Good morning, welcome to Landstar System, Inc.'s first quarter earnings release conference call. All lines will be in a listen-only mode until the formal question-and-answer session. Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Jim Gattoni, President and CEO, Jim Todd, Vice President and CFO, Joe Beacom, Vice President and Chief Safety and Operations Officer. Now, I would like to turn the call over to Mr. Jim Gattoni. Sir, you may begin. Thank you, Bill. Good morning, welcome to Landstar's 2023 first quarter earnings conference call. Before we begin, let me read the following statement. The following is a safe harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relates to Landstar's business objectives, plans, strategies, and expectations. Such information is by nature subject to uncertainties and risks, including but not limited to the operational, financial, and legal risks detailed in Landstar's Form 10-K for the 2022 fiscal year described in the section Risk Factors and other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking information. Landstar undertakes no obligation to publicly update or revise any forward-looking information. Given the current freight environment, with soft demand and readily available truck capacity, Landstar performed relatively well in the 2023 first quarter. Heading into the 2023 first quarter, demand for truck transportation services was somewhat soft. In addition, Landstar was faced with probably the most challenging quarterly financial comparison in its history. Landstar's 2022 first quarter was not only our best ever first quarter performance, but the best quarterly financial performance for any quarter in the company's history. Prior to 2022, the 2021 first quarter established a new all-time record for first quarter revenue at Landstar. 2022 first quarter revenue exceeded the 2021 first quarter by 53%, growing by over $683 million. In fact, net income and diluted earnings per share each established new all-time Landstar quarterly records in the 2022 first quarter that remain unbroken today. In contrast, the freight environment was dramatically different in the 2023 first quarter. Looking back at the 2022 first quarter, consumer demand was very strong and supply chain disruption was at its peak. Those conditions resulted in a lack of available truck capacity, driving truck transportation pricing to all-time highs. Following the 2022 first quarter, demand began to soften and supply chain bottlenecks began to clear. Beginning the summer of 2022 and carrying through today, we are clearly in a different freight environment. Truck capacity is more readily available, with market conditions currently favoring the shipper. As it relates to Landstar's 2023 first quarter performance, our results were generally in line with what we expected. Our first quarter guidance called for the number of truckloads hauled via truck to be below the 2022 first quarter in a 10%-12% range, and overall revenue per truckload to be below the 2022 first quarter in a range of 15%-17%. The actual number of loads hauled via truck in the 2023 first quarter was 12% below the 2022 first quarter at the low end of the truckload volume guidance. Actual revenue per truckload in the 2023 first quarter was 14% below the 2022 first quarter, slightly better than the high end of the truck revenue per load guidance. The slightly favorable variance on revenue per truckload compared to guidance was mostly driven by a higher than anticipated revenue per truckload in January, offset by a lower than anticipated revenue per truckload in February. March came in near our expectations. In the first several weeks of April, truck revenue per load is trending slightly below normal sequential month-to-month trends. As to our air, ocean and rail intermodal transportation services, 2023 first quarter revenue was $108 million, or 55% below the 2022 first quarter. The significant decrease in this non-truck transportation revenue was in line with our expectations of lower volumes across all the other modes and the expectation of a significant decrease in ocean revenue per shipment. The decrease in revenue of our non-truck transportation services was mostly due to a 48% decrease in ocean revenue per shipment and lower volume of 39%, 32%, and 9% in rail, ocean, and air services, respectively. With respect to conditions in different parts of the truckload market, as mentioned in the earnings release, revenue on unsided/platform equipment held up considerably better than revenue hauled via van equipment and other truck transportation services. The quarter over prior year quarter revenue comparison for van were much more challenging than those for revenue on unsided/platform equipment. Revenue on van equipment in the 2022 first quarter crushed all-time first quarter records for van loadings and revenue per load. Revenue hauled via unsided/platform equipment, although also still strong in the 2022 first quarter by historical standards, was less impacted by peak supply chain disruption and heightened consumer demand. One metric we follow is revenue per mile on loads hauled by BCO trucks, which tends to be a more pure indicator of pricing, as this data excludes fuel surcharges billed to customers that are paid 100% to the BCO. Revenue per mile on van equipment hauled by BCOs in the 2023 first quarter was 26% below the 2022 first quarter. In contrast, revenue per mile on unsided platform equipment hauled by BCOs in the 2023 first quarter was only 6% below the 2022 first quarter. It should also be noted that although the market has softened significantly from a year ago, Landstar revenue per mile on BCO van and unsided platform equipment both remain above the pre-pandemic 2020 first quarter by approximately 30%. I believe that rates will remain higher than pre-pandemic levels given the significant amount of additional cost pressure to operate a truck today as compared to three years ago. Turning to volume, total loadings on all modes in the 2023 first quarter were almost 13% below the 2023 first quarter. Loadings in our top 25 commodity categories, which make up about 70% of our load volume, were down a combined 10% compared to the 2022 first quarter. From the 2022 first quarter to the 2023 first quarter, total loadings of consumer durables decreased 11%, automotive equipment and parts decreased 15%, hazardous materials decreased 4%, and building products decreased 16%, while machinery increased 2%. Landstar is known throughout our industry as a key truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those entities reach out to Landstar to provide truck capacity more often than during times of more readily available truck capacity. The freight hauled by Landstar on behalf of other truck transportation companies includes almost all our commodity groupings, including our substitute line haul service offering. Substitute line haul loadings was one of our strongest commodity performers throughout the pandemic. Load volume for this service offering varies significantly based on domestic consumer demand and decreased 60% in the 2023 first quarter from the 2022 first quarter. Revenue hauled on behalf of other truck transportation companies in the 2023 first quarter was 47% below the 2022 first quarter, a clear indicator in our model that capacity is more readily accessible. Revenue hauled on behalf of other truck transportation companies was 18% and 24% of revenue in the 2023 and 2022 1st quarters, respectively. Our business remains highly diversified with over 25,000 customers, none of which contribute over 4% of our revenue in the 2023 1st quarter. The decrease in truckload volume we experienced quarter-over-prior-year quarter was primarily driven by changes in the overall freight environment rather than the loss of any major accounts. During the 2023 1st quarter, BCO truck count decreased by 472 trucks and has decreased approximately 9% since this time last year. Historically, Landstar has experienced increased turnover in BCO truck count when truck rates decrease. Over the past 12 months, truckload rates decreased at the most rapid pace in recent years. The largest truckload rate decrease was with respect to services provided on van equipment, which is a primary equipment type hauled by BCOs. BCO turnover has also been influenced by a significant increase in the cost of repairs and extended period of time trucks are out of service awaiting parts. The ability to get back on the road is also impacted by the high cost of used trucks, which impacts the potential for a BCO to trade their existing used truck for a newer used truck that may be less subject to unscheduled maintenance issues and enforced downtime. I will now pass to Jim Todd to comment on other additional P&L metrics regarding the 2023 first quarter performance. Thanks, Jim. Jim G. has covered certain information on our 2023 first quarter. I will cover various other first quarter financial information included in the press release. In the 2023 first quarter, Gross profit was $152.9 million, compared to Gross profit of $214.6 million in the 2022 first quarter. Gross profit margin was 10.7% of revenue in the 2023 first quarter as compared to Gross profit margin of 10.9% in the corresponding period of 2022. In the 2023 first quarter, Variable contribution was $208.7 million compared to $270.5 million in the 2022 first quarter. Variable contribution margin was 14.5% of revenue in the 2023 first quarter compared to 13.7% in the same period last year. The increase in variable contribution margin compared to the 2022 first quarter was primarily attributable to an increased variable contribution margin on revenue generated by Truck Brokerage Carriers, as the rate paid to Truck Brokerage Carriers in the 2023 first quarter was 330 basis points lower than the rate paid in the 2022 first quarter. Variable contribution for truck brokers load increased 9% in the 2023 first quarter compared to the 2022 first quarter, despite a 10% decrease in Truck Brokerage revenue per load. Other operating costs were $12.4 million in the 2023 first quarter compared to $11.1 million in 2022. This increase was primarily due to increased trailing equipment maintenance costs and an increased provision for contractor bad debt, partially offset by increased gains on sales of used trailing equipment. Insurance and claims costs were $27.6 million in the 2023 first quarter compared to $30.8 million in 2022. The decrease in insurance and claims costs as compared to 2022 was primarily attributable to decreased net unfavorable development of prior year claim estimates and decreased severity of accidents during the 2023 period. During the 2023 and 2022 first quarters, insurance and claims costs included $1.9 million and $4.3 million, respectively, of net unfavorable adjustments to prior year claim estimates. However, total insurance and claims costs were 5.3% of BCO revenue in the 2023 period and 4.2% of BCO revenue in the 2022 period. The 110 basis point increase in insurance and claims costs as a percentage of BCO revenue was almost entirely attributable to the 19% decrease in BCO revenue per load. Selling general and administrative costs were $53.6 million in the 2023 first quarter compared to $52.7 million in 2022. The slight increase in SG&A costs was primarily attributable to increased information technology costs and increased wages, almost entirely offset by decreased provision for compensation under the company's variable programs and decreased employee benefit costs as a result of favorable medical and pharmacy loss experience. In the 2023 first quarter, the provision for compensation under variable programs was $3.3 million compared to $7.2 million in the 2022 first quarter. Depreciation and amortization was $15.2 million in the 2023 first quarter compared to $13.8 million in 2022. This increase was almost entirely due to increased depreciation on software applications resulting from continued investment in new and upgraded tools for use by agents and capacity. The effective income tax rate of 23.3% in the 2023 first quarter was 50 basis points higher than the effective income tax rate of 22.8% in the 2022 first quarter, primarily attributable to larger net excess tax benefits from stock-based compensation arrangements during the 2022 first quarter. Looking at our balance sheet, we ended the quarter with cash and short-term investments of $388 million. Cash flow from operations for the 2023 first quarter was $139 million, and cash CapEx were $6 million. Back to you, Jim. Thanks, Jim. Our records, our record success in the 2022 first quarter made for very difficult year-over-year comparisons. Heading into the 2023 second quarter, year-over-year comparisons are only slightly less challenging. Beginning in the 2022 second quarter, we began to see truck pricing soften. Sequentially, revenue per truckload in the 2022 second quarter was 3.7% below the 2022 first quarter. Truckload has continued to be strong in the 2022 second quarter, increasing 3.6% over the 2022 first quarter. Yesterday's earning release made note that early April truckload count was trending below historical sequential monthly patterns. Historical sequential patterns in this context refers to the five years prior to the pandemic. Given the lower start in truckload volume in early April, we are anticipating that sequential month-to-month trends in truckload count will return to more normal patterns in May and June. Taking into account our early April loadings experience and assuming the return to normal month-to-month trends, we expect truckload count in the 2023 second quarter to be about equal to the 2023 first quarter. This compares to an average increase in truckload volume of approximately 8% when comparing historical first quarter to second quarter truckload volume. We expect truckload pricing to be significantly below the 2023 first quarter, as rates have slightly softened in early April. We expect 2023 second quarter revenue per truckload to be below 2023 first quarter revenue per truckload in a range of 1%-3%. The decrease compared to the 2023 first quarter is primarily due to January 2023's relatively strong revenue per truckload, which drove the average for the first quarter above the starting point of the second quarter. We also expect revenue for our non-truck modes to exceed the 2023 first quarter by 10%-15%. Based on these assumptions, we expect revenue in the 2023 second quarter to be in a range of $1.4 billion-$1.45 billion, and diluted earnings per share to be in a range of $1.90-$2.00. The 2023 second quarter guidance incorporates a variable contribution margin range of 14.2%-14.4%, and insurance and claim costs similar to the 2023 first quarter. There are some specific items impacting the 2023 second quarter range of diluted earnings per share guidance of $1.90-$2.00 compared to the 2023 first quarter actual diluted earnings per share of $2.17. Second quarter SG&A is expected to be above the first quarter due to the cost of Landstar's annual convention in April. We expect employee benefits, primarily medical loss experience, to return to more normalized levels. We expect variable contribution to be 2%-4% below the 2023 first quarter. This anticipated variance results from the expectations of a higher rate of purchased transportation that would be paid to Truck Brokerage Carriers in the 2023 second quarter versus what was actually paid in the 2023 first quarter. The second quarter tax rate is expected to be slightly higher than the first quarter, driving a $0.03 unfavorable earnings per share variance compared to the first quarter. With that, Bill, we will open to questions. Thank you very much, sir. At this time, we will begin the question and answer session. If you would like to ask a question, please press star one on your touch tone phone. Once again, that is star one to ask the question. To cancel your request, please press star two. We have the first question coming from the line of Scott Group of Wolfe Research. Your line is now open. Hey, thanks. Good morning. Good morning. Jim, I just want to get your perspective on you're counting on normal seasonality in May and June. What changes in May to sort of start to get freight more in line with seasonality? What's driving that assumption? It's actually the lower April, to tell you the truth, 'cause we're, you know, we've seen the dip and a little bit of leveling off. We think we're gonna, I don't want to call it a trough, but it's really just coming off what's going on in April. The volumes are relatively, they're relatively strong compared to 2020. You know, they're very strong still. It's just, we're seeing a little bit of stabilization there, we expect to hit this April trough and just kind of go back to normal seasonal trends. It's really mostly due to the April softness. Okay. When I look at rev per load, down from 1Q to 2Q a few percent, are you expecting that to be the bottom for rev per load? You know, there's a lot of talk about this, you know, huge spread still between contract rate and spot rate. You know, if spot doesn't get better, do you think that means further pressure to contract rate? How are you thinking about all that? When looking at what we look at, Scott, is a 20-day rolling average. I get that report every day to show what the last 20 days look like, because our day-to-day spot rates bounce all over the place. I think what we're looking at today is a lot of bounce in the day to day and a little bit unpredictable. I think we're comfortable in the short term to say that we're gonna be, you know, within that -1% to -3% first quarter, below first quarter range. Beyond that, it's hard. I am still a believer in cycles. I do believe that contract rate and spot rate are gonna spread apart or stay spread apart. Eventually, you know, you're gonna firm up that spot rate, whether that's now or sometime later in the summer. I don't want to call it trough, but I think, you know, we have recently seen the spot rates drop a little bit more into April. There's a little bit of concern that 1%-3% might be, I don't wanna call it aggressive, but we're pretty comfortable with where we are and let the spot rates will hang on for now because I think the spread between contract and spot is relatively large right now, and I don't know how much further it can go down. I mean, I guess that was my question. Let's just say if this is, if Q2 is the bottom for spot, do you think it's the bottom for your rev per load in Q2? Because of the contract spot spread, do you think there would be further pressure in your rev per load into the back half? I don't think there'll be further pressure into the back half when things start to. You know, unless the economy drops off even more, I would think we're pretty comfortable with a normal seasonality on revenue per load trends after, you know, we get through this midway through the end of the second quarter. Now, you know, it all rides on economic demand, but I'm pretty comfortable saying that we probably see normal trends flowing after the second quarter as things start to shift based on my theory of normal cycles. 'Cause if you look through the pandemic, we almost normal cycled to a tremendous peak and then a, you know, dropping into a trough here. You know, we started seeing our rates drop in February, which was, you know, 13, 14 months ago, and you're looking at an 18-month, 18-24-month peak to trough. I'm a believer in the cycle. It happened through the pandemic, and I think it's gonna happen again. Okay. Thank you, Jim. Appreciate the thoughts. We have the next question coming from the line of Jordan Alliger of Goldman Sachs. Your line is now open. Yeah. Hi. Just curious, interesting with the pricing in the dry van versus the unsided, you know, the gap of the -26 versus the -6. I'm just sort of curious, does that spread narrow with dry van worsen, with the unsided sort of worsening, or is it more the other way around, where it all sort of converges? Like, I'm just sort of curious the dynamics on the unsided versus the dry van around the pricing from here. Thanks. I would actually say it's converged right now. If you look at, we watch the variance between our revenue per load on van compared to our revenue per load on flatbed. What's interesting, it was last year's first quarter where that gap was about as close as I've ever seen it. The gap between, the flatbed rate's typically higher than van rate. I've never seen it below van rate, tell you the truth. First quarter last year, the spread between the van revenue per load and the flat revenue per load was only 25%. That to me was like an all-time gap close. It was the closest it's ever been. If you look at history, it tracks between about 40% and 70% gap. We are right now back to the more normal 60%-70% gap between van and flat, revenue per load. I would say it's already at its normalized point between the spreads between those two. Great. Thanks so much. We have the next question coming from the line of Jack Atkins of Stephens. Your line is now open. Okay. Great. Good morning, Jim and Jim. Thanks for taking my questions. Please do. So I guess, you know, kind of sticking with the rate series of questions here for a moment. You know, Jim, kind of going back to the prepared comments where, you know, you're still seeing a pretty hefty premium in rates today, rate per load today versus, you know, pre-pandemic. When we kind of look at spot market rates, though, they're kind of broadly back to 2019 levels, excluding fuel. You know, I guess what, as a spot player, why do you feel like your rates are kind of gonna significantly decouple over time from where the spot market rates have kind of settled out? I think our rates are always a little bit higher than what you're reading in the industry, a lot because our BCO stuff is, you know, you've got drop and hook, you got trailers in there, you've got. It's specialized, non-routiny, regular route, not really dedicated type business. You know, if there's, you know, people running spot that is pretty much routine, that's not where we play. We're generally are. We always do sit a little bit higher. Yeah, I read a lot of the stats, and if you remember, I don't know if it was February last year or before, when, you know, there were certain industry trade reports coming out that, you know, we were pre-pandemic, you know, that revenue per mile was below pre-pandemic last February. It was, that was crazy. We were still 30% or 40% above. It's really hard for me to speak to industry data because I couldn't get my hands around it back then. You know, you just see relative stability. Our trends that we look at, like I've got 10 years of trends, our trends are performing at below historical norms, not so absurdly that I'm worried that I'm gonna go pre-pandemic, you know, below pre-pandemic. The cost in the system, we don't own trucks, we could feel the cost in the system, right? You're looking at our cost of insurance compared to 2019. I think if you look back, it may have cost us on a BCO load, $80 a load. We're up over $125 a load today, right? It's all those things built into the, into the, into the system and into the industry that I don't think you're gonna drop back there. If you look at revocations, somebody put stats out about, you know, truck authorizations and truck revocations. Those are up, right? You're already seeing some kind of turn in the amount of available capacity in the industry, you know, I would guess over the next few months or few quarters, we're gonna see more trucks come out. I think there's a stability here because if rates go down more, it's just gonna push more trucks out of the system. Yeah. Yeah. Absolutely. That makes a lot of sense. I guess maybe shifting gears for my follow-up question, I'd love to kind of get your thoughts on cross-border. You know, you guys have a large cross-border franchise. You know, there's a lot of good things that could perhaps happen, you know, in terms of cross-border freight over the next, you know, few years. Just would be curious to get your kind of take on what you're seeing in your cross-border business today, how you think that's gonna trend over the course of this year. You know, we are seeing some new rail partnerships to start to move some of this cross-border freight via the rail. Do you think that sort of reinforces a longer-term positive view there, or does it increase competition? Just would love to get your thoughts on that item. Jack, you didn't say good morning to Joe, but Joe's with us today, and he's actually an expert at Mexico cross-border. Good morning, Jack. Hey, Joe. Good morning. Yeah, great question. Yeah, we're still very bullish on cross-border and, you know, seeing some evidence of the nearshoring that we've heard about for quite a while. As compared to the overall market, that market has held up quite a bit better, both from a volume and a price perspective. Yeah, we're still pretty optimistic there, still seeing a lot of opportunities there. As it relates to the rail, I guess we'll see. I saw some of the, you know, the commentary about the mergers, and now we're gonna have more rail competition and that kind of thing. I guess it just depends on how that shakes out and what the service requirements are, what the, you know, whether it's something that can go on the rail or not. I just don't have enough detail to say, you know, with any degree of certainty whether that becomes supportive or more of a competitive thing for us. You know, continue to be pretty bullish on the cross-border business going forward, just based on, you know, all the things that seem to be materializing around some of the nearshoring stuff and then just the relationships that we have on the border and some of the capabilities that we continue to develop on the border and, you know, carrier relationships and transloading capabilities and that kind of stuff. We remain pretty optimistic there. Yeah, Jack, on top of that, you know, our revenue is down much more than the Mexico cross-border revenue is only down about 9% compared to our overall drop in revenue. Yeah. Okay. No, that's great. That's great to hear. I appreciate the color. Thanks, guys. Yep. We have the next question coming from the line of Stephanie Moore of Jefferies. Your line is now open. Hi. Good morning. Thank you. Yeah. You know, Jim, I always appreciate, I think, your perspective on where we are in the cycle, and I think we can all admit that it's been a pretty abnormal, I guess, three years now and everything that's transpired. I just wanted to get your perspective. You know, I think you clearly outlined, you know, where it stands currently on capacity and demand levels. You know, maybe how do you think this could pan out if the U.S. broadly moved into more of an economic recession as we go through 2023 and early 2024, as I think many economists, well, some economists at least are pointing to. What do you think that could mean for this current freight cycle, especially compared to historical ones? Thank you. Yeah. The one thing you think about is the shift from contract rate to spot rate. That's the one differentiating factor we have with some of our peers who actually have contract rates. You know, when I talk about an 18-24-month cycle, we would look, if the economy weakens, we're clearly gonna see volumes drop off further than we're currently thinking about. We would probably also see that rate drop further than we would than we're currently thinking about with if we have a worsening in economy going into the back half of the year. I'm still a believer that it won't drop back to the pre-pandemic levels from a pricing standpoint, due to the significant cost burdens in the industry. When you own a truck today, the cost of a new truck, the cost of repairs, the cost of driver wages, the insurance costs, and everything that ties to running a truck today will get trucks out of the system quicker, and I think you'd see that happen. My thing would be, I'd say that I'd be a little more worried about a drop-off in volumes, which is the one thing we try and control here. Then the rate, you know, I think it'll be a little more stable in a drop-off like that. It just 'cause there's gonna be a point where the trucks are just not gonna haul freight. I, you know, I think we're not far from that point. No, understood. Maybe just as a follow-up, in this current environment, what are you seeing maybe from a competitive standpoint in this market? Any, you know, irrationality just given where rates are, or, how does it kind of compare to other, to previous periods at this point in the cycle? Thanks. Yeah, in this point in the cycle, the usual stuff is happening. We're getting a lot of requests for quotes and pricing, and the shipper is at the advantage. I don't think there's any question right now. The shippers are still looking for price cuts, and it's typical for this time of a cycle for them to be coming at us with price cuts for some of our normalized business, some of the stuff we do routine, even some of the drop and hook business, we're getting that. You know, and you try and hold off as much as you can, and sometimes we have to walk away because you can't get trucks to haul the freight. That's one of the things that you see a trigger. Now, we're not seeing that yet with trucks being like, you know, I can't haul it for that rate. you know, sooner or later, they're gonna push the pricing low enough where it's gonna be hard to find a truck. Now, we're not there yet, but that's the typical cycle, right? That's what drives our spot rates back up over time. Great. Really helpful as always. Thank you so much. Yeah. We have the next question coming from the line of Bascome Majors of Susquehanna. Your line is now open. Jim G., in starting in October, you began walking us through kind of a hypothetical revenue downside scenario and how the business might perform. I think you started off at 20%, you honed that a little bit for us in January or February. Can you walk us through, you know, trying to kind of walk the business to trough how the business might perform and, you know, anything you would change to what you've shared with us before, based on how this year's developed so far? Thank you. Nothing's really changing to kind of what we said before, other than the fact that we're not, you know, that 20% bogie of a drop-off is looking a little less likely, based on the current trends. If we were to get back to a 20% drop-off, I would probably repeat what I said in October. Now, I think there's probably a little more cost pressure than I anticipated back in October. We still see things rising, whether it's wages or insurance risk and stuff like that. I would say if we can have a safe year, and we do get back to a 20% drop-off in revenue comparatively to 2022, I still think that would be achievable. I am concerned a little bit on the cost side with, you know, some of the inflation come across some of the things, whether it's trailer repairs. That's one of the things that's been hitting us. You know, on our trailer side, trailer tires and all the other things where we have a little bit of a more fixed component, which is very small in our business, but still could knock us out of that 50% margin. That's actually, you know, my follow-up from Jim Todd was going to be if you could walk us through some of your expense outlooks that you laid out to us a few months ago and any of those have changed. Can you know, if anything is really seeing inflation from the expectations you set a few months ago, maybe help us understand that and maybe an updated view on, you know, the incentive comp tailwind or as well as we think about how to model the bottom line? Thank you. Sure. I would echo some of Jim's thoughts with respect to other operating. Back in February, I gave a +$1 million-$3 million year-over-year. I'm probably closer to that +$3 million, whereas the depreciation number I gave, I think a $4 million-$7 million, we're gonna be just in the environment we're in, a little bit more disciplined there on the CapEx side, so I'm probably close to the low end. With respect to the compensation under variable programs, back in February, I gave a base case assumption of $12 million of tailwinds there and a total bear case of $18 million-$20 million in tailwinds. Based on, you know, first quarter, I'm probably wrapping $16 million-$18 million best guess of tailwinds from those programs, 2023 over 2022, which probably gets you to a flattish, you know. 1Q of 2022, SG&A was favorably impacted to the tune of about $2.5 million from forfeitures on equity compensation arrangements. That's why we had a slight increase year-over-year. 2Q 2023, I think we'll be down on the SG&A line year-over-year. Thank you both. We have the next question coming from the line of Bruce Chan of Stifel. Your line is now open. Yeah. Thanks operator, and morning, everyone. Jim, you know, always appreciate your breakdown of activity by vertical and, you know, it seems like there's been a little bit more resilience here on the industrial side of things than the consumer. Is there anything to tease out there as far as whether the industrial economy is just doing better or whether maybe it's further behind than the restock and, you know, or excuse me, whether it's further behind than the destock? Then as you start to plan for a restock, you know, do you have any sense of, you know, what side of the economy might be recovering first? To me, it's more of a year-over-year comp comparison than it is a, you know, which one's doing better. You know, I think the, you know, the peak of van was way above the peak in flatbed. There's no question. I think there's just a lot more stability on the industrial side than the consumer side. Consumer really drove the last two or three years, and it wasn't really driven that much by the industrial economy. It's more to me when I look at it, you know, one of the things we saw positive was machinery. It was only positive, like, 2% in load volume. That's not gangbusters. On a comparative, you know, from looking at where we were last year, van revenue per load peaked in I wanna say February, flatbed only peaked in July. Their peaks were so much different, you know, where the peak van in February is probably 50% of where it was three years ago, the peak in flatbed was 20% or 30%. It's more of a year-over-year comp. To, you know, to summarize it, flatbed was a lot more stable going through the pandemic than the van stuff. Van just really drove the business for the last two and a half years, and it's dropping off faster than the industrial economy. Okay, great. That's really helpful. Just a quick follow-up maybe for you or Joe. If we could just get your perspective of what's happening here on the lending side. I mean, not just with the rates, but, you know, with potential credit crunch. How is that, you know, affecting your business on the BCO side but also on the Truck Brokerage Carrier side? As it relates to people buying to buy new trucks. Is that one? I'm not sure I follow the question. Yeah, exactly. Just as far as, you know, the potential entry for new equipment, new trucks, new capacity in the marketplace. Yeah, on the new truck side, what really impacts us more than anything is the used truck pricing because our guys generally don't go out and buy $180,000-$200,000 trucks. It has, in some of my prepared remarks, it stops guys from, you know, with the elevated used truck pricing, you know, they wait longer to get repairs, right? It keeps the utilization is down partly because of that. Our utilization was below where it was last year, and that's a loads per BCO per week number. What it keeps our guys, it could keep them on the side of the road for a little while because they have repairs they need to get done. They're not in the new truck. Right now they're still not I don't see them buying a lot of used trucks because of the way the price is still relatively high compared to where it was historically. The new truck pricing isn't something that really impacts us as much as it would someone who's driving assets. Okay, great. Thanks. Appreciate the color as always. We have the next question coming from the line of Scott Schneeberger of Oppenheimer. Your line is now open. Morning. Sorry, guys. Was on mute. Good morning, all. Just I kinda wanted to follow up on Bruce's first question on the specifically on the flatbed side. Could you speak, Jim Gattoni, I guess to the February to March and particularly the April trends? You just kinda responded that it looks very stable. Do you expect it to continue to be stable? Curious, is there anything you can point out that's been providing the stability? The manufacturing reshoring trend, anything with renewables, infrastructure bill, anything like that you can point to that you've been hearing from the field? Thanks. One thing about the flatbed unsided service offering is that it's a little more volatile because, you know, you've got heavy haul mix in there, length of haul, and a whole bunch of stuff when you look at a revenue per load component for that. What we're looking at, and I'll tell you what the flow was from January, February, and March, compared to prior year on the revenue per load on flatbed, it was +6% January, -10% in February, and then -3% in March. It's really hard to get your hands around that short term, month-to-month flow. When we speak about it, we're kind of looking at a longer term trend than that. When I look at end markets there, with us, it's really, like we're not big infrastructure guys. We don't do roads or anything like that. What it does do indirectly is as flatbed gets tied up, you know, it just provides less flatbed capacity in the market, and it just drive rates up. You know, if industrial production starts dropping off a little bit on the heavy machinery and stuff like that, but infrastructure starts kicking in, I think that you're just gonna see more stability on the flatbed side than you would on the van side. It's kind of what we're seeing and what we've seen over the last three years. Do I think it's gonna go gangbusters? No. I never, you know, I was never in the position to say that any growth on the flatbed side would offset the consumer demand drop off. Yeah, I think I said that two years ago. I think that's where we are right now. I like the stability more than I like the stability on the van side. I think we're pretty comfortable with a more stable flatbed environment based on the demand we're seeing from, you know, the typical stuff. It's, you know, ag or some mining or some, you know, if they do infrastructure, you know, we'll be hauling some of the equipment, but we don't necessarily do bridges and stuff. Got it. Thanks. I guess I'll follow that. Maybe some monthly commentary on the van side and anything particularly interesting in April over in van. Thanks. Well, I think that one, I would say it was more stable. Both January over January is only -2%. We, you know, compared to last year on the van side, which is kind of unusual. Typically it drops off more. The drop off happened in February, so we saw the drop off of 17% from, I'm sorry, that's sequentially. It dropped from December to January 2%, but then it dropped 17% from January. It made up for the January typically drops off more than that, but by the time we got to the end of February, it was kind of a normal drop off. I'm quoting bad numbers. -2% year-over-year, -17% year-over-year February, and then -14% year-over-year March. You saw some improvement. The commentary is correct. Unusual January, it was higher than we anticipated. The drop off in February made up for that, and then we saw what we thought was rather normal coming into March. It's a lot more, there's a little bit more slope on the van side than there was on the flatbed side. We actually do look at that month to month. It makes a little more sense than the flatbed side. Okay, got it. Thanks. We have the next question coming from the line of Christopher Kuhn, from The Benchmark Company. Your line is now open. Yeah. Hey, good morning, guys. Thanks for taking the question. I just, you know, you have an enviable balance sheet. Just wondering what the plans are for the cash in this rough environment. Are there potential acquisitions or buybacks? Hey, Chris. Yeah, you know, you know our model, right? We've got $625 million agents in 2022 generating 97% of the consolidated revenue, right? We prefer to invest in technology tools to make them more successful. You're absolutely right. We, you know, despite $83 million in dividends paid in the first quarter and $15 million of buybacks, cash still, you know, increased 1Q 2023 versus year-end. We're opportunistic when we think it's value accretive to jump in there. You know, we look at the back of the baseball card last year, we'll get aggressive. Okay. Just a quick follow-up. You talked about the variable comp and the 20% down revenue environment. The cash flow guidance, I think, or the cash flow commentary you've suggested before still could be pretty around $300 million. Are you still comfortable with that? Yeah, we put out, Chris, $300 million, I think, last summer, and then we revised that in February to $350 million free cash. First quarter, I think we did about $133 million of free cash, but included in there was a $41 million network and capital release, right? Given the step down. If our 2Q guidance is good and move throughout the year, you know, I'm still comfortable with that $350 or above. Okay, great, guys. Thanks very much. I just wanna touch on. Before we have another question, just to clarify, I wanna re-clarify our revenue for per load trends for van and flatbed. year-over-year, van January was -2%, February was -17%, and March was -14%. flatbed year-over-year, January was +6% in January, -10% in February, -3% in March. Just to clarify. Next question. We have the last question coming from the line of Felix Boeschen of Raymond James. Your line is now open. Hey, good morning, everybody. Hey, I was just hoping we could talk about BCO utilization. Jim, I understand some of the comments around parts maintenance, but I'm curious just how you're thinking about BCO utilization through the year. Bigger picture, if you think anything structural has changed in utilization, you know, versus pre-pandemic levels. Yeah. Hey, Felix, this is Joe. I, you know, we've kind of again broadly talked through the utilization picture. It was down 5% in the quarter, year-over-year, and I really do think that is, you know, utilization tends to decline when you have a declining volume or demand or pricing, and we've had both for a year or so. I think there is just a lot of hesitancy there. I think the equipment stuff that Jim spoke to earlier, it really can't be underestimated. There is a lot of uncertainty. If you're, if you're running a used truck and you're gonna get out on the road and it's gonna break down, and you're gonna be 1,000 miles from home, and you can't get a part for three weeks. That's daunting, right? I think it's a culmination of the options that are out there and the costs that are on the capacity providers and then just the uncertainty around equipment. I think all those things, plus the declining haven't quite hit trough. I think all those things are kind of leading the utilization piece. And as those things firm up and start to turn, I think the utilization will obviously move back in the other direction, and you'll see truck count move back in the other direction as well. I don't think there's anything structural, I guess was your other question, Felix. I don't think there's anything structural around the utilization piece. I think it's just a lack of certainty, right? With uncertainty, people tend to be a little bit more hesitant to do things, and they're just kind of being less productive. Got it. I appreciate it. Yep. At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks. Thank you. In closing, we don't expect much change to the overall freight economy in the near term. Truck revenue per load remains well above pre-pandemic levels. Demand for freight transportation has significantly softened as compared to a year ago, driving truckload volume lower. Directionally, it is difficult to forecast truck volume levels beyond the next few months, as future economic conditions are very unpredictable. Regardless of the economic environment, Landstar's challenging year-over-year comparisons, the resiliency of Landstar's variable cost business model continues to generate significant free cash flow, with fiscal 2023 free cash flow expected to exceed $350 million. 2022 was a historic year for Landstar, achieving new levels of record financial performance. Landstar has always been a cyclical growth company, reaching higher highs as we did in 2022, with higher lows like we expect in 2023. Landstar has no reason to believe history won't repeat itself, though. We look forward to achieving higher highs when the freight economy turns. Thank you. I look forward to speaking with you again on our 2023 second quarter earnings conference call, currently scheduled for July 27th. Have a good day. Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.