I don’t want to sit here and talk about inflation too much. But, cost of trailers, maintenance stuff like that of 15% to 20%. You’ve got wages up more than historically over the last two or three years. So I think there’s inflation in there and this organization is going to try and battle back to get back to that 50% margin. I mean, I think that’s clearly going to be — I would guess it’s going to be a goal of the organization to get back there. The other thing we got too is, you know, we went through this tech modernization and upgrades to everything we possibly could do here to provide value to the agents and the capacity out there. So there’s been some tech, tech spending over the last five years has been a little higher than normal. So there’s also that.
So there’s — if you look at those costs, there’s a little bit more cost in the organization to offset this year as compared to 2019.
Scott Group: Okay. And then, it strikes me that everyone’s been saying, we’re in this really, really bad market, but the capacity is taking longer to come out than we would have thought. And maybe that’s why the market hasn’t tightened up at all yet. But your specific model is seeing something different in that. Your BCO count is now below where it was before the cycle started. And I don’t know that we’ve seen a cycle where that’s happened, where your trough is on BCO is below the prior trough. So why do you think your specific model is seeing something more extreme in terms of capacity reductions relative to the overall market?
Joe Beacom: Yes, Scott, this is Joe. That’s a great question. I think one of the things and kind of is embedded in that 20% of our turnover is related to major repairs to equipment. We run — we tend to run older equipment here. And I think that the fact that repairs have been very, very challenging and very, very expensive has made that number pretty significant. And perhaps we’re a little bit different in that regard. So I think when those things happen, it hits us a little bit harder. That is probably the single biggest explanation for that, just based on why people are leaving. And I just, you know, in the broader market, I find it hard to read the broader market and to get an accurate assessment to know whether we’re down more.
I think we’re down below where we were in 2019. I completely agree with that. Yes, it’s a little bit puzzling because the age of the fleet, as far as BCOs, is about the same. It’s really — maybe they’re on the leading edge. Maybe they’re on the leading edge of coming back to, we hope so. The relationships that we have when they depart are not bad, we don’t believe as I mentioned on the prior question, I don’t think they’re leaving maybe for long-term. There’s only a small, I think it was around, I think it was like 14% of those that left, actually were getting out of trucking. So I think they’re there to come back. I just think they’re taking the opportunity if they can’t make a reasonable living and they’ve got other options, which perhaps they do.
They’re sitting on the sidelines, waiting for a more compelling case to come back.
Scott Group: Yes, I mean, I’m just thinking about this way, like your BCO count is, again, now well below where it was in ’19, your approved and active brokerage carriers is still well above, right? So it just feels like you’re seeing the brunt of it more than the overall market.
Jim Gattoni: I think one of the things you got to look at too is the type of freight we haul. We are heavy spot business and if you heard, I talked about that 3PL, non-trucks up being on 42%. So you got to look at kind of what they’re hauling in our network too. And some of that, when you look at that overflow type business that irregular out non-routine, non-repetitive type freight, that market clearly is a little bit softer than you do on the contract world. So the contract trucks stay around a little bit longer than these guys because we’re dealing with a drop off in that type of freight. I think that has a little bit to do with it.
Scott Group: Okay, and then I could just ask one last thing, like this recent improvement in spot just to start the year, what’s your view? Is this just weather? Is it sustainable in any way? How are you thinking about that?
Jim Gattoni: I’d like to believe it’s the beginning of that six to eight cycle turn, right? One thing I would point out is, and this isn’t quite a green shoot, but we’ll give you a little bit of — we had record truck brokerage spreads at the beginning of last year, right? So that meant that the capacity and that was very, very loose. Starting after the second quarter, coming into third and fourth quarter, we saw that compress a little bit, we’re still seeing. So I think that would tell you that there’s a little bit of pressure coming in from the trucks to us to pay them a little bit more. So in that environment, that it kind of holds to say, if they’re pushing us more on rate from the truck side that spot rates, it’s not a weather thing. It’s the beginning of maybe flattening or maybe, what we’re saying is normal seasonal upticks coming up in the end of second — mid-2024. So I look at that, the spreads on the third party truck pay.
Scott Group: Thank you, guys. Best of luck, Jim.
Jim Gattoni: Thank you.
Operator: Thank you. We will move to the next question coming from the line of Jack Atkins of Stephens. Your line is now open.
Jack Atkins: Okay, great. Thanks for the time, guys. And Jim, I’ll echo everyone’s sentiment. Hopefully now you’ll have time to focus on your golf game. But I guess kind of shifting gears here. I would maybe just like to kind of think about some of the inflationary pressures in the business this year. And so maybe this is a question for Jim Todd, but I guess as you sort of think about incentive compensation accruals, can you maybe help quantify that for us a bit? And then elsewhere, could you maybe talk about the cost inflation that you may be seeing at 2024 versus 2023, just so we can kind of have the full year calibrated correctly on an expense perspective?
