Expeditors International of Washington, Inc. (EXPD) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Expeditors Domestic Market Update Webinar. My name is Nicole, and I'm going to be your host for the webinar today. Before we get started, I'm just going to go through a few ground rules. So you are off camera and you are muted as a participant of the webinar. But if you do have any questions, feel free to put those into the Q&A window, you'll see a little window at the bottom of your screen, and we will get to answering all questions that you put in that window throughout the webinar. We will have a dedicated Q&A session at the end where we will try to address most of the questions that come through. If we don't get to your question, then we will follow up with you via e-mail after the webinar. In addition, we are going to be sending a feedback survey out after the webinar via e-mail. And with that survey, upon completion, you will be linked and directed to a new window with a copy of the presentation slides that you see today. So I'm going to go ahead and introduce our speakers today. We have Angi Varga, the Director of TransCon Services for The Americas; John Butler, Director of Ground Network Services. We have Chris Malinoski, Manager of Ground Network Service; Carolina Galindo, Manager of TransCon Services for Mexico and U.S. Southern Border, and Gary Ernest, Regional Manager for Cross-Border Solutions. So without further ado, I will pass it on to Angi to get us started with webinar.

Thanks, Nicole. Thanks, everybody, for joining today. We used to take about anywhere from 40 to 45 minutes to get through the content and then we'll leave some time at the end for questions. But just a quick recap of some of the topics we're going to cover today. I'll start off with the domestic air. And then John and Chris is going to go through domestic trucking, and also share some background on how our LTL network is adapting to the trucking environment. Then Carolina is going to talk about Mexico and Southern border. Gary is going to close out the geographic discussion on Canada, and then I'll close with the Q3, Q4 outlook. So with that, let's go right into domestic air. So [indiscernible], he's our domestic air freight expert. He's actually traveling in our network today, supporting some of our offices. So I'm going to try to fill his shoes and give you some background, what do you want me to share with everyone today. So passenger travel continues its slow steady rise at the end of summer. It's actually been called revenge travel as people are getting back to make up for some lost time. So I don't know if anybody has been out in the airport slightly, but there's tons of folks out there. The airline -- majority of their fleets are back online. They've got a handful of aircraft that are still not working just yet, but for the most part, fleets are back up and running. But airlines are dealing with the level of same challenges that many companies are, and that's with staffing. And you'll see some of those staffing challenges if you travel, but it's still a slow recovery rate in that aspect, especially with some of the ground crews, if you will. And then you're going to hear a recurring thing in this discussion around fuel cost. Every industry that operates equipment fuels a huge expense for them, the airlines being no exception, fuel being their largest operating cost as part of their network. And then globally, past revenues dropped was $372 billion in 2020 versus the $324 billion in 2019. But we're starting to kick back with a forecast of $227 billion just close to pre-pandemic numbers. And then two, when you think about the top U.S. commercial carrier stocks below is what we have kind of a quick chart of what that looks like. But overall, stocks -- the commercial stocks are starting to show a positive trend year-over-year. Keep in mind, you'll see this in a couple of the slides of pandemic. We don't have it here, but it started just at March of 2020. We can kind of see how the stocks have changed. And then three, you can see their indexes, how it's starting to slowly kind of kick back up. So with that, just like I mentioned, the fuel costs are definitely curtailing the path to recovery for the airlines. And you guys might even see that if someone's been [indiscernible] in some travel, I personally have got some travel through the end of this year around the holidays. Got to make sure to get that done pretty quickly just knowing that fuel has been impacting it, but airline tickets are definitely from the passenger side of the house, personally speaking, they're definitely up from what I've seen. But again, we can see some of the areas that are impacting fuel being a big part of that. So with that, I'm going to take you to the next slide. And so as we talked about fuel. So again, you can see this is just an example of what consumption and fuel cost. [indiscernible] the detail, in early 2019, how it closed here. And then you can see exactly where the pandemic hit. And then there was a low, and now as it picks up again. And this gap represents the huge cost that carries head and it's further impeding the time to recovery in this industry. So again, fuel again hitting home when it comes to the operating costs. And then lastly, to close out the air piece of it. This chart shows domestic passenger travel. We always like to look at this because it does echo exactly how the recovery process is going. So we start to travel. If you look at May 2019, and then how it comes up, you see March here is when the pandemic and, obviously, the chart is reflective of that. And then you can see here as we're going into 2022, we're starting to slowly pick up almost to where we were back in 2019. So there is hope that we're back to normal and with that, I would say the capacity being back -- the domestic air freight that Expeditors [indiscernible] to our network. We're still moving thousands of pounds on a daily basis, and I share that because we've got the retail peak season coming up, so we've got a ton of retail customers are going to be taking advantage of that capacity in the air market. So with that, I'm going to turn it over, and now we're going to switch modes and start talking about trucking with John Butler. John?

Thank you, Angi. Good morning, everyone. Thanks for taking the time out of your day and joining us. So I think we started doing some of these webinars a couple of years ago when things were -- just COVID first started, it's been changed pretty abruptly a couple of years ago, but I would just kind of comment as you get into some of the slides, some of the things that you start to see is much more return to normal, but I think we're seeing -- as sharply as it changed 2 years ago, I think we're seeing just a sharp return, if you will, back to normal. I think we'll probably see that some of the data and some of the stuff we're seeing in the market. So first one, just at a very high level, we'll recap 2002. So trucking gets into cycles, and I'll talk about that and it's not come in slides just a little bit, but no doubt about it. We've entered into a different cycle and perhaps it started at the end of Q1, or beginning of Q2, most certainly. And you start to see some of that in the data both in terms of truck availability and then particularly, rates. The -- some of the operating conditions that operated in Q2 -- or excuse me, that we just came out of Q2. Tight labor market everywhere. Talk a lot -- a little bit that about how that's affecting not just the truck drivers, but docks and warehousing and that stuff, supply chain disruptions. I think conventional wisdom is those are improving. They certainly are for some equipment, but nonetheless, that was still with us in Q2, and perhaps becoming less of an issue now. Record high fuel prices. I think you're going to hear that a lot across all modes. Obviously, that's impacting supply and demand as well as the operating costs quite significantly. Speaking of demand, there is a demand -- excuse me, softening of durable goods taking place, which is impacting some of the demand for freight. I think that's to be expected. If you just think about it, there was little to no spending going on or consumer spending going on, on services such as travel for a longer period of time and whether it's pent-up demand or just the opening up of all things. We're starting to see less durable goods and more spending on services, which is a little bit of a transition from what we saw a year ago or 2 years ago, most certainly. So that's impacting demand, which impact rates. And then most -- on the rate side of the equation, at a very high level, what we've seen since literally February and certainly as we came to the end of Q2, demand on the spot market for trucking has fallen about 20%. So typically, the spot market would only support maybe 10%, maybe 15% of the freight that moves out there on a truckload basis. And a lot of that tended to support irregular routes or some infrequent shippers. But during the last 2 years, the pandemic, considerable more procurement was done on the spot market versus the contract market. We're starting to see that come back, and we'll talk about that in a minute. But that shift really started to take note in second quarter of 2022, and has only continued to accelerate. So contract rates have started to -- at least, in some lanes out of some areas have started to fall off a little bit. You would expect that as spot rates fall, and that's certainly what we've seen. And the data that you look at those charts does demonstrate that at a very -- this is on an aggregate level. But the top chart demonstrates that spot rates are coming down. As that goes on for a period of time, shippers adjust and carriers adjust and that starts to pull down contract rates. And that's kind of the tell-tale sign of when we're entering into a new cycle. Just I think one of the more severe things, and we've got a slide on that, but we're starting to see -- when the pandemic started, you saw capacity didn't go away, it just got parked or idled. And then it came back into the marketplace to some degree. You're starting to see some of that. And then you saw a lot of capacity in terms of motor vehicle -- or carrier registrations coming to the marketplace they're out in the 2021. Here we are in 2022, and you're starting to see lesser amounts of those motor vehicle -- or those carrier registrations to be renewed. So we are losing capacity and whether or not it's idling those trucks or maybe some of those trucks moving over to some larger fleets to say, get out of that truck market. I think we're going to see a combination. But that data probably will be self-evident about another quarter from now. But in the meantime, volumes are down, rates are coming down. Capacity is exiting the market to some degree, and so here we go. We're going to give a new cycle. Next slide. We'll take a look at the aggregate, where our rates and where our shipment is going. So I just mentioned rates are coming down. And as we get -- this is beginning of bid season. So these carriers anticipate opening our available capacity. We'll see how aggressive they get with rates. A lot of folks out there are expecting that the truckload carrier piece should remain pretty good throughout the remainder of 2022. But as we head into the end of the next -- beginning of the next year, one of the forecast that I've seen start to look at some rates potentially coming down just a little bit. So the spot market -- and then I don't want to go into detail, I said those rates have come down by 20%. So when the trucking rates come down 20%, a lot of these carriers literally, they're upside down. They're losing money every time they pull a load. So they're either going to sell their truck, park their truck or lease on to a carrier that might have some contract rates under their portfolio and that's how they survive or how they survive until the next cycle that lets them do stuff a little more independently. So we're going to continue to see that transition over the next -- certainly, next 2 quarters, and we'll see that shakes out volumes. So what's interesting, if we take a look at these 2 charts, and these are the Cass Indexes. This is a broadly distributed index, used quite a lot. I think it's very heavy with a lot of shippers and stuff, so it's bringing down, but if you look at the chart on the right, that's just shifting volumes or shipment counts. And you can see the dip in 2 years ago, then you can see the rebound, but the trends kind of normalized in terms of where it would have been if COVID never happened. But the chart on the left is what happened to the rates as capacity exited the market. And obviously, there's an exponential impact both up and down with capacity is either too much or too low, and you see that in the price, and that's certainly what we're seeing here. So as capacity and rates start to match up, you start to see some normalization of these indexes, and I think that's what lies ahead. But the other reason I want to show these 2 charts in this particular order is the shipment counts are stable, if not constant, but the rates, obviously, have been pretty erratic. But let's go to the next slide. Because I think this is always -- I get asked a lot about [indiscernible] the question. The slide in terms of truck capacity out there, every [indiscernible] say there's a truck driver shortage or there's not enough trucks. And I think that's always the case, whether it's driver turnover or churn or people coming into the market or exiting the market. There's always a lot of jobs available in trucking, but I don't think that's synonymous with truck driver shortage per se. I think there's always people going local over the road and driving team, getting out of a Class A into a Class B or whatever it may be. But the trucking marketplace as what I would say the aggregate capacity for, for-hire trucking is actually down pre-pandemic levels. So you can see it was pretty robust right before COVID hit, and it continued to fall, fall, fall. And then obviously, at the end of 2021, you're starting to see that count start to come back up there. And I think a lot of that was some new entrants into the market, folks getting their CDL, schools opening back up, new registrations or motor carrier registrations. So you did see capacity come back in the marketplace that this chart doesn't go far enough to see what happened when the prices started to fall and fuel started the rise. So we've got the next slide, we're going to get into that just a little bit. But capacity has returned to the marketplace, probably adequate -- they're more than adequate to meet the demands, but we're still seeing a lot of shifting going on. So it's still quite volatile. So the next slide, we're going to get into a little bit of the scope -- click on the next one. I'm sorry, before we go there -- fuel. I said we probably mentioned fuel a few times because this is probably the single biggest disruption event in 2 years, which is the rapid rise of fuel. A year ago at this time, I'm going to talk the driver wages was the #1 cost item for motor carriers. It is now fuel. For larger carriers and certainly under contract rates, they can be passed through or recovered. That's not always the case on the spot market. They tend to settle for less or don't get fully reimbursed or don't even get recovery at all, if you will, to that gap in fuel. And that's why you start to see some of that capacity in the spot market, vital or exit that whole marketplace. But the challenging thing for fuel is if you don't get that pass-through, the swing that we've seen, 150% that you pay at the pump today, but you might get reimbursed from your shippers 30 or 60 or even longer, sometimes that's problematic, obviously, for cash flows, but it's exceptionally problematic for small carriers. So I think this will further accelerate the shift away from some of the independents and smaller fleets and perhaps you'll start to see some new trucks lease on or drivers sign on with some of the larger fleets. So we'll be watching for that. And I think once we see that, we'll start to better understand where we're at in this ever-changing cycle. But fuel is obviously not only changing people's purchasing habits, but shipping habits. It impacts everything. And we're certainly seeing the impact of that already. And I think that's -- it's not just in the trucking capacity piece, but in the demand for all goods and stuff. It's starting to show up everywhere in terms of consumption and data. So one, it's a downward trend, but your guess is as good as mine where this goes, but the impact it's had on carriers exiting the marketplace, they're not renewing their authorities can't be overstated. So next slide. I'm going to take a look at some of the other areas that we touched on in the last couple of calls and over the years is the impact on tractors and trailers or equipment. We mentioned that 2020 and '21, you had a lot of new entrants come into the market, taking advantage of some of those higher rates. And that put -- not only that, but you had production either sidelined or delayed due to supply chain disruptions with OEMs and getting your hands on newer equipment was problematic, particularly trailers. Steel, rubber, all the components that go into this equipment was subject to increasing cost or delay, and that's certainly the case. You're starting to see some improvement on the deliverables of tractors. Trailers are still pretty much sold out, but that's starting to recover in terms of the lead time from when you order a trailer to when you get a trailer. So there is room for improvement on there, as you would expect, as demand starts to fall. Obviously, some folks cancel their new orders or they postpone the new orders of equipment. So there is a little bit of recovery going on, on the equipment side of the house, tractors more so than trailers. And just a little note on trailers. What happened with trailers over the last 2 years is demand for trailers went through the roof. And it wasn't because -- well, 2 things. You had a lot of people spending all of their disposal income on durable goods, which takes up a lot more trailer space than services, if you will. But then the other component about that, we saw a lot of shifts in commodities moving. For example, the rise of e-commerce with the bubble packs and everything else that go into your stuff that may be delivered to your home. That started changing the way warehouses and distribution centers work, and they're starting to chew up and utilize a lot more trailers in the fleet. So not only we've [indiscernible] trailers coming into the marketplace, but they are higher utilized with the new shifts in business than ever before. So naturally, the cost of new trailers has been quite remarkable. I think that's -- of all the trucking costs that I track with the driver wages, their insurance, you name it, I think the cost of the trailer leads the way in terms of the year-over-year increases the last couple of years. But it is signs of improvement. There are signs of recovery going on there. So hopefully, we're out of the woods. A final note on equipment though. The tractors and trailers -- with the trailers, tractors and of course, [indiscernible] make tires, the maintenance cost for all this equipment is way, way up. But a lot of carriers who would typically trade in their trucks on 3-year cycles or 400,000 miles or whatever it may be, a lot of them have kept their equipment on the road a little bit longer. So you'll start to see higher maintenance costs, maybe more breakdowns as some of these fleets get older. The reason they weren't necessarily -- you couldn't get new trucks, if you had or if you had to buy a new used truck, you can pay upwards of $100,000 for a truck that is 5, 6 years old. And there's a lot of them out there like that. So as new equipment does come on, obviously, a lot of the fleets will begin trading up those cycles again to get some newer equipment. But I think as we sit here today, the average age of the tractor on the road for, for-hire trucking is something higher than it was a year or 2 ago. And it's probably going to be a little bit of time before that kind of goes back to normal if it ever does. On the driver updates. So 2 years ago, drivers were a problem, schools shut down, new entrants were coming in marketplace, segments like the teams broke up, weren't reinstated. They were pretty hard to find. So we are seeing a lot of drivers come back in the marketplace. Schools are open. We're not seeing the return of the teams to a degree. But a lot of the fleets they have talked over the last month or 2 are starting to see teams come back in the marketplace. And that's something that lagged behind the recovery of the solar drivers quite a bit, but we are getting at least -- and I don't know if it's changes in shipping out there or if it's just new drivers who are coming back into the team drivers, but there is quite a bit of recovery on both, the solar and the team fleets. If you look at what happened over the last 3 years, a lot of the carriers gave 2 and sometimes 3 rounds of wage increases for the drivers. So the spot market, we talked about, fallen through floor and we certainly bid the contract market, which most of these trucks operate in, those operating costs are all up. The wages are all up, and those are pretty sticky. So I think it's going to be a couple of periods until we start to see some big changes in this area. But right now, there is a very robust recovery on driver availability out there. Recruiting hasn't gotten any easier, but there are drivers out there, to be fine, to fill the jobs as we speak. So next slide. All right. This is a little more I guess, rates -- or excuse me, cost and capacity that should be self-evident on how it necessarily packs everybody's business on a phone call. But chart on the left, you've seen that probably many, many times, but I just want to show all segments; Flatbed, Reefer and Van, month-over-month decreases in rates. So Flatbed has been the most hard hit, and I think that's tied to construction and commodities and stuff, but all segments are down quite a little bit. A year ago, this was just the opposite. Chart on the right, we start to look at what's happening with the rates. And obviously, you can see when this transition started at the beginning of the year, things kind of fell to the floor. The maps on the bottom. Okay. So the map on the bottom on the left, where you have like a heat map here, that's from 1 year ago. And this is the over under in terms of trucks and loads available. And the chart on the right is the -- this month, and this is of an index, but you can see that the lighter shades means that there's been an improvement in terms of available capacity. Last year, capacity was tight all over the place, far more trucks -- excuse me, far more loads than trucks. This year, just about everywhere, albeit maybe New Mexico, New York and Virginia, that has been the case. There's been more trucks available for -- and less -- or less loads or the combination of the two, and that's why you're starting to see these spot rates fall. And hang on, that's when you're starting to see some of the contract rates fall. That creates different opportunities for shippers like us -- or excuse me, providers like us, whoever we are, to change some of the stuff or do some of the stuff that may be we're prohibited during last year or even 6 months ago as you start to see some softening in the truckload marketplace out there. Next slide. Just to note on LTL. Obviously, you saw a lot of mode shifts and shipment characteristics change over the last 2 years in LTL. But LTL has fared better, at least it's faring better as we speak right now versus truckload. Obviously, they compete for the same drivers. They tend to have a little bit better advantage than the OTR fleet simply because the driver dispatches and schedules are a little more home-time friendly, so they can retain the drivers a little bit better, and they are faring a little bit better, but nonetheless, their operating costs. Well, LTL carriers are very, very good about managing their yields and pulling freight into their network that contributes in applying accessorials or pulling off the freight that doesn't contribute into their network. And that's an ongoing discipline that has been -- you can see the change in shipment characteristics and yields and revenues as you see some of the actions in the LTL carriers, but they are faring a little bit better at this time. One thing you are seeing in the LTL carrier space, though, same as truckload is all of those cost components. New equipment, trailers. We mentioned sticky driver wages, but office employees with inflation, they're up. Computer equipment and supply demand. Computer equipment is up. Every cost component for every carrier, LTL, truckload, you name it, is up. So obviously, as things normalize, it's -- we're not going to -- you're not going to see a return to 2019 or at least not on anybody's forecast that I have seen. Next slide, I just want to go into -- we talked earlier, and I just want to bring this back a little bit, and I'll hand it off to Chris. So obviously, we've seen some upward trajectories in terms of trade demand, lack of capacity, driver wages, everything was up, up, up until probably beginning of Q2. And now we're starting to see these things go down. So we always look at it from where we're at in the cycle and everything goes through cycles. So the thing about trucking cycles as they tend to be a little bit quicker than, say, broader economic cycles. But they can last 2 to 3, sometimes 4 years. I think this last cycle that we were in, lasted longer than the previous cycles. But there's no doubt about it. We're probably up in the Northwest quadrant where new equipment orders are slowing down. Rates may or may not hit rock bottom on the spot market or certainly not in the contract market yet. But capacity starts to exit the marketplace. So then if you rotate to the right, you start to see what will we expect at the end of this quarter or maybe in the next quarter. Trucking rates, when we start to pull out of this cycle, will start to rise again. We're not seeing anything like that yet. But at least we have a little bit of a road map where history has shown us what happens next. So with that in mind, it is Chris who will speak next, and we start to look about where we need to adjust our operations, how do we need to procure, how do we need to stay 1 step ahead of maybe a capacity constraint or operational issue or where do we need to take advantage of capacity or cost in the marketplace that we kind of use this cycle to understand how we need to manage and change things in our network. And the fun part for us, at least Chris and I is, as things change, it creates new opportunities and new ideas and the volumes are always coming and going. So yes, while this is probably a better time than shippers for a year ago and maybe not so for carriers, it's an exciting time for folks like Chris and myself because all of these changes start to create opportunities to do some pretty cool stuff and build a bigger, better network that might not always be possible when things were pretty chaotic just a year ago. With that, I'll hand it over to Chris, and he can kind of tell you what he's working on.

Sure. Thanks, John. So I think as many of you know, here at Expeditors, we operate a dedicated closed-loop exclusive ground network. It moves all of our air, ocean, domestic cargo between all of our facilities. So to John's point, all of these macroeconomic situations and trends are something that we take into account on a regular basis. So if you hit the next slide, Nicole, what you'll see is a very similar cycle but to -- more specific to Expeditors. And if you hit that one more time Nicole, I think there's animation. Yes. Perfect. So like John said, we're really seeing ourselves right now in the market in the kind of northwest quadrant, so somewhere around that lighter green to -- in between lighter green and the red buckets there. So we're seeing new capacity into the market. We know that, that's going to drive some of the rates down. We know, as a result of that, we're going to see capacity come out of the market. We anticipate that. We anticipate kind of going back into the cycle. So to give you just a little bit of perspective on where we've seen this over the last year, if we rewind to a year ago, we were heavily reliant on the spot market, right? So any additional capacity, any changes to our network or to our schedule, we were 100% having to go out to whoever had available capacity, and you guys all, I'm sure, dealt with this in very similar situations. That was really the story of Q2, Q3 of 2021. As we moved into Q3, Q4 of last year, what we saw is contract capacity become available but at a much higher rate, premium rates, you guys, I'm sure, all experienced that any new capacity you brought into your own networks, always probably at a premium. But that's what we move forward with in order to secure that and lock in place so that we could keep the network and allow it to grow, really more important than anything else. As we moved into Q1 of this year, that's when we've been able to transition any of this new capacity over to our core service providers and really put that into a dedicated model, a closed-loop profile that allows us to keep that capacity captive and running back and forth. And we've really seen that open up in Q1 and kind of into Q2 of this past year, where we're finding that all of the carriers that we're working with have available capacity to those that they want to work with. And that's really been a fairly successful transition for Q2, and now as we move into Q3. And now that we're moving into the end of the year, we're seeing more and more opportunities to bring on that dedicated capacity in order to expand and change some of our network. So Nicole, if you hit the next slide, just a quick recap here. So our ground network, we moved approximately 3,000 truckloads on a weekly basis. It connects every one of our Expeditors facilities. Like I said, it moves our air, our ocean, our domestic cargo all over the place, right? So it's very well defined. It's very well structured. It's scheduled, it all works well. But at the same time, similar to all of your supply chains, we've had to be dynamic and adapt to many of the changes that we've seen over the past 2 years, and really as we grow. So I wanted to highlight a few of those examples of what we've done to change our network and kind of adapt to the environment, just to give you some semblance of perhaps things that you're thinking about as well within that. So first thing that we really needed to combat was the supply chain disruptions, right? So whether it was domestic or international air, international ocean, we saw all different types of ships and where cargo was, right? So we saw heavy reliance on Chicago for international air cargo, concentration of ocean cargo in L.A. And then since really the beginning of this year, we've seen a deconcentration of Ocean cargo going all around the country. So while we have our core hub-and-spoke model within our network, we've also had to adapt to implement San Francisco as a major port of arrival for air cargo because as capacity was filling up and as space became constrained in all the different major markets, airfreight started moving all over the country. So adaptively, we changed how we run our network, and we've created kind of a through hub with San Francisco, where we can now service the Pacific Northwest with direct truck routings once cargo gets into San Francisco. And kind of in reverse, we're able to provide a domestic service offering that goes Pacific Northwest to Northern California on a next-day basis. So we found some opportunities that really have worked well for us, for our cargo flows, holistically throughout our network, but also served the needs of some of what our customers are looking for. Other areas that we've dealt with supply chain disruptions, especially this year, and Gary is going to talk to this a little bit more on the piece about Canada. But when there was a significant border situation going out of Canada and disruptions and mandates and all the things that were going on, capacity became very sparse for anybody that ships north or south of the border through Canada. So we've really doubled down on the dedicated capacity that we run on our lanes going back and forth to Canada in order to secure those drivers, in order to guarantee that we have the capacity, in order to really safeguard our network, our customers' freight, keep everything moving. So we've been somewhat adaptable, right, to supply chain disruptions. Now John's point about a dwindling team driver population. And yes, there are definitely some very positive signs that that's going to be returning, or at least positive growth in terms of team counts. But I think if you talk to any carrier that's out there, their team counts pre-COVID are probably anywhere from -- it's 25% of what it used to be to 75% -- or yes, maybe 75% of where it used to be, but nobody's back even before COVID. So some of the things that we've looked at throughout our network is where we can convert team capacity and team transit times to solo relays. And a great example of that is Atlanta to Miami. It's a run that perhaps is just a little bit too far for any 1 solo to execute on a time-definite basis, and usually, we rely on the team. It's about 650 miles or so. But what we've been able to engineer with the help of our carriers and partners is a relay with Solo. So instead of using a team drivers to go back and forth, we're able to use 3 solos that can execute at near team transit times while maintaining the need on solos rather than dependency on the teams. So I think that's probably some of the things that we're going to be looking into the future about ourselves. Another solution that we have for this kind of dwindling team population is more and more reliance through some of our secondary hubs. So markets like Memphis and Charlotte and Columbus that can service within 500 miles, the vast majority of the eastern population, we're going to be moving more and more of our operations through solo relays over our hubs in those areas, again, to kind of cut back on the need for teams. Now teams will always be needed in a time-definite market, and I'm sure that you guys find the same need. But where we're really concentrating is the western part of the United States, right? Chicago to L.A., there's very little ability to hub and spoke or create solo relay path. Now we've done some, for instance, Chicago to Denver, over Omaha, again, solo relays that are able to achieve team transits. But really where we're concentrating our efforts on teams is on the major markets. Chicago, back and forth to L.A. Dallas, back and forth to L.A. These are team-friendly environments, if you will. There's always capacity needed. There's always demand that's out there. So what we find is the team drivers are much more likely and successful in really picking up these loads that need to move between those markets. So a lot of good things there, but certainly something that we've had to change our perspective on. And then in terms of labor challenges in general and just drivers -- driver availability. The 1 thing that we've really seen, I'm sure that you've seen the same thing is where drivers are domiciled has changed astronomically, right? I mean I think almost every driver in the U.S. either lives Texas, Florida, Georgia or somewhere in the south, right? But where they're especially not living is the major markets, like, for instance, Chicago, New York, New Jersey, Los Angeles, there's just less and less drivers living in those markets. So what we've looked at in our network is reversing where we typically domicile drivers. So whereas we used to have drivers that were out and back from Chicago, home every single weekend with their families, home every other day with their families. But in Chicago, by pushing our operations to move into a 24/7 environment and operating almost every one of these lanes 7 days a week, we can now domicile drivers in the smaller markets like a Minneapolis or in Omaha or in Austin or even Laredo or McAllen. So we've really dug very deep to figure out where we're seeing success with driver recruitment, and aligning our network to that so that everything can grow. We continue to have a scalable product for you. So I hope that gives you a little bit of insight into some of the things that we're thinking about internally within this network. But again, if you have any questions or anything, of course, I'm always open to it, and we have a great Q&A section here. So with that, I'm going to turn it over to Carolina to talk to us about Mexico.