J B Hunt Transport Services Inc ($JBHT) Q2 2026 Earnings Call

Please note this event is being recorded. I would now like to turn the conference over to Andrew Hall, senior director of finance. Please go ahead.

Good afternoon. Before I introduce the speakers, I would like to provide some disclosures regarding forward-looking statements. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates, or similar expressions are used to identify these forward-looking statements. These statements are based on JB 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 JB Hunt's annual report on Form 10-K and other reports and filings with the Securities and Exchange Commission. Now, I would like to introduce the speakers on today's call. This afternoon, I'm joined by our president and CEO, Shelley Simpson, our CFO, Brad Delo, Spencer Frasier, EVP of sales and marketing, our COO and president of highway services and final mile, Nick Hobs, Brad Hicks, president of dedicated contract services, and Darren Fields, president of Intermodal. I'd now like to turn the call over to our CEO, Miss Shelley Simpson, for some opening comments. Shelley,

Thanks, Shelley, and good afternoon. I'll start with some quick comments about our financial performance in the quarter. As you've seen in our release, on a GAAP basis, total revenue increased 19%, operating income improved 32%, and diluted earnings per share improved 45% compared to the prior year period. These results reflect disciplined execution and continued momentum from the strategy we've been discussing for several quarters around operational excellence and lowering our cost to serve. While market conditions have improved, the biggest driver of our performance continues to be our people executing at a high level on service, safety, productivity, and cost discipline while leveraging our technology investments. As demonstrated this quarter, our cost discipline performance wasn't at the expense of supporting future growth as we achieved double-digit volume growth across JBI, ICS, and JBT in the quarter. The investments we have made over the past several years in our people, technology, and capacity are creating meaningful advantages for our business and allowing us to respond quickly to opportunities in the market. Let me turn to our efforts on lowering our cost to serve. While market fundamentals have shifted, this remains one of the most important operational initiatives underway across the company. Over the past year, we've removed over $135 million of structural costs from our company, and we continue to look for opportunities to simplify processes, improve productivity, increase asset utilization, and leverage technology to automate work. Just as importantly, these efforts are improving the customer experience while creating operating leverage across the organization. Our objective remains the same as it has been since the beginning of this initiative. Build a stronger, more efficient company that can generate higher returns across all market environments. We are encouraged by the progress we are making and believe there remains additional runway ahead as we continue to scale our technology investments and improve efficiencies across our scope of services. Turning to capital allocation, our approach remains consistent. We are a disciplined growth company and we are equally disciplined in how we deploy capital. Our first priority continues to be investing in the business where we see opportunities to generate attractive long-term returns. We remain committed to maintaining a strong investment grade balance sheet, supporting the growth of our dividend, and being opportunistic with share repurchases when appropriate. We believe the investments we have made throughout this cycle have positioned the company exceptionally well for future growth. Importantly, much of our capacity has already been funded, providing us with significant flexibility as demand for our services improves. The combination of a strong balance sheet, healthy cash generation, and disciplined capital deployment gives us confidence in our ability to continue creating long-term shareholder value. That concludes my comments. I'll now turn it over to Spencer.

Thank you, Brad, and thanks to everyone for joining the call. I'll start by saying how proud I am of our team's performance this quarter. In a rapidly changing environment, our people stayed focused on what we could control, serving customers, managing through volatility, and helping them make the best decisions across their transportation networks. During the quarter, we saw an acceleration of the structural changes in the market that we discussed in April. Truckload capacity continued to tighten from ongoing regulatory enforcement while at the same time many carriers continued to face higher operating costs that are not fully supported by prevailing rates. As a result, several industry indicators, including higher tender rejections, higher spot pricing, and lower driver employment, moved towards levels not seen since 2021 and 2022. The pace of change has created real planning and execution challenges for our customers. Many shippers were not positioned for the speed and magnitude of these shifts and they are now looking to the best providers who can help them build more durable and flexible plans around capacity, cost, service, and mode. In the second quarter, overall freight demand improved modestly from the first quarter. Demand in many industrial markets is improving and US consumer demand remains resilient. That said, demand for JB Hunt's suite of services continues to outpace the market, supported by record volumes in JBI and double-digit volume growth in both JBT and ICS. We gained market share across our services. Retention remained strong and our pipelines in all business units continued to expand. As demand improved and capacity tightened, pricing and planning conversations with customers became more transparent, more frequent, and more flexible. We saw customers initiate more out-of-cycle/mini bids as they work to keep pricing aligned with the rising cost of capacity. Customers are also becoming increasingly mindful of the carriers they rely on, consolidating more of their business with providers that can deliver capacity at scale. This is where our mode-neutral business model and our continued investments in people, technology, and capacity create meaningful value. We are positioned to help customers optimize across orders, shipments, and modes, and to provide practical solutions as their networks adjust. During the quarter, the strongest areas of customer engagement centered on highway to intermodal conversion, dedicated fleets, and access to safe, secure, and reliable capacity. Looking ahead, we are actively helping customers prepare for fall peak, reset capacity assumptions, and begin transportation planning for 2027. While many customers did not plan for this level of a change to occur this quickly, through external customer surveys and our ongoing customer conversations show a growing recognition that it is becoming more expensive to support the capacity, service, and professional driving jobs that power our nation's supply chains. We believe that reality will shape future supply chain planning and budgeting discussions and it reinforces the role JB Hunt will play in helping lead customers through a very dynamic operating environment. With that, I'll turn the call over to Nick.

Thanks, Spencer, and good afternoon. I'll share updates on our final mile and highway businesses. But first, as we do at internal meetings, I'll start with an update on safety. Safety is core to our culture at JB Hunt, and we continue to challenge ourselves to improve on our record safety performance as measured by DOT preventable accidents per million miles. I'm proud that year to date through the second quarter, we are besting last year's results by 11%. To support our current and future growth, we will bring on drivers to maintain our high service levels to our customers. As the driver market has tightened, we have implemented various strategies to recruit and retain drivers to meet our growing needs. We have implemented sign-on bonuses in several markets and targeted driver wage increases in select markets. While these are important early actions, we believe the industry will need to continue investing in professional drivers who operate safely and comply with regulations designed to protect both themselves and the motoring public. Moving to final mile, demand remains stable across our core end markets of furniture, exercise equipment, and appliances. Demand in our fulfillment business remains strong, driven by off-price retail channels. Our sales pipeline remains healthy and we are adding new opportunities as we work to offset as much of our previously disclosed $9 million revenue headwind due to our focus on being disciplined. We remain committed to being safe and secure and providing customers with the high service levels that they have come to expect from JB Hunt. In JBT, our focus on operational excellence continues to drive growth and market share gains, highlighted by our fifth consecutive quarter of double-digit volume growth. As we discussed last quarter, the top truckload market remains challenging for independent contractors, leading us to rely more heavily on third-party capacity at current market spot rates. During the quarter, our revenue increased 35% with load growth of 14%, but our gross profit dollars declined 12%. Primarily due to higher purchase transportation rates. While we are seeing spot market opportunities in ICS to help offset some margin pressure, we don't have the same degree of opportunity within our trailer network business. Given the pace of market change, pricing implemented just a few months ago is no longer sufficient. Going forward, we remain disciplined in taking appropriate risk and are working with customers to better align rates with current market conditions and the value we provide. I'll close with ICS. The positive momentum we have felt in our business is beginning to translate to improved financial performance. We have been successful in bid season, winning more volume and are securing double-digit rate increases. While gross margin remains under pressure compared to last year, they improved sequentially from the first quarter, supported by increased spot and many bid opportunities and contractual freight repriced closer to current market conditions. The market remains dynamic and going forward our focus remains on leveraging our cost as volume scales through the platform and generating more gross profit dollars. While encouraged by the second quarter results, we remain focused on building sustained momentum. With that, I'd now like to turn the call over to Brad.

Thanks, Nick, and good afternoon, everybody. I'll provide an update on our dedicated business. Starting with the quarter, our second quarter results once again highlight the strength of our dedicated business. Despite a slow start due to weather, demand in the lawn and garden category improved and demand across our other end markets performed as expected. The second quarter also delivered another record safety performance for DCS as our team's commitment to safety and operational excellence continues to lower our cost to serve and deliver greater value for our customers. It's worth reminding everyone that while fuel is primarily a pass-through in our business, it is dilutive to operating income margin percentage. In the second quarter, we estimate that fuel was close to a 100 basis point headwind to operating margin percentage compared with the prior year quarter. During the second quarter, we sold approximately 250 trucks and remain confident we will achieve our full-year target for gross truck sales of 1,000 to 1,200 new trucks. Our sales pipeline remains robust and has strengthened over the past few months as the tightening truckload market has driven increased customer interest in a dedicated solution. In fact, our pipeline is currently at a record level in terms of number of trucks, which is a testament to the strength of our dedicated business and the value we consistently deliver for our customers. Even with more opportunities in the pipeline, we have not altered our pricing or return discipline to chase growth. We have a proven track record of value creation through our customer value delivery platform. And with our scale and density, we believe we can offer differentiated solutions to customers in the market. Last quarter, I outlined our expectation that we would return to fleet growth this year while achieving only modest operating income growth for 2026. On the fleet side, we need to see a wave of new truck growth for a few months before that growth translates into improved profitability. Given the expenses associated with starting up an account, I remain confident that this wave of growth is coming. However, we remain unwilling to sacrifice our discipline around margins and returns, particularly at this point in the cycle, simply to accelerate growth. Doing so would add risk and variability to our dedicated business, which has proven resilient throughout cycles. In fact, our win rate on new deals remains consistent with historic levels. While dedicated has historically been the last part of our business to see an inflection from a change in the freight cycle, and that will likely be true again in this cycle. I remain confident in our business and the growth opportunities ahead of us. We have a large untapped addressable market to grow into and a proven track record of disciplined financial and operational performance. I remain proud of our entire team's efforts, the great work of our professional drivers, and the value we create for our customers. With that, I'll turn it over to Darren.

Thank you, Brad, and thank you everyone for joining us this afternoon. The consistent execution of our strategy over the past several years has positioned us well to capture market share gains in the current environment. Service levels remain strong and we have available capacity to support customer growth at a time when Intermodal's value proposition is the strongest it has been in more than a decade. During the second quarter, demand for our intermodal service outperformed normal seasonality for the third consecutive quarter, and we also set a quarterly volume record with over 578,000 loads. For the quarter, volumes were up 10% year-over-year, the first double-digit volume growth quarter in over a decade. On a monthly basis, volumes were up 9% in April, up 9% in May, and up 12% in June. Transcon volume grew 5% while our Eastern volume increased 16%. Our Eastern growth comped against a plus 15% performance in the prior year, or said differently, up 31% on a 2-year stacked basis. We continue to see significant road-to-rail conversion opportunities in the East, particularly as rising truckload rates, fuel prices, and tightening truckload capacity make intermodal an increasingly attractive solution for shippers. While we have available container capacity to grow with our customers, we remain disciplined to ensure the growth is sustainable over the long term and add acceptable returns for the value we create. The rail network is experiencing quality growth and we remain actively engaged with our rail providers on resource planning to support both current and future growth. While rail service has moderated slightly as volumes accelerated, conversion activity is at levels we have not seen in more than a decade. We remain confident in our rail providers' commitment to service and our collective ability to support higher volume levels while maintaining dependable and reliable performance. The same supply challenges affecting truckload capacity are impacting the drayage market where driver availability remains tight and we are working diligently to attract quality drivers to support our growth in this environment. Our insource drayage strategy is a meaningful competitive advantage. By owning our tractors, containers, and chassis, and utilizing primarily company drivers, we maintain greater control of the customer experience while reducing reliance on more costly and less reliable third-party drayage capacity. We previously outlined a path to the low end of our long-term margin range through contributions from cost, volume, and price. We have done great work on lowering our cost to serve and believe we have achieved the point of margin from cost. On volume, the growth has materialized while remaining disciplined to attract the right freight that adds balance and connectivity across the network. So I would say we are pretty much there with the point from volume. The opportunity that is still in front of us is price. As you all know, our intermodal bid season begins each year in October and finalizes in Q3. So we're nearing completion of the 2026 bid season. In the first half of this year's bids, the operating environment at that time didn't present the same pricing opportunities that the current environment has. Historically, intermodal contract pricing has lagged truckload pricing and we continue to believe that to be the case moving forward. However, given the pace of change in the truckload market, we are increasingly encouraged by the pricing opportunity heading into the 2027 bid season than we were even a couple of months ago. Encouragingly, our improved financial performance over the last several quarters is unrelated to any material contributions from price to cover inflation. While in prior cycles, we would typically see our financial performance lag other transportation modes, we feel like we've led the broader industry as this cycle ensues. With that, I'd like to turn it back over to the operator to open the call for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. The first question will come from Baskam Majors with Stevens. Please go ahead.

Thanks for taking my questions. Hey, Brad. Darren, following up on sort of how you ended that on the pricing discussion and the optimism going forward. Can we talk through how prevalent the multi-year price agreements are with Intermodal customers today compared to prior cycles and how much visibility do these commitments give you into the contract rate renewal plan into 2027 and even beyond? And just beyond the renewals, taking a step back, beyond core pricing, what opportunities does Hunt have to increase intermodal revenue per load over the next few quarters that might not show up in a renewal number but could still meaningfully impact the business?

Sure. On the multi-year conversation, certainly we have customers that we have engaged with multi-year programs. I don't know that we've ever talked about the percentage of our business that that entails. And so I'm not ready to highlight that specifically, but we're aware of customers value to our network and maybe areas that we can work with those customers specifically related to cost around serving their business. And so, the behavior of our multi-year business is typically a little bit different than the constant change that we may face with customers that aren't engaged in multi-year agreements. Look, the environment we're in today does present new opportunities for us. I think that the number of mini bids or the number of times customers are reaching out to us looking for an answer, I don't remember it ever being any stronger than it is right now. We have tremendous numbers of opportunities to talk to our customers about new opportunities. Not every single one of those opportunities is going to drive intermodal volume. It's coming in the door for JB Hunt's total book of solutions. And so we're constantly looking for that opportunity. I do think new business pricing has contributed to benefits in our network and I fully expect that will continue through the remainder of this year and deep into next year's bid cycle. I know Spencer may also want to comment on this.

Yeah. Hey, Baskam. Thanks for the question and Darren, I'll kind of start where you left off. Really around mini bids. I think the frequency of bids has definitely increased. You said extraordinary. It was actually a record in the quarter the number of opportunities and that comes across bids proposals as well as reviews. The main point on mini bids I'd like to say is I'd almost like to get rid of the mini bid term. They are structurally larger bids as customers are competing for capacity to reset their networks. Our customers are still having significant challenges across their routing guides and that gives again all of our services opportunities to step up and be the go-to for them and create opportunities again to hopefully get the right returns that we need on all of our businesses. So, we look forward to continuing those conversations and working through and set our customers up with capacity plans that they can count on.

The next question will come from Chris Weatherbe with Wells Fargo. Please go ahead.

Hey, Chris. Hey, Brad. Good afternoon, guys. Maybe just picking up on that point, Spencer, you're talking about mini bids. I guess we understand how the bid cycle works and what's locked in and maybe what needs to wait a bit, but how do you think about the back half from a realized yield on the intermodal side with the combination of mini bids and then maybe a little bit of an opportunity around peak season because we have seen some announcements from other folks about peak season surcharges. So maybe just wrapping that all in and how we could think about the second half if there is going to be any change and what we could see.

Yeah. Chris, thanks for the question, too. I'll let Darren talk about yields and things like that. I think he's got a good answer for you there. But regarding peak season, I will talk about that. You know, we do engage in peak season planning conversations at the end of the peak season of the prior year. So, we've been in peak discussions since the end of 2025. We do have peak agreements with our customers today that have proactively planned for the 2026 season. And then we're in discussions right now trying to get forecasts with our customers and setting up really our plan and sharing with them the cost to serve and execute peak. So as far as that goes, I would say that peak from my perspective is going to be similar in timing and shape. You know, the import peak that talks about coming in early, that can happen early a little bit later, but really the lag, there's always a lag from the import peak to the execution of the domestic peak because that domestic peak is really matched to meet their consumer demand and so that's why I say the timing and the shape we expect to be similar and we continue to have ongoing discussions to make sure we're set up for success with our customers.

Yeah, Chris, let me just jump in. It's Darren again. I'll jump in on pricing change and magnitude. Look, we're not going to, I don't have a forecast number for you or any kind of guidance. What I'll tell you is our Eastern Network business behaves and trends, tracks against highway competition. And we have massive opportunities coming in the door. Spencer just highlighted that we're setting records with the opportunities that we see. The gap between the highway rates and intermodal rates has grown in this cycle. And for a long time we've said somewhere between 10 and 15% discount fuel inclusive.

The eastern network is and has been sustainable for intermodal, and we have a larger gap in the price today, largely because of rates that are now six, seven, eight, ten months old. So as we go through the rest of the year and bring on new business, we anticipate certainly closing that gap. I don't know what magnitude that presents in terms of the mix of the rate, how you model that. Just know that certainly the opportunity to improve pricing. Now we're also faced with inflationary pressures. Driver wage cost is going to move up. The cost of labor is going to move up. Our rail providers are all going to be talking to us about cost challenges they're facing. And so we're looking for pricing to recover against inflation while also improving our margin a little bit. So certainly as the rest of the year goes on and as we move into the next bid season, we will look for that gap from intermodal to truckload to close.

The next question will come from John Chappelle with Evercore ISI. Please go ahead.

Thank you. Darren, on the volume side, the acceleration from April through June and then we look at the second half of 25 or even if you wanted to stack it, it feels like it's an easier comp. So when you take that June number of 12%, look at potentially easier comps, the backdrop that you just laid out as it related to capacity rail service, the spread, is that a number now for volume in the second half of the year that continues to build off of that 12%? And if not, what kind of derails that, no pun intended?

Is that a guidance question?

No, no, no. There's a cadence question.

Listen, I think the demand for our services is extraordinarily strong. What you heard in some of the prepared comments is a lot of focus on disciplined growth. There were opportunities in the second quarter for even more volume that wasn't going to be sticky or might have contributed to even worse cost challenges for us. So we're being careful in ensuring that intermodal is the correct long-term answer for volume to onboard and convert from the highway. And I would anticipate that opportunity will continue. We're also careful with our own capacity challenges. We need to hire more drivers. We need to onboard more drainage capacity today. So that can be a bit of a headwind for us, but I'm confident in J B Hunt's ability to go out and attract, retain, and bring on drivers for our needs. As the rest of the year goes on, I don't know how to give you a forecast of percentage change, but I know that demand is really strong for what we're doing.

The next question will come from Tom Wadawitz with UBS. Please go ahead.

Hey Tom.

Yeah. Hey, good afternoon. Congratulations on the strong growth and execution on the plan. I wanted to get a sense related to intermodal margin of just where you're at on bridge productivity and also rising utilization of containers. It seems like you probably had a period where productivity was below normal maybe against a weaker freight backdrop in 23 and 24, and then the past year you've had some nice improvement in that productivity which I think has helped. Where are you at on loads per great truck and container utilization? Can that go up further and help your margin in intermodal, or is that kind of peaked out and you can't squeeze out more there? Thank you.

Sure. So on productivity around the assets and our people, our driver productivity as well as our tractor productivity has been extremely strong. And clearly we didn't pre-buy capacity on the tractor front or the driver front like we have containers. So we do have excess containers still, and there are thousands of loads for us to go grow into that capacity. So certainly volume growth in intermodal will continue to help spread fixed cost out over the system and continue to unlock margin improvement. I don't want to lean into driver productivity and tractor productivity on the driver front as being a major contributor to margin expansion. I think over the last 12 months we really did a great job as an organization, and the team was very successful in finding productivity benefits, and that is part of our cost-to-serve initiatives that we announced a year ago. So we've been successful there, but I will always put some pressure on that team for productivity improvement, but I'm not looking for that area to really unlock margin expansion. On the container front, certainly getting back to call it 2018-type container turns is certainly where we would anticipate to move. And over the last year or two, seeing that improvement while we stopped buying containers was one of the ways that has really helped that while we continue to grow into it.

The next question will come from Jason Cidle with TD Cowan. Please go ahead.

Thank you. Hey guys, how are you doing? Impressive quarter. Wanted to ask you, have you seen any impacts from at least early on from the Montgomery decision, both looking at ICS as well as the asset-based side? And if you haven't seen it thus far, what are you expecting down the road from both a capacity as well as an insurance cost standpoint?

Yeah, I would just say, this is Nick, so I'll jump in on that. I would say that we've seen more carriers come to our platform and more carriers getting approved. So I think we have seen carriers migrating from small brokers, that is our speculation, trying to go to higher ground. Plus we have a lot of freight as we've talked about. Our volumes are way up. So I think we have a lot of opportunity. But from our standpoint, the Montgomery decision, it's just increased a lot of focus on carrier selection and broker responsibility, but we already exceeded the federal minimums and we have dynamic monitoring going on. So no risk exposure increase there for us because we think we've been doing a really good job for many years with our safety focus. But we think we have seen more carriers migrate over to our platform because of that.

I might just add too, this is Brad Hicks. From a dedicated standpoint, in my prepared remarks I talked about record pipeline. How much of that is directly related to the outcome of that ruling is hard to say, but I certainly think that along with the other regulatory enforcement and the pressure on drivers, I do think there are examples where shippers want to ensure that they are partnered with the right reliable supply chain partner, and I do think that's a factor. It's really hard to pinpoint to what extent, but I do think that that is showing up to some degree.

The next question will come from Brian Austin Beck with JP Morgan. Please go ahead.

Hey Brian.

Hey afternoon everybody. Maybe just two follow-up questions on capacity. Shel mentioned some of the markets are really tight in terms of the driver side. Darren, does that cause concern on the drayage side? I know you have a lot in house, so everybody else probably feels it more than you would, but is that something where if you're already at the top end of productivity, maybe that becomes a little bit more of a challenge. And then if you can just talk through a little bit more about pulling back some of the containers off of the stacks because I know you're over about 90% right now for the first time in a while. So really peak season discussions already underway. What are you thinking about managing that stack and maybe bringing some of that more to market? Thanks very much.

Well, certainly anytime there's challenge with the driver supply, all parts of the supply chain that hire professional truck drivers are going to face some amount of challenge. I think the third-party drayage capacity out there has been under some pressure, and so I do think we have an advantage against our competition given the amount of in-source, the amount of company drivers we use. We do partner with outside carriers though and have had a lot of success for a number of years to do that, and that will remain an important part of our strategy. But as we see specific markets that are most challenged, we feel that as well. And it just sends customers looking for an intermodal conversion opportunity from the highway that much faster in those markets. And so it just contributes to even more pressure in those markets where we're trying to onboard and hire and grow our driver base so that we can grow with customers. We'll continue to work on that. As far as the container supply, we manage forecasts with customers. We manage expectations. We have a network plan around our volumes. And as we see new opportunities come at us, we're going to look for how much capacity we need to bring out of storage. That's been an ongoing process for us for well over a decade now. It's just been more visible with the amount of equipment we've had in storage over the last few years. So I don't think that our behavior around when to bring containers into the market is any different today than it ever has been. But certainly I can understand and appreciate the question.

The next question will come from Jacob Lax with Wolf Research. Please go ahead.

Hey, afternoon. Thanks for your time. Maybe just to follow up on that, how much capacity for incremental growth do you think you have today within intermodal, and how do you think about balancing volumes versus pricing going forward? And then is the competitive backdrop in transcon improving at all? Thanks.

So first of all, on the volume front, how much excess capacity? I don't know. We've got, I think for the last couple of years we've said we've had over 20% available capacity for growth.

Grew 10. So,

Let's settle on 10. And as it relates to the comparison of price versus volume, look, we're in this business and own these assets to generate a return on those investments. So we certainly balance our pricing opportunity and the volume growth opportunity around how it can contribute to our network, add value, and expand our margin. And those decisions are going on every day with the opportunities and will continue to come through the door like that. I think in the transcon competitive space, it has behaved a little bit different than normal and would have expected a little bit more pricing strength there than what we've seen. That has just shown up, a lot of rail-owned competitor, rail-owned asset-based — I'm sorry, the rail-controlled competition that we face has been a little more aggressive than what we've seen in the past. So there are times when we've been able to use our service quality and our ability to provide benefits to our network to defend that, to win more, to grow. We're not losing share in transcon, but it has been a little bit more difficult pricing environment there. Our prices are improving. I want to make sure everyone hears that our prices are up year-over-year in the transcon. It's just that the truckload capacity market is not as big of an influencer on that market as it is in the east.

The next question will come from Ken Hexter with Bank of America. Please go ahead.

Hey, good afternoon and nice job on handling the double-digit intermodal load growth into flowing into results. Brad or Darren, if utilization is up to 90% and you've got 10% excess capacity, where does utilization get to before you start buying equipment? And can you detail a bit more on the rail service level comments that you made? Are you concerned this is a cap on your growth rates near-term? Is there any particular region or market feeling more pain? Thanks guys.

Yeah. Ken, let me start with maybe not necessarily correcting my statement, but I think going back in history and saying, 'Hey, we have 20% capacity and the simple math of saying we grew 10 would suggest 10.' I think there's still opportunities, particularly — and I'll let Darren support this comment — when we're growing in the east, we have opportunities to turn those boxes faster. So a load isn't necessarily a load in every instance. And so with the growth we're seeing in the east, I think there would be opportunities for us to turn this equipment faster. I don't recall there ever really being a time when we put out an earnings report and you see a length of haul in intermodal below 1,600 miles. I think we've had two consecutive quarters of that. So the 31% two-year stack growth in the east, if that trend continues, there's probably opportunity to get more productivity on that container. So let's not just get too set in viewing that we only have 10% capacity, and then Darren, I'll let you take over from there.

Well, I think on the rail capacity front, look, when you start throwing the amount of growth that has come at those teams in pretty short order, everybody needs a minute to sort of build their plan, understand their resource planning. I'm not at all concerned about rail service moving forward, and especially the commitment to growth capacity and having the people available for our rail providers to operate. That is universal amongst all of our rail providers. Everyone is very focused on maintaining the right levels of their headcount and their equipment and just all of their ability to do that. So will there be blips along the way if growth shows up unexpected or if we and our customers are unable to forecast it and communicate what's coming? That's what makes me concerned. So I think we're doing a really good job of highlighting information we need and the ability to forecast how much volume is going to come at us and how do we communicate that with our rail providers. And everybody is very receptive, and the teams have never worked more closely than they are today in preparing for this growth.

The next question will come from Rich Harain with Deutsche Bank. Please go ahead.

Thanks team. Hi. So I guess just zooming in on some things first. Darren, I think you said pricing was positive in transcon. So the intermodal pricing that we saw reported ex fuel going positive for the first time since 2022, that's not just driven by mix, right? It's driven by some real same-store pricing growth. I wanted to clarify that. And then regarding a little more than normal transcon competition, it's encouraging to hear you're still able to defend share in the market despite that, but we're trying to understand if there's anything changing that would prohibit intermodal's ability to narrow its gap to TL rates over the next several quarters. You reminded us that could be a very attractive pricing opportunity over time given how wide the spread is. I just wanted to see if there is a significant opportunity for JBI or if the competitive environment has changed to make that more or less likely. Thanks.

Well, more than anything I want to make sure 1% positive price on revenue per load ex fuel is what we reported and is accurate. But as you heard, our eastern growth is up 16% where transcon was plus five, taking that, that's a negative to mix. So the positive pricing that is out there has been material for us to overcome a negative from the mix as we grow in the eastern network. Those loads are lower revenue per load units than a transcon load is. That doesn't mean it works at a worse margin. That's not at all what I'm saying. It's all contributing to positive benefits inside our network. But prices in the transcon, I absolutely believe will continue to close the gap back to what is their historical norm against truckload over time. It just hasn't moved as fast because the amount of business that comes to us to convert from the highway to rail in transcon is just a smaller percentage of the opportunities. There's not as much of that business for us to go convert today as there is in the east. And so that's where you see a greater opportunity to impact price mid-cycle with new opportunities that present themselves. It is just stronger in the east than it is transcon. As we move into next year's bid cycle, I fully anticipate the opportunity to talk and work with our customers around inflationary cost and generate positive improvements in our margins on that business as well.

The next question will come from Jordan Alliger with Goldman Sachs. Please go ahead.

Yeah. Hi. So a couple things. One, I'm just curious, coming on talking about dedicated in the context of what you mentioned on the pipeline and against the startup timing, how do you think about that modest EBITDA growth that you talked about? I don't know if you provided an update around that or the progression as we think from here. And then I just wanted to come back to a volume question again. I think you had mentioned the shape of the peak could look similar, and I just wanted to understand if you mean similar to 2025 as we went from Q2 to Q3 and into Q4. Thanks.

Jordan, this is Brad. I'll start with dedicated and maybe flip it over to Spencer to reiterate comments on peak. One thing we've certainly seen, the pipeline has grown. It's at record levels, even higher than we saw at the peak of COVID. And so I do think that demand for professional dedicated solutions is peaking. Is that a factor of the driver market and the pressure that people are seeing? Yes. Is it a factor on what we're seeing in the one-way rate market and the pressures that shippers are seeing? Yes. I commented already that Montgomery probably plays a role as well. But we can't forget that it's often a long sales cycle in dedicated. Historically, that's 12 to 18 months. There are times when shippers are motivated to go a little faster to introduce those solutions and the value that those solutions create. Hard to say if at this point we're seeing that speed up decision-making, but we're really excited about not only where we sit with the pipeline, but really the great performance that our team has had through execution, our safety performance of our professional drivers, and the great work of our field operations and execution supporting our customers and driving value. A lot of our growth historically has been organic, and there are numerous conversations and opportunities inside that pipeline growing with customers that we already have. We certainly are always motivated and driven to grow our customer count and grow with new customers. There's a fair amount of those opportunities inside of our pipeline as well. So we're really optimistic about where we sit. Really excited about our performance coming through Q2. If you really think about close to 100 basis points headwind or pressure on what fuel did coming in at 100 operating ratio in terms of how our fuel surcharge mechanisms work, that puts us fundamentally inside of our target margins just barely. But we're excited that we made that step. I'll turn it over to Spencer.

Yeah. Hey Jordan, I think to your question, I would answer that it would be similar to 2025, and also as our volumes move from Q2 to Q3 to Q4 when I talk about shape and timing.

The final question will come from David Vernon with Bernstein. Please go ahead.

Hey, good afternoon. Thank you. Just a quick call about driver wage issue. I mean, Shelley or Nick, could you maybe put some numbers around what kind of wage increases you're seeing out in the marketplace a little bit about how you guys are positioned versus the rest of the broader industry? And if you're talking to a generalist and you're seeing this sort of supply-demand problem with labor, if wages go up, where does the industry labor from in this kind of market?

Yep. I would just say we are seeing some pressure on driver wages. There are certain markets where we've had higher sign-on bonuses and those are increasing. The locations are increasing where we have sign-on bonuses. So the driver market is clearly getting tighter, but that really flows into our sweet spot with our corporate driver personnel and our ability to hire drivers and attract drivers. We think it sets us up very well across pretty much every segment, so really excited about that. The second part of the question, where you think you'll get drivers, I think it'll pull some people that maybe have left the industry previously, come back into the industry. I also think there'll be some good training opportunities for young people, but that's nothing quick that's going to solve that. So I think we're in for a longer-term answer to get the capacity where it needs to be. And I think there's always a good source of maybe a lot more military folks come in and some government getting involved on providing some training for people leaving the military. So there's some good sources out there, but there's not a good quick solution tomorrow. So I think that means capacity will remain tight for a while, which sets everything up for more intermodal conversions while we get that sorted out on the capacity side.

Hey David, I was just going to expand on one of Nick's comments around our corporate driver personnel. I think we've talked about this over the years, but we have tremendous experience. We believe that it is a competitive advantage for us, and we believe that we are positioned to outperform the market with respect to attract, recruit, and retain drivers. So while this pressure is felt across the entire industry, we think that we're best positioned to succeed when that pressure exists. And I think that we've proven that in our history in the past. And I think that we're already seeing signs of being able to win in this environment that we find ourselves in right now.

This concludes our question and answer session. I would like to turn the conference back over to Miss Shelley Simpson for any closing remarks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.