J.B. Hunt Transport Services, Inc.

Q1 2021 Earnings Conference Call


spk_0: reading thank you for standing by welcome to the at j b hung first quarter twenty twenty one earnings call at this time on spencer knowledge and only mode after the speakers presentation there will be a question and answer session to ask a question during a session on a depressed star one on your telephone please be advised that today's comforts is being recorded if you require any father substance place press star zero hour now like to have the conference a virtue your speaker today and brad delco vice president of finance an investor relations
spk_1: please plan
spk_2: good afternoon the boy introduced the speaker that would like a clip from time to provide them disclosures regarding portland payments people making v or looking statements within the meaning of the private security litigation reform act of making any by words that it expects it dissipates in him at the mates were similar expressions are intended to identify these for looking statements a big ones are based on katie on current plan and expectation bob risks and uncertainty the could cause he drank the even result to be materially different from those set forth in the board looking statements for information regarding race backers please refer to take the hunt annual report on form nk and other reports and filings with the securities exchange commission now i'd like introduce the speaker done today call because afternoon i'm joined by our ceo john roberts our see a oh john cool though shelley and are cheap commercial officer and atp a people in human resources net carbs are chief operating officer and president a contract services brad hicks president a pilot services and there and field president of intermodal at the time i'd like to turn the call to our ceo it for john roberts some opening comments john
spk_3: they could grab and we discussed here her last call we entered twenty twenty one with a cautious but informed positive outlook on what we can expect and pounds of demand and in the toy replenishment need from our customers a thousand the temporary disruptive present about weather events in february most of the data support and generally optimistic view of those expectations and encourages art direction going for as we evaluate current market conditions and the need of our customers we're determined that an increase in our capital investment plan is warranted accordingly were announcing a full forty percent increase in our originally stated plan to able to procure map of incremental contain nervous trainers and the needed supporting equipment such as chad feet and tractors project yeah
spk_2: the new projects and for capital investment now reach one point two five billion dollars for this year a clear milestone for a company we have to care contract to increase our container flea bomb out of six thousand units and twenty twenty one for and a model ringing and that had this and target to approximately twelve thousand units for twenty twenty one a little over a thousand of which are temperature controlled containers we are also increasing actually their fleet and how or services about fifteen hundred units bring that tone fleet expansion had three thousand for twenty twenty one all of this equates to just above and eighty percent increase our original container growth plan and a one hundred percent increase to our charter fleet expansion plans for crazy if the buff programs dark hello added comments on our capital expenditures are in his remarks
spk_3: let's discuss margins
spk_2: after announcing our plans to issue clarification for all segment margin target hear our last fall and that the understanding that we have had the margin goes under specific review for over a year we will reestablish our target with you here today for in a model we lower our margin goes from eleven to thirteen percent to ten to twelve percent the fundamental reason for this structural change is that it prevents the company with the ability to grow to it and serve customers while also generating an appropriate and sustainable are alive feet and the
spk_3: call it a bit of adjustment we also see offered improve our effort you know the and warm up a box parents promote and to ally with our tractor and chatting ratios all of which would be positive for the business and returns for dcs me increase our margin golf from eleven to thirteen percent to twelve to fourteen per se
spk_2: a while this change appear to be a step up in margin expectation it is actually the realization of a fundamental increasing the fleet five which allows growth and start or fences to occur without disrupting the core business as as it had in the past and other element revealing clarity for the fleet been has a if removal on the file mile activities which require a lower margin given the latter asset requirements as discussed the margins are set to provide an appropriate return for a visit been given the acid intensity of the year a higher margin has always been needed for jd t we are just thing our margin range from eight to twelve percent in between eight and ten percent the primary him for this change is a recognition of a lighter acid position as we focus our investment on adding of and not track with one for the do point out that we're in the early stages of transforming this model focused on more trailers and will continue to die with the margin requirements and market support to achieve rather than the appropriate life sea levels to reinvest right here we reaffirm our long term target margin rain between four and six percent and for bottom our services we reaffirm our long term target margin range between four and eight percent each segment later will add comment on the main drivers for the margin target and the resulting are a lot the expectation
spk_3: he's going for final comment for me on the availability of professional drivers or asset they didn't fit and or care providers it under unusual pressure from
spk_2: lol we have faith travel hiring it's use it at varying degree of difficulty gary previous tightening sack of we see the current pressure being meaningfully more pronounced and likely prolong shelley your neck lab more color on our perspectives cordingley we are taking some unique staff in our efforts to address this critical challenge
spk_3: these include reducing the eligibility time for new driver benefit from ninety to thirty days expanded efforts to explore new way to train and mentor new entrance to the field of professional drivers and of course a comprehensive overview of dropper wages in compensation all in we believe we are advantaged our brand are recruiting and hiring systems a focus on retention and the vitally important increasing efforts in improving our inclusion and awareness for the vast the birth of he currently in place with are amazing driver and field management teams i will not turn to color john puello for his come
spk_2: and you done and good afternoon everyone i'd like to start by providing a couple comments on our first quarter of twenty twenty one from a consolidated perspective given the weather another constraints facing the industry we're pleased with their revenue operating income and dps growth for this quarter with notable achievements and our highway services revenue as got ideas and jpg rub significantly over the prior year quarter with respect to whether we previously guided to a fifteen to twenty million dollar estimated operating in a income impact from the february winter storms in closing the quarter we determined that and back to be approximately six seventy million which primarily includes lost opportunities within our intermodal segment of approximately twenty five thousand loads other cars pressures and a quarter of primarily related to hire driver costs to try acting retain drivers and higher coz across our various networks and operations to the congestion and the overall labour tightness from increased freight the man's incapacity constraints you'll know we ended a quarter with approximately five hundred fifty million in cash but this being driven in part by a review of the capital investments the john it highlighted we had previously guy to get back to be between eight fifty nine hundred million for twenty twenty one and we are now up dating now to one point two five billion primarily driven by the intermodal container ads and the trailers for a three sixty bucks program this investment supported by the current environment but also are longer term outlook while not specifically included in the cab explains a gas and liquidity also allows for further consolidation or file mile businesses as opportunities may arise but regards the margins as noted the conclusion of i review of our segmented margin targets was informed by the current and future stay of our business segment in terms of our desired returns a capital a rebel equality capital intensity and the desired market penetration rate other inputs to arranges include underlying risks regarding nature of our customer contracts but in terms of reciprocated commitments and contractor ration finally from a capital allocation standpoint we continued stock buybacks in the corner but far less opportunity in the back half and then fell into our blackout period are we have guided toward significant capital investment we still anticipate continuing or buyback approach to out twenty twenty one a final note on coal because we can to offer page imo or or are getting paid time off or ppl to employees have needed to quarantine during the quarterly committed to providing to jail to employees to allow them to be vaccinated thereby ensuring their deputy is not impacted when eating time away from work to be vaccinated we've been working with local health care organizations the house vaccine clinic said or corporate headquarters to provide vaccination to employees their handled family members and other eligible community members together we have an articulated more than thirty thousand members of our community and are working with our field employees to provide vaccination assistance unreplicable area guidelines and procedures as a result of these efforts we have incurred approximately eight million and caught and the current quarter designated specific pelvic costs compared to fifty million that we experience and first quarter of thousand twenty i complete my remarks and i like her now turn it over the shell
spk_0: thank you john and good afternoon my commercial update this afternoon or focus on general market conditions and our experts expectations for the year as well an update on the progress we're making as an organization with that three sixty platform additionally the to earlier we entered twenty twenty one with cautious optimism about opportunities presented to us the opportunity to include a means to recover from the costs incurred last year as we honor that commitment to customers be equally as important the opportunity to solve capacity challenges for and on the half of our customers those capacity challenges for our customers remain very present and the current landscape ale more likely process throughout two thousand and twenty one highlighted by tight labor market elevated costs a picture capacity and overall lack of supply chain fluidity as an organization we remain committed and focus on meeting the needs of our customers on and yeah commitments in doing so by striving towards our mission to create the most efficient transportation network and north america i remain encouraged by the level of discussion and interaction with our customers on the very important subject of revenue quality capacity and costs and while argue on pricing as a little more elevated today than what we discussed at our last call the reality is that our clients to serve as also higher it's parts presents itself primarily and our labor costs as well in the illusion of our assets or equipment turn we in the industry as a whole are facing meaningful cost pressures to recruit fire train and retain qualified professional truck drivers to meet the capacity needs of our customers as our future outlook on clots remains fluid so will i approached price to ensure that our investment to meet the capacity to our customers are supported with our expectations for an appropriate rate of return please return to put our ability to continue to invest in our assets which are people the and our equipment as well as our investments in technology to serve the growing needs of our customers and as we prepare for record equipment at this year we are working very closely with our customers on equipment turns and forecast to enable better network fluidity shifting gears to rgb have three sixty platform i could not be more excited about the progress we're making as well as the opportunities we have ahead and the last quarter i've been extremely encouraged by the level of engagement we're seeing in the platform from our carriers and shippers as are caveats in this area continued to break new records weekly and monthly we remain focus on reducing friction across the supply chain making it easier for shippers and carrier years to match it as them to optimize and transact in real time when of our big areas of focus is on improving visibility and transparency across the supply chain and we are encouraged about the opportunities we have to make progress in these areas supported by our recently announced alliance with google well as we collaborate and co innovate on solving some of the industry's biggest problem i'm extremely proud and excited for all the opportunities presented to us and our ability to solve for our customers' needs utilizing our people products and services our diversified services or are scroll powerbar technology platform continue to be valued in the marketplace and supported by the customers leaning into i thought for their need finally as i have recently added the role of even p a people in human resources i would like to share how encouraged i am about the work we're doing enhancing are included culture while early and our journey and the organization leading in the syria and with more to discuss and to share in the future i'd now like to turn it over the net
spk_3: thank you shelling good afternoon
spk_4: i'm
spk_2: they getting on several areas of topics including the current blabbering barman results in performance a dedicated with him additional context with the updated margin target raise that john that you know bigger and family all were due regard to performance performance the final model so he said
spk_4: i'll start with some good thought and comrades around the block imagine a big industry is facing the most challenge drug markets that seen in a thirty seven year career job people we estimate that the degree of the grab it grew up in graduates the drug and alcohol during our and the impact presented by the pain unit combine have resulted in and possibly two hundred twenty thousand feared drivers available to me industry capacity beginning as we don't we are taking a comprehensive approach to attract and retain our professional bribing work for including a judgment to a white to the benefit while also focusing on the quality of the job we believe we have some of the best way professional driver with rational grabbing garden and we're crop up
spk_2: portfolio services including intermodal great that it needed to us and final miles or the
spk_3: over ninety percent of are driving doctor local regional about a consistent route an opportunity for more home
spk_4: on dedicated result dedicated to wander respond in an agile fashion the challenge you've grown at it despite several weather related disruptions in a quarter he has delivered it or you or order ribs on companies is bird i believe that it did that chestnut to operations seen a professional drivers who responded in want to recover for customers
spk_2: all while playing poker site execution and the official utilization of our assets as a result customers country to see value in the quality and flexibility of our professional outsource crowded with solution as also have be a bar strong path
spk_4: we ended the first quarter selling approximately three hundred and eighty trucks and dps and we're off to a strong start in two thousand and twenty one all walcott moon kitchen right to remain above ninety eight percent regarding everyone's favorite topic about margin we believe in it particular to update the market on are targeted mark margin range which now the and that twelve fourteen percent in the bcs segment from the previous rank of lemon the thirty percent in at the decision is the fallen off our value proposition
spk_2: scale efficiency as well as the capital to the and like that more importantly it is worth noting that nothing and are partly model had changed but rather one of the revealed itself with the realization that the current scale of the operation that that's an opportunity to grow the business while experiencing as dragon startup costs associated with customer graham that
spk_4: a different way we see the same opportunity presented to us day to balance dodgy bar to grow well into the future while maintaining discipline around i returned them shuffle
spk_2: grab what my comments on quantum all services follow mods or using of able to deliver a strong performance in the quarter and to continuation of fourth quarter pick the lock screen in our business while be the que one which had not been in the signal no more while whether good with disrupt the business temporarily were able to recover we get our customers good delivered in only speed they modest impact overall performance and you know we remain active in conversations the grown scale with our current a new customers across not would grant and to capitalise on the opportunity throughout the year additionally will continue to advance to your we deliver a differentiated products are good some the high standard decided they'd be a customer satisfaction with regards to margie we are maintaining our target range of old a personal or growth trajectory of or as that and on at that animals are offering operate will continue to employ when we fall within that radius would gain greater scale with our value added services
spk_5: that concludes my remark for turn it over to graduate
spk_2: thank you know it the organizations excitement and enthusiasm for a highway services business continues to be evidence by the progress in our results and further supported by the opportunities our customers present us with the provide needed capacity solutions comment and i will briefly touched on some of the highlight of our highway service services businesses which includes both integrated capacity solutions are ideas and track or t in short the marketplace for getting a three think he continues to provide our customers capacity solutions utilizing a combination of are more time out modal digital right platform while complimented with are dropped her the pool powered by getty humphrey sixty i'll start with idea i guess with able to deliver revenue of five hundred twenty five million or fifty six percent growth over the prior year and deliver operating in ghana seven million which is now and second consecutive quarter and profitability and our journey along our digital transformation similar to the fourth quarter of twenty twenty the core presented us with opportunity to help customers source capacity effectively and efficiently on our platform and an otherwise constrain market environment segment volumes were down one percent year over year driven by a decline of lpl gums offset however by truckload volumes which rep ten percent in the court higher spot market opportunities higher contractual rates and the previously mentioned exchange contributed to the fifty eight percent increase in gross revenue polo going forward we will remain focused on balancing the right mix of volume growth opportunity presented to us as we remain committed to our investment in three key areas are people are technology and scaling the platform and john alluded to earlier are margin target remains forty six percent in the segment which we believe is achievable as we move beyond our heavy investment cycled a chief scale and as the business model matures in jp tea or track a segment with able to deliver forty three percent year over year growth in first quarter revenue calling just shy of hundred fifty million dollars operating income with ten million which is the highest for a first quarter since two thousand and seven growth and the technique continues to be driven by not out that and at that light service offerings powered unsupported by the jp have three the platform and katie he has shifted to more of an app that my model we have an ability to provide trailing capacity to customers and maybe home either kb her own equipment are independent contractors or our only capacity the through the platform the did i agree that the bought offering demand man for that sort of the strong and supports the previously disclosed one hundred percent increase to our prior trailer fleet investment for twenty twenty one our margin targets in jp t are now eight to ten percent from the prior eight to twelve which recognizes the ship to a more at that like model that said and similar to find mouth services are performance relative to those targets will be dependent on the asset intensity of the business as it evolves and as always are returns on capital remained the core pockets of our investments to grow the business in closing i would just like to reiterate the excitement and growth opportunities with the across our highway services portfolio to sell for our customers need in an efficient and as shelley alluded to earlier more frictionless way we remain committed to our investments in our people technology and scaling the platform which include our investment to spain and are three fifty bucks program and conclude by comments on a path it over there
spk_6: thank you brad clone the tavern one today will provide some additional details on her first quarter performance give you some thoughts about network fluidity imbalance provide some perspective on the man and price environment and cap it off with comments on are updated capital investment and target margin range the john hi
spk_2: added earlier volumes declined three percent in the quarter broken down by month as plus three percent in january a sixteen percent decline in february and plus four percent in march as we called out in the earnings release the weather challenges in the quarter are estimated to have impacted us by twenty five thousand intermodal urged primarily in february but the effects did carry over in march the rail network has shown signs of improvement so far in april although we are not only back to pre weather's service levels we have and continue to expect to see improvement as we move through the second quarter while rail challenges are well known another challenge we face is what we refer to as customer street time which has increased as our customers are falling behind on unloading inbound delivered unit in a timely manner we believe both the rail terminal congestion and the customer unloading challenges are direct results of labor challenges inside our operation driver hiring continues to be a significant challenge in the industry will take on higher wages in order to attract and retain new driver years we fully expect the same is true for the rail terminal contractors and customer warehouse labor demand for intermodal service remains at incredibly strong levels the pricing market is performing at a level to cover our cost increases from last year as we honored our commitments as well as the inflationary cost pressures we are experiencing this year related to driver hiring certainly the increasing driver wage and rail cars or topics with our customers but we're also highlighting the velocity challenges and the cost of equipment ownership as you should be able to conclude the pricing environments supports our decision to add additional capacity to our fleet is john highlighted earlier and as we discussed last quarter during the last call we said we expected pricing to come in and high single to load double digit increases and at this point we feel more often as think about things trending towards the higher end of that range adjusting for mix as we entered the quarter just over ten percent of our business at implemented twenty one pin cycle raids by the end of the quarter just over forty percent of the volume had current bid cycle rates we will expect that to climb to seventy percent by the end of key to and the remainder to finalize during two three as john covered in his opening comments we have adjusted the and margin target range to ten to twelve percent we have highlighted many times that we remain focused on generating the appropriate return on invested capital in the business and while margins are an output of achieving are targeted returns returns or also influenced by other factors including asset turns capital intensity and consideration of contribution for lead we believe that new target rain strikes the right balance between generating appropriate returns the support reinvestment to capitalize on what we believe is a long sustainable growth opportunity presented by the market the future of intermodal remains bride as it provides an economically attractive alternative is so some of the challenges our industry is facing a clothing the driver market higher fuel costs capacity the carbon intensity of the supply chain and the need for investments in public infrastructure also as john highlighted we have expanded our container order in two thousand and twenty one to approximately twelve thousand new containers including bone dry and temp control that will begin to arrive in key to it continued through the end of the year as we have lived through the current did cycle it is clear that our customer earth want more capacity from us and we are responding the commitments from our customers death for during the season fully support it's additional investment and capacity we are confident that focusing in delivering value to our customers will support the appropriate returns needed to invest to meet their needs and put us on a straw
spk_0: the path toward long sustainable growth that concludes my prepared comments as a reminder to ask a question press start and a number one on your telephone to draw your question pass accounting everyone a chance to ask the question
spk_2: we ask
spk_0: question why we can tell like even a roster our tenafly ever to read them
spk_7: yeah thank you and just at with would we present a lot you got there we know are prepared comments went long so we we are going to cut you off with one question ah just just this one quarters appreciate you guys follow his instructions
spk_4: in your first question comes to mind allison i understand where credit credits
spk_7: a thanks i'm cut off on so i did when i can
spk_2: the yeah we could synchro the the are like i see on intermodal and not be played it a pack about the at lower margin target which already to like until four am but it it sounds like what you're saying is that he added there were targeted back and cap at all or of not going to change that south maybe to get other thing too that and then he had just with maybe
spk_8: more broadly i even though the big that towards are moving to that it's like a more off it might not all and and would just carry it on your on your thoughts or expectations for longer term battery consolidate our i think and yeah
spk_2: oh let me let me first touch on the intermodal allison pre sade the question at the end of the day
spk_8: at times in the path we know it's been awhile since we ran in the eleven the thirteenth at times in the past
spk_2: since that time or revenue per load has increased substantially two thousand and eighteen and and
spk_8: again this year prices are increasing increasing pretty rapidly so have cost leaving us and a profitability level on a per load basis that that is still similar to even better than it used to be when we were in the eleven to thirteen range which translates to returns on the capital in a normal total even at a slightly weaker margin that are still as good as they used to be in that that's really what's driving seven some of that conversation and i'll let cool oh probably speak to more on the enterprise side
spk_9: yeah so i you know else and we look at really are oh i see from from we manage from a consulting fees and so we honestly have investments and the an individual segments different times for example we announced the increase in the container or that's a huge capital investment in the current year but we look at that overall investment over the twenty your life with us and so are we manage the a balance of the segments on a console
spk_10: and basis and those are gonna increase and decrease
spk_11: just depending on the level investment the we haven't that time
spk_2: next question comes chris with the city a good afternoon i want to stay on intermodal of i couldn't ask about the twelve thousand containers i guess what i'm trying to understand is when you look at the market today i did you said your customers want more capacity from you had you talk a little bit about these containers and enter how well they're already spoken for and i think taking into account just for the cord the mammoth in the market but also maybe the sort of under utilization that been caused by the congestion so in other words how long do you think it to deploy those are actively in the market or because actually creates a little bit more supply relative to what the band is today
spk_0: so i would say our our customer demand is a significant and the this six thousand containers we plan to order in the when we announced that in of the fourth quarter earnings call back in january
spk_12: and the current velocity environment just wasn't wasn't given us as much capacity as or our customers clearly clearly wanted from us i'm not of the opinion that adding these containers put an oversupply in any way into the market i still believe that the market will be a under support
spk_13: did with capacity based on the last the and in some challenges their we we we've made this decision knowing that we could have fully utilize those can those containers that a that we announce have we've expanded the order on thank you
spk_14: next question comes john campbell chappelle
spk_8: evercore i i thank you a question for brad hex and maybe shelley just six months ago you had expected i see as to turn a profit in the back after twenty one that you went on and didn't as profit and forty twenty said you expected profitability and second half twenty one didn't even better profit and in one que twenty one so the question is yeah
spk_2: are you are we looking at is still achieving the scale that you are hoping to attain in the second half of twenty one and if that's the case is earned even greater step change in the profitability and the gross margin potential of this business specially when you layer in this collaboration that you're hoping to achieve with google the average i'll take it that and maybe a the said it over to show it had any other further comments bill
spk_15: what we may have been too cautious when we when we spoke at the end of queue for about what what the first part of this year held we'd still are in a heavy investment window as we clarified i think acres ago but the market conditions really are are very favorable as we think about revenue quality and our overall ability to get the rate at a level that accounts for the increase in pp that we have seen the the revenue per load levels are amongst the highest we've seen in art history that but
spk_7: also to as pt and so on the combination of those two with where we're at in our platform development which we feel very encouraged by as we turn into que to is is very favorable for us and so your did that wow at the get a further ahead and we had anticipated certainly the outcome and output of que en
spk_15: would reinforce that to it to some degree but we still have work to do we still have investments that we are at a place that we're very satisfied with on our journey felt that
spk_0: and here we are still very healthy time stealing our business when we started our bid season at really across all of our said when our come from our ally met on cause think of as the like that necessarily reflect their of in the feedback we were getting vs whether competitive market look like said he would go ahead
spk_15: after the and first quarter we moved a disproportionate amount of spot shipments versus what we have historically new the and publish fines were lower and week affected at the beginning of the first quarter as we have progressed through that quarter and even moving here in april we have seen our customers lean into as never
spk_10: get lane and and really giving as larger beard award across our second and particularly and side highway so would say are be he one was a more robust environment or spot at price in general and as a live in the queue to i think that there will be
spk_0: seasonal margin pressure and and particular having published pricing that should be more on an annual basis but having said that and more specific to the work that we're working on with google and our alliance we feel are very focused on our code innovation together to solve an interesting challenges focused primarily
spk_16: and right now and transparency and visibility we do think that that will help connect to our bottom line which is why brad reaffirmed our margin target in as the as we are encouraged with our results we are laser focused on getting to scale very critical to have a great platform to create that most efficient right place network in north america
spk_2: next question ravi shankar are you actually and hi for nearly one i just a clarification on the other market targets it looks like you guys are are of the and i am and also live and he has gonna keep your my targets flat it was like a down as a trade off far higher top go which which seems like a vague reasonable approach but war
spk_10: level of revenue growth roughly are you underwriting to get to those margin target
spk_17: a rally this is brad in a week we don't typically give some guidance but he knew it in terms of other things we said publicly particularly around intermodal in a week we believe we should be over a long period of time growing at a faster rate than than the market in the reason for that is because we feel like we have some advantages
spk_2: it's a that kind of what we've talked about in intermodal and then with dedicated i think next provided comments about what we target to sell each year but but we're not going to we're not gonna give you specific revenue growth targets we've obviously worked hard to get you guys more transparency on what we feel like is the right margin target range that generates be appropriate returns on our capital and allows us to continue to grow well into the future as the market presents as those opportunities next question as that insert
spk_8: hey hey thanks afternoon guys so you guys have been added call it a ten percent intermodal margin the last three years as as the rates reset higher do you think you'll be closer to that twelve percent margin run on an annualized basis and then
spk_9: this one point two five billion a cat back should should we think about this is a one off or a new normal
spk_0: oh god this is there and i'll take that the margin quest in you know we didn't we just don't we've given year long term
spk_3: target and so to say we expect anything we expect to land inside that target and that certainly our goal and that's lol we come into work every day and focus on he's got this is john from from a account as callbacks standpoint we've obviously elevated this out there was a little bit of
spk_4: carry over from last year that we paused is going to the pandemic in that there might be a little bit of pulford but at this i wouldn't use this as a a runner a specifically it's elevated from a little bit from where are our normal run rate will be going forward and next question comes
spk_18: goldman sachs
spk_4: the i i'm sort of curious on the final mile business would sham with pretty strong from o'clock and standpoint maybe gifts and thoughts around that and specifically in the pace has been really strong obviously there's a lot of trends betting that and to serve a curious them yeah
spk_10: how long do you think we can extend that outlook i mean would you say it will be fairly robust this year and and and beyond in the a mile general thanks
spk_19: the i would be cheaper to dig i'd say that than that
spk_20: a lot of it will put you in the key on the you watch any disruption
spk_21: and the decade
spk_14: i am normally very very well
spk_2: and i really the books that really got a big bird no damage like keyboard he warned answer really expect everything to go back to normal in panama i'll be thirty three a movie at our target range is fully think they they lasted a year next question
spk_22: tom i great science
spk_2: yes chat
spk_10: ah yeah get good afternoon i were to ask you a little bit more about the animal contract raid and i guess you could talk my contract rates are all if you want on your granny point you in strength
spk_0: is this i if you think a big step up after the february or whether impact should we be thinking about potentially fifteen percent contract raid or are you saying that a kind of nine or ten we ought to be thinking about like a lab and just trying to get attentive a large that step up in any expectation for contract rates would be
spk_23: well tom i appreciate the attempt to have a month you know we highlighted i think all to to allow double and wheatley reiterated in earlier comments that were feeling more confident about the higher end of that as outside of that statement i really don't think it's the i don't know even know when not yet to say anything beyond that so i did i don't know how to guide yet anything beyond double digits
spk_8: gobble up a keeper we think it goes triple digits about them next question and and justin
spk_9: steven
spk_8: and can wrap on the quarter
spk_2: ah on intermodal margin i know john you called out at seventeen million dollar whether impact on a consolidated data for i was wondering if you can't quantify what the impact way and intermodal pain and if you could share with air modal margins would have loci acts weather and then thinking about the longer term
spk_8: i'm and or modal margin guidance he can you go into a little bit more detail on what that accounts for the progression of rail service or says where we are today
spk_2: oh yeah sorry just an i can as far as the the weather impacts on intermodal we we really look at it from from the load stay on point out you know what we says it's only five thousand loads and to translate that into mars and it takes a lot of speculate in calculating snow removal insurance and claims and so what we what we have good insight is the impact on the loads and the volumes and i think that's the best way i don't know how to translate that into what what margins of looked like had we not had the weather a ban at others it's too many subject of things in there
spk_19: and i apologize or at forgot your second part of the question
spk_24: i'll probably take that when i think he was asking the way you know how much does it play into our ability in than the new margin range to get either an improvement or in rail service or the expectation that it will remain somewhat stock or slower a challenge philosophy adding more than anything we have
spk_8: probably
spk_2: some believe that rail velocity has slowed down since the days of our eleven to thirteen margins and i'm not i'm not ready to tell you that i have an expectation that it's gonna get back to those levels of do i think that rail the last the will improve in two thousand twenty one and beyond
spk_8: i do i mean i think that has a lot to do with this labor supply challenge that we've highlighted many times in the end i don't think the railroads are up there impacted by that as well particularly at the the terminal level so i would expect some improvement which can help us
spk_2: but i don't know that i can see rel the last the getting back to the levels it was you know two or three years ago i sometimes
spk_14: bank of america
spk_15: a good afternoon i'm just like a little bit about the congestion and tightness maybe are your thoughts on how long the flat given the low inventory than the benefit of the tightness that you're seeing now versus then contrasting that with the fear of over ordering equipment so as congestion clears the it's the in the near term that you're stuck with with some access a quick and or impacting rates yeah i think of from the from intermodal perspective you know
spk_10: there is such a strong demand for intermodal services for highway conversion in the eastern part of the country that is it necessarily attached to congestion at ports are particularly difficult congested along the west coast we have a lot of confidence in our ability to continue to grow intermodal
spk_0: although will there be a blip quarter somewhere i guess that's possible but i think we feel very good about the long term projection of that that equipment ads that's that's frankly why we did
spk_25: i would i would just add to that they're in that that young we'd we'd see congestion also on i like services i'd probably with our box program and not so much for that railed congestion or for congestion but in terms of our customers unload behavior and and so your those labour challenges that there and mentioned that we can see the impacts from at airports and ramps and we also see on the customer behavior side and so we're paying very close attention to that we would we would hope and expect to see a lift from where we're at today and we really felt that deteriorate beginning to middle of covert last year and so young that that equipment velocity and availability is being negatively impacted by our customers ability to unload the equipment and will work very closely with them to try and sell for that and i would pay or maybe just from a customer view
spk_15: as well inventory i think will continue to be an issue improve your percent three the second half as this year i think that is newer new and particularly what's happening and on the import sad really trying to replenish happy to see how consumers are spending that is continuing from twenty twenty i would say that
spk_7: challenges that worked fearing thing whether it's at the port or the rail and in particular the labour side for and professional drivers that is a major issue that is very different the time that will take us more time to work through and we are very focus with our customers on cross selling and coming up with better pick planning we do have a crew
spk_15: raw or services at good line of sight as the how will help our customers be right and have a successful peak feed the weather that think if you are happening in the back half of the year feel really confident about the work reagan together next question comes brian often and with and jp morgan
spk_2: you have to thanks for taking the question since wanted to see in terms of the i cs and three sixty you big of alliance he announced another a partnership with keep trucking at where do you feel like you are in terms of partnerships as you're trying to but have skill in the network and clear view benefiting from a bit of spot spot market strength as he mentioned that how far
spk_26: you think you are from really getting to scale what was her to measure should we look for and hijacking against them
spk_27: i'm well thank you for that bryan we are at have three key areas that were focused time and jp at three think the really access transparency invisibility and that directly relates her customer and cost service and capacity we do have multiple as you call them partnership
spk_28: a price each one of those as our strategy and our work continued we don't and now every piece of that because we don't see the advantage in the market to openly discussed that but we do have and specific words that it's happening inside that from a scale perspective we will continue to work on remaining friction the want to make it simple for a stripper or a carrier and to be able to connect quickly and efficiently and sell any of the connections that we could make and leverage other people's expertise and really bring that are saw for that region yet three sixty we will review and employment so i would say our scale our ability to scale will be containing the sulfur customers number one from a full scale or from a full scroll perspective but also
spk_2: making sure that we highlight at the technology for that they can get actor to the right now the right track of the right time pricing then will be reflective and transparency and and ultimately customers want to be able to track their shipment the same way we track a dominant pizza from the town called and the time he gets to our home and that our focus on oh do they had to their shelley that that from an execution standpoint as we establish those key partnerships or were constantly focused on how it can improve productivity and efficiency so that we can provide for our customers that that cost benefit that service benefit that visibility benefits so we pay very close attention to the internal aspect of those her capability as we move on down the road as well expression something like operator i'm here and are just wondering if you can give us some color on on the fall thousand and two boxes
spk_6: if specifically and when it's coming where it's going my guess is it it's mostly are marked for the east but if you can just talk about that and and also which is related to that one thing that he had on i'm trying to understand is how the keep your eyes and the business in the intermodal business kind of of all this is that new capacity comes online it's it's obviously a lot of
spk_2: capacity twelve percent new capacity i assume it's i'm in a good for growth because of the improvement it turns and maybe deluded to length of hall and yield maybe even slightly dilute of to margins but the not delude of tar oh i see i'm just trying to think through that such you can just talk miles is probably like five questions in there but you don't want when it's coming where it's going and and how to the keep yeah it's kind of evolve as that new capacity comes online
spk_0: you're so you know we we now six thousand earlier in in our fourth quarter earnings call and today we're out daily not up to twelve there are some temp control equipment in there
spk_29: roughly a thousand a temp control boxes that will come in at have have been in in in our plan for for some time and so that those will all flow into the west coast now the dry boxes
spk_4: the the logistics plan to get those boxes into our system
spk_2: it continues to evolve in in some ways we're we're securing our capacity to bring that equipment predominantly to the west coast and predominately to southern california so that it enters our market at the right time those boxes begin to deliver during que to and really are spread throughout the
spk_4: rest of the year with and there's their prior little bit extra during cute three where you'll be you'll be receiving a little bit heavier flow that equipment in to help us for peak season certainly for the the longer term life or that equipment we would expect expected to be diversified into the easter network but in truth thousand twenty one it's really gonna help us a lot i'll ask for sure
spk_0: next question concerning line and ask yeah thanks for taking my question wanted to turn back to final mile can you talk a little bit about your contract structure would local carriers in terms of your visibility into cost inflation and and you know he you talked about your long term margin target reiterated it for to
spk_30: eight a couple years ago you'd you talked kind of two to four in the early stages or are we sustainably based on how you see this business turning in that in that longer term range at this point like you
spk_3: yeah thank you for the question i think we are doing that way the what we're seeing a contract right they are going up with our contractors the market is there a guy who critically with the amount of background check credo from security and safety protocol now we try to hold ourselves to the high standard warner contract is that way for the of ebola or i the fact that onto our cost more that they're not structured yeah like dedicated contract are or are but yeah we have their good relationship with our customers with the top of woman netflix some service all the way around so we think will be able to go back to our customers get the market the main to get there so yet that i think we're in the right market green even if the yard sale work to improve the margin done some that with the right with existing customs and we're going to continue to do that it will move forward so yeah we can of what the border a more boring
spk_2: there
spk_4: yeah
spk_3: question comes from a line of tired of our man
spk_2: key bank capital markets
spk_14: a great thanks and good evening
spk_9: i'm just for clarification deal with a margin targets the what you're laying out what you're updating is really is a fair to say is this the normalized range know how price pricing business and you should we think about that there could be cyclical factors were you could be above or below those ranges for a period of time and and secondly it certainly feels like with i see as and dad
spk_2: educated you can be in those range by in the other segments are there any investments or changes that you need to make to be within the margin ranges on yeah within within a near term basis i would you say i'll start with dedicated person i'm an elite deal breaker will not your you know pricing model locally could not comment we think we got to the scale now ah with the growth of were saying this year we've had very ah good q one leaves on three hundred eighty trucks already meanwhile to a really good start use last week we'd nine hundred and thirty to reach rock so we think that we got the scale that will they be able to absorb that without impacting on margie and then also we defended the density of the marketplace you get
spk_8: research marketplace the help of be more efficient
spk_2: the game we start productivity as well increased every not a huge quarter in all that without officially and density that really allow that to work on that margin or without increasing costs darker i'll add to that the for my way services perspective and yeah we we did a just a slightly our truck tar it's that that mostly just a pure reflection is as john alluded to have a movement towards more of an app that like position where we rolling our box program without having to make the the historical heavy investment of the tractor and and so that really just helped us can assure up where we think that will be ah we are still on that journey our bucks initiative i really just lost less than eighteen months ago
spk_15: and as we've also stated day we've we've increased ah the investment for a incremental boxes just a here and and and so we're tracking along for our expectations and we see the ability to get back to that expectation switching gears over type yet similarly were at the end of our heavy investment period of that again characteristics productivity gains the advantages that we're seeing and capitalizing on because of the platform where were able just be more efficient and make better decisions and and really eliminate waste out we see those things that that the reinforced the the earth
spk_31: an affirmation of the range that the john reiterated and so those are the things that they drove us that again
spk_32: i think it's important for all of our be used fundamentally it's about return on that the capital for us and if if things change in the model
spk_33: you know whether that be the a further movement at that light in our truck the model then that could influence of things down the road
spk_4: but at this point of those are the targets that we think are extremely realistic and achievable
spk_3: i pouted quickly on intermodal certainly i would expect that you know we're we're kind of through that noise period of of time what related to arbitration in an underlying rel cost we have
spk_15: what we feel like is a very good understanding of that role in our cost and and felt like this margin adjustment was appropriate
spk_0: as well as little for growth do i think there is the opportunity to live at the high end of it i guess at times that certainly possible and you know i'd i don't know outta how to predict that but as certainly would expect to be within that zone is is is certainly a sustainable plan for us to continue to grow in model did that baby to wrap at the as an organization i think that cyclicality will come
spk_15: i'm or we have underestimated or miss our cost basis for our customers we will continue to honor our commitments and any time we've made a commitment to a customer are based on a fixed price in that attempts and changes up or down you could see a movie in the margit margin target range and even outside of that either direction but over the longer term we think that those margin targets are appropriate based on what we know today and based on a great plan when our customers some concern
spk_2: brandon
spk_34: barclays
spk_35: yeah i think the operator in good have never to take my question i guess show it can i power for with secure on ah i see as wines cause i do think it was down about one percent is quarter in a you could get a lot of price obviously we're probably morgan is better than agitation at the very thing to read through on market share competitiveness
spk_4: as you know cause i think it's skill and number of transactions that you really want to get towards the back happy so can you talk to you whether or not that was the as the back to square
spk_2: yeah great question so our overall include happening and from an ltl perspective we really have a can come to mind that we have been overcoming that calm and fatter ltl factor we're starting grad particularly an unrestricted platforms for a profit and a better plan at around the lg outside and you know if you just forget truckload by news the liked your third volumes were at a ten percent growth plan but a good talk about this earlier in this call that be very first part a bid season although we had been educating and talking through what we believed or the cause they would be to serve our customers in all of our services that didn't directly a line to be competitive price sir we were feeling from our customers in been season i will say we held our ground on pride in that really all of our segments overall and and or customers are implemented those been the first quarter many of them fit were not worth the they were falling apart because the price with not commensurate to the cost that other carriers the and the brokers were giving to customers so as we progress through first quarter we started picking up volume again very much in line with what our strategy was as an organization in total and have a lot of confidence in our scaling and gaming more market share in queue to and beyond and not just the yes but also in be team remember the platform is not just an idea our product it is across our entire enterprise how we can leverage that for customers to really allow them to have the right and cost service and capacity he we saw scaling inside j b t as well in the first quarter we will continue to day in and take market share in both jbt and i feel for three sixty platform in and certainly in the animals face well aber we have time for one question
spk_3: last question
spk_2: david new guy thinks of in the of your answer your question for a on the as and i'm in a more volume and in a quarter could you talking about what the agreed with in march and how we should be thinking about the bill over the over disruption boy the besides if you like your well so certainly we we are allotted earlier that you know february was just very difficult as the year old aware and weather related impact and that that good bleed into the first part of of march we did highlighted the march overall grew up for person that
spk_3: member last year march probably had a little bit of code it impact there was some disruption in intermodal at that time so to say that
spk_2: volumes use in march reached free or whether disruption levels i you know we were we were continuing to learn or to rebuild the network get the capacity in all the markets where it needs to be and get back on a on a better for lost the front with art container equipment

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