That’s what’s given them so much confidence to talk through this, but also recognizing there are so many shipments on the highways that need to convert. That’s why we made the release to go to 150,000 intermodal containers. So for us, it’s down to a little bit of timing. Certainly we don’t price our business based on how much equipment we have. We price our business based on each customer, what the market looks like and what balance looks like as well. And if we want to move into storage, that’s us being disciplined in our approach not to distort the market dramatically.
Operator: Your next question comes from the line of Jonathan Chappell from Evercore. Please go ahead.
Jonathan Chappell: Thank you. Good afternoon. Shelley or Darren, I just want to revisit the leverage part of the intermodal model. Your volumes were up again, but the margin was at a cycle low, maybe a multi-cycle low. So is this strictly a function of carrying too many resources, you need the volume to come back, once you get the volume you can add significantly more without adding resources and you get the margin improvement there. Or how much of it is actually moving the pricing needle and then therefore do we have to wait for kind of a full year of resetting the price before we can kind of revisit the bottom end of the long-term range?
Darren Field: Well, so I’ve said this multiple times. Volume is maybe a little bit more valuable to our margin today than it ever has been because of the amount of capacity we’ve had underutilized. So yes, volume is one of the key components. But volume proportionally doesn’t move the margin needle near as fast as price does. The harsh reality is, we need both of those elements. Pricing has long been a lagging indicator. And here you are at the end of Q3 and you can see the results from more or less a fully implemented recent bid cycle, and now we’re going to go into a new one. And so you don’t get to see the full results of that, probably until next summer, the end of Q3. Meanwhile, we’ll be looking to grow and unlock benefits there.
But there is no magic recipe here. We need both of those elements and that’s why we’re so focused on delivering excellent service so that we can generate the value for our customers that translates into an appropriate return on our investments.
Operator: Your next question comes from the line of Jeff Kauffman from Vertical Research Partners. Please go ahead.
Jeff Kauffman: Thank you very much. Shelly, thank you and your team for answering all that you have. I want to ask a question a different way. You’ve seen a lot of cycles, and each one’s unique, and each one’s different. I think what’s different about this one is, we came out of this extremely tight capacity situation and into a very loose one because of de-stocking. I hear you saying we see signs that looks like it’s ending. But what is different in terms about managing this cycle than the previous cycles? And kind of to the question that’s been asked two or three times, based on where you are right now, when do you think on a corporate basis we come out of this volume morass? And when do you think on a corporate basis we’re in a position to realize higher yields on the service you’re providing because of the higher costs?
Shelley Simpson: Yes, thank you for that conversation Jeff. And you know I would say we have had a lot of experiencing managing through the cycles. I do want to repeat something that I’ve said previously, and that is, this great recession largely resembles the great economic recession of 2009. I think when I look back to what we did, and we did a great job was really investing in our people, making sure that our people felt safe, our people understood our long-term strategy, and we did a great job coming through that. I believe for us in this near term, continuing to evaluate what our customers are saying compared to what’s happening in the market and making sure that we’re prudent in our short term costs while not losing long term focus, I think is very important for us continuing moving forward.
You’ve heard Darren talk about pricing, you’ve heard Brad talk about pricing. I think the cautiousness that you hear from us is, we can talk about a freight recession. We’re not experts on what’s going to happen in the economy. We don’t have customers negative. I would say they are neutral to positive. But I don’t know that anybody is an expert here as to what’s going to happen from an overall freight demand perspective. So it’s difficult for us to see what’s happening moving forward. I will tell you, we’re not changing our margin targets. We are very focused on delivering value for our customers. We know that we can deliver value for customers. Our customers will pay us an appropriate return and therefore delivers long-term compounding returns for our shareholders.
That’s our focus. Our entire company, all 35,000, really focus on making sure we do that very well. We deliver for our customers and we look at it from their lens. We have a great opportunity to eliminate waste through mode converting into intermode, using the power of the platform and how we service it, continuing to differentiate our value inside our final mile business segment, and delivering the most efficient fleets through our dedicated contract services. That’s our overall vision. That’s how we talk to customers, and we believe that can deliver the right returns over the long term. But also if we see something changing in the near term, we’ll continue to adjust, have conversations with customers, and make sure that we are delivering on the promises that we’re making.
Operator: Your next question comes from the line of Bascome Majors from Susquehanna. Please go ahead.
Bascome Majors: Your quarter end dedicated truck count rose for the first time in a year this quarter. Can you talk a little bit about if you think we’re through the worst of the like-for-like shrinkage and in customer churn and whether or not that can be stable to grow again? And you know if we end up in that environment the next year, do a lot of costs have to come back to support that growth after you’ve been in degrowth mode for several quarters? Thank you.
Nick Hobbs: Yes, I would just say that, based on our — first of all, we think that we’re flat, stable is what I would say. If I look at our renewals and things coming up, I feel that we’re in a pretty good position there. Talking with our customers feel pretty stable. And then our pipeline is healthy. So I like where we’re at. We’re going to hit our targets. We feel very comfortable hitting our sales targets. And I think that sets us up hopefully very good, but again, I don’t know what the economy is going to do and how people are going to react to that. But I will just say that our customers, our new customers that we’re out pursuing, they’re still loving the product that we have out there. We’re still successful in the sales. So that says even in this environment, we have a lot of interest out there. So we’re only 4% to 5% percent of the market. And so we feel good about the future.
Brad Delco: Hey, Bascome, this is Brad Delco. I do want to add just a little bit more to that, though. I mean, keep in mind, too, when Nick’s saying that the fleet is stable, there have been startups throughout this year. And so, we — as Nick alluded to, we expect to hit our sales target of 1,000 to 1,200 trucks this year, that has come with some shrinkage at some of the accounts, that has come with losing some accounts that we’ve already talked about and reflected in sort of the 94% retention versus what was previously usually north of 98%. But we have had startups and we’ve had margins hold up relatively well. And so, hopefully, again, depending on things outside of our control with the economy, we could grow our fleet without seeing maybe the extreme types of pressure on margins that we saw during some of those COVID years when we were bringing on several thousand trucks a year, which was more unusual in terms of the pace of growth.
Nick Hobbs: And the other thing on the truck that we don’t need to lose during the year were, there was about 600 trucks that we had extra from having old trucks out there. So we take that out of there and it paints a little different picture. So we feel good about that.
