Q3 2023 J B Hunt Transport Services Inc Earnings Call

Good afternoon. My name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the J B Hunt Sports services incorporated third quarter 2023 earnings Conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if you would like to withdraw your question again press Star one.

Thank you Brad Delco Senior Vice President for J B Hunt. Please go ahead.

Good afternoon before I introduce the speakers I would like 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 995.

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 and involve risks and uncertainties that could cause future activities and results to be materially different from those set forth in the forward looking statements for.

For more information regarding risk factors. Please refer to J B Hunt's annual report on Form 10-K, and other reports and filings with the Securities and Exchange Commission.

Now I'd like to introduce the speakers on today's call.

This afternoon, I am joined by our CEO John Roberts.

Our President Shelley Simpson.

Our CFO John Kuo.

Nick Hulse, CFO and president of contract services.

Darren field president of intermodal.

And Brad Hicks EVP of people and President of Highway services.

Now I'd like to turn the call over to our CEO , Mr. John Roberts for some opening comments John Thank you, Brian and good afternoon, I would like to take a minute to highlight and reinforce some of the key tenants around how we manage the company.

While the challenges in the freight cycle are well known and documented and as a result, there is no need to rehash here I will again remind you about our long term approach to the business.

Our focus is on deploying capital in areas of the transportation industry, where we see long term opportunity to compound returns we participate in an industry with a large addressable market that is cyclical.

Remaining disciplined around our investments with a long term focus on our people technology that enables and capacity to deliver for and on behalf of our customers will support and drive long term growth for the company and our shareholders.

Kristen: Good afternoon, my name is Kristen and I will be your conference operator today. At this time, I would like to welcome everyone to the JB Hunt Transport Services Inc. 3rd quarter 2023 earnings conference call.

In March of 2022, we announced a joint initiative with BNS desk to substantially improve intermodal capacity and service for our customers.

We've recently announced and closed the acquisition of a brokerage assets or be NSS logistics. These are key examples of how our companies are working together to best align efficient and value added solutions for our customers.

Kristen: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one.

While the brokerage market is challenged we see lots of opportunities to drive efficiency in the supply chain with our people powered enabled by our technology. Our J B Hunt 360 platform. We continue to work closely with BNS EF and all of our rail service providers to strengthen and create a more reliable intermodal product and I am pleased to see.

Ravi Delco: Thank you, Ravi Delco, senior vice president for JB Hunt. Please go ahead. Good afternoon.

Ravi Delco: Before I introduce the speakers, I would like to provide some disclosures regarding forward-looking statements. This call may contain forward-looking statements within the meaning of the Private Security's 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 JB Hunt's current plans and expectations and involve risk and uncertainties that could cause future activities and results to be materially different from those set forth in the forward-looking statements. For more information regarding risk factors, please refer to JB Hunt's annual report on form 10K and other reports and filings for the Securities and Exchange Commission.

The progress in our intermodal segment relative to the market and our results.

Dedicated in final mile continued to show resiliency in this environment.

Proving again that our premium service products can be differentiated from the competition.

R. J B Hunt 360 box product in our truckload segment continues to experience growth, providing an asset backed solution. While also leveraging our investments in technology to efficiently serve customers in closing we have a tremendous team here at J B Hunt with a lot of experience, we will remain disciplined on cost and investments too.

Best prepare the company to serve.

Ravi Delco: Now I'd like to introduce the speakers on today's call.

The growing needs of our customers, we will remain focused on earning appropriate returns on capital and driving efficiency in the supply chain to drive greater value for our customers I remain confident in the future growth of the company now ill turn the call over to our President Shelley Simpson.

Ravi Delco: This afternoon, I'm joined by our CEO, John Roberts, our president, Shelley Simpson, our CFO, John Kulo. Nick Hobbs, CFO and president of contract services, Darren Field, president of Intermoral, and Brad Hicks, EVP of People and President of Highway Services.

John and good afternoon, My comments will cover our areas of strategic focus and how we are setting ourselves up for long term success.

Of course, these comments will align with our priorities for 2023, which as a reminder, artist first we remain committed to disciplined long term investments in our people technology and capacity.

John Roberts: I'd now like to turn the call over to our CEO, Mr. John Roberts, for some opening comments. John? Thank you, Brad, and good afternoon. I would like to take a minute to highlight and reinforce some of the key tenants around how we manage the company. While the challenges in the freight cycle are well known and documented, and as a result there is no need to rehash here, I will again remind you about our long-term approach to the business.

Delivering exceptional value to our customers.

Third drive long term compounding returns for our shareholders.

As you've heard us say since the fourth quarter call earlier. This year, we have been in a challenging freight environment or a freight recession, largely driven by excess inventory in the supply chain.

John Roberts: Our focus is on deploying capital in areas of the transportation industry where we see long-term opportunity to compound returns. We participate in an industry with a large, addressable market that is cyclical. Remaining discipline around our investments with a long-term focus on our people, technology that enables and capacity to deliver for and on behalf of our customers will support and drive long-term growth for the company and our shareholders. In March of 2022, we announced the joint initiative with BNSF to substantially improve intermodal capacity and service for our customers.

Our customers have been working through excess inventory and as we stated last quarter, we felt like that destocking trends started to moderate in June .

As we sit here today, we see further evidence of this trend and most notably in our intermodal business, which is at the forefront of it.

North American supply chain.

To be clear on the overall environment, we are not at a point yet to say we're out of the freight recession, but we do feel like we're coming out of it or said differently Directionally, we are seeing signs of things moving in a positive direction.

John Roberts: We recently announced and closed the acquisition of the brokerage assets of BNSF logistics. These are key examples of how our companies are working together to best align efficient and value-added solutions for our customers. While the broker's market is challenged, we see lots of opportunities to drive efficiency in the supply chain with our people. Powered and enabled by our technology, our JV-Hunt 360 Plus. We continue to work closely with BNSF and all of our rail service providers to strengthen and create a more reliable intermodal product.

Going forward, our focus remains on how we deliver value for and grow with our customers over the long term by finding ways to improve efficiency and drive waste out of the supply chain.

As you've heard us say before we have a long term approach to how we manage our business and how we invest across our company foundations, which are our people technology and capacity. Our people have always come first and we remain committed to our investments in our people and.

And proper training and their safety, and then fair and equitable compensation and benefits throughout our company, we have the experience and talent to execute in all types of environments.

John Roberts: And I am pleased to see the progress in our intermodal segment relative to the market and our results. Dedicated and final mile continue to show resiliency in this environment, proving again that our premium service products can be differentiated from the competition. Our JV Hunt 360 box product and our truckload segment continues to experience growth, providing an asset-like solution while also leveraging our investments in technology to efficiently serve customers. In closing, we have a tremendous team here at JV Hunt with a lot of experience.

As an example, the officers of our company have a collected 350 years of experience not just in the industry, but at our company.

The experience and talent of our people combined with our capacity to deliver.

Connected and enhanced by our technology investments are what combined to deliver exceptional value for our customers.

John Roberts: We will remain disciplined on cost and investments to best prepare the company to serve the growing needs of our customers. We will remain focused on earning appropriate returns on capital and driving efficiency in the supply chain to drive greater value for our customers.

I believe we're seeing evidence of the strength of our brand and service by staying committed to our long term investments in our people technology and capacity as we progressed in the recovery I am confident in our ability to meet the growing needs of our customers as a result.

In closing while.

John Roberts: I remain confident in the future growth of the company.

The environment is still challenging it is important to keep in mind that pricing is aligning indicator.

Shelley Simpson: Now I'll turn the call over to our president, Shelley Simpson. Thank you, John, and good afternoon. My comments will cover our areas of strategic focus and how we are setting ourselves up for long-term success. Of course, these comments will align with our priorities for 2023, which as a reminder, are to first remain committed to discipline long-term investments in our people's technology and capacity. Second, deliver exceptional value to our customers, and third, drive long-term compounding returns for our shareholders.

Volume is typically a leading indicator.

We are encouraged by the performance of our intermodal business that is gaining share in the market and the resiliency of our dedicated business. They continue to deliver efficient solutions for customers.

Our final mile business is holding up well despite seeing varying degrees of demand from the end markets, which they serve highlighting the quality of our premium service product.

And in our Ics and JBT business, we continue to see both segments feel the brunt of the freight cycle, most notably in price and volume. They continue to believe in our ability to scale. This business to drive efficient solutions with our brokerage and drop trailer services, we will continue to manage the business.

Shelley Simpson: As you've heard us say, since the fourth quarter call earlier this year, we have been in a challenging freight environment, or a freight recession, largely driven by excess inventory and the supply chain. Our customers have been working through excess inventory, and as we stated last quarter, we felt like that de-stocking trend started to moderate in June. As we sit here today, we see further evidence of this trend, and must notably in our intermodal business, which is at the forefront of the North American supply chain.

This for long term growth and I remain confident in our ability to deliver long term sustainable returns for our shareholders with that I'd like to turn the call over to our CFO John <unk> John .

Shelley and good afternoon, everyone I'll be brief with my comments, but I want to hit on a few items, including a high level review of the quarter and an update on our capital plan. So.

Shelley Simpson: To be clear on the overall environment, we are not at a point yet to say we're out of the freight recession, but we do feel like we're coming out of it, or said differently. Directionally, we are seeing signs of things moving in a positive direction. Going forward, our focus remains on how we deliver value for and grow with our customers over the long term by finding ways to improve efficiencies and drive waste out of this supply chain.

So starting with third quarter results overall freight activity remained under pressure during the quarter as compared to last year.

On a consolidated GAAP basis revenue for the quarter declined 18% year over year operating income declined 33% and diluted earnings per share decreased 30%.

These declines were primarily driven by lower freight volumes and yields combined with inflationary cost pressures, primarily in the areas of salaries and wages capital cost and insurance and claims expense we.

Shelley Simpson: As you've heard us say before, we have a long-term approach to how we manage our business and how we invest across our company foundations, which are our people, technology, and capacity. Our people have always come first, and we remain committed to our investments in our people in proper training, in their safety, and in fair and equitable compensation and benefits. Throughout our company, we have the experience and talent to execute in all types of environments. As an example, the officers of our company have a collective 350 years of experience, not just in industry, but at our company.

We did have a discrete tax item in the quarter was slower to our effective tax rate to 18, 2%.

The overall impact to our earnings in the quarter was <unk> 16 per share spread across the tax and interest expense line items.

We continue to make investments in our business for the long term across our company foundations, our people technology and capacity.

From an invested capital standpoint, these investments are in real estate.

Both trailing in power and as previously mentioned, we did close on the purchase of the brokerage assets from BNS theft logistics in the quarter.

Shelley Simpson: [inaudible] and closing. While the environment is still challenging, it is important to keep in mind that pricing is a lagging indicator, while volume is typically a leading indicator. We are encouraged by the performance of our intermodal business that is gaining share in the market and the resiliency of our dedicated business that continues to deliver efficient solutions for customers. Our final mile business is holding up well despite seeing varying degrees of demand from the end markets, which they see in the future.

Our balance sheet remains strong with ample liquidity available to support our investments we.

We are conservatively leveraged is still below our target of one times debt to trailing 12 months EBITDA.

$1 billion revolver remains undrawn and available as needed.

I previously guided to one five to $1 8 billion of net capital spend for the year exclude.

Excluding the acquisition, we anticipate falling around one 6 billion for the year.

Similar to last quarter. Some of this is timing related but also we are being prudent where it makes sense with our spend.

In terms of our capital priorities no change on this front first and foremost we will continue to invest to grow our business, we will maintain an investment grade credit rating and support our dividend.

And finally, we will use excess cash to repurchase stock.

In the third quarter, we repurchased approximately 267000 shares and we will remain active as opportunities present themselves.

This concludes my remarks, and I'll now turn it over to Nick.

Shelley Simpson: [inaudible] here. Similar to last quarter, some of this is timing related, but also, we are being prudent where it makes sense with our spend. In terms of our capital priorities, no change on this front. First and foremost, we will continue to invest to grow our business. We will maintain an investment great credit rating and support our dividend. And finally, we'll use excess cash to repurchase stock. In the third quarter, we repurchased approximately 267,000 shares and will remain active as opportunities present themselves.

Thanks, John and good afternoon, I will provide an update on our dedicated and final mile segments and will give an update on areas of focus across our operations.

Start with dedicated I remain pleased with the performance of our dedicated business in the quarter and the resiliency of our model demand for professional outsourced private fleet solutions has held up well in the environment and we continue to see many opportunities in our pipeline.

In the quarter, we sold approximately 265 trucks and new deals, which brings us to over 830 year to date, we are feeling more confident in hitting our gross sales target of 1000 to 200 trucks for the year.

Based on the timing of some deals that pushed from the third quarter ended the fourth quarter. We are seeing some stabilization in terms of our fleet sizes across our accounts, although we are seeing some slightly higher customer churn than we previously expected.

In the instances, where we have lost an account we believe the business was lost at inadequate rates of return, particularly considering the value proposition, we bring to our clients going forward, we remain extremely confident in our ability to deliver value in the market that will allow us to compound our growth over many many years and further penetrate our large addressable.

Market.

Now on to final mile.

Pleased with our performance in the quarter and how we have positioned ourselves as a premium service provider in the industry.

I believe we have been able to prove our value propositions as we are nearing the end of some of our work to improve the revenue quality of our portfolio of business. This is evidenced by the year over year improvement in profitability in this segment. Despite lower revenue in terms of the end markets. We serve we are seeing a slight uptick in demand across some of our end markets in.

This segment, although furniture deliveries remain as tough spot, we continue to focus on providing a superior service experience delivering big and bulky items into the homes of our customers customer.

This continues to resonate well in the market and as a result, we see new brands engaging in discussions and being added to our sales pipeline.

Similar to last quarter I'll close with some comments on safety in our equipment. We continued to invest in employee training of new equipment and technologies that will improve and enhance our safety performance as an organization. This very much aligns with our company foundations, taking care of our people, but also the motoring public we continue to roll.

And we're facing cameras in our fleet and remain on track to be 60% complete of our fleet by the end of the year.

We are encouraged by the data we've seen so far since this initiative has gotten underway and also encouraged by the impact this should have on our cost to serve our customers.

Nick Hobbs: This concludes my remarks, and I'll now turn it over to Nick. Thanks, John, and good afternoon. I'll provide an update on our dedicated and final mile segments, and we'll give an update on areas of focus across our operations.

As the industry is well aware of the cost of claims continue to just move higher and higher and we are feverishly working to mitigate the risk.

A quick update on equipment previously stated that we would be complete with cleaning out older equipment by the end of the third quarter. We've had a couple of hundred units spill into the fourth quarter, but I would say we are in a very good position with our equipment across all businesses.

Nick Hobbs: I'll start with dedicated. I remain pleased with the performance of our dedicated business in the quarter and the resiliency of our model. Demand for professional outsourced private police solutions has held up well in the environment, and we continue to see many opportunities in our pipeline. In the quarter, we sold approximately 265 trucks in new deals, which brings us to over 830 years today. We are feeling more confident in hitting our gross sales target of 1,000 to 1,200 trucks for the year.

I would say we are finally caught up with some of the backlogs that were created as a result of the pandemic and our rapid growth over the last few years. This concludes my remarks, so I'd like to now turn the call over to Darren. Thank you Nick and thanks, everyone for joining US. This afternoon I'll review the performance of the intermodal business during the quarter given up.

Nick Hobbs: Based on the timing of some deals that push from the third quarter into the fourth quarter, we are seeing some stabilization in terms of our fleet sizes across our accounts, although we have seen some slightly higher customer turn than we previously expected. In the instances where we have lost an account, we believe the business was lost at inadequate rates of return, particularly considering the value and proposition we bring to our clients. Going forward, we remain extremely confident in our ability to deliver value in the market that will allow us to compound our growth over many, many years and further penetrate our large addressable market.

Update on the market and service performance and highlight the continued opportunity we have to deliver value for our customers and long term growth for all of our stakeholders.

I'll start by reviewing intermodal performance in the quarter as I said last quarter and you heard Shelly say earlier, we believe the inventory destocking trends started to moderate in June and we saw evidence of that trend continued throughout the quarter as our volumes inflected positive for the first time in three quarters.

Nine months, our volumes were down 1% in July up 1% in August and up 4% in September in September we had our largest intermodal volume week in our history, and we're able to meet the strong demand with exceptional service.

Nick Hobbs: Now on to final mile. I am pleased with our performance in the quarter and how we have positioned ourselves as a premium service provider in the industry. I believe we have been able to prove our value in propositions as we are nearing the end of some of our work to improve the revenue quality of our portfolio of business. This has been, by the year over year improvement and profitability in the segment despite lower revenue.

I am encouraged by the fact that we are seeing the volume lift across both our trans continental and eastern network, highlighting overall increased customer demand for intermodal service. We believe this is driven by the overall market. But also we believe we are taking market share with our strong service that is outperforming the <unk>.

Nick Hobbs: In terms of the end markets we serve, we are seeing a slot uptick in demand across some of our end markets in the segment, although furniture deliveries remain in a tough spot. We continue to focus on providing a superior service experience delivering big and bulky items into the homes of our customers' customers. This continues to resonate well in the market, and as a result we see new brands engaging in discussions and being added to our sales pipeline.

Competition.

During the quarter, we did see margin pressure, both year over year and sequentially largely related to the full implementation of the recently re priced bids, which as a reminder, trended towards the lower end of our pricing expectations as bid season progressed, we continue to.

Nick Hobbs: Similar to last quarter, I'll close with some comments on safety and our equipment. We continue to invest in employee training and new equipment and technologies that will improve and enhance our safety performance as an organization. This very much aligns with our company foundations taking care of our people, but also the motoring public. We continue to roll out inward facing cameras in our fleet and remain on track to be 60% complete of our fleet by the end of the year.

<unk> resources and capacity and the related cost to ensure that the quality of our service holds up as customer demand for a differentiated service product grows.

Yeah.

With regard to rail service providers, we have been pleased with the service from each of our providers their commitment to the intermodal offering and growing the overall market in fact, I would say that our rail providers are dialed in both in the east and the West we believe that the railroads realized that the true test of their service.

Nick Hobbs: We are encouraged by the data we have seen so far since this initiative has gotten underway, and also encouraged by the impact this should have on our cost to serve our customers. As the industry is well aware, the cost of claims continue to just move higher and higher and we are feverishly working to mitigate the risk.

Will come once freight volumes increase with overall demand on their networks, but we are confident in their ability to maintain high service levels throughout the recovery. We are very encouraged by the current work we are doing with BNS F. In the west and feel even more confident about our differentiated service.

Nick Hobbs: Finally, a quick update on equipment. I previously stated that we would be complete with cleaning out older equipment by the end of the third quarter. We've had a couple hundred units spill into the fourth quarter, but I would say we are in a very good position with our equipment across all businesses. I would say we are finally called up with some of the backlogs that were created as a result of the pandemic and our rapid growth over the last few years.

We now have J B hunt employees in their headquarters in Fort worth working side by side together to create and customize solutions for our customers and solving to eliminate service challenges as they arise we continue to work collaboratively to solve for and on behalf of our customers a clear differentiator.

Darren Field: This concludes my remarks so I would like to now turn the call over to Darren. Thank you Nick and thanks everyone for joining us this afternoon. I'll review the performance of the intermodal business during the quarter given update on the market and service performance and highlight the continued opportunity we have to deliver value for our customers and long-term growth for all of our stakeholders. I'll start by reviewing intermodal's performance in the quarter.

<unk> in the market.

We believe intermodal presents a strong value proposition to customers with significantly improved rail service at a discount to truck pricing all while cutting carbon emissions on a load by 60% compared to the truck alternatives as such we see an enormous amount of freight that we believe should be.

Darren Field: As I said last quarter and you heard Shelley say earlier, we believe the inventory de-stocking trend started to moderate in June and we saw evidence of that trend continue throughout the quarter as our volumes inflected positive for the first time in three quarters. By month our volumes were down 1% in July, up 1% in August and up 4% in September. In September we had our largest intermodal volume week in our history and were able to meet the strong demand with exceptional service.

<unk> converted from truck to intermodal, we continue to work closely with our rail providers and are encouraged to see the strong service, which contributes to a better overall experience for customers.

In closing we strongly believe in the strength of our intermodal franchise and the opportunities to drive significant growth over many many years, our customers Trust us believe in our product and want more of it we have the people the technology to enable and the capacity to handle significantly more volume.

Darren Field: I'm encouraged by the fact that we are seeing the volume left across both our transcontinental and eastern network highlighting overall increased customer demand for our intermodal service. We believe this is driven by the overall market but also we believe we are taking market share with our strong service that is outperforming the competition. During the quarter we did see margin pressure both year over year and sequentially largely related to the full implementation of the recently reprised bid which is a reminder trended toward the lower end of our pricing expectations as bid sees and progressed.

And then what we're handling today are excited to work with customers to meet their growing demand for efficient transportation solutions.

That wraps up my prepared remarks, and I'll turn it over to Brad Hicks.

Thank you Darrin and good afternoon, everyone.

I'll review the performance of our integrated capacity solutions and truckload segments.

I'll also provide an update on J B Hunt 360.

Before I begin I would like to publicly welcome the new employees, we recently on boarded as well as the agents from our acquisition of the brokerage operations of BNS F logistics we.

We are excited about the opportunities this creates to leverage our investments in technology and the breadth of services, we provide to better serve our customers.

Darren Field: We continue to carry resources and capacity and the related costs to ensure that the quality of our service holds up as customer demand for a differentiated service product grows. With regard to rail service providers we had been pleased with the service from each of our providers their commitment to the intermodal offering and growing the overall market. In fact I'd say that our rail providers are dialed in both in the east and the west.

Starting with Ics overall, the brokerage environment remains challenged and competitive.

Segment gross revenue was down 48% year over year, driven by a 38% decline in volume and a 17% decline in revenue per load.

Overall truckload demand, particularly in the spot market.

<unk> muted versus the prior year period.

Darren Field: We believe that the railroads realize that the true test of their service will come once freight volumes increase with overall demand on their networks but we and they are confident in their ability to maintain high service levels throughout the recovery. We are very encouraged by the current work we are doing with BNSF in the west and feel even more confident about our differentiated service. We now have JB Hunt employees in their headquarters in Fort Worth working side by side together to create and customize solutions for our customers and solving to eliminate service challenges as they arise.

During the quarter, we did elect to focus our efforts on revenue quality.

And leading the market to push rates on certain lanes and accounts to appropriate levels.

As a result, we did call a decent amount of revenue and freight from our portfolio.

As the quarter progressed, though we did see a sequential improvement in gross profit dollars per load, particularly in our spot business, but also in our contractual business.

We continue to invest in areas to mitigate strategic theft.

Enhanced capability in our platform and right size, our resources with our current demand through attrition.

Darren Field: We continue to work collaboratively to solve for and on behalf of our customers a clear differentiation in the market. We believe Intermodal presents a strong value proposition to customers with significantly improved rail service at a discount to truck pricing all while cutting carbon emissions on a load by 60% compared to the truck alternative. As such, we see an enormous amount of freight that we believe should be converted from truck to Intermodal. We continue to work closely with the rail providers and are encouraged to see the strong service which can contribute to a better overall experience for customers.

Overall, we believe some of these changes will position us for better success in the future.

Wrapping up on Ics and to level set a little on expectations in the near term we are seeing some margin pressure related to peak season, so far in Q4 in.

In addition to expecting some dilution from the recent acquisition in the fourth quarter.

Shifting now over to JBT our truckload.

Gross revenue was down 17% year over year, driven by a 22% decline in revenue per load and partially offset by 6% increase in volumes.

Overall demand for our J B Hunt 360 box service offering is outperforming the overall market as volumes in the quarter were up double digits versus the prior year.

Darren Field: In closing, we strongly believe in the strength of our Intermodal franchise and the opportunities to drive significant growth over many, many years. Our customers trust us, believe in our product, and want more of it. We have the people, the technology to enable and the capacity to handle significantly more volume than what we're handling today are excited to work with customers to meet their growing demand for efficient transportation solutions.

Customers continue to see value in the flexibility and efficiency of combining the drop trailer capacity with the ability to source the right carrier on the J B Hunt 360 platform to move the trailer.

The right carrier on the right load and at the right price that's the power of the platform.

Going forward, we will continue to make investments in the development of our 360 box offering to strengthen this product and drive greater efficiencies for our customers.

Brad Hicks: That wraps up my prepared remarks and I'll turn it over to Brad Hicks. Thank you, Darren, and good afternoon, everyone. I'll review the performance of our integrated capacity solutions and truck load segments. I'll also provide an update on JB Hunt 360. Before I begin, I would like to publicly welcome the new employees we recently onboarded as well as the agents from our acquisition of the brokerage operations of BNSF logistics. We are excited about the opportunities this creates to leverage our investments in technology and the breadth of services we provide to better serve our customers.

Overall, we believe there is growing demand in the market for this service offering and we see long term opportunities in this area.

Wrapping up on 360 as you have heard throughout our comments, we remain committed to investments in our company foundations.

Our people technology and capacity.

I think it is appropriate to point out that technology as a foundation.

I think it is appropriate to point out that technology as a foundation.

<unk>, our people and capacity as the link that connects them.

Technology enables our people helps drive productivity and creates efficiency in how we source and serve customers with our available capacity.

Brad Hicks: Starting with ICS, overall, the brokerage environment remains challenged and competitive. Segment gross revenue was down 48% year over year, driven by a 38% decline in volume and a 17% decline in revenue per load. Overall, truck load demand, particularly in the spot market, remains muted versus the prior year period. During the quarter, we did elect to focus our efforts on revenue quality and leading the market to push rates on certain lanes and accounts to appropriate levels.

That capacity comes in the form of our own assets or the assets, we can secure for or on behalf of our customers.

J B Hunt 360 is our platform that empowers and enables our people and helps us access the right capacity to serve our customers efficiently with a valuable service.

Our platform J D 360 informs us about the market and provides a solid foundation to drive productivity in our operations across the organization and eliminate waste in the overall supply chain.

Brad Hicks: As a result, we did call a decent amount of revenue and freight from our portfolio. As the quarter progressed, though, we did see a sequential improvement in gross profit dollars per load, particularly in our spot business, but also in our contractual business. We continue to invest in areas to mitigate strategic theft, enhance capability in our platform, and right-side resources with our current demand through attrition. Overall, we believe some of these changes will position us for better success in the future.

While some of the productivity is masked by the current environment, we remain confident in our ability to drive long term value for our customers and our company with our investments.

This concludes my comments, so I'll turn it over to Brad Delco to provide instructions before the operator opens the call for Q&A.

Thank you, Brad and just for the audience given the number of folks in queue, we're going to limit. The question to one question with no follow up.

Chris Crystal you can go ahead and start the Q&A.

Your first question comes from the line of Chris Wetherbee from Citigroup. Please go ahead.

Brad Hicks: Rapping up on ICS and to level set a little on expectations in the near term, we are seeing some margin pressure related to peak season so far in Q4, in addition to expecting some dilution from the recent acquisition in the fourth quarter. Shifting now over to JBT or truck load, segment gross revenue was down 17% year-over-year driven by 22% decline in revenue per load, and partially offset by 6% increase in volume.

Hey, Thanks, good afternoon.

Maybe really wanted to start on the margins, particularly in intermodal.

And maybe you get a sense of how would you guys are thinking about that and maybe more specifically from <unk> to <unk>. It seemed like the cost per load went up decently and I guess I'm trying to make sure I understand if thats mix or if it's just sort of the full brunt of labor costs labor inflation, and how do we think that thats kind of trends going forward, because we did see a step up.

Brad Hicks: Overall demand for our JD Hunt 360 box service offering is outperforming the overall market as volumes in the quarter were up double digits versus the prior year customers continue to see value in the flexibility and efficiency of combining the drop trailer capacity with the ability to source the right carrier on the JD Hunt 360 platform to move the trailer. We will continue to make investments in the development of our 360 box offering to strengthen this product and drive greater efficiency for our customers. Overall, we believe there's growing demand in the market for this service offering and we see long-term opportunities in this area.

And load sequentially curious, if we see that continue and will start to drive some operating leverage in that part of the business.

Well I'll start Chris just with.

We're not satisfied with our margin we did have cost pressures in the quarter certainly fuel is a component of that.

And the way I would describe the ability to launch some growth or.

Growth doesn't always come neatly packaged we moved a lot of MTS to onboard new business. Our coiled spring is what enables us to onboard new business quickly.

We're very confident in the product we're offering we're confident in the service we're offering.

And as the next bid cycle comes around.

Brad Hicks: Rapping up on 360, as you have heard throughout our comments, we remain committed to investments in our company foundations, our people, technology and capacity. I think it's appropriate to point out that technology as a foundation between our people and capacity is the link that connects them. Technology enables our people to help strive productivity and create sufficiency in how we source and serve customers with our available capacity. That capacity comes in the form of our own assets or the assets we can secure for or on behalf of our customers.

We're willing to talk to our customers about our cost challenges do we think volume can unlock efficiency, absolutely, but as youre ramping up rapidly.

There will be some cost elements that creep in there that we are that we're going to have to battle.

And secondly, we just we more fully implemented the pricing cycle and let's face. It our price was was down in the quarter and that was part of the margin headwinds.

Your next question comes from the line of Allison <unk> from Wells Fargo. Please go ahead.

Brad Hicks: JD Hunt 360 is our platform that empowers and enables our people and helps us access the right capacity to serve our customers efficiently with a valuable service. Our platform, JD Hunt 360, informs us about the market and provides a solid foundation to drive productivity in our operations across the organization and eliminate waste in the overall supply chain. While some of the productivity is masked by the current environment, we remain confident in our ability to drive long-term value for our customers and our company with our investments.

Hi, Good evening, just sort of in line with that Chris <unk> question there.

The positive are you seeing more positive trends there.

And there's certainly a market share grab from truckload potentially that's out there.

How do you think of releasing that excess capacity into the market at this point, assuming your share gain and the opportunity out there how should we think of that as we kind of move through.

The progression into more positive trends here.

Well Allison I don't know how to to give you.

Brad Delco: This concludes my comment, so I'll turn it over to Brad Delco to provide instructions before the operator opens the call for Q&A. Thank you, Brad, and just for the audience, given the number of folks in Q, we're going to limit the question to one question with no follow-up.

A firm guidance on on how quickly it will come on board.

We're engaged with our customers every day looking for.

Ways to save them money and one of the primary ways. We do that is convert highway business to intermodal we're looking to.

Chris Weatherby: Chris, Chris, then you can go ahead and start the Q&A. Your first question comes from the line of Chris Weatherby from City Group. Please go ahead.

Better balance, where we can with Onboarding new business that supports our network and those will be our focus areas in terms of how quickly. It comes on I guess.

Chris Weatherby: Hey, thanks. Good afternoon. Maybe we'll want to start on the margins, particularly in their modal and maybe get a sense of how you guys are thinking about that. Really, maybe most specifically from 2Q to 3Q, it seemed like the cost per load went up decently. And I guess I'm trying to make sure I understand if that's mixed or if it's just sort of the full brunt of labor cost, labor inflation. And how do we think that that kind of trends going forward because we did see a step up and load sequentially curious if we see that continue if it will start to drive some operating leverage in that part of the business?

That gets determined by how quickly the customers grow and how the overall market reflects on us I am confident in the service product we're offering that's what we can control right now and so that's what we're focused on.

Your next question comes from the line of Jordan <unk> from Goldman Sachs. Please go ahead.

Yes, hi.

I know, it's hard to put all the moving pieces together, but I'm sort of just curious the third quarter margin intermodal I mean do you think this could represent the bottom of the cycle. If volumes continue to inflect positive in box turns move up sequentially, which occurred in the third quarter. Thanks.

John Roberts: Well, I'll start, Chris, just with, we're not satisfied with the margin. We did have cost pressures in the quarter, certainly fuel us a component of that. And the way I would describe the ability to launch some growth, you know, our growth doesn't always come neatly packaged. We moved a lot of empties to onboard new business. Our coiled spring is what enabled us to onboard new business quickly. We're very confident in the product we're offering. We're confident in the service we're offering.

Yes.

Well I think when you when you phrase it like that.

All depends on what happens with our customers' volume, but if everything were to remain equal and we can onboard more volume and there is no.

Recession, we're faced with then yes, it can be the bottom, but theres. So many external factors that are going to influence.

Okay.

John Roberts: And as the next bit cycle comes around, you know, we're willing to talk to our customers about our cost challenges. Do we think volume can unlock efficiency? Absolutely. But as you ramp it up rapidly, you know, there will be some cost elements that creep in there that we're going to have to battle.

Your next question comes from the line of Ken <unk> from Bank of America. Please go ahead.

Hey, good afternoon. This is kind of extra.

Just on intermodal again, I guess your thoughts on the trend up 4% at the end of the quarter was that due to the Canadian Port strike is that maybe talk about if that trend is continuing in October .

John Roberts: And secondly, we just, we more fully implemented the pricing cycle. And not to face it, our price was down in the quarter and that was part of the margin head.

And then just if youre focused on long term and keep buying the assets I just want to understand that capex comment because it sounded like you're slowing down but if you have all these 15% of assets store do you lengthen the downturn by continuing to buy and store does that make it a longer term time turnaround.

Allison Poliniak: with your next question comes from the line of Allison Poliniak from Wells Fargo. Please go ahead. Hi, good evening. Just sort of in line with Chris's question, you know, there's the positive, you seem more positive trends. There's certainly a market share grab from truckload potentially that's out there. You know, how do you think of releasing that excess capacity into the market at this point, just giving your sugar and the opportunity out there. How should we think of that as we kind of move through the progression of the more positive trends here?

Hey, Ken This is Brad Delco I'm going to try to see if we can answer all five or six of those questions with.

Each of the executives so I'll, let Dan address the intermodal on and let John Kuo address the Capex question and if we Miss one.

<unk> E mail, because I know, we already cut you off.

As the quarter went on one thing that intermodal volumes.

One of the more positive elements is we were really growing throughout the network certainly imported goods that trans load somewhere on the west coast are a part of that but we were pleased with growth we were able to see inside of our eastern network as well. So it was really evenly spread I mean, you might have heard in the prepared.

Allison Poliniak: Well, Allison, I don't know how to give you a firm guidance on how quickly it'll come on board. We're engaged with our customers every day looking for ways to save them money and one of the primary ways we do that is convert highway business to intermodal. We're looking to create better balance where we can with onboarding new business that supports our network. And those will be our focus areas in terms of how quickly it comes on.

<unk> comments, we set a single week volume record during the month of September and that felt really good for our team to see the value of our services and how our customers Trust us and are are giving us more of their networks.

Yeah, and Ken just from a capex standpoint broadly speaking.

Allison Poliniak: I guess that that gets determined by how customers grow and how the overall market reflects on us. I'm confident in the service product we're offering. That's what we can control right now. And so that's what we're focused on.

We've been talking about how we had to retain a lot of equipment in 'twenty one to 'twenty two just because of the inability to get that I think that we've made a lot of great progress on working through our replacement in 'twenty three.

We will still have some in 'twenty four.

Jordan Alliger: Your next question comes from the line of Jordan Alliger from Goldman Sachs. Please go ahead. Yeah, hi. I know it's hard to put all the moving pieces together, but I'm sort of just curious. The third quarter margin intermodal. I mean, do you think this could represent the bottom of the cycle if volumes continue to reflect positive and box turns move up sequentially, which occurred in the third quarter? Thanks.

As you know all of our growth Capex is principally success base through dedicated and even within intermodal. We are carrying as we've talked about excess container equipment right now, but we'll work through that and then we'll purchase new as our growth maintenance deemed necessary.

Okay.

Your next question comes the line of Scott Group from Research. Please go ahead.

Jordan Alliger: Well, I think when you when you phrase it like that, it, you know, it really all depends on what what happens with our customers volume. But if everything were to remain equal and we can onboard more volume and there's no moment procession we're faced with, then yeah, it can be the bottom, but there's so many external factors that are going to influence it.

Hey, Thanks afternoon, So darrin as we enter 2020 for bid season do you think there's further downside risk to intermodal rates into the first half of the year as the next wave of contracts will start to reset or.

Is there a shot that intermodal pricing can start to get better and then just separately just quickly. The dedicated retention went from 98% to 94% is not a one off sort of blip or is that sort of a new potential trend.

Ken Hoexter: Your next question comes from the line of ten holester from Bank of America. Please go ahead. Hey, good afternoon. It's kind of extra just on on intermodal again. I guess your thoughts on the trend up 4% at the end of the quarter. What was that through to the Canadian port strike is that maybe talk about if that trend is continuing in October. And then just if you're focused on long term and keep buying the assets, I just want to understand that CapEx comic because it sounded like you're slowing down.

Well I'll start on the intermodal pricing question look I mean, the reality is it's it's both an opportunity and a risk we don't know.

The freight recession.

Has been a real thing.

We've talked about inventory destocking and the role that that played in demand in our industry for several quarters now and we're confident that that.

Ken Hoexter: But if you have all these 15% of assets stored, do you lengthen the downturn by continuing to buy and store? Does that make it a longer time turn around? Okay, and this is Brad Delko. I'm going to try to see if we can answer all five or six of those questions with each of the executives. So I'll add there and address the modal one and let John Kulo address the CapEx question.

Pressure relief during the during the third quarter.

Questions remain about the U S economy, what's going to happen to the consumer what will demand b as we head into 2020 for I guess, we don't really know that do I think that the quality of our service.

Ken Hoexter: And if we missed one, assuming email. Good, I know we already cut you off. Well, as the quarter went on, one thing that intermodal volumes. One of the more positive elements is we were really growing throughout the network certainly imported goods that translate somewhere on the west coast are a part of that. But we were pleased with growth. We were able to see inside our eastern network as well. So it was really evenly spread.

That's a good discussion with our customers about our cost absolutely. So will there be an attempt and what we talk about the needs that we have and the costs that we're faced with absolutely we will but we're going to have to wait and see how that plays out.

Yes. This is Nick I'll I'll talk about Vcs retention, we did face some pressure in the quarter on some losses of a couple of accounts that.

Ken Hoexter: I mean, you might have heard in the prepared comments. We set a single week volume record during the month of September. And that felt really good for our team to see the value of our services and how our customers trust us and are giving us more of their network. Yeah, and Ken, just from a cat-back standpoint, probably speaking, you know, we've been talking about how we had to retain a lot of equipment in 21 to 22, just because of the inability to get that.

The competition, we also had an account or two smaller account or two that went bankrupt and then just our CVD processes, our customers business slows down we tried it.

You engineer and reduce fleet, so with all that being said the way we reduced our we measure that retention there was some loss in there from same store sales a quarter ago.

Can't tell you what the future is going to abate I don't know what the economy is going to be I do feel very confident with our execution and our disciplined around all of that and so feel good about the future, but I can't predict what the next two or three quarters can provide.

Ken Hoexter: I think that we've made a lot of great progress on working through our replacements in 23. We'll still have some in 24. As you know, all of our growth cat-backs is principally success-based, through dedicated and even with intermodal. We are carrying, as we talked about, excess container equipment right now, but we'll work through that, and then we'll purchase new as our growth plans deemed necessary.

Your next question comes from the line of Justin Long from Stephens. Please go ahead.

Thanks, I wanted to ask one on the acquisition of the brokerage business from Dan Logistics is there anything you can share on the impact this could have on both the topline and the bottom line and as you think about the longer term does this deal change your strategy for Ics include.

Scott Group: Your next question comes in line of Scott Group from Research. Please go ahead. Hey, thanks afternoon.

Scott Group: So, Darren, as we enter 2024 bid season, do you think there's further downside risk to intermodal rates into the first half of the year as the next wave of contracts will start to reset? Or is there a shot that intermodal pricing can start to get better?

<unk> targets on profitability.

Hey, Justin This is Brad Hicks, let me start by just saying that.

When we evaluated that acquisition, we saw several elements.

We like one in particular is just how their customer base complements against our customer base.

Scott Group: And then just separately, just quickly, the dedicated retention went from 98 to 94%. Is that a one-off sort of blip? Or is that sort of a new potential trend?

The other side of that is and I mentioned in my prepared remarks, the welcoming of the agents that's a new area of investment for us and so we do feel like we want to figure that out and then look to exploit that and when you really think about the backdrop of the breadth of services that J B Hunt can offer we really feel.

Scott Group: Well, I'll start on the intermodal pricing question. Look, I mean, the reality is it's both an opportunity and a risk. We don't know. Well, you know, the freight recession has been a real thing. As you know, we've talked about inventory destocking and the role that that played in demand in our industry for several quarters now. And we're confident that that pressure relief during the third quarter questions remain about the US economy.

Like that could maximize the potential.

The agent business model.

And so we're really excited about that as we think about the deal itself.

I mentioned that will have some lingering cost in Q4, we think that those will be in the range of $5 million to $6 million in part due to acquisition costs as well as integration related expenses and then just as a maybe a baseline benchmark we feel like in Q4.

Scott Group: What's going to happen to the consumer? What will demand be as we head into 2024? I guess we don't really know that. Do I think that the quality of our service wants a good discussion with our customers about our costs? Absolutely. So, will there be an attempt? And will we talk about the needs that we have and the costs that we're faced with? Absolutely, we will. But we're going to have to wait and see how that plays out.

That's going to generate an incremental approximately $100 million worth of revenue for Ics.

Your next question comes from the line of Amit Nycturia from Deutsche Bank. Please go ahead.

Thanks, Hi, everyone.

Yeah, and I just wanted to go back to volume.

Nick Hobbs: Yeah, this Nick, I'll talk about DCS retention. We did face some pressure in the quarter on some losses of a couple accounts that to competition. We also had an account or two smaller account or two went bankrupt. And then just our CBD processes, our customer's business flows down. We try to value engineer and reduce fleet. So with all that being said, the way we reduce, we measure that retention. There was some loss in there from same store sales a quarter ago.

We've kind of been in this.

One step forward one step back.

NAMIC with volume releases.

January .

And there's obviously some cyclical things going on that are good in terms of the west coast imports, maybe a couple of months ago, and you're taking some market share, but there are some leading indicators that are showing maybe.

The volume coming into the West Coast ports is coming down as the peak season is a little bit muted and so I wanted to kind of balance that with maybe the confidence that you all are kind of exuding on volume.

Nick Hobbs: Can't tell you what the future is going to be. I don't know what the economy is going to be. I do feel very confident with our execution and our discipline around all that. And so feel good about the future, but I can't predict what next two three quarters can provide.

And just trying to understand can we read the situation a couple of months from now where what we're seeing in September and August was a little bit of a head fake from a volume perspective, just help us with the confidence that you have in terms of what youre seeing an ability to kind of continue on that trend.

Justin Long: Your next question comes from the line of Justin Long from Steven. Please go ahead. Thanks. I wanted to ask one on the acquisition of the brokerage business from the end logistics. Is there anything you can share on the impact this could have on both the top line and the bottom line? And as you think about the longer term, does this deal change your strategy for ICS, including your targets on profitability?

Well thanks.

<unk>.

The tough part about a volume conversation is.

Our customers haven't been very accurate with their forecasts or their ability to predict what their needs are what they are confident and our confidence remains high on is that.

When they do have a need where we're a go to provider for them and we continue to grow confidence out of our customers in our execution ability or capacity or willingness to two startup new business quickly.

Brad Hicks: Hey, Justin, this is Brad Hicks. Let me start by just saying that you know, when we evaluated that acquisition, we saw several elements that we liked. One in particular is just how their customer base compliments against our customer base. The other side of that is, and I mentioned in my prepared remarks, the welcoming of the agents. That's a new area of investment for us. And so we do feel like the we want to figure that out and then look to exploit that.

And so our approach to that we will continue to be the same we have.

Our customers are under cost pressure and one of the ways. They can save money as convert their highway business back to intermodal and so we're going to be very focused on and our ability to grow there.

Brad Hicks: And when you really think about the backdrop of the breadth of services that JD Hunt can offer, we really feel like that could maximize the potential of the agent business model. And so we're really excited about that.

I also can't help but we're winning share in the market any kind of growth to the west coast will be a benefit for us I also think the last 12 months have been so confusing based on the way our customers managed inventory is really I don't think anything.

Brad Hicks: As we think about the deal itself. You know, I mentioned that we'll have some lingering cost in Q4. You know, we think that those will be in the range of $5 to $6 million in part due to acquisition cost, as well as integration related expenses. And then, you know, just as maybe a baseline benchmark, we feel like in Q4, that's going to generate an incremental approximately $100 million worth of revenue for ICS.

It has been predictable and so.

We're very confident in the product we're offering we're confident that we're going to be there for our customers and we're going to continue to offer a product that they want to use that's what we can control.

Your next question comes from the line of Brian Austin back from J P. Morgan. Please go ahead.

Emit Material: Your next question comes from the line of emit material from Deutsche Bank. Please go ahead. Thanks, everyone.

Hey, good evening, thanks for taking the question so.

Just to tie all that up there and can you give us some sense as to how the rest of peak season is going here into October after those records in September and then just more broadly speaking as you as you talk to folks for next year and the shippers that youre dealing with.

Emit Material: I just want to go back to volume. You know, we've kind of been in this one step forward, one step back dynamic with volumes, really since January. And there's obviously some cyclical things going on that are good in terms of the less cost imports. Maybe a couple months ago, and you're taking some market share, but there are some leading indicators that are showing maybe the volume coming into the West Coast ports is coming down as the peak season is a little bit muted.

Can you give us a sense that any of them are trying to lock in capacity for.

For potential uptick and then when it gets something on board before rates started to move up or do you feel like theres still a little bit more inflation that they want to get out of their system, where freight rates, maybe we're taking a harder harder look to start the year and maybe one more bite of the Apple So any sense in terms of partnership positioning and the outlook for next year.

Emit Material: And so I want to kind of balance that with maybe the confidence that y'all are kind of exuding on volume. And just trying to understand, could we be in a situation a couple months from now where, you know, what we're seeing in September and August is a little bit of a head fake from a volume perspective, just help us with the confidence that you have in terms of what you're seeing and ability to kind of continue on that trend.

It would be helpful. Thanks.

Well, let me, let me start with sort of the exit from Q3 into Q4 I mean.

We continue to bring equipment out of storage none of our equipment has gone back into storage and demand remains really really strong.

Just as it was throughout September so far here, we are it's October 17th.

Emit Material: Well, thanks. I think the the tough part about a volume conversation is, you know, our customers haven't been very accurate with their forecast or their ability to predict what their needs are. What they are confident in and our confidence remains high on is that when they do have a need, we're a go to provider for them. And we continue to grow confidence out of our customers in our execution ability, our capacity, our willingness to start up new business quickly.

Things have effectively continued coming out of the back into September as they were.

Thank you you asked the question Brian about.

Expectations, and whether or not shippers, who have another bite of the Apple I, just I think Darren sort of already address its too soon.

Comment on what pricing expectations will look like next year I think there has been a let me just say theres been a handful of customers that are at least engaged in dialogue around.

What maybe we're seeing so it's different than hey, I'm going a bit your business I want another rate reduction there is and there is a sense of I don't want to accidentally run out of capacity in any of my service offerings. So it's at least that dialogue.

Emit Material: And so our approach to that will continue to be the same. We have, you know, our customers are under cost pressure and one of the ways they can save money is convert their highway business back to an intermodal. And so we're going to be very focused on our ability to grow there. I also can't help, but I mean, we're not going to share in the market. Any kind of growth to the West Coast will be a benefit for us.

Don't want that to represent as if they are busy trying to lock up capacity right now I mean, I do think customers would love to lock in.

Low prices.

Emit Material: I also think the last 12 months have been so confusing based on the way our customers managed inventory. It's really, I don't think anything has been predictable. And so we're very confident in the product we're offering. We're confident that we're going to be there for our customers and we're going to continue to offer a product that they want to use. And that's what we can control.

And that's where back to my earlier comments.

We've earned the right to have a conversation about cost challenges, we have and I think that that's been at least understood not telling you anybody's agreeing to anything there's just still a lot of questions out there.

Okay.

Your next question comes from the line of rap Ravi Shanker from Morgan Stanley . Please go ahead.

Brian Ossenbeck: Your next question comes from the line of Brian Ossenbeck from J.P. Morgan. Please go ahead. Do you get a sense that any of them are trying to lock in capacity for potential uptick and they want to get something on board before rates start to move up? Or do you feel like there's still a little bit more inflation that they want to get out of their system from a freight rates and maybe they're taking a harder look to start the year and maybe one more less bite of the apple. So any sense in terms of partnership positioning and outlook for next year will be helpful. Thanks.

Thanks, a lot for anyone.

You guys are flagging competitive risk and multiple segments.

Dedicated Ics I think maybe ill answer I am.

Is this a surprise.

Where's this pressure coming from is it coming from and other public company is it coming from small and midsized carriers I just said.

Follow up on the Iam side a related question you said that you feel like you're taking share and that's driven some of it is volume acceleration.

Again is that share excuse me from truck or are you also taking share from other imc's.

Where do you want to start Brian .

Yeah.

Yeah, I'll have Darren start on the intermodal side, and then I'll, let Nick talk about the competitive dynamics that <unk> seen to the extent.

He is seeing it in Dcs and then.

Brian Ossenbeck: Well, let me, let me start with sort of the exit from Q3 and the Q4. I mean, we continue to bring equipment out of storage. None of our equipment has gone back into storage and demand remains really, really strong just as it was throughout September. So far, here we are at October 17th. Things have effectively continued coming out of the back into September as they were. Now, I think he asked a question, Brian about expectations and whether or not shippers have another bite of the apple.

Brad Hicks can wrap up with comments on brokerage and what he's seeing on power only I think we're taking share both from the highway and from other intermodal channels have been really proud of the team's focus and efforts on the highway conversion front.

But inevitably there have been.

Reising actions by our customers earlier in the year and maybe we didnt win something in three months later.

Come back in through a mini bid we win it a second time, because maybe a provider struggled to service that opportunity and that that's not news that happens every year, but that has certainly been something at play here. This this summer.

Brian Ossenbeck: I just, I think Darren sort of already addressed this too soon to comment on what pricing expectations will look like next year. I think there's been a let me just say there's been a handful of customers that are at least engaged in dialogue around. You know, what maybe we're seeing so it's different than hey, I'm going to bid your business. I want another rate reduction. There's an, there is a sense of I don't want to accidentally run out of capacity in any of my service offering.

With a dedicated I'd, just say that the fleets that we lost.

Brian Ossenbeck: So it's at least a dialogue. I don't want that to represent as if they're busy trying to lock up capacity right now. I mean, I do think customers would love to lock in low prices. And that's where, you know, back to my earlier comments where we've earned the right to have a conversation about cost challenges we have. And I think that that's been at least understood not telling anybody's agreeing to anything. There's just still a lot of questions out there.

A couple of other publicly traded companies.

And we just.

Couldnt match that from a return standpoint, so we walked away, but I would say that if you look at our pipeline, we have a healthy pipeline and the deals that we've won and priced.

Meet our return requirements. So we're very happy with that.

So we're always fighting competition out there so I feel good about the future and where we're going.

And I'll round it out from maybe what we're seeing in brokerage I think that.

In brokerage as you all well know it's been an incredibly difficult environment.

Sabbatical swings in rate from just 12 to 18 months ago versus what we see today. So it is.

More competitive in the brokerage segment than what you heard from Nick and Darren.

It's a fight out there as I mentioned in my prepared remarks, we call. Some freight that was not favorable for us, but we've also lost some freight due to the competitive bid process that our customers.

Ravi Shanker: Your next question comes from the line of rabbi shanker for Morgan Stanley. Please go ahead. Thanks for anyone. So I think you guys are flagging competitive risk and multiple segments dedicated ICS. I think maybe also I am. Is this a surprise? Where's the pressure coming from? Is it coming from other public companies that going from small midsize carriers? I just follow up on the IM side or related question. You said that you feel like you're taking share and that's driven some of this volume acceleration. Again, is that share exclusively from truck or are you also taking share from other IMCs?

Took took advantage of her utilized during this bid season.

And I'll tie it back to our acquisition and really the value of J B Hunt 360, and what we see.

Is leading our platform execute and creating that value for our customers and so.

With that acquisition and where we're at at largely feel like we're at the bottom and just kind of bouncing along but there is extreme pressure on PPE and so we do see carriers pushing back on the floor of what <unk> is today and really just kind of navigating those those choppy waters as we worked through.

Darren Field: Where do you want to start, Brad? You know, I'm Darren Star on Intermodal 5, and then I'll let Nick talk about the competitive dynamics that he's seeing to the extent. He is seeing it in DCS, and then Brad Hicks can wrap up with comments on brokerage and we're seeing on power only. I think we're taking share both from the highway and from other Intermodal channels. I've been really proud of the team's focus and efforts on the highway conversion front, but inevitably there have been pricing actions by our customers earlier in the year, and maybe we didn't win something in three months later, we then come back and through a mini-bid, we win it a second time because maybe a provider struggled to service that opportunity, and that's not new, that happens every year, but that has certainly been something at play here this summer.

The beginning of the fourth quarter.

Ravi I would also say and feel like organizationally, we wanted to be physically responsible and take a long term view on the business that we have and also business that we onboard.

If you heard anything from kind of what these three precedent had talked about nick's comments around not making a proper return.

Aren't talking about a couple of points here. These are dramatic changes.

It maybe our competitors decided to be strategic with that account for whatever reason and we believe the best decision for J B Hunt and the health of our business and our customers long term is to walk away from that business same thing from brands perspective, really challenging what's happening in the market I think.

Brad is leading in that space and really talking to our customers about the long term benefit long term value has that business been up whether it be a sticky answering the why now I do think breads.

Comments around it being we're in a fight there I think.

Darren Field: For the dedicated, I'm just saying that the plates that we lost were a couple of other publicly traded companies, and we just couldn't match that from a return standpoint, so we walked away, but I would say that if you look at our pipeline, we have a healthy pipeline and the deals that we've won and priced meet our return requirements, but we're very happy with that.

The <unk> doesn't last for that long you can't lose money for a long period of time in this business and so I think for US we take a long term view I think in intermodal, where largely where we thought we'd be maybe at the lower end of our pricing expectations that placements, what our customers have talked to us about and where we are leaning forward.

Your next question comes from the line of Brandon <unk> Glen Ski from Barclays. Please go ahead.

Brad Hicks: So we're always finding competition out there, so I'll tell you a bit about the future and what we're going. And I'll round it out from maybe what we're seeing in brokerage. I think that, you know, in brokerage, as you all well know, it's been an incredibly difficult environment. Mattible swings and rate from just 12 to 10 months ago versus what we see today, so it is probably more competitive in the brokerage segment than what you heard from Nick and Darren.

Good afternoon, and thanks for taking my question.

Shelley maybe to follow up from that and the idea about being disciplined around capital because you guys have been reinvesting in the business here for the last two years at pretty elevated rates.

And I know, we had the pandemic in the last five years, but intermodal volumes have really been kind of stagnant looking back that far I guess, what do you guys see in the next five years that transitions out of the stagnant volume outcomes I know theres been a lot of changes with the rail if the pandemic, but I guess the fear here and I think historically you guys were always valued high.

Brad Hicks: You know, it's a fight out there. As I mentioned in my prepared remarks, we called some freight that was not favorable for us, but we've also lost some freight due to competitive bid process that our customers took advantage of or utilized during this bid season. But you know, as I'll tie it back to our acquisition and really the value of JD Hunt 360 and what we see is letting our platform execute and creating that value for our customers, and so with that acquisition and where we're at, you know, I largely feel like we're at the bottom, and just kind of bouncing along, but there is extreme pressure on PTE.

Because of the focus on ROIC, but maybe or we just overinvest in this cycle now.

Well, let me say this Brennan I think our customers Darrin that arent necessarily our customers are struggling.

With with our forecast will look like and I know, we gave an update on this earlier, but I. Just we completed bid season I would expect our customers to have made material improvements in what freight they are giving us a bid compliance and we have not seen a major change in our bid compliance. So I think we're up into the mid 60 now and intermodal.

And just for comparison.

Brad Hicks: And so we do see carriers pushing back on the floor of what PTE is today, and really just kind of navigating those choppy waters as we work through the beginning of the fourth quarter. Robbie, I would also say it as feel like organizationally, we want to be physically responsible and take a long-term view on the business that we have and also business that we onboard. You know, if you heard anything from kind of what these three presidents have talked about, you know, mixed comments around not making a proper return, you know, we aren't talking about a couple of points here.

If you went back to 2017 that would be in the Ninety's. So customers are struggling to know what's going to happen from a forecasting perspective. If you go look at the one we have parts of our business intermodal JBT.

Inside Ics those businesses arranging when that's fully implemented between mid <unk> and mid sixties, that's difficult for us to think about our networks and what that will look like but we also know that customers aren't satisfied with that this is the reason youre seeing many beds trying to find that equilibrium on are the right.

<unk> between high service and cost overall, and then I should say, where we are investing.

Brad Hicks: These are dramatic changes that maybe our competitors decided to be strategic with that account for whatever reason, and we believe the best decision for JD Hunt and the health of our business and our customers long-term is to walk away from that business. Same thing from Brad's perspective, really challenging what's happening in the market. I think, you know, Brad is leading in that space and really talking to our customers about the long-term benefit, long-term value.

Remember in 2022, a big part of our.

And that's meant that carried over into 2020 was our lack of ability to gate equipment, particularly on the tractor side CPUC, our fleet replenishment and making sure that we're in good shape there, but also in intermodal what Darren talked about our ability to move very quickly with our customer who is a key to our success in September anything moving in.

Brad Hicks: Has that business been able to be as sticky as we would like? No, I do think that our comments around it being we're in a fight there. I think, you know, the fight doesn't last for that long. You know, you can't lose money for a long period of time in this business. And so I think for us, we take a long-term view. I think in a modal, we're largely where we thought we'd be, maybe at the lower end of our pricing expectations, but pleased with what our customers have talked to us about and where we are moving forward.

To October you heard Dan say, we're continuing to Unstack. Those are hundreds at a time you are talking about big numbers that we're swinging dramatically and so for US we know what it looks like to shut down our supply chain, we did it in 2020.

In intermodal it was very difficult to onboard equipment and to get things moving again I do think that we're doing a nice job of evaluating what our customers are saying with our own experience to that and trying to plan out how much equipment that should look like we still believe in our long term future our customers believe in it as well and then.

Brandon Oglenski: Your next question comes from the line of Brandon Oglenski from Barclays. Please go ahead. Good afternoon. Thanks for taking my question. Shelley, maybe to follow up from that and you know the idea about being disciplined around capital because you guys have been reinvesting the business here for the last two years at pretty elevated rates. And you know I know we have the pandemic in the last five years, but intermodal volumes have really been kind of stagnant looking back that far. I guess what do you guys see in the next five years that transitions out of this stagnant volume outcomes?

Just one more thing I think our customers have a lot of questions and the first half of the year. They were struggling on inventory. They were trying to determine our conversations has shifted slightly and to now they have confidence in intermodal at least our intermodal product can deliver that's what's given data on so much confidence to talk street desk, but also recognizing there.

Our so many share that's on the highways that need to convert that's why we made.

The release to get to 150000 intermodal containers, so for us it sounds a little bit of timing certainly we don't price our business based on how much equipment. We have we price our business based on each customer what the market looks like and what balance looks like as well and if we want to move into storage, that's us being disciplined in our.

Shelley Simpson: I know there's been a lot changes with the rail of the pandemic, but I guess the fear here, and I think historically you guys were always valued higher because of the focus on ROIC, but maybe are we just over investing this cycle now? Well, let me say this, Brandon, I think our customers there in this earlier customers are struggling still with what their forecast will look like, and I know we gave an update on this earlier, but I just we completed this season.

<unk> not distort the market dramatically.

Your next question comes from the line of Jonathan Chappell from Evercore. Please go ahead.

Shelley Simpson: I would expect our customers to have made material improvements in what freight they are giving us a bid compliance and we have not seen a major change in our bid compliance. So I think we're up into the mid 60s now in intermodal just for comparisons. If you went back to 2017, that would be in the 90s. So customers are struggling to know what's going to happen from a forecasting perspective. If you look at the one way parts of our business, intermodal JVT and inside ICS, those businesses are ranging with bids fully implemented between mid 50s and mid 60s.

Thank you and good afternoon.

Kelly or Darren I, just wanted to revisit the leverage part of the intermodal model, where your volumes were up again, but the margin was at a cycle low maybe a multi cycle. Though so is this strictly a function of carrying too. Many resources you need the volume to come back once you get the volume you can add significantly more without adding resources and you get the margin improvement there or how much of it is.

Moving the pricing needle and then therefore do we have to wait for a kind of a full year of resetting the price before we can kind of revisit the bottom end of the long term range.

Shelley Simpson: That's difficult for us to think about our networks and what that will look like, but we also know that customers aren't satisfied with that either. This is the reason you're seeing many bids trying to find that equilibrium on the right balance between price, service, and cost overall.

Well, so I've said this multiple times that volume is maybe a little bit more volume more valuable to our margin today than it ever has been because of the amount of capacity. We had underutilized. So yes volume is one of the key components.

Shelley Simpson: And then I should say where we are investing. Remember in 2022, a big part of our investment that carried over into 2022 was our lack of ability to get equipment, particularly on the tractor side. CPC are a plate replenishment and making sure that we're in good shape there, but also in intermodal, what Darren talked about our ability to move very quickly with our customer was a key to our success in September.

But volume proportionately doesn't move the margin needle nearest fastest price does the harsh reality is is we need both.

Of those elements.

Pricing has long been a lagging indicator and here you are at the end of Q3, you can see the result from <unk>.

Shelley Simpson: And even moving into October, we heard Darren say we're continuing to unstack those aren't 100 at a time. We're talking about big numbers that we're swinging dramatically. And so for us, we know what it looks like to shut down our supply chain. We did it in 2020 in intermodal. It was very difficult on board equipment and to get things moving again. I do think that we're doing a nice job evaluating what our customers are saying with our own experience to that and trying to plan out how much equipment that should look like. We still believe in our long term future our customers believe in it as well.

More or less a fully implemented recent bid cycle and now we're going to go into a new one.

And so you don't get to see the full results of that probably until next summer. The end of Q3. Meanwhile, we'll be looking to grow and unlock benefits there.

But there is no magic match.

Magic recipe here, we need both of those elements and that's why we're so focused on delivering excellent service. So that we can generate the value for our customers that translates into an appropriate return on our investments.

Shelley Simpson: And I might just echo one more thing. I think our customers had a lot of questions in the first half of the year. They were struggling on inventory. They were trying to determine our conversations have shifted slightly into now they have confidence that intermodal, at least our intermodal product can deliver. That's what's given Darren so much confidence to talk through this, but also recognizing there are so many shipments on the highways that need to convert.

Okay.

Your next question comes from the line of Jeff Kauffman from vertical Research partners. Please go ahead.

Thank you very much.

Kelly, Thank you and your team for answering all that you have I wanted to ask a question a different way.

You've seen a lot of cycles and each one is unique and each one is different and I think what's different about this one as we came out of this extremely tight.

Shelley Simpson: That's why we made the release to go to 150,000 intermodal containers. So for us, it's down to a little bit of timing. Certainly, we don't price our business based on how much equipment we have. We price our business based on each customer what the market looks like and what balance looks like as well. And if we want to move into storage that that's being disciplined in our approach not to store the market dramatic.

<unk> situation and to a very loose one because of destocking.

I hear you, saying, we see signs that looks like it's ending.

But what is different in terms about managing this cycle than previous cycles.

And kind of to the question Thats been asked two or three times.

Based on where you are right that when do you think on a corporate basis, we come out of this volume morass and when do you think on a corporate basis, we're in a position to realize higher yields on the service youre, providing because of the higher costs.

Jonathan Chappell: Here next question comes from the line of Jonathan Chappell from Evercore. Please go ahead. Thank you. Good afternoon. Shelley or Darren, I just want to revisit the leverage part of the intermodal model. No, your volumes were up again, but the margin was at a cycle low, maybe a multi cycle low. So is this strictly a function of carrying to many resources you need the volume to come back.

Thank you for that conversation Jonathan.

I would say we have had a lot of experiencing managing through the cycles I do want to repeat something that I've said previously and that is this for this freight recession largely resembles the great economic recession in 2009.

Jonathan Chappell: Once you get the volume, you can add significantly more without adding resources and you get the margin improvement there where how much of it is actually moving the pricing needle and then, therefore, do we have to wait for kind of a full year of resetting the price before we can kind of revisit the bottom end of the long term range. Well, so I've said this multiple times that volume is maybe a little bit more volume, more valuable to our margin today than it ever has been because of the amount of capacity we've had underutilized.

Yes, I think when I look back to what we did and we did a great job was really investing in our people, making sure that our people felt safe our people understand our long term strategy and we did a great job coming through that I believe for us in this near term continuing to evaluate what our customers are saying.

Compared to what's happening in the market and making sure that we're prudent in our short term cost while not losing long term focus I think is very important for us continuing moving forward you've heard Darren talk about pricing you've heard Brad talk about pricing I think the cautiousness that you hear from us as well.

Jonathan Chappell: So yes, volume is one of the key components, but volume proportionally doesn't move the margin needle nearest fast as price does. The harsh reality is is we need both of those elements pricing has long been a lagging indicator and here you are at the end of Q3 and you can see the results from more or less a fully implemented recent bit cycle and now we're going to go into a new one.

Jonathan Chappell: And so you don't get to see the full results of that probably until next summer the end of Q3 meanwhile we'll be looking to grow and unlock benefits there, but there is no magic magic recipe here we need both of those elements and that's why we're so focused on delivering excellent service so that we can generate the value for our customers that translates into an appropriate return on our investments.

We can talk about a freight recession, we're not experts how much can happen in the economy. We don't have customers negative I would say they are neutral to positive, but I don't know that anybody is an expert here as to whats going to happen from an overall freight demand perspective, so it's difficult for us to see what's happening moving forward.

I'll tell you we're not changing our margin targets, we are very focused on delivering value for our customers. We know that we can deliver value for customers our customers will pay us an appropriate return and therefore delivers long term compounding returns for our shareholders. That's our focus our entire company all 35000 really focused on making sure we do that.

Very well, we deliver for our customers and we look at it from their wins, we have a great opportunity to eliminate waste through mode converting into inner mountain using the power of the platform and our highway services continuing to differentiate our value inside our Panama business segment and delivering the most efficient place to our dedicated contract services faster overall.

Jeff Kaufman: Your next question comes from the line of Jeff Kaufman from vertical research partners, please go ahead. Thank you very much. Shelley, thank you and your team for answering all that you have.

That's how we talk to customers and we believe that can deliver the right returns over the long term, but also if we see something changing in the near term. We will continue to address have conversations with customers and make sure that we are delivering on the promises that we're making.

Jeff Kaufman: I want to ask question a different way. You've seen a lot of cycles and each one unique and each one is different. I think what's different about this one is we came out of this extremely tight capacity situation and into a very loose one because of destocking. I hear you saying we see signs that it looks like it's ending, but what is different in terms about managing this cycle than the previous cycles.

Your next question comes from the line of Bascom majors from Susquehanna. Please go ahead.

Your your I'm sorry.

Quarter end dedicated truck count rose for the first time in a year this quarter.

Jeff Kaufman: And you know kind of to the question that's been asked two or three times based on where you are right now, when do you think on a corporate basis, we come out of this volume arrests and when do you think on a corporate basis, we're in a position to realize higher yields on the service you're providing because of the higher costs. Thank you for that conversation, Jeff. And you know, I would say we have had a lot of experiencing managing through the cycles.

Can you talk a little bit about if you think we're through the worst of the like for like shrinkage in and.

Customer churn and whether or not that can be stable to growing again.

We ended up in that environment into next year.

Do a lot of costs have to come back to support that growth after you've been in growth mode for several quarters. Thank you.

Yes, I would just say that.

Shelley Simpson: I do want to repeat something that I've said previously, and that is this break this break recession largely resembles the great economic recession of 2009. You know, I think when I look back to what we did and we did a great job was really investing in our people, and if you sure that our people felt safe, our people understood long term strategy, and we did a great job coming through that. I believe for us in this near term, continuing to evaluate what our customers are saying, and compared to what's happening in the market and making sure that we're prudent in our short-term costs while not losing long-term focus.

Based on our first of all we think that we're flat stable with where I would say if I look at our renewals and things coming up I feel that we're in a pretty good position there talking with our customers feel pretty stable.

And then our pipeline is healthy so I like where we're at we're going to hit our targets.

We feel very comfortable hitting our sales targets and I think that sets us up hopefully very good but again I don't know what the economy is going to do and how people are going to react to that.

But I would just say that our customers are new customers that were out pursuing theres still loving the product that we have out there we're still successful in the sales of that even in this environment.

Shelley Simpson: I think it's very important for us continuing moving forward. You've heard Darren talk about pricing. You've heard Brad talk about pricing. I think the cautiousness that you hear from us is, you know, we can talk about a break recession. We're not experts on what's going to happen in the economy. We don't have customers negative, I would say they are neutral to positive. But I don't know that anybody is an expert here as to what's going to happen from an overall freight demand perspective. So it's difficult for us to see what's happening moving forward.

We have a lot of interest out there. So we're only 4% to 5% of the market and so we feel good about.

The future paybacks in this Brad Delco I do want to add just a little bit more to that though I mean keep in mind too Nick saying that the fleet is stable there have been startups throughout this year and so.

As Nick alluded to we expect to hit our sales target of 1200 trucks. This year that has come with some shrinkage. It at some of the accounts that has come with losing some accounts that we've already talked about and reflected in sort of a 94% retention versus what was previously usually north of 98.

Shelley Simpson: I will tell you, we're not changing our margin targets. We are very focused on delivering value for our customers. We know that we can deliver value for customers. Our customers will pay us in appropriate return and therefore deliver as long-term compounding returns for our shareholders. That's our focus. Our entire company, all 35,000, really focused on making sure we do that very well. We deliver for our customers and we look at it from their lens.

But we have had startups and we've had margins hold up relatively well and so hopefully again, depending on things that are outside of our control with the economy, we could grow our fleet without seeing maybe the extreme types of pressure on margins that we saw during some of those COVID-19 the years, when we were bringing on.

Shelley Simpson: We have a great opportunity to eliminate waste through mode converting into intermo. Using the power of the platform and the highway services, continuing to differentiate our value inside our final mile business segment and delivering the most efficient place for dedicated contract services. That's our overall vision. That's how we talk to customers. And we believe that can deliver the right returns over the long term.

Several thousand trucks, a year, which was more unusual in terms of the pace of growth and the other thing on the truck and hope that we don't need to lose during the year, where there was about 600 trucks.

John Roberts: But also if we see something changing in the near term, we'll continue to adjust, have conversations with customers and make sure that we are delivering on the promises that we're making.

That we had extra from having no trucks out there so.

We take that out of there then it paints a little different picture. So we feel good about that and it will be add to that just to pick because.

Bascome Majors: Here next question comes from the line of a basket of majors from Susquehanna.

Exactly what I was going to try to talk to is that you've done a great job taken out the incremental trucks that we've had have any carry because we couldn't get new equipment, but also the CVD work that you've done being offensive and our strategy there yes.

Nick Hobbs: Please go ahead. You're a quarter in dedicated truck count rose for the first time in a year this quarter. Can you talk a little bit about if you think we're through the worst of the like for light shrinkage and customer churn and whether or not that can be stable to growing again.

Yes, so we've done a lot of one and two truck reductions at existing accounts, where you're seeing that through the history. You asked about our history as we do that through down cycles.

His back and dividends from those trucks coming back plus some others. So we really feel good about that and if.

Nick Hobbs: And then if we end up in that environment the next year, do a lot of costs have to come back to support that growth after you've been in degrowth mode for several quarters. Thank you. Yeah, I would just say that based on our first of all, we think that we've flat stable is where I would say if I look at our renewals and things coming up, I feel that we're in a pretty good position there talking with our customers feel pretty stable.

If I look at the business, we process in 'twenty, two and how it's performing in 'twenty three is performing exactly the way we process it and thats with the cost in there and Thats what the proper returns. So we feel very solid about our dedicated model and I think my point to that is that's our long term view, making sure that we flex with our customers.

Understanding Orient dedicated fleets.

Nick Hobbs: And then our pipeline is healthy. So I like where we're at. We're going to hit our targets. We feel very comfortable hitting our sales targets. And I think that sets us up hopefully very good. But again, I don't know what the economy is going to do and how people are going to react to that. But I would just say that our customers, our new customers that we're out pursuing, they're still loving the product that we have out there. We're still successful in the sales. So that's even in this environment. We have a lot of interest out there. So we're only 45% of the markets. And so we feel good about the future.

Long period of time in.

In total and I think Thats a good thing.

Your next question comes from the line of David Vernon from Bernstein. Please go ahead.

Hey, good afternoon, guys. Thanks for taking the question. So team I would like to ask you a little bit about driver availability and hiring from a capacity perspective, and we spent a lot of the last 510 years talking about driver shortages could you talk a little bit about the labor environment when youre hiring for dedicated and intermodal and then also from a capacity perspective as you look at the brokerage business are you seeing any signs of Quebec.

Assay rationalization in the truckload market that you can point us to in terms of trying to get supply and demand back into a better balance. Thank you.

Nick Hobbs: Hey, batsman, this is Brad Delco. I do want to add just a little bit more to that though. I mean, keep in mind too when Nick saying that the fleet is stable, you know, they have been startups throughout this year. And so, you know, as Nick alluded to, we expect to hit our sales target of 1,200 trucks this year. That has come with some shrinkage at some of the accounts that has come with losing some accounts that that we've already talked about and reflected in sort of the 94% retention versus what was previously usually north of 98.

Yes.

I'll take this Nick I'll take the driver side.

Good really solid drivers are still hard to find we are fond of them, they're much more available than they have been.

But we feel very good about the supply of drivers we still have pockets in different areas that are Todd and the driver wages are not going anywhere. They are staying up there is a lot of demand out there for other other jobs. So we don't see the driver wages really going down.

Nick Hobbs: But we have had startups and we've had margins hold up relatively well. And so, you know, hopefully to begin, depending on things that outside of our control with the economy. You know, we could grow our fleet without seeing maybe the extreme types of pressure on margins that we saw during some of those COVID years when we were bringing on several thousand trucks a year, which was more unusual in terms of the pace of growth.

But with our.

Corporate Robert personnel group, we are able to find the drivers we need right now.

From a carrier community, we are seeing the pressure.

Kind of show itself with with reductions or some losses in closures.

But I also feel like.

That difficult backdrop of the brokerage environment and what when I mentioned that they are pushing back on the the lowering cost of pte.

Nick Hobbs: So, the other thing on the truck, you know, that we don't need to lose during the year where there was about 600 trucks that we had extra from having no trucks out there. So, we take that out of there and it thinks a little different picture. So, we feel good about that. Let me add to that just a bit because exactly what I was going to try to talk through is that you've done a great job taking out the incremental trucks that we've had, having a carry because we couldn't get new equipment.

Kind of come in line with what customer rates have done and so to me. That's the signal that says there at that breaking point and so while it hasnt been in the high volume yet we do anticipate that we will continue to see an increase in losses or closures as we move forward deeper into 'twenty three 'twenty four.

As long as this rate environment persists and so we have seen that continue to gain momentum.

Nick Hobbs: But also the CBD work that you've done being offensive and our strategy there. Yeah, so we've done a lot of one to two truck reductions at existing accounts and we think that through the history. You asked about our history is we do that through down cycles. It pays back and dividends from those trucks coming back plus some others. So, we really feel good about that. If I look at the business we priced in 22 and how it's performing in 23 is performing exactly the way we priced it and that's with the cost in there and that's with the proper return.

Macro scale, yet, but I think that's just a matter of time.

Theres only so long that the carriers can hang on with the low rates.

This concludes the Q&A portion of the call I'd like to turn the call over to President Shelley Simpson for some closing remarks.

So thank you so much for joining our call I will say that you've heard as talk through this last hour really as to where we see the businesses today, but also focused on our future and what our long term prospects are across all facets of our business segments. We do love the complementary nature of all five of our segments as our.

Nick Hobbs: So, we feel very solid about our dedicated model. And I think my point to that is that's our long term view, making sure that we select with our customers understanding or in dedicated fleets for a long period of time in total. And I think that's a good point.

Customers are really ask us to help them through the North American supply chain, we feel like that we can answer our customers with any of those five segments pleased with the volume growth in intermodal and what our customers have told us that they want to buy from US we're starting to see that in our results. We allowed the resiliency of our dedicated bottle and I think youre seeing that play out.

David Vernon: Your next question comes from the line of David Vernon from Bernstein. Please go ahead. Hey, good afternoon guys and thanks for taking the question.

Nick Hobbs: So team, I'd like to ask you a little bit about driver availability and hiring from a capacity perspective. And we said a lot of the last five, 10 years talking about driver shortages. Could you talk a little bit about the labor environment when you're hiring for dedicated and intermodal. And then also from a capacity perspective is you look at the brokerage business. You know, you see being any signs of capacity rationalization in the truckload market that you can point us to in terms of trying to get supply and demand back into better balance.

Out here in the third quarter very pleased with our progress in final mile. We didn't talk about that much but very pleased but that's continuing to push our customers on making sure that we are paid appropriately for the value that we create and also pleased with what's happening in <unk> hundred 60 box with volume growth overall, the freight environment has been challenging.

It is nothing new to our team, it's not a matter, yes, but when we actually can completely out of the freight recession, but we are encouraged by some of the results in some of our businesses I would say in total we're very proud of our people and in this environment for us to be able to flex in all of our businesses and make sure that we had already.

Nick Hobbs: Thank you. Yeah, I'll take this neck. I'll take the driver's side. Good, really solid drivers are still hard to find. We are finding them. They're much more available than they have been. But we feel very good about the supply drivers. We still have pockets in different areas that are tied. And the driver wages are not going anywhere. They're staying up. There's a lot of demand out there for other other jobs. So we don't see the driver wages really going down.

Delivering on what our customers are asking us for is the highlight of everything that we do sometimes our people are working so hard and they don't get to see the fruit of their labor, but I would tell you. They are working harder today than they've ever worked and total for that we're super proud of our team we remain committed to our team and remain committed in our history.

Nick Hobbs: But with our corporate driver personnel group, we are able to find the drivers we need. I think from a carrier community, we are seeing the pressure kind of show itself with reductions or some losses and closures. But I also feel like that difficult backdrop of the brokerage environment and what I mentioned that they're pushing back on the lowering cost of PPE to kind of come in line with what customer rates have done.

Nick Hobbs: And so to me, that's the signal that says they're at that breaking point. And so while it hasn't been in high volume yet, we do anticipate that we will continue to see an increase in losses or closures as we move forward deeper into 23 into 24 as long as this rate environment persists. And so we have seen that continue to gain momentum, not at macro scale yet, but I think that that's just a matter of time. There's only so long that the carriers can hang on with the low rates.

Key priorities delivering value for our customers committed to our people and finally committed to long term returns for our shareholders with that I'd like to turn it over to John Roberts, our CEO for final thoughts. Thanks, Shelly Farewell said I continue to land on your <unk>.

Andy here that this recovery is not an if question at all.

When question.

Appreciate and respect the colors need more on the win.

Wish we could give you more of the compliance data definitely tells us that we're all working towards a better asked of owning both the data and the and the results in the quarter tell us that there is a lot of headwinds out there but.

I think we continue to find our way back to this idea of people who have experience.

Indeed, the people on this leadership team have an app.

Absolute ton of experience in that.

That gives us confidence to not feel like we have to make short term decisions. When we know what the right long term decisions are for instance, when we talk about our container ads, we used very large macro numbers, but I wanted to emphasize that was a very very precise calculation may.

Brad Delco: This concludes the Q&A portion of the call.

Shelley Simpson: I'd like to turn the call over to President Shelley Simpson for some closing remarks. So thank you so much for joining our call. I will say that you've heard as talk through this last hour really is to where we see the businesses today, but also focused on our future and what our long term prospects are across all five of our business segments. We do love the complimentary nature of all five of our segments as our customers really ask us to help them through the North American supply chain.

With the railroads on real capacity real availability real conversion opportunity, we didn't just make up a number there and when we don't see that demand, we look at and we alter the timing, but what Shelly said, it's so vitally important.

Shelley Simpson: We feel like that we can answer our customers with any of those segments. Please, with the volume growth and intermodal and what our customers have told us that they want to buy from us. We're starting to see that in our results. We love the resiliency of our dedicated bottle and I think you're seeing that play out here in the third quarter. Very pleased with our progress and final mile. We didn't talk about that much, but very pleased with us continuing to push our customers on, making sure that we are paid appropriately for the value that we create.

We were asked questions about just today the volume in intermodal what drove the volume down in intermodal as PSL very very simply.

And we reacted to that by completely shutting down our desire to continue to bring on equipment that is extraordinarily hard to source.

And it takes a very long time to get landed.

His experience working right there for you, saying Hey, we did the calculation we did the math these assets have an extraordinarily long life. They sit quietly we're not stockpiling class eight tractors, we're buying the right assets.

Shelley Simpson: And also pleased with what's happening inside 360 bucks with volume growth overall. The freight environment has been challenging that is nothing new to our team. It's not a matter of yes, but when we actually come completely out of the freight recession, but we are encouraged by some of the results in some of our businesses. I would say in total, we're very proud of our people and in this environment for us to be able to flex in all of our businesses and make sure that we are delivering all what our customers are asking us for is the highlight of everything that we do.

When I asked myself, how can we best position the company for the win win.

When we recover we have to invest in the right assets and we have to learn from our experiences and we apply that it's just preparation for the win.

Shelley Simpson: Sometimes our people are working so hard and they don't get to see their fruit of their labor, but I will tell you they're working harder today than they've ever worked in total for that. We're super proud of our team.

I totally appreciate what the folks on this call do but when you are here with us in this room were looking at long term.

So much real good conversation on Capex and it is elevated and that that is a very serious matter, but I want to reiterate the drivers behind that were a shortage of supply.

Shelley Simpson: We were made committed to our team and remain committed in our three key priorities, delivering value for our customers, committed to our people, and finally committed to long-term returns for our shareholders.

Really talk about the impacts that shortage of supply has on our system, but when we carry equipment over its natural life you have to carry extra you have to fix it more you have to park. It more we're looking at that with our OEM, saying wait a second let's think this through like we're thinking through container managed.

John Roberts: But that I'd love to turn it over to John Roberts or CEO for final thoughts. Thank you, Shelley. Very well said. I continue to land on your idea here that this recovery is not an if question at all. It's a win question. I really appreciate and respect colors need more on the win. We wish we could give you more of the compliance data that definitely tells us that we're all working towards the better us feeling but the data and the results in the quarter tell us that there is a lot of headwind out there.

Those are all capital events I am like Shelly.

Really pleased with the progress in final mile I think that's an important business for us and I know, there's a lot of pressure on it.

I am thankful for the discipline that I see in the businesses. When we are under so much volume pressure.

John Roberts: But I think we continue to find our way back to this idea of people and experience. The people on this leadership team have an absolute ton of experience and that gives us confidence to not feel like we have to make short-term results. When we know what the right long term decisions are, for instance, when we talk about our container ads, we use very large macro numbers, but I want to emphasize that was a very, very precise calculation made with the railroads on real capacity, real availability, real conversion opportunity, we didn't just make up a number there.

Have the experience to know that holding onto bad deals is not going to turn out right in the long run. We've tried those exercises a don't really work for US we have such great visibility into every aspect of the company every single fleet Dcs has its own Standalone P&L.

No.

Top to bottom what's happening in there and categorically. If you go around the businesses, we know where we have the problems and we just are tolerant to sit in.

If someone else wants to do it at those margins then that's fine with US we will be ready when the right business comes along but.

Finally, I would just say that.

John Roberts: And when we don't see that demand, we look at, and we look at the alter the timing, but what Shelley said is so vitally important, when we were asked questions about just today, the volume and intermodal, what drove the volume down and intermodal is PSR, very, very simply. And we reacted to that by completely shutting down our desire to continue to bring on equipment that is extraordinarily hard to source and take a very long time to get landed.

Shelly is exactly right. The most important asset we have.

35000 people that work here.

And the investments that we'll make in them in the technology and in the capacity that will take us, where we're going or well in place well supported and are underpinned by something that I wrote down that Shelly said that is one of my new favorite phrases.

Remain prudent with short term cost, while maintaining our long term focus.

We thank you for calling in today.

John Roberts: But that experience working right there for you, saying hey, we did the calculation, we did the math, these assets have an extraordinarily long life, they sit quietly, we're not outstoppiling classic tractors, we're buying the right assets in it, and when I asked myself, how can we best position the company for the win, for the win we recover? We have to invest in the right assets and we have to learn from our experiences, and when we apply that, it's just preparation for the win.

June quarter.

And this concludes today's conference call. Thank you for your participation and you may now disconnect.

Yeah.

Okay.

Yeah.

Yeah.

John Roberts: I totally appreciate what the folks on this call do, but when you're here with us in this room, we're looking at that long term. So much real good conversation on CAPEX, and it is elevated, and that is a very serious matter, but I want to reiterate the drivers behind that were a shortage of supply. We'll really talk about the impact that shortage of supply has on our system, but when we carry equipment over its natural life, you have to carry extra, you have to fix it more, you have to park it more.

John Roberts: We're looking at that with our OEMs, say, and wait a second, let's think this through like we're thinking through container management. Those are all capital events. I am, like Shelley, really pleased with the progress in Panama, I think that's an important business for us, and I know there's a lot of pressure on it. I'm thankful for the discipline that I see in the businesses when we're under so much volume pressure to have the experience to know that holding on to bad deals is not going to turn out right in the long run.

John Roberts: We have tried those exercises, they don't really work for us. We have such great visibility into every aspect of the company, every single fleet of DCS has its own standalone piano. Now we know top to bottom was happening in there, and categorically if you go around the businesses, we know where we have the problems, and we just are tolerant to sit, and if someone else wants to do it, if those margins then that's fine with us, we'll be ready when the right business comes along.

John Roberts: But finally, I'd just say that Shelley is going to exactly ride the most important asset we have, are the 35,000 people. Worker, and the investments that we'll make in them in the technology and in the capacity that will take us where we're going are well in place, well supported, and are underpinned by something that I wrote down that that Shelley said that I is one of my new favorite phrases. I mean, we remain burdened with short-term costs while maintaining a long-term focus. With that, we thank you for calling in today.

Kristen: How can you encore? Miss Concluses, today's conference call. Thank you for your participation, and you may now disconnect.