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

Alright. We are going to go ahead and get started with the next presentation. My name is Tom Wadewitz, I cover the freight transports at UBS. It's a real pleasure for me to be able to host Schneider National. We have the CEO, Mark Rourke; we have the CFO, Steve Bruffett. We have Steve and Tyler in the IR team that are somewhere in the audience here, over there. So thanks to all of you for joining us. I really appreciate you taking the time with us today. We, as I think you know, there's the QR code that you can use to send in questions. I'll try to work them in if you have questions. And so we're going to do this fireside sat -- chat style.

Mark, I think the way I think of starting things off is just kind of like what's happening with freight. So maybe we can start there. But if you have any other comments you want to kind of start with, that's fine, too. So thank you for joining us.

Yes. Well, Tom, thanks for having us. We're thrilled to be out and in person and seeing you. Obviously, what's really transpired with our company over time, we are very much diversified across the mode. So it's a good chance to check in and what's different about truck and dedicated network, obviously, a big intermodal presence. And then finally, our logistics business has been on fire relative to its growth. So what's transpired with us, maybe since the last time we were together, is that we continue to leverage this multimodal platform with particularly our asset and ASA light business is now representing 60% of our revenues and nearly 50% of our profits. And so -- and that's a change from -- I think we just celebrated our fifth year of being public, actually back in April. Time goes back, yes. So very much was that part of our investment thesis to be this multimodal platform, and it's somewhat satisfying to sit here 5 years later and see that playing out.

Great. Great. Yes. Thank you for that. And I think it's been a strong -- certainly a strong brokerage and trucking market last year and continued into this year with obviously some changes in spot, but you guys did a great job leveraging that opportunity and growing a lot in logistics and brokerage, and putting up strong results. What have you seen in terms of the freight market the last couple of months? I know there's been a lot of focus on spot market and some of the spot metrics. What have you seen in the freight coming through your system last couple of months?

Certainly, more recently, we would consider the overall demand situation, particularly in our network business to be very strong. We're not a large spot player. So we're more of a contract shop and both in truck and intermodal, very solid demand, although we do have some customers starting to fluctuate a little bit, particularly, we're starting to see some seasonality, which we hadn't seen seasonality in a couple of years enter back in. So very good demand, very strong on the contract side. And spot rates are more getting on par with what we've seen in the increase in contract rates over time. So that's how we would describe truck and intermodal in the network side. On the dedicated front, we play a lot in retail, and we play a lot across multiple different industries. And as we've assessed, we haven't really seen any variation relative overall demand on the dedicated side, which not immune to if there's a change in freight demand, but certainly a little bit more protected, but we're seeing that be very, very steady. And really, there's a lot of focus on the spot rates. And certainly, that's a leading indicator, but it's not the only indicator.

How would you characterize -- I think you said, the contract business is still good. I think of say, okay, well, how much are contract rate is going up, and it's a function of when was the business repriced before. But how do you think about that progression, have you seen a deceleration contract rates? Have you seen customers saying, well, the market is a bit looser, can we push back more? How has that discussion been playing out?

There's really 2 things going on. We're in the midst of allocation season that if you're going through annual or semiannual -- or excuse me, biannual event. A lot of activity has gone on in the quarter there. But also we've seen over several quarters time, where customers have absolutely been trying to get their freight from the spot market to contract. And so we've been iterating through over the last several quarters, multiple events just to try to get that freight that was in the spot back to contract. And so naturally, when you do that we're accepting more because it's priced contemporary to what we believe makes sense from a market standpoint, less turndowns, less gets into spot. And so it's a very natural progression and 1 that we would have expected to play out the way it has. So that's on the kind of the spot. On the contract side and the allocation events, it's still a very constructive market. Customers, I think, are certainly support part of the inflationary cost that the industry has felt from wages, to equipment, to insurance, to maintenance, to parts, and so we are still in a very positive and constructive environment relative to those costs.

Do you think that shippers are -- you can make an argument and say, well, shippers were so in need of capacity and their supply chains were so damaged last year that there's going to be a time lag between when they focus on price relative to just getting visibility and access to capacity. Do you think that, that's the right way to look at it that maybe that's supportive for contract rates and how shippers deal with you for a period of time? Or how would you think about that dynamic?

Well, we're largely a trailer pool shop, right? So we're dealing with mid- to large-size shippers. First, we are looking for certainty of both service commitment and price. So we generally are aligned that way relative to our contractual mix. So at this time, Tom, we are still in that very constructive environment. We are obviously accepting more because things have been priced appropriately. We're not in the spot market. And so it's less chaos, if you will. But I think that is by design and things operate from a commitment of service and a performance for everybody when there's less chaos.

Right. Okay. How do I -- how do you think we should consider the retailer data points, the big-box retailers out a couple of weeks ago with earnings. I think there was some more commentary this morning from Target. And it seems that potentially there -- over inventory situation from excess inventory situation for some big shippers. Part of it might be out of season, but also the evidence of the consumer changing a little bit. Is that -- how does that flow through to demand that you see with those customers or in the market in general?

Well, a couple of things. Sort of the customers that you mentioned there have not only the size and the scale and the sophistication to be aggressive through the pandemic process to manage and get after inventory. And so they get a lot of attention and justifiably so. But it doesn't mean it's the right inventory in the right places, and it's the in-season and so we haven't -- at this juncture, have not seen any slowdown in the pull-through demand that is on the more normal replenishment cycle. And so could that be coming? We have -- again, we study that intently. We have a lot of tools that we look at to assess market places and assess various parts, because we play in extreme retail, home improvement retail, big box retail. And so we have such a diversified play there that we get a really good assessment across the board. What has changed a little bit is seeing some seasonality enter back into it, whether it's in the home improvement channel or in the last couple of weeks, we started finally to see some of the other seasonality, summer food and beverage season start to kick in. And so last week and this week is the first meaningful time we've seen the more normal seasonality start to return on some of the other elements that serve retail.

So I guess in terms of some improvement in spot recognizing that's not a big area for you, right? You think that kind of normal seasonality coming in at some of the areas that were maybe delayed or picking up and that is, I guess, support or can be supportive?

Yes, certainly, the northern part of the country was a bit delayed. And obviously, we're in an extreme outpost in Green Bay, but we can attest to that. And so that delayed a few weeks what we would normally see in that kind of that outdoor season of seasonality, but those shippers who play in that space are starting to increase.

Right. Right. Okay. Let's see. How do you think about growth drivers or maybe we can work through the different businesses? What are some of the key growth drivers for you in dedicated? And how do you -- how should we think about your potential pacing for growth on a multiyear basis and start with dedicated and then go through the other segments?

Sure. And Steve, you can jump in any time here. But as we've worked through the last several years, we've been very purposeful around how we've established and shaped our portfolio to be more resilient. And so let's start with Truck and Dedicated. I think we finished first quarter a little over 5,700 trucks. 55% of our revenues now, even in the truck segment, center around a dedicated configuration. And we are focused on durable Dedicated, not capacity generation dedicated. So very much on a specialty type service, a DC to store, something that we're doing that's durable through whatever business cycles may be out there. And so that's a continued focus or -- it fits well with the driver demographic and what they desire from a certainty and a schedule and a drumbeat of what the work they're going to do every day. So it lines up both with what the customer values and also lines up at a very tight labor market with the professional driver desires. So a much different configuration in our Truckload segment. That said, so dedicated being our #1 strategic growth driver in truck. Number 2 is in intermodal. We've increased our container count consistently about a 10% on a CAGR basis since 2017, we're up 26% over a year ago relative to container count. And again, that fits very well to what our strategy is around own box and own chassis and a company dray model that provides maximum control of us to be able to serve our customer, because we're in control of those elements. The big news for us, Tom, is moving to the UP coming up on the western part of our network, starting in totality next year. And what that gives us is the maximum differentiation from our largest competitor, because we are going to be on the UP and the CSX, which gives us maximum differentiation for those shippers, who value that controlled asset, controlled company dray products. So we feel really good about that. We feel that's exactly what we need to do to get after the doubling of this business by 2030. And we also have a more efficient network, because the connections between the UP and the CSX is more steel wheeled, particularly at those key interchange markets versus us to have to move it over the road from 1 rail to the next. So we got a great setup, obviously. So we got a lot of planning, and we're in the midst of that, and we expect to have that just a terrific transition. So that's number two. And then number three...

Well, I mean, I guess I can -- so let's come back to it. I was going to ask you a little more the DUP, but let's get to the third...

Strategic growth driver would be our logistics business and perhaps our differentiator there, Tom, is that we have a stand-alone capability within our logistics business and so it can generate its own demand, its own customer acquisition. And as such has been a growth vehicle from that aspect, but also because of our large presence in the other modes, we have a collaboration opportunity. So I think 92% or 93% of our top 50 by across all 3 of our services there. And then we have this emerging power only by leveraging our trailer network to bring small carriers to large shippers. And so those 3 distinct buckets within our capability there within the logistics is what's been behind this phenomenal, not only top line growth, but also a much larger contributor to the earnings profile of the company.

So if we go back through those and drill down a little bit on some of the key growth drivers. If you go to Dedicated, should we think of a couple of hundred trucks a year as being kind of a normal growth? Is it north of that? Or how do we -- not trying to say, oh, precisely, but just kind of broader what's a reasonable pace of growth in your Dedicated business thinking about it from a kind of trucks' perspective?

Sure. I would -- that would be very much a forward number for me, 400 would be a forward number, so 4 to 6 is well what we're targeting on -- the addition there is that's both organic and then we have opportunity like we did with late in the year, look at some acquisitive opportunities and we're still very much pursuing how we look to get it both organically and through acquisition.

Do you need to cannibalize some of the irregular route drivers to support that? Or do you think that you can grow at that pace without bringing over kind of netting down on irregular route or network?

Well, first, we think we have to give the drivers the opportunity to do what they want to do, right? Because if we don't, somebody will. And so we have a very open process, so folks can -- if they live in the right geography, that's the type of work they want to do, and it makes sense for them. We allow that transfer. That being said, we have a whole lot of folks, who don't want to do the same thing every day and want the variety and don't need to be home daily or weekly. And so the beauty of our portfolio, we can play those desires against multiple different configurations within the business. So our absolute desire is to stabilize and not have any more attrition as it relates to the network. -- side of the business. But in the labor market we were in and the desire that the driver had, we weren't going to let them go somewhere else to achieve that objective.

Okay. So that makes a lot of sense. What's the -- how do we think about dedicated in the downturn? Do you think the pipeline shrinks maybe the activity with some customers goes down, obviously, you could have that go up if they are more recession resistant businesses? Or do you think that what's driving the pipeline could persist, even if there is a broader freight downturn?

Yeah, I would say, there is really no part of anybody's portfolio that could be completely immune to an economic or freight recession setup, I don't want to insinuate that. There are portions of it which I believe is a, particularly, an intermodal on the variable cost structure were a brokerage business and dedicated, again, why those 3 are strategic growth drivers for us, have some attributes that make the more durable and more recession proof, if you will. The second part of question though, Tom, is we are focused on those specialty type services that are easily replicable by just putting a van one-way network as a substitute. And so as you think about where we're focused, where our growth has been, it's been largely on those type of configurations, which again, we believe, gives it more resiliency through economic cycles.

What do you think are the key drivers of those customers looking to do Dedicated? I mean I think that helps us build intuition on scenarios for a recession or freight downturn or flat-trade environment, whatever.

Well, I think just like us or a private fleet or what somebody might try to do from a strategy standpoint and their transportation is give a level of certainty of coverage, service and cost. And so again, I think Dedicated fits most effectively across those objectives for both the carrier and the shipper. And what I really like about those arrangements is our interests are highly aligned. And we all want an operation that can be more efficient, that can have less cost to serve, and can have a great service experience for both the driver and the customer. And so it lines up so well with both parties' objectives, I think that's why increasingly becomes something that folks are interested in doing more of.

Right. Okay. If we go to the intermodal side and consider, I guess, the opportunity, how do you think -- so you get some benefit versus your largest competitor by going to the most differentiated status, I think, is the way you characterized it. Are there transitional costs where some shippers may not want to ride on UP, and they may prefer to stay with BN. Are there meaningful risks that there's kind of a less favorable service performance from BN for you as you transition? How do we think about those risks and when they might show up, whether that's next year or second half this year or how do you look at that?

Yes, let me approach that through the eyes of the customer, I think, is probably the most effective way to answer your question, Tom. There was a debate of why do we announce so soon, right, almost a full year in advance. And part of that is we wanted to make sure, a, we were being a respective partner to the person that we've been with for a long time and that we could be open and transparent for their planning purposes. But importantly, for us, it was being able to get out in front and talk openly with our customers about what we were going to do, why it made sense for us and certainly why it made sense for them. And I will tell you, we've been incredibly encouraged by the reception of that change. And again, I think it comes to this whole ability to keep a maximum, if you have a basket of freight and you're trying to diversify by carrier, by railroad, by somebody who has their own asset, maybe somebody who doesn't have their own assets, it gave a customer maximum choice there, and that was received well. What we really did have to what are we going to get from this change? More origin destination pairs, more efficient gateways, because of the connection improvement between our Eastern partner, and our Western partner. And so taking this time to really get out and be able to ventilate that in the marketplace with our customers well in advance of an allocation decision, I think was absolutely the right call and has been reconfirmed by the experience that we've had since we've been talking to our shippers. And so maybe controversial at the time, but certainly, I think, the right approach.

Right. Right. Okay. Do you think that there is -- it's reasonable to say there's going to be a quarter where you have some transitional costs and that shows up or it's a strong backdrop and you're just going to absorb that and maybe you get wins that offset that?

Yes. What we're doing today, so first of all, the other benefit of doing early, both with the UP and with us, we have massive planning sessions on how we can best do this in a way that we don't expect any back pressure or back fall because of the change. And a couple of things come to mind there. First, on nonoverlapping and competing lanes, we're already starting to get all the processes and all the things that we want to do together, ironed out well in advance of a massive migration. Secondly, what's really important when you go through that is how are you setting up, what you're going to do now on your commitments that are durable through the entire allocation of any of the customer, and we have aligned that. And the third element is that during the transition, we have to make sure that we are prepared not to have any equipment hung up between the transition, between the current provider and the new provider. And so those are the 3 major planning elements to -- almost all of those in our control, right? And we have a great partner, who understands the importance of what we're trying to do in the West that are making the investments that they need to make sure that, that goes well, because we've got 1 great chance to make a really strong impression on the change. And so the good news is we're out every month talking to our customers, giving them an update to our dray fleet. So this whole thing has allowed us to be transparent, which is how we operate most effectively and very, very confident where we stand today that we're going to have a great experience.

Do you think this causes you to skew your mix more towards the West than it's been the last couple of years? I think we've heard from you that there is maybe more opportunity in East to think that may have been part of a function of your competitive status riding on the same railroad as day behind. So you think there's some rebalancing where you get a bigger step up in the West.

Well, when you look at the domestic intermodal market, 70% share with the top 4 essentially on the domestic side of this. And we were the only ones last year to actually grow volume year-over-year, '20 to '21. And we did that by not having all what we wanted to get accomplished in the West. And so it really speaks to the strength of our Eastern franchise. And so now we absolutely believe this complements what we're able to take share in the West to complement the great success we've had out East, and particularly because these railroads fit so well together on the TransCon business. So absolutely, this is about resiliency, maximum differentiation and growth. And otherwise, we wouldn't put ourselves through it.

When we look at that -- you said you grew containers, I think 26% over -- is that -- I don't know if that was like a year-end 1Q number, whatever the framework or retail framework. And you look at other big players have added a lot of containers as well, whether that's Hub Group or J.B. Hunt. And so at the same time, you've had, I don't know, a 5-year trend down, 3-year trend, maybe 3 years down in rail box turns. So you've kind of -- you've got a situation where there's capacity adds that over time have been offset by lower rail fluidity. What happens if the rail fluidity really improves and you've got 30%, 35% growth in market capacity, because everybody added boxes and the rails run 10% better. Maybe that's too theoretical. I know it's...

There's a lot of variables.

Issue, yes. Right, right. But is that...

I'm sure you have a model for that, but...

We do. But is that something we should be concerned with? Or how do you think about that? Maybe that's a '23 event, not second quarter, obviously.

I think there's a couple of things to peel back in your question there. First on the rail-owned equipment side, they aren't reinvesting to the same degree as the private box owners are, right? So we're seeing that other part of the market gets smaller, while the private box container counts are going up. As we look back and as we assess the market, we believe the market can certainly get back to pre-PSR or precision scheduled railroading volume levels. A, because of railroads are expanding options a bit, particularly as we have assessed what we get by going in the West and the East combination that we just talked about. And when you look at the 550-mile length of haul or longer, even if we just get a 1% improvement there, that's about 1.3 million orders. And so when you combine the growing aperture for intermodal on the rails, when you combine the ESG tailwinds that we have for customers making significant commission commitments and our execution capability and model, we don't believe we're going to outrun -- the market is going to outrun the box count that we can support. So we think all of those trends are very, very, very doable.

So do you think the railroads, as you look at '23, '24, do you model in meaningful improvement? Or you say, well, we'll keep it in their fluidity and turns or do you tend to assume that it's today is the best indicator of what you get in the future?

If we keep this through fluidity, there's really 2 components. There's a rail off-premise franchises and then there's what we're doing on the street with our company Dray and what the customer is doing, what they have control of our box. We are executing incredibly effectively with what we can control there, which is the company dray piece, which we think is a weapon. We are seeing some improvement at the customer locations through their labor and process that we're seeing some improved fluidity what we think is in front of us, which we haven't seen yet as much as on the rail side, with the crews that they're after, the training, the staffing, what they have in front of them, should give us some confidence that we'll see some improvements on that element that we haven't had a chance to enjoy yet.

We've heard -- I think we hear a little bit of mixed feedback on the warehouse piece, like I think we had heard about improvement, but then some questions about, well, is that continuing? And is there kind of a Southern California issue partly that they've raised pay, but the warehouses still may not be attracting the labor they want. So is that something that was kind of up and down? Or do you think there's actually been improvement that continues on the warehouse piece?

Well, we -- my comments on around our customers on loading it once they get it. So that's more of a indolent comment, not a port comment. Do we have concerns about the port activity and everything? Absolutely. Customers also were part of the difficulty, because once we would get it to a distribution center or get it in land, it would sit instead of turn in 2 days, it might was turning at 4 or 5 days. And so what we've seen there is that is where we've seen the most improvement across the network is what the customer signs controlling.

Right. Okay. And you're talking about kind of Midwest warehouse is not necessarily LA area warehouses?

Not port activity, correct.

Yes. Okay. That -- yes, that makes sense. What -- I guess, what's your level of investment in chassis that is that -- has that been kind of a pinch point or that's something that you're fine and you're fine with trades capacity? Because you talked about it as a strength.

Chassis is right now, we're not satisfied where we are. We obviously had some tariff issues coming out of Asia. On the OEM, and we're working on some domestic production options. I would tell you, at this juncture, that is a little bit of a constraint for us, and we're working through to a better solution there. Boxes, we got creative, bringing in their own ships and doing things last year to help us get ahead with. Chassis is 1 that we're working aggressively.

And when do you think you get that, is that like a second half of this year? Is that a '23 event? Or when do you get...

I think we'll make progress yet this year.

This year. Okay. What about the driver market? Is there any change in the driver market? Or is that something that's same -- I mean, I know it's always tight, but is it getting any better recently or it's just the same?

I always get the DEFCON mixed up, if it's 4 as highest or DEFCON 1. But it is still incredibly difficult. We are seeing with the actions that we've taken in the industry and others have around wages and we opened 6 to 7 of our own academies to get after the new CDL holder that we could kind of develop ourselves, and that's given us some relief. So it's a little bit easier, it is. And I think it also speaks to the configuration of the portfolio being more dedicated and intermodal dray driven. Again, lines up better with what peoples' desires are from a work configuration. So that combination has provided a little bit of relief, Tom, but it is still incredibly challenging.

What about equipment delivery on the tractor side? What are you seeing there?

I'll let Steve talk for a while. Dominating over him.

Woke me up. Yes, it's been steady, but sluggish and a little behind schedule, I would say. But I think our expectation sitting here today is that we would end up receiving substantially everything that we've guided toward this year, which is about $500 million in net capital expenditures. But it's been a struggle. It's interesting too, they're experiencing -- they -- most of the OEMs have global supply chains themselves. And so what they're experiencing from 1 week or month to the next as to what the pinch point is, it moves around. It could be headlights, because there's glass involved or it could be brake drums or it could be brake pedals, most recently. Yes. There was a chip involved and some metal. So just -- it moves around as to what the constraint might be, but they're doing a good job working through that overall and making, like I said, the deliveries we expected is just probably 2 to 3 weeks behind schedule.

So only 2 to 3 weeks behind schedule, they're not...

That's been our experience to date.

Is that better, I think, than last year? Or how would you compare the experience to last year?

No. I would -- obviously, we're positioned with most of our spend with 1 provider here. So we are highly integrated with them. So I would say it's more of a continue of the same. And I would preface Steve's comments with that is not all the equipment we wanted. So of what we reached a commitment on, we're going to get, but it would still be less than what we would have desired. And Tom, as we look forward, we see no relief in 2023 of that same element. So -- and that applies on the power and on the trailing equipment side. So when we are looking at prior periods, which we so much like to do in your industry, of what happened the last time something was a catalyst. What we didn't have was this equipment constraint condition, right? And it's persisted last year. It's persisted this year. And every indication it's going to persist in 2023. And so we do have some capping or gating element to what the industry can do. And that's what somebody as large and connected as we are, let alone the midsize, which is what you're seeing just the craziness in the used equipment market and so whoever is coming into the space is coming at an incredibly high cost position.

What makes you think that in '23, the issues continue? Is that like do the OEMs tell you that? Is that a function of just understanding what they do and where the constraint comes from or what?

We've never been involved earlier and planning for 2023. And as they look at the things that are out in the front of them, they see no relief. Therefore, we're going to see very little relief. So...

Right. Okay. Makes sense. If anybody does have questions, you're welcome to submit them, and I'll -- I don't have any that have come in yet, but please go ahead, if you want to. The -- I guess the downturn, so you said we like to look at downturns that's true or cycles, I should say, cycles not downturn. We like upturns a lot as well. But how do you think about like your commentary on capacity, do you think that, that would set us up for a shorter downturn, a shallower downturn or do you think at the end of the day, maybe it delays the impact? How do you think about the shape of the cycle to the extent you can presumably you have a view on that, right?

Well, I'd like to start that question maybe on the supply side, on the capacity side. I think a disproportionate amount of growth that has occurred or change has occurred has been on the very small carrier, independent operator, chasing a very lucrative spot market, et cetera. And as we can only assess what we're selling equipment to those folks for in the used equipment market, I mean it is a much, much different condition than any other cycle that we would have been in my 34 years exposed to from that standpoint. So I think the question is how durable is that element that has had a disproportionate amount of the growth going to be in any type of economic or freight downturn when and if that occurs. So that's what I would watch most closely. And there's a lot of stress in that market presently with the spot market moderating more and we're seeing some of that pain and how they're communicating with our brokerage world. But we haven't seen a mass exodus yet. We haven't seen a major change. We are seeing probably more distressed companies talking about looking for an exit strategy perhaps. In fact, we announced 1 today about an hour ago. 1 such occurrence. So I think we're on the front end of that, Tom, and we'll have to see how that plays out, but that is a much different dynamic than certainly anything we've experienced the last couple of cycle adjustments.

Do you have a quick thought on what you announced to, I think a small acquisition, maybe a quick side on why -- what you did, why you did that?

Yes, I'll let Steve.

Sure. It is a relatively small transaction. So it should be put in that context. But it was an opportunistic way for us to gain access to drivers and equipment to deploy against growth opportunities that we see predominantly in our dedicated and power-only solutions. And so I think it will be a nice fit of a tuck-in. Unlike what we did with MLS, which was to keep it completely separate and preserve that company for what they do and do well in the markets that they serve. This 1 would be quickly integrated into our existing businesses, and we'll move on from there. It's an opportunistic thing that came our way. And so we're pleased to get that transaction closed today.

What do you -- how do you think about acquisition opportunities that might be bigger? Or how significant a component inorganic growth is for your broader multiyear growth strategy?

Steve?

Yes. Certainly, in the overall capital allocation discussions and prioritizations that we have, inorganic growth is up towards the top of that list. Of course, organic growth and things that we can find to invest in, they are at the top. But in addition to the durability or the resiliency theme that Mark has hit upon numerous times as we allocate capital across our portfolio, is a growth story. We seek to establish a growth story to go along with that resilience. And I think M&A can play a productive role within that properly done. We try to be very selective and stay on theme as we think through the M&A space. And at the same time, we have a lot of firepower. We have a very clean balance sheet with virtually no debt and a lot of capacity. So our aperture is pretty wide open, looking for opportunities to continue strategically bolstering that growth profile.

To include considering large transformational opportunities too. So we've had more of a dedicated play in this play here, more of a tuck-in, but more recently, but certainly, at our strategy work and our discussions, transformational is not off the table.

What would you consider to...

I don't -- I wouldn't progress to give you a specific example...

But like type of business, would it be more likely to be asset light, logistics, brokerage, technology, would it be more likely to be asset based. I don't know if you want to characterize it?

Yes, I think we would lean towards more of specialty space, something a bit outside the vanilla dry van truckload if there is such a thing. Dedicated like we've done or any other type of specialty trucking would be a big interest. But not a lot to look at of attractiveness on the intermodal side for a host of reasons. But -- and if the right thing came along on the non-asset side, we would look at that as well.

Are you optimistic the right thing may come along in a couple of years?

I'm of the belief that we are on the front end of some transformational change in the industry. You're seeing how we're bringing together small carriers with large shippers around a platform of an orange trailer. I think there's more opportunity to consolidate in some unique ways as opposed to just trying to look like an airline sector or an LT health sector. I think there's some other unique ways to bring together a consolidation path in our industry. And that spans the spectrum from heavy asset to asset-light and bringing this -- maybe this vehicle or this trailer conveyance in the middle.

Right. We don't have a lot of time left, but I do want to get some thoughts on power only. I hate to perhaps shouldn't have left it right till the end here. But how do you think about the opportunity on a multiyear basis for that? How do you relate that to the cycle? I think some investors would say, well, power only benefited from the extreme tightness in the market, but I think that there's probably opportunity well beyond that. So maybe a couple of thoughts or some perspective on your Power Only business.

Yes. Lots of talk about here, Tom, but I'll try to be succinct. First, certainly, we did benefit through the tightness by being able to introduce a seamless product to our customers and have them understand the value of it. So that's been a real positive. And so there's no barrier, particularly our approach, which makes it very seamless to the customer. They don't have to do a special reservation. It's -- we make a deconflict all of those commitments on the front end and then we execute across our various capacity types on the back end, seamless to the customer. So, a, that went well. Secondly, we've also been able to show a great value proposition to the carrier community in a very tight market, which gives us increasing confidence that there's going to be even more value to that same carrier in a market that isn't as robust, right? So I think the question was, is this durable? And then the third element of that is that just like many parts of our business or most parts of our business, this is from our standpoint, not an overflow exclusively, we benefit from overflow, but we're also heavily contracted in the Power Only space. And we don't conflict with our company network, or owner operator. As I mentioned, we deconflict through our pricing and our revenue management tools on the front end, so that we can execute with excellence on the back end. So I am highly optimistic this is durable, because we've been able to show great value and the customer isn't different in many ways, just manage the experience for us. And then the carrier has gotten a great benefit, particularly the 1 we're targeting here, the micro carrier, getting access to freight that they otherwise would have no access to. And so I think that's durable through whatever cycle. We may not have all of the overflow that we had coming through this cycle, but our intent would be to replace that with contract volume that's durable throughout.

Do you think you can grow loads, maybe not revenue per load could go down, but do you think you can grow loads and power only through a moderate freight downturn?

We do. We do.

And what's the key element...

And it's a great augmentation to our network, which is a little bit smaller in size than we would like. And so those things are very much from a freight characteristic in what we do more similar.

Is there a gating factor for growth in power only? Is it like I know you got some trailers in the acquisition, which is helpful. So is it really expanding the trailer fleet that supports that growth? Or are there other factors and you've got not constrained on doing Power Only?

Well, a couple of things that, again, are here and in front of us that help in this regard. Tom, is, first, we have built out our digital connection with our Quest platform, we have been focused more on the internal processes. And what we've done now with freight power for carrier, freight power for shippers, focused on those connections with our other freight partners, carriers and shippers. And so now we have great digital connection, so it's easy for our shipper to get all the same experience that they would if it was a Schneider company truck, because of how we've connected. It gives them great visibility to the freight. And we're now adding to those features to be more focused on what they want next, the touring capability and the building of a network within a network. And so those tools have come on board now that we didn't have 2 years ago that we have today, that help us think about how does this sustain itself and grow, without having to grow the people and the infrastructure at the same at the same level. That's what I'm most excited about, particularly on this service offering. It's our -- generally our entry into new technologies and new business processes. And so I think we reported on the last call, we grew volume a little over 20% and grew headcount 6, and we see that as a benefit to this over time. That will obviously play in other parts of our enterprise, but we start in our brokerage and Power Only part of the business.

Right. So your technology tools help you continue that and you're continuing and you add more capabilities, so that supports the growth. That makes a lot of sense. We've gone a couple of minutes over. We probably should wrap things up Mark and Steve, thanks so much for joining us. We really appreciate it. Thank you.

Appreciate it, Tom.