Andrew Cox

Andrew Cox asked whether the current supply-led thesis alone is sufficient to sustain rate momentum throughout the year, given recent rate fluctuations and historical precedents.

Answer

Chairman and CEO Derek Leathers agreed that supply-side is the kickstart, but not the sole driver of the market turn. He highlighted increasing and real enforcement efforts, visible in Werner's network and nationwide rejection rates (cresting 14%, COVID-like levels, even accounting for storm impact). Leathers believes supply constraints, coupled with demand inflection from large tax rebates and potential interest rate relief, create a strong setup. He emphasized Werner's proactive One-Way restructuring and PowerLink solutions to avoid sole reliance on market recovery.

Andrew Cox asked whether the current supply-led thesis alone is sufficient to sustain rate momentum through year-end, noting historical cycles typically require coinciding demand impacts, and sought Werner's demand outlook.

Answer

Derek Leathers, Chairman and CEO, affirmed that supply-side constraints, driven by sustained and increasing enforcement efforts, are the 'kickstart' for the market. He cited unprecedented rejection rates (cresting 14%) as evidence of real tightness, even accounting for storm effects. He coupled this with potential demand inflection from large tax rebates and interest rate relief, expressing optimism for the market setup.

Andrew Cox asked about consolidation trends in the dedicated segment, its impact on competitive dynamics, and Schneider's appetite for dedicated M&A compared to other capital allocation priorities. He followed up with a question on the FMC probe, asking if an adverse ruling would negatively affect fluidity, service, and the road-to-rail conversion thesis for domestic intermodal.

Answer

Mark Rourke, President and CEO, stated that organic growth is the primary objective, but Schneider has actively participated in dedicated consolidation with three acquisitions in three years. He confirmed their continued appetite for M&A, citing a strong balance sheet and a target-rich dedicated environment. Jim Filter, EVP and Group President of Transportation and Logistics, believed the FMC probe's primary impact would be on the ocean side rather than domestic intermodal.

Andrew Cox of Stifel asked about the impact of consolidation in the Dedicated segment on competitive dynamics and Schneider's appetite for Dedicated M&A versus other capital allocation priorities. He also followed up on the potential effects of an adverse FMC probe ruling on domestic intermodal fluidity, service, and road-to-rail conversion.

Answer

Mark Rourke, President and CEO, stated that organic growth is the primary capital allocation objective, but Schneider has a strong balance sheet and appetite for accretive Dedicated acquisitions, having successfully completed three in the last three years. He noted they are constantly reviewing opportunities. Jim Filter, EVP and Group President of Transportation and Logistics, clarified that the FMC probe's primary impact would likely be on the ocean side rather than domestic intermodal.

Andrew Cox inquired about the challenges Landstar faces in deploying new AI technologies across its decentralized agent network, specifically regarding training, data safety, costs, and any early adoption success stories.

Answer

President and CEO Frank Lonegro explained that Landstar segments agents to tailor tools, acknowledging that adoption cannot be forced but is driven by perceived competitive advantage. He highlighted abundant internal data and external partnerships. VP and Chief Corporate Sales, Strategy, and Specialized Freight Officer Jim Applegate emphasized Landstar's long-standing digital transformation, noting that the entrepreneurial model, when armed with technology, is highly adaptable. He cited examples like automated data entry, intelligent load matching, and optimized BCOs for larger accounts, confirming strong agent interest in technology.

Andrew Cox from Stifel inquired about the challenges and opportunities in deploying new technologies, particularly AI tools, across Landstar's decentralized agent network. He asked about potential hurdles in training, data safety, and costs, and sought insights into early agent adoption and the overall speed of implementation and impact.

Answer

President and CEO Frank Lonegro and VP and Chief Corporate Sales, Strategy, and Specialized Freight Officer Jim Applegate explained that while agent adoption of new tools cannot be mandated, the strong pull from agents for technology and AI solutions, driven by the desire for competitive advantage, ensures uptake. They highlighted Landstar's extensive data, collaborations with the AI ecosystem, and a decade of digital transformation experience as key enablers. Jim Applegate detailed early successes with AI in automating data entry, intelligent load matching, BCO optimization, and enhanced tracking, emphasizing that the company's established "muscle" in technology deployment positions them well for rapid AI integration.

Andrew Cox (on behalf of Bruce Chan) asked how C.H. Robinson's operating model would respond to an upcycle, specifically differentiating between a shallow spot recovery and a steeper demand recovery, given the company's current adeptness in a 'lower for longer' environment and the anticipated operating leverage in an upcycle.

Answer

CFO Damon Lee and CEO Dave Bozeman explained that C.H. Robinson's strategy and operating model are designed to perform across all market cycles, including a 'lower for longer' environment. They emphasized that the fundamental process changes, driven by automation and technology, are permanent, not temporary cost reductions. In an upcycle, this means the company will not need to revert to previous cost structures or add back human capacity, as the work is now technology-heavy. The highly scalable incremental cost of technology (token cost) will generate substantial operating leverage, positioning the company strongly for market inflection, supported by its robust balance sheet.

Andrew Cox (on behalf of Bruce Chan) asked how C.H. Robinson's operating model would respond to an upcycle, specifically differentiating between a shallow spot recovery and a steeper demand recovery, given the company's current adeptness in a 'lower for longer' environment and the anticipated operating leverage in an upcycle.

Answer

CFO Damon Lee and CEO Dave Bozeman explained that C.H. Robinson's strategy and operating model are designed to perform across all market cycles, including a 'lower for longer' environment. They emphasized that the fundamental process changes, driven by automation and technology, are permanent, not temporary cost reductions. In an upcycle, this means the company will not need to revert to previous cost structures or add back human capacity, as the work is now technology-heavy. The highly scalable incremental cost of technology (token cost) will generate substantial operating leverage, positioning the company strongly for market inflection, supported by its robust balance sheet.