Greetings, and welcome to Schneider Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Bindas, Director of Investor Relations for Schneider. Thank you. You may begin.

Thank you, operator, and good morning, everyone. Joining me on the call today are Mark Rourke, President and Chief Executive Officer; and Steve Bruffett, Executive Vice President and Chief Financial Officer. Earlier today, the company issued an earnings press release, which is available on the Investor Relations section of our website at schneider.com. Our call will include remarks about future expectations, forecasts, plans and prospects for Schneider, which constitute forward-looking statements for the purposes 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 Form 10-K and those risks identified in today's earnings release. All forward-looking statements are made as of the date of this call, and Schneider disclaims any duty to update such statements, except as required by law. In addition, pursuant to Regulation G, a reconciliation of any non-GAAP financial measures referenced during today's call can be found in our earnings release, which includes reconciliations to the most directly comparable GAAP measures. Now, I'd like to turn the call over to our CEO, Mark Rourke. Mark?

Thank you, Steve and hello, everyone and thank you for joining the Schneider call today. I'll open with commentary on operating segment results for the fourth quarter, and then offer company context for 2021 expectations. But before we get to your questions, I am going to ask Steve Bruffett to provide some additional insight on the overall enterprise results, and then affirm our full year 2021 net CapEx and earnings per share guidance. The most recently completed quarter, I think just provided an ideal backdrop for us to leverage the power of our portfolio of services, to not only optimize our base volume commitments, but dynamically capture an increasing share of the dislocated freight needs of our shipper community. I think that was best -- especially evident in our truck brokerage revenue growth of over 60% year-over-year. In our Truckload network configuration certainly influenced by the pandemic, we’ve experienced a meaningful shift in our capacity mix that we deploy in the market daily. Two trends that we don't consider permanent or structural have occurred. The first is a year-over-year drop in the number of non-family team drivers and teams as our highest utilization capacity type. And the second short-term trend is an increase in owner-operators securing their own operating authority to pursue the elevated spot market directly. Team's owner-operators run predominantly in our longer length of haul national network versus our now heavier mix of solo company drivers who are operating in the shorter length of haul regional configurations, which our company drivers in general prefer due to the more predictable work and time at home schedules. Our brokerage business though did benefit from this mix change as we serve an increasing share of the longer length of haul or interregional lanes, including team service with third-party carriers. A further…

Thanks Mark. Good morning, everyone. I'll begin with a recap of our enterprise results for the quarter and full year. Beginning with revenue excluding fuel surcharge, our fourth quarter 2020 was up 15%, which is quite a contrast from being down 11% just two quarters prior when the pandemic had its largest negative impact. Likewise, our adjusted income from operations was up 16% compared to the fourth quarter of 2019, and that compares to being down 24% in the second quarter of 2020. The point is that the strength of the fourth quarter revenue and operating earnings made up for the weakness of the second quarter and enabled us to earn just over $300 million of adjusted income for the year. Looking at our quarterly income statement, I'll note that First to Final Mile operations were largely shutdown by the end of the third quarter of 2019. So, the impact of First To Final Mile is contained to the restructuring line, both the fourth quarter of 2020 and the fourth quarter of 2019. Remaining aligns with the income statement for the fourth quarters of both years are an apples-to-apples comparison. There were obviously a lot of moving parts in the fourth quarter of 2020 compared to the prior year, but there are a couple of key variances that I want to highlight. The first is salaries, wages and benefits, which were about $26 million higher than the fourth quarter of 2019. $18 million of the increase was due to the year-over-year difference in incentive compensation. And that was mostly due to there being small to no payouts for most participants in 2019. The remaining increase was largely attributable to wage and benefit enhancements in 2020, including those for drivers and those who support the strong growth in our Logistics segment.…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Jack Atkins with Stephens. Please proceed with your question.

Hey, guys. Good morning and thank you for taking my questions.

Good morning, Jack.

So, I guess, Mark, if we could maybe start on the Logistics segment, the fourth quarter results were obviously very strong. To what degree were the results a function of the market? And then also maybe to what degree is it a glimpse of what's to come as we think about Schneider leveraging its broader transportation platform over the next couple of years? And I'm curious if you could maybe expand a bit further on the FreightPower platform that you're talking about there, and sort of -- what sort of value are you bringing to the small and -- small carrier, the micro carrier that sort of you couldn't really access before with this new platform.

Great, Jack. Thanks for the question. And as we look at 2020 as a backdrop, I think it serves as an accelerant of our strategic thesis that an emerging business model of aggregating freight and capacity across multiple modes through the use of technology really, in my view, took an inflection point for us. The goal is to achieve a level of scale and relevance. But we believe an asset-centric model at the foundation and certainly augmented and perhaps heavily by third-parties is the most compelling and sustainable way to approach an aggregation model, and I think sustainable through business cycles is the thought there. So, in other words, it's more than just the technology or platform play. Our thesis here is that a multimodal capacity approach across platforms of intermodal or regular route trucking dedicated, and then extending with third-party power. In our case through orange trailer, I think, offers great value to shippers, because we're giving them an optimal blend of additional reach, hitting their KPIs, but also a convenience because it's ease of access. So not only trailer pools, but also to an extended reach of capacity. And so, that's really what we've been building out on our strategy. And this heavily constrained second half marketplace in 2020, we really got a chance to really exercise our network management decision science. As you mentioned, the FreightPower launch allows us to get off the desktop. Our brokerage group is phenomenal working with smaller and midsize carriers, but getting to that micro carrier, that owner-operator that might have one or two or three trucks is more of a mobile play. And we certainly saw the reach in our Power Only with that group accelerate tremendously once we had the ability through FreightPower to do that. So, taking that ubiquitous orange trailer and container solving for yes, more often, and then being able to ultimately optimize our assets more effectively to drive out -- to drive yield to drive out waste is really what we're after there. So -- and again, really encouraged by what you saw in the fourth quarter, well, certainly there’s some lift in the marketplace, but a lot of our capability really came to bear there to do that really effectively.

Okay. Gotcha. That makes sense. And I guess for my follow-up question, as we think about the asset-based trucking operations, I think if I remember correctly the long-term sort of margin guidance, there is 11% to 13%. How are you guys thinking about the ability to maybe do the upper end or maybe even better than that over the longer term? I think when we look at some competitors out there, they have a similar type of asset mix. They are talking about more mid-teens type margins in their asset-based division, are there some cost opportunities, some margin enhancement opportunities that you guys can target over the next couple of years to maybe improve the margin profile of that business longer term? Thank you.

Yeah. Jack, we're absolutely focused on extending margin really across all our platforms. As it relates to truck, we think the optimal level for us really starts with what's our reach there, which is in our view about 6,000 trucks. And we -- with some of the difficulty with the team and the owner-operator piece that I highlighted in my opening thoughts, we dipped under that a bit. And we want to get that to about 6,000 units. And as we stated prior, we also think getting over a multiyear horizon to get our dedicated contract configuration on par with that is really what we're focused on. Other margin enhancing activity, certainly for us is in the productivity and sweating our assets. We think we have opportunity there, particularly, and we've had some success here in December and January. You start to restore some of those team capacity levels because that's premium freight at a premium utility, and we want to make sure that we're -- and we do that really, really well, and we want to make sure we get our strength back to where we have historically been. And we continue to invest in decision science around this whole network solutioning around our company driver, our owner-operator, and now this whole Power Only piece to -- and we think there's margin enhancement through all of that by making better decisions on -- at all our moments of truth at the initial pricing, at the acceptance, and then at the dispatch level. And we're working from a margin enhancement standpoint to do some things on the driver community to root out some of what plagues the industry, particularly new people to the industry, which is this whole income variability that early in some one's career can cause some difficulty. And so, we're looking at some new approaches and models there that we think not only enhances retention, but lower overall cost of acquisition of capacity. And certainly, the quicker we get folks up, the experience scale, the better performance that we get into the business. And so, multiple fronts there and excited about what we've brought to the table to advance those things here, and in the part of 2020. And we'll start to -- I believe, start to get reap the benefits of that here in 2021.

Okay. Great. Thank you.

Our next question comes from Ravi Shanker with Morgan Stanley. Please proceed with your question.

Steve or Mark, can you unpack the 2021 guidance a little bit more, kind of give us your assumptions and kind of what do you think pricing looks like on the contract side? And again, you gave us some detail on the fleet, but kind of what does your overall fleet look like? It doesn't look like you're planning for much growth and also driver wages.

Yeah. Ravi, thanks. There's, obviously, quite a few assumptions that go into any full year projection. And I would say that we have opportunity across the board within our portfolio for earnings improvement. If you look at our guide range for adjusted EPS, it's roughly 16% to 28% earnings growth. And there's a scenario is where we can certainly see where we could outperform that depending on particularly how the second half of the year plays out, but we have opportunity. We think if we ranked our segments in terms of earnings and margin improvement opportunities on a year-over-year basis, I think we'd put Intermodal first, given that they were the most impacted in 2020 by the pandemic. So, we see revenue and earnings, margin opportunities to be quite robust in the Intermodal space for us. And I would put Truckload segment second, because we see continued growth opportunities in dedicated and as well as the network enhancements that Mark outlined there. In the Truckload space, we continue to experience robust conditions and displaced freight that Mark has referenced. So, that sets itself up for a constructive pricing arena in the similar contractual ranges that we've discussed over the last couple of calls, the upper single digits to low double-digit type of range, depending on a customer and their profile. Talking about CapEx a bit, you mentioned -- Mark mentioned that we're looking to get our network capacity up to closer to 6,000 trucks. So that's an inherent in our assumptions. We're also targeting several hundred unit growth in dedicated to go with that. And then, there's a presumed growth in our dray fleet to support Intermodal growth. So, it's a variety of things within there, as well as improving the age of fleet. And we're looking for a target there more of a 24-month as our target. And we've got a little -- we're just over 30 months on average now. So we expect to improve that by over six months on average, by the time we get through with this investment program that we'll run through this year and into part of 2022. So, I don't know if that answers everything you asked, but …

No, that's great. I think the one thing was driver wages. Do you address that?

Yeah. We've done some things throughout 2020 relative to the wages there. I mentioned a program to also do some things how we construct those programs to address income variability. And we think we still are into an inflationary market, but our guidance reflects the net price positive and margin enhancing really across all of our asset-centric services. So, we're very confident that the market is supporting what we need to do to stabilize the driver compensation area.

Got it. Maybe as the follow-up, your digital initiatives in Logistics, look like they're really paying off. Obviously, you announced some important kind of partnerships a few quarters ago. But are these all in-house developments? Kind of how much are you spending on these technology initiatives relative to what you did for Quest a few years ago? And do you feel like you need to make any acquisitions in the space?

Great question, Ravi. And yeah, we really look at this as where do we get leverage that we can work with some real great domain expertise outside our four walls, and we've identified a number of places to do that, that we not only make investments with them to accomplish that, but also bring what we have to offer on intellectual capital to advance their efforts, and then certainly our size and scale behind it to get it to commercial heft. So, we're continuing to look. We'll take advantage of those opportunities. One of the quickest ways to drive improve the margins in the short-term would be to dramatically cut back on our tech investments, because we are now and still spending at a level that I think to see we would say slightly above what we were spending at during those Quest implementation. And so, we're in the constant refresh, the constant looking to stay, particularly around this aggregation of freight and capacity model that we think is going to be a long-term winner in the marketplace. And so our spend reflects that. And we would expect that over the next couple of years, we will be at that pace. But it'll be a combination of in-house as well as looking for those leveraged partners that your question started with.

Got it. Thank you.

Our next question comes from John Chappell with Evercore. Please proceed with your question.

Thank you. Good morning.

Good morning.

First question, either Mark or Steve is on Intermodal. You stated the obvious that the congestion and service issues kind of kept you from getting the business that your capacity was set up for. Is there any way to quantify the impact of those service issues on the fourth quarter? And thus far through January in the first couple of days of February, have you seen any improvement there and the ability to kind of catch-up a little bit on some of the business opportunities?

Yeah. It's a bit of an imprecise science to be able to be exact on those impacts, but certainly we can point to the last orders delivered per day as a result of the delays, the congestion, the allocation issues that we had really across the network, even more so in the east than what we would typically expect. And so I don't have an exact number for you, but it's both on the revenue side and we were squeezed on the cost side. And so, there is a little bit of a flywheel effect that we just didn't get a chance to take full advantage of. While things have improved modestly in the last, it's still a very much an over-served network presently from a congestion standpoint and we've seen perhaps a bit more improvement in the east, and we still grew even within the quarter, in the fourth quarter, well into the double-digits on the eastern part of the network, but we had issues and those are subsiding a bit. But I think we're still going to be in less than ideal conditions here for a little while yet.

And this is not a complaint about weather, because weather has been very calm so far this winter. But this week and this upcoming week, we do anticipate a little network disruption from weather, that will further delay getting that fluidity back that we'd like to see in the network. And just back to your question about the fourth quarter and Intermodal, I think we were otherwise on track to achieve a 10% margin roughly in that range for the fourth quarter, independent of the -- if that's another way of answering your question.

Yeah. That's super helpful. Thank you. And just for a follow-up, the two simple announcement a couple of weeks ago, pretty noticeable because a lot of the major companies across the logistics chain are getting involved with this company specifically. And I know there's a lot in the startup phase. So maybe you can just talk about what attracted you to this particular investment, the commitment from Schneider and then Mark, especially what your role will be as part of the advisory board and any advantage that that may give Schneider as part of this investment.

Yeah. First, I just want to be -- make this thing we're going need to save for professional drivers for many, many years to come. And so -- but that being said, the advancement of the technologies associated with -- ultimately getting to some type of level four autonomy is advancing. And we think there's a lot of safety -- obviously benefits along that path that can be deployed even earlier than when that all might be ready for mass commercial deployment. And we've really taken the approach here. We think there's two or three folks that we have assigned resources to, both technical inside the business and particularly in our equipment area and from a business standpoint that we think could ultimately be a winner at the end of whatever this path is. And so to simple being one of those offers some real interesting developments on some of the things that they're working on. And so it's just making sure that we're invested, we're engaged, we're learning and preparing for what could be a series of deployments in different business models, whatever the case may be as this path unfolds itself. And we just thought -- we think it's important to stay out in front of that and embrace where the world's going and looking forward to engaging on that path.

Anything on timing or the capital investment, or is it pretty -- still open at this point?

Yeah. I think it's still open. I think we'll be in some level of testing as we are with electric. We -- again, we started a little bit of that in 2020, and we think we'll have more electric test points in 2021. I don't think we'll have anything of any material testing in autonomy in 2021, but in the out years, I think we'll start to see some applications that we can at least understand what the potential is.

Great. Thank you, Mark. Thanks, Steve.

Our next question comes from Todd Fowler with KeyBanc Capital Markets. Please proceed with your question.

Great. Thanks and good morning. On the guidance maybe for Steve, I know historically the first quarter has been the lowest percentage of overall earnings and it builds throughout the year. Can you give us any thoughts and kind of the quarterly progression this year? My guess is that the back half is a little bit more challenging to forecast, but maybe a little bit of help with how you've seen the year unfold with some of the timing of contract renewals and cost inflation and those sorts of things.

Hey, Todd. If you rewind the clock a year prior to the pandemic, I think we would have said that our composition of earnings would probably be a little more heavily weighted toward the second half of the year than our historic norms would suggest. And I guess, as we sit here today, it would be a little bit the opposite of that going into this year, as we see strengths coming into the year and a constructive set up from both price and volume across our portfolio. Like we've indicated, it's very difficult to know what the second half of this year looks like, but I think, there's equally good chance that we follow our normal distribution seasonally and that would be a good setup for the higher end of our range and perhaps above it.

Yeah. Okay. That makes a lot of sense, Steve. And then just to follow-up, on your approach to the Intermodal market into 2021, it seems like one of your main competitors is very focused on price this year. It certainly seems like that that's a focus for you as well. But you look at 2021 is an opportunity within Intermodal to potentially take some share. And maybe if you could let us know what your expectation for container fleet growth is for 2021 in your CapEx budget. That would be helpful. Thanks.

Yeah. We are focused on both top and bottom line expansion. We believe -- I think we're on target to add a couple of thousand containers to the fleet to support that. And I think certainly, notwithstanding some of the disruptions that we've had here in the back half of the year, we still have a very compelling value proposition for the shipper, the increase focused around the ESG elements that are more and more active in our conversations with customers. Intermodal has a terrific response to that. And across the -- and really multiple lengths of haul. We're having great success in the east, which is a direct competition, more so than in the west with truck. And we're still finding a great opportunity to bring value to customers. And so, I think we've got some runway ahead of us on growth. And as Steve mentioned, I think we have a good margin story that we're after from a restoration standpoint year-over-year coming through. A very difficult second and early part of third quarter of 2020.

Yeah. No doubt, Mark. That makes a lot of sense. Okay. Thanks for the time this morning. I'll turn it over.

Thank you.

Our next question comes from Jason Seidl with Cowen and Company. Please proceed with your question.

Yeah. Thank you. Good morning, gentlemen. Wanted to dive a little bit deeper on the Intermodal outlook. Steve, how should we think about margin improvement on a quarterly basis as we roll forward? I'm going under the assumption that you guys are getting pretty good rate increases as we move throughout the year, particularly in the second half, and then knocking on wood, assuming rail performance improves.

Yeah. I think, as we progressed through the year, I think we will see strengthening in margin in Intermodal as well as Truckload as we gain critical mass with the rate renewals and bid cycles and so on and get -- regain the fluidity that we're seeking in the networks and that the ramps. So, first quarter itself is probably the lowest margin of the full year. And then we'll build off of that as we go. I see a strong second half setting up for Intermodal.

And in terms of your overall driver market, how has sort of COVID impact the number of available drivers on any given day? I mean, what percentage of your guys are out due to COVID restrictions, whether they unfortunately have it or just quarantining because they've been to a location.

Yeah. We have a file that a national trend of kind of the ebbs and flow of the outbreak. And fortunately for us most of our impact there has been more in the contact tracing end versus the affliction of the virus end, but it’s still -- when you see something spike geographically, we generally are experiencing that very similar to our population. And so, on any given time, we probably have a few hundred folks that are in some level of contact tracing or -- and we are obviously on the absolute side of safety and make sure that we're supporting our associates so that they're not making that trade off between doing the right thing versus having income to make that decision. So, it's a little bit disruptive, not only while you're pushing on the working side, but some of the costs side of that element as well to make sure that we're doing the right thing. So -- but we are seeing an improving picture there, just like -- it looks like for the most part, the country's starting to see an improving picture and certainly looking forward to this vaccine rollout being and gaining traction.

That's a good color. Gentlemen, I appreciate the time as always.

Our next question comes from Chris Wetherbee with Citigroup. Please proceed with your question.

Hey, thanks. Good morning guys.

Hi, Chris.

Maybe if we could talk a little bit about the fleet, can you keep it a little bit more color to sort of the fourth quarter dynamics in terms of the step-down particularly for-hire. I think you talked a little bit about the team dynamic, but can you talk a little bit about that? And then, maybe as you look out into 2021, outside of CapEx specifically, what are you doing to try to be able to serve rebuild that? I guess there's probably some driver pay dynamics that need to kind of go into effect, but just a little help on the fleet, would be great.

Yeah. From the fleet build standpoint, Chris, I take your question to be more on the network side of that is that the two primary components is the one that I opened with which was the owner-operator community and the team piece. We're actually had some nice success, particularly the second half of the quarter. And so far in 2021 here on the company solo side of having some improved numbers and netting capacity in those places. We're still not where we want to be. As we've talked about on the team side, and again, that's where the utility of the -- is the most beneficial for us to be in that configuration. So -- and we've done some things on wages already there. We've done some things on the equipment tractor spec coming into 2020. So, we're really making ourselves as highly as attractive to that unique capacity type. And we have terrific freight. So, now it's just getting the numbers where we want to get them. So, those were the two primary. And again, I don't think those are permanent or structural pieces. Those are kind of egocentric to the times. And we think that'll stabilize as we kind of push out through the year.

Okay. That's helpful. I guess when you think about the 2021 guide, do you have 6,000 kind of coming back -- getting back to 6,000 on the for-hire network side in the first half of the year. And so you're able to kind of take advantage of that. And then maybe longer term, is 6,000 the right? Is there the ability to kind of get back to a growth mode at some point? I know the market is cyclical from a rate perspective, but you think you have the ability to push that number higher over time? Or do you want to?

I'll kind of take the back half of that one first. And I think, certainly, we like the network business. We think we're good at it. It makes sense for us. It's more challenging from a driver capacity standpoint, because of -- generally a bit more variable in its schedule, a bit more variable in its routing, and folks -- that's why Intermodal so attractive, dedicated is so attractive because it has a bit more of that predictability that drivers in general are looking for. And so, it's just is -- our experiences chasing too hard into the network side comes with a heavy cost. By the same token, we think it provides great value to our customers. It fits well to have a good solid healthy network. And I think it was good for our dedicated business, because there's a lot of cross sell opportunity there. So, I think it's important that we're well-positioned there. And we're one of the largest fleets, obviously even in the network side of the business in the country. But we're not looking at least at this juncture our planning horizon to get much above that 6,000 number. We think that's the right spot for us and grow the rest of our fleets around that 6,000 number.

Okay. And any thoughts on the bounce back in 2021 to get back to 6,000 at the first half, second half of it?

I think we will substantially be there in advance of the peak season. So maybe not exactly by first half, but shortly thereafter would be the plan.

Okay. Thanks very much for the color. I appreciate it.

Our next question comes from David Ross with Stifel. Please proceed with your question.

Yes. Good morning, gentlemen. Mark, you mentioned you would be open about some temporary changes to capacity mix. One also talked about potential temporary changes in lane balance and freight flows. Last year saw a lot of shippers and origins boom, and others went down sharply. Big picture, how are you looking the freight flows as we move through 2021? Have they started to shift back from where they got out of whack last year? Are they still a little bit abnormal? How do you manage through that?

Our freight flows generally support our various regional configurations that we play within our network business across the country. And we're fairly well balanced from east to west. And so, I don't think we've seen any major shifts there. Obviously, we've had commodity shifts with what's going on in consumer products and retail and food. And so we have some accelerated trends just an overall kind of customer mix, but it really hasn't changed because our network is what our network is and we try to certainly bent where it makes sense occasionally outside of that framework. But for the most part we're keeping to our knitting there, it's where our drivers are domiciled. It's our work configurations to get them home on a regular basis. And so, we wouldn't say that there's been -- I don't think Steve, I think we'd represent there hasn't been any major shifts. We've adapted to some things that's when the beauty of the whole Power Only, and other things that we've done, we've done with some other folks assets more so than disrupting our network.

You mentioned the increase in third-party drayage rates, was there also an increase in third-party dray usage? How did the percent of outside dray compared to normal or targeted percentages?

Yeah. Yeah. You're right on. It's actually a couple of things to comment there. When we talked about additional -- onboarding additional costs, we've been successful. I think we added about a hundred accompany dray drivers in the fourth quarter, and we had to use additional third-party expense, not only in the cost, but in the frequency to make up and catch up when things finally did arrive where they were supposed to arrive. And so to make sure that we could protect some of the customer experience through the process. So, the dray fleet had being a bit larger, so there's some recruiting expenses in there. Obviously, Steve mentioned we're going to put some additional capital. But in the short-term, we didn't get the full benefit of that because we were still because of the performance in the congestion and the rail performance, we were tapping into the third-party markets more so than we would have needed to in a more normal fluidity standpoint.

And do you have the percentage -- roughly what percent was done in-house versus third-party in the quarter?

Yeah. We wouldn't be upper 80s in the fourth quarter in-house. I tried 88, 89 something in that range.

Close to 90.

Yeah. And we could be as good as the low to mid 90s if we're really humming.

Great. Thank you for the color.

Our next question comes from Tom Wadewitz with UBS. Please proceed with your question.

Yeah. Good morning. Wanted to, I guess, ask you a little bit about the mix on capacity. I think you've historically -- you've leveraged technology really well to access drivers, recruit drivers use owner-operators. But I guess some of the reliance on owner-operators causes may be greater cyclical volatility when the market is good, they want to go do their own thing. It seems like we're -- we've seen that this time around as well as 2018. Do you consider going to a higher percent of company drivers? I don't know. You had some comments about changes early on -- sorry -- I missed if you said that. But is that something where you say, we just don't have the stability with as much the lines on owner-operators and we got to shift that. So, how do you think about that element of the overall driver in capacity strategy?

Tom, you're, right. We did experience in certain parts of market inflection 2018, and now as we got into the back half of 2020 that you have a little bit more volatility there. But it does serve as such a great career path for our experienced associates to be their own business person. And so, we think that's a great value proposition over time for those who have that interest. And so a lot of the seating that comes into those arrangements, it might be a three, four or five year Schneider company driver that's looking to take the kind of the next step. And so, it kind of fits in an integrated fashion in some respects to our whole capacity deployment model. That being said, would we -- are we interested in growing the company side and to include perhaps the ratios between company owner-operator in our network business? I think that would be a fair statement. And -- but it doesn't dampen our enthusiasm or our interest in owner-operators, because they generally play in the longer length of haul networks and they generally are one of our top utility utilization performing capacity types. So, there's a lot of advantages. And they're a good business people. They understand the business. And we -- so I don't want that to come across as that we're looking to discount that, but having a higher mix of company, yeah, I think that would make sense for us.

Okay. And then, if I can ask a little bit on brokerage, you had pretty impressive results in brokerage both in terms of top line, in terms of operating income. I don't know that it's gotten a lot of focused on the call. And it seems that 2021 ought to be pretty much a sweet spot for brokerage in terms of -- contract rates up, maybe later in the year spot falls a little bit sort of cost capacity. So what are the assumptions you have for your brokerage business in the guidance? And is that an area where -- based on fourth quarter, you could maybe see some better than expected results, or maybe upside to the guidance?

I'll open maybe with -- and let Steve kind of close on that thought. But Tom, I'll take that as feedback as if we're not talking about this great brokerage model that we have, then that's our fault, because we've been talking about -- in our view about positioning this portfolio of both asset-centric all the way to very asset-light. And our brokerage offering is just -- in up markets and down markets, it's done extremely well. It's leading away in our growth profile. And in particularly now how we integrate this in-between Power Only solution, I think we have nothing, but more upside to come here. So, -- and it's a terrific mix of people and leadership and the technology that we're deploying for -- and execution and an engagement in this digital space, but also from the whole decision science behind it that helps us make the right decisions on pricing and purchasing. And so I just couldn't be more thrilled with the performance of that business and its influence on our portfolio. And at some point, I think, we'll start to get credit for it, because at this point I don't think we're getting enough credit for it.

Yeah. I would agree with that. In terms of feedback, it's certainly a compliment. But any -- Steve, any thoughts on how that might affect the guide, just given how big the number was in fourth quarter, whether you'd seen that strength continues or whether you set a lower bar within your guide in terms of what brokerage does in 2021?

Sure. I think if anything, there is potentially an opportunity for upside in what's nested within our guide. We did not assume the unique dynamics of the fourth quarter of 2020 repeated themselves in the fourth quarter of 2021, for example. If that were to come to fruition, there's certainly upside just from the Logistics segment itself in our guidance. We'll have to see how the year plays out. But Mark's comments, the complimentary nature of our traditional brokerage offering as well as this power off -- Power Only offering and the tools and technology we have to go with it and a great team that supports it and drives those initiatives, I think it's a great asset within the portfolio.

And Tom, my comment was not used specifically, it was the market in general. So, that didn't mean for you to take it that way.

Right. It just did. The results were impressive. I just thought it was worth pointing out as well. Anyway, thanks for the time.

Thank you, Tom.

Our next question is from Scott Group with Wolfe Research. Please proceed with your question.

Hey, thanks. Morning guys.

Good morning, Scott.

So, Steve, I know you -- Intermodal is going to have the best earnings growth among the segments this year, but can you actually share what your -- the Intermodal and truckload margin assumptions are within the guidance?

We haven't gotten to that level of granularity, Scott. But I would refer back to our longer term margin guidance that we give for segments, which is the 11 to 13 for the Truckload segment, 10 to 12 for Intermodal in four to six for Logistics. And I think you can pretty safely assume that that we're -- our guidance in captures at least somewhere in those ranges for all the segments.

Okay. And then on the cost side, Steve, you mentioned earlier insurance, incentive comps and COVID bonuses. Can you just walk through what you're expecting for each of those pieces in 2021 and maybe if it's more helpful this way that other operating segment that usually operates at a loss, what we should assume for that this year. Thank you.

Yeah. I think that we've said, in general, $3 million to $4 million of loss a quarter is a reasonable expectation recognizing that we do have some volatility within that other non-reported part of our segment reporting. I do not expect at this point the incentive compensation to be such year-over-year topic, as we go into 2021. If you rewind the clock, we had very little payout virtually none in 2019, and then, some forms of payout in 2020. So, it created for the last several years, a lot of volatility moving through that other category on our segment reporting. I would like to think that that's a more comparable number year-over-year as we go through this year. Regarding insurance, we've assumed some modest external third-party premium inflation in 2021 versus 2020, but expect continued good underlying safety performance as it have from the frequency and severity part of things. So, I'm not anticipating large year-over-year variances in that category either.

Okay. Great. Thank you, guys.

Thanks Scott.

Our next question is from Jordan Alliger with Goldman Sachs. Please proceed with your question.

Hi, morning. I just wanted to follow-up on truck brokerage. Can you maybe give some sense? I know you're not including the dynamic in the fourth quarter of 2021, but how big of a proportion of the growth, whether it be revenue or profits, or it ties into this Truckload overflow freight. I'm just sort of curious on that too, because the Truckload is still pretty tight out there. I'm assuming that dynamic -- again, I don't know how big it was of the growth, but I'm assuming this dynamic potentially could lead to continued sort of supercharged growth, at least for the next couple of quarters in 2021.

Yeah. Without getting into specifics, which that -- we're probably not going to go to a place where we've talked about where we separate the Power Only results from within our Logistics, segment reporting. But it was obviously a profitable component and additive, as the dynamics of the environment supported some premium opportunities with pricing and good solid execution by our team within there. And I think that that's certainly continued so far this year, and we would expect maybe not quite as hot as the fourth quarter. But I think that we'd expect ongoing contributions from that service.

Yeah. I think it's important to think about strategically. We don't see this simply as an overflow model. We see it as an aggregation of capacity and demand that can play effectively in all markets. Obviously, we had to adjust and adapt and do some things to seize what was in front of us there in the second half of 2020. But it simply won't be overflow. We'll make commitments. We have the engineering and the science behind what we think makes sense to do there. So, it'll play in all markets.

Okay. And just a follow-up, maybe give -- I know the teams is probably an issue with regards to revenue per truck per week in the network business. Can you maybe give some color? I mean, I think you mentioned, hopefully you'll see some stabilization. So, should we look for revenue per truck per week to start gradually improving a little bit more than what we saw even in the fourth quarter?

Yes. That would be absolutely our expectations. So, through -- what we talked about, not only on the rate work that we're working on, but also the productivity elements and the recovery of some of that team capacity, but productivity really across our fleet.

Great. Thanks so much.

Thank you.

Our next question is from Allison Landry with Credit Suisse. Please proceed with your question.

Good morning. Thanks for -- Stephen my question. Just following up on this topic of Power Only, it sounds like it's growing pretty fast, but maybe you have sufficient trailers right now. But I guess, I mean, is there a point at which you grow the business such that you would need to invest in additional trailers, or realize it may not be something imminent, but maybe if you could just sort of speak to how you think about the trajectory of that business on a mid to long-term basis.

Yeah. Allison, that's very much -- and we'll have some growth in our trailing equipment profile this year, specifically as a result of that. And the good news is those are long lasting assets that are much more economical than a tractor asset. And so, it's an investment that -- and again, it's highly leverageable across our owner-operators, our company drivers and then select third-party solutions. So, it's a very -- I use the word ubiquitous. I'm not sure I know what it means, but I use the word, because it can apply across really all of our platforms. And so, I think, it's an excellent investment and probably one that you'd want to be a little heavier versus a little light to make sure you take advantage of what you can do there. But -- so I think over time you will see some more trailer centricity to our equipment and revenue equipment profile.

Okay. And I mean, it seems just based on what you're saying that the returns on the incremental invested capital should be relatively high. Is that a fair way to think about it?

I think so. Yeah. I think that's fair way to think about it.

Okay. Just you guys did a special dividend. How are you thinking about capital allocation returns to shareholders in 2021, the buyback program potentially on the table or something that you guys are considering, or on board the preference just to be to keep returning cash via dividends. Thank you.

Sure. Allison, I'll take that. And given the size of the special dividend that we paid in November and my earlier comments that given our organic investments that we expect to make in the business to deliver shareholder value in 2021, not expecting a big build in that cash position for this year. And I think our regular dividend will serve as our shareholder distributions for the calendar year of 2021. And we'll evaluate things as we move forward from there.

Thank you, guys.

Thank you.

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