Q4 2020 J B Hunt Transport Services Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to B J B Hunt fourth quarter 2020 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
And I ask a question during the session you will need to press star one on your telephone.
You require any further assistance, please press star zero and.
And now like to hand, the conference over to your speaker for today, Mr. Brad Delco, Vice President of Finance and Investor Relations. Thank you. Sir Please go ahead.
Thanks, Katherine and good afternoon, everyone and thanks for joining us.
Before I introduce the speakers I would like to take some time to provide some disclosures regarding forward looking statements.
This call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 words, such as expects anticipates intends estimates or similar expressions are intended to identify these forward looking statements.
These statements are based on J B Hunt's current plans and expectations involve risks and uncertainties that could cause future activities and results to be materially different from those set forth and the forward looking statements.
More information regarding risk factors. Please refer to J B Hunt annual report on form 10-K, and other reports and filings with the Securities and Exchange Commission.
Now I would like to introduce the speakers on today's call. This afternoon I am joined by our CEO, John Roberts, our CFO John Kuo.
Shelley Simpson, our chief commercial officer, and EVP of people and human resources and Nick.
Kobs, our chief operating officer, and President of contract services.
Darren field, our president of intermodal and Brad Hicks, our president of Highway services.
At this time I would like to turn the call to our CEO, Mr. John Roberts for some opening comments.
Thank you Brad.
Well 'twenty and 'twenty, we will bid you farewell and good riddance.
And all kidding aside we are thankful to enter 'twenty and 'twenty one to start a new chapter and to continue our intended journey 'twenty.
2020 taught us many lessons and not the least of which is that we have a community of employees drivers and providers and.
And that are more and capable of dealing with change and crisis.
Last year also revealed the essential nature and the services, we provide as we experienced challenging and dynamic but ever present demand through 2020, we affirmed again that all of the businesses, we have committed to and invested in complement each other and create a very differentiated model for our customers.
We look ahead in 'twenty and 'twenty, one and beyond with confidence.
During the fourth quarter, we experienced some very traditional demand cycles for customers across all services consistent with holiday activities. These needs were coupled with unusual inventory restocking and import challenges, particularly on the west coast, Our fleet and the highway and contract businesses presented reliable capacity.
He held up well and we discovered new ways to integrate our assets across customers and accounts and.
And intermodal we did we did substantially meet all coverage commitments during the quarter and the year. However, we struggled to achieve meaningful search reported as we've been able to do and the past most of the inability to provide incremental capacity and particular off the west coast was driven by intermodal network imbalances.
It's no real increase in our container fleet.
And a lack of timely.
Yeah empty equipment repositioning we are working with our network managers pricing teams customers and our rail providers to improve on all of these challenges as we go forward.
Our growth and final mile reveals the positive attributes and market demand for this channel and the growth presented and highway services Ics at 56% and JBT at 50% for the fourth quarter of 2020 is encouraging.
The progress made with our 360 platforms continues to reveal good placement and benefit for our customers and carriers.
Additionally, we found new ways to cross utilize the systems internally during the year, which we expect to continue.
Anticipating questions about our margin targets and general let me submit our plans and.
And it's been awhile since we have given the meaningful updates to our stated goals and the reality is that some key inputs related to achieving those results have changed over time for intermodal. We acknowledge that we have not met our margin goal for several years now we will monitor this year's bid season to inform our expectations on how well we can expect to recover.
<unk> increases and our overall cost structure, clearly, we see that certain fundamental conditions have evolved and the business model primarily relating to rail purchase transportation expense overall rail velocity customer behavior container free fleet utilization and driver wage costs.
One way or another we will either confirm our target range shall remain 11 to 13 for EBIT margins and intermodal or we will reset these expectations based on our customers' reaction.
These large and target comments do not apply to only to intermodal and Youre also where we have outperformed the high end of our stated target range and Dcs for the seventh consecutive quarter. These targets are under review and if deemed appropriate we will announce any changes for the segment along the same timeframe as he updates.
J B I finally, our stated margin rate and for JBT has been 8% to 12%, which doesn't fully take into account. The continued moving our best segment to a more asset light model. Accordingly. This range is also under review for customer reaction. All this being said, we'll be monitoring the market very closely over the coming months and plan on update.
Our targets on a comprehensive basis at a later day.
As a reminder, our margin goals are established purely to support requirements for returns on needed capital investments for our shareholders and so that we can continue to reinvest in the business to grow to meet the needs of our customers as previously announced we made several leadership changes during the fourth quarter, which we believe are low.
The company's needs going forward and several key areas. Let me just say that we're excited about all the changes we were able to make our bench is very strong. We have also made recent announcements about investments supporting inclusion and diversity and sustainability with the University of Arkansas, We're excited to head into 2021 and beyond.
With the momentum and opportunities, we see and have confidence that our experience will take us on the right direction.
Now I'll turn the call over to John Kuo, our newly appointed Chief Financial Officer for his comments John.
Thank you John and good afternoon to those joining us on the call.
And that's on the fourth.
Consolidated.
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Can you hear me now.
Okay.
Okay, sorry about that thank you John and good morning, or excuse me and good afternoon to those of us b joining us on the call today.
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I'll provide a couple of comments on the fourth quarter from a consolidated perspective, and then let the business units are covered their segments.
Overall, we are pleased with our revenue growth this quarter with notable achievements and the highway division as well as dedicated.
Cost pressures and the fourth quarter were primarily related to higher costs across network and operations due to congestion and labor tightness from increased freight demand.
And I are driver costs to attract and and train drivers and a capacity constrained environment.
And we also incurred a higher group medical costs and the quarter.
A quick update on Covid costs will continue to offer paid time off to our employees and a quarantine due to COVID-19 concerns and we incurred approximately 5 million of cost and the quarter designated as specific to Covid for a total of approximately $34 million year to date.
While I believe our facility work is complete we expect Covid PTO costs to continue given the current level of case counts and will likely be a headwind for us over the near term.
We continue to closely monitor our working capital metrics and the changing credit landscape as we enter the new year.
And we're encouraged as we experienced what I would consider to be somewhat of a normal fourth quarter with respect to customer collections.
We resumed stock buybacks early in the fourth quarter, but five and less opportunity and the back half of the quarter and then fell into our blackout period, we anticipate continuing on a normal buyback approach in 'twenty and 'twenty one.
And we ended the quarter with approximately $320 million and cash.
The resulting net debt of <unk>.
Just under $1 billion.
We still target our leverage ratio at one times EBITDA and anticipate staying close within that range and 21.
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We ended the quarter with 150 million of net capex to finish the year with approximately $600 million.
And is split roughly one third growth Capex and two thirds replacement.
As of today, we're forecasting a full year of 2021 net capital expenditures to be approximately $8 $50 million to $900 million, which includes revenue equipment as well as approximately $75 million and technology investment and our core transportation management system with.
We continued development of this technology, and 'twenty and 'twenty with more systems going live and must be coming depreciable in 'twenty and 'twenty one.
Prospective we expect approximately $20 million of incremental depreciation as we bring new systems and operations.
Finally, we had some discrete items and the fourth quarter was Florida or effective tax rate.
And then the full year, 'twenty and 'twenty with a rate of 24%.
As of today, we're expecting a 'twenty 'twenty, one and effective rate to be and the range of 24% to 25%, but we'll continue to watch for new administration changes.
That's all I had prepared today and I'll now turn it over to Shelly.
Thank you John and good afternoon.
Our commercial update this afternoon will focus on general market trends or expectations on how this will impact our organization and our customers in 'twenty and 'twenty one.
And how J B Hunt investments and innovative culture continues to drive our ability to help us solve for our customer supply chain needs.
And it's with little doubt that 'twenty and 'twenty well, it's one of the most challenging and dynamic freight markets in my career. The pandemic created a tremendous amount of uncertainty that was felt across the global supply chain.
And that's a shift from our services to a good economy and the inability for supply chain and keep up with demand and inventory levels and and precarious position that will take time to rebuild.
Import levels have and continued to surge and congestion and dwell time at ports rail terminals and customer warehouses is also contributing to the inefficient use of available capacity.
Combined with the challenges that this pandemic has had directly on our industry heroes our drivers.
The supply of qualified and trained driving professionals have been impacted by capacity limitations and driving schools quarantine protocols retirements and addition to pressure as a result, and escalating insurance costs and the recent drug and alcohol clearinghouse.
Unfortunately, these challenges have put inflationary cost pressures on our and many businesses and as the market is anticipating what pet further inflationary pressure on transportation rate in 'twenty and 'twenty one.
These rates however are necessary to support our index that.
We have already made a commitment to increase our capacity and both intermodal and 360 box. These.
These investments are earmarked for areas and our network, where we have confidence and the demand for our service at appropriate rates and.
And our ability to turn our equipment and effectively.
We view both of these as requirements to support this investment and our desire to generate appropriate returns on this investment.
We also had built and optionality to expand our capacity at the results that we experienced through bid season support further investment and other areas of our network, but in particular, the intermodal Western network.
While challenges always exist and our business what I really want to highlight is the amazing job our organization has done and being able to solve some of our customers' toughest challenges and what wasn't extremely tight capacity environment and the fourth quarter.
And I think you're aware by now our organization is not constrained by the number and physical assets, we own or operate but by our ability and source capacity through our digital platform the marketplace for J B Hunt and 360.
And you see the blending of our physical assets and our digital assets and enable us to accelerate our ability to solve our customers' problems to solve for yes, when they needed capacity the fourth quarter serves as a perfect demonstration and this dynamic as we and many other asset based providers had FIS.
Nickel constraints and our own capacity, but by leveraging the platform Ics and J P. T. We're able to deliver record setting capacity performance for our customers and.
An example, J B T delivered its highest revenue since three Q of 2008, and with almost 1900 fewer or 70% less company owned trucks versus that period.
In closing I am proud of the team's ability to solve for gas for our customers. It's the power of our squirrel, it's the power of our diversified offering and it's the power of our platform.
Our customers lean and to us during this challenging time, which we think continues to support our strategy to honor our commitments and maintain our long term focus on serving our customers' needs and our organization's mission to create the most efficient transportation network in North America is what drives.
The us to be better and to do more it is what has and what will continue to drive innovation in our company and for our industry.
And speaking of innovation and my expanded role and the organization I will be spending more time, focusing on how we can leverage the platform to deliver more value across the enterprise to our customers I believe the opportunities to deliver value.
Around predicting both price and visibility by leveraging data will be critical elements of our strategy moving forward and I'll, just say more to come on that and the near term.
I'd now like to turn it over to Nick.
Thank you Shirley and good afternoon, and I'd like to spend a few minutes discussing the performance of both dedicated and final mile and also shed some light on our pipeline and some high level views on our outlook.
First on dedicated results dedicated had another solid quarter that delivered the highest fourth quarter revenue and operating income for our segment and our history and we have previously discussed the benefits of our diversified customer base and the flexibility of our operations have allowed us to surge with customers who needed it.
While scaling back with customers, who have been negatively impacted by the current state of the economy.
Demand for our professional outsourced private fleet solution continues to build as customers and potential customers are price rising insurance costs, greater challenges recruiting and retaining and professional driving workforce and the realization of the capital tied up and their own fleet does not provide them the flexibility that we have been.
Able to deliver for our customers.
We ended 2020, selling 1331 trucks, and Dcs, which compares to 890 trucks. So year to date through the end of September quarter.
And you can see on our fourth quarter's stats, we added 192 drugs sequentially, which did impact the quarter in terms of startup costs and we would expect some pages and fleet growth and startup costs returning to the business for the near to mid term.
Also we expect the industry has and will continue to face driver wage pressure and we will be keeping a close eye on it and we monitor the performance of our fleet and believe we have some of the best wages and professional drivers and industry, who enjoy the consistency of working and a dedicated environment.
Finally, we do expect to return to the previous stated range of selling 800 to 1000 trucks a year.
On final mile services pharma, and I was able to deliver and all time record revenue of 243 or $213 million or 17% greater than the previous record set last quarter.
This growth was driven primarily by new contracted business through 'twenty, and 'twenty and supplemented by acquisitions and in fact, we track our contracted sales progress very similar to Dcs and I was proud of the team's performance and so on $84 million of new business and final mile. Throughout 2020, we are.
Continuing to see strength and robust opportunities for growth across our portfolio and are excited about our further building out our exercise equipment channel with the most recent acquisition of mass movement.
Going forward, we will continue to make investments and our service and product offering to ensure the highest standards of service and safety and satisfaction are met and this critical and rapidly growing part of the supply chain. We believe these investments are critical as we deliver goods and that's our inside the home of our customer's customer and <unk>.
And these investments and our desire to provide a differentiated service product, we will be focusing on appropriate returns and our business to support these investments.
Also while it's still early and the new role with C. O O I thought I would share some high level thoughts on how I think we can leverage our platform to manage our assets more efficiently across the enterprise.
If I learned one thing and Dcs over the years, it's the benefit of having density and markets and what flexibility that provides our customers.
And our own operations I see tremendous opportunity for us to leverage the platform to drive greater efficiencies across all assets across the enterprise and look forward to providing future updates in the near future that concludes my remarks, and so I'll turn it over to Darin and now.
Thank you Nick happy new year, everyone.
The quarter presented similar challenges for our intermodal network fluidity and balance that were presented in the third quarter and similar to what we communicated that we expected would occur on our last call.
Is that this afternoon and my comments will focus on network fluidity and balance the demand pricing environment, and then I wanted to talk about 2021, and our focus for this year.
First our volumes were minus 2% and October flash.
In November and plus 6% and December rail.
Rail provider velocity challenges and terminal congestion weighed heavy on our container fleet productivity during the quarter, while we werent able to move all the volume available to US we were able to accomplish one of our top priorities that we have communicated since the start of the pandemic and that is honoring our capacity commitments to our customer.
Throughout the quarter, we utilized a much higher percentage of the outsourced drayage capacity and an effort to drive productivity through the network. This included efforts to pull containers from the rail terminals to assist and the congestion challenges. We also rerouted significant volume over fees.
And ex the Arizona and Stockton, California that would have normally moved from a southern California origin rail terminal. These higher costs at the drayage operation are reflected in the results of the quarter, our customers participated with incremental incremental revenue to help cover those costs, but that revenue fell short on.
Providing the same margin and what we would have seen without and activity.
We have commented on the labor challenges, we're all facing during the pandemic on the previous earnings calls, California was particularly difficult during the quarter. We certainly believe the rail network and face and labor challenges at terminals and net locations, where we believe our rail providers expect and will deliver better productivity.
And the future certainly better than what we experienced in the quarter and make these comments primarily to highlight that we face conditions and the fourth quarter debt, we can address and improve as we move out of the pandemic.
So far and January volume demand remains extremely strong and the cost to serve our customers remains elevated rail velocity and congestion has improved for now but labor challenges and increased demand will continue to impact rail velocity as the year goes on and we fully expect pricing and this bid cycle will cover that.
Cost increases that we're experiencing that are more structural in nature and our network.
We believe 2021 will present opportunities for us to make progress on the margin front costs on all fronts Dray rail and productivity have all come at us at a fast pace in 'twenty and 'twenty and this new year presents our opportunity to price those costs into our business, we must find growth opportunities that cause.
Implement our network and provide balance benefits, while also increasing core pricing that reflects the current cost to serve our market and the very early and small percentage of pricing results achieved thus far are encouraging and we're confident that our customers want to grow with us at prices that.
Support and investment in capacity expansion.
We have ordered over 6000 containers that will be manufactured in 'twenty and 'twenty, one and we have flexibility on how and when those containers will be rolled out.
We have strong confidence and the ability of our network to consume growth, particularly in the east. We also recognize that we still have significant cost and velocity challenges and southern California, and simply adding containers is not the only solution required to grow capacity and net key market.
And B NSF and J B Hunt are working together to find better capacity solutions for our customers and our prices will reflect those efforts importantly, as we progressed through bid season, we do have opportunities to increase our container order if market dynamics support the need for additional capacity.
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Throughout 2020, our employees have been the backbone of our conviction to honor the commitments, we made to our customers I'm. So thankful to our employee base for that conviction and I believe we will translate that culture and the benefits for our financial performance and our returns in 'twenty and 'twenty one.
That completes my prepared comments, so now I will turn it over to Brad Hicks.
Thank you Darren good afternoon.
I'd like to share how honored I am to be on this new role and just how much excitement there is and the organization for our highway services businesses.
Which includes both integrated capacity solutions or Ics and truck.
My comments this afternoon will focus on the performance of both segments and.
And as Shelly alluded, how we were able to sell for yes, and a very dynamic environment for our customers and deliver the capacity they need it and the quarter.
Ics was able to deliver revenue of $587 million or 56% growth over the prior year, which was also 36% growth sequentially from the third quarter.
And previous calls and referenced our investments and technology and people have been around enabling us to scale the business and we were able to see a glimpse of this dynamic play out in the quarter.
As we've talked about scaling the business our focus has been on being able to grow revenue and gross profit and a disproportionate rate to operating costs.
We were able to deliver $31 million of sequential gross profit improvement and a corresponding $24 million increase and operating income which translates into a 77% incremental margin on every dollar of gross profit.
Speaking of which Ics did deliver positive $5 6 million of operating income in the quarter and while we have shared our expectations for returning to profitability by the second half of 'twenty. One we are going to stand by that view as they were just a lot of unique dynamics in play and the fourth quarter.
And we expect some seasonal effects plus continued investment to.
To keep us on track for delivering on that expectation.
And J B T or truck.
And was able to deliver 50% growth and fourth quarter revenue year over year to $140 million.
This is the highest achieved.
Excuse me. This is the highest revenue achieved in this segment since the third quarter of low eight as Shelly had mentioned in her opening remarks and.
And we have approximately 70% fewer company owned trucks versus that time period.
As you're beginning to see the power of the platform allows both Ics and J D key to scale with and for our customers to solve for their needs and and the fourth quarter that need was capacity.
As J B T has shifted to more of an asset light model, we have and ability to provide trailing capacity to customers that may be hauled by other J B hunt owned equipment or our independent contractors or power only capacity sourced through the platform.
And as our 360 box offering.
This gives us greater options to choose what is best for the customer who is looking for a drop and hook capacity solution and by Beth I mean, the most efficient option that eliminates waste and the system.
To close out my comments I would just like to reiterate how highway services powered by the platform was able to meet the needs of our customers and the quarter by delivering flexible capacity options. We continue to see strong activity between customers and capacity and our platform, which will continue to support investments into our highway services.
Loosens.
Whether it is in the marketplace are within the 360 program.
I'd like to turn it back over to Brad Delco.
Thanks, Brad and Katherine at this point, we are ready for questions and just like to remind the audience. Please given the length of the folks and the Q1 question and one follow up thank you.
Youre welcome ladies and gentlemen, just as a reminder, if you'd like to ask a question. Please press star and then the number one and you.
Your first question comes from the line of Chris Wetherbee with Citibank.
Yeah, Hey, thanks for taking the question.
Maybe I can start on John sort of opening comments around intermodal margins and I was just wondering if you could kind of give a little bit more color. It sounds like 'twenty. One is a year, where you had the opportunity to see some margin expansion I guess I'm curious around the timing of your comments about sort of maybe questioning whether the 11% to 13% is the right number going forward can you just give.
A little bit more color on the thought process on what it will and what you need to feed and sort of make a decision on that.
So Chris this is Darren and I'm going to I'm going to start with that.
I think when John highlighted those comments, we just know that the performance of our intermodal margin over.
Several years now would be a question on the call and rather than try to.
Talk through.
Exactly when in 2021 exactly at what time would we have a public release with some change we just wanted to highlight hey.
We do agree that 2021 is a year that we need to make progress we fully need to.
And and the pricing market and what's going on around us feels like.
It's the right time to talk about that the other thing that I think John highlighted is that the margin comments are relative to intermodal aren't aren't alone. He was highlighting commentary about the enterprise and other business units and that's why I think John wanted to talk about that.
Net debt.
And he looked at the last five years, we have three years of unusual activity between.
And our relationship with the railroads and also and pandemic. So we do believe 2021 will be a more settled here when it comes to our margin targets and certainly and that's why we have split up our conversation around new equipment on behalf of our customers. We want to put the initial order in and then we're going on.
Work through with each customer through the bid process to determine and the returns will be appropriate for us to get inside that range.
Okay. Okay. That's helpful. I appreciate it and then maybe a follow up sticking on intermodal.
Can you talk a little bit about what the rate negotiations are looking like through the fourth quarter in terms of magnitude for 'twenty. One any color you can give about what you think you might be able to achieve from a rate growth perspective, and intermodal would be helpful.
Sure and I think on the third quarter call I think I've said high single digits to double digits and I would say.
That's a that's still remains to be a pretty good place.
Placeholder for pricing in general for our network. There are certainly key markets, where it's substantially higher for its absolutely and the double digit area, you know west coast capacity cost.
Is it different challenge for us frankly than elements of say, our eastern network and what's going on there when I look at the network and think about how well pricing translate in the bid cycle. You know a lot still has to be seen we did say high single to low double digits, and and I think that debt remains to be up.
Pretty good a pretty good place holder, but certainly there are pockets of our network, where I think it will be higher than that.
Okay. Thanks for the time appreciate it.
Your next question comes from the line of John Chappell with Evercore ISI.
Thank you good afternoon everybody.
Darrin it seems like there's going to be very little reprieve and the next couple of weeks and months you know the typical Chinese new year Chinese new year slowdown.
And post peak season, and just based on ship schedules and and activity and it seems like the ports and me running hard and for the next couple of months.
And what's your confidence level and the rails ability to and continue to improve this imbalance and fluidity.
I actually see a significant change and your ability to meet the volumes that are out there and the first quarter and into the second quarter without any type of February slowdown.
Yes.
Yeah, well I think.
Look I'm confident and the way, we communicate with our rail provider out west we are aligned and efforts to try to drive capacity out there I'm also confident and the.
And the way our organization on our enterprise Salzburg capacity challenges I do think that obviously.
There may be a little reprieve in the parcel demand and some other impacts on the rail network and a full truckload intermodal seems too.
And have some momentum in terms of our ability to.
To drive capacity out west. So I think we'll have a better position going forward and the first quarter than we felt in the early part of the fourth quarter around moving empties out west that doesn't mean that we'll be moving as many as the customers would like for us to move so.
Justin and velocity slowdown has been a challenge, but I think the force the first quarter of 'twenty, one does present the.
And the potential for better velocity than what we experienced in Q4.
And then just as a direct follow up to that you'd mentioned kind of briefly the opportunity East coast are you seeing significant freight shift to the east coast, just given the challenges and the west coast and is the congestion and the imbalances and the eastern part of your network.
Similar to what's been going on on the West Coast.
So you know there was meaningful opportunity for us in the eastern network during fourth quarter debt, we had to delay.
Implementing intermodal Lee we serve those customers with our highway solutions, but we were.
We were delaying and implementing some new business and the east during the fourth quarter, while our equipment was consumed and serving some customers on the west coast as we go through the first quarter, we have already experienced growth and the east coast and and feel confident that that will continue to be available.
To us that growth is not tied to customers rerouting to different imports. That's highway conversion of business that has been available for us.
For some time now through the back half of last year.
We are aware of some customers that are talking about altering.
Altered their imports strategy will continue to look at what their plans are and and we'll provide solutions as those opportunities present themselves. We certainly believe the eastern network moves more fluidly than what we had experienced in the west.
Certainly in the fourth quarter, but we fully expect.
On the whole network and to see gradual improvements has 21 continues.
And taking data on that as well just that the growth and the eastern network. If you look at our sales activity across the enterprise, we are up year over year and and accelerated into the fourth quarter. So our customers asking us to solve for their needs and channel and then our benefits Athene and the data and our platform now we recognize.
A number of shipments that actually should or could be moving intermodal that gives us even more confidence we saw that number growth substantially throughout the year as well. So the combination of more activity along with what we've seen the platform that we actually moved over the highway and it should be moving intermodal there's two pieces.
And I really helped us and our confidence and our plan and the eastern network.
Great. Thank you Shelly and thanks, a lot there.
Yeah.
Your next question comes from the line of Brian <unk> with J P. Morgan.
And.
Hey, good evening. Thanks for taking the question maybe just a follow up for you Shelly on the on that last commentary about where you can see that should be moving on the network and on the <unk>.
Past.
And it's around eight to 10 million, maybe as high as $11 million loans can you just talk about the progress you think you've made and getting some of that conversion. It sounds like you have started to see some and.
And the East and you do you think the the service challenge and it says they've appeared and does that really delayed or and impaired the opportunity you feel there is to convert some of the free it off highway.
Our brains and so some of the way Gary talked about which is the opportunity for us to work across the enterprise here coming into the fourth quarter, and we certainly felt pressure and from our customers from unplanned activity, but also just to level up to me and not matching and they'd be able to think capacity and the market and we.
Did a great job across the company solving for our customers and so I think more and weighted our customers need and and we applied what was the best answer based on the capacity that we can source at the a price and.
And service that the customer really could work with we still think there is a huge opportunity and intermodal I go back to what we see and the platform.
It is a significant number of shipments that are moving on the highway and it really should convert into intermodal with more fluidity and our ability to really get the network more and motion, but our objective Brian is really to own that business.
Across our entire organization, whether its one palette to everything and customer moves. We now can handle that in North America and so we're trying to solve for our customers recognizing there are constraints, but certainly our mission statement to create the most efficient transportation network in North America, and most efficient and to move into intermodal.
And so we are intense working closely with our customers to do just that.
Okay. Thanks for thanks for that and maybe a follow up on on the Ics.
Performance in the quarter and it was clearly very strong sequentially year over year, having them and look at it loads per employee.
We're way up and and it looks like there's some mixed impact as well.
The comments were that you're still sticking with the second half.
Productivity or the profitability trend rather so maybe you can just bridge bridge the difference between what happened and this quarter, which was quite strong and and what do you think is maybe one time or is going to have off from here a little bit more seasonally such that youre going to still.
Kind of hit the same target that you were before after such a strong result.
Yes, Thank you Brian.
The comment was that we would still maintain and getting to profitability and the second half of this year and there's no question that with the profits that were generated in the fourth quarter.
And we anticipated that question, but the reality is that the fourth quarter of 'twenty really did have some pretty abnormal things that drove incremental volume on our way as Shelly just mentioned you know our ability to say, yes, and and find that answer for our customers, but each and every one of them are now reevaluating what their.
Network and what their makeup of carrier mix is going to be for 'twenty and 'twenty. One. So we still have work to do on our tech investments that will be somewhat of a drag for us and the first half as we close out the investment component and so you know as we think about that there's just a little bit of.
Unusual and this in Q4 that makes it very hard to predict as we move into 2021, what I would say is that we are incredibly.
Incredibly satisfied with how the platform.
For full loans with that rapid growth and that rapid pressure of customer need and so it does tell us and we're on the right track and.
We have a high confidence level to reiterate our previous expectations.
So I don't know if you want to add anything to that really just say Bryan and I hope that we can convert out of Ics and there are more efficient ways to do business inside the organization that is a huge focus for us we are working with our customers. We recognize that there were and planned activity.
And <unk> and costs that don't necessarily make for inefficient wage and these goods have been a long time, having said that we are still very focused on taking market share and making sure that we continue to grow our customers are on board and we did gain very favorable.
<unk> from our customers throughout.
The quarter and ending the year with some of our highest ratings from customers. So our ability to solve with excellent now we're trying to solve for overall cost for our customers and I think some of the things that brad's referencing that we wanted to get some of this business converted into intermodal we know the eastern network is and easy.
Place for us to start and then we want to continue to work on where the platform can create benefits for our customers. So we can start to grow and those new channels.
Thanks for all the detail, Brad and Shelley I appreciate it.
Your next question comes from the line of Tom <unk> with UBS.
Yeah good afternoon.
And congratulations on the strong results and our brokerage and Ics.
Good to see that moving to profitability. So you know so far ahead of schedule.
Yeah. My question I think that some of the points that I believe John made earlier in the call and considering what the kind of longer term liquid b.
You implied that the margin outlook might come down on intermodal what about the volume outlook is that something I know you don't have a formal target, but you know.
It's been low or the last couple.
A couple of years then your history. It seems like you'd have a great setup for intermodal volume growth in 'twenty and 'twenty one but.
How do you how should we think about just the kind of multiyear intermodal volume look.
You know maybe compared to what we've seen the last couple of years or in the past.
And Tom at this Brad Delco, I'll, I'll, I'll respond to that and I'll, let darren or anyone else to add to it I mean historically, what our message has been is we think the intermodal market still has secular growth characteristics, we expect intermodal volumes to outpace growth of the general transportation industry.
<unk>.
And given our scale on our size and our ability to serve and solve for our customers needs and we expect to be able to grow faster than than the intermodal industry and so we'll leave it at that I mean, that's our long term view I mean, clearly when capacity is constrained and areas, we'll we'll perform underperformer over perform.
But that's been our message is going to make sure that was clear to the audience and I'll pass it over to Darren and anything else to that and well certainly from a volume perspective I understand that the highlight on the question around particular looking back on the fourth quarter. There was there was significantly more volume available.
To us and the market and it.
And what we were able to have handled based on velocity challenges that were going on and and we still feel strongly and.
Shelly mentioned it.
We're bringing on customers with intermodal at the right time, when we have capacity available and that doesn't mean that we're taking capacity away from our commitment that we've already made.
As we go into 'twenty, one we did talk about we've ordered more containers.
We expect pricing to accommodate potentially are you know it is if velocity of our rail system today is more structurally slower than what it was you know.
Four or five years ago than pricing is going to have to contemplate that when we think about investment and those long term assets and so that's a big focus for us, but we did highlight that we are buying equipment. This year, because we're confident in the customer's desire to buy that service, so and as Brad mentioned I mean, we do.
Intermodal volumes to grow.
At least as strong as the industry I do think and the back half of last year that was a challenge for us, particularly in the network and the weighting where we were relative to capacity demands on the west coast and as moving forward, we're going to have to.
Grow where capacity is available and then look to change operations and the markets where capacity is difficult and how do we drive efficiency out west and we highlighted that were engaged in conversations with our rail providers there and we do believe we can both be more efficient in the coming years out west.
Yes.
So that it sounds like you're saying, we're not you're not reviewing the volume view for intermodal, but you are reviewing the margin view.
What about the.
Historical.
No no we're not.
And we want to grow and we're gonna grow volume and 2021, and we're going to expand margin and we need to do both and the market will support both.
Right.
My my follow up would just be.
You know historically I think the 100 basis points, maybe 130 years of pretty good margin improvement year for intermodal. It does seem like there's a stronger formula for intermodal margin performance in 'twenty and 'twenty one.
You have a chance to do kind of better than historical in terms of margin performance and 21.
In the intermodal segment.
I think it's just too early to say well will you know that Omnicom is Brett you know, we don't give that specific guidance and so we're going to avoid answering that.
[laughter], Okay fair enough. Thank you for the time.
[laughter].
Your next question comes from the line of Allison Landry with credit with credit Suisse.
Thanks, Dan and just following up on some of the comments he made in response and Tom's question.
But you said something about.
And maybe rail pricing there needs to be some contemplation of that and so I wanted to ask and you said, where you sit today I mean, obviously you know John I think in your opening remarks, you were sort of alluding to something more structural going on with with rail costs.
And does that mean, when you think about debt the bid season and the next few months debt intermodal rates need to go up significantly more than TL rates and then the second part of my question you can count this as my follow up I mean and.
On your discussions with the rails are all talking about sort of broadly and wanting to grow is there any willingness on their part and maybe become a little bit more accommodative on on rates to sort of drive more traffic on to the networks out if you could share your topic of your thoughts on on those topics that would be great. Thank you.
To answer the last question first there's not a railroad waiting in line to lower their cost.
I'll wait on that phone call for them.
No that's not happening.
No.
And then takes out.
There are there are markets, where yes intermodal price is probably do need to outpace truckload rates, but there are markets, where the intermodal prices can be.
And maybe even below truckload market price changes, so it's a little bit broad to make a statement that intermodal rates need to outpace truckload rates I don't think they do and I don't think they necessarily will throughout our entire network, but there are some key pockets, where yes, absolutely think they will.
Okay.
Thank you guys appreciate it.
Yeah.
Your next question comes from the line of Scott Group with Wolfe Research.
Hey, Thanks afternoon, guys, John and I got a couple for you.
So first on the volume side, what changed in December to allow the volume growth to accelerate.
And do you have any perspective, you can share has that continued so far.
To start the first quarter and any thoughts on and on how to think about volumes and the first quarter.
Yeah, I think I think as as the quarter went on there was a <unk>.
Small repreve in and our ability to reposition empties out west and and that showed up and in December a little bit better than it had earlier in the quarter.
Some of it might be related to a weakness in December of 2019 frankly.
But certainly January so far has been has been what we expected it to b and that has been demand has been strong and our network is more fluid.
Yes.
Okay and.
And then I wanted to try one more on the margin side.
First I think you just said it but I just want to make sure I heard that you are I know youre not giving guidance on margins, but you think intermodal margins improved this year and then the other part is the longer term guidance.
Is the <unk>.
As you revisit this is this more a function of the reality of.
What the margins have done the last couple of years and the tougher part of the cycle or is it more a warning of don't expect the margins to get to that 11% plus range and the good part of the cycle.
And we know what the passes and we're trying to think about the forward are you trying to suggest to US Hey, we may not get to 11.
I don't think anybody here and trying to get price. Yeah go ahead and okay. Scott I don't think we're trying to suggest anything other than acknowledged that the intermodal margin has been of a primary topic for our investors for some time, we're coming out of a very turbulent.
The linked period Shelly highlighted that gosh for three years, we've had charges from arbitration. We're in the middle of a pandemic. We've got driver hiring challenges. The outsource market is extremely difficult, we honored commitments to our customers and as we go through 2021.
We are hopeful and and have the expectation debt.
I'm not going on I want to be cautious on unused and stability, but certainly a lot of those challenges.
Bill will fall behind Us now.
Market certainly is ready to support strong price increases.
And and we will see what we can do I think that's been our message is that we'd like as a more stable year to evaluate that and that's that's really the bulk of what the message was yes, I'll just add Scott and this is John on that.
And there are a number of items that we hope are behind us like arbitration P. S. R.
The pandemic has been this year and some of the outputs of that are things like I was talking and Craig earlier, and then you've got some day on this.
Driver availability is in a new place today and so while we're going to go to the market for rates to help deal with changes and evolution and our cost structure to get back to that place. We think we should be by the way and not on.
I hope, we're being very clear because I think we have a duty to be clear that we haven't changed our expectation and we believe this year will solidify and a more settled and I'd like to turn and show you settled environment and now it's not a smoothed environment, it's sort of the ongoing current state.
Let's look at driver availability and that was just referencing driver schools or other direct okay drivers are retiring and schools are putting out new driver that puts and a unique pressure that's going to be on going though the things around <unk>. So on arbitration and all that we think are more.
<unk>.
So we've got to go to market and we've got and see if the customer is willing to pay for J B Hunt to provide company assets to do dray to present, a large fleet to have a presence that can serve that can do things that we've been able to do and the past theyre going to answer that question for us through this year in and.
Their decisions around how they award business and at what rate.
If we can't get that answer to get us back to 11 to 13 and I'm going to make sure we communicate that and all the things that go with it but we're not there and early indications and conversations we're having with Shelley and the sales team and their and his team are that we still have optimism that the customer needs.
We provide and it's unique by the way and we want to keep providing it but we need debt support and we need those margins to return to achieve the returns that we've enjoyed in the past and that's really where we are I also think it's important to say, it's not just intermodal margins and which was purely the purpose of that.
And part of my opening remarks that the whole company has to take a really deep breath and look at where we are and intermodal. We also have to look at where on dedicated because as we split that business that we've seen hey, we need to look at that business. The returns of the assets required for that business and we need to make sure. We're on steady and again the terms steady foot.
Thing for what we can present and in terms of expectations not only to you but to our customers as we set price and as we establish contract same is true for our truckload business. We're looking at Hey, you know Theres a theres a place here with the growth we experienced in the fourth quarter and some of the nuances that we're experimenting with around <unk>.
Trailers, we might be able to remodel our capital thoughts and truckload that might be able to be supported by a different margin profile and on.
And I'm just trying to.
Coordinate that conversation.
And not a one time event and one off I think the company has a duty to evaluate it.
Expectations and and this is the year that we're calling out and we're gonna do that and I think we'll be able to give you progress reports on all the way and and I think there'll be a lot of clarity and transparency with it.
And Mike just from a customer view, we have a lot of confidence and the orders we placed for both intermodal and highway services and you heard me talk about the pipeline and that he has so our customers and demand is high we have confidence that we can get to appropriate return on that.
That debt, we have ordered already and now we just want to make sure. We understand is there more appetite and what we've already set up structurally for 2021 and I will tell you I think that our customers want more from us than what we are planning right now, but we'll see that through the bid season and be able to.
The average that and then to reiterate what Darren said, our margins will improve and intermodal.
And that's what we're marching towards we took care of our customers, we reiterated that through the entire pandemic all through 'twenty and 'twenty that we would honor our commitments and it is very much like what we did in 2017 and 2018, we honored our commitments, we came back to customers and 2018, and our customers' matched up with us.
Cost to price, we go and expected change from that but we want to walk through our bid season, and just seeing if we should take more and more of a stance on equipment ordering password and they've already committed.
Thank you guys appreciate it.
Your next question comes from the line of Amit Mehrotra with Deutsche Bank.
Thanks, Hi, everyone. Just following up on the long term or targets and intermodal and not to beat a dead horse.
I've always considered that business a very high.
Return on invested capital business and.
As we've known with final mile you can have lower margins, but the returns on capital can be very high and so I was just thinking about as you guys are just maybe.
Possibly adjust our long term expectation of the.
The book earnings of the book margins of the business.
Is there anything happening structurally that maybe allows the intermodal business to retain the ROIC and it has now even though the margins are lower or.
Or any change and operating ratio expectations will directly correspond to the to the change and.
And on capital on that business.
And Matt This is Brad.
And I'll, let John are there and add to what I say, but.
And when you think about it and if revenue or cost per load is going up and you're and you're really focused on just margin percent with which I think and the investment community is very focused on.
If revenue per load goes on.
And contribution and are on a dollar basis per unit remains consistent or improves and the capital required to generate that contribution and on a dollar basis stays the same and you can achieve similar ROIC.
Even though there is degradation and the margin. So I know there is so much focus on margin percent.
I think b the work that will be done this year and that we're gonna be transparent and communicate with the investment community is we're going to look at all of the inputs.
And we're going to just make sure that we are and in fact generating what we deem to be appropriate returns on our investment and.
And we'll update what that margin output is based upon the analysis. So.
That's my comment Darren and John if you want to add anything more to that.
Well I mean, we've said for many years now that we care first about our return profile and really Brad I think you highlighted it debt. That's that's our measuring stick and that's how we're going to think about have we been successful and our approach to managing the investments and our assets are we.
And then a strong enough return and I'm quite certain that that's what John holds me accountable to do is to find improvements and the way that debt. Our return profile is so that's our focus and 21 and and what the comments I made earlier, we want to provide our customers with the services, we currently present and.
And but we expect and demand a proper return on that investment and if the customer says Hey, I don't.
I cannot.
Put that and we've actually seen that a little bit you mentioned final mile. There was a period, where we were only company assets and the expense related to net and the margin required for that service or not supported and the market. So we paid it off of debt offering and today and we've seen a great growth path and being able to offer them a different.
Capital profile that can run on a different margins and still present and kind of returns that we expect is there and said that's been our north star for a very long time and it serves us well and we're on about to abandon it and so if we get back results from this work and says Hey, we can't achieve that 11%.
<unk>, Okay, and then what are we did and mix how do we look at our fleet profile and consider different approaches to how we offer that service debt would end up and even at lower margins similar to better return.
Performance and that's how we're going to.
Yeah, I think that's the point right. If you begin to measure the quality of the business ROIC is the right measure and.
The ore is not really you can bifurcate them grow and depending on what you talked about so that's.
And that's a good point and yet the follow up if I could I know work coming past time here, but Dara and I wanted to ask how congestion is impacting the intermodal business vis vis volume and costs and the only reason I ask this question because if I look at box turns at least the way we look at it.
Not much lower.
And where it was pre COVID-19 or I'll just.
Prior to all just congestion and I know youre, adding more trailers this year, which will help with growth, but if you could just address address how box turns are still holding up so well when theyre significant congestion and rail service because I would have imagined that that's where I would have seen it.
And if you could just talk about that.
Well I think our I think in the period of time pre COVID-19.
You saw box turns debt were similar to what they are in COVID-19, but we had significant amounts of capacity and storage debt.
Had been bought at periods of time, when with velocity was challenged and congestion existed in you know.
Period, leading up to 2019, we had grown our fleet to deal with a little bit weaker terms and pricing was.
Returns were supporting that as we as we came into 'twenty and 'twenty.
Turns were not built around the size of our fleet and our volume was not yet where we had anticipated it would be based on how large our fleet was so we were anticipating velocity and improvements in 2020, and and we were experiencing that right up until the pandemic so really stop.
<unk> and June demand went off the charts and and everything slowed down a bit and so yeah, you're not seeing any kind of significant change and turns and and that's relevant to how bad congestion has impacted.
The amount of time it takes a container to travel on intermodal loads today is longer than it was a year ago, and we would expect for that to improve this year or I should say it was longer in Q4, we should expect that debt that transit will either improve this year or the price.
<unk> will reflect that we have to own the asset for a longer amount of time in order to accommodate the load for the customer and that's how we're going to view it but I do expect congestion.
And velocity and our system to gradually improve in 'twenty one.
So what you are implying them. This year is a more balanced between loads and yields and then right because if your box turns improve and maybe volumes improved commensurately and you get a more balance dynamics and yield and volume.
Well I think I think our lean this year is actually more to price than it is.
Anything else, we've got to expand our margins, but we are confident in our ability with the equipment acquisitions that we're making in order to do that.
Okay. Thank you very much I appreciate the time.
Our next question comes from the line of Justin Long with Stephens, Inc.
Thanks, and good afternoon.
Maybe to follow up on that that last question around rail service and velocity issues. There and is there a way to think about that magnitude of the margin impact we've seen and that back half of 2020, So intermodal margins have been around 9%.
And if service were to get back to pre pandemic levels.
Where would that margin shake out and I'm. Just curious if that's you know tens of basis points. If it's 100 basis points is there any help you can provide on that front.
I, probably can't get too specific there Justin and I just know this that when you look at the fourth quarter. The amount of outsourcing. We did was significant on the drayage front, we had employees of our own in quarantine and I think John Kuo mentioned and how much the company had spent on PT.
T O related to Covid time for our employees, yet, we're replacing the capacity that that employee was going to present, but go on to the open market and bringing outsourced costs that were significantly elevated in 2020 and so.
That's that's some of the major drivers of margin challenges in the fourth quarter service and velocity is a component of it.
But really and in and in the back half of last year, and particularly in the fourth quarter Drayage cost increases as we had to go to the outsourced market were significant.
Okay and as my follow up I just wanted to ask if there was any update to the quarterly cadence of the repricing you expect and in both intermodal and the contractual business and and Ics can you just help us with where we sit today in terms of what's been repriced and and how the.
Remainder of our bid season showed progress on a percentage basis.
Sure so.
For the most part of the company's followed similar trends intermodal and a little bit different on <unk>.
How much has been price so far but if you just look at typically we start on bid season, and Q4, and that's kind of what we deem as the start about 10% of our business or so starts and that time here and particularly in intermodal.
Who is putting their bids out is more impacted and our intermodal segment, but as you move forward, we've priced about 35% of our business between 35 and and 40%.
Our business on that somewhere in the mid teens has been awarded and very little has implemented a little more and intermodal and now.
Already implemented if you just want to look at intermodal think of it like this Q1 around 20% Q2 around 35% Q3 around three and Q4 around 10, and it's in that range, depending on when customers come out with our actual bids sometimes that changes, but that's about the right timing.
Okay, great and those are all numbers those percentages or when implemented correct.
Yes, okay.
Very helpful. Thank you for the time.
Yeah.
Your next question comes from the line of Ken Huckster with Bank of America.
Yeah.
Hey, guys. Good afternoon, Shelley you, Brett Darin mentioned earlier on intermodal that January as expected and a fluid network and and we saw the spot market up and Ics and 104% and and the spot loads and it seems like we're going to see working through the Chinese new year at the ports and low inventories can you can you kind of talk about how you see demand trending and into early 'twenty one.
And maybe overall segment thoughts.
Yes, so from a customer's view of inventory is still an issue and we do see the labor challenges, particularly coming inbound on the import side and I would say and it's been a little bit slower than anticipated here for the last seven to 10 days, but the forecast really puts us back.
In line and particularly when you look at what's happening from an important in total volume. We do think that our customers will continue to restock all the way through the first half of the year and I'm not sure how much of a slowdown and we're actually going to see from Chinese new year.
Considering that there is a backlog of containers that are trying to come into the port and trying to turn and get out to.
And to be deployed I think that that will move forward and we come into what would typically be a lull. We do you think the worst case it will be tighter than unusual from a seasonality perspective and that will push forward into the rest of what's happening and the truckload market I would say spot price and general has fallen over the last seven.
And 10 day matching what we've seen from a demand perspective, but I don't think anything is out of the norm and still anticipate a stronger than normal first half.
Just to clarify what was the little slower and the last seven days was that.
And any particular business or just traffic overall.
And so just across the board and our customers trying to get throughput from an import perspective.
Got it and then and dedicated Nick you mentioned the margins now and the mid teens.
You noted 800 to 1000, new trucks is that business that you've you're confident is sold and committed is that at new rates, maybe you could talk a little bit about your thoughts on on going forward on dedicated.
Yeah.
And that is business that based on our pipeline our pipeline and January both and dedicated and final mile was stronger than our pipeline January of last year. So we feel very good about our pipeline.
And those numbers, so not signed deals yet.
It's based on how our pipeline flows we feel very comfortable confident and that 800 to 1000, new trucks next year and cash.
And this spread that's J.
Just you know if you remember and amidst the pandemic Nic provided some context, so we thought because of the pandemic we lowered.
Low or the expectation.
To six to 800 granted dedicated sold 1300 and 31 trucks and in 2020.
Yeah, I think Nick's comments was we're going to just return to the sort of long term target of trying to hit 800 to 1000.
Thanks, I appreciate you squeezing me and have a good.
Anymore.
Yes.
Your next question comes from the line of Brandon on Glen Ski with Barclays.
Hey, good afternoon, and thanks for taking my question.
Yes on the Ics segment, you know you guys are still sticking to turning profitable by the second half of the year.
And the strategy there is still incremental leverage so putting new transactions on the platform and what.
What about the existing brokerage business as well it is part of that strategy rely profitability outlook rely on transit and that business on to the 360 platform and then.
How do you repurpose.
Count and that division to be more efficient and a more digital world. Thank you.
Yes, Brandon.
We've been transitioning our people through.
A modest to severe reorganizations over the last 18 months really in anticipation of what the forward model will be so a lot of that work has already occurred.
And really it's about finalizing our tech development. So that we can maximize our own efficiencies with the activities that are on the platform.
Theres no question that we expect to continue to grow and grow volume we've touched on a little bit earlier that the abnormal spot volumes will look for a more efficient way to transact and 21 and that's okay, but we know we have to have a lot more and momentum focused on bringing on new.
And customers.
Predominantly at the small and mid sized shipper level to help us continue to fuel the platform and that's where we and.
We think about second half it really is the culmination of the completion of the tech spend and.
And the pivot of overall volume and activity on the platform.
And that swings us back to profitability as we model that out now what we saw again in Q4 was somewhat amplified due to the extremely abnormal high level quality and revenue. If you will on the spot side and maybe it gives us a glimpse of what it will be when we get there we're not anticipating that strength necessary.
Really over the first few months.
If it continues to stay as hot on the market.
And then there is a chance that that could occur a little bit earlier, but we're not talking about a day one we're talking about months not quarters. There. So I think that that's just reaffirms that second half has high confidence on our ability to to deliver the positive Brendan let me make a net to debt and.
During the first half of last year, and we talked a little bit about the reorganization and we talked about that we had resource to our people and to actually start calling on customers and.
And I really are and my comments I talked about our activity levels being up substantially throughout the year. That's a direct result of our reorganization. So we've already started to see benefits from the platform and a portion of our Ics segment, our focus has been.
Really making sure that we completed our internal work for our people and that's what Brad is referencing we are continuing to make investments, we're letting our customers and our carriers drive us on how to create a more efficient way to do business and both of those fans and that will be ongoing however, we will.
Free the internal works that will actually marry the externalization of our 360 platform with our internal resources and think of and automated shipment they'll actually come off of the conveyor belt. If you will to our people who really need to problem solve today, there's operate and <unk>.
<unk>, you'll start to see the leverage that happens inside that and then last night I'll make on Ics returning to profitability and the second half certainly we're trying to march towards repeating what our fourth quarter performance was so we've not given up hope that we can continue into Q1 and into Q2.
But we do have specific idea is earmarked for our future and those ideas could put pressure on us, but we will continue and remember our strategy is to continue.
Continue to invest in our people and and our technology. So that we can scale the platform scale and so much critical component and creating a more efficient network and so that will be our focus through the first half and this year and if we can outperform like we did in Q4 I think you'll be pleased with those results.
I appreciate that Charlie Thank you.
Okay.
Hi, Catherine and we have time for one more question.
And final question comes from the line of Todd Fowler with Keybanc capital markets.
Okay, great Thanks, and good evening.
I guess the good news is on probably set on the margin commentary. So the last question won't be on that.
Dara and I guess, maybe you know to some of the comments about the timing of the implementation into 'twenty one day.
Do you think that you'll be able to show margin improvement in the first half of the year or is it really a function that you need to see the bids more fully implemented and and the rail service to improve to get to that margin progression or margin improvement kind of and the second half and for a run rate to exit the year.
Well I think I think some oh.
Elements outside of our control can influence that skill and given that we are still facing some pandemic.
Conditions out there labor continues to be very difficult.
I'm not sure exactly when I know debt.
You know, we're implementing pricing and and Shelly outlined it and it moves a little slower and maybe.
Maybe.
And we would like for it to certainly at this point, but but I would expect by some time to have new price is implemented.
So back half of the second quarter into the third quarter, you've got a substantial percentage of your of your book of business with new and fresh rates based on the conditions today and that should be better representative of the pricing market and the results.
Okay that helps and then maybe just to close out the call Shelly. If you think about coming to the end of the spend on 360 as you look out beyond the second half of 'twenty one.
And your expectation that <unk> provide above market growth, just and Ics or can you see stronger revenue growth in the other segments and how much of it is really predicated on seeing revenue growth versus lowering costs, just kind of how do you see 360 coming together as you move you know kind of beyond the implementation.
And the spend pace that you've been going through over the last couple of years. Thanks for the thought.
Great question, and that's one of the things and my expanded role to really think about how do we leverage the platform across the organization and so I'll be able to really focus and on how we do that on behalf of our customers. So if you think about the work that I mentioned earlier and it's in our platform today and it should be moving intermodal how do we get more price.
Script, Gabe on that front and of that instead of running a report afterwards and actually making the recommendation and then predicting of how and shipment or recommending house shipment can maybe that's just one example that many that we see across the organization and I want to make sure that I clarify something we are not at the end of our tech spend.
We are at the end of our internal work that will connect our external platform with our internal platform. We will continue to invest and Jamie had 350 and we see this as an accelerator for our organization from a revenue perspective, I think you were able to see that and J B T and Ics and that's first place that we saw.
And our 360 platform. It was really the place that was logically and adjacent to the work that we were doing and so we were able to and see the benefit there, but youll continue to see three safety and <unk> made in his opening comments remarks around the platform and how we leverage that and then finally I think you'll see this in our annual report the number.
Millions of miles and we eliminated from our assets by leveraging the platform, we directly get to see that and cost reduction and more our platform scales. The more on our own assets should be the most efficient assets are certainly at the top of the most efficient assets and available in the market. So continue.
And to try and drive cost on behalf of our customers.
Yeah, Okay, great. Thanks, again for the time Tonight everyone.
So I'm on a just take a minute here and close and suffer a little bit over our time. So thanks for your patience and I Hope we got the most questions I can say definitely that there is a sense of urgency for us to get this margin question and answer because it's so dominates our discussion we really don't get a chance to talk about the more copper.
And hence have advantages that we have and there was a lot of discussion and our remarks about platform enterprise company solving problems for customers that really use all of the parts and so it's important that we hear the volume on this question and I think were going on.
Work hard and make sure we get that resolved as soon as we can but where we are in the use of our systems is encouraging for us and revealed itself a lot I think and the fourth quarter I think our customers look to J B Hunt to get answers. They don't look for us to buy services they find.
And attitude here and investment here and mindset that is call US we will help you figure this out and we are entrepreneur and entrepreneurial enough.
Allow ourselves to find new ways and I.
That is a very important element that is longer term and nature of it doesn't necessarily answer the immediate questions, but highway plus intermodal plus dedicated plus final mile plus platform et cetera is J B Hunt and it's a strong position we're in to settle the nature.
And our go forward into 'twenty, one gives us a good it changes we're gonna have to answer these questions and we're going to answer them.
And whether we like the answer or not we're going to answer the questions and I know there is commitment there I'm excited that we got to a place where we could add equipment and intermodal I think that's a very important thing to take away. This fleet will be over 100000 units in 2021, and as a as a provider of services and value to come.
<unk>, we stay at the low there and that I think we expect demand a certain place and the market. The final amount of exciting our pipelines really are in good shape and and all of our businesses frankly, and I'd just add debt our leadership team is very.
He said we've made some changes that you guys can't and latest can all see from where I sit but our energies up we're asking new questions. We've moved the board around a little bit and I'm just really excited about that I think that's something that we'll continue to reveal itself.
I think we were pleased and encouraged with the quarter, we will see how that's received but we care less about this quarter, we care more about the long term I'm going to give a final shout out to the good people and J B Hunt who through 2020.
Took on a pandemic and not only did we survive it we thrived and it and we actually grew closer together as a team both at the leadership level, but at every level on the company and and I'm very proud.
So we wish you well today and and we'll look forward to our next call.
Ladies and gentlemen, this concludes today's conference call B. Thank you for your participation you may now disconnect.
Okay.
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Yes.
And.
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