J.B. Hunt Transport Services, Inc.

Q3 2021 Earnings Conference Call


spk_0: thank you for standing by and welcome to the third quarter two thousand twenty one earnings conference call at this time all participants tiny listen only mode after the speakers presentation there will be a question and answer session to ask a question during the session the only depressed press one on your telephone please be aware during the queue and eight years you will be limited to one question please be advised that day conference is being recorded and if you should require any further assistance please press start zero are not like to and the conference over to your speaker for today mr bradshaw cow thank you sir please go ahead
spk_1: good morning
spk_2: good boy introduce the speakers i would like to take from time to provide from disclosures regarding forward looking statements this call may contain forward looking statements within the meaning of the private securities litigation or format of ninety ninety five words that as expects anticipate in pans estimates are similar expressions are intended to identify these for looking statements these statements are based on arabians current plans and expectation and about risk and uncertainties that could cause he directed these results to be materially different from those set forth in the forward looking statements for more information regarding the risk factors please refer jb hunt annual report on form ten k and other reports and filings with the securities and exchange commission now i'd like to introduce you to the speakers on today's call this morning i'm joined by our ceo john roberts or see a bow junk hello kelly simpson keep commercial officer and even p a people in human resources net carbs chief operating officer and president of contract services grab hicks president of highway services and there and field president of intermodal at the time i'd like to turn the call to our ceo mister john roberts for some opening comments john
spk_3: like brad the morning and thank you for joining us today the third quarter continued to present the momentum we spoke up during our laughed earnings call we also see persistent irregularities in demand pattern substantially resulting from port labor and inventory charge this other customers the congestion a key and bad point locations has further challenge the desired smoothing a supply chain in preparation for the upcoming holiday season we find that the dialogue with our keep customers revealed both accounts labor market and a panther need to increase the in stock levels across the system
spk_2: plant additions star container and trailing fleet and the expansion contract services both fall mile and dedicated can all contribute positively as the headwinds debate
spk_3: the company of not insulated from the labour dynamics mentioned above for customers
spk_2: this year we have reached all time highs and the need for company drivers and all segments as well as openings we have our office and field tanks we have done comprehensive an exhaustive research on our current compensation and benefit programs along with aren't incentive have plans to help better position our job going forward
spk_3: progress and closing the gap about driver and non driver position has been made during the core and we are optimistic the gaps will continue to shrink for us
spk_2: as are getting it will guess they were just generally pleased with the performance of all segments however we do have ample room for improvement with the inventory flows and palm tractor model in our power my business as well as in the utilization of equipment and intermodal even with these opportunities we see our supply chain focus services
spk_3: well positioned than healthy for the long term the of our customers
spk_2: we're also encouraged by the continued progress and same utilization about three sixty platforms and the productivity gains resulting from expanded usage across the company with our carriers and with a shepherd
spk_3: the past you wish have returned to the a new tradition of honoring our multimillion mile drivers who over many years accomplice the pinnacle of our profession and law we have posted two sessions for a total of over one hundred drivers reaching between two and five million the sake miles along with their families for a two day celebration with our entire corporate team we have been extremely careful to host the sessions following cdc guidelines never letting it done all of us a world of good to see a very best and personally been the energy has been contagious and i'm sure that it will curious board nicely please check out our website to see how we recognize the
spk_2: incredible men and women are now trying to call over john cool over his comments gop thank you john good morning everyone staying consistent with recent quarter itself start by providing a couple comments on our third quarter of twenty twenty one from a consolidated perspective overall we are pleased with our revenue growth over the prior year which was up twenty seven percent and the result of improvements and all segments are operating income increase fifty six percent with mixed results from some segments that are the result of cost pressures from labor issues but also due to the significant growth in implementing new a contractual businesses will be addressed in the segment discussions interest expense was consistent with prior year and we had a slight increase in our tax rate resulting in earnings per share of a dollar eighty eight for the quarter which is an increase of nearly sixty percent over the prior year impacts of labor shortages network congestion and just general supply chain challenges are well known and they persisted in the quarter against training our ability to service the demand and effectively utilize our assets similar to what we experience in the second quarter additional cost pressures in the quarter were primarily related to hire purchase transportation costs and other employee costs of instead of compensation and medical benefits we ended the quarter with approximately five hundred and thirty million in cash at the beginning of the year we had announced a heavy investment and equipment for twenty twenty one while all orders remain in place the constraints noted have limited our ability to in service equipment drunk conventional means including leaving your own private vessels were able to add just shy of three thousand a the i containers and over nine hundred jbt trailers during the quarter as well as having success in sourcing your tractor names as a result of solid relationships with our equipment manufacturers considering these constraints we're adjusting are expected callback span for the remainder of twenty twenty one and alex factor callback to approximate a little over one billion for the full year we remain committed to obtaining combative server customers and continue or focus on obtaining the equipment ordered while we haven't finalized plans for twenty twenty two yep or initial expectations are for callbacks to exceed twenty twenty one levels below depend largely on the ability and timing to in obtaining the equipment a purchase fifty million of our shares in the third quarter bringing us two hundred and thirty thirty five million for the year and anticipate containing buybacks in a more regular basis we'll continue to balance or cash outlay on equipment dividends and buybacks for the remainder the year as up opportunities unfold trending towards are targeted one time see with our leverage made metric on a note basis the reason quarters we have updated you on cause directly related to covered with your friends will be principally been in the form of special bonuses for frontline employees and ppl for employees the into quarantine are we still in for these cause we have now labs quarters of providing this and as such there no meaningful reconciliation comes to the prior quarter to continue to monitor the impacts of coven focusing on the health and safety of our people are saying informed of state and federal mandates around vaccinations and other protocols this concludes my remarks and i'll know turn it over the shelley
spk_4: thank you john and good morning
spk_5: like commercial update will focus on you know market conditions are updated thoughts around peak season and our preliminary planning for two thousand and twenty two or also gives them at that attacks on the progress we're making and saturdays kb had three sixty multimodal digital freight platform
spk_4: we continue to see plenty of opportunities in the market to provide title services for customers needing comprehensive supply chains relations
spk_5: while fluidity across the supply chain remains challenging we are working closely with our customers to develop and execute plans they get their freight delivered we believe our ability to source capacity on the jb have three sixty platform continue to differentiate us and our go to market strategy and ensure customers find the most efficient way to move their freight capacity remains tight across all channels as evidence that elevated spot and contact rate across all modes of transportation further adding to fluidity check challenges is the backlog afraid off the west coast waiting to get unloaded at the port we share in these frustrations and are not immune to these impact as some of our containers are also sitting out in the pacific waiting to be unloaded while peak season is upon us we believe the bottleneck than the west coast are going to compact and even intensify further peach is capacity need into november and december and are preparing ourselves accordingly as we think about planning for two thousand and twenty two we will turn our attention to leveraging are people technology and equipment to not only optimize your potter sprayed but even more important than optimize their free spend for it is moving inefficiently today is elevated truck and spot rapes which will be right for conversion to intermodal when we also have the full onboard and of our twelve thousand new intermodal containers while we were main focus on executing or pc some plans we are also focus on position their customers to deliver on their budget for two thousand and twenty two with the most efficient and cost effective solution available and again we stand ready to meet the needs of our customers as we entered the new year
spk_4: we continue to be extremely encouraged by the trends we're seeing in rgb at three sixty multi modal digital for a platform
spk_5: carrier and shipper user activity an engagement metrics continue to accelerate providing further evidence and the value of being able to optimize and transact in real time and a more frictionless process with regards to automation we have completed the pilot as some of our automated tools for matching free which winship person carriers and have begun are thoughtfully paste rollout of the system to personnel in the field we expect to see additional productivity and service quality benefits over the next year as the system it's fully rolled out in the and was
spk_4: as we move forward we remain focus on improving access visibility and transparency on our platform which we believe sets us up to achieve our mission statement to create the most efficient transportation network in north america closing out my comment and similar to a message or shared with your last quarter i remain extremely courage to better position to leverage or people act as and technology to help our customers through their supply chain challenges
spk_5: don't attribute combined with our experience tenured workforce and broad and expanding scroll of services is what i believe differentiates us in the market and why i believe customers continue to lean into us during these challenging time that includes my comment and i'd now like to turn it over to nick
spk_6: but you're showing that morning
spk_2: i will focus my comments on the performance of over dedicated contract for his business or dcs and or bottle mile service boot
spk_7: every month i'll also provide you know update from a operational perspective on both the drug market as well as our ability to source equipment
spk_2: and are dedicated business we continue to see tremendous demand for professionally outsourced with solutions propelled by the current market dynamics round robin equipment availability or backlog and papuan remain strong i am extremely proud of the team's ability to execute this quarter highlighted by the addition of seven hundred and forty four drugs in the quarter this is the largest number of prague as and any single quarter as historically of the gay started cause the put pressure on margins in the quarter and record calls before we begin to recognize revenue but let me be clear we are extremely pleased with the results of that sets the stage for solid growth and momentum as we roll forward the do business we have been on boarding represents a broad and diverse mix of customer accounts across both industry verticals and geography while we're in the industry are facing bravo recruitment challenges customers in most instances have been willing to support our out a cycle adjustments to support high wages
spk_3: for professional driving workforce
spk_2: and i alluded to earlier we continue to see strong demand for service and as enough day we have sold one thousand eight hundred ninety nine trucks year to date as of september thirtieth or an incremental seven hundred and thirty four truck from my last update on our second quarter call now transitioning to our final mile services update we see solid growth opportunities in this market that is and will be supportive our ability to differentiate our service product as a result we continue to make investments in our people and processes to support our growth outlook relatively to some of our recent quarter profitability was pressured as a result of several factors
spk_7: similar to dedicate a week spruce startup cost in the quarter given the smaller base a business does have a disproportionate impact on a result additionally are under carriers are also facing labour challenges particularly for the second seat in the delivery trucks in addition to those at our customer warehouses finally and as we just last quarter supply chain issues are impacting product availability and in turn our ability to leverage or network to deliver goods particularly in the appliance in furniture categories
spk_2: we believe these challenges are mostly transitory going forward we are encouraged by the new business we are on own boarding and we are on pace for record new year of sales we continue to see a solid atlanta both growth opportunity that we plan to capitalise on in the future our success will be largely dependent on
spk_7: our ability to differentiate the service experience for customers customer and we remain committed to making the needed investments to achieve that differentiation
spk_2: family the clothes on some general operational update we have been extremely focused on are hiring efforts in the field to support our growth as we have discussed in passport we believe job behind offers one of the most attractive driving opportunities given the concentration of work in both local and regional applications combined with thought pay and career transmen opportunities this is also true for our field managers and operations personnel we have continued make adjustments to wages and benefits to make our company even more attractive those is seeking a rewarding employment opportunity additionally we have been working closely with our when the providers in order to support our grow we have had to hold praise of some of our equipment to support our pop one but continued stay attentive to both maintenance cost him fuel economy as a result that concludes my remarks saw turn it over to bread iconic in the morning i will focus my comment on the performance of integrated badly solutions and for up and like are are recognizing all members of our idea of gdp segments for how they continue to respond in the current environment and elevated the maintenance or customers continue to presented with opportunity to deliver a truck and trailer and badly solutions and the team continues to respond very well and the demanding times the experience of our people leveraging our technology platform and other developers continue to provide opportunities to source and provide capacity for customers and what continues to be an extremely capacity constrained environment the ability to source that capacity is enabled their technology investments in the rgb have three sixty platform and is complemented by our drop trailer pools with three jake with three sixty bucks schooling we continue to that in these areas as well as in our people to provide more solutions for our customers i'll start with my comments on trucker rigidity revenue grew a seven percent year over year to two hundred and four million dollars is the first quarter the jpg segment has generated over two hundred billion dollars of revenue since two thousand seven and we were able to accomplish this with nearly sixty percent fewer drugs vs that period this is yet another example of organizations focus on providing value added solutions for customers while maintaining our of the phone scaling into large address will markets with our desire for adequate returns on our go we believe our drop for like about the or three fifty bucks in the power only badly source platform providers an opportunity for sustainable growth are trailing about the increased twenty percent or the prior year and eleven percent from the end of the second quarter and the diamond generated fourteen point seven million dollars of operating income the highest of any third quarter since two thousand and six going forward we will concede that they disappoint our desire to grow while also focusing on driving greater network of isn't these particular particularly and our draft trailer number shifting gears to integrated capacity the solutions or idea segment idea delivered six hundred and sixty six million dollars of revenue breaking our prior quarterly record achieved just last quarter revenue grew fifty five percent versus the prior prior year period sigma volumes grew four percent in the quarter while specifically truckload volume growth was fourteen percent year over year the cost of sourcing third party about the remains elevated which is a continuation of the date friends we have been through the latter part of twenty twenty and all of twenty twenty one that they're gross margin did expand on hundred fifty basis points sequentially as a result of further scaling about but one implementation of higher congressional race and robot bot opportunities we believe the market dynamics good tighten even further in the fourth quarter as congested across the supply chain of likely to compress the time in your pick feed them and intensify customer needs for to that exclusions right up to the holidays
spk_8: going for we will compete with that to expand the capabilities of versions of our whole time a little bit over a platform for carrier the customers as well as for people to drive greater productivity and efficient in and sort of the cost effective solutions for customers
spk_2: even carried right visibility to the radar platinum in closing we continue to be valid momentum across our gdp an idea douglas as evidenced by both segment delivering the strong as outlined growth across our school of services for the fourth consecutive quarter in a row while my work have been down there is still much to accomplish but along the way we will remain committed to are not been down people and our technology platform it will drag weight other system and help deliver on our to disintegrate the most efficient transportation network in north america this concludes my comment how passing over there thank you brad and good morning i'm gonna focus my comments on three items related to our in a model business first and gonna review performance in the quarter i will also discussed network fluidity and our continuous effort to improve velocity and capacity for our customers in finally i will discuss continued investment anibal people and the on boarding of are trailing capacity that we think is going to put us in a solid position to meet the to to tremendous demand we're seeing for our services and to further support and accelerate the truck the rail conversion opportunities while demand for our intermodal services remains very strong or volume performance in the quarter does it reflect that as fluidity challenges across our network continued to temper available capacity to serve that demand as we discussed last quarter we believe the court challenges around network fluidity for both are rail providers and customers center around availability of labor and has continued to provide challenges across the entire supply chain volumes for the quarter were down six percent and by month volumes were down seven percent in july down six percent in august and down five percent in september improvements in rail network fluidity particularly at the terminals and quicker turns of our equipment a customer low patients combined with the on boarding of the new containers would and will help us provide additional capacity as we discussed last quarter we implemented programs with our customers to encourage better utilization of our equipment while protecting our need to generate appropriate returns on are significant investment in both people and equipment to support additional capacity importantly these programs are designed to provide the benefit of additional capacity that results from gained efficiencies i would say that the results from this program thus far have been mixed we have seen some customer locations improve while other locations have deteriorated even in instances as with didn't the same customers footprint i would also say from our perspective the results of the program have been mixed based simply on the fact that we would absolutely prefer to move more volume and provide more capacity for customers which was not the case in the quarter i believe this highlights this severity of the labour challenges across the supply chain box turns in the quarter fell sequentially to one point six two vs one point six five in the prior quarter further supporting that view we continue to be optimistic about the opportunities for long term sustainable growth in our intermodal business customer demand continues to grow and rl providers continue to view us as a solution to the current congestion challenges that are even more severe in the international intermodal market owning are own equipment including power trailing and chassis and are highly skilled driver and operations personnel are differentiated in the market particularly around fluidity and service this is further supported bar jb had three sixty platform that allows us to source capacity when rail congestion or restrictions hamper our ability to serve in closing intermodal value proposition room main strong as driver and labor challenges continue to plague the supply chain combined with higher energy prices and the fact that and intermodal shipment on average sixty percent less carbon intensive than the all truck alternative we will continue to make investments to support the meaningful growth opportunities and the market we expected take delivery of our entire twelve thousand container order by early two thousand and twenty two setting us up to provide meaningful savings for our customers as we begin the next bit cycle that concludes my prepared comments
spk_9: ladies and gentlemen
spk_0: mind if i ask a question please past ah one he reminded that you'll be able to ask one question yeah first question
spk_10: to tell with ever quiet thank you the morning everyone during attacking to start with you on the fluidity question and what that means for limes going forward if we blair that on top of the high profile announcer made this week can the administration and the porch shifting to twenty four seven operations conceivably how do you think that that plays into your volumes and and quite frankly the fluidity of the system and year and and do you think you and your partner's have the capacity if the gates are open longer death to handle more volumes and finally key to that profitably at i don't know that translates into overtime costly out of that figure into the profitable
spk_2: annie of the business if you're kind of running at twenty four seven bob jog or a question on we are continue to be confident that as our customers have growing demand in southern california that we have capacity to to continue growing with those customers but we are asking the customers to help us in that area to help us unload faster and create a more fluid capacity solution for us we're also on boarding additional equipment during the fourth quarter which will sir only help but we would anticipate that we will continue to offer
spk_7: additional capacity for our customers as the customers participate nat solution so that's the key element of ass while getting equipment out of the port is gonna drive new demand but at the same time the customers have to be able to receive it and we're working with them more supporting them in that area and and that
spk_11: really really important for us
spk_0: your next question from line
spk_12: whether be with said
spk_3: if he thinks the morning
spk_13: guarantee the another one for huge is one of the think about that revenue per load and the intermodal side obviously a very very strong performance it or anyway you can kind breakdown in what has cut corps base rate relevant to what might be throughout that the sorial at that
spk_3: penciled the going up hope he come back to the network and he volume and agility should pick up
spk_14: with the
spk_2: annabelle underlying environment that you're building now offer going forward and xl quarters yeah i we anticipated this in and importantly we're not gonna we're not going to build a break that down in any in any way i just want to bali remind the entire group lists them we're not gonna break out any sort of asses sorial commentary i think that you know core pricing what was wrong going into the third quarter and in a while costs were also up and we we will always anticipated our core pricing is maintaining our coverage for the cost exposure that we have we're paying drivers more today we're hiring outsource carriers
spk_0: at higher rates today our equipment utilization is down that's driving some of the pricing out there and certainly a real providers also participate in in not in our cost base so those are all factors to drive a core pricing in and we really probably don't have any a
spk_15: other commentary on that at this point
spk_16: next question comes from the line as cat grant's little research
spk_15: hey thanks at the morning just before i get the my question to darn just the fall of there like is it fair though that core pricing would have accelerated from whatever reason the second quarter yeah it's it's fair to assume that
spk_2: okay so i guess how are you thinking about contractual pricing for next year and might have trucking companies talking about at least mid single digit pricing and then just given the environment can you may be talk about your plans to grow their container count beyond that the twelve thousand that you're taking this year or early next year okay i'm i think that as a go into next year and a pricey environment or probably way early to offer any kind of commentary compared to some of the other it were surprised that anybody would come out say anything about that at this point there's just too much on known today i mean we've never been in an environment like this this and that cost environment is going to drive pricing for us it that's always gonna drive our pricing decisions as we're we're focused on the returns of the investments we put into place certainly the the container order for twelve thousand or that we announced earlier this year we continue to on board that equipment as as fast as we can get it here the decisions about advancing the equipment and next year will continue as we as we finalize plans for next year and frankly as we continue to work with customers and see what's happening in the market relative to demand velocity improvements that are are really of
spk_17: available to our customer base to achieve savings not only in what they're in their intermodal experience today like converting more business off the highway at better pricing compared to to truckload and really ought to produce awful lot of capacity of we can just improve the velocity of the current food
spk_18: we all that being said if if we see an opportunity to expand our equipment and the customers are supporting not with pricing than i have no doubt our organization will will set a path to do that but we have a long way to go before a decision is made on that mine
spk_14: steven
spk_2: thanks again morning i'll stick with the intermodal last quarter's unhelpful commentary on occasion of the intermodal container deliveries and any update on that front you could share in terms of the number of containers you're expecting to receive in the fourth quarter and then in the first and then also would like to get your thoughts on the sequential progression of box turn so next couple of quarters his need additional containers make it tougher to to see some improvement a a weird said that we expected to get three to four thousand in two three and i think we highlighted in prepared comments that we were just under three thousand while we had a quick me anchored waiting to unload literally just weeks ago that would have certainly hit on that mark we are at this point i'd say we would end the year somewhere between eight and nine thousand of the boxes on boarded so we we feel like there is a
spk_7: an improved cadence in the fourth quarter coming with with new boxes on boarding
spk_2: you know but we're not immune to the challenges of the the the port of los angeles and on boarding that equipment that certainly has influenced our ability to get that that equipment here and will continue to work through it we feel really good about how we how we approach that this year and and will continue to to to work to that end but eight to nine thousand bodies the end of the year saw let you do the math on the fourth quarter as far as box turn
spk_19: sequential keynes that's a great question in that you know we're we're focusing with our customers every single day on how to improve that number related to their actions that are influencing it now they're not the only influencer certainly a rail providers
spk_20: are moving somewhat slower than than we would have anticipated so at this point you know i would have said is the end of two to that i can imagine it getting worse and you know what it did so i'm going to be cautious to give you any cannon thoughts on that moving forward i just wanna hi i that were working every single day to improve that number and that won't end any time you know we're chasing to turns a month
spk_21: and in really anticipate a lot of conversation with their customers on this over the coming months
spk_13: next question
spk_20: with to pay the operator hi i'm karen i had a question i get on intermodal volume growth is beyond the cycle
spk_22: you know what we're talking
spk_23: fuel prices
spk_22: really have to do with kind of a higher level floating
spk_2: sure if this is a real by the international or companies are probably i would add or boxes inland or from the fourth
spk_24: that it and if there's a real up
spk_25: and that the really
spk_5: inside next year the dern gum all good good thoughts i think shelley and i will both the comment on this question you know for for a long time our target for growth and intermodal has been highway converse in first but certainly we have felt that domestic intermodal in a fifty three foot container was a benefit to shippers importing through southern california and and the flows of the international equipment and the massive amounts of empties that that flow to various ports in order to get back to asia certainly does represent an opportunity i think that as the international congestion
spk_25: in at various rail terminals throughout the the interior the country of have driven a lot of conversations with customers that are looking for that solution we have grown up with the inner with trans load for for many many years now and would anticipate that that is a a primary folk
spk_11: as for our growth in the coming years in absolutely plan to capitalize on that a gnome shell you may have a comment young and so are we would that our ability to grow in intermodal into areas so translating for sure would be an opportunity for think about the advantages we can give bed the railways and our customers were
spk_26: really as around their operation so because we control really the three critical component the chassis the driver and the container and our ability to create a very fluid network at the destination is very different than what happened today from the international perspective and when railroads are constrained that allow that to think about and process differently their the second one is an over the road conversion twitch as i did talk about that now opening remarks but we do see a high percentage or shipment that are moving on the rail today part of that are intentional strategy to own any lane that moves intermodal an hour
spk_2: highway stay and so we're gaining access and information through rj be happy sixty multimodal digital break platform to be able to know what we can and should talk to our customers about converting the that's going to be a big focus for us as we can through the rest of the fourth quarter very focused on t to in helping our customers be successful we also are working closely with them to determine afraid that moving on the highway today that we note to move in the intermodal fairly tell you there's twelve thousand boxes i have had competent them being able to load those at good quality of revenue and a thing as the the earlier pressure and what we would add would really be dependent on what our customers can do from isolated in perspective on training and equipment next question concerns with most are now hi good morning and to put a turnkey dedicated in fms has the same issue is there a way to quantify the negative impact on the new business as first is the cost inflation and then i guess if we're looking at you for your back lol comments should we assume that these elevated or does it start intensify here to any color and be helpful
spk_0: yes i would you say that we look at what we call our core business we see the operating margin being very acceptable within our range
spk_27: clearly without in a range of god it's so we break that are internally look at that so with is it an operating very well ah and then our start ups are looking very good we measure those in they're coming out a start up a get to certain hurdle rates so we're very pleased with the pricing and how that's that's performing and then from the backlog i would you say yes the backlog is probably
spk_7: i'm a little more than has been historically so the demand is still there there's a lot of demand for services nor pipeline is very very full on the dedicated and on the final miles sad and then on the final miles sad
spk_28: it's gotten smaller base on and so the startups are really dramatically impacting their goes contractor rates are up and were just being a lot of warehouse labor rights up as well so we're getting a lot of cost in there so we got some supply chain issues and labor costs that we're addressing ah but ah
spk_29: the demand is still there for our services as well but the number one impact and final mile i would say is our startups
spk_2: sometimes out with morgan stanley
spk_5: five miami one i can follow up on that love comment and how do you think about that going into four km and you've had this high quality problem of ah that the launch costs and dedicated our for a while now and we do recognize it as i call the problem by going to have you think about that going to for kill and also maybe for shelley on the i see aside at what's the update on be odd that the google partnership that you guys had at adding that was a product or launched the bowser drop of the end of the or it that's it on track and how do be think what that's getting into next year thank you
spk_0: and the that's a good way to get to questions in there in one breath i guess it out
spk_3: yeah we got it a on the dedicated than i would to say that with our the man still pent up were going to continue to feel pressured with the start of this before are supplied his own start out there were going to continue to see that moving forward for a while
spk_2: i would say i in our google strategic alliance we are on track and feel confident about at the two big projects the we've been working on our first one is further along than the second win but that's really still timing was a good shape we do have a bigger idea that we have brought and to the discussion and that is a huge focus avoid the team is looking into we're not ready to say whether that would be a twenty twenty two are really yet on top of at the first two projects that would you ever more aspiration idea that we're working on an echo innovation segment next question comes from the line of jordan alec our with goldman sachs yeah higher morning just not yet a nice stuff in the moral margin the quarter and with your comments around bottlenecks maybe intensifying new in the fourth quarter and a are you looking about twenty twenty two in terms of timing of splurging congestion easing but the i'm putting all that together
spk_0: the grill and once them for said kind of the number we can benchmark got or is it difficult to assess those watching situation
spk_2: well you know i think we talked about or long term margin targets ten to twelve that get the first quarter call him in april and beyond that commentary i don't think we can can really highlight anything else you know
spk_30: our mission right now is to achieve drove and routine read achieve return on the investment of i put me it those are the factors the driver decisions in intermodal
spk_5: just just fallen know what about on any higher the high level costs around the supply chain situation going into next year i'm in you expecting alleviation then i think that we are all common sense people and realize that there will come a time when they can just in eases we're gonna stop very short of predicting when that will happen because like you we have no idea but if somebody told me in the second half of twenty two two things will loosen up a bit i'm not gonna be surprised but at the same time we're gonna have to wait and see next question comes from the line bhaskar commenters was has gone yeah thanks for taking my question you're eighteen months into this surge in supply chain disruption when you sit down with your customers you what does your sense for how things are changing in a permanent or semi permanent nature from how they your afraid and in want to manage their supply chain and what decisions are you making at the senior management i'm bored level to to capitalize on that matches next year but two three four years down the road thanks
spk_2: try to take that into the betting has anything to add you know i think our customers are hopeful that this is not a permanent or a long term position and from how the supply chain is operating today there is too much uncertainty which is driving too much costs an unplanned events whether that is
spk_7: and plan on the shipping side where where it should be shipping from or even where it's going to so i think there is a good hope that we can create more efficiently that's something that we're working on with our customers and in the last thing we want to do and be inflationary and total without looking first to say what can we
spk_2: do to help our customers meet their budgets an overall i would call you customers in general and that the he makes celebrate with something we rolled out there sales summit february twenty twenty it could not have been a better theme as we named and recovered and we have continued to see our customers accelerate oil and solution the idea that i think they are leaning more into providers they can do a multitude of different delivery for them or crawford supply chain certainly we're seeing now worth the market share games across all five of our segment
spk_3: anarchists our of asking us to consider and do things with not done before and so we are being open to solving for at best dancers or them we are agnostic as the how we move a and so that helped create a differentiation in the market for as but they need a lot to help they are constrained on labor not too as at their i'd beat the location but also just in our office personnel and that we are leading edge or technology or engineering team i would say across the board have a lot of confidence that we're going to be able to continue to take more market share and help our customers be right when encounter have an official approaching
spk_31: i would just add that for mercy and really as the customers trying to take control of everything they can which leaves and ours is kelly said so they're getting ships the releasing their own ships they're wanting us to go into the ports for the help them control the experience in there in the rudeness on the intermodal side with transit
spk_32: load and in their helpless with on the dedicated side with more fleet so it's really about customers gaining control of their supply chain and that fits very well with us
spk_33: leveling i would play in red hook's is that you're recognizing the stress and strain disruption a cook a lot of pressure on our customers as supply chain supply chain teams and at find it's way and our group and and we remained remarkably proud of how are talented employees of help navigate
spk_30: those choppy waters and so is it there's largest pressure and stress and and our team is have found a way to thrive in that environment on behalf of our customers
spk_34: let me just love it is john love to finish the the thought with that a question on the floor which is you know we are return of the capital business and all of the needs and demands hit the filter of if we do this do we achieved kind a that were used to annex back in that are
spk_2: our own of anarchist refineries back because we reimburse but that that visibility we have to perform performance piano returns on those investment it is vital to that last death of getting the approval to make him that his the continue to grow the business as we have next question wayne let's with you be ikea good morning so i wanted to see if you could offer some thoughts on labor markets mean it seems like you knew he talked about labor labor labor being the constrained i'm thinking about intermodal in particular i just wonder if you could comment about some of the particular labour elements whether it's warehouse you know real animal terminals your own dredge are you optimistic that if you look at a couple quarter that labour availability will increase and is you know if so what he is that just a functional paying people more or and then i guess a related component how do you think about vaccine mandate and you know if you say that goes into effect what does that do too i you know can have a broader impact on the labour side thank you okay i'll let me take that first and then we'll have nick comment on some some thoughts around driver availability and and vaccine mandate as well another labour thought so you know i think our rail providers and the transportation system that were running worse were recruiting truck driver years at in intermodal in addition to the rest of the organization
spk_20: edit at an extremely rapid pace and it's it's difficult i don't want that to come across any the it's never been more difficult than it is today is fine and attract and retain qualify drivers it's very very challenging and in certainly the costs are are were facing that i believe are rare
spk_35: providers are not immune to it in their contract workers inside the terminals continues to be a challenge for the rail providers but i think they have actions in place to to counter that and certainly at the end of the day that simply means we all have to compete for that labour the thing that has been the most
spk_20: it's difficult for us to get eyes on his customer warehouse labor and that's where there is a significant bottleneck is our customers ability to unload the demand that they have and so when you ask the question about what do we see a future in which that changes i i don't know that we have a line of sight
spk_5: i to any kind of real dramatic improvements in it but what we have line of sight to is our customers have to process their supply chains more efficiently to achieve their goals in that seems logical to was that they will attack this labour situation nifty me as it more yeah would you say on the labour situation it's across the board it's minus taxes drivers ah there you go been tremendous pressure on wages as the that consuming own for quite some time all throughout the supply chain more on the the button
spk_3: or the vaccine mandate or testing we will be compliant ah with that and we're working with a third party so that we if it becomes a and order ah and gets the most of them will be compliant with it it will be a lot of bureaucracy ah i don't see it really help in this situation
spk_5: other than causing confusion and a supply chain even more ah but we will be compliant with that and follow that process so on it it will have some impact on the industry that we will make it through it great a good morning and johnathan congrats on on great results in the top operating quarter a just to clarify that on the last statement there so you're not seeing and shift or or benefit as we move past peak and the supply chain right that it's not like the the increase wages so far the increasing but then i guess to to give baronet a quick break shelley rider nick from your perspective across the supply chain is there any thoughts on underlying demand or shift from what you see aside from peak outside of congestion you know obviously because some of the volume down on on animal and he thought get on underlying demand would be great
spk_36: i can thank you for that matter that comment
spk_11: you know a big all of us now i you go to the shelves today at the store many of those are empty and we're hearing that directly from our customers as they are am somewhat surprised that the what's happening and peak and well intentioned pete longer ah into november and december
spk_0: birth and that will make from our replenishment in the first quarter and even in the the second quarter of next year so we do believe that the first quarter will be unusually stronger than it has then the end of may be a more typical environment really trying to get their shells and image or in the right places in the right time so
spk_3: demand from that perspective is still there in total you know who don't have great comments about the second half of the year because people are are acting earth and customers are really trying to do that through their budget process right now but ah
spk_2: i would say strong the man optimistic i feel really good and then last comment i've been asking retailers if they feel like because that's chris that the than the right products won't be on the shelves will gift card be more here and it's christmas be then in i think that the were leaning to i yes which means they would be more shopping and more retail sales in january and obviously more need for us replenish any of those get as well next question comes to mind
spk_5: fowler with keybank capital market
spk_37: great thanks and good morning come to read i wanted to ask on the the stuff up and profitability and i see as i know that the second half of this year they're kind of been a mark around with that was when we can hit the inflection points but i also know there's been a lot of cross currents kind of into brokerage market so you talk a little bit about huge improvement profitability and
spk_5: also we look to twenty twenty two is that a year where ah i see as can be in the the targeted marjorie to to six percent if dog still we we we continue to progress on our strategy and the investments that we've made in arts people in our technology that will allow us to scale and and i think as you look back over really the last several quarters we've continued on that trend and we remain supported an optimistic as we continue to move forward in the queue for a obviously there are a tremendous amount of unknowns that have been discussed at length or this morning on in in all segments of our of our company as well as with our customers
spk_0: but young the the solutions the were able to provide for our customers in the time of need
spk_38: you know they're leaning in and were being very successful by being able to put them in most efficient answer that whether that's or highway products on jp have three sixty bucks whether that's intermodal or or even in i see out and so young i guess said a different way we remain very pleased that the progress and really see no reason that we will continue to take steps forward to create leverage as we scaled him try them i add to that scale is so important in the platform you know we get start on the turn three sixty side first and him further launched with shipper three sixty we do believe that we
spk_3: had
spk_2: a good percentage of carriers that are coming into our platform looking at our shelves if you will and looking for product and we have a lot of into south also the you don't have enough freight and that we are very focused on making sure that our platform in the destination location for carriers to be able to come in search for what they want and get the product that they needed the right time we have had confidence in our the amount of time that we've actually been and carriers and the different measurement that were saying continuing to break record even that very constrained environment we are in a new mode winter three years so that allow us to go back into the demand side talk to customers in a different way but scaling is the most important component for as in getting ah not only revenue growth for or dinner bed primarily for our bottom line profitability as well
spk_5: next question comes from the line of brian off with jp morgan
spk_2: hey your mind thanks for taking a question
spk_5: shelley and in bad maybe follow up on that last last train of thought you a become less three quarters of the i see as has had more spot than than their contract volume minutes who has shifted back this quarter so i can vibrate and how you're thinking about balancing that makes when things are so volatile against maybe the opportunity to to continue taking more share and then if you just touch on the expectations for productivity and be sixty you mentioned is tina efforts and how the nation i just more than a productivity play where do you think this will help i've really grow the top line which at least and three sixty look like as a bit now flat quarter recorder i this in this period thank you
spk_3: brian as start yeah if i take it if i take you back momentarily we have a strategy going into que one that we were maintaining the cost levels that we saw at the end of twenty twenty eight and in really we didn't win we talked about that and argue on release of and and then we started
spk_39: because we come back to us and we started to grow into the disease and thirty two accused rape and so we would anticipate wanting to continue to move forward and and be successful from they published standpoint and get maybe a little bit more balanced from a historical perspective
spk_0: obviously busy the just kick off for the next year about a week and a half ago and so we'll see where that this it's or no expectations of to continue to grow in published frames to great balance against the spot opportunity some of that really goes back to the disruption of is shelley have done earlier in the calls were young
spk_40: frank patterns are different and friends demands are different in some of that is contributing to evaluated spot needs but i do believe that we think about the board or you'll look to see more published a balance and i went and did add to that brian that for our customers and in the contract and spot market we'd have been very disciplined and growing in our platform and feeling the platform we do not believe it's prudent for our customers or south to accept every order that a customer is asking us to accept that outside of are committed capacity and there huh
spk_5: ben thousand the shipments per day that we are turning down that we are talking to our customers about creating a better answer in a better solution and cattle that part of the reason that you see more spot and you see contract as well on top of what rad talked about i think that's really important if i go to am your question automation way you think of and jb had three think the as apple ecosystem that help connect are shippers or carriers and are people to that sir automation is intended to be across those three a group said are interconnected in the platform that current automation is intended for our people and that's really connecting our ship or really encourage three sixty internally for our people in our new system will he also have other automation ideas for both carriers and for shippers that will help them be more productive over the long term as well i can and we have time for one more question yeah last question comes from line as brandon alinsky with barclays
spk_3: pip hey guys thanks for sneak mean at the nth get off or try to encapsulate here mean we're seeing so much inflation on the revenue find the cause side and i think a the questions were getting at this like how much of it's gonna be transitory or how much did your customers be thinking this is just the new cost of doing business
spk_41: in and put fight if we do get cost efficiency is fighting opened up next year me the powerful we could see negative rates by maybe even a creative to margin
spk_3: i think that the really great question i certainly hope that the climb that our customers are experiencing today and no budget will not be the law firm card for their budget there are so many and plan caught happening in the supply chain today that we can i get to a more static and a better more efficient way to move goods we see that across all of our segment in total the having said that the underlying cause of drivers equipment is going to say i don't see in this environment
spk_2: taking driver wages down or consumers taking their own wages down or equipment is not getting any cheaper so it's done with the question into those two areas are based car will continue in that is gonna be our new norm but the wedding shipments are moving are completely inefficient we can help our customers be
spk_3: come so much more efficient really taking them out of that high costs to serve into more predictable cause server think about the over the long term if you enjoy having yeah thank you other the john ones closer out some comments yeah just close up and say offering her that she goes to the good job at ladies to get around the table we sometimes have too much information to cover i've up we did get in touch on it as a great workout new jersey a br
spk_0: and the opportunity that are present in that business as a dedicated growth is a good set up for going for we are they would continue this is in that industry leading business our highway services across the border and are creating a and one thousand yen
spk_42: in this disrupted time them and then he just lack of knowledge we didn't talk much about bottle mile but

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