J.B. Hunt Transport Services, Inc. (JBHT) Earnings Call Transcript & Summary

All right. We're going to go ahead and get started with the next presentation. I hope everybody had a great lunch. We're excited to be here again in person in Nashville with J.B. Hunt, a company we know pretty well at Stephens. So joining us from the company today is John Roberts, President and CEO; Shelley Simpson, she's Chief Commercial Officer and EVP, People and Human Resources; John Kuhlow, the CFO and EVP of Finance; and my old team made Brad Delco, VP of Finance and IR. This will be a fireside chat format. So I'm going to start with a few questions and then I'll pass it to the audience. So if you have any questions you'd like to ask, you can be thinking of them now. But pleasure to have you guys join us today. Thanks for being here and supporting the event.

Maybe I'll start with a question for John Roberts. It's easy to get caught up in the cyclical dynamics of the market. So can you just set the stage for us and talk about J.B. Hunt's strategy the next 5 years, what the focal points are going forward?

Yes. Thank you, Justin. Thanks for having us. We definitely appreciate the cyclical dynamics that we've faced in the past and expect that we'll deal with the ups and downs as they present, although we do also challenge ourselves to think of -- reimagine if I can use a term that Shelley has been using a lot lately, reimagine how we deal with those cycles, how we anticipate them, how we prepare for them, but they are just part of the flow. In the last 5 to 10 years, we have been able to, I think, elevate the conversation that we're having with our customers about providing solutions and being a lot less concerned with where we might try to point the customer as much as helping learn where the problem is for them and then finding ways to solve it. We've opened up our Highway Services group that was once a truckload company and a brokerage group that are working much more closely together now, we've really found areas that are totally driven by the needs of the customer that we can invent and develop answers for in transportation. And so I think with the base we have, we have an intermodal franchise, is well placed and well run and has I think, a good runway of growth ahead of it. I think we see a need for that kind of transportation answer in the long term. We have a large fleet service and dedicated where we have a way to answer a question that wasn't able to be answered as well 15 or 20 years ago. I talked earlier in one of our sessions about why would a company have a private fleet? Well, a company would have a private fleet because they didn't feel there was an alternative to owning your own equipment and taking care of that part of your supply chain. Now there is an answer. The history of our -- we're celebrating our 60th year as a company this year, which we did quite nicely. We missed 50. I'm not sure exactly how 50 got missed. We were in a little bit of a transition 10 years ago. But -- When you think about what all has happened over that 60 years, it's not hard to imagine the next 5 or 10 being a -- maybe even an amplified continuation because we're getting better at it. We're getting better at listening. We're getting better at being agnostic, which is a term we like to use about how we answer that question. And because we have that big intermodal position, our fleet position, our highway position, we can answer a lot of questions. So I would expect us to continue to challenge ourselves on where is that customer need, can we serve it in a way that's sustainable and can we scale it? Does it fit into what we do today and is a continuation or is logically adjacent for us. The market that we serve is colossal in size. And so there's no reason that we can't continue to grow and grow in a healthy way and really present great answers for our customers which leads to great opportunities for our people. And that's really kind of where the magic starts to happen. I'm a firm believer in growth. I know it is the most -- probably the most important thing. To keep our people interested, I was telling the story in the last 24 hours about how I've been with the company for 33 years, I never seriously thought about -- have I thought about leaving because every time you get to a juncture, we've come up with another challenge. So I think we want to continue that because I think it helps keep our health. And additionally important and something I was just talking with Ted a minute ago about, it's just that cultural dynamic that we have. And in the next 5 years, what does our work life look like? It's going to be different. And the pandemic has probably accelerated that a little bit, probably opened some doors that weren't open before. And we need to be really thoughtful about that as it relates to growth, people, culture, all of which I think will do well, and I think we'll be having a great conversation over the next 5 to 10 years.

Well that sounds great. And as you think about that growth going forward, 5 years from now, what do you think the pie chart for J.B. Hunt looks like across the different businesses versus where we are today?

Yes, that's a question that I've been asked many times in the past, and I used to think about the answer differently than I think about it today. In the past, we had such a limitation on our ability to grow governed by how much equipment we could procure and place and hire for. So the pile was half intermodal and 20-plus percent dedicated. And I don't know that, that is as important for us today because we aren't limited as much as we once were because our 360 platform gives us access to so many new ways to say yes, that it may be that we see a real shift in that non-asset platform service because it can grow faster. But the truth is, I don't know that it matters as long as we're bringing great answers. We have customers that really need intermodal. We have customers that need to move in those same lanes over the road. And we're okay either way with that. So I don't mean to skirt the question. I just know that we want the pie itself to get a lot bigger. If it looks like it looks today, that's okay because we're -- I feel like we have a lot of differentiation in our intermodal business. So that if it continues to be a large portion of what we do, that's good because it's unique. But if it also were to share the pie a little bit more with something like a 360 or dedicated, that's good because that means that's what the customer is looking for. So we really point our arrows at what's that customer need, and we almost let the customer decide what that pie will look like.

Understood. And maybe I'll -- we'll kind of pass the mic down here, I can go to John Kuhlow next, and then I'll turn it over. But from a return perspective, I know that's something you've really emphasized is ROICs or North Star. How do you feel about returns the next 5 years? Just looking at the different moving pieces today? It feels like the business could become more asset light based on some of the things that you're doing. So should we be expecting a better ROIC profile for J.B. Hunt 3 to 5 years from now versus where we are today?

Well, that's a great question, and I appreciate you acknowledging that, that is really the North Star for us as an organization and something that we've cultivated over the last 10 years, really focusing in on that more so than in the past. I think the question really is a little bit dependent on how the pie looks in the 5 to 10 years. Each of our services has a different return profile. We manage all of the businesses to what we think is a good acceptable return in that service offering. And so it's really just going to be dependent on where we are growing and in which segments and service offerings that we're working in. I will say that the focus is on growing return. And so I hope it's elevated, but it's really going to be dependent on which services we're offering at the time.

Understood. Okay. Shelley it's your now. So J.B Hunt 360, I know a lot of people in this room are familiar with it, but it might be helpful to just kind of give an overview of how you think about J.B. Hunt 360 and the value it provides and also how it's differentiated versus a traditional broker or even a competing digital broker.

Yes. I think that would be maybe the first myth about what J.B. Hunt 360 is, is that it is just brokerage. For us, we look at every component of the supply chain and how we move goods for our customers. We try to take all of our systems that we've for 60 years, really internally only used, and we thought about how we externalize those systems on behalf of our customers and our carriers. And we don't just think about the business that moves with our own assets. We've really extended the asset into all 3.5 million assets that are available in the market. So for us, we are very intentional on reaching our mission to create the most efficient transportation network in North America. In order to do that, we have to be able to see all capacity and all shipments to really eliminate the waste that exists inside the system. We know there's waste from a mode perspective. There's also just a waste from a time perspective. And so we believe that there is a great opportunity to really change the market through technology. That's a huge focus for us, and we really think about it in 3 different areas. First, we think about it always from our customers, what are our customers asking for? Can we make money? And is it logically adjacent, that's a question our CEO asked me on a regular basis as I'm talking to our customers. And so we are obsessing about making sure that we deliver our customers what they want, and we call it, we want to make sure we are the go to. So we call that BTGT inside our organization. We want to be that one call that they always think of and enabling them through a platform creates a way for us to not only get to our current customers, but also scale over the long term to other customers. When we think about the carrier community, we think about that in all drivers and how we connect carriers into the access point of freight and availability for them. So if you think about the way we shop online, we shop online, typically for convenience, so that we can get any product at any time at any price that we want it or at the lowest price from an availability perspective. So value is really created. That's exactly how we think about it from a carrier connectivity. So our ability to scale inside 360 becomes really critical. We have to make sure our shelves are completely stocked and that they have several SKUs, if you will, to choose from overall. And then finally, and the most important component for us is our people. And so our people really sit in the middle in the platform, although the platform can execute on both sides of the equation for both shippers and for carriers, our people are really what makes the difference. So we have worked very hard and are in the middle of a transformation in our technology for our people. And so part of J.B. Hunt 360 is actually reimagining the way work will happen for our people over the next 20 years. We've implemented about half of our operating system into the cloud, so off the mainframe in the cloud, and we're completing our orders and execution piece. That will then bring the new future of using digital transformation in our business into our legacy part of our company, which is the way we've always conducted business, making our people smarter, faster and certainly more efficient. That's really the way we think about J.B. Hunt 360.

Great. I'll open the floor. Any questions in the audience?

John, there's been a lot of issues with the railroads and then clearly intermodal is still the big piece of the pie. What's your outlook for what the [indiscernible] can acumen in terms of growth? Especially with your customer focus on Los Angeles and there are a lot of issues out there.

Yes. The question is around how the railroads will embrace and respond to the growing needs in intermodal, that's fair?

Yes.

Summary. Well, kind of at a macro level, Ted, I think that the people that we talk to at the railroads appreciate what intermodal can mean to their networks. It's a fairly young element of what can be a growth channel for railroads, even though it's 30 years old. That's not very old in railroad terms, as you know. And when we talk about the potential volumes that are on the road today that can be on the rail, it's meaningful and can change the real trajectory of these companies in conjunction with how we see changes in other elements of railroading that are maybe declining or have matured or whatever the right terminology is. But intermodal is a great transportation answer. It's efficient, it's scalable. It can be reliable. And so we're challenging our providers to really appreciate. The customer we're dealing with has a lot of choices. And in some regards, railroads aren't used to a customer having a lot of choice. And so their systems and their operational processes don't always align with that dynamic that our customers have a lot of options here. So I think we're making good progress. I know we've had some very recent conversations about service reliability, congestion, things that get in the way of intermodal being an alternative that's more cost-effective and can be and should be more reliable. They need to make investments. You know a lot of the stories of what we've been through in the last several years. But I've always held out hope because the conversations that I have tell me that the people running the railroads understand the opportunity here. And I think that we want to see that investment continue. We want to see forward thinking around how we can get better utilization, create a better service. And right now, today, I believe that will happen. I'm counting on investment to happen. I'm counting on them to appreciate that our customers have choice and that we should be very careful not to let our customers down because if we convert a customer into intermodal and then let them down, we have twice the selling job to go back and get them back. And I'm convinced really that the upper management teams at the railroads we deal with completely understand that. And so I think that momentum is a positive. And that's what we're counting on.

Any other questions in the audience.

[indiscernible] the chassis shortage has been over the past year or so, we've seen obviously a big drop in chassis production. Just starting to recover as the domestic manufacturers and the [indiscernible] the following the tariffs. Is that -- as that happens, can we expect congestion to improve?

Overall, I would hope so. I'm not tuned quite closely enough to what all we think is causing the congestion. Shelley might be better to answer that if you have a perspective on that.

Yes. So the question was around chassis shortage overall. I mean certainly, that has been an issue and an opportunity. We're a little more immune from that as an organization. And if you think about the type of work that we do, it's after the transload that we typically get engaged or involved. So we don't have the same problem, but it is what's causing some of the port congestion and some of the opportunity, but there's a lot of different constraints that are causing that at the port level. I do think things will ease and get better, but I think that's been a big part of what you've seen over the last several months.

I do want to add something because I don't think it's directly related to the question, but a question I get asked a lot is about J.B. Hunt's role in this sort of congestion problem that is getting a lot of press, and it's certainly in the headlines. And my consistent response to that is if you think about it this way, I truly believe J.B. Hunt is part of the solution to these challenges as opposed to maybe being one of the cogs that might be in the wheel. So think about, there's a lot of focus and investor questions around, well, we need to penetrate the truck market, and we need to convert highway off the rail and the value that customers see for intermodal, all the things John said, but even more so now is the idea of the carbon diet or reducing your carbon footprint. I mean ESG is a tremendous topic. I'm sure it's been talked about in meetings here. It's talked about in meetings internally, and we're certainly getting those questions from our customers. The second component -- so again, we're focused on converting highway freight to the rail, but a lot of people don't think about all these international boxes coming into the West Coast. And if you think about the bottlenecks within these rail terminals and what some of the -- those bottlenecks are, one of which is crane lifts. Well, if we can transload 3, 40-foot international containers into 2 53-foot domestic intermodal containers, well, now that crane is only having 2 lifts, and we're only using up 1 well car because we're double stacking as opposed to 1.5. And so the efficiencies that you're creating for the entire system, second or in addition to that, you're allowing that international box to basically stay there and get put back on the ship to go back, which is what I believe most of the maritime folks would like to see. So I think there's really sort of a two-pronged way of thinking about intermodal over the next several years and J.B. Hunt being part of that solution to working out the inefficiencies in addition to leveraging the platform and everything else that we have going on. So I just felt like it was worth adding that.

Question right here.

Shelley, I'd just like to go back to J.B. 360. And in my mind I feel like this is the perfect environment for the congestion to really demonstrate the value of that platform to your customers. And so I was just kind of curious, if I imagine a world where J.B. 360 didn't exist today, I guess, how would things have been different from how the [indiscernible] customers would be responding? Like what have you been able to do that you have been able to in the past to really show that [indiscernible].

Yes. Great question. And so if you look at the revenue growth that our company has experienced, it's going to be our largest in our history overall. And I think the platform was uniquely positioned for us to be able to take advantage of the crisis that we're going through right now. Part of it for our people is when we're saying, yes, we're already seeing the efficiency in our head count in, let's say, matches that are occurring, a number of matches per shipment available in the platform. So it's essentially doing the work for us. So it's freeing up. If you think about being in a constrained environment, it really comes down to what's the productivity of an individual. Now we have the productivity of an individual on the back end of the process. We let the platform work on the front end of the process and move as many goods as possible or as many shipments as possible in a more automated fashion. Then we repurposed in those operations teams that we've actually reduced in number of positions, if you will. We repurpose those into the shipper side. So we're actually calling on more shippers. We're having more conversation. We're introducing them into the platform as well. So one of the interesting things through this pandemic that we've seen is more use and more use cases for the platform. So in the scenario of port congestion that has been something our customers are asking us to solve. We haven't yet put port moves into our platform in a meaningful way. That's an idea. There are several ideas that we have. If you just think about how we've started the platform, it's been in the full load space for the most part. Now it's really about scaling all types of the business in the trillion-dollar market here in the U.S., how do we think about that? What should our roadmap look like? And then how are we just constantly solving for what our customers look at? And then lastly, if you look at what's happened in the JBT space, this is probably one of the most underlook spaces because people still talk about it as if it's our old legacy part of our company. And although we're very proud of that because that's our roots, we've really completely reimagined our JBT space. So we've used the platform J.B. Hunt 360 to really facilitate goods inside the truckload space. So when we think of moving truckloads for our customers, we really just think about what do they need us to do? And does it require more equipment or not? Meaning, does it require a trailer at a facility. If it does, that moves in 360box. If it doesn't, we move that in the platform in a live scenario. But in both scenarios, we're able to leverage the capacity we have in 360 to make those moves happen. So now you think about intermodal dray, what's happening in JBT, what's happening in ICS, ultimately in final mile, all of those segments will be able to reach into the platform and be able to extend their capacity in total. If you look at JBT's results and growth, I think that was a standout in the quarter. I think you'll continue to see that as we are focused on taking market share and growing, becoming more efficient for our customers in 360.

Maybe just a follow-up on one of your comments earlier on, 50% of the operating system is in the cloud. Correct me if I am wrong. I think it was Google that was your cloud provider and you're working on a couple of projects with them. I guess, is that 50% threshold where you -- where you're comfortable seeing some of that? [indiscernible] like does that -- is that like a tipping point in terms of where you are with Google with some of those initiatives -- should be able to?

Yes. It's a good question. You asked about our alliance. It's a strategic alliance that we've made with Google. Why the announcement and how critical are they really to the success of J.B. Hunt 360. As we started J.B. Hunt 360 nearly 4 years ago, we really had this idea set that start it with our customers. We actually brought them in for a session to unveil what our ideas and our thoughts were. Our customers actually completed that and went into pilot with us to really develop what J.B. Hunt 360 is. And it's actually where the idea of 360box came from. We started development after that conversation. And from there, the level of data that we have inside our platform is so significant that we know there is efficiency to be gained but also just better ways to do business. We really want to leverage the best of what we bring to our customers and also what Google brings to the customers when it comes to AL or AI and ML. And I think we've got key projects that we're working on with them. Why did we make an announcement in a strategic alliance? Because we believe that they're best positioned to help us with exactly what we're working on in the platform and really to build a multibillion-dollar platform in the industry that really becomes the place that people want to source freight and people want to come and make sure that they have the right cost servicing capacity in total. We think aligning ourselves with a provider that can do that with us becomes critical for our long-term success. So the cloud move, we were already in the transition of doing. We actually did not search out Google for a strategic alliance. We were talking to them about our multi-cloud strategy. But it was in those conversations that we started having with them around really our bigger vision as an organization in our mission statement. And we just started creating alignment what it meant to think about market, to co-innovate in the market, that's what really created the alliance. I will say we've had really great success with Google, our migration, I believe, is a record for Google or if it's not the best transition they've had. It's in the top couple or so in how fast we migrated over into Google from the cloud. But it's really our operating system that we still have a considerable amount on the mainframe that's moving, and that's going to be moving into Google Cloud. That's not dependent on any specific projects.

I did want to ask about peak season and just to get a general update on what you're seeing in the market? I know equipment delivery is another big question. So if you could provide an update there as well?

So most of this year, we've talked a lot about the supply chain challenges. We also talked about our fourth quarter, felt like we were prepared and ready for our customers. I don't think that there is a major update to what peak season would look like or should look like. I think our customers have been slightly surprised by the level of output that they've been able to generate. It's been slower than what they've expected. But I would say we haven't had any major changes from a fourth quarter peak perspective, we're still focused on making sure that the shelves are stocked on behalf of our customers. But I think what has changed in conversation is with the OEMs and what's going to happen for delivery on trucks and equipment for next year. That's something that we have been talking not only with the OEMs, but also talking with our customers. That's been a change to what their plans are, and I think that's going to change as it's constantly evolving, we feel really great about the equipment that we're onboarding, which is 12,000 intermodal containers, 3,000 360boxes. And we feel good about those and onboarding those by the end of Q1. The tractors, I think we have a good plan for. We can hold our trades because we do a considerable amount of trades for next year. So we can hold our trades and stay longer on our equipment, but we're still working through the math on that. Having said that, I think that could be a market dynamic that happens because I'm not sure that everybody will be able to hold their trades or it will be economically feasible to do that. So the cost of service is going to move up. That's a new cost that we really had not talked to our customers about. So if you think about the maintenance expense, not just for J.B. Hunt, but I would make the assumption for all of that, and I also think used truck prices will move up considerably as a result of the shortage of number of trucks available.

Okay. Great. Checking for questions. If you have something, raise your hand. If not, I'll keep going. The growth in dedicated and new sales activity has been very significant. Brad, you can decide who gets the mic on this one. But at what point does it make sense to kind of revisit the growth framework for that business? I mean -- and I guess the key question is how much of this success is a function of the cyclical dynamics versus secular dynamics? That's what's hard for us to see from the outside. So maybe it's an answer on the private fleet conversion you're seeing and what component of the growth that's making up?

I mean I'll take a shot, Justin, and Shelley or John or John to add. But I mean, there's clearly cyclical dynamics to the outsourcing of private fleet, but there has always been sort of a secular driver as well. And obviously, we were seeing tremendous demand. We've talked about as seeing essentially the strongest pipeline or backlog we've ever seen. I believe we added close to 1,300 trucks in the last 2 quarters, and we've consistently talked about a healthy run rate of gross sales of 800 to 1,000, you'd see some churn, albeit our retention rate is quite strong in that business. And so that would get you something slightly less than 800 to 1,000. The reasons for that, I mean, driver market is challenging. So a constraint to growth is the availability of drivers. Number two, I would say is the availability of our people. And so you think about all of the training that goes into getting folks prepared to run and operate effectively a small private business. We have seen such tremendous growth. I mean the bench strength, I mean, we've depleted a lot of the bench. And typically, after a big year like this, you have a little bit of a break that allows you to sort of catch your breath. I don't know that that's going to necessarily play out for us in the last 12 -- in the next 12 months. And so the constraints to growth are people, the assets and then clearly, what underlying demand that's out there. John, I know, is putting a lot of pressure on teams internally to rethink the 800 to 1,000. But we need to think about what is the right healthy way to grow without wanting to deteriorate the quality of service. So making sure you're putting the people in place that have the experience to run these accounts because it's really not worth adding in a bunch of new locations and new accounts if you're churning out more business on the other end. So focusing on the 98% plus retention rate is, I think, what has allowed us to continuously grow that business. So...

I guess on the labor constraint point, obviously, that's been a hot topic for some time. Does it feel like it's getting better? Is it getting worse? Is it about the same? What are you seeing right now?

Well, it might bring labor into a couple of different areas. First, we've talked about drivers for my 27-year career. So that's something we're constantly focused on. I would say we think we've plateaued on the driver side. However, we're at a very high watermark. Part of that is the demand that we see from our customers and the number of trucks that Brad has talked about and dedicated, but we also see that in our Intermodal segment as well. So I would say, for drivers, we're at a high watermark, and we're holding. It isn't really keeping us from starting up business because we do extend into our 360 platform to create the start-up that's necessary for our customers and then start to backfill from there. But I think that's a demand perspective. I would say labor on the office side, the great resignation, we are not allergic to either. And so I think when we talk about reimagine that John talked about, we're really thinking about it at the office level and really our focus on making sure we take care of our people so they can take care of our customers. And when you think about our office team, they're really who is helping facilitate our drivers, our maintenance technicians, but also making sure that our customers are well taken care of. So we are thinking about a lot of different things, a lot of investments. I don't know if we've seen what's happening on the labor side in the office just yet, but it's not just labor. It's also the type of work, how they do their work, where they do their work. We're reimagining all of that, not just from a pay perspective. In the past, we were able to tweak pay or turn pay, and that typically would fix 95% to the problem, today, that's not the case when it comes to labor. And then technicians are in the same boat. We do have the advantage in the organization of lower turnover in general and long tenure, but the speed at which we are growing, I think it's creating some challenges for us. We are taking an offensive move from that perspective. And we've presented to John on Monday, some good lean-in strategies on what we need to be doing from a people perspective across the board. We've always been on top of it with drivers. Now I feel like we're going to be investing in our teams when it comes to our office people and leaning into them on that investment, I think, will pay off for us greatly. Because we do think we're going to have a good growth year next year. And I might even add to something Brad said about how large we could be in dedicator of what that means. I think it comes down to the type of business that we onboard and how many customers and locations we onboard. If we had a customer that needed us to convert 200 or 300 private fleet truck and it was already a truck, and we didn't need to go get trucks. That would be one location, with some managers that wouldn't be near as taxing as we need to actually go get all the trucks and it's in several locations, and now we're spreading lots of managers then. So that's why I think Nick's being very careful and thoughtful about what we should do and also giving us flexibility. Remember with our trade cycle, we get that. We have that as in our plan that we can flex up and down as a result. But I think it's a good challenge. We're constantly thinking about what that number should look like. What we don't want to do across the entire enterprise is do anything to our brand that would be deteriorating. So focusing on creating raving fans with our customers is our #1 focus. And whatever that means for us, we would rather -- If we had to choose between growth and brand, we would always choose brand, but we think we can do both.

Great. We'll pass it down to John Kuhlow, continue to share the mic. So maybe a balance sheet question. Earnings are showing some nice improvement here recently. It seems like next year will be a solid year for growth. Why is 1 turn of leverage the right number to think about going forward? And how are you kind of rank ordering the capital allocation priorities?

Well, the onetime has been kind of what we've guided to, to help the investing public understand how we're doing that. We're not sold on that number. We're not fixed on it. We want to try to maintain our investment-grade status. And so we need to be cognizant of the rating agencies and other things, but that is something that we are looking at, and it's not something that we're allergic to growing that if the need arose. So whether it was an acquisition or bringing on a large, dedicated fleet or whatever the case may be. And so we're not bound by that. That's just been something that we've used as our target. -- felt like there was a second part to the question, but I'm not sure. It's something on the...

Capital allocation. So if you were to take that higher hypothetically, kind of how would you rank order buybacks, acquisitions dedicated et cetera?

Yes. Our approach to capital allocation is really driven by a focus on total shareholder return. And so dividends is a component of that. Buybacks is a component of that. The most key element to that is our operations. And the way we focus on allocating capital and making decisions along those lines is what do our customers need from us and our service offerings. We have a very disciplined pricing model that we have developed over the years. It focuses primarily on return on invested capital. We put those service offerings through that model, and it dictates what the capital needs may be. Whether that's equipment, adding people, adding technology. So that's really our focus and how we come about with our capital allocation approach.

Okay. Great. Helpful. Any questions from the audience? Go ahead.

Maybe just touching on the intermodal side. I was just kind of curious, I know the pricing the [indiscernible] [ have been ] really helpful in offsetting the congestion that's occurred. But just kind of thinking more broadly, you can choose between a 1% increase in price and 1% increase in box turns, 1% increase in containers like what's most relevant, most impactful for the business?

So the question was which component is more impactful for intermodal in the business and why? If I were to just answer it for today and today only, it would obviously be price because price has the most leverage. But when we look at what the market is and our ability to create the intermodal market, we think growing for our customers is the most important thing that we can do. And maintaining appropriate margins. And so that's why when we talked about having what we called our incentive to our customers, really how do we help our customers understand what the true cost of their labor challenges look like by holding on to our equipment, it clearly articulated to them, here's exactly what it's costing us, which, therefore, should be costing you and helps you make different decisions. But we are so stringent on that. We're talking to our customers on a regular basis as to what the charges are and how we go to $0. So we're very focused on those numbers down to $0, which means we would be more fluid in the network. If we could have a lot of price and a lot of turns and happy customers, we'd want to do all 3 of those. There's always going to be a fine balance for us, but we want to move more shipments on behalf of our customers. Remember, if we're not able to move the shipments, likely no one is moving them on intermodal or chances are great that no one can. And that means that they're moving them on the highway and the discrepancy between the price of moving a shipment on the highway versus the price to move it on intermodal is very large. And so with the rising cost of fuel and just the constraints that are happening in the system, we want to do our very best to get those shipments that are moving inefficient on the highway back over into Intermodal. And that's really what we're focused on long term, I think our customer wins and we win as a result.

I know in the past, around this time of year, you've been known to send out a customer letter and you've been pretty open with your customers about the costs and the state of the market and setting price expectations. Is that something you're planning to do before year-end? And maybe, Shelley, you can just talk about kind of price and costs in 2022?

Well, it's actually before about 24 years ago, that was not something that we did or in the last 3 years. So the first 24 years, we only sent out, I believe, I've been involved in pricing for 25 years. I think we'd only sent out 3 customer letters for the first call it, 20 years. The last several years, we've had -- it's been necessary to update our customers on a more frequent basis because it's been so disruptive, and we wanted to make sure they were well equipped to talk to their C-suite. So the reason we would ever send a letter is really to equip our key contacts with what's happening with data in the market, and that's exactly what we've done. The only time we really want to send a new customer letter is if we think something has dramatically changed. We have been on calls with customers, and we have been sharing information, but we've not shared with them what we think costs will do. We also didn't share with them this year what we thought. What we said was we need to be fluid. In order to move through this year, we need to be fluid in cost servicing capacity. And we want to make sure that your product gets to ultimately the shelf for consumers. As our customers understood that as we march through 2020. I'm not planning on issuing any letter because I don't think anything has changed dramatically. But if it were to change, that would necessitate a letter. We do put out customer advisories that we just post to our website, and we'll push them an advisory that's very different than really walking them through what's happening from a supply chain perspective and what to expect on cost. Our first time I think that we ever guided them on cost was August of 2017. And I don't know how much they believed us on that, but I think they came to understand that we typically are on the front end of what's happening in the supply chain. So really, we don't want to just send out a letter unless something dramatically changes because we want to make sure if we send the letter there's something that can be useful for them, and they don't just see it as a regular cadence of here J.B. Hunt's letter again.

Got it. So I should maybe read into that, this capacity-constrained environment that we're in. Your expectation is that probably continues for most of next year?

We see a constraint at least for tomorrow. It's very difficult for us to see how long we will be constrained. Everything we forecasted, I think our budgets are way off, which sometimes that's good. Sometimes that's not. We have shared with our customers that we have inflation. We have cost pressures that we need to share in that. That's not a new conversation, but just like I brought up with the OEMs, us not being able to take on new equipment, that creates an increase in cost. And if I had known that in March, we still would be having that conversation in March. Historically, really before these disruptions happen so frequently, we could typically understand our cost basis, and we would put that into our bid pricing and our customers could then plan for that. Just like we're getting constant updates on costs, so are our customers, so they understand that. the bids that they're putting together right now don't have the best data behind them. They certainly aren't that good at forecasting because we aren't either. And so we're both challenged with this data set to say, okay, how do we create a network. And as you know, if you're running any kind of asset part of a company, you really do need to define your network and what that looks like. Our customers have struggled with that. We have as well. And so we're constantly finding that balance. They know that we have inflation that we need to have conversation. We haven't really given them that number yet because it's going to be customer-by-customer type of business. where they're located. I mean it's going to be very surgical with our customers. We don't really -- we have not ever to my knowledge outside of maybe a railroad change or something that's happened to us that we've had to talk to our customers, we don't really issue wholesale rate increases. It's not really the way we conduct business. We typically talk to each customer individually because some customers for next year, we might need only a 2% or 3% rate increase because the type of business and how fluid they are. And in other customers, we might need a 30% rate increase. So we don't like to send letters because then they use that and say, well, this is what I thought you said to me. And every case is going to be a little bit different.

Makes sense. Last call for questions from the audience. All right. I'm going to end with one for my old teammate, Brad Delco. So you've been on the other side of the table for a little over 2 years now. What do you feel like is the most underappreciated aspect of the story today now that you've seen the other side?

Put me on the spot, and I'd like to be really kind of funny. I'd like to be real funny with my response. I tell this in a joking way, but I think that Wall Street has this sort of idea that in periods like we're in that -- and I've used this earlier, that the CEO would have their feet up on the desk and just say, hey, just the tide has shifted into our favor, just give them a bunch of rate and margins are going to expand, we're going to make a lot of money and Wall Street will cheer and reward that. And this is the easy part of the cycle for us being in the seat. It is, by far, the most least accurate perception you can have. And so to put it into terms, I always used to think about when I was on the sell side, we're either in earnings season, which to the extent everyone in the audience is an investor understands what earnings season is like or travel season because you're going out and doing NDRs. The earnings season is always really tough. Early mornings, late night. I feel like the J.B. Hunt team, when I say team, it's 31,000 people has -- we have been in earnings season for 21 consecutive months. I mean it has been a grind. That's kind of my funny answer. I would say, I do think there's a misconception that we're a very siloed organization. And I don't know where that started because I see this group as well as other members of our executive leadership team, they grind every Monday morning and talk about things that are really top of mind for our organization, our customers, John leads another meeting on Thursday morning with a broader group of our leaders. And just this constant focus on how we can leverage technology here and people here and use them here and when you think about 360box, that's effectively kind of a network business moving effectively containers, except their trailers. Well, we have people that are very good at running networks in our Intermodal business. And you could talk to Darren, he's upset. He's lost some really strong members of talent because we see a big opportunity for growth in JBT. And so we have a lot of strength. We have a lot of depth in this team. And I just -- I want to make sure that Wall Street continues to see that. So you'll see us continue to introduce new people to this audience and let them test them and ask some questions and just see sort of how deep the bench is. So that's just kind of 2 things I wanted to get across.

All right. I figured that in with a fun question. So thanks so much for being here. Appreciate the support. And hope everyone has a great rest of the conference. Thanks.