Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to J.B. Hunt's Fourth Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. And I would now like to turn the conference over to Brad Delco, Senior Vice President of Finance. You may begin.

Good afternoon. Before I introduce the speakers, I would like 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 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'm joined by our President and CEO, Shelley Simpson; our CFO, John Kuhlow; Spencer Frazier, Executive Vice President of Sales and Marketing; our COO and President of Highway Services and Final Mile, Nick Hobbs; Brad Hicks, President of Dedicated Contract Services; and Darren Field, President of Intermodal. I'd now like to turn the call over to our CEO, Ms. Shelley Simpson, for some opening comments.

Thank you, Brad, and good afternoon. While 2024 was a continuation of the challenging freight environment, I am proud of the work of our team and how we position the company for our future. We focus on providing excellent service to our customers, improving our record-setting safety performance, and maintaining cost discipline, all while leveraging our strategic investments in our people, technology, and capacity. We have been in a period of heavy investment to better prepare ourselves to expand all aspects of our business in the future. Our commitment to our people and providing quality, differentiated service and capacity for our customers, particularly during another strong peak season, sets us up extremely well to scale these investments ahead. Looking forward, the overall strategy and focus of our organization is on operational excellence and scaling into our investments. We are positioning the business for long-term growth that generates appropriate returns on capital and delivers long-term value for our shareholders. The decisions we make to strategically hold on to our people and capacity through the freight recession and make some bold investments, like acquiring the Intermodal assets from Walmart, were made through that lens and has only enhanced our future earnings potential. That said, while our performance has held up relatively well in this difficult environment, we aren't satisfied with the current results of our business, particularly around margins and returns on capital. A focus and a top priority for our leaders in the company is to get us on a path to repair and improve our financial performance. My confidence in this team and our ability to leverage our brand and our full services coming off of another strong year of service execution and safety is extremely high. We've executed on two consecutive quarters of record Intermodal volumes with capacity to grow more while we focus on repricing our larger book of business. Our dedicated business has been remarkably resilient and has solid visibility to future growth. We still have work to do in our brokerage business and progress is being made, but I see many opportunities to scale that business ahead. And I'll let Nick provide some color on the plan there. Our JBT and Final Mile businesses have a good model, and we see plenty of opportunities for growth ahead. While market dynamics remain uncertain around the timing and magnitude of a potential inflection, our focus in 2025 is to grow and begin to repair our margins. We will be coming out of the freight recession from a position of strength. We believe the value we create for our customers with our capacity and our exceptional service levels are unique in the market and that our returns should mirror this value. We and our customers know this. We stand ready to continue to expand with our customers and to add new customers under the J.B. Hunt brand. The team will have more commentary on each area of business. But in closing, we have proven our service levels and our safety culture are unmatched and have available capacity ready for future growth. We will continue to focus on the long term, while taking steps in the near term to improve the return profiles of our business, all with the same mission to drive long-term value for our people, customers, and shareholders. With that, I'd like to turn the call over to our CFO, John Kuhlow.

Thank you, Shelley, and good afternoon. My comments will cover a high-level review of the quarterly year, some additional color on our cost control efforts, as well as provide an update on our capital plan for 2025. As a general overview, we saw signs of seasonality across the business and experienced a strong Intermodal peak season. That said, the deflationary rate environment coupled with an inflationary cost environment weighed on margins versus the prior year. Starting with fourth quarter results. On a consolidated GAAP basis compared to last year, revenue declined 5%, operating income increased 2%, and diluted earnings per share increased 4%. We did have insurance-related charges totaling $53.4 million in Q4 of 2023 and intangible asset impairment charges totaling $16 million in Q4 of 2024. The asset impairment charges this year are related to early termination of leased facilities and intangible assets recorded from the BNSF Logistics acquisition. After consideration of these charges, operating income and diluted earnings per share declined year-over-year, largely driven by the deflationary pricing environment. For the full year 2024, on a consolidated GAAP basis, revenue declined 6%, operating income declined 16% and diluted EPS decreased 20%. These results include the impact of the previously mentioned charges. Looking to 2025, we expect inflationary cost pressure to continue in the areas of insurance premiums and people costs. Despite two consecutive years of record safety performance, our insurance premiums have more than doubled over that period due to the higher cost to resolve claims. This is an industry challenge and these inflationary costs will need to be passed on to shippers and eventually consumers. Now speaking specifically to the first quarter of 2025, given normal seasonality on a sequential basis, we expect operating income to decline at a similar rate as what we saw in 2024 after consideration for the charges we disclosed or more specifically somewhere around 20% to 25%. On the subject of cost, we have made progress across the business to right-size our cost structure. In April 2024, we outlined $100 million of aggregate costs we were carrying across the company related to investments and resources in both our people and capacity. We also noted that we had visibility to these costs and where they lived within the organization. Since this time, our headcount has been reduced through attrition and performance management and now sits approximately 12% below our peak levels. On the capacity side, we commented that we had about 20% excess capacity in both JBI and JBT. Since we made those comments in April, we did invest further in our capacity in JBI with the purchase of Walmart's Intermodal assets. And while our business activity levels have increased, so too has our capacity. That said, we feel confident in our ability to generate a solid return on those investments over the useful life of those assets. As it stands today on a consolidated basis, the aggregate cost of that additional capacity is around $60 million. While progress has been made, we remain focused on controlling costs in the near-term without reducing the long-term earnings power of our business. I'll wrap up with an initial look at our capital plan. For 2025, we expect our capital expenditures to be between $700 million and $900 million which is up from the $674 million in 2024. Our first use of capital is always to invest in our business for growth. Through strategic decisions and opportunities in the market, we have pre-funded a large portion of our future growth in JBI and as has historically been the case, our capital needs in DCS are success-driven. Our other businesses require very little capital investment. We plan to continue to support our dividend in 2025, which has increased at this point for 20 consecutive years. Finally, we will continue to opportunistically repurchase stock as a means of returning value to shareholders. In 2024, we repurchased 514 million dollars of stock at an average price of 169 dollars per share. 2024 marks the second largest year for share repurchases in our company's history. With our modest leverage, limited near-term capital needs, and view on where we are in the cycle, we think repurchases are a prudent use of capital at this time. This concludes my remarks and I'll now turn it over to Spencer.

Hey, thank you, John, and good afternoon. I'll provide an update on the market, our sales objectives, and some feedback we are hearing from our customers. In the fourth quarter, we saw a strong peak season materialize, particularly across our Intermodal business, as well as in our Highway businesses. In Intermodal, customer demand came in strong, and we were able to execute this higher volume while maintaining high levels of service for our customers. In JBT and ICS, we experienced seasonal volume trends and some margin pressure in December, as the market tightened, which is normal around the holiday period. Throughout peak season, we were in constant communication with our customers around their changing capacity needs. Given our strong value proposition around capacity and service, we were considered the go-to for our customers. While we see capacity exit the industry every day, overall, there is still some excess capacity available in the market. That said, some customers are securing capacity a little earlier than normal, which has historically been a good indication that supply and demand dynamics are shifting. Regardless of market changes, our focus is on providing the best possible experience and service for our customers. Having a full suite of services to deliver optimal solutions for our customers is a strong and differentiated value proposition in the market. In 2025, we will continue to pursue operational excellence while providing exceptional customer service. We believe that providing high-quality service and creating unique value for our customers is the right thing to do every time and foundational to growing our business. We create value for our customers, and that will continue to be our focus. But we also plan to have conversations with each customer to make sure we are getting paid appropriately for our investments and efforts. Coming off another peak season with solid execution and service, we are in the best position to have conversations with customers about the value we create for their business. I'll close with some feedback we're hearing from customers. First, we received very positive feedback on how we executed peak season, and we are already working on our plans for next fall. Secondly, each customer is unique in terms of size, industry, and supply chain needs, which demand different strategies to execute their supply chains and mitigate potential disruptions. For example, we believe most of our customers are taking more of a wait-and-see approach to see how potential tariffs might influence future purchasing and business decisions. Regardless of their strategies, we believe we are in a strong position with our suite of services and the investments we've already made to support their work, take share in the market, and make appropriate long-term returns. We remain focused on the long term while taking steps in the near term to improve the return profiles of our business, all with the same vision to create the most efficient transportation network in North America. I'd now like to turn the call over to Nick.

Thanks, Spencer, and good afternoon. I'll provide an update on our areas of focus across our operations. Before I begin my comments, I'd like to say I'm excited to be taking on the role as President of Highway Services and Final Mile. I will provide a quick update on those specific business. I'll start with some comments on safety and customer value delivery or CVD. Our company is rooted in a foundation of safety and is at the core of what we do every day. I'm proud to say that 2024 was another record performance for us measured as DOT preventable accidents per million miles. This is the second consecutive year of record performance and a testament to our focus on continuously improving in this area. Our safety performance is just one example of our focus on customer value delivery or CVD that we continue to roll out across the organization. As Shelley mentioned in her remarks, we have been very focused on operational excellence across the organization improving the value we create for our customers through our CVD process. We believe this puts us in the best position to retain and grow our business while ensuring our customers see and appreciate the value we are creating for them. Shifting more specifically to the businesses, I'll start with JBT. Our focus remains on attracting the right freight for our drop trailer network while ensuring capacity is correctly positioned across the network to serve this freight efficiently. Our service level remains strong, and we continue to look to methodically grow this business while maintaining network balance, which will support future growth while driving efficiency and greater profitability. On Final Mile, demand for big and bulky products remains muted with soft demand in furniture and modestly soft trends in exercise equipment and appliances. We continue to focus on providing high levels of service, differentiating ourselves in the market, and ensuring we are appropriately paid for the great work we do. I'll close with some comments on our strategy in ICS. The past couple of years have been challenging in ICS, but I believe we are in a more solid base to build off moving forward. In 2024, we incurred quite a bit of expense related to the integration of the BNSF Logistics acquisition this year that will not repeat in 2025 to the tune of 35 million dollars. This includes the impairment charge John referenced earlier. Going forward with our base business on a more solid footing and with the integration behind us, our focus turns to growth and, more specifically, growth with the right customers. We need to further diversify our customer base in terms of size as well as industry, really targeting businesses that we can differentiate ourselves with our service, people, and technology. We are implementing some of the playbook we utilized and dedicated to help us generate better leads and customers that we believe will see the value in the service we offer. We have better alignment with our sales resources and the strategy we are confident that sets us up to scale the investments we've made in the business overall. We are already seeing some momentum as volumes and customer accounts have been growing in the past two quarters. Finally, we are continuing our focus on controlling cost. The team has made significant progress in rightsizing our cost structure, but there are still opportunities for additional improvement. As we come out of this recessionary freight environment, we will focus on leveraging our investments to drive greater productivity. I'm excited about the work we're doing within ICS and believe we have a long runway of growth and the ability to scale quickly in this business. With that, I'd like to now turn the call over to Brad.

Thanks, Nick, and good afternoon, everybody. Before I get into my prepared comments on our dedicated business, I'd just like to say how excited I am to be leading us in this area. I recently celebrated my 29th anniversary at the company, and having spent 25 of those years in our dedicated business, in some ways, it feels like a homecoming. While we have had a lot of success in the business, I feel a strong sense of responsibility to continue to expand on our performance and accelerate our growth. As we have talked about in the past and Nick had hit on previously, we focused our dedicated business on providing professional outsourced private fleet solutions for our customers. We believe our performance during the downturn has been a standout in the market and highlights the strength and resiliency of our model. We have a diverse set of customers by both industry and geography with the average size of our deals remaining relatively small. With this diversification and also having a decentralized model, we have great visibility into our performance, which drives strong accountability both for the benefit of our customers and financial management. We continue to see considerable opportunity for future growth with a qualified addressable market of approximately 90 billion dollars. We are pleased with our pipeline and the opportunities we see across a diverse set of customers and industry. We've maintained our disciplined underwriting standards on new business, and I'm pleased to report on another strong quarter of new truck sales. We sold just shy of 440 trucks of new business in the quarter. 2024 marks one of our best truck sales years in our history, a strong statistic considering the environment. This only reinforces our belief in our value proposition to our customers, further supported by our customer value delivery process that Nick just touched on. I'd like to take a second to review our performance in 2024 and maybe set the stage for 2025 and our view of our future opportunity. A little over a year ago, we spoke about having visibility to some fleet losses and we certainly combated that challenge throughout the year. We also saw some pressure with customer bankruptcies and to a lesser extent, competition on a small portion of our portfolio. We sit here today with visibility to some of the fleet loss pressure continuing through the early part of second quarter. That said, with our sales momentum and strong pipeline, we feel fairly good about our ability to return to net fleet growth in 2025. As we discussed before, we do typically incur some start-up expense with newly launched businesses, but given the average life of our contracts remain around five years, we recover that investment over the life of the deal. This is all embedded in our underwriting process. Excluding some of the noise around fleet losses in 2024, our base business, though excluding the start-up drag from the new adds, did operate within our stated margin target range of 12% to 14%. As we progress through 2025, we look forward to the fleet losses abating and returning to our long-term growth trajectory, which we target to be about 800 to 1000 trucks per year on a net basis. With this as the backdrop for 2025, we expect top-line and operating income growth this year will likely be modest. In closing and looking forward, the playbook and process remain the same: execute with operational excellence, drive additional value for our customers through our customer value delivery process, and continue to invest in our people to help support and accelerate our growth. With that, I'd like to turn it over to Darren.

Thank you, Brad, and thank you to everyone for joining us this afternoon on the call. I'll review the performance of the Intermodal business during the quarter and give an update on the market and service performance. I'll start with Intermodal's performance. Overall, we saw the momentum from the third quarter continue into the fourth with total volume up 5% year-over-year. Sequentially, we outperformed normal seasonality as the fourth quarter set a new quarterly record for Intermodal volume. In fact, in the quarter, we had the largest Intermodal volume month ever surpassing 200,000 loads in October. Our largest volume week and our largest volume outbound Southern California. Nine-month Intermodal volumes were up 4% in October, 7% in November, and 3% in December. As it pertains to mix, our TransCon volumes increased 4% during the quarter and Eastern volume grew 6%. I remain encouraged by volume growth in the East despite depressed truck rates, which is a testament to the strong service levels of the rails and how that translates into an attractive and valuable alternative to truck for our customers. Going forward, we continue to see a lot of opportunities for future volume growth given the attractive economics and environmental benefits of Intermodal versus a truck alternative. During the quarter, we experienced a strong peak season where we were able to meet the elevated demand of our customers while maintaining high service levels, highlighting the strength and flexibility of our network. For a few weeks early in the quarter, rail service in the West modestly deteriorated as the railroad experienced record Intermodal demand. In order to fulfill our service promise to customers during this time, we had to do some unnatural activities to help keep the rail network fluid. While rail service was restored to normal after a few weeks, the additional costs we incurred more than offset the benefit of incremental volume in our network and put pressure on our margins. Going forward, as a reminder of our pricing cadence, we will be living with the vast majority of our current pricing through the first half of 2025. We are in the early innings of our bid season and it is too early to comment on the outlook of bid results. That said, due to inflationary cost pressure across our business and the deflationary pricing experienced over the last two years, we will need to correct our pricing while remaining focused on our cost to return our business to reinvestable levels. We're entering this bid season from a position of strength having just successfully executed our second peak season with high service levels and our available capacity was able to handle strong customer surge demand. The improvement in customer bid compliance also gives us greater visibility for opportunities to fill in lane imbalances across our network to drive greater efficiency. In closing, we sit here today at or near the end of the worst freight recession we have ever experienced, having just reported two consecutive quarters of record Intermodal volume. As we look forward, we see more opportunities for volume growth coupled with opportunities to improve our margin performance. While our margin performance has been under pressure and is not at acceptable reinvestable levels for us, we continue to lead the industry in both margins and returns. Our focus in 2025 is on growing into our available capacity and beginning to repair our margins by ensuring that the value we create for our customers is realized and captured. We strongly believe in the strength and value of our Intermodal franchise. We have the people, technology, and capacity in the network for growth and remain excited to work with our customers to meet their growing demand with an efficient, cost-competitive, and more environmentally friendly solution. That concludes my prepared remarks. So I'll turn it over to the operator to give instructions for the Q&A portion of the call.

Thank you. And we will now begin the question-and-answer session. And your first question comes from the line of Chris Wetherbee with Wells Fargo. Your line is open.

Yes, hey, thanks. Good afternoon, guys. I guess maybe if we could start on the first quarter commentary that you gave, which I thought was helpful. I guess maybe first a point of clarification. I just want to make sure that you're talking about the sequential decline in operating profit for the entire business, not just one of the segments? And then assuming that's the case, just maybe if you can give us a little bit more color about some of the moving parts that go into that. Is it lingering costs from peak season, some of the headcount or people sort of cost pressures that you're noting? Just want to get a little bit of a breakdown of what's driving that sequential decline of that magnitude.

Hey, Chris, it's Brad Delco. How are you? So just to clarify, so yes, we rarely give guidance. And including that in our script, really we thought it would be helpful to analysts and investors. We talked about seeing normal seasonality from Q4 to Q1, given consideration to the impairment charge. So I would say take our GAAP number, you can add the impairment charge back and then the 20% to 25% sequential decline in operating income is what we intended to say. And that would be in line with really what we've seen over the last, call it, 10 years, excluding maybe the two unique years during the pandemic. So I just want to reiterate that is in line with normal seasonality. And I sense from comments and notes there's concern about pull forward. And I just think there is a little bit of a disconnect. If investors and analysts are very concerned about this pull forward and this record volume performance we're seeing, then they are not really reflecting that in their expectations going forward. And so we sit here today. I think Spencer did a great job of giving a review of the market. Our expectations are normal seasonality from Q4 to Q1, and it’s just not reflected right now in current expectations, and we just wanted to clean that out for everyone. I don’t think we will continue to give guidance, and we probably will not go into any further detail on this call on guidance. And so I just wanted to go ahead and clean that up here at the start.

And your next question comes from the line of Jason Seidl with TD Cowen. Your line is open.

Thanks operator. Shelley and team, afternoon here. I wanted to touch on the CapEx commentary. If I heard that right, that was 700 million dollars to 900 million dollars, that implies either 4% growth or over 30% growth. I guess, I was wondering maybe you can talk to me about the underlying assumptions for both the top and bottom part of the range.

Yes. Regarding the CapEx numbers, we estimate that there are between 600 million and 700 million dollars needed for replacements each year. A significant portion of our CapEx plan for 2025 is focused on power replacement specifically. We have made property investments over the years and are planning for a bit more in 2025. The range we are providing is influenced by the success of dedicated sales as we approach 2025. While we expect growth in our numbers, we usually give a broader range at the start of the year until we gain more insight into those successes in Dedicated.

And your next question comes from the line of Jon Chappell with Evercore ISI. Your line is open.

Thank you. Good afternoon. Shelley, you mentioned a couple of times in your prepared remarks focusing on improving returns on capital and improving margins. Obviously, the cycle would play a big role in that, but I assume you're not counting on the cycle recovery anytime soon. Given some of the inflationary pressures that John talked about and even Darren talked about, what steps can you take that are in your own control that you can start improving both of those metrics without getting more help from the broader market.

Yes, good question. Thank you for that, Jon. So I would say there's a few things inside our businesses, and I'll speak specifically for Intermodal. If you think about the challenges that we had through 2024, a big part of that was around balance. Our ability to move the network actually loaded versus empty, that is a core strategy for us in this bid season to really focus on making sure that we're loading our equipment and minimizing the amount of empties that we're moving. The networks out of balance for a couple of reasons. One, our customers have shifted from the West Coast to the East Coast, and that's caused more to happen out of the West Coast, and then also some of the things that are happening in Mexico. So that would be one thing. We'll continue to focus on our cost control efforts that we've been working on really since the last one to two years, and so we see that. We'll also be scaling into our cost with revenue. So we do have good growth as we look at this year across our segments, and we'll start to scale into the revenue. But I will say our customers understand, I think Spencer covered this well, our customers understand where we are across our businesses and also the commitment that we've made to them. We are in the best position that I have seen our company across all five services with the level of value and service that we have given to our customers. We are going to continue to maintain that. We think that those conversations that we'll have with customers will be able to discuss what makes the most sense for us and what makes the most sense for them on a customer-by-customer basis. So I think it's really twofold for us: keep controlling costs and work on minimizing some of the incremental costs that we've had in the last half of the year, focused on our growth and then also talking with customers around the value that we create.

And your next question comes from the line of Brian Ossenbeck with JPMorgan. Your line is open.

Hi, thank you. Good evening. I appreciate you taking my question. I would like to ask about Dedicated since you provided some guidance on that. However, you've also mentioned some challenges and churn. It seems like it may take some time to establish these contracts, but I recall you mentioning modest year-over-year growth in both operating income and revenue. I understand you don't want to provide more specific guidance, but I feel that expectations might be a bit too optimistic based on how this business usually operates, even as you return to growth. Any additional information on this would be appreciated. Thank you.

Yes, thanks, Brian. Just trying to convey that we have known losses that were not completely out of the woods yet, that we do feel largely will be behind us in the second quarter. I'm just trying to help everyone understand when they can expect our net tractor growth to get back on plan and back on our historical model. We feel very good about that. We're coming off of a great performance year, certainly didn't meet all our expectations, but we are remarkably proud of where we did finish the year, both from a performance standpoint, whether it is talking about safety, as was mentioned earlier, our driver management and retention. We see our retention rates on overall customers rebounding from earlier in '24 versus where we sit today. We feel like we have good line of sight to get back to our historical expectations of 98%, 98.5% retention in the not-too-distant future. So I can't really offer you any more specifics than that, but do feel great about our pipeline and believe that we'll continue to deliver new sales that will offset known reductions or losses, and then we'll get back on plan.

Yes. And Brian, I'll add a little bit in terms of what was included in some of the prepared remarks. Brad did mention we do expect to see net fleet growth this year. But just thinking about the cadence of onboarding new accounts, we talked about the investment. We typically start these things up, and it does put margin pressure on the business for start-ups. Usually, it's about three months of losses, then the next three months of that startup will recoup the losses that were incurred in the first three months of that start-up. And so, like to date of new deals is effectively breakeven through the first six months. So we would really need to see significant fleet growth early in the year in order to contribute operating income or EBIT dollars, if you will, to that business in the second half of the year. And so if we think about a normal cadence of how these fleets will be sold and onboarded across the year, you're really talking about growing the fleet this year and seeing the benefit of that at a future period, which should probably be next year.

And your next question comes from the line of Jordan Alliger with Goldman Sachs. Your line is open.

Yeah. Hi. I'm just sort of curious a little bit on the first quarter, if I could. Just to see if I understand, I'm assuming the bulk of the dollar drop-off sequentially Q4 to Q1, is going to come in Intermodal. And so I'm just sort of curious how much of that is driven by, let's say, the revenue fall-off versus like a margin degradation to something well less than 7%. Thanks.

Hi Jordan, this is Brad again. We don't want to delve into the specifics of guidance by segment or overall guidance. We see a difference between market expectations and our own. It's important to remember that we are now on our third earnings call discussing our pricing visibility for the first half of 2025, and historically, we've referred to this as the cake being somewhat baked. We mentioned this at the end of our second quarter call and again in our third quarter call. Consequently, there are not significant opportunities to adjust Intermodal pricing, and our current efforts will be evident in how we approach Q3 and the transition from '25 to '26, where we will see more about what bids look like. In Dedicated, we are experiencing typical seasonality, and in our SEC filings, we referenced Q1 weather and other factors. The environment remains challenging for businesses operating trucking assets. We are focused on the usual seasonality in Q4 and Q1, and that’s where I’d like to wrap up regarding any other guidance questions.

And your next question comes from the line of Scott Group with Wolfe Research. Your line is open.

Hi, thanks. Good afternoon, everyone. I wanted to follow up on what's happening in bid season and how it will impact Q3 and the transition into 2026. Darren, I understand you mentioned that it's a bit early to make definitive statements about bid season, but can we at least express some confidence in achieving price increases? Could you provide more insight into the current status of bid season? Additionally, is there enough evidence to suggest that if we do see price increases in the latter half of this year, it will lead to a margin improvement in Intermodal?

Okay. Thanks for the question, Scott. Certainly, we're on two consecutive years of this crazy long freight recession that's frustrating to all of us. I think that I want to be really clear with the whole audience. I'm so proud of the team for the way we have executed and really earned back confidence from our customers. We are the clear leader in service and capacity. Our customers buy on service, cost, and capacity. So certainly, you have to be the leader in at least two of those three, if you can't be in all three. There will be markets where capacity demand certainly justifies price increases. You also heard Shelley comment on our need to fill up and rebalance the network and do some repair work on volumes to support headhaul markets. In those particular lanes, we're looking for cost takeout there. The pricing conversation may behave a little differently. The reason I'm kind of trying to talk about how we think about this pricing cycle, it is a conversation one customer at a time. I'm very confident that the service product we've offered over the last two years has really earned us the right to have really strong confidence in what we're providing value for our customers, and we are going to share that with the customers and work on our price. When we said it's too early, we really haven't completed very much of the bid cycle. There are a lot of ongoing conversations. Everybody is under cost inflation challenges. Our customers are not into that, so it's an ongoing conversation. But certainly, we feel confident that as truck rates climb, as new capacity demand hits us, we can certainly begin to repair our margins, and improvements in price will have to be part of that.

And your next question comes from the line of Ken Hoexter with Bank of America. Your line is open.

Hi, good afternoon. It's interesting to hear about the end of the worst freight recession. However, the dip in the first quarter is a bit concerning for the progress. Last quarter, Darren mentioned that you didn't expect to return to 1.8 to 2 turns per month, but it seems like box utilization has improved, with turns rising to over 1.5 and utilization possibly reaching the 90s. How should we consider the scalability of this? Could you discuss what assets are still parked, what remains to be utilized, and how overall utilization is progressing?

I want to address the first comment regarding the transition from the fourth quarter to Q1, which was somewhat unexpected. Considering the seasonality of our business, we have already established all our pricing during our bid season. Everything we are currently working on is set for implementation in the third quarter of 2025 and later. Therefore, we are entering Q1 with Intermodal pricing that has been decided. Demand for our services has reached record levels throughout the latter half of 2024. Our operational service excellence for our customers has never been better from an Intermodal viewpoint, and we haven't seen this level of performance in many years. This positions us well for future success. Q1 reflects the results of the 2023-2024 bid season. As we move forward, we will concentrate on what this means for the latter half of '25 and into '26. Now, Darren, I’ll pass it to you to discuss the question about turns.

Sure. So clearly, record volumes without onboarding more equipment have improved utilization for us. That is clearly a big part of our story moving forward is we have to scale into those capacity investments we've made. We are very aware that we have excess capacity, and we're proud of the fact that we were able to grow. I think what I said on the last call that the years of two loads per container per month are probably behind us. That has a lot more to do with the railroad schedules and the way that the rail networks flow. Everything today flows a little bit slower than it did when we last turned at 2 times per month. I would even say our customers have a role in their ability to unload the equipment and create maximum utilization, and we have seen that be a challenge for some of our customers. As we move forward, do I think that we can turn the entire fleet at 1.8 for a whole calendar year? That's probably also not in the cards. But certainly, in the heaviest months, and I would anticipate October is always going to be your biggest month of the year. And so if we are turning the fleet at 1.8 times in October, I think that certainly would be a challenge for us, but it is not an out-of-sight goal that we can certainly look to achieve. We would like to see our turns continue to improve as we grow volumes. I'm going to duck your question and not answer specifically, but we have more room for improvement than what you even saw in 4Q.

And your next question comes from the line of Brandon Oglenski with Barclays. Your line is open.

Hi, good afternoon. Thank you for taking the question. Darren, maybe following up with that then, I think in the prepared remarks, it was discussed like spare capacity in Intermodal was close to 20%, then you guys did the Walmart deal. Maybe that's what Ken was also getting at in his question. But where do you see spare capacity maybe in your network and maybe more broadly across the system? And is that a hurdle that we still have to get over as we look in 2025?

We still have significant underutilized capacity, and the cost of storing that equipment is a considerable challenge for us. Our focus will be on scaling and increasing our volumes while enhancing pricing. Regarding the Walmart equipment, we reported over 122,000 containers at the end of the fourth quarter. When we brought on the Walmart equipment, it needed modifications, and that work is not yet finished. We completed the acquisition in early or mid-last year, and right now, that equipment is stored away because we are still growing into the 122,000 containers we currently own. The Walmart equipment will become more active as demand increases and we finalize the necessary conversions to integrate it into our system.

And your next question comes from the line of Daniel Imbro with Stephens. Your line is open.

Yeah, thanks. Good evening, everybody. Thanks for taking our question. Maybe I'll ask on the ICS side. We saw stronger gross margins, particularly given the move in truck rates during the quarter. I guess can you just talk about how the pricing strategy has changed here? I think in the prepared remarks, you mentioned you expect a return to growth this year. So maybe we're past kind of the peak pressure there, but if normalized margins used to be mid-teens, could they be higher for ICS here? Just how should we think about that profitability? Thanks.

I'll try not to give any guidance here. I'll just talk about our philosophy. We think we're in a really good spot right now. We've got through the integration. We think we've got through our customer losses that really come on board for the most part back during the peak of COVID and some of that. We think we're in the right spot. Our sweet spot is going to be focusing on the customers that have hard-to-do business, multi-stop, other specialty things. And so we are really focused on mid, small size, expanding in different industries. We feel good. We had a really good gross margins because of the project work we were doing, it's solid anyway that we had some extra project work in there in Q4. But we are proud of our gross margin, and we want to continue to have some of the best gross margins in the industry and grow our business. Our strategy is to find the right customer that appreciates our service we do. We do great service, has a great reputation, and we're hearing that from our customers, and expanding with some of our existing customers as we speak. So we are excited. We think we’ve got a lot of the noise behind us, really ready to launch at scale, and that’s what we need. We need to scale on our investments in our sales team and in our technology that is really good. It sets us up to scale really well. So we’re excited about that and got a lot of good conversations going on with our customers.

And your next question comes from the line of Tom Wadewitz with UBS. Your line is open.

Yeah, good afternoon. So I wanted to ask you on Intermodal volumes. You've had a lot of strength in Intermodal volumes in 2024. It does set you up for a more difficult comparison. Yes, it sounds like you don't think there is a lot of pull forward, but I just want to get a sense of do you think against that tougher comp, we should be considering flattish Intermodal volume? Or do you think that it's appropriate to say, hey, we're still going to get some volume growth. I guess if you think there is some growth, are there any verticals that you say, hey, this area can really drive it if it's housing or auto or consumer. So I appreciate your thoughts on that, just broadly how to think about Intermodal volume. Thank you.

Sure. Well, for years, we've highlighted that we believe there's at least 9 million to 11 million loads of Highway business where Intermodal can and should be the correct answer. We continue to see opportunities for volume growth in the Eastern network, particularly as the truck market swings. We're really uniquely positioned with a good bit of available capacity. Both of our Eastern rail providers are performing excellently, and we are in a great spot to convert that business to Intermodal, as the truckload market begins to change and customers are faced with higher costs and higher rates out of the truckload market, Intermodal can be a great answer to that. And so we believe, for the long-term, for many years, we have growth opportunities in the East. Out West, certainly, it has been traditionally a little bit more dependent upon the imports. But there are so many intact international moves today as we think about the most efficient way for customers to plan their supply chains, converting out of the 40 and transloading on the West Coast into our equipment can provide them really strong efficiency efficient answers. And then certainly, we've talked a little bit about growth in Mexico. And as that market continues to expand, we are excited about our opportunity there. So our expectations and the way that we approach every year will always be to find methods of growth. The last two quarters being record volume quarters continue to give us strong confidence that the value we are providing to customers with service can continue and expand from here.

And your next question comes from the line of Bruce Chan with Stifel. Your line is open.

Thanks operator. And good evening everyone. Darren, maybe one for you. Certainly good to see the demand levels in JBI. But just maybe to dig into the service issues at your rail partner a little bit. I think there's maybe a temptation to see shades of 2021 or 2022 with the fluidity getting affected by higher volumes and then causing some higher costs as you support your service standards. Is that not a fair characterization? And if not, what kind of gives you confidence that maybe this is just more of an episodic or one-time disruption?

Sure. Okay. Thanks for that question. And I'm glad I get an opportunity to comment on this. There are infrastructure challenges at railroads, and that's not what this is. And that's the good news because infrastructure challenges are years to solve. That's big in CapEx investment and can be certainly a headwind. But that is not the case in this circumstance. Certainly, record Intermodal volumes, the terminals and the capacity that BNSF has expanded and added really showed up for us throughout the second half of the year. But as those record volumes in both international and our domestic business hit them in October, I think it became a little bit more of a people challenge. They went through a new union agreement in 2023 and that meant some changes in the way their employees work hours showed up. I think the planning of their resources and the way the employees took time off or had sick time created some challenges. There were also some imbalances in their own railcar fleet. So these are planning issues. There are people issues that can be solved in a matter of months, and we are very confident in our ability to exercise growth on the West Coast, next peak season, and execute even more volume than we did this year. We have great dialogue with BNSF about this. They are equally as unhappy about that element that hit us this year as we are, and we’re working together to come up with better ways to think about that. But I don’t want the group to believe that, that was a 2021 like event, it’s not it at all. It was really just a change in the way their employees behaved about time off.

And your next question comes from the line of Bascome Majors with Susquehanna. Your line is open.

Can you talk a little bit about the typical notice your dedicated customers need to give before exiting the contract? And just how much visibility and conviction you have into the churn really giving way after the second quarter and the ability to really net grow the fleet and kind of seeing that gross growth you've been delivering in the second half and for the full year. Thank you.

Yes, Bascom. Each agreement is unique and specific to each customer. So there's not really a formal standard in terms of how we work closely with each customer. There are really three types of losses that we incurred. I'll just rehighlight that. First and foremost, our customers, some of them have been pressured in their own industries and their businesses. And so we see fleet sizes that reduce, as a result of that. And that's one type of conversation. And quite frankly, our CVD process helps us be proactive with our customers when we see their demand shift upward or downward in the environment we've been living in the last two years, as Darren mentioned, there's been more of those downward revisions, but that is part of how we offer flexibility for our customers. There are also points in times when we recover, I don't know, recessionary times or where we go plus net positive on all the ads that we have. So if we do the right thing by our customer in the most difficult of times, we believe that they're going to continue to partner with us, and we will be rewarded for that when there are more appropriate times for growth in their industries. So that's one thing. Then we also had, and we mentioned in the prepared remarks and even our earnings release, we did have some bankruptcies this year. These are some of our customers that their businesses struggle vitally, and so we lose business in that fashion. Then the third is typically through a competitive bid. In many cases, it's a renewal of a term where we're nearing the end of that contractual commitment. Given the current economic pressures that our customers are facing, they look to bid that out. We've had all three of those working against us over the past 12 months to 18 months. We do see it, and it did slow. The combination of all three of those slowed throughout 2024. I think that’s really what gives us the optimism as long as we can deliver on our sales plan, which we are very optimistic about that based on our pipeline and our more recent performance. We feel like we will get back to that net positive later this year.

And your final question comes from Ariel Rosa with Citigroup. Your line is open.

Great. Good evening. Thanks for squeezing me here at the end. I wanted to ask about the first quarter outlook. So Brad, hopefully you won't kill me. But I'm a little confused because you mentioned that there were some, I think, you called them unnatural costs in the fourth quarter, but you're saying you expect kind of normal seasonality in the first quarter. I would have thought given the unnatural cost that maybe we would expect slightly better than normal seasonality in the first quarter. So I'm just trying to understand, is this kind of a reflection of either particularly weak trends in terms of seasonality in terms of the kind of giveback in the first quarter? And then maybe you could talk about what the prospect is for improvement as we kind of move through the year into the second quarter and beyond. Thanks.

Well, Ariel I mean, we very rarely give guidance. There are reasons why we don't give guidance. We feel like we have a great business, a great business made up of five different segments, and we really like a lot of the time in these sort of environments or opportunities to speak to investors to talk about our great businesses and not talk about what's embedded or implied in our guidance, which is a big reason why we're just not fans of issuing it. We saw there being a disconnect. We think that there are concerns, like I said about pull forward. I'm just really calling out if there's that much concern about pull forward and us benefiting in Q4 or Q3, as Q3 was written about related to pull forward, then why wouldn't that be reflected in forward expectations? Where are we pulling this demand from? So we sit here today and we just saw a disconnect in Q1 relative to normal seasonality. We executed a very strong fourth quarter peak season in Intermodal. We have double-digit EBIT margins and returns on capital in our dedicated business that has proven to be the most resilient trucking business through the last 2.5 years. We have a lot of momentum. We sit here after two consecutive quarters of record Intermodal volume, as Darren said, at or near the end of this freight recession with opportunities ahead to grow both volume and make sure we are getting the appropriate value out of the great service we're providing customers. There is a lot of optimism and excitement at least in this room about the future prospects because we just tried to level set expectations for Q1 on what normal seasonality should be. That’s what we want to set. Our goal will be to try to execute and outperform normal seasonality. I’m not going to provide more details on color as to the puts and takes of 4Q versus 1Q.

Thank you. Thank you for joining the call. We try to be more transparent on this call and help you understand where we believe we are in the cycle. But also, as I think about the past few years, we've been in a time of investing really looking at our position of strength as a company, how can we invest in our people, our technology, and capacity to set us up for great future success. We focus on controlling our costs, and we strategically focus specifically this year on being exceptional in our safety and delivering the highest levels of value and service to our customers. And we've done that. It was our proven year that's what Darren called it, through most of the year, and we proved it, we’ve done that, our customers and their satisfaction with us at the highest level that we recorded. So standing on the bedrock of our operational excellence, this is our year to grow, and it’s our year to build on the successes that we’ve had. We’re going to be focused on growth, improving our financial performance, and we’re going to take great care of our people, and that allows us to deliver on our brand promise and make sure that we have success for our future. Thank you for joining the call. Look forward to speaking with you next time.

And ladies and gentlemen, that concludes today's call, and we thank you for your participation. You may now disconnect.