Good afternoon. My name is JP. I'll be your conference operator today. Welcome to the Knight-Swift Transportation fourth quarter 2022 earnings call. All lines have been placed on mute to prevent any background noise. If at any time during this call you require immediate assistance, please press star zero for the operator. Speakers from today's call will be Dave Jackson, President and CEO, Adam Miller, CFO. Mr. Miller, the meeting is now yours. Thanks, JP, good afternoon, everyone, and thank you for joining our fourth quarter 2022 earnings call. Today, we plan to discuss topics related to the results of the fourth quarter, provide an update on current market conditions, and share our full year 2023 guidance. We have slides to accompany this call, which are posted on our Investor website. Our call is scheduled to go until 5:30 P.M. Eastern Time. Following our commentary, we will answer questions related to these topics. In order to get to as many participants as possible, we're going to limit the questions to one per participant. If you have a second question, please feel free to get back in the queue. We will answer as many questions as time allows. If we're not able to get to your question due to time restrictions, you may call six zero two, six zero six, six three four nine. To begin, I'll first refer you to the disclosure on page two of the presentation and note the following. This conference call and presentation may contain forward-looking statements made by the company that involve risks, assumptions, and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors or Part 1 of the company's Annual Report on Form 10-K filed with the U.S. SEC for a discussion of the risks that may affect the company's future operating results. Actual results may differ. Now on to slide three. This chart on slide three compares our consolidated fourth quarter revenue and earnings results on a year-over-year basis. Revenue excluding fuel surcharge declined by 9.5%, while our adjusted operating income declined by 39.3%. GAAP earnings per diluted share for the fourth quarter of 2022 were $0.92. Our adjusted EPS came in at $1.00. These results included a $15.4 million pre-tax charge, which negatively impacted EPS by $0.07 for an actuarial insurance adjustment related to third-party carrier risk in our Iron Insurance business. On a year-over-year basis, lower volumes in the absence of a holiday peak season negatively impacted earnings. Now on to the next slide. Slide four illustrates the revenue and adjusted operating income for the fourth quarter in year-to-date periods in each of our segments. In an unusually soft fourth quarter, our largest segments proved their ability to operate efficiently. Our Truckload segment operated in the low 80s, while LTL and Logistics stayed in the mid 80s. Our Intermodal was impacted by weaker demand, as well as greater availability of truckload capacity at better service levels. Freight demand in the fourth quarter was well below typical seasonal patterns. While spot opportunities were very subdued and projects were infrequent as anticipated, general freight demand was softer than expected. We believe this was largely driven by the holiday goods pull forward earlier in 2022, an existing inventory overhang dating back to last year, where some products arrived too late for the season, and general caution around what retailers could expect from consumer demand. Weak demand pressured volumes and pricing, while ongoing inflation was a further headwind on operating income in most segments. The chart on the right highlights the percentage of revenue during the fourth quarter of 2022 from each of our four segments, as well as the percentage of revenue from our other services, which include our rapidly growing insurance, equipment maintenance, equipment leasing, and warehousing services. We are focused on improving service to our customers and reducing costs as we navigate a tough operating environment. We continue to work on diversifying our business and developing complementary services that bring strategic value to our customers and partner carriers. The next few slides will discuss each segment's operating performance, starting with Truckload on slide five. On a year-over-year basis, our Truckload revenue, excluding fuel surcharge, declined 7.2%, while our operating income declined by 36.5%, reflecting the comparison of an unusually weak fourth quarter of 2022 against perhaps the strongest fourth quarter we've ever experienced. Our Truckload business navigated the softness well and operated with an 82.7% operating ratio. Our efforts to reduce spot exposure and secure more contractual committed freight since the beginning of 2022 helped us maintain an adjusted operating ratio in the low 80s. During the quarter, revenue per tractor fell 8.6%, driven by a 3.9% decrease in revenue per loaded mile and a 4.5% decrease in miles per tractor. The decline in revenue per tractor, combined with inflationary pressures across our business, caused the reduction in Truckload operating income. Most notably, we see ongoing cost pressures in equipment, maintenance, and insurance. We continue to take steps to align our cost structure with the reduction in volumes. Having a diverse group of brands and services, including nearly 5,000 dedicated trucks, provides us with flexibility and strategy. For example, as over-the-road truckload volumes have softened year-over-year, our dedicated business has grown top-line revenue and improved margins on a year-over-year basis. Despite the soft market, our customers still value trailer pool capacity at scale, and we see this expressed through both our Truckload and Logistics segments. We continue to invest in our already industry-leading trailer fleet, which grew sequentially to nearly 79,000 trailers. We believe our scale in trailers is a competitive advantage and provides our customers capabilities that are extremely difficult to replicate. Now on to slide six. Our LTL segment continues to perform well and make progress on yield and network initiatives. For the quarter, revenue excluding fuel surcharge was $204 million, and we operated at an 85.5% adjusted operating ratio. This represents a 480 basis point improvement from the fourth quarter last year and only a 100 basis point sequential degradation despite demand softening from more than a typical seasonal step down from the third to fourth quarter in LTL. Pricing remains strong as revenue excluding fuel surcharge per hundredweight increased 13.3% year-over-year. The leadership at both AAA Cooper and MME were able to complete the system integration during the fourth quarter, less than 12 months since the acquisition of MME. This creates seamless connectivity for our customers while maintaining the culture and brands of each company. We believe this positions us to provide additional services to existing customers, as well as create new customer relationships. Our Knight and Swift brands have deep relationships with large shippers who in many cases deal with larger LTL providers. Creating a super-regional network in the short term and a national network in the long term will enable us to find opportunities to further support our existing truckload customers with LTL capacity. I now will move to slide seven. Our Logistics segment continues to perform well with an adjusted operating ratio of 86.4. Gross margin also expanded to 22.1% in the quarter compared to 20.7 last year. Overall revenue was down 42.2%, driven by a 28.9% decrease in revenue per load from lower spot market rates and a decrease in load count of 18.6%. Load volumes were negatively impacted by lower import volumes, particularly out of the West Coast ports. Our customers continue to value the power-only services we provide, which resulted in our power-only volumes feeling less pressure than our traditional live load, live unload activity. Our vast and growing trailer network allows our customers the ability to optimize their warehouse space and labor costs. Third, third-party carriers prefer power-only business because it saves them hours at each load and unload location, lowers their capital investment and risk, reduces their operating costs, and gives them access to freight they historically wouldn't be able to participate in. We continue to be excited about this business and have several technology initiatives ongoing that will improve the experience for our third-party carriers, as well as provide more seamless information internally and to our customers that will lead to more opportunities to utilize our equipment. I'll now touch on Intermodal on slide eight before turning the call over to Dave. Revenue decreased to 8.6%, driven by a 6.3% decrease in load count and a 2.5% decrease in revenue per load. Intermodal volumes are being pressured by the general freight environment and the current competitive position of the truckload alternative. Customers are leveraging the extremely low spot rates, quicker transit times, and better service in the truckload market. Labor within the rail network appears to be improving as we enter the first quarter, leading to improving transit times and more predictability for our customers. These improvements should help close the service gap between Intermodal and Truckload and support future growth for this business. I'll now turn it over to Dave. Thank you, Adam. Good afternoon, everyone. Slide nine illustrates the growth in our businesses that make up the non-reportable segment, which include insurance and maintenance under the Iron Truck Services brand, as well as equipment leasing and warehousing activities. For the full year of 2022, we reached $517 million in revenues, representing 69% year-over-year growth. For the quarter, we had a 32% increase in revenue year-over-year. As previously mentioned, the results of the other services were negatively impacted in the fourth quarter by an actuarial adjustment of $15.4 million pre-tax related to third-party carrier risk in the Iron Insurance business, which resulted in the $11.6 million operating loss for this segment. We are already taking steps to enhance our insurance program, which include a recent conversion to a new platform that we expect will lead to improved collections and more timely cancellations. We've applied rate increases to various lines of coverage that will bring underwriting results in line with expectations. These service offerings have found tremendous interest from small carriers, especially as we help them improve their cost structure, though later in 2022, we have observed the pressure of the weaker environment impacting these carriers, as seen through their difficulties paying insurance premiums and the practice of extending maintenance service intervals on their equipment. We expect to continue growing the revenues and income from these other services over time and believe this effort supports our ongoing diversification objective. On to slide 10. This slide illustrates the progress of the intentional changing of the composition of our business into an industrial growth company. The chart on the left shows the percentage of adjusted operating income from each of our segments and our other non-reportable services since the Knight and Swift merger in 2017. We're pleased to report meaningful contributions in earnings from each area. These diversification efforts are intended to make us a less volatile company, and we expect will help us mitigate the downside through truckload freight cycles. Our Truckload earnings now represent approximately 65% of consolidated earnings, which is a meaningful shift from where we were in 2017 following the merger. This reduction in the percentage of our earnings coming from Truckload has been achieved while we significantly improved our Truckload earnings from a 2017 full year combined pro forma Knight and Swift earnings of $319 million - $748 million for 2022. The chart on the right shows our annual adjusted earnings per share since the merger. Our adjusted EPS has moved from $2.16 per share in the first four quarters following the merger to $5.03 per share in 2022. Moving to slide 11. Strong earnings have driven increases in our free cash flow since the Knight-Swift merger, reaching $819 million in 2022. Year- to- date, we've used cash to increase our dividend to shareholders by 20%, repurchase $300 million worth of shares, and paid down $395 million in long-term debt and leases. Since the 2017 merger, we've invested $1.6 billion in acquisitions. Making acquisitions remains a high priority, and our strong cash flow generation and leverage ratio of less than 1.0 provide us with ample capacity for M&A opportunities. Our balance sheet is strong, and we're well-positioned to invest in organic growth, pursue acquisitions, purchase more shares, increase dividends, and/or pay down debt. We are constantly evaluating market conditions to maximize our use of cash to create value for our shareholders. On slide 12, we demonstrate the return on net tangible assets, which remains a key measurement for us. In 2022, we achieved a 19.0% return on net tangible assets. Our goal is to improve this measurement by focusing on three key areas, growing our less asset-intensive businesses. Two, acquiring and improving businesses. Three, expanding margins in our existing operations. We've achieved synergies and improvement in every business we have acquired, be they warehousing, asset-based truckload, less-than-truckload, or truckload brokerage. We believe our focus in these three key objectives will leverage our core competencies in areas of opportunity that are unique to us and will allow us to continue to generate significant returns to our shareholders in the long run. On slide 13, we provide an outlook for market conditions as we begin 2023. We expect the current softness will persist through the first half of 2023, based on indications from shippers on work, that are working through their inventory overhang. This soft environment, combined with ongoing inflation in equipment, maintenance, and insurance, and rising interest rates will increase the pressure on carriers, especially smaller and less well-capitalized carriers. These factors will most likely accelerate capacity attrition in the coming quarters. I'll now turn it back to Adam to cover our 2023 guidance. Thanks, Dave. On to our last slide here, slide 14. For the full year 2023, we expect adjusted EPS to be in the range of $4.05-$4.25. Last year, we expected the first half to be strong and then cool off in the second half, which is largely what happened. In 2023, we expect the opposite, a more challenging environment in the first half, before we start to see a recovery to a more typical freight demand leading up to an improving Q4 peak season. Over-the-road truckload contract rates will be pressured with few non-contract opportunities until the latter half of the year. We expect these non-contract opportunities, combined with some return of peak season volume, to result in rates inflecting positive year-over-year in Q4. Overall truckload revenue per mile should be down mid to high single digits in Q1 and trending to be positive by low single digits in Q4. Dedicated rates should increase in the low single digits for the year. Truck count should remain sequentially stable throughout the year, with miles per tractor inflecting positive year-over-year by the middle of the year. Our LTL segment is expected to see slight improvement in revenue with relatively stable margins. Sequentially, Logistics revenue per load should drop in the first quarter before increasing sequentially throughout the year. We expect volumes to follow a similar trend. Gross margin will compress as the freight market picks up, pushing Logistics OR to climb into the high 80s to low 90s. Intermodal revenue per load and margin will deteriorate in the first half before improving again in the back half. For the full year, we expect the operating ratio to be in the mid 90s. Revenue and op income in our other services will increase, driven primarily by improvement in rates and new customer growth in our Iron Insurance business and increased volumes in warehousing. Inflationary pressure will decelerate as labor loosens and equipment availability improves. Gains are expected to be in the range of $10 million-$15 million per quarter, and our CapEx is expected to be in the range of $640 million-$690 million. Our tax rate is expected to be around 25%. Interest expense is also projected to increase from where we were in the fourth quarters as rates continue to climb. That concludes our prepared remarks. JP, we will now open the line for questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press star and the number one on your telephone keypad. Again, this is one on your telephone keypad, star one. We'll pause for a moment to compile the Q&A roster. Your first question comes from the line of Jack Atkins from Stephens. You may ask your question. Okay, great. good afternoon, Dave and Adam. Thanks for taking my question. Hi, Jack. Hi, Jack. I guess, maybe a two-parter here, but, you know, Dave, I'd be curious if you could maybe comment a bit on the fourth quarter to first quarter seasonality, given that, you know, the fourth quarter of 2022, to your point, was anything but peak. How would you sort of think about that trending sequentially, if you could kind of help us set our expectations there? I guess just to kind of follow up on your comment about, you know, what your customers are telling you about the trends and trajectory of their businesses, what's giving you the confidence to think that, you know, we're gonna see a trough in sort of freight fundamentals in the first half of the year, and that we can kind of build back in the second half? If you could just expand on those two items, I'd appreciate it. Thank you. Okay. Thank you, Jack. Yeah, I would say that from fourth to first, this is one where the step-down is significantly lower than what we're used to. I would say that the freight market continues to show signs of life here as we go through January. You know, typically you would see quite a bit of seasonality in the fourth quarter, which then changes with the holiday in the rearview mirror moving into a first. We, you know, we do expect first to be, you know, seasonably softer than a fourth, that they always are, but there's a good chance that after we complete the first quarter, we'll look back and this might have been the most benign change sequentially from a fourth to a first. I would say that some of what gives us some indications of how this will play out, maybe from customers would be the fact that in the fourth quarter, so much of their holiday inventory had already arrived. Some of it had already arrived 10 or 11 months before, and it kind of sat around. It just barely missed the holidays. It seemed that by the time October started, the fourth quarter freight was already had already arrived and was largely in position. The so that explanation made sense to us, and so naturally our next question is, well, how long are you gonna continue to have this inventory overhang? The general consensus, almost unanimous from customers that have given us this kind of, or have given us feedback about their inventories, has been that by the time they get through the spring, things are caught up. That makes sense. I mean, freight was flowing rather normally by the time we got to summer of 2022. Throughout the summer, there wasn't the traditional delays on imports. The import volumes definitely support the idea that this freight has already been here and came early. What we expect is that through the first two quarters of this year, we'll see this softness as a result of freight that's already moved, and then we start to move back into a more normal cycle. You know, consumers are hanging in there. Everybody's been trying to figure that out. It's pretty remarkable that we've had the kind of performance as an industry. Certainly for our company, it's seems remarkable to have that kind of a performance in a fourth quarter that really didn't have the seasonal uplift. I think it tells us really, the, or it's evidence of the lack of oversupply that came rushing in as what, as has normally happened in previous cycles. We just didn't see that in 2021 and in 2022. Well, in 2020 either, 'cause most of 2020 was really good. In 2020, 2021, and the first half of 2022, when we had still a very healthy environment, we just didn't see the oversupply. I think that's partly why you see our asset-based truckload business put up an 82.7 operating ratio in a fourth quarter that is a year past peak. I mean, the peak was fourth quarter of 2021. Certainly that wasn't because of demand. I think it tells us how tight supply really is. When you fast-forward that, Jack, and you think that we're gonna burn off this inventory and we'll be back to a normal goods flow, our flow of goods come, call it summer through the back half of the year, without the expectation that there's incremental supply added. In fact, we believe supply is leaving, has been leaving, and will continue to leave over the next two quarters. That gives us confidence that we'll see a much different environment in the back half of 2023. Yeah. Just to add to that, Jack, I mean, just looking at historical data of how cycles have typically trended, it's unusual for rates to be down year-over-year for more than four quarters. I think that's what gives us confidence in looking at fourth quarter of this year where rates could inflect positive. I think we've had a lot of dialogue with many of our customers. Many of those are the largest retailers in the nation, a lot of largest CPG shippers in the nation. You know, independent conversations which would support, you know, just their buying habits and how they change pretty dramatically in the fourth quarter and even into the first quarter. In all those conversations, the expectation is for those ordering patterns to begin to normalize and to see those volumes really begin to pick up into that June and July mark. I think it's not only just our view of the market looking at, you know, historic data, then our own information, but also through the discussions with our customers. Okay. Thank you again for the time. Your next question comes from the line of Tom Wadewitz from UBS. You may now begin. Yeah, great. Thanks. Good afternoon. Dave, you talked a bit about this in your response to the first question, just really on the cycle and how you see it playing out. I guess another kind of angle on that topic, do you think there are reasons why shippers may behave differently in a current freight downturn compared to other downturns? I mean, truckloads are highly fragmented. It's kind of hard to get my arms around the industry behaving differently, maybe like the largest trailer pool players behave differently. I'm just trying to, you know, get a sense of, you know, if there's not a bigger downturn on rates or, you know, what could be partly shipper behavior is different or even large carrier behavior is a bit different. Yeah, that's the question. Thank you. Thanks. Thanks for the question, Tom. I would say, you know, one thing that stands out that's a different behavior than what we've seen maybe historically or in previous cycles, is how well contractual rates have hung in there and what the demand for trailer pools has been. I think that, where you see that showing up in our business is how well we've held on to our rate per mile. Now, of course, you know, we try to anticipate the market many months, many quarters in advance. Ideally, we're somewhere between six and 12 months ahead of schedule all the time in how we anticipate and plan. This time last year, we were clearly increasing our commitments and moving away from the spot market. That, of course, has served us well, as you see in the results. When you look at our Logistics business, for example, you know, one that had an 86.4 operating ratio, despite the fact that load volumes were down almost 19%. You got to remember, you know, when you have a logistics business, but you also have such a large asset-based business, you know, there's going to be probably a little support. Normally, the loads would flow the other way, but there might be a little bit more support that business. You look at our power-only volumes, those were down 14%. Our gross margin continued to be very strong, 22.1%. There's some value that's been created there. There's customers giving us opportunities when I would say other logistics firms, you know, are struggling to break even. We've been able to enjoy nice margin, hold on to volumes, and I think that's because we create more value for the trailer pool. I think those are connected. I think we see that in our Logistics. We clearly see that on the asset-based side of things. I do think that's a little bit of a different, that's different behavior in the past. I mean, if we go back to pre-ELDs, the playbook for this kind of environment was very predictable. You would see shippers would move towards very large non-asset-based brokers who would come in, offer, in many cases, double-digit rate declines. They would win massive volumes. Then they would execute. They would go find anybody and any carrier that could haul those. There were people that were willing to do that at discounted prices, given the difficulty in the market. In many cases, it appears that some of those smaller carriers that maybe didn't have ELDs would figure out how to run more miles to stay alive in difficult times. Well, we have ELDs today which regulate and are effective in enforcement of the hours of service rules. You can't just go extend the day. You can't run more miles to make up for the fact that maybe you're not making as much. Likewise, our shippers, they can't just rely on that flexible group to wait around to be live loaded and live unloaded when a truck and a trailer and a driver show up, and the warehouse has to figure out how to stop what they're doing and unload it, as opposed to. For us, we can drop the trailer, and they can get to it, hopefully within a day or two. In this ELD world where you can't extend the day, if you will, they have to be paid if they're detained. If you're detained more than two hours, even the smallest of carriers have to be compensated for that. That changes the economics tremendously. So I think from... Those are just a couple of reasons why we think it creates so much value. We're definitely seeing that hold through. I think that if you look at the last 12 months of contract rates, not just for us, but based on some of the industry data, what you'll find is those rates are not down much. I mean, you know, somewhere mid single digit rates, generally speaking, and that's over a very broad group of a very fragmented industry. Whereas spot rates declined every single month for 12 consecutive months in 2022. That's, that's never happened to have such a steep decline in spot rates. Those rates now are showing signs of a bit of a dead cat bounce, if you will. I mean, they're just kind of bouncing maybe along the bottom. We're at or near the bottom on spot rates, and now the question becomes, Tom, you know, when do those rates start to crest up, and when do we see the inflection point? If you look at the last couple of cycles, in 2017 it was, it was in July or August 2017 that spot rates came through the inflection point from the bottom and came through contract rates, and then they spiked and they hit their peak by August of 2018, and then they were back down. Whereas in a post-ELD world, we saw this happen in the June, July 2020 is when spot rates came off the bottom, and they intersected contract rates that were higher at the time. Those rates continued to move forward up until January 2022, which is when spot rates officially peaked before they started to decline for the 12 consecutive months, as I mentioned. I think now we find ourselves where those spot rates have come off, contract rates have really held in there, probably in large part to the value of trailer pools. Now those spot rates are poised and if not, have started to make their way back up to an intersection point. What we know is once they intersect, we begin to enter a period of positive rates, not only in spot rates, but start to see positive contractual rates. The question becomes how long do you go until that peaks again. That has everything to do with broader economic demand and to what degree do carriers oversupply their fleets by buying too many trucks and trailers, which I will tell you for the, I don't know, third consecutive year, you know, purchasing new equipment still is on allocation, it is not a free-for-all, and the cost is much higher, to say nothing for the impact of interest rates. Tom, probably a 10-pound answer for a five-pound question, but that was some feedback. There you go. There's a lot to work with. All right. Thanks for your time, Dave. Appreciate it. Thanks. Your next question comes from the line of Todd Fowler from KeyBanc Capital Markets. Your line is now open. Great. Thanks. Hey, hey Dave. Hey Adam. Thanks for all the detail and the thoughts on the guidance. Maybe just to pick up, and Adam, I think you touched on this in the first question. Dave, you touched on this a little bit to Tom's response. You know, thinking about your commentary on revenue per mile and the high single-digit declines to start the year and then inflecting positive, how do you have that parsed out between contract and spot? You know, what are you seeing right now on kind of the contract renewal pricing side? How is that working through the numbers as we move through the revenue per mile assumptions for the year? Yeah, I think so, Tom, there's, or Todd, sorry. There's very little spot opportunity in our expectation in the first half of this year, so most of that decline would be a result of contract renewals. It's still early on in the bid season, we haven't had too many final awards, so those declines are more anticipated than that we actually have received. We're still in the early phases of that and having good dialogue with our customers. Our expectation is in the back half of the year, some of the improvement in rate will come from, you know, contract renewals, but more or less the spot rate improving and in some of the projects that we typically participate in the fourth quarter. Adam, just to follow up on that comment, you know, on the contract side, you know, what is a reasonable expectation for contracts this year? I mean, just given the spread right now between spot and contract. Yeah. Again, we're still kind of feeling it out through the bids, so I don't want to put a number on that right now. We're still kind of understanding, you know, it really depends, Todd, on when we renewed the contract with that customer. I think the early parts of the bid season, that number will be larger, the higher single-digit could be lower double-digit, and as the bid season progresses, that number, you know, gets reduced. Yeah, Todd, it's hard for us- Yeah. To just generalize the whole thing because we have, we have pieces of business that still need to be increased in rates because of how it works and how it fits into our network and the fact that we continue to see inflation. We do have other parts where sometimes we have an opportunity to maybe make a concession, help a customer who's trying to hit a budget target or goal if, if things are working in a super efficient way, and perhaps to Adam's point, the time in the cycle when that rate was renewed. This is not an across the board answer that rates are automatically down. That's just not the case. Yeah, 'cause I think we mentioned that some of our dedicated business, I think that's what Dave's alluded to, will have to increase because of how it's performing. I think that's, I think, a typical hedge in an environment that we're faced with when you have OTR and dedicated, they perform differently in these type of environments. Understood. It's helpful context, just really trying to think about that expectation for that positive inflection in the fourth quarter, which certainly would seem to be positive. I really appreciate the time and the thoughts tonight. Thanks. Thanks, Todd. Thanks, Todd. Your next question comes from the line of Ravi Shanker from Morgan Stanley. Your line is now open. Thanks. Good afternoon, gents. I think Dave, you said, I think it was about a year ago now that you think raw EPS has a 4 on it, and clearly your guidance for the year implies that you're comfortable above that level. If I were to kind of just, like, take a step back and listen to what you've been saying on this call so far, kind of talking about the cycle actually not being as bad as prior cycles and the mid-year inflection, everything else, it doesn't really sound that bad. In that context, kind of the guide seems kind of punitive at this point, especially given that you have a really easy fourth quarter comp in 2023. I'm just thinking of, like, are there any puts and takes in some of the non-TL segments that we need to keep in mind? Kind of, you know, what are some of the, kind of, you know, the moving parts and maybe the bull case or the bear case, that, you know, that can get you to a higher number than what you guided to or a lower number if the cycle turns out to be much worse than we expect? I mean, the full truckload still represents 2/3 of our earnings. The full truckload is by far the piece that moves the needle the most. You know, when we look at what we would expect to earn in the first half of the year, you know that's going to be less than 50% of what our annual guidance would be. You know, I don't know if it's 45%, 55%, you know, 45% in the front half of the year, 55% on the back half of the year. It's not like, it's not like we're looking at a back half that's a total Hail Mary in order to get over $4 a share. I will tell you that for us to achieve more than $4 a share would be a tremendous accomplishment, recognizing that here in 2022, we just earned just over $5 a share with, you know, such a tremendous environment. For us to adapt and yet have a stock that trades based on being a pure cyclical, well, a cyclical would not react that way. We would be countercyclical to earn more than $4 a share. It isn't going to be easy, but our model guides us there or we wouldn't put it there. I think, you know, one factor that we have working for us is the LTL portion of our earnings. Boy, we just couldn't be more happy with that group. I mean, that's a group that, yes, LTL is feeling as an industry is feeling a little bit of pressure, but it's nothing like the volatility that you see in what happens with rates on the full truckload side. It's a business that for us, we just continue to make incremental progress. That's a bit of a factor that's out there that, hey, we're new into it and we want to be a little bit cautious. In this fourth quarter, in addition to performing with an 85.5 OR that's almost 500 basis points better than the 90.3 a year ago, that's a business where we were able to take the MME brand and business that's a 100-year-old company, and our leaders at AAA Cooper were able to successfully integrate a new backend system that really touches and affects 100% of the business. It was tremendous modernization to do while still running and working the business. That took effect in October and has continued to be modified. There will continue to be synergies that will roll out. I mean, this, we didn't use dimensioners as an example at MME before the acquisition. Those investments that have been made that will continue to take effect. I should note, Ravi, that that business revenue was up almost 15% with adjusted operating income up over 70% on a year-over-year basis. That's diversification. That's why we're in LTL. That's why we like it. We continue to find ways that we can bring synergies between TL and into LTL. We're still working to fill out the country and geographically to have a nationwide offering. That will continue. That will continue to help us. There's a lot of people, I think, Ravi, that aren't sure we can earn $4. Just if I look at what some of the guidance and how the. I mean, the stock seems to be tied to, us earning a lot less than that. Hey, we've done our homework in terms of where we feel like our guidance is going to be best on or based on the best information we have available now to try and predict the future. That's the range we came up with. Yeah. Ravi, I think, you know, last quarter I went into greater detail of how each segment would need to perform to achieve, you know, that $4 mark. You know, I think as we look at our guidance, we're not going to that detail on our guidance today. You know, it fairly aligns there. I think maybe the one outlier is, you know, Intermodal. We talked about that being a mid-90s operating ratio. We've just seen some challenges there on volume, especially with the better availability of truckload capacity and the service that that performs at versus Intermodal. So that'd be one area that would be maybe off from what we would've called out last quarter. Generally speaking, our segments will perform as I laid out. You know, we'll still have to see how everything, you know, plays out in this bid season. You know, we just have a tremendous amount of confidence based on, you know, how these cycles have developed historically and the communication we're having with our customers. Understood. Thanks both. Thank you. Your next question comes from the line of Ken Hoexter from Bank of America. Your line is now open. Hey. Great. Good afternoon, Dave and Adam. If I can just kind of maybe follow up on that $4 floor and the stress test there. Just maybe talk a little bit about the truckload side, you know, moving back into the... Does that go to mid upper- 80s in your thought? I guess specifically confidence in the gains. You've got $10 million-$15 million. It seems to add $0.10-$0.15 to the targets which could put some pressure alone, I guess, on that floor. Then on the Intermodal side, any comments on the, you know, now transition of Schneider over to Union Pacific? Obviously they had some service issues, how your service has been, and is that part... I know you mentioned kind of the mid-90s that, you know, can you see deterioration if they start getting maybe better access to the yards or thoughts on Intermodal? Sure. I'll start on your truckload question. You know, last quarter I talked about in a difficult environment, the Truckload segment as a whole, which would include our over-the-road and our dedicated business operating in the mid 80s, and that would be our expectation for the full year, with that being a little more challenged in the first half of the year and then improving into the back half, particularly into second quarter. Or sorry, the fourth quarter. As it relates to your Intermodal question, you know, thus far there hasn't been much impact with the conversion from Schneider from the BN to the UP. I think we watch our service closely. I mean, there's certain areas where we certainly can improve the service, and I don't know that it's related to the Schneider conversion. I think just the challenges that we've been dealing with some of our rail partners across the board. It does seem like the rail fluidity is improving. Rail labor is more readily available, we have, you know, confidence that will continue to improve. I think our customers have seen that. I think we've improved service dramatically with certain customers where we expect to receive large awards this year. We're confident to be able to build that low count into the back half of the year. I think the first half is still gonna be a bit of a challenge given the environment we're currently in. Adam, can you just wrap up on the gains on sale rec, 'cause that's such a big, I guess, swing factor in that range. Yeah. Yeah. Yeah. I mean, we had the gains coming off meaningfully from where they were last year. You know, we have a good purview into the used equipment market. Hey, even in the first quarter when spot market's been as slow as it has been, which would typically mean that you've got, you know, small carriers not buying equipment, we're still seeing activity. I think that's a result of just very lean inventories because the OEMs have still, you know, been, you know, challenged to fulfill everyone's orders. I think most of the large carriers have continued to age their fleet out. That's just limited the inventory of used equipment. What we are selling is still at healthy margins. We don't see that changing dramatically throughout the year. Great. Appreciate the time and thoughts. Thanks, Ken. Your next question comes from the line of Bert Subin from Stifel. Your line is now open. Hey, good afternoon, and, thank you for the question. Hi, Bert. Hey, Dave. Hey, Adam. If I look at slide 14, I don't wanna belabor the point, but I think it's obvious, you know, thinking about your $4 plus earnings guidance, you know, that implies about a 100% earnings power expansion, which is obviously a tremendous feat. I think people are trying to get their arms around that. If I look at slide 14 and those guidance assumptions, where would you say the greatest uncertainty is in your mind as you go through them? I mean, it's tough to say. I mean, the guidance is kind of our best guess based on what we know in the market today. I don't wanna say it's aggressive. I don't wanna say it's conservative, this is what we feel is kind of down the fairway with the knowledge that we have today, Bert. It'd be tough to point out one of the data points as, you know, being more uncertain than another. Well, if Washington somehow messes with tax rates, that would be the biggest. We'll start there. If we can't stay at close to 25% tax rates. Does that help you, Bert? Yeah. Yeah, I think that's gonna move the needle. So maybe- Yeah. All right, go ahead. Realistically, Bert, rate per mile. If rate per mile. Weird things happen with rate per mile, obviously that's a big lever to move. You know, we're not sitting here looking at a market that's about to slow. You know, spot rates peaked 13 months ago. I mean, so we are, we already are well into this. If you can predict what's going to happen with rates, you know, you can predict a lot of things. Nobody knows exactly how that's going to go, but we've seen significant resiliency in our rate per mile through this year as a result of the way we've built the business and the way we do things, but also the relative value that we create, you know, compared to other folks. You'd be hard-pressed to go back and find any other cycle where you went peak to trough in longer than 18 months. You just don't find it. I mean, often it's, you don't see the double digit. Or you don't see the declines in over 12 consecutive months. You'd be hard-pressed to find peak to trough in greater than 18 months. This one, we're already over 12 months into this, and this one was not precipitated by a oversupply of equipment coming into it like every other cycle was. That gives us a little bit of a glimpse into what we can expect both in contract rates as well as spot rates that we think will rebound in the back half of the year. But I mean, that would arguably be the biggest lever of, in the guidance. Dave, maybe just put another way, you know, Logistics, the manner in which you operate it is certainly different, you know, from several years ago, and LTL is, you know, new business altogether for Knight-Swift. I guess my question is maybe how do you get comfortable with those assumptions? Because, you know, Logistics OR, you know, you're implying sort of low double-digit to high single-digit margins, which would be, you know, fantastic, particularly in a bad year. And LTL, you know, somewhere in this sort of, you know, mid-low teens range on margins. You know, both would be really good and haven't really played those out through a down cycle, at least in their current form. I know you've talked about your models sort of consistent. I'm just curious, you know, are those not... There's not a ton of uncertainty there for you, it's more on sort of how contract rates play out? No, I mean, I would say there's less uncertainty in the LTL world. I mean, it performs just so much more consistent than full truckload does. We have a bit of a secular story on top of what's going on in the industry. That's. You know, the secular story just has to do with the kind of synergies and opportunities we have, and what can come from a super regional that can connect large portions of the country and allow us to compete in some of the national arena already. The other side to that, I would tell you, wages continue to go up. LTL industry wages are on pace for probably about a 5% increase to the wage of those drivers. That's different than LTL or different than full truckload. I think you're going to continue to see LTL rates have to go up because their largest expense continues to be inflationary. On Logistics is gonna be volatile, the reality is our Logistics business, you know, if I look at just this most recent quarter, it produced $23 and $500, 000 of operating income, of which we're grateful for all of it. In terms of moving the needles, moving the needle on our entire, nearly $8 billion parent company, that's, that, you know, that isn't, that isn't the one that, that isn't the biggest lever. I'd add on the Logistics front, Bert, I mean, we do have that moving up, you know, from the mid 80s, which we accomplished in 2022. We note here in the guidance high 80s, low 90s. Just if you look at the absolute performance for 2023, it would be very good compared to really anybody else in the market. It's just we're coming from such a strong position in 2022. We do expect to give up something there. Now, I mean, as you know, in Logistics, your largest cost is purchased transportation. That's going to be variable and move with rates. Generally speaking, when you're doing power-only loads, that's, those rates are less volatile. Typically hold in stronger because there's less competition in the brokerage market, yet you're buying capacity in the open market. The Gross margin there are a lot more resilient than your pure live load, live unload opportunities. Thanks so much. Thanks. Your next question comes from the line of Amit Mehrotra from Deutsche Bank. Your line is now open. Thank you. Thanks, operator. Hey, Dave. Hey, Adam. I guess I just had a couple quick ones. One, Dave, how likely is it, do you think, for Knight to do another acquisition this year? Kind of like a meaningful acquisition like AAA, that can really move the needle in terms of earnings contribution. Adam, you know, if we look at the fourth quarter results, I wanna go back to maybe Jack's question around the first quarter. Because in the fourth quarter, we didn't really see a crack in yield on a loaded mile basis. You know, it was down like 1% sequentially. It's probably gonna be down like 10% sequentially in the first quarter. I'm trying to reconcile that dynamic with Dave's comment initially saying that you should see like not much of a seasonal, a very counterseasonal move, 4Q to 1Q, because if I look at 4Q, we just didn't see the crack in yield that we may be expecting in the first quarter. It would be just helpful, Adam, I think if you could help us, you know, frame like what is the actual decline you expect in truckload profits from 4Q to 1Q, just given that dynamic on yield. Amit, from an M&A perspective, you know, we sit here right now at about a 0.97 leverage ratio. We're well-positioned to act. Our number one priority, clearly is LTL. Those take time, and you have to have the right timing in some cases for that to work out. In between those, we look at a variety of companies, and as we alluded to in our last quarterly call, truckload carriers are attractive to us. Because we have so much comfort, we have, we think an enviable track record with that, and we know it, we love it, and we wouldn't be afraid to do truckload deals as well. We think we have the bandwidth to be able to do both. We remain very interested and I would say very active in the M&A world. Yeah. Your second question, Amit, you know, when I look at 2021 versus 2022, I mean, you know, the fourth quarter there was unbelievable in 2021 and, you know, led to a big step down, I think almost $0.25-$0.26 a share, you know, into Q1, which Q1 was still strong. Q4 this year, we are hauling freight in just normal course. We didn't have projects, we didn't have spot opportunities. Usually as you transition from Q4 into Q1, you don't have a lot changing in that freight dynamic. Now, you have bids that you're working through, but many of those bids aren't effective until you go into probably early second quarter. Some will be, you know, later in the second quarter. As the bid season progresses, you're probably complete by, you know, probably mid third quarter. Is rate gonna be pressured Q4 to Q1? Probably. I don't know it's to the extent that you quoted, but I don't see the normal step down you would see from a Q4 where you have project business, you have robust spot market, and then you move into Q1 where you're just, again, moving freight in the normal course. The dynamic hasn't changed that dramatically. adjusted profits in trucking went down 18%, you know, 4Q 2021 to 1Q 2022. Are you basically saying that it's gonna be down significantly less than that as you move from 4Q 2022 to 1Q 2023? I'm saying overall for the business, I wouldn't see the same step down in profit from Q4, the same percentage step down in profit from Q4 to Q1. Got it. Okay. That's very helpful. Thank you, guys. Appreciate it. Yeah. Thanks, Amit. Well, JP, we appreciate your help as our operator. Everyone, thanks for joining our call today. We apologize to a little more than a half dozen who were in the queue to ask questions we didn't get to. Welcome you to reach out to us directly, and hope everyone has a great evening. This concludes today's conference call. Thank Thank you for participating. You may now disconnect.