HUNT J B TRANSPORT SERVICES INC Q4 FY2024 earnings call

• Focus on providing excellent service to customers, improving safety performance, and maintaining cost discipline while leveraging strategic investments in people, technology, and capacity.
• Positioning the business for long-term growth with a focus on operational excellence and scaling into investments. Strategic investments like acquiring Intermodal assets from Walmart were made to enhance future earnings potential.
• Intermodal had two consecutive quarters of record volumes with capacity to grow more while repricing the book of business. Dedicated business is resilient with solid visibility to future growth. Brokerage has progress but opportunities remain. JBT and Final Mile have growth opportunities.
• Made progress in cost control: headcount reduced by ~12% from peak levels, capacity adjusted, and focused on controlling costs without reducing long-term earnings power.
• Capital plan for 2025: CapEx between $700 million and $900 million, support dividend for 20 consecutive years, and opportunistically repurchase stock.

Intermodal: Fourth quarter total volume up 5% year-over-year, with Q4 setting a new quarterly record for Intermodal volume, including the largest Intermodal volume month ever (surpassing 200,000 loads in October) and TransCon volumes up 4%, Eastern volume up 6%. Dedicated Contract Services: Resilient with strong visibility to future growth, sold just shy of 440 trucks in the quarter, 2024 was one of the best truck sales years in history, expecting net fleet growth in 2025. Highway Services and Final Mile: JBT focuses on attracting the right freight and growing while maintaining network balance; Final Mile had muted demand in big/bulky products but focuses on service and proper payment; ICS had challenges with integration but now focuses on growth with the right customers and cost control. Brokerage: Progress being made but still work to do in terms of financial performance.

• Expect inflationary cost pressure to continue in insurance premiums and people costs. Insurance premiums have more than doubled in two years due to higher claim resolution costs.
• For Q1 2025, expect operating income to decline sequentially by 20%-25% after consideration of charges.
• 2025 CapEx expected to be between $700 million and $900 million, up from $674 million in 2024.
• Focus in 2025 is on growing and beginning to repair margins while leveraging investments to drive productivity.

• Inflationary costs in insurance premiums and people costs that need to be passed on to shippers and consumers.
• Uncertain market dynamics regarding the timing and magnitude of a potential inflection in the freight environment.
• Potential service issues with rail partners in the West causing additional costs while trying to maintain service standards.
• Fleet losses, customer bankruptcies, and competition impacting the dedicated business's growth and margin performance.

Q: Chris Wetherbee asked about the sequential decline in operating profit for the entire business and the moving parts driving it.

A: Brad Delco clarified it's normal seasonality from Q4 to Q1 with consideration of the impairment charge, and the 20%-25% sequential decline in operating income is in-line with normal seasonality Q: Jason Seidl inquired about the CapEx commentary and underlying assumptions for the range A: John Kuhlow explained CapEx range is dependent on dedicated sales success, with a bulk of it related to power replacement and some property investments Q: Jon Chappell asked about steps to improve returns on capital and margins without relying on market recovery A: Shelley Simpson mentioned focusing on network balance to minimize empties, continuing cost control efforts, and scaling into revenue with growth across segments Q: Brian Ossenbeck questioned Dedicated's guidance and churn A: Brad Hicks discussed known fleet losses being behind us in Q2, good pipeline, and retention rates rebounding; Brad Delco added onboarding new accounts has margin pressure but new deals are effectively breakeven through first six months Q: Jordan Alliger asked about first quarter and Intermodal's role in sequential drop-off A: Brad Delco stated they're talking about normal seasonality in Q4 and Q1, with pricing for Intermodal already set for Q1 Q: Scott Group asked about bid season and margin inflection in Intermodal A: Darren Field said bid cycle is ongoing, customers buy on service, cost, and capacity, and pricing conversation is one customer at a time with confidence in providing value Q: Ken Hoexter inquired about Intermodal utilization and scalability A: Shelley Simpson referred to Q1 being a result of 2023-2024 bid season, and Darren Field discussed improved utilization but years of two loads per container per month are behind us, with opportunities for improvement in future months Q: Tom Wadewitz asked about Intermodal volume growth prospects A: Darren Field mentioned opportunities in Eastern network, West Coast imports, and Mexico, with belief in long-term growth due to providing value through service Q: Bruce Chan asked about service issues with rail partner resembling 2021-2022 A: Darren Field clarified it was a people planning issue, not infrastructure, and solvable in months with good dialogue with rail partner Q: Bascome Majors asked about dedicated customers' notice period and churn visibility A: Brad Hicks explained each customer agreement is unique, with fleet losses from customer industry pressure, bankruptcies, and competitive bids, but CVD process helps be proactive and expects net positive fleet growth later in 2025 Q: Ariel Rosa asked about first quarter outlook and normal seasonality A: Brad Delco stated they're leveling set expectations for Q1 on normal seasonality, with optimism about future prospects despite Q1 sequential decline