Joe Beacom : Great. Thanks, Stephanie. Yeah. So I think BCO count, you’re correct. I mean we’ve seen some elevated turnover really the result of the economic backdrop that we’ve been talking about here for the last few minutes. I would think that as long as that stays the way it is, I think the duration of this downturn where rates are down and volumes are down and demand is down. I would anticipate that we would continue to see some decline in the fourth quarter. And we’re talking about a more likely recovery in the eight-quarter range versus the six-quarter range. So early into next year, it’s kind of hard to say. Seven of the last 11 first quarters, we’ve seen a decline, that’s pretty typical for us. So I don’t think we’re at the bottom from a BCO account because I think that just the demand is there.
But our BCO count, if you look back, has been pretty volatile and really as a result of where the economy is. In ’17 and ’18, we were up about 1,200 trucks, right? In ’19, we took a small drop, and we’re declining through the first quarter of ’20 until the pandemic and then over the next couple of years, we went up 1,600 trucks or more. So it does move pretty quickly with the economic backdrop. So while I continue to see some declines in the coming months, I do think we will bounce back when this thing turns. And then from a utilization standpoint, we were down 5% year-over-year in the first quarter. We were down 3% in the second quarter, but we were up 2% in the third quarter. So — and in the quarter, we were down 1% in July, up 3% in August and up 3% in September.
So there is some improved utilization. I think we do a lot here to make sure we’ve got analytics tools for the BCO so that they can understand kind of their business better. And ultimately, we try to take the surprises out of the equation for them, but the environment has been difficult. They really didn’t see this decline coming as rapidly as it came. But really, I think it’s the duration. I think most BCOs can withstand a decline that lasts a period of time. But this — the duration of this one, I think, has had some impact on the viability of some of those BCOs and I think they’re taking the opportunity to either do something else and come back later or perhaps, in some cases, maybe get out of the business for a time. But — that’s kind of — the ads are not an issue for us.
Our additions coming into the fleet have actually been fairly strong. It’s just keeping those that are here, and I think a lot of them are making the decision to sit on the sidelines until some of this stuff works itself out.
Stephanie Moore: Got it. Thank you. And then just second for me. I know your guidance assumes a pretty muted peak season in the fourth quarter. Can you give maybe an indication what you’re hearing from your customers around peak season? Thanks.
Jim Gattoni : Volumes being down pretty significant coming into the fourth quarter. I mean they just — the expectation is compared to prior year’s fourth quarter, they’re talking 10% or 20% volumes down. You’re talking about the — some of the parcel carrier, where we do substitute line haul, specifically that doesn’t necessarily mean — it’s not the flatbed side, it’s the band side, but the — just as we said, based on the conversations my field guys have had with the customers. They’re not giving us exact metrics, but saying they expect not a dynamic peak season.
Stephanie Moore: Thank you.
Operator: Thank you. [Operator Instructions] At this time, we have the next questioner from the line of Bruce Chan of Stifel. Your line is now open.
Andrew Cox : Hey, good morning, team. This is Andrew Cox on for Bruce this morning. I just wanted to get your commentary on the J.B. Hunt acquisition of BNSF Logistics. I wanted to know if they compete with Landstar for agents, is there any kind of overlap there, any commentary? Thank you.
Jim Gattoni : Yeah. We’ve seen no — when BNSF Logistics existed prior or any of that stuff, we didn’t see any pressure from that when it existed under a different name and don’t expect that we would see any kind of pressure as it exists in its form moving on to J.B. Hunt. So the answer to that would be at this point, we haven’t seen anything either from the existing legacy BNSF brokerage to when it’s going to transfer with J.B. Hunt.
Andrew Cox : Okay. Great. And another one, I’m thinking we haven’t heard about the trailer fleet on the call today. I just wanted to get an update on there where you stand in terms of size, age and any potential CapEx requirements headed into next year?
Joe Beacom : Yeah, hey, Andrew, this is Joe. I’ll take a shot at that. The trailer fleet is just under 15,000 currently. And as you may know or if you don’t know, due to the inability to really acquire new trailers for a couple of years there during the pandemic, we held on to some of our older equipment, and we’re in the process of cycling some of that out. Some of that is what’s attributed to what Jim Todd talked about earlier with the increased maintenance costs. So we’re in the process of trying to rightsize the fleet now. We typically have two van trailers for every BCO pulling vans in the drop and hook market, and we’re a little north of that. So we’re trying to rightsize that through some sales, which you saw in the quarter. And then looking forward, the intent is to maybe get into some new equipment in 2024 at some point. But again, watching BCO count pretty carefully.
Andrew Cox : Okay. That’s all I got. Thanks, guys.
Operator: At this time, I show no further questions. I would like to turn the call over back to you, sir, for closing remarks.
Jim Gattoni : Well, I would guess that everybody ran to the EPS call, but I’m going to close with a statement regardless. Before I close, I want to briefly discuss freight cycle dynamics to provide additional big picture context to this year’s results. Landstar’s revenue performance through the freight cycle that occurred over the past three years, ultimately set the stage for where we are today. Generally, in the ordinary course of business, we experienced spot market down cycles that drive revenue from peak to trough as well as up cycles that drive revenue from trough to peak. In both cases, the typical spot market freight cycle from peak to trough or trough to peak occurs over a period of six to eight quarters. And these cycles are typically driven by three main factors: the level of industry demand for freight services, the level of available truck capacity industry and the differential between industry-wide contract and spot pricing at any given point in time during the cycle.
Looking back over the recent down cycle, Landstar’s peak quarterly revenue occurred five quarters ago in the 2022 second quarter. Since hitting peak quarterly revenue in the 2022 second quarter, Landstar’s experienced a down cycle during which quarterly revenue has thus far decreased each quarter over the following five quarters. Recent overseas conflicts, the impact of student loan repayments on consumer spending, labor disruptions in the U.S., increasing interest rates, political uncertainties and many other factors make it difficult to predict exactly when the current down cycle will end and the revenue will begin to cycle imports. Due to the overall economic and geopolitical environment, I expect the start of the upcycle may be delayed towards the latter part of a typical cycle.
Nevertheless, even with the challenges in the freight environment that we, along with many others in our industry have experienced through 2023. Landstar’s driver cost [ph] business model has continued to generate solid returns. Our balance sheet has never been stronger. We remain focused on the elements of our business that we can control. We continue to invest in digital tools, process improvements and people to empower agents’ capacity providers for continued success. Thank you, and I look forward to speaking with you again on our 2023 fourth quarter earnings conference call scheduled for February 1. Enjoy your day.
Operator: Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.
