Schneider National Inc
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Schneider National Inc
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Greetings, and welcome to Schneider National Third Quarter 2020 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Steve Bindas. Please proceed.
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. Hello, everyone, and thank you for joining the Schneider call today. I will begin with some comments on our operating segment results for the quarter because I think it's important to offer context, at least on our view, of where we are in the business and freight cycle. And then before I -- we get to your questions, I will ask Steve Bruffett to provide some insight on our overall enterprise results, our special dividend announcement, our ongoing strong liquidity position as well as our full year 2020 earnings guidance.
On our second quarter earnings call, we outlined near-term expectations across our 3 operating segments. First, we expected that the driver supply market would continue to be a challenge, further heightened by the tight supply condition into an increasingly robust freight demand picture. We expected to see meaningful improvement in our Intermodal margin performance towards our long-term target range of 10% to 12%. And we expected both enhanced Intermodal volumes and network balance to contribute to that improvement.
And then finally, in our brokerage business, we expect that to continue to offer a significant growth driver for our portfolio as we continued to invest in tools and capabilities to effectively reach shippers and carriers across the spectrum from large to micro. So how did that play out? And more importantly, what does that foretell for the fourth quarter and perhaps as we turn the calendar into 2021? I think I'd start by perhaps using a wrestling term. The quarter was marked by a 2-point reversal from Q2 as the market demand in our whole truckload network business far exceeded our capacity to say, yes, the levels our customers are asking us to.
Our daily order rejections climbed to record levels throughout the quarter. And in fact, they've climbed a bit further now as we've entered into the month of October. Our observation as many product suppliers are running behind in production when equipment is drop loaded, too often COVID-related challenges with labor availability has led to delays in timing of unloading our equipment and consuming far too many trailers and containers and disrupting our networks. Additionally, low inventory levels and stock-outs are a big concern to retailers of all sizes and specialties. And it's our belief now that, that situation will take some time to correct well into 2021.
Additionally, driver availability is difficult in the present environment as I've seen in my 30-plus years in this industry. I think it's well documented that the new driver funnel to the industry is significantly constrained, and that's been as a result of COVID-19 and the number of new CDL graduates that are available to come into the industry. While our retention has improved in total, we have experienced some unique pockets of challenge, and I just want to share a couple of those. One of those areas is the attrition rate for our team drivers who are an increasingly important component to deliver transit sensitive cargo, particularly in this time of supply chains being strained with low inventories.
COVID has reduced our nonfamily team configurations due to the discomfort of operating in tight quarters with one another. We have responded with economic incentives, which recognize that unique nature of teaming, and particularly the value shippers are willing to pay for that team transit and performance, but it's been a challenge here in the short term. Secondly, and perhaps similar to what we saw in some respects, in 2018, we have seen a portion of the owner-operator community acquired their own operating authority to participate directly in the spot market. And those 2 factors in combination with the primary reasons, we contracted about 250 drivers sequentially from the second quarter in our truckload network configuration.
Intermodal, they crossed over into the positive year-over-year order volumes beginning in August, and that trend has accelerated further in October as our new business awards are being realized. While order volumes and pricing levels improved throughout the quarter, network congestion, available company dray resource levels, combined with rising expense of third-party dray, and as I mentioned earlier, those higher container dwell times at customer inbound locations impacted our network fluidity and cost performance more negatively than we initially anticipated. But overall, our operating ratio in the Intermodal segment improved 430 basis points sequentially from the second quarter, and we fully expect further progress in the fourth quarter.
In Logistics, our revenues grew 20% year-over-year as our transactional brokerage and our import-centered logistics offerings capitalized on the volatility in the market, and we effectively cross-sold customers on the value of our asset-light segment. But net revenue per order and brokerage experienced considerable compression early in the quarter but steadily improved throughout the quarter into a highly inflationary third-party carrier market. However, our model's ability to adapt in our heavy spot concentration limited year-over-year erosion of operating ratio to just 100 basis points.
Now looking forward, and before I turn it over to Steve Bruffett, let me close with a thank you and a few thoughts looking forward. First, I want to express my appreciation to all our drivers and associates for their hard work and dedication to ensuring that goods continue to flow across the country as we remain amid the pandemic. And my sense, unfortunately, is we have a few more quarters to go before we return to a more normal environment. And we remain focused on the safety and health of our associates, especially in light of the rising COVID case count here in Wisconsin and the Upper Midwest.
But looking forward, our primary commercial focus is to capture responsible levels of premium spot-rated business through peak season while addressing our contractual book increases across our portfolio of services, particularly in our truckload asset-based network, dedicated and intermodal configurations. And as it relates to spot, we finished the quarter in the low double-digit percentage range in our truckload network business. And while we are predominantly contractual in our asset operations, and we must balance our customer commitments with the need for improved contract rates to support the cost of securing capacity, we did see in the quarter some meaningful traction in that regard. And we think contractual rate increase realization is ahead of us yet. We believe that those rate increases are achievable not only in the near term, but throughout the 2021 annual bid cycle.
In Intermodal, we continue to offer market and execution differentiation on the eastern portion of our network. We had another quarter of double-digit percentage year-over-year volume growth in the third quarter, and we expect that we're going to be able to continue to convert over-the-road opportunities due to the solid reliability and economic value we provide to shippers going forward.
We also expect our brokerage business to build on its solid top and bottom line performance with a constant pipeline of technology investment and deployment. In fact, this week, we will launch our next-generation freight power app, and this is uniquely positioned to give carriers access to our Schneider brokerage volume as well as select Schneider trailer pool demand, which sets us apart from traditional brokers.
And finally, our road map for a collaborative effort with Mastery logistics has advanced with a full slate of technology implementations targeted in 2021 across our power-only brokerage and dedicated execution platforms. This collaboration leverages Mastery's unique tech platform domain expertise with our size, scale, intellectual capital across multiple modes, and we're confident we're going to drive value back into not only our business, but our customers' business.
With that, Steve, I'll turn it over to you.
Great. Thanks, Mark, and good morning to everyone on the call. I'll provide some brief perspectives on our enterprise results for the quarter and then give an update on our outlook for the remainder of the year. Our third quarter enterprise revenues and adjusted earnings were similar to the third quarter of 2019, which is somewhat ironic, given how much has happened between then and now. Revenues, excluding fuel surcharges, were within $7 million of last year, and adjusted earnings were within $2.5 million. Looking at our income statement. And given that revenues were slightly down from the prior year, you generally expect that expenses would be down as well. This was the case for most expense items, but there were 2 line items of expenses that showed an increase.
The first was salaries, wages and benefits, which was up $2 million, and this is due to a $16 million year-over-year difference in incentive compensation accruals. In the third quarter of 2019, we reversed accruals that had been made earlier in the year. While in the third quarter of this year, we continued to make accruals. The second expense item was operating supplies and expenses, which was up $6 million. The $13 million adverse tax ruling referenced in the earnings release is recorded in this line. This amount is also included in our Other segment. So the third quarter of 2020 would show a $1.3 million loss in this segment without the tax ruling. Regarding the tax ruling, it relates to a dispute over the excise taxes on glider kits and pertains to tax years 2011 through 2013. We continue to believe we have a sound position on this matter and are preparing an appeal.
One last comment on the income statement is that this is the last quarter in which we have First to Final Mile in our year-over-year comparisons as those operations concluded in the third quarter of 2019.
Moving to the balance sheet and cash flows. I'll start by referencing a comment I made on the second quarter earnings call. On that call, I stated that we had an objective to deploy at least a meaningful portion of our excess cash position over the next 4 to 6 quarters. Our announcement today of a $2 per share special dividend is obviously a component of that cash-deployment objective. Given our strong free cash flow generation over the past couple of years, we are providing a sizable dividend payment to our shareholders.
And at the same time, we preserved balance sheet capacity to pursue our strategic growth initiatives. Through this approach, we're able to generate both near-term and longer-term shareholder value. Considering the upcoming payment of the special dividend, coupled with the fact that we anticipate over $130 million of net CapEx in the fourth quarter, we expect to be net users of cash for the remainder of the year. We now anticipate that our year-end cash and marketable securities will be approximately $425 million.
Regarding our forward-looking comments, Mark provided commentary on the market conditions that we're experiencing. The truckload market is highly constrained, and we're balancing our contractual obligations with the need for higher rates in an inflationary driver market. And we anticipate that this condition will continue well into next year. We also expect sequential margin improvement for the fourth quarter in all 3 of our primary operating segments. Based on these expectations, our guidance for adjusted diluted EPS is $1.18 to $1.22. And given our year-to-date adjusted results of $0.81, that leaves $0.37 to $0.41 for the last quarter of the year, which would be among our best fourth quarters. Lastly, our guidance for full year net CapEx is adjusted slightly to $250 million.
So with that, we'll open up the call for your questions.
[Operator Instructions]. Our first question comes from Ravi Shanker with Morgan Stanley.
So on the driver situation, clearly, kind of many of your peers -- all your peers kind of pointed to driver recruiting challenges and seated truck issues this quarter. But I was a little surprised to hear you talk of some of your drivers going off to become owner operators similar to what you had in 2018. I was of the view that kind of given some of the restrictions with insurance headwinds and bank financing, et cetera, it's a little harder to convert drivers to owner operators this cycle. How do you think that evolves as we head into 2021?
Ravi, maybe just for a point of clarity, what I'm suggesting in some of our data was our current owner operators who are least on to us, we've seen some conversion from them -- from us to their own operating authority to get after the spot market directly. And we saw a little bit of that in 2018. So it's not company drivers necessarily converting to owner operators in this environment as somebody who's already has experience and perhaps a bit of a track record in that regard. So I don't want to overstate it, but it had some influence on us relative to the quarter.
Okay. That makes a lot more sense, and that's my bad. I misunderstood that. Also Mark, maybe on the special dividend, can you just give us a little more color on the timing of that, why now? And kind of what does this mean in terms of medium to long term, both earnings confidence as well as cash deployment strategy?
Sure, Ravi. This is Steve. I'll take that one. Obviously, a special dividend is not something to do casually. We've had conversations on these calls over the last several quarters about what we might do or not do with our cash position and how to deploy it. We've had lots of internal analysis and consideration and continue to do so. And in the meantime, our cash balance continued to build. So we felt that it was appropriate timing for us, given that we crested $800 million of cash in the third quarter to do something. And then it became a question of sizing. And so we felt like we wanted to do something that was big enough to make a difference and provide that return and value to our shareholders in the near term, but again, preserve a ton of optionality with a strong balance sheet and liquidity position to still keep after the same strategic initiatives that we've had for a while and looking to execute upon. So that 4 to 6 quarters being, which is now more like 3 to 5, remains intact as far as we are looking to deploy in organic and inorganic growth opportunities across the organization.
Our next question comes from Jack Atkins with Stephens.
So I guess just to kind of start -- as we kind of look forward into 2021, and Mark, I don't know if you want to take this or if you want to leave this to Steve. But there are obviously some puts and takes. You've got rate that's going to be a good guy when I think about your trucking operations, driver wages, which will be a little bit of an offset to that. Obviously, there's some strange expense comps on a year-over-year basis just given COVID. But we're hearing others talking about some pretty meaningful potential OR improvement in 2021 versus 2020. Is it right for us to think about Schneider within your trucking operations in the same light? Or just any sort of context around 2021 margins, I think, would be helpful.
Thanks for the question, Jack. And certainly, we think we're in a constructive setup for next year for a host of reasons, both in the kind of the economic backdrop, but also from internal improvement opportunities that we have. And so we absolutely believe we've got margin improvement opportunities across our truck and intermodal platforms and would anticipate thus continuing to invest, particularly in the dedicated arena. We feel really solid about our pipeline there, but we're also very much in favor of keeping a large presence in the one-way and network business as well, and that's one of our strategic intents, perhaps not to grow it over the long term as much as some of our specialty services, but still have an excellent presence provide value. And we think that leverage within the portfolio between specialty and network operations makes a great deal of sense for our customers. It makes a great deal of sense for us. So yes, we're bullish. We're not yet giving guidance for 2021, and we'll do that when we get together next, but we should expect and we certainly expect of ourselves to see improvement.
Okay. No, that makes sense. And I'm glad to hear you say that. And I guess for my follow-up question, Mark, just kind of going back to your prepared comments about your partnership with Mastery, and I know I asked about it last quarter as well. But now that you're sort of 3 to 4 months into that and sort of had a chance to dig into it, how should we be thinking about the impact that, that partnership can have on your Logistics business in 2021? Is that going to be more of a revenue opportunity? Is it more about improving profitability and OR? Or is it just more about sort of thinking about strategically longer-term positioning, you're starting to be a much bigger player from a platform, just driven being a platform company within Logistics? How should we think about all that?
Yes, Jack, terrific question. And really, you covered lots of the bases there. 2021 will largely be an implementation year for us, and we feel really good about where we are with Mastery, the collaboration between the companies. And obviously, they -- and [Jeff] have a terrific track record, particularly, and that's where you see our priorities as we are looking at where we provide leverage, and that's in the brokerage space, and it's in the space where we're starting to blend relative to our strategy between asset and non-asset around the Schneider trailer. And so we could have done that ourselves, but we thought this was a great opportunity to find leverage with the Mastery platform. I think over time, it certainly lowers our cost structure as we get to that leverage, but it also advances from a speed standpoint our capability. And so you'll see in 2021 and my comments is largely that's around our non-asset portfolio, but we also see some opportunities for simplification and automation, in particular, in some of our asset-based offerings, particularly in dedicated. And so we're very thoughtful relative to the staging of the priorities, and we leverage where those strengths are. But we have gotten nothing but feel better about where we are now than when we started this journey in a meaningful way back mid part of this year.
Our next question comes from Michael DiMattia with Wells Fargo.
I was wondering if you could delve a little bit more into the driver availability issue. Maybe you could please explain your approach to the issue in terms of how you expect the issue to impact OpEx just going forward. And if you can also elaborate a little bit more in terms of the economic incentives that you indicated that you are providing to drivers to retain them, given that you stated that you lost 250 drivers sequentially quarter-over-quarter.
Yes. And we would anticipate, and what we are experiencing -- I think what the industry is experiencing is, I think, is well documented at the top of the funnel, particularly new entrants with COVID and availability of students and the social distancing requirements of schools have all limited a couple hundred thousand new entrants into the industry this year. And our typical strategy relative to company driver capacity is generally -- toggles between 60% experienced, 40% inexperienced. And so those are impacts for us and as they are for others when you cut some of the top-of-the-funnel optionality. So, that's one.
Secondly, we did see incentives that I referred to, centered around the team configuration, which is fairly unique to operate inside a truck for often 20-hours a day in tight quarters, and what we saw was some attrition there, and particularly in the nonfamily configuration. And we have a great team offering. We have great team customers and certainly willing to step up and help us fund what's necessary, at least from an incentive to recognize that uniqueness. You still have to have folks comfortable doing it, but we wanted to make sure that we reflected the value they provide to our customers and provide to the Company.
And so we enhanced our entire package as it relates to -- from equipment to compensation relative to our team configuration. And so what we're also trying to do is not get too far ahead of ourselves on the costs front without getting recovery from the market. And so there's a great deal of work that's took place in the third quarter, will take place in the fourth quarter, and certainly, as we turn the calendar in 2021, to recognize the inflationary cost that we anticipate as an industry across the driver to recover as much on the front end of that as possible from our -- from the market.
And just maybe one quick follow-up to that in terms of as you look forward over the next 18 months. If the freight market is as tight as it is and you're turning down the amount of loads that you are, is there -- would there need to be a rate increase per mile to help offset some of these issues? What are some of the tools that you have at your ability to combat the driver wage issue while still keeping profits moving higher?
Yes. Certainly, part of that is recovery from the market on a rate perspective. Part of that is being -- using your market reach to be very cognizant of the experience that you're creating for your driver with the freight that you're making commitments to that's respectful of them, their time, their experience. We put a great deal of emphasis and effort against that. That's -- whether that's in our Intermodal dray business, our over-the-road trucking business, our dedicated configuration, we're very mindful of what the entire environment that the driver experiences based upon those decisions that we make. And so we combat that with the environment. We combat that with making sure that we're getting a commensurate return from our customer to make sure that we can share that with the driver. And I would expect all of those initiatives just to be of material importance going forward.
Our next question comes from David Ross with Stifel.
I wanted to dig into the intermodal side of things a bit. Steve, maybe you can give us volume growth by month through the quarter and into October. You said that it turned positive. I just wanted to see how positive they're trending recently.
I guess, David, that's a layer of detail that we haven't gotten into on these calls and our investor discussions. And so we'd prefer to stay away from monthly trends, but it did strengthen as we went through the quarter and continues to do so as we bring on new business wins here in October, and given the seasonality, would expect that to continue into November and early part of December as well before the seasonal slowdown. So I think well positioned and getting some network fluidity back that still is not -- there still are certainly hotspots, both customer locations and certain ramps that aren't operating as efficiently as they can, but we have seen improvement, which helps with our asset utilization and container terms.
Given the ramp issues, some ramp closures, customer detention, what's the pricing ability on the intermodal side right now? I think it's lower year-over-year. But as the truckload market has tightened, how quickly are you able to get the prices up on Intermodal to account for some of these cost increases?
Yes, David, as we've been through the renewal period here in the third quarter, and what anticipate and we're working on presently is it's following very close in line with what we're experiencing on the truck side. And some of that is there was more erosion, I think, in intermodal over the last couple of years based upon some competitive dynamics going on in the marketplace. So we believe we have consistent, and across the board, a rate capture ability in our Intermodal business, not only between now and the end of this year, but as we turn the calendar into 2021.
And then can you just remind us of what percentage drayage is third-party versus Schneider in-house and where you want that to be?
Yes. We typically target and typically perform in the 90% range, give or take, just a bit on either side of that from our own orange assets. And sometimes in the seasonality periods like we're in now, that dips a little lower. In the first part of the year, it raises a bit above that 90% range, but that's generally what we're targeting.
Our next question comes from Jordan Alliger with Goldman Sachs.
I was wondering if you could give a little more color on your thoughts on the -- I know on the capacity situation, I know the outlook obviously is very strong from a pricing perspective. But there's been some concerns of late, of course, about Class 8 orders. And just sort of wondering how you think about that. What kind of orders are they? How do you balance that with the driver issues? And then if you could touch briefly, you spoke a little bit to what your own plans are for your fleet, in terms of fleet growth, whether it be dedicated or one-way truckload over the coming quarters.
So first question, I think, centered around kind of Class 8 orders. And what we've experienced, and you see it in our numbers here in the fourth quarter relative to net CapEx is just finally, now, we're starting to get fluidity back on the OEM front relative to deliveries, and we've been delayed throughout the year. So I think we're always trying to figure out as well what's just catch up and what's -- we're in a catch-up mode for replacement as we come into the fourth quarter because of the delays that we've experienced in the first part of the year. So we're not seeing any great evidence of capacity coming back like the 2018 condition.
If you recall, we were, as an industry, not only had a robust demand picture, but we have lots of capacity coming in at the same time, which then made that adjustment in 2019 a little bit more painful. We just don't see that anywhere in any meaningful fashion occurring in this environment like we did in 2018. Used truck market getting a little bit better, but not overly robust. And certainly, the driver capacity at the top of the funnel issue, I think, is an industry-wide dampener for several more quarters.
And then as it relates to fleet focus for us, our intent is to get back a little bit of the attrition that we experienced through COVID, and what I just described earlier today, on the network side of the business, but not looking to grow beyond a little bit of catch-up from that attrition. And our focus for organic or potentially acquisitive growth centers around our specialty businesses, whether that would be in the liquid bulk space dedicated. And certainly, we would anticipate further growth in Logistics and Intermodal. So our network business that we want to keep fairly consistent.
Our next question comes from Allison Landry with Crédit Suisse.
In terms of the intermodal market, I think you mentioned in your prepared comments earlier that you are expecting improvement in Q4. So I just wanted to just clarify, was that a sequential comment? Or do you think you can possibly see year-over-year improvement in Q4?
Yes. My intention on that comment, Allison, was -- is sequential improvement as we march our way back to our long-term target range of 10% to 12%. We expected to make meaningful progress in the third quarter. We -- in our view, we did, and we think we'll make some other and further progress in Q4 towards those targets.
Okay. And is there any way to sort of quantify the network inefficiencies maybe just in terms of the magnitude of the margin impact? And I mean, is it -- does it sound like that's going to be much in Q4? Maybe that's more early '21. Is that the right way to think about it?
Yes. We most look at what could we have delivered into our business if we didn't have some of those constraints relative to third-party dray and the extra dwell time for our assets. Even though our turn time year-over-year on a per month basis is fairly consistent. We know we gave up opportunity of several thousand orders more we could have delivered within the quarter that we had the capability that were loaded that we just couldn't get through the system efficiently. And so that is improving.
We expect that to improve, particularly a lot of focus with our customers on the dwell time. If you want additional coverage, we can't keep going into DCs that aren't unloading that end up backing us up or putting cost into our business to go find another empty outside of that. So I've been pleased with the response. Customers are dealing with many of the same issues that we are relative to labor availability to address the turn time inside their 4 walls, but it is improving, and we're seeing -- we would expect to see further improvement here in the fourth quarter.
Okay. All right. That's helpful. And then just -- I know that you mentioned replenishing the fleet and catching up a little bit there, but maybe just sort of more broadly, if you could give us a sense for how you're initially thinking about CapEx in 2021 and if there's any sort of major growth projects or new technology investments that you guys were evaluating.
Sure, Allison. This is Steve. I'll tackle that one. We haven't guided obviously for 2021 yet but would indicate that we expect CapEx to be quite a bit higher than the $250 million this year, which is below normal. And we're refining those numbers right now as we're in our budgeting season here. In addition to catch-up replacement capital that Mark mentioned, we probably would anticipate some growth capital for our dedicated configuration, in particular. And so there's those elements, but there's also an age of fleet dynamics that we're contemplating. And Mark mentioned the driver experience, which is a priority to us. And so looking at that age of fleet in the context of both driver experience as well as potential new technologies down the road and positioning ourselves to be able to adapt as quickly as is reasonable could involve some CapEx towards that part of our objectives as well.
Our next question comes from Bascome Majors with Susquehanna.
I wanted to go back to Intermodal. Clearly, a very pricing sensitive business as far as profitability goes. And if you look at this year, you're probably going to end up, earnings-wise, 30% to 40% below the 2008 peak. I'm curious, you seem optimistic on pricing, and that feels appropriate, given the conditions we're seeing today. Is there a path back toward profitability in the Intermodal business for 2021? And what are the 1 or 2 variables that could get you there and keep you short?
Yes. This is Steve again. 2018 was a really unique year where everything that could possibly go right in the intermodal space went right. In our particular case, for example, we were onboarding several thousand new containers coming into the West Coast. We could get them off the ship and immediately put them into use in the -- coming out of the California market and getting into the network efficiently and so on, and there are fuel dynamics and other pricing mechanisms that were working in our favor, and it's fair where everything works that well. We even indicated during 2018 and early 2019, I recall, commenting on one of these calls that the 13% or 14% margins we were achieving at that point in time were abnormal and not our expected norm. And that's when we started talking about this 10% to 12% margin range for Intermodal as being a reasonable longer-term place that we land across business cycles. And so I think that remains consistent with our view sitting here today.
Our next question comes from Chris Wetherbee with Citi.
I had a specific question on the for-hire revenue per truck per week. I just wanted to see -- I know you guys have talked a little bit about sort of the circumstances in the market in the third quarter. But can you break that apart a little bit? And can we talk a little bit about realized rate relative to productivity? Just kind of curious about that number that I think is down 5% and maybe sort of the cadence of how that could improve as we move forward into the fourth quarter.
Yes, Chris. I'm not pleased with the performances, particularly in that metric that you just pointed to. Some of that is the unseated truck count. Ironically, we're coming off this quarter a 5-year high on productivity on our solo fleet on our seated truck count in that exact quadrant, the truckload network. But the combination of being skinny on the teams, which is a high utility at a high rate per mile and the combination of the unseated units there really dampened that metric. So -- and we had a nice upturn in price per mile or -- which attributes, obviously, to revenue per truck really started in a meaningful way in September. And so we think we're, on the price side, are starting to see the momentum that we're after there. Probably going to have a couple of quarters to work through this team dynamic that we're looking to address and then, obviously, then fill the unseated trucks that we have will drive that metric. That combination of those 3 things, we think, will be a positive contribution to that metric for the next several quarters.
Okay. But still a little bit of a lag as we move forward as you're trying to work through the team situation?
Yes.
Okay. Got it. That's helpful. And I know we've talked a lot about the environment, but I don't know if you've offered a specific sort of outlook for rates as we think about 2021 on the contracted side, just going to get a sense of maybe what you think the magnitude could be. It seems like the setup relative to a fairly tight capacity market is positive, but I don't know if you can offer a view on what you think the rate improvement might look like.
Well, all the signals that we have and the work that we're doing now is going to -- it's a constructive environment. And so that's customer by customer, how they fit, what are their contribution to our network to the business. But Chris, certainly, mid-single digits to low double digits, we think, are within the end of the spectrum, and we're going to continue to refine what we expect that to be here as we get through this quarter, and we'll be in a position to give you more insight on that as we get together next time.
Our next question comes from Scott Group with Wolfe Research.
So if I look at all the large TLs this quarter, I think they were all in mid- to high teens margins, and you guys were at 10%. I guess, why do you think there's such a gap? Do you think there's anything structural there? What, if anything, are you guys doing to start closing that gap?
Yes. Scott, we certainly think we have a proven opportunity, particularly in the network side of the business. And it was really, as we look at this quarter, balancing our commitments relative to our contractual versus the amount of business that we put out into the spot market, we are generally much more contractual orientated. But as I -- I think I mentioned in my opening comments, we're starting -- and we started to move that from the mid-single digits to the low double digits to take advantage of a bit more of the pricing -- the quicker pricing opportunities that exist in the marketplace. And we're going to continue to balance that, the long-term positioning of the business and the customer community with the opportunity to get yields relative to the spot market. So we can do better, and we will do better. And it's a combination of contractual, network play as well as how we approach the spot market.
Okay. And then just going back to that last question about the rev per truck. Was rate per mile positive or negative in the quarter? I wasn't sure if I understood the answer.
Yes. So in our truckload network, it was positive for the quarter but not -- it improved throughout the quarter. So we were slightly negative in July, and we improved throughout the quarter to get -- as the September closed, we were positive for the full quarter.
Okay. So utilization is down a lot right now. Okay. Okay. And maybe just last thing. Do you think you're back in the 10% to 12% Intermodal margin next year?
Yes. That would be our expectation. We haven't obviously provided guidance yet, but we think we're on the trajectory in the path of -- as we've laid out in our last discussion.
Your next question comes from Tom Wadewitz with UBS.
I wanted to ask you a little bit about growth next year and how we should think about it. I think when we look at the Intermodal in third quarter, it seems like even if you had more containers, you might not have had more loads because of that you couldn't get the containers in the gate or couldn't get them turned at the shipper warehouse. So I guess, how do you look at the container fleet in 2021? Are you going to grow the fleet? Is that a meaningful lever to support low growth in Intermodal? And then on the truck side, I mean, it sounds like you're dealing with a pretty meaningful unseated tractor issue. So would you expect the tractor fleet overall to grow in 2021? Or will you do well just to keep it kind of flat, given how tight the driver market is?
Yes. Thanks. Let me start with where you ended there. We would expect that we will be growing our dedicated truck count. We would expect that we would deal with and get our network fleet back and some of the unseated issues that we're referencing here with both the solo fleet and the team fleet, but I would not anticipate any meaningful growth in the network side of the business that will center around our specialty dedicated location. And I would anticipate, and we haven't fully communicated, but we do believe we have growth opportunities across the board in our Intermodal business, and we will make the appropriate investments to achieve those.
Okay. So you would plan to grow the containers to support the growth in '21?
We will be comfortable growing both the container and the dray fleet to support growth in Intermodal, yes.
Okay. Great. And then you did the special dividend. You still have a good amount of cash available, maybe some ability to add leverage as well. How much are you focused on growing inorganically? Is that still a meaningful component? Are you still spending time on that? Or is that something that's just not a high priority for you?
Yes. I'll take that one. Steve here. And nothing's changed about our prioritization, I would say, as we've gone through 2020. It probably did take a bit of a backseat as we were dealing with all the rapidly changing environment and so on. But now that we are where we are, nothing has really changed about our longer-term strategic objectives. And so we remain interested in looking for opportunities. At the same time, we don't want to do something that doesn't make complete sense for us just because we have the capacity to do so. So it's finding the right opportunity is most important to us more so than speed.
Do you think it's likely you'll do a deal in '21?
It's always hard to handicap whether a transaction is going to happen or not. It's an objective. We would like to, but we're not going to force it just to do it.
Our next question comes from [Sanjay Ramsalini] with Bank of America.
Just perhaps looking at the focus of dedicated, I mean, obviously, competitors have begun to shift their fleet towards growth in dedicated. You guys have obviously noted the strategic objective of keeping your mix of one-way relatively high. So maybe just some color on what the ideal split there is. And then perhaps just going into your ideal sort of contract versus spot would be helpful.
So first part of that was ideal mix between dedicated configuration in one-way. Ideally, and this will be over a several year horizon, but to getting to a 50-50 mix there would be, I think, a reasonable objective for us as an enterprise. I think there's synergies and value by having a very strong one-way network as well, having a meaningful sized dedicated configuration. And so that 50-50 would be ideal. And I think it also recognizes the value that the driver community gets from those type of positions and those type of experiences. And then I think the second question might have been on the network on spot versus contract? Did I catch that one correctly?
Yes. Yes, that's right. Yes.
Yes. Traditionally, we've been more of a contract shop playing in the mid-single digits in spot, mostly just to deal with out-of-balance issues in the network and repositioning. Our technology and tools and value that we can derive from that would suggest that we should be a bit higher than that. So targeting perhaps the low double-digit range is something that I think makes sense. And obviously, it depends on the market and what your opportunities are, but we certainly have the capability to toggle that. And right now, we're targeting low double digits.
Perfect. That's great. And just following up on that, I think -- and obviously, in the release, you guys noted that the September network saw price yielding kind of a mid-single-digit improvement year-over-year. So maybe more in the short term in 4Q, kind of what are you kind of expecting on price? Obviously, noted your comments before on where you see the contracts going in '21, but just more so in 4Q and what you've seen so far in October?
The first part of that question, are we talking about network pricing in the near term and what we're seeing?
Yes. Yes.
That's your other question. I just didn't hear it clearly. It's a continuation. Obviously, we're -- like we've indicated several times on the call, we're predominantly a contractual business, 90% or so. And substantially, all of those rate renewals have occurred already. So the opportunity in the market is around the edges with premium and spot opportunities and some proactive conversations with a subset of our customer base. And so the typical seasonality type of play as we are in the fourth quarter now and especially over the next 6 weeks or so. And so we will be doing those typical types of things. At the same time, a lot of work is underway to begin to be well prepared as we enter 2021 and are actually in a rate renewal cycle.
Our next question comes from Brian Ossenbeck with JPMorgan.
Maybe following up on that last one, just in general, as you enter the RFP season again here. I know you're leaning a little bit more towards the spot market as you just indicated a few times here. But anything that could materially reprice in the fourth quarter? Are you seeing more freight being pulled forward than on many bids and more so than usual, maybe now against to 2018? And then, Mark, do you think that we're going to see any meaningful change on just how contracts are thought of and balance between shippers and carriers just on the heels of all the volatility that we've seen, which doesn't look like it's going to subside for a little while here?
Yes. Brian, a couple of thoughts. Fourth quarter generally is not a large contractual renewal period. Although it is and presently is where we're focused on some key out-of-cycle increases relative to a subset of our customer community. So those things are being prosecuted and being prosecuted favorably. So we'll see some price improvement more in the out-of-cycle portion of that than the kind of the in-cycle. I see really just 2 different things going -- 2 different streams going on in the customer community as it relates to your question around processes or approaches that can be more durable for both the carrier and the shipper as opposed to these 52-car pickup events that happen on an annual bid cycle. You have a number of sophisticated shippers more and more interested, particularly as the cycles appear to be more rapid, and less -- and length that puts a lot of constraints on routing guides and approaches that just doesn't seem to meet kind of the modern-day needs of both the carrier and shipper.
So you have a lot of those discussions around what's the right setup, not to be too complex that both sides can live through cycle changes and get into some very constructive discussions. And the other trend that you see, which is more and more of the transportation spend pool, is coming under purview of a global purchasing organization, which kind of does the opposite and puts things into the bid more frequently and puts less value against durability to be "at market." And so those are 2 vastly different approaches, and both are seeing trends upward as opposed to the professional transportation department kind of making the selection and the pricing decisions holistically. So I think both of those offer unique challenges for both parties, and we have to be prepared to operate effectively in both.
And relative to the last up cycle, 2018, did -- has anything really changed towards maybe more partnership? Or is it, like you said, we're just still kind of -- some have moved in that direction, but it's still bifurcated?
Yes. It's a process that moves more at a glacier pace, Brian, and anything that we've seen radical. We can see some more short-term pricing initiatives, which we've seen this year, which maybe is a step in that direction. Ironically, so many of the other inputs that go into a manufacturing process, it's very common for the shipper to have those type of inputs on some type of index pricing, something durable over time that adjusts, but it hasn't seemed just taken a foot yet in transportation. Something we're interested in, I think the industry would benefit from, and maybe this cycle we'll see a breakthrough.
Got it. One quick follow-up on freight power. If you could just give us a little bit of a preview on that digital marketplace. What it gives shippers? What type of flexibility they have in there? And also on the carrier side, how is it different than some of the other offerings that we've seen come to market over the last couple of years? That'd be helpful.
Great, Brian. Yes. Just a couple of thoughts, yes. I think you're -- behind your question is a crowded space as it relates to those type of "marketplaces" or apps or however you want to look at it. Our primary focus and what we're doing now is on the carrier side of the equation. We have some other things that will be coming down the pike on the freight power that will be more central to the shipper side. But we're really trying to create, where we can, differentiation and the type of freight that we can offer versus it just being a technology differentiator, and particularly as it relates to getting select access to our third parties around Schneider trailer pool freight. And so depending upon how a carrier thinks about allocating their resources, I think we may have some mechanisms that can allow them to be a bit stickier with us, particularly as we have access to select trailer pool freight. And they can run in a network. And maybe they have 10 trucks, they put 3 there, and they run 7 in a different configuration. Those are the things that we're starting to see emerge. And that's what we think is a bit of a differentiator from a traditional broker.
Our next question comes from Todd Fowler with KeyBanc.
This is Zach on for Todd. Just wanted to go back to the conversation on spot versus contract, and you're targeting low double digits. But just kind of what is the timing of flexing the network up to, say, that low double digits? And if spot were to turn, how do you feel in terms of just timing to maybe rightsize it back to maybe that mid-single-digit trend?
Yes, Todd, I think maybe what you're getting at there is not getting yourself too far out of whack in either direction, which is why we think that's at the upper end of what we feel is best over the long term for us, is that mid-single-digit to low double-digit range, depending upon where we are in the market. And so we're very cognizant of our commitments to our shippers and what that means to reliable freight 12 months out of the year, how we get our drivers home on a regular basis, the experience that they feel by being part of Schneider. And so that is and will remain the vast, vast majority of what we think makes the most sense in the network configuration. So that's why we don't want to get much beyond that so that we can flex it back to the more reasonable or lower level, if necessary. And so that's where we are now, and we don't expect to get much beyond that.
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