Schneider National, Inc. ($SNDR)

Thank you very much. Welcome back from lunch. We had a great session with Senator Mansion. So appreciate everybody joining that. I thought it was super informative and interesting to kind of dig through the political dynamic. We have a return to the transportation track this afternoon and especially on the trucking side, and we are very pleased to be joined by the gentleman national we have Darryl Campbell all the way down, EVP and Chief Financial Officer; and Jim Filter, EVP, Group President and of transportation and logistics. Gentlemen, thanks so much for joining.

Appreciate it. Thank you.

I think the way we've started most of these is to kind of just do a bit of an overview of what you guys are seeing so far in the market. The second quarter has been pretty dynamic. It seems like maybe we're beginning to add a little bit more demand to the market, and certainly, capacity is getting tighter. So maybe I'll turn it over to you for a couple of comments there, and we'll start to dig into the business.

Yes. Yes. Well, I'd say demand, while there's some pockets of strength, certainly, especially in what we're seeing with production picking up a little bit. Generally, it's been stable is the way I would characterize it, demand. But what we've seen the most activity is capacity exiting the market. If you think about 1 thing that we keep talking to customers about, we've been discussing this for a long time that over the last decade, truck accidents are up almost 20%. And despite the fact that large trucking companies like Schneider have been making a lot of investments are actually improving crash frequency. The overall market has been growing. Overall number of crashes has been growing. Certainly, part of that is a more distracted public, but we knew that something else was going on here. And we do applaud the administration saying, look, that's enough. We've got to address this. And there are so many different facets that they're addressing here. Whether it's -- I'm taking a group of drivers from another part of the world that don't understand what's like to drive here. I'm going to skip the normal type of certification, the normal type of training. I'm not following ELDs, there's so many different steps that they've been avoiding is really what's resulted in crashes increasing at this rate, and that is starting to come out and it's exiting very quickly. But we'd still say there's probably half that capacity is still out there in the marketplace that's still ahead of us. So as much as we've seen so far, we believe that there's still more room to run there.

And so what about the second quarter has been so dynamic for the spot rates? Is it really -- is it more just the demand side -- excuse me, the capacity side where we are starting to see those exits I think it was notable, the May FMCSA carrier authorization numbers did take a more meaningful step down than we had seen in the previous couple of months. I know, obviously, we had road checks, so maybe there's some of those factors kind of playing in. So maybe talk a little bit about what the sort of maybe specific catalysts of the spring have been.

Yes. So every year in the last 3 years, we've seen this with Roadcheck followed by Memorial Day. That is also a good indicator that the people that are not operating legally were looking for a place to hide, and we're coming out every single year. So not surprising there that we are seeing those type of factors. This year was no different in terms of seeing that type of impact as well as -- when we're talking about the capacity that is exiting, it's the most irrational capacity. They're not playing by the same rules as everybody else, that have been governed. That's really why I believe that this down cycle has lasted so long as the capacity that was added right after the pandemic -- they weren't playing by the same rules. It took them a long time to come out, and we're just starting to see the front end of that.

Yes. Okay. No, that makes sense. And let's touch a bit on the demand side. I think you said stable if we could kind of think about it, whether it's the obviously, housing has been sort of the piece that's been largely absent from any of the discussion. The consumer has probably been fairly resilient over the last couple of years. I think there's optimism that maybe industrial is getting better. We've seen ISM improve. But maybe that's not really flowing through yet. So how would you sort of think about those big buckets of demand?

Yes. Seeing ISM is favorable. We're seeing those buckets are starting to flow through. What we haven't seen is with interest rates -- we came into the year expecting that we could see a couple of interest rate cuts. And at this point, we're probably just as likely to see an interest rate increase as a cut. And so those parts of our portfolio, home building everything that goes into a new home being created as well as automotive, perhaps not as strong as what it could be had we seen a rate decrease. .

Okay. All right. That's helpful. And then I think as we're sitting here, we're getting to the tail end of what is the traditional bid season with a lot of implementation of these contracts coming in and then flowing into the second half of the year. I guess maybe if you could give us a lay of the land of how you think it's been progressing so far.

Yes. So as we talked about on our call, what we had seen was mid- to high single digits, but there were shippers that took much larger decreases over the last year or so. Those shippers were seeing double-digit increases. At the same time, allocation events aren't the only way that prices start to move for this industry. That's 1 factor. And those shippers that aren't making as much movement as it relates to those allocation events as a shipper, they don't have to guarantee that they're going to have the freight for us as a carrier, we don't have to promise that we're going to have a driver available. And so there's an opportunity here of what freight we're actually accepting -- are there additional opportunities out there in the market that we're able to move. Of course, there's also opportunity within the spot market to be able to capture price.

And so I guess as you think about that we've begun to hear a little bit more discussion of double-digit rates. I think you noted that some of the shippers that maybe had gotten lower ones are beginning to get that. I guess, how would the mechanics work in the back half of the year if the rate environment continues to draft higher. So obviously, we think traditionally about a lot of the work being done in the first half of the year, but there is going to be some flow through if things continue to sort of percolate. So -- is it mini bid activity kind of picks up and we'll see sort of that flow in. Obviously, you guys have some spot exposure, not obviously an enormous amount relative to the size of the business. But let's talk about how that could play through.

Yes. We -- certainly, we saw that back in 2022 there are allocation events, shippers completed 1 of those. They start falling apart, do a mini bid another mini bid and some of those things were just coming so quickly because at the same time, if shippers are trying to get more capacity, we're going to have to be more aggressive in terms of bringing capacity into our business, and we're going to need to be able to get that rate. So generally, we're looking for something that's more durable, sustainable, but this is probably going to take a couple of allocation events to get back to recovering the price that has been lost over the last couple of years.

Yes. And then I guess maybe thinking about it from like the actual truckload business versus dedicated. And then I do want to talk about intermodal and logistics. You have a lot of different pieces of the business that you have exposure to in the cycle here. But I guess we're probably talking more in the context of the One-Way Truckload business. I guess, how do things kind of play on the dedicated side of your network?

Now dedicated, absolutely more stable, multiyear contracts. At the same time, within Dedicated, there are opportunities as we're looking for backhaul, there's more backhaul opportunities that you're able to identify. There's also spot price freight that you're able to pull into that dedicated fleet as a backhaul. So it's not completely distinct. . Yes. Okay, I would just add, in Dedicated, we've been very focused on productivity, right? So I have said that revenue per truck per week is the metric that we use to kind of measure how successful we've been during the down cycle. So we're not necessarily adding trucks or looking at truck count as a metric. So it's not just price but productivity as well.

And how do you think about utilization across the truck business? I guess that's 1 of the things that we're trying to understand a little bit more as the opportunity, particularly for the big fleets. If we do see this consolidation event here, will there be opportunity, like you said, maybe not early and just fleet count itself, but more productivity. Is that something you can get on both sides, network as well as the dedicated

Yes. So in Q1, we saw our revenue per truck per week in network go up by 7%. Most of that was utilization. Most of that was productivity. So we're continuing to lean into that. That's really just a matter of there's more opportunities out there, do you get the right mix of freight. So part of it isn't always do you get the highest paying for it, but what works best for your network to better utilize the drivers. And the real reason for that is that's an opportunity also pay our drivers more because they're receiving all of that themselves in terms of the productivity benefit. .

And I guess, the guide for the year, I guess it's probably helpful to talk about that, right? Maybe we can think about the bookends. So the $0.70, the dollar, can we kind of talk a little bit about what you need to see Hopefully, the $0.70 is largely off the table, I don't know. But if we're thinking about what the opportionality could be, what would drive upside to the guidance?

Yes. So I mean, just to level set, we 1 quarter in, at least in terms of what we've announced publicly. So there's still 3 quarters to go and 1 of the themes that's actually guided for a full year, right? And we give you credit for that -- not a lot of your peers are doing the same. . Yes. So -- but what we saw in the first quarter was very encouraging, right? So we did see capacity exiting probably more rapid than we initially anticipated, which is a good thing. We saw the benefits of our cost and our productivity actions come through as well. So we had weather disruption, we had higher fuel prices that impacted us in the first half of the quarter, and we were able to rebound largely because of all the actions that we took in terms of productivity and cost. At the same time, I think, as Jim said, there's a balance to that in terms of demand. So demand has been stable. And what we've said is to get to the higher end of our guidance, we need demand in flat right? So whether that's initially, there was some expectation of recost. As Jim said, there was expectation of inflation normalizing. There's some recognition, at least from an energy/ful standpoint, there is risk of higher inflation. So we're balancing what we've seen in terms of supply treating and our cost and productivity actions with the fact that to get to the high end, you need more demand inflict. So depending on what happens on the balance of the year, the cadence of kind of the improvement and the amplitude of the improvement will be largely driven by demand.

Okay. And then 1 thing that's come up a couple of times so far over the course of the day has been the early discussions around peak season. So I think it's probably being driven to some extent we're beginning to see ocean rates move up. Some of it's fuel, but there's also demand on relatively lower capacity -- have you started to have any of those conversations. It sort of strikes us as last fall, really after Thanksgiving, we saw spot rates really inflect meaningfully higher, and that was partly driven by the fact that capacity was coming out, and there was a bit of a peak season. So -- is this something that's kind of coming into customer conversations yet?

Yes. So we always -- especially in our intermodal business where this is most prevalent, we're always having that discussion as we go through an allocation event because we want to make sure from both sides there's a clear understanding of what are you getting at this price point. How much demand increase are you expecting that we're going to be able to cover. So with a large retail shipper, we would always have that discussion this year is really no different for us. Perhaps there's more potential demand out there. I don't know, but it's clear that it's top of mind for shippers.

And our shippers generally sort of receptive to the idea they've gotten away from that. The first part of the year was driven by weather and nothing else really. Are they starting to get more receptive to the idea that something might be shifting a bit structurally in the capacity environment of trucking?

Yes. I think there's -- the other thing that is on the mind of shippers. They've seen that -- first of all, over the last few years, they've known that something was irrational. There was pricing that really didn't exist. So there were shippers that came to us and said, "Hey, you should be able to make this transit in a day, and we said, well, that's more than 11 hours." And we said, well, somebody else is driving that? Well, that's illegal. They've talked to us about wants to do illegal cabitage? That's not legal. So they've known that some of the things that they've been doing really weren't safe and needed to be adjusted. So they understand that there's a big difference there. I think the big change here is the Montgomery case in the last couple of weeks. So in the past, if you said, well, they're doing that, but I don't really care. Well, now they have to care because now they're owning that liability. And so I think that's the big change in the marketplace that today, if it's a small carrier, they have 750,000 of insurance level. They might be doing this by a broker that only has a $75,000 bond, and it's just the thought well, all of that liability rush with them. Now they're saying, Wayman, I own that. And so I want to make sure that I need to be asking these questions about safety. Are you -- what is your rating with FMCSA as well as how much insurance are you carrying because I'm carrying all of the access above that level. So it's starting to matter to shippers.

So I guess let's talk a little bit about Montgomery because, obviously, it's the potential -- it seems to be pretty meaningful. And I guess maybe thinking about it from Street from a capacity standpoint. I don't know if you have a sense of how much capacity you think probably is less employable in the world of Montgomery. And I guess I also wonder how brokers are going to approach this, whether they're just going to be willing to take on more liability risk themselves or actually make some changes by carrying more insurance. So maybe let's start with the carrier piece. What do you think sort of gets impacted here? Because clearly, we don't have safety scores on the vast majority of the market today.

Don't have safety scores you have other information available. And so for us, back in 2022, we would publicize that we had 60,000 carriers that we worked with in our brokerage business. It's now less than 14,000. And specifically, what we were targeting or the reason we are targeting was because of cargo security, and we're certain to understand, we met, there's a lot of Cameleon carriers out there, individual people that had multiple motor carrier authorities and what they were doing with switching and using that to be able to seal -- but likely, if they're willing to do that, they're willing to skirt some other laws in this country. And so when we look at the Ben diagram of all the different regulation that's out there, the people that are violating are often violating multiple rules. As we've gone -- the reason why we went through is to be able to get down to that group of carriers that we said, "Hey, look, we betted these. We are comfortable with them. I would tell you, based on our experience, there aren't 50,000 carriers in this country that you could bet and say that they're safe. And so when there's a broker or someone saying, "I use more than that. I know they're using carriers that are unsafe. And so I think there's a lot of this industry that is going to have to go through a different betting process to get down that level.

I think we've heard this from other people in your position as a larger, more credible player in the market that I think some of your bigger changes around carrier vetting occurred in the past. Have you done anything incremental since the Montgomery ruling came out?

We haven't changed anything since Montgomery. The other changes we've already made have put us in a position to be able to understand here's the carriers we want to operate with do believe that there's going to be additional data sources that we're going to be able to use and perhaps get a little bit further than just the rating system us -- perhaps using some of the basics going forward just as people start building additional tools.

So we think that brokers are going to get more selective in terms of the qualification criteria that we use, not only initially, but on an ongoing basis in terms of monitoring. And we also believe that insurance carriers are going to get more selective in terms of the risk that they underwrite. So I think the combination of those 2 things could have a significant impact. .

So we've seen the pool of brokers continue to get smaller over the last couple of years. I think it peaked an immediate aftermath of code has been sort of steadily moving down here. I mean is your expectation then that you'd expect as we go through the rest of 2016 to continue to see the same sort of pace as it get a little bit faster? I guess we're trying to get a sense of how much of a consolidation opportunity there really is in brokerage? And does it take some time to play out because you need insurance cycles to reset or some like that.

Yes. I think there's a couple of factors here. So number 1 is exactly what we're talking about in terms of the reliability, credibility of the brokers that you'd expect that there's some consolidation because me, at the same time, the number of brokers exploded up to 25,000. Just through normal competitive dynamics, you would expect a little bit of consolidation here. The other side is in terms of the use of -- and we've been using AI for a number of years. And I'd tell you is there's some companies that have gone out there really focused on the efficiency I can get with AI. I can tell you that's probably the fastest way to go bankrupt in this industry. You have to work on becoming effective. And the long history we've had in this industry, the fact that we operate an asset-based business, we're able to understand how rates move to be able to make sure that we're not just efficient, but we're really effective at the same time. So I think that's the other thing that starts to draw a little bit of consolidation in this industry.

Yes. And I guess maybe as we think about like gross margin dynamics, do you think that there's risk to gross margins over time? One of the brokers that we talked about noted that 50% of their volume was flowing into sort of the bottom cohort of the carrier market, which would suggest maybe easier, better buy rates for them down there. Is that something that structurally changes going forward, do you think? .

Yes. I think we talked about we're felt really good about our performance in the first quarter in our logistics business. We felt it was a differentiator because there are a lot of companies in the space that were getting compressed. What we're really focused on in that business is differentiation. How do we lock on to a vertical where we have really good understanding of that business and then be able to provide additional value-added services. And sometimes that's within our logistics business. Sometimes it reaches back into our asset-based business. And so all of our owner operators have visibility to all of our brokerage freight have an opportunity to move it. We have an opportunity to move it with our intermodal business, our truckload business and just gives us a little bit different competitive dynamic with those customers.

Okay. That's helpful. And then maybe wrapping up this conversation as we think about it, a lot of -- obviously, what's happening here, the most obvious sort of potential impact could be rising driver pay. So how do you think about your ability to source drivers in the market today?

Yes. So a few different things. Number one, the best way we want to be able to take care of our drivers was would productivity. Get your drivers more miles, they're happy. The business is very happy as well. We also have to be able to restore the margin for our organization. Eventually, price has to be able to flow back into increasing driver wages as well, but those have to take place. We feel really good about our position to be able to attract and retain drivers. And we have a hire to retire mentality. We bring a lot of drivers into this industry. Often they start in our network business, where we get a feel for it, spend weeks out of time out on the road really be able to have that freedom as their life starts to change, are wanting to get home a little bit more frequently. We have jobs like intermodal and dedicated where you get in home every day or every -- at least every week or every few days. changes their lifestyle. And then there's a point where they start saying, "Hey, I'm really comfortable with this. I want another challenge." We have more complex jobs like bulk. And now I need to understand how pumps work and different types of chemicals. And then there's a point where drivers say, I'd like to own my own truck. And so we have a leasing arm that helps drivers go out there and buy their own truck and continue to be part of the Schneider organization.

Okay. And then let's talk a little bit about intermodal. I think intermodal is an interesting dynamic as it stands right now because we're having all of the capacity tightness, obviously, rising fuel prices, all of which would seem to be pushing volume your way from an intermodal perspective. Can you give us an update on how you're thinking about that, sort of the volume environment there? Is demand a little bit better than it would be seen on sort of the truck side? How do you think about it?

It's the right environment for intermodal when you think about it's truck pricing. It's fuel and really just good service from every 1 of the railroads right now that when inspire a shipper to start to convert -- at the same time, we're going to be disciplined on the way that we do this, that we're going to find opportunities that are accretive to our business, understanding that if you're just going and grabbing volume. Sometimes you can find yourself using third-party dray capacity and that incremental load is not generating incremental earnings for the organization. So we're going to do that in a disciplined manner, and think there'll be more opportunities ahead of us.

And I guess, how would you think about the relationship on the pricing side or the contractual bid season from intermodal relative to truckload. Typically, there's a lag here. expect it to be the normal -- the normal lag or we'll see maybe a little bit more pricing later this year and obviously, a lot more in 2027. How do you think about that?

Had kind of 2 pieces to think about, first of all, truckload rates dropped a lot faster than intermodal rates. Intermodal rates are more durable through the cycle. So can't expect the same amplitude of a change as the market starts to increase as well. But what we haven't necessarily gotten to a spot of where we're going to need third-party capacity to build, execute orders. That's usually what really trips this market. It's not necessarily using the trailing -- utilizing all the trailing capacity, but it's when do intermodal carriers start to get to that spot that you have to use third-party capacity. Now there's a great deal of intermodal market that is non-asset-based IMCs. They're already in that spot where they have to go and use the third-party dray cost. And as that starts to push upwards, that's where we would expect to see more volume lift but also a pricing.

Okay. And anything from a competitive dynamic, I mean, we have -- 1 IMC that's not providing much information into the market right now and obviously, others that are. So I don't know if there's anything that you've noted that's different from a competitive landscape.

Yes. We have 1 not reporting any information, 1 that just went through a bankruptcy, 1 that's losing money. So -- and then you have all the non-asset-based IMCs. So that's that's the competitive dynamic. We're not interested in joining them in that side of the market. We feel -- we're not satisfied with where our margin is in that business. But relatively speaking, we should feel pretty good. We're focused on us and getting back to our long-term margin. .

And we touched on peak in the previous conversation, but obviously, you noted intermodal is a big part of that piece. We have heard about peak season surcharges from 1 of the other big IMCs. Is that something you'll be implementing? Is it already in place? I guess, how would that work?

So every single year, even years where we didn't have that impact, we had processes in place. just because you don't want a shipper that suddenly you weren't receiving volume all year and here's a whole bunch of orders and you're going to be taking away from somebody else. So we always have those plans in place. Whether shippers will execute on those, you really don't know until you get to that spot. So not being quite but difficult for us to understand how many shipments each shipper is actually going to have.

Okay. But presumably, if you start to get out of balance to the up above where the limits on order is for every agreement, and that's how we talk about peak programs as we're going through allocation events because we want to set -- here's where the guardrail is given the price that we landed at. Okay. And then I wanted to ask a couple of questions about margins and sort of the pace of recovery because -- you're not alone in this industry of having dealt with some meaningful headwinds and obviously some margin compression over the course of the last couple of years. So I think 1 of the big questions I get a lot is how quickly can we see what is obviously happening in the spot market. We can all look at our Bloombergs and see how things have ripped to how does that translate into your numbers? So as we think about the -- is it how much comes in 2Q? Is this really more of a 3Q, 4Q dynamic on that, specifically looking for numbers. I'm just trying to think about how it flows through your business mechanically. So when we know when to expect it?

Yes. I think I would just start with an acknowledgment that what we've seen over the last 4 years has not been normal, right? So a lot of the difficulty that people have sometimes is applying normal rational a cycle that has been abnormal. So when we think about cycles usually think about cycles in terms of 18 months, so 18 months up, 18 months down, thereabout. We are beyond 3 years, going into 4 years of kind of a down cycle. So now we know a lot of the reasons why that was irrational capacity being a big part of that. So as capacity is we're going to leave the market and at a more accelerated piece, we've started to see the benefits of that in terms of spot pricing in it. Ultimately, spot pricing improvements will lead to contract renewal improvements, which we're also expecting. But if you're going through multiple years of kind of an irrational market, it's fair to think that you're going to need more than 1 allegation event to get back to what's normal. So we think that we're in a good path in terms of where pricing is about -- we're not waiting for pricing, right? So 1 of the reasons that we initiated a $400 million cost savings program that we achieved last year and that we doubled down on is that we know that there are self-help items that will get us on that path. So if you kind of think about our three segments: Truckload, our normal cycle margin targets are 12% to 16%. Dedicated, we can obviously see where that's feasible. Network, we're very optimistic. But for the past 4 years, we've been operating in a tough cycle just because primarily most of that irrational capacity has been the network. So as that continues to leave, we expect more of a benefit in network, and we expect network to inflect the most. Once network inflect positive, we think we'll be on a clear path back to kind of that segment target of 12% to 16% intermodal I think that's a very great story where we haven't seen price over the last several -- several years, but we've grown our volumes, 8 consecutive quarters, we've improved earnings without any price. So if you kind of think about the lag that Jim talked about, as intermodal pricing improves, it's not hard to think that once you get some pricing 10% to 14% margin target is achievable -- and then on the logistics side, we've been able to weather the storm and actually have positive earnings when a lot of our competitors haven't. So if we're hovering around 2% in a down market with some pricing improvement with all the productivity and cost initiatives, a lot of AI investments are in logistics, we think we can easily get to 3% to 5% in a normal cycle. So that's kind of what we're thinking there.

So probably a couple of allocations and the biggest swing factor is going to be the network business, and that's, like I said, it's going to take a couple of allocations. So to get back there. And we think a lot of what benefits network will benefit logistics as well in terms of price. Okay. And can we touch a little bit on the cost side. So you noted you have $40 million last year, $40 million this year. Where -- what do you get in 1Q? Where are we in the process towards achieving that 40?

And is this the kind of thing with technology we should think is sort of you'll get something on a year-in, year-out basis. I don't know if it's $40 million, but something like that. I see I'm never satisfied. We're never satisfied, right? So we -- this is not a 1-year program. It's a multiyear program that we started several years ago. We've probably been more vocal in terms of the things that we've been doing. A lot of it is nondriver head count and we're kind of stressing not a driver because the drivers are important, especially in this cycle. So we took 7% of our nondriver heads out in 2025. We think that we're on a path to at least equal that, if not exceeded for 2026. That's just 1 piece of what we're doing. AI is a big part of being able to take out non-driver headcount. But it's not only removing heads, it's reallocating work to more profitable work in terms of value-added work for our associates. We're very focused on asset efficiency. Asset efficiency has multiple benefits. It has benefits in terms of revenue per truck per week, but it also has benefits in terms of cost, and we're very focused on third-party spend. So the things that we're doing -- we're very focused on making sure that as the cycle reflects, those costs don't come back. And then I wanted to come back to Intermodal for a minute because I did want to talk about sort of the rail environment. So service, I think, generally speaking, has probably been fairly good. Would love to hear your characterization of the intermodal service environment. And then we can talk a little bit more deeply about your rail relationships? Yes. So overall, like you said, service has been very good. But specifically, I believe it's structural. Look at the changes that the railroads have made over the last 5 years or so, really since PSR came to -- back to the U.S., just the way that they're operating looks a lot more like a trucking company in terms of understanding their capital, where they're allocating, where are they making their investments, how do they think about train schedules day in, day out. And so believe that even with some growth, they have an opportunity to maintain that level of service. And then I guess as you think 1 of the topics you guys get asked a lot, and I'm going to ask it, too, is sort of your thoughts relative to the potential for transcontinental merger in the rail space.

Obviously, you're not aligned with -- directly with the 2 carriers merging? So I guess how do you think about how that can play out for you? What are the opportunities you'd be looking at as you're thinking out of a multiyear period and your relationships with the various rails?

And as you know, over the last 5 years, we've made 2 major shifts that so we understand how to go through this evaluation process. We're engaged with all 4 of the major railroads here in the U.S. just to investigate and understand their capabilities, both today and the future. And the ones I'm talking would obviously switch from the BNSF to the Union Pacific. And right on the heels of that, we switched our Mexico business to the CPKC. And what we saw the benefits from the CPKC having a single-line railroad, and we spent a lot of time understanding how they were going to operate that train. We had a lot of confidence in their ability to execute that. And so we made that choice even before their launch to switch over to that as we saw it was the best opportunity for us. So we'll continue to investigate this. I think we're going to be looking at this for at least another year, maybe 2 years even as they go through this process. But if there is a better opportunity, we are willing to listen and consider other opportunities.

Okay. That's good characterization. I guess maybe the last question I have is just how you're thinking about capital allocation. I think we're hopefully going to be on a path to margin repair in the industry broadly. And so I do think it begs the question over time, how you think about the opportunities and what you think you can do with the business. You've done some M&A. I think Cowen was probably the last one. How do you think about the opportunities going forward?

Yes. Well, I'll start and add in. So number 1 is organic growth opportunities with each 1 of our business units as long as we're within our long-term margin bands to continue to grow, and we think some of those opportunities are out there ahead of us. You mentioned acquisitions. We're absolutely interested in acquisitions going forward. But we're going to be disciplined. We're not looking at doing fixer uppers. We've had 3 large ones in the last few years that we'd say all of them were successful. And I don't think there's too many ship -- or too many carriers that can say that each 1 of their acquisitions has grown since the point that they made the acquisition. I think it's actually been the opposite that quite often they shrink. And then we look at returning Mike, back to the shareholder, too.

Yes. So I think we've done a really good job of controlling our leverage, right? So even when we've done acquisitions, we've delevered pretty quickly.

So we acquired Cowen in December 2024. Our leverage was 0.7.8x. As of today, we're back down to 0.3x. So that means we don't need to choose necessarily between organic and inorganic growth. We can do everything that we want to do. So focus on where we have differentiation organically, as Jim said, M&A, but also a robust dividend program that we continue to to fund and then we re-upped our share authorization in January for another $150 million. So we have the luxury of being able to do everything that we believe has a commensurate return. Do you think there'll be more opportunity, more potential targets, particularly on the fleet side, if we see Montgomery and some of these driver restrictions, regulatory changes, pressure those folks a bit more than average. Is that going to be something where you'd see midsized fleets potentially coming up more often? Well, we're not interested in a fixer upper so that's running illegally, and then we're -- that's where we're going to step in. So I don't think that's necessarily going to change, but we are still eager to flex our muscles there because we think we've created a really good process for acquiring companies.

That sounds great. Well, we are out of time, but I appreciate both of you guys spending some time with us chatting today. Thank you very much. Thank you.

All right.