Schneider National, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Structural Improvements:
  • Optimizing capital allocation across strategic growth drivers like Dedicated Truck, Intermodal, brokerage, and Logistics. Acquired Cowan Systems in December 2024, with contributions immediately accretive and expected synergies of $20-$30 million at maturity.
  • Managing customer freight allocation with purpose and discipline, foregoing volume with some shippers to maintain price discipline, and seeing an increase in shipper mini allocation events. Revenue per truck per week improved 2% in both truck network and dedicated, driven by price.
  • Delivering an effortless experience by gaining market share with new customer awards through combining portfolio elements, particularly effective for retail and food & beverage industries.
  • Containing costs across all expense categories, with targets of over $40 million in additional cost reductions, including investments in AI-based digital assistant technologies.
• Freight Market Perspective: Truckload earnings improved, Intermodal had volume growth and earnings increase, Logistics saw earnings growth. Focused on controlling costs, maintaining price discipline, and leveraging strategic differentiators like dedicated brands, asset-based offerings, and logistics platform.

Segment Performance

• Truckload: Revenues excluding fuel surcharge were $614 million in the first quarter, up 14% compared to the same period last year. Operating income was $25 million, up nearly 70% year-over-year. Dedicated averaged over 8500 trucks in service in the quarter, up 27% from over a year ago, representing 70% of Truckload segment trucks and 71% of revenue.
• Intermodal: Revenues excluding fuel surcharge were $260 million in the first quarter, 5% above the first quarter of 2024 due to volume growth and increased revenue per order. Earnings nearly doubled year-over-year on 4% order growth, with rates remaining largely flat year-over-year.
• Logistics: Revenues, excluding fuel surcharge were $332 million in the first quarter, 2% above the same period a year ago. Operating income was $8 million, a 50% increase compared to first quarter 2024, primarily due to effective net revenue management and the continued strength of the Power Only offering.

Guidance

• Earnings per Share: Adjusted earnings per share guidance for the full year 2025 is $0.75 to $1, assuming an effective tax rate of 23% to 24%.
• Net Capital Expenditures: Net CapEx guidance revised to $325 million to $375 million for the full year from $400 million to $450 million previously, reflecting moderating impact of trade policy, economic uncertainty, and volume/price trends.
• Segment-Specific: Truckload network expects more moderate pricing improvements; Intermodal expects continued volume growth and moderate pricing improvement; Logistics expects continued year-on-year improvements in net revenue per order but less pronounced for the remainder of the year.

Risks

• Uncertainty from trade policy, consumer health, and tariff-driven uncertainty affecting freight demand and pricing recovery. Impact on forward sentiment for customer freight demand and consumer health is less clear, making price recovery less certain.

Question and Answer

• Q: Good morning. Thanks for taking the question. So I guess, maybe if you guys could give us a little bit of context considering your unique position in the market, what are you seeing when it comes to the expected deceleration of imports obviously you don't move international boxes but that stuff is all connected. So maybe what are you seeing and hearing from customers and what is contemplated in the updated guides?

A: Yeah, Brian this is Jim. Thanks for the question this morning. So it's really important that we're staying close to our customers as we go through this and that we're remaining nimble and offering broad solutions. As we look at across our business segments we look at Truckload and Logistics sectors, it's primarily North America oriented so difficult to quantify the impact there. When we look at Intermodal, it's approximately 15% to 25% of our businesses is tied to imports. And that's from a variety of different origins, so it's not all related to China. And we do expect that there is going to be some drop-off in volume in the Intermodal business, but we expect that our new business wins in Intermodal that Mark spoke of will largely offset what we're anticipating from imports declining. But we'd also say that we do believe that the conditions are ripe for a bullet. It appears that imports may be dropping faster than consumer demand. and a low in shipping could be the catalyst that removes additional capacity from the market. And if there were new trade agreements, there could be an abrupt restart to imports with less capacity than there is today. And so that's not our forecast, but that could be the bull case that Mark spoke of. And so we're going to stay focused on two priorities is staying close to our customers, being nimble, offering those broad solutions. But the second is focusing on what we control within each one of our sectors, the four tenets that Mark spoke of.

• Q: Good morning guys. Darrell I think I caught on the guidance conversation you mentioned growth and over the course of the year. I don't know if that's each one of the quarters and specific to -- do you think that you can get EPS growth on a year-over-year basis for the entire year quarter-by-quarter?

A: So, we typically don't give guidance by quarter, so the comments that I made were in the context of the remainder of the year. So, as it relates to the remainder of the year we expect to have year-over-year growth in price and in margin, but we don't get to that level in terms of giving quarterly guidance.

• Q: Hey thanks. Good morning guys. Darrell I think I caught on the guidance conversation you mentioned growth and over the course of the year. I don't know if that's each one of the quarters and specific to -- do you think that you can get EPS growth on a year-over-year basis for the entire year quarter-by-quarter?

A: So, we typically don't give guidance by quarter, so the comments that I made were in the context of the remainder of the year. So, as it relates to the remainder of the year we expect to have year-over-year growth in price and in margin, but we don't get to that level in terms of giving quarterly guidance.

• Q: Thanks operator. Morning gentlemen. Can you talk a little bit on the dedicated side about how we should look at margins? I mean obviously there's some churn going on. You're bringing on some new business. Is this new business that you're bringing on at better margins than the churn?

A: Yes, we have a profile for returns in dedicated and so we're not necessarily compromising on our expected margin returns there. As we've talked in Truckload more than 100% of our earnings are coming out of dedicated in the Truckload segment in the short-term as we're working to restore profitability in the network side Jason. So, very comparable. We have very consistent methodology that we use relative to the solutions that we bring on behalf of our customers in dedicated. So, we wouldn't consider them necessarily margin eroding or materially margin enhancing it's consistent with our profile.