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Edited Transcript of JBHT earnings conference call or presentation 15-Oct-19 9:00pm GMT

Q3 2019 J B Hunt Transport Services Inc Earnings Call

LOWELL Oct 19, 2019 (Thomson StreetEvents) -- Edited Transcript of J B Hunt Transport Services Inc earnings conference call or presentation Tuesday, October 15, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brad Delco

J.B. Hunt Transport Services, Inc. - VP of Finance & IR

* David G. Mee

J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO

* John N. Roberts

J.B. Hunt Transport Services, Inc. - President, CEO & Director

* Shelley Simpson

J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services

* Terrence D. Matthews

J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal

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Conference Call Participants

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* Allison M. Landry

Crédit Suisse AG, Research Division - Director

* Bascome Majors

Susquehanna Financial Group, LLLP, Research Division - Research Analyst

* Benjamin John Hartford

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Brian Patrick Ossenbeck

JP Morgan Chase & Co, Research Division - Senior Equity Analyst

* Christian F. Wetherbee

Citigroup Inc, Research Division - VP

* David Griffith Ross

Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Global Transportation and Logistics

* David Scott Vernon

Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst

* Jason H. Seidl

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Jordan Robert Alliger

Goldman Sachs Group Inc., Research Division - Research Analyst

* Justin Trennon Long

Stephens Inc., Research Division - MD

* Kenneth Scott Hoexter

BofA Merrill Lynch, Research Division - MD and Co-Head of the Industrials

* Scott H. Group

Wolfe Research, LLC - MD & Senior Transportation Analyst

* Thomas Richard Wadewitz

UBS Investment Bank, Research Division - MD and Senior Analyst

* Todd Clark Fowler

KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to J.B. Hunt's Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Today's webcast is being recorded and will be available for replay after the call on the company's website at jbhunt.com.

I would now like to turn the conference over to Brad Delco, Vice President of Investor Relations. Mr. Delco, please go ahead with your presentation.

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Brad Delco, J.B. Hunt Transport Services, Inc. - VP of Finance & IR [2]

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Good afternoon, and thanks for joining us. Hopefully, everyone has had an opportunity to review our earnings release that was issued earlier today. If not, you should be able to access the release on Investors section of our website at jbhunt.com.

Before I introduce the speakers on today's call, 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 risk 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.

With that out of the way, I would like to introduce the speakers on today's call. This afternoon, I'm joined by our CEO, John Roberts; our CFO, Dave Mee; Terry Matthews, President of Intermodal; Nick Hobbs, President of Dedicated; Shelley Simpson, Chief Commercial Officer and President of Highway Services; John Kuhlow, our Chief Accounting Officer; Darren Field, EVP of Intermodal; Brad Hicks, EVP of Dedicated; and Eric McGee, EVP of Highway Services.

At this time, I'd like to turn the call over to our CEO, Mr. John Roberts, for some opening comments. John?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [3]

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Thanks, Brad. Today, we're introducing a new element to our calls, which will focus on our strategic longer-term point of view to help better shape the information you are getting from us each quarter. We hope this will enhance and align your understanding more closely to ours and the extended perspectives we use to make decisions.

Let's reflect on some of the key steps in our most recent strategic efforts that will help outline the building blocks that are in place today. There are key events that have occurred in each of the last 5 years that are very consistent with the cultural approach we have always taken as an evolving growth-oriented transportation service provider. From 2015 through 2017, we implemented new processes to help identify and remove waste from all aspects of the company using employee input, known as ELEVATION. We also completely restructured our information technology teams from the top down and publicly committed to important incremental growth channels in the commercialization of our freight management tools, known as J.B. Hunt 360° and also to growing our Final Mile Services business.

In 2018, we launched 360° marketplace and continued growing and digitizing our brokerage business, running nearly $600 million on the platform that year. We also closed on the first acquisition the company has made in 26 years with special logistics to expand our presence in fulfillment and forward deployment supporting Final Mile. This acquisition, now 2 years old, is performing above our expectations compared to the data we used in the purchase decision.

During 2019, we have focused on and invested in growing the programming and infrastructure needed to support our new technology initiatives. The carriers have expanded to more than 600,000 trucks with a sign on to the J.B. Hunt 360° platform and transacted -- transactions executed through the marketplace for J.B. Hunt 360° are currently on a $1 billion run rate. We have also closed on a second acquisition in Final Mile, expanding our furniture delivery and agent presence with Cory. Overall, through acquisition and organic growth, we have expanded the Final Mile network by over 40% so far year-to-date, and we will be breaking out this channel in 2020.

With regard to our legacy businesses so far, in 2019, Intermodal has continued to move towards accommodated service levels with help from our rail providers and the substantive completion of lane and service changes in what is most commonly known as PSR. Our fleets continue to have elasticity in potential box turns, and we expect to return to historically sound utilization metrics per month before prudently initiating new purchase orders to further expand the container fleets.

The DCS accelerated its organic growth through the past 2 years, reaching unprecedented contracted expansion in unit counts and revenues. As expected, the implementation expenses related to strong growth have mitigated over time, and we expect the core business in private fleet services to return to targeted margin performance. We also expect continued organic growth in this channel of private fleet creation and conversion.

Highway Services, including our truckload business and all brokerage services, continues to migrate to a more digital and lighter asset model, moving towards independent contractors and contract carriers with our capital focusing on the trailer fleets. They're exploring new and different ways to approach the trailer needs of our customers and carriers with the 360° box programs and hope to find the right equation to expand this opportunity.

Overall, I'm generally pleased with our progress on this part of our journey and continue to believe in our direction. I reiterate my confidence in this leadership team and our employee base across the country.

I will now ask Dave Mee for his comments on the quarter. Dave?

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [4]

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Thank you, boss. For the most part, we thought the quarter played out pretty much as anticipated. Again, in general, freight volumes are still below 2018 levels, but we have seen seasonal uptick remain and continue its pace, and most of it was evidenced in each of our segments.

In Intermodal, overall volumes were flat with a year ago as we announced. During the quarter, we saw absolute year-over-year changes, in other words, calendar month to calendar month. We saw July down 2%, August down 1% and September up 3%. However, as we pointed out in our second quarter call, we've been paying particular attention to the daily load counts each month, both in recognition of the lower 2019 freight volumes and looking for some assurance that a traditional seasonal pattern would remain even at the lower freight levels.

So for the third quarter 2019, loads per workday for July were 7,851, August was 7,987 and September was 8,342. And as a starting point for reference and a reminder, June loads per workday was 7,817. While we are encouraged by the increased throughput, we are still experiencing cost pressures, primarily in rail purchase transportation rates and localized driver inflation, not across the country, but definitely in local markets as well as the additional cost associated with growing our network which is now more in -- out of balance than it has been in the past.

In Dedicated, new truck additions were lower than recent quarters, but they actually were in line with first and second quarter 2018. The pipeline as it stands today remains very robust, and we're confident that we'll add the 800 to 1,000 trucks in 2019 that we expect.

But Final Mile continues to see good throughput in both the historical and newly acquired business, and the 2 acquisition have positioned us to generate higher-than-expected organic growth in Final Mile in this current year, in 2019.

ICS results for the quarter reflect what we believe is the current state of the market. Competitive and even aggressive contractual pricing to retain business and/or grow market share resulted in gross margin pressure with little or no opportunity in spot market to mitigate the gross margin decline. We compounded ICS' operating margin decline by increasing our technology spend on the marketplace with J.B. Hunt 360° by over 60% year-over-year and 10% sequentially from second quarter with the expectation that we will be able to compete and we have to compete for share in this environment to gain scale in the platform for the rest of 2019 and most likely through 2020.

Trucks saw same-store sales contract rates were positive in the third quarter year-over-year. However, customer spot activity was less than half of what it was a year ago, which affected both its load counts and overall rate per loaded mile. While we have seen some seasonality in the market and customers are meeting their Truckload contractual commitments, customer spot activity is not expected to rebound substantially in the fourth quarter of 2019.

Brad, that concludes what I have prepared.

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Brad Delco, J.B. Hunt Transport Services, Inc. - VP of Finance & IR [5]

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All right. Michelle, we're ready for questions, so let's open up the queue.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Todd Fowler.

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Todd Clark Fowler, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [2]

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It's Todd Fowler with KeyBanc Capital Markets. I feel a little bit guilty, John did a nice job of laying out some longer-term things, but I'm going to start with some near-term questions. Dave or Terry, can you share some thoughts on just how you see the fourth quarter peak shaping up? You've got volumes that are comping positive in September. One of the other Truckload carriers out today talking a little bit about less robust peak. I know some of your earlier guidance talked about fourth quarter volumes turning positive based on bid compliance. So if you could just share some comments on what you're expecting for fourth quarter, both on the volume and the margin side for Intermodal, I'd appreciate it.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [3]

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Yes. This is Terry. So with regards to the fourth quarter, I think in the second quarter, we talked about we would be in positive territory for volume in the fourth quarter, and we haven't changed that direction with regards to positive volumes in the fourth quarter. As far as peak is concerned, September, from the West Coast was stronger than the September we saw in 2018. So it's been rather robust, and we see that starting to continue into October. With regards to margin, we believe our margin in the fourth quarter from an OR basis, should improve from what we saw in the third quarter.

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Todd Clark Fowler, KeyBanc Capital Markets Inc., Research Division - MD and Equity Research Analyst [4]

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Okay. And just for a follow-up, Terry, your comments on the September strength, do you have a sense if any of that has to do with potential pull forward related to tariffs? Or do you think that, that's maybe more of a reflection of just true demand in the marketplace?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [5]

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I haven't heard anything from our customers. Shelley might have heard something. But I haven't heard anything from our customers that they're pulling forward product and shipping it early. I see her head shaking no. So I think it's more just basically what's going on in the marketplace.

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Operator [6]

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Our next caller -- our next question comes from the line of David Ross.

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David Griffith Ross, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Global Transportation and Logistics [7]

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Dave Ross from Stifel. Just a question on Final Mile, which seems to be growing quite nicely, I think you said you expanded the network 40% year-to-date. How big do you think that could get in 2 years' time?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [8]

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Well, we're on a run rate of about $500 million to $550 million. And we're very comfortable, we'll continue to grow at a very fast clip. I don't know if we're giving guidance, Dave, on some targets or where we want to be...

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [9]

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Two years until...

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [10]

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Yes, 2 years.

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [11]

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I don't know, 10% a year, 5% a year?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [12]

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10%, 10% plus.

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David Griffith Ross, Stifel, Nicolaus & Company, Incorporated, Research Division - MD of Global Transportation and Logistics [13]

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And then on the Dedicated side, is that going to grow at a similar clip? Or is that expected to be a little bit more GDP plus? And have you seen any difference in the private fleet conversion recently versus the last couple years?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [14]

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The only thing that's really changed in the private fleet is we were really hot in '18. And I think it's back to a normal decision time frame of 18 to 24 months that we've seen very consistently other than when it sped up a little bit in '18 because of the market. But I think you will see us be very consistent with the truck adds we have this year is probably the truck adds we'll have again next year. Our top line, as Dave said, very good. We're very confident in the private fleet conversions, and we're -- our retention rate is still very, very high, 98%. So we feel very good about where that's going next year.

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Operator [15]

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We have the next question. Caller, please state your name, company affiliation.

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Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [16]

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It's Tom Wadewitz from UBS. Wanted to ask a question on how we might think about the Intermodal margin. It seems like you've -- you're executing on the transition in volumes and certainly seeing volume growth in the transcontinental side. It seems like price is a lever that you're pushing to some extent to get that growth. So how do we think about Intermodal margin, perhaps the next couple of quarters or if you look into 2020? Is it reasonable to think that margins improve if you have volume growth but less price? Or how do we think about the kind of that levers of volume and price moving different ways and what that might mean for margin?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [17]

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Yes. In the third quarter, we thought it was going to improve versus the second quarter. But because of some of the network imbalances that we have, we had to reposition more empties and then our empty costs exceeded what we anticipated it would be in the third quarter. And as I mentioned earlier, we believe our margin should improve in the fourth quarter as we compare it to the third quarter. As far as next year, we're still in the budget process. We don't foresee anything that should change our margin profile. If we can continue to grow and to continue to watch our cost and not have anything from a macro standpoint in the economy, we would anticipate that our margins should improve.

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Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [18]

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One -- I guess one additional question or one follow-up. How do we think about the numbers that you're providing in ICS of more volume going through that system and what that means? I mean obviously, I guess it means you're utilizing the system. But is there a point whereas more goes through, the margin performance should be better? Or do we think about more going through being an acceleration in coming acceleration volume performance? Or what does it mean when you put more through 360° in terms of the impacts on results?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [19]

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Yes. So Dave talked about scaling the business, and I think that's a key piece in building the platform. We focused this year on really being able to move any shipments through the platform. And we're about -- by end of this year, should be 85% of our volumes should be able to execute inside the platform if we were fully utilize inside that. But for us, it really is about scaling our revenue and allowing us to really get after what we believe is the bigger idea, which is creating a more efficient transportation network in North America. So it's about reducing costs for our shippers and increasing time for carriers, saving them money and giving them a better experience overall. So we believe there is a better way to move goods, just like Intermodal was a better way to move goods from truckloads, we believe using a digital freight platform is actually a better way to transact and for customers and carriers alike.

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Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [20]

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Do you have a sense of the time lag of when we would see that? Or is that tough to identify?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [21]

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We definitely are talking about that here internally. As Dave spoke earlier, we did further accelerate our investment into the platform. The more that we see the transactions that are occurring in the platform, the more we see the opportunity to further eliminate the waste in the system. And so I think we'll be going into 2020 with more work, particularly on the data science side with what we can do with the data that we see in the platform. One of the things that we're really focusing on, we've seen a 400% increase in the level of data that we see interacting in the platform. So about 5 billion sets of data points that we are really trying to discern in different categories, how we apply more machine learning and AI into that information. It's one of the ways that we will create a more efficient transportation network. That work is really just beginning. I would say we're at the infancy stage of we've been building the platform, we've been collecting data. Now our ability to really create a different way to move goods, whether that's with a different carrier or a different mode. So we talked for a long time about how there are somewhere between 7 million and 11 million shipments that are on the nation's highway that we believe could move into Intermodal. That's one big idea we have through the platform. The more data we see, the more information we have, the more we know how goods should move over a longer period.

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Operator [22]

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Our next question comes from the line of Brian Ossenbeck.

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Brian Patrick Ossenbeck, JP Morgan Chase & Co, Research Division - Senior Equity Analyst [23]

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Brian Ossenbeck from JP Morgan. Maybe Shelley, if we can continue on that last thought about the shipments converting off the Highway to Intermodal over time. Then maybe just a bigger -- longer-term picture for John as well. What do you think really gets the Intermodal business back to sort of secular growth that we've seen over the last couple of decades? When do you think the truck conversion really becomes a material contribution to that? Still think service has ways to go on the rail side before you get there? And then if you could just size up the maybe secondary opportunities when you look at reefers as the rails start to offload more trailers and move more containers and then anything material on the transload opportunity?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [24]

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So can I just talk about our platform just for a second as it relates to Intermodal because I think one of the things the platform allows is access, access to shipments and access to capacity. If you look at what's happening in the market, we see about $80 billion to $85 billion of freight every year, and that's continued to grow for us as we've penetrated really, I would say, mid- to large customers. We've really not moved into that small, midsize market as much overall. So customers that are currently shipping in truckloads, so this is more of a macro view, customers that currently ship truckload just don't know another way to do that. And I would even say those are in the midsize names. And so they want -- they believe that they have the assurance of how their shipments can move at a predicted price and predicted service by using what they've historically done. If you really give access to small midsize shippers to really what can transact on a real-time basis, making movements more dynamic, it changes the way a shipper can move and can open up what the market can look like. So we'd just talk about that from a market perspective.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [25]

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Yes. This is Terry. So from a growth perspective, I think I've identified before 4 or 5 key things. What is the price of fuel relative to truck? Price of fuel. What is the truck rate? What is the truck capacity? What is the rail service, which is a real key in terms of being able to convert highway freight to rail? And then what are the general macroeconomics? So when you put those 5 things together, we keep on looking at bucket of freight of 8 million to 10 million loads that we see that fit the Intermodal network in North America but yet not have converted. So as those factors turn positive and the more of those factors that turn positive, you'll see the acceleration of Intermodal.

The second thing I would mention is that the railroads want to grow Intermodal, publicly stated, the 2 Eastern railroads, they said they'd like to grow 10% in 2020 in the East Coast. And these 4, 5 factors will be key as to how we will be able to try to accomplish that goal. So yes, railroads willing and able. And then you have some market conditions, but we also see the freight. So the timing of how all that melds together is really the big question. And I think you'll see, as I mentioned, as those 5 things turn positive for Intermodal, you'll see an acceleration.

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [26]

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Let me -- I'll just add a little bit on the top to the question of transloading on refrigerated. All the markets that we're studying, there's some big numbers in those channels that we want to pay attention to. I think the key point is that the railroads are interested, and we definitely hear them talking with us about what do we need to do to continue to be able to organically convert incremental volumes into their networks. PSR being substantially done is a little bit of a cleansing activity. I think the conversations are positive and they're -- with the highway conversion of refrigerated, transload and other, they're certainly looking at the future potential in Intermodal as being growth oriented.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [27]

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And lastly with regards to refrigerated, we're up to 1,000 refrigerated containers, and we plan on adding containers in 2020 to continue to be able to grow that business double digit.

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Operator [28]

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Our next question comes from the line of Jordan Alliger.

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Jordan Robert Alliger, Goldman Sachs Group Inc., Research Division - Research Analyst [29]

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Jordan Alliger at Goldman Sachs. One question is can you talk a little bit about the impact of the IT spend versus the impact of the fundamentals on the ICS business, some sort of order of magnitude? And I know you're going to keep spending on IT as we go into next year. But is this sort of like the peak quarter impact? Or is there a way to frame that?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [30]

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So we aren't just spending money on the technology side. We're actually investing on the people side as well because to build the marketplace, we really believe that creating an experience which has [waving fans on] both shippers and carriers is the most critical component to the platform. So in areas where carriers aren't interacting in the platform or shippers don't have enough density, we're having to insert our people in the process. We also have quite a few people inside that space that are focused on what the experience actually is. So it see a bit more from the sales perspective on both carriers and customers. So quite a bit, but I don't think we've given guidance as to what that looks like. I think leaning into next year, we will continue to make investment on technology. We are working, as I said earlier, around what we can do with the data. And we still have to firm up what our budgets look like, but I would expect further spending, at least at the same level, if not possibly more. And on the people side, continuing to grow people. One of the reasons [we had] from an earlier discussion or an earlier question is what do we get for that? We do think the technology will create speed, speed at which we can move transactions. But it will really fuel our growth from a highway perspective, and even the opportunity to talk to customers about different ways to move goods. So I would say next year continuing to have pressure on our operating income results. But our longer-term focus really for us, our 3- to 5-year vision on creating that more efficient transportation network creates a very large marketplace. And that really is our North Star.

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Jordan Robert Alliger, Goldman Sachs Group Inc., Research Division - Research Analyst [31]

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Okay. And then just on the -- so I guess sort of just as a follow-up, and I know the fundamentals are separate, I know there'll be pressure in EBIT in 2020. Is there a way to get a sense, will profits go back in the black at some point? Or do you expect it to stay sort of in the negative range in some way?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [32]

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So we're still working on our budget for next year. And -- but I would say I think we're going to have pressure on our bottom line performance. We will be watching all the key metrics in the platform. That's going to be our biggest driver overall. We know there will be inefficiency. Today, we have inefficiency that's happening in the platform from a carrier purchasing perspective and also from new freight that we're onboarding into the platform. That will work itself out over time. And as we get through start-up, that's probably more impactful right now, but as we continue to accelerate our growth, which is a key thing for us, we'll continue to onboard new carriers, new lanes for both customers and for carriers, and that's going to put pressure on our margins as well.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [33]

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Yes. And Jordan, what -- taking a little bit longer view, the answer is that no, we don't expect this exercise to be a loss leader just to get into the market. We expect this business unit to take this technology and turn it into a profitable business using the technology, the people and all the investments that are occurring here in 2019 and most likely throughout 2020. Does that means that actually turns black in 2021 yet? We don't know. Five years ago, it was pretty easy to put some numbers on a chalkboard and say absolutely yes. But the market's changed, as we've seen in the meantime. But yes, I would say that from our perspective and from a strategic standpoint, this is not a loss leader. This is to be designed, to be a profit center just as it was before we started spending the money to transform it into a more digital platform.

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Jordan Robert Alliger, Goldman Sachs Group Inc., Research Division - Research Analyst [34]

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Got it. That's very helpful. And just one other quick question perhaps. Can you give a sense for what, on Intermodal front, your thoughts on bid season and bid season timing? You're able to do 5% ex fuel surcharge, 2% all in this quarter. I know you've talked sort of low single digit of late. So I'm just curious, any follow-up thoughts on that front?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [35]

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Well, bid season is just starting, and we haven't really gotten any results back. So the last 2 years, it's been a very orderly market. And I would anticipate next year to be an orderly market, knowing the pressures that other providers have with regards to rail, PTE, that's out in the marketplace. So if our costs are up, our expectation is that we will have positive price to cover those costs.

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Operator [36]

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Our next question comes from the line of Benjamin Hartford.

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Benjamin John Hartford, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [37]

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Ben Hartford with Baird. Maybe, Shelley, back to ICS here. When you measure success as you build out this platform, how do you kind of singularly define success? I guess I'm looking at this $200 million in revenue executed through marketplace, and ICS this quarter up $50 million year-over-year. Has the profile of the customer that you engage with through Marketplace, has it changed? Is it meaningfully different from the profile of the customer that you typically interact with across the business lines? It's a bit of a leading question. I'm curious if you're able to engage with smaller medium-size customers more effectively in that $200 million bucket this quarter year-over-year. And if not yet, will you? Maybe you could talk a little bit about the profile of that customer, how it's changed and how it could change over time.

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [38]

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Sure. So we have largely spent time with customers that know us and know us very well. And so the interactions that you see currently in Marketplace are customers that we have deep relationships with and that really buy across our 9 services that we offer inside our 4 business segments. We do plan to go into the small and midsize market. We really don't participate as an organization there much. That's something that will be coming out in 2020, and that's definitely part of our plan in our scaling out of the platform.

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Benjamin John Hartford, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [39]

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Okay. And then just if we're looking at the gross margins this quarter, understanding some of the competitive dynamics, as this project matures and as you do kind of supplement the growth with some of the smaller medium-sized customers as that development continues, how do you anticipate that gross margin percentage trending over time if we kind of smooth the average? If we look at this quarter as a baseline, should it benefit from mix offset by the natural competitive pressures? Or is there something else going on as we think about that gross margin trend over?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [40]

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Yes. Great question. I think that the gross margin percentage could stay similar to what you see inside our earnings results in Q3, plus or minus 100 or 200 basis points in total. But I think the bottom line performance can get back into the range that we've really talked about, 4% to 6% in total. If you look at what's happening inside ICS, just in the base part of our business, we're up as expense of -- expense as a percent of revenue really across everywhere that we're investing. So certainly in our employee expense where we expect to get leverage in our direct expense, our E&T and all of our new systems all have significant expense sitting inside that. We do watch each one of those metrics so that we can understand what our productivity and our throughput looks like. But as we lean into the back end of next year, so maybe fourth quarter of next year, moving into 2021, we do expect productivity improvement to start to occur inside our people. We're just getting started on the point of automation that we need to really happen from an employee base perspective. And that, we think, will enable us to start getting to -- back to profitability.

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Operator [41]

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Next caller, please state your name, company affiliation.

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Justin Trennon Long, Stephens Inc., Research Division - MD [42]

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This is Justin Long with Stephens. Maybe to start with Intermodal, I know you were successful winning some Intermodal business late in the bid season. If you were to strip out the tailwind from some of those market share gains, how would you say the underlying volume environment trended in the third quarter relative to what you would view as normal seasonality?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [43]

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Yes. I think there's kind of 2 stories. We had 4 or 5 bid events that happened towards the latter part of the second quarter, plus we had bid events prior to that, that should have allowed us to grow even more than what we were anticipating. And it really came down to the compliance that we've talked about. I think what you've seen in the latter part of the third quarter and into now is that the compliance is better than what we saw in the second quarter, and that's kind of lifting all boats, if you will. So we have 4 or 5 big customers that have helped us, but then the compliance for the rest of the base has also given us a lift.

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Justin Trennon Long, Stephens Inc., Research Division - MD [44]

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Okay. And going back to the Intermodal OR questions and thinking about the progression going forward. Terry, do you feel like we need to see price increases in next year's bid season in order for the Intermodal OR to improve in 2020? Or do you think there's enough levers with volume growth, better rail service, et cetera, to drive improvement in margins next year even if pricing is flattish?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [45]

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Well, pricing moves the lever quicker than volume. So obviously, price would help us to get there. I think with the momentum that we have with volume moving into the first half of next year, we should have some good volume comps given the economy staying where it's at and nothing new showing up in regards to the macroeconomy. So to answer your question, the price would move the needle quicker. The question will be is how much of that can we get and what are costs that we have to try to cover to add margin.

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Justin Trennon Long, Stephens Inc., Research Division - MD [46]

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Okay. And just to clarify something you said earlier, you said if your costs are up in Intermodal, you expect pricing to be up as well. Do you feel like Intermodal pricing can be up even if truckload pricing is down contractually in 2020?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [47]

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That's what happened so far in 2019. I think there's a probability that yes, you could see that.

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Operator [48]

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Our next question comes from the line of Ken Hoexter.

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Kenneth Scott Hoexter, BofA Merrill Lynch, Research Division - MD and Co-Head of the Industrials [49]

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It's Ken Hoexter from Bank of America Merrill Lynch. Maybe just to follow on that, maybe more near term. If you're looking on pricing, you're looking for positive volumes for the fourth quarter, I guess you're saying that revenue per load can also be positive. And maybe you can just talk about the rate environment, not only in Intermodal, but perhaps for each segment.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [50]

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Yes. I think on the second quarter conference call, I mentioned that we should have a positive rate for load in the fourth quarter, and we haven't changed that thought process.

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [51]

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I would say brokerage both -- I think Dave spoke to the competitive environment inside brokerage. And I would say that we're just starting the bid season. We do see competitive pressure to retain our current business inside brokerage. And on the asset part of the business, really too early to tell, having different conversations with different customers.

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [52]

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And I would just say on the Dedicated side, 70% of our business has ECI, CPI built in. So that portion will get whatever those indexes dictate. We got 30% that does not have that in there, but 2/3 of that is not up for renewal in the next year, so that will not feel any pressure. So that leaves about 10% of our business that would face some pressure that could face potential pressure in the one-way market, but we feel good about that. Overall, our rates will be up in Dedicated is our feeling.

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Kenneth Scott Hoexter, BofA Merrill Lynch, Research Division - MD and Co-Head of the Industrials [53]

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Great. Appreciate that run through. And a quick follow-up. Maybe you talked about the acceleration from the West Coast volumes and obviously a decline still on the East Coast. Can you talk about are there any service issues still cleaning out lanes? Or is it just demand picked up on the Transcon versus the decline in the regional volumes? Maybe just talk a little bit about on the volume side for Intermodal.

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [54]

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Yes, services picked up from where it was last year. It's not where the railroads have targeted to be, but they have definitely improved and it's helped our velocity and their on-time service through the customer. The East Coast is -- continues to see pressure with truck on the fringes, and that hasn't really subsided at all with regards to what we're seeing in the marketplace today.

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Kenneth Scott Hoexter, BofA Merrill Lynch, Research Division - MD and Co-Head of the Industrials [55]

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So just to clarify, it's more of a truck competition than it is a lane closure or change in PSR strategy from your main provider out East?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [56]

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Yes. We still have the hangover for another 4 or 5 months with regards to the PSR where we lost 60,000 or 70,000 loads starting in early January. And that we should comp that in January through March, I think is where -- and those were implemented. So that's 70% of what's going on in the East in terms of our negative volume. The other is kind of the fringe freight, as I call it, the 1%, 2%, 3% with regards to the competition with the truck and then slash the poor service that we saw last year. Those combinations where we lost a couple of percent to truck. But if service picks up and if the market starts to tighten, that usually drifts back our way.

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Operator [57]

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Next caller, your line is now open. Please state your name, company affiliation and ask your question.

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Jason H. Seidl, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [58]

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It's Jason Seidl from Cowen. Two quick ones here. One, you guys did a good job sort of breaking down how you see the market moving forward. Obviously, you're not going to be predicting the economy or fuel. But I guess where do you see truck capacity going in 2020? And do you -- are you confident in what you've seen thus far from PSR implementers that rail service will be improved next year?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [59]

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Well, from a rail service perspective, yes, I think the railroads will continue to get better, especially as other commodities are a little bit slow. So I anticipate that the rail service will get better. They have not met their targets that they have set out to meet, and I think they will improve versus what we've seen this year.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [60]

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And Jason, are you talking about iron when you say the truck market? Or are you talking about truck service?

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Jason H. Seidl, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [61]

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Overall truck capacity on iron.

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [62]

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Capacity, not -- okay, I'm going to let someone -- I thought you meant -- I didn't know if you meant the price of used trucks or not. That's why I was asking. I'll let Shelley talk about that.

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [63]

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So I would say the macro view from a capacity perspective, obviously, would change our view. We think that it's sluggish in the market, mostly from the supply side, demand is not as strong as anyone would like. I don't know how confident we are in that being that we've done budgets now for 20 years and we never hit our budget up or down from a capacity perspective. So I would say next year, first half of next year could be more sluggish similar to right now. Second half, I think macro will be more of an indicator.

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Jason H. Seidl, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [64]

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Okay. No, that's good color. I guess my follow up here is your main Western partner is the only ones to not implement PSR or at least a form thereof. Is that something that you envision them doing at some point?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [65]

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You'd really have to ask them. The conversations that we have had with them, they've said that they've had some form of PSR going on in the railroad for over a decade. So they might -- I would think that they're doing certain things but they aren't calling it PSR.

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Operator [66]

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Our next question comes from the line of Allison Landry.

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Allison M. Landry, Crédit Suisse AG, Research Division - Director [67]

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Allison Landry from Crédit Suisse. Dave, you commented earlier about some aggressive behavior in terms of brokerage contractual rates. So I was just curious if you think that's sort of normal from a cyclical standpoint? Or are you seeing increased competition from either tech-based entrants or some of your more traditional peers that might be also going after the digital freight marketplace?

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [68]

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I'll let Shelley answer that question.

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [69]

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I would say it's more competitive than it has been. Certainly, I think technology, in general, has changed the way our customers view the level of predictability. If you look at what's happening in the brokerage space today, cost and capacity and service is more predictable right now than it was a year ago. Our customers leaned into more asset mix in this season last year. I think this season, based on early discussions with customers, they are more comfortable leaning into brokerage based on the pricing that they're seeing from early bid season. I would say there could be likely a shift to more brokerage here this bid season at a macro view, and I would say it is more competitive.

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Allison M. Landry, Crédit Suisse AG, Research Division - Director [70]

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Okay. And then just as a follow-up in terms of the extra repositioning and network imbalance cost that you saw in JBI, could you help to maybe give us a sense or quantify what that was in the quarter? And give us a little bit of color on what drove that. It maybe seems like it was a little bit worse than you guys had anticipated.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [71]

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Yes. Some of that came from the bid cycle, the last 1/3 of the bids that came out, part of it is customer compliance, where we thought we had balance and the customer didn't give us the freight that they thought that they were going to give us. That's what created that. I think what I mentioned that if we hadn't had that extra cost that we would have improved our OR versus the second quarter. And I think I'll leave it with that.

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Operator [72]

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Our next question comes from the line of Chris Wetherbee.

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Christian F. Wetherbee, Citigroup Inc, Research Division - VP [73]

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Chris Wetherbee from Citi. Just a follow-up on that question to make sure I understand repositioning cost, we should not expect that to continue into the fourth quarter that was isolated to 3Q?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [74]

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It's too early to tell. We're only 15 days in. If the West Coast continues to stay strong like we've seen it, it could have some extra repositioning costs. Typically, that fades off in the last 45 days of the month. It's just too early to really make that call.

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Christian F. Wetherbee, Citigroup Inc, Research Division - VP [75]

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Okay. That's helpful. I appreciate it. And then maybe coming back, just to make sure we put the numbers around it. The tech spend, I think, Dave, you mentioned maybe up, I think you said 60% sequentially. I don't know if that puts us into the sort of $16-or-so million. I don't know if my math is right there. But could you quantify sort of what that tech spend is? And Shelley, you mentioned that maybe it goes up going forward. Just trying to frame this up a little bit. I mean is it possible maybe we're talking about an $80 million or $100 million sort of annual spend in this? I just want to try to get a sense sort of how maybe that adds up as we go out into 2021.

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [76]

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Well, are you talking enterprise-wide or inside ICS?

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Christian F. Wetherbee, Citigroup Inc, Research Division - VP [77]

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Both.

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [78]

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Enterprise-wide, yes, $100 million enterprise-wide guide is a piece of cake. That's easy. We proved in September we're past that. And that's just the OpEx side. Inside ICS itself, ICS in the quarter, I think that the tech side was a little bit shy of $14 million in the quarter. And that's up 60% year-over-year. And that's just on the development side.

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Christian F. Wetherbee, Citigroup Inc, Research Division - VP [79]

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Okay. Okay. No, that makes sense. And then I guess could you help us sort of frame out how you think -- and we talked a lot about this, I guess on the call. But I just want to sort of make sure I understand sort of how we think about the growth through the marketplace as we think about 2020. What are sort of the numbers we should be thinking about from a revenue perspective? And then I guess when can we start to see this turn towards sort of income and start to a generate return? I don't know, maybe you can frame up what you think your sort of return hurdles are for this investment.

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [80]

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Well, so we continue to have more needs from the base part of the platform. And I talked earlier about what we do with the data. And that's going to be the most significant driver of what we do from a tech perspective moving into 2020 and beyond. In total, we do expect our revenue to accelerate next year. We still are working on our budget and what our 5-year book will be in total for all of ICS but also across the enterprise. Our hurdles really are across every category that I've talked about that we are working towards scaling. So we have too high of employee costs currently based on as a percentage of revenue, we have too high of E&T costs, pretty much across the board that touches the platform, we're investing heavily inside that space. It will take us, I don't know, maybe 18 months or so to really get through that and develop the scale that we believe we need to then start leveraging into our cost as a percent of revenue.

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Christian F. Wetherbee, Citigroup Inc, Research Division - VP [81]

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Okay. So we're thinking kind of 18 months from now is the right way to be thinking about that, Shelley?

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Shelley Simpson, J.B. Hunt Transport Services, Inc. - Corporate Executive VP, Chief Commercial Officer & President of Highway Services [82]

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Sure.

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Operator [83]

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Our next question comes from the line of Ran Yang.

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David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [84]

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It's David Vernon from Bernstein on. I just wanted to ask you, Dave, a question on the balance sheet and sort of the long-term sort of outlook for returns here. So first on the balance sheet, you've got about $75 million worth of cash sitting on the balance sheet. And you guys are used to kind of pretty religiously managing that balance down. Is there a reason why we're holding that much cash or any sort of change in the prioritization of available cash from sort of prior practice?

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [85]

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No, David, no change. There's a lot of times when we'll end up with cash inflows faster than outflows in a period of time where I can't do anything in public markets with it. And so I'm just basically putting it on my balance sheet because I either can't deploy it in the repurchase programs, I have a wall in equipment purchases. So it's more timing than it is any kind of change in strategy.

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David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [86]

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And is there a draw on that other than equity repurchase? Like is it being held aside for equipment or something?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [87]

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No. Not any particular purpose, no. (inaudible).

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David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division - Senior Analyst [88]

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All right. And then one thing I'd love to get -- sorry, there's a little bit of a lag. One other question I'd love to get your help in terms of helping investors to understand is a little bit of a change in business mix. Obviously, the DCS business, the ICS business is growing a little bit faster than the Intermodal business. Historically, one of the things that's been great about J.B. Hunt is the high level of return. Can you help us understand kind of what the relative return profile of these businesses are just to think about kind of how that shift is going to affect the business long term?

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John N. Roberts, J.B. Hunt Transport Services, Inc. - President, CEO & Director [89]

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Well, we haven't broken out the internal ROICs, simply because don't want to get into a lot of debate with regard to allocation of shared services and allocation of footprint for asset profile, which you end up having to do and then you get comparison issues. We have that debate anyway. What we've said is that we definitely, longer term, think that the ICS should be the highest returning asset that we own or segment in the portfolio because it's the lowest capital intensive. And Intermodal would, at this point in time, be next in line. But even today, that probably is going to have a run for its money as we convert to a more asset-light model in truck. So everything is based on the relative asset size. And then so Intermodal would be, let's say that truckload is less asset intensive, so it would be next, then Intermodal and then Dedicated. With that being said, how we measure each of those business units is relative to the peer groups. And the peer groups are obviously, ICS would be brokers; truckload would be asset-light truckers, so they may be possibly a Landstar-type model is what we would have to compare ourselves to. Intermodal is in a business of itself, so that should be pretty easy if we can compare that to those players; and Dedicated is kind of a quasi-business because it is not truckload. It is not one-way truckload. So while it does compare itself to Werners and Knights, which is phenomenal and the rest of the traditional truckers, we kind of hold it to a higher standard because it doesn't have the price fluctuation that those typical truckload carriers have to go through. So I would say that you would end up comparing it to higher-end truckload carriers, the Knights, the Heartlands, the things of that nature from an ROIC perspective. And the way they are performing, ICS is obviously lagging today. Historically, it is not, but it is today. Intermodal is lagging on a 12-month basis given that the charges we've taken in the past year. And so its NOPAT performance is low on the trailing 12 months. Truck is going through some transition. So it's kind of all over the board at this point in time but improving. And Dedicated is actually performing on a return basis better than our expectations.

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Operator [90]

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Your next question comes from the line of Bascome Majors.

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Bascome Majors, Susquehanna Financial Group, LLLP, Research Division - Research Analyst [91]

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Yes, Bascome Majors from Susquehanna. On Dedicated, heading into the rail after recession, that was about the 5,000 truck, $1 billion revenue business. You've got twice as much many trucks, 3x as much revenue and the growth you've generated over the last 10-plus years there. Can you walk us through how the larger dedicated business, how you think that performs in a recession scenario? Where are you vulnerable to weaker pricing and volumes that's going to hit the overall one-way truckload market? And where do you get some cyclical protection from the contract structure you've got there?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [92]

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Yes, I would just say, typically, our contracts are about 4.5 years length on average, some longer, some 7, 9 years. And so we get some protection there. But if you talk about just a downturn in the economy, as we've gone through that and seen that through the years, what we typically see is you may see a bankruptcy of somebody that goes out because of financial condition. So we may take a hit of 100 trucks or something like that. And then as -- it depends on the industry that's impacted the most in the down cycle, we may see some truck shrinkage at accounts, and we do that with our customers, that's the flexibility that we offer, and we'll take those trucks and place them at new accounts. But when the economy turns south, that means that CFOs like Dave are really scrutinizing their capital and what they're going to do. And so we take that opportunity to really go talk to them about capital and deploying their capital and where they are going to deploy it, and let us do it in a more efficient way and save them money. So we hit up the CFOs hard during that time, and we have a lot of success of selling that way. Where we have some exposure to the one-way market is again depends on the timing of that and that portion of our business, that 30% of our business that does not have indexes in it, what portion of that is up for renewal at that given time when the economy strong, we'll face some pressure on that. So it's hard to say, but it's -- could be 10% of our business or something like that potentially. But I would just tell you that I turn up the heat on our sales team when the economy goes south because there's a lot of people that's wanting to get out of their private fleet. And so the CFOs are more available to us than ever before during that time. And so I would expect us to continue to sell.

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Bascome Majors, Susquehanna Financial Group, LLLP, Research Division - Research Analyst [93]

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I appreciate the detailed answer there. And Dave, just a follow-up for you. Looks like net CapEx was approaching $600 million year-to-date. Can you give us an updated look at what the full year spend could look like for this year? And any preliminary thoughts on next year?

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David G. Mee, J.B. Hunt Transport Services, Inc. - Executive VP of Finance & Administration and CFO [94]

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Don't have preliminary thoughts on this year. The one number I know I missed on my forecast was the amount we're capitalizing on tech. The -- originally, I thought it was going to be somewhere in the $40 million range; it's probably going to be north of $80 million. So CapEx is probably going to be up somewhere around $680 million by the time the year is out. And it's all due to the accelerated tech spend that's being capitalized.

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Operator [95]

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Our next question comes from the line of Scott Group.

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Scott H. Group, Wolfe Research, LLC - MD & Senior Transportation Analyst [96]

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It's Scott Group from Wolfe. So Terry, just is there any way you can help us think about Transcon versus East margins, if there's much of a difference there? And then you already commented earlier about rail PTE expense for some of your competitors, and I wasn't sure what you're trying to say that you've got similar cost inflation next year as everybody else, better, worse? I wasn't really sure what your point was.

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [97]

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Yes. My point on that is that as all providers of Intermodal have rail PTE challenges, the likelihood of decreasing rates is less than the likelihood of having to increase rates. Our programs are obviously different than most, so I won't go into that. And the second part of your question was?

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Scott H. Group, Wolfe Research, LLC - MD & Senior Transportation Analyst [98]

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Transcon versus East margins, if there's much of a difference there?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [99]

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I think in previous calls we've talked, there isn't much of a difference in that. What you'll find is that the profile of the load is different in terms of there's more revenue associated to the Transcon load. So a margin of X on Transcon load is different for the total op income versus a smaller load with a similar margin, but that load will take much less time to be able to execute.

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Scott H. Group, Wolfe Research, LLC - MD & Senior Transportation Analyst [100]

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Just back on PTE for a second, directionally, do you think you've got more or less PTE headwind in '20 versus '19?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [101]

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Less.

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Scott H. Group, Wolfe Research, LLC - MD & Senior Transportation Analyst [102]

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Okay. And then just last thing real quick, any way you can help us try to just think about fourth quarter volume? I know you said positive, but you think it's sort of similar to that 3% in September, better, worse? Anything that you could just help us with the model?

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Terrence D. Matthews, J.B. Hunt Transport Services, Inc. - Executive VP & President of Intermodal [103]

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Positive's better than flat. So I don't have any real guidance on that. We haven't really given guidance on that. So a couple percentage is what you'd probably be looking at. Nobody's expecting a spike, Scott.

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Brad Delco, J.B. Hunt Transport Services, Inc. - VP of Finance & IR [104]

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Okay, Michelle. That concludes our call.

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Operator [105]

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Thank you for using AT&T Event Conferencing. You may now disconnect.