BAIRD 2026 GLOBAL INDUSTRIAL CONFERENCE - SCHNEIDER NATIONAL INC

Explicit Guidance:

• No specific 2026 or 2027 financial guidance (revenue, EPS, or margins) was issued for the year 2027.
• Cost Savings: Doubled 2026 cost savings target to $40 million, currently on track to meet.
• Long-Term Margin Targets: Reiteration of existing long-term margin ranges as the path to these targets is accelerating:
  • Truckload: 12%–16%.
  • Intermodal: 10%–14%.
  • Logistics: 3%–5%.
• Current Baselines (Q3): Truckload margin at 8%; Intermodal margin at 7%; Logistics margin within range (absent claims).
• Capital Allocation: Balance sheet leverage held at 0.1x; secured $300 million in additional liquidity capacity in Q3.

Business-Segment Outlook:

• Truckload: Focusing on disciplined growth in earnings rather than truck count; driving capacity expansion only where paid for; leveraging "post-Montgomery" environment to capture higher-priced dedicated freight from shippers seeking reliability over spot capacity.
• Intermodal:
  • Network Realignment: Executing a strategic pivot to CPKC (Canadian Pacific Kansas City) and Union Pacific to create a transcontinental "center of the country" corridor, aiming to capture loads previously shifted to truck due to reliability/speed gaps.
  • Competitive Moat: Differentiation via 100% owned containers, chassis, and company drivers; expecting to outperform competitors relying on multi-rail alliances.
  • Performance: 19 straight quarters of growth; targeting conversion of short-haul and non-traditional lanes into profitable intermodal routes.
• Brokerage: Leveraging robust carrier screening and ownership verification tools to mitigate "chameleon carrier" risks; anticipating a structural shift where large, compliant asset-based providers gain market share against smaller, non-compliant peers.
• Dedicated: Focusing on high-service, high-reliability, and specialty equipment contracts; avoiding "capacity-only" dedicated models that pose counterparty risks in the post-Montgomery liability landscape.

Market and Competitive Outlook:

• Pricing & Costs: Anticipating a multi-year cycle for "margin repair"; industry costs have risen ~30% since the pandemic, with prices currently lagging; expecting rates to rise in 2027 to offset inflation and driver/truck cost increases.
• Driver Capacity: Projected to be a structural constraint; 50,000 drivers entered via rapid training (2 days) in 2021–2022, creating a substandard workforce. New entrants require 6 weeks of training (~$7k cost), limiting the rate of capacity growth compared to 2021.
• Competition/Consolidation: Belief that the number of carriers will remain constrained; 65,000 carriers reduced to 14,000 by 2023. Expecting continued industry-wide margin repair as shippers accept higher rates to mitigate insurance and liability risks.
• Service Levels: Shifting demand from price-centric to risk-centric; shippers prioritizing insurance protection and safety compliance over low spot rates.

Macro / Industry Outlook:

• Interest Rates: Acknowledged that housing and auto markets are sensitive to rates; potential rate impacts could alter demand stability.
• Regulatory (Montgomery Rule): Post-Montgomery liability is a structural headwind for small carriers/brokers but a tailwind for large, compliant firms like Schneider; expecting increased litigation risk for shippers/brokers if negligent hiring occurs.
• EPA Standards: 2027 is a focal point for engine standard changes; company plans to maintain steady replacement capex rather than "pull-ahead," similar to 2010 precedent.
• AI & Autonomous Vehicles: Viewing AI and AVs as future levers for structural cost reduction.

Strategic Initiatives:

• Capacity & Fleet:
  • Replacement CapEx: Continuing disciplined investment in fleet replacement (tractors/trailers); net capex impacted by improved proceeds.
  • Utilization: Targeting 20% more volume on intermodal equipment (2021–2022 levels) and 30% more on 2017–2018 vintage equipment.
• M&A: Balance sheet positioned for opportunistic M&A; focus remains on "disciplined growth" and service differentiation (primarily dedicated) but open to other targets if disruptive factors (AI, AVs) create attractive acquisition profiles.
• Technology: Investing in AI for cost extraction and enhanced carrier screening in brokerage.

Risks and Headwinds to Outlook:

• Regulatory Liability: Post-Montgomery rulings could expose shippers and brokers to significant indemnity insurance costs and litigation, potentially dampening spot market activity for non-compliant players.
• Insurance Market: Uncertainty regarding the availability and pricing of insurance for smaller carriers and brokers; potential for coverage gaps to disrupt the market.
• Cost Inflation: Driver wages and truck prices expected to remain elevated, potentially requiring more than a single allocation cycle to fully recover parity.
• Demand Volatility: Housing and auto demand remain sensitive to interest rate fluctuations.
• Execution Risk: Realization of margin targets depends on successful network optimization in intermodal and sustained cost discipline.

Management Tone on the Future:

• Confidence: High confidence in the "unique cycle" favoring margin repair; views the current environment as the most significant opportunity for structural change in the industry.
• Discipline: Strong emphasis on "disciplined growth," refusing to "throw money" at capacity issues without ROI; prioritizing earnings growth over asset count.
• Long-Term View: Believes the path to long-term margin targets is "accelerating" due to capacity exiting the top of the funnel and structural cost efficiencies.
• Hedges: Notes that rate increases may not fully offset all cost inflation in 2027; acknowledges that market dynamics (rates, demand) could change the outlook.

Miscellaneous:

• CPKC Partnership: Expects the new CPKC alignment to create a "bigger pie" for transcontinental shipping by solving reliability issues that previously forced shippers to use trucks.
• Fleet Age: No immediate need for a massive fleet refresh; focus remains on improving utilization of existing assets and maintaining replacement discipline.