Good afternoon. My name is Garrett Holland, senior analyst covering transportation and logistics at Baird. We're very pleased to have the J.B. Hunt team joining us this afternoon for a discussion. You know, from the company, we've got Shelley Simpson, President, Darren Field, Executive Vice President, President of Intermodal, as well as Brad Delco, you know, Vice President of Finance and IR. We're going to turn it over to the company for a few quick opening comments, and then we'll return for Q&A. Great, Garrett. Thank you. Turn it over to Shelley. Thank you. Yeah. So, thanks for having us. Our mission at J.B. Hunt is to create the most efficient transportation network in North America. You know, we think about that across our 5 business units, and if you think about any package, whether it's coming inbound to the U.S. on an import or being manufactured all the way to the final consumption into your home, that's really the way we have aligned and structured our 5 business units to be able to handle that for customers. So think something bigger than a parcel shipment and larger than a box. For the most part, we can handle that across our businesses, in total. When you think about the company overall, in 2022, we were nearly a $15 billion-dollar company, with about 35,000 of us, executing every day on behalf of our customers. We are located all throughout the U.S., Canada, and Mexico, and that is where we focused on in total. We look at it overall from an asset and non-asset perspective, really solving for our customers based on what the most efficient way is to do business in total. We are very focused on our three priorities in 2023. We remain committed in our long-term approach to people, technology, and capacity. For us, we think about it from a people-first perspective. Fairly simple. If we take good care of our people, they're going to take great care of our customers, and ultimately, that's going to take great care of our shareholders. Our long-term view allows us to move through it throughout any cycle. So in the up and the down, we do try to work with our customers to think about what are proper returns based on what the cycle looks like. The second thing for us, just delivering value for our customers, very important, and I think you've seen us, accelerate in this area really since COVID hit, how we're thinking about customers, how we are having a long-term approach, but also just making sure everyone in the organization is thinking about: how do we create value for our customers? We want to differentiate ourselves and create a gap so that we can, get a proper return from our customers in the up and the down cycle, and that will allow us to drive long-term compounding returns for our shareholders. You know, one of the things in the company, I'm giving you really what our Section 16 officers look like, but really, you could take this throughout the organization. We are a very tenured organization. If you looked at the 14 officers here, the average tenure at J.B. Hunt is 25 years. The strength of that is we have seen many cycles throughout our career. I've served on the executive leadership team for the past 16 years, and so I was at the table during the great economic recession, and certainly as we've come through and are going through the freight recession today. Take this down into our director level, a lot of tenure inside our organization. So when we have them think about what we need to get accomplished, in total, they've had the experience to be able to do that. I talked about our foundations and how we think about that, and people being at the forefront of how we do business over the last 62 years. But technology really is the gap between the capacity that we deliver on and how our people really take care of our customers. We do think of technology as empowering our business, so we are going to continue, and we'll always have a people-first approach, but technology can empower our employees, but also can empower the shippers that do business with us and really any carrier that does business with us as well. And certainly our final foundation around capacity, that is what we're known for. Being able to say yes to a customer when they're asking us to solve a problem for them across our segments is an important component of how we do that. You know, we do have leading positions in a very large addressable market. You look at the size of the company, we are a large company, but we are actually small inside the market that we serve. The market is around $625 billion. We think about all five of our segments being able to grow at a healthy pace. We allow our returns and our growth profile to really be measured as we're talking to customers. We do see long term, being able to grow on behalf of our customers. That's why capacity becomes so important. We are mode neutral, and I think that's an important component of how we go to market. We talk to our customers about their problem, and then we solve for it with one of our five business units versus starting with what products that we have and then trying to sell to our customers. We've talked a little bit about our technology, our brand strength, but for us, it really does come down to our people and how we believe our people deliver on behalf of our customers. If you think about our five segments, really, JBI is our largest segment. Darren is our President of Intermodal. For us, in total, Dedicated our second largest, and if you think about our five businesses, you know, the asset parts of our businesses are going to be concentrated between the two largest parts of our company. The other three parts of our business is going to be either asset light or no assets, from a capacity perspective in total. When you think about from a profitability perspective, the bulk of our income is going to happen through our two largest parts of our business. It also requires the most amount of capital inside that. Our other businesses are going to be higher ROIC as they start to get within their margin profile. Then finally, I talked about how we think about long term and how we do business with our customers. You can see there's step-ups in our business when we see crisis happening in the supply chain. So if you go back into 2018, you can see that step up, that function that occurred. You also see our long-term discussion with customers as profit follows. So, loads are leading, price is lagging. It's the best way to think about that as we do our bid season for a full year, typically in all of our transactional business, so intermodal and the rest of our business is non-Dedicated. Dedicated is going to be on a long-term, five-year on average contract that's going to be indexed to what's happening in the market from an employment overall. And then if you could see what happened through COVID, the exact same thing happened. But I think really what this presents for us is just our focus, our North Star is ROIC. We are focused on generating the proper returns, and you can see our growth has been significant over the last decade in both revenue and operating income. Real quickly, I'll touch on capital allocation. You've seen over history, you know, first and foremost, our CEO and our president say, "Growth is oxygen." We have been growth focused on growing across the 5 segments at acceptable returns. Our number one priority for capital is reinvesting in our company. We do wanna maintain investment-grade credit rating. We have been supporting our dividend, and it's been growing, I think, now for at least 17 consecutive years, and then we'll use excess free cash flow to opportunistically buy back stock. So, we'll continue to invest to prepare our businesses for future growth, and I'm sure we'll have some questions on that as I turn it back over to you. So, Garrett, thanks again for having us. Great conference. Hey, thanks for being here. With that, we'll dive into the Q&A. If the audience has any questions, feel free to submit it through the portal or raise your hand, and we'll work you into the discussion here. Maybe just to start, a lot of experience on the stage and in prior downturns, based on, you know, the operating data you see, where would you say we are in this current freight cycle? Well, you called it a freight cycle, so I'm gonna stay with the theme word of freight. Because, you know, we've talked about being in a freight recession now, really since the back of last year, all the way through second quarter. And on our third quarter earnings release, we did talk about, you know, business improving, primarily in our intermodal business. That's gonna be the start of the supply chain. We reached an inflection point where we went positive on our growth in intermodal. We saw some of that from what was happening on the import side and certainly some of what our customers were saying. As a reminder, the freight recession largely was attributed to what was happening in inventory and our customers destocking, and also just getting inventory in a better position. Having said that, I would say we're in a more positive direction than we were in the first half of the year, which was really going through the hardest part of a freight recession, largely driven by inventory. Our full review, I would say, you're seeing positive signs that we talked about from third quarter in intermodal, and I think you're seeing the truckload part of the market still working through, I would say, bouncing along the bottom, trying to find its way up, but still plenty of capacity on the truckload side. And then Dedicated, certainly, I think, in a long position with our customers, long-term contracts, I think those are in a more favorable light. Having said that, there is a difference between a freight recession and an economic recession. You know, we've said we're not great economists, and so you probably heard cautiousness on our call, just based on what we saw geopolitical and really what's just happening from a consumer perspective. So a little more caution on the third quarter call, primarily because we're just not sure what's gonna happen with the consumer. No, that's helpful. I guess, as you think about, this peak season and quarter-to-date trends, are you seeing any shifts in demand as you talk to shippers? Well, you know, as we mentioned, we set a single week volume record for our intermodal business during September, and we highlighted on that call that at that point in October, we hadn't seen any change. Import data still is hanging in there, and I think AAR data would suggest that volumes are still holding in there, so we're busy. Customers today are coming up with sort of a new approach, and by that I mean it's less about, "Hey, I need another price reduction," and more about, "How can we get a more stable relationship going? What should we be considering today for our future?" And we're encouraged by that. I think it's kind of a new approach to saying, "What's a shipper of choice, and what do I need to be preparing for in a time when capacity tightens up and gets, and truckload market maybe, becomes less available and prices are gonna climb?" So customers are at least interested in talking about it. I'm not ready to say they're jumping on the, the train of, "I'm gonna be paying a lot more, and I need to go lock up capacity," but they're concerned about it. And so that, you know, I think that's a sign of the times around, hey, earnings season for transport's very, very difficult. There's, there's nothing healthy out there, and our cust- our customers care about that. They care deeply about it, and I think they've all identified that, hey, this is cutting pretty deep, and I better get ready for some pricing discussions because really it's not sustainable. And so I'm encouraged by the dialogue. Customers are talking about how can they utilize intermodal to offset maybe cost increases coming in their highway business. And so we believe that we've got an answer to help them with their budgets, without it being a rate reduction on our side. It can be a cost savings opportunity for the customer to convert highway business to intermodal. And so we think the future in 2024 has some real opportunity, but there is this idea, the consumer economy, and we don't know about that. So that's the watch-out. Yeah, the monthly progression and volume and, and, you know, the, the busiest week, record, volume week is, is certainly a, a sharp contrast to, to a lot of other dynamics in the marketplace. So what's driving that? And, you know, from an operating side, how do you service that volume? Yeah. So I think that. And I told my team we had a 2024 planning session last week, and I had all of my leadership group in, and just talked about how proud I am of their service, sort of tenacity in 2023. I think together, we've really, really lifted our culture, and we've really jumped through hoops to serve our customers at the time it was most important. On a town hall recently, speaking to every employee we had, I said, "Hey, it's our prove it moment." Because, you know, in August, I sat on a stage at an investor conference and said, "I don't think there's gonna be a peak season." We weren't seeing any signs of it. Our customers gave us no warning that this was coming. Yet, as they're tendering orders and we're watching load bookings, everybody's kinda looking at each other like, "Wow, we got to get ready." Well, our rail provider was ready, our equipment was in the right place. Our field operations teams have been so hungry to be busy again and to really challenge the maximum of their capacity, and I think they jumped through hoops, and everybody executed. I do think it was a differentiator with BNSF. They really, really, delivered on the capacity we needed. You know, Shelley and I went to Fort Worth in December of 2020, coming out of that first fall of pandemic, and we sat in a board meeting with BNSF, talking about customers' frustration with our inability to move more, more goods. And we said, "We have to start right now preparing for 2021." We settled in on an amount of capacity that would have been a record, and we built a plan to execute on that. Well, by the time 2021 came around, we really still couldn't even execute. After a year of planning, we were working hard with them. I, nobody was doing anything on purpose to limit our opportunity, but headcount at the railroad was a struggle, and velocity of the equipment, customers weren't able to unload. I mean, there were a lot of factors in that. This last September, we raced past that number. We never had a conversation other than day-to-day, "Hey, load bookings are way up. We're gonna. We need to get empties. We need to pull down the stack in this market. “We need to ship a train full of empties to California to prepare for it.” Everybody just went into action and operated, and I really think it's a strong testament to our ability to serve the customers. Now, that represents the opportunity to talk about our future with them, too. Yeah, it's certainly exciting times. You made an announcement yesterday- With respect to the partnership with BNSF, the Quantum product. You wanna spend a minute talking to us about that, you know, the potential that represents and, you know, the relationship as it's, you know, developed with BNSF? So we probably have a lot of people in the room that may not know that in 1989, Mr. Hunt and Mike Haverty, the current President of the Santa Fe Railway, shook hands on a train in western Illinois, establishing a plan to grow to be a trucker partnering with a railroad, who, at the time, were enemies, really to grow a new offering of an intermodal, at least for our business. We actually called it Quantum then. We bought trailers. They were decaled with Quantum. I don't know... I need to learn this history. I don't know exactly how long that lasted. Quickly, our customers said, "Hey, it's really confusing, J.B. Hunt trailers and Quantum trailers," and we pivoted to all J.B. Hunt logoed equipment, so I don't know how long the Quantum name lasted. But then fast-forward to 2022, we're in an off-site executive session, BNSF leadership team, our leadership team, and we challenged each other and said, "What, what do customers want to buy today that they can't get in the market?" And really, the idea of Quantum was reborn, and that is simply service-sensitive business that a customer has been hesitant to use intermodal for. So it is targeted at highway conversion. Let me say this, what it's not: it's not meant to be, "Hey, I have a service problem with my intermodal business, upgrade it to Quantum." That's not what it's for. It's a highway conversion model. It's a... You know, we have a team of people working in Fort Worth with BNSF that are monitoring the business. It's customized, it's agile. So we may truck a load by design a day or two a week because that's what the customer's supply chain needs, while intermodal's the right answer for three days of the week. Or maybe they're watching the network, and there's a weather event in Montana, and the trains, there's a mudslide, there's flooding, there's something that might cause a delay, and so we pivot to ICS, and we're trucking the load for that customer. Now, when it moves intermodal, there's an intermodal rate on it. When it moves highway, there's a highway rate on it. It's not like a guaranteed service, but it is a targeted program for highway conversion with a very high service level. We have executed a pilot now, since really since late June. We're delivering on up or up above 97% on-time service to our customers and actually moving 24 hours faster than if the same loads had moved without the Quantum team monitoring them. So we're really excited about what it can do to expand our addressable market. You know, Shelley highlighted that we operate in very large addressable markets. Well, the intermodal growth opportunity for us lies inside the highway addressable market, and so this is one of the efforts that we've, we're developing in order to attack more highway conversion for intermodal. Yeah, to pick up on that point, you know, clearly an opportunity to, you define, you know, 7-11 million loads yesterday, you know, as the, you know, market opportunity. But to what extent is, you know, market share an outcome versus a goal? Specifically within the intermodal market, how do you distinguish between those then? I'm sorry, say that again. So are you, I mean, what are you doing to really incent that market share transfer today? You know, is it service-oriented? Oh. Is it demand-oriented? Okay. Market share to us is, I would say we're more focused on that highway conversion than we are just fighting in a bid for the business that has always been intermodal. Now, we're the only channel really marketing BNSF today, so we want to grow our market share as it relates to any customer that has historically said, "I want to have diversification of the western railroads, and then I want to have diversification of the carrier mix on the western railroads." You know, today, we would anticipate some market share from that. But our focus is highway conversion, transload of international intact moves. How can we grow with those? And we do that by differentiating our service, and we want to have pricing that is sustainable and earns an appropriate return in our investments. How would you characterize the pricing market today in intermodal, and where do you see, you know, risk or opportunities we think about 2024? Well, clearly in 2023, there was downward pressure on price. We did expect that going into the year. We really felt like with some of the costs that had come on board to the industry, you know, weaker velocity, asset utilization was down. We thought, "Hey, more volume, better velocity, we can turn the equipment faster, that make the drivers more productive with their time on the drayage fleets." There is an opportunity, even with negative pricing, for us to come out on a better side of that. That's probably not really how that happened. I mean, volume, volume didn't come on board as fast as we would have liked to it have, and so certainly there has been pressure from negative price. I think our focus has been delivering excellent customer service, honoring the commitments we made, even at weaker prices, and then talking to our customers about our future, and it's simple: driver wage is not going down, and rail employee wages are not going down. Equipment's not gonna be cheaper. The utilization of that equipment can be a tool that gets spread over more loads, and can that translate into some cost benefit for the customer? Sure, but the other variable costs are just... They're real, everybody's facing them, and I really do anticipate that our discussions in 2024 pricing cycle will be increased discussions, at least at J.B. Hunt. You clearly stated ROIC is the North Star. Describe the path and timeframe back, at least at JBI, to the target margin. Yeah. You know, the fiscal cycle, I'll call it, at J.B. Hunt, at least, and really, this is created from the pricing cycle. We kinda measure, call it July through June, as the result period from the previous year's pricing cycle. And we can look back historically at big pricing moves, and the reality is that cycle still continues, and so it's pretty hard to really change anything, the trajectory that we're on with price until you get through that cycle. And so I really do feel like we can get on the right path in the back half of 2024. I don't know exactly when that happens, but I know that the dialogue we're having with our customers and their value that they get from the product and the service we're offering, gives us a chance to accomplish that. I expect to make really material improvements in our next cycle. I don't know exactly how much it'll be or when, but it's certainly an expectation of our management team that we get there as fast as we can. I'd like to believe it'll be one cycle. We'll have to wait and see. Now, that's helpful. Maybe shifting to the Dedicated business, another industry-leading position. You know, what are you seeing from a demand standpoint there? Obviously, freight market demand is lower, but you've been clipping along at, you know, a healthy growth rate annually. You know, you're optimizing fleets. What are you seeing in the Dedicated business today? Yeah, I think it's important that our Dedicated business really is private fleet conversion. That's our focus. As an organization, we really don't wanna be in a bid process. If we are in a bid process around, you know, creation of a fleet or capacity fleet, that's gonna live a little more in our highway business than it is inside Dedicated. I would tell you, our pipeline has held up this year and is healthy. Going into next year, it is healthy as well. You know, we spent a lot of time during this freight recession talking to our customers about what the optimal fleet size should look like. We were fairly offensive in that strategy, you know, just from our, our learnings from the past of knowing what happens when there's a lot of pressure around cost. We wanna make sure our customers aren't coming to us. We wanna walk our customers through what we believe that they can do, and then that'll come back to us over a longer period of time. Typically, when we're doing something like that, if we, if we downsize a fleet and we're offensively doing that with a customer, we're gonna get something for that. We always wanna get into longer term agreements or get something inside that, whether that's a change in the how we adjust our pricing, things like that. So I would say the majority of that work happened through second quarter of this year, maybe even a little bit here in the third quarter, but forward view, I would say more positive forward view around where our customers are at. Again, assuming no economic change from a freight recession perspective, feel pretty good there. Also took out trucks just, you know, we had a hard time getting new equipment. We've been onboarding new equipment this year, so we had extra trucks that we've turned in as well, and so combination of those two things, and then a little bit of change, really one bigger fleet for us, and that was more of a competitive, you know, rate reduction that we just decided to walk away from. And so for the most part, feel good about our pipeline, feel really good about our future. That's great. Touching on the brokerage or ICS business, you know, what are you seeing there? Obviously, a lot of disruption in brokerage today. You made an exciting acquisition with BN. Where do you see that business trending as we look out into 2024? Yeah. So I would say brokerage has been the hardest hit, at least for us, but I also think for the industry in this freight recession. If you think about our customer's business, it's the business that's least predictable. And so during COVID, it's the business that was like overflow business, that customers would say: "I need help. I need you to say yes." And we had an easy way to say that. You know, today, with what's happened in total shipments, most of that's impacted our brokerage business. For us, you know, brokerage reminds me a lot of what it looked like back in the mid-2000s, you know, when truckers were really competing on price. And, you know, that's something, you know, what do you learn through a freight cycle? One of the things I've really started to think about is, we don't need to compete on price in brokerage. That just is not healthy for our long term. We need to take a step back, figure out where we're creating the right level of value, and really start to get back into a return perspective. Overall, I think brokerage will settle in. But you know, we took a different approach in the third quarter, and we actually started changing pricing on customers that just didn't make sense for our long term. If we can't make an appropriate margin during a freight recession, it's gonna be very difficult to create even that more, much more value. And so it's been somewhat of a reset inside ICS. I would expect them to continue to progress, and that's one of the reasons that we had the acquisition in BNSF Logistics, that part of their business. You know, I think that shows the strength of the partnership that we have at the BNSF now, really since early last year, how we're thinking about what's the best of what they have, the best of what we have, and how can we, you know, complement each other better. You know, feel good about that, and we're onboarding that as we speak, and feel positive about the direction of that business next year. Very helpful. Just interested in your thoughts too, why we haven't seen more capacity fall out of the truckload market. For all the challenges we've been discussing, you know, why hasn't capacity gone away? Why aren't we closer to equilibrium? Well, I mean, all that would be speculative, but I would say this, you know, in this cycle, so much money was made during the pandemic, from specifically, from the small carrier community, maybe even large carriers too, but small carrier community, I don't know how much they've saved back and how long that cycle will last. I will say you're starting to see, some exits occur, but it does, if you just did the math on how long that will take, it might take a little bit longer. I, I'll say we have pushback from, from carriers on pricing, saying: "You know what? You know, I've given everything that I can." When the customers we normally will talk to a customer when a customer is pushing on us. You know, I think that can change coming into next year. I'm not sure at what point of the year that'll happen, but I can see that changing. When we think, you know, the cycle ahead, just help us understand, you know, the idiosyncratic opportunities that have positioned your business, you know, for good growth over the next 3-5 years? Yeah, I think what's very important is that we maintain our focus on our people, make sure that our people feel valued, heard, safe, respected, and welcomed. And, you know, when our people feel safe in the environment that they're in, they start focusing on our customers. They start saying: "Okay, I hear all these layoffs. I know what's happening, but I know what's gonna go on at J.B. Hunt. At J.B. Hunt, I'm gonna be safe where I'm at, and now I can focus on what we want to go get done with customers." We talk a lot about focus on what we can control. What we can control is making sure that we deliver the very best product for our customers. You've heard Darren talk about it. We're doing that across our entire business. If you were to ask the company right now, everyone is focused on what we call Customer Value Delivery. What is the value we're creating for customers? Our customers know that we're long term, we're gonna continue to stay focused on that, and they also know that we're in the business to make a fair return. You know, I think we've continued to build on that as a strategy, as an organization, and specifically during this part, you heard Darren talk about having a record week in intermodal. You know, we could have taken a different approach with our customers in that. We could have talked to our customers about pricing in that moment. Again, that would be short term versus building confidence from our customers that we can handle their business over the long term, and that we'd get paid appropriately, for that over the long term as well. Great perspective and update from the J.B. Hunt team. Thank you so much for being here. Thank you, Garrett. Thank you. Appreciate it. Take care. Yep.