Schneider National, Inc. (SNDR) Earnings Call Transcript & Summary

Thank you for joining us for our 3:00 fireside chat session here. And again, thanks for being with us in person at the Stephens Investment Conference here in Nashville. Really excited to see everyone over the last couple of days. So looking forward to our discussion here for our 3:00 fireside chat. We've got Schneider National with us. I think for those of you that don't know, Schneider, who's headquartered in Green Bay, Wisconsin, is the second largest trucking company in the United States, and one of the largest providers of intermodal capacity in the U.S. as well. The company also has a large and rapidly growing brokerage operation, that's a meaningful bottom line contributor. From the company, we've got Mark Rourke, Schneider's Chief Executive Officer. And Mark, thanks so much for joining us. Really, really appreciate it. It's great to have you here. I know you -- it just means a lot that you are here with us today. So thanks so much for doing that. And while I hand the mic over to you for some introductory comments, then we'll go into Q&A.

Great. Well, Jack, we're pleased to be here, and thanks for running such a great event. I know we're always focused on the cycle. Maybe we'll just talk a little bit, maybe a little bit through that because it has been an accelerant, a little bit of our strategy. It's certainly pressure tested us and we really focus around being an aggregators through our platform on both the demand side of the equation, and also aggregate on the supply side through us large [ truck of ] segment that we certainly operate in the irregular route and dedicated, but increasingly growing in the intermodal area. And then as you mentioned, Jack, on the brokerage side. And so that's really given us the impetus to invest faster in intermodal, and particularly in the container count, I think we're one of the only providers that grew margin, and grew volume in the third quarter. And certainly, our brokerage outfit has just done a phenomenal job giving options to our customer base. And increasingly, using this Orange Box as a way to link trailer pool shippers with our company capacity, but increasingly with smaller micro carriers on the Power Only front. And so that's, again, advanced our thoughts relative to how we throw tech and how we throw additional assets against that Power Only offering. And so coming through this cycle, it's just going to get us out the other end of this a little further along in some of those key strategies of aggregating demand on one side. Aggregating capacity on the other. And just using our tools, our technology and our [ decision science ] then to optimize on behalf of our customers to provide a deeper and deeper reach. So I feel really good how we've positioned that and really appreciate of the team's efforts, taking this challenging time and using as an opportunity to advance strategies. So that's what we're doing.

Well, awesome. Let's dig into the strategy for a moment. We do have some macro questions that we'll get to, but I think it's important to really talk about what you guys are doing at Schneider. So you've got these 3 business lines, right? There's 3 reporting segments. But in essence, you're just trying to provide capacity solutions for customers. So let's start with logistics and what you're doing there. Because the power only movements, we've really seen the larger asset providers like Schneider, they can also provide power only offerings within the logistics segments are taking significant market share here. Can you talk about shipper demand for Power Only capacity and how Schneider has -- you've been investing for a while to be able to make this happen. What Schneider's strategies within logistics and how Power Only plays into it?

Yes, our logistics offering in toll has just been an extreme focus, a, because it's a great testing bed for technology and some advancement of our digital capability for both on the carrier side and the shipper side, but specifically to power only what an asset provider, like as Schneider, with that scale of 40,000 trailing pieces of equipment out there. And not understands how to manage a network of trailing equipment. What we really found is our customers think about us really what touches that dock is that Orange Box. They're less concerned about how it gets moved. What's your price point, your service point? And do I have a box available when I want to load it. And so that's really been our focus is leveraging that capability and then using the digital connection that we've invested in, in freight power to connect those carriers with that box in a way that's very seamless to the customer. They get all the tracking of where it's at, just like if it's on a Schneider asset because quite honestly, it's on the Schneider asset with that trailing capacity. And it's just given us the ability to augment, particularly our network business and say, yes, more often. And what I'm really excited about, Jack, is if we can prove that we've been able to be a value to a carrier in this market. We're going to be a real value to a carrier when it normalizes or becomes and perhaps in a less robust market because we've been able to show the value of that in this type of environment. So it's a great tool for us to grow our business without as much capital and offer solutions to customers and really, we think, all business cycles.

In a post ELD world, which honestly we've been in now for several years, does the ability to have drop trailer pools and provide that service to your customers. Is that just increasingly important for a large asset carrier like yourself?

Yes. When you think of the constrained labor environment, the driver experience has always been important, but it increasingly as you're competing across multiple industries, multiple carriers that the ability to be very cognizant of every minute matters, and how you dispatch, how you support. And then certainly, the freight that you have and the trailer pool environment that allows in and out quickly, it allows the driver's time to be respected, and we have such great data of who does that well, who doesn't do that well, who's impacting the driver inside the 4 walls of the facility that we can put back into our acceptance and revenue management tools so that we make sure that, that gets very, very strong consideration of what freight we're after and how we run the network. And so Jack, trailer pools are a very important part of that. It's not all of it, but it's a very important part of it.

So how do we think about this is a question I get from investors. I've got this question because we're seeing this rise of power only. How do we think about the cyclicality of that type of business? I mean, is it in vogue now because capacity is so [ tight ] when things normalize, the [ tight ] could go out there? Or does that business have some countercyclical characteristics as well?

Yes. We have to test it through cycles. Clearly, but there's a shipper component to that and there's a carrier side to that. Certainly, the shipper depends on your approach to this. Our approach is to make it very seamless. We're not asking them to reserve special boxes for that. We're not asking them to do anything outside of their normal business process. So from the shipper side, we've got great adoption, and they're seeing the performance of it. And so I don't think we're going to have a barrier, maybe in the old days, when the market goes the other way, we don't want any brokerage in our business. Well, I think what they're seeing is the value of that service. Conversely, if the carrier has so much choice now, but we're having such success growing it on the carrier side, we're very confident that in a tighter or a less tight freight market, that's even going to be more attractive to that smaller carrier. And so we think we've got the right sweet spot there. It will be just like anything else, a little bit of ebb and flow, but we don't think it's a cliff either direction or simply a product of the current cycle. Time will tell.

Okay. Got it. So when you think about the strategy within your logistics business, we're looking forward here, there's -- we've talked about trailer pools and Power Only. But you've also been investing heavily in technology. You've got a partnership with mastery as well. What's next for logistics? What should we kind of think about over the next couple of years in terms of key initiatives to continue to move the ball forward there?

For us, the logistics and our asset business historically, we've been a mid- to certainly a large shipper carrier. Big generally got big customers add big carriers. And that still plays today in many ways in our asset business, less so, but still has a concentration factor there a bit. What logistics has done for our enterprise is help us reach that small tail long tail shipper, the smaller shipper that because we're doing that in a digital way, we're doing that in the telesales way, not out through the windshield of a salesperson, it's really extended our reach and our customer base. And at times, that means that we start to convert people that didn't even know that intermodal existed because they may only ship 1 or 2 loads a week that fits the profile that we can convert to our intermodal product. So that whole cross-sell back into our business. A disproportionate amount of that comes out of our logistics. And we see that continuing. We see -- again, we're not constrained by capital or drivers in that business. And so using the digital way to low cost, the low cost of acquisition of a carrier and a low-cost acquisition of a customer is what's so attractive to us in that environment.

Okay. Got it. Got it. Maybe we can shift gears and talk a little bit about intermodal, which is another growth driver for you guys. How do you think about the -- everyone tends to focus on margins there when we have the quarterly conference call for a good reason. I understand that. I want to talk about the margin profile of that business, but how should we think about the longer-term line trajectory there in terms of adding boxes, improving turn times, things like that?

Yes. We're really, really bullish, Jack, on the intermodal offering for a couple of reasons that we're going to end up adding several thousand boxes this year. Unfortunately, too much back-end loaded, they wouldn't get full advantage of them. But going into next year, we're going to have full advantage of that, and we're going to add additional assets to that business. And what we think is so important to us is that we control over 90% of the dray on our company driver assets, a very attractive, highly productive jobs for our driver community. So we can -- and we have and growing that capacity type even in this environment, and we'll continue to do that. We own the box. We own our chassis, and so we're in that full control end-to-end of the experience of the customer. And now we have this tailwind called environmental sustainability. And I'd tell you, our environmental person who would talk to a customer once a quarter. Every week, we're talking to multiple customers about what sustainability means and how intermodal plays. And so -- in fact, we've got to figure out how we resource that a little bit differently because it's become so prevalent. So that was combination of things. And so today, more freight because of the congestion has converted percentage-wise from the train back to over the road. So we know there's some lift when things normalize, congestion recedes a bit and additionally, sustainability in addition to the fact that we have more boxes, and we have this great asset control service offering. So we put all of that together, and we think we have great runway relative to the growth of that business, both on the top line but also what it contributes on the enterprise on the bottom.

Okay. That's great. Makes a lot of sense. I've dominated the first several questions here. I want to make sure we can get an audience participation as well if there are any questions, don't hesitate to jump right in. If not, I can certainly keep going here. So maybe a kind of shifting to a little bit of a macro question here before we get back to more company-specific items. You mentioned improved supply chain fluidity to the degree that, that we start to see that one day. Are you beginning to maybe see that a little bit at the margin here over the last couple of months. Could you maybe a kind of talk about what you're seeing in the supply chain currently?

Yes. If there's a frustration that we have has been the lack of productivity in our truck business improving or the intermodal business, and it's largely centered around the dwell time on the inbound unloading or the outbound loading of our equipment. And so that's been a cholesterol, if you will, that's just been there for multiple quarters that's inhibited our ability to turn things, drivers as efficiently as we like or containers in their intermodal business as efficiently as we like but we are seeing slight improvement, finally, and so have to be a function of additional labor could be at the warehouse level for our customers. It could be a little bit about seasonality that get the product to the store, and there is emphasis there. But we are seeing finally improvement in productivity and we would see direct one-to-one almost correlation between the lower in dwell time on those trailing assets. And so it's an encouraging sign. We had a little bit of a slight back over the holiday weekend of Thanksgiving. So we'll see if that was -- how long we can and our customers can sustain that, but it's at least the first encouraging signs, Jack. And some time, we've had relative to some asset productivity, which is a great inflation hedge as we get into next year, if we can sustain that.

Right. And that's something I want to talk about a bit, a bit later because that's something that really everyone's been challenged with, but that -- as that gets better, it should help drive improved profitability. On the labor side for a moment, can you just -- we'll talk about that because we're several months past the expiration of those enhanced unemployment benefits. Is that I had another truckload CEO tell me earlier today if August was at 10 in terms of difficulty finding drivers today is a 9.5%. So still really challenged. I don't know if you would agree with that or disagree with that, but I would be curious to get your take on the -- where we are from a recruiting perspective.

Yes. I think here's our view and our experience here more recently would be that the wage activity that we and the industry has done is starting to at least to get some more inquiries from folks outside the industry. Jack, I think we talked about it on our call, for the first time in a decade, we [ stood up ] our training academies in the second quarter, started to get some yield of that in the third quarter, where we help people off the street and get their CDL that previously, we would only take, if you had your CDL. So that was a lever, tells you how that 10 meant how that translated. And so our traction that we've seen and predominantly and dedicated and our intermodal dray world has been benefited from that effort, but that's a kind of a grow your own investment that we've had to make ourselves. But at least encouragingly, those investments are playing some yield here as in the third quarter and now increasingly in the fourth. So...

So that's great. That's great. So I guess that should give you some confidence in the direction of your fleet count year on a sequential basis that you can start to get some more traction there?

Yes. I think you'll see it in our numbers and dedicated. You'll see it in our numbers. Intermodal, we're trying to get our fleet business and the network to more stable. I don't think we'll see a lot of growth there necessarily. That's where the power only augments that 25%, 30% of our network at some point, I think, could be in this power only and the rest center around our network driver, but certainly are going to see it and dedicated certainly are seeing it in intermodal.

As you -- just a kind of going on and back to this Power Only thing just for one, I don't want to harp on it for too, too long. I mean, it's an important topic. But as you sort of think about your business, you reported in these 3 segments and other carriers do the same thing. But increasingly, with Power Only, it's an extension of your asset-based truckload business, even though it lives and logistics. So I'm just sort of curious if over time, logistics, and the asset-based truckload business would a kind of, in some ways, merge in your mind in terms of how you think about and operate the go-to-market strategy.

Yes, Jack. As it's actually quite insightful. Certainly on the commercial side, the network management side, there is a very much a blending, and we made a comment about mastery is one of the ways that we're going to bring this automation and bring these things closer together because that's a little different than our strategy was 10 years ago when we went through our initial Quest platform change. And so we're using this opportunity, looking at our strategy and how it's a bit different. And you're right, there are these connection points between our over-the-road business and our logistics business around the customer, around the trailer management, that there is a bit of a blending. It's still largely, a large customer solution who uses trailer pools. So there's still a much different overall customer profile in our brokerage business, but certainly the power only, there's leverage in their synergy.

Okay. Got it...

But we are going to report that in logistics, not truckload. We think it skews the numbers when you do the other way.

Okay. Understood. So it's going to continue to live in brokerage, but from a back office perspective, is it integrated from a sales force perspective currently? Or is that ...?

Increasingly so.

Okay. But not fully.

Yes. We don't have to put a lot of our brokerage sales resources against that. It's really -- it's a solution that we're providing to the customer and that comes through our -- more of our asset-based seller.

Got it. Maybe thinking about another bottleneck to industry capacity. Typically, it's drivers, that's the biggest bottleneck, but now it's drivers and equipment. Can you tell us your thoughts on when we could maybe see some relief on the equipment side, both trucks and trailers?

Yes, Jack, maybe I'd frame, we have some momentum, we think, a little bit on this new driver entry in our training academy. If I look out to 2022, where does the industry start to see some constraints. I would predict at this juncture, and are looking out at the trailer OEMs, and the tractor OEMs, that could even be more difficult in 2022 on production and delivery than it was in 2021. And so that's going to serve a little bit, obviously, as a dampener. The second part of that, in February 7th, I believe it is, or the 17th, we get to a new driver training entry rule that drivers have to have a certified school, a certified level of training to even get to their CDL, which doesn't affect our schools, but there's a lot of folks that get their CDL through [ Cuzaneti ], taking them out back and learning how to drive and then going down to your DMV and getting a CDL. You cannot do that anymore. And it would -- I think we would all find it surprising how much of the CDLs get created in this country relative to a process more like [ Cuzaneti ] than through a formal truck driving school. And so early in the year, and I think that's -- whether you're in a construction company or whether you're in a manufacturing company that may have a couple of trucks. All of that then starts to change how all that gets done, and that's going to put another constraint on the CDL market early in 2022. So...

Interesting...

So I think that equipment piece, now what that will do, it should bolster the used equipment pricing for another year. But it's going to be difficult, I think, on both trailing and power equipment for 2022.

The change that's going into effect for the driver training school, you have to go through one of these schools. Again there's no other way right around to get a CDL.

Yes. For the state licensing, you have to then verify where this schooling took place and the accreditation of that school, which has a minimum number of hours, a minimum curriculum. It isn't just -- here's -- I just took the written test, let me go out and take a test and I get a CDL. So it radically changes that entry point into the industry.

That is interesting. That's the first I've heard about that. And that's that for intrastate -- states, I guess, because there's a sort of a 2-parter to that, right? Because you crossing state lines, there is a different requirements and staying within a state.

It's a federal requirement to get a CDL.

Right. Okay. Got you. Got you. Okay. So when you a kind of pull that together and think about constraints on capacity from a driver and equipment perspective, we haven't talked about demand. So maybe I get your take on demand backdrop, you know where I'm going with this. So we'll do the demand side first. Certainly, consumer feels great. Tailwinds in industrial, I would think, next year, but how are you seeing the demand picture shape up next year?

Jack, we just haven't had any normal level of seasonality in -- I don't know, it feels like 1.5 years. And so it's been running at this red hot level. So as we sit here in the fourth quarter, one of the measures we do is how many do we accept versus turn down versus get to other parts of our portfolio. That's been very steady. We haven't really seen a drop off. The one improvement we've talked about, which is dwell time. So we've seen a little bit in the productivity standpoint. There's things on both sides of this ledger. You can certainly get a bear case when you think about inflation can do to consumer demand. Flip side, we've seen more employment. We've seen a very healthy retail sector. Some customers have improved inventories. Many tell us that they're still far from where they want to be on inventory. And even some of that is it's in all-in the wrong places. It's stuck at the ports or it's stuck in the wrong. And so there's a whole movement of inventory to get in addition to the right place. So we think that's certainly got some tailwind. And on the flip side, what's the government response to all these variants and around coveting. What -- so there's a number of things on both sides in ledger at this juncture, talking to our customers, we feel it's more on the bullish side than it is on the bearish side, but there's enough to be looking at on both sides of the equation, for sure.

So when you a kind of put the supply and demand picture together, how do you think about the sustainability of what we're seeing? This is unlike any cycle, I think we can remember in recent memory, certainly. I think there is an expectation on the part of the market meeting the investor community that we would begin to see some loosening at some point next year, probably the middle of next year is probably what I always consider the base case in terms of investor mindset. Do you think that is fair expectation, too early, too late?

Yes. Well...

No one has a crystal ball. I get that.

Every quarter, I've been coming to these things. I've been hearing that same thing for about it's always peak. It's always speak, it's always speak, great. So I think it is that combination of what's the constraints on capacity. There's some -- still some structural things here that we just talked about. I think demand is still favorable. I think the consumer is still healthy. And we're so diversified our view to the market because that's one of the pleasures we have. We have everything from extreme retail to Big Box retail to manufacturing to consumer products. And so we really try to get as much insight across all of those as we can. And most of our customers are still in that, hey, we need you here, and we're looking to put these plans in place that are maybe not as chaotic as we've been through, but still very, very robust.

Okay. So the outlook mix are pretty...

As far as we can see.

Yes.

Maybe that first half, it's harder to see beyond that maybe. But certainly, the first half seems pretty solid.

Yes. And I'm sure you're in the early -- your team is in the early innings of discussions around spring bid season. This is always a difficult question to answer because every customer engagement is different. But how do you -- what's the right bogey to think about from a rate perspective in spring bid season in terms of rate increases? Some people are saying double digits. Other people are a kind of maybe saying mid- to high single digits. What's your expectation?

Well, there's a good contract momentum even on the carryover coming into 2022 based upon what has all been repriced in the second half of the year, Jack. So there's good momentum going into the year there. There's still inflationary pressures. You got the full year impact of drivers. You've got this equipment inflation, parts inflation. So I'm still of the opinion that it's going to be a very solid pricing environment next year, upper single digits would be if you're going to post -- get me to take a position, that's where I would be at ,and customers are still looking for more of a lockup of capacity. And it's been more of that discussion than it has been about a rate discussion. And so -- and more people are interested in not putting freight out to bid, but let's just take what is it going to take, let's get it wrapped up and let's get moving.

Well, that gets me to sort of a longer-term a kind of thought around what we're going to look like coming out with this pandemic. Assuming we ever do come out of the pandemic. But I would think that there are some customers that are looking to maybe reexamine how they approach the market in terms of procuring capacity instead of viewing trucking as being highly commoditized, maybe look for strategic capacity providers. And I know everyone a kind of gives lip service to that, but everyone is also coming back to each other during more challenging parts of the market wanting rate decreases. So do you think that there's a real chance here to maybe change the way shippers and carriers do business and really develop strategic relationships with large companies like yourself.

That's been the thought for a long time, Jack, and who takes the first step to make that happen. I do think there is a mechanisms now for more immediate price discovery through APIs and some other more efficient for that non routing guide or noncontract freight. So that certainly have improved speed and connection with customers on that portion of the freight. Unfortunately, there's been more of that available for them in this market. But increasingly, whether you call it market index pricing or other mechanisms, folks are interested in not having as much disruption on both sides. We are in source carrier, excuse me, the shipper. And so carving out freight that doesn't get out into the 52-card pickup process has gained momentum, not so much in the market pricing. You still have to have these discussions about what makes sense and how do you make sure both sides are taken care of if ever markets turn. I do think market index pricing is a way that can really get after a more stability. And we can show customers that, in the end, they do very, very well when they don't put all their freight out to bid over a multiple cycle period because they get better service, they get better commitment, acceptance. And in the end, they get a very solid value from a price standpoint in the marketplace. It's just getting people to make that switch and make that leap from a customer standpoint and the durability of those arrangements has been the problem. People change, strategies change, and then how durable is those decisions?

Right. I think the volatility of the freight markets over the last decade plus, I think it's created part of the reason why there's so much driver turnover in the truckload industry. Freight moves from carrier to carrier, which disrupts the life of the driver, and they move on too. I guess you're someone who spends a lot of time thinking about the future direction of the truckload industry, the freight markets in general. Is there a chance over the next, call it, 5-plus years, we a kind of redefine the role of a truck driver, the job of a truck driver, and it's not so much that we're going to pay you by the mile, you're a kind of a contract employee to -- there's a way here to make this more of a true career, provide stability in their lives, which will provide stability in your business?

Jack, I think we have to get there. And we're going to have more of a fixed pay structure for even those regular route drivers because we have to provide that level of stability. I think the whole sustainability initiatives will drive some behaviors and customers and [ carriers ] or like to take waste out and more predictability, more engineering of solutions even in the kind of the irregular route world. I think all of those trends a kind of point us in that direction because we can't sustain a level of turnover in that non dedicated and non intermodal dray world and feel good about it.

Yes. It makes sense. When you think about your largest business, which is your network business, your trucking business, if you will. You have a lot of different types of fleets within that one segment. Obviously, dedicated, then you've got specialized fleets and [ vans ] as well. How are you thinking about the growth of that -- can that be a growth engine for you as well, I guess, in terms of top line? And if so, where would that be coming from within that is?

For us to get then what we're focused on there is that what we just talked about, how do we have that more of an engineered committed solution for the drivers experience and for the customer side to drive that, because our focus on growth has been in the specialty and the dedicated side in intermodal dray because we can do that. Largely in those configurations, and we need to find ways to replicate in some way or shape or fashion in that network side, Jack. And that's why the power rolling has been such a great play for us because we can still serve the customer in that network. They only see the Orange Box. We're doing all of the optimization behind the scenes. And so that's how we're at this juncture until we get to this engineered on which we're working on is how we're going to grow the network side.

Okay. Got you. And is that growth is coming? You mentioned engineered, dedicated, specialized, it seems to be more you guys want to lean into from a growth perspective. One market that -- I know you guys have some exposure to, but to me, it's going to be pretty exciting on that the other side of pandemic, is cross border. Is there an opportunity to increase you cross border exposure. I know it could be a complicated market but in terms of assets to the border and -- you may discrete me but that seems to be a growth area for [ free ] transportation for the next 5 years.

Yes. No doubt. There's -- obviously, we're talking a Northern Border and Southern border. We're talking Southern...

Southern border. Thank you for clarifying that.

Yes, we have about a 25-year presence in Mexico, in country, which we found it really to seize that folks like to do business with people in countries. And so we are equally focused for growth. And you're right, we see near shoring. We see all kinds of trends that are favorable. And not only that, but where's the biggest trading partner with Mexico happens to be Texas and where is the growth in our population of the country, Texas and that Southern tier. So there's a lot of macro trends that are in addition to where freight is originating, but where is freight destining that make a lot of sense there, Jack. So we see it both intermodally and we see it over the road as Mexico a key growth area for us. And the beauty of intermodal, we can do a seamless through the border as well and with this near shoring and the length of haul associated, and with some of the dynamics going on in the rail industry, with the KCS, all looks very, very favorable long term to focus on Mexico.

Over time, does it make sense to maybe expand your transload capabilities there? Or do you feel like you have sort of what you need it to grow with the market.

Yes. We do some of that, but what we hear from customers more and more is they want to get away from the transload case. A, it's more secure, it's faster and it's less handling and they have a better play. And so that trend, at least those discussions with customers are on the wane, and it is more about a throughput service and a speed service through the border that's gaining more momentum. So -- and we think there's just enough share there that makes the most sense to focus on that.

Understood. Understood. So sticking with the trucking business for a moment and you think about the margin potential there, you all alluded to the fact that you're going back and you're reexamining sort of what the long-term sort of targets for that business should look like. I guess this is obviously an extraordinary market right now. We have a significant amount of gains on sale that's flowing through the business as well. But you have major productivity challenges too. So I guess, as you sort of weigh how all that works together, how should we think about the margin profile of your trucking business as we sort of look forward. I mean there are some other competitors maybe have a little bit different mix of asset versus non asset within their business that are mid-teens margins or higher. What would prevent you for maybe achieving that overtime?

Yes, I don't think there's a lot of players there, Jack. So my premise is that we're competing really well on the truck side. Even on the gains front, it depends how you invest. You're investing in retail operations, wholesale operations, just suppose equipment, what's your maintenance? How are you attracting who are you selling to? So all those are earned on both sides of the equation. And so they're part of trucking. I think the question, though, what's on the mix. And I think, overall, our mix will increasingly move to dedicated, which will have some of that more stable, less cyclical element as it relates to the margin performance. But we have higher aspirations in that business, and we expect that we're going to have higher performance in that business, particularly because of the scarcity of it in the network side of the business. And the stability and growth and the value that we provide on the dedicated side. So I think you'll hear from us shortly how we've come through that process and what our expectations and targets are. And when we say that, we're talking going up, not sure. I'm not going down. So...

That's great. Well, look forward to learning more about that. Okay. So this is sort of a longer-term kind of question, but you all are investor -- an investor in too simple. I'm curious to get your take, Mark, on how you see it -- the role you see autonomous playing, autonomous truckload, autonomous trucking, rather, the role it's going to play, if I can a kind of give one word here within the truckload market over the long term, whether that's 5 years, 7 years, 10 years, what's the role of autonomous?

Yes. It's really early and really encouraging on the technology, certainly. I guess, as we look at this, we think, at least initially, it will look and play maybe a lot like our intermodal business, where we're going [ exit-to-exit ] and then we have dray on the final mile or both the origin and the destination end. But again, those are cost offsets. To what you may not have when you have the interline being fully autonomous, you have to have that covered in the cost. So that serves an offset. You have staging, whether it's terminal capacity or extra ramp capacity to do that. So we have to get through all the economic models. I know that people like to just focus on, maybe there's not a Class A driver in the truck on the middle mile, but there's additional costs all around that, that has to be looked at as an offset, at least initially. So -- but promising. Certainly on the longer length of haul. We have a great product today called autonomous. It's called double-stack intermodal train, by the way, Jack, that does really well and operates in a similar fashion. But the technology is advancing. There's different approaches. We happen to believe that engineered from the ground up through the chassis, up through how the equipment is made is probably the best one that we're most excited about, but there's others that have different ideas on how to bring those services to market. But we think it's in the next several years, there's going to be at least some edge cases where that makes some sense and that we're going to be out learning how that can play a bigger role.

What part of the market do you think autonomous can really address? Like how -- what big -- how big is the slice of the truckload market to address?

Well, what folks will understand here over time, it has to be a network and it has to be somewhat balanced, right? So the digital disruptors sometimes think it's all just algorithm, Well, there's the whole -- the network component of that. So terminal operations, perhaps an LTL could make sense in my view, team capacity that you have, certain level of balance because of what you're doing may make sense, at least early, as an augmentation. But the balance issue is real important. I can't sit there and wait. If you're going to get to this benefit of a 20-hour truck or a 23-hour truck, it's going to be the last one that converts away to electric. It will be our longest diesel truck, I believe because of the range that you need to take advantage of that. So it's not going to be maybe as favorable in the environmental space. So those are all the things that we're working and trying to figure out because there's obviously, a bit more complexity than exists today.

Understood. Autonomous, what's interesting to me about it is, over time, it could be perhaps a factor that could drive some consolidation in the truckload market. It's a market that barriers to entry are fairly low. And so we haven't really seen consolidation here like we have another modes. One, I'd be curious to get your take on what do you think could ultimately drive consolidation in the market. And two, could autonomous [ be that catalyst ]? Jack, it's a great question.

Jack, it's a great question. I think it can be [ a catalyst ], maybe not [ b catalyst ], but it's going to take well capital, [ lies ] companies, that can do this, that have the sophistication to run these networks, maybe have the terminal capacity, have the dray capability to bring all that together and make it work economically. So I do think it can play a role. I don't think we're going to get to the LTL size or maybe the parcel or airlines, but even what we're doing today and some others are doing on this aggregation of capacity and demand is a form, in my mind, of aggregation of consolidation, excuse me, because we're aggregating on behalf of customers, both demand and capacity, even though it may not be under a single operating authority, but it's in the company itself is consolidating the industry a bit. So -- and I think you'll see more acquisition activity as well, even maybe some big deals, but maybe much more like you're seeing today, smaller deals. I think you'll see us be interested in more and more in the future of that as well. And we have an active effort presently to take advantage of the market as it exists today. So I think all of those things start to move that direction -- And I think you're starting to see it. I think we're on the front end of that -- of a very long time of -- in the coming for sure.

Maybe a kind of shifting to M&A as we close our discussion here for now. But I just want to pick up on that comment. I mean, what parts of your business do you M&A could really supplement them? Like what could you -- what could M&A really accelerate for you?

Yes. We think we have a lot of great organic growth opportunities that are underserved today. We've talked about those in logistics. We've talked about those in intermodal. For us, it's what's the most defensible segments that you can look at relative to that can be augmented with acquisitions. And so something that's giving a little bit of an extra touch to the customer, something a little more defensible than straight, what we would consider network driving type -- is our philosophy here. So whether it be dedicated or specialty, something else that you are doing to provide value to the customer besides moving the product a to b is where our interest is. And I might get you into new markets that might get you into new work configurations, but something that gives you a little bit of a moat like Warren Buffett likes to say around your business, how do you build, at least in this fragmented industry, a bit of a moat, and that specialty world is where we think that is.

Makes sense. I mean with M&A be something that could contribute over time to your logistics business?

We think we have such a great capability organically there, Jack. But what you have seen is our venturing and how do we think about with -- like we've done with mastery, like we did with Platform Science, like -- so there could be those areas that provide leverage back into the business that we get a chance to bring our brand to credentialize some new technologies. We're really studying the sustainability thing really hard to understand where we could leverage some tech, and leverage what we do in the asset world, and how we can maybe aggregate some of these data points in the non-asset world. So there's a number of things that we're looking at that in venturing though, that can play a role.

Well, that makes me think about a question here, just kind of off the cuff. I mean, Schneider has been very active over the years and investing in early around investing in some of these transportation technology start-ups it's been successful. It's been -- those returns have really worked. I'm not asking for individual company names that you think are [ interesting ] going forward, but just areas within transportation technology that you think hold the most promise to be being something exciting to see over the next few years?

Yes, we want to be strategic with our venturing, right? And so first of all, we want to make sure it improves the business that we're in today in a way that makes sense because that's how we bring value to the venture itself. And so there's a myriad of technologies. We talk about sustainability. We've talked about platforming in the connection with the driver. And so anything that enhances the customer or the driver or sustainability is probably where our focus will be because we think that gives us the most leverage back into our business.

Okay. Well, sounds good. Well, we're just about out of time, unless there are any additional questions from the room or, Mark, thank you so much for being with us today. Really, really appreciated...

That went faster. Yes. Thank you.

Absolutely. Thank you, Mark. Really appreciate it. Thanks, everybody for joining us.