck. By the way, 2027, there is an engine emission standard that comes into play if something does not get pushed that will increase the cost of the truck as well. We have a question back there. Thank you. Two questions. I think I heard you correctly in that you're seeing a little bit better demand. I think you said that in terms of the ratio and the turndowns that you provided. How much of that is supply leaving the market versus some sort of uptick in retail demand, restocking, etc.? I mean, we all know that consumers have been spending on services over goods here for a long period of time. At some point, it's got to inflect a little bit. At the same time, in the background, I feel like the consumer is starting to be a little tapped out, you know, long in the tooth on spending, and that could come down. I'm just curious if you could unpack the demand statement you made earlier a little bit more. Secondly, from a CapEx perspective, where are you investing your money this year and next year, knowing that we're in a downturn? How do you put your money to work in the best place possible so that in a recovery, you're better positioned? Yeah, I'll start with the consumer one first. I mean, look at consumer credit card debt. I mean, when you say tapped out, I mean, there's a fair number of people that are tapped out. Breaking down demand versus, you know, the supply coming out, I don't have exact numbers. It's definitely a combination of both. I don't know what the split of that would be. If the consumer starts spending less, I'll go back to COVID. When COVID happened, people were at home. They were redoing bedrooms, bathrooms, landscaping, building a home office because they're working from home. All those things were goods on trucks or people at home in front of their computer ordering stuff off Amazon all day long. All that stuff moved things on trucks, which was good. You fast forward a year or two after COVID, and people decided to get back out into, you know, real life, per se. They started taking trips. They started going to concerts. The services type industry, airline flights, that stuff did not necessarily move product on trucks. The trucking industry started coming down, and that is where we have been kind of ever since then. When the talks are out there of the government, you know, digging into wasteful spending, efficiency, and all of that, I mean, the government is the biggest employer out there that we have got. If people start feeling skittish about their job in a government perspective, they are going to start cutting back. That is one aspect. What they're going to start cutting back on are those, what I would say, the services type stuff, the discretionary spending of concerts, cruises, vacations, those types of things. They're still going to buy groceries. They're still going to buy toilet paper. They're still going to buy cereal, you know, beer, those things. That's the type of stuff that we haul. Our freight, we believe, is still going to stay pretty steady for those types of goods that we haul. You may see a bigger impact initially from some of the services type industries. Your second question, I think, was CapEx. Our fleet age right now, our tractors is two and a half years. Our trailers is seven to seven and a half years. Still decent for the industry on trailers, but not where we want to be. At one point, we had our trailer fleet down to four and a half years. With the acquisitions of Smith and Millis, we inherited a lot of trailers that were older trailers. We would like to get that fleet age of the trailers back down. We have trailers that we are not using today just because we do not have a need to use them because of capacity. They are some of the older ones. If we can get a deal done on those, that will help us lower the age down. We do have some trailers coming this year that will also help us impact that overall trailer age. You cannot really give a trailer away right now because nobody needs a trailer because of not enough freight moving for the amount of capacity that is out there. We will continue to stay ahead of the tractors. We want to keep that two and a half to maybe a little less than that. We will look to see on pre-buy how many trucks that we buy ahead of the engine emission standards if that standard holds up. From a CapEx, I would say probably we are going to stay fairly consistent on tractors, but you could see us do a little more on trailers. Right now, our trailer ratio, we are heavier on trailers right now than we need. We will want to bring that ratio down. We will intend to bring that ratio down. That will be probably selling more trailers than we are buying and then probably using some of those proceeds to, you know, to stay ahead of the tractors, especially kind of not really knowing where the pricing of tractors goes into the future. How does that emissions get phased in in two, three years? Just what are the details around that? January 1st of 2027. Any truck that's built or sold after January 1st of 2027 has to have the new emission standards on it. You hear the term pre-buy. People, you know, this year and next year, some OEMs are trying to hedge their bets of everybody coming and flooding them in 2026 to buy trucks. They are staging it to say, you'll get a slot in 2026 based on the slots that you buy trucks in 2025. It is kind of a two-year look. There is a lot of water to go under the bridge in the next two years. We do not have a crystal ball on that yet, but it is something we are definitely going to stay on top of. We want to keep that fleet age down. You don't want that fleet age to start aging on you, then the maintenance costs start getting you. I got a last question. How much more expensive is a truck with a new emission standards engine in 2027 versus a 2026? What's that gap look like? I've heard anywhere from 15%-20%. And that's before any, that's on top of any kind of tariff, I would say, implications. So it could be more than that, depending on where tariffs go. We'll have to see if EPA is delaying 30+ decisions. I don't know if EPA 2027. We'll see. Saw that on the elevator on the way down. We'll see about that one. We did have some news break after all. We're a little bit over time, but Chris, just real quick thoughts. We've asked everybody about cargo theft and cargo security. We keep hearing that more from shippers and at conferences. Obviously it's not a trucking or a Heartland problem. It's a supply chain issue. Where does that fall in terms of, you know, the one items or the pain points rather for shippers in your conversations? Is there anything that the industry overall is working towards to help fight that, essentially? Yeah, it's definitely something that's been on the uptick in recent years. When people get desperate, they'll start shopping on semi-trailers. We just hope it's not ours. We have certain safety security protocol that we go through. We tell our driver to do every time. We're starting to see some of the cargo theft is in the brokerage type rings where a load will get brokered, that load will get double brokered and triple. People are intercepting those. I don't know how it all works, but they're intercepting the bills of lading and stuff. They go in as a carrier, pick the trailer up and kind of the bad actor saying they're somebody that they're not. Out the gate they go with the trailer. How we protect ourselves from that is we don't haul any broker freight. We don't take broker freight. We do not broker any of our loads. That is kind of our first line of defense, just do not do it. That being said, there are always loads that are in transit all the time where our driver parks. How they secure that load is definitely top of mind. Yes, theft is on the rise and it is something that you have to look at. It is all about educating your drivers and having good, sound safety and security protocol that the drivers are going to help you enforce. Okay, we are actually over time now, so we'll go ahead and wrap it up there. Chris, really appreciate you making time for us and for your thoughts on the industry and on Heartland. All right. Thanks for having me. Thanks for coming. Yep. Thanks for being here.