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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning and welcome to Landstar System, Inc.'s Third Quarter 2018 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; Kevin Stout, Vice President and CFO; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; 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, Daren. Good morning and welcome to Landstar's 2018 Third Quarter 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 2017 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, and Landstar undertakes no obligation to publicly update or revise any forward-looking information.
Our 2018 third quarter financial performance continue to build on the outstanding record results Landstar achieved in our 2018 first half. Third quarter revenue, operating income, and diluted earnings per share each set all-time quarterly records.
During our second quarter earnings conference call we provided 2018 third quarter revenue guidance to be in the range of $1.175 billion to $1.225 billion. Revenue in the 2018 third quarter was $1.202 billion, approximately 27% above our 2017 third quarter.
Our 2018 third quarter revenue guidance anticipated the number of loads hauled via truck to be similar to the 2018 second quarter were 7% to 9% above the prior-year third quarter. 2018 third quarter truckload volume increased 7% over the 2017 third quarter.
As it pertains to the quarter over prior-year quarter comparison, note that the 2017 third quarter included approximately 16,000 loads hauled via truck in support of disaster relief services related to the storms that impacted southeastern United States and Texas.
Excluding loads hauled via truck for disaster relief services in the 2017 quarter, 2018 third quarter truckload volume increased 10% over the 2017 period. Our third quarter guidance also anticipated revenue per load on loads hauled via truck to exceed prior year in the range of 19% to 22%. Revenue per load on loads hauled via truck in the 2018 third quarter increased 19% over the 2017 third quarter.
Our third quarter guidance call for diluted earnings per share to be in the range of $1.58 to $1.64, actual third quarter diluted earnings per share was $1.63.
My prepared remarks during the 2018 second quarter earnings conference call included our anticipated gross profit margin for the 2018 third quarter to be in the range of 14.4% to 14.6%. Actual gross profit margin in the 2018 third quarter was 14.3%. The shortfall on the 2018 actual gross profit margin to our guidance was primarily due to mix as a higher percentage of truck loadings during the quarter was hauled via truck brokerage carriers driving the gross profit margin lower than expected.
During the 2018 third quarter, truck loadings increased over the prior year month by 12%, 8%, and 2% in July, August, and September, respectively. Excluding the loads hauled via truck, related to disaster relief services from fiscal September 2017, the number of loads hauled via truck in fiscal September 2018 exceeded prior-year September by 11%.
As mentioned in our second quarter earnings conference call, we expect that the very strong month over prior month comparisons of truck revenue per load to remain extremely strong in July and August and to moderate slightly in September given the strong rate environment that began in September 2017.
Consistent with these expectations, revenue per load on loads hauled via truck increased over prior-year month by 22% in July and August and 15% in September. Seasonally, we generally experience a low-single-digit sequential increase in revenue per load on loads hauled via truck from the second quarter to third quarter. During the 2018 third quarter, changes in revenue per load on loads hauled via truck from June to July and July to August were in line with seasonal trends while the change from August to September was slightly weaker than recent seasonal trends.
The number of loads hauled via rail, air, and ocean carriers was 25% above the 2017 third quarter. The increase in rail, air, and ocean loads was driven by a 21% increase in rail loadings and a 32% increase in air and ocean loads.
Revenue growth in the third quarter included $24.1 million of revenue contributed by new agents. Revenue from new agents in the 2018 third quarter was the highest third quarter revenue from new agents in Landstar history. We continue to attract qualified agent candidates for the model and the agent pipeline remains full.
We ended the quarter with a record 10,443 trucks provided by business capacity owners, 747 trucks above our year-end 2017 count, and 288 trucks above the end of the 2018 second quarter.
During the 2018 third quarter, we recruited a slightly higher number of BCOs compared to the 2017 third quarter and also experienced significantly fewer cancellations as compared to prior year's third quarter. As a result, the net increase in the number of BCO trucks in the 2018 third quarter was our highest ever quarterly net increase.
Loads hauled via BCOs increased 2% in the 2018 third quarter over the 2017 third quarter on higher truck count, partially offset by a 6% decrease in BCO truck utilization defined as loads per BCO truck per quarter. We had a record number of third-party carriers operate on our behalf during the 2018 third quarter.
Our network is strong and continues to attract qualified owner operators and third-party capacity providers. Gross profit increased approximately $31 million or 22% compared to the 2017 third quarter.
Here's Kevin with his review of other third quarter financial information.
Thanks, Jim. Jim has covered certain information on our 2018 third quarter, so I will cover various other third quarter financial information included in the press release.
Gross profit, defined as revenue less the cost of purchased transportation and commissions to agents, increased 22% to $171.3 million and represented 14.3% of revenue in the 2018 third quarter compared to $140 million or 14.8% of revenue in 2017.
The cost of purchased transportation was 77.5% of revenue in the 2018 quarter versus 77% in 2017. The increase in purchased transportation, as a percent of revenue, was primarily due to mix related to an increase in the percentage of revenue contributed by truck brokerage carriers.
The rate paid to truck brokerage carriers in the 2018 third quarter was 54 basis points lower than the rate paid in the 2017 third quarter. Commissions to agents was 8.3% of revenue in the 2018 third quarter versus 8.1% in 2017.
The increase in commissions to agents, as a percentage of revenue, as compared to 2017 was due to an increase in net revenue margin, revenue less the cost of purchased transportation divided by revenue, on loads hauled by truck brokerage carriers, and an increased commission rate on revenue generated by BCO independent contractors primarily attributable to an increased percentage of agents achieving incentive targets.
Other operating costs were $9 million in the 2018 third quarter compared to $8.1 million in 2017. This increase was primarily due to increased trailing equipment costs partially offset by decreased customer bad debt – excuse me, contractor bad debt.
Insurance and claims costs were $18.8 million in the 2018 third quarter compared to $17.9 million in 2017. Total insurance and claims costs for the 2018 quarter were 3.6% of BCO revenue compared to 4.1% in 2017.
The increase in insurance and claims, as compared to 2017, was primarily due to increased unfavourable development of prior-year claims in the 2018 period. Unfavourable development of prior-year claims was $3.4 million in the 2018 period compared to $1.1 million in the 2017 period.
Selling, general, and administrative costs were $46.7 million in the 2018 third quarter compared to $44 million in 2017. The increase in SG&A cost was mostly attributable to an increase in stock compensation expense and increased wages and benefits, partially offset by a decrease in the provision for bonuses under the company's incentive compensation plans.
Stock compensation expense was $4.9 million and $1.4 million in the 2018 and 2017 third quarters respectively with the increase mostly due to the impact of increased earnings on our performance-based equity compensation arrangement. The provision for incentive compensation was $5.2 million in the 2018 third quarter compared to $6.8 million in the 2017 third quarter. Quarterly SG&A expense, as a percent of gross profit, decreased from 31.4% in the prior year to 27.3% in 2018.
Depreciation and amortization was $10.8 million in the 2018 third quarter compared to $10.1 million in 2017. This increase was primarily due to the increase in the number of company-owned trailers.
Operating income was $87.1 million or 50.8% of gross profit in the 2018 quarter versus $60.6 million or 43.3% of gross profit in 2017. The increase in operating margin was driven by increased gross profit partially offset by increased insurance and claims cost and increased SG&A expense. Operating income increased 44% year-over-year.
The effective income tax rate was 22.4% in the 2018 third quarter compared to 29.2% in 2017. The 2018 effective tax rate was favourably impacted by the Tax Cuts and Jobs Act of 2017. The effective income tax rate was also favourably impacted in both periods by federal domestic production activities, deductions and research and development credits, tax benefits resulting from disqualifying dispositions of the company's common stock, and by excess tax benefits.
Looking at our balance sheet, we ended the quarter with cash and short-term investments of $254 million, cash flow from operations for 2018 was $204 million, and cash capital expenditures were $7 million. There are currently 2 million shares available for purchase under the company's stock purchase programs. Back to you, Jim.
Thanks, Kevin. Recent trends suggest that the extremely tight truck capacity market experienced during most of the first three quarters of 2018 had moderated a bit in September. Although capacity remains tight in September and through the first few weeks of October, it appears to be not quite as tight as we experienced earlier in the year. For the fourth quarter I expect the truck capacity market to remain relatively tight as compared to historical levels. However, I project that our quarter-over-prior year quarter rate of growth in truck revenue per load in the 2018 fourth quarter will not be a strong on a quarter-over-prior quarter basis as we had experienced during the first three quarters of 2018 in large part due to much tougher year-over-year comparisons plus the slight improvement in available truck capacity in September and early October 2018.
With that said, we still expect robust 2018 fourth quarter truck revenue per load, higher than the 2017 fourth quarter in an upper single-digit percentage range. I also expect the number of loads hauled via truck in the 2018 fourth quarter to be in line with recent third quarter to fourth quarter seasonal trends, resulting in a slightly higher number of loads hauled via truck as compared to the 2018 third quarter, or 8% to 10% above the 2017 fourth quarter.
Based on the continuation of recent revenue trends I currently anticipate 2018 fourth quarter revenue to be in the range of $1.180 billion to $1.230 billion. I expect gross profit margin to be in the range of 14% to 14.3% in the fourth quarter, assuming fuel prices remain stable, BCO utilization is similar to the 2018 third quarter, and overall truck capacity remains relatively tight. Based on that range of revenue and gross profit margin and assuming insurance and claim costs are approximately 3.5% of BCO revenue, I anticipate 2018 fourth quarter diluted earnings per share to be in the range of $1.56 to $1.62.
Overall, I expect the record-breaking pace of the company's 2018 financial performance to continue through the fourth quarter. Through the first three quarters of 2018 revenue increased approximately 32% over the same period of 2017 on a 10% increase in volume and a significant increase in revenue per load on loads hauled via truck. The first three quarters of 2018 have witnessed many all-time quarterly records for Landstar. 2018 thus far has been a remarkable year and we firmly believe we will finish the year on a strong note.
The 2018 fourth quarter will include a big milestone for us, the 30th anniversary of the formation of Landstar. In 2018 we're also on the cusp of a big financial milestone. Based on our expectation that 2018 revenue will exceed $4.5 billion, we expect year-over-year organic revenue growth to approach $1 billion. That would truly be an outstanding achievement to cap off a record-setting year. In our view, the overall environment for Landstar continues to be strong. We remain focused on profitable load volume growth, increasing our available capacity to haul those loads, and empowering our network of entrepreneurs to succeed in the highly competitive, technology-driven transportation industry.
And with that, Daren, we will take questions.
Thank you very much, sir Our first question comes from Jack Atkins from Stephens. Your line is now open.
Hey, Jack.
Hey, Jim. Good morning. Good morning, Pat, Joe, Kevin. How are you guys doing?
Good, good.
Thanks. Good morning, Jack.
Good, Jack.
Good, good. So Jim, if I could just sort of start with a macro question for you. You noted the first few weeks of October have sort of underperformed normal seasonality a bit, and I'm just sort of curious. We're beginning to hear that I guess from more and more folks, but what do you think is driving that? Do you think there's just more capacity coming into the marketplace? Do you think demand maybe a little bit softer than what we would normally see for this time of year? Do you think peak season has been a little bit slow to get started, maybe pulled forward to the ports? Just would be curious to get your take on sort of the macro on what's going on out there.
Well, I think I believe that it's just a little bit of both. We would guess it's more of a demand side than is it a supply side from a capacity side because hard to believe you can put that many trucks in such a short period of time of impact. So our thoughts here is that it's a little bit of both but more on the demand side. But again, with that said, when you look at the DAT numbers coming out in September, it wouldn't indicate that. But we're sensing more of a demand. You're having easier access to trucks right now. I think it's finally a little bit easier where we're satisfying more of the EDI requests that come through from a percentage level, basically the orders coming through.
But as it relates to a peak season, for Landstar our peak really is in October. And we generally don't see an uptick in October; what we generally see is maybe mid-November is when really things start to take off for us. So we haven't hit the peak. We anticipate a peak like we had last year though, very, very strong demand coming back into the market. Don't get me wrong. It's still pretty strong now; it's just you see the slight softness coming to October as it relates to rates.
Okay.
But we do anticipate the rates to climb similar they would from October, November, December, and we projected that November and December will climb up off of October just based on our peak and the way our peak works.
Okay, okay. That makes sense. And then just kind of thinking about the model for a minute. I mean, obviously very noble business model that I think performs really well at different points in the cycle. But you guys do have quite a bit of spot exposure, and I think a lot of investors are looking at spot rates during the quarter and seeing flatbed rates in particular really coming down versus normal seasonality. But you guys were really able to sort of outperform that. Can you help us think through sort of what allows you guys to really perform so well especially when the markets begin to fall off? Is it freight mix, is it modal mix? Just trying to think that through.
Well, if you think of the business within our business, right, you have drop and hook, right? 30% of our freight that's probably on our trailers through drop and hook, those rates tend to hold a little firmer because we have committed capacity into that market. So we don't have long-term contracts in that situation but rates tend to hold a little better than what you see. They are spot business but I think they seem to tend to hold a little better. So we have niches that actually will hold better. Heavy haul, I mean, those tend to hold a little bit stronger depending on what the heavy haul market looks like.
So even though we're in spot we're pretty penetrated into some of our customers and they don't remove us in a situation where they see spot markets dropping as quickly as they might remove someone who's in there just hauling a couple loads in a day. So I think that's why you see a little bit less of a reaction on the front end now. In the long-term, I think if it stays softer I think over time we generally – it catches up to us. But in the front end we generally don't see a drop off the way you see all the people putting out on the – whether it's DAT or those guys.
Okay, makes sense. And just one quick follow-up on that, Jim, if I could. Is there a way to think about what percentage of your business is now drop and hook?
Yeah. It's about 30%. I don't know the exact number. We're looking to see if we – Joe may have it. We can go back to that one when we get it.
Okay. That's great. Thanks again for the time, guys.
31.4%.
31.4%, Jack.
Of total truck, Jack.
Great. Thanks, Joe. Appreciate it, guys.
We're precise with the numbers we provide.
Thank you, Jack. Our next question comes from Matt Reustle from Goldman Sachs. Please go ahead.
Hey. Good morning, guys. Thanks for taking the question. When you're looking at demand in the fourth quarter, how much of what you're expecting in terms of that November and December strength do you think could be tied to preloading of inventories and getting ahead of the tariff changes in January? And I know it's tough to predict demand into next year, but any early thoughts on what you'd expect to see in the early part of 2019?
Yeah. The one thing about our business model and being spot market is it is very difficult for us to predict what we see going into next year. But I don't think there's any – we're not projecting any change in demand for tariffs or anything starting in mid-November. We just think it's a normal e-commerce push coming through with the big guys moving all the freight during the back half for the Christmas season. So we don't anticipate that – our numbers don't anticipate much for the pull forward of inventory or any of that stuff; we're just looking at a normal based on our requests from those big three shippers or carriers that we work with. And going into the first quarter, it's really difficult until we finish out the year. December is a big indicator for us on what's going to happen in the first quarter. And until we get there in the spot world it's hard to predict what we're going to be looking at in the first quarter.
Understood, understood. And then second question, just on plans to deploy the buyback. You didn't do any this past quarter. Any thoughts around that given recent stock weakness and how you might think about using the repurchase program?
Yeah. I would anticipate that – if you look in the second quarter we jumped on it. It was trading at about $105 I think was the average purchase price, so I would anticipate that we would – we have 2 million shares authorized under the plan. And the reason we didn't buy in the third quarter is it really tends to be I think we – from the minute we released earnings we have two days where we can't be in and from that point on it climbed up pretty rapidly. And we basically don't buy on a run up. But if we settle at this range, yeah, we would tend to be in the market.
Great. Thanks, guys.
Our next question comes from Ravi Shanker from Morgan Stanley. Please go ahead.
Hi. This is actually (23:11) here for Ravi. I just wanted to touch on the BCO count. It has been strong all year and particularly in the third quarter. Is that something that is more on the attrition side? And also in a case of an environment slowdown, do you think you can keep the BCO recruitment strong?
Yeah. Hi, this is Joe. The growth in BCO count throughout the year has been really we've had some improvement in additions but largely it's been a result of retention-related to growth. And we do expect to continue to add trucks in the fourth quarter, perhaps not at a net pace that we have in the second and third quarter. But yes, we do anticipate growth.
Got it, okay. So they're actually positive or maybe flattish. And again, on BCO utilization you mentioned a 6% decrease this quarter. Can you just tell us what drove that and how should we think about that moving forward?
Yeah. Just it feels like the BCOs have had a very strong year. Rate growth has been pretty significant. And it seems like their ambition kind of maybe tailed off a little bit having made such strong revenue and earnings performance early in the year, that their ambitions were a little bit less in the third quarter. And that is not abnormal, so that's kind of our best guess as to what happened there.
And the comps are very tough there also. Last year's third quarter had very high BCO utilization.
I see, makes sense. And final questions from me before I pass that to someone else. Did you provide any gross margin guidance for the fourth quarter? And if not, what would seasonality imply?
Yeah. I gave...
We gave a gross profit margin estimate of 14% to 14.3%.
Great. Thank you. That's it from me.
We have Todd Fowler from KeyBanc Capital Markets. Your line is now open.
Morning, Todd.
Great. Hey, Jim, good morning. Thanks for taking the question. I think that this probably dovetails onto the response to the last couple of questions. But just can you help us think about the gross profit margins that you had in the third quarter and then what you're guiding to for the fourth quarter? It sounds like mix drove the gross profit margins falling below the range. So can you just help us? It sounds like that the BCO utilization was down a little bit and that's a function of that. But is that the main driver there or is there something else we need to think about with the gross profit margins in 3Q and what you're guiding to for 4Q?
Yeah, Todd. This is Kevin. Yeah, the BCO utilization basically drove the third quarter, and the utilization again was very tough comps compared to last year. So when we guided we didn't assume that we're going to have that much utilization as we did in the prior year but it's still below the historical average, if you will. So, yeah, we're anticipating 14% to 14.3% in the fourth quarter. Last few years we've had a higher percentage of the loads moved in the fourth quarter move onto brokerage, so we're assuming a further decline there on the gross profit margin largely due to more brokerage revenue.
Okay. And so, Kevin, as you think about the fourth quarter, what you do have embedded in there is basically the BCOs have had a strong year and they want to take some time off towards the end of the year. That's already embedded in what your expectations are both from a revenue standpoint and from a gross margin standpoint?
To a degree, yes.
Okay, got it, good. And then just at a high level, can you help us think about as you move into 2019 I understand that maybe predicting what we're going to see from a top line standpoint in pricing and volume could be tricky. But what are some of the big buckets on the cost side that we should think about either where you're going to see some cost inflation and costs moving up or where you could see some variability if we do see kind of a softer market relative to what we've experienced this year?
Well, the big line item there that moves on a year-to-year basis is incentive comp, and we've got about $20 million assumed for 2018. If we go back to a normal run rate where we hit our targets exactly, that number should approach the $8 million number. So I guess you could look at that as like a $12 million tailwind. Should be a little bit of a pickup also on stock comp. That's more in the $4 million to $5 million range, I would say.
And then anything, Kevin, going the other way? I think at this point the IT costs are fully in the numbers, and so those would be relatively consistent into 2019. But any cost inflation we need to think about next year?
No, just a typical merit increases midway through the year. And, yeah, the IT spend should be similar next year compared to 2018.
Okay, very helpful. Thanks for the time this morning and the color.
Yeah.
Next, we have Amit Mehrotra from Deutsche Bank. Your line is now open.
Thanks, operator. Hi everybody. Congrats on a good quarter. Just following-up on the volume commentary. Initially, you said it's demand-driven and could be demand-driven. I just want to get a better understanding of that. Where specifically maybe are you seeing pockets of demand weakness? I don't know if that's a question you can answer, but I'm going to ask it anyway. And also, the guidance for 4Q does imply a nice kind of sequential uptick in volumes, 4% or so, which I guess is peak season-driven. If you can just help us understand how that kind of stacks up on typical seasonality because it does tend to move around a lot if you look at previous years? Thanks a lot.
This is Pat. As it relates to where we see some demand slowdown, it's principally primarily on the platform side and widespread on the platform side. If you look at some of the charts that we put out and you look at the commodity declines in building products, that's a wide variety of accounts in there that are down year-over-year on the platform side. On the van side we kind of see a similar demand that we've seen throughout the year. A little light in certain areas, but principally the demand piece has been on the platform side. And if you think about it from an equipment and a capacity standpoint, you don't see a lot of new platform capacity coming into the marketplace. I think that's why Jim indicated that we think its more demand than capacity on that platform side.
And Amit, this is Kevin. On your question about the sequential volume changes, historically – and this is based on a five or six-year average – sequential truck volumes increased 4% in Q4 and that's about right where we're guiding to.
Got it. Okay, that's very helpful. Thank you, both. And just one more follow-up on the yield side of the equation I guess. I just want to understand the continued strength in yields given what we're seeing in the spot market turning negative on a year-over-year basis. And I know Internet Truckstop and DAT are not kind of the end-all, be-all with respect to the pricing growth you are achieving, but there clearly is a relationship. And so if you could just help us think about how and why your performance is diverging to the positive versus what we're seeing in the spot rate data. And more importantly, I guess what's your confidence knowing full well that you maybe don't have a lot of visibility, but just your confidence level given your tenure in the industry of the company's ability to achieve positive yield and pricing in 2019 after the stellar 2018?
To be honest, when the reports started first coming out that the spot pricing was lower than it was last year, it kind of took us by surprise because we weren't even close to that. Like we said, October right now, looks like it's still running about 10% above prior year. So trying to decipher where they're getting their numbers from, we find it difficult sometimes to correlate the two. Maybe it's our mix of flat versus van, length of haul comes in, so it could be anything. But even looking at our revenue per mile and carving out any impacts of the length of haul or anything, we're still showing decent growth in our spot rate business over where it was last year. So it's hard to speak to what – we're aware of what was being reported by those entities, but correlating our information to what they're putting out has been difficult.
Yeah. I mean, for what it's worth, we're hearing the same thing from other truckload carriers where there's a real bifurcation between what ITS and DAT are reporting versus what they're seeing in their own spot business, but I'll leave it at that. Thank you, guys, for the time. Appreciate it.
Our next question comes from Matt Brooklier from Buckingham Research. Please go ahead.
Hey. Thanks and good morning.
Good morning.
Could you guys provide truckloads – the year-on-year growth by month? And if not, can we get that?
I have those, Matt. Volume in the third quarter went July 12%, August 8%, and September 2%. But if you take out the 16,000 loads from September 2017 related to the storms, it was 11%. So it went 12%, 8%, 11%.
Okay. And then, do you have that number month-to-date for October?
No, we don't.
I guess is it trending kind of in line with the guidance that you provided?
Yeah. It's more seasonal. The volume side is more seasonal where the price side is a little softer than seasonal.
Okay. And then this is more a conceptual question. You talked to having more exposure on the spot side of things. You also talked about how some of your drop and hook businesses is kind of still spot but it's maybe a little bit more contractual. I guess I'm posing the question could some of this moderation in the spot market potentially be related to shippers at this point in the cycle maybe starting to get a little bit more contractual and some of the spot volume that we had in the system over the past 12 months maybe shifting over to more contractual capacity and therefore maybe putting some downward pressure on the demand side in terms of certain spot markets?
Matt, this is Pat. Certainly, what we saw earlier in the year was what we characterize as a mini bid or a fulfillment bid where customers would come to us and say hey, we have these 30 lanes. Can you price them? We have these 15 lanes; can you price them? We've seen less of that as we've gone through the course of the year. However, their bid cycles where they send out their RFPs and their RFQs remains very consistent. So what we saw is a moderation in, again, what we'll call those mini bids, those fulfillment bids, but the bid activity in terms of year-over-year when they send those bids out, they've been very consistent along those lines.
Okay. That's helpful. That's all I got. Thanks for the time.
Our next question comes from Bruce Chan from Stifel. Your line is now open.
Yes. Good morning, gentleman. I think most of my big ticket items here have been addressed, so maybe I want to turn to a more conceptual question. It looks like we may have gotten some clearer guidance on the hair follicle testing law which, coupled with the Drug and Alcohol Clearinghouse, could maybe pose another significant step-up in capacity tightness, and I know that's something that you had addressed. So I guess when you think about those two things, what is sort of the magnitude of the impact in terms of your outlook for kind of end of year or maybe next year?
Bruce, this is Joe. I'm familiar with the hair follicle testing and the clearinghouse, and both of those things I think are still a ways off. I think from what I've read and from some of the numbers that have been put up by some of the other carriers that have tested the hair follicle testing, it looks like there could be a little bit of some pressure on candidates coming in the door and to the industry and staying in the industry, so I think there could be a tightness of capacity that comes from that. But from a timeframe perspective, I didn't think it was anything in the near-term. I thought that was quite a ways down the road with still some details to be worked out.
Okay, all right. Appreciate that color. And then just looking at air and ocean for a little bit, it looks like load growth did quite nicely but revenue per load fell off quite a bit, down 20% or so year-over-year. Can you walk me through what the dynamics are there and why it was down so much?
Well, if you think about the air business and some of the stuff we were doing last year, we were doing several charters in support of the relief activities down in Puerto Rico. That carried a significant rate per load.
Got it. Okay, that makes sense. And then final maybe housekeeping question, I don't know if you gave a number as far as agent count or Million Dollar Agent count. If you have that, that'd be great.
The Million Dollar Agents, we tally that up annually. In 2017 we had a record 542 I think the number was, so really that number. Based on the year we're having we should be at or above that. But at this point, we don't tally it up until we get through the year.
Okay. All right, fair enough. Well, thank you. Appreciate the time.
Yeah.
Next we have Scott Schneeberger from Oppenheimer. Please go ahead.
Good morning. This is Daniel on for Scott, and thank you for squeezing us in here.
Sure.
Can you guys please provide some perspective on e-commerce-related loads? How much you've done historically and how that might shape up this year overall or for peak season in particular?
It's difficult for us to say specifically how much we do. Obviously, we work very closely with providers of shipments on e-commerce delivery, so we kind of have some good visibility into what that looks like. And so we anticipate the fourth quarter e-commerce activity, the peak activity if you will, to be very similar to last year.
Thank you.
At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks.
All right. Thank you, Daren. And thank you and I look forward to speaking with you again on our 2018 fourth quarter earnings conference call currently scheduled for January 31. Have a good day
Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.