JB Hunt Transport Services Inc. (NASDAQ:JBHT) Q1 2019 Earnings Conference Call - Final Transcript

Apr 15, 2019 • 05:00 pm ET


JB Hunt Transport Services Inc. (NASDAQ:JBHT) Q1 2019 Earnings Conference Call - Final Transcript


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Good afternoon. My name is Artesia and I will be your conference operator today. At this time, I would like to welcome everyone to the 2019 Q1 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you.

Mr. David Mee, you may begin your conference.

David G. Mee

Thank you, Artesia. Good afternoon and thank you for joining our call. With me are John Roberts, our CEO; Terry Matthews, President of Intermodal; Nick Hobbs, President of DCS; and Shelley Simpson, our Chief Commercial Officer and President of Highway Services, for those of you that don't know, covers both our ICS and Truck business units.

Quick reminder on the format. After I churn through a couple of minutes of opening remarks, we'll open the lines for questions. Please note yourself and please limit yourself to one question and one follow-up so we can get through as many people as possible on the call. Thank you.

John N. Roberts, III

As for opening remarks, on a consolidated basis, the published results obviously revealed headwinds in parts of our business that massed improvements and forward progress and others. In Intermodal, volume or lack thereof is obviously the main story. We expected it to be down from a reasonably strong first quarter 2018 to the expected and planned ramp closings to train reroutings and from our sequential volume trends coming off a very strong pricing season in 2018. But the service disruptions from weather issues starting in late January and progressing through late February actually caused some freight to revert back to the highway, in addition to loads being outright cancelled.

When the service begin to improve, we did not see a snap back in customer demand in March, which was our biggest surprise and frankly missed our expectations. While it is way too early to make a trend call for either the second quarter 2019 or for the rest of the year, we are still waiting for customer demand to accelerate.

DCS did have a progressive quarter as they successfully onboarded an additional 400 plus trucks in the new customer contracts and again the integration of the Cory acquisition, which closed in February. Overall, margins held as expected as non-final mile business that has been operating for more than 12 months performed in a seasonally expected 11% , but this success was masked by the start-up costs in the quarter and the growing lower-margin, high return on capital for Intermodal business and the Cory integration cost.

ICS results demonstrated the aggressive customer pricing becoming apparent in the brokerage market, the adequate supply of capacity to meet that customer demand and our commitment to devote resources to further develop the technology expected to capture additional revenue opportunities, assist driving out waste in the transportation industry and lower our enterprise operating costs. For the quarter, in addition to their reported revenue, ICS sold approximately $80 million in revenue recognized by our other business units,