J.B. Hunt Transport Services, Inc.

Q4 2021 Earnings Conference Call


spk_0: the day and thank you for standing by welcome to the fourth quarter two thousand twenty one earnings culprits call at this time all participants are analysts and only mode after the speaker presentation there will be a question and answer session to ask a question during the session you will need to press dar one in your telephone please be advised that the coppers is being recorded if you require any further assistance please press start zero out now lead to have the culprits over to your speaker today vice president of finance and investor relations with your bride delco please go ahead
spk_1: good afternoon before introduce the speakers i would like to take some time to provide some disclosures regarding forward looking statements is call me campaign forward looking statements within the meaning of the private securities litigation reform act of nineteen ninety five words such as expects in his aides and and estimates or similar expressions are intended to identify these the statements his payments are based on james caan plant applications and about risk and uncertainty that could cause he directed leave and result to be purely different from set forth in order to statements for more information regarding risk factors please refer to jb it's annual report on formed mk another reports and filings with the securities and exchange commission now would like to introduce speakers on today's call new and i'm joined by our ceo john roberts or see a bow junk below shelley simpson chief commercial officer and a vp of human and people in human resources net carbs chief operating officer and president of contract services aaron field president of intermodal and brad higgs president of highway services at this time i like to turn the call to our ceo mister john roberts for some opening comments john baked bread and good afternoon thank you for joining are called the day we offer twenty twenty was a remarkable year in our history but i'll consider twenty twenty one ever good contender for being equally challenging
spk_2: and in the next a perpetual challenge we have continued to see our collective resiliency and string carrier theory with unique pounds a team had a jacket and adapted to multiple scenario changes impacting her got where the ability to thrive
spk_1: in twenty twenty one our leaders make bold call to increase investment in our people our technology and expanding our place across her asset base we had long been committed the following a disciplined approach for all capital allocation and believe investments are good for customers in a long term
spk_2: i can't say enough about the way every one of our team members has risen to the opportunities presented in his current bar accordingly have done exhausted research on where we stand the guy being competitive in total compensation for people and we move into twenty twenty two i came later have unilaterally of to copper hit the changes your bait legged and senate compensation and benefits increasing our awareness for how to approach attracting and retaining the best how is critical to our mission of creating a most efficient transportation network in north america the on broadway experience and toy twenty one ago precedented once again revealing than the fair for the of our services and confirming the approach or people take on solving our efforts challenges we had a seventeen hundred and seventy eight tractors to be here six thousand eighty compared with intermodal with five hundred regarding one that tractor ad and three thousand six hundred about prayer for great sixty bucks program and highway the continue to work strategically with are gonna providers on build and delivery planned and we had a the twenty twenty two with the bro coming out of twenty one we get his fate ongoing the man for all types of power and training equipment well for look for the working with our rail service provider to pilot projects across all aspects of interval service capacity man with and utilization
spk_1: like the old comment on our effort relating to sustainability over the past several years we have worked to better understand communicate in advance our being in the support area while we have thing good progress and have been recognized by many third party for effort we also believe we haven't told what to do with
spk_2: committed to mission to create the most efficient transportation network and north america and we are also committed to being transparent on the progress of our sustainability journey reckon it'll provide more specific information sell like tyler call other two are fearful john cooler
spk_1: thank you john and good afternoon everyone my comments today will follow a similar pattern as a previous calls were i'll review our recent performance on a consolidated level of then provide some commentary on our callbacks plans for tony twenty two and as well as i approached the capital allocation and then are close with i'm thoughts on or financial priorities for the coming year overall we are pleased with art or fourth quarter performance highlighted by growing revenues twenty eight percent and operating income that the five percent over the prior year period without positive year over year revenue performance across all segments and positive operating income performance and all segments except for dps which nickel cover in greater detail in his remarks as they look across our business the common denominator in terms of our pain points continues to be labour related in wages salaries benefits and recruiting france in both driver and non driver but continue to elevate investments and or people as was evidenced by or decision to provide a special bonus in december of nearly eleven million dollars to front line workers for their efforts and working through the supply chain challenges facing our customers in the industry below the line interest expense a slightly lower than the tax rates slightly higher than the prior period resulting in gap bps or two dollars and twenty eight cents a share for the quarter or a fifty percent increase or says a prayer period as has been stated in previous call the impacts of network congestion labor shortages and general supply chain challenges are well known and have continued to have a meaningful impact on our business and are likely to persist particularly given the heightened challenges evolving around coven infections across our country we ended the quarter with three hundred and fifty six million cash which was slightly higher than plan last quarter and provided you with updated thoughts on or twenty twenty one that callbacks and the that would fall within the one billion dollar range which we missed by approximately one hundred and thirty million business is almost entirely due to supply chain delays contained an impact our ability to take timely delivery of our equipment we remain committed to these investments in capacity out serve our customers and we anticipate that callbacks for twenty twenty two to approximate one point five billion dollars we continue to prioritize or capital to invest in our business support our dividend repurchase shares and opportunistically execute on our i'm in a strategy all while maintaining a modest no leverage ratio of around one times the but that and importantly continuing to maintain our investment grade status before it closed up my comments and in light of expecting some questions around or tweet tweet you alex i'd like to provide some context not guidance but contacts for our financial priorities and to be twenty two his priorities include continuing investments in our people maintaining a strong balance sheet of support all of our plans investments and focusing on generating appropriate returns on the capital we're investing to grow our businesses and serve our customers the discipline focus on the priorities enables us to manage the business for long term growth and success that concludes my remark salt turn it over to shelley
spk_3: thank you john and good afternoon today i want my commercial at update and focus first on a quick review of two thousand and twenty one and how we were able to deliver for customers i will then focus my comments on the market and how we're going to approach the oncoming supply chain challenges for and on behalf of our customers family i'll finish up with some updates on our priorities for jp have three sixty mile modal digital frank platform as we move forward apple as we've discussed over the past year the free environment has been extremely volatile and unpredictable and not just for capacity providers but also for those that we are providing fc for to meet their needs and this environment we as an organization like our customers have had to adapt to this deception and i firmly believe that are noted not comprehensive supply chain solutions approach has been a key to help our customers over the last year where we were able to honor our commitments and particularly during peak season another key element of our success with a significant commitment and investment and physical assets across all of our business segments from containers and chappie to tractor trailers that said i would be remiss to leave out the most critical element of our success and that is our people our drivers mechanics like planners and all of that behind the scenes helping our front line workers sixteen tang altogether course with our technology platform jp and three sixty which i believe gives us a distinct advantage and sourcing efficient capacity for our customers simply put our investments people and technology put us in a position to say yes and two thousand and twenty one and have meat for a future bread as more and more customers are leaning in as we look at the market today and try to prepare for the year ahead many components of our business plan and go to mark the strategy or summer to those exercise here in our recent past the market remains challenging capacity constrained and unpredictable and we will need to remain agile in our approach to secure and capacity
spk_4: for customers
spk_3: some unique areas as the impact and capacity is the ability to source new equipment which is why to keep you start prices elevated and as a result small carrier rates as well as he customers morning to lock up more capacity and dedicated arrangements and lean into technology that drive efficient in their supply chain and how they pick your capacity as an organization we see tremendous pent up demand to convert highway freight to intermodal with elevated truck great the tight labor market higher fuel prices and sixty percent improvement in carbon efficiency intermodal offers vs shrug needless to say two thousand and twenty two will present us with many opportunities to grow and we will approach the market similar to how we always have serving our customers as our top priority while maintaining sound financial discipline finally as a look at the investments remade building out and scaling gbm three sixty i continue to be encourage where we are relative to our long term plan as we have discussed user activity and engagement continue to accelerate and break records across both carrier and super platforms solidifying the value of optimizing and transacting in real time in a frictionless process as we look ahead to this year with the opportunities to further acceleration as we continue the rollout of our new automated tools and drive even greater efficiency and our organization and higher service quality for our customers these tools will enable and hands and leverage are people and court technologies to drive more efficiencies in the marketplace which gets us even closer to our mission to create the most efficient transportation network in north america to wrap up we continue to uncover innovative ways to accomplish that mission including the collaborative work with google and the recently announced strategic alliance with way male where i see tremendous opportunity for ethics or solutions that merged two of the most innovative companies in the trains play asian industry autonomy striving and or multimodal digital for a platform to be had three sixty that concludes my comments and i'd now like to turn it over in it
spk_5: but usually good afternoon
spk_1: today i'm going to review the performance vote on a mile and dedicated segments as well as provide some thoughts on the road and for these businesses as we move forward i'll also provides day of the vault from an operational perspective on our ability to source equipment and some updated views on the problem or i'll start with vanilla and we have discussed over the last several order we have been focused on making the right investments in our people and processes to ensure a high level of service quality and execution for the size and family delivery of our customers products into their customers homes that drink and choosing queue for a service quality and safety will be a cornerstone to the long term growth and success of our business these investments labour challenges as well as the blood changes ruptures for some key markets that we serve have continued away or margin for damage and the most recent quarter in addition to some story else for some newer counts as we set out to differentiate or service brought up with also said l to demonstrate that differentiated by yeah we bring to our customers and the market we believe that differentiation is being recognized as we are coming off or largest fails year for new business and twenty twenty one that said in the coming months we do expect person business at risk and we focus of but even greater emphasis on generating the appropriate financial returns on these investments going forward we continue to see a solid pipeline of organic growth opportunities with potential to supplement some of that road with small token acquisition as a way to build our our servers capabilities and coast were list shifting to dedicated are dedicated business continues to have a lot of momentum as or backlog and papuan for new business to start ups continue to build to record levels despite the on boarding of nearly eighteen hundred new trucks in two thousand and twenty one in terms of truck sales we sold over twenty five hundred trucks of new be business in the year a new record for us or an incremental six hundred sixty three units specifically in the fourth quarter historically we have shared a target for sale eight hundred thousand trucks per year and at this point we feel it's appropriate to update their long term target to one thousand to twelve hundred based on our team's ability
spk_6: to execute
spk_1: as planned or expected they start of stupid near term pressure on margin performance at the elevated driver pay and recruiting cause and specific to the quarter the special bonus we provided are frontline employees but we remain confident in our ability to project manage each of our accounts to the appropriate levels of for off ability returns which should reveal itself in the coming quarters in terms of priorities going forward we will remain focused on the execution of our growth plan as well as maintaining our culture for operational exploits have service and safety while maintaining through some challenges around a modestly less experienced t same as or pace of growth has been robust closing out with some operational updates as you could tell them my dedicated comments there's a lot of momentum which had that but additional pressure on our organization to sort both robbers and equipment i would say that but the truck and trailer market as well as a driver market remain extremely tight and does give me some concern for our ability to expert execute on our growth plan to meet the demands of the business that said we are working closely with her away aims to get delivery a product and continue to recruit tirelessly to meet the barber demands across crossed our organization that includes my remarks or turn it over to dan
spk_7: thanks dad good afternoon everyone
spk_1: de maya comments will reach out the performance of our model business and twenty one and specifically the fourth quarter of also provide an update on are significant investment to expand our capacity it's with our equipment orders and finish up with some thoughts about the outlook for the business in two thousand twenty two is we anticipate a strong demand for services as a result of our investments and the value of intermodal in the truck the rail conversion equation like to start by reviewing a recent performance demand for intermodal service remain strong in the fourth quarter but similar to recent trends was it reflected in the volume performance for the business and network congestion and restrictions hindered a large amount of our potential capacity that said i'm proud of our team and it's ability to onboard the equipment available to us to ensure that we met the commitment to our customers during their peak period of the ban on a positive note we did see improvements in the quarter and parts of the networks specifically the speed and which customers were able to turn our equipment harvard those improvements were effectively offset by further deterioration in other parts of the network namely rail velocity for the quarterbacks turns achieved minimal improvement from the third quarter needless to say lots of work remains to be done as a result volumes for the quarter were down three percent year over year and by month volumes were down four percent in october down three percent november and down one percent in december he on boarding of new equipment was slower than we anticipated taking delivery of only twenty seven hundred units in the quarter and approximately half of our twelve thousand orders for the year naturally this will push more units into our delivery plan for the first half of twenty twenty two disinvestment in additional capacity and the corresponding investment in additional trucks and chassis and most importantly are people puts us in a good position to serve our customers and focus on growth in twenty two in addition to these investments we continue to work closely with our customers and rail service providers to improve velocity in the system to unlock the laden capacity in the network predicting the exact timing of improvement in the network fluidity is difficult particularly in light of some of the more recent disruption caused by new kill with case is impacting our own and our customers operations as we look forward to the year ahead and similar what you've heard earlier we're optimistic about are opportunities to grow the business we have executed a plan that puts us on a solid growth trajectory based on items within our control consistent with our street strategy historically we will focus on strike in the right balance between volume and price while maintaining our financial discipline on targeting appropriate returns on our business of course returns and margins are impacted by items like velocity and asset utilization of which will also be a key component in terms of how we manage the business as we progress through the year kids a patient of questions on both volume and margin expectations for the year my answer is it depends but know that the business will be managed to protect our investment and are returns on that investment in closing intermodal by value proposition remain strong supporting our view of long term sustainable growth we continue to see ample opportunities to convert highway freight as well as trans loading freight into our domestic containers we believe our service backed bar people and the ownership for var equipment is differentiated in the market and even more so when combined with the power of the jb had three sixty platform that allows us to source capacity efficiently when needed that concludes my remarks so i'll turn it over to brad hicks thank you dad and good afternoon everyone i'm going to cover the performance of highway services which includes both integrated capacity solutions
spk_8: and truck
spk_1: but before i do i would just like to stop for a second thank all the members and idea and jbt for how they continue to rise to the occasion to deliver on behalf of our customers particular particularly during what with another tight and capacity constrained peak season you've heard of talk now for quite some time about how we plan on leveraging our investment and our people and our technology to support rapid growth in this area of our business and i look back on the past year i couldn't be more pleased with how this team has responded to deliver on entertainment i like the first cover ip ass or integrated capacity solution segment we delivered seven hundred and thirty nine million a revenue in the quarter with year over year growth twenty six percent
spk_9: this growth was driven from are primarily by an increase in revenue per load as total loads were down one percent year over year in the quarter truckload volume was up three percent versus the prior year period
spk_1: going into pig we felt like are volume counts with the based on a rapid growth a year ago from third to fourth quarter in addition to some of the discipline we instilled in our bid strategy earlier the year which combined with scaling and productivity benefits it is reflected in our profitability improvement
spk_9: as we look forward i know our teams are excited about the rollout of to technology and hanford this year they will enable greater productivity of our people and greater service for our customers and cares which will support our growth and scaling of the business even further
spk_1: the close out my comment on i yeah i would like to establish some priorities for the year which include continuing to that and and leverage are people in technology focus on operational excellent so customers and carriers have a world class experience utilizing the jb humphrey sixty platform and create value for customers and carriers that would support for their market share games shifting gears now to track or jb t revenue grew eighty five percent year over year to two hundred fifty nine million while operating income improve the twenty six million in the quarter and delivering result fix this segment haven't achieved in two thousand and five i think it's important to highlight that are go to market strategy has evolved as the makeup of our trucks service offering has continued to gravitate to a more asset like model i remain encourage by our ability to disrupt the traditional way i have serving customers in the segment to discover new and innovative ways to scale into the large address and addressable dropped trailer market that has normally been served by the large asset base carriage by leveraging the power of weapons we made in art jb have three sixty platform our people and building out our three fifty bucks networking capacity we are positioned for growth and financial return support our strategy and further investment similar to yet these investments will focus on building out further capabilities with our technology investing more in our people and investment in in our physical assets which in this case is additional trailing capacity we will continue to maintain our that the plan on our capital allocation in the theory of investment but i am encouraged by or progress and the opportunity for long term sustainable growth in the segment in closing we continue to see a lot of opportunities in our highway service businesses to provide an efficient source of capacity for our customers by leveraging our investments in our people and kb had three thick the are most api modal digital for a platform as i said last quarter much work has been done but much more remains and we will stay focused on delivering on our mission to create the most efficient transportation network in north america i conclude my comments so turn it back over to the operator tobin the call for qnx
spk_0: as a reminder to ask a question you want to pass star one in utah to let's try a question past the pound per capita in company class please limit your questions to just one question per person no follow up question again please limit your questions to just one question per person now follow up question he departs questionable company that group with full free search
spk_10: hey thanks for morning and me so i can squeeze a few into one and done just on the container count and sounds like six thousand containers getting pushed into our first half the are are are you adding additional containers beyond that and in the second half the your what where do you expect to end and then just from me on pricing and and margin standpoint any directional collar on on how much of the oldest is as a story all and them as long as just environments days tight like that now that you're above twelve percent from a margin stamp or he the go stay above twelve
spk_1: oh my goodness got you managed multiple questions they're and good morning to hit his got an aunt or you are with the morning there are on one of the hanging out game
spk_8: so listen them yeah we we were at the word or not satisfied with the flow of the new equipment in in the fourth quarter certainly delays in the transportation is adequate meant it impacted us and that as pushed doug
spk_1: six thousand and two two thousand twenty two we are gonna add capacity in two thousand twenty two beyond those were not prepared to release a number of like that today as it relates to ask sorry olsen what not you know i anticipated this question of course in and really only one answer at one time today we're not gonna tell you how much was as soil and how much was core pricing we set out i think every time i've been on an earnings call i've talked about our focus on pricing to return profile that continues to be the case certainly in two thousand twenty one we experience and unusual characteristics in and the equipment utilization was was hampered and we took action and and certainly that and and answer is is part of our results in the in the fourth quarter but we also had meaningful costs to recover in the pricing cycle last year two thousand twenty saw really significant cost increases that we experienced and we were able to communicate that with customers and certainly recovered some of those costs we certainly have an additional pressure on driver wages and were constantly talking to both our customers a rail providers about the need for velocity improvements in not in our assets so as we have always done we will price or a return
spk_9: profile there are probably times if utilization of our equipment is is difficult it may require a slightly higher margin because utilization is is hurt but certainly as we as we can get benefits are better velocity and equipment maybe the same margin
spk_1: requirement lv isn't there in a we we issued the long term margin guidance of ten to twelve and for the calendar year two thousand and twenty mind we hit and eighty nine alarm and eleven percent margin so we're right in the middle of our long term guidance
spk_9: and i certainly would anticipate in two thousand twenty two were able to continue growing while also pricing in an effort to recover cost exposure that we have
spk_0: your next question comes from allison pull any act with wells fargo
spk_11: hi good morning or evening a half an unsavoury hundred three sixteen it certainly unique environment and the in the business has grown or that the the technology has expanded has this environment at all altered any you're talking you're in that path it's long term all that has this environment alter panel where you want to take that that you know offering as you go forward and you opportunities am or needs and that are out there that you think it's depressing with that
spk_3: a good morning and good afternoon with the sell out how to take that ah in and certainly the more than we are working with our customers and the trains place providers the more opportunity that we are seeing i can see now that we just made me elaine out with way man i think that there is a great opportunity to lemonade the inefficiency that's happening in the market our customers are helping us tried that strategy or carriers and helping us tried that strategy as we said in are opening remarks we are pleased with the progress we are ahead of schedule oh you have new ideas on the road map and continue to want to explore that the isn't anything that logically adjacent or customers are asking us and that we can i give a proper return to it's something we're going to investigate and continue to move forward with our mission
spk_0: next question comes from japan long with stephen
spk_12: thanks
spk_13: one of their ask about the eleven million dollars special bonus could you give us some additional color on how that was spread out across the different segments and then in dedicated as we look at margins and how they progress sequentially in that bonus may be part of the for q and decline but i am
spk_12: getting a lot of it's coming from that significant amount of fleet addition you've made sequentially the last couple of quarters the as we think about the growth and dedicated going forward at what point do you think we can get back to that targeted margin of twelve that fourteen percent
spk_1: they just in this brand i'll give you the numbers them to get over to make to give you the response of the second part of your question intermodal jb i have the impact was three point four million dcs the impact was five point nine million i see as was a hundred thousand at the mass was nine hundred thousand jb t was four hundred thousand for a total of ten point seven million
spk_14: just in a cynic
spk_5: i'll just tell you that we feel very good about our ability to operate in that range
spk_1: when i look at just are based business were clearly operating in that range i can't predict the future i just tell you that are papuan is much larger today than it was last year and you are so if i could tell you when the demand will back off on the amount of i had that we have coming can tell you when our margins will get back down there on the base business there's a slight an impact is from robber wages that were saying ah just from the timing of eighty percent of our business has index is in it so the timing of when we may have to give a driver wage as opposed to whom we implement that rate increase in the index could be just a little bit that impacts is but our viewers we take care of the customer for the long term and not put business that risk just for two or three months of right and great so we feel very solid about our based business and how it's performing we're excited about the new business that is coming out and doing well so we just barely got outside the range for the year
spk_5: so i think that's pretty good if i look at that with the oh adding over eighteen hundred drugs and selling over twenty five hundred
spk_0: your next question comes from johns apple with evercore isi
spk_2: like you good evening everyone and their in the lap call you said he implemented from programs that better encourage equipment turn then he noted earlier prepared remarks that you're seeing some of the benefits they're both effectively being upset at some of the rail the where do you think you are on these initiatives to that has real survey
spk_1: it done and we all have does it back to quote unquote normal the next month or so he can really see an inflection a her about box turn especially your onboard and arrested as twelve thousand and shooting and on on
spk_15: well i mean certainly
spk_1: we did see some minor improvement in the fourth quarter from the third quarter but minor i mean very very minor effectively flat you know and and then we we highlighted that rail the last he took a little bit of a step back in the fourth quarter like he said we would anticipate real velocity to have some improvements i know that all of our real providers want nothing more than four velocity to improve so i'm confident that that there
spk_9: the efforts underway
spk_1: as that takes hold you know there there there is really significant capacity available in the market from intermodal t to need more loads the good news is demand remains extremely strong we have customer business that we could could have on board it in the fourth quarter that we were able to because the slow down in velocity and capacity so we remain really bullish on our opportunity to fill up that capacity in the combination of new containers coming on board and a return to may be pre pandemic the last the statistics we really feel strongly that we have a lotta demands and we see that in other parts of our business there is business operating inside the jamie her up enterprise today than intermodal is the correct solution for but in two thousand twenty one truckload really find a solution maybe it was a transit time requirement for that customer or a lack of capacity in the market from intermodal that both of those factors play a role in a lot of confidence we have is the ability to grow as a velocity improves
spk_0: your next person comes from a meet the hotel with deutscher day
spk_16: a thanks up there and a just intermodal volume of it is there a better opportunity attacks as real capacity of on the be and this year because the maybe some of the market shift that have occurred talk about what impact that has if any on on your ability or volumes of i just wanted to follow up on that on the on the pricing questions earlier
spk_1: if you talk about cause and fighting for costs but obviously it's a very tight market fuel costs are up i'm just honoured stand where you think that the market based pricing opportunity is this year if you think that that market opportunity allows for double digit pricing grow up for contract the come up and twenty twenty two thank you okay well you know the market is gonna answer that question for us we're certainly always out there competing were aware of of of you know
spk_17: prices that are winning business and were aware of prices that are losing business in the competition and so certainly at the market presents an opportunity for double digit increases i would tell you my experience always says that without cost increases
spk_1: it's not likely that double digit rate increases present themselves without significant cost pressure it's it would be i would consider a highly unusual for our rates to climb in the double digit range without corresponding costs challenges come in come in at the market those are gonna dominate with driver wage predominantly
spk_18: but certainly the the asset utilization is is also
spk_1: i'm playing a role and i'm as a maid what was the second part your question i'm sorry the we address both both own capacity on oh capacity on the it as def let me just you know we're aware of of another channel that certainly left bnsf
spk_17: in and went to uni pacific in in certainly that that presents an opportunity i'm in those lips were occurring on bnsf were were aligned with bnsf in a growth strategy we have discussions with bnsf a daily about our efforts to grow together and we have a lot of focus in the
spk_0: in that area in twenty two
spk_19: your next question will come from jason seidel with talon
spk_2: a thank i around good evening everybody
spk_20: look a little bit after volume growth on the in a model side know clearly you are impacted by some of the congestion on the rails supply chain but if you would have to put it in no numbers contacts what what percentage impact would you think it would had on the volumes twenty twenty one i'm just trying to frame it's how we can think about it is clears up will can opportunity priests
spk_1: sanford southern twenty two and beyond hey jason this is brad out i mean i'll take a crack at bad but you know we we don't give specific targets or guidance or email haven't said ah an expectation or what we're really big intermodal turns are but if you you know assume we've been running mid one six low one six on monthly box turns and assume you know i don't know one eight one eight five which is probably where we were running preprinted pandemic that's probably an approximate way them to get to a number that says what the opportunity as if we got back to those pre pandemic velocity levels at
spk_0: supply chain was young moving from both a customer and real capacity service perspective
spk_21: your next question comes from ravi shankar with morgan stanley
spk_22: ah thank everyone this is not a twenty two a though guidance question i promise the but i just on i see yes is that now structurally eight three to four percent thought margin business kind of irrespective of whether cycled as or kind of if if portrayed do rollover next york enough but that margin be under pressure out as a follow up on that story old can you confirm that three oldest guy know you weren't qualified but where was it
spk_23: a higher or lower sequentially in the fourth quarter ready to attack with think if
spk_9: go rob i'll start media let dared speak to the as surreal component their the and spread hicks joe we don't give guidance i do think that if you go back in the last
spk_24: two four years we made substantial investment in the business both and people and technology that will allow for scale and leveraging of the platform
spk_9: then you on that journey we are
spk_25: satisfied with the progress that we've made
spk_9: but we still have work to do so oh i would anticipate that we we stay on a positive trajectory as we go forward because we are seeing the benefits of the cac investments both through through leverage through efficiency gains and and i think you can see that from our overall growth and results over the last several quarter and so on
spk_1: yeah we're certainly encourage them but we as i stated my prepared palace
spk_0: how or not satisfied yet and we have work to do but i do think that we've that i continue to show progress and will continue to show progress towards our long term objectives
spk_26: on the us soil question sorry ravi were just knock answer that question next question will come from brian often back with jp morgan he could even thanks her taken the question
spk_2: the wanted to see to can just give us a broader perspective of the challenges in in labor hiring or ten chanting is mentioned you meet some pretty significant changes across multiple areas say the help of he can run through some of the availability and wage pressures challenges you're seeing across that the browsers terminals drainage
spk_1: and and specific mean sounds like dedicated might be more of a short term impact the some of the unseated truck
spk_5: challenges you have right now which seems to be somewhat unique for a business and has been growing p well last couple years presented our thank you
spk_1: a brand that bramlett nick address the driver's side of that and then shelley kind of address the the brought organizations i that question so
spk_5: i'll be i'll go there were a driveway deserved significantly it pretty much in every division again we don't do anything across the board it's bad thought by location but our calls for hires are always the entire sign on bonuses
spk_1: in the market is very very difficult ah with the drivers being out there are facing cove it
spk_5: we have our percent of our fleet with covered right now than we've added any other time they're not as severe but more off source an impact on that were seen impacts on of orientation because of coded own schedule versus what actually shows are so we're same some short term impacts their ah but we think we've addressed the the driver market pretty well but it still takes a little bit longer to fill up trucks in our start us and we start up even if they're prost appropriately and with as many as we have starting up or that continued to be a challenge so ah the other thing is just on the tech sad we're facing a lot of pressure on the maintenance tech side ah
spk_3: in the shops as well and that affects some of our current times and getting equipment turns so they're just constant new challenges that we're facing all the time around wages and our faces and wage pressure in the shop as well that we're addressing so ah top that they'll do it for me alex shelley talk about the office other things that when we looked at comprehensive way around all of our and late
spk_27: or challenge we really moved from a defensive mode with what happened with kobe to not at the planet and it's really long as to move forward and think about investments we need to make for great for our customers so we lived across all our compensation and starting with our benefit package and there with a specific
spk_3: changes that we made to our benefit as well as a total rewards whether that with in benefits or also what happened from a short term cash and tunnel to also long term and and as as well there with had a more comprehensive approach really probably first time in quite some time across the entire organization from drivers to i
spk_0: maintenance technicians and our office and boy we are leaning yeah were on the offensive thought of that really preparing for grow inside all of our segments and and all of our support group so it's something that we see happening here at the first that this year we've been investing into enter labor all of last year but a their talk about our
spk_28: hi and as really trying to line out our price to what's happening and car the try to be often to than that the make sure we have drivers make sure we ever maintenance technician and make sure that we have her office employees ready equipped and available to help our customers
spk_2: your next question will come from chris leather be with citigroup
spk_1: hey thanks
spk_2: you're without a little bit about the fleet again and your models for and
spk_1: before your see on the ocean how many boxing match second one six thousand and other on a variable out there about twenty twenty one that's fine i guess i was given how strong demand environments sounds for animal services the boxes and you have some greater fool the market how many boxes what you want to grow beyond the six thousand and twenty what would be would like to market opportunity for you to grow into
spk_9: man dressed that's the magic question isn't it so we have the we we certainly am
spk_29: we have a meaningful percentage of those six thousand that are literally on vessels either at are waiting to unload or in some form of transportation i don't know that we've decided yet to break out how many i think it's a fair assumption
spk_30: just spread those the six thousand more or less evenly over the first half of the year if we can move them in faster than that we will i'm i'm aware that i've given direction on this call for the last two calls of of equipment count expectations and we haven't met either of those
spk_1: sort of want to give a too much out there but certainly were trying to get all of that quitman here just as as soon as as we can you know i think that
spk_15: with all of the talk of velocity challenges in two thousand and twenty one we're gonna be a little bit careful watching what comes from the last the improvements mean there is really a lot of growth capacity in the system we have today plus the six thousand
spk_1: in boxes yet to be received we can really grow a lot we have a lot of confidence in our real providers and a rail network in our ability to to grow business there in the event the velocity can't improve then certainly we have due to go bomb or equipment in an effort to have to grow at the say he pays but that will come with sort of new challenges so
spk_3: adult have an answer for you on how many we would like to have we'd like to have as many as we can fill up to be honest and know there's no great answer to that question but certainly we have tremendous growth opportunities with our customers were confident in the demand equation out there and we know that if we can i improve velocity weekend grown a hurry in in the event that we can improve velocity then we'll have to go secure more containers and grow that way today as take up a one level just for our customers overall i would say demand demanded very strong across all of our services and the weather it then container add three fifty back at bought fad or as and dedicated or phylum our our customers are asking us to grow were really walking through
spk_0: you either bit season or communication and those conversations and dedicated and foul mouth to help us determine what we should do and we would have a balanced approach making sure that we ah you know do it with a with our customers honor our commitment and grow with much as possible with a proper financial return so badly and so far has gone well
spk_2: and will continue to get through been season to help as we're fine with that can look like across all of however segment yeah next person will come from jordan alec go with goldman sachs
spk_1: yeah hi i'm so curious from a very high level standpoint relative to let's say on an hour early december or you would you say i'm more or less optimistic on the whole supply chain congestion is you using let's say over the first half or is it just keep pushing later and just them just the clarification on dedicated even what you said on purchases and cells are we looking at a dedicated fleet down and twenty twenty two vs the fourth quarter of twenty twenty one thanks
spk_27: yeah a jordan this out alarm among them
spk_3: as shelley to address the first party your question about our view on just a rehash your question or outlook on supply chain today vs maybe where his early or were was early december and then to the second party your question about dedicated him fleet additional in nyc address and fill out our say it throughout all of twenty twenty and twenty twenty one when we would make a prediction typically we were wrong and so although am i would like to be optimistic i think the latest round of covert has caught everyone by surprise the i can't say that i feel
spk_27: optimistic about the supply chain challenges going away in the near term in a were focused on making sure that we help our customers be right to help them smooth out their supply chain challenges and that were there for them
spk_3: how would they need time there's more crisis in the supply chain or mode agnostic solutions really come to the forefront because we're fairly in different as to how we help our customers be wrapped around or customers sulfur yes and then continued to me that that so for us we're gonna be there for them i can't really say for optimistic or not because i'm not certain
spk_9: what lies ahead but we are planning for that we are
spk_5: on the offensive thought as i said earlier on equipment on people and on technology with the we or or customers spend even more so this year than last year
spk_1: and i'll just say that we've saved up twenty five hundred drugs and we started about eighteen hundred of oven and so that means we get a significant amounted to start already in the hopper before we sell anything this year we are waiting on some trailing equipment to stop some stuff that we're huh
spk_0: building trades and and various other things on the power sad so i would say he was going to be just like the last two three quarters force
spk_31: i'm right in that ballpark is where we think it's gonna be from a number same point yeah next question comes from ten hector with bank of america a good afternoon pumps
spk_9: john you mustn't callbacks i about i think it was about a billion the half i if if you're at what net at age seventy seven you said a hundred fifty million rolls over can walk us through how you get to the billion half where you know how you see that step up and and brad just real quick as a clean up i think you mentioned some new tech and i see as it should we expect costs to step up there and
spk_1: he margin pressure is that just blended into the costs a can add it to john l l give a little bit of color on the cat bags were not really in a position to give too much detail but of the one point five i would say around ten percent is for general corporate herbs building and hands and something like that the rest is probably split evenly between the trucks and and trailing equipment and by trailing equipment i mean containers i mean a dedicated trailers and also three sixty bucks so that's probably around seven hundred million and then the rest is on
spk_32: tractors and that's another seven hundred million and again not gonna give too much color on now by that includes both a replacement and growth for twenty two and i would just like add what we did car man
spk_1: we gave some guidance for the last couple of quarters a lot with i kept backs would be we've also given for for for your twenty twenty two that's based on both what we want to order but also what we think we can get and so there's certainly a lot of noise and uncertainty as the aliens are trying to meet their plans and and get see equipment we need will continue to update on our progress there but just know that there's risk in that number based on what we can get in and place in service and then can on part to their ya that that technology and handsome it's it's it's really on the tail of the investment that we have been making
spk_0: and what i'm referencing there's that we will be deploying some internal tools that will allow and should allow for our peoples productivity to be improved which we would expect
spk_33: will allow us to advance our strategy and we move forward and so i'm just really excited about finally get done with some of those tools that they were going to be able to utilize to to make better decisions to make decisions faster and to enhance overall productivity of our workforce and at last i'll come from palm weight lift with you as i'm good afternoon so
spk_1: wanted to ask a think you know it seems to me like this a pretty consensus view out there that there are obese and supply chain improve and tear through the air i in i fear that view on
spk_3: i wanted to get your sense of what if that's wrong and in a we don't see supply chain improvement and you can i have a repeat of twenty twenty one where things are pretty congested three the year a what would that look like for jp hans and then just a may be short term second question you know what your best read and growth and percent for yes and twenty twenty two should we can't think of it is stable is maybe the base case or any any thoughts on that thank you i feel like i've answered the and some as there and before i think we're in a great position for our customers we didn't make the call early and twenty twenty one to add more equipment to lean and and you're saying that equipment now starting to come on line so i think in a great position with our
spk_27: customers were going to continue to be very close with them and make sure that we get an answer whatever customers' needs are and twenty twenty one more than any other year i saw as be able to mid pray for our customers they wouldn't necessarily had lived in that mode or that type of shipment in the past
spk_3: when a customer had a shipment we could say yes cheviot three sixty allowed for a lot of that but also the interconnectivity and all of our segment working very closely together understanding work that through that and how we could help our customers i don't see a lot of negative impacts for our organization if it were to say things yeah the the add is we're already set up for the ad and and we're continuing and to not cause with our customers
spk_1: when you say that there's consensus that it's gonna get a lot better i'm not sure how much that consensus is optimism vs reality and i think that that's really key questions that were asking our customers certainly will want to help our customers get better when help them be more plan and help them reduced cost and their supply chain and title but if nothing changes from today will continue to lean into our customers will continue to ask them how we can help them more and we will make a more bets on how we can help them through our people technology and our equipment and then you know every stated we're we're we're not interested in giving guidance around little are return expectations are for the year i think that it were early and believe that we're going to need to see what the market does and how it continues to respond to the work that we have been doing
spk_9: you know if you look back over the last several years going back to eighteen i'm at least encourage that we've returned
spk_0: closely to a profitability level we saw before the early live tech investments other word i invite of our a desired a long term range yeah at this point so we're working every day to the technology that i just reference to his as hopeful to to eight us in that and we would anticipate and expect to continue on our journey top
spk_2: towards the four percent six percent range that we stated previously
spk_34: and we have time for one more question which will come from brandon oakland ski with barclays
spk_9: hey good evening everyone thinks for up put me here at the end of the showing has affected his father letter or mean for brad you know with like headcount that we down and i see as and you know core truckload growth maybe three percent he to talk about the market dynamics are has reached you know more of a level of maturity that were contemplating in a maybe
spk_1: your and a half ago or there's still lot more to go on that one you know really what it comes down to is that the the headcount the you see there is direct to the business and because of how we've managed in and restructured over time there are some headcounts that support the business that are not inside of the be you and so i would say that the obviously we're leveraging technology in an effort to grow account at a disproportionate level to the growth of the business and and as really what our focus is and and were satisfied with the barrage
spk_0: we've been there perhaps the numbers that are published aren't entirely revealing of the total
spk_2: headcount inside the organization that supports those
spk_1: and this will conclude our cue and a session our knowledge to call over to see john roberts the closing remarks at this time
spk_2: thank you and add odd like are saying i appreciate a much more balanced discussion here today
spk_1: though we still have work to do i kept a low score here on the questions that wrath of are different leaders and i i am encouraged him will continue in that vein am you know i would say to to big take away or that would businesses are all lined up well opposition look to grow look to continue the momentum that we had and then collectively bethesda that individual string we have a compound it strange there are a like the question what of it does he get better and and when jelly was answering a question i'm thinking to myself okay so that means we keep doing what we're doing here we've learned how to do that but but if you look at the history that were demonstrating through this pandemic through this supply chain disruption with that really a fairly simple focus on in best for customers serve customers could generate the right amount of of town and then and best for customer the gap
spk_2: we'll really have a predisposition to one element or another and we continue to move down this road of being agnostic we just want to answer that question and up make our our momentum with the customer base is continuing to gain street that they are appreciate that we will invest or the
spk_1: i'm an equipment they appreciate that we will pivot away from and equipment investment if a better answer presents itself so you know closing out the year would we we were thrilled with the year we were thrilled to get to pay our people a special bonus and just close by saying that people focus is really worried that for us i've never seen the can have exhausted work that we've done this year to understand our position and balance that against risks of not taking action vs taking action than and thinking about how we need to make those investments return for instance
spk_0: i'm waiting with think about our assets you know that we we have great check we have great asset and equipment that are people are are the difference they they and i know that's a little bit cliche some of us but i'm telling you that when it gets down to push and shove are folks you're gonna be there they're going to get the job done

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