Participants

Brad Delco; Senior Vice President-Finance; J B Hunt Transport Services Inc

Shelley Simpson; President, Chief Executive Officer; J B Hunt Transport Services Inc

John Kuhlow; Chief Financial Officer, Executive Vice President, Chief Accounting Officer; J B Hunt Transport Services Inc

Spencer Frazier; Executive Vice President of Sales and Marketing; J B Hunt Transport Services Inc

Nicholas Hobbs; Executive Vice President, President of Contract Services, and Chief Operating Officer; J B Hunt Transport Services Inc

Bradley Hicks; Executive Vice President - People, President of Highway Services; J B Hunt Transport Services Inc

Darren Field; Executive Vice President, President of Intermodal; J B Hunt Transport Services Inc

Chris Wetherbee; Analyst; Wells Fargo Securities, LLC

Daniel Imbro; Analyst; Stephens, Inc

Jordan Alliger; Analyst; Goldman Sachs Co. & LLC.

Brandon Oglenski; Analyst; Barclays Capital Inc

John Chappell; Analyst; Evercore Group L.L.C

Bascome Majors; Analyst; Susquehanna Financial Group, LLLP

Scott Group; Analyst; Wolfe Research, LLC

Ken Hoexter; Analyst; BofA Securities, Inc

Brian Ossenbeck; Analyst; J.P. Morgan Securities LLC

Richard Harnain; Analyst; Deutsche Bank

Ravi Shanker; Analyst; Morgan Stanley & Co. LLC

Ari Rosa; Analyst; Citi Investment Research

Presentation

Operator

Good afternoon, and welcome to the J.B. Hunt Transport first quarter 2025 earnings conference call. (Operator Instructions) Please note that this event is being recorded. I would now like to turn the conference over to Brad Delco, Senior Vice President of Finance. Please go ahead.

Brad Delco

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 intended to identify these forward-looking statements. These statements are based on J.B. Hunt's current plans and expectations and involve risks 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 J.B. 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 am joined by our President and CEO, Shelley Simpson; our CFO, John Kuhlow; Spencer Frazier, our EVP of Sales and Marketing; our COO and President of Highway Services and Final Mile, Nick Hobbs; Brad Hicks, President of Dedicated Contract Services; and Darren Field, President of Intermodal.
I'd now like to turn the call over to our CEO, Ms. Shelley Simpson, for some opening comments. Shelley?

Shelley Simpson

Thank you, Brad, and good afternoon. The team will provide more details on each of our business segments, but at a high level, our results during the first quarter came in largely as we expected and as we shared with you back in January. I continue to be proud of the work of our team and remain confident that we have better positioned the company for future growth and success. We are seeing our service performance provide us benefits during this bid season.
Safety is core to our company's culture, and we continue to improve on our key metrics despite following two consecutive years, a record setting performance. We also remain focused and disciplined on our cost without sacrificing on our strategic investments in our people, technology and capacity. We are well positioned to scale into and leverage these investments as we grow in our large addressable markets served by our portfolio of services.
As we've shared, we are not pleased with our returns and efforts across the organization continue to reduce and eliminate costs, refine our capital plans and drive further productivity across our businesses. As I said last quarter, beginning to repair our margins and improve our financial performance remains a top priority for our leaders and our company.
Looking ahead, while headlines are changing daily, our overall strategy and focus as an organization remains the same, be operationally excellent provide a valuable service for our customers that is critical to their business needs and scale into our strategic investments.
That said, our executive team has explored various options we might employ to more aggressively eliminate costs in some of our scenario-planning analysis. However, we are fortunate in that our assets move to where our demand for our services originate, so we will have to stay agile and make quick decisions if the market dynamics change. We will stay informed by our internal data, customer feedback and outlook and make decisions as needed to maximize long-term value for our shareholders.
Before turning this over to the team, I'll close with this. The strength of our business supported our investments during this challenging freight environment while meaningfully enhancing the future earnings potential of our company. While the timing of the market inflection still remains uncertain, we will exit from a position of strength, which is unique in our industry and becoming even more unique each day. We have proven our service levels and safety culture are unmatched.
We had record first quarter intermodal volumes. Dedicated continues to have industry-leading margins, and we're seeing signs of improvement in our highway businesses. Our brand is very strong with customers, and we have the talent, systems and capacity to support our future growth.
With that, I'd like to turn the call over to our CFO, John Kuhlow. John?

John Kuhlow

Thank you, Shelley, and good afternoon, everyone. I'll review the first quarter, provide some additional details on our efforts to control costs and also give an update on capital allocation. As a general overview, our results for the quarter came in as expected and on the better side of the guidance range we had provided last quarter. That said, seasonally lower volume and rate pressure, coupled with inflationary cost headwinds more than offset our cost control and productivity improvements and weighed on margins versus the prior year period.
Starting with first quarter results. On a consolidated GAAP basis, revenue declined 1%, operating income decreased 8% and diluted EPS decreased 4% compared to the prior year quarter. The declines were primarily driven by lower yields and inflationary cost pressures across the business with noticeable increases in insurance premiums for the third consecutive year. For the full year, we continue to expect our tax rate to be between 24% and 25%, with the cadence throughout the year similar to what we reported last year.
On the subject of cost, we have made progress to rightsize our cost structure across the business, and this remains an area of focus. Over the past two years, we have reduced our people costs by over $200 million through headcount attrition and performance management. That said, a portion of these savings have been offset by annual merit increases and higher benefit costs for our employees, particularly in the area of group medical costs.
While the economic backdrop remains unpredictable, we remain focused on being cost disciplined without disrupting valuable aspects of our franchise, like our strong culture, experience across the field and preparedness to meet future customer needs. Our leadership team is consistently reviewing the business with our customer needs, and we will adapt to economic conditions, as necessary.
In addition to managing our people costs and reducing discretionary spending, we have and will remain focused on improving equipment utilization, network balance and efficiencies and reducing events to mitigate claims cost.
I'll wrap up with some thoughts on our capital allocation and priorities. First, I want to highlight that during the quarter, we issued $750 million of new senior notes, which extended the term on some of our debt that was maturing later this year.
For 2025, we are now expecting net capital expenditures to fall between $500 million to $700 million, below our prior view of $700 million to $900 million. Despite the continuation of a tough operating environment across the industry, we continue to operate from a position of financial strength with our leverage at target of 1 times trailing EBITDA.
Since we have prefunded much of our future capacity needs, our capital needs are really for replacement and success-based needs we have in our Dedicated segment. We expect to generate strong cash flows and put that cash to work to generate the highest returns for our shareholders. During the first quarter, we repurchased $234 million of stock and have $650 million remaining on our current authorization.
This now concludes my remarks, and I'll turn it over to Spencer.

Spencer Frazier

Thank you, John, and good afternoon. I'll provide an update on our view of the market and some feedback we are hearing from our customers. During the quarter, overall customer demand trended in line with normal seasonality giving consideration for an earlier Lunar New Year and the weather events that occurred in January and February.
Demand for our intermodal service continued to be strong as our focus on operational excellence differentiates us from our competitors. This focus enabled us to safely execute and meet the expectations of our customers.
In our brokerage and truck segments, we saw some weather-induced tightness. However, the truckload market loosened as the quarter progressed. This suggests truckload capacity continues to exceed demand. Regardless of market and macro changes, one thing is certain, we will continue to focus on providing the best service and value for our customers. And this focus has benefited us during bid season, affording us additional opportunities to grow with customers while also getting some rate improvement.
I'll close with some customer feedback. First, regarding service. Our customer sentiment is high, and we were honored with several awards during the quarter. Secondly, and not surprising, the uncertain macro environment and trade policy are top of mind for our customers. We recognize there are a lot of questions right now about how tariffs may impact the market. We believe they have the potential to impact both supply and demand, but the magnitude and timing is difficult to predict.
Our customers continue to plan for multiple what-if scenarios, but most of them are waiting for the dust to settle to determine how tariffs might influence and change their short and long-term business strategies. As part of this scenario-planning process, some customers are considering ways to alter supply chain freight flows and/or their country of origin sourcing. But these changes will be part of a much longer decision process.
Regardless of the strategies they deployed, we believe we are executing from a position of strength. Across our suite of services, our brand has never been stronger. We've made the investments to support our customers' business, take share in the market and make appropriate long-term returns for our shareholders.
I would now like to turn the call over to Nick.

Nicholas Hobbs

Thanks, Spencer, and good afternoon. I'll provide an update on our areas of focus across our operations, followed by a quick update on our Highway and Final Mile businesses. I'll start with some comments on our safety performance. As Shelley mentioned, safety is core to our company's culture, and we are coming off of two straight years of record performance measured by DOT preventable accidents per million miles.
I'm proud to say that through the first quarter, we have seen further improvement in our performance. During the first quarter, we also achieved another big safety accomplishment that we're proud to share. Our maintenance team in Cedar Rapids, Iowa achieved 1 million collective work hours without any injuries. This is an outstanding accomplishment that represents over 19 years of dedication and attention to detail to ensure safe, injury-free operations.
Shifting to the business. I'll start with Final Mile. Demand for big and bulky products remains muted with relatively weak demand for furniture, exercise equipment and appliances. That said, demand in our fulfillment network was positive, driven by off-price retail trends. Going forward, our focus remains on providing the highest level of service with a strong focus on being safe and secure as we deliver products to and on behalf of our customers.
Moving to JBT. Our focus is on methodically growing this business while remaining disciplined on maintaining balance in our network to drive the best utilization of our trailing assets. Bid season is always competitive, and this year is no different, but we are relatively pleased with our success so far in terms of retaining business, getting some modest rate increases as well as winning new customers. Our service levels remain strong, and that has been noticed by our customers, which has resulted in additional bid opportunities compared to last year.
Going forward, we like the progress and direction of the business and the improvements we continue to make, but meaningful improvement in our profitability will be driven by overall demand for truckload drop trailing solutions and our ability to fill excess capacity. I'll close with some comments on ICS. Our focus here remains on profitable growth targeting the right customers where we can differentiate ourselves with service while also diversifying our customer base.
Compared to the first quarter last year, we've seen more than a 20% increase in our customer count. We're about 1/3 of the way through the bid season and are pleased with the award so far and have confidence that we will continue this momentum. Our gross margins performance held up well in the quarter as we managed our purchase transportation costs, which will remain a focus while also continuing to drive efficiency in and cost out of our operations. Going forward, we will remain focused on scaling into our investments with both new and existing customers while making improvements on our cost and our productivity.
With that, I would like to turn the call over to Brad.

Bradley Hicks

Thanks, Nick, and good afternoon. I'll provide an update on our dedicated results, review our pipeline, and how we focus on operational excellence in our business. I'll start with the quarter. At a high level, the first quarter played out as expected, despite the challenging operating environment. Weather did impact us slightly more than we consider normal, particularly in the Southeast, but we were able to recover some of that impact.
Additionally, we have not seen as much of a spring surge with our lawn and garden customers, which could be delayed as we experienced a sub seasonal lift from February into March across the portfolio. At this point, we think it's too early to tell if this is a seasonal shift or less inventory being pushed out to stores. Nonetheless, the team did a great job of managing our costs and resources to deliver value for our customers.
Overall demand for our professional outsourced private fleet solutions is held up relatively well in the market. We sold approximately 260 trucks of new deals during the first quarter. As a reminder, our annual net sales target is 800 to 1,000 new trucks per year. While our pipeline remains strong, as we have said for several quarters, we have visibility to some fleet losses throughout the second quarter. Our value proposition to customers remains strong as the cost and complexity of managing and running your own private fleet continues to rise.
As a reminder, we have a long contracting process that typically takes about 18 months to close. Admittedly, we have seen some customers take a little longer to execute contracts as they are taking a more wait and see approach with some of the uncertainty in the market.
As is always the case, we remain disciplined on the type of deals we underwrite without sacrificing our return targets, and we'd still say we are pleased with the activity in recent sales we've been able to close. We believe our performance in our dedicated business during the downturn has been a standout and highlights the strength and resiliency of our model.
We have a diverse set of customers by both industry and geography, with the average size of our deals remaining relatively small. With over 25% of our business serving food related industries, we also see consistency and stability across the portfolio.
Our big focus right now aside from our customer value delivery activities is a strong focus on safety, which, as Nick mentioned is core to our culture. It is important to our drivers, the motoring public, and also is our best risk and cost mitigator in the current environment.
Going forward, we continue to expect to return to Netfleet growth in 2025, but the timing of when deals sign and close will largely drive our ability to return to modestly positive revenue and operating income growth for 2025.
We believe our differentiated model and the value proposition we offer customers is unique and are confident in our ability to compound our growth over many years to further penetrate our large addressable market.
With that, I'd like to turn it over to Darren.

Darren Field

Thank you, Brad, and thank you to everyone for joining us this afternoon. I'll review the performance of the intermodal business and give an update on the market and how we are focusing on operational excellence. I'll start with Intermodal's performance.
Overall, demand for our intermodal service was strong as we expected in the quarter. I am pleased to share we set a first quarter volume record which comes on the heels of two consecutive all-time volume records in the second half of last year.
Volumes in the quarter were up 8% year-over-year and by month we're up 9% in January, up 6% in February, and up 7% in March. As it pertains to mix, our Transcon volumes increased 4% during the quarter, and eastern volume grew 13%, our third consecutive quarter of positive Eastern Network performance.
We also saw very strong volumes in our Mexico business, a market in which we see significant opportunities in the future. I remain encouraged by our demand, particularly in the eastern network where we face the greatest competition from depressed truck rates. This is a testament to the strong service levels of the rails and how that translates into an attractive and valuable alternative to truck for our customers.
We came into bid season this year with a three pronged strategy, and I would say we are mildly pleased with our success so far. We know our margins need repair, and rates will be a large driver of that, but the degree of rate repair will be somewhat market dependent. While we are still in bid season and have some large bids that will be awarded over the next couple of months, we have had only modest success in repairing rates while retaining existing business.
Second, we were focused on achieving more network balance and winning the right freight for our network. This is an example of ways we can reduce cost and drive efficiencies by eliminating the costly movement of empty containers. We have been more successful executing on this part of the strategy.
Lastly, as in the case each year, we want to grow with new and existing customers while remaining disciplined with our rates. As a result, we have lost some business to other providers offering lower rates, but I believe we have still been successful in this third prong of our strategy to grow our overall portfolio.
Our focus on operational excellence continues to be on delivering value to our customers and positioning the business for future growth and acceptable returns on our investment. We remain focused on driving out waste and improving asset utilization by working to eliminate empty moves of our equipment. We also are strongly committed to further improving our safety performance to mitigate risks and costs associated with safety events.
In closing, we remain confident in our intermodal franchise and the value we provide for our customers. We have the capacity and capability to grow into our investments while continuing to lead the industry in both margin performance and returns on capital.
I'll now turn the call back over to the operator to give instructions for the Q&A portion.

Question and Answer Session

Operator

(Operator Instructions)
Chris Weatherby, Wells Fargo.

Chris Wetherbee

Hey, great, thanks. Good afternoon, guys. Maybe Darren we can just pick up on where we left off I guess in terms of intermodal bid season. So you know we're three months later than the last time we all talked about this. I think at the time you were maybe a little less confident or maybe didn't want to say that you get rate increases as we go through this year.
It sounds like it still is a challenging environment, but maybe you're pleased by some of the progress. Do you think we get rate increases in intermodal in 2025 as you kind of complete the bid season over the next, couple of months?

Darren Field

Okay, I appreciate the question, Chris. So we commented in those prepared comments about, mildly pleased with our success in the midseason, and I think that's because we approach it really in three key areas. We want to fill some empty legs and fill up some costly empty moves, and I do think we've been effective at that.
We have achieved growth in our eastern network and we have absolutely had some wins in pricing. We've taken some losses in prices, so I want to be clear that I don't want to sound like we're getting rate increases across the Board. I think we've been effective at communicating with our customers about the value we represent, and we have achieved some rate increases. We've also lost some business due to discipline price approach where we asked for a price increase and the customer wasn't willing to give us. It is competitive, I will say that.

Chris Wetherbee

Okay, just in terms of sequential, just one quick follow up just to make sure I'm understanding what you're saying as you think about the environment, is it going to be more dictated by sort of mix of the business and that's what you know yields might be influenced by more so as we move forward I just to, get a sense of how that plays out.

Darren Field

Yeah, clearly growth of 13% in the Easter network while 4% in the Transcon is going to change some of the revenue per load modeling that you might see out there. And let's face it, Eastern Network loads have shorter length of haul and are smaller revenue per load. That doesn't mean that they're The margin profile on those loads are worse or anything like that.
So certainly the mix of the business is going to be a little bit different than what we've seen recently, and as we continue to grow in the east, that will be an influencer on our revenue per unit that you see in the quarterly results.

Chris Wetherbee

Great. Thank you for the time. I appreciate it.

Operator

Daniel Imbro, Stevens Inc.

Daniel Imbro

Yeah, hey, good afternoon, everybody. Thanks for taking our questions. Darren, maybe to follow up on the intermodal side, I guess from a profitability or what is going well through midseason, it sounds like you are repairing the network. You're successfully filling some of those empties. I guess, how should we weigh the puts and takes maybe an unfavorable mix, but more -- and to being filled as we think about the profitability standpoint from here and then I guess with the uncertain macro and who knows what happens, I'd love to hear some commentary from what your customers are saying, but how are you guys thinking about managing your cost base as you move through the year just given the uncertainty on demand and the visibility into volume due to [3Q]?

Darren Field

Okay, let me start with the ability to fill empty legs and how you might think about that. I do. I want to be clear, I think so far in midseason we've been effective at that. I also know that historically we have delivered, we've communicated that 30% of our pricing implements each of the first three quarters and about 10% in the fourth quarter and that's no different this year. And so the impacts of the benefits of filling empty lanes probably weren't fully visible inside the first quarter and we look forward to seeing those benefits as we move throughout the remainder of the year. I'm not sure I can follow what the other questions were.

Spencer Frazier

Yeah, Dan, Daniel, thanks for the question. This is Spencer. Regarding, what our customers are saying, I shared earlier that each one of them are going through scenario planning, and really they've been doing that likely since maybe even ahead of the election. And they've been implementing various strategies that you could really expect whether it's pulling some stuff forward, pausing some shipments, possibly canceling a few, and also changing really the origin of manufacture.
But one thing I've had the opportunity to talk to several customers in the last few days, so as our team, and we support really a broad cross section of industries. And the thing that stands out in these conversations is they are resilient. They're finding ways to work through things as things change daily, and they're also thinking about long-term plans and what they might need to look at.
And you can also think about my perspective and ours here. We view these as opportunities. We've been through this before. We've been through challenges before with our customers and our value proposition stands out in times like this.
And so there might be a few things continuing to change till, like I said, the dust settles, but when that settles, it will create opportunities for us to grow with our customers and serve them. With our broad suite of services, and I did mention, right now we're executing with a position of strength, and as the commercial lead that puts us in a great position to take care of our customers as they make changes today and over the long term. So appreciate that question.

Shelley Simpson

And Daniel, I'll try to take the last question, which is really around cost. If you think about how we came into this year, we established our budget really with an effort to grow, repair our margins, everything we set out, we finished our first quarter with results that largely came in as expected. And we're in a unique environment now because we've finished up record for a third quarter in a row, record performance and intermodal with volume growth, our dedicated business that pipeline stays strong, and we have customers asking us to grow in highways.
But having said that, we recognize things are changing and, that's changing by the day or the tweet or the moment. And so for us, we want to be fluid and we need to make sure that our plans align as conditions change.
So I talked about this in my opening remarks. We have to be focused on growing, but our scenario planning really is a three pronged approach. What next steps can we make in cost management depending on which different scenario plays out, how do we think about our stock and our buyback strategy there and how can we be prudent in capital spending.
You heard John say that our results and how much we bought back in stock, we reduced our CapEx guidance by $200 million but our commitment is to strike the right balance between adjusting short term and the short term, if that becomes longer term, that changes our scenario planning, but we're not going to jeopardize the value we can create over the long term.
And I might get in with this. We have a seasoned executive team. Our average tenure at JB Hunch is 27 years. We've been here before. We've been through ups and downs, and every single one on this team are shareholders and are directly tied to our shareholders as well from a compensation perspective. And so when I think about the good and the bad times that we've been through, we know how to be nimble, and as we see more clarity on the environment, we're going to respond appropriately.

Daniel Imbro

Yeah, really appreciate all the color. Best of luck everybody.

Operator

(Operator Instructions)
Jordan Alliger, Goldman Sachs.

Jordan Alliger

Yeah. Hi, I just wanted to circle back on tariffs and perhaps what you are seeing in terms of pull forward. There's been some thought that over the next 90 days with this pause, there'll be actually a step-up in pull forward. And if so, what could that mean for the back half of this year from a volume growth perspective. Will we move into a destock mode and year-over-year volume pressures in the back half. We Realize things are fluid, but if you could maybe give some thoughts on that high-level stuff would be great. Thank you.

Spencer Frazier

Jordan, this is Spencer. Like I said earlier, each customer is in a unique spot, and they've done different strategies up to this point, and I think they're making changes, as Shelly even talked about in a very fluid way and almost daily. One thing I do think as time goes on here, whatever the outcomes of these trade negotiations are, if it does go a little bit longer, like we've seen, there might be some downs.
But when there are ups, it creates tremendous opportunity and could create challenges across our customers' supply chains that we can help them out with and really helping them to optimize their order shipments, their modes as well as their fleets.
And one thing has been consistent, though, is in our customer conversations, they're always trying to drive towards reducing cost, finding efficiencies. And one of the top conversations we've had and are still having, it's almost, I think, we're having a 100% of them as an example of finding efficiencies is really mode conversion from the highway to intermodal.
And I think that's the long-term thought of our customers. They know things are still in a changing environment, and that's a great way for them to find the most efficient answer to move their supply chain. So that's one of the things I think we'll see as things go on here and until the negotiations are settled, we'll just move with that.

Darren Field

Jordan, let me jump in here. This is Darren. I just want to say on the pull-forward discussion. Look, we've said this now this will be our third consecutive quarterly call where we don't have a bunch of customers telling us that they have pulled forward shipments now. Is it -- is it possible some have and just haven't talked about it. Is it possible that some of them -- their marketing arms made orders that maybe transportation didn't know.
I mean that's all certainly possible, and we don't want to be guessing at whether or not it was pulled forward or not. There are a few conversations that clearly there have been some, but we're struggling to get direct customer feedback about that.
Now we did see some pull forward out of Mexico for a short window of time last quarter. I think that was -- it's not a big impact to our volumes, but certainly want to acknowledge that, that has happened. So again, we continue to look for feedback from our customers every single month, every single quarter about what's happening with their own demand. And again, everybody is remaining cautious with their feedback and they're trying to adapt their plans to the environment that they're in.

Jordan Alliger

Thank you.

Operator

Brandon Oglenski, Barclays.

Brandon Oglenski

Thank you for taking the question, Darren. I was wondering if you could follow up on the commentary about some accounts going to other intermodal carriers on pricing. Is that reflected in the current run rate or the run rate that you saw in volumes in March? Or is that incremental to the outlook? And I guess more broadly, just what is it going to take to get to the right pricing outcomes in this market?

Darren Field

Well, certainly, we believe strongly in the service offering that we've really invested in and delivered on throughout last year and throughout the first quarter and asked our customers to help us in -- with prices. And in some cases, the customers felt like maybe prices that they saw from competitors would give them the service and the quality of capacity that they needed.
And we didn't feel like the alternative to the price we asked for was good enough for our returns and felt like we needed to be disciplined in that approach. And so yes, we did have some losses. I don't want to overplay the magnitude of that. There's still a lot of the bid cycle to implement, and there's really a lot of decisions from our customers we're still waiting on.
And so I don't know what the run rate coming out of March was we wouldn't typically provide that level of detail, and I don't feel like we can do that today. I don't even know that I know it exactly given challenges with volumes that just -- customers were doing a lot of different things at the end of last quarter, and we got to wait and see kind of where that shakes out.
But the disciplined approach to the price we ask for to get correct returns, particularly in the demand heavy headhaul markets is an important part of our strategy, and we've been successful with that in many, many cases, and there are some examples where we learn.

Bradley Hicks

Yes, Brandon, this is Brad. Just a follow-up on that. I think just to digest what Darren said, in headhaul markets, where we see the greatest demand, that's probably the areas we're having the greatest success getting rates. I think it was important for us to share with you and other investors that there are, in some instances, situations where we're pushing rate hard enough to where we are walking away from some business. And that at least should be a testament to ourselves as well as to the market that we're willing to walk away from business that we don't think makes sense of the network.

Brandon Oglenski

Thanks, Darren. Thanks, Brad.

Operator

John Chappell, Evercore ISI.

John Chappell

Thank you. Good afternoon. Spencer, I think we've talked about uncertainty quite a bit at this point and no one really knows how things are going to transpire. It sounds like you have three different scenarios that you're looking at as an executive team. The NRF did come out with some pretty steep reductions on import numbers starting in May, 20%-plus for several months.
So if that's one of the scenarios that you're potentially considering? How does JB Hunt manager assets and really kind of your price ask, if that's the type of outcome that we're looking for starting in a couple of months.

Darren Field

Well, I think that, that research note that showed a pretty steep decline in demand, particularly from China. It's something that we've obviously considered in terms of how we would manage the assets? And do we start -- I think part of your question is -- are we going to start changing our pricing direction based on research like that. I don't believe that would be our strategy. And we can't chase business with price because of the fear that is really unknown now of such a sharp decline in imports.
And the other elements there are, hey, some of these products are -- might be manufactured in Asia and maybe the consumer spends money on a product that came from somewhere else. So we just -- we don't even know what volumes are going to produce as those changes really impact. And so I think that it's pretty fluid right now, and we're trying to adapt to the environment that we're in and feel like we will be effective with that.

Spencer Frazier

Yes. And Darren, I might add in some of the customer conversations that we've had, like I said, people were making changes even pre-election, postelection, post March 1 or pre-March first, in April. And that's still happening and several have been very aggressive in moving their country of origin sourcing already. And so to your point on that survey, I think that's one viewpoint of what could happen. But also, as Darren mentioned, there's lots of places that people are shifting things to make sure that they can serve really ultimately the American consumer and their customer and have product on the shelves. And we're going to be in a position to move that.

John Chappell

Thanks, Spencer and Darren.

Operator

Bascome Majors, Susquehanna.

Bascome Majors

Thanks for taking my questions. Some of your largest customers are value-focused retailers with significant China import exposure. I'm just curious qualitatively, how have those bid conversations evolved in the last two weeks?
And not just specifically to pricing, though I would like to hear if that tenor has changed. But more broadly, with issues of lanes involved or your concerns about bid compliance or a number of loads, just understanding if there has been a shift in the back and forth in those large complicated bids for some of these customers.

Spencer Frazier

Yes. I might just talk about compliance through the quarter. Our compliance was strong. I think our customers -- one of the things that we've said is they've returned to kind of normal seasonality and trends. That does allow them to forecast better and connect really their demand to their transportation needs, and they've done a really nice job of that.
And so I think our compliance so far has continued to improve, really across all of our businesses, highway and intermodal. And then really what comes forward, we continue to talk with them and we're transparent about asking for forecast information. And right now, customers have not changed their forecast with us regarding their demand trends.

Operator

Scott Group, Wolfe Research.

Scott Group

Hey, thanks afternoon guys. So just a follow-up just on the tariff piece. Maybe do you have any -- I know it's -- it will be an estimate, but any sort of rough estimate of what percent of Intermodal at some point originates overseas and maybe what percent comes from China. That's just first part.
And then just secondly, any -- what's the plan in terms of what you're doing with capacity? I know there's -- we have a lot of record volume, but there still are a bunch of -- seemingly a bunch of containers not being utilized. Is there any thought of cutting capacity to manage the environment to start getting some better price and margin? Just thoughts on capacity.

Darren Field

Well, let me start with your last question first there. Certainly, we don't necessarily think that reducing the amount of capacity we have is going to change the way we price. Now certainly putting it in storage and being prepared to come out of this kind of cycle with ample capacity for the long term. Again, those investments are really long term in nature. And so that's why that equipment exists.
Yes, we have excess equipment today and we have a lot of capacity to grow with our customers. We're looking at options on what other ways can we use some of those assets in other parts of our business. That's certainly something that we're investigating. We don't have anything to say about that today, but we're looking at other ways to utilize the equipment. We've probably never given this data, but we can do that here today. I mean call it between 20% and 30% of Intermodal's volume originates on the West Coast.
Now inside that, what percent of that originates in China. I don't know that we've ever done that study, and so I want to be hesitant to actually make a guess here. But certainly, the imports that originate in China and the ever-changing environment that we're living in, we're just going to keep in close contact with our customers, with our rail providers and try to understand what's headed at the West Coast and make plans accordingly based on what we see.

Scott Group

Thank you guys.

Operator

Ken Hoexter, Bank of America.

Ken Hoexter

Hey, great. Good afternoon. So it sounds like it's not being driven by a pull forward in terms of these strong intermodal volumes, but you're hitting record levels of volumes. But you've got mid-single-digit margins now. So you're talking about losing some business on price.
So does that mean you're not pushing hard enough on price? I'm just trying to kind of contrast the record level of volumes with kind of the smallest margin level or smaller margin levels than you historically pushed for? And then, Brad, maybe to lead into that, is there any comment you throw out on 1Q to 2Q historical seasonality on margins like you gave in the first quarter?

Darren Field

Well, certainly, Ken, the volume that we're seeing was a lot of it is continuing on from last year. And we've highlighted that we would live with last year's pricing cycle for some time. So that's been part of the challenge on -- certainly on the margin front as we have really seen nice growth, particularly in the Eastern network. That's not quite -- you don't have as many days of containers consumed inside that kind of volume.
So we need even more growth. And the good news is there's a lot of growth to go get in the Eastern network and we would anticipate growth in that market for years to come, and we'll continue to focus on that every day. But the cost of the equipment continues to be a challenge for us and the imbalances inside our network have been a headwind for us, and we're looking to make repairs in that area and feel like we have had success in the bid cycle so far.

Brad Delco

Ken, that your last question, I assume you're asking me and not Brad Hicks about dedicated guidance. But aside from the one slip-up we had last earnings call, where we did provide some guidance, we're going to revert back to our 64-year trend of not providing guidance about that. But we'll give you guys updates as we have on relevant and important items as we go through conference season.

Ken Hoexter

Is it guidance? Or is it just asking for what historical trend has been? I'm just looking for an average -- from your perspective?

Brad Delco

Well, I'm sure everyone on this call has an Excel model where they can do averages and come up with their normal historical trends.

Ken Hoexter

Understood. Thanks for the time.

Operator

Brian Ossenbeck, JPMorgan.

Brian Ossenbeck

Hey, good afternoon. Thanks for taking the question. Just a quick follow-up, just maybe looking at the profitability on a per load basis. We've seen record volumes in the last three quarters, but per load is one of the lowest on record. Is there anything that potentially could change in how you get paid for some of those network inefficiencies.
Anything in terms of how contracting is being done differently in the next cycle that might prevent this from happening again. Obviously, it's been a record. So maybe it won't. But just wondering how you have to wait so much time to really get that pay off after delivering -- delivering so much volume? And then just a quick follow-up on truckload conversion. It sounds like it's actually going pretty well in a pretty soft market. So I wanted to hear how that was progressing.

Darren Field

Well, obviously, our margin, and we've been pretty vocal for a number of quarters. We're not satisfied with it. We led with really excellence in operations and service provided to our customers. We've had two consecutive great peak seasons and felt like we were in a good position to ask for more price.
The reality is the market around us is a challenge. Highway capacity remains one of the biggest competitors, if not the biggest competitor we have, certainly in Intermodal to generate better pricing. And that's the amount of equipment that we have, the challenges from network inefficiencies, that's just empty moves.
As we fill those that's a cost takeout to improve margins, but it takes time to get that implemented and takes the full bid cycle, and we'll continue to need to work on that even further even after this bid cycle. So an awful lot of effort goes into improving that margin. It's not a lack of willingness to talk to the customers about it.
But certainly, there will always and forever be a balance between the price we ask for and the volume we received from our customers, and we do need both. And that's the harsh reality of it. And we don't sit around and stare at the excess containers and change our price based on that. We're working hard to deliver great service to our customers and asking them to pay us fairly. And they're asking us to be relevant with what the alternatives to our product are. And at times, their alternatives don't support the rates we're asking for. And so that's the balance we're constantly fighting in.

Spencer Frazier

Brian, I want to add another part to that question, really just talking about mode conversion trends. And I want to touch on that again. I think that opportunity there. If you kind of separate the import supply chain from the domestic supply chain, our customers coming into this year definitely knowing where we've been at in this prolonged kind of freight recession, they understand the capacity and their planning and things like that from a truckload perspective, there is less elasticity every day.
And so they're thinking longer term, and that's why on the back of, like Darren said, our operational excellence and the value we've created over really the last, I'm going to call it, close to 20 to 24 months of great service. Our customers have tremendous confidence in leveraging intermodal to meet their supply chain needs and transit cost and high service levels.
So with a little bit of a concern still longer term about things could change in the domestic truckload market. Highway conversion is the number 1 topic and on the back of great service. So they have confidence and they know that they need to have alternatives as things do change. And that's still a conversation regardless of the import supply chain drama today.

Brian Ossenbeck

Okay. Thank you.

Operator

Richa Harnain, Deutsche Bank.

Richard Harnain

Hey everyone. Thanks for welcoming me onto this call. So I wanted to ask, I know Shelley, you talked about how you're trying to stay fluid and not sacrifice some of your strategic investments if you don't need to. But is there a [Florida] margins we should be thinking about here as you go through the exercise on identifying cost-out opportunities or maybe thoughts on how to think about a level of decremental margins if demand really worsens? Will they be similar to history or better considering some of your latent capacity that you can presumably take out if the market requires it.

Shelley Simpson

Yes. Great question. Thank you for that. So that's part of our scenario planning. I would say, from the most dramatic, and I think it was a question earlier on the call, that said, -- Hey, there might actually be a pull forward here in Q2 and then a drop off in the second half of the year. You can imagine the scenarios we are trying to plan through.
And for what length of time that those exist, how much is this short term actually longer term is it only a three month problem or a six month problem. So that's everything that we're working through. As we speak, we're listening to our customers. We're watching internal data. We're getting information from the railroads as well. So really trying to digest all of that information right now. To say what steps should we take and at what point and certainly, margins are a part of that process.

Richard Harnain

And one more, maybe more for Darren. You talked about how you're proceeding through bid season. This is not guidance, but just directionally. Consensus is baking in about 2% gains in intermodal revenue per carload for the second half of the year. Is it fair to assume that could prove optimistic just given where we are in bid season and pricing trends where they are -- or given the ongoing negotiations, you still could maybe get to positive price at some point in the near future?

Darren Field

Yes. I don't know what any kind of consensus element is. We continue to work hard with every single customer to generate more appropriate returns and begin to repair our margin. We're trying to grow -- the mix of our business is a good bit different maybe than as we sit here today in this current environment, it's a little bit different than what we would have anticipated. But the continued growth in the East gives us a great opportunity, and we'll continue to watch what happens in the -- as West Coast demand becomes more clear to us as the summer goes on.

Operator

Ravi Shanker, Morgan Stanley.

Ravi Shanker

Good afternoon. Maybe a couple of follow-ups here. We've been hearing from shippers recently that the competitiveness of the dedicated market has kind of stepped up in recent weeks, which is kind of understandable given the state of the cycle. But have you seen any change there that's worth calling out, in particular?
And also just on the comments on rate repair. Is the message that, that rate repair here takes multiple pricing cycles? Or do you think with appropriate condition, it's going to happen in this current bid season.

Bradley Hicks

Thanks, Ravi. Brad Hicks here. I'll start with at the first part of the question. I think through our lens, it's hard for us to see that it's any more competitive than what I would say is what we've been experiencing in the last couple of years in the freight recession and the dedicated that we have. Our primary focus is private fleet conversions. And so in many instances, we're just competing against the decision to retain their private fleet or outsource their private fleet.
Now in fleets that have already been outsourced and as we've seen renewals, we probably see a little bit more competitive landscape there in renewing business or competing against other dedicated providers when that business has been put out to bid.
I think for us, the key point is we had pretty good sales numbers in the quarter. We always want more, but 260 isn't too awful bad. The fundamentals of the business shine through for us, whether that's driver retention and our safety performance that we talked about in our opening comments. There is inflationary costs that we continue to deal with in areas like insurance. But the reality is our value proposition to customers is as strong today and in this environment.
And certainly, with some of the uncertainty that we've talked about, with tariffs, our value proposition is the capital management, the risk component that we removed from the shipper, our ability to recruit drivers in any and all environments as we've proven.
And then lastly, our operational excellence. And so those are the things that we feel like differentiate us against some other dedicated providers and the form inversion that the they classify, dedicated. And quite frankly, we're very proud of the results that we have through Q1 and feel like we have a great plan for the balance of the year with high confidence to deliver on that plan.

Brad Delco

Ravi, the second part of your question, were you talking about bid season for highway brokerage or intermodal. Can you clarify what you were asking there.

Ravi Shanker

Yes. Intermodal, I think there was a mention of the world of phrase rate repair and kind of how that might take a while. I wasn't sure if that happens in the course of one bid season? Or did it get to the levels you need to support your long-term margins? Does that need to take multiple cycles?

Darren Field

Well, so this is Darren. Listen, when I said rate repair, I probably should have said margin repair and certainly, they run in tandem as price increases come our way. It gets us closer towards our long-term margin target. We still believe that, that's achievable. I don't know that we came into 2025, expecting fully achieve margin repair in this cycle.
We do have a lot of excess capacity that probably more than one cycle is required to continue to fill that up. But we wanted to get the business on a trajectory to see an improvement in our margins in 2025. And we still have a long way to go to know if we will be successful or not.

Ravi Shanker

Understood. Thank you.

Operator

Ari Rosa, Citigroup.

Ari Rosa

Hey, good afternoon. So just to kind of maybe beat a dead horse here. I'm curious to hear what are the prospects foreseeing intermodal margin improvement on a year-over-year basis through the rest of the year. Just if you give your thoughts on that, like I understand in first quarter, you still had some contracts that were kind of carrying over from last year. But as you get these rate renewals, like should we expect margin improvement in second quarter and beyond?
And then Shelly, maybe if you could talk about just like has something changed in terms of the dynamics of the industry versus what maybe existed pre-COVID that has -- makes it harder to get back to that kind of pattern that you've been on of kind of seeing earnings kind of steady earnings growth through the cycle with higher highs and higher lows.

Darren Field

So I'm not going to guide you on margin repair throughout at what point can you see that? We just aren't going to provide that information. Certainly, every day that we get an opportunity to execute for our customers, look for efficiencies, find ways to take cost out, grow our volumes, grow in the right corridors at the right rates is the strategy. I know our shareholders want to know exactly when that will happen. There's no lack of effort at this team, every single day trying to make that happen.

Shelley Simpson

And maybe I'll take what has really shifted. So if we go pre-COVID. If you think about the times when we've had a downturn, and I'm going to go all the way back to '09 because that's so clear in my mind. Not only do we have a downturn in volume, we had a downturn in price, but we also had a downturn in cost.
Here, we've come into now finishing up our third year of great recession with meaningful pressure to reduce costs from our customers. And you've seen that in the work that we've been doing, trying to eliminate costs, but the inflation that's coming alongside that, I can't think of a single cost item that is actually down through this freight recession.
So that's very unlike anything we've ever experienced. So we have at least two years of pricing pressure downward with inflation that in that same time period, moving up, the combination of those two things, we are really pushing hard to eliminate the cost in between that. If you just think about pricing coming down pick whatever it is, and you hear it in the market could be double digits, and our margins have deteriorated, but if you think of the inflation associated with that, the amount of cost we have to take out is meaningful. It becomes more meaningful if the scenarios get more dramatic.
And so I don't think that is just JB Hunt. I think that's what's happening across our industry. So we haven't seen a relief from a cost perspective, and that's what's creating more volatility, I think from maybe what the past have been.
And then last thing, if I think about the highs and lows of lows, Covid really created that, and that's unusual as well. So those two-year earnings seasons were extremely high. Now they're extremely depressed. The problem is we're in this environment where it's gone on for so long. We have to repair our margins. When you think about what's going to happen in the next turn, I think that's going to be challenging to try to smooth things out because we're not at a good starting spot to begin with. So those would be the comments that I would make around what's different than what we've seen in the past.

Ari Rosa

Shelly, if I could follow up quickly. Do you think carriers are more willing to take thinner margins than in the past or live with kind of thinner margins?

Shelley Simpson

Well, from what I can see some -- I don't know if I'd call it thin margins, if there isn't any margin. So it's -- I've been here almost 31 years, Nick has been here 41 years. I've never seen a recession last three years. I think everyone is holding on. And so if that's thinner margin at no margin, that's the hold on position. So it is a very difficult environment that we're operating in, and I think everyone is trying to adapt to it.

Operator

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

Shelley Simpson

Great. Thank you, and thank you to everyone on the call. It has been a difficult environment for the past few years, and sometimes our people's hard work just isn't reflected in the operating performance of the company.
And I know we've been talking on this call of looking forward and what's happening. But I just want to take a pause on behalf of our people -- we've been very focused on being operationally excellent, and that's been a key priority, and they delivered on that this past quarter and have continued to deliver. They're on track for another record year in safety. We've delivered unmatched service to our customers and that's led to increased retention.
We're growing our customer count and we're producing record volumes, and we will repair our margins. And all that has to sync up in timing. We're ready to be nimble and react to any environment, and that's exactly what we're going to do. Thanks for joining the call and your interest in JB Hunt.

Operator

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