The operator introduces the J.B. Hunt Transport Services, Inc. Third Quarter 2023 Earnings Conference Call and provides some disclosures regarding forward-looking statements. The CEO, John Roberts, and other company executives are present on the call. Roberts highlights the company's management approach and acknowledges the challenges in the freight cycle.

The company has a long-term approach to the transportation industry, focusing on areas with potential for long-term growth. They have made strategic investments, such as a joint initiative with BNSF and the acquisition of brokerage assets, to improve efficiency and value for customers. Despite challenges in the brokerage market, the company is leveraging technology and working closely with rail service providers to strengthen their intermodal product. Their dedicated and final mile segments continue to perform well, and the J.B. Hunt 360 platform is driving growth in the truckload segment. The company remains disciplined in managing costs and investments to meet the needs of their customers.

The company remains committed to earning appropriate returns and driving efficiency in the supply chain to benefit customers. The President, Shelley Simpson, discusses the company's strategic focus and priorities for 2023, including investing in people, technology, and capacity. While the freight environment is still challenging, there are signs of improvement and the company is focused on delivering value and long-term growth with customers. They have a long-term approach to managing the business and investing in their foundations.

The company values its employees and invests in their training, safety, and compensation. They have experienced and talented individuals, along with technology investments, to provide exceptional value to customers. The company is confident in its ability to meet customer needs and remain committed to long-term investments. While the current environment is challenging, the company's intermodal and dedicated businesses are performing well, while their ICS and JBT segments are feeling the impact of the freight cycle. The company will continue to manage for long-term growth and deliver sustainable returns for shareholders.

The speaker briefly discusses the third quarter results, which saw a decline in revenue, operating income, and earnings per share due to lower freight volumes and inflationary cost pressures. They also mention investments in the company's foundations, people, technology, and capacity, as well as the recent acquisition of brokerage assets. The balance sheet remains strong and the company is conservatively leveraged. The speaker expects to spend around $1.6 billion in net capital for the year and their top priority remains investing in business growth.

In this paragraph, the speaker discusses the company's commitment to maintaining an investment-grade credit rating, supporting their dividend, and using excess cash to repurchase stock. They also provide an update on the performance of their dedicated and final mile segments, highlighting the resiliency of their model and the demand for their services. The company has sold over 830 trucks this year and is confident in hitting their gross sales target. They have also seen some stabilization in their fleet sizes, but have experienced slightly higher customer churn. The speaker remains confident in their ability to deliver value in the market and penetrate their large addressable market. In final mile, the company has positioned themselves as a premium service provider and have been able to prove their value propositions.

Despite lower revenue, the company has seen an improvement in profitability in their segment due to an increase in demand in some of their end markets. They continue to focus on providing excellent service and are seeing new brands engage with them. The company is also investing in employee training and new equipment to improve safety, and they are on track to complete their fleet's installation of inward facing cameras by the end of the year. They are also working to mitigate the rising cost of claims. The company is also caught up with equipment backlogs and is in a good position. The call is now turned over to Darren.

The speaker will discuss the performance of the intermodal business in the quarter, noting a positive trend in volumes and record-breaking week in September. They attribute this to both overall market demand and their strong service, which has helped them gain market share. However, there was margin pressure due to repriced bids, and the company is investing in resources to maintain high-quality service. The speaker also praises the commitment of their rail providers in growing the market.

The paragraph discusses the confidence in the railroads' ability to maintain high service levels during the recovery of freight volumes. The company is working closely with BNSF to create customized solutions for customers and sees potential for significant growth in their intermodal franchise. They have the capacity and technology to handle more volume and are committed to meeting the growing demand for efficient transportation solutions. The speaker will now review the performance of the integrated capacity solutions and truckload segments, as well as provide an update on J.B. Hunt 360.

The speaker welcomes new employees and discusses the recent acquisition of a brokerage company. They mention the challenges in the brokerage environment and the decline in volume and revenue. Efforts were made to improve revenue quality, resulting in some loss of revenue. However, there was a sequential improvement in gross profit. The company is investing in mitigating theft and improving their platform. In the near term, there may be margin pressure and dilution from the recent acquisition. In terms of truck load, there was a decline in revenue per load but an increase in volume. The company's J.B. Hunt 360 box service is performing well.

The company is seeing continued value in their drop trailer capacity and the ability to source the right carrier on their J.B. Hunt 360 platform. They plan to invest in their 360 box offering to drive efficiency for customers. Technology is a key foundation that connects their people and capacity, and their 360 platform enables them to access the right capacity to serve customers efficiently. The platform also informs them about the market and helps drive productivity and eliminate waste in the supply chain. Despite current challenges, the company remains confident in their ability to drive long-term value for customers and their company through their investments. The call will be limited to one question per person.

Krista begins the Q&A session with a question from Chris Wetherbee about the company's margins. Wetherbee asks about the increase in cost per load in the second quarter and how it will affect margins going forward. CEO John Roberts acknowledges the cost pressures and explains that volume can unlock efficiency but there will be some cost elements to battle as they ramp up rapidly. He also mentions the implementation of a pricing cycle and the impact it had on margins. The next question from Allison Poliniak is in line with Wetherbee's and also focuses on the positive trends the company is seeing.

The speaker discusses the potential for a market share grab from truckload in the intermodal industry and the company's strategy for releasing excess capacity into the market. They mention their focus on converting highway business to intermodal and creating better balance in their network. The speaker also acknowledges external factors that may affect the bottom of the cycle for intermodal and the company's margins.

The executives of the company are addressing questions about the 4% increase in intermodal trend at the end of the quarter, which they attribute to growth throughout the network. They also mention setting a single week volume record in September. In regards to CapEx, they explain that they have made progress on replacing equipment in 2023 and will still have some in 2024, but their growth CapEx is success-based through dedicated and intermodal.

During the 2024 bid season, there is both potential for intermodal rates to improve and downside risk due to uncertainty about the economy and consumer demand. The company plans to discuss costs with customers, but the outcome is unknown. In the third quarter, the company faced pressure on dedicated retention due to competition, bankruptcies, and efforts to reduce fleets.

Brad Hicks, speaking on the company's recent acquisition of the brokerage business from BNSF Logistics, said that the deal complements their customer base and allows them to invest in new areas such as agent business models. The company expects some lingering costs in Q4, but the deal is expected to generate an incremental $100 million in revenue for ICS. However, Hicks could not predict the future and how the economy will affect their retention.

The speaker, Darren, is being asked about the company's volume and how they are confident in their ability to continue growing. He explains that their customers have not been accurate in predicting their needs, but the company remains a go-to provider for them. They are focused on converting highway business to intermodal to save costs and have been winning market share. Any growth in the West coast will also benefit the company.

The speaker reflects on the past 12 months, stating that customer inventory management has been unpredictable. However, they are confident in their product and their ability to meet customer demand. The next question is about the current peak season and whether shippers are trying to secure capacity before potential rate increases. The speaker responds that demand remains strong and equipment is being brought out of storage. They also mention that shippers may have another opportunity to secure capacity in the future.

The company is unsure about pricing expectations for next year, but some customers are engaging in dialogue about potential rate reductions. There is also competitive risk in multiple segments, including dedicated, ICS, and IM. The company is taking share in the IM segment, but it is unclear if this is exclusively from truck or also from other IMCs. The executives will discuss the competitive dynamics in each segment.

The executives of J.B. Hunt Transportation Services discuss the company's success in taking market share from other intermodal channels and their focus on converting highway customers. They also mention losing some dedicated fleets due to competition but having a healthy pipeline for future deals. The brokerage segment is described as highly competitive, but the company's acquisition of J.B. Hunt 360 is seen as a valuable asset in creating value for customers. There is pressure on PTE in the current market.

The company is facing challenges in the fourth quarter due to carriers pushing back on the current PTE and navigating uncertain market conditions. The executives are taking a long-term view and being fiscally responsible, with some choosing to walk away from unprofitable business. They are also facing challenges in the intermodal market, but are largely meeting their pricing expectations. The company is focused on being disciplined with their capital investments.

The speaker, Shelley Simpson, is responding to a question about intermodal volumes in the last five years. She acknowledges that there has been a stagnant trend in intermodal volumes, but attributes it to the uncertainty caused by the pandemic. She mentions that customers are struggling to forecast their freight needs, which has affected bid compliance. She also mentions that the company has invested in fleet replenishment to ensure they are prepared for future demand. Overall, there is a lack of clarity in the market, but the company is adapting and investing for the future.

The speaker is asking about the low margins in the intermodal business despite increased volumes. They want to revisit the leverage aspect of the business model.

The speaker discusses the factors that contribute to margin improvement, including carrying too many resources, increasing volume, and moving the pricing needle. They acknowledge the importance of both volume and pricing in achieving margin improvement, and mention the lag time in seeing the full results of a new bid cycle. The speaker also notes the uniqueness of the current cycle, which has transitioned from tight capacity to loose due to de-stocking, and suggests that there are signs of this trend ending.

The speaker discusses their experience in managing through economic cycles and the current state of the market. They emphasize the importance of investing in their people and being prudent with costs while maintaining a long-term focus. They also mention their customers' positive outlook and their commitment to delivering value and achieving long-term returns for shareholders.

The company's main focus is on delivering for their customers and eliminating waste through various methods. They aim to differentiate themselves and provide efficient fleets. The dedicated truck count has stabilized and the company is confident in hitting their sales targets. The future is uncertain, but they are prepared to adjust and continue delivering on their promises to customers.

The company's customers are still satisfied with their product and sales remain successful, indicating strong interest in the market. Despite challenges, the company expects to hit its sales target for the year and maintain stable margins. The company has also been successful in managing the extra trucks from previous years and has implemented a strong offensive strategy in the CBD market.

Nick Hobbs discusses the company's history of reducing trucks at existing accounts during down cycles, which has paid back in dividends. The business is performing as expected in 2022 and the company feels solid about its dedicated model. In terms of driver availability, there is still a shortage of good drivers, but the supply is improving. Driver wages are not expected to decrease.

The speaker, Shelley Simpson, is pleased with the current state and future prospects of the company's five business segments. They are seeing growth in Intermodal and have a strong dedicated model, as well as progress in final mile. They believe their business segments complement each other well and can meet the needs of their customers in the North American supply chain.

The speaker is pleased with the company's efforts to ensure appropriate payment for their services and the growth in volume within their business. They acknowledge the challenging freight environment and the hard work of their employees. They are committed to delivering value for customers, supporting their team, and creating long-term returns for shareholders. The CEO emphasizes the importance of experience and making long-term decisions.

The speaker emphasizes the precision and calculation behind their container ads and the impact of PSR on Intermodal volume. They mention their investment in the right assets for long-term success and the challenges of dealing with a shortage of supply. The speaker and Shelly are pleased with the progress in final mile.

The speaker acknowledges the pressure on their business and expresses gratitude for the discipline of their team in not holding onto bad deals. They have visibility into every aspect of the company and are not tolerant of problems. They are willing to wait for the right business opportunity. The speaker also emphasizes the importance of their employees and investments in technology and capacity for the future. They end the call by thanking the participants and looking forward to the next quarter.

This summary was generated with AI and may contain some inaccuracies.