But that’s how we’re thinking about seasonality, and I would characterize it fairly typical as we would normally see it through history, which was what you suggested in your question.
Operator: Our next question comes from the line of Daniel Imbro from Stephens. Please go ahead.
Daniel Imbro : Good morning, guys. I want to start on the dedicated side. Growing truck count nicely on dedicated. We may have missed it, but what does the sales pipeline look like there. And then as we think about the embedded ramp in earnings in the back half, are there start-up costs as you’re winning these contracts that are weighing on the first half? Or how should we think about the profitability of that acid as we roll through the year.
Mark Rourke: Yes, good question. And certainly, the best time for cost for dedicates when you’re just farming everything that you have and you’re not starting up. So, there is impact when you go through go through start-up. But we’re in a pretty consistent cadence of start-up on a quarterly basis. What I outlined in my opening comments is we have site to several start-ups in the second and third quarter based upon implementation schedule. We laid out at the beginning part of the year that we expected to net up several hundred dedicated trucks knowing that now that we’re at 6,200, 6,300 trucks, even a modest churn of 2%, 3% creates a couple of hundred units of new business that you have to grow to maintain yourself. And so those initial projections are pretty much where we see and expect the year to play out.
So, the pipeline is strong. We’ve increased our efficiency, meaning we have improved our tractor-to-driver ratios in Dedicated, which has helped us lower cost for new implementation. We’ve got more efficient, so we use those tractors on some new start-ups which lowers our friction costs to get things started up. But overall, we would still very bullish, and this is across a very diversified part of the economy. We’re not really concentrated in any one area. We have good distribution across both the industrial and the consumer markets.
Daniel Imbro: That’s helpful. And then as a follow-up, maybe on intermodal margin, you had revenue down sequentially. There was some disruption from weather and yet OR improved from the fourth quarter. Is that just some rail cost adjustments that flow through in the first quarter with your partners? Or what specifically drove that margin improvement despite those conditions?
Jim Filter: Yes. This is Jim. And thanks for the question. Specifically, it’s some improvements that we’re sequentially healing our network. — and as well as utilization of our drivers. So, when we were talking about going through the bid season been very specific of growing where we have differentiation, where we can take out empty miles. And as we’re taking out empty miles, that’s improving the asset utilization and productivity, and that’s enabled us to have some sequential improvement in margin.
Operator: Our next question comes from the line of John Chappell from Evercore ISI. Please go ahead.
John Chappell : Thank you. Good morning. Mark, on the power only. So, some real positive comments there increased each month throughout the quarter. It seems like that’s been one part of the business that’s held up pretty well, relatively speaking, relative to the rest of the portfolio. Yes, the logistics margin now is still in the sub-2% level. So — can you help us just understand, does power only just provide kind of a stickier business from a volume perspective? Or is it truly higher margin? And I guess maybe in the absence of the only you’d be kind of bouncing around breakeven.
Mark Rourke: Yes, let me see what I can kind of share here. First, as we generally have talked about in our brokerage business in total, we are generally 50-50, about 50% contract, 50% spot to the customer. That can toggle depending upon market into a 60-40 either direction. Under the power-only model within there, we are even a higher percentage of contract business, so it’s repetitive. It gets what we commit to through allocation events. And because we’re bringing some asset component to that, the trailer, we do get a higher net revenue per order in power only than we do in our traditional brokerage offering. And it’s just exasperated presently just because of the difficulty in the — the highly competitive nature of the Live Life brokerage margin — or excuse me, market.
And so, power only is accretive to the margin performance of the business in total and even more so now in this what we consider the most difficult part of the market for our live-live brokerage offering.
John Chappell: Okay. That helps. And then I apologize for how big picture this is, but I think it’s pretty important. It feels like the capacity is still pretty stubborn across the truckload side and just hasn’t accelerated to the pace necessary. And then we’re also seeing some really negative commentary out of some of the biggest consumer products companies in the country or the world. So, I’m just trying to understand with those two headwinds remaining seemingly the, where do you think some of the sequential improvement has come from since January consistently and even into April? Is it just like things couldn’t go lower and there’s only one way to go from here? Are there green shoots outside of maybe the bigger picture things that we focus on that we just can’t see yet?
Mark Rourke: Yes. It’s hard to have perfect vision across all of those elements, which I think has been so stubbornly difficult going through this. current elongated freight cycle, Jonathan. But I do believe most customers are through the inventory destocking, right? So, whatever is kind of moving through the channel. There is something that’s backing it up to replenish. And so, while it’s not building necessarily, we don’t see a lot of that condition — it does seem to be “more normal relative to where inventory is, sales occur. And then whether it’s coming through the vendor inbound into D.C. or through our dedicated trucks from DC to store, it’s steady. I would consider demand fairly steady. And certainly, we saw improvements through the quarter in the first quarter and our early view here to April. So again, always hard to predict the future. But we’re seeing would seem to be a more normalized condition.
Jim Filter: Yes. And I think the other key aspect here is just the importance of remaining diversified. We’re not tied to any one single customer that’s making up a significant portion of our volume in any one of our segments, and that enables us to be successful through the cycle.
Darrell Campbell : Yes. And I guess the only thing I would add is some of those macro factors that you did outline have led to the reduction in the guidance, right? But as we look forward, we do have some conviction based on the sequential improvement. It’s not only on the pricing side, but the productivity actions and the cost actions that we’ve taken have helped to improve our earnings as we’ve gone through.
Operator: Our final question for the day comes from Brian Ossenbeck from JPMorgan. Please go ahead.
Brian Ossenbeck : Another one here. Maybe listen — that’s right. I just want to ask real quickly on a negative cash flow for Darrell. It seems like maybe this should be the low point, but you’re still sticking with most of your CapEx plan. So maybe you can just walk through that. And then Jim would be good to hear your thoughts on the dynamics in international intermodal. We’ve clearly seen some pretty strong growth, easy comps, but just wondering your thoughts on how that trickles down into domestic, is that channel getting more full and so therefore, we should see more bands loading? Or do you think that maybe these ocean carriers are really just fine, sending more and more boxes IPI and that might be a headwind for growth.
Darrell Campbell: Yes. So, I guess I’ll start. So just to clarify your question, negative free cash flow, right? So, our operating cash flow was actually positive — almost $100 million in the cycle, which I think is very, very impressive. So, the dynamic really is the CapEx. So, as we kind of entered into the year, we talked about the improvements that we’ve made in our age of fleet targets, right, and that would continue some of those actions. We talked about the growth that we expected in dedicated and intermodal tractors will become more efficient as the quarter has come through, and that’s really what’s allowed us to reduce our CapEx guidance as it relates to attractive growth going forward. But as Jim said, we want to make sure that as we become more and more disciplined, we’re still positioning ourselves for the recovery.
So, we’re not trying to cut CapEx that’s necessary for our growth. So, the dynamic ready for free cash flow is the combination of lower earnings for the first quarter and our continuation on our CapEx strategy.
Jim Filter: Yes. And this is Jim to answer the question about international intermodal. And yes, it is up on a year-over-year basis. But that’s really just function of, to your point, how bad it was a year ago. So, it looks more stable as does the distribution between East Coast and West Coast. So, it’s becoming a little bit normalized — and so I wouldn’t really say that there’s been this growth in international in terms of taking share from domestic intermodal — so it’s good to see that a little bit more normalcy. In terms of the ocean carriers and their position, what’s still out there is disruption. There’s been a lot of disruption in the world, and we’re one more disruption from the ocean carriers saying, I’m going to need my boxes because I’m going to be taking longer routes and that pushes even more to pack to transloading.
Operator: Thank you, ladies and gentlemen. As you have no further questions at this time, we will conclude today’s conference call. We thank you for participating, and you may now disconnect. Since at this time, we will conclude today’s conference call.
