and anything else. If that's the case, I just wanted to understand, you know, are your recruiting and capacity investments beginning to alleviate those bottlenecks? You know, in the previous answer, you said that your recruitment efforts really ramped up in 3Q and those new employees weren't the most productive. I just want to, again, better understand if we're through the most intensive phase of those investments or do costs still have room to move higher but you just feel better about your ability to recover them through pricing.

Well, appreciate the question, Risha. You know, certainly in the third quarter, our volumes, there was more available to us than what we were able to execute. And you heard us highlight, you know, challenges on the driver market. And I don't remember a time when our own drayage capacity became a little bit of a bottleneck for us. And we probably faced some of that As the third quarter moved on, and that was a little bit of a surprising position to be in. That's not something we're used to, and thus we highlighted cost challenges as a result of that. So I don't want the 8% volume growth in the third quarter to represent that that's all we can do. Certainly as the quarter went on, we had a lot of success. and hiring drivers. But we had some moments during the quarter where we had to slow down load bookings and we had to make sure we were able to honor our commitments. It's a very important part of our operational excellence process with our customers. They believe in it. It gives us long-term growth strategy. So as we move forward, you know, I think that The ability for pricing to cover those costs is certainly very important, but I have no lack of confidence that our customers, they're not surprised by our discussions around our costs. I think as this year went on, early on in the year, there was some concern and a lot of pushback from customers on price increases, but as the year has gone on, Those conversations have become more realistic. It's not easy. No customer is handing us money. We have to go in and work with them and be clear as to these costs that we're facing. And I think that the realities of the market are helping our customers acknowledge that that's where we're at. And as we move forward, I have no doubt that we can get prices that The next question is from Jordan Alliger with Goldman Sachs.

Please go ahead.

Yeah, hi. I just wanted to come back to dedicated, and you might have touched on some of this, but I'm just curious. Are you actively reopening contracts in Dedicated that perhaps you signed six months ago and as you've started to start them up realize costs might be accelerated faster? Have you been able to go into even some of those more recent contracts to rejigger them before they actually get going further? And then can you maybe talk to, of the $50 million or so of cost headwind, what proportion would you say was tied into Dedicated? just trying to get a sense for the timing of margin repair and dedicated as we move ahead. Thanks.

I'll start, Jordan. This is Brad Hicks, and maybe let Brad Delco respond to the second part of your question. Yes, the answer is yes, and what I said earlier is there's nothing in any of our agreements that prevents or precludes us from reviewing and having conversation with our customer to ensure that we have the right economics in place and the startup of that business. It makes it really easy for us to at least work close with our customer with proper alignment on the strategy that we're going to deploy. In some instances, that's funding and supporting the funding of sign-on bonuses. In some instances, it's a dramatic W-2 adjustment. And so we're evaluating the entire book of business. We are choosing our spots relative to which customers we're going to now with the greatest needs versus those that may be are smaller in terms of what the gap is, but we will look to address all of our needs throughout the next few quarters.

Hey, Jordan, and this is Brad. With regards to the first part of your question, I would say, I mean, we have the most number of drivers in dedicated. We have the largest number of employees in dedicated. So when we think about really the cost on hiring, recruiting, training drivers and You can kind of get to the conclusion that more than half of it was DCS. And then two, in terms of medical costs and how we allocate those across the business, given it's the largest segment, they also saw the largest increase or miss the budget or forecast on some of the group medical costs that we saw. But I think that's probably the extent of the detail I'm willing to provide on that.

The next question is from Ken Hexter with Bank of America. Please go ahead.

Hey, great. Good afternoon. Hey, Ken. Good afternoon. So, Brad, is there, I guess, a lot of discussion on pricing? Is there a level of pricing you need on the system average, maybe an intermodal, to get to those margin targets you've been doing, what, 2% X fuel, 11% all in? So does X fuel have to get to double digit in this cycle? Just trying to understand kind of a level you need. And then can you talk about capacity? I think it was mentioned before, kind of the percent of boxes still in storage and maybe thoughts on CapEx to get there. And then just a clarification, Nick, you noted risk at ICS. Were you talking about carriers post-Montgomery? I just want to understand the statement of risk at ICS. Thanks.

There were 17 questions there, so I'm trying to process which one was first. I lost track.

Somebody go first. Well, he's asking what level of pricing is required to achieve the margin.

Yeah, well, two, I mean, Darren, you would answer this, but two call-outs, revenue per load X fuel up 2% with 18% eastern network growth and 1% transcon. You could view that as negative mix, and so that would suggest to you that on the network looking at it on maybe like a same-store sales basis or something. Darren, I think when we were at a conference, you said that CFOs shouldn't answer questions about how much price we need. That's why you guys don't let me meet with customers. So I'll now pass it over to you and let you answer.

It's very important that Brad Delco remembers we don't have a business if we don't have customers. You know, it's – Look, I know why you're asking the question, Ken. At the end of the day, our pricing has to outpace our inflationary costs, or we have to find methods of taking costs out. I think as we went through 2025, we were very effective in our lowering our cost to serve initiatives, and we saw success. We've been able to sustain that. The low-hanging fruit, if you will, or maybe that's the wrong term, just big initiatives to get costs out are going to be very difficult in this environment given just inflationary headwinds. So it is more about price at this point. So I don't have an answer for you in terms of when you see You know, a different revenue per load price change, all of a sudden that means that we fix our margin. Just what I'm trying to represent is it's absolutely the best environment for us to go deliver improvements in our margins, given how well we've done for our customers, how well we've executed on peak season for our customers, and how well our organization does in this kind of environment to join forces, get the drivers we need, build our capacity answers, and solve problems for our customers. So this is the time that we need to prove that, and we'll let our results be the proof that we know what we're doing.

And Ken, this is Nick. The risk I think that you're talking about that I said in my statement was to truck. We put business at risk, so we took some bold moves on rates, and that's both in ICS and truck. and we lost some business, but ultimately a lot of it come back to us at the price that we needed. So it was just a risk of putting that at business for price.

Yeah, I think I want to add two things there because I do remember us previewing that with our investors last quarter on this call to say, hey, we know we need to take some risks. We lost money in JBT last quarter and that team did a tremendous job turning Thank you for joining us. Clearly, that is a top priority for us as we go into 2027. But there was a question, or part of your question, Ken, about containers and capacity. We have capacity to grow into, and the capital we've deployed, we've talked about pre-funding our growth. And so, on a trailing 12-month basis, I believe our operating income is up 16 or 17%. and most of that was done without really the benefit of price. But what's also important is if you look at our invested capital, at least our average invested capital balance, third quarter of 26 versus 25, it's down about $400 million. So we've seen about a 200 basis point improvement in our return on invested capital, which is still our north star. Now, we will improve our returns on capital by improving margins, but we will also be disciplined on how we deploy our capital And we've certainly been very active in returning a lot of value to our shareholders through share repurchases and dividends, and that will likely continue. So with that, I'll turn it back to one more question. Okay.

And that next question is from Tom Waterwitz with UBS. Please go ahead.

Yeah, good afternoon. Thanks for the question. I wanted to ask about the intermodal dynamic in the West. You did see that kind of lower 1% growth. I think you had referred maybe earlier this year to competitive dynamic in the West that was kind of constraining things. I just wonder if that's a factor in the relatively low transcon intermodal volume growth. And do you think that's going to change? Would it be reasonable to expect an acceleration in that volume as we look forward? And then just real quick for Spencer, what do you think on peak, like your services are doing great, but any kind of broader comment on customer act, you know, customer views on, you know, normal peak, strong peak from a, you know, broader truck perspective? Thank you.

Yeah, Tom, Darren here. I just, you know, the transcom growth at 1%, I would agree, has been, you know, we would have maybe, thought that that would have been a little better than what it has. I think that we have been very disciplined over a number of years. We don't want to grow too fast in the head hall and just eat up the benefits of that growth with the cost of repositioning empties. And so that market has had some of its own challenges. Also, you know, the highway capacity Thank you for joining us. Thank you for joining us. competitive forces surprising us. That would have been two or even three quarters ago. I don't think that in today's environment, I think everybody is faced with cost challenges and I would fully expect prices on the Western business to also improve. And certainly as capacity tightens up, our ability to reposition empty equipment in order to create the capacity remains really strong, and so we're ready to solve for our customers out there. It just hasn't – we haven't seen quite as many opportunities for growth there. Spencer?

Yeah, Tom, I'll just wrap up by saying, you know, the demand for all of our services across the country is really strong right now. And when you think about your peak question, I would say kind of the normal shape, there is a little bit of a slower start. However, we do have peak volumes coming to us, not just off the West Coast, but also off the East Coast, and significant opportunities to pick up share where maybe others don't have capacity today. And that can be West Coast, cross-border Mexico, and across our Eastern Network. And then second, I'll just add, I want to go back to JBT. I'm extremely proud of the work that that team did and creating value for our customers. And Nick talked about risk, putting business at risk, but a lot of that business really boomeranged back to us. Our customers have to check the market when we do that. We understand. But it came back to us at different times, which really allowed us to even say and reinforce our value proposition in that segment. And that's really what we're going to continue to do across the board in all of our businesses. We're going to make sure that we are creating the right value for our customers and making the most of every opportunity that fits our networks and where we can provide great service and capacity.

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

Well, thank you for joining our call. And I want to close with just repeating and reiterating our priorities outlined out at the beginning of the year. I actually want to do it in a little different order. First, our priority from now moving into next year is repairing our margins to create long-term shareholder returns. We feel confident we can do that because we have created discipline growth through our operational excellence. So we're sitting in a position with our customers that's at the highest place that we've been from a sentiment perspective. and growth creates value when it generates attractive returns and we remain focused on improving profitability while positioning the business for long-term success. We believe the actions we're taking today will strengthen our earnings power, it's going to expand our returns and it will create long-term value for our shareholders. Look forward to speaking with you next time.

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