Schneider National, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Freight Market: Market conditions softened in Q3 with softer volumes, retreating spot rates. Supply-side catalysts like English language enforcement, CDL renewals, carrier bankruptcies, and Class 8 production below replacement levels are present.
• Strategic Initiatives:
  • Revenue Strategy: Dedicated had wins in specialty areas with a robust pipeline. Network continued rate increases but spot exposure elevated. Intermodal saw volume growth. Logistics Power Only revenues up.
  • Productivity Actions: Progress on $40 million cost savings, including Cowan synergies. Headcount reductions and asset efficiency improvements.
  • Capital Discipline: Focus on doing more with less, balanced portfolio, and strategic investments.

Segment Performance

• Truckload: Revenue excluding fuel surcharge was $625 million in the third quarter, up 17% year-over-year. Operating income was $20 million, a 16% decline year-over-year. Operating ratio was 96.8%, an increase of 130 basis points. The majority of claims-related costs were reflected here.
• Dedicated: Operating income benefited from the addition of Cowan but was adversely impacted by claims-related costs and churn.
• Intermodal: Revenues excluding fuel surcharge were $281 million, up 6% year-over-year. Volume growth was 10%, and operating income was $17 million, a 7% increase compared to the same period last year. Operating ratio was 94%, an improvement.
• Logistics: Revenue excluding fuel surcharge totaled $332 million, up 6% from the same period a year ago. Income from operations was $6 million, down 16% year-over-year. Operating ratio was 98.1%, an increase of 50 basis points.

Guidance

• Adjusted EPS for 2025 now ~$0.70, incorporating higher claims costs in Q3 but expecting no repeat in Q4.
• Net CapEx revised to ~$300M from $325M-$375M due to pausing tractor orders.
• Truckload network volume trends sub-seasonal; Dedicated benefits from new business but start-up friction; Intermodal flat pricing; Logistics pressure on truckload volumes.

Risks

• Claims-related costs from 2021-2023 policy years.
• Uncertain demand environment, especially in the industrial sector.
• Regulatory and supply-side dynamics impacting capacity.

Q: About Dedicated wins, what's the nature of those wins?

A: The vast majority of those wins were in our pipeline, skewed to the specialty segment, with start-up friction due to ramp down/ramp up of operations.

Q: What's the truckload market view for 2026?

A: Supply side is more constructive going into 2026, but demand remains uncertain.

Q: Intermodal revenue per load, any specific factors?

A: Impacted by mix and shorter haul, focus on growth in strength areas like Mexico and East.

Q: Intermodal acquisition status?

A: Early in process, confident in team, and we've navigated similar changes successfully before.

Q: Spot exposure in network business?

A: Double historical levels for optionality, to redeploy to better contract business.

Q: Supply side impact on 2026?

A: More constructive supply, but demand is a wildcard; Schneider positioned to handle dynamics.

Q: Productivity and AI, details?

A: $40M cost target, AI driving productivity with double-digit gains and potential for 50%-60% improvement in some areas.