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Summary of Schneider National FY Conference Call Company Overview - **Company**: Schneider National (NYSE: SNDR) - **Industry**: Transportation Logistics - **Business Segments**: - **Truckload**: $2.5 billion, with 70% in dedicated configurations, focusing on longer contracts and deeper customer relationships [9][10] - **Intermodal**: $1 billion-$3 billion, asset-based with ownership of chassis and containers, partnerships with Union Pacific, CSX, and CPKC [9][10] - **Logistics**: $1 billion-$1.2 billion, including brokerage and new offerings like Power Only [10] Market Dynamics - **Current Freight Market**: - Demand has been stable but not dramatically improving; August and September were sub-seasonal [16][17] - Customers are cautious due to government uncertainties, leading to reduced volumes in consumer products [18] - **Regulatory Environment**: - Changes in regulations are being enforced differently, impacting supply dynamics [22][23] - Concerns about shadow capacity and the need for supply rationalization [22][23] Intermodal Market Insights - **Rail Merger Impact**: - Union Pacific and Norfolk Southern merger could create a more competitive environment; Schneider is optimistic about potential benefits [46][51] - Performance has improved, with a 10% year-over-year growth in the third quarter [48] Dedicated Market Dynamics - **Market Trends**: - Focus on specialty equipment and long-term contracts; pipeline activity has increased significantly [56][58] - Private fleets have grown disproportionately compared to for-hire services, but a correction is expected [56] Financial Outlook - **2026 Projections**: - Optimism for a more constructive environment due to fiscal and monetary stimulus, with expectations for mid to slow single-digit increases in contracts [75][76] - Focus on organic growth, capital deployment for dedicated and intermodal segments, and potential acquisitions [93][94] Technology and Automation - **AI and Automation**: - Schneider is investing in automation to improve efficiency and reduce costs; initiatives include using AI for low-value tasks [81][86] - A target of $40 million in annual savings has already been surpassed, indicating effective cost management [90][92] Shareholder Value - **Share Buybacks**: - Schneider views its stock as undervalued and is considering share purchases as part of its strategy [96] Key Takeaways - Schneider National is adapting to a dynamic freight market with a focus on dedicated and intermodal services - Regulatory changes and market conditions are influencing supply and demand dynamics - The company is leveraging technology to enhance operational efficiency and is optimistic about future growth prospects in 2026

Core Insights - Schneider National, Inc. is launching Schneider Fast Track, a premium solution aimed at shippers with time-sensitive and high-service freight needs [1] - Fast Track integrates Schneider's extensive asset-based truckload and intermodal capabilities with strategic rail partnerships [1] - The initiative aims to establish a network of some of the fastest and most consistent intermodal lanes in the industry [1]

Revenue Performance - Operating revenues for Q3 2025 reached $1,452.4 million, a 10.4% increase from $1,315.7 million in Q3 2024[116]. - Revenues excluding fuel surcharge for the nine months ended September 30, 2025, were $3,840.0 million, up 9.4% from $3,508.6 million in the same period of 2024[120]. - Enterprise operating revenues increased by $323.3 million, approximately 8%, in the nine months ended September 30, 2025 compared to the same period in 2024[161]. - Truckload revenues (excluding fuel surcharge) increased by $249.8 million, or 16%, in the nine months ended September 30, 2025, driven by a 23% increase in Dedicated volume[177]. - Intermodal revenues (excluding fuel surcharge) increased by $41.9 million, approximately 5%, in the nine months ended September 30, 2025, primarily from a 6% increase in volume[183]. - Logistics revenues (excluding fuel surcharge) increased by $46.3 million, approximately 5%, in the nine months ended September 30, 2025, mainly due to the Cowan acquisition[186]. Income and Profitability - Adjusted income from operations for Q3 2025 was $38.4 million, compared to $44.3 million in Q3 2024, reflecting a decrease of 13.3%[121]. - Net income for the nine months ended September 30, 2025, was $81.5 million, slightly down from $84.4 million in the same period of 2024[116]. - Adjusted net income for Q3 2025 was $21.7 million, a decrease of approximately 31% compared to $31.5 million in Q3 2024[125]. - Enterprise income from operations decreased by $7.8 million, approximately 18%, in Q3 2025 compared to Q3 2024, primarily due to increased salaries and wages and equipment-related costs[131]. - Logistics income from operations decreased by $1.2 million, approximately 16%, in Q3 2025 compared to Q3 2024, primarily due to increased salaries and wages from the Cowan acquisition[156]. - Enterprise net income decreased by $2.9 million, approximately 3%, in the nine months ended September 30, 2025, primarily due to a $12.0 million unfavorable change in total other expenses[158]. Expenses and Costs - Total operating expenses for Q3 2025 were $1,417.1 million, an increase from $1,272.6 million in Q3 2024, reflecting rising operational costs[123]. - Total other expenses rose by $5.1 million in Q3 2025, mainly due to a $5.9 million increase in interest expense related to the Cowan acquisition[134]. - Total other expenses increased by $12.0 million, approximately 102%, in the nine months ended September 30, 2025, largely due to a $14.0 million increase in interest expense[165]. Cash Flow and Capital Expenditures - Free cash flow for the nine months ended September 30, 2025, was $193.7 million, down from $212.0 million in the same period of 2024[127]. - The company reported cash flow from operations of $184.2 million for Q3 2025, down from $206.4 million in Q3 2024[116]. - Net cash provided by operating activities decreased by $35.2 million to $451.4 million for the nine months ended September 30, 2025, compared to $486.6 million for the same period in 2024[198]. - Net capital expenditures decreased by $16.9 million to $257.7 million for the nine months ended September 30, 2025, compared to $274.6 million in 2024[201]. Taxation - The effective income tax rate increased to 26.5% in Q3 2025 from 22.1% in Q3 2024, with the provision for income taxes decreasing by $1.7 million, or 20%[137]. - The effective income tax rate was 25.0% for the nine months ended September 30, 2025, compared to 24.0% for the same period in 2024[169]. Strategic Focus and Growth Areas - The company continues to focus on acquisitions to enhance service offerings and broaden the customer base, supported by a strong balance sheet[105]. - The logistics segment remains a key area of growth, leveraging asset-light freight brokerage and supply chain services to meet customer demand[108]. - Truckload segment revenues (excluding fuel surcharge) increased by $92.3 million, approximately 17%, in Q3 2025 compared to Q3 2024, with dedicated volume growth of 22% attributed to the Cowan acquisition[145]. - Intermodal revenues (excluding fuel surcharge) increased by $16.7 million, approximately 6%, in Q3 2025 compared to Q3 2024, primarily due to a 10% increase in volume[151]. - Average trucks in the Truckload segment increased to 12,291 in Q3 2025 from 10,397 in Q3 2024, reflecting the impact of the Cowan acquisition[142]. Financial Position and Liquidity - As of September 30, 2025, cash and cash equivalents increased by $76.5 million compared to December 31, 2024[194]. - The company has a $250.0 million revolving credit facility maturing in November 2027 and a $200.0 million receivables purchase agreement maturing in May 2027, with a combined available capacity of $276.9 million as of September 30, 2025[193]. - An additional $100.0 million draw on the delayed-draw term loan facility was made, partially offset by a $95.0 million repayment of an unsecured senior note[194]. - The company anticipates that cash generated from operations and available credit facilities will be sufficient to meet its requirements for the foreseeable future[193]. Other Considerations - Goodwill impairment testing will be performed as of October 31, 2025, with the analysis expected to be finalized during the fourth quarter[204]. - There were no off-balance sheet arrangements that could materially affect the company's financial condition as of September 30, 2025[205].

Core Viewpoint - Schneider National's shares fell 8% following a disappointing earnings report, driven by weak demand and increased insurance costs, leading to a significant reduction in the company's full-year outlook [1][2]. Financial Performance - The company reported third-quarter adjusted earnings per share (EPS) of 12 cents, which was 8 cents below consensus estimates and 6 cents lower year-over-year. This figure included a 7-cent impact from higher insurance claims costs [2]. - Consolidated revenue reached $1.45 billion, marking a 10% year-over-year increase and slightly exceeding the consensus estimate of $1.43 billion, primarily due to the acquisition of Cowan Systems [4]. Guidance and Outlook - Schneider lowered its full-year 2025 adjusted EPS guidance to approximately 70 cents, down from a previous range of 75 to 95 cents. Without the insurance impact, the guidance would have been closer to 77 cents, aligning more with the 80-cent consensus estimate [2][3]. Market Conditions - Freight demand remains below seasonal averages in October, although it has improved compared to September. The company noted that July's demand was boosted by a pull forward ahead of tariffs, while August and September were weaker than normal [3]. - Management indicated that shippers are becoming more selective in choosing carriers as regulatory enforcement increases, which has led to a rise in Schneider's spot market exposure from 5% to 6% [6]. Operational Insights - The truckload (TL) unit generated revenue of $625 million, reflecting a 17% year-over-year increase, while the dedicated fleet saw a 26% revenue increase due to a 28% rise in truck count from the Cowan acquisition [8]. - The Outbound Tender Reject Index, a measure of truck capacity, indicates that current tender rejections are higher than the previous year but do not signal a recovery in the market [7].

Core Insights - Schneider National reported revenue of $1.45 billion for the quarter ended September 2025, reflecting a year-over-year increase of 10.4% [1] - The company's EPS was $0.12, down from $0.18 in the same quarter last year, indicating a significant decline [1] - Revenue exceeded the Zacks Consensus Estimate of $1.44 billion by 1.01%, while EPS fell short of the consensus estimate of $0.21 by 42.86% [1] Financial Performance Metrics - Operating Ratio for the consolidated segment was reported at 97.6%, higher than the estimated 96.2% [4] - Intermodal Operating Ratio was 94%, slightly above the average estimate of 93.4% [4] - Truckload Operating Ratio was 96.8%, compared to the estimated 94% [4] - Logistics Operating Ratio was 98.1%, exceeding the average estimate of 97.5% [4] Revenue Breakdown - Fuel surcharge revenue was $152.7 million, surpassing the average estimate of $143.47 million, marking a year-over-year increase of 10.6% [4] - Inter-segment eliminations revenue was reported at -$56.1 million, worse than the estimated -$39.23 million, representing a 46.9% increase year-over-year [4] - Logistics revenue reached $332.1 million, slightly above the average estimate of $328.12 million, with a year-over-year growth of 5.9% [4] - Other revenues were $117.8 million, exceeding the estimated $104.9 million, reflecting a 12% year-over-year increase [4] - Revenues excluding fuel surcharge totaled $1.3 billion, above the average estimate of $1.29 billion, with a year-over-year change of 10.4% [4] - Intermodal revenue was $281.4 million, surpassing the average estimate of $275.21 million, indicating a 6.3% year-over-year increase [4] - Truckload revenue was $624.5 million, slightly below the average estimate of $631.49 million, but still showing a 17.3% year-over-year increase [4] - Network revenue excluding fuel surcharge was $187.4 million, below the estimated $199.29 million, with a year-over-year change of 1.2% [4] Stock Performance - Schneider National's shares returned +8.6% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - Enterprise revenues excluding fuel surcharge were $1.3 billion, up 10% year over year [20] - Adjusted income from operations was $38 million, a 13% decrease year over year [20] - Adjusted diluted EPS for the third quarter was $0.12 compared to $0.18 for the same period in 2024 [20] Business Line Data and Key Metrics Changes - Truckload revenue excluding fuel surcharge was $625 million, up 17% year over year, primarily due to the Cowan Systems acquisition [21] - Intermodal revenues excluding fuel surcharge were $281 million, up 6% year over year, reflecting volume growth of 10% [23] - Logistics revenue excluding fuel surcharge totaled $332 million, up 6% from the same period a year ago [24] Market Data and Key Metrics Changes - The company experienced softer volumes with existing customers and retreating spot rates in August and September [8] - Retention rates of incumbent business jumped 10 points quarter over quarter in Intermodal, contributing to a 10% volume growth in the quarter [13] - The company noted that third quarter volumes grew over 50% in Mexico, with the highest growth rate in the eastern U.S. since 2022 [13] Company Strategy and Development Direction - The company is focusing on structural improvements in three main areas: revenue strategy, productivity actions, and capital discipline [10] - The company aims to drive growth in specialty segments, which are considered more durable and offer unique services [35] - The company plans to leverage its strong pipeline in Dedicated to upgrade its overall portfolio by moving away from lower-yielding operations [12] Management's Comments on Operating Environment and Future Outlook - Management noted that while market conditions have been subdued, there are catalysts for supply-side rationalization that could improve dynamics [28] - The company expects volume trends to remain sub-seasonal and spot rate conditions to be an important swing factor [27] - Management expressed confidence in navigating the current environment and highlighted ongoing efforts to improve asset efficiency and lower costs [66] Other Important Information - The company recorded $16 million more in claims-related costs than anticipated, primarily due to unfavorable developments on three prior year claims [7] - The company has a structural cost savings target of over $40 million, which will continue to build in the fourth quarter [21] - Net CapEx was $108 million compared to $93 million last year, with a reduction in expected full-year CapEx to approximately $300 million [25][26] Q&A Session Summary Question: About Dedicated wins and market demand - The majority of wins in Dedicated were from the company's pipeline, with a focus on specialty segments that offer durability and unique services [35] Question: On the broader truckload market view - The supply picture is more constructive going into 2026, with regulatory actions expected to impact capacity positively [56] Question: Demand environment for the network business - The demand picture is steady but unspectacular, with the consumer holding up well, while industrial demand remains in contraction [115]

Core Insights - Schneider National reported quarterly earnings of $0.12 per share, missing the Zacks Consensus Estimate of $0.21 per share, representing a -42.86% earnings surprise [1] - The company posted revenues of $1.45 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.01% and showing a year-over-year increase from $1.32 billion [2] - The stock has underperformed the market, losing about 22.7% since the beginning of the year compared to the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the coming quarter is $0.25 on revenues of $1.47 billion, and for the current fiscal year, it is $0.82 on revenues of $5.73 billion [7] - The estimate revisions trend for Schneider National was unfavorable prior to the earnings release, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Transportation - Services industry, to which Schneider National belongs, is currently in the bottom 7% of over 250 Zacks industries, suggesting a challenging environment for stock performance [8]

Financial Performance - Revenues excluding fuel surcharge grew by 10% year-over-year to $13 billion in 3Q25[80] - Adjusted income from operations declined by 13% year-over-year, primarily due to $16 million in claims-related costs[80] - Adjusted diluted earnings per share decreased from $018 in 3Q24 to $012 in 3Q25[75] - Adjusted EBITDA increased to $149 million in 3Q25 from $144 million in 3Q24[75] Segment Results - Truckload revenues excluding fuel surcharge increased by 17% year-over-year, driven by the Cowan Systems acquisition, but income from operations decreased by 16%[85] - Dedicated average trucks grew 28% year-over-year due to the Cowan acquisition[85] - Intermodal revenues excluding fuel surcharge increased by 6% year-over-year, driven by a 10% increase in volume[88] - Logistics revenues excluding fuel surcharge increased by 6% year-over-year, while income from operations decreased by 16%[91] Capital Allocation and Strategy - The company has a $150 million share repurchase program, with approximately $461 million remaining authorization as of September 30, 2025[60] - Dividends have increased 90% since the IPO in April 2017[60] - The company identified $40 million in cost savings in 2025 driven primarily by Cowan Systems synergies and productivity initiatives[71]

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