Landstar System, Inc.

Q2 2021 Earnings Conference Call


spk_0: the morning and welcome to lancer system incorporated second quarter two thousand and twenty one earnings release conference call all lanes will be in a listen only mode until the formal question and answer session today scalia's being recorded if you have any objection see me disconnect at this time joining us today from lancer are some get tony president and ceo fred been saudi vice presidency fo rob brasher rice resident and seat commercial officer job you can vice president cheap feeding operations officer i would like to turn a collaborative mr gym get tony sir you may begin
spk_1: thank you card
spk_2: good morning and welcome up the left are twenty twenty one second quarter earnings commerce call avoid begin let me read the following statement the ball safe harbor similar to the price his litigation reform act like ninety five statements made during this congress called they're not based on historical facts are forward looking statements during this time it's call we may make statements the contain forward looking information the related to lifers business subject plants rallies and expectations such information by nature subject today or is and risks including but not limited to the operational financial and legal risk tell them less or swarm ten cable and twenty twenty one twenty twenty this clear you're describing effect and respected another as if the pilots from time to time these risks uncertainties good cause actual results are about to differ materially from historical results are those anticipated and better should not place undue reliance on such for looking information and laughter undertake no obligation to publicly update or revise any forward looking information or twenty twenty one sec for financial performance was by far the best currently performance and last our history said quarter revenue gross profit operating income operating margin and earnings per share were all each all time quarterly records to put this performance in perspective try to twenty twenty one second quarter left or achieved it's all time quarterly record for revenue in the twenty twenty fourth quarter and at all time quarterly records for gross profit operating income and earnings per share in the twenty twenty one first quarter lazarus financial performance in of twenty twenty one second quarter exceeded the company's existing all time quarterly records for revenue gross profit operating income and earnings per share by twenty one percent seventeen percent eighteen percent and nineteen percent respectively in reviewing the company's twenty with twenty one second quarter performance quarter of a prior quarter financial comparisons to the twenty twenty second quarter or not meaningful this is due to the significant downturn in the twenty twenty second quarter in demand for freight services and the us economy in general relating to the coven nineteen pandemic and various initiative taken by laughter in response to the pandemic to support of network of agents and be sealed during our first quarter twenty twenty one earnings conference call we provided twenty twenty one second quarter revenue gonna be in range of one billion four hundred million dollars to one billion four hundred fifty nine dollars and i would arise per share to be in a range of two thousand twenty to two dogs and thirty cents revenue the twenty twenty one second quarter was one billion five hundred seventy one million dollars and i would have expired per share with two thousand forty cents our guides for the twenty twenty one second quarter was at that time entirely based on the most recent sequential month to month trends and short term expectations will and relating to those trends our initial guidance assume truck looked out would increase in amid single digit percentage range over the twenty twenty one first quarter as a related the truck revenue pirlo first quarter truck revenue per load typically is lower than that of the second third and fourth quarters however revenue per load on most hobby a truck in march twenty twenty one was an all time monthly record our initial guidance for the twenty twenty one sec for anticipated the truck revenue prologue would continue at the record march twenty twenty one more level throughout the second quarter implying a softer month a month seasonal trend and an overall increase in the twenty twenty one second quarter above the twenty twenty first quarter and amid single digit percentage range our expectations that revenue per truck and would stabilize at marches record level held true april as a parameter patroclus was about the same as in march albert drug runner pro load further increased and made from april at a higher rate than we anticipated based on historical seasonal trends while june truck revenue per load compared to may with slightly below typical seasonal trends however do truck revenue prologue was at an all time record level for any month in anticipation of an oncoming investor commas go we updated our initial twenty twenty one second quarter guidance on may twenty eight be a for make a pile of yet see the updated guides reflect the truckload by him at the time training above the twenty twenty one first quarter in a lot double digit percentage range and revenue bravo on most hobby a truck training above the twenty twenty one first quarter in a high
spk_3: single digit percentage range
spk_2: based on those trans the updated guidance called for twenty twenty one second quarter revenue and i learned for shared of both slightly exceed the high end of the initial guidance actual second quarter truckload revenue was generally in line with our may twentieth guidance while total revenue came in and a little better than we expected compared to the updated guns mostly due to strong performance in our non truckload transportation services to help give a sense of actual twenty twenty one month a month trends compared to reason seasonal trends xp at the last are covering the same time period we compare the thousand twenty twenty one trans with our performance from to thousand sixteen to two that nineteen were not including result from the fifth be or twenty twenty given the significant adverse impact the coven nineteen pandemic cat on the freight industry on average from two than sixty the to that my team the number of loads and revenue per load unloads hobby a truck increase from the first to second quarter's by nine to six point eight percent and to present respectably the number love hobby a truck and the twenty twenty one second quarter through twelve percent compared to twenty twenty on first corner while revenue per load on also be a truck increase seven and a half percent over the twenty two went on to score clearly both grow rates growth rates are much stronger than reason first or second quarter trends as a relief to the number los i'll be a truck the change from march april twenty twenty one trended consistently with a seasonal trends based on our to thousand and sixteen to that making history although the sequential performance in april twenty twenty one was most likely better than the historical trend as we believe march twenty twenty one load by and was elevated do to great moving from physical february two this march due to the storms they had the us and late february the girl than an overload for the a truck from april to may was one hundred forty basis points better than the average increase from two that and sixteen a do that nineteen wardrobe or made a june was in line with historical trends as a relief to revenue pirlo march or april twenty twenty one was one hundred forty basis points below the two thousand and sixteen to do that nineteen average but road from april to may with two hundred based point above the two thousand and sixteen two thousand i nineteen average bro for made a june was slightly below the seasonal trend reflected in the average change we experience into that sixteen the to love nineteen from landmark fanboy consumer demand for building products consumer durables and small package be ecommerce continue to drive record banned by the twenty twenty one second quarter the number let's all be an automatic platform equipment group or thirty five percent over twenty twenty second quarter mostly due to improvements in us manufacturing sector beginning of march as it relates to the new age and pipeline we continue to attract qualified asian candidates for the model revenue from new agents was twenty four point three million dollars in the point when he wants a quarter the highest revenue from new agents and over twelve quarters at the truck capacity we ended the quarter with a record eleven thousand five hundred fifty seven trucks provided by been badly donors over five hundred sixty more trucks compared to our here and twenty twenty count during the twice when he wants a coterie we recruited ten percent more details than during the twenty twenty second quarter rbc or retention rate also improved as compared to the twenty twenty second quarter of another be feel cancellations in the twenty twenty one sec quarters bree present below the twenty twenty third quarter overall the net increase the number be fios be feel truck for the twenty twenty second quarter speak so either ability to track qualified capacity and a truck to pass the market low tar baby seals increase broccoli twenty six percent in the twenty twenty one second quarter over the twenty twenty second quarter on a twelve percent increase in average struck up plus a twelve percent increase in bc a truck utilization divine as loads bc truck per quarter it is worth noting about these your truck out and utilization or twenty twenty second quarter were adversely impacted by the pandemic when the the second quarter with a record number of proof third approved third party cars or network while number of active third party cars which we define as carriers who have all the love in the preceding hundred and eighty days increase forty three percent in the twenty twenty one second quarter over the twenty twenty third quarter or not would get stronger continued to attract third party truck capacity i will not pass
spk_4: a friend to comment on additional fee and or metrics and a few other second quarter financial statement items read thanks jim good morning everyone and thanks again for joining us do covered ah revenue performance so i'll make some additional comments about european know specifically are gross profit operating costs are bringing guns and taxes as well as the balance sheet in cash hello gross profit in the second quarter increase ninety five percent to two hundred and twenty point eight million dollars compared to one hundred and thirteen point one million dollars and twenty twenty gross profit margin was fourteen point one percent of revenue in the second quarter this year compared to thirteen fruit point seven percent in the same period last year
spk_2: the increasing gross profit margin was mostly trivial to the impact of twelve point six million dollars a pandemic relief incentive payments made to the copies be ceos and agents in april and may have twenty twenty partially offset by mix as a percent of revenue contributed from our fix margin business which has higher gross profit margin
spk_4: degrees from fifty one percent of total revenue last year the forty six percent this year
spk_2: due to the impact of the covert pandemic
spk_4: on our twenty twenty second quarter a more relevant comparison is to look at this far sequential growth in the twenty twenty one second quarter compared to the first quarter of this year
spk_2: even by this measure we performed extremely well with gross profit increasing thirty one and a half million dollars or seventeen percent to the highest gross profit in the company's history sequential decreasing gross profit margin from four point seven percent and the twenty twenty one first quarter to fourteen point one percent in the second quarter was mostly due to mix as truck brokerage revenue became a larger share of a revenue in the twenty twenty one second quarter an agent commission incentives tied to achieve and of specific revenue thresholds on loads hall by b c
spk_4: i was also group has a percentage or revenue compare the first quarter
spk_2: moving onto our indirect costs and expenses are other operating costs or eight point nine million dollars in the second quarter of this year compared to seven point four million dollars and twenty twenty
spk_4: this increase was primarily the result of higher trailing equipment maintenance and tire costs due to a higher trailer count and improved utilization more recruiting and qualification costs related to rbc as and fewer games on trailer disposal during the twenty twenty one period compared to last year insurance claim costs were twenty four point one million dollars in the second quarter this year compared to nineteen point eight million and twenty twenty total insurance claim cause represented three point seven percent of b c o revenue this year compared to five point two percent of b c or revenue last year the decrease of the percentage of b your revenue was mostly the effect of the thirty seven percent increase in dc of revenue per load in absolute dollar terms the increase in insurance and claims expenses primarily due to the increase severity of current your claims during the twenty twenty one period additional miles driven by our the ceos any one point eight million dollar inc
spk_2: recent insurance premiums
spk_4: partially offsetting these increases was a one point five million our benefit from the decrease in net unfavorable development of prayer claims and twenty twenty one second quarter compared to twenty twenty second quarter selling general and administrative costs or fifty four point one million dollars in the twenty twenty one second quarter compared to forty point six million dollars and twenty twenty the increase in as june a costs was almost entirely driven by the estimated cost the company's variable cash instead of compensation plan and equity incentive plan increasing by twelve point six million dollars over the twenty twenty second quarter to the expectations of a record setting financial forecast for fiscal year twenty twenty one partially offsetting those costs increases was a lower provision for customer back that bad that
spk_2: addition to preciation and amortization expense was twelve point one million dollars in the twenty twenty one second quarter compared to eleven point five million and twenty twenty
spk_4: operating income was one hundred and twenty two point two million dollars or fifty five point four percent of gross profit in the twenty twenty one quarter horses thirty two point two million or twenty eight point four percent of gross profit in twenty twenty operating income represented a new all time quarterly record for lancer or effective of income tax rate was twenty three point nine percent and the twenty twenty one second quarter compared to twenty two point three percent and twenty twenty the increase in the effect of income tax rate was primarily trivial to a higher than anticipated state tax refund last year that reduce the twenty twenty second quarter effective tax rate
spk_2: as well as a higher provision for non deductible executive compensation during the twenty twenty one period partially offset by the recognition of increased access tax benefits during the twenty twenty one second quarter compared to the same period last year related to vesting of share based compensation
spk_4: or net income for the twenty twenty one second quarter was ninety two point three million dollars which was up from thirty one point two million dollars in the same period last year
spk_0: and up from seventy seven point two million or nineteen and a half percent compared to twenty twenty one first quarter
spk_4: are deluded e p s in the twenty twenty one second quarter was two dollars and forty cents up from two dollars and one cent and twenty twenty one first quarter looking at our balance sheet to end of the quarter with cash and short term investments of two hundred and thirty nine million dollars cash flow from operations year to date in twenty twenty one was one hundred and thirty seven million dollars compared to one hundred ninety eight million dollars during the twenty twenty period the decrease in cash castle from operations was mostly due to changes in working capital with sixty three percent increase in revenue your here driving up net receivables find his accounts receivable less accounts payable compared to a decline and working capital and the same period last year which generated cash from working capital in the year to date twenty twenty period
spk_2: for wrap up i like to just say that i'm very pleased to be at landstar and look forward to talking with and meeting many of you hopefully even and person a schedules and events from it gemini and the rest of the lamps or team a really pleased by the company's performance performances past quarter and we look forward to keeping you updated on the business as we make our way throughout the remainder of twenty twenty one and i'll turn it back to gym to discuss around for the third quarter thanks bread and and welcome to this us appear management freight the man began the significantly improved in august twenty twenty as us economy began to improve from increase consumer spending the strengthen the frightened by but the began in august continued to the end of twenty twenty as such your over your financial comparison should begin to normalize as we move through the twenty twenty one third quarter as or later on twenty twenty one third quarter expectations anticipate a strong crate by to continue from the twenty twenty one second quarter in a normal brain environment with a supply of trucks and break the memory remained stable the company's third quarter truck revenue per pirlo typically slightly exceeds the second quarter while another of mojave hobby a truck typically track slightly below the second quarter when we experience those trends third quarter revenue often approximates revenue of the second quarter one rose private tells to decreased slightly from the second quarter due to a lower problem probably probably revenue per load and a number of lords hobby a truck or it historical high levels and when the first the weight of july truck revenue per load and the number let's hobby a truck or tracking in line with typical june to july trends based on this performance we believe there's a scene with their season of the ability of these elevated price and volume up based on the current environment i expect twenty twenty one third quarter truck revenue prologue to exceed the twenty twenty one third quarter and elo twenties percentage range and a number loads i'll be a truck to exceed the prior third quarter and amid team percentage rate as such i expect third quarter around of be similar to the twenty one twenty twenty one st quarter revenue in a range of one billion five hundred fifty million dollars to one doing and six or my mouth i also had has been shorts some plan costs in a twenty twenty one third correct be approximately four point six percent obese your of revenue about a three point eight percent of bc revenue experience of the twenty twenty one first half dozen treat asthma and join the and cost is based on increase premiums relating to auto liability coverage that where you're paying a third party insurance companies increase of verity we have already experienced during the first several weeks of july as compared to the twenty twenty one first mostly due to a small number of specific incidents and our experience it over longer periods of time playing cause ten the track more in line with historical trends a way of experience was born twenty twenty one based on that range of revenue assuming insurance and claim costs at price me for pointed crowd biggio avenue anticipate twenty twenty one third quarter die learn is prettier to be in a range of to twenty two two thousand thirty cents the projected increase in insurance and claims costs reflect on our third quarter earnings per share guidance as can compare the actual insurance claim causing a twenty twenty one second quarter would adversely impact twenty twenty one third quarter earnings per share by approximately twelve cents overall i'm extremely pleased with last are first half twenty twenty one performance twenty twenty one first that revenues by far the highest first half revenue the company's history and increase approx we six hundred twenty million dollars or twenty eight percent compared to the rep previous record set in the point eighteen first them while gross profit increase approximately eighty three million dollars or twenty five percent compared to the two thousand eighteen period twenty twenty one percent for profit operating income net income and average per share with but were by far behind never achieved in any first half in the company's history in our view the overall by a freelancer continues be as drives has been in any point on last two decades and last our position for a year tremendous success we continue to increase our bell capacity remain focused on providing and enhancing technology based tools for the thousands of small business owners in both the agent capacity sides for an hour
spk_0: i expect twenty twenty want to continue at it's record setting pace as a rule of the easily surpass five billion annual revenue for the first time in our history
spk_5: and with that kirby we will open to questions
spk_6: make very much sir at this time we will begin to question and answer session if you would like to ask a question peace press dar one on your touchstone phone once again dentist i went to ask a question to cancel your request of peace press start to our first question would come from the line of jack africans have stevens linus up and he still had a hack i a great job
spk_7: good morning morning rob and joe and fred congratulations on your own with the company
spk_5: thank you and morning and by the morning or them though i guess maybe maybe the star jam you know kind of going back in picking up off of up off of a comment you made on up on the last conference call there you are you talking about
spk_8: net operating margins answer at how they could trend once we begin to see
spk_7: yeah the cycle you know maybe begin to normalize into into twenty twenty two and i know that yeah it's very very difficult than anticipated project sort of how things are going to train from here no one would have anticipated we'd be where we are today
spk_9: you know i know that there are a lot of
spk_5: you know cause that sort of flux up and like down in your business depending on sort of what's happening with the top line what's happening with gross profit and i'm just curious have you had a chance to maybe think about that operating margins being above fifty percent next year he even if we were to see up a slower it was spot market from afraid perspective
spk_2: if you think that's you think that's realistic either a lot of get a lot of questions just around the sustainability a trans and if and if folks can grow earnings and twenty twenty two i would be curious to get your thoughts on that subject yeah jack one of the things have taken considerations as you know are you know that the the management team and employees here on that we'll be a instead of days when it's highly variable to our our results
spk_10: then you know you would like to doesn't like a second best year ever and and we didn't literally had a bonus targets and where there was a so run put that on the flipside on a great your like or have and that that that i have a complaint of the elevated and i'll tell you right now that dumb or projection for this year is probably a nine twenty to twenty five million dollar range for that and typically of eight million
spk_2: and other in any equity cop actually works in a similar fashion because it's tied to you know or equity awards that based on drop in earnings and therefore we have a similar of variability there and your by look and about inequity car probably another twenty five million this year for that's are you look at about combined forty by the fifty million and ah but in this year and in a normal year be about twenty combat so you've got that supporting a or that fifty percent operating margin of like there's a lot of pressure on the march this year we're putting fifty five percent of right so you can we can have a decent decrease in gross profit and still support a fifty percent margin just because of the tell winds of the art the way our bible car programs
spk_8: which would benefit everybody out your that the theory here is that a if the bc owes the agents are doing that well in the marks kind of thought the the executive team your shouldn't get awarded and of would have been a great year it's the same thing agents to be fields are doing great than we do great odds are the model kind of protect itself when it comes from that kind of margin perspective when you have a little softening into the
spk_5: into a into a year and i would think and i have i been run numbers believe we could pry have a decent sized pull back and gross profit and still stay about fifty present around fifty percent because that tell went on the on the of dna one okay know that that makes them make a lot of fans and appreciate that additional car on a gym and i guess from a follow up question
spk_7: you know you guys have been
spk_11: sorry your investments in technology over the last several years and i think people under under appreciate
spk_2: just how much technology you guys have and have push forward to the agency in into your into your be theos over the past few years but you know given how strong this year and who is from atop wanna gross profit perspective are there any thoughts may be accelerating similar technology investment just just because you have a sort of when from a from a proper perspective no job with of l l jack that you know back in two thousand fifteen when i stopped and roll i told everybody has an open checkbook to make our tools better and we're spending what we can get it done we have so many projects in the air right now there are there's nothing that stands there's there's nothing that stands or another we would add or to to the project live what we're focused on on the front end of this is user experience right agents and trucks you know making them more efficient making things more effective on the tools that already existed but making a more effective than and we have a lot of stuff in the pipeline there on the back and that we don't have to rush into as an e r p n your billing system because our stuff is pretty much from the eighties and it works today administratively but sooner or later will jump on that but there's no reason the jam that in it'll helps you know it'll help build efficiencies within the building but it's you know we're really really focused on user experience i don't i don't think there's anything that i would say hey we should as we should spend another fifty million dollars on t today my would trickle in other projects it'll be a move forward a little bit but i wouldn't say there's anything are unbeaten on the world all sudden we got we're going accelerate this project into a year and it's gonna cost fifty million i i think we're still going to do we do and spend an extra twenty or thirty million incrementally and and actually that incremental no longer incremental to that's probably the spend right where we are right now where we used to be you're probably twenty to thirty million over where we were four years ago and that that level of spanish prime
spk_0: stay where it is almost like you say we're we're not aware of anything we're going to pull forward
spk_12: but if there was something i wouldn't say it's gonna jump from twenty five thirty to fifty to sixty out of and okay that makes total sense thanks again for the top guy from a guy quarter thankyou our next question would come from the lampard portfolio of keybank capital markets your last open sir please go at a that a good morning gym fred welcome to the ah the self proclaimed superior management team like ever get a beer
spk_13: jim so and on the guidance you know and i understand it makes sense to sit at the guidance based on what you've seen from historical season seasonal patterns i know the bureau be your cancer starting to normalize he the last couple of quarters you run ahead of seasonal patterns are other things that you're seeing right now you're either and underlying to me and or things on the supply side
spk_2: that suggests that we're going to shift to more in line with seasonal trains or three the you're seeing that would buy you one way or another or vs seasonality to move to the back out of the year lol todd on the first quarter i got a little skeptical and i was i i flattened out the second quarter because i'm march was so great but this time i think it's a little bit different june june was good at work were said an all time high revenue prologue but what we've seen through june of yet if you you know when i went to my comments he heard that made a june was more seasonally on line when it comes to loadings and then made a june revenue prologue was slightly below the seasonal trend again talk and sixteen eighteen nineteen trends i think i think a raid it's really because i'm a spike right so that the softer june made a june as bikers mates spiked you know i had so and in the first couple weeks here was in july the first three weeks in a july i'm seeing the normal june or july trend so i'm basing this on about six or seven week stability right i think we're seeing i got six weeks of stability right now seeing things that are tracking normal as we would have seen in those three years
spk_12: i'm sixty three or four years from sixteen to nineteen so there's there's nothing pushing us either higher or lower than that at this point so out that that's how we get to the trend and and we think it's gonna continue and you know with you know we always knew clearly were meeting with the know rob meet with his team and joe talks to hit him about what they're seeing in the market and in it supported by the commentary coming out of the field and
spk_2: tuck under the age of the customers is how we come up with that we we look we're looking at a more normal second or third quarter trump
spk_14: okay yeah no that that makes sense and as helpful as it sounds like more be a wounded him what we've seen in the last six weeks or so kind of more consistency more stability and so yeah maybe just along those lines you know can you speak to eating specific are different between what you're seeing on the be inside and what you're seeing on the unsighted our platform side from a seasonal see point and what your expectations with
spk_2: be for both of those for the rest of the year i'll turn over after that the ice the i'd i'd near the strength really is still on the bad side it's whether it in other the building products consumer durables or subs july holes really i'm it's really where where the markets fans were flat bench gotten a little bit better you know it's it's not gang busters but most most of the performances will come out of than with with with leopard being better i'm still most of those customers and ship present we're hearing from that are you know they're taught they're still concerned about the quarter right and the peak and stuff like that so you know it just feels like a normal seasonal trend are on the van side and then apply flatbed maybe a little improvement as we go through the quarter but the others there's nothing specific that change and either of those dynamics that i'm aware of the one thing you're we thought about sector is right now everybody's talk about the automotive sector and the lack of ships one of the we've only had we'll have to
spk_14: commodity and commodities that the or sectors that dropped and load volume from the first quarter second quarter and one was automotive right and i think we expected that common into the quarter and i expect that one's gonna continue
spk_12: but other nat there's nothing really unusual in the trend that we're looking to trends
spk_0: for the rest of the year
spk_15: okay yeah all of that makes sense okay thanks so much for the times when of thank you for our next question would come from the line of best majors obsessed with hannah your line is open peaceful and
spk_2: yeah thanks for taking my questions here time your gym you your stock is certainly a lot higher in absolute terms than than when it was when you were buying more aggressively in past years but the multiple has come down as you're going to come up you do you feel that we're a watching the point where where that normal return caprica be more attractive or do you think would still in the special dividend mode if you when that time comes
spk_14: oh god you notice we bought about a hundred fifty their thousand years back in the quarter left that that's kind of a light quarter for us
spk_2: you know we will see to pull back and the thought about ten percent and we didn't really see anything in the change in the business dynamics he also it clearly when you look what the street say that eight eighty five for the year eighty three for the year yeah our party is now a lot more reasonable that it was six six months ago so yeah i think i think we're in a buying opportunity such a way now i would expect that you know
spk_4: we're going to be opportunistic and of if it if it stabilizes where it is in others it some
spk_2: it's i think it's opportunistic what weren't an opportunity to mystic a position right now it doesn't count as a special at the end of the year and we will still always discuss that in december by looking to get on the balance sheet many opportunities we have in the market but damn right now yeah i'd expect some similar to what we didn't the second quarter
spk_15: as long as a price stabilizes within a you know a certain range
spk_2: and again of it starts when we don't we don't compete against investors of we start seeing a climb up but we like the stability aware it when it was and we didn't see any change in the business dynamics
spk_16: yeah thanks for ah thanks for sharing that young one housekeeping question i don't know if i heard thoughts on where the gross margins it's ruined you give us an update on that and apologize if i missed it
spk_2: ah we didn't say it because we're keep another secret
spk_15: blow actually as a as a similar but maybe a little less than the second quarter and you typically see a little bit of a down turn and i think the first to as fourteen one i think were using like maybe thirty nine to fourteen at this point and it really american we developed a little more brokered come across a means nothing to do with any pressure from the time has a capacity it's really just the way we typically trump in you want to get one more in their me you did make some comments to an earlier question about
spk_2: you been able to maintain and a pretty good operating margin even if net revenue dollars turn against you next year he looks like it least the sell side is settling out it somewhere with the mid to high single digit p s decline next year me is that feel reasonable based on your july twenty two when you
spk_3: when crystal ball any thoughts on how we bridge from this year to next i think it's very difficult in this environment the project twelve months out because of the unpredictability the pandemic stimulus stops people have a back to work people may be traveling i think it's difficult to answer
spk_2: i'm of were that a ps know i know what the street has is it reasonable
spk_3: i it's a better question toward the under this year than it is right now or but i think as a management team here we do they are going to see some softness sometime in the first half
spk_17: and i still think that softness is not gonna i don't think get to the point where it's gonna you know get us below that fifty percent margin especially when we have a bob you know that tell when of about thirty million dollars were that
spk_0: by the top sit in fg and a this year that you know if we hit targets next year he have that damn that tailwind so i'm sitting here uncomfortable i will will maintain a fifty percent margin next year with a little soft this and gross profit
spk_18: oh by answer that question
spk_19: thank you our next question would come from lengths got group of wolf research milani something pistol and
spk_2: okay thanks morning guys he met this an uptick in an insurance costs should we should we think about this is a one quarter then door is this in your mind sort of the the new normal arrange on from insurance costs a part of it it's a part of it is probably just special to the quarter because we are aware of a little bit of increase have already come into the for three weeks of july yarn and when you have an incident you hear about it i'm getting the facts takes a lot longer than his do and sometimes back change so we don't know exactly the outcome of a couple these things that happen in the first quarter so there's a little bit of excess in there you know i would if i would have guessed now my you know without those interviewed by four point two four point three percent not four point six percent but we're hoping that we were very conservative on that number and things on the incidents we know about you know our i'm
spk_14: the all that you know that thought patterns and stopped support your maybe a lesser verity than what we think they have that that that they found like so
spk_19: i think it's a little happy the four points if to be honest with the other conservative but you know it's so hard to predict what's gonna happen in insurance claims based on history by a little heavy
spk_2: right right right and can your your point about the last six or so weeks have been seasonally normal after such a long period of allow performing seasonality what's your history do we typically after we have this period of of in mind with normal do we do we have a shot to get back to better than normal the word is is typically or historically that the beginning of the transition to underperforming normal what would your crystal ball here are my crystal ball balls it's very hard to decipher what we think's gonna happen at peak right october november december ah capacity still tight there's no question there and of demand creeps up i think he got a season or better than seasonal yeah i just demand for trail equipment still very strong a matter of going to be enough trail cook trailing equipment in the market the satisfy all that the man common across the your and worst anticipating a pretty strong
spk_19: fourth quarter so we might see of stability come in here through august september but if we get peak as strong as was last year you might be seen acceleration about seasonal now i'm a pessimist than do i believe that know but that is a scenario that could play out you know what right now as i say here
spk_18: i would tie the i think our fourth quarter going gonna look like the third quarter which look like the second quarter and will just finish out the year it this more seasonal trend okay and then they could just as bread one
spk_4: the model generates such tremendous cash flow and i don't know that there are amazing acquisition opportunities in in in your model
spk_2: is there an argument that you guys can just run with some more dead on the down she didn't and sort of dramatically increase the the the the piece of shareholder returns you know that's a that's a tough on i mean you know the company can support more that there's no doubt crushes would you do right if you raise that with that cash
spk_20: elsa that will consider overtime but the right now no plans to change the capital structure lot like last are pretty much been dead a our whole lives right and an electrician opportunity and or that on the balance you we kind of like the way the model as we have flexibility and when we buy when we paid dividends your loan of the bounty with a lot of that to me feel like just a one time
spk_0: what's your next move your were not you know a totally a burst of wouldn't doubt on the books but there's gotta be an opportunity in a reason to do it
spk_21: can thank you for the ten guess thank you the next question would come from the of bruce ten of stifel your line is open please go ahead
spk_2: thank you operator and morning team gym in a he talked about some of the shipper concerns about peak in the end of the year
spk_22: and i know you don't have tons of visibility here but just based on from the conversations that you've been having in what would you make of where their inventory levels are right now and how long it'll take for them to normalize a ruthless rock the question came into a little i mean i think again especially when you look at ecommerce in consumer spending as it is employer those everything is disrupted any you take into consideration of things are going on in the real things that are going on
spk_11: i'm at the port from overseas
spk_23: we're missing a whole of stabilization yet as with the conversation where and with our customers that that operate in a true peace is
spk_22: they don't know and we've been added his conversations with life for the first quarter as to
spk_11: aligning with they're making sure they've got capacity making sure that they're taking care of so so i think it's a big i know i'm all of the case that we have right now that again is often the bear with the could happen based on
spk_21: a a new up to the pandemic but but consumer spending still seems to be i home sales you'd be i remind me laugh so so there will be great
spk_24: they're concerned about how strong he is going to be moving into the look on l a third early and through the fourth quarter
spk_21: that that's great color and and maybe you know just one more followed by good we've been sort of chipping around the edges of of the question
spk_25: in a gym i know you said that guy you were expecting you know maybe some potential softness in on the early part of next year but you as you think about
spk_2: you know your comments around peak if you think about where inventory levels are right now in earlier this year you said that you were expecting a kind of normal twelve to eighteen months great cycle in a do those comments the whole true
spk_26: now at what i was i was on the pessimist red night your back in january and or your enrollees i was talking about the back have an easier because work and hadn't into that twelve the sixteen months cycle where their contract rates are climbing and spot read come through up your input and respected you know i'm singling a majority of of a spot rate
spk_2: and a normal cycle twelve eighteen months now work with i yeah i think we're going to see if i go i think it's just extended that's where we're gonna look at it next year thing sooner or later going to stabilize were in a single the business the
spk_27: sites in other if where are you know there's that the theory of people started traveling get entertainment not buy goods and stuff anymore you maybe that's been pushed out a little bit dicey with the new very common in a many people are to be home again or or not traveling as much are going to hesitate a little bit the travel and maybe more maybe that buying of goods will continue to
spk_0: out the rest of the a but sooner or later i'd we do still anticipate your slow down the man and contract rates coming up and and some of the freight that we all moved out a contract that will keep some of that but you know some of that runs from the spot right into the contract market and in that enters i don't think that cycle changes i think it's just extended
spk_28: perfect thank you and you next question would come from decent sidle up cowan your linus open please go ahead thank you haven't or hague and morning gentlemen
spk_23: and and up and walked into the team here wanted to touch on the be ceos and how difficult it has been if at all to keep attracting them and if you've seen any difference in some the stage that may remove some the stimulus payments and then maybe some thoughts next year if we ever get washington to agree
spk_29: we aren't of the structure bill how we should think of that hits that impacting star
spk_30: gadgets and this is your i am i would say that are as gym made and as some comments on is in his remarks are recruiting volume is up ah i think we're we're a week and would be remiss to say we don't let the work pretty hard to get the be fios in the door but i think the environment and where things are and the networks
spk_23: that we provide them makes it
spk_29: where were pretty attractive location for them so that that's why it's the are in the door numbers up as long as the environments days the way it is i think we provide a lot of transparency into the opportunity at lansdowne i think we get increasingly good at that over time to work out on your own authority or if you're in another system
spk_22: ah we show you what you can do it lands landstar and i think it helps people make the decision to come our way and i think we continue to be good at that we hadn't can't give you any detail as to what state they're coming from or others gonna think they don't know that we've seen anything that that steps out to say they're coming from states that are met with or without the in
spk_31: have the unemployment benefits but
spk_22: i just think the overall environment for somebody who owns a truck and wants to get paid on percentage in who wants to really chart their own financial future at the that's what we provide and i think that's an incredibly attractive that picture i will try to capitalize on that and and it for the last several quarters we've been able to do so
spk_23: again in regards to a potential on the for billions and so the impact how the i i think if if that happens and and you see a lot of bad and industrial activity going on i don't think it directly impacts landstar we might call a little bit of it but i think what he does is it further titans the black and market a end
spk_32: the market in general for those that may participate in that which helps rate climate accords when when rates are high you know that opportunity a and lamps are maintains mary
spk_0: very rosy and i think we continue to add equipment but that's directly i don't i don't see any really direct effect from the infrastructure belgian
spk_33: push a the time is always going on to graduate next to her thank you had to some have two more questions on cue the next question would come from scotch neibert your oppenheimer these glad
spk_2: ah thanks very much good morning welcome fred on him i get i am a few questions on now i'm had the really and market and case with regard to the the have you wine whole business that's really been growing ah what would he is he with you know get capacity for for parcel carriers going forward i had been of to the back half and if you but looking out a few years what happens out for your business they and in how you get that in a mystery out playing out the bigger picture thanks yeah now the to lionel and we talked about it before his
spk_10: yeah i anticipated like it it's to two or three large customers right the of shippers for us not not even shippers pilot carries right
spk_14: yeah anticipate that that they they kind of real line they decide to either put assets in there are they they yell day are
spk_2: they improve their i'm networks in there and they're carrier bait and stuff like that but damn what we're hearing right now is that and i anticipated that happening after the first quarter where they would bring more that and house but right now hearing is just that's not the plan right i think that on a softer line whole bins i think with they elevated throughout the rest of the year
spk_33: and even into next year i'm a would stay relevant as high as it is but i think will always be participating added a little bit elevated level compared to where we have historically because he has consistently and of weight break blow patterns not wanting to put assets into the system or leave a significant number that it's i think that holds true birth this condition i think will hold true for a while and then i i think that was your question on that be calmer side of the business and what a trans because it's right now i can tell you live in the from the first or second quarter i mean the load by him and that increase twenty five percent in also continues to rob outperform on a normal seasonal trend would be and especially for the to line hold pretty elevator right now
spk_2: thanks preheat that and then i i i think i heard in now i think it was and todd's question you are you're talking about the it's hip dynamic an automotive he said that yeah and prescribing if i'm wrong and that they were there were two sectors that would down first quarter second quarter automotive game one
spk_23: i'm curious about the other please correct yeah yeah if if if if if i heard that right overall and then it just is curious was a you guys you've done a lot of auto auto parts movement and i'm curious about that dynamic vs new car and and how you're handling and doing mac on for thanks
spk_2: yes older and sort of yeah you're you're right on i mean you got an automotive and this is a volume for quite a sequential volume common what what it was from key wanted you to we thought we thought to sectors that i've actually had negative volume growth and one was automotive which is a you know seventy percent of bob
spk_34: of our revenue volume
spk_2: ah of our volume or any other was electrical wasn't which is less than three percent with it was down two percent so nothing there was one of our major categories but every other sector or that we had was positive by and wrote you wanted you to as a released a new cars we we still are playing in that area the your business we may move a little bit of that by
spk_35: yo the significant
spk_33: peace over by nineties on preserve his part gone in lot of plants we will not do and new car moves
spk_2: great thanks in just get to fall on their eyes and thanks where thanks to the detail on the or the up the other categories is a quarter of overall i know what the catchall on both the or will one of the one of the last growing your beer is curious anything you'd call out in that category i'm a bit the help it can be so broad just and anything now and then gives you that the nets would not affect part of a broader scope for all kinds and up like a by ten percent of that of our total oh things for the corners out
spk_36: all a note when the age of puts it on their just pathetic a so some of that we we know the customers not done as i know what the commodity as i've generally just the typical you know non toxic not hazmat type type commodity but there's nothing within their that the any signet that's the biggest category with the not other yellow some others
spk_0: stop in their deal government's right relatively small foodstuffs a small but nothing that move dramatically within their summer ups and presents i'm are up twenty three present by but nothing really move the needle as much as you consumer durables building products and or your arm yourselves to my
spk_37: got it and for that the
spk_38: thank you if you would like to ask the question dismissed are one hundred touched on phone once again that is darwin to ask a question next on t would come from dying of stuff anymore of truest your line something please go ahead
spk_39: hi good morning morning i wouldn't touch on it
spk_2: a topic of lamps are blue and just am any update their in terms of how some of the technicians eat and rolling out with them i know it's a small portion your business but it is some a little bit of a shift towards actually kind of an exposure to contraction of rates would like to get any kind of update air and ah aliens or blue it also may be an update on some the technology initiative by know than a multiyear roll out across the organization for as long as with a surplus of any color there would be helpful and get less are blue on the technologists as kind of to for one is you know our systems here are are the core systems here are really designed for the spot world and they've been built out over twenty or thirty years know very good at the very good for what we do in that arena and as you mentioned you know get into that may be dedicated more contractual business which needs a kind of a different tms so there is that component of blue that is a little bit different than poor core business from a tms standpoint to run dedicated business assign capacity dedicated capacity were contract rates right so that's a little bit different the stop that were using over there that similar as like when for clarity which is our visibility ability to write that yoda less or blew off as access to our pricing tool and in not always the i can activia stuff like that so their similarities a is one of the best examples was to give the ability for us to use that to see how it you know how effective it is with third party as you know getting data from the third party trucks is kind of an industry challenge yeah the trucks don't want to share their information with you or they don't want to load your app you know you got the ways to do it so you go to aggregators and it gives us the opportunity there to actually get dedicated capacity work directly with us
spk_14: on specific lanes and worked through that communication piece on the clarity side too you know on the on the visibility to the frame
spk_2: the other do as you don't we parade agents through their to to to show my we're doing your they they they help us we help them kind of on how to run that kind of dedicated bit as they ever want to get into it your it's run by twenty the thirty million dollars of right right now and a look and will continue to grow up a technology their as we progress down the road with the we're not in that dedicated capacity world so that that tool is gonna be able to handle you're pushing frame or or you know the the dave dedicated capacity just picking the right right off or would push in the freight to them and it's autumn my automated the one day it does that we don't have a lot of traction here as we caught the other book it now product that we have my where the caught with the where the carrier just can push a button and except allowed build the our world the a lot of where he didn't want a couple calm a lot trucks wanna talk to the agents right in the last are blue years where will get traction on the book it now concept directors when the when they when the freight is owned and the capacity knows that they're afraid all i can do is push a button and let us know that they target so there's those the variations
spk_40: between blue in the poor and you know where
spk_0: an early stages of get much power get not technology up and running i was told the other day than a few weeks we will have the dms running or start running low through it so it's progress and it's a it's it's a good way to test some of the existing tools of the agencies
spk_41: very or thank you so much for the color
spk_0: and you at this time i see no further questions i would like to turn to call back over to you sir for closing remarks yeah like a kirby a you and i thought speaking with you again or twenty twenty one third quarter earnings as call currently scheduled for october october twenty first

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