Landstar System, Inc. (LSTR) Earnings Call Transcript & Summary

Good morning, everyone. I'm Scott Schneeberger, the senior transportation services analyst at Oppenheimer. Thank you for joining us today. It's my pleasure to have Landstar's CEO, Jim Gattoni; as well as Joe Beacom here to discuss current business conditions and the company's investment story. Landstar is a leading North American provider of high ROIC asset-light truck brokerage services, we're using a fireside chat format, where I'll ask some high-level questions upfront for an overview of the business. And later in this session, I'll transition to asking questions submitted by you and the audience via the Zoom. So first off, getting started, Landstar reported a very strong first quarter performance a couple of weeks ago. So Jim or Joe, could you please put this business environment in the context by comparing it to what you've seen from past cycles?

Well, I think by far, it's the -- I've been here since 1995. And to me, it feels like the strongest business cycle we've ever been in when it relates to what the -- our specific business model. We do -- we're heavy into the spot business. And when you have this strong demand coming through, especially on the e-commerce side and the consumer demand, the access to capacity, truck capacity, probably starting August, September last year, it tightened up very rapidly. With -- you would never expect Landstar's business model, which we used to be heavy manufacturing, right? A lot of flatbed business, a lot of heavy manufacturing, consumer demand actually drove our outperformance, which is -- would -- people who knew us for the last 10 or 15 years would think, wow, that's kind of strange. But what happens in our model the agents really -- they seem to be able to react to wherever the transportation, where the freight is needed, where the trucks are needed. So from an e-commerce standpoint, consumer demand drove significant growth in our van side, which is about 60-something percent of our business. So there's a little bit of softness on the manufacturing side and the flatbed side, but the dominant force of the van and the consumer demand, whether it was consumer durables, building products or we refer to e-commerce is where we haul freight between the hubs of the parcel carriers, just really -- the strength there just took over from the softness on the manufacturing side and continued to the first quarter, and it's actually continued today. So when you look at our business model, having the spot market. The spot market strength right now, I would have said that we were going to go through a cycle of 12 to 18 months, we see a little pull back in the spot. And I'm kind of pulling back that a little bit and saying, I think we're going to see this strength till last through the remainder of the year, where originally, back in January, I said we'd see a little -- we'd see it soften up a little bit and then back half of 2021. I just don't sense that now because of the consumer demand is still really strong. You see in manufacturing pull up a little bit, and it's driving the flatbed at least in a positive direction. Building products still strong and that's substitute to line haul stuff, along with consumer durables is really strong right now. To the extent, one thing we look at is, we have 13,000 trailers in our system, which is mostly 53-foot trailers. And typically, the first quarter is light on demand, you can't find trailing equipment today. I mean just people are already looking for stuff. And the short-term rental markets dried up and access to trailing equipment is very tight. So that's a real good measure of what that first quarter was like. What typically you see things kind of soften up a little bit. And our trailer guys here who manage utilization, get a little bit of a breather. And that was no breather for them this year. So we've already got shippers talking to us about peak and fourth quarter and where are we going to get the trailing equipment from. So I think there's a lot of concern on the shipper standpoint of about how we're going to support the peak end of the year. That's what makes me shift from, okay, this was going to soften up in the back half to now maybe we'll see it cycle back in 2022.

Great. Thanks, Jim. You touched on a little bit on my next question, but maybe add a little on here. And that's that Landstar has a sizable mix of exposure to industrial-related end markets. And U.S. industrial production growth recently inflected positive on a year-over-year basis. Please discuss the current demand environment from an end market perspective, particularly over on flatbed and elaborate on the opportunities we see going forward.

Well, if you break our flatbed, there's a mix within flatbed, right? 30% of our business is flatbed. 30% of that is heavy specialized, kind of like the John Deere, Cat tractors stuff like that, heavy machinery-type stuff. There's not a lot of strength in that heavy haul stuff yet, well, like the ag and mining stuff like that just doesn't seem to be bouncing back yet or exports of that equipment, you don't see that really bouncing back that strong yet. General manufacturing has put a little bit of -- little bit more stability and actually a little strength in the flatbed side. Just from a general standpoint, maybe metals and stuff is getting a little bit better. General machinery is getting a little bit better, but still not going gangbusters. I would say that it's just really better than where it was when manufacturing was negative 14% last year's second quarter and was negative through the rest of the year over the prior year growth. I'll put a strain on that flatbed market. But we're seeing a little bit of strength. But I wouldn't say that it's like blown it out of the water right now, and we're still on the van side with the e-commerce and the consumer durables more than the manufacturing sector coming back. I mean there's clearly better stability there now and it's strengthening both on the volume side on the flatbed. Flatbed volumes are strengthening and so is the rate. But still -- I anticipate manufacturing getting stronger, and that market is just going to get tighter, which would add to our first quarter records, anything coming back in manufacturing flatbed would add to the record because I think the van side is going to stay strong throughout the year.

Great. And again, maybe not as much visibility on the flatbed side, but it sounds like you're thinking something similar to the van?

Yes, I don't think it gets to the -- the van side was just absolutely crazy with rates up 30%, volumes up high teens. I don't think you get there on flatbed. I just don't think you do unless they throw some huge infrastructure package. And all of a sudden, we tighten up that flatbed market. I just don't see it accelerating to the extent that the consumers drove that van demand. I mean there's no -- consumers drive -- their waves of demand just drove that crazy. I don't see a big wave of demand coming on the flatbed side, I just see a general strengthening gradual growth off of there from kind of lows from last summer.

You think could it come to say we get maybe sooner than expected an infrastructure bill passed. Could it come as soon as the back half of the year? Would that surprise you? Would you think that, that activity on flatbed would -- if that were a catalyst to happen that soon or something more in 2022?

Well, if they do something with infrastructure, I don't think there's any doubt that you'd tighten up that flatbed market. And just indirectly would benefit us because rates would go up, right? Without that, I'm not sure we're going to see any kind of -- I still think we're going to see the gradual strengthening through the year and throughout 2022 as manufacturing picks up. I just -- but the infrastructure bill clearly would cause improvement in both volumes and rates as it relates to the flatbed market.

Truck brokerage capacity is, obviously, very tight at the moment as we've been discussing. Landstar has been making strides in expanding its network of truck driving capacity in recent quarters. This include to expanding the company business capacity owners or BCOs, which provide exclusive truck driving capacity to Landstar. Please discuss recent trends in both industry and Landstar's truck capacity and how you see that evolving over this year?

I think Joe, he's my expert on that one, will...

Yes. Yes, Scott. I think from the industry perspective, it's been pretty consistently stated the difficulty in a lot of the asset-based guys to grow their fleets, largely due to production limitations, right, around chips and the ability to produce enough tractors to try to meet the accelerated demand. That doesn't seem to be getting satisfied at this point in time. From what I read, it looks like the production capabilities are really meeting replacement but not allowing a lot of growth on the tractor side. And then on the driver side, I think you've got an equally significant challenge with some of the driver school productivity and some of the drug and alcohol clearinghouse statistics that you begin to see where there's just not a lot of interest from employee drivers to necessarily get back in the trucks. I think that's a challenge the industry has been facing and continues to face. Owner operators, our BCOs, on the other hand, are a little bit different in the sense that they already own their own trucks, right? And they're running a small business, and it's whether or not they want to put that business into motion and where they want to align themselves. And to our benefit, they've chosen to align their businesses with Landstar. So you've seen a pretty significant and continued growth in our BCO count over the last few years. And we don't really see that changing. We think given the demand and price environment, it's an ideal environment for us to recruit and retain BCOs, and that continues through April. Our turnover rates are in the very low 20%, 22%, I think, close to that, Scott. So we really like the way things are going there. And I think you see some parallels in the truck brokerage space as well, where I think a lot of smaller carriers, the 1 truck, 2 truck, less than 10 truck guys are, they own their equipment, and they're deciding based on the environment to bring that capacity into the market. And we're seeing that as well, and it's helping us satisfy some of that elevated demand that we're seeing.

Thanks, Joe. Just some follow-up questions on that. You mentioned recruiting is going well. I think you're qualifying that as BCOs, in truck brokerage carriers, is it fair to assume that if we have a strong construction build this summer, that is yet another data point or a pull away from adding capacity as a lot of folks would opt for that as opposed to truck driving. And you mentioned a few other hurdles as well. So if you could just address that. And then also, you mentioned a 22% turnover rate, how is that historically? I'm just curious how your retention is relative to historical rates there.

Sure. I'll answer those in reverse. So typically, our turnover is between 25% and 35% So to get down to 22%, it just -- it gets obviously more difficult to get those lower numbers. But if you look at the industry, the industry is 80% to 100%. So we're pretty happy with that. I do think that if infrastructure or some other demand trigger is pulled, you'll see more capacity coming to the market. I think one of the things that we were successful in doing is not only growing the proof count, the number of carriers through some automation, we improved the number of carriers in the network. But the number of carriers that were active in the network in the first quarter was up over 27%. So I think what you're seeing is that those carriers that are out there and deciding to become active in the market, they are finding the opportunities that present themselves. And clearly, some of the things that Jim addressed on how we're attacking demand, we're able to use some of the technology and some of the tools that we've got to get those carriers hauling Landstar loads.

Great. Please provide a view -- your view of the truck brokerage models, propensity to gain share within the overall truck transportation market historically and how you view penetration developing over coming years. Just curious how you see the brokerage industry relative to the broader trucking industry and compared to historical perspectives as you look ahead?

I believe it has a lot to do with the freight market, right? When -- if you are -- are you regular route dedicated freight, or are you more into the non-routine regular route specialized type freight, right? And when you think of truck brokerage, it doesn't play well into a manufacturing facility who's got 10 loads a day, it's very scheduled. It's very routine. Your might as well through assets at it, right? Either you hire an asset-based carrier at lower rates to run the miles and run the wheels out, so you get high utilization of your trucks, right? Or you just -- you own trucks as a shipper as a manufacturer, you run it that way. And I think it's more the dynamics of the freight world in the U.S. than it is -- than what drives brokerage and us penetrating. I don't think you see brokerage penetrating into the asset world, right, where the asset-based carriers are running routine regular route freight for a shipper who's got consistency. I think the more disruption you have in the marketplace, the more we develop on-time delivery, where the truck has to -- it'd be in places where it wasn't scheduled for disruptive stuff or for nonrepetitive. That plays well in the brokerage market, right? Because you want your capacity to be utilized and to be able to bounce around the country into certain areas. So although we can play in the dedicated business, and we play in the spot world, carriers tend to be a little portable if you don't own the asset, right? So if we're paying a carrier today $2 a mile and industry rates go to $2.50, that carrier either wants his $2.50 or he is going to leave you. So I think it's the freight dynamic. I think in the U.S., you're getting more and more of that non-routine irregular, nonrepetitive freight just because supply chain disruptions and the way people are managing supply chains within the U.S., it really plays into the broker world where you need a truck today, but you don't know what time, right? And I think from the scale that the brokers have shippers see our ability to access a truck, even in a dedicated world. So when you're talking about even holding assets, you only own 10 trucks, that capacity is going to look to us to keep their trucks moving, right, unless they're in dedicated lanes. So again, you end up with -- in a situation, where that capacity does 10 -- that owner of 10 trucks may be moving freight from point A to point B, when get to point B, he needs someone like us to move them back to point A, right? So that also plays well into the brokerage. And I think that's -- I think that will continue to expand the brokerage market as the freight type of dynamic continues to evolve over time and the supply chains get a little more complex, and it's a little less routine than what you have today. You can see from history at the Landstar side, our BCO count has grown pretty significantly over the last 3 to 4 years, maybe 2,000 or 3,000 drivers. But our volume growth has really been coming from third-party trucks, right? And so you have shippers reaching us -- out to us as a broker to help them kind of solve these non-routine regular route problems. And I just think they're more apparent today, and I think they're going to be more apparent into the future that really is conducive for a brokerage model more than the asset-based guys. So as freight volumes grow and those big carriers are just remaining the size they are. I mean you need the broker in there to help coordinate through these small carriers. So I see continue to gain market share into the future. It's been going for 20 years, and I don't see if we'll have it slow down.

Got you. And curious, just competitively, if you can discuss Landstar's investments in technology, how they will shape the company going forward? And I mentioned competitive, could you please comment upon your perception of competition from digital freight brokerage models. We hear a lot about them. Just curious what you see as the evolution of the industry and what you're doing in the field of technology to strengthen your differentiation?

Well, first off, this is a very large industry, right? And there's a lot of small people that play in it, right? It's very fragmented. And I think that the digital freight brokers, they have a place. I think there's freight out there for them. I don't think it's the freight we haul. I don't think it's that non-routine regular route specialized stuff because that takes a lot of handholding. And I would never say that those models aren't capable of handling freight. But I would say that when it comes to a digital freight broker, we're as much a digital freight brokers as those guys who are pitching it. I mean we have all the tools. We have apps on the phones. We have all the loads. In the cab of the truck, the guy can go on his phone and select a load just like he can with those digital freight brokers. We have all that. We've always played that way. We've always stayed up on the latest technology. So I think they're just another competitor coming into the market, but I don't necessarily think they're a competitor to us. I think they're more focused on the more routine regular route-type freight, more committed type freight where the shipper is just expecting a truck to show up. We haven't seen them penetrate into our customers so much. I mean, here and there, and what we actually hear is about 3 months after they penetrate, we get the customer back because trucks just don't show up. So we take them seriously. We watch what they do. But again, I don't think they're a differentiator. I think they try and sell as a differentiator because they're trying to raise capital as opposed to make a profit. So I think that's the sales pitch on their side. Again, I don't want to discount their ability to compete in the marketplace because they can. But again, just not necessarily against us. When you talk about technology in Landstar, if you go back to the 90s, when the Internet first came out, we create a load board that you can have on a desktop at a home. So we've always stayed -- I'm not calling it cutting edge, but we've always stayed up-to-date on the latest software applications that are available to share information between our agents, customers and capacity. And today, I still think that we probably have some of the best tools out there regardless of whether you're Uber Convoy. We have a pricing tool that does algorithms and we use data scientists to build it out, right? And I heard a pitch a while ago from these third-party -- these digital freight brokers that their tools would be able to project out spot rates in 6 months when I'm sitting there telling you, I can't tell you what spot rates are going to do next week. Because of the ship -- we can have a storm in the winter that blows spot rates up. You can have flood somewhere to blow spot rates up. It's not predictable when you live in the spot world. Contract rates, maybe they can get there a little bit on the next 6 to 12 months out. But I would say that we have our pricing tools probably as good as any, but I'll tell you that it is good for 7 days as it is for 3 days, but it's not very good after you get to 20 days or 30 days because it's just unpredictable. From a track and visibility standpoint, we have something called Clarity where we can track freight from point A to point B We geo-fence our trailers. We geo-fenced our freight with technology, if needed, if requested by the customer. I mentioned our load boards in the cab of the truck. If you're a driver for -- if you're a BCO or even capacity and you're heading to Kansas City, go on our load board on your phone, find out what loads are leaving Kansas City and make a phone call. One of the big things that they push is the removing the human element from the transaction. But I'll tell you that our drivers, our BCOs and our agents still want the phone call. We can give them all the tools you want. We can automate this process. But I don't think a driver -- an owner operator is not going to drive 100 miles for a load that he saw on a phone and he can't guarantee is still sitting there. Our guys don't do that. They're going to call an agent and say, would you please guarantee to me do that still there. So there's a lot of interaction, a lot of communication. When it comes from -- especially when it comes to non-routine regular route, and it's not a route that guys typically hauled before, so the agent will walk him through any special handling. So when it comes to technology, what we're investing is, I took the CEO role back in 2015. To be honest with you, I think we weren't falling behind, but we were archaic. We are running off an IBM i mainframe and try to attach stuff to it. And I use -- for my simple mind, I use the analogy of a concrete cinder block, right? The IBM i is like a concrete block where you try and screw things into it or pound things into it from an application standpoint, whether you want to hook in a cloud-based software or application or something we've built that's sitting on our servers and here, it's very hard to integrate that stuff into our existing legacy systems. In 2015, we launched a significant type -- the concept of going to the cloud, and building out all the apps and doing all stuff to connect to now a cloud-based system as opposed to that concrete block. So now we're -- we've moved into a position to be more like Mr. Potato Head than Mr. -- than a concrete block, so we can plug and play. We're replacing the operating system on the mainframe with a new TMS and then outside the TMS, where we've built the pricing tool. We've built the visibility tool. We've built the load boards. We've built all that stuff to be flexible and agile in the world we live in today. So that's everything we're working on, and to continually upgrade them, continually launching better tools. We're looking for -- we launched LandstarOne about a year ago, which is a single source. We just have the apps like spread around somebody's phone. We now have it all in 1 source called LandstarOne that the capacity use. They go into that once. They can see fueling stations and the pricing of fueling stations that are local within how far away they are and it gives you a map of where they are. The load boards have now been moved into there. We launched the Maximizer 2 years ago from a load search standpoint. Our load boards historically have been a 1 load at a time. A truck would go in there, find the load they want, call the agent, secure the load and head on his way. What we did to kind of improve the user experience was created a thing called -- we call the [ mac balancer ] Maximizer, is now -- if I'm a driver -- if I'm an owner-operator in Jacksonville and I want to be back in Jacksonville in 7 days. I just put that in there, right? I haul a van, I'm in Jacksonville, I want to be home in Jacksonville in 7 days, give me the routing, give me the loads that will get me in that route guide and get me back home in 7 days. And in about 2 or 3 seconds, I ran one once, it gave me 9,000 options, but it's listed in revenue order. So it was like $10,000 worth of revenue, 3 pickups, 3 drop-offs and back home in Jacksonville in 3 days. So there's not just getting off the IBM i. There's also a little innovation and creation going on here with the business teams that we're doing. So we are launching new stuff and new thoughts and new ideas at the same time and become more flexible. So when people are out there talking about all this technology and all this stuff, how we're going to be disintermediated and stuff like that. It's not going to be from technology because you'd never let technology be a differentiator because it's not hard to build apps, it's how you execute and use them, right? That's the key. And who wants to use them. And the user experience you share with not just the agent family and the BCOs, but with the customer, too. And that's kind of where our focus is.

Excellent. Thanks. It sounds good. I love the Mr. Potato Head analogy. I'm curious, how is the -- investing in IT for the last 5, 6 years, the -- where are you in the process? Are you in years ahead, incrementally going to spend more, spend less? Are you happy with where you are? Or just how will that impact you financially as far as doing the things you want to do to help build Mr. Potato Head?

Yes. I think we're currently at the spend level I want to be at. Seriously, I don't think I have to elevate the spending. We have some back office stuff we have to do. That doesn't necessarily have to be jammed in 1 year. What we focused on the first thing, clearly, what you should focus on is your user experience, so the guys who actually generate the revenue and all of freight. So our focus has really been outward looking to the customer, the capacity and the agent family, and that was kind of where our most significant spend was. I shouldn't say -- that's where the emphasis was. So we wanted to get it done quicker and jam it into a couple of years, right? So I would say our spend will probably level off to where we are. We just continue to invest in the back office stuff like invoicing and processing and stuff like that and to make that a little more seamless because our operating system today is still a little bit archaic because a lot of the revenue processing and the payable stuff is still hanging on that mainframe. And over time, we're going to transition out of that. But I think we have a good -- we call it now the -- it used to be the roadmap, and now we have an ecosystem, right? The road map is no longer a roadmap. The ecosystem exists. And all we're doing is upgrading everything we've got. The pricing tool is getting a little bit of an adjustment, the visibility tool, all that stuff just continues to develop and get better as we move forward. So the ecosystem is alive, and the roadmap that we have now is really for the back office type stuff, just to improve and build efficiencies within the organization. But from a spend standpoint, I would say that it's not going to grow significantly from what we're spending now. Unless something, you never know, so maybe something pops, and we need to make a big investment. But on the roadmap, I have in my head over the next 3 to 5 years, I think we'll see a leveling off of the investments. I shouldn't call them investments because if we saw an investment, we'd actually jump on it, just to maintain and just improve some of the tools we have. So we did not need to go out and announce a $500 million or $1 billion spend over the next 5 years because as I said, we lived in the world of sharing information. We had the load boards, and we have the -- we didn't necessarily have a pricing tool or the visibility tool, but we have them now. But our whole business model is built on the sharing of information. So like I said at the beginning, we've been building apps and software stuff to share that information since 1993. So we weren't behind by any means on anything where these other guys needed to actually try and do a catch-up with load boards and building out their tools.

Excellent, thanks. About 7 more minutes, it looks like we have -- I'm going to ask one final question. I see we do have a couple of questions in the queue. So let me wrap up by asking, if you could please provide an overview of Landstar's unique agent model, it's competitive differentiation. Can you just please discuss recent trends in revenue via new and existing agents?

Yes. Clearly, I'm a little bit biased. I've been here for 25 years. So I'm going to be biased through the agent model because I think one of the competitive advantages we have is that the agents are in the local markets, right? We don't have, not to put it down, but we're not sitting in like with 700 people cold calling shippers or trying to coordinate shippers' freight, right? We are in local market with local presence, dealing with local shippers, right? And in our model, the agents eat what they kill. So they're incented to go out and build a business and grow that business. And with our support, whether through technology or sales support and stuff like that, I really like the small business, an entrepreneurial spirit, which really drives this organization. That's really the goal. The role of the corporate office is to drive that, and they'll continue to make these independent operators out there successful. You can see what happened to Landstar over the last 1.5 years due to pandemic. Heavy manufacturing, doing a 30-something percent of flatbed and when opportunity arose to move into the consumer e-commerce stuff or the consumer durables market, our agents were there, right? There was demand coming from all different directions on the consumer side. And they elevate and they drive the growth of the organization because they thrive on opportunities and they thrive on disruption. And I think we played right into that -- our model plays right into that. So I think there is a -- there's clearly competitive advantages. But I am the guy to be a realist. I think there's some competitive disadvantage because we are decentralized. And we don't necessarily control what the agents do. We just try to influence them. So there's -- our job is really to give them all the tools to succeed and try and inspire and empower them, not necessarily control them. So there is a disadvantage. But clearly, I think the advantages far outweigh that one little disadvantage. And I'll deal with that decentralization, a lot easier than I can deal with trying to drive growth through a company organization. I think it's our mindset to grow the entrepreneur. I think the other thing on -- if you're looking at the brokerage world, having the dedicated BCO capacity, 11,000 guys, who are exclusive to us, I think that's a big advantage. I think the customers like it. They like the fact that we are -- we're not just an arranger of freight. When we put freight on a third-party truck, we're just an arranger. We're the middleman that sits between the shipper and the carrier. And we're very good at that by all means. I mean, everything we do is kind of top-notch. But the owner operators give us -- they drive under our motor carrier 30. So we're actually a motor carrier under the DOT regs. And that gives a customer more comfort because as a motor carrier, reliable for the cargo, right? We -- you step in to help resolve any cargo issues. When you're a third-party broker, you can settle those cargo claims with a customer, but you're not legally bound typically to do it. So I think a lot of our customers, they like the drop and hook, which is under our motor carrier authority. I like that fact that we take legal liability on certain things and kind of not always, but often keep the shipper out of anything like that. So a big fan of the model, generates a lot of cash flow, low capital requirements, other than our van equipment. But again, I think it's the penetration of the agents into the marketplace geographically that really helps us build the scale.

Great. Thanks, Jim. About 4 minutes left. And as I mentioned a couple -- I'm going to take it to the questions from the audience. So I'm going to ask you 2 of them, just given we're a bit limited in time. So I'm going to ask you both now. I'll refresh you, so if you need it. But first one is talking about strong van rate versus flatbed. Do you think the van has further upside from here? Or do you think it stays stable at these really high levels before decelerating in 2022? And this one came in earlier when you were discussing it. So you might have captured that a little bit, but maybe if you want to talk about extending that out a little bit and the part about decelerating in 2022? I'll come with the other one after.

Yes, just whoever has the question, just make sure you know I'm a pessimist and realist. And I mostly speak to the negative more than a positive, which is a bad trait I have. But I would expect, if demand and supply stay in balance where they are right now, I wouldn't expect an acceleration of the van market until -- if it stays this way, you'll see strength into the fourth quarter, seasonally. I'm talking month-to-month, quarter-to-quarter, not over prior, prior comparisons are no -- aren't worth anything right now. But I would say that we've seen stability in the rate at a very elevated level right now. And I would expect that, that stability is probably going to maintain unless you see something trigger demand there. But my expectation is to see a similar rate throughout the year. And maybe -- if demand stays where it is, there's a little peak in the back 2 months of the year, we might see that grow on the van side. It's -- look, it's -- we're at record highs, okay? So on vans, on the van freight, and it hit in March. And I think what's driving the second quarter, we're looking at, I think, 10% to 15% revenue growth from the first quarter, second quarter is because of the elevated rates in March, and I just carried those assuming they're going to go through the rest of the quarter in the second quarter. And I believe they're going to say at that elevated rate, and they have stabilized at that rate. So my answer would be stability, not necessarily growing much off of where we are unless something weird happens.

That's great. And we do have just 1 minute left and this last question looks to be a quickie. It's -- you mentioned capacity is tight, trailer capacity tight, what is -- what are Landstar's plans for new trailers, incremental trailers? And how do you strategically gain that as far as orders based on the cycle?

Well, lucky enough, we actually -- we had preliminary held a spot for 300 trailers to be delivered on August 1. I don't know where that stands. We officially booked the order in March and locked it up. But I think if you put an order in for trailers today, Joe, I believe they're not getting delivered to 2022. So anybody who's trying to get new vans.

It's tough.

If you didn't order them. Joe probably has more color on it.

Yes. No, I think it's really difficult to get the trailers now. If you haven't had your orders in, we had to lock some of ours in even earlier. I think how we'll handle it. We typically -- Scott, we'll have 2 trailers for every BCO truck. And in this year, we've got significant orders in, and we're starting to take delivery of some of those trailers now, and that will continue in preparation for peak. And if BCO growth is super strong, and customer demand is strong, then there were trailers that we had earmarked potentially to sell. We would just retain those. And that should get us -- take that trailer question mark off the table for us for the balance of '21.

Excellent. Thanks. Well, that gets us to the end of the session. Thank you, Joe. Thank you, Jim. Really appreciate all the insight and thanks, audience for asking those questions. I hope everyone got a bit out of that. And congratulations on the strong start to what looks like should be a very strong year. So thanks, guys. Thanks again.

Thanks, Scott.

Okay. Bye-bye, all.