Good afternoon. Thank you for attending today's J.B. Hunt's Second Quarter 2022 Earnings Conference Call. My name is Amber, and I will be your moderator for today's call. All lines have been muted during the presentation portion of the call with an opportunity for questions and answers at the end. I now have the pleasure to hand you the conference over to our host, Brad Delco, Senior Vice President of Finance with J.B. Hunt. Brad, please proceed.

Good afternoon. Before I introduce the speakers, I would like to take some time to provide some disclosures regarding forward-looking statements. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates, or similar expressions are intended to identify these forward-looking statements. These statements are based on J.B. Hunt's current plans and expectations and involve risks and uncertainties that could cause future activities and results to be materially different from those set forth in the forward-looking statements. For more information regarding the risk factors, please refer to J.B. Hunt's annual report on Form 10-K and other reports and filings with the Securities and Exchange Commission. Now, I would like to introduce the speakers on today's call. This afternoon, I am joined by our CEO, John Roberts; our CFO, John Kuhlow; Shelley Simpson, Chief Commercial Officer and EVP of People and Human Resources; Nick Hobbs, Chief Operating Officer and President of Contract Services; Darren Field, President of Intermodal; and Brad Hicks, President of Highway Services. At this time, I would like to turn the call to our CEO, Mr. John Roberts, for some opening remarks. John?

Thanks, Brad, and good afternoon. Thank you for joining our call today. We are pleased with our performance in the second quarter despite challenges around key factors of our business including labor, equipment availability, and rail service. The quarter did present evidence of a cyclical shift in market balance in certain areas of our business, and we see macro data that informs us about our current position, such as spot rates and used truck values. That said, and most importantly, our results for the quarter continue to reveal the changes we have worked to implement to enhance our position in each segment of the company based on lessons learned and experiences gained over many years and cycles. There are different characteristics of our business segments that should be complementary to the needs of our customers in all economic conditions. These include a flexible, much lighter asset position in our highway services offerings, compelling solutions for private fleet conversions aiding in the nuances of managing advanced transportation networks, a more economical and carbon-friendly full-load services offering in Intermodal, and a Final Mile delivery position that addresses a growing demand channel. We remain in a leadership position across our many businesses and from a position of strength financially and on the teams' experience and ability to navigate through an ever-changing, constantly evolving global supply chain. I am encouraged to be in healthy, cash-generating businesses across the company. Let me address the clear service challenges we are experiencing with our rail providers. We are in active discussions with the highest levels of our primary rail providers to continue our work on improving service reliability and velocity. We remain confident that the right decisions and investments will be made to bring us back to where we need to be. We remain committed to the path we are on with Intermodal and have made no changes to our plans with the expectations for the noted improvements to show through in the second half of this year. In fact, at this point, we have made no alterations to our plans for the year in our equipment and capital expenditure allocations. While we acknowledge there are timing and delivery challenges, we take a long view and know that we have extended needs in all categories for replacement and growth assets. This position recognizes the so-called crosswinds we are experiencing, as noted, and will be covered more during this call. Our direction is fully informed using real-time data on all key aspects of each business and input from our customers. Our leadership team is here and will cover each business more specifically for you. But before that, I will turn the call over to our CFO, John Kuhlow, for his thoughts on the quarter. John?

Thank you, John, and good afternoon everyone. My comments today will review our recent performance in the quarter on a consolidated basis. I'll also provide a quick update on our CapEx plans and our priorities for capital. Overall, we are pleased with the strong results the team was able to deliver in the quarter, highlighted with revenue growth of 32%, operating income growth of 46%, and GAAP earnings per share growth of 50%. We did incur two large but partially offsetting income statement items in the quarter. First, we incurred a $30 million increase in casualty claims, which is recorded in the insurance and claims line of our income statement. And second, we recorded an $11.6 million workers' compensation insurance benefit in the salaries, wages, and benefits line. We've discussed the net impact of $18.4 million in our release and provided the net impact by segment in those respective sections. We were equally pleased with our efforts and continue to maintain a strong balance sheet with leverage below our net debt target of one times EBITDA on a trailing 12-month basis. We ended the quarter with $124 million of cash and zero drawn on our revolving credit facility. Our $350 million 2022 notes, which are in the coming quarter, and we are reviewing our plans to retire these notes, but are not concerned about liquidity matters given our options. On CapEx, we continue to be slightly behind our plans of $1.5 billion that we forecasted for the year. But as John alluded to you, we remain committed to that target for both replacement and growth needs to service and growth with customers. The lag in CapEx versus plan is almost entirely due to challenges in obtaining equipment. As a reminder, our priorities for our capital remain focused on building long-term sustainable value for our shareholders, customers, and our people. We're able to accomplish this by remaining disciplined and allocating our capital to generate fair and reasonable returns to support reinvestment in our business, which remains priority number one. We bought back almost one million shares of stock in the quarter as opportunities were presented, and remain committed to buybacks and dividends as a capital management tool, as supported by our Board. This concludes my remarks, and I'll now turn it over to Shelley.

Thanks, John, and good afternoon. My commercial update will cover current market conditions and how we continue to have confidence in our position across our scale of services to provide value for our customers. I'll also provide an update on our priorities across the key areas of our business, which are our people, technology, and capacity, and how the combination of all three allows us to differentiate ourselves in delivering exceptional value to our customers. The freight market remains dynamic and continues to face unique and evolving challenges at different cross-sections of the broad supply chain. Labor availability, network velocity and fluidity, in addition to varying inventory dynamics around product mix, continue to put strain on the effective utilization of available capacity. Some trends we identified last quarter, like a softer transactional spot market remain, but also remains is a healthy demand for our Intermodal capacity and our professionally outsourced product fleet solution in DCS, and the frictionless way we connect customers with capacity in our highway services businesses by leveraging our J.B. Hunt 360 platform. The businesses we are in today across our entire scale were not built or created overnight. Careful thought, planning, and execution, with durability and strength in financial discipline were, and remain top of mind. We do recognize that broader demand trends are a concern, and we continue to have frequent and open dialogue with our customers regarding their capacity needs. We remain optimistic about our ability to compete to deliver the best value to our customers by offering a full suite of services across the scale that can help eliminate waste, create efficiencies, and drive out costs from the system. Last quarter, I said our opportunity to provide and create efficiencies for our customers is greater this year than at any point over the last two, and that remains true today. Freight has been moving inefficiently, creating additional costs, and we continue to see tremendous opportunity to eliminate waste in the system. Enhanced visibility, powered by the largest multimodal digital freight platform, J.B. Hunt 360, remains a tremendous opportunity for customers to effectively source their capacity needs. During the quarter, we launched new foundational principles that help define who we are as a company, what we strive for on behalf of our customers, and what our employees should expect as a member of our organization. In fact, our innovative, entrepreneurial, and say-do culture is founded on these principles: people you trust, technology that empowers, and capacity to deliver. That is J.B. Hunt. It is by no accident that people come first. It remains our top priority to take care of our people who take care of and deliver value for our customers. We empower our people, our organization, and our customers with investments in technology to help provide productivity and efficiencies in our collective processes. And finally, we continue to invest in our capacity to deliver on meeting the growing needs of our customers. I'll close in a similar fashion as I did last quarter. We believe our mode-indifferent approach allows us to provide flexible solutions to dynamically meet and respond to the needs of our customers. Our investments in our people, technology, and physical capacities have us in the best position to provide the right solutions for our customers in the three key areas of cost, capacity, and service. That concludes my comments, and I'd now like to turn it over to Nick.

Thank you, Shelley, and good afternoon. I'll review the performance of our Dedicated and Final Mile segments and provide an update on our professional drivers and equipment, and the impact that is having on our operations. I'll start with Dedicated. Demand for our professional outsourced private fleet solutions remained strong as evidenced by our continued growth in our fleet during the quarter. Our backlog and pipeline also remained strong. After selling 600 trucks in Q1, we sold slightly over 800 trucks in the second quarter. We talked last quarter about seeing solid momentum in the business, and that remains the case today as we continue to onboard new business. We've added nearly 2,200 trucks to our business in the last 12 months, which continues to stand out versus the competition. This unprecedented demand and growth for our highly engineered Fleet Services has put 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 to Final Mile, as we discussed earlier this year, our focus for '22 has been on revenue quality and making sure our investments in our differentiated service product are properly valued in the marketplace. I'm pleased with our efforts and the success we've had so far to improve our profitability, but more work remains a priority moving forward. We continue to see strong demand for our service with new customer opportunities in the pipeline. But we have also seen some softening demand in some end markets, mainly in the value furniture category. Our recent acquisition, Zenith Freight Lines, is performing well and is presenting good opportunities for future growth. Zenith contributed about $28 million of revenue in the quarter. Going forward, we will remain committed to providing unmatched 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 second leg of the growing piece of the supply chain. Closing with some general comments on operations, the driver market remains competitive and challenging, but it feels more stable than it has in a while but at considerably higher costs. That said, the equipment market remains extremely challenging, and we are managing intensely around the impact on our operations. To support our replacement needs in the growth we've seen across our organization, we will be holding trades on roughly 4,000 tractors this year. Additionally, inflationary cost pressures on tires, parts, maintenance technicians are meaningful, and the higher frequency of repairs as a result of an aging fleet is also impacting the utilization of our tractor equipment. We continue to work closely with our OEM providers to secure the safest and most fuel-efficient equipment we can in the most expeditious way possible. That concludes my remarks, so I'll turn it over to Darren.

Thank you, Nick, and good afternoon, everyone. I'll review the performance of our Intermodal segment. I will also give you an update on current network dynamics, customer demand, and capacity. I'll start by reviewing the performance of the Intermodal segment in the quarter. Demand for our capacity continues to be greater than our ability to serve that demand. After seeing modest improvements in both rail velocity and customer activity in the first quarter, we saw performance deteriorate throughout the second quarter. Box turns in the quarter were essentially flat versus the first quarter and underperformed our expectations. That said, volumes by month for the quarter were up 4% in April, up 9% in May, and up 10% in June on a year-over-year basis. We took delivery of an additional 1,300 containers in the quarter and expect to take delivery of more in the second half of the year as we continue investing in capacity to meet the needs of our customers. While our network velocity and resulting volume performance were disappointing in the quarter, the system and programs we have in place continue to protect the significant investments we've made on behalf of our customers. As we sit here today, we remain optimistic that rail performance and velocity will improve as the rails are not incentivized to move slower. Near and long-term growth opportunities for the Intermodal business continue to be in front of us, and our rail channel partners are well aware of those opportunities. As John mentioned, 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 filling that available capacity, which is supported by feedback from our customers. When rail velocity does improve, we fully expect to improve available capacity, but also demand for that available capacity as service levels improve. As inefficiencies are removed from the network, we fully expect that to be reflected in our cost to serve customers and rightfully so in the cost to our customers. In closing, our Intermodal product continues to present a strong value proposition to customers with significant capacity to serve their needs in a more sustainable, efficient, and carbon-friendly way. We will continue to prioritize investments needed to support our long-term growth and to better serve our customer needs. We believe our service, backed by our people and the ownership of our equipment, is differentiated in the market, and even more so when combined with the power of the J.B. Hunt 360 platform that allows us to source capacity efficiently when needed. That concludes my remarks, I'll turn it over to Brad Hicks.

Thank you, Darren, and good afternoon, everyone. I'll review the performance of our Integrated Capacity Solutions and Truckload segments, what we collectively call highway services. While we did see a market shift in the quarter, specifically related to spot opportunities, we believe our investments in our people, technology, and assets helped us deliver a great and demanded service from our customers, which I'll touch on at the end of my comments. But first, let's start in ICS. ICS top line revenue growth was 3%, comprised of a 3% decline in volume, more than offset by a 5% increase in revenue per load. Unpacking that a little more, our truckload volumes were also down about 3%, but this was largely a function of the shift I referenced earlier. Our contractual truckload business increased in the upper teens percent year-over-year, while our spot business was down mid-teens on a year-over-year basis. We made a call earlier this year to focus on the public side of our business, which we believe was the right strategic move. That said, we did adjust the dials mid-quarter on some of our platform parameters and saw improvement in spot rate and freight trends as the quarter progressed. We will continue to target the right and appropriate balance between volume growth and profitability, and our goal remains to outperform industry trends over the long-term on growth, but more importantly, on delivering value to customers. I am confident with the power of our people and the technology investments in our J.B. Hunt 360 platform to drive increased efficiency and value in our service offering and help us deliver our mission to create the most efficient transportation network in North America. Shifting over to truckload, we continue to see evidence of our customers valuing our drop trailer network service offering. Volume growth of 14% in the quarter supports that view. We see tremendous opportunity as customers begin to think differently about the blending of their live network and drop trailer network capacity needs. We believe that we have the right experience managing trailing assets and a complex network business. We've gained that experience on our Intermodal business, but in this instance, leveraging all the capacity and capability of our J.B. Hunt 360 platform to source the most efficient capacity for our customers versus the rail network. This shift from an asset-intensive to an asset-light model supports our goal of scaling a large business with fair and acceptable rates of return on our capital. In closing, I would just like to reiterate our strong belief that the blending of what has historically been separate networks—live load and unload freight versus dropped trailer freight—remains in strong demand and is valued by our customers. We remain committed to investing in our people, technology, and assets to support this growth. That concludes my comments, so I'll turn it back to Brad to give some instructions before the operator opens the call for Q&A.

Thanks, Brad. And I just want to remind the audience if you don't mind, please ask one question and get back in queue. We have a lot of folks on the call this afternoon. So, with that, I'll turn it back to the Operator, Amber. Thank you.

Of course, thank you. We will now begin the Q&A session. Our first question comes from Todd Fowler with KeyBanc. Todd, your line is now open.

Hey, great. Thanks and good afternoon. So, I guess maybe to start, I don't know if this is for Shelley or maybe John Roberts if you wanted to take a stab at this, but maybe to help level-set kind of some of the commentary that you have around the demand environment. Certainly, we appreciate that there's a lot of crosscurrents that are out there, but as you think about the progression into the second half of this year, I'm just curious, are the indications that you're expecting a weaker environment in the second half relative to where we were in the first half based on customer feedback? Any color around the fall peak would be helpful? And then any potential pricing conversations or impact on pricing based on the change in demand environments right now? Thanks.

Okay, thank you, Todd. I think you gave me three questions, so I'm going to do my best to answer them as best as possible. So— We are having really good conversations with our customers that I think, not unlike what's happened in the pandemic in the last two years, there are continuing 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. But just also the bottlenecks that are occurring from port activity to, we talked in our last call about what was happening coming out of China. And then 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 normal July that might be the first July that we've seen in a seasonality perspective since COVID started. We do think that there will be a peak. To what extent, we're still not sure. We feel confident in the different areas of our businesses and how we're having conversations with our customers. If we were to think about from a pricing perspective, we're pretty much finished with bid season and we're going to be entering into a new bid season here in a couple of months. So, our pricing is pretty much set 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 in cost. I have talked about our transitory costs versus our structural cost challenges, and we are trying to get them up to speed on where there are transitory costs and we can start helping them create a more efficient supply chain. So, I think it's—we haven't even started bid season and what's coming in the next couple of months, but I would say, I think our customers are prepared to have a good second half. I haven't had a lot of feedback on a significant downturn. I will say inventory has had some short-term challenges and changes for our customers, going all the way upstream in the supply chain, but those are supposed to be more short-term than they are long-term. And, Nick, did you have something to say?

Yes, I was just going to say, in our dedicated business, as we watch our load count in the day, which is basically from the warehouse to the store, our volume is up and trending up. So, it's looking good from that standpoint. So, we're still seeing consumer demand strong, and that's—we're closest to that.

Hey, great. Good afternoon. So, and just—John, I guess great job on Intermodal. Maybe can you talk a bit about—more about the rail service and if loads are up 8% while there are service levels, I think you said were flattish, how we should think about that? Are you starting to see an improvement, your thoughts on outlook into the second half as you go into peak? And then same thing on price, right, can you delineate maybe the excess pricing from that poor rail service, because you mentioned as the service gets better you could see pricing then come down for customers, maybe talk about how we should think about in terms of the price impact? Thanks.

Well, let me start on service. We talked about velocity, actually deteriorated some during the second quarter. We know that none of our rail providers are satisfied with their operations today. I think the intensity at all of our rail providers is extraordinarily high today in all efforts to onboard new crews and find a pathway to a better service product. I think that collectively, us and our rail providers all understand that there's additional demand, additional revenue, additional volume waiting on us to improve our service. I think that that's universally understood. And I do anticipate that we're going to see some improvements during the second half of the year. The key question is when. And I don't have a great answer for that. I mean, I really think the railroads will have to answer that question. But we're confident in the programs they're initiating, and we are confident that they will see improvements as the year continues. I think all we tried to highlight on the pricing front is there's accessorial programs out there for delays at customers, those certainly are areas where that's cost to remove 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, when the rail velocity improves, really our industry, I would think J.B. Hunt and all Intermodal channels will see a slight pickup in equipment costs there. And certainly, we would anticipate at least some of those would be passed along to the customers.

Hi, good evening. So, can you touch on— with J.B. Hunt 360, can you touch on where you think we are in the growth and evolution of that product offering, particularly as we think to that downside scenario? And then somewhat associated with that, within ICS, kind of similarly, how we should think about that gross margin range through cycle, just any thoughts there?

Hey, Allison, this is Brad Hicks. Thank you for the question. And when I think about 360, we're very public about the investments we made in '18 and '19, really leading into '20. We do continue to invest in 360 to expand its capabilities and the value that it can create on behalf of both our customers as well as our carriers. But by and large, the—I guess the foundation of that platform, I would say, is behind us. But that's not to say that we won't continue to make investments and find ways to improve upon it. And then, remind me again part two of your question? Yes, certainly. Thank you for the reminder. We certainly saw margins expand dramatically in the second quarter with the pressure that had been placed predominantly in the spot and where we were at relative to the bid cycle with publish rates. Is that the peak? Hard to say, and I think it's still too early to tell. Certainly, PTE has come down, but it is still well north of historical or pre-COVID levels. Obviously, Shelley mentioned there are some structural costs that probably remain. But we'll just have to see what the second half holds around capacity versus supply. But certainly, we were able to take advantage of the expanded margins, as you can see in our results for the second quarter, we were pleased by that, and we feel like we managed through that pivot in an appropriate way.

Thank you. Good afternoon, everyone. Thanks for the time. The insurance claim that you had of $30 million in the quarter, can you elaborate on that a little bit more and help us understand if this was a one-time thing related to the quarter, a loan or some kind of incident, or is it an ongoing item? Thank you.

Hey, Ravi. This is John Kuhlow; I'll address the one-time charge. We tend to try to avoid calling—referring to things as one-time, but this one was a charge that we had incurred in the quarter for claims that result—or were part of prior years. There were two or three claims that are going to settle or have settled outside of our coverage limits in one of the towers. And so, again, everything is part of the business, but these related to prior periods.

Hey, thanks, afternoon. So, as you start planning for the upcoming bid season, would you expect to see a divergence in Intermodal and truckload pricing or would you think that they would sort of trend directionally together? And then maybe just separately for Nick on the dedicated side, so the growth really kicked in, in the second quarter last year. I'm just wondering, a year later, all those trucks that you had, and how are those performing relative to the margin targets?

Yes, okay, Scott, Darren here. I'll handle Intermodal first. I think, certainly, this massive change in spot prices that's evident out there feels like it is putting a little bit of pressure on Intermodal. But I don't know that I think it's this overwhelming influencer as highway capacity is still not typically the largest competitor to Intermodal out West. Typically, we're competing against all water costs or certainly other Intermodal channels or intact channels. And those costs will drive the Intermodal market, and then the underlying rail costs are going to be the biggest influencers far more than what is going on with truckload pricing. Now in the East, certainly highway rates can play a real influence on our ability to convert business off the highway to Intermodal. All that being said, with fuel prices where they are, and with velocity being challenged to this point, I think we 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, I think there will be some convergence, meaning if trends in highway published prices are to trend flat or certainly slow or even take a tick down, certainly the Intermodal market will have to respond. But I think the cost, the underlying cost structure of Intermodal, really for all the channels, is a little bit different than what it is on the highway.

Yes, Scott, this is Brad. I would just mention maybe from a highway standpoint, I think it would be safe to anticipate that there would be flat-to-downward pressure, at least in the shorter term. What does that mean going into all of 2023? I think it's entirely too early to really tell. I think that we'll know a lot more as we get deeper into the fall in terms of understanding what demand looks like relative to supply. But, certainly, we anticipate maybe some flat-to-down pressure, and from a pure highway standpoint.

All right, Scott, this is Nick. To your question, I am looking at the entire book of '21 adds for us, and it's operating within 20 basis points of our base business that's been around for a long time. So, it is doing very well, that's including deals that started up in November and December. So, we're very pleased with that, and it's hitting our targets.

Hey, thanks. Maybe a question for Darren, I wanted to get a sense of Intermodal container additions through the rest of the year. Is Q2 sort of a good proxy to use for quarterly growth going forward? And in maybe bigger picture, are there challenges to continuing to add to the fleet if rail service doesn't get better? So, obviously, you've been pretty successful adding to fleet, and we haven't seen really much improvement in rail service, so maybe that's the answer. But kind of curious about how you think about continuing to grow the fleet, and if we're not going to get a pickup here over the course of the next several months or into the back half of the year, are there other challenges or cost dynamics that start to crop up as a result of that? Thanks.

Sure. So, well, we ended the quarter just above 110,000 containers, and we're often marching on our announced plan to expand our capacity up to 150,000 over the next three to five years. So, with only 1,300 ads in Q2 of this year, I think we would fall well short of that plan, if that is what we do. As velocity changes come about, and there are opportunities for us to gain capacity with the equipment we already own, we will adapt our pace of onboarding that equipment based on customer demand and what's going on in the market. I don't want to say that it's just going to be a steady flow and will always be exactly the same. I don't think it will be, but it would be certainly our opportunity to try to grow into new capacity that came from velocity improvements. But at this point, probably announcements related to our equipment will continue to just land on that march towards 150,000. And obviously, each quarter, you'll be able to see what we added. We would prefer for it to be steady, but at the same time, we have to adapt, and we know that ROIC will always be our Northstar and will guide us through that process. And we'll continue with the flexibility that we need to be prudent as stewards of those investments.

Hey, Chris, it's Shelley. Just one thing to note there is 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 balance the challenges of getting more Intermodal containers to move in the system, and the opportunity that will be present here in short order. So, our conversations with customers are going well around the Western network. And so, for us, will be more surgical as to where we can grow. But think about our performance in the second quarter. We did a really great job, even through the challenges, growing with our customers on lanes that made sense for the railroad for our customer and ourselves. And we'll continue to do that. So, I think it's going to be important that we continue to onboard equipment as we see room for growth for ourselves.

Thanks, operator. Hi, everyone. I guess I just had a couple of quick questions. One is wanted to understand the implications from AB5 potentially being implemented. My feeling is as it relates to the Intermodal business, it could be a pretty decent market share opportunity given you in-source the vast majority of your trade drivers. I think your competitors do not. So, if you can just talk about if AB5 is implemented or executed, what the implications are for the industry overall and specifically how J.B. Hunt's position is in that and then, Darren, I was hoping you could update us on the joint initiative with BNSF. I saw the Intermodal, the transload facility, I think you guys put up a few days ago in the press release, would just love to get an update on what BNSF 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 come that can maybe drive a step function improvement in the terms of the volumes?

Yes, Amit, it's Nick, I'll take the first on AB5. And we've been watching that since basically 2018 and we feel like we're in a really good spot with that. We don't expect the new law to have an immediate or material effect on our California operations. We discontinued a few years ago, our use of independent contractors operating under our authority. And so, out there, we provide either J.B. Hunt employees or we use brokerage to other motor carriers. So, we feel very confident that it's not going to interrupt our business and probably play into our strengths particularly out in the Intermodal side.

Yes, Amit, I think I heard you say that you thought that we outsource more of our drayage activity than.... Yes, you did it right, I'm sorry I didn't hear that right, just going to clean that up, if I didn't hear that right appreciate. So, yes, we don't feel like AB5 is going to be an influencer of our operation in any way. So, as it relates to all things joint efforts with BNSF, I think that our mission today continues to be probably more focused on elements beginning next year. I mean, frankly, there's no new capacity announcements that have come from BNSF yet. As soon as something like that is available, 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. But I think that you should all anticipate and expect it right now. We're very focused on seeing velocity improvements and just service improvements in our system and that's dominating our conversations today.

Thank you. Good afternoon. Nick, I think this question is for you, but others can chime in as they see fit. I mean, you have a pretty unique look at two massive parts of the transportation chain with rail and truck. And on the one hand, you still have this elevated contract rate in this very high fuel. On the other hand, you've had spot turning over in the rail service issues. And I know we're hopeful for velocity improvements. I think we were very hopeful of that in April as well. As you look at your mode in different ways of servicing customers, is there a point where maybe you're concerned that the Intermodal kind of permanent modal shift has missed this opportunity, missed this window? And if so, how do you kind of position all the different segments of J.B. Hunt whether that's a capital dollar or labor, etc., to kind of shift gears pretty quickly if Intermodal is never going to really dream the dream?

Well, Jon, this is Shelley. I have a higher voice than Nick, but I would say our opportunity with our customers, we are mode indifferent. So, understanding their needs specifically is important in how we develop what our strategy is and how we deploy capital as a result, much like what John Kuhlow talked about in his opening remarks. For us, we think that Intermodal will continue to deliver great value for our customers, and we're bullish on our growth plan in our Intermodal segment, but we're bullish in our growth plan across all of our segments over the long-term. So, for us, we think that there are some short-term pains that have felt longer-term, but we do think that there is a window of opportunity here where the rails will get better, our customers will get better, inventory will get to the right locations, and the supply chain will start to find a better balance, if you will. And we think having all five of our segments that really take product from the very beginning of the supply chain all the way in to the final home of our consumer will yield ourselves well in an environment that is more normalized and for our customers will be able to say, "Yes, anytime they need it." Each one of those segments has different margin targets and returns inside their own area. But we do see great growth across all five channels and Intermodal being one of our strongest growth vehicles over the next several years.

Thanks, with the significant run up in fuel prices we've seen recently, I was curious if you could share how much of a sequential headwind that was to margins and then, Nick, the number of dedicated truck sales remains extremely strong despite what's going on with spot rates right now. So, as you reflect on the last couple of years and the strength that we've seen in dedicated sales, how much of that strength would you say is cyclical versus secular coming from private fleets that are outsourced?

I'll jump in on the dedicated side first, and thinking about that, I would just say that when I look back through our pipeline, it is still at an elevated level, a touch higher than it was this time last year. And so, I think our demand is there. And when I looked through the detail, and we reviewed it the other day, it's a lot of private fleet conversion. So, I think it's just a long-term. We got a lot of density going on right now. A lot of density kind of helps us. We have good solutions for customers and with Intermodal growing, we have a lot of synergies there. So, I think it's just good momentum. I don't think it's cyclical. And we try to say that we're different than the normal over the road rates, one-way rates. And I think this has proven it out. So, that demand is very strong, it will impact.

Hey, Justin, this is Brad, and I'll kind of add a little bit to the fuel question, expecting that and I did some work on there. We talked about it in DCS; it was at least 100 basis point headwinds to margin percent on a year-over-year basis. We also looked at it on a sequential basis. And you would have seen a decent amount of margin improvement sequentially. If you excluded the impact of fuel, you're aware we don't report or margin without a fuel surcharge, like some others in the industry. But it was a headwind to margin. But as a general statement, I wanted to say fuel is a pass-through for us, and it really shouldn't impact our EBIT dollars. And so, I just want to be consistent with how we've talked about it in the past and how we're talking about it here. Albeit, we did provide a little bit more color on DCS recently, and I thought I'd just reiterate that.

Yes, hi. Curious on the Final Mile business, sort of ex the revenue quality initiatives that you guys have been working on? Can you maybe talk to what demand or volume sort of look like in that business? And obviously, it's working a bit because the profit sort of bumped up from the first quarter, so maybe help think through the profitability in that segment looking ahead, thanks.

Yes, so the demand is still strong. It's spotty. And some, as we said, in our press release in the value furniture side of things, the demand is there, one of the CEOs of one of those companies told me that a year ago, fish were jumping in, customers were jumping into his boat, six months ago, he had to fish with nobody on it. And now he's having to work really hard to get sales. So, that was the analogy there. So, that's for the lower end furniture value side; the other side is really still busy. Inventories are getting corrected. So, we're seeing a lot of demand, we picked up some new business there. And our service is really what's separating us and our background checks. And that seems to be playing well. And you're seeing this quarter, a lot of would put a lot of pressure on rate at existing business. And we were successful in that, we lost some, but we feel good about the locations we lost. So, it's setting up good. And we got some more room to go.

Thank you, operator. Good afternoon, all. I want to focus a little bit on ICS. I think you mentioned, you made some tweaks into the quarter and then you gave sort of a number, I think down 3% for volume growth on the truckload side. Could you give us maybe an idea of just the volume improved any after you made those tweaks in the quarter?

Yes, Jason, I think what I wanted to help understand is that we saw a really sharp decline in spot activity throughout the month of April. Finishing up March, as we talked about, our volumes were pretty positive in Q1, but really kind of hit a wall those first 15 to 18 days of April. Then we were able to change some of our parameters and the algorithms that we use and some of our artificial intelligence around price points and win rates. And so, we did see it improve from that April timeframe. Historically, we've not provided that for this business segment. So, I'm not going to show that today. But know that April was where the majority of the decline occurred, and we were able to step up from that position for the balance of the quarter.

Thank you. That concludes today's Q&A session. I will now pass the conference back over to John Roberts, CEO, for any additional or closing remarks.

Okay, thank you. And we appreciate the time you've spent with us here today. I hope we've been able to give you some color on a quarter we're proud of. I think, importantly—maybe even more importantly is the looking towards the second half and into next year. The first thing I want to remind everybody on this call is that this table has a lot of experience. And we're all data-driven managers. We pay a lot of attention to what's going on around us. And all the things we've talked about here today, from bids to used truck values, any element that would inform us is being taken into consideration. We talk very regularly about what does that change in direction in whatever element we're focused on mean to our business. That experience we have helps us remember what we thought the last time we might have seen something like that. So, I really feel like it's important that we remember we are 25 and 30-year senior members here; we've been through a number of these economical, whatever we're looking at here, changes. We hear really clearly from our customers; they talk to us very candidly. We talk very candidly with our rail providers. I know there's a good amount of appropriately placed concern on rail service, but I am confident, as we all are, that this will resolve itself. I'm seeing evidence of that; we're in good conversation. I think the comprehensive nature of our businesses, as described here today, is a great balance. We give our customers just about everything they need, and they sort of balance each other. When one is moving in one direction, another one might be assisting or helping or leading to. I think that's been covered with DCS not being a trucking company, as Nick just said, it doesn't necessarily follow the same patterns. But I fear that can still be misunderstood, even today, that that business is viewed as some kind of trucking company. And we just really need to keep working on getting through that. But Final Mile showing us some recovery, I think the blend that's happening in highway is really productive and really puts us in a great place with our customers, as Shelley pointed out, to be mode-agnostic or indifferent, we have an answer. We blended assets into position where we can say yes to a lot of questions. And I think that in total, these businesses are healthy; they are well-placed; they are industry-leading, run by very capable managers, not just at this table but around our whole system; there's a lot of experience involved there. So, it's about execution the rest of this year. As someone said, we know a lot about what we need to know. We pay attention to our data. And I think that we are looking forward to the second half. And we will look forward to seeing you all again on our next call. Thanks for being here.

That concludes today's J.B. Hunt's second quarter 2022 earnings call. Thank you for your participation. You may now disconnect your lines.