Intermodal Margin Outlook
Q: Has revenue per load stabilized for margins to recover?
A: Management noted that despite completing the 2024 bid cycle in Q2, the prices and yields achieved were not strong enough to improve margins as desired. They're not changing their long-term margin target but recognize that pricing improvement is essential for margin enhancement. While volume is valuable due to underutilized equipment, over the long term, pricing will always be the most valuable element to improving margins.

Operating Income Decline
Q: Can you change outcomes without market improving?
A: CEO Shelley Simpson acknowledged that the last two years have been the most difficult in her 30-year career. The company is focused on long-term strategies, investing in people, technology, and capacity to be prepared for customers. They're working to provide best-in-class service and create value for customers, aiming to deliver appropriate returns for shareholders. While not pleased with current performance, they see signs that things are moderating or getting better and remain cautiously optimistic.

Volume Growth and Market Share
Q: Why aren't you taking share like prior downturns?
A: Management believes they're dominating the transcon marketplace with substantial volume growth. In the East, significant headwinds from truckload pricing have impacted share gains. They're optimistic about discussions with customers and will continue to look to grow, especially as concerns about highway capacity arise.

ICS Division Performance
Q: What's causing the 25% volume decline in ICS?
A: The market has been incredibly difficult and competitive. A focus on quality has weighed on volume losses. Unexpected business losses occurred shortly after acquiring BNSF Logistics' brokerage assets. Integration brought incremental costs in the first half. While dissatisfied with ICS performance, management is encouraged by recent positive volume trends and their strategy starting to take form.

Dedicated Segment Margins
Q: Will dedicated margins improve as start-up costs moderate?
A: Start-up costs are beginning to come in, with a significant chunk starting in July. Some pressure on margins will continue in Q3 due to these costs, but it's seen as positive for future growth. Competitiveness is noted in the retail segment, with aggressive pricing from competitors. Despite this, the pipeline is solid, and they have a good footing on future sales.

Peak Season Expectations
Q: What separates a good peak season from a disappointing one?
A: Normal seasonal demand is returning, similar to pre-2020 levels. Customers are better with bid compliance and understanding their volumes. There's cautious optimism, with customers hesitant due to past false starts. If a more seasonal pattern continues, they expect demand and profitability to reflect that.

Predicting Downturn and Recovery
Q: What did you get wrong about the downturn's magnitude?
A: The simultaneous occurrence of price declines and inflationary costs was unexpected. They also underestimated how long capacity would stay in the market despite carriers losing money for over two years. Recovery requires capacity to exit the market or increased demand, with capacity exit being more likely.

Equipment Utilization and Costs
Q: Are lower utilization and costs tied to Walmart assets?
A: The Walmart equipment acquisition isn't fully reflected in results yet. They have more equipment than currently utilized, with significant growth capacity—able to handle 20% more volume. There's leverage to gain by adding volume and utilizing equipment, but negative pricing pressure is a headwind to margins.

Quantum Product and Mexico Transition
Q: How are Quantum and Mexico transition performing?
A: The Quantum service is exceeding customer expectations, though volume benefits haven't been fully realized yet. There's a long runway for growth with the Quantum product. The shift from KCS to Ferromex in Mexico has been successful, though customer education and transition took time. Volume has been recovering, and they feel good about progress.

Transcon Growth and Market Dynamics
Q: Are you losing share due to variable rates?
A: Management expects to outperform the domestic market on Southern California eastbound volume. They don't believe they're losing share to other intermodal channels. There's a shift in the mix of transload versus intact international cargo. Southern California volumes were up double digits, and they feel good about their pipeline.