Okay, welcome back to Transports in the afternoon here. Very excited to get started again with the folks from J.B. Hunt. We are 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 and Dedicated Contract Services, and Brad Delco, SVP of Finance. I think probably the best way to kick off would maybe be 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. Let's talk the truck side to start.
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.
Yeah, 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. I would say what they're planning on is a peak, but not a very sharp peak, more kind of a 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 is what most of our customers are saying. There are a lot of things that's nuanced to that capacity. 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. It's just a matter of supply at that point.
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. We've seen road check and stall spot rates tick up quite a bit from some of our carriers. When we think about our OEs, they're saying, "Hey, their sales is not there. Their inventory at the dealers is really high." Got a little concern there. They also say, "I see some inventory that's coming into auction that's been repossessed." Hadn't seen that before. Nuances. 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.
I would just say when we think about proficiency, English proficiency, there have been different reports out. I think that'll have a little bit. I don't know how much impact, a little bit. I would also say there's a lot of noise really in the industry starting to spark about cabotage. I think that's really coming on. I think that's a really big play on where cheap rates are coming from. 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. I think that could take some capacity out as well. That's the driver for violation of the visa. Pretty serious stuff. I think that's happening some. 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'll be as, they won't be as blatant as what they were during road check of more inspections. I think in probably the red states, there'll be more enforcements out doing some of those inspections. I think that's how they will catch it on the cabotage. I think there'll be some, the ATA, American Trucking Association, 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. I think some will participate more than others. Brad belongs to the Arkansas Trucking Association. I'm on the American. I would just say a lot of states are talking about those things. I think they're doing their part to get enforcement to really pay attention to that.
We'll see what the impact is.
If you think about the market as it stands right now, are there any sort of particular areas that are either a bit stronger or a bit weaker than others?
Yeah. 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. As Brad says, furniture went in recession. I'd say exercise equipment is another one that's that way. On the upside, home improvement retailers, interest rates are high. People are not buying new homes. 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. You see some of that. I'd say there's movement from more higher end. Everybody's trading down a level on the retail side as well.
Okay. 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. 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 in just the slightest little thing. If you see a, 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. When those trucks went south for about a month or so, you saw rates in the Southeast tick up. That tells me the sensitivity is there. They were getting fairly close. Tender reject rates are in the 7-ish, 6, 7-ish % range. That's starting to trickle up. Those are just ever slightly going up. That's my optimism.
All right. Moving in the right direction. Not a bad thing. 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 outperform the peers by a pretty decent amount, even at this point in the cycle. I guess, how are we thinking about it? Do we feel like we bottomed from a dedicated perspective?
Yeah. First, Chris, thanks for having us. Appreciate the invitation to be here and participate in the conference. You know, for us, our strategy is the same. We are hyper-focused on private fleet and private fleet conversion. When we are successful at identifying that true candidate, 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. We work hard to do the comparison to understand what our value proposition is for them to consider that outsource. 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 are in today, insurance and risk is very top of mind. Nuclear settlements. We can take that ownership of that risk element away from them and create that protection for their core business. The last 2 really surround our density, our size and scale that translates to flexibility for that shipper. Every time we look at a private fleet and we look at the business that they execute, they are 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 is a day-a-week issue or need that they have. Maybe it is 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 intermodal drain fleet, whether that's leveraging capacity out of mixed groups to source the ebbing and flowing. We can do that at a high service level, typically at the same base cost that their base fleet costs. 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 full 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. They are not having to go to the market and get that premium truck to cover that need at that point in time. Those are the value propositions. From that lens, I think that we have been reasonably satisfied with the sales and the growth that we have had. I think we were on record at 1,540-ish trucks last year, I think, that we sold new business. Unfortunately, you do not see a ton of that coming through as net growth because we have had, as we have alerted you all for the last 7 or 8 quarters, known losses that we are working against. Again, an element of our dedicated is that with those losses, we are 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. That is why we've been able to have that visibility. The good news is we're largely flat in this window of time. 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. As I sum up 2025 in dedicated, I would say things have been very steady for us. 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.
I do feel like I would not say it is 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 are still bringing on new names, new fleets, new deals. The one area that maybe we have not highlighted as specifically, the other thing that we have been dealing with the last couple of years is existing fleets that we did not lose, but they are a little bit smaller today than they would have been maybe 18 or 36 months ago. That is a 20-truck fleet that that customer, whatever it is they do, they are a little bit down coming off of COVID. Now we are a 17-tractor fleet. 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. 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. Those can come in and really be healthy for us and be accretive to our performance pretty quickly. 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. We do believe, as Nick mentioned, that equilibrium is getting real close. I think that there's fragilness in supply chain and the supply side. Any little lift will start to be felt. I think that'll be really healthy for J.B. Hunt.
Hunt in terms of fleet count. Just remind us when we start to get past some of the big churn as we need to see that in 3Q, 4Q, progressively as the year goes on. 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. We might not start that location until November or December. 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. 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 2026, depending on the type and style of the equipment. I think that you'll see us have net tractor growth in the second half.
The last question before I move on to Brad Delco, pricing around CPI-ish is kind of the right way to say. I mean, is that still the opportunity in dedicated?
Are you talking about what our increases have been?
Increases.
Yeah. Most of our agreements have a formula that's a hybrid of the CPI and the ECI. Those have been trending in the 3 and a half-ish range, which is down. 2 years ago, we were more in the 4 and a half. It stepped down closer to 4% last year. Now we sit 3 and a half-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 out on the calendar of the anniversary of those agreements. 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. 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 an 89.02%.
Because we're getting those 3, 3 and a halfs. The other thing that I tell customers all the time, because sometimes they do not love it, but if you do not have that tool, what you really have then is an agreement that is a zero, zero, zero. You are faced with needing a 15% adjustment. I do think that those customers that had their own private fleet, they are used to that annual cadence of costs going up, whether it is the group medical insurance or their insurance premiums or even when they buy trucks. I have done this for 29 years. In every single one of those 29 years, a tractor costs more than it did the previous year, right? The cost of equipment trickles up. I think they are just used to that. It works.
It makes it non-objective, 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. I do think it has really helped the business model have stability and resiliency. I think that's been evident in this cycle.
Brad Delco, you don't get off the hook. We're going to ask you some intermodal questions. Put your intermodal hat on. I guess maybe give us a little bit of the 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. Can you talk a little bit about just volume trends? We can kind of touch base on price as well.
Sure. I mean, I'll keep it high level. 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 the, 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.
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. 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. 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. 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, yeah, 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. That type of growth in our Eastern network, when we really have had not many significant tailwinds, if anything, we might have had more headwinds, headwinds being very depressed truck rates, headwinds being lower fuel prices. 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 10-15% discount to truck. 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. We're seeing good growth there. 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. When we have tailwinds, what could that growth opportunity look like? You give me a chance to talk, Chris. I'm going to take every minute I can.
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. Every incremental dollar of capital we deploy there for growth is success-based based upon a typical signage of a five-year contract. Nick, managing the other parts of our business, really doesn't require a lot of capital.
When I think about where we are today, how our balance sheet's set up, what our opportunity is going forward, to the extent it's still a when not if there's a recovery, we're in a good position kind of on the operational side. In terms of how we've 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.
Just to close the loop on price, I'm guessing the commentary is not much different than what we heard last time. We're kind of in a flattish type of environment.
I heard a different competitor on stage today talk about flat to up slightly. I do not think we disagree too much with that. I think for us, we have talked about going in, this is intermodal specifically, we have 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 is market dependent. Now, number 2, either have been our network has been more out of balance than normal. So winning the right freight, eliminating drive-out cost. We have been, and I would say probably most successful in that part of our strategy in mid-season. Number 3 is to grow volume. 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 have had good opportunities to get price in head haul lanes.
Where we're seeing typically stronger demand, where it has been more competitive, has been in back haul. There is benefit of having more balance in your network, eliminating empties. 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. 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.
Yeah. 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. We feel good about that. We'd love to have more. We're trying to fill up our boxes. It's about more loads. We're seeing growth. We're trying to leverage our boxes and maximize the revenue on the boxes. 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. A lot of variable costs in there. If we can get those things moving, that helps us a lot. 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.
Yeah. We've had a tremendous focus on service all across our org. Always had great service in dedicated. Really, we've just tried to get a service mindset across every business unit. That's been an initiative along with CBD. 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 is a step ahead of most of our customers and 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. They'll give us a little bit more. Our competitors or incumbents, if we are the incumbent, they got to beat us by a little bit more to take that business. We've been successful with 4 of our larger customers in that sense.
That tells me also, gives me confidence that they think the market's about to turn as well.
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. We have seen that with a lot of the competitors. You guys have culled, 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 break-even/profitability over the next couple of years?
Oh, yeah. Clearly, that's the plan. I'm excited about brokerage. It's the first time I've been in brokerage. I've been with the company 41 years. Last November, I got the opportunity for brokerage. I think that 6 months has been like a decade. I was telling somebody the other day. I'm excited about it. We're set up. We've done a good job of reducing our cost there. I think we've got our fixed cost right. We can still do a little bit. What we've got to do is really leverage our fixed cost, which is our systems and our people. I think we can get a lot of leverage with where we're at. I think we're getting close to where we want to be. 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. 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 building 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. I think we're in really good shape where their customers really leverage and grow. Over the next couple of years, I think you're going to see the margins start to improve. You'll clearly see a lot of growth and margin improvement there. I think we're really sitting in a really good spot in brokerage.
You mentioned the cost side. That is something we've been watching closely. That has been ticking down kind of quarter to quarter. Are we at the right level now, or is there more opportunity left on the cost side there?
I think there's a little bit left. I would say if I was going to weigh it, it's probably 80-85% needs to be more freight coming in. Let's go get the freight and get customers and also trim it a little bit. We've got some initiatives that we're looking at to really still try to trim cost out without getting into the muscle. That's all across the business. I would feel we've done a really good job of right-sizing facilities and offices and all that on the brokerage side. I think we're in a really good spot. Just tweak a couple more things.
Got it. Brad Hicks, 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 what dictates that. How do you think about that?
Yeah. When I think about where we sit today and getting it back into that 12-14, 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 startup 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.
Now we got to get enough in range that it can overcome the new starts and the drag that we have on new implementations. 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, 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. It's kind of those we're constantly weighing that around the decisions we're making. 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 800-1,000. 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. 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. The starts are where not necessarily can we dictate that. Sometimes we can have overweighted starts in Q3 and underweighted in Q4. You get a little bit of that whipsaw effect. I feel like we've been there probably 3 of the last 5 years. I feel like we can get back there in 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. Back in the day, if you were building out a retail model, you could look at vintage analysis of like, okay, all the stores you opened in 2015 or all the stores you opened in 2026. We literally have that level of visibility into each of our startups. I have shared this on some of our calls, if you looked at our first quarter performance, gap operating margin of 9.8% does not compare to a lot of our competitors how they report their margins, net of fuel surcharge, which if we were to report that way, would show our margins better.
If you removed all startup accounts in 2025, so any revenue that we generated associated with the 2025 startup and any operating loss that we had associated with those specific locations. By the way, if we started up something late in 2024, it would still be a drag to first quarter. It was about a 100 basis point headwind to that margin. That 9.8 would look more like, call it a 10.8. It just gives you a little bit of visibility. First quarter is always the most challenging. What we have 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 your better. I think Q4 usually falls somewhere between Q1 and kind of that Q2, Q3 average.
There is just a tremendous amount of financial accountability and discipline in this business, I think, largely gets overlooked. 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. This 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 12-14, right? There's times that it's closer to 12. There's times that 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 is 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. For us in dedicated, it typically looks like this. You lose money the first 3 months, call it a 125 OR. Sometimes maybe 130. Sometimes it's 120. The next 3 months, you're basically break even. You should be on model thereafter. When you look at it over a anything that starts 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. That's where that timing plays a role. We keep a real close line of sight on that.
Anything really that started in 2024, anything that starts up in 2025, everything else previous to 2024 is grouped at a macro level in what we would call our base business.
In the time we have left, I probably should have asked for maybe 2 slots to talk about all the different businesses that you guys have here. I did want to come back to intermodal. 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. 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. Maybe some progress on the balance side. 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 the border of guidance. So we're all.
Just on the border. We're just on the border.
We're all trying to trade it. 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. 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, yeah, I mean, we go to work every day to drive improvement in our business. We're going to work every day trying to drive improvement. I think that we'll be able to talk to better balance. It could be a visible sign that shows up, hopefully, in the results in Q3.
That's when you'll see most of that work really come to fruition. 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. 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. The industry as a whole needs price to help recover margin. Balance can drive margin improvement. Yes, absolutely.
The last thing I want to ask, and you touched on it a little bit, was sort of the cost side. I think you and I have talked a little bit more about some of the things. There's obviously been insurance headwinds. There's been some other headwinds across the business. 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 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 are 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. That experience will allow us to execute the way that most people have come to expect J.B. Hunt to execute.
We're going to try to give a little bit more color as to what we think some of those opportunities are. That means that there are opportunities. You're right. 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. I think you can see based upon industry margins, they're certainly well needed and in need of repair.
I'll just add that we've been on that cost management journey really for about 3 years now. 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?" I do feel like the 3 strategic areas of our organization are people, our technology, and our capacity. 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. That does not mean that we still are not challenging ourselves every day. More recently, we've taken more of a holistic approach where each member of our executive leadership team, where maybe last year it was Brad Hicks looking downward inside a dedicated, what else can we do inside a dedicated?
This year we've taken an approach that's a little bit more across a channel. 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. We've all kind of come at it a little bit different lens. It's actually helped. We have some good action plans that are as a result of that. I think we're likely to maybe share a little bit more information about that in our Q2 earnings. 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? 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 so much for joining us. Really appreciate it.