Bascome Majors

Bascome Majors followed up on the 'fight for business' strategy, asking about specific tactical opportunities for quality revenue wins within the merchandise portfolio. He also inquired if any new competitive 'leakage' beyond the previously discussed J.B. Hunt situation is anticipated for 2026.

Answer

Chief Commercial Officer Ed Elkins and President and CEO Mark George identified growth opportunities in automotive, discrete chemical markets (non-petroleum, energy, waste), and utility coal, citing strong train performance and terminal fluidity. They noted intermodal remains sluggish and seaborne coal faces a tough fight. They reiterated the known 1% revenue headwind from competitive actions but did not specify additional new 'leakage' beyond that.

Bascome Majors followed up on the "fight for business" strategy, asking about specific tactical opportunities for quality revenue growth within the merchandise portfolio and any other potential competitive freight leakage beyond the previously discussed J.B. Hunt situation for 2026.

Answer

Chief Commercial Officer Ed Elkins identified automotive, discrete chemical, energy, and waste markets as growth opportunities, attributing automotive success to network fluidity and customer confidence. He noted Intermodal recovery hinges on demand and anticipated strong utility coal but a tough seaborne coal market. President and CEO Mark George added that geopolitics might influence coal market disconnects.

Bascome Majors of Susquehanna asked about the conviction that competitive responses seen in intermodal would not extend to the carload side of the business. He also inquired about the nature of conversations with large industrial carload customers post-merger announcement, specifically if they were optimistic or cautious.

Answer

President and CEO Mark George expressed confidence in the carload business due to a 'firm runway of success' in service, providing consistent and reliable movement. Chief Commercial Officer Ed Elkins added that Norfolk Southern is known for its strong relationships and partnerships with large industrial customers, who are curious about the future but confident in Norfolk Southern's involvement. He noted that this combination of relationships and good service acts as a strong defense against erosion.

Bascome Majors inquired about the conviction that competitive responses in intermodal would not affect the carload business and the nature of conversations with large industrial carload customers post-merger announcement.

Answer

President and CEO Mark George expressed confidence in the carload business's resilience due to a strong service record and established relationships with industrial customers. He noted that customers are curious about the future but confident in Norfolk Southern's involvement. He acknowledged the competitive landscape but highlighted relationships and good service as a strong defense.

Bascome Majors inquired about the current board dynamics, the level of alignment among directors, and the board's number one priority for senior management over the next 12 to 18 months.

Answer

CEO Mark George described the board as 'remarkably unified,' with new and existing members having 'congealed in a beautiful way.' He stated their primary objective is to support the management team and its strategy, which they believe is yielding results. He characterized the dynamic as supportive and coaching-oriented, with management feeling fully supported.

Bascome Majors followed up on the long-term strategy, asking about the current balance between margin expansion and seeking market share growth in 2026, and how this bridges to a future where margins might consistently exceed mid-cycle levels.

Answer

CFO Damon Lee reiterated the focus on 'quality earnings growth' and the continuous experimentation with revenue management decisions to balance volume and margins. He stated that once the mid-cycle margin thresholds (40% for NAST, 30% for Global Forwarding) are met, the company will prioritize earnings growth, potentially by supercharging market outgrowth. President and CEO Dave Bozeman added that the approach remains disciplined and measured with the right economics.

Bascome Majors inquired about the strategic balance between margin expansion and seeking more market share growth in 2026, especially as the company approaches a point where margins might consistently exceed mid-cycle levels.

Answer

CFO Damon Lee reiterated the focus on 'quality earnings growth' and the continuous experimentation with revenue management decisions to balance volume and margins. He stated that once the mid-cycle thresholds of 40% for NAST and 30% for Global Forwarding are met, the company will prioritize earnings growth, potentially by investing margins into supercharging market outgrowth. CEO Dave Bozeman emphasized the disciplined and measured approach with the right economics.

Bascome Majors asked how C.H. Robinson plans to stay ahead of 'copycat strategies' from other brokerage businesses attempting in-house AI development or third-party software vendors/startups, given the financial returns from their AI-driven productivity.

Answer

CEO Dave Bozeman, Chief Strategy and Innovation Officer Arun Rajan, and CFO Damon Lee detailed C.H. Robinson's multi-faceted competitive advantage against 'copycat strategies.' They emphasized the unique combination of expert logisticians, proprietary AI technology, and a lean operating model that drives ROI-focused, disruptive innovation. Arun highlighted their vast data set and the scalability of owning their technology, while Damon underscored their strategy to outgrow markets and expand margins, the symbiotic relationship between tech and the operating model, and the agility of acting like a startup with the backing of an investment-grade balance sheet and 450 in-house engineers.

Bascome Majors asked how C.H. Robinson plans to stay ahead of 'copycat strategies' from other brokerage businesses attempting in-house AI development or third-party software vendors/startups, given the financial returns from their AI-driven productivity.

Answer

CEO Dave Bozeman, Chief Strategy and Innovation Officer Arun Rajan, and CFO Damon Lee detailed C.H. Robinson's multi-faceted competitive advantage against 'copycat strategies.' They emphasized the unique combination of expert logisticians, proprietary AI technology, and a lean operating model that drives ROI-focused, disruptive innovation. Arun highlighted their vast data set and the scalability of owning their technology, while Damon underscored their strategy to outgrow markets and expand margins, the symbiotic relationship between tech and the operating model, and the agility of acting like a startup with the backing of an investment-grade balance sheet and 450 in-house engineers.

Bascome Majors from Susquehanna asked about the progress of technology projects, specifically what "inning" the company is in regarding initiatives driving revenue and efficiency, and when the transformation might shift from "stair-step" to more incremental continuous improvement.

Answer

Arun Rajan, Chief Strategy and Innovation Officer, stated that while recent >30% productivity gains aren't sustainable at that level, improvements will be "evergreen" with a long runway to meet 2026 targets. CEO David Bozeman emphasized that continuous improvement is now embedded in the company culture and is expected to persist through all market cycles, not just as a one-time project.

Bascome Majors inquired about any changes to the company's outlook on the cyclical puts and takes affecting its path to its 2026 financial targets, given a few months have passed since the Investor Day.

Answer

CFO Damon Lee stated that there has been no pivot or change from the targets and strategy laid out at the December Investor Day. He reiterated that the company feels good about the path to achieving its 2026 goals and noted that the provided financial range was designed to account for market uncertainty. The focus remains on controlling internal execution and maintaining discipline.

Bascome Majors questioned whether BCO utilization serves as a leading indicator for fleet growth or if rates are the primary driver, and sought a detailed outlook on 2026 expense pacing and cadence.

Answer

VP and CFO Jim Todd stated that utilization tends to pick up when rates go up, noting that Q4 2025 BCO utilization was a positive surprise. He detailed 2026 expense views, including a hypothetical $12 million headwind from variable compensation programs (incentive and stock comp) if plan is met, and potential offsets from trailer refresh (gains on disposal, reduced maintenance). He also mentioned the unpredictable nature of insurance and claim costs.

Bascome Majors asked about the current full-year accrual for incentive and stock compensation relative to original expectations, and how much of a headwind its normalization would be in a 2026 recovery.

Answer

Executive James Todd clarified that the company is currently accruing about $12 million for 2025 compensation, down from a normalized expectation of $21 million. He indicated that a return to normal levels in a hypothetical 2026 recovery would therefore create a $9 million headwind as costs normalize.

Bascome Majors asked about the initial plan to manage the cadence of labor inflation from the 2023 Teamsters deal, how the Amazon glide down and network reconfiguration changed that plan, and confidence in dealing with the uptick in labor inflation in the second half of 2027.

Answer

Carol B. Tomé (CEO, UPS) explained that the Network of the Future, involving network rationalization and automation, has progressed well and, coupled with the Amazon glide down, will considerably decrease the workforce (down over 40,000 people). Brian Dykes (EVP and CFO, UPS) added that investments create a less labor-intensive, more flexible network, minimizing the impact of wage increases by driving down total expense and having a different revenue characteristic in the network.

Bascome Majors inquired about the initial plan for managing the Teamsters labor inflation cadence (high, low, moderate increase in the back half of the contract), how the Amazon glide-down and network reconfiguration altered this plan, and the company's confidence in addressing the anticipated labor inflation uptick in 2H 2026.

Answer

Carol Tomé (CEO, UPS) explained that the Network of the Future (network rationalization and automation) progressed well, and combined with the Amazon glide-down, significantly reduced the workforce (down over 40,000 people), thereby mitigating the impact of contractual wage increases. Brian Dykes (EVP and CFO, UPS) added that investments aimed to create a lower labor-intensive, more flexible, and scalable network, especially for peak, reducing the need for extensive labor. He noted that the new network with different revenue characteristics would minimize the impact of the wage increases.

Bascome Majors of Susquehanna asked for a long-term view of the competitive landscape out to 2027-28, questioning if more major industry shifts are expected and where competitors like FedEx, USPS, and regional players might hold advantages.

Answer

CEO Carol Tomé acknowledged the accelerating rate of change, citing generative AI as a potential driver of productivity. She noted that UPS is focused on creating customer 'stickiness' through differentiated, complex logistics. She gave examples of proactively filling competitive gaps, such as launching an economy product in Europe and expanding weekend services, both of which are seeing double-digit growth. President, International, Europe, Indian Subcontinent, Middle East & Africa Kathleen Gutmann confirmed the success of these initiatives.

Bascome Majors asked about the negotiation status of the SurePost delivery service agreement with the USPS and the potential challenges and opportunities it presents.

Answer

Executive Matthew Guffey stated that UPS is working quickly to find a mutually agreeable solution with the USPS. CEO Carol Tomé confirmed there are both challenges and opportunities in the negotiation and that an update would be provided on the fourth-quarter earnings call, with no financial impact expected in Q4.

Bascome Majors asked Steve Angel to elaborate on the tactical changes in senior management compensation incentives, both annual and long-term, compared to previous years, following his earlier comments on compensation philosophy.

Answer

Steve Angel, President and CEO, CSX Corporation, outlined the new compensation metrics: annual focus on operating margins, operating income dollars, and safety; long-term (three years) focus on return on capital and total shareholder return relative to the S&P 500 Industrials. He emphasized focusing on a handful of meaningful metrics to motivate the organization.

Bascome Majors asked Steve Angel about his philosophy on incentivizing senior management, specifically the right annual and long-term incentive structures for the railroad industry and CSX.

Answer

Steve Angel, President and CEO, outlined key incentive metrics: profitability/operating margins, growth (volume leverage), safety (with management compensation linked), customer service, and long-term return on capital, which he considers the 'truth serum' for capital-intensive industries.

Bascome Majors asked when investors should expect to see the full financial output of the current strategy, suggesting 2025 is a challenging year and questioning if 2026 or 2027 would be a cleaner period for assessment.

Answer

CEO Joseph Hinrichs defended the strategy's prior success, pointing to industry-leading rail margins in previous years. He affirmed that the 3-year financial thesis from the November Investor Day is still intact and that 2026-2027 is the right timeframe for judgment. However, he emphasized the immediate priority is to restore network performance and confidence.

Bascome Majors inquired about regulatory opportunities under the new leadership at the FRA and STB that could generate significant productivity for CSX in 2025 or 2026.

Answer

CEO Joe Hinrichs expressed optimism about a more supportive regulatory environment. He highlighted the importance of getting more technology into the inspection side of the industry and working with union partners. He feels the current leadership at the STB and FRA understands the benefits of growing rail volume and is focused on data-driven progress, which should help advance safety and technology initiatives.

Bascome Majors asked if the solid domestic parcel growth rates could be maintained into fiscal year 2027, considering potential competitive headwinds from UPS's relationship with the Postal Service and future contractual competition.

Answer

Brie Carere, EVP and Chief Customer Officer, FedEx, stated that she does not view a relationship between competitors (UPS and the Postal Service) as a threat to FedEx's primary growth strategy. She emphasized FedEx's focus on high-value segments like B2B, home delivery, and ground commercial, which are not services the Post Office could provide, and highlighted FedEx's stronger value proposition and commitment to profitable market share.

Bascome Majors questioned if FedEx's solid domestic parcel growth rates can be maintained into FY27, considering potential headwinds from UPS's Postal Service relationship or post-Teamsters contractual competition.

Answer

EVP and Chief Customer Officer Brie Carere stated that she does not view a competitor's relationship with the Postal Service as a threat. She emphasized FedEx's focus on high-value segments like B2B, Home Delivery, and Ground Commercial, which are not typically serviced by the Post Office, and reiterated their commitment to taking profitable market share.

Bascome Majors asked about FedEx's strategy for monetizing its data assets, exploring new revenue models, and the potential scale of this business, especially following the recent hire of Vishal Talwar as Chief Digital and Information Officer.

Answer

President & CEO Raj Subramaniam highlighted the immense value of FedEx's unique data, emphasizing its role in enhancing operations (e.g., Network 2.0), differentiating customer experience (e.g., Surround platform, DX commerce platform), and enabling future AI-led capabilities and new revenue models. He noted the company's long-standing work in organizing this data.

Bascome Majors asked for the specific capital expenditure amount for the FedEx Freight segment in fiscal 2025 and how that figure is anticipated to trend within the overall fiscal 2026 CapEx budget of $4.5 billion.

Answer

EVP & CFO John Dietrich provided the specific figure, stating that capital expenditures for the FedEx Freight segment in fiscal 2025 were $437 million. The response did not detail the expected trend for fiscal 2026.

Bascome Majors asked for details on cash flow, specifically requesting the capital expenditure figure for the FedEx Freight segment in the last fiscal year and its anticipated trend within the new budget.

Answer

EVP & CFO John Dietrich provided the specific figure, stating that capital expenditure for the FedEx Freight segment was $437 million in fiscal 2025.

Bascome Majors of Susquehanna Financial Group inquired about the progress in building out the dedicated LTL sales force and the incentives and outcomes intended for that team.

Answer

EVP and Chief Customer Officer Brie Carere explained the focus of the new sales team is on profitable growth and gaining deep LTL expertise. She noted the team will also help grow share in the small and medium customer segment. The hiring process is underway and will continue through the next fiscal year.

Bascome Majors questioned the profit contribution of XPO's European business relative to its operating expenses, opportunities for profit improvement, and the long-term strategic outlook for the segment.

Answer

Mario Harik (CEO, XPO) acknowledged the European business's smaller profit contribution but noted its outperformance against seasonality and ongoing revenue growth, particularly in the UK. He confirmed plans for margin expansion, though not at the magnitude of North American LTL, and reiterated the long-term goal to sell the European business to become a pure-play North American LTL carrier when market conditions are favorable.

Bascome Majors questioned the profit contribution of XPO's European business relative to its operating expenses, asking about specific cost takeout and profit improvement opportunities in Europe, and the long-term plan for the segment.

Answer

CEO Mario Harik acknowledged that while the North American LTL business is the primary focus, Europe has multiple levers for growth and efficiency, outperforming seasonality on profit growth and growing revenue. He stated that XPO is either number one, two, or three in LTL, truckload, and warehousing in Western Europe, with plans to expand margins, though not to the magnitude of North American LTL. Ultimately, XPO's goal is to sell the European business to become a pure-play North American LTL carrier when the time is right and the right price can be achieved.

Bascome Majors of Susquehanna followed up on capital allocation, asking about the philosophy behind the share buyback and how to size it, and also noted the encouraging decline in restructuring and transaction costs.

Answer

CEO Mario Harik explained that the core philosophy is shareholder value creation. With meaningful free cash flow expected, the company will both pay down debt and buy back shares, with the ratio depending on the stock's valuation. He called this an underappreciated lever for future value creation. CFO Kyle Wismans added that the lower restructuring costs relate to completed cost-takeout initiatives that will contribute to future earnings growth and OR outperformance.

Bascome Majors from Susquehanna asked about Old Dominion Freight Line's strategy regarding the balance of service, price, and volume growth, given the potential for a fourth consecutive year of tonnage decline, and if the company would adjust its approach in this prolonged weak market.

Answer

Adam Satterfield, CFO, reiterated Old Dominion Freight Line's commitment to its long-term strategy of investing in network expansion (totaling $2 billion over three years despite volume declines) and maintaining service and price discipline. He expects lower capital expenditures next year and believes this approach positions the company for profitable market share gains when the market recovers, especially as competitors with higher operating ratios may need to increase prices.

Bascome Majors questioned the company's strategy given a potential fourth consecutive year of tonnage decline, asking if Old Dominion Freight Line would reconsider its balance of service, price, and volume growth to benefit shareholders in this "new, weaker, more competitive paradigm."

Answer

Adam Satterfield, CFO, stated that the company has heavily invested $2 billion over three years for future growth despite volume declines, and will likely reduce CapEx next year. He emphasized confidence in long-term market share opportunities, believing the company's disciplined approach to service and cost control will lead to strong performance when the market inflects, especially as competitors may need to raise prices.

Bascome Majors of Susquehanna asked for a reminder of typical fourth-quarter seasonality and an update on the company's expected incremental margins when the freight cycle eventually turns.

Answer

EVP & CFO Adam Satterfield stated that Q4 typically sees a 0.3% sequential revenue-per-day decrease and a 200-250 basis point increase in the operating ratio. For a recovery, he believes a long-term incremental margin of 35% is still a reasonable expectation, which would support a return to a sub-70% operating ratio over time.

Bascome Majors of Susquehanna International Group, LLP asked for a reminder of typical fourth-quarter seasonality and what incremental margin profile the business can deliver when the freight cycle turns.

Answer

EVP & CFO Adam Satterfield outlined typical Q4 seasonality as a 0.3% sequential revenue-per-day decrease and a 200-250 basis point operating ratio increase. For a recovery, he stated that while the recent sequential incremental margin was high, a long-term average of 35% is a reasonable expectation, which would support a return to a sub-70% operating ratio over time.

Bascome Majors asked about the competitive impact of UPS targeting 'tweener' freight (150-300 lbs) and for an update on competitive dynamics with 3PLs and direct industrial customers.

Answer

CFO Adam Satterfield downplayed the impact of UPS's focus on 'tweener' freight, noting it's a small part of the market and not a focus for ODFL. He mentioned that both industrial and 3PL business performed slightly better than the company average in Q1 and that he expects freight consolidated into truckload to eventually return to the LTL network.

Bascome Majors asked about ODFL's interest in lower-weight 'tweener' freight targeted by UPS and for an update on the competitive landscape for 3PL and industrial customers.

Answer

CFO Adam Satterfield stated that lower-weight freight is not a focus for ODFL, whose average shipment is 1,500-1,600 lbs, and he doesn't see UPS's move as a major industry disruption. He noted that industrial business (55-60% of total) and 3PL business both performed well in the quarter.

Bascome Majors asked which market segments are currently gaining or losing share and how Old Dominion plans to retain talent as a competitor may be seeking new leadership.

Answer

CFO Adam Satterfield noted that business from 3PLs is performing well and expects the industrial segment to strengthen. President & CEO Marty Freeman addressed talent retention, expressing confidence in the 'OD family culture,' competitive compensation, and extremely low employee turnover (less than 1%), stating he is not concerned about losing salespeople.

Bascome Majors asked for a level-set on what would constitute normal seasonal margin performance for the first and second quarters of the upcoming year.

Answer

CFO Adam Satterfield outlined typical seasonality for the operating ratio: a deterioration of about 100 basis points from Q4 to Q1, followed by a significant improvement of 400 to 450 basis points from Q1 to Q2. He noted this improvement is driven by revenue acceleration and operating leverage on fixed costs.

Bascome Majors followed up on M&A, asking if the recent demand blip has altered seller expectations. He also sought insight into prior cycles, specifically what duration of a downturn or what catalysts (cash flow stress vs. market fear) have historically opened up M&A opportunities for Kirby.

Answer

David Grzebinski (President and CEO) explained that M&A catalysts have historically included both cash flow stress (leading to near-insolvency situations) and sellers transacting during a peaky market to avoid future problems. He reiterated Kirby's strong balance sheet (1.2-1.3x debt/EBITDA) and significant free cash flow (over $200 million in Q3), which has been allocated to share repurchases (1.3 million shares in Q3, over 400,000 in Q4) in the absence of acquisitions, emphasizing a patient approach to M&A.

Bascome Majors asked about the impact of tariff pressure on cash flow and inventory, seeking clarification on the net offset and how tariffs are expected to flow through the P&L, affecting top line, gross profit, and bottom line in coming quarters. He also followed up on Rafael Santana's comment regarding expected growth in new locomotives and modernizations for next year, asking if it was a North America or global comment and if the mix might shift more towards modernizations with new product rollouts.

Answer

CFO John Olin explained that tariffs initially impact cash, then inventory, flowing through the P&L over 2-4 quarters. He detailed a four-pronged mitigation strategy: securing exemptions (e.g., USMCA), supply chain shifts, cost sharing with customers, and enterprise-wide cost prudence. President and CEO Rafael Santana clarified that the growth expectation for new locomotives and modernizations was a total (global) comment, with stronger variation in North America, and the backlog supports these positive dynamics.

Bascome Majors asked about the impact of tariff pressure on Wabtec's cash flow and P&L, specifically where the company stands on net offsets and how the tariffs are expected to flow through the P&L over coming quarters, affecting top line, gross profit, and bottom line. He also sought clarification on whether the expected unit growth for new locomotives and modernizations (mods) next year was a North America or global comment, and if the mix might shift back towards mods with the rollout of new mod products in North America.

Answer

CFO John Olin explained that tariffs initially impact cash, then flow through inventory to the P&L over two to four quarters. He noted that Q3 saw the financial impact of tariffs, and outlined a four-pronged mitigation strategy: securing exemptions (e.g., USMCA), supply chain optimization, sharing costs with customers, and company-wide cost prudence. Olin indicated that the highest gross and net impact of tariffs is still expected over the next couple of quarters. President and CEO Rafael Santana added that pricing is a key element of mitigation. Santana clarified that the expectation for new locomotive and mods unit growth next year was a global comment, with stronger variation in North America, and the backlog supports positive dynamics for both.

Bascome Majors of Susquehanna asked about the potential risks and opportunities for Wabtec's services business in a transcontinental merger scenario. He also inquired about the status of expiring long-term modernization contracts and the outlook for deliveries in 2026.

Answer

CEO Rafael Santana stated that Wabtec has strong partnerships with the relevant railroads and sees significant opportunities to drive efficiency, noting past mergers have been positive for the company. Regarding contracts, he highlighted that Wabtec has its strongest-ever pipeline, with growing interest in new locomotives, and he is confident this will convert to backlog growth and provide visibility into 2026 and beyond.

Bascome Majors of Susquehanna asked about the potential risks and opportunities for Wabtec's services business from a transcontinental merger, given differing maintenance strategies among Class 1s. He also inquired about the status of expiring long-term modernization contracts.

Answer

CEO Rafael Santana expressed confidence, stating that Wabtec has strong partnerships with the railroads involved and that past mergers have been positive for all parties. Regarding contracts, he highlighted that Wabtec has its strongest-ever pipeline, with significant interest in new locomotives, and he is confident this will convert into backlog growth and provide visibility into 2026 and beyond.

Bascome Majors asked for qualitative details on Wabtec's supply chain to better understand the potential impact of reciprocal tariffs, specifically questioning the value of U.S.-shipped content for locomotives assembled internationally.

Answer

CEO Rafael Santana described Wabtec's North American footprint as 'largely localized' and 'quite balanced' under USMCA. For international markets, he explained it's a balancing act between sourcing competitive local content (like fabrication) and leveraging global scale for critical imported components (like controls and engines). He emphasized that the approach is well-balanced to manage these dynamics.

Bascome Majors of Susquehanna asked for a breakdown of the high single-digit growth from new locomotives and mods between price and units, the status of extending major North American mod contracts, and the launch timeline for the Evolution fleet modernization program.

Answer

CEO Rafael Santana confirmed active discussions with North American customers for both new units and mods but declined to break down the growth components. He announced that the Evolution fleet modernization is currently in testing and is expected to be fully commercialized by the end of next year, with a more significant impact in 2027, offering up to 7% in fuel savings.

Bascome Majors asked if the North American locomotive replacement cycle is plateauing in the near term, potentially shifting growth leadership to international markets.

Answer

CEO Rafael Santana responded that the North American market remains mixed and customer-specific. He emphasized that demand continues for both new and modernized locomotives, driven by customer investments in cost reduction, reliability, and efficiency to improve operating ratios, rather than solely for carload growth.

Bascome Majors of Susquehanna sought clarification on the discrepancy between the Wells Fargo deal's projected modest accretion and historical pro forma dilution, the financial impact of the DB Cargo deal in Europe, and recent sequential trends in North American rail lease rates and utilization.

Answer

EVP and CFO Tom Ellman and President and CEO Bob Lyons clarified that the pro forma financials for the Wells Fargo deal do not account for SG&A synergies or management fees, which contribute to the expected accretion. Bob Lyons stated the DB Cargo deal is a long-term European investment, not materially accretive in its first year. EVP and Chief Commercial Officer Paul Titterton noted that North American lease rates remain healthy, with slight sequential softening, but the market is holding up well due to a balanced supply, unlike prior downturns. Bob Lyons added that strong scrap rates help maintain market balance.

Bascome Majors from Susquehanna inquired about the progress made on the Wells Fargo Rail transaction since its announcement two months prior. He specifically asked for an update on due diligence findings and whether synergy expectations had come into better focus, and when the company might provide more detail on those synergies.

Answer

President & CEO Robert Lyons explained that extensive due diligence was completed before the deal was announced and that no surprises have emerged since. He confirmed that all initial assumptions about the transaction remain firm. Mr. Lyons stated that GATX will not provide detailed synergy figures or a more specific outlook until the transaction closes, which is anticipated in Q1 2026 or sooner.

Bascome Majors from Susquehanna Financial Group asked for an update on the Wells Fargo Rail transaction, specifically what GATX has learned from due diligence since the deal was announced and what synergy assumptions were made.

Answer

President & CEO Robert Lyons explained that due diligence was largely complete before the announcement and no surprises have emerged since. He reiterated that all initial assumptions about the transaction are holding firm. Mr. Lyons declined to provide specific synergy details, stating that GATX will be more forthcoming with the financial outlook and integration plans once the transaction closes, which is expected in Q1 2026 or sooner.

Bascome Majors asked for an update on the Wells Fargo Rail transaction, inquiring about any incremental findings from due diligence since the deal's announcement and when the company might provide an update on synergy expectations.

Answer

President & CEO Bob Lyons explained that the due diligence process was largely complete before the transaction was announced in May, and no surprises have emerged since. He stated that all initial assumptions about the deal are holding firm. However, he noted that GATX will not provide specific details on financial accretion or synergies until the transaction closes, which is anticipated in Q1 2026 or sooner.

Bascome Majors asked for an update on the Wells Fargo Rail transaction, specifically what GATX has learned from due diligence since the May announcement and whether synergy expectations have come into better focus. He also inquired when the company might provide a detailed update on potential synergies.

Answer

President & CEO Bob Lyons explained that extensive due diligence was completed before the deal was announced and that no surprises have emerged since. He stated that all initial assumptions about the transaction remain firm. Lyons reiterated that GATX will not provide specific details on synergies until the transaction closes, which is expected in Q1 2026 or sooner, at which point the company can be more forthcoming.

Bascome Majors from Susquehanna asked for an update on what GATX has learned from due diligence on the Wells Fargo Rail transaction since its announcement and questioned the synergy assumptions made at the time of the deal.

Answer

President & CEO Robert Lyons explained that the due diligence was largely complete before the announcement and no surprises have emerged since. He reiterated that all initial assumptions about the transaction remain firm. He declined to provide specific synergy details, stating that GATX will be more forthcoming with that information upon the transaction's closing, expected in Q1 2026 or sooner.

Bascome Majors of Susquehanna Financial Group inquired about whether GATX would have raised its 2025 guidance if not for tariff-related uncertainty. He also asked for an assessment of the supply-side thesis in railcar leasing versus demand risks, a ranking of business segments by uncertainty, and trends in sequential lease rates for tank versus freight cars.

Answer

President and CEO Robert Lyons stated that GATX typically reassesses guidance mid-year and the first quarter performed as expected, so reiterating was standard procedure. Paul Titterton, EVP and President of Rail North America, affirmed that the supply-led market thesis remains intact, with high new-car costs supporting the value of the existing fleet. Lyons identified European rail as the segment with the most current uncertainty and noted that sequential lease rate changes showed no significant delineation between tank and freight cars.

Bascome Majors asked about the sequential development in lease rates, the portion of the fleet remaining to be renewed in the current strong pricing environment, and the investment balance between the JV and direct portfolio in the Engine Leasing business.

Answer

Paul Titterton, EVP and President of Rail North America, described lease rates as strong and relatively flat sequentially. President and CEO Robert Lyons added that the LPI is expected in the mid- to high 20% range for 2025. EVP and CFO Thomas Ellman clarified that about half the fleet has been repriced to date. Lyons affirmed the strong partnership with Rolls-Royce, stating the bulk of engine leasing investment will continue through the JV.

Bascome Majors of Susquehanna International Group inquired about the drivers for the updated earnings guidance, the long-term sustainability of remarketing income from the secondary railcar market, the progress on repricing the North American fleet, and the high-level outlook for 2025.

Answer

EVP and CFO Tom Ellman attributed the guidance increase primarily to stronger-than-expected remarketing gains in Rail North America, noting other segments were performing in line with initial expectations. President and CEO Bob Lyons addressed the secondary market, stating it remains robust with strong demand from a diverse buyer base, supported by GATX's high-quality assets and leases. Lyons also confirmed that about half of the North American fleet has been repriced at higher post-2022 rates and provided a generally positive outlook for 2025, citing a favorable lease pricing environment.

Bascome Majors asked about the higher visibility, big-ticket cost items in the 2026 budget, such as health and welfare and insurance, and the inflationary backdrop. He also inquired how much pricing and growth would be needed to offset these costs and achieve margin recovery, considering the $50 million-plus incremental cost savings.

Answer

CFO Brad Delco identified wages, employee benefits (group medical healthcare), and insurance as key inflationary pressures for 2026 planning. He highlighted the company's strong safety performance as a way to reduce claims costs. He stated the $100 million 'lowering our cost to serve' initiative is intended to be visible to owners and hoped for single-digit rate increases for the industry to achieve healthier margin recovery, emphasizing the need for appropriate returns on investments.

Bascome Majors asked about J.B. Hunt's higher visibility, big-ticket cost items for the upcoming year's budget, including health and welfare and insurance. He inquired about the current inflationary backdrop, how it might shift next year, and how much pricing and growth would be needed to offset these costs, considering the $50 million-plus incremental cost savings.

Answer

CFO Brad Delco identified wages, employee benefits (particularly group medical healthcare), and insurance as key areas of inflationary pressure. He noted that while insurance renewals are ongoing, claims settlements are driving higher costs, though strong safety performance helps mitigate this. He expressed that the industry needs single-digit rate increases, ideally above 3% inflation, to achieve a healthier path to margin recovery and reinvestment levels, emphasizing that the $100 million cost-to-serve initiative aims for visible savings for shareholders.

Bascome Majors from Susquehanna inquired about the high level of share repurchases, asking whether it reflects an opportunistic view of the stock's value or a more structural shift in the company's capital allocation strategy.

Answer

EVP & CFO John Kuhlow confirmed there has been no change to the company's capital allocation strategy. He explained that with growth capacity pre-funded and strong free cash flow, the company is opportunistically repurchasing shares while prioritizing its dividend and maintaining a target leverage of 1x EBITDA. Buybacks are a primary use for excess cash flow.

Bascome Majors from Susquehanna inquired how bid conversations with large, value-focused retail customers with significant China import exposure have evolved recently regarding pricing, lanes, and bid compliance.

Answer

CFO John Kuhlow responded that bid compliance was strong during the quarter as customers returned to normal seasonal trends, which improved their forecasting. He stated that, as of now, these customers have not changed their demand forecasts with J.B. Hunt.

Bascome Majors inquired about the typical notice period for Dedicated customers exiting contracts and management's conviction that customer churn would subside after Q2, enabling a return to net fleet growth.

Answer

Bradley Hicks, President of Dedicated Contract Services, explained that while agreements vary, losses stem from customer fleet reductions, bankruptcies, and competitive bids. He noted that the pace of these losses slowed during 2024, which, combined with a strong sales pipeline, gives them optimism about returning to net fleet growth later in the year.

Bascome Majors asked about the biggest opportunities for secular operating income growth over the next 3-5 years, beyond near-term margin recovery, and if this outlook differs from the past.

Answer

CEO Shelley Simpson stated that she does not see the company's profile changing significantly. She expects the two largest segments, Intermodal and Dedicated, to remain the primary growth drivers due to their large addressable markets, with margin profiles returning to historical target ranges once the current freight cycle normalizes.

Bascome Majors asked for more detail on the transition from 'integration to transformation,' seeking to dimensionalize new revenue wins. He also requested clarification on the nature of EBITDA add-backs, specifically whether they were allocated at the segment level or held at corporate.

Answer

President, CEO & Director Shawn Stewart confirmed new business wins across truckload, international airfreight, and ground services. CFO Jamie Pierson added that the combined platform has enabled wins that were not possible on a standalone basis. Regarding add-backs, Mr. Pierson clarified that the vast majority of 'other' adjustments, such as non-cash stock compensation and facility closing costs, are non-cash or restructuring-related and are managed at the corporate level for better visibility.

Bascome Majors from Susquehanna requested a revenue breakdown between air and ocean forwarding and its corresponding profitability. He also asked for a high-level overview of typical seasonality for the newly combined business.

Answer

CFO Jamie Pierson stated the company is not yet providing a detailed air/ocean profit breakdown but confirmed air revenue is slightly larger than ocean. CEO Shawn Stewart cautioned that traditional seasonality is 'out the window' but described a typical pattern of a soft Q1 followed by a ramp-up in Q3 and Q4. He emphasized that consumer confidence is the key indicator they are currently watching.

Bascome Majors from Susquehanna asked about the potential for positive cash flow, the relationship between EBITDA and unlevered free cash flow across segments, and the profit drivers within the Omni business.

Answer

CFO Jamie Pierson indicated that achieving positive free cash flow is highly feasible once one-time transaction costs are past, noting the business was cash flow positive in the second half of 2024. He confirmed that for both the forwarding and asset-light LTL segments, EBITDA is a strong proxy for unlevered free cash flow. Both Pierson and CEO Shawn Stewart added that Omni's profits are driven by a diverse portfolio including air/ocean forwarding, warehousing, and VAS, with plans for more detailed segment reporting in the future.

Bascome Majors from Susquehanna inquired about the company's debt covenant cushion and comfort level as the requirements tighten. He also asked for more detail on the business mix within the Omni segment to better understand cyclical exposures.

Answer

CFO Jamie Pierson confirmed a $32 million consolidated EBITDA cushion as of Q3 and expressed confidence in managing compliance as covenants tighten, supported by a new rolling forecast process. He explained that Omni's diverse mix of services makes KPIs difficult but announced plans to change the reporting structure to a product-focused view (ground, air, ocean) starting in Q1 2025 to provide greater clarity.

Bascome Majors of Susquehanna International Group inquired about the key drivers of the updated guidance range, specifically asking to frame the potential profit contribution from the new Final Mile business and the Martin Transport acquisition if they onboard as planned.

Answer

Phillip Yeager, President & CEO, identified the new Final Mile business as the largest driver, with onboarding expected in late Q3 and Q4. He specified the Martin acquisition is anticipated to be accretive by $0.01-$0.02 in Q4 2025 and achieve mid-single-digit accretion in 2026. CFO Kevin Beth added that the Final Mile wins are expected to be accretive to the overall logistics segment margins, highlighting the success of integrating previous acquisitions.

Bascome Majors asked for qualitative commentary on conversations with large retail customers regarding import disruptions and how those discussions inform Hub Group's high- and low-end guidance scenarios. He also questioned the timing for visibility on holiday shipping decisions.

Answer

Executive Phillip Yeager explained that guidance scenarios are based on a variety of potential outcomes, from a quick rebound (high-end) to a prolonged slowdown impacting consumers (low-end). He noted customer reactions are mixed, but inventories are not yet overstocked. CFO Kevin Beth added that the guidance incorporates public data and that non-Intermodal businesses offer some resilience. Yeager projected that visibility for holiday shipping should emerge in the late June to early July timeframe.

Bascome Majors of Susquehanna Financial Group sought an update on the previously announced 100-basis point margin expansion target for the Logistics segment, asking about the company's conviction, pacing, and any changes to seasonality. He also inquired about the M&A pipeline and capital deployment strategy.

Answer

CFO Kevin Beth reaffirmed the company's expectation to achieve the 100-basis point improvement in Logistics margin, noting the cost savings would more than offset the restructuring costs. Executive Phillip Yeager added that the annual benefit is estimated at $18 million for a $13 million investment, and he expects strong sequential margin improvement from Q4 to Q1 in Logistics. On M&A, Yeager stated that the company has the right service offerings but will continue to look for opportunities to build scale, with a focus on non-asset logistics segments and a very good pipeline for an active M&A year.

Bascome Majors from Susquehanna International Group inquired about Trinity's production plans and delivery cadence for the second half of 2025, the rationale for purchasing tax credits, and how current manufacturing margins align with long-term Investor Day targets given lower industry build rates.

Answer

CEO E. Jean Savage stated that Q2 represented the bottom of the cycle, with deliveries and margins expected to improve sequentially through year-end. She expressed confidence that operational efficiencies will enable a quicker margin recovery as volumes return toward the 40,000 industry delivery level targeted at Investor Day. CFO Eric Marchetto explained the tax credit purchase was for the 2024 tax year, noting that new legislation will significantly reduce future cash tax burdens and that broader clarity on taxes and trade should help customers underwrite new investments.

Bascome Majors of Susquehanna inquired about the decline in the Future Lease Rate Differential (FLRD), the difference between the FLRD and the quarterly renewal rate, the expected cadence of earnings with a Q2 trough, and the rationale for choosing a term loan over an ABS structure for recent financing.

Answer

CEO Jean Savage explained that the FLRD's fluctuation is due to the mix of car types renewing over the next 12 months, whereas the 29.5% renewal rate reflects the specific mix from the just-completed quarter. CFO Eric Marchetto confirmed Q2 is expected to be a low point, driven by lower Rail Group deliveries and back-end weighted gains on car sales, while leasing revenue should steadily improve. Marchetto also noted the new $1.1 billion term loan was an attractive opportunity to refinance and upsize existing bank debt, though the ABS market remains a viable future option.

Bascome Majors inquired about Trinity's backlog coverage for 2025, the expected cadence of deliveries and earnings between the first and second half, and how tariff-related risks are being shared in new purchase and lease contracts.

Answer

CEO Jean Savage stated that both deliveries and orders are expected to be stronger in the second half of 2025, pending clarity on tariffs. She confirmed that contracts contain escalation clauses to pass through tariff costs, though the company is actively working to mitigate these impacts. Savage also noted that leases for cars on Trinity's balance sheet have similar escalation capabilities to account for cost changes.

Bascome Majors asked about the specifics of the Rail Products Group's margin guidance for Q4 and the full year, the drivers of recent margin outperformance, and potential risks. He also questioned the strength of the order book given recent below-book-to-bill quarters, customer hesitancy in placing orders, the durability of the strong secondary market for railcars, and the outlook for the Future Lease Rate Differential (FLRD) as the company continues to reprice its lease portfolio.

Answer

CEO Jean Savage clarified that the full-year margin guidance would be at the high end of the 6-8% range, driven by improved labor and operational efficiencies. She attributed the recent order slowdown to customer caution ahead of the election and a return to normal lead times, but noted strong underlying demand fundamentals and a robust Q4 order pipeline. CFO Eric Marchetto added that a high 78% lease renewal rate signals customer confidence. Marchetto also confirmed the secondary market remains robust, leading to higher gains and lower net fleet investment. Savage concluded that with 48% of the lease fleet repriced, the balanced market continues to support strong, double-digit FLRD and sequential lease rate growth.

Bascome Majors from Susquehanna asked for the expected full-year 2025 free cash flow outlook and for insight into Q4 seasonality, particularly if the U.S. industrial economy does not improve before year-end.

Answer

CFO David Saperstein projected full-year free cash flow to be in the $700 million range. For Q4 seasonality, he advised looking at the Q3-to-Q4 2024 trend for the Truckload segment. He noted that the significant LTL margin compression seen in Q4 2024 was an aberration due to losing SMB business and would not be repeated, though some seasonal pullback is normal.

Bascome Majors asked for an updated view on long-term strategic goals, including M&A and a potential spin-off, given the changes in the market over the past year.

Answer

Executive Alain Bedard reiterated that the long-term plan remains intact but the timeline has been delayed. He stated that any large M&A is unlikely until 2026, and a spin-off of the Truckload division is now more likely a 2027 event. Before any major strategic moves, he emphasized the need to first improve the Truckload OR to best-in-class levels and, most critically, to successfully turn around the U.S. LTL business to achieve a sub-90 OR.

Bascome Majors of Susquehanna asked if the historical 250 basis points of Q4 OR degradation is still a reasonable seasonal bogey. He also requested a financial framework, like incremental margins, for how to think about Saia's performance when tonnage growth returns to the low-to-mid single digits.

Answer

EVP & CFO Matthew Batteh said the 250 bps is a good long-term average but President & CEO Frederick Holzgrefe cautioned that this will be the first Q4 with the 21 new terminals, making history less reliable. For a recovery scenario, Holzgrefe pointed to the strong incrementals Saia generated during its Northeast expansion, suggesting the company could return to, or even exceed, that performance due to the scale benefits of the new national network.

Bascome Majors of Susquehanna Financial Group asked for help framing expectations for the operating ratio (OR) for the remainder of the year, starting from the current ~89% level. He also requested a housekeeping update on the outlook for interest expense and depreciation.

Answer

President and CEO Fritz Holzgrefe declined to give a full-year OR forecast, stating the focus is on managing the business at the current level, controlling costs, and being positioned for a recovery. Executive Matthew Batteh advised that the year-over-year increase in depreciation would continue at a similar run rate to Q1. He expects interest expense to continue through the year as they use their credit facilities, likely peaking in Q2 or Q3 depending on real estate transaction timing.

Bascome Majors of Susquehanna Financial Group inquired about the expected quarterly margin cadence for 2025 and whether the current slowdown in terminal openings could re-accelerate with a cyclical upturn.

Answer

Executive Matthew Batteh confirmed that to reach the full-year OR target, performance must improve from Q1, with Q2 typically being the strongest quarter. CEO Fritz Holzgrefe stated that the primary catalyst for 2025 is maturing the 21 terminals opened in 2024. He sees a multi-year runway for growth that could accelerate with macroeconomic help, but the current focus is on executing within their control.

Bascome Majors of Susquehanna asked if 2025 CapEx would taper back towards the long-term target as a percentage of revenue and when Saia might begin returning cash to shareholders. He also asked for an assessment of how far Saia's pricing is below the market.

Answer

Executive Matthew Batteh noted CapEx will remain elevated to support the larger business but should trend down as a percent of revenue over the long term. He added that discussions on capital returns are 'not too far out.' CEO Fritz Holzgrefe addressed pricing by comparing Saia's revenue per shipment to peers, stating that closing this gap is a fundamental opportunity enabled by the newly expanded national network.

Bascome Majors from Susquehanna asked about Union Pacific's long-term strategy for its locomotive fleet as its modernization agreement nears its end, and whether a potential business combination would complicate fleet refreshment plans.

Answer

EVP of Operations Eric Gehringer explained that the company's strategy involves a mix of modernization programs, overhauls, and daily shop investments to ensure fleet reliability and efficiency. He stated that while the distribution of spending across these three buckets may change based on fleet condition and traffic mix, all three remain critical components for delivering a consistent service product.

Bascome Majors of Susquehanna Financial Group asked about the recent leadership change at the Surface Transportation Board (STB) and what new opportunities might arise for the industry under the new chairman.

Answer

CEO Vincenzo Vena expressed optimism for a continued strong and transparent relationship with the STB, highlighting a shared goal of providing good service. EVPs Kenny Rocker and Eric Gehringer added they are encouraged by the potential for quicker decisions and faster movement on service-related matters, which benefits both the railroad and its customers.

Bascome Majors asked about CN's biggest competitive concern if U.S. rails consolidate into two transcontinental networks and whether CN's past merger experience would keep it on the sidelines.

Answer

CEO Tracy Robinson declined to speculate on hypothetical mergers, stating that the company's focus is on executing its own strategic plan. She firmly reiterated that in any industry scenario, CN would "very rigorously defend our competitive access and our growth prospects."

Bascome Majors asked if any new direct freight opportunities from Canada to Mexico have emerged from the recent market volatility, noting a competitor had mentioned such trends.

Answer

CEO Tracy Robinson confirmed that CN is seeing some of this activity, though she noted it was part of ongoing work predating the most recent tariff news. She gave a specific example of growing business in recreational vehicles that were once transported by truck, which aligns with the strategy for their Falcon interline service.

Bascome Majors of Susquehanna asked for more precise guidance on below-the-line items like interest, FX, and non-controlling interests for Q4. He also questioned the sustainability of current production rates given lower order levels and asked when management might need to make decisions to reduce output if orders do not improve.

Answer

Justin Roberts, VP of Financial Operations, provided a Q4 forecast for interest expense and noted the unpredictability of FX, while giving directional guidance for unconsolidated affiliates and non-controlling interests. CEO Lorie Tekorius and EVP Brian Comstock explained that production rates have already been adjusted throughout the year. They emphasized that the 19,000-unit backlog provides strong visibility and that they are seeing increased inquiry levels and pent-up demand, giving them confidence in future production.

Bascome Majors of Susquehanna asked for details on the production plan for the remainder of fiscal 2025, the order level needed to sustain it, and the drivers behind the expected gross margin moderation from Q1's high level. He also sought clarification on the positive commentary regarding cash flow and liquidity.

Answer

Executive Justin Roberts indicated that production volume is expected to remain steady through the fiscal year, with a mix shift towards more commoditized cars in the second half. He noted the recent pickup in the order pipeline provides confidence in filling open production slots. Roberts attributed the expected margin tapering primarily to this product mix shift and a degree of caution. CFO Michael Donfris explained the constructive cash flow outlook is driven by strong margins, manufacturing efficiencies, disciplined capital deployment, and a global focus on working capital management.

Bascome Majors asked for a breakdown of the fiscal 2025 delivery guidance across different markets, inquired if the guidance implies an EPS near $5, and questioned the market shift away from speculative orders by leasing companies.

Answer

Brian Comstock, EVP and President of the Americas, explained that confidence in the delivery guidance stems from a product mix shift in the latter half of the year and a strong secured backlog. Justin Roberts (executive) added that the first 6-7 months of the fiscal year have very solid production visibility. CEO and President Lorie Leeson confirmed that the EPS estimate was 'spot on' and expects continued improvement in fiscal 2025. Regarding leasing, Brian Comstock noted that the lack of speculative orders from lessors has benefited builders and has been a trend for 4-5 years, while Lorie Leeson added that the market is showing more disciplined behavior, which is positive for the industry.

Bascome Majors from Susquehanna International Group asked for an update on the dispute with Italian tax authorities, including the amount reserved and any potential risk to GXO's EPS or tax rate.

Answer

CFO Baris Oran clarified that the matter does not impact the 2025 adjusted EPS or tax rate. The company has an accrual of $66 million against an initial challenged amount of $91 million and expects to reach a settlement consistent with the accrued amount in 2025. The cash has already been reflected in leverage levels since Q3 2024.

Bascome Majors from Susquehanna questioned GXO's long-term organic growth target, noting that performance has been in the mid-single digits since mid-2022, and asked if it was time to lower the double-digit expectation.

Answer

CEO Malcolm Wilson stated that it was not the right time to revisit long-term targets, citing the ongoing CEO transition and uncertainty around the Wincanton integration timing. He explained that the prolonged CMA regulatory review has created prudence in the timing of realizing the expected $55 million in synergies, pushing more of the benefit into 2026. He indicated an update would come once there is more clarity on these factors.

Bascome Majors of Susquehanna Financial Group noted the positive cyclical commentary and asked how this translates to the 2025 outlook, questioning if 2025 will be a bridge year or if GXO could potentially reach its long-term 10% organic growth target.

Answer

CFO Baris Oran confirmed that the trend of sequential organic growth improvement is expected to continue into 2025, leading to an acceleration of growth compared to 2024. He stated that Q4 of last year was the clear bottom. While not providing specific 2025 guidance, Oran emphasized that the direction is "clearly up" and that further commentary would be provided on the Q4 earnings call.

Bascome Majors questioned how tariff uncertainty is affecting pricing discussions with retail customers, how the current bid season has progressed compared to normal, and whether underlying bid volumes have changed materially.

Answer

CEO Derek Leathers stated that market uncertainty is causing customers to prioritize execution certainty, leading to constructive conversations and a shift from spot to contract freight. CFO Chris Wikoff added that bid season retention has been strong, with contractual rates increasing in the low-to-mid-single-digit percent range. Leathers also noted that awarded bid volumes are tracking closer to actual freight volumes this year, with underlying demand from discount retailers remaining resilient.

Bascome Majors inquired about the completion and implementation timing for bids with major retail customers and asked if the decision to withdraw two-quarter forward guidance was driven more by pricing/margin risk or macro/demand uncertainty.

Answer

Executive Adam Miller stated that while some bids were implemented in Q1, the majority will hit in Q2, with some large customers in early Q3. He clarified that the decision to suspend Q3 guidance is driven more by uncertainty around volume, not pricing. The concern is that even with bid awards, customers might not tender the expected number of loads due to supply chain disruptions, which creates a significant challenge in forecasting network balance and volume for Q3.

Bascome Majors asked about free cash flow expectations for the year and the priority for its use between LTL network expansion, opportunistic TL acquisitions, or share buybacks.

Answer

Brad Stewart, an executive, stated that they expect meaningful improvement in earnings and free cash flow for the year. He clarified that the 2025 focus is on driving efficiency in the existing LTL network, not aggressive expansion. This strategy should generate healthy free cash flow, with the primary use being deleveraging, followed by opportunistic share buybacks.

Bascome Majors of Susquehanna asked if historical Q1 earnings seasonality is a valid framework for modeling 2025, given the company's current structure and Q1 guidance.

Answer

Executive Adam Miller advised that historical seasonality is difficult to apply because the company's composition has changed significantly with the LTL expansion and U.S. Xpress acquisition. Executive Brad Stewart added that the subdued truckload market has dampened typical seasonality, which would likely return with greater amplitude in a stronger market.

Bascome Majors asked why Schneider's dedicated business appears more resilient than its peers' during the extended downcycle and whether this outperformance can continue.

Answer

EVP and Group President Jim Filter attributed the resilience to structuring multiyear dedicated solutions that are difficult to replace with network freight and focusing on specialized verticals. CEO Mark Rourke added that recent acquisitions have diversified their dedicated portfolio into new verticals like automotive and specialty retail, enhancing its stability.

Bascome Majors of Susquehanna Financial Group asked where freight is migrating if large carriers are shedding unprofitable business, as it doesn't appear to be flowing to small carriers via brokers. He also inquired about what catalyst is needed to restore market discipline and which carrier types are still accepting flat-to-down rates.

Answer

CEO Mark Rourke suggested the market is at or near a bottom after a 'long slog' of slow supply erosion, which is helping in rate discussions as customers also sense a turn. CFO Darrell Campbell noted their visibility is limited to their brokerage's smaller carrier community. EVP Jim Filter added that customers are increasingly conducting strategic reviews of their carriers' financial health, looking for stability from partners like Schneider.