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Thank you for standing by. My name is Jael, and I will be your conference operator today. At this time, I would like to welcome everyone to the Schneider National, Inc. Fourth Quarter 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to withdraw your question, simply press 1 again. I would now like to turn the conference over to Christyne McGarvey, Vice President of Investor Relations. You may begin.

Thank you, operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer; Darrell Campbell, Executive Vice President and Chief Financial Officer; and Jim Filter, Executive Vice President and Group President of Transportation and Logistics. Earlier today, the company issued an earnings press release. This release and an investor presentation are available on the Investor section of our website at schneider.com. Our call will include remarks about future expectations, forecast plans, and prospects for Schneider National, Inc. These constitute forward-looking statements for the purpose of the safe harbor provisions under applicable federal securities laws. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from current expectations. The company urges investors to review the risks and uncertainties discussed in our SEC filings, including, but not limited to, our most recent annual report on Form 10-Ks and those risks identified in today's earnings release. All forward-looking statements are made as of the date of this call, and Schneider National, Inc. disclaims any duty to update such statements except as required by law. In addition, pursuant to Regulation G, reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release and investor presentation, which includes reconciliations to the most directly comparable GAAP measures. Now I'd like to turn over the call to our CEO, Mark Rourke.

Thank you, Christyne. Hello, everyone, and thank you for joining the Schneider National, Inc. call today. I want to begin by acknowledging that the fourth quarter results fell short of our expectations. When we provided our update last quarter, October results and market conditions were supportive of finishing 2025 at approximately $0.70 of earnings per share. However, November and much of December were materially more challenged than our guidance had contemplated, reflecting a very truncated peak season and poor weather conditions throughout the Midwest. We saw momentum as we exited the year, which we believe is a direct result of supply attrition in our industry in the last several months. We believe we are in the early innings of normalizing market conditions, in part due to the various regulatory actions being taken. Importantly, these actions are not only driving capacity to exit the market at an accelerated rate, but the ability to backfill new entrants is also increasingly diminished. We expect the full impact will likely be measured in quarters, not months. Still, the last several years have proved to be a challenging backdrop, and we are not satisfied with our results. During this downturn, we made strides in lowering our cost to serve in network, changes that are structural and will improve our operating leverage going forward. At the same time, we have grown our dedicated offerings to nearly 70% of our fleet, increasing the durability and resilience of our truckload segment. We've created true differentiation and value in the marketplace in our intermodal offering and scaled our flexible asset-light tech-enabled solutions. All of which have been supplemented with our accretive acquisitions. We recognize that improving market conditions is needed for the full benefit of these investments to be evident, but we believe we will exit this down cycle more ready than ever to meet a market correction. We are not simply waiting for improved cycle dynamics. We enter 2026 with more conviction in the importance of continuing to execute our strategic initiatives to drive structural improvement in our business. We are carrying momentum from our cost savings program, including ramping synergies in our acquired companies, leading intermodal growth, including the recent launch of our intermodal fast track service, heavy dedicated start-up activity, and network earnings improvement into this year. I will provide more commentary on our outlook and expectations for 2026, but first, I want to hand the call over to Darrell, who will provide a more comprehensive overview of fourth-quarter results. Darrell?

Thank you, Mark, and good afternoon, everyone. I'll review our enterprise and segment financial results for the fourth quarter, along with our year-to-date cash flow trends and provide a capital allocation update. Summaries of our financial results and guidance can be found on pages 21 to 26 of our investor presentation available on our Investor Relations website. In the fourth quarter, revenues excluding fuel surcharge were $1.3 billion, up 4% year over year. Our fourth-quarter adjusted income from operations was $38 million, a decline of 15% compared to a year ago. Adjusted diluted earnings per share for the fourth quarter was $0.13, down from $0.20 a year ago. As Mark referenced, fourth-quarter results reflect more challenging market conditions than we had previously anticipated in our guidance. October saw steady demand with elements of seasonality, though more subdued than is typical. Our guidance had assumed that trend would persist through the balance of the year, but demand turned sluggish in November, affecting minimal peak activity as shippers worked down inventory, which created a significant volume shortfall versus our expectations. This was exacerbated by the poor weather in the Midwest that brought volume and caused headwinds. However, the sharp reaction of spot rates to the weather disruption demonstrates how the excess of capacity in recent months has brought the market closer into balance. Volumes remained fairly muted until December when shippers began to feel an inventory drawdown and more actively sought out additional capacity as routing guides became stressed. This enabled us to realize some premium project business, still, the strength exiting the year was compressed and not enough to offset the temporary demand that characterized much of the quarter. These more challenged market conditions were also compounded by extended and unplanned auto production shutdowns with certain customers, spiking third-party capacity costs in logistics, and heightened healthcare costs. Market dynamics in the quarter have masked our continued progress on our strategic efforts, including those related to improving asset efficiency and lowering our cost to serve. We achieved our targeted $400 million of cost savings, including synergies from the common systems acquisition. Our momentum will continue in 2026, with an additional $40 million of cost savings, which Mark will detail in his remarks. From a segment perspective, truckload revenue, excluding fuel surcharge, was $610 million in the fourth quarter, up 9% year over year. Truckload operating income was $23 million, a 16% increase year over year. Operating ratio was 96.2%, an improvement of 30 basis points compared to last year. The impact of the market was most evident in the network, which remained unprofitable. Restoring profitability in the network remains a key focus, and the fourth quarter did see modest year-over-year improvement as our ongoing cost and productivity actions at least partially offset softer conditions and elevated healthcare costs. These actions include efforts to improve equipment ratios, rationalize non-driver headcounts, and increase bill miles per tractor. As market conditions improved, we did see momentum in December in both productivity and realized price. Dedicated operating income grew year over year, benefiting from an additional two months of Cowen, versus 2024. While volumes were not immune to market conditions, we also saw adverse impact from unplanned auto production shutdowns with select customers. After two quarters of elevated churn, this moderated in the fourth quarter as expected. Startups also picked up as new business wins remain elevated versus the first half of the year, and we finished 2025 with approximately 950 trucks sold. Our fleet count was roughly flat quarter over quarter, as productivity enabled us to utilize our existing equipment for implementations. Armor startup activity drove greater than expected headwinds to track the productivity and costs, particularly in driver recruiting. Intermodal revenues excluding fuel surcharge were $268 million for the fourth quarter, a 3% decline year over year. This reflected volume growth of 3%, which was more than offset by mix-related declines in revenue per order. Despite last year's tariff-related pull forward creating a more difficult comp, volumes grew for the seventh quarter in a row. We also continue to outperform the broader market strength led by Mexico, which grew over 50% year over year. However, demand slowed in December, reflecting an earlier end to peak season, after some additional pull forward in the third quarter. Intermodal operating income was $18 million, a 5% increase compared to the same period last year, driven by solid conversion of our volume growth and the benefit of our cost initiatives, which drove operating ratio to 93.3% or a 50 basis points improvement versus last year. Logistics revenue, excluding fuel surcharge, totaled $329 million in the fourth quarter, up 2% from the same period a year ago, driven by the Cowen acquisition and an increase in gross revenue per order offsetting ongoing volume pressure. Logistics income from operations was $3 million, down from $9 million last year, while operating ratio was 99.2%, an increase of 180 basis points. While gross revenue benefited from the spike in spot rates in December, we also saw a disproportionate spike in our purchased transportation, especially in certain geographies such as California, which we believe was exacerbated by regulatory pressure on capacity. This resulted in significant compression in the net revenue per order on our contract-rated business, including power only. Even as we were able to leverage our spot exposure to accept and serve the highest spot-rated business. Some project-related business materialized late in the quarter, but this only partially offset the net revenue margin compression. Turning to our balance sheet and capital allocation. As of December 31, 2025, we had $403 million in debt and lease obligations and $202 million of cash and cash equivalents. Our net debt leverage was 0.3 times at the end of the quarter, an improvement from 0.5 times at the end of the third quarter because of the pay down of $120 million in debt. This also marks continued deleveraging from 0.7 times at the end of 2024, enabled by strong cash flow generation even in a difficult backdrop as we prioritize capital discipline. The strength of our balance sheet gives us ample dry powder to complete additional accretive acquisitions if the right target becomes available while still maintaining an investment-grade profile. In the fourth quarter, we paid $17 million in dividends and $67 million for the year. During the quarter, we opportunistically repurchased approximately 284,000 shares. On January 26, 2026, the board of directors authorized a new stock repurchase program under which $150 million of the company's outstanding common stock may be acquired over the next three years. Under the previous program, we repurchased 4.4 million shares for $110 million. Net CapEx in 2025 was $289 million compared to our guidance of approximately $300 million, primarily due to the timing of certain payments. Free cash flow improved 14% year over year. We expect net CapEx for 2026 to be in the range of $400 million to $450 million. This primarily encompasses the replacement CapEx needed to protect our Asia fleet. We head into 2026 with a continued focus on growing earnings by prioritizing asset efficiency gains over outright equipment growth. Our adjusted earnings per share guidance for the full year 2026 is $0.70 to $1, which assumes an effective tax rate of approximately 24%. We expect to see supply-driven market improvement and the benefits of our incremental $40 million in cost savings built through 2026. As a result, we anticipate a stronger second half of the year. However, we remain in an environment that's characterized by both inflationary cost pressure and demand uncertainty. The midpoint of our guidance assumes demand is consistent with what we saw for 2025, with elements of seasonality but no acceleration. Moving from the low end to the high end of our guide assumes varying degrees of demand, with the low end assuming modest softening, especially in the consumer sector, and the high end reflecting a slight overall pickup in economic activity. I will now turn the call back to Mark to share more perspective on 2026 expectations and outlook.

Thank you, Darrell. I want to start with my perspective on the freight market as we move into 2026. As outlined earlier, results were marked by conditions that were softer than expected for much of the quarter, though we did experience material tightening in December. The volume follow-through from our customers came primarily toward the very tail end of the quarter. The capacity crunch at year-end caused some of our most transactional customers to push freight into the early days of January. As the month progressed, conditions reverted to more normal seasonal patterns with spot rates moderating from recent highs. The end of the month also saw severe weather conditions across much of the country, which caused disruption to our operations. However, customers are also feeling the impact and have large backlogs. We are beginning to see premium opportunities to help them work through the disruption. As we look forward, the industry is already feeling the impact of supply rationalization related to regulatory actions in areas such as non-domiciled CDLs, English language proficiency, and driver school certifications. These actions are both removing capacity outright and, importantly, restricting the funnel of new entrants. As a result, we expect capacity attrition to continue to ramp, and we continue to believe the impact is likely to be greater than what we saw from the electronic logging mandate in 2017. From here, demand is the largest swing factor in how the cycle evolves. The trajectory of consumer spending, impacts from the big beautiful bill, and interest rate policy all have the potential to significantly influence the timing and magnitude of improvement in market conditions. We closed 2025 with contract price renewals on our expected ranges. We are far from finished, and more progress needs to be made on rate restoration across our service offerings. We are very early in the freight allocation season, but it is clear that customers are increasingly cognizant of the growing supply side risk. While the network is a smaller portion of our business today than our history, our spot rate exposure is also at historical highs, which will enable us to quickly capitalize when conditions improve. Our spot exposure will stay elevated in the near term and potentially even beyond 2026 if we feel rates have continued upside amid a significant shift in capacity. Beyond network, we also expect improved cycle dynamics to drive outperformance in rate and volume in our traditional brokerage, along with backhaul gains and dedicated, stronger over-the-road conversion in the model. We look forward to transitioning to a more supportive market. We also enter 2026 equally as eager to build on the progress we have made in our efforts to drive structural improvement in the business. We will continue to drive growth through differentiation and maintain a disciplined focus on doing more with less. Beginning with our strategic growth initiatives in truckload, the network remains a key part of our service offering, but we have made significant progress over the last several years to pivot the portfolio to more of a dedicated configuration. While we are not targeting a specific mix, we will continue to lean into dedicated earnings growth, particularly with specialty equipment solutions, which is now a majority of our pipeline. We are seeing strength in food and beverage, home improvement, and automotive verticals. Our specialty configurations typically have unique equipment or value-added actions by the driver, or often both, that are not easily replicated, creating durability in the business. We are seeing strong momentum in building the early stages of our pipeline, creating a wide funnel to support continued growth even as new implementations ramped up. In intermodal, while we will not be immune to market conditions, we believe we can continue to drive share gains by leaning into our most differentiated lanes. A direct reflection of our ability to drive win-wins for our customers and for Schneider National, Inc. We expect Mexico to continue its growth leadership. The launch of our Fast Track offering, where our service reliability is exceptional, will drive incremental growth, and we are already seeing customer interest and conversion. Despite the strong growth in 2025, we see a long runway for over-the-road conversion amid more greenfield market opportunities. This includes opportunities from the changing rail landscape where we remain engaged with both Eastern railroads. Finally, we will continue to leverage our multimodal offering to meet our customer needs however they manifest. In 2026, we will optimize volumes between our network and logistics offering based upon market conditions. In the near term, more volumes will flow toward the network. As conditions strengthen, logistics will enable us to meet increased demand and scale revenue while maximizing network profitability. As we continue to execute our growth plans, we will remain disciplined in our approach, focusing on growing earnings through operational efficiency regardless of market backdrop. As Darrell mentioned, we achieved our 2025 cost savings program. This was comprised of Cowen synergies, which continued to ramp in the fourth quarter, and broader productivity-led cost reductions. We expect these to be structural even as we enter a more robust market. We have reduced our non-driver headcount by 7%, which was primarily achieved in the second half of the year, bringing momentum into 2026. In 2026, we expect to deliver another $40 million in cost savings as we continue to execute our ongoing initiatives, including incremental benefits from reductions in headcount, further tightening of equipment ratios, and additional insourcing of third-party spend, including maintenance and drayage expenses. We also continue to roll out AgenTik AI throughout all our service offerings in a variety of support functions. We are already seeing enthusiastic adoption across the enterprise and early payoffs in improving service levels and in lowering our cost to serve. This discipline will also be reflected in our capital spending, as we prioritize growing earnings through asset productivity. In Intermodal, even with our market-leading growth in 2025, we believe we can grow up to 20% to 25% without having to add containers. We may add some dray capacity over time, but this will enable us to insource even more of our drayage capacity, improving productivity, and reducing third-party spend. Within dedicated, we believe we can accommodate much of our growth plans to increase productivity and by reallocating resources away from lower-performing accounts. We have identified our lowest returning assets, and the actions needed to improve them. In many instances, we will work with our customers to drive a win-win, but it is where we are not. The strength of our new business wins enables us to put our assets to better and higher use. These actions are already underway, and we expect to have the majority implemented by the second quarter of the year. Taken together, as we noted earlier, we believe the full course of supply rationalization is likely to occur over several quarters and through more than one bid cycle. We believe 2026 will mark only the beginning of normalization and cyclical recovery but not in its full breadth. Realizing that full impact, as well as the continued execution of our strategy and a more sustained demand inflection, marks a clear path to stronger mid-cycle returns beyond 2026. Finally, as you likely saw yesterday, we announced leadership changes. Beginning July 1, I will assume the role of Executive Chairman of the Board of Directors. And I am pleased Jim Filter will be appointed Schneider National, Inc.'s next President and Chief Executive Officer. I am confident in Jim's ability to position the company for its next phase of growth as he brings nearly three decades of Schneider National, Inc. experience and deep operational expertise. He's been integral in executing our commercial and operational strategies. And now I'd like to turn the call over to Jim for his remarks. Jim?

Thank you, Mark, and thank you to the entire board of directors for their trust and support. I am honored to take the helm at Schneider National, Inc. Despite a challenging market in 2025, our actions throughout the year strengthened our foundation and positioned us to benefit as conditions continue to improve. We are already seeing early signs of improving market conditions as supply rationalization is underway. We remain disciplined, focused, and well-aligned to capture the upside of a recovering cycle. With a strong balance sheet, a resilient portfolio, and momentum in our strategic initiatives, we are optimistic about the opportunities ahead and confident in our ability to drive earnings and returns higher. As I look forward to stepping into this role, I'm focused on leading Schneider National, Inc. through this next chapter and driving long-term value for our shareholders. Thank you, Jim. And with that, we will open it up for your questions.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press 1 again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. And we do request for today's session that you please limit yourself to one question and one follow-up. Your first question comes from the line of Ravi Shanker of Morgan Stanley. Your line is open.

Great. Thanks, everyone. A CEO transition at Schneider National, Inc. is not something that happens very often. So I just want to recognize the moment. Mark and Jim, congratulations on the next phases of your career. Maybe, over the questions. I think, Mark, you gave us a sense of what you thought of 2026 so far. Just in your guide, kind of what bid season is kind of priced in the midpoint and high end? I think you said expected ranges of pricing. What does that look like? And also, I think, Darrell, you walked through some of the demand side moving parts in the guide. What are the supply side assumptions that underpin your guide?

Thank you, Ravi. This is Mark. So maybe we'll just tackle the guide a little bit relative to, I think, your first part of that was price. As we came out of 2025, and really, if you break across the portfolio in our network business, even in a less constructive, in my view, environment, we were able to get mid to low single-digit contract renewals. Even if that meant placing some additional capacity into the spot market for the short term. And so we would expect that we're going to continue to lean into price because price recovery is part of what needs to occur to get back to our mid-cycle earnings targets. We also would expect that increasingly, we need to see some of that in the truckload space as we normally do before we start to see that transpire in intermodal. And what I'm really proud about the intermodal group is that we're growing volumes even with different mixes relative to the revenue per order, a little higher backhaul, a little shorter length of haul, and we're still able to translate that additional volume into incremental margins into the business. And so I think we have a solid path to continue to lead intermodal growth. Focusing on our key differentiation markets, and remain very bullish there. But maybe again, a little bit more time before we see price catch up to what we expect in truckload.

And then, Ravi, as it relates to the supply side, so, you know, pretty wide range, which, you know, reflects the uncertainty in the market, but in all, you know, points in our guidance, we're expecting supply to continue to exit. There's a lot of momentum as it relates to regulatory enforcement that's driving supply out. We've seen that in 2025 or the next expect that to, you know, continue into 2026. So one of our baseline assumptions is that, you know, capacity will continue to exit. Now the degree at which and the pace at which that supply exits, you know, will determine how we move along, you know, from the low end to the high end of the range. From a demand standpoint, the low end of the range at $0.70, just as a reminder, we finished the year at $0.63 of EPS. You know, there's an admission that there is some conservatism that's embedded in $0.70. We're assuming that demand conditions at $0.70 are, you know, comparable to what we saw towards the end of 2025, the second half. So softer market conditions, but as we kind of move up the range, we expect, you know, a more constructive demand picture. As it relates to the midpoint of the range, we're focused on a lot of things that are within our control. So all the initiatives that Mark outlined in terms of cost, you know, we completed $40 million of cost savings in 2025. We expect to continue and, you know, sign up for another $40 million in 2026. So that's embedded within the midpoint of our range. We're also focused on going where we have differentiation intermodal, specialty dedicated. So the midpoint assumes that. We also face some headwinds towards the end of the year. You know, the unplanned auto shutdowns, the heightened healthcare costs, we don't expect any of those to recur. So that's all built into our midpoint assumptions.

Very good. Thank you. Next question comes from the line of Jonathan Chappell of Evercore ISI. Your line is open.

Thank you. Good afternoon. Mark, I wanted to talk about the dedicated revenue per truck per week for a second. If we look at the sequential move from 3Q to 4Q, it looks like it's the lightest it had been in at least ten years, and minus almost 4% year over year. So it just seemed kind of counter-seasonal, and I know our models certainly don't line up with yours all the time, but it looks like the biggest area of the shortfall in 4Q EPS. So, I know there are start-up costs that hit OR, but maybe help explain the dedicated revenue per truck per week and why that may have lagged so much in 4Q.

Sure, Jonathan. Thank you for the question. One of the things that are embedded in there is the automotive shutdowns that occurred because of componentry issues, namely around chips, which really affected Dedicated specifically, but also some of our intermodal business coming in and out of Mexico. And so that was unplanned. That was not forecasted well, and our OEMs had to adapt and adjust to that. And that predominantly hit in the month of November, but it hit most of the month. So, unfortunately, that was most prominent in our metrics within dedicated. And, also, as we have three large start-ups, which we anticipated in our guidance relative to the fourth quarter. We have some additional cost issues there relative to capacity and some of the difficulty getting all of that sourced, which also had some impact. So those were the items. Again, we don't think those are long-term in nature. You know, we always have levels of start-up activity, particularly when you sell 950 units throughout a year. But we have three larger start-ups in the fourth quarter.

And this is Darrell. One other thing I'd add is the healthcare costs that we saw that were heightened in the fourth quarter, most of that was in truckload, and the majority of the truckload was in dedicated revenue of the truck.

Thank you. Just as a follow-up, going back to that $40 million of costs, they're targeting again this year, how much of that is volume/revenue dependent? Because if we just add $40 million kind of the adjusted net income from '25, you get pretty close to the midpoint of the '26 guide. So is that, like, $40 million if the fundamentals of the business kind of track as you're expecting and maybe something less than that if we're closer to the low end of the range from a volume or a pricing perspective?

Yeah. So I think as I mentioned, this is Darrell. Sorry. As I mentioned in the prepared remarks, the $40 million of cost savings, a lot of it is productivity-based. So as volume increases, you know, some of those will be more evident, especially because they're structural. So as volume returns, the costs aren't going to return at the same pace. There is an acknowledgment at least that we're still in an inflationary environment, so while we do expect that the cost savings will, you know, offset much of that, it won't offset all of the inflationary pressures. That's another factor to consider. So I'm not sure if that answers the question.

Yep. No. That's helpful. Thanks, Darrell. Thank you, Mark.

Thank you, Jonathan.

Your next question comes from the line of Brian Ossenbeck of JPMorgan. Your line is open.

Hey, good afternoon. Thanks for taking the questions. Now that the merger application's been filed and, I guess, will be refiled, I wanted to see if you could give some comments, see if you had some time to digest what maybe some of the domestic intermodal commentary within there might mean for Schneider National, Inc. and how you're kind of viewing that. Also, one of your peers filed for Chapter 11. So maybe just some broader comments about the lay of the land and domestic intermodal with those two big factors out there.

Yeah, Brian. Thanks. This is Jim. So, obviously, all the way through this process, we've been engaged in collaborating with each one of the rails and especially the two Eastern providers. We're very happy with our current provider in the East, but, you know, we're continuing to understand the information as it emerges. There really wasn't any significant new information to submission, but everything that has come out just reinforces our confidence in that intermodal, our intermodal team, their ability to assess new services, help us navigate through any opportunities that emerge. And in terms of the overall competitive dynamic in intermodal, you know, we feel very good about our position. We've had seven quarters in a row where we've been able to grow, and we're growing into areas of differentiation. And there's a lot of those. So, you know, you think about in Mexico, we're delivering service that's one to three days faster, 99.98% claims free. It's really that's a big advantage, not just to other intermodal carriers, but over the road as well. And now we're leveraging some of our differentiation with Fast Track with shippers that have really high service expectations. So, you know, we feel really good relative to all of our competitors. And so, you know, we're not immune to market conditions, but I feel like we continue to outperform in our intermodal business.

Alright. Thanks, Jim. Darrell, maybe a quick follow-up on CapEx. It looks like it's going up a reasonably decent amount next year. I'm sure they're subject to market conditions perhaps, but you can give a little bit more color in terms of what's in there. It sounded like maybe some of that was equipment. Is that for purely replacement, or is there some growth in there?

Yeah. Sure. Good question. So, yeah, as it relates to CapEx, the past several quarters, we've been talking about just focusing on growing earnings as opposed to truck count, and we've seen that across, you know, dedicated network intermodal across the board. We're focused on doing more with less and dedicated, for example, where reallocating equipment to, you know, higher-yielding business. So our CapEx plan for 2026 is mostly replacement-based, just given our focus on keeping our fleet count flat. So we're protecting our Asia fleet. And primarily all of the CapEx is replacement.

Brian, we also had a little less CapEx this year as we were looking for tariff clarity. That has emerged and clear, and we also had a little bit of timing in the fourth quarter to the first quarter just based upon availability of one facility and some equipment. So that's really the step up, and it's all, to Darrell's point, firstly, in the replacement cycle.

Okay. Thank you. And congrats, Mark and Jim.

Thank you. Thanks, Brian.

Your next question comes from the line of Ken Hoexter of Bank of America. Your line is open.

Hey, great. I'll start off with the same. Mark and Jim, congrats as you each move on to the next phase. Well deserved. The auto plant shutdowns, I mean, seem like such a major differentiation for your business alone. Given that scale, and I guess the last conference you did was in November, was there any thoughts to doing a pre-release? Or since it's such a change of magnitude to your thoughts on your outcome, and then, I guess, as you look forward to the operating ratio, right? So typically, you deteriorate about twenty basis points into the first quarter at Truckload. And I know you don't do quarterly rollout, but maybe just given the a couple of things you threw out there, Darrell, on the timing of cost savings or, you know, as the $40 million rolls in. Anything you want to kind of talk about differentiation from normal given where we're leaving off and the different dynamics here?

Yeah. Ken, let me take the first one as it related to the automotive. And certainly one of the items that we've leaned into and diversification of our revenue base is looking for new growth opportunities. Manufacturing was one of those that we had targeted. And production part automotive is playing a bigger role in our portfolio, which in many conditions is a very good thing. And there was a lot of uncertainty. The OEMs didn't know exactly all was going to happen there when that problem occurred, and so we didn't have full understanding clarity as our customers were working through that. But one of our acquisitions and certainly our organic dedicated growth has had success in the production automotive parts. So in 2026, that's a development that's a bit more of our story, which we think in the long term is a very good thing, particularly as we continue to leverage our strengths in and out of Mexico. And the importance of the automotive industry relative to the Mexico base. So we would have liked to have clear visibility to that in a whole host of ways. But that was an emerging issue that a number of our OEMs had to work through, and they worked through that to varying degrees of success to keep production up. So that's really what occurred there, and from a transparency standpoint. And then follow-up on his other question.

Yeah. So a lot of the cost savings again are, you know, structural, but also relate to productivity. The expectation is that the second half of the year shows more improvement. And that follows through also with cost similar to what we saw in 2025 where there was a ramp throughout the year. Some of the initiatives are going to be consistent throughout the year. Such as the, you know, the non-driver FTE, you know, reductions but anything productivity-based would be more back half-weighted.

And then I was really the first quarter, we're off to a very interesting start, obviously, with the weather conditions and the disruption that we're feeling, but also what our customers are feeling. And so we believe there is a backlog of significance across the supply chain just because the entire breadth of the weather looks like we may have another storm coming at us this weekend. So I think that comes with opportunity. It comes with the depth of our portfolio that we're going to be able to respond, and I think we'll be able to leverage how we help customers deal with that. And be paid reference to the value that we're going to create. And so we're seeing some of that emerge already, Ken, but I think it'll come down to what is the how's that whole quarter play out from the cost, the recovery, and the demand catch-up. So the company and we are poised to take advantage and be there for our customers, and it's just but it's a really, really disruptive time just based upon the extent of the storm and the impact.

Yep. If I could just get one clarification. Right? So it seemed like the Cowen fleet total stayed fairly consistent through the year. It didn't look like the fleet dropped off. But intermodal, your loads really dropped off. You know, I had big load wins in the second and third quarter, upper single digits that tail off in the fourth quarter. Is that the same thing in the auto business on intermodal that you're talking about on the truck rates to John just before?

It feels like a sneaky third question, but we're going to go ahead and let that one go. Go ahead.

Okay. Thanks, Mark. You know, really, if you look back at the comps for last year and the fourth quarter of last year is when we really started seeing across the industry a pickup in demand. I remember there was the threat of tariffs, and then, that really carried into 2025. The pull ahead. And so you know, we continue to grow year over year, which actually is much better than the overall industry. So from our lens, we really didn't see a drop-off. It was really just a matter of a tougher comp year over year.

Wonderful. For the time, guys. Appreciate the thoughts.

Okay.

Your next question comes from the line of Jordan Alliger of Goldman Sachs. Your line is open.

Yeah. Hi. Just wanted to come back to demand a little bit. Obviously, you alluded to it a few times, but there's been a lot of puts and takes this past '25 with tariffs pull forward, etcetera. There were some indications that we had seen perhaps that inventory at wholesale and retail had drawn down quite a bit and maybe this dovetails a little bit with your comments on the pickup in demand in December. So you have any contacts from customers or what have you, how they're feeling about inventory levels as we move into this year? And is there some sense of optimism perhaps that, you know, maybe with various stimulatory effects, we could see a restock type of event for freight? Thanks.

Yeah, Jordan, this is Jim. I'll take that one. And so you're absolutely right. As going through November, December, we believe end-market consumer demand remains stable. But we were seeing customers starting to work down inventory, and that really changed the last two weeks of December. And so there was some restocking activity that was attempting to take place in the last couple of weeks of December. So there were some shippers that were scrambling for capacity, and some of that pushed into January. And we're working through some of that backlog with some shippers that had some freight carryover. And I'd say that was really the most transactional shippers that had that carryover, as Mark was talking about. Also generating some premiums and also some additional cost to shift drivers around. We are still working through that when, you know, winter storm Fern came through. And, initially, that created some cost for us as we're, you know, getting equipment back up. We've been operating through that. We're not completely clear, and now we have another storm coming through. And so I think some of this carryover is going to continue for a few more weeks as we look out there. And so we have some of those activities taking place. I say that impact is going to be disproportionately negative for the most transactional customers. And, historically, when we look at these things, the spot rates it's not just a quick event. It goes up higher over multiple weeks, and it starts, you know, in the area that's immediately impacted but then expands beyond that as capacity is dislocated, and then if we look further out on the horizon, there's a lot of positive catalysts that we see out there, whether it's from capital investments as a result of the One Big Beautiful Bill Act, some strong tax refunds, interest rate cuts that surface for home investment again. So, you know, the positives out there. But that being said, you know, we've seen some head fakes before. While we are absolutely seeing supply come out of the market already, still waiting a little bit for those demand catalysts to convert before we completely underwrite it.

Maybe just to put a bow on that, Jordan, as you look at the logistics manager index, you really did see a precipitous drop in inventories at the latter part of the year, particularly in December. Which feels consistent with what our experience was in the month of November, which we saw drop off really in most demand categories, and then it really started to bounce back as Jim said, late in the year when capacity was tight, and it's really carried that concept through here for the first several weeks of January. So, absolutely, I think that could lead to a more intense replacement or replenishment cycle. We'll have to see. But we think that's lining up for more probability in that direction.

Thank you.

Your next question comes from the line of Tom Wadewitz of UBS. Your line is open.

Yes. Good afternoon and Mark and Jim also want to add my congratulations to both of you. Mark, certainly a pleasure working with you over the years. And wish you the best. And, likewise, Jim, I'm sure you'll do a great job in the new leading position. Let's see. So wanted to get your thoughts on, you know, if we don't see improvement in demand, how much rate you think you can get from just the supply side. Right? Like, you seem pretty optimistic on supply with good reasons by reduction. Can you get kind of mid-single-digit trade on that with, say, truckload contract rates if you don't get help from demand? Or you think that's going to be is that maybe too high of too high a bar?

Yeah. Tom, thanks. This is Jim. So let me just maybe clarify a little bit on capacity and our position on that, and then I'll step into rates. So, you know, generally, we subscribe to the fact that this is an efficient market, and when it's working properly, you see an upcycle that lasts about eighteen months, followed by a down cycle that lasts about eighteen months. And here we are four years into a down cycle, so something is different. Not normal. We've been talking about shadow capacity for quite a while. And that's coming from non-documented workers that are able to get CDLs, CDL mills, graduating students without the investment to become safe drivers. Drivers that don't meet the English language proficiency, b one committing cabotage, and ELDs that are self-certified improperly. So the step up in enforcement that we're starting to see that's not only removing capacity, but that's starting to constrict the top of the funnel with new drivers entering. And in particular, the most irrational capacity is what's exiting, and that's what's we believe, creating a condition that will enable the market to adjust. And, you know, we're starting to see that when you have a little bit of tightness out there. We also see it in our own business. We see that in our driver recruiting volume moderating. We've had some buyers of our tractors canceling purchases because of their driver pool shrinking. And we've seen a sharp contraction in our brokerage carrier account. Particularly in regions where non-domicile exposure was outsized in places like California. But it's not an event-based situation. There is no cliff. It's going to take time to play out. So we expect that capacity is going to continue to decline even well after the market reaches equilibrium. And so, you know, it's going to take quarters for us to get there, but this cycle might last longer. And so as we're talking to shippers, I think they're starting to understand that as well. Because what I've been hearing from shippers more recently is they're focused on the supply risk. They're looking for rate assurance. And, you know, they saw this in December. They're seeing it through these storms. So we have more shippers asking us for multiyear deals. We're seeing that, and they're, you know, they're coming with more mini bids, which tells us there's some disruption. So I talked to the most strategic shippers. They understand our costs and the nature of this industry. So they look at the same Atri data that we do that says our costs are up about 25% since before the pandemic. Meanwhile, rates haven't moved very much. In 2019, was a pretty low base. And so, you know, this is something that's going to take some time and perhaps going to take several bid cycles to play out. But that could also mean that there's some potential for several years of upside.

Okay. Thank you. Thank you for that. How I guess, given your framework of how you think it plays out, where would you where are you most optimistic on improvement? I guess from a margin perspective in 2026, like do you think brokerage could really kind of move beyond the squeeze and do really well? Do you think intermodal, like shippers, start to really, you know, kind of give you more volume or is it all about rate and truck? Just how do you think about where you might see a stronger opportunity for improvement in '26?

Yeah. Thanks, Tom. So the first place that I would expect that we're going to see that improvement is going to be in our network business. That's where we have an outsized exposure to the spot market today. Higher than what we normally have. So I think there's opportunities to see that move very quickly. I mentioned intermodal. I do believe that we're well-positioned to capture some additional upside when that truckload market improves and inventory levels are, you know, starting to be replenished, we'll be able to take opportunities there. And then our logistics business is very nimble, and so I think there when there's disruptions out there in the marketplace and customers are looking for a broad portfolio to solve problems, they really become that glue that jumps in and can provide great service to the customer, but also returns back to the enterprise.

And, Tom, I'd also add on dedicated. I think one of the underappreciated facts about dedicated is the value that you can provide as a multimodal platform that we have relative to backhaul efficiencies. With the 8,500 trucks operating in various configurations, there are opportunities to drive value back to the shipper, but also to ourselves relative to margin enhancement. This was one of the really great places of using AgenTeq AI to talk to other agent AI to garner efficient volumes on our backhauls that can, you know, it's a very high incremental margin play for us, and so we're really leaning into that. The scale that we have in dedicated allows us to really take advantage of that. And it's also one of the values of having a logistics offering and a network business is because we can leverage those various channels to achieve that. So I'm very bullish as well that with what we have available to us and dedicated that we can still drive self-help margin improvement on a whole series of approaches and backhaul being one of them.

Do you think you'll see good responsiveness and dedicated too as I guess, as freight picks up?

Yeah. Yeah. I do. You know, because you look at, you know, a couple of things. We had a terrific year of selling 950 units of new business. We didn't see all that obviously translate into the count of the fleet. That's because we have the opportunity now to drive efficiency because some of that churn we experienced last year wasn't true loss. Business. It was current customers not having as much demand. And that brought a correction in the number of units that we placed against those contracts. So if there's demand improvement, there's automatic improvement in our account structures because of what kind of went backward a bit in 2025 when they didn't have the demand. And plus the margin-enhancing opportunities I'm talking about here with backhaul.

Right. Okay. Great. For the time.

Thank you.

Your next question comes from the line of Bruce Chan of Stifel. Your line is open.

Hey, good afternoon team. This is Andrew on for Bruce. I just wanted to discuss consolidation in Dedicated and how you guys think that's going to affect the competitive dynamic. And what's your expectations for, you know, the trend of more consolidation in the industry, and maybe what's you guys' appetite for dedicated M&A at this juncture versus other capital allocation priorities? Thanks.

Yes. From a capital allocation standpoint, obviously, organic growth is our number one objective there. But we've been a player in the dedicated consolidation with three primary dedicated acquisitions over the last three years. Our balance sheet and our deleveraging even further has allowed us ample opportunity to even consider something larger than what we've done to date. So, yeah, we have not lost appetite. Each of those acquisitions has done very, very well for us. We've really gained our stride relative to getting after synergies, how to assess those things. And so we're not going to take a stretch and a reach for something just to put something on the board. But we have the ability to leverage what we have in our strengths and so very much. We're constantly reviewing. We're leaning in. And really more than just dedicated, but dedicated has been the place that we saw a really target-rich environment. To continue to advance what we believe is a long-term value for our enterprise and long-term value for our shareholders.

Agreed. Thank you. If I can follow up maybe with one on the intermodal side. Were you wanted to know how you guys are thinking about the FMC probe? You know, would you guys think that an adverse ruling here would negatively affect fluidity service and potentially the road to rail conversion thesis?

I'm not sure we caught that front end of that question. Can you do that again, please?

Sure. Yeah. We were it's about the FMC probe. We're just wondering if an adverse effect if an adverse ruling there would affect fluidity and service.

Yeah. I think primarily what that impact would be on the ocean side rather than for domestic carriers.

Domestic intermodal?

Yeah. For domestic intermodal.

Okay. Thanks. I'll pass it back to you.

Your next question comes from the line of Chris Wetherbee of Wells Fargo. Your line is open.

Hey, thanks. Good afternoon, guys, and congrats Mark. Congrats, Jim. Best of luck to you guys. I guess, I wanted to ask about network profitability. So, I guess, what do you think the steps are or maybe what do you need to see from a market perspective, whether it be pricing demand, some combination of that? To get the network back to profitability? And I guess, maybe in the range, $0.70 to $1 kind of how do you sort of book on that at the low end? Is sort of network gotten back to profitability? At the high end, it is? I guess, I'm trying to get a sense of how to think about that within the range as well.

Yes, Chris. Thank you. And certainly, the network has been most impacted by the cycle here and the overcapacity of the market. And there's really two things that we think are paramount for us is what we're working relative to how do we put additional productivity across our assets. In fact, one of the benefits of having just a little bit of recovery in the month of December, we had a multiyear high relative to our build miles per truck and actually had it didn't really make up for the whole quarter of the tepid demand, but just that whole tightening of capacity really led and the demand picture led us to a very solid result there in addition to some price capture, which is really the second thing. We have not adequately recovered in that market, particularly the cost inflation that has occurred that Jim referenced just a couple of minutes ago. So it's a combination of those two levers predominantly. We like the size of the business where it's at. We're not after a particular mix. And the other thing that we're looking to do to help it recover here is leverage our logistics capability alongside our network business to optimize across power-only brokerage and our assets, and we believe in an increasing demand market we'll be able to take care of the assets first and then lever some of these other opportunities that we have to scale our business and take additional volume without putting additional capital but really focusing on the margin recovery of the network. But it's going to take both productivity and some price recovery.

And this is Jim. You know, just to add on to that, what encourages me is that when we saw spot prices increase here multiple times over the last six weeks. We've increased our exposure to spot. To take advantage of those opportunities. And to me, that's the start of driving change into that business.

Okay. And any thoughts around the range how to think about network profitability for '26?

Yeah. This is Darrell. What I would say is that even just to add on to Jim's point, even in a softer backdrop in 2025 and, you know, even in the fourth quarter, you know, the year, we did see improvement in earnings in the network without the benefit of price. Right, or significant benefit of price. So as we get more productive and as volume comes through, as Mark said, we do believe that there's an outsized leverage that we'll see first of all in the network. As it relates to specific guidance, we don't give guidance by sector. But there's an expectation of, you know, meaningful improvement given initiatives that we're after.

Okay. And then just a quick follow-up on the intermodal side. The pricing in the fourth quarter. Any I guess, maybe yield in the fourth quarter or maybe any comment about how you're thinking about bid season might start to be developing as you think about 2026?

Yeah. Thanks. This is Jim. So as we look at last year, our contract renewals remained flat. But by leaning into our areas of differentiation through the allocation season, able to continue to grow and grow off of a base where we're already growing. Including in a market that has some pretty difficult comps. So in terms of, you know, pricing, there is a little bit of pressure was driven by, you know, doing more backhaul. It's a little bit more mix-related. Also, were fewer instances of premium opportunities in the fourth quarter, given the shorter and earlier peak season that we talked about in the third quarter, so we didn't have that benefit. As we're looking going forward, expect that, you know, we're going to continue to lean into those areas of differentiation and be able to grow through the allocation season.

Yes. So, the improvement in intermodal did not come with an improving market of premiums or a project quote work in this fourth quarter.

Yeah. For, you know, just to tack on to that, for the year, we delivered nearly 20% operating income growth for Intermodal with a little help from the market. And that's really because of growing in areas of differentiation.

Got it. So much for the time. Appreciate it.

Thank you.

Next question comes from the line of Ariel Rosa of Citigroup. Your line is open.

Hi, good afternoon. So I wanted to ask get your thoughts on how you think about normalized mid-cycle earnings potential. There's a lot of moving pieces, obviously, with the cost-cutting initiatives and the acquisitions that you've done that you referenced. You know, especially as it was Mark who mentioned it might take a couple of bid cycles to get back there. Just how are you thinking about what mid-cycle earnings could look like for the business? And if it takes a couple of bid seasons or bid cycles, does that mean we're talking about something beyond '27? Is it really kind of '28 or '29 before we start to see that type of performance from the business? Thanks.

Great. Thank you for the question, Ariel. Yeah. We think, certainly, we're not guiding out to '28 and '29, but we think we can certainly get track a meaningful traction towards our long-term targets across our various sectors. We don't think we'll probably get all the way there, obviously, through one cycle in the 2026 season, but I certainly don't I wouldn't want to leave the impression that it's going to take the twenty-eighth to twenty-ninth. We'll provide more updates as we get through the year on how we're progressing in the business. But we think this market and I always like to look at what's different now than what maybe you came into last year's condition? There's just a, in our view, more favorability certainly on the supply side. There appear to be more catalysts on the demand side, and we're experiencing just in these most recent events, the really fragile nature of what happens when you get demand and capacity a little bit closer. And so again, how well those things and the speed from which that demand and the capacity hits, I think, will dictate the speed from which we get back to the mid-cycle returns. We have a lot of self-help items that we have that we can get there and make material improvement without it being just what's going on in the broader market.