Q1 2024 J B Hunt Transport Services Inc Earnings Call

Unknown Executive: All is being recorded. I would now like to turn the call over to Brad Delco, Senior Vice President of Finance. Please go ahead. Good afternoon.

I'd now like to turn the call over to Brad Delco Senior Vice President of Finance. Please go ahead.

Brad Delco: Good afternoon before I introduce the speakers I would like to provide some disclosures regarding forward looking statements.

Unknown Executive: Good afternoon. Before I introduce the speakers, I would like to provide some disclosures regarding four looking statements. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates, or similar expressions are intended to identify these forward-looking statements. These statements are based on J.B. Hunt's current plans and expectations and involve risks and uncertainties that could cause future activities and results to be materially different from those set forth in the forward-looking statement. 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.

Brad Delco: This call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.

Brad Delco: <unk>, 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 more.

Brad Delco: 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.

Brad Delco: Now I would like to introduce the speakers on today's call. This afternoon, I'm joined by our CEO, John Roberts. Our president is Shelley Simpson. Our CFO is John Kuhlow. Nick Hobbs, COO and President of Contract Services; Darren Field, President of Intermodal; and Brad Hicks, President of Highway Services and EVP of People. I'd now like to turn the call over to our CEO, Mr. John Roberts, for some opening comments. John?

Brad Delco: Now I would like to introduce the speakers on today's call. This afternoon I'm joined by our CEO John Roberts.

Shelley Simpson: Our President Shelley Simpson.

Shelley Simpson: Our CFO John cooler.

Shelley Simpson: Nic cards.

Shelley Simpson: And president of contract services.

Speaker Change: Darren field, President of intermodal and Brad Hicks President of highway services and EVP of people.

Speaker Change: I'd now like to turn the call over to our CEO, Mr. John Roberts for some opening comments John.

John N. Roberts: Thank you, Brad, and good afternoon. I will be brief with my comments, but I want to hit on a few topics before I turn it over to our team to give you their updates and address your questions. Last quarter, we said goodbye and good riddance to 2023 and welcomed the new year with some reservations and concerns, but nonetheless confident in the strength of our organization and the journey we are on to build an even bigger and better company.

John N. Roberts: Thank you Brad and good afternoon, I'll be brief with my comments, but want to hit on a few topics before I turn it over to our team to give you their updates and to address your questions.

Last quarter, we said goodbye and good returns to 2023 and welcome the new year with some reservations and concerns, but nonetheless confident in the strength of our organization and the journey, we are on to build an even bigger and better company.

John N. Roberts: Over the last several years, you have heard us talk about how we've managed business for the long term, remain focused on being financially disciplined, and care about our people who have the knowledge and talents to help us execute for and on behalf of our customers. From that perspective, nothing has changed, and we remain committed to staying the course. Over that same time, we have faced challenges, taken some calculated risks, and made some strategic decisions that I remain confident will positively impact our company and our future growth.

John N. Roberts: Over the last several years you have heard us talk about how we manage the business for the long term remains focused on being financially disciplined and being for our people who have the knowledge and talent to help us execute for and on behalf of our customers.

John N. Roberts: That perspective, nothing has changed and we remain committed to staying the course.

John N. Roberts: Over that same time, we have faced challenges have taken some calculated risks and made some strategic decisions that I remain confident will positively impact our company and our future growth.

John N. Roberts: To be fair and somewhat critical, the current environment we are in has remained persistently challenging and for longer than we had predicted. But what I remain confident in are the strategic decisions, and the direction and course we are on are well charted. Our conservative nature, financial discipline, and coming from a position of strength have afforded us the opportunity to invest throughout this period to better prepare us for the eventual turn. We stand ready.

John N. Roberts: To be fair and somewhat critical of the current environment. We're in has remained persistently challenging and for longer than we had predicted.

John N. Roberts: But what I remain confident in is the strategic decisions and the direction and courseware on as well charted.

John N. Roberts: Our conservative nature financial discipline, and coming from a position of strength has afforded us the opportunity to invest throughout this period to better prepare us for the eventual turn we stand ready.

John N. Roberts: Our company and our teams are working hard. To use a sports analogy, we are putting in the work, exercising the muscles, becoming more lean, challenging the playbooks we know, and better preparing ourselves for our future state. While it's hard to see that in light of what I would characterize as a disappointing financial performance against our standards, I remain appropriately metered with. Elements that support that view should and will be revealed in the following discussion from our leaders.

John N. Roberts: Our company and our teams are working hard to use a sports analogy, we are putting in the work exercising the muscles, becoming more lean challenging the playbooks, we know and better preparing ourselves for our future state while it's hard to see that in light of what I would characterize as a <unk>.

John N. Roberts: Disappointing financial performance against our standards I remain appropriately metered with optimism.

John N. Roberts: <unk> support that you should and will be revealed in the following discussion from our leaders.

John N. Roberts: Finally, as recently announced, this will be my last earnings call as Chief Executive Officer. It has been a tremendous honor to serve in this capacity for the last 13 years. Our board of directors has taken a very thoughtful approach to succession planning and has tremendous confidence in my successor and our entire leadership. So now, I'd like to turn the call over to our President and incoming Chief Executive Officer, Ms. Shelley Simpson.

Speaker Change: Finally, as recently announced this will be my last earnings call as Chief Executive Officer. It has been a tremendous honor to serve in this capacity for the last 13 years. Our board of directors has taken a very thoughtful approach to succession planning and has tremendous confidence in my successor in RF.

John N. Roberts: <unk> leadership team.

John N. Roberts: So now I'd like to turn the call over to our president and incoming Chief Executive Ms. Shelly.

Shelley Simpson: Thank you, John, and good afternoon. As John made pretty clear, the market continues to be challenging. We remain focused on what we can control and how we position our business to deliver exceptional value for our customers and shareholders over the long term. The challenge we face today as an organization is managing the business to best prepare us for future growth while balancing the need to manage and control costs in the near future. To be clear, the strategic opportunities we have across our business segments give us great confidence in our future success. Last quarter, we introduced our priorities for 2024.

Shelly: Thank you John and good afternoon.

Shelly: As John made pretty clear the market continues to be challenging.

Shelly: We remain focused on what we can control and how we position our business to deliver exceptional value for our customers and shareholders over the long term.

Shelly: The challenge we face today, if an organization is managing the business to best prepare us for future growth, while balancing the need to manage and control cost in the near term.

Shelly: To be clear the strategic opportunities, we have across our business segments, yes, that's a great confidence in our future success.

Shelly: Last quarter, we introduced our priorities for 2024.

Shelley Simpson: Our focus as a management team and an organization is to execute on these priorities, which, as a reminder, are one, to deliver exceptional value to our customers through operational excellence; two, to scale our long-term investments in our company's foundations, which are people, technology, and capacity; and three, to drive long-term compounding returns for shareholders. Markets are always hard to predict. Even more so over the last several years, given the wild swings we have seen on both the supply and demand sides of the equation. But one thing we know for sure, markets ultimately return to some balance. After overcorrecting on one side or the other,

Shelly: Our focus as a management team and an organization.

Shelly: Execute on these priority, which as a reminder, our plan.

To deliver exceptional value to our customers through operational excellence to scale and long term investments in our company Foundation, which our people technology and capacity.

Shelly: Entry chat long term compounding returns for our shareholders.

Shelly: Markets are always hard to predict.

Shelly: And even more so over the last several years given the wild swings we have seen on both the supply and demand side of the equation.

Shelly: One thing we know for sure markets ultimately return to some balance.

Shelly: After over correcting on one side or the other.

Shelley Simpson: We continue to view the market as out of balance, and customers have been, and are taking advantage. We've been surprised by the competitiveness of the bid season thus far. We can't predict when the current rate environment will change, and as a result, we remain committed to our efforts to control our costs. Importantly, though, we are doing this without sacrificing the long-term opportunities for our company to grow and generate greater returns for our shareholders. [inaudible] I would argue we've only enhanced it during the first quarter with some of the investments we've made, most notably our purchase of the Walmart Intermodal Container Fleet.

We continue to view the market is out of balance and customers have been and are taking advantage.

Shelly: We've been surprised that the competitiveness in the bid season, thus far.

Shelly: We can't predict when the current rate environment will change and as a result, we remain committed to our efforts to control our cost.

Shelly: Importantly, though we are doing this without sacrificing the long term opportunities for our company to grow and generate greater returns for our shareholders.

Shelly: In fact I.

Shelly: I would argue we've only enhanced hit during the first quarter with some of the investments we've made most notably our purchase at the Walmart intermodal container fleet.

Shelley Simpson: We are also adapting how we approach our customers and contracts in terms of our commitment. We will always be long-term focused and strategic. That said... We will have to be thoughtful in how we work with our customers. Our management team and business leaders are intensely focused on our cost efforts while maintaining discipline on our long-term growth and return on capital thresholds. I remain confident in our strategy and approach to manage through this part of the cycle.

Shelly: We are also adapting and how we approach our customers and contracts in terms of our commitment.

Shelly: We will always be long term focused and strategic that said.

Shelly: We will have to be thoughtful in how we work with our customers.

Shelly: Our management team and business leaders are intensely focused on our cost efforts, while maintaining discipline on our long term growth and return on capital thresholds.

Shelly: In closing our <unk>.

Shelly: Main confident in our strategy and approach to manage through this part of the cycle.

Shelley Simpson: We continue to make thoughtful and disciplined investments that will only enhance the future performance of our company. While the magnitude of this part of the cycle has certainly been more severe, both in terms of depth and duration, we strongly believe in our ability to outperform the market in service quality, value, and growth. We have, and will continue to, prove our ability to deliver outperformance for our people, our customers, and our shareholders.

Shelly: We continue to make thoughtful and disciplined investments that will only enhance the future performance of our company.

Shelly: While the magnitude of this part of the cycle has certainly been more severe both in terms of depth and duration. We strongly believe in our ability to outperform the market on service quality value and growth.

Shelly: We have and will continue to prove our ability to deliver outperformance for our people our customers and our shareholders.

Shelley Simpson: Our confidence is in our people, our experience, our complementary businesses, our scale, and our financial strength, which uniquely positions us for our future. As we've said in the past, we remain committed to disciplined investments in our people, technology, and capacity, but we will continue to challenge ourselves on our costs. I am confident that we will be better positioned as a result coming out of this part of the cycle as we continue to pursue our vision to create the most efficient transportation network in North America. With that, I'd like to turn the call over to our CFO.

Shelly: Our confidence is in our people our experience our complementary businesses, our scale and our financial strength, which uniquely positions us for our future.

As we've said in the past we remain committed to disciplined investments in our people technology and capacity.

Shelly: But we will continue to challenge ourselves on our costs I am confident that we will be better positioned as a result coming out of this part of the cycle as we continue to pursue our vision to create the most efficient transportation network in North America with that I'd like to turn the call over to our CFO John <unk> John Thank you.

John Kuhlow: Thank you, Shelley, and good afternoon, everyone. My comments will cover a high-level review of the quarter, provide some additional color on our costs and the impact on margins, as well as provide an update on our capital plan for 2024. As a general overview, we continue to face inflationary cost pressures despite also facing deflationary pricing pressures. Our financial performance is not where we want it to be, particularly in intermodal and our highway service.

John N. Roberts: Kelly and good afternoon, everyone. My comments will cover a high level review of the quarter provide some additional color on our costs and the impact on margins.

John N. Roberts: As well as provide an update on our capital plan for 2024.

As a general overview, we continue to face inflationary cost pressures, despite also facing deflationary pricing pressure or.

John N. Roberts: Our financial performance is not where we want it to be particularly in intermodal and our highway services.

John Kuhlow: We recognize that some of this is driven by market dynamics, while some is related to our decision to remain committed to our investments to drive future growth. As Shelley alluded to, we remain committed to our efforts to control our costs while trying to maintain the right balance of resources to support our future growth. I'll start with a high-level review of the first quarter.

John N. Roberts: We recognize that some of this is driven by market dynamics, while some is related to our decision to remain committed to our investments to drive future growth.

John N. Roberts: As Shelly alluded to we remain committed to our efforts to control our costs, while trying to maintain the right balance of resources to support our future growth.

Speaker Change: I'll start with a high level review of the first quarter on a consolidated GAAP basis compared to last year revenue declined 9%.

John Kuhlow: On a consolidated gap basis compared to last year, revenue declined 9%, operating income declined 30%, and Diluted Earnings Per Share decreased by $35. The declines were primarily driven by a combination of lower yields and freight volume, combined with inflationary costs.

Speaker Change: Operating income declined 30% and diluted earnings per share decreased 35%.

Speaker Change: The declines were primarily driven by a combination of lower yields in freight volume combined with inflationary cost pressures.

Nicholas Hobbs: Our tax rate in the quarter was 28.7% versus 24.7% in the prior year. The increase was related to discrete items and other adjustments, and we continue to expect our annual effective rate to be between 24 and 25%. As previously mentioned, in addition to the market dynamics, our commitment to our investments in our people, technology, and capacity is putting additional pressure on our cost structure and, as a result, our margin. We have visibility to these costs and their impact on the performance of each business.

Speaker Change: Our tax rate in the quarter was 28, 7% versus 24, 7% in the prior year.

Speaker Change: The increase was related to discrete items and other adjustments and we continue to expect our annual effective rate to be between 24 and 25%.

Speaker Change: As previously mentioned in addition to the market dynamics, our commitment to our investments in our people technology and capacity.

Speaker Change: Putting additional pressure on our cost structure and as a result, our margin performance.

Speaker Change: We have visibility to these costs and their impact on the performance of each business segment.

Nicholas Hobbs: On a consolidated basis, these costs aggregate to approximately $100 million, related primarily to having too many resources with our people and capacity for our current business levels that we plan on scaling into. That said, we remain committed to our cost initiatives and have identified additional areas of opportunity to address, which should not impede our ability to support meaningful growth of our business. We are confident in our ability to scale and leverage our investments.

Speaker Change: On a consolidated basis these costs aggregated to approximately 100 million related primarily to having too many resources with our people and capacity for our current business levels that we plan on scaling into over time.

Speaker Change: That said, we remain committed to our cost initiatives and have identified additional areas of opportunity to address which should not impede our ability to support meaningful growth of our business.

Speaker Change: We are confident in our ability to scale and leverage our investments, but right now our focus is on how we best control our costs in the near term without diminishing the long term earnings potential we have built in the business.

Nicholas Hobbs: But right now, our focus is on how we best control our costs in the near term without diminishing the long-term earnings potential we have built in the business. Switching gears to our capital plan, we are focused on maintaining a strong balance sheet to provide us with ample liquidity to deploy capital as needed to drive long-term value for our shareholders. We have navigated this challenging freight environment while remaining conservatively leveraged at or below our target of one times debt to trailing 12 months EBITDA.

Switching gears to our capital plan, we are focused on maintaining a strong balance sheet to provide us with ample liquidity to deploy capital as needed to drive long term value for our shareholders.

Speaker Change: We have navigated this challenging freight environment, while remaining conservatively leverage at or below our target of one times debt to trailing 12 months EBITDA.

Nicholas Hobbs: We did retire $250 million of our senior notes that matured in the quarter with availability under our credit facility. For net capital expenditures, we previously stated an expectation to spend between $800 million and $1 billion for 2024, and we have no change to that range, despite some recent announcements to further expand our capacity in our intermodal sector. And finally, we'll remain opportunistic with sharing purchase. This concludes my remarks, and I'll now turn it over to Nick.

Speaker Change: We did retire $250 million of our senior notes that matured in the quarter with availability under our credit facility.

Speaker Change: For net capital expenditures, we previously stated and expectation to spend between $800 million to $1 billion for 2024, and we have no change to that range. Despite some recent announcements to further expand our capacity and our intermodal segment.

Speaker Change: And finally, we will remain opportunistic with share repurchases.

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

Nicholas Hobbs: Thanks, John, and good afternoon. I'll provide an update on our dedicated and final mile businesses and give an update on our areas of focus across our operations. I'll start with dedicated. During the first quarter, I was pleased with the strength and resiliency of our results. In spite of the challenging freight environment, demand for professional outsourced private fleet solutions has held up well despite the feeling that we are swimming against the current. We sold approximately 690 new trucks during the quarter, a very strong start towards our annual growth sales target of 1,000 to 1,200 new trucks for the year.

Nick: Thanks, John and good afternoon, I'll provide an update on our dedicated and final mile businesses and give an update of our area of focus across our operations I'll start with dedicated during the first quarter I am pleased with the strength and resiliency of our results spot.

Nick: Spot the challenging freight environment.

Demand for professional outsourced private fleet solutions has held up well despite the feeling we are swimming against the current.

We sold approximately 690, new trucks during the quarter very strong start towards our annual gross sales target of 1000 to 200, new trucks for the year.

Nicholas Hobbs: While our sales pipeline remains strong, as we said last quarter, we do have some visibility into fleet losses or downsizes throughout 2024. This strong start in sales gives us some confidence in backfilling these losses over the course of the year. We are seeing some signs of stabilization in terms of our fleet sizes across our accounts, although our customers continue to feel pressure in their business. While moderating, we continue to see some fleet downsizing due to business activity, but also some bankruptcies here recently.

Nick: While our sales pipeline remains strong as we said last quarter, we do have some visibility into fleet losses are downsizes throughout 2024.

Nick: This strong start in sales gives us some confidence and back filling these losses over the course of the year. We are seeing some signs of stabilization in terms of our fleet sizes across our accounts, although our customers continue to feel pressure in their businesses.

Nick: While moderating we continue to see some fleet downsizing due to business activity, but also some bankruptcies here recently.

Nick: We continue to remain disciplined on the types of deals we underwrite without sacrificing our return targets and pleased with the activity and recent sales we've been able to close in our pipeline, we remain focused on delivering value to our customers in this environment and maintaining the business knowing it will support our future growth going.

Nicholas Hobbs: We continue to remain disciplined on the types of deals we underwrite without sacrificing our return target and are pleased with the activity and recent sales we've been able to close in our pipeline. We remain focused on delivering value to our customers in this environment and maintaining the business, knowing it will support our future growth. Going forward, we remain confident in our differentiated model that has proven its resiliency in this tough market and our ability to compound our growth over many years and further penetrate our large addressable market. Moving the final mile.

Nick: We remain confident in our differentiated model that has proven its resiliency in this tough market and our ability to compound our growth over many years and further penetrate our large addressable market.

Nick: Moving to final mile.

Nick: We have made good progress improving our business from revenue quality strong service metrics and more stabilized profitability levels, all while continuing to create value for and on behalf of our customers.

Nick: We continue to see the market evolve and customers more high quality service on a national scale to meet their big and bulky final mile delivery needs.

Nick: Our first quarter results did include a benefit of $3 1 million from a favorable settlement of a prior year claim.

Nicholas Hobbs: We have made good progress improving our business through revenue quality, strong service metrics, and more stabilized profitability levels, all while continuing to create value for and on behalf of our customers. We continue to see the market evolve, and customers want high-quality service on a national scale to meet their big and bulky final mile delivery needs. Our first quarter results did include a benefit of $3.1 million from a favorable settlement of a prior year claim. Overall, demand for big and bulky products remains mixed, with soft demand in the furniture industry and stable demand in both appliances and exercise equipment.

Nick: Overall demand for big and bulky products remains mixed with soft demand in the furniture industry and stable demand in both appliances and exercise equipment.

Nick: Overall, we are modestly encouraged by our sales pipeline and we continue to see new brands engage in discussions with our team our focus in this business continues to be providing the highest service level with a strong focus on being safe and secure as we deliver products into the homes of our customers customer.

Nick: We will remain disciplined with new business to ensure appropriate returns for our service, while staying focused on growing the business and improving profitability.

Nick: Similar to last quarters I'll close with some comments on safety aligning with our company foundation of taking care of our people, but also the motoring public we continued to invest in employee training and new equipment and technologies to enhance our safety performance. We are over 85% complete with rolling out and we're facing cameras.

Nicholas Hobbs: Overall, we are modestly encouraged by our sales pipeline, and we continue to see new brands engage in discussions with our team. Our focus in this business continues to be providing the highest service level with a strong focus on being safe and secure as we deliver products into the homes of our customers' customers. We will remain disciplined with new business to ensure appropriate returns for our service while staying focused on growing the business and improving profitability. Similar to last quarter's, I'll close with some comments on site.

Nick: Through our trucks with a goal of being 100% complete by the end of the third quarter.

Nick: We have seen a meaningful reduction in AUM road collisions per million miles on trucks that have cameras installed. Additionally, we have reduced the ot preventable accidents per million miles approximately 25% in the quarter as compared to the prior year period.

Nicholas Hobbs: Aligning with our company foundation of taking care of our people but also the motoring public, we continue to invest in employee training and new equipment and technologies to enhance our safety performance. We are over 85% complete with rolling out inward-facing cameras to our trucks with the goal of being 100% complete by the end of the third quarter. We have seen a meaningful reduction in on-road collisions per million miles in trucks that have cameras installed.

Nick: As our focus on safety remains at the forefront of our operation as the cost of claims continued to move up exponentially. We continue our efforts to find new innovative ways to enhance our safety performance and further mitigate risk where possible. This concludes my remarks, so I would like to now turn it over to Darren. Thank you.

Darren P. Field: And thank you to everyone for joining us this afternoon on the call I'll review the performance of the intermodal business during the quarter give an update on the market and service performance and highlight the continued opportunity we have to deliver value for our customers and all of our stakeholders.

Nicholas Hobbs: Additionally, we have reduced DOT preventable accidents per million miles by approximately 25% in the quarter as compared to the prior year period. As our focus on safety remains at the forefront of our operation, as the cost of claims continues to move up exponentially, we continue our efforts to find new, innovative ways to enhance our safety performance and further mitigate risk where possible. This concludes my remarks, so I would like to now turn it over to Darren. Thank you.

Darren P. Field: I'll start with intermodal performance overall demand for our intermodal service was weaker than our expectations, while imports into the west coast have improved and inventories per our customers are in a more balanced position, we have yet to see that translate into any meaningful pickup in demand.

Darren P. Field: <unk> for our valued service product volumes in the quarter were flat year over year and by month were down 2% January up 3% in February and down 1% in March while we are seeing growth in business in some lanes, particularly outbound southern California, we.

Darren P. Field: Thank you, Nick, and thank you to everyone for joining us this afternoon on the call. I'll review the performance of the intermodal business during the quarter, give an update on the market and service performance, and highlight the continued opportunity we have to deliver value for our customers and all of our stakeholders. I'll start with intermodal performance. Overall, demand for our intermodal service was weaker than our expectations. While imports into the West Coast have improved, and inventories per our customers are in a more balanced position, we have yet to see that translate into any meaningful pickup in demand for our valued service product. Volumes in the quarter were flat year over year and by month were down 2% in January, up 3% in February, and down 1% in March.

We are seeing pressure from truck pricing in the east.

Darren P. Field: We have been surprised by how much competition, we are seeing in bids but are remaining disciplined with our valued service offering in.

Darren P. Field: In February we announced we entered into a multi year intermodal service agreement with Walmart in an arrangement that includes the purchase of Walmart's intermodal assets. This will increase our available container capacity as we execute toward our stated target of 150000 containers while this.

Darren P. Field: Capacity is not needed at the moment, we saw this as a unique opportunity to make an investment that we feel confident will be beneficial to the organization over time.

Darren P. Field: While we are seeing growth in business in some lanes, particularly outbound Southern California, we are seeing pressure from truck pricing in the east. We have been surprised by how much competition we are seeing in bids but are remaining disciplined with our valued service offering. In February, we announced we entered into a multi-year intermodal service agreement with Walmart in an arrangement that includes the purchase of Walmart's intermodal assets.

Darren P. Field: After not having enough capacity to meet our customers demand in 2021 and 'twenty. Two we have consistently been growing our capacity to ensure we are out in front to meet our customers' growth needs. While also providing a high quality service product that is reliable.

Darren P. Field: We are pleased with our rail providers service levels their approach and commitment to growing intermodal. We are in constant communication with the railroads on ways. We can work together to drive growth.

Darren P. Field: This will increase our available container capacity as we execute toward our stated target of 150,000 containers. While this capacity is not needed at the moment, we saw this as a unique opportunity to make an investment that we feel confident will be beneficial to the organization over time. After not having enough capacity to meet our customers' demand in 2021 and 2022, we have consistently been growing our capacity to ensure we are out in front to meet our customers' growth needs, while also providing a high quality service product that is reliable. We are pleased with our rail provider's service levels, their approach, and commitment to growing intermodal. We are in constant communication with the railroads on ways we can work together to drive growth.

Darren P. Field: While we believe that week truckload pricing due to overcapacity is influencing customer decision, making we continue to see a large amount of freight that should be converted from over the road to intermodal and we have the capacity and people in place to grow with our customers and recapture share from the high.

Darren P. Field: Wei.

Darren P. Field: As we have previously discussed we continue to work with our rail providers to launch new services based on feedback from our customers our announcements last year launching quantum with BNS SaaS and our new Mexico service in collaboration with BNS SF and fair mix are two examples bolt.

Darren P. Field: Service products are performing well, but we are still early and see opportunities to grow with both services moving forward.

Darren P. Field: While we believe that truckload pricing due to overcapacity is influencing customer decision making, we continue to see a large amount of freight that should be converted from over the road to intermodal, and we have the capacity and people in place to grow with our customers and recapture share from the highway. As we have previously discussed, we continue to work with our rail providers to launch new services based on feedback from our customers. Our announcements last year launching Quantum with BNSF and our New Mexico service in collaboration with BNSF and Ferromex are two examples.

Darren P. Field: Finally on costs as we have said previously we have the resources and capacity to handle significantly more volume than what we're currently handling to the tune of at least 20%.

Darren P. Field: This has been a drag on our margin performance and more than anticipated given both the depth and duration of the current market dynamics, we continue to challenge ourselves on our costs, while trying to balance the future needs of the business to support meaningful growth.

Darren P. Field: In closing we continue to strongly believe in the strength of our intermodal franchise, our customers Trust us and we continue to find new and innovative ways to better serve their transportation needs. We arent pleased with current results and have the people technology and capacity in place that will allow us to scale into.

Darren P. Field: Both service products are performing well, but we are still early and see opportunities to grow with both services moving forward. Finally, on costs, as we have said previously, we have the resources and capacity to handle significantly more volume than what we are currently handling, to the tune of at least 20%. This has been a drag on our margin performance and more than anticipated given both the depth and duration of the current market dynamic. We continue to challenge ourselves on our costs while trying to balance the future needs of the business to support meaningful growth. In closing, we continue to strongly believe in the strength of our intermodal franchise.

Darren P. Field: These investments we remain excited to work with our customers to meet their growing demand with an efficient cost competitive and more environmentally friendly solution.

Darren P. Field: That concludes my prepared remarks, now I'll turn it over to Brad Hicks.

Bradley W. Hicks: You Darrin and good afternoon, everyone I'll review the performance of our integrated capacity solutions and truckload segments.

Bradley W. Hicks: Our customers trust us, and we continue to find new and innovative ways to better serve their transportation needs. We aren't pleased with the current results and have the people, technology, and capacity in place that will allow us to scale into these investments. We remain excited to work with our customers to meet their growing demand with an efficient, cost-competitive, and more environmentally friendly solution. That concludes my prepared remarks, and I'll turn it over to Brad Hicks. Thank you, Darren. And good afternoon, everyone.

Bradley W. Hicks: I will also provide an update on some of our work in JV is not 360.

Bradley W. Hicks: Starting with Ics and similar to the past few quarters. The overall brokerage environment remains competitive from both a volume and rate perspective.

Bradley W. Hicks: Segment gross revenue declined 26% year over year in the first quarter driven by a 22% decrease in volume and a 5% reduction in revenue per load.

Bradley W. Hicks: These figures include the contribution from BNS F logistics, which contributed a little over $70 million of revenue to our results in the quarter.

As we expected we had some challenges with the integration of the business, but are encouraged and remain optimistic about our opportunity to penetrate the small and medium sized shippers through this channel.

Bradley W. Hicks: I'll review the performance of our integrated capacity solutions and truckload segment. I will also provide an update on some of our work in J.B. Hunt's recent, Starting with ICS, and similar to the past few quarters, the overall brokerage environment remains competitive from both a volume and rate perspective. Segment gross revenue declined 26% year-over-year in the first quarter, driven by a 22% decrease in volume and a 5% reduction in revenue per load.

Bradley W. Hicks: One additional challenge we faced in the quarter is the proliferation of strategic cargo theft that we have discussed previously which I'll touch on later in my comments.

Bradley W. Hicks: We continue to make progress on adjusting our resources to our current business levels.

While driving greater account accountability in the business.

Bradley W. Hicks: As everyone is aware spot rates have and continue to be under a lot of pressure.

Bradley W. Hicks: While some of the weather driven tightness in January pressured gross margins looser capacity in February and March helped us recover to some degree.

Bradley W. Hicks: These figures include the contribution from BNSF Logistics, which contributed a little over $70 million of revenue to our results in the quarter. As we expected, we've had some challenges with the integration of the business, but we are encouraged and remain optimistic about our opportunity to penetrate small and medium-sized shippers through this channel. One additional challenge we faced in the quarter was the proliferation of strategic cargo theft that we have discussed previously, which I'll touch on later in my comments.

Bradley W. Hicks: Closing out on Ics, we arent pleased with the current results, but we continue to make adjustments to improve profitability, while focusing on ways to enhance the productivity to allow us to scale disproportionately to our cost when the market terms.

Bradley W. Hicks: Moving over to truckload.

Bradley W. Hicks: Segment gross revenue was down 13% year over year, driven by a 9% decline in revenue per load and a 5% decrease in volumes.

Bradley W. Hicks: Overall demand for our J B Hunt three.

Bradley W. Hicks: <unk> hundred 60 box service offering is outperforming the overall market as volumes in the quarter were up once again versus the prior year.

Bradley W. Hicks: We continue to make progress on adjusting our resources to our current business levels while driving greater accountability in the business. As everyone is aware, spot rates have been and continue to be under a lot of pressure. While some of the weather-driven tightness in January pressured gross margins, looser capacity in February and March helped us recover to some degree. Closing out on ITS, we aren't pleased with the current results, but we continue to make adjustments to improve profitability while focusing on ways to enhance productivity to allow us to scale disproportionately to our costs when the market changes. Moving over to truckload, segment gross revenue was down 13% year-over-year, driven by a 9% decline in revenue per load and a 5% decrease in volume.

Bradley W. Hicks: That said, we would characterize demand for drop trailing capacity as soft as a reflection of our current trailer utilization and what we're seeing in bids.

Bradley W. Hicks: Similar to what you heard in intermodal, we have greater resources of drilling capacity than what the current demand environment requires.

Bradley W. Hicks: We view, our trailing capacity, specifically as being greater than 20% underutilized.

Bradley W. Hicks: We have been encouraged by how well demand is held up for our drugs trailer solutions J B Hunt 360 box, but we are certainly seeing pressure on rates.

Bradley W. Hicks: Thankfully this model allows us to be more variable with our cost and we think ultimately will present opportunities for us to scale a cost competitive solution for our customers, while generating an appropriate return on our capital.

Speaker Change: I'll close with some comments on 360.

Speaker Change: Technology enables our people helps drive productivity and also drives efficiency and how we source and serve customers with our available capacity.

Speaker Change: While technology is a foundational pillar for us It has opened new avenues for bad actors to engage and sophisticated strategic theft. Given these organized groups access to thousands of loans through our platform.

Bradley W. Hicks: Overall, demand for our J.B. Hunt 360 box service offering is outperforming the overall market, as volumes in the quarter were up once again versus the prior year. That said, we would characterize demand for drop trailing capacity as soft as a reflection of our current trailer utilization and what we are seeing in bid. Similar to what you heard in Intermodal, we have greater resources and tracking capacity than what the current demand environment requires.

Speaker Change: To combat the increase in strategic theft, we are making some adjustments to harden the security of our system and have new initiatives that will deliver in the future to further enhance the security of our platform.

Speaker Change: As you have and are likely to notice we are shifting some processes to be more manual in nature until these new security features are implemented.

Bradley W. Hicks: We view our trailing capacity specifically as being greater than 20% underutilized. We have been encouraged by how well demand has held up for our drop trailer solution, the J.B. Hunt 360 Box, but we have certainly seen pressure on rates.

Speaker Change: Long term, we continue to believe our technology investments will drive productivity and efficiency gains and remain confident that these investments better position us for long term growth with our customers and allow us to create greater value for our stakeholders.

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

Brad Delco: Hey, Lisa in light of the time could we at <unk>.

Bradley W. Hicks: Thankfully, this model allows us to be more variable with our costs, and we think it will ultimately present opportunities for us to scale a cost-competitive solution for our customers while generating an appropriate return on our capital. I'll close with some comments on three six. Technology enables our people, helps drive productivity, and also drives efficiency in how we source and serve customers with our available capacity. However, while technology is a foundational pillar for us, it has opened new avenues for bad actors to engage in sophisticated strategic theft, giving these organized groups access to thousands of loads through our platform.

Brad Delco: Analysts ask one question and one question only.

Brad Delco: Yes, absolutely.

Brad Delco: If you would like to ask a question. During this time simply press star one on your telephone keypad and if you would like to withdraw your question that is star. One again again, we do ask that you. Please limit yourself to one question and one follow our one question only and if he would like to reenter the queue. Please do so we will now take our first question from Jason Seidl with TD.

Brad Delco: Cowen.

Jason H. Seidl: Thank you operator, good afternoon, everyone.

Jason H. Seidl: I wanted to talk a little bit.

Jason H. Seidl: About the pricing market you mentioned, how it was a bit challenged on the intermodal side.

Jason H. Seidl: What percent of the book is already done now and then what percent re prices in <unk>.

Bradley W. Hicks: To combat the increase in strategic theft, we are making some adjustments to harden the security of our system and have new initiatives that we'll deliver in the future to further enhance the security of our platform. As you have and are likely to notice, we are shifting some processes to be more manual in nature until these new security features are implemented. In the long term, we continue to believe our technology investments will drive productivity and efficiency gains, and we remain confident that these investments better position us for long-term growth with our customers and allow us to create greater value for our stakeholders. That concludes my comments, so I'll now turn it over to Brad Delco to provide instructions before the operator opens the call for Q&A. Hey Lisa,

Jason H. Seidl: Yes, so Jason this is darin.

Darin: We've said before we price about 30% in each of the first.

Darin: Three quarters and about 10% in the fourth quarter and so that's the pricing cycle that began in October of 'twenty three as is.

Speaker Change: Something less than half complete but around 40%.

Speaker Change: We will take our next question from Ken <unk> with Bank of America.

Ken: Hey, great. Good afternoon, John Best of luck in your next steps.

Ken: Congrats.

Ken: So I just want to talk about I guess cost if I think about the 20% excess capacity here.

John You mentioned kind of the $100 million target maybe talk about your thoughts on do you get rid of capacity at this point to work with the industry to shrink that do you maybe walk us through the process of getting that $100 million of of cost out.

Unknown Executive: Hey, Lisa, in light of time, could we have the analysts ask one question and one question only? Yes, absolutely. If you would like to ask a question during this time, simply press star one on your telephone keypad.

Ken: The down cycles lasting longer.

Unknown Executive: If you would like to ask a question during this time, simply press star one on your telephone keypad. And if you would like to withdraw your question, that is star one again. Again, we do ask that you please limit yourself to one question and one follow-up or one question only. And if you would like to reenter the queue, please do so. We will now take our first question from Jason Seidl with TD Cowen. Thank you all.

John N. Roberts: Yes, so Ken.

John N. Roberts: As we kind of said in the opening remarks.

John N. Roberts: We've been talking for a while now about our investments.

John N. Roberts: And our people and our equipment.

John N. Roberts: And we thought it would be helpful to provide some additional transparency on the impact of these investments and so we've quantified as best we can for that for you.

John N. Roberts: We do have good insight into our productivity and utilization metrics.

John N. Roberts: That's informed us of.

John N. Roberts: This cost measure.

John N. Roberts: And so if we were focused on the short term there could be a different play to call here, but we have a very long term view on the company and our investments and we believe in our strategic decisions.

Darren P. Field: Yeah, so Jason, this is Darren. We we've said before, we price about 30% in each of the first three quarters and about 10% in the fourth quarter. And so that's the pricing cycle that began in October 23 is something less than half complete, but around 40%.

John N. Roberts: Around our very.

John N. Roberts: Our valuable resources so.

John N. Roberts: If there is a.

John N. Roberts: Major economic environmental change, we may consider but right now we're focused on growing into this capacity.

Unknown Executive: We'll take our next question from Ken Hoexter with Bank of America. Hey, great. Good afternoon, John, best of luck in your next steps. Shelley, congrats. So just want to talk about, I guess,

John N. Roberts: And holding on to our commitments to our people for the long term.

John N. Roberts: We'll take our next question from Brian <unk> with Jpmorgan.

Brian: Hi, Thanks for taking the question.

Brian: Darren just thoughts on the.

Brian: The volume trends <unk> seen a lot of international intermodal volume going inland intact, and clearly a big disconnect with your volume and your primary rail partner in.

Unknown Executive: We'll take our next question from Ken Hoexter with Bank of America.

Unknown Executive: Yeah, Ken, as we kind of said in the opening remarks, you know, we've been talking for a while now about our investments, and our people, and our equipment. And we thought it would be helpful to provide some, you know, additional transparency on the impact of these investments. And so we've quantified as best we can for that for you. We do have good insight into our productivity and utilization metrics. That's why they informed us of this cost measure.

Brian: In the West when you look at transcon versus their total volume. So wanted to get your thoughts on that is that a precursor for.

Brian: In a more trans loading more domestic coming imports that have been pretty strong now or do you think there is some sort of shift and this is going to be a bit of an overhang for awhile and perhaps losing some share to the international International track.

Unknown Executive: And so if we were focused on the short term, there could be a different play to call here. But we have a very long-term view of the company and our investments. And we believe in our strategic decisions and our very valuable resources. So you know, if there is a, you know, major economic environmental change, we may consider it. But right now, we're focused on growing into this capacity and holding on to our commitments to our people for the long term.

Speaker Change: Yeah. So on on certainly the west coast imported volume that we've seen.

Speaker Change: Has to some degree disconnected, but of course, a year ago. The comparison for imports a year ago was so poor that I don't think it was very difficult for snows.

Speaker Change: Comparisons to look so so strong the other thing I just want to highlight while our volumes were flat for the quarter for the entire network, our southern California eastbound volume did grow in the quarter by double digits and so we we did experience some some volume growth in segments of our business now obviously.

Unknown Executive: We'll take our next question from Brian Ossenbeck, with J.P. Morgan.

Darren P. Field: Hey, thanks for taking the question. Darren, just thoughts on the volume trends, you know, seeing a lot of international intermodal volume going inland intact, and clearly a big disconnect with your volume and your primary rail partner in the West when you look at Transcon versus their total volume. So I wanted to get your thoughts on that. Is that a precursor for more transloading, more domestic coming imports have been pretty strong now, or do you think there's some sort of shift and this is going to be a bit of an overhang for a while, perhaps losing some share to the international track? Thanks.

Speaker Change: That means we didn't grow and actually lost volume in other areas.

Speaker Change: I think in the earnings release, we talked about being negative 7% in the eastern network.

It's been a.

Speaker Change: Dogfight with truckload capacity pricing being really really competitive in and as we move into further end of the year. We continue to look for ways to drive cost out present value to our customers and be prepared for growth in the future.

Darren P. Field: Yeah, certainly, the West Coast important volume that we've seen has to some degree been disconnected. But of course, a year ago, the comparison for imports a year ago was so poor that I don't think it was very difficult for those comparisons to look so, so strong.

Speaker Change: We will take our next question from Ravi Shanker with Morgan Stanley.

Ravi Shanker: Thanks for talking maybe one just on the intermodal pricing to follow up here.

Darren P. Field: The other thing I just want to highlight, while our volumes were flat for the quarter for the entire network, our Southern California eastbound volume did grow in the quarter by double digits. And so we did experience some volume growth in segments of our business. Now, obviously, that means we didn't grow and actually lost volume in other areas.

Ravi Shanker: I know you guys pointed to the truck market, obviously being loose here, but is it just truck or are you also seeing price competition from some of your <unk> and also kind of.

Ravi Shanker: Are you confident that this is just a function of the cycle, where it is right now or do you feel like because of that excess capacity, maybe kind of a little more sustained even if volumes start to come back. Thank you.

Darren P. Field: I think in the earnings release, we talked about being negative 7% in the Eastern Network. That's been a dogfight with truckload capacity pricing being really, really competitive. And as we move further into the year, we continue to look for ways to drive costs out, present value to our customers, and be prepared for growth in the future. Now, we'll take our next question from Robbie Shanker with Morgan Stanley. Thanks a lot, everyone. Just on intermodal pricing, the follow-up here, I know you

Ravi Shanker: So I think it's we've said that we're probably out of the business of trying to predict the future because it's been really really difficult for over four years now.

Ravi Shanker: Certainly pricing in intermodal, whether it be from truckload capacity or other intermodal competitors. It has been competitive.

Ravi Shanker: <unk>.

Ravi Shanker: History would tell us that it is where we are in the cycle right now and that there will come a time when pricing and volume will return.

Unknown Executive: We'll take our next question from Ravi Shanker with Morgan Stanley.

Ravi Shanker: That Shelley.

Ravi Shanker: <unk> prepared comments really highlighted that we're in a spot where.

Unknown Executive: So I think we've said that we're probably out of the business of trying to predict the future because it's been really, really difficult for over four years now. Certainly, pricing in intermodal, whether it be from truckload capacity or other intermodal competitors, has been competitive. And, you know, history would tell us that this is where we are in the cycle right now and that there will come a time when pricing and volume will return.

Ravi Shanker: It's out of balance and certainly customers have taken advantage of that in the future really gives us an opportunity to seek both growth and pricing improvements.

Ravi Shanker: And we will take our next question from Justin long with Stephens.

Yeah.

Justin Trennon Long: Thanks, John and Kelly Congrats to you both on the announcement.

Justin Trennon Long: Maybe to pivot for a moment Dcs Nick I wanted to ask you about the commentary from the prior call that it could be hard to grow dedicated revenue and profitability. This year, but when I look at the truck sales in the first quarter, they were pretty strong and it sounds like you're a bit more confident that you can.

Unknown Executive: We, you know, I think that Shelley's prepared comments really highlighted that we're in a spot where it's out of balance, and certainly, customers have taken advantage of that. And the future really gives us an opportunity to seek both growth and pricing improvement.

Unknown Executive: And we'll take our next question from Justin Long with Stevens.

Nicholas Hobbs: Backfill some of the attrition you see ahead. So when you put it all together do you feel like dedicated can hold relatively flat in 2024, and maybe you could just comment more broadly on the competitive environment and dedicated as well.

Nicholas Hobbs: Thanks, and John and Shelley, congrats to you both on the announcement. Maybe to pivot for a moment to DCS, Nick, I wanted to ask you about the commentary from the prior call that it could be hard to grow dedicated revenue and profitability this year. But when I look at truck sales in the first quarter, they were pretty strong, and it sounds like you're a bit more confident that you can backfill some of the attrition you see ahead. So when you put it all together, do you feel that dedicated can hold relatively flat in 2024? And maybe you could just comment more broadly on the competitive environment and dedicated as well.

Nicholas Hobbs: Sure. So yeah, we had a very good sales quarter 690 trucks.

Nicholas Hobbs: Good quarter four so we're off to a good start our pipeline is looking good.

Speaker Change: From a competitive standpoint, I would say, who we see that we're competing with a lot of the private fleets, it's not a lot of our publicly traded companies.

Speaker Change: So we feel good in that competitive market.

Speaker Change: And so we feel good about where that's going and I would say.

Speaker Change: Just look at this quarter, we've had some losses bankruptcies, we've also our 10th largest customer.

Nicholas Hobbs: Sure. So yeah, we had a very good sales quarter, 690 trucks is a good quarter for us, so we're off to a good start. Our pipeline is looking good. From a competitive standpoint, I would say who we see that we're competing with is a lot of the private fleets. It's not a lot of our publicly traded companies. And so we feel good in that competitive market, and so we feel good about where that's going and I would say you know just look at this quarter we've had some losses from bankruptcies we lost our 10th largest customer to that and so with all that said with our sales pipeline we think we'll be able to hold flat as we've kind of given guidance that we do I think towards the year so feel good about that before we're at and the sales platform continues to be Hey, Justin, this is Brad just

Speaker Change: To that end so with all that said with our sales pipeline, we think we will be able to hold flat.

Speaker Change: As we've kind of given guidance that we do I think towards the year. So feel good about that but where we're at and the sales pipeline continues to be strong.

Speaker Change: Hey, Jeff This is Brad just to I mean, consistent with what Nick said, but I think our direct comments last time, we're hanging in light of our visibility to some fleet losses.

Brad: It would be difficult to grow.

Brad: But I think most of the market is interpreted that is relatively flat I don't know that we want to be on record providing guidance for that but I would say the pluses or minuses.

Brad: Since we previously stated that I think clearly the sales performance in Dcs coming out of Q1 is a lot stronger than we anticipated we talked last year about some some the pipeline being very strong in some bigger deals begin there obviously some of those landed but I would also say so that's the positive side on the negative side.

Brad Delco: Hey, Justin, this is Brad. Just to, consistent with what Nick said, I think our direct comments last time were, hey, in light of our visibility to some fleet losses, it would be difficult to grow. But I think most of the market has interpreted that as relatively flat. I don't know that we want to be on record providing guidance for that.

Brad: And this was in Nicks comments, we have seen a pickup in some bankruptcies and so that's.

Brad: Maybe a little bit of a negative to offset some of the positive on the news on the new sales.

Brad: Performance that we've seen to start the year. So just wanted to add that in.

Brad: Okay.

Brad: And we will take our next question from Tom Waterworks with UBS.

Thomas Richard Wadewitz: Yes. Good afternoon, I wanted to ask you a little bit more about the Walmart contract I think the way you talked about it in the prepared remarks was along the lines of adding containers. My understanding was that you were also adding new freight along with those containers. So.

Brad Delco: But I would say the pluses are minuses. Since we've previously stated that I think clearly, the sales performance in DCS coming out of Q1 is a lot stronger than we anticipated. We talked last year about the pipeline being very strong, some bigger deals being in there, and obviously, some of those landed.

Thomas Richard Wadewitz: Wondering if you could just give us a thought on kind of.

Brad Delco: But I would also say, so that's the positive side. On the negative side, and this was in Nick's comments, we have seen a pickup in some bankruptcies. And so that's maybe a little bit of a negative to offset some of the positives on the new sales performance that we've seen to start the year. So just want to add that.

Thomas Richard Wadewitz: How well utilized where the containers.

Thomas Richard Wadewitz: You're bringing on and how should we think about the pace of that is that something that kind of ramps across a couple of quarters.

Thomas Richard Wadewitz: And I would think that would be big enough to see in your volume numbers, but just really wanted to see if you could give us a bit more perspective to understand that.

And also I'd be remiss, if I didn't say something just congratulations John.

Unknown Executive: We'll take our next question from Tom Wadowitz of UBS.

Darren P. Field: Yeah, good afternoon. I wanted to ask you a little bit more about the Walmart contract. I think the way you talked about it in your prepared remarks was along the lines of adding containers. But my understanding was that you were also adding new freight along with those containers. So I wonder if you could just give us a thought on kind of how well utilized the containers that you're bringing on board and how we should think about the pace of that.

Thomas Richard Wadewitz: Shelley congratulations to you as well.

Speaker Change: Okay. Thank you.

Speaker Change: So on the Walmart agreement, it's a confidential agreement between us and Walmart, So I'm going to be pretty limited in what I would say there is certainly the opportunity to grow.

Speaker Change: Towards our 150000 container and target.

Speaker Change: With capacity that existed in the market.

Speaker Change: Was a unique opportunity for us that has been in dialogue for some time certainly that didn't get created in the first quarter that certainly when it got announced in.

Darren P. Field: Is that something that kind of ramps up across a couple quarters? And I would think that'd be big enough to see in your volume numbers, but just really wanted to see if you could give us a bit more perspective to understand that. And also, you know, I'd be remiss if I didn't say something just, you know, congratulations, John, and, you know, Shelley, congratulations to you as well.

Speaker Change: And we're really.

Speaker Change: Encouraged by what it will mean for the long term future.

Speaker Change: Value. We can we can build from that program. There are mutual commitments, obviously of capacity and volumes inside that agreement beyond that I'm, probably not going to be able to comment on the volume what I would say from a timing perspective, I think we've shared that.

Darren P. Field: So on the Walmart agreement, you know, it's a confidential agreement between us and Walmart. So that I'm going to be pretty limited and what I would say there certainly the opportunity to grow towards our hundred and fifty thousand container target with capacity that existed in the market was a unique opportunity for us that had been in a dialogue for some time. Certainly, that didn't get created in the first quarter. That's certainly when it got and now, and we're really encouraged by what it will mean for the long-term future value we can build from that program.

Speaker Change: It'll it'll onboard to our fleet over the course of the year that doesn't mean much of it will be in storage and we will go.

Speaker Change: Potentially unutilized until we can can grow into the capacity.

Speaker Change: Certainly.

Speaker Change: I think the.

Speaker Change: What was the last question.

Speaker Change: Drawing a blank here Tom could you repeat the last part of your question.

Darren P. Field: There are mutual commitments, obviously, of capacity and volumes inside that agreement. Beyond that, I'm probably not going to be able to comment on the volume. What I would say from a timing perspective, I think we've shared that it'll be onboard our fleet over the course of a year. That doesn't mean much of it will be in storage, and we'll go potentially unutilized until we can grow into the capacity. Certainly, I think the, what was the last part of the question?

Thomas Richard Wadewitz: Yes, I think just trying to figure out is this something that we would see affect the volume numbers as it builds through the year I think.

Thomas Richard Wadewitz: That's been our expectation that you would be big enough to actually see it in the volume numbers, but wanted to see if you could offer a thought on that too.

Speaker Change: Yes, probably really can't comment on the volume related to it certainly where we're looking to grow with all of our customers.

Speaker Change: And then while we're on this topic I do want to link maybe Tom that question with the earlier question to John Kuo about how we're approaching capacity and our investments and this to me is an example.

Darren P. Field: I think just trying to figure out if this is something that we would see affect the volume numbers as it builds through the year. I think, you know, That's been our expectation that you would be big enough to actually see it in the volume numbers, but wanted to see if you could offer anything.

Speaker Change: Are you seeing.

Speaker Change: That's really timber down the pace at which we're adding containers.

Speaker Change: We recognize that the market wasn't developing or evolving as quickly obviously, the we've mentioned that the depth and duration of this current part of the cycle has lasted longer than we anticipated and I think some of that recognition was you're seeing us pull back.

Darren P. Field: Yeah, I probably can't really comment on the volume related to it. Certainly, we're looking to grow.

Brad Delco: Yeah, and then while we're on this topic, I do want to link, maybe Tom, that question with the earlier question to John Kuhlow about how we're approaching capacity and our investments. And this, to me, is an example, you know, you've seen us really temper down the pace at which we are adding containers. You know, we recognize that the market wasn't developing or evolving as quickly. Obviously, we've mentioned that the depth and duration of this current part of the cycle have lasted longer than we anticipated.

Speaker Change: On the pace at which we are taking those deliveries of additional containers and so what I thought was a good attribute of this transaction, which was opportunistic was we certainly have accelerated our pace of getting to 150000 containers, which we announced back in 2022.

Speaker Change: Without adding additional capacity to the industry and so just I think it's a good highlight here and just wanted to reiterate that for the audience.

Brad Delco: And I think some of that recognition was you seeing us pull back on the pace at which we were taking those deliveries of additional containers. And so, what I thought was The good attribute of this transaction, which was opportunistic, was that we certainly have accelerated our pace at getting to 150,000 containers, which we announced back in 2022, but without adding additional capacity to the industry. And so just, I think it's a good highlight here, and just wanted to reiterate that.

We will take our next question from Boscombe majors with Susquehanna.

Bascome Majors: So if you look back to 2017 in the Big picture context that was a challenging year for intermodal, but if you compare that to the current trailing <unk> volumes compounded half a percent or so yield has driven high single digit revenue growth and profit.

Bascome Majors: Pounded it.

Bascome Majors: For intermodal about 4% and Thats after adding back the insurance cards last quarter and I realize this is just raw and look at the numbers a lot of this is due to the railroad driven circumstances outside of <unk> control, but if this backdrop of less structural growth and more cyclical volatility continues to be the norm.

Unknown Executive: We'll take our next question from Bascom Majors on Susquehanna.

Darren P. Field: So if you look back to 2017, in the big picture context, that was a challenging year for Intermodal, but if you compare that Current Trailing 4Q Volumes compounded at 0.5% or so, yield is driven by high single-digit revenue growth, and profit compounded at, for intermodal, about 4%. And that's after adding back the insurance cards last quarter. And I realize this, you know, just a raw look at the numbers, a lot of this is due to the railroad-driven circumstances outside of Hunt's control.

Bascome Majors: Warm into next year and beyond how do you manage your operations and capital allocation priorities differently over the long term. Thanks.

Speaker Change: Well ill jump in from an intermodal perspective, and then we may have others that want to comment but.

Speaker Change: Those through 2021 and 'twenty two when we really could not provide enough capacity for our customers I think really did teach us an important lesson as well as.

Darren P. Field: But, you know, if this backdrop of less structural growth and more cyclical volatility continues to be the norm into next year and beyond, how do you manage your operations and capital allocation priorities differently over the long term? Thanks.

Speaker Change: The amendments between us and our rail providers to grow with each other I mean, those are our genuine commitments. The announcement back in 'twenty two jointly with BNS SaaS to grow the fleet was a joint commitment to expand capacity for the intermodal market and both companies are.

Darren P. Field: Well, I'll jump in from an intermodal perspective, and then we may have others that want to comment. But, you know, going through 2021 and 22, when we really could not provide enough capacity for our customers, I think really taught us an important lesson as well as commitments between us and our rail providers to grow with each other. I mean, those are our genuine commitments. The announcement back in 22 jointly with BNSF to grow the fleet was a joint commitment to expand capacity for the intermodal market.

Speaker Change: Honoring that commitment.

Speaker Change: Making sure that our customers are aware that were there and ready to support them when they need to grow now clearly if the magnitude of the cycles really in flex much greater that can mean that the down cycle can be a little more painful and then it's hard to be out in front enough to cover that.

Darren P. Field: And both companies are honoring that commitment and making sure that our customers are aware that we're there and ready to support them when they need to grow. Now, clearly, if the magnitude of the cycles really inflects much greater, that can mean that the down cycle can be a little more painful, and then it's hard to be out in front enough to cover the up cycle.

Speaker Change: Upcycle and so we will we will certainly adapt as best we can we will continue to work with our customers to ask for better forecast and how can we get better identification of the opportunity, but we know this when we are there to support our customers growth demand.

John Kuhlow: And so we will certainly adapt as best we can. We'll continue to work with our customers to ask for better forecasts and how we can get better identification of the opportunity. But we know this, when we're there to support our customers' growth demand, it certainly bears fruit for our shareholders over the long term, as those customers just gain more and more confidence in our ability to serve their needs.

Speaker Change: Certainly.

Speaker Change: Bears fruit for our shareholders over the long term as those customers just gained more and more confidence in our ability to serve their needs.

Speaker Change: I would just add in terms of the capital allocation John cooler you can add to this as well.

John: Think about our different businesses dedicated as a success based capital.

John: Pull down if you will so when we sell a new dedicated deals it requires us to invest capital and we will continue to do that because of the discipline and how each of those deals are underwritten to specified.

John Kuhlow: John Kuhlow, you can add to this as well. You know, think about our different businesses, you know, dedicated to success-based capital. Pull down, if you will.

John: Turn targets, if you think about intermodal primarily most of those assets at least on <unk>.

John Kuhlow: So when we sell new dedicated deals, it requires us to invest capital, and we will continue to do that because of the discipline and how each of those deals is underwritten to specified return targets. If you think about Intermodal, primarily most of those assets, at least on the trailing side or the containers, they're 20 plus year assets. We're obviously way out in front of what investments are needed to support our growth there.

John: Trailing side or the containers, there 20, plus year assets. We've obviously are way out in front of what investments are needed to support our growth.

John: And so then it's a matter of whats the right.

John: Replacement cycle for risk factor equipment, and what's the right balance of what we're utilizing maybe the 360 platform form for in sourcing third party capacity, whether it's an intermodal dray or other parts of our network and then finally, where we would see capital is is growing 360 box in the trailing equipment. So I think.

John Kuhlow: And so then it's a matter of, you know, what's the right replacement cycle for extractor equipment and what's the right balance of what we're utilizing, maybe the 360 platform for in sourcing third party capacity, whether it's an intermodal dray or other parts of our network. And then finally, where we would see capital is in growing the 360 box and the trailing equipment. So I think there's a lot of flexibility in terms of how we deploy capital.

John: There's a lot of flexibility in terms of how we deploy capital and this is and this is an example of a year. If you look in the first quarter.

John: EBITDA, certainly down year over year, but the debt to EBITDA on.

John: Trailing 12 months basis is actually down from where we were at the end of Q4, and our cash balances up slightly so generated very strong cash flow in the first quarter and so our capital priorities won't change number one will be to invest in our business number to support our dividend maintain investment grade credit rating and Newark.

John Kuhlow: And this is an example of a year; we look at the first quarter, EBITDA certainly down year over year, but the debt to EBITDA, on a trailing 12-month basis, is actually down from where we were at the end of Q4, and our cash balance is up slightly. So, we generated very strong cash flow in the first quarter, and so our capital priorities won't change. Number one will be to invest in our business.

John: Number four would be to Opportunistically buy back stock and every once in a while we do see inorganic inorganic growth opportunities, but that's not really at the core of who we are and so that will kind of continue to be our discipline going forward.

John Kuhlow: Number two, support our dividend, maintain an investment-grade credit rating, and number three or number four would be to opportunistically buy back stock. And every once in a while, we do see inorganic growth opportunities, but that's not really at the core of who we are, and so that will kind of continue to be our discipline going forward.

John: We will take our next question from Scott Group with Wolfe Research.

Scott H. Group: Hey, Thanks afternoon, and best of luck to John Congrats shortly.

I had a near term and then a bigger picture question. So.

Scott H. Group: Just to help set near term expectations are.

Unknown Executive: We'll take our next question from Scott Group with Wolf Research.

Scott H. Group: We expect intermodal Rev per load in intermodal margin.

Unknown Executive: Hey, thanks for the afternoon and best of luck to you, John. Congratulations, Shelley.

Scott H. Group: To improve sequentially from Q1 to Q2, and then just bigger picture you guys keep talking about the depth and duration of the cycle longer worse than you thought I guess, what's the catalyst for this to change it's not the overall economy is fine it's not like we're in a recession and Theres Some D.

Unknown Executive: I had a near term and then a bigger picture question. So just to help set near term expectations, should we expect intermodal revenue per load and intermodal margin to improve sequentially from Q1 to Q2.

Scott H. Group: Demand recovery coming so what what actually in your mind is going to change is it is it possible I guess.

Shelley Simpson: And then just the bigger picture, you guys just keep talking about the depth and duration of the cycle, longer, worse than you thought, I guess. What's the catalyst for this to change, right? It's not, you know; the overall economy is fine. It's not like we're in a recession, and there's some V demand recovery coming. So what actually is going to change in your mind? Is it is it possible, I guess, just like, you know, where it feels terrible versus 21 and 22. But maybe those were just unprecedented years that we just need to ignore. I don't know.

Scott H. Group: It feels terrible versus 21 and 'twenty two but maybe those were just unprecedented years that we just need to ignore.

Speaker Change: Scott I'll quickly jump in on your first question around Q2 versus Q1, you know were a non guidance.

Speaker Change: <unk> and we're trying hard not to be predictive.

Speaker Change: <unk>.

Speaker Change: Certainly.

Speaker Change: Okay.

Speaker Change: History would tell us that volumes in Q2.

Speaker Change: On average are better than Q1 that doesn't mean I'm, telling you that Q2 would be better but history would suggest that's been the case and so beyond that we don't have enough visibility into pricing at this stage to make any prediction as to what would happen with that.

Unknown Executive: Scott, I'll quickly jump in on your first question around Q2 versus Q1, you know, we're a non-guidance organization and we're trying hard not to be predictive. However, history would tell us that volumes in Q2, on average, are better than Q1. That doesn't mean I'm telling you that Q2 would be better, but history would suggest that's been the case. And so beyond that, we don't have enough visibility into pricing at this stage to make any prediction as to what would happen. It's got now, so I'll take it.

Speaker Change: Hey, Scott I'll take the second part of that question. Yeah. If you think about the last four years I've said this in my opening comments at the highs and lows have been more dramatic in mind any time period in my 30 year career, and so our ability to predict has been very difficult we have seen periods of.

Shelley Simpson: Hey Scott, now I'll take the second part of the question. You know, if you think about the last four years, as I said in my opening comments, the highs and lows have been more dramatic than at any time period in my 30-year career. And so our ability to predict has been very difficult. We have seen periods of positive growth that then quickly fall off. And so I think you see a management team here knowing what our customers are asking us for in the future but being cautious about any positive signs that we could be seeing as we've seen some of those retreat several times over the last couple of years.

Speaker Change: Positives that and quickly fall off and so I think you see a management team here, knowing what our customers are asking us for in our future are being cautious about any positive signs that we could be seeing as you've seen some of this retreat several times over the last couple of years.

Speaker Change: You think about what's happening in the market, there's an oversupply of capacity and that's not exiting quick it off that's an important component.

Speaker Change: For all of our businesses across all five of our segments. I also think what's happening from our customer feedback and what feedback, they're giving us confidence for us to be able to grow even in the middle of a freight recession. So how can we think about that differently. That's why we are so focused on delivering great service and more value for our customers.

Shelley Simpson: And if you think about what's happening in the market, there's an oversupply of capacity, and that's not being used quick enough. That's an important component for all of our businesses across all five of our segments. I also think about what's happening from our customers' feedback and what feedback they're giving us on confidence for us to be able to grow even in the middle of a freight recession. So how can we think about that differently?

Speaker Change: And also the confidence.

Speaker Change: And as our customers build over time, and our ability JP hot and the railroads will ever really great service for a longer period of time I think our customers.

Speaker Change: Over the last several years have struggled with gaining the right level of consistency of service from intermodal collectively from the railroads and Jamie and Thats, something thats going to take us time to win back the confidence. So I would say those are all the things that we're watching and talking to our customers about what I will say this and we also said this in our opening comments.

Shelley Simpson: That's why we are so focused on delivering great service and more value for our customers. But, over the last several years, we have struggled with gaining the right level of consistency and service from Intermodal, collectively from the railroads and J B Hunt. And that's something that's going to take us time to win back their confidence. So I would say those are all the things that we're watching and talking to our customers about. And I will say this, and we also said this in our opening comments, you know, that our customers are giving us good feedback.

Speaker Change: You know that our customers are giving us good feedback it has been a difficult more competitive bid season than what we expected, but we're managing through that we're working with our customers and we're really trying to think about what's the best long term for both them and us.

Speaker Change: We'll take our next question from Jordan <unk> with Goldman Sachs.

Speaker Change: Yes.

Speaker Change: Okay.

Shelley Simpson: It has been a difficult, more competitive bid season than we expected. But you know, we're managing through that, we're working with our customers, and we're really trying to think about what's best long term for both them and us.

Jordan: So we're having some really bad static. So can you hear me now call back in and then it's just a matter go ahead, okay. Yeah.

Jordan: Can you help me understand a little bit how the.

Jordan: The operating leverage is going to work in intermodal I think you mentioned about 20% over resource.

Unknown Executive: We'll take our next question from Jordan Alliger with Goldman Sachs.

Unknown Executive: We're having some really bad static, so we might need to get you to call back in. No, no, that's better. Go ahead. Okay. Yeah. Sounds better. Can you help me understand a little bit?

Jordan: So when the cycle does turn up and we get that inflection in volume and price.

Jordan: How quickly can that get absorbed how quickly do you think margins can get back to the targeted range you guys have talked about thanks.

Unknown Executive: Sure. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay.

Jordan: Well.

Jordan: Certainly pricing is always up the.

Jordan: The fastest cure for a margin challenge.

Darren P. Field: Well, you know, certainly, pricing is always the fastest cure for a margin challenge. That's going to contribute quicker than just raw volume, but volume today with 20% excess Access Capacity has never been more valuable to our system in terms of the role it can play in expanding margins. So it feels like, you know, how quickly can we grow into 20%? Well, it's certainly been more than a decade since we grew 20% in any one year. We're still very confident in the overall market for truckload business where intermodal can and should be the right answer.

Jordan: That's going to contribute quicker than just raw volume, but volume today with 20% excess.

Jordan: Excess capacity has never been more valuable to our system in terms of the role it can play an expanding the margins so it feels like.

Jordan: <unk>.

Jordan: How quickly can we grow into 20% well it's been.

Jordan: Certainly more than a decade since we grew 20% in any one year, we're still very confident in the overall.

Jordan: Market of truckload business, where intermodal can and should be the right answer for but.

Darren P. Field: But I don't want to tell you that we're going to grow 20% in a year's time. I don't know if that's what's in the cards. We'll have to wait and see. Our system is built for it and could accommodate it.

Speaker Change: I don't want to tell you that we're going to grow 20% in a year's time I don't know that thats.

Speaker Change: That's in the cards will have to wait and see our system is built for it and could accommodate it but that's not necessarily what we'll see so from a timing perspective to get back into the margin target I mean, certainly we need to see when does that inflection happen and what what is the pace.

Darren P. Field: But that's not necessarily what we'll see. So from a timing perspective, to get back into the margin target, I mean, certainly we need to see when that inflection happens. And what, you know, what is the pace of this sort of pricing opportunity? How fast is capacity exit? What's the sort of sharpness in the curve of the demand environment? And if I had given you a prediction on that, I'm sure I would be

<unk> of sort of pricing opportunity, how fastest capacity exit what's the sort of the sharpness in the curve of the.

Speaker Change: <unk> environment, and if I, if I gave you a prediction on that I'm sure it would be wrong.

Unknown Executive: We'll take our next question from Amit Mehrotra of Deutsche Bank.

Speaker Change: We will take our next question from Amit Mehrotra with Deutsche Bank.

Unknown Executive: Thanks. Darren, I just want to go back to maybe a couple of questions ago when you talked about 2Q volumes being typically better than 1Q. I mean, are we seeing any evidence of that? Did you see any of it at the end of March? Are you seeing any of that in April? Because 4Q to 1Q, obviously, it's down typically 5 to 6, and you guys were down 9 to 10. And so I'm just trying to understand if you're actually seeing it on the ground.

Speaker Change: Thanks.

Amit Singh Mehrotra: Darren I just wanted to go back to maybe a couple of questions go when you talked about <unk> volumes being typically better than <unk>.

Amit Singh Mehrotra: Or are we seeing any evidence of that.

Amit Singh Mehrotra: Did you see any of it at the end of March are you seeing any of it in April because <unk>, obviously, it's down.

Amit Singh Mehrotra: Typically five to six and you guys were down nine to 10, and so I'm just trying to understand if you're absolutely seeing it on the ground and then obviously Norfolk Southern Theres a lot going on at Norfolk.

Unknown Executive: And then obviously, Norfolk Southern, there's a lot going on in Norfolk. They announced that they're basically exiting 15% of their service on 15% of their intermodal lanes. Does that have an impact? Usually, you guys have weighed in on the dynamics happening in the rail space. And obviously, there's a lot going on in Norfolk, and we'd love to get your opinion on it given the strong partnership you have there. Hey, a minute. I'll start.

Amit Singh Mehrotra: They announced that they're basically exiting 15% of their <unk>.

Amit Singh Mehrotra: Service on 15% of their intermodal lanes.

Amit Singh Mehrotra: Does that have an impact and you usually you guys have weighed in on.

Amit Singh Mehrotra: Dynamics happening in the rail space, and obviously Theres a lot going on at Norfolk, and would love to get your opinion on it given the strong partnership you have there out east.

Speaker Change: Hey, Amit I'll start just first on your question about Q2 and forward guidance I mean, we're just not in the history history don't don't provide.

Darren P. Field: Hey Amit, I'll start just first with your question about Q2 and forward guidance. I mean, we're just not in the history, don't provide, you know, intra-quarter updates on volume, and we're not going to do that here, so I'll turn it over to Darren if he wants to comment on the second part of your question, but we'll be limited on what we'll say there too.

Speaker Change: Intra quarter updates on volume, but we're not going to do that here.

Speaker Change: I'll turn it over to Darren if you want to comment on the second part of your question, but will be limited on what we'll say there too well.

Darren P. Field: <unk> announcement by Norfolk, Southern on the intermodal changes was almost completely international intermodal related so it hasnt been an impact at J B Hunt in any way whatsoever in terms of what's going on there I just we're not involved in that and I don't I don't think it's appropriate for me to comment on that.

Darren P. Field: Well, the announcement by Norfolk Southern on the intermodal changes was almost completely international intermodal related. So it hasn't had an impact at J B Hunt in any way whatsoever in terms of what's going on there. I just we're not involved in that. And I don't I don't think

Darren P. Field: And then the final thing I'd make and again just to sort of point out.

Darren P. Field: You did mentioned volumes down essentially by around nine 5%. That's certainly is worse than normal seasonality.

Darren P. Field: I would point out though.

Darren P. Field: You wanted to look at that same analysis historically, we see Q3 Q4 volumes relatively at parity and we saw and we talked about seeing a stronger peak season.

Unknown Executive: And then the final thing I'd make, and again, just to sort of point out, Amit, you did mention volumes down.

Darren P. Field: It was expected and I think what was sort of experienced by the overall market.

Unknown Executive: I would point out, though, if you wanted to look at that same analysis, historically, we see Q3, Q4 volumes relatively at parity, and we saw, and we talked about seeing a stronger peak season than what was expected. And I think what was sort of experienced by the overall market. And so if you compared where Q1 volumes came in relative to Q3, again, assuming that normally Q3 and Q4 are relatively flat, Q3 volumes were down 7%, which is a little bit closer to normal seasonality.

Darren P. Field: And so if you compare where our Q1 volumes came in relative to Q3 again, assuming that normally Q3 and Q4 relatively flat.

Darren P. Field: Volumes were down, 7%, which is a little bit closer to normal seasonality.

Darren P. Field: And we will take our next question from Jon Chappell with Evercore ISI.

Jonathan B. Chappell: Thank you good afternoon.

Jonathan B. Chappell: Darren I was going to ask you basically what Brad just talked about the fourth quarter. We set a peak season that no. One was expecting your volumes were better than typically in the third quarter pricing was even up sequentially. If we look at it just revenue per load and then the first quarter pretty substantial step back. So I'm just trying to understand what changed in that six month period wireless.

Unknown Executive: We'll take our next question from John Chappell with Overcore ISI.

Jonathan B. Chappell: <unk> better <unk> worth the trucking market seem to think all the way through so is that a front end loading by customers was that something indicative of the economy.

Unknown Executive: Thank you. Good afternoon.

Darren P. Field: Darren, I was gonna ask you basically what Brad just talked about, fourth quarter, you set a peak season that no one was expecting, your volumes are better than typically in the third quarter, and pricing was even up sequentially if we look at just revenue per load. And then the first quarter, you know, pretty substantial step back. So I'm just trying to understand what changed in that six-month period. Why was 4Q better?

Jonathan B. Chappell: Rail service, how can we had kind of like the green shoe period in <unk> and then another step back in one kit.

Yes, I think youre asking the same questions that we asked to our customers throughout <unk>.

Jonathan B. Chappell: Both events I mean that the.

Jonathan B. Chappell: The fourth quarter.

Jonathan B. Chappell: The uptick in demand for US was a surprise in our system was able to accommodate capacity to execute on it equally coming out of the fourth quarter.

Jonathan B. Chappell: We were surprised by.

Darren P. Field: 1Q worse? The trucking market seemed to stink all the way through. So was that a front-end load by customers? Was that something indicative of the economy of, you know, rail service? How can we add, you know, kind of like the green shoot period in 4Q and then another step back?

Jonathan B. Chappell: The magnitude of the decline in the first quarter in and certainly.

Jonathan B. Chappell: I don't have a great answer in terms of what the catalyst was I think the mix of our particular customer base certainly drove the opportunity in the fourth quarter.

Jonathan B. Chappell: May certainly be returning kind of as Brad highlighted maybe what we experienced in the first quarter was actually a little bit of a return back to normal off of a higher fourth quarter and we've got to wait and see where we're the year takes us.

Darren P. Field: Yeah, I think you're asking the same questions that we asked our customers throughout both events. I mean, that the fourth quarter uptick in demand for us was a surprise, and our system wasn't able to accommodate capacity to execute on. Equally coming out of the fourth quarter, we were surprised by the magnitude of the decline in the first quarter. And, and certainly, I don't have a great answer in terms of what the catalyst was.

Jonathan B. Chappell: We will take our next question from Brandon <unk> with Barclays.

Brandon: Hey, good evening and thanks for taking my question and congrats John and Shelley as well.

Brandon: Can you guys talked maybe Ics profitability sequentially did worse than in the first quarter.

Being disciplined around customers and focused on returning to profitability for the brokerage business.

Speaker Change: Thank you.

Darren P. Field: I think the mix of our particular customer base certainly drove the opportunity in the fourth quarter. And it, you know, may certainly be returning, kind of as Brad highlighted. Maybe what we experienced in the first quarter was actually a little bit of a return to normal after a higher fourth quarter. And we've got to wait and see where the year takes us. We'll take our next question from Brandon Oglenski with BART. Hey, good evening, and thanks for taking the question.

Speaker Change: Yes, Thanks, Brian It's Brad Hicks.

Bradley W. Hicks: Certainly been extremely competitive for several quarters now as we think about the brokerage market.

Bradley W. Hicks: In particular, the spot market and what we've seen there we did see a modest tick up in January only to see that kind of level back down to the trough, but it's been really for probably the last four plus quarters.

In terms of rate.

Bradley W. Hicks: And quality of revenue has done well.

Bradley W. Hicks: We're certainly focused on trying to grow where we can grow and grow with customers that we believe that we can create value for such that that's stickier and the forward view.

Unknown Executive: We'll take our next question from Brandon Oglenski with Barclays.

Bradley W. Hicks: As I've mentioned in previous quarters, those that we supported at their time of greatest need of has seemingly gone the way of finding the lowest cost solution that they can possibly find and that's certainly armed.

Bradley W. Hicks: Yeah, thanks, Brandon. It's Brad Hicks.

Bradley W. Hicks: Certainly, we've been extremely competitive for several quarters now, as we think about the brokerage market, in particular, the spot market. And what we've seen there, we did see a modest tick up in January, only to see that kind of level back down to the trough that it has been for probably the last four plus quarters, in terms of what rate and quality of revenue has done.

Our business our volumes, but do feel like our gross margin recovered throughout the quarter. We saw it hit severely during the winter storms in January which was abnormal for us, but we were able to recover and deliver a gross margin of.

Unknown Executive: [inaudible]

Unknown Executive: We had some storms in January, which was abnormal for us, but we were able to recover and deliver a gross margin of a little over 14, I think it was 14.3. So we were encouraged by that, and we're certainly focused on volume. We'll take our next question from David Vernon with Bernstein. Hey, good afternoon. And thanks for taking the question. Um, so you mentioned in the press release that

Bradley W. Hicks: A little over 14, I think it was 14 three so we were encouraged by that and we're certainly focused on volume.

Bradley W. Hicks: We will take our next question from David Vernon with Bernstein.

David Scott Vernon: Hey, good afternoon, and thanks for taking the question. So you mentioned in the press release.

David Scott Vernon: The disciplined approach to the market for the value of services in the intermodal segment.

David Scott Vernon: Just wondering if you can give us some some expectations around kind of how you're approaching the market. The rest of the year or anything you've learned out of bid season that would speak to kind of what the volume outlook might be.

Unknown Executive: We'll take our next question from David Vernon with Bernstein.

David Scott Vernon: For full year intermodal growth in the segment.

Unknown Executive: Yeah, so, you know, I think that the pricing that we issued early in the mid-season had some surprises with the results, and it was really competitive.

Speaker Change: Yes so.

Speaker Change: I think that the.

Speaker Change: The pricing that we see.

Speaker Change: Issued early in the bid season, we did.

We had some some surprises with the results and it was really competitive and we were surprised by.

Darren P. Field: And we were surprised by the magnitude of some of the truckload opportunities, truckload rates from truckload competitive competitors out there. And that certainly has helped us to identify whether we can offer shorter-term programs to our customers as we move forward. Are there opportunities with our rail providers to participate with us in a way that we can be more competitive? And we're seeking all of those opportunities, one opportunity at a time, one customer at a time, and we'll continue to do that and see where we land as we move throughout the year?

Speaker Change: The magnitude of some of the truckload opportunities truckload rates from truckload competitive.

Speaker Change: Competitors out there and that certainly.

Speaker Change: Has has helped us to identify can we can we offer shorter term programs to our customers as we move forward are there opportunities with our rail providers to <unk>.

Participate with us in a way that we can be more competitive and more we're seeking all of those opportunities are.

Speaker Change: One opportunity at a time, one customer at a time and we will.

Speaker Change: Continue to do that and see where we land as we move throughout the year.

Unknown Executive: Thank you. We'll take our next question from Jeff Kauffman with Vertical Research Partners.

Speaker Change: Thank you.

Speaker Change: Our next question from Jeff Kauffman with vertical research partners.

Unknown Executive: Thank you very much.

Jeffrey Asher Kauffman: Thank you very much and John Congratulations and Shelley Big fan congratulations as well to you.

Unknown Executive: John, congratulations, and Shelley, a big fan. Congratulations as well to you.

Unknown Executive: My one question is the following. You mentioned

Jeffrey Asher Kauffman: My one question is the following.

Unknown Executive: Growing out the franchise, the focus on the longer term, I was a little surprised to see the trailer count down so much sequentially from the fourth quarter. Are we basically saying the trailer pool experiment is done? And we're going back to something more normal? Or is there something driving that that that would be something worth noting?

Jeffrey Asher Kauffman: You mentioned growing out the franchise to focus on the longer term I was a little surprised to see trailer count down so much sequentially from fourth quarter.

Are we basically saying the trailer pool experiment is done and we're going back to something more normal or is there anything driving that that would be something worth noting.

Unknown Executive: Something worth noting

Unknown Executive: Hey, Jeff, I think you're talking about the end of the period versus the average. Yeah. Is that right?

Okay.

Jeffrey Asher Kauffman: Yes.

Speaker Change: So Jeff I think you're talking about the ended period.

Speaker Change: Average.

Speaker Change: Yep.

Unknown Executive: Well, it's down about 1700 units. So I was just kind of curious why it was down so much given the trailer pool growth that we've seen in that division for the last number of quarters. Yeah, yeah, I'm showing what we reported in the period for Q1 for our truckload segment at a little over 13,000 trailers, which is just down 100 from the same period in 2023. Apologies, I was looking for us this fourth quarter, but I can come back to you offline. I was just a little bit.

Speaker Change: Right.

Well it is down about 1700 units.

Speaker Change: So I was just kind of curious why it was down so much given big trailer pool growth that we've seen in that division for the last number of quarters.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Showing what we reported in the period for.

Speaker Change: For Q1 for our truckload segment.

Speaker Change: A little over 13000 trailers, which is just down a 100 from same period in 2023.

Speaker Change: <unk>.

Speaker Change: Apologies I was looking versus fourth quarter, but I can come back to you offline I was just a little yes, Jeff let's cover that offline I think we did have some trailers.

Unknown Executive: Yeah, Jeff, let's cover that offline. I think we did have some trailers that were transferred over to DCS. So if you notice the DCS trailer count is higher, and that's a lot related to some of the business that was transferred at the start of 2023. If you recall, we moved some business out of JVT into VCS, and some of the ownership of that trailer stayed in JVT for the year, and we transferred those over.

Jeffrey Asher Kauffman: That were transferred over to Dcs. So if you noticed the Dcs trailer count is higher and Thats a lot related to <unk>.

Jeffrey Asher Kauffman: Some of the business that was transferred at the start of.

Jeffrey Asher Kauffman: 2023.

If you recall, we moved some business out of JBT into Vcs and some of the ownership of that trailer stayed in.

Jeffrey Asher Kauffman: State and JBT for the year.

Jeffrey Asher Kauffman: Transfer those over yes, let me just add per my opening comments that we do have excess capacity and so we're making good companywide decisions around where we can utilize those in the short term but no.

Unknown Executive: Yeah, and let me just add, for my opening comments, that we do have excess capacity, and so we're making good company-wide decisions around where we can utilize it in the short term, but in no way are we abandoning our 360 box strategy. As I mentioned, we actually had volume growth inside of the network that that box strategy supports, and we remain very encouraged about that service offer.

Jeffrey Asher Kauffman: Way are we abandoning our 360 box strategy as I mentioned, we actually had volume growth inside of the network at that box strategy supports and we remain very encouraged about that service offering.

Speaker Change: That's the context I was looking for thank you.

Speaker Change: And we have a follow up question from Tom there were less likely to be our last question if that's possible.

Bradley W. Hicks: And we have a follow-up question from Tom. Let's let this be the last question. Absolutely. And our last question will come from Tom Wadowitz with UBS.

Speaker Change: Absolutely.

Speaker Change: Our last question will come from Tom <unk> with UBS.

Unknown Executive: Yeah, great. Thanks for giving me a chance for the follow-up question. There was some discussion on bad debt expense, and it sounded like it was meaningful. I think you referred to the 10th largest customer in Dedicated. And so I'm guessing that was maybe an effect, a meaningful effect on the margin in 1Q. Can you give us any quantification of how big that was, you know, year-over-year or absolute, just so we could kind of think about, you know, potentially parsing that out or just understanding that impact? Thanks.

Thomas Richard Wadewitz: Yeah, great. Thanks for giving me a chance as a follow up question.

Thomas Richard Wadewitz: There was some discussion on bad debt expense it sounded like it was meaningful I think you referred to like the 10th largest customer and dedicated.

Thomas Richard Wadewitz: And so I'm guessing that was maybe an effect a meaningful effect on the margin in <unk> can you give us any quantification of how big that was year over year absolute just so we can kind of think about potentially parsing that out or just understanding that impact. Thanks.

Thomas Richard Wadewitz: Yeah. So Tom this is John cooler so just.

John Kuhlow: Yes, Tom, this is John Kuhlow. So just our bad debt expense on a consolidated basis, quarter over quarter, was $4.6 million. We had a reversal in the prior year, first quarter, excuse me, first quarter of around a million, and we had, we charged $3.6 million in the first quarter of this year.

John: Our bad debt expense.

John: On a consolidated basis.

Over quarter was $4 6 million.

John: We had a reversal in the prior year.

John: First quarter excuse me first quarter of around $1 million and we had we charged <unk> $3 6 million in the first quarter of this year.

John Kuhlow: in the first quarter of this, and most and how most of that would have been in DC primarily a

John: And Tom most of that would've been in MVC, primarily a dedicated.

Shelley Simpson: Thank you. And that does conclude the question and answer session. I'd now like to turn the call back to Shelley Simpson for any additional or closing remarks.

John: Thank you and that does conclude the question and answer session I would now like to turn the call back to Shelley Simpson for any additional or closing remarks.

Shelley Simpson: Thank you and thank you everyone for joining the call. You know, it's here we are in going on two years of a really difficult freight market and the hardest freight market I think in my 30 year career and, I think certainly for the entire leadership team. And it's hard to see what's really happening well when you see financial performance struggling as a result, but we did have some really great things I want to make sure to call out for our people.

Shelley Simpson: Thank you and thank you everyone for joining the call.

Shelley Simpson: Here, we are in going on two years of a really difficult freight market and the hardest freight market I think in my 30 year career, and I think certainly for the entire leadership team.

Shelley Simpson: And it's hard to see what's really happening good when you see financial performance struggling as a result, when we did have some really great things I want to make sure to call out for our people.

Shelley Simpson: Number one, our people continue to deliver great safety performance, as we reduced accidents per million miles DOT preventable by 25%. And that is something important. And at the forefront of how we think of our operations. We also deliver great on-time service for our customers. And that's their expectation that we continue to deliver value, and that's where we're going to be focused. We've talked a lot about, you know, what we can control.

Shelley Simpson: Number one our people continuing to deliver a great safety performance as we reduced accidents per million miles.

Shelley Simpson: Key preventable by 25% and that is something important and at the forefront of how we think operations. We also delivered for our customers on great on time service and that's our expectation that we continue to look for value and that's where we're going to be focused we've talked a lot about what we can control and although we're not pleased with our performance.

Shelley Simpson: And although we're not pleased with our performance, we're focused on controlling our costs without jeopardizing our long-term opportunities. You know, we listen to our customers, and they're counting on us. They want us to deliver the right value for them. And we have to make sure that's the right value for us.

Shelley Simpson: We are focused on controlling our costs without jeopardizing, our long term opportunity.

Shelley Simpson: Listening to our customers and they're counting on us they want us to deliver the right value for them and we have to make sure. That's the right value for US we remain committed to being long term and our focus of being disciplined in our investments and we want to stay balanced between the needs of our customers and delivering the greatest return for our shareholders, but I want to make sure.

Shelley Simpson: We remain committed to being long-term in our focus but being disciplined in our investments. And we want to stay balanced between the needs of our customers and delivering the greatest return for our shareholders. But I want to make sure that I end on this. You know, we talk about being for our people. And if you think about where we are as an organization, you know, we've been led by four different leaders previous to me, and John Roberts has had the privilege of leading our company for the last 13 years. You know, John is one that won't normally turn the spotlight back on himself.

That I end on this.

Can we talk about being for our people.

Shelley Simpson: And if you think about where we're at as an organization. We've been led by four different leaders previous to me and John Roberts has had the privilege of leading our company for the last 13 years.

Shelley Simpson: John It is one that will normally turn the spotlight back on him. So since I'm sitting in the seat now I get an opportunity to do that.

Shelley Simpson: So since I'm sitting in the seat now, I get an opportunity to do that. In our 13 years, John actually entered the organization. In that time period, into the Fortune 500, we've seen our company grow substantially over the course of the period. And we've also seen our shareholders benefit greatly. As I step into these shoes, they are big shoes to fill.

Shelley Simpson: And our 13 years, John actually entered the organization.

Shelley Simpson: In that time period into the Fortune 500, we've seen our company grow substantially over the course of period and we've also seen our shareholders' benefit greatly as I step into the shoes. They are big shoes to fill but I would tell you we have great leaders that not only sit at the table with me, but all throughout our organization our tenure in the <unk>.

Shelley Simpson: But I will tell you, we have great leaders that not only sit at the table with me, but all throughout our organization. Our tenure in the company is something that's remarkable, and something that I think has been tried and true about what makes a culture successful. But I would be remiss if we weren't to say one of our greatest advocates for our people is our still CEO, John Roberts. And I want to make sure I give him an opportunity to speak based on being our CEO and spending time doing that.

Is this something thats remarkable and something that I think has been tried and true to what makes our culture successful, but I'd be remiss, if we weren't to say one of our greatest advocates for our people is are still CEO, John Roberts and I wanted to make sure I give him an opportunity to address based on being our seat.

<unk> and spending time doing that and just wanted to say thanks on behalf of John not only our leadership team, but for the 35000 people that have stayed with you for the last 13 years. Thanks for everything you've done and I'll turn the call over to get approved.

Shelley Simpson: And I just want to say thanks, on behalf of John, not only for our leadership team, but for the 35,000 people that have stood with you for the last 13 years. Thanks for everything you've done. And I'll turn the call over to you. Well, I appreciate that, Shelley. You know, I'm not like I don't like a lot of attention. I'll tell you that it's been the greatest honor of my professional career to get to be a part of and lead this team through some incredible growth years, through some learning years, through some evolution. And I could not, even with this quarter and even the last few, as you mentioned, the last couple of years. I could not be more proud.

Speaker Change: I appreciate that Shelley you know I'm not.

Speaker Change: I don't like a lot of attention.

Speaker Change: I will tell you that it's been the greatest honor of my professional career to get to be a part of and lead this team through some incredible growth years through.

Speaker Change: <unk> learning years.

Speaker Change: Through some evolution.

Speaker Change: And I could not even with this quarter and even the last few as you mentioned in the last couple of years.

Speaker Change: I could not be more proud.

John N. Roberts: group of people, all 35,000 of them, for everything that has happened under the banner of our scrolls and the way that we always put our people and our customers first, knowing that we have a duty to return compounding growth and reliable, credible information so that our shareholders, our owners can make good decisions. And I think that that's something we want to protect. And we want to be candid and transparent. We are, I can say with no hesitation at all.

Speaker Change: Of this.

Speaker Change: Group of people all 35000 of them.

Speaker Change: For everything that has happened.

Speaker Change: Under the banner of our growth.

Speaker Change: And the way that we always put our people and our customers first knowing that we have.

Speaker Change: A duty to return compound being.

Speaker Change: Growth and reliable credible information so that.

Speaker Change: Our shareholders our owners can make good decisions and I think that Thats something we we want to protect and we want to be candid and transparent way.

Speaker Change: I can say with no hesitation at all.

John N. Roberts: And I've been up here the last couple of weeks, hanging around and kind of watching for the things that I look for when I want to see my team win the Masters, win the Super Bowl, win the NCAA Tournament. And I see it. I see it all. I've seen it all for the last couple of years.

Speaker Change: Up here the last couple of weeks hanging around and kind of watching for the things that I look forward I want to see my team when the Masters win the Super Bowl win the ANC Deadly tournament.

I see it I see it all.

Speaker Change: It really for the last couple of years, but right now the fire's Hot.

John N. Roberts: But right now, the fire's hot, and our people are responding to that. Our leadership is guiding us in the way they're supposed to guide our priorities are right, and I get to hand this, these institutions, this brand, to a very, very capable person in Shelley.

Speaker Change: And our people are responding to that our leadership is guiding the way they're supposed to guide our priorities are right and.

Speaker Change: Get to hand this.

Institution.

This brand.

Speaker Change: <unk>, a very very capable person then shelley.

John N. Roberts: And importantly, she and I both agree, neither one of us can do anything without our team and specifically our leadership. We have the highest level of responsibility to be sure that we get it right, and when we don't get it right, get it right. Redirect Involved.

Speaker Change: And importantly, C&I both agree neither one of us can do anything without our team and specifically our leadership team.

Speaker Change: We have the highest level of responsibility to be sure that we get.

Speaker Change: Get it right and we don't get it right get it right.

Speaker Change: Redirect evolve make sure we keep our focus on the right things, it's an honor I am humbled.

John N. Roberts: Make sure we keep our focus on the right things. It's an honor. I am humbled. I am amazed. I am thrilled. I am sad. The best news

Speaker Change: I'm amazed.

Speaker Change: Im thrilled I am sad I am.

Speaker Change: All of the above the best news is that still have a seat at this table.

John N. Roberts: I still have a seat at this table. I look forward to being chairman of this company and working in a different capacity but hope to continue to leverage my 35 years of experience and 25, 13 of which was Forge Running Dedicated Contract Services, where I learned so many things in the last 13 plus years plus being our CEO. I just thank you for your trust. I feel like we've had a great relationship with you guys, and it's been a lot of fun.

Speaker Change: I look forward to being the chairman of this company and working in a different capacity, but hope to continue to leverage my 35 years of experience.

Speaker Change: 25, 13 of which was.

Speaker Change: Forward is running dedicated contract services, where I learned so many things in the last 13, plus being our CEO just.

Speaker Change: Thank you for.

Speaker Change: Your trust.

Speaker Change: I feel like we have we've had a great relationship with you folks and it's been a lot of fun, but a lot more fun and it hasnt. Its just not allowed one right now so we got to go to work so thanks for calling in.

John N. Roberts: It's been a lot more fun than it wasn't, it's just not a lot of fun right now. So we've got to go to work, so thanks for calling in, and we'll be back with you next quarter with Shelley at the helm.

Speaker Change: We'll be back with you next quarter with Shelley at the helm.

Unknown Executive: Thank you. And that does conclude today's presentation. Thank you for your participation today. You may now disconnect.

Speaker Change: Okay.

Speaker Change: Thank you and that does conclude todays presentation. Thank you for your participation today you may now disconnect.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: