Let's go ahead and get started with the next presentation. For those that don't know me, my name is Felix Boeschen, Senior Machinery and Trucking Analyst here at Raymond James. Today we have Schneider with us. With us, company CEO Mark Rourke, as well as Group President, Jim Filter. You know, before we get into more of a true Q&A, fireside type format, I was just hoping, Mark, you could maybe give a bit of an overview of Schneider. You know, who you are, what you do, and some of the key end markets that you play in? Great. Well, thanks for having us, Felix. Schneider is a large, diversified transportational logistics provider. Our primary end markets is that we're serving the consumer side of the economy and the industrial side of the economy, the things that move in the back of 53 ft containers and trailers. As such, we are largely centered around retail, which is a big part of the consumer economy, everything from big box to value high value dollar, or excuse me, extreme value retail, like dollar stores, and then especially folks in between, but also have a very big presence in consumer products. The things that you're picking up at the store every week or so. On the industrial side, we serve automotive, we serve the chemical industry as feedstocks into the manufacturing process, paper goods. We get a very good view, broad section view of the economic activity across the country and Mexico. Those are our primary service areas, Mexico and the domestic United States. Strategically, we look at ourselves really serving in three primary segments, Full Truckload, which is a component of both one-way network type configuration. Someone just has an order from A to B. Increasingly, our business has shifted to the dedicated contract configurations, where we are aligning ourselves with customers on some very specialty service, either very high service levels, can be very focused around specialty equipment, where you're doing something besides moving product from A to B, the driver's doing some value-added service. Now that is where we have 60% of our Truckload's businesses now in that configuration. The reason we like that, those are 3-5 year contracts. They are very deep and sticky with the customer, very high renewal rates. As you think about the labor market today, drivers prefer that type of work because it's predictable work, predictable schedules, and generally they're home on a more frequent basis. Truckload is our largest segment and represent about half of our earnings. Then we're one of the very large Intermodal providers, where we use our rail partners on the middle mile to serve the longer length of haul. We'll get a chance to talk more about that because went through a big strategic shift there. The tailwinds in that business, what we like is, it's favorable economics for the customer because we can leverage where truck is effective and where rail is effective, and it's got a tailwind because of the emission reductions and the carbon footprint pressure so many of our customers are under, and there's no better way to reduce emissions than to convert from over the road to Intermodal. Our third segment is where we operate on behalf of our customers, but it doesn't necessarily have to be our truck or necessarily our trailer. We are serving a Logistics and Brokerage function where we can grow our earnings and revenue without investing as much capital to do that, but still add great value to the customer, helping them solve their transportation challenges. The first two segments largely focus around trailer pools with large to mid-size shippers. What our Logistics business allows us to do is capture the long tail customer, the small shipper, in a more economical fashion, digitally. We collaborate across all those segments commercially, but we run those very separately because it takes different skills and different ability to serve the customer based upon those various service offerings. Perfect. I was hoping we could start maybe big picture. If I look at the Schneider sort of portfolio and maybe from a, from a modal exposure perspective, you know, I think you mentioned Truckload's about 50%, and that includes obviously one-way plus dedicated. Correct. The other half of the business, Intermodal Logistics, has really grown as a percent of the total pie. I think it's up from 30% or so five years ago. How do you think about that mix long term at Schneider? Is 50% the right level? Do you wanna be more asset light? Just help us maybe understand how you manage the business in that light. Well, you're right, Felix. From the time we went public in 2017, our portfolio has transformed, and very purposefully, to allow us to be able to serve across multiple modes, help the resiliency of the business, but also reflect how we can grow earnings and revenue without having to always put a truck and a driver in a spot. Our Intermodal Logistics allows us to grow with less capital intensity. I would tell you we're probably a little ahead of where we thought we would be at this juncture. We're really pleased at that mix. If we even stayed here and just grew the segments in a proportionate way, I think we would be happy with that. We would consider ourselves right now not capital constrained if we can hit our hurdle rates. We have a bulletproof balance sheet, dedicated is really uncapped what we think we can grow there. Our Intermodal business, we've throw out goals there to double that by 2030. Logistics obviously is a more of a technology and a digital play for us. We've been growing that rapidly. That's been growing at about a 15%-20% CAGR for the last 5 years. We continue to look for ways to do that. I think as we sit here today, we think we got a terrific mix. Doesn't mean we won't ebb and flow as the markets- Right Develop over time, but we don't feel we're misallocated on capital or we're misallocated relative to that mix, and they're all investment grade. Yeah, that's the key, that they're all investment grade, so we're not holding anybody back. We wanna make sure that we're continue to invest and continue to grow all three segments. You know, you mentioned trailer pools in your prepared remarks, and I thought, Mark, you said something really interesting on your last earnings call. You said you want to be a more trailer-centric organization. Can you help us understand what does that mean? Well, you know, what we can provide as a large trailer provider to our customers is they're looking for efficiencies in their operations at the warehouse, at the distribution center, or even at their end customer, delivery. That means a drop and hook operation. We can feed a trailer pool, and the customer can bring the trailer in and out of their location when they load or unload it at their convenience versus having to be there at a specific time because that's when we arrive. What that's allowed us to do is not only run our operations more efficiently with our company assets, but we've introduced this power only concept where we bring our trailer to bear. We can accept the order in a very seamless and easy way from the customer standpoint, and then we can determine if it's a company driver, owner-operator or a third party. That's given us a little bit of a bridge between our asset-centric truck business and our Brokerage business and allows us then to grow share and do so by leveraging that orange trailer. I think over time, that'll be more of our focus of let's use our advantages of a large national trailer pool network, our technology, and bring solutions to customers that doesn't have to be just exactly where our company driver is on any given day. You know, within that sort of drop- trailer business, can you maybe talk about some of the recent growth rates? I think one of the questions that investors are struggling with is frankly the sustainability, right? Because we're coming out of a very, very tight market. Yep. To what degree did that help, and how is it holding up today in a more balanced or loose market? Yeah, it's a great question. I get that frequently. Maybe let frame it this way. When we had this during the COVID era, it was a great concept to customers, so we had great adoption just because of the stress of the market. If you compare the fourth quarter of 2021 versus the fourth quarter of 2022, vastly different market conditions, and yet our volumes held to 95%. That- That's the Power Only volumes. That's the Power Only volume. Cause the question, is that sustainable? Well, the markets were much different, and we're feeling that effect today as well, that we've made it easy for the customer. It's really an extension of our network business in many ways. I'm convinced through these cycles now that we have something that can sustain itself. You know, you mentioned the network business, and I just wanna make sure I'm clear in understanding this right. It's not as though you're de-emphasizing the Truckload segment. Maybe help us understand how do you figure out, you know, where to put that incremental load, whether it's logistics, more asset lighter, or you do it in-house with your own power capacity? Yeah. Well, first of all, the customer's in control if they're, you know, going to be able to switch between Intermodal, Truckload. When, you know, we're spotting that trailer that's at their location, we're looking at where is our capacity and what's gonna make the most economical sense for us. We use this Schneider FreightPower app to be able to post loads to make those available when we don't have enough capacity. Beauty of that is, you know, a small carrier can go and accept that load, and then it gets digitally assigned in our system without a person ever having to touch the order. Really what that does, it gives carriers who would have no access to large trailer pool shippers directly, we are the mechanism that connects that shipper with that carrier, and that orange box is the mechanism that happens. I do wanna talk about Intermodal, but before we get there, just to wrap up on maybe Logistics. You did increase your margin target in that, you know, for that segment, you know, I think on your 4Q earnings call. Can you talk about what drove that and to what degree does power only play into that? Sure. Yeah, we raised our long-term target, a range of margin of 5%-7%, up from 4%-6%. There's really two components there. We've invested in the digital transformation of our business, and Brokerage generally leads the way in our tech hub there. We believe we can grow the business at a faster rate without growing our people at that same level. So that's a contributor to margin. The second one, if we're gonna inject capital into the business, we have to get a return on that capital via Power Only in the trailer. Those two combination effects is behind the raise in our targets. We've been performing mid to upper end of that range. Maybe talking about Intermodal, you know, we talked about it. You, you wanna double that business by 2030, I think is how you've put it. You just recently switched your Western rail partner. Could you maybe talk about that transition? You know, what allows you to do now? What's different about the Schneider Intermodal network today versus a couple of years ago? Yeah. Jim, I'll let you take that. Maybe just one framing before we get there, Felix. Unlike the truck business, which is highly fragmented, the domestic Intermodal business, the top four players have about a 70% market share, and that's a very specialized business. You have to be very good at an execution and hence, I'll let Jim kind of answer the question as it relates to the, to the change. We're in a much different competitive environment and, one that we wanna see that we believe we can leverage. Yeah. Previously, we're operating on the same railroad as our largest competitor in the West, and by moving over to the UP, we differentiate ourself relative to that largest competitor in the West. The other competitors that are on the UP, we're differentiating based on being more asset-based. We have the largest company driver dray fleet on the UP. We're the only competitor that owns our own chassis. The connection to the UP is much more efficient. CSX, yeah. Between UP and CSX, thank you. Much more efficient. We went from about six lanes where we would have a steel wheel connection where the containers wouldn't have to come off of the train to now we're over 40 connections that are steel wheel connections, so they move directly from the UP onto the CSX and gives us improved transit time, improves reliability and lower cost for all of us. That, you know, that ability to differentiate is what changed for us. Can you maybe talk just a little bit about current demand within the Intermodal business? I think what, you know, frankly, I wrestle with, and maybe some investors wrestle with, is I think there's inherently fairly large retail exposure in that business. You're also coming off a really tight Truckload market where maybe you couldn't put as much volume into the Intermodal business as you would've liked. Maybe, you know, how are you thinking about sort of volumes into 2023? What are you hearing? Yeah, I'll take that one. You know, and just a little bit more specific on Intermodal first, and Mark kind of wrap up on maybe a little bit broader. Specifically in Intermodal, it's not just, you know, total demand out there, but it's relative to Truck and being able to compete. I think Mark talked about this earlier, that customers are starting to get to that spot of thinking about sustainability and now having to take action. There's opportunity to convert from over the road to Intermodal. For the last couple of years, it's been slow because of rail performance that's inhibited some of that changeover. CSX continues to operate at an extremely high level. Western Railroads have improved from where they were operating before, really just coming out of hiring more crews. The other area of opportunity for Intermodal is really a private asset carrier like ourselves against the rail-owned equipment, which at one point was about 1/3 of the total Intermodal moves were containers that were owned by the railroads themselves. You know, as small Intermodal marketing companies that would lease a box, lease a chassis, hire dray people on both sides, coordinating all those to all that margin stacked up, it's just not as efficient as a company-owned equipment. Those are large opportunities to be able to take share there. I feel like you're right. The Intermodal has a more of a concentration of imports, and the imports have certainly moderated. We don't think that's gonna be a long-term trend. We also think Mexico can be a winner in the reallocation of supply chain decisions across the globe. Both of those markets, and particularly Mexico, can be very favorable towards an Intermodal offering as well. We are in the middle of an air pocket, clearly, but we don't think that's a long-term trend. You know, Jim, I thought the comment around decarbonization is quite interesting. Could you maybe put it into perspective, you know, how much cleaner, how much better is an Intermodal move versus an equivalent Truckload move? I think the logical follow-up to that is, you know, how much is that actually driving modal conversion? Is there any internal way you look at that? It's always difficult to answer that, which ones are specifically because of carbonation and/or decarbonization and versus all the other factors that play into that. Typically, you're looking at between 60%-70% less carbon emissions by switching Intermodal. It depends on the specific lanes. There's some that are even a little bit higher than that. As much as we really didn't see a lot of that movement over the last few years, so while we've been talking about it, starting to see more shippers that are saying specifically, "I'm going to make this move because I need to decarbonize. I need to start to show some improvement." They've set targets that are largely at 2030, every year, they're starting to show, "Well, what was our results this year?" Several customers that made, took positions are showing that they took a step back last year, now they're feeling the pressure of, "I've got to do something to be able to show some improvement." Otherwise, there's no belief that you could ever get there by 2030. Yeah. you know, maybe sorry for the blunt question here, but does that give you more pricing power in Intermodal? Yeah. It's the overall value. You know, your ability to decarbonize, as well as your service level, I believe it creates some favorability for us. If you look at our fourth quarter results, our revenue per order was up 7.5% Intermodal, despite the moderating market. Absolutely, we think we can add value. The other things we're adding value, we've converted, and we're in the process of converting dray trucks to electric, particularly in the Southern California Basin, which gives us another differentiator as we bring 100 units on that we can really show value to customers that are looking to do that. We certainly wanna hold those resources back for those folks that find value there. I think there's some economic value that the company can take. I don't know, this might be best for Jim, but I'm just curious. I think your box turns are down almost 30% off of, you know, peak levels. Yeah. Is there something structural that's changed maybe with your exposure, Transcon versus East Coast? Or do you think we can get back there over time? Yeah. Well, certainly, we can get back there. What initially drove the decline in box productivity, it was customer unloading as we were going through the pandemic, as well as rail performance that was driving that. Both of those have improved back to the previous levels or better. You know, we're targeting the same number that you are, looking at about 2017 numbers as that's realistic to get back to. It's really just a function of having quality demand to be able to grow back to that level. You know, I guess my logical follow-up question to that is, if I look at your 4Q margins in Intermodal, they were actually ahead of your long-term target. Yeah. Those long-term margins are full year margin targets. There is some seasonality that occurs, especially in Intermodal. You look at the full year, we're 12.8%, I believe, margin. Right in the middle of that long-term trend. Believe that's where we wanna be. We wanna make sure that we're staying within that ditch line and then maximize growth on top of that. Okay, that's helpful. You know, we got about 10 minutes left, and I really haven't talked much about your traditional Truckload business. I was hoping we could maybe do that. First of all, you know, I think everybody here is probably watching the spot rates. You know, one of the things I'm asking all my transportation company is there's this idea out there about capacity coming out of the market because, you know, you're effectively running at or below operating costs from a spot rate perspective. I guess my question is this, have you seen capacity come out of the market? What's sort of the key indicators that you're watching on that front? Well, capacity does need to come out of the market, and I think we are starting to see that. A couple things that we look at internally are lease defaults, particularly around the owner-operator community, and those are virtually non-existent for the last two years, and we're back to pre-pandemic levels of defaults, which is both within the Schneider portfolio and other companies that we have visibility into. The other thing we look at is through channel checks, what's going on in the insurance renewals. The companies that might have been at 15 trucks that went to 25 because they could because of the spot market, our channel checks are indicating they're coming back to 15 or 13 or, you know, 12 trucks on the renewal front. Those are really good leading indicators. It has a little bit of a lag to it as we do. This is the high renewal period here in the first quarter. I think, and particularly also talk to the Truck stops change, what they're seeing on the small carrier fills. I think we're starting to see that impact, play out. Yeah. You know, Felix, you're talking about spot rates. One thing that looks a little bit different to us this cycle versus previous cycles is that elasticity for spot rates. Five years ago, if you were trying to get a spot rate from a large public carrier, you were emailing or calling, "Can I get a rate?" Well, now we have apps, we have APIs, we're directly connected. When spot rates decline this time, in a matter of a couple months, they had declined about 30%. Previously, that took a couple years to decline 30%. As we're talking to customers, elasticity, because of this transparency, works both directions. We don't know when precisely that's gonna happen as customers burn through inventory. When it does, I'd expect that, you know, you're gonna see this lift. if it's customers burn through inventory in a few months, maybe you're at a Goldilocks where these things kind of happen. Converge, so to speak. Yes. If it's nine months from now, there's just that much more in capacity that will have left, and it'll be a much sharper change. Now correct me if I'm wrong, but if I think about your Truckload business, your spot exposure actually is quite minimal. What I'm more curious about is the softness in spot rates. You know, to what degree do you think that's impacting contractual truck pricing? Maybe talk to us a little bit about what you're expecting there, maybe how much you're through bid season at this point and sort of how those conversations are going. Yeah. I think if you look at across our portfolio, we'll get to the network side of that. As you looked at our fourth quarter Intermodal 7.5% revenue per order, we feel that that's gonna be very well positioned as we go through the allocation season. I think we'll hang in there quite favorably. dedicated is long-term contracts, we have some renewals that have to take into account some of the inflationary impacts. We're actually expecting our pricing to improve year-over-year in the dedicated arena. I think what you're pushing on is the network side of the business where we have about 4,000 trucks in our exposure there. You're right. We're generally in the 5%-7% range in spot. We're a little bit higher for now, but it doesn't really drive us because we're largely a contractual piece. I think we'll see, at least as we get through the early part of this, the mid-single to maybe upper single-digit percentages could adjust. But that's coming off some very positive price movement we've had over the last couple of years, so we're not gonna get back to 2,000 and you pick the number rates. But the most exposure we have in that is in the network side, but it's also a much smaller part of our company. You know, I thought at your, you know, on your last earnings call, you sounded a bit more encouraging about the second half of the year. Can you maybe talk us through what's driving that, maybe how you think volumes could play out through the year just based on what you're hearing from customers? Yeah. I'll let Jim comment as well. I think part of this is the mix of the, that of our change of our mix over time is more resilient. That was very purposeful in how we wanted to construct that. Secondly, we were really looking forward to seeing through the earnings season here how the inventory played out to both the big box, the specialty players, the home improvement channel. That was mixed, right? You had some folks who have been working on this for several quarters, actually had some really good progress. You have others that got more work to do. As that burns through, cause the market is holding up pretty well considering all of that, right? We have to get through that, the remaining part of that inventory burn. I would feel fairly confident that that will largely get dealt with here as we get through the second quarter, and we'll start to get back into a more normal replenishment that we just haven't been in for the last three quarters. That's where our optimism is born. Okay. Then, you know, we talked about, you know, Schneider's portfolio from a modal perspective early on, but there's been sort of another mix with a mix change, if that makes sense, if I look at your Truckload business. Cause dedicated continues to grow as a percent of the overall tractor count. Could you maybe talk about how you think, you know, Schneider might look a couple years from now in terms of network versus dedicated? Yeah. Well, that, you know, I'm a firm believer that a healthy network business benefits the whole portfolio. It's one of the hardest things to do for a customer. Customers value that. For having a dedicated business that you have some ebb and flow, it's a great collaborative element and on behalf of your customer, on behalf of capturing additional opportunity. We want a healthy and large one-way network, but we don't want it to be necessarily any larger in the percentage than it currently exists. We'd be very happy with that. We could see some moderate growth there, but we are really leaning in on both organic and acquisitive to grow those dedicated contract configurations. You know, we're out in front. We've had several hundred units that we expect to grow organically this year. We're well on our pace to do that, but we would also be very encouraged if we could find another acquisition that we had like we had a year ago to boost that further. Maybe that's a good segue into capital allocation. As you mentioned, you did one or two smaller deals, mostly on the dedicated side in recent history. Is that the sort of deals that we should expect out of Schneider? Is there anything within your portfolio maybe where you feel you could add something incremental? You know, Mark, you specifically have talked about specialty. Yep. Can you maybe explain what that means in the context of what you're looking at, what you define as specialty? Yeah. As we think about, first of all, we have great organic opportunities in front of us, and that's our primary allocation of capital. Priority is our organic growth opportunities. As we look at acquisitive, though, we don't really see a lot of opportunity that would at the multiples that would be attractive to us in the Logistics space when you look at our track record of growth there. You know, we think we have a, n ow that you've got Power Only in there, that's really gonna be an organic play for us. Intermodal has a little different playing field, so not a tremendous amount of opportunity there. That leaves the truck side of our business, and specialty to us is what is things that you're doing that's not generic. What are you- Specialty, either through specialty equipment, specialty services, long-term nature contracts, very sticky, hard to replicate, those are the things that we find most interesting, and that's what we found with our MLS acquisition, and that's what we're looking to duplicate. You know, can we talk just a little bit about CapEx in general? Because, you know, I think you've talked about, correct me if I'm wrong, but no major container ads this year. Correct. Your CapEx is still up quite a bit, and my hunch is that it has to do with fleet replenishment. Could you maybe talk about what you think is a good maintenance CapEx level through cycles? You know, once we're through 2023, do you think your average age of equipment could be all caught up relative to, you know, what you hope it would be? Yeah, I've been saying that for two years. You're right. As you look at our range, we think it's $525 million-$575 million. There's really two components. It's the organic growth of dedicated that we expect to achieve there. We are behind, we've been behind, we haven't had a chance to catch up in a couple of years because of the constraints on allocation from the OEMs. We do have some artificial catch-up that we have to do there. We're not dramatically behind, but we are more confident sitting here today that we could get out of this year on our targets than we have been the last couple, but we have to see it. You're right. We feel we're gonna sweat our assets in our Intermodal containers and might do a few chassis. Most of our CapEx this year will be on the truck side. We have about 45 seconds, but I do have to ask you just this last one. Talked about M&A a little bit, it sounds like the focus there is specialty. Talked about organic investments in CapEx. What do you do with the rest of the cash? You announced a modest buyback. Maybe talk to us about that versus dividend, how you think about that long term. We raised our dividend again. We're up about 60% growth in our dividend since we went public, right? We still were looking for ways to return to our shareholders. The modest buyback that you mentioned, we'd like to be at least in a position we could target where our share count will be, and that could just be equity grants. We'll probably trim a few million above that. Organic, acquisitive, dividend, and those buybacks, that would be our priority order. Mark, Jim, that takes us to 30 minutes. I'm gonna say thank you very much. Appreciate it.