[Management View]
J.B. Hunt Transport Services, Inc. reported flat revenue, decreased operating income, and marginally lower diluted EPS amidst inflationary pressures. The company generated over $225 million of free cash flow and executed a record $319 million stock repurchase. Management emphasized operational excellence, scaling investments in people, technology, and capacity, and repairing margins as top priorities.

[Outlook]
The company expects net capital expenditures to be between $550 million and $650 million in 2025. Most benefits from the $100 million cost-reduction program will materialize in 2026 and beyond. Intermodal volumes are expected to grow, driven by the Eastern network. Dedicated segment fleet losses are largely behind, positioning the business for net fleet growth in the second half of 2025.

[Financial Performance]
Revenue: Flat compared to the prior-year quarter.
Operating Income: Decreased 4% year over year.
Diluted EPS: Declined less than 1% year over year.
Free Cash Flow: Generated over $225 million.
Stock Repurchase: Repurchased $319 million of stock.

[Q&A Highlights]
Question 1: Darren, when I tie together a lot of your comments, mostly on the last part on the bid season, underperformed expectations in this area, but still up modestly year over year. What you've done in the East and the share gain you've had there, and then the mix offset there. Think about the revenue per load cadence for the next four quarters. Like the cake is baked in the mid-26. Does the rest of the year and early next year look like 2Q, or is there anything that can really change the dynamic of that driver?
Answer: Mix can play a big role, and there's a lot happening mid with mix right now. Core pricing being slightly positive is essentially the result of the 2025 pricing cycle. We will begin preparing for pricing discussions and plans for 2026 capacity with our customers as the remainder of the year goes on. Intermodal has traditionally lagged the truck market, but we will be closely watching the highway market and trying to adapt.

Question 2: I wanted to ask about the $100 million of cost that you guys have talked about. Is that separate than the $60 million you guys have talked about in the past in terms of capacity opportunities? And then as you think about the breakdown within the segments or maybe the cadence of that dropping through, can you sort of give us a little bit more detail on how you see that playing out maybe through the rest of 2025 and beyond?
Answer: The $100 million is a continuation of the work addressing excess equipment pressure on margins. Asset utilization is a big part of that. Savings will be proportionate to the level of spend within segments and weighted by each segment's progress towards margin targets.

Question 3: I was hoping we could talk a little bit about cost improvement initiatives but specific to ICS. Any color around ICS and just how you're approaching your efforts there would be most appreciated.
Answer: We have been working to take cost out of ICS for the past few quarters, focusing on span of control and efficiency with our people. Operating expenses in ICS have decreased by more than $3 million year over year. We are looking under every rock and crevice to drive cost out and are close to turning the ship around.

Question 4: Can you give us a little bit more description on the cost savings target? How much of this is volume dependent, and are there any bigger buckets you can point to from a headcount perspective?
Answer: The $100 million cost savings target includes structural changes to costs we've been incurring, such as salaries, wages, benefits, and equipment utilization. Volume improvement will help drive cost out, but many savings are structural changes.

Question 5: You had a comment that you think we're at a point where intermodal margins will be stable to modestly improved. Is that a sequential comment or a year-over-year comment?
Answer: We believe our cost initiatives and efforts will help stabilize margins. Pricing hasn't kept up with inflationary costs, but growth and cost control are also big factors that can help us. Sequential improvements in margin are expected.

Question 6: You mentioned in your prepared script the dedicated customer loss trickled into July. Was there any benefit on margin in 2Q, and how long should startup costs be a drag on margin before recovery?
Answer: The timing of fleet count positively impacted 2Q truck count by about 85 trucks versus expectations. Startup costs typically drag on margins in Q4, but we remain disciplined on the type of deals we underwrite.

Question 7: Can you drill down a little bit deeper on how you think peak season will develop? Can you get positive volume growth, and do you see more mix shifts around TransCon versus East Coast?
Answer: Forecasting demand is challenging due to trade policy changes. Peak season surcharge programs started earlier due to volatility. We are prepared to meet demand whenever it occurs.

Question 8: Can you talk a little bit about the opportunism and access to cash with CapEx falling down, and the opportunism in repurchasing stock versus other uses longer term?
Answer: We remain focused on reinvesting in core businesses and maintaining our dividend and leverage. We repurchase stock opportunistically based on value and market conditions.

Question 9: Can you describe the market backdrop now, and thoughts on how peak season surcharge programs flow through yields versus normal seasonality?
Answer: We are prepared for potential surges in demand and have built a program to avoid taking on excess costs. We are aligned with BNSF to be ready for demand upticks.

Question 10: How does growth in the East relative to flat loads or downloads in TransCon help with lane balance strategy and cost efficiency outlook for Intermodal segment?
Answer: Eastern network growth has lower costs for repositioning empty equipment due to shorter distances. The mix of business in the East is consistent throughout the year, reducing pressure on empty repositioning costs.

Question 11: Intermodal and dedicated EBIT have converged. Is this cyclical or structural, and how do we think about the trajectory of EBIT for both segments into the up cycle?
Answer: The convergence is more cyclical. Dedicated margins are closer to target ranges, while intermodal has prefunded capacity for growth. Both segments are set for growth and have strong secular trends.

Question 12: Should we think about the $100 million program in 2026 as being a net impact to EBIT, or is it more appropriate to consider it a gross initiative?
Answer: The $100 million cost savings target is a net impact to EBIT. We have identified areas where we can remove costs from the system, despite inflationary pressures.

[Sentiment Analysis]
Analysts and management maintained a cautious but optimistic tone, emphasizing cost control, operational excellence, and readiness for growth. Management's confidence in achieving cost savings and improving margins was evident.

[Quarterly Comparison]
| Metric | Q2 2025 | Q2 2024 |
|-----------------------|---------|---------|
| Revenue | Flat | Flat |
| Operating Income | -4% | N/A |
| Diluted EPS | -1% | N/A |
| Free Cash Flow | $225M | N/A |
| Stock Repurchase | $319M | N/A |

[Risks and Concerns]
Inflationary pressures in wages, insurance, and equipment costs weighed on margins. Muted demand for big and bulky products in the Final Mile segment is expected to persist through year-end. Pricing challenges due to cost pressures were noted.

[Final Takeaway]
J.B. Hunt Transport Services, Inc. demonstrated resilience amidst inflationary pressures, focusing on operational excellence and cost initiatives. The company is prepared for future growth, with investments in people, technology, and capacity. While challenges remain, management's strategic priorities and cost-reduction efforts position the company for improved financial performance and margin repair in the coming years.