J.B. Hunt Transport Services, Inc.

Q2 2022 Earnings Conference Call


spk_0: good afternoon thank you for attending to days jb hans second quarter two thousand twenty two earnings conference call my name is amber and i will be your moderator for today's call all lines will be needed during the presentation portion of the call with an opportunity for questions than answers at the end as you would like to ask a question please press star one on your telephone
spk_1: key pad
spk_0: i now have the pleasure panty the conference to host broad delco senior vice president of finance with jp hot breath please proceed
spk_2: good afternoon before he produces between would like to take some time it provides and disclosures the for the next week you call me country forward looking statements you didn't immediately private security with asian american can be bad words such as expects you to the paid in pans estimates were similar expressions can be to it and by be forget these babies are based on video and current planes and expectations the that risk and uncertainty that could cause he directed these and results to be purely different when they said forth and experience for more information regarding risk factors please or forty two different game or court on and take an adult reports in parliament the securities and exchange commission now would like to introduce the speakers in today's call this afternoon i'm doing burial ceo john roberts or see a film junkie show sensing she commercial also in a bp of people and she's resources nick carbs chief operating officer impregnate contracts services gary field pledge to be a good many and bled hits president of health services at this time i would like to turn you call to have seasonal mister john roberts to see be else down thanks granted good afternoon thank you for joining our call today we are pleased with our performance in the second quarter despite challenges around key factors at our business including labor and availability and rail service or did for the advent of a cyclical shit and market ballot concern as area about fitness and we see macro data that informs us about our current position such as spot rate and use drug dog that said and most importantly i resolved for the quarter continued to repeal the changes we have worked internet to enhance our position and each segment of the company based on weapons large expatriate gained over many many years and cycles there are different characteristics of our business segments that should be complimentary to the need to our customers and all economic conditions these include a flexible much lighter assets musician and are highly services offerings compelling solutions for privately conversion aiding in the do off his of managing get dance transportation networks and more economical and carbon friendly followed services offering in a model and a final bob at every position that dresses a secular only growing demand shell we remain in a leadership position across are many businesses and from a position of strength allegedly and on the change experience and build it navigate through an ever changing constantly evolving global supply chain i am encouraged to the the and healthy cash generating businesses across the totally let me address the clear service challenges weird dirty with our rail for bad we are in active discussions with the highest levels of our primary real providers to continue our work or proving service reliability and a lot
spk_3: we remain confident that the like seasons and investment will be made to bring us back to where we need to be
spk_2: we remain committed to the pat we're on with intermodal at have made no changes to our plans with the expectation for the noted improvements to show through in the second at of this year in fact at this point we've made no alterations to our plans for the year in our with met and capital expenditure allocations while we acknowledge their timing and delivery charges we take a long view and know that we have extended the in all categories for replace that and broke assets this position recognize these so called cross wins we are experiencing as noted and will be covered more during this call our direction is fully informed using real time data or all the aspects of each business an input from our customers
spk_3: our leadership team this year and will cover each business more specifically for you but before that i'll turn the call over to our seattle junk cooler for his daughter on the court john
spk_2: a good job and good afternoon everyone my comments today will review our recent performance in the quarter on a consolidated basis and all the provide quick update on or catholics plans and our priorities for capital overall we are pleased with the stronger those the team was able to deliver in the quarter highlighted with revenue growth a thirty two percent i bring income growth of forty six percent and gap earnings per share growth that fifty percent we did encouraged too large a partially offsetting income statement items in the quarter first way incurred thirty million dollar increase and casualty claims which is recorded in the insurance and claims line of our income statement and second we recorded and eleven point six million workers compensation insurance benefits in the salaries wages and benefits line
spk_3: we discussed the net impact of eighteen point four million in our release and provided the net impact by segment in those respective sexes are equally pleads with their efforts and continue to maintain a strong balance sheet with leverage below or net at target of one time the but dot on a trailing twelve months basis the end of the quarter with the hunter
spk_4: twenty four million of cash and zero drawn on a revolving credit facility the load or three hundred fifty million twenty twenty two notes mature in the coming quarter and we're rebuilding our plans to retiring these notes that are not concerned that liquidity matters given our options i'm callbacks we continue to be slightly behind our plan at one point five billion that we forecast for the year but as john alluded to remain committed to that target for both replacement and girl leads to service and grow with customers
spk_3: a lagging cap backs vs plan is almost entirely due the challenges in obtaining equipment
spk_2: as a reminder a priority for a capital read me focus on building long term sustainable value for a shareholders customers that are people were able to accomplish this by remaining disciplined and allocating our capital to generate fair and reasonable returns to support reinvestment and our business which remains cry
spk_5: already number one
spk_3: the bought back on this one million shares of stock in the quarter as opportunities were presented and remain committed to buybacks and dividends as a capital management tool has supported by are board
spk_2: this concludes my remarks and are now turn it over is shelley
spk_6: and son and good afternoon my commercial after or cover current market conditions and how we can carry the have confidence in application across a scroll of services for add value for our customers
spk_7: i'll also provide an update on our priorities across the key areas about that this which are are people technology and capacity and how the combination of all three allow us to differentiate ourselves and at delivering exceptional value to our customers
spk_6: the market remains sentiment and continue to be presented with unique in evolving challenges at different cross sections at the broader supply chain
spk_7: labour availability network a lot of the ability and additional bearing inventory dynamic around product mac continue to pitch strain on the effective utilization as available capacity some trance we're gonna fight last quarter like a softer transactional stock market remain but we're also remains it's a healthy demand for intermodal capacity and are professionally outsource private flight coalition and gps and they're pretty much way we reconnect customers with capacity and are highly services
spk_6: officers by leveraging are jp had three sixty platform that this essentially or intraday across an entire school or not built are treated overnight careful thought planning and execution with durability strength of financial discipline were and remain top of mind
spk_7: we do recognize a broader demand trans are a concern and we continue to have frequent now open dialogue with our customers regarding their capacity need
spk_6: we remain optimistic on our ability to compete to deliver the best to our customers by offering a full suite a services across the scroll they can help eliminate way create efficiencies and drive that cry from the system
spk_7: last quarter as said are opportunity to providing create efficiencies for our customers is greater this year than at any point of the last two and that remains true today
spk_6: frank has been moving and efficiently creating additional cost and we continue to a tremendous opportunity to eliminate wait in the system
spk_7: enhance visibility howard battle largest multimodal digital freight platform jpm three pick the remains a tremendous opportunity for customers to effectively source the capacity need
spk_6: during a quarter we launched new foundational principles that helped define who we are as a company what we strive for on behalf of her customers and what our employees should expect as a member of our organization in fact are innovative entrepreneurial and say do culture is founded on these principles people you trust technology that empowers and capacity to deliver
spk_8: that is jb hunt
spk_7: it is by no accident that people comes first as it is and remains or top priority to take care of our people who take care of and deliver diaper customers we empower or people are organization and our customers with investments in technology to help provide product liberty and efficiencies in our collective processes
spk_6: and finally we continue to have that in our capacity to deliver on meeting the growing needs of our customers i'll close in a similar fashion as a good last quarter we believe our mode in different approach allows us to provide flexible solutions to dynamically meat and respond to the needs of our customers
spk_7: our investments in our people technology and physical capacity habits in the best position to provide the right solutions for customers and at three key areas of cost capacity and service that includes my comments and that now like to turn it over to like usually a good afternoon or review the performance of are dedicated for animal segments and provide an update on a professional drivers and equipment and the impact that is having on our operations
spk_2: i'll start with dedicated demand for professional outsource private fleets lucent remained strong evidence bar continued growth in our fleet during the quarter or backlog and pop line also remain strong
spk_3: after selling six hundred trucks and few one week so slightly over eight hundred trucks in the second quarter we talked last quarter about the solid momentum in the business and that remains the case today as we continue to onboard new business
spk_2: we that in nearly twenty two hundred trucks to our business in the last twelve months which continues to stand out versus the competition this unprecedented demanding growth for a highly into new fleet services but a strain on the organization and the team has responded extremely well to the challenge going forward we will remain focused on operational excellence attracting and retaining the best talent and executing our growth plan which all supports the value we deliver to our customers shifting the final mile as we discussed earlier this year or focus for twenty two has been on revenue quality and making sure investments in are differentiated service product is properly valued in the marketplace
spk_3: i am pleased with our efforts in the success we have had so far to improve our profitability but more work remains and remained the pro already moving forward
spk_2: we continue to see strong demand for service with new customer opportunities in the pipeline but we also have seen some softening demand and some in markets mainly in the value furniture category our recent acquisition zenith bright minds is performing well and is presenting good opportunities for future growth the it contributed about twenty eight million of revenue and a quarter going forward we will remain committee to providing and match service in the industry and we continue to make investments to support that effort we believe this will support our long term performance in this secular a growing piece of the supply chain closing was some general comments on operations the driver market remains competitive and challenging but it feels more stable than has in a while but at considerably higher cost that said the equipment market remains extremely challenging and we are having to manage intensely around the impact on their operations to support our replacement need in the great we've seen across start organization we will be holding trade zone roughly four thousand and tractors this year additionally inflationary cause pressures on tires art maintenance technicians are meaningful and a higher frequency of repairs a result of an aging fleet is also impacting the utilization of our tractor equipment we continue to work closely with our away and providers to secure the safest and most fuel efficient equipment we came in the most expeditious way possible that includes my remarks was turned over to their thank you neck and good afternoon everyone our view performance of our intermodal segment of also give you an update on current network dynamics customer demand and capacity i'll start by reviewing the performance of the animal segment in the quarter demand for to past he continues to be greater than our ability to sort that to me and after seeing modest improvements in both rail velocity and customer activity and first quarter we saw performance deteriorate throughout the second quarter box turns in the quarter were essentially flat versus the first quarter in underperformed our expectations that said volumes by month for the quarter were up for percent in april up nine percent in may and up ten percent indian on a year over year basis we took delivery of an additional thirteen hunter containers in the quarter and expect to take delivery that more in the second half the year as we continue to investing capacity to meet the needs of our customers while our network philosophy and resulting volume performance were disappointing in the corridor the system and programs we have in place continue to protect a significant investments we've made on behalf of our customers as we sit here today we remain optimistic that rail performance and the last big will improve as the rails are not incentivized to move slower near and long term growth opportunities for intermodal business continue to be in front of us in our rail channel partners are well aware of those opportunities as john manchin we are working closely with all levels of our rail channel partners to address the velocity challenges starting early next year as new capacity becomes available to us on bnsf we fully anticipate feeling that available capacity which is supported by feedback from our customers
spk_4: when rail velocity does improve we fully expect to improve available capacity but also demand for that available capacity as service levels and proof as inefficiencies are removed from the network we fully expect that to be reflected in our cost to serve customers and rightfully so
spk_3: so in the cost to our customers
spk_2: in closing or intermodal product continue to present a strong value propositions customers with significant capacity to serve their needs in a more sustainable efficient in carbon friendly way we will continue to prioritize investments needed to support our long term growth and to better serve or customer needs
spk_4: we believe our service backed bar people and the ownership of our equipment is differentiated in the market and even more so went to bond with the power of the jp had three sixty platform that allows us to source capacity efficiently when needed that concludes model months won't turn it over to brad hits thank you very good afternoon everyone a review the performance of are integrated at the solutions and truckloads segments but we collectively call highway services
spk_2: while we get the a market ship in the quarter specifically related opportunity we believe our that within our people technology that that helped deliver a great and demanded service from our customers which helped her drawn into my comments
spk_4: the first what that and i feel idea topline revenue growth was three percent comprised that a three percent decline in volume more than offset by a five percent increase in revenue per load unpacking that a little more or truckload volumes roth of down about three percent but it was largely function of the shit that referenced earlier barking
spk_2: gradual truckload the increase in upper teeth percent year over year while our spot business with down between than a year over year basis
spk_9: we made a call earlier this year to focus on the other side of our business which we believe was the right strategic move that said we did it just the dials mid corner of them of our platform parameters and saw improvement and aren't rated freight trains at the quarter progressed we will continue to target the right and appropriate balance between volume growth and profitability
spk_4: and our goal remains outperform industry trends over the long term on growth
spk_9: but more importantly on delivering valued customers i am confident with the power of our people and the technology that month and our jb have three sixty platform to drive increase efficiency in value in our service offering to help deliver our mission to create the most efficient transportation network in north america
spk_4: shipping over to truckload we continue to see evidence of our customers valuing are dropped trailer network service offering volume growth of fourteen percent luck or support that you will be tremendous opportunity at customers begin to think differently about the blending of their live network and dropped trailer network capacity needs we believe that we have the right experience managing trailing assets a complex network business we've game that experience and our intermodal bit but in this instance leveraging all the capacity and capability of our jb have three sixty platinum source the most official capacity for our customers
spk_9: versus the rail network
spk_4: this shift from an asset intensive to an asset light model supports our goal scaling a large business with fair and acceptable right to return on our capital in closing i would just like to reiterate our strongly that the blending of what has historically been separate networks live load and unload rate versus drop trailer freight remains and strong to ban and value bar customers we remain committed to end up in our people technology and assets to support this growth that includes my comments the back to bred to get some instructions before the outbreak or opens the called q and i
spk_2: thanks brandon i just want to remind the audience if you don't mind please ask one question can get back into we have a lot of folks on the call this afternoon so with that and turn it back to the up your humor thank you
spk_0: of course think you will now begin the cuban a session if you would like to submit for a quarter please press star followed by one on your telephone keypad and for any reason you would like to remove that question please press star folded by to again to submit for a question that star one as a reminder of you're using the speaker phone please remember to pick up your handset before asking her questions will pause here briefly as questions are registered our first question comes from taught flower with keybank todd your line is still open
spk_3: hey great thanks and good afternoon and psychically me to start my own offices for jollier me to john roberts if you wanted to take a stab at this but maybe to to help level said kind of some of the commentary that you have a rounded to me and environments you're certainly we appreciate that there's a lot of cross currents that are out there by you as you think about
spk_9: you know the progression into the second half of this year the just curious or the indications that you're expecting a a weaker environment in the second half relative to where we were the first half based on customer feedback your any whole around the fall peak would be helpful and need any potential your price your conversations or impact on pricing are based on the change in demand environments right
spk_10: now thanks
spk_6: okay then he saw that the to give me three questions submitted do my best to answer
spk_7: that is it possible to have a very close ties to ourselves
spk_11: that looks a lot of up up up up up up
spk_7: we are haven't really good conversation with our customers that i think not em like what happened in the pandemic the last two years there is continuing to be challenges in the supply chain that are creating uncertainty in the market in particular with our customers around inventory which is really generated from consumer behavior that just also the bottleneck said are occurring from port activity to and we talked in our last call what was happening coming out of china and it's certainly what's happening still with labor at each part of the supply chain in general so i would tell you i think we're having a seasonally norm
spk_6: mole july that i be the first july that we've seen in a seasonality perspective since colbert had started we do things that there will be a peach to what extent we're still not sure we feel confident in the different areas ever businesses and how we're having conversation with our customers ever think about pricing perspective work pretty much finished with that season and we're going to be entering into new bit season here and a couple of months surprising is is pretty much sat across all of our businesses except for what's happening in the spot market in total i think our customers are trying to understand what's happening and cost to have talked about or transitory
spk_0: cost versus or structural cross challenges and we are trying to get them up to speed where there is transitory cost and we can start helping them free a mortician supply chain so you know i think it's we haven't even started been season and what's coming and the next couple of months but i would say i think our customers are prepared
spk_7: you have a good second hast i haven't had a lot of feedback on as a significant downturn a will say inventory has had some a short term challenges and changes for our customers go and all the way upstream in the supply chain but there's are supposed to
spk_3: be more short term than they are long term on and make did you have something that i was just gonna say oh in our dedicated business is a good watch your local on the day which is basically from the word else to the store or volume is up and dreaming up so it's a look and good from that standpoint so we're still see consumer demand strong and that's where closest to that
spk_4: great thanks for the color
spk_12: thank you
spk_0: our next question comes from
spk_13: ken huckster with
spk_14: think of america
spk_15: can you nfl open
spk_16: hey great good afternoon
spk_4: so it's gonna guess great job on intermodal baby can you talk about about more about the rail service and and have loads or up a percent while while their service levels i think he said we're flattish a are we should think about that are you starting to see an improvement or you know your your thoughts on on i'll look into the second half as you going to peak and then the same thing on price right can you delineate
spk_17: maybe the access pricing from that poor rail service because you mentioned as the service gets better you could see pricing then come down for customers may be talk about how we should think about that in terms of the price impact thanks
spk_18: well well me let me start on service we talked about the last the actually deteriorated some during the second quarter
spk_2: we we know that none of our real providers are satisfied with the their operations today i think the intensity at all of our real providers is extraordinarily high today in in all efforts to on board new cruise in and fine
spk_4: a pathway to a better service product i think that collectively
spk_18: us and our real provider to all understand that there's additional demand additional revenue additional volume waiting on us to improve our service and
spk_4: i think that that's universally understood and i do anticipate that we're going to see some improvements during the second half the year the key question is when and i you know i don't have a great answer for that i'm in a really think the railroads will have to answer that question
spk_18: but we're confident in the did the programs their initiating and we we are confident that they will see improvements as the year continues i think all we tried to highlight on that the pricing front it is you know
spk_3: there's asses soil programs out there for delays at customers those certainly are areas where that cost to to removed from the customers as velocity improves but in addition to that equipment ownership is not cheaper today it's more expensive than ever to buy equipment and so that way
spk_12: when the rail velocity improves really are industry i would think jb on in all intermodal channels will have a a slight pick up in equipment costs there and and certainly we would anticipate at least some of those would be passed along to the customers
spk_15: right presented on thank you thank you our next question comes from
spk_19: i'll simple linear with wells fargo allison july know who that name
spk_9: ah good evening of sookie touch on know with rgb hunt sixty ti to somewhere you think we are in that work and evolution of that product offering particularly as we think that downsides marielle and then someone associated with that with an icy yes you know kind of similarly have hobbies think that that gross margin range to cycle does any thoughts there
spk_2: ill them or that the british
spk_20: thank you for the question of and you know what i think about three picks the with we were very public about the investments we made and eighteen and nineteen really leading into twenty we do continue to invest in three sixty to expand it's capability than the value that a concrete on behalf of both our customers as well as or carriers a but by
spk_19: enlarge the i get the foundation of that platform i would say it behind us but that's not to say that we won't continue to make investments and find ways to improve upon it
spk_4: and then remind me again part two of your person
spk_2: it's up with an icy as is there a gross margin range that we should be thinking and freely you know practically everything about that time downside scenario that pregnant and ram give certainly thank you for the reminder
spk_9: you know we certainly saw margins experience dramatically in the pecking order with the the pressure the that been placed a predominately in the spot and where we're at we're where we were out relative to the bit cycle with obliterates
spk_4: you know is that the p
spk_21: hard to say and i think it's still too early to tell certainly pt is come down but it is still well north of historical or three coded levels honestly shelley mentioned are there are some structural cause that probably remain but but you know i will just have to see what the second half old around cup
spk_22: our city versus supply a that but certainly we we were able to take advantage of the expand emerges as you can see our results for the second quarter we were pleased by that feel like that we managed through that pivot
spk_12: in in appropriate way
spk_23: great thank you
spk_0: thank you
spk_15: our next question comes from
spk_24: ravi shankar with morgan stanley robbie your line is now open
spk_3: i'd like a good up when we won back the time
spk_4: d r insurance claim that yeah to thirty million dollars in the quarter i can you elaborate on that little bit more and help us understand if this before they at one time thing and related of the quarter or low and or some kind of incident or is it an ongoing i'd like it hey ravi that the junk hello alice i'll address the the one time charge
spk_3: would we can't to try to avoid calling referring things as one time but this one was the charge that we had occurred in the quarter for claim that result or were part of a prior year
spk_4: there are two or three claims that
spk_25: aren't going to settle or have settled outside of our coverage limits in one of the towers and so
spk_12: again everything is is part of the business but these related to a prior periods
spk_0: we thank you thank you
spk_26: our next question comes from scott group were wolf research outlining how open
spk_18: hey thanks afternoon and so as you start planning for the upcoming bid season would you expect to see a divergence and intermodal and truckload pricing or would you think that they would sort of trend directional together and then maybe just separately for for nick gun on the data good sides of the growth really kicked in and in second quarter last year and i'm just wondering a year later the all those trucks that jet added our our those performing relative to them to the margin targets
spk_4: wow okay got there and hero handle intermodal first you know i think
spk_18: certainly the this is massive change and spot prices that's evident out there feels like god it it is
spk_9: put know little bit of pressure on and a model but i don't i don't know that i think it's just overwhelming influencer as highway capacity is still not typically the largest competitor to to intermodal out west typically were competing against all water costs or certainly other
spk_18: intermodal channels or intact channels and those those costs will drive the intermodal market and then the underlying real costs are going to be the biggest influencers far more then what is going on with truckload pricing now in the east certainly a highway rates can play in a a real influence on our ability to convert business off the highway to intermodal all that being said with with fuel prices were they are and with velocity being challenged to this point i think we'd feel like preparing for the next round we should see velocity improvements which can translate to value for customers that intermodal can provide when compared against the highway so
spk_9: i think there will be some convergence meaning if trends in highways publish prices
spk_4: our to to trend flat are certainly slower even taker i ticked down certainly the intermodal market will have to respond or but i think the cost the underlying cause structure of intermodal really for all the channels is a little bit different than what it is on the highway
spk_2: yeah got this brad i've just mentioned maybe from a highway standpoint at i think it would be safe to anticipate that there would be flat to downward pressure at least in the the shorter
spk_3: and joe what does that mean going into all of twenty twenty three i think it's entirely too early to really tell i think that will know a lot more as we get deeper in the fall in terms of understanding what the and looks like relative to supply
spk_27: but but certainly would anticipate maybe some flat the down pressure and and from up your i was and point or got the snake ah your question i'm looking at the entire book a twenty one and scores and it's operating within twenty basis points of are based businesses been around for
spk_0: or a long time so it is doing very well that's including the over started up in november and december ah so we're very pleased with that and it's hitting our targets thank you guys
spk_2: thank you our next question comes from chris whether be with city
spk_18: has your line is now open he dang nippy question for daring one to get a sense of in a mobile container additions to the rest of the year is two teams that have a good proxy use for corner we got going forward and in in a mini bigger picture and they're challenging to continuing to add to the fleet if rail service does it get better so in obviously you been pretty successful adding to the lead me haven't seen really much improved health service a baby that the answer but got a curious about how you think about to dig to grow the sweden you're not going to get to pick up here of the next several months or back after your brother challenged costs dynamic that are to crop up as a result of that thanks or so what we we ended the quarter just above hundred and ten thousand containers and we're off in marching on our announced plans to expand our capacity up to one hundred and fifty thousand over the next three to five years so with only thirteen hundred am in key to have this year i think we would fall well short of that plan if that is what we what we do
spk_4: as as velocity changes come about and there's opportunities for us to game capacity with equipment we already own we will adapt our pace of on boarding that equipment based on customer demand and what's gone on your market and i don't wanna say that it's just gonna be
spk_18: be steady flow and will always be exactly the same i don't think it will be but but you know it would be certainly or opportunity to to try to grow into new capacity the came from a from mom velocity improvements but at this point probably announcements related to our equipment
spk_7: will continue to just land on that march towards one hundred and fifty thousand and nine and obviously each quarter you'll be able to see well what we added we would prefer to it to be a steady but at the same time we have to adapt and we know that
spk_6: our oh i see will always be our north star and will guide us through that process and and will continue with the flexibility that we need to
spk_2: be prudent with as as stewards of those investments a cloistered shelley just one thing to note there as we do have a unique opportunity in january where we will have more capacity on our western railroad providers so i think we're trying to equally balanced and in other chow
spk_12: lunges at getting more intermodal containers to move in the system and the opportunity that will be present here in short order so our conversations or customers are going well are around the western network and so for us will be more surgical as to where we can grow at the get better performance in the second quarter we did a really great job even
spk_28: you the challenges growing with our customers on lanes that made sense for the railroad for a customer and ourselves and will continue to do that said think it's going to be important that we continue to onboard equipment as we see and room for growth for ourselves
spk_13: okay got it thanks so much
spk_29: thank you our next question comes from
spk_5: i met martha with the shipping admit your line is now open
spk_2: the operator hi everyone i'm a i guess i just had a couple quick questions one is
spk_5: one is understand the implications for maybe five
spk_3: potentially being implemented the my my feeling is is really to the intermodal business it could be a pretty decent marketer opportunity given you know you in source of after jordy of your of the directory drivers i think your pet pet your competitors do not so you can just talk about it's a eighty five is implemented up are executed you know what what the implications are for the industrial raul and politically rgb hunts position than that and then damn i was hoping you can update us on you know the joint initiative with bnsf with i saw the i'm the inner mode the trampled facility at that you get put up a few few days ago the press release i'm which is love to get an update on on what would be an ss the progress that they've made in terms of giving you a little bit more clear access to capacity if that's being implemented now or is that sort of more to calm the can maybe drive stuff function improvement in the turns in the volumes
spk_2: yeah amid to sneak out take the first on a b five and we've been watching that since basically two thousand and eighteen and we feel like we're in a really good spot with that ah we don't expect the new law to have an immediate or material effect on or california operations
spk_4: we discontinued a few years ago or use of independent contractors
spk_18: operating under our the wording and sell out there we provide either jb on employees or we use brokerage to other motor carrier so we feel very conservative that going to interrupt our business and probably play and are straight particularly out in the intermodal site yeah they emit i i think i heard you say that you thought that we outsource more of our drainage activity than a week he is source in source he did i am so i didn't hear that right just gonna clean that up if if if i didn't hear write a priest so what yet we don't we don't feel like a be fine is gonna be an influencer of our operation in in any way so as it relates to all things joint efforts with bnsf i think that
spk_2: our mission today continues to be probably more focused on elements beginning next year i mean frankly there's there's not new capacity
spk_29: announcements that have come from bnsf yet as soon as the something like that is available i'm i'm sure you'll read it we still feel very confident in the way that we are communicating with bnsf on all things capacity
spk_12: but i think that you should all anticipate and expect that right now
spk_15: we're we're very focused on seeing the last the improvements and just service improvements in our system and that's a dominating our conversations today
spk_0: got it okay thank you very much pressure done thank you
spk_2: our next question comes from
spk_3: john chapel with evercore
spk_2: john your line of now open
spk_30: thank you good afternoon i'm nick i think the questions for you but others can chime in and they see fit in your the pretty unique look at to
spk_6: massive parts of the transportation chain with rail and truck and the one hand you started elevated contract raid in this very high fuel and the other hand you bad spot turning over in israel sort of issues i know we're hopeful for velocity improvement i think we were very hopeful of that enable as well as you look at your mood in different way of servicing customer
spk_7: this is there a point where maybe your concern that the intermodal it'll kind of permanent model shifted has miss this opportunity missed this window and it's so on kind of position all the different segments a gay behind whether that and capital dollars or labor that are ah to kind of you know ship here's pretty quickly if if animals never gonna really dream the dream ah what john is shelley i have a higher voice the net effect as
spk_6: i would say in our our opportunity with our customers we are mode indifferent and so entertaining their needs specifically is important in how we develop what our strategy is and how we deployed capital as a result much like like junk cooler talked about in his opening remarks you know for us we think that intermodal will continue to deliver great guy for customers and were bullish on our growth plan and our intermodal segment but we're bullish on growth plan across all of our segments over the long term so you know for us we think get there are some short term pain that have felt longer term but we we do think
spk_31: get there is an ear a window of opportunity here where the rails will get better our customers will get better inventory will get to right location and the supply chain will start to find a better balance if you will and we think having all five of our segments it really hate product from the very beginning of the supply chain although away and
spk_12: to it or the final home of our consumer will yield ourselves the well in an environment that is at more normalizing for our customers will be able to say yes in each and they needed each one of those segments have different march and targets and returns inside their own area but we do see great great across all
spk_0: channels and intermodal being one of our strongest for the goes over the next several years okay like each other
spk_32: thank you our next question comes from justin long with stevens
spk_2: just send your line is now open
spk_3: thanks with be significant run up and fuel prices we seen recently i was curious if you paid care how much of a sequential and when that winds to margins and then nick the number of dedicated truck sales remains extremely strong despite what's going on with spot right right now also as you reflect on the last couple years and the strength and we'd seen and dedicated sales how much of that strength would you say is cyclical verses secular coming from private fleet center outsource i'll i'll jump in on the dedicated sad first and to do about that i would you say that when i look back through our problem it is still at an elevated level or touch higher than it was this time last year and then so i think our demand is there
spk_2: when i look through the detail we reviewed it the other day it's a lot of products with conversion so not think it's just the long term we got a lot of density go and own right now and then a lot of density comments helps us we a good solutions to customers and with remote a growing weed have a lot of synergies there so i think it's just a good momentum i don't think it's cyclical and we try to say that were different than the them the normal over the road rage one way rates are you i think this is proven ago so that demand is very strong you will and had just in this is brad and i'll open adding that to the fuel question expecting and ninety two some work on there
spk_33: we talked about in dcs and in it was at least one hundred basis points headwind to margin percent are you read the basis was a little long a sequential nieces and you wouldn't see
spk_34: op was a decent amount of margie for you to couldn't sleep you to be packed if you did your where we don't report and war or margin than a fuel surcharge like some losing streak but it was a head wound emerging as but as a general statement i didn't want to see if you feel is a pass through for us and really
spk_28: shouldn't impact are either dollars and only thing i just want to be consistent with how we talking then pass now we're talking down here i'll be we did provide with more color on dc has recently opponents reread them
spk_35: that's helpful thanks
spk_36: thank you
spk_37: our next question come from
spk_38: gordon alligator with goldman sachs jordan your line of you're hired
spk_17: yeah i am
spk_39: curious on the final mile business
spk_3: sort of x the revenue quality initiatives that you guys been working on t may be talk to what demand or volumes her look like in that business and obviously it's working a bit because profit sort of bumped up from the first quarter so maybe help think through the proper billion in that segment looking ahead thanks
spk_40: yeah so
spk_3: the by and is still strong it's is
spk_4: body and some as we said in a press release in the value of furniture sided things ah the demanded there were the c e o's of of those companies told me that a year ago we're jump in and customers were jumping into it though
spk_21: six months ago yet the fish with
spk_3: with no buy and own it and now is avenue worked really hard to get sales so that was the analogy there so
spk_38: that for the lower and furniture by you thought the other side is really still busy ah inventories are get corrected so we're seeing a lot of the man we picked up some new business there and our service is really what separating us and our background checks and that things they playing well and you're saying is
spk_40: with this quarter a lotta wood but a lot of pressure on right and existing business and we were successful in that we lost some of the phone but we feel good about them
spk_12: the locations we lost so it's not good we go we got some more room to go
spk_0: the the prophet thought though given the thirteen million i think he didn't the second quarter
spk_41: yeah i think our we're we're going to see when i will give guidance but we're we're happy with we're we're we're at right now
spk_0: thank you
spk_42: thank you that's a sin come from
spk_9: jason said l with colin faith in your line is now open thank you are operator route afternoon off when a focus a little bit on on i see as say i think you mentioned you made some tweaks inter quarter and then you give sort of a number as think go down three percent for volume growth in the truckload side could you give us may be an idea just a volley
spk_43: improved any after he made those tweets in the quarter
spk_18: the adjacent yell at think what what i wanted to help understand is that we saw a really sharp decline in spot activity throughout the month of april and a yeah finishing up march as we talked about our volumes were pretty positive and que one
spk_9: but that really can't hit a wall those first a fifteen eighteen days of april then we were that's when we were able to change deliver a parameters of the algorithm that we use and some of our artificial intelligence around a price points and win rates and so we did see improved from that april timeframe historically we've not provided that for this business segments omega the sure that today but know that that april was where's the majority of the decline occurred and we were able to step up from that position that other
spk_44: the the quarter
spk_9: and can at that's very helpful or also went when you look at your carrier based you know we have you seen any movement on terms of the smaller a micro size carriers given the drop off and spot in the rising fuel have you seen those people may be i hang up the keys you don't have a big that we are seeing a little bit about what one of the areas that i think we've seen it more pronounced is the growth of our independent contractors and arts a jpg segment which i do think it the a relative element of people that were out operating on their own that are looking to attach into a larger system
spk_2: that has a better freight
spk_43: consistency the for their benefit and so i think that that's certainly an element that we pay close attention to ah
spk_6: in terms of the volume of people that are just purely hang of it up
spk_7: obviously everyday and the news there's some carriers that were see in and we would probably anticipate given the right level in the spotted by or meant that there is likelihood of more of that in the battle of the year but not great data thus far i do know that if we we we highlighted in prior years and twenty one in particular just how many people thought there are
spk_6: spring authority those numbers are certainly well well down from those the historical eyes that we saw last year so certainly let people are going that way and i do feel like we've seen elements in decades even relative to some of our driver hiring improvement that we've experienced it could be representative of a p
spk_7: apple looking for a safer place
spk_45: in case and i might add to that we
spk_46: jason officially m i add to that details are all in the platform we do see as trends and said the platform that far as the kind of market is so large i you know we're hitting new record the inside characteristic see that would not be unusual and in this environment and it does allow us to move more quickly and of like
spk_0: brad just talked about came out of the platform allowing us to make tweaks readily sometimes when the flip happened suddenly it's difficult for our platform to recognize the sudden shift or movement on price and wet price it will take to do that to do a manual intervention there but we have
spk_15: seen as fast or platform activity would you have a higher retention rate as to how many carriers that are and apple yet more cares and a higher retention rates more like dan and there are several records that happen in the second quarter so at the from that perspective we seen it but and from carriers just going out of business i think that be difficult for us to see
spk_9: by two extra caution
spk_32: thank you
spk_9: our next question comes from palm weird what's with you b s
spk_47: hum line is open
spk_9: yeah great thank you so i've wanted to see if you could offer a quick thought on how we should think about sequential intermodal margin where there might be kind of improving in treaty versus to que were similar and then shelley and dirt you added some comments at the beginning of the color provide some common to and freight i'm just wondering if it seems like there's been a lot of concerned about pre really falling off lot of concern about the consumer
spk_4: but it doesn't really seem like freak out that much weaker and second quarter
spk_7: do you think that it's likely that we see a significant fall off and free looking forward to steal given the pressure on the consumer where you think maybe it's just that the concerns about a fall off and for inactivity have been over done a bit and maybe the consumer eggs and better than the than you know people are expecting look i gotta say long term margin target and intermodal is ten to twelve percent and i'm sorry tom that saw you get
spk_6: don't i would say that have a lot of a we spent the last hour talking about his the different different signals we're seeing in different parts of the market i think part of what you've heard from brad and how we services as a result of a successful bid season
spk_7: happening and are less dislocation from our shippers from their route and god perspective i think you're starting see stabilization there
spk_9: i would say i think we are well positioned in any environment whether at the market turns as south or stayed as he as we think that we're going to have a successful and good second half of the year certainly way too early for us to talk about anything beyond that that we haven't had any customer specifically tell us
spk_7: that we should be concerned about volume certainly we are all listening and reading the news and as to what's happening out there and had to self fulfilling prophecy does happen and well adjusted and make me than according that was really great and i said this in are open comments the supply chain is inefficient our customers are paying too much money because goods are moving the way they should move we have a great opportunity to cube more for our customers filling up trailers and containers we also have a great opportunity to do mode conversion getting it in a more efficient way to move goods and twenty twenty three sets out to be a softer freight environment we're going to be in a perfect position because we will have added thousand and more containers
spk_6: thousands of more containers that would be on it and ready to start moving into any way along with a platform with brad and are dedicated flavor they were well positioned to have a great twenty twenty three and any environment
spk_12: okay buddy you you haven't seen signs of the term sharp fall off yet right some using be you just haven't seen customer input pointing to his sir paul off at this point zephyr
spk_0: we have seen a more seasonal july
spk_3: the last two years have been it's been difficult to predict what would what would happen in the supply chain of say july is typical normally heard nick earlier say that we're seeing good to me and happen indicated site which would be going to the store or we have had concern from customers on inventory i haven't the wrong inventory and where it is located but i've not heard any customers tell us that there is a downturn coming or or anything a plan from a large percentage thank you
spk_48: thank you
spk_4: that concludes today's to any often i will now passed the conference pop over to john roberts ceo for any additional are closing remarks
spk_3: okay thank you and we appreciate the time you spent with of here today i hope
spk_2: we've been a would be some color on a quarter we're proud of and i think importantly maybe even more importantly is the looking towards the second half and and into next year the the first thing i want to remind everybody on this call is at the table has a lot of experience and way
spk_49: are all data driven manage sweet we we pay a lot of attention to what's going on around us in all the things with talked about your day from bid to use shrug values of you know if any element that would inform us is is being taken into consideration and week we talk very regularly about
spk_3: what does that a change in direction in whatever element we're we're focused on mean to our business and that experience that we have elses remember what we thought the last time we might have seen something like that saw out of really feel like it's important that we remember we're we're twenty five and thirty years see
spk_2: senior members here weeks we've been through a number of these economic goal whatever were like again gear changes we hear really clearly from our customers they they talk to us a very candidly we talk big handedly with a real providers and others
spk_3: a good amount of of appropriately place concern or rail service but i'm confident as we all are that this will resolve itself i'm i'm seeing evidence of that we're we're in good conversation and i think that the the overwhelming reason is that you know better so service on the rail is a better answer for everybody involved in so there's not a big thing really and our way there i think the comprehensive nature of our businesses as described here today if it is a great balance we we give our customers just about everything they need and they they they sort of the balance each other when when one is moving one direction another one might be assisting or helping or leading to and i think that's been covered you know with with the dcs not being a trucking company of nick diaz said you know it doesn't necessarily follow the same patterns but i fear that can still be misunderstood even day
spk_0: that that business is a is is good as some kind of a trucking company and
spk_2: we just really need to keep working on getting through their butts are mild showing us some recovery of think the blend it's happening and highways is is really productive

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