Greetings and thank you for standing by. Welcome to the J.B. Hunt 2021 Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advise that today’s conference is being recorded.

Good afternoon. Before I introduce the speakers, I would like to take some time 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 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 CEO and President, John Roberts; our CFO, Executive Vice President, Finance, John Kuhlow; Shelley Simpson, Chief Commercial Officer and Executive Vice President of People and Human Resources; Nick Hobbs, our COO and President of Contract Services; Brad Hicks, President of Highway Services; and Darren Field, President of Intermodal. At this time, I would like to turn the call to our CEO and President, Mr. John Roberts for some opening comments. John?

Thank you, Brad. As we open our earnings call for the second quarter 2021, it makes sense to consider our comparison data with recognition for where we all were this time last year with the onset of the COVID virus. That said, we will continue our discussion on our views of our progress across the enterprise. A general term we believe fits our current position is momentum. We noted for you during our last call that we have meaningfully increased our equipment orders for containers in Intermodal and trailers for the J.B. Hunt 360box program. Through the quarter we gained confidence in these decisions and are working with our vendors to accommodate delivery of this equipment throughout the balance of the year with a keen focus on being able to meet the needs of our customers as we approach the traditional peak seasons. This is a fluid situation and we are deploying some new and creative ideas for ongoing equipment delivery. Shelley will add color for us on how we plan to work with our customers heading into the second half of 2021 and 2022.

Thank you, John, and good afternoon, everyone. I’d like to start with providing a couple of comments on our second quarter just from a consolidated perspective. As John noted, we are pleased with our revenue, operating income and EPS growth for the quarter with notable achievements in our Highway Services revenue, as both ICS and JBT, they were certainly over prior-year quarter, but more importantly, they are carrying the momentum from their first quarter results into the second. Current quarter was significantly impacted by labor shortages, putting a strain on our ability to serve -- to service demand and effectively use our assets. Cost pressures in the quarter were primarily related to higher purchase transportation costs, salaries and wages, and other costs across our networks and operations.

Thank you, John, and good afternoon. My commercial update will focus on general market conditions, our expectations and plan for our customer’s peak season capacity needs, as well as an update on the progress we are making as an organization with our J.B. Hunt 360 multimodal digital freight platform. As we discussed last quarter, we entered 2021 with cautious optimism about the opportunities the market could present to us during the year. Now that the year is just halfway over, clearly the opportunities are bountiful, but so too are the challenges. Demand for our capacity solutions across the scroll of services remains at elevated levels. Capacity across the supply chain remains tight, and challenges around velocity and fluidity are still very present and likely to persist, at least through the end of the year.

Thank you, Shelley, and good afternoon, everyone. I’m going to spend my time giving a brief operational update focused on the current driver market and some other processes we are reviewing, in addition to providing some greater detail on the performance of DCS and Final Mile Services in the quarter. I’ll start with some quick thoughts from our operational perspective focused on the current state of the driver market in addition to our current review of some of our processes. Consistent with my comments from last quarter, the driver market remains as challenged that I have seen in my 37-year career. As you will hear from Darren’s comments in a few moments, we believe the availability of labor is having a meaningful impact across almost every part of the supply chain, ranging from the ports to rail terminal operations, warehouse operations, and certainly, over the road driver market. While we continue to believe we are in a relatively solid position with some of the best paying and highest-quality jobs in the market with over 90% of our jobs being either local or regional in our Dedicated, intermodal dray, Truck and Final Mile operations.

Thank you, Nick, and good afternoon. My comments today will focus on the performance of our Highway Services business during the quarter, which includes both Integrated Capacity Solutions or ICS and Truck or JBT. Let me start off by saying how excited I am to see our team respond to the opportunities our customers present us with to deliver both truck and trailing capacity solutions to serve their needs. These capacity solutions were enabled by our multimodal digital freight platform J.B. Hunt 360 and complemented by our drop trailer pools with 360box. Additionally, these capacity solutions across Highway Services continues to provide value for our customers, as evidenced by this most recent performance being the third quarter in a row in which both ICS and JBT delivered the strongest growth within our organization. This continues to support our decisions to focus our investments on our people and technology, which is driving further scale across the platform and our organization. I’ll start with my comments on JBT or Truck segment. Revenue grew 70% to $184 million. This is the highest revenue this segment has delivered since the second quarter of 2008. Operating income was $14 million, which was the highest second quarter level achieved by the segment since 2007. Our growth and performance continue to -- continues to be driven by our ability to provide capacity solutions with or without our physical trucking assets, but with our trailing assets. Our ability to solve for the most efficient way a load should move by finding the right carrier, at the right time and at the right price is what continued to drive strong demand for our 360box product. More importantly, our ability to access capacity quickly has allowed us to be able to tell our customers yes. As we had discussed in…

Thank you, Brad, and good afternoon everyone listening to today’s call. My comments this afternoon will focus on Intermodal’s performance during the quarter. I will also provide some additional details on network operations including the onboarding of new containers and how we are working to improve velocity and in turn capacity in our network for and on behalf of our customers as we approach peak season. Demand for our Intermodal capacity remains robust. In fact, demand continues to significantly outpace our available capacity, which remains constrained by rail performance and restrictions in addition to customer detention of our trailing equipment. We continue to believe that the origin of these challenges center on the availability of labor for both the railroads, particularly in their terminals and our customers in their warehouse operations. Volumes in the quarter increased 6%, broken down by month as plus 17% in April, plus 8% in May and minus 6% in June. As we discussed a year ago, June 2020 was a particularly strong month for us as we had equipment properly positioned for the surge in net -- in demand as the activity across the supply chain restarted. Network velocity continues to be well below our expectations as evidenced by our box turns, which were approximately 1.65 turns per month during the quarter. We are working very closely with our rail providers and customers to improve our capacity across the network by focusing on reducing the detention of equipment and helping our rail providers reduce congestion across their terminal infrastructure. Going forward, the onboarding of our new equipment will also assist us in serving our customer’s capacity needs, particularly as we approach peak season. On that front we began taking delivery of our new equipment in the last few weeks and have even more on the…

Hey, Mika. Just if you don’t mind, this is Brad, a word to the audience. We’re going to do one question again like we did last quarter. So Mika I will turn it over to you to open the call for questions.

All right. Your first question comes from the line of Allison Landry from Credit Suisse. Your line is now open.

Thanks. Good afternoon. So just wanted to ask about Intermodal, you mentioned that the customer detention for equipment is at all-time highs and in the second quarter presumably, you’re charging accessorial. So hoping you could quantify this for us in the quarter relative to what it was in Q1 or sort of a normalized run rate?

Allison, I don’t -- we’ve been talking to our customer base about the impact it’s had on our capacity for really several months and even into last year we’ve really been highlighting this challenge. I don’t know that we had significant changes in the revenue cycle during the quarter as we’ve always talked about that. I think that when we’ve -- what we’ve been doing more recently with our customer base is trying to highlight and incentivize faster unloading. But that was probably towards the end of the second quarter, so beyond that I probably don’t know how to highlight the impact of that during the second quarter.

Okay. I mean, I guess, what I’m sort of getting at, I mean, do you think that there was a positive margin benefit that you experienced in Q2 as a result of this that we shouldn’t be modeling again going forward?

Yeah. I just don’t think we can break out accessorial conversation as it relates to the margin. But no, I wouldn’t say, that there was anything material in the quarter related to that.

Okay. Thank you.

Your next question comes from the line of Ravi Shanker from Morgan Stanley. Your line is now open.

Thanks. Good afternoon, everyone. Just on ICS, can you help us understand the gross margin path forward? Clearly, you guys have done well to kind of keep the op given the black there. But, A, what percentage of your book has been re-priced, and B, kind of assuming spot rates don’t collapse from here or kind of are we looking at the current trajectory of gross margin for the back of the year? Thanks.

Sure. Just to start and I think Shelley might join with a comment or two. But we definitely anticipated that seasonal margin pressure. We highlighted that in our Q1 call and so we were not surprised by the second quarter performance with respect to where we landed. And I think that, historically, the second quarter was always the more pressured gross margin quarter that we experienced. So we would anticipate seeing lift as we move into Q3 and Q4 away from that based on historical norms. Shelley…

Yeah.

… on the bid data?

Yeah. From a bid season perspective, we’re slightly behind in ICS from where we are in JBI, what is implemented. JBI is further along. I think that’s because of the volatility that’s happening in the brokerage market in general. Just under 60% has been implemented. I would also say that our revenue per load changed inside ICS as a result of moving more business in near-term to contract versus contract with carriers. And so that business and a higher revenue per load did yield a lower gross margin percentage, but our gross margin dollars per load was still up. So it’s a little bit apples and oranges compared to what we have historically done just because the revenue per load has changed so dramatically.

Thank you.

Your next question comes from the line of Justin Long from Stephens. Your line is now open.

Thanks. Good afternoon. I wanted to ask about your ability to ramp Intermodal volumes sequentially in the second half. Shelley, you mentioned a few of the key drivers in the prepared remarks, but is there any color you can give on the number of Intermodal containers you expect to be delivered in the second half and any thoughts around the sequential progression of box turns as we think about your capacity to grow beyond the 500,000 loads in the second quarter?

Hey, Justin. I think the key to this is certainly customer demand has been very, very strong and velocity has been the bottleneck. We highlighted that we have new containers on the water today. We have strong confidence in our ability to receive between 3,000 and 4,000 during the third quarter. We also highlighted that we feel like of the 12,000 we announced at the first quarter earnings call, some of those will certainly filter into the early stages of 2022. The team is working every day to continue to receive more containers as we move into the fourth quarter, but for now we can highlight 3,000 to 4,000 in Q3. I think that on the velocity front, we’re working with customers to find ways to free up the equipment faster. That’s certainly an ongoing effort. And then the railroads, the key there is getting faster velocity out of the rail system. And we’re aligned with all of our rail providers on their mission to improve their velocity. And so that is an expectation of ours during the quarter. If you’re asking for specifics, we highlighted 1.65 turns in the second quarter. We think that can improve somewhat to slightly in the third quarter, but not yet ready to believe it’s going to be a real material impact at this.

Okay. Great. Very helpful. Thank you, Darren.

Your next question comes from the line of Amit Mehrotra from Deutsche Bank. Your line is now open.

Thanks so much. Hi, everyone. Darren, another Intermodal question. We’ve obviously had some updates from the rail Union Pacific shutdown eastbound movements to their global for terminal. I think BM has also started to meter space on its own intermodal trains at least through the end of this month. Can you just help us think about what the volume impact is, a little bit similar to the last question in terms of what the headwind this may be as you move from the second quarter to third quarter? And then you’ve been really helpful in the past about talking about maybe the margin progression expectations and you’ve been bang on in terms of sequential margin improvement as the pricing further gets implemented. You guys have shown good drop through in the Intermodal on the incremental revenue growth at least sequentially as some of the pricing comes through, should that just be a continuation into the third quarter as that 30% gets re-priced? What’s the right expectation around margins, if you can just answer those two questions? Thank you very much.

Hi, Amit. This is Brad. I’ll take the first part of that. I think Darren did a really good job of giving a lot of details on expectations for box turns and containers, and clearly, where demand is. So I don’t think we need to address anything more in terms of expectations for volume. I’ll let Darren provide comments on the rail service and maybe the UMP stuff, but I just wanted to get that point across. So Darren?

Sure. So, Amit, appreciate the questions. The thing on the restrictions that you’ve heard from UMP is those are, well, we don’t operate on Union Pacific, but it’s largely understood to be international only. So there is not a lot of impact to us on domestic volumes. And BNSF and J.B. Hunt are working really well together every day in an effort to expand our capacity and improve velocity, and everything we can do to create fluidity at the terminals in order to help provide that we are doing that and working with our customers on scheduling, we’re draying loads out of the terminals. We’re doing a tremendous amount of work in order to improve fluidity. So when you’re hearing some of that restriction information, sometimes it’s more international focus than it is domestic. We have some energy from that as, I think, the international supply chain has been one of the more significant drags on productivity for the various rail terminals. And certainly, if they can be focused on eliminating some of the congestion from international in order to free up capacity for domestic, we would certainly stand to have some benefit from that. I’m not saying that’s what they’re doing, but certainly the announcement from UMP was focused on international only.

And then the margin progression question.

Oh! The margin. I think we said that, on the last call, we restated our long-term margin target of 10% to 12%. We said, we thought we would make some improvement as 2021 went on and as we implemented prices and that continues to be true. We’re inside that range and feel good moving forward that we will stay inside that range.

Got it. Thank you very much.

Your next question comes from the line of Scott Group from Wolfe Research. Your line is now open.

Hey. Thanks. Good afternoon, guys. I know you -- it sounds like you don’t want another volume question but I had one because I’m not so clear. Do you -- I mean, I guess, I’ll just ask it directly, do you think you can grow volumes year-over-year in the third quarter? And then on -- just to follow up on the margin side, as these accessorials kick in some more and you get the full impact of pricing, do you think that there is potential to get towards the upper end of that margin guidance towards the back half of the year?

Hi, Scott. This is going to be Brad again. I mean, I think, Shelley, in her prepared remarks talked about volume will be influenced by three main factors, rail fluidity, the tension at customer locations, as well as the onboarding of our new containers. And we -- some of those are out of our control. We talked to you and Darren gave you specific guidance on what we think containers will do in the quarter. So other than that it’s going to be hard to give you anything more specific than what we have. So I’ll just respond to that part of the question. And then to your second part, I’ll turn it over to Darren.

I’m going to need a quick refresh on the second part.

Scott, refresh us on the second part of your question.

Yeah. It was just about as we get the full impact of the pricing and the accessorials, do we -- is there a potential to get to the upper end of that margin range? And then maybe just to clarify the first part of that volume question, Darren, you mentioned June a year ago was a month where you had the boxes in the right place, was that the same scenario? Did you have the boxes in the right place in the third quarter last year, I just don’t really remember?

Okay. Well, I’ll just hit on that real quick and then we will hopefully move on from the volume stuff. So we depleted our stored containers in -- at the -- during June of 2020, which largely created a lot of very fast fluidity for us, because we had gone into storage during the really weakened part of the second quarter last year. So during the third quarter demand was so strong? No, we didn’t have equipment really positioned strongly. So that was back to the need to really reposition the equipment, which drove a lot of the velocity challenges that we certainly had a year ago. On the margin front, it’s a range, because a lot of factors influence that. Certainly, can we achieve it? It really depends on some of the cost challenges, and at this point, there is not let up on challenges for recruiting and hiring and retaining drivers, there is no let up on the cost to outsource capacity, our need to secure capacity in order to dray loads out of the terminal. So all of those cost challenges are real, so we just got to stick within the, say that, it’s going to be within the range and I think that’s really all I can comment on the margin.

Hey, Scott. If I could add to that. We are working on -- at a very tactical level with our customers on a regular basis, probably, the most detailed plans that I have seen is work with our customers to try to avoid those charges. So we’re doing a lot on the front end to try to identify where the bottlenecks are. Our intent is to move more volume. We do have to have these three things come in line, but we really haven’t thought about it. Our accessorials are not there for us to gain incremental or even more margin dollars to our bottom line. Our accessorials are there. So that if we can’t anticipate what’s happening as those containers and 360boxes are dwelling that we can be properly rewarded for that box sitting.

Makes sense. Thank you, guys. Appreciate it.

Your next question comes from the line of Chris Wetherbee from Citi. Your line is now open.

Yeah. Good afternoon. Maybe a question on DCS, if I could, if you could just give us a little bit of sense of maybe how the pace of new fleet acquisitions will go in the back half of the year and maybe sort of contrast that with how we should expect startup costs to kind of ramp, obviously, it was a bit of a heavy quarter this quarter, curious if that persist in 3Q and into 4Q or do you see it decelerate a little bit?

All right. Well, based on our pipeline, we think that, well, you saw Q2 was very strong. We think Q3 will be strong as well and it’s hard to tell on Q4. We got -- make sure we got equipment. We got to make sure we got drivers. So, there’s just a lot of unknowns that far out. I will say that the pipeline is full, but there is a lot of things that go into metering how fast we can start those up, drivers, equipment and even some on the management side. So, but I would say Q3 is looking very strong as well.

Your next question comes from the line of Ken Hoexter from Bank of America. Your line is now open.

Great. Good evening. So great job in keeping rates ahead of costs, and Nick, talked a little bit about the hardest hiring environment in 37 years, and Nick and Brad, I think everybody highlighted the labor pressures to keep fluidity. So, John, maybe step back and give a little bit of your thoughts on labor and when you think about hearing impacts of embargoes on some of the networks, are there any concern that the network starts to meltdown like we’ve seen on some of the rail networks when it starts spreading and spreading out wider from just one area, especially when you’re adding capacity when the rail network is not fluid? Is there a concern that it gets gummed up and they’re not able to take advantage of their precision scheduled railroading overhauls?

Yeah. Ken, let me have Darren respond to that. I think he’ll have a better look at it.

So is there a concern of a meltdown, I think, that the railroads have all shown a fairly quick step in to slow volume down if heading towards that kind of a challenge. 2021 has been certainly an unusual year. So, but, no, I don’t expect any kind of meltdown from the railroads. I do think that when we talk about labor challenges with the rail system, I mean, I really do think it’s -- we’re talking about locations that need to find 4% or 5% more employees in order to be fully staffed and overcome kind of a challenge that they’re in now. These aren’t just massive, massive amounts of people that they need to hire. So it feels like that would be highly unusual and I think all of the railroads are very focused on these challenges and they are out addressing them. And I don’t feel like we’re -- that some sort of a significant meltdown is a very significant risk at this point.

All right. Next question comes from the line of Tom Wadewitz from UBS. Your line is now open.

Yeah. Good afternoon. Well, I guess, a related question. I mean it seems like labor is such an important topic. I wanted to get your thoughts on how you look at labor intensity of your model. I tend to think Intermodal is obviously less driver intensive than trucks. So you would have some advantage versus truck in a tight labor market. But just wanted to see if you could offer some thoughts about does this tight labor market provide advantage to J.B. Hunt in a certain way? And then if you could also just say, have you seen any signs of improvement? I think we’ve got, I know if it’s 25 or 26 states that I think it started to ease up on the payment of the bonus unemployment. So is that improving or is there kind of no light at the end of the tunnel in terms of labor availability? Thank you.

I would just say from a labor standpoint, I would say, as I said in my comments, very, very tight. I think we do a very good job responding to that. Our model is pretty agile, very site specific on how we can address individual labor concerns whether it’s in some of our fulfillment warehouses, Final Mile or whether it’s Intermodal rail ramp specifically. So I think we have a very solid approach and then we got a very robust corporate driver personnel team that helps us in the labor market. So it’s challenging. And then I would just say the other side of it is, we have very good, as Shelley alluded to relationships with our customer. We’re very open. We try to stay ahead of that, show them metrics in those areas and try to get ahead of that with them. So I think it’s an advantage to us, personally in the tight market. Now does that mean we don’t have pain? No, we have pain, but probably not as much as others. And then on your question about unemployment, it’s too early to say. We’ve been having some conversations about can we measure in the states that’s rolled back the unemployment benefits? Have we been able to recruit more there? It’s too early for us to tell. I think by the end of Q3, we’ll have a better feel for that. I know at the end of September, supposedly the rest of the country will roll back on that. So I think it will just kind of become very clear at that time. But it’s too early right now to tell. Most of that’s in the South and if I was going to say any area was a little less pressured than the other it would be in the South a little less pressured, they’re all pressured, but a little less pressure there in general, so..

I’d just add to that, Nick, on your first part of your question, you use the term or we have good agility and I think that that’s very well represented in the pivot that we’ve made in our strategy in JBT moving more towards an asset-light. And I think that that’s facilitated the growth that we’ve experienced over the last several quarters that we’ve been talking about records since 2007 and 2008 by going to that asset-light model and tapping into the carrier base that we’ve had access to via ICS. And so 360 platform has certainly enabled us to be more flexible for our customers and be able to do more for them in that environment is just another good example of that.

And I might just finally add. One of the things with our customers we certainly talk to them about where our pain points are at. But it is much easier today for us to say, yes, and to make a pickup on behalf of a customer. It really comes down to costs. So when we take our more than 20,000 drivers and extend that to our platform reaching nearly 1 million trucks, our ability to source on behalf of our customers is significantly different than what it would have been maybe in the last cycle. So we can always say, yes. It’s just down to cost and what that means from a pressure perspective, helping us meet with our customers and helping make sure that their budgets are intact.

Next question comes from the line of Brian Ossenbeck from JPMorgan. Your line is now open.

Hi. Good evening. Thanks for taking the question. I just wanted to ask one about ICS and 360 in particular. So some of the employee count was up a little bit at the end of the period from the first quarter, but the average number of loads per employee was still so pretty good moving favorably. So I wanted to see if we could talk about just productivity on the platform and then here in the near-term maybe for the rest of the year? And then just give us an update in terms of the roadmap, the investments going forward here across the different metrics, as you should look at in terms of people, technology and scale. It seems like you made progress in all that, but also seems like you’ve got some more investments to be had, so maybe if you can give us an update on productivity and where you see the investments going next for 360? Thank you.

Yeah. Thanks, Brian. A lot inside of that question. Yeah. We’re definitely satisfied with the progress that we’ve made. Appreciate you gravitating towards our three critical areas of our people, our technology and scale. I think that that has been demonstrated over the last several quarters and as we continue to grow on the scale, we’ve gotten back to profitability, which we’ve talked about for the last eight quarters that investment window. Investments will continue on. Obviously, with the work that we’re doing with Google and the co-innovation that will come from that will allow us to make good decisions around how we continue to invest to enhance 360 platform and how we can make sure that we’re providing value for our customers and for carriers. I think it’s clear that our goals are to create the most efficient transportation network in North America and we feel real good about where we sit with respect to that. I would say that, the things that are most important to our customer is really cost, service and capacity, and our investments continue to focus around visibility, transparency and access, and that’s where we’ll continue to make decisions on how we move forward. Shelley, I don’t know if you want to add anything to that.

Yeah. I might just add that as we are looking at our five-year modeling that we’ve put in place when we very first rolled out 360, we have made good improvements across the Board. We still do see -- I mentioned this, I believe at the end of last year that we did have some internal work happening in 360 with our internal systems called Match that will help us connect our people with what’s happening in the marketplace. And so really allowing us to use that frictionless digital platform externally and connecting that with people when we really need to be problem solvers on behalf of our customers and our carriers and so we’ve made improvements there. We do still have improvements left that need to occur in our five-year modeling. And then certainly in the scaling piece, our gross margins as a percentage, those numbers we still believe that we will continue to find the right truck at the right time, at the right price that will allow us to continue to expand margins inside that overall.

Your next question comes from the line of Jordan Alliger from Goldman Sachs. Your line is now open.

Yeah. Hi. I was wondering if you could talk a little bit to Final Mile profitability. I think the long-term target range is 4% to 8%. You’ve kind of been in there the first half. With probably what’s going to be a strong peak, I mean, could -- and the various cost pressures, do you think we could stay sort of within general targeted range through the balance of the year? Thanks.

Yeah. I’d say we’re clearly moving in that direction. There is a lot of things going on. One, there is a lot of cost pressure that you alluded to inside the warehouse of loading of our box trucks, second seat only, even our contractors, so contractor labor rates are going up. So we’re facing some headwinds there. But the other part of it is just the supply chain. We’re at the very end of the supply chain. So we got to make sure that the product is there. The furniture industry, if you look at that, there’s a lot of long lead times, chips are affecting a lot of the appliance folks. So there’s just a lot of things going on in that, but our plan is to stay in that target range, but there is a lot of headwinds towards you. So it’s hard to clearly say right now.

Your next question comes from the line of David Zazula from Barclays. Your line is now open.

Thanks for taking my question. Maybe another one for Brad on Final Mile, you mentioned the revenue per stop is down due to a shift between the asset-based and asset-light segments of that segment. I wonder if you could just comment on whether that’s just kind of the normal course of business or whether that’s an intentional shift towards a more asset-light model within Final Mile?

We are very agnostic with our customers. We present both pricings. And so it just depends on which customer is buying at the time. Right now it seems to be the non-asset was -- what was being bought recently. But I would just tell you a couple of deals on the asset side right now. So it moves around, but what I see in the pipeline, I would say is more on the non-asset side for the most part. There is still an asset play that moves in there every once in a while and so it moves around. It’s hard to predict. We’re pricing all of them. And so we just adjust our ROIC based on the amount of capital we have to put in there. So, but the pipeline, I would say, is more on the non-asset side right now.

Your next question comes from the line of Todd Fowler from KeyBanc. Your line is now open.

Great. Thank you. Brad Delco, can I ask what Intermodal volumes were yesterday? Is that okay?

Operator, next question please. I am just kidding, Todd. Go ahead.

No. You’re partially kidding. I understand. And I’m kidding…

Oh! Yeah. Thanks. You’re absolutely right. Partially kidding.

What I did want to ask about is, there’s a lot of anticipation, a lot of hype around this peak season. So maybe partially for Shelley, maybe partially for John Kuhlow, as we think about kind of peak planning with the expectation be that this is more of an elongated peak and our customers are going to start the pull forward activity earlier than what we typically see? And then how do we think about the seasonality of either EBIT or the earnings cadence in the second half of the year, should that follow kind of the change in customer shipping habits or is it just a situation where we’re going to be at this elevated level for a longer period of time just where the demand environment is? Thank you.

Thank you, Todd. I’ll take the customer side and then I’ll turn it over to John on the last part of the question. The disruption that occurred in 2020 has continued all the way through today and we believe will continue through the rest of this year and into next year. Our customers do have a displacement happening from an inventory perspective and we have heard our customers say they moved from being ordering from a need by date to a when can you get it to me date. And so there is inventory in the supply chain today that has already been delivered that typically would not be there. So there has been some pull-forward. I think it’s just been based on a lot of the disruption that’s happened particularly in the global supply chain. So that has caused kind of the upstream issues that are now hitting in the U.S. as well and it’s certainly we know the problems there occurring across every parts of the supply chain in delivering goods for our customers. I would say our customers from a demand perspective believe that the rest of this year will be strong into next year as well. And finally, I would say, peak season, we are doing a ton of peak planning. I talked about that on the last earnings call. We are doing that again now and we’re really doing that comprehensively across all of our five segments. And so, how can we help understand the needs of our customers, what that will look like and then what will we do when more disruption occurs in locations that are outside of what we are focusing on from a peak perspective? The sooner we can do that the more success we will have together with our customers.

And Todd, apologize, but I probably have to shoot down your second question that don’t really know how I can answer that without giving you guidance on our margins for the second half. What I will say is, as Shelley mentioned, we’re doing everything we can to talk with our customers and understand what their demands are. We’re trying to get as many resources as possible, both people and assets with the equipment orders that we have put in place to try and be in the best position to address those needs. And as Darren mentioned, working with the rails to see what we can do to try to alleviate some of this congestion. So we’ve given margin target guidance ranges and that’s really all the further I can add to that.

Your next question comes from the line of David Vernon from Bernstein. Your line is now open.

Hey, guys. Thanks for taking the time. Question for you on longer term CapEx, I’m just wondering kind of as you look across demand for equipment, I mean, to this year and then to next year, should we be expecting sort of a multiyear sort of level of elevated CapEx or do you feel like we should be seeing the recovery in rail service and box turns that would allow you to kind of deliver with a little bit less than we’re spending in fiscal 2021?

Well, I’ll provide just some comments on consolidated CapEx and what we’re looking at. As we mentioned, some of what — the orders that we have placed, some of those are going to be pushed into 2022. We haven’t changed those orders and so, that will move. And so I would expect that our 2022 CapEx is going to be elevated as well. We’re still trying to understand what the replacement and growth needs are. Frankly, we have reduced some of our trade-in this year on tractors, just to continue to maintain the available capacity and so we will probably have a higher CapEx in 2022 with that as well. So those are -- right now, I would say, that our 2022 CapEx is going to be not as high as 2021, but will be elevated over what we’ve seen historically.

Your last question comes from the line of Jeff Kauffman from Vertical Research. Your line is now open.

Thank you very much and thank you for taking my question. Shelley, you had mentioned earlier about how customer inventories were as tight as you’ve seen them. Is there any way we can put that into perspective either with anecdotes or just to give us an idea of where inventory levels are at customer x or customer y relative to where they should be?

Well, I can’t speak specific at the customer level. Obviously, I have some of those anecdotal stories. But I think it’s, what I said earlier which is, they don’t have the inventory exactly where they wanted or at the timing that they wanted, either. I think there are concerns about this Christmas season and will they have all of the necessary inventory on shelf or available through e-commerce channels. So that’s a concern of our customers. Inventory will take some time to catch up just to more normal levels. But there are several stories from our customers whether it’s Christmas product already here in stock ahead of schedule or concern that their peak shipments that are supposed to be on the water aren’t on the water yet and so there is a lot of concern coming here into the back half of this year.

Okay. Mika, thank you. This is Brad. I just want to thank everybody for the questions. Obviously, we will be in touch with you guys in three months and if you have anything before then, feel free to reach out. My email address and phone number is on our earnings release. Thank you for your time.

This concludes today’s conference call. Thank you for participating. You may now disconnect.