Earnings Guidance and Outlook
Q: Will earnings grow in the second half versus first half?
A: Management anticipates earnings growth in the second half, with revenue up mid-single digits, driven by Intermodal and Logistics volumes. They expect a modest sequential dip in Intermodal margins in Q3 due to rail price lag and volume realization, but Q4 should see a step-up. , ,

Intermodal Pricing Power
Q: What conditions will enable pricing improvement in Intermodal?
A: Improvement in demand and capacity exit will drive pricing power, with a potential inflection moving into 2025. Management needs to see demand continue to improve, capacity attrition, and a strong peak season to confidently project price-driven earnings growth.

Intermodal Volume Growth
Q: How did Intermodal volumes trend, and what's driving growth?
A: Intermodal volumes increased, with April up 12%, May up 9%, June up 2%, and July up 14% year-over-year. Growth is driven by new business wins, particularly in Local East volumes, which were up 26%, though this has a negative mix impact on revenue per load. ,

Rail Pricing Lag Impact
Q: How does the rail pricing lag affect margins?
A: Rail contracts have provided benefits in the first half, with some resetting quarterly. There's a lag effect, so when prices inflect upward, margin expansion opportunities emerge. This lag impacts margins modestly in Q3, but Q4 is expected to improve. ,

Customer Retention and Stickiness
Q: How sticky are the new Intermodal volumes?
A: Management believes the majority of new volumes are from truck conversions, with a 20% cost differential favoring Intermodal. High service levels and customers' desire to de-risk capacity enhance volume stickiness and retention.

Margins and Cost Efficiencies
Q: How is the company managing margins and costs?
A: They've improved productivity by 15%, reduced empty repositioning costs by 25%, and decreased cost per day by 13%. Headcount is down 7% year-over-year, and they see further efficiency opportunities. ,

Acquisition Opportunities
Q: Are there plans for acquisitions?
A: With previous acquisitions integrating well, they are exploring opportunities to add scale and differentiation. The balance sheet is strong, and they are hopeful to complete an acquisition this year.

Peak Season and Surcharges
Q: Is there potential for peak season surcharges?
A: Customer discussions are mixed, but positive signs exist. It's too early to tell if surcharges will occur; clarity is expected around late August after Labor Day.

Logistics Segment Improvement
Q: Which parts of Logistics are improving?
A: Logistics revenue is expected to increase sequentially, driven by new wins in Managed Transportation and Final Mile. Brokerage margins expanded by 100 basis points quarter-over-quarter, with July volumes up 10% year-over-year.

Dedicated Segment Margins
Q: What impacted Dedicated segment profitability?
A: Profitability was softer due to investments in service for new customer wins and a spring surge, requiring higher-cost third-party capacity. The margin impact was mid-single 100 basis points but is not expected to recur.

Mexico Volume Growth
Q: How significant is the growth in Mexico volumes?
A: Mexico volumes were up 60% in the quarter. While not a significant earnings contributor now, it is expected to be a driver of growth in the foreseeable future due to significant customer investment.

Transloading Activity Increase
Q: Are you seeing increased transloading activity?
A: Yes, outbound Southern California volumes were up 5%, and inbound volumes up 7% year-over-year. While it's early to assess peak season impact, sequential demand improvement is evident.

Network Efficiency and Drivers
Q: How is network efficiency progressing with Local East growth?
A: Service levels are strong, with productivity up 15% despite drayage share declining 600 basis points to 73% due to 15% fewer drivers. They see opportunities to add drivers and redeploy equipment to further improve capacity and costs.

Brokerage Market Dynamics
Q: Are shippers shifting from asset-light to asset-based providers?
A: They haven't observed a shift toward asset-based providers. Customers value the flexibility of non-asset brokers and are moving toward contract pricing amid spot market volatility. ,

Headcount Reduction
Q: What are the trends in non-driver headcount?
A: Legacy headcount is down 7% year-over-year to 18.6%. Including acquisitions, there's been a 28% decline from the peak in 2022, driven by efficiency improvements from technology deployment and workflow changes.

Contract Durations Adjustments
Q: Are you adjusting contract durations due to market changes?
A: Management is constantly assessing their network and maintains ongoing dialogue with customers. They are open to adjustments based on market conditions to maximize margins.

Expenses for Customer Wins
Q: Were increased expenses for new customer wins expected?
A: Increased expenses were primarily in Dedicated, related to start-up costs and higher-cost third-party capacity due to driver shortfalls. These are normal launch costs and investments in service.

Rail Pricing Lag Consistency
Q: Is the rail pricing lag different in the East versus the West?
A: The rail pricing lag framework is similar in both the East and West regions.

Freight Market Recovery Indicators
Q: What indicators are you watching for market recovery?
A: Management is monitoring freight market conditions, capacity attrition, and spot market volatility. They expect pricing inflection moving into 2025 but remain cautious due to unpredictable market conditions. ,

Asset-Based Competition Exposure
Q: Are you seeing increased competition from asset-based operators?
A: They haven't observed significant shifts toward asset-based providers. Customers appreciate the flexibility and diversified modes offered by their non-asset services.