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

Okay. Welcome back to Transports in the afternoon here. Very excited to get started again with the folks from J.B. Hunt. So we're very pleased to be joined by Nick Hobbs, who is COO, President of Highway Services and Final Mile Services to my right here. We have Brad Hicks, President, Dedicated Contract Services; and Brad Delco, SVP of Finance. I think probably the best way to kick off would maybe to talk a little bit about what you guys are thinking about the current environment. It's obviously a very dynamic environment with the potential that people are looking for a bit of a lull, maybe followed by some pickup in freight. But let's talk the truck side to start. So -- maybe Nick, kick it over to you to kind of talk about your business and what you're seeing in the markets and then we can kind of go down the line.

Yes. I would just say in our conversations, we've talked to a lot of our customers. We get out a lot and talk to a lot of our customers. And I would say what they're planning on is a peak, but not a very sharp peak, more kind of go up a little bit and kind of flatten out, plateau. I would say that's from the highway side, probably the intermodal side as well, what most of our customers are saying. So there's a lot of things that's nuanced to that capacity. So we think the demand is going to be fairly consistent. Okay, peak. If you talk to most customers, they all got different nuances of how they've handled the tariffs. But probably peak will be okay. And so it's just a matter of supply at that point. And I think there's a lot of different noise, different things going on that maybe gives us a little bit of optimism that maybe some things are happening on the supply side that might be going away a little bit. And we've seen road check and saw spot rates tick up quite a bit from some of our carriers. Then when we think about our OEs, they're saying, "Hey, their sales is not there. Their inventory to dealers is really high." And so got a little concern there. Then they also say, I see some inventory that's coming into auction that's been repossessed. So I hadn't seen that before. Nuances. And then I would just say the other thing that we're listening to in addition to our customers, they're feeling good about their end consumers. But I would just say when we think about proficiency, English proficiency, there have been different reports out. I think that will have a little bit. I don't know how much impact a little bit. But I would also say there's a lot of noise really in the industry starting to spark about cabotage. And I think that's really coming on. I think that's a really big play on where cheap rates are coming from. And so I think if they really start enforcing some of that more, and we're hearing things coming out of Texas that they've done some testing. So I think that could take some capacity out as well, and that's the driver for violation of [ visa ]. So pretty serious stuff, and I think that's happening some. So okay demand, maybe a little supply out. If you look at net revocations of operating authority, it continues to go down, less and less trucks. So maybe a little bit of optimism.

Okay. So before we move on to the other businesses, let's talk a little bit about the capacity side because I think those are all interesting things that you pointed out, I think, particularly English language proficiencies, the B1 drivers as well. I guess, do you expect -- I guess, first off, how do you think about enforcement? Do you have any indication of what enforcement might look like when we get to the end of June and the English language proficiency goes into effect?

I just think it will -- I don't know if it will be as -- they won't be as blatant as what they were during road check of more inspections. But I think in probably the red states, there'll be more enforcements out doing some of those inspections. So I think that's how they will catch it. On the cabotage, I think there'll be some -- the ATA, American Truck Association is going to be talking to Duffy to try to get more attention from him to focus on that. I think it's going to be a state-by-state enforcement at the state level, and I think some will participate more than others. And Brad belongs to the Arkansas Trucking Association. I'm on the American. And I would just say a lot of states are talking about those things. So I think they're doing their part to get enforcement to really pay attention to that. So we'll see what the impact is.

And if you think about the market as it stands right now, are there any sort of particular areas that are either a bit stronger, a bit weaker than others?

Yes. So weakness, I would say furniture is clearly weak. There's been no demand. A lot of people bought furniture during COVID kind of went away. And then as Brad says, furniture went in recession. I'd say exercise equipment is another one that's that way. But I'd say on the upside, home improvement retailers, interest rates are high. People are not buying new homes. So a lot of remodels. So they're more optimistic. Grocery, pretty optimistic, everybody kind of trading down from eating out as much to more meals at home. So you see some of that. And then I'd say there's movement from more higher end, everybody is trading down a level on the retail side as well.

Okay. And then maybe the last one before we move on for a moment. If you were to think about truckload market equilibrium, care to venture I guess, kind of how close we are to that and how much extra capacity might still be lingering around the market right now?

I'm an optimist. So I'd say we're getting pretty close to equilibrium just because of all those previous things I've talked about. I think we're there and just the slightest little thing. If you see -- we saw a slight increase. There's not as much of a produce season in Florida as there used to be, but there's still a little bit of one. So when those trucks went south for about a month or so, you saw rates in the Southeast tick up. So that tells me the sensitivity is there. They're getting fairly close. And then tender reject rates are in the 7-ish, 6, 7-ish percent. So that's starting to trickle up. So those are just ever slightly going up. So -- that's my optimism.

All right. Moving in the right direction. That's not a bad thing. So Brad Hicks, maybe we'll talk a little bit about Dedicated and how you guys are thinking about things there. That's been a business that's significantly steadier. It's not lost on us that the margins in that business outperformed the peers by a pretty decent amount even at this point in the cycle. So I guess how are we thinking about it? Do we feel like we bottomed from a Dedicated perspective?

Yes. Well, first, Chris, thanks for having us. I appreciate the invitation to be here and participate in the conference. For us, our strategy is the same. We are hyper focused on private fleet and private fleet conversion. And so when we are successful at identifying that true candidate, and so our version of Dedicated and every carrier, I think, has their own version of Dedicated, but our version looks like here's a private fleet that, that customer owns and operates. And we work hard to do the comparison to understand what our value proposition is for them to consider that outsource. So things like let us use our balance sheet. We'll supply the capital, we'll buy the trucks and trailers. Even if they're currently owned, we'll buy them from that shipper. That frees up their own capital to pour back into their core business, whatever that core business might be. In the environment we're in today, insurance and risk is very top of mind, nuclear settlements. And so we can take that ownership of that risk element away from them and create that protection for their core business. And then the last two really that's around our density, our size and scale that translates to flexibility for that shipper. And so every time we look at a private fleet and we look at the business that they execute, they're making a choice on where do they settle in on the size of their fleet. Do they build it for the peak volumes that they have? Maybe that's a day a week issue or need that they have, maybe it's seasonal. We're able to come in and baseline our fleet typically lower than that, because we can leverage the balance of the J.B. Hunt scroll, whether that's another dedicated fleet, whether that's our intramodal dray fleet, whether that's leveraging capacity out of Nick's groups to source the ebbing and flowing. And we can do that at a high service level, typically at the same base cost that their base fleet costs. And so when they have to trickle up, I'm sure we'll talk a little bit about peak and what the expectation is, but we're working with all those customers now on what their fall needs are going to be and then how we're going to execute that plan to grow their fleet incrementally for 4 weeks at a time, for 6 weeks at a time, for 8 weeks at a time. When we do that, we do it at the base rate. And so they're not having to go to the market and get that premium truck to cover that need at that point in time. And so those are the value propositions. And from that lens, I think that we've been reasonably satisfied with the sales and the growth that we've had. I think we were on record at 1,540-ish trucks last year, I think, that we sold new business. Unfortunately, you don't see a ton of that coming through as net growth because we have had, as we've alerted you all for the last 7 or 8 quarters, known losses that we're working against that. And so again, an element of our dedicated is that with those losses, we're not having to consume those losses all at the same time simultaneously. We've had wind-down clauses in those agreements that they have to step down over a period of time, and that's why we've been able to have that visibility. The good news is we're largely flat in this window of time, and I think that's still a very good positive considering the landscape of the overall market. Very proud of our operating performance, as you highlighted, still not hitting our expectations in terms of our target, but we're really, really close. Again, a great testament to the resilient model that I think that we have. And so as I sum up '25 in Dedicated, I would say things have been very steady for us. And I'm going to take that, and I would want you all to read into that, that that's a positive because things have been anything but steady in the prior 2 to 3 years. And so I do feel like -- I wouldn't say it's the bottom, but I do feel like for us, our expectation to get back on that net growth, we still have a very healthy pipeline. We're still bringing on new names, new fleets, new deals. The one area that maybe we've not highlighted as specifically. The other thing that we've been dealing with the last couple of years is existing fleets that we didn't lose, but they're a little bit smaller today than they would have been maybe 18 or 36 months ago. And that's a 20-truck fleet that, that customer, whatever it is they do, they're a little bit down coming off of COVID. And now we're a 17 tractor fleet. Well, you do that a few times over the just shy of 700 unique account locations we have, that adds up to a significant amount of trucks. What we've seen in other cycles, though, is that those will rebound. And when they do rebound, we're the immediate beneficiary. It doesn't cost us anywhere near the same amount to onboard back onesies and twosies at an existing fleet as it does to start up a complete fleet. And so those can come in and really be healthy for us and be accretive to our performance pretty quickly. And I would expect that to happen sometime in the future. We're not great predictors as we all know. We've tried to predict it for each of the last 2 years, and we've been wrong. But we do believe, as Nick mentioned, that equilibrium is getting real close. I think that there's fragileness in supply chain and the supply side and any little lift will start to be felt, and I think that will be really healthy for J.B. Hunt.

And in terms of fleet count, just remind us when we start to get past some of the big churn is we need to see that in 3Q, 4Q progressively?

Yes. I think we'll get back to net growth in the second half. I can't guarantee it's by the end of Q3 or if it's in Q4, there's timing that comes in. We can sell a deal even today, and we might not start that location until November or December. And we have some of those already in the profile on things that we've already sold and executed against that have yet to start. Every customer is a little different. Sometimes if it's specialized equipment, it can be a little bit farther out, and it won't be too long when we get commitments from new customers on new locations. Some of those will even start to push into early '26, depending on the type and style of the equipment. But I think that you'll see us have net tractor growth in the second half.

And the last question before I move on to Brad Delco. Pricing around CPI-ish is kind of the right way to think. I mean, is that still the opportunity in Dedicated?

Well, so are you talking about what our increases have been? Yes. Most of our agreements have a formula that's a hybrid of the CPI and the ECI. Those have been trending in the 3.5-ish percent, which is down. Two years ago, we were more in the 4.5. It stepped down closer to 4 last year. Now we sit 3.5-ish where we've been able to execute those. The one area that typically -- so that's -- if we have a 5-year agreement, we have that inflationary index that comes on the calendar of the anniversary of those agreements. And so that helps us do a better and more effective job at offsetting what inflation we've experienced as a company versus my peer business units. And I think that, that also is why you see us run that 9.8% operating margin in Q1. I think we ended last year at 89.02 and so because we're getting those 3, 3.5 and the other thing that I tell customers all the time because sometimes they don't love it. But if you don't have that tool, what you really have then is an agreement that's a 0, 0, 0, and then you're faced with needing a 15% adjustment. And I used to that annual cadence of costs going up, whether it's the group medical insurance or their insurance premiums or even when they buy trucks, I've done this for 29 years. And in every single one of those 29 years, the truck their costs more than it did the previous year, right? So the cost of equipment trickles up. And I think they're just used to that. And so it works and it makes it nonobjective, unemotional and allows us to really work with our customers and focus on efficiency gains and value opportunities as opposed to having to negotiate every 9 to 12 months on what are the rates going to be. And so I do think it has really helped the business model have stability and resiliency, and I think that's been evident in the cycle.

So Brad Delco, you don't get off the hook, so we're going to ask you some intramodal questions, put your intramodal hat on. I guess, maybe give us a little bit of a lay of land of how things are going. I think in the past, you've talked about how the East was reasonably resilient in spite of what's been a softer truckload market. So can you talk a little bit about just volume trends, and we can kind of touch base on price as well.

Sure. I mean I'll keep it high level. But Nick did a good job early on basically saying, listen, we see the headlines. We know the concerns. We see how volatile the general market has been. There's been fears of air pockets and bullwhips and all that. I've heard it and read all what has been written about it. You average it all out and you kind of have seen probably significantly more steady business over the course of the last several months than the sensationalized views and opinions that I think have been talked about or written about. We were sharing some charts, and I think it's interesting when you look at sort of the order book and the shipments that have been outbound, call it, China, what we've seen in terms of magnitude in terms of the up and down has actually been smaller than what we see every year during Lunar New Year. So not to say much to do about nothing. We have certainly seen our customers all have different strategies in terms of how they want to manage through some of this noise. But when you average it all out and everyone had different strategy and everyone, maybe we can debate some stuff -- some inventory was pulled forward. Some people are trying to bring some stuff in during this 90-day pause. But when it all sort of averages out, I think generally, business has been way more stable than what I think concern has been from the market. To your second point, specifically on intermodal, yes, I mean, I've been fairly vocal in a lot of my investor conversations that a big part of the story that's being missed right now, we put up 13% volume growth in the Eastern network in the first quarter. And we have a large base of business. And so that type of growth in our Eastern network when we really have had not many significant tailwinds. If anything, we might had more headwinds, headwinds being very depressed truck rates, headwinds being lower fuel prices. So when you think about things that typically drive that conversation or that conversion, it's, "Hey, we want to mitigate some of our cost headwinds." I'm hypothetically speaking here, but if we think truck rates are going up a couple of percentage points, we can convert some of our highway freight to intermodal, get the benefit in the Eastern network. We talk about it typically being a 10% to 15% discount to truck. And I think Darren Field, our President of Intermodal, has done a good job on our last couple of public appearances, earnings calls to give credit where credit is due. The Eastern railroads are performing extremely well. Customers are getting the benefit of consistent service at a discount to truck, and we're seeing good growth there. And I think that, that should be optimistic for the future when we likely will see more -- or the industry will see higher truck rates. The industry, maybe with some more demand, maybe with lower interest rates, maybe with stronger housing, may see fuel prices drift up. And so when we have tailwinds, what could that growth opportunity look like? And I just -- you give me a chance to talk, Chris, I'm going to take every minute I can. I appreciate that. We're in a really good position in terms of how we're set up organizationally with -- we have been focused on cost, driving productivity, but we've also been very disciplined in terms of capital. We can grow a lot in Intermodal without really needing to deploy a lot of capital to support that growth. Brad Hicks running Dedicated will be hopefully deploying a lot of capital because Dedicated is our most capital-intensive business, but every incremental dollar of capital we deploy there for growth is success-based based upon a typical signage of a 5-year contract. And Nick, managing the other parts of our business really doesn't require a lot of capital. So when I think about where we are today, how our balance sheet is set up, what our opportunity is going forward to the extent, it's still when, not if there is a recovery, we're in a good position kind of on the operational side. But in terms of to like how we positioned ourselves with what investments we've made during this downturn to allow us to generate a lot of good return, a lot of good cash flow off of the investments we made.

And just to close the loop on price, I'm guessing the commentary is not much different than what we heard last time. So we're kind of in a flattish type of environment.

I heard a different competitor on stage today talk about flat to up slightly, and I don't think we disagree too much with that. I think for us, we've talked about going in -- this is Intermodal specifically. We've talked about our strategy being, obviously, we want to repair our margins. Pricing will do that first and foremost and fastest. We compete and that's market dependent. Now number two, there have been -- our network has been more out of balance than normal. So winning the right freight, eliminating drive out cost. We've been, and I would say, probably most successful in that part of our strategy in bid season. And then number three is to grow volume. So we feel good about being able to balance. We feel good about our ability to grow volume. We have to compete on price. We think we've had good opportunities to get price in headhaul lanes, so where we're seeing typically stronger demand, where it has been more competitive has been in backhaul, but there is benefit of having more balance in your network, eliminating empties. And like I said, we feel like that's been a part of our bid strategy that we could probably speak most confidently about being successful.

I'm going to come back to that. But Nick, I want to touch base with you on price as well. We didn't talk about bid season and kind of how you think that plays out over the course of the truck business.

Yes. Truck business is really pretty similar to what he just said, flattish to up just a little bit on what we've seen and what we call our same-store sales. So we feel good about that. We'd love to have more. We're trying to fill up our boxes. So it's more about more loads, and so we're seeing growth. So we're trying to leverage our boxes and maximize the revenue on the boxes. So we try to think of our truckload business like Intermodal, just not rail associated. We use independent contractors and other third-party carriers to handle our boxes. And so a lot of variable costs in there. So if we can get those things moving, then that helps us a lot. So we've been successful, growth one and then getting a little bit of rate, but we do need a lot more rate.

Okay. Nick, you might just mention too, I know you mentioned it earlier today where you had some scenarios where customers that we've given fantastic service that do seem to be rewarding us more than maybe the market will bear. I think that's worthy.

Yes. We've had a tremendous focus on service all across our org, always had great service and dedicated. And really, we've just tried to get a service mindset across every business unit. And so that's been an initiative along with CVD. But what we've been seeing is -- some of our customers that are very astute in what's going on in the market and usually kind of as a step ahead of most of our customers and what -- when it's turning. We've seen some of them give us a little bit of a premium because our service is at the top of the scorecard. And so they'll give us a little bit more. And so our competitors shown the incumbents, if we are the incumbent, they got to beat us by a little bit more to take that business. So we've been successful with 3 or 4 of our larger customers in that sense. So that tells me also gives me confidence that they think the market is about to turn as well so.

And then on ICS, I did want to touch on that as well to get a sense of how you see that sort of playing out. This has been a challenging market, I think, across brokerage for the last couple of years, and we've seen that with a lot of the competitors. You guys have called, I think, some of the business there as well. I guess as we look out and think about 2025, what do you see as the opportunity there kind of getting that business back towards kind of a breakeven/profitability over the next couple of years.

Yes. Clearly, that's the plan. I'm excited about brokerage. It's the first time I've been in brokerage, been with the company 41 years. And last November, I got the opportunity for brokerage. I think that 6 months has been like a decade, I told somebody the other day. So -- but I'm excited about it. We're set up. We've done a good job of reducing our cost there. So I think we've got our fixed cost right. We can still do a little bit. But what we've got to do is really leverage our fixed cost, which is our systems and our people. And I think we can get a lot of leverage with where we're at. So I think we're getting close to where we want to be, but we're really focused on very service-sensitive, high-value loads. We're trying to go after not what I would call the commoditized part of brokerage and really trying to grow that. And we've had a lot of success in the last few weeks. We're getting a lot of momentum on our sales of really getting clarity on what we're going to sell and build them back. About a year or so ago, we probably got a little too aggressive on our pricing and lost some business that we probably looking back, shouldn't have lost. But I think we're in a really good shape with our customers to really leverage and grow. And over the next couple of years, I think you're going to see the margins start to improve, and you'll clearly see a lot of growth and margin improvement there. So I think we're really sitting in a really good spot in brokerage.

You mentioned the cost side, so that's something we've been watching closely, and that has been ticking down quarter-to-quarter. Are we at the right level now? Or is there more opportunity left on the cost side?

I think there's a little bit left. But I would say if I was going to weight it, it's probably 80% to 85% needs to be more freight coming in. Let's go get the freight and get customers and also trimming a little bit. Because we've got some initiatives that we're looking at to really still try to trim cost out without getting into the muscle. And that's all across the business. But I would feel we've done a really good job of rightsizing facilities and offices and all that on the brokerage side. So I think we're in a really good spot. Just quick a couple more things.

Got it. Brad, Hicks, you want to talk about sort of dedicated margins in the context of your longer-term targets. You say you're not quite there yet. I guess as we think about the sales cycle and the length of the contracts, how long do you think it takes to get back towards that? I know the market is going to be part of the -- what dictates that. But how do you think about that?

Yes. When I think about where we sit today and getting it back into that 12% to 14%, one of the things that has been difficult in these last 8 quarters as we've had more pronounced losses when you turn off business that's otherwise performing and while at the same time, you're replacing it with new business that you have to onboard that carries a pretty significant expense in those first few months, that's kind of a negative position to be in. Now as we grow in the future, we are going to have those start-up costs and so that does overweight us a little bit. We do like to look at our business, we'll call it the base business, and we evaluate the health and performance of the base business. And I think we said this before that the base business is performing inside of range. And so now we got to get enough in range that it can overcome the new starts and the drag that we have on new implementations. And so I feel like we're real close. It's hard to say in terms of the timing or quarters. The other thing that can work against us there, Chris, is if we do have a period of substantial growth well, then it will overweight us on those. The crazy thing is that if we had no growth in the second half, as an example, which we don't want, and I'm sure that ultimately, you all don't want either, it probably would put us in our targets. And so it's kind of those -- we're constantly weighing that around the decisions we're making. But we believe just as all of our businesses at J.B. Hunt, we're focused on growth. We're focused on getting back to that net 800 to a 1,000. Once we get there and that cadence and pace, I think you'll see us come really in line with what our target ranges are. So the sooner that we can do that, I think the faster we get back to those. Notwithstanding if you have too much growth in one quarter versus another, we've always been a little bit lumpy in that regard. We can try and time the sales, but the starts are where -- not necessarily can we dictate that. And so sometimes we can have overweighted starts in Q3 and underweighted in Q4, and so you get a little bit of that whipsaw effect. But I feel like we've been there probably 3 of the last 5 years, and I feel like we can get back there in a relatively short fashion.

Chris, I think if I can add, the one thing I think is largely overlooked or misunderstood about Dedicated is the level of account-by-account visibility we have to profitability. And back in the day, if you were building out a retail model, you could like look at vintage analysis of like, okay, all the stores you opened in 2015 or all the stores you opened in [ 2016 ], you literally have that level of visibility into each of our start-ups. And so we look at, and I've shared this on some of our calls, if you looked at our first quarter performance, GAAP operating margin of 9.8% doesn't compare to a lot of our competitors, how they report their margins net of fuel surcharge, which had we -- if we were to report that way, would show our margins better. If you removed all start-up accounts in 2025, so any revenue that we generated associated with the 2025 start-up and any operating loss that we had associated with those specific locations. And by the way, if we started up something late in 2024, it would still be a drag to first quarter. But it's about 100 basis point headwind to that margin. So that [ 9.8 ] would look more like, call it, a 10.8. And so it just gives you a little bit of visibility. And first quarter is always the most challenged -- what we've talked about seasonality in our business. Dedicated first quarter is usually one of the more challenging from a margin perspective. Q2 and Q3 are usually you're better, and I think Q4 usually falls somewhere between Q1 and kind of that Q2, Q3 average. So there's just a tremendous amount of financial accountability and discipline in this business, I think, largely gets overlooked. And one thing I think we should be encouraged about the underwriting discipline of how we price those deals has not changed at all through the last several years. And so it just gives me a lot of hope and a lot of optimism for what this business will look like going forward.

It does -- the way that we underwrite will ebb and flow a little bit, but we still have our floors. And we've not compromised that even in the 1,500-plus tractor sales we had in 2024. As an example, we did not compromise our floors. And so there's times when we're on the upper end of that range, it's a lot like the 12 to 14, right? There's times that it's closer to 12. There's times it's closer to 14. We're probably in an environment where it's closer to that floor more recently, but we've not gone below the floor. And I think that, that just speaks to the discipline that we have, the level of visibility we have. Brad mentioned the view. I mean, every one of our unique locations has its own profit center managed by an individual P&L with an individual manager. We look at it in different groupings, whether it's the verticals that we're in, whether the timing of when they start, we still even are monitoring all of our '24 starts and how are they coming out. And so for us, in Dedicated, it typically looks like this. You lose money in the first 3 months, call it, a 125 OR, sometimes maybe 130, sometimes it's 120. The next 3 months, you're basically breakeven and then you should be on model thereafter. And so when you look at it over -- anything that starts in the second half is a loss for us. It's going to be a drag. Anything that started in January, we get 6 to 7 months of target profitability in this calendar year. And so that's where that timing plays a role, but we keep a real close line of sight on that. Anything really to start in '24, anything that starts up in '25, everything else previous to '24 is grouped at a macro level in what we call our base business.

So in the time we have left, I probably should have asked for maybe 2 slides to talk about all the different businesses that you guys have here. I did want to come back to Intermodal. So Brad Delco, you did mention balance in Intermodal. I think you talked about 3 pieces of the -- 3 legs of the stool, I guess, volume, balance and then price. And so we understand the price dynamic and where you are there, volume, like you said, kind of maybe less volatile than what was perceived by the market and maybe some progress on the balance side. So how much margin opportunity comes from balance? How do you think about that? Is that something that has the potential to improve margins sequentially without price changing materially?

We're on border of guidance. So...

Just on the border, just on the border.

Where I'll try to trade is. I think we could see a visible improvement, assuming all else being equal, which, by the way, in transport, you never have all variables the same and only the one variable here being balance change. So -- my hope would be that as we've talked about, when most of our bids are completed, when we implement bids, it becomes typically visible in Q3 that we would have an opportunity with that as well as things we're working on, on the cost side that, yes, there's -- I mean, we go to work every day to drive improvement in our business. And so we're going to work every day trying to drive improvement. But I think that we'll be able to talk to better balance, and it could be a visible sign that shows up in -- hopefully, in the results in Q3. That's when you'll see most of that work really come to fruition. But I think if Darren were here, he would say it's not hundreds of basis points. It may not even be 100 basis points just from balance. But it's enough that all else being equal, I mean, we're still getting hit with inflationary cost pressure. We kind of talked about where pricing is. We need -- the industry as a whole needs price to help recover margin, but balance can drive margin improvement. Yes, absolutely.

The last thing I want to ask, you touched on it a little bit was sort of the cost side. So I think you and I have talked a little bit more about some of the things, and there's obviously been insurance headwinds. There's been some other headwinds across the business, and you're not alone in that. It's kind of run across the industry. Are there things we should be thinking about cost restructuring type of efforts that will ultimately drive better profitability across the businesses to be thinking about in the next quarters?

I would say more to come on this. I think as an organization, each of our executive leaders has focused in on a particular area. We've reviewed costs that we think present opportunities for structural improvements. We want to be very careful about how we manage things for the near term without sort of sacrificing what we think are opportunities for long term. I think Brad or Nick talked about, we don't want to cut into the muscle. We were very careful at managing our culture. We have a very strong culture at J.B. Hunt. We have a lot of tenure. We just have a lot of people that are really experienced that we will want to lean on when market dynamics change, and that experience will allow us to execute the way that most people have come to expect J.B. Hunt to execute. And so we're going to try to give a little bit more color as to what we think some of those opportunities are. And that means that there are opportunities. But you're right, there's some of the cost inflation, structural insurance -- that's an industry issue. The industry will need a pricing cycle, maybe -- I don't know, maybe pricing cycles to recover some of the inflationary costs we've experienced over the last several years, because most parts of the transportation industry have been in a deflationary pricing environment. And I think you can see based upon industry margins, they're certainly well in need of repair. We've been -- I'd just add that we've been on that cost management journey really for about 3 years now. And each year, we've had to really look at each other and look ourselves in the mirror and say, okay, what else? What else can we do? What else can we do? But I do feel like the 3 strategic areas of our organization, our people, our technology and our capacity, and we've continued to make what we believe are the proper investments in each of those 3, so that we are prepared when this market turns. But that doesn't mean that we still aren't challenging ourselves every day. And more recently, we've taken more of a holistic approach where each of a member of our executive leadership team, where maybe last year, it was Brad Hicks looking downward inside of Dedicated. What else can we do inside of Dedicated? This year, we've taken approach that's a little bit more across a channel. So for example, I was tasked and I've been leading efforts for maintenance for the entire organization. Nick's been leading efforts on driver and driver-related costs and efficiencies for the entire organization. And so we've all kind of come at it a little bit different lens. And it's actually helped. And we have some good action plans that as rolled out. I think we're likely to maybe share a little bit more information about that in our Q2 earnings. But we're always going to be looking for that continuous improvement. How can we maximize our efficiencies, how can we lower our cost to serve for our customers. But to Brad's point, there's some really significant headwinds that really are structural to the industry that we're going to need some rate to help overcome.

Got it. I think we are out of time. So gentlemen, thanks much for joining us. Really appreciate it.

Thank you. Thank you.

Thanks, guys.