Landstar System, Inc.

I think that's what happened last night.

Good morning and welcome to Landstar System Incorporated's first quarter earnings release conference call. All lines will be in 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, Fred Pensati, Vice President and CFO, Rob Brasher, Vice President and Chief Commercial 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, Annie. Good morning, and welcome to Landstar's 2022 First Quarter Earnings Conference Call. Before we begin, let me read the following statement. The following is a safe harbor statement under the Private Securities Litigation Reform Act of 1995, statements made during this conference call that are not based on historical facts or 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 2021 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 unless there undertakes no obligation to publicly update or revise any forward looking information. Our 2022 first quarter financial performance was the best ever quarterly performance in last year history. Typically the first quarter of each year is seasonally softer than all other quarters of a given year. In fact, it is highly unusual for a first quarter financial performance to exceed the financial performance of the immediately proceeding fourth quarter. the 2022 first quarter did just that. First quarter revenue, gross profit, variable contribution, operating income, and diluted earnings per share will reach all-time quarterly records ahead of even our record 2021 fourth quarter. During the 2022 first quarter, we initially provided first quarter revenue and earnings per share guidance as part of our 2021 year-end earnings release on January 26. We provided an update on February 28th in a Form 8K we filed with the SEC to address the potential impact the invasion of Ukraine could have on Lansar's first quarter results. We provided an additional update on our 2022 first quarter performance in a Form 8K we filed with the SEC on April 5th in advance of management's meeting with analysts at Lansar's annual agent convention. Overall, revenue was an all-time quarterly record of $1,970,000,000 in the 2022 first quarter, approximately 13% above the high end of our initial guidance and in line with our April 5th updated guidance. Revenue increased $683 million or 53% over the 2021 first quarter. In particular, Landstar experienced strong growth in both truckload rates and volume, along with significantly increased revenue from ocean freight services, largely on rate increases. Typically, truck revenue per load in the first quarter is seasonally lower than that of the second, third, and fourth quarters. In only three of the past 10 years prior to 2022 has first quarter revenue per load truckload exceeded that of the preceding fourth quarter. Revenue per load on loads hauled via truck in the 2022 first quarter was an all-time quarterly record and exceeded the 2021 fourth quarter by 4%. The sequential quarter to quarter percentage increase in revenue per load on loads hauled via truck for each quarter since the third quarter of 2020 has been above historical trends. From the 2021 third quarter to the 2021 fourth quarter, though, the sequential growth rate slowed. Our initial guidance for the 2022 first quarter assumed that the deceleration in sequential quarter-to-quarter growth would continue and therefore assumed revenue per load on loads hauled via truck would return to more normal seasonal patterns on a month-to-month basis. However, as disclosed in our February 28th Form 8K, truck rates during the first eight weeks of January and February 2022 exceeded prior year's corresponding period by 27%. That year-over-year increase was due to rates increasing from December to January and from January to February by 3.3% and 2.3% respectively. Those positive sequential trends put February revenue per truckload approximately 3% above December, far above normal seasonal trends where February rates are always below the prior year's December. Given the pricing strength Landstar experienced during the first two months of 2022, it wasn't surprising that truck revenue per load in March was equal to that of February, even after considering the recent spike in fuel costs. In this regard, it should be noted that generally for Landstar, changes in the price of diesel at the pump impacts revenue hauled via truck brokerage carriers, but has very little direct impact on revenue hauled by BCOs. Additionally, as expected, the year-over-year comparison in truck revenue per load in March was much more difficult than during the first eight weeks of 2022, as rates in March of 2021 increased 11% over February 2021. Overall truck revenue per load in January, February, and March 2022 increased 25%, 29%, and 17% over January, February, and March of 2021. As to rates by equipment type, truck revenue per load on loads hauled via van and unsighted platform equipment in the 2022 first quarter increased 27% and 19% respectively over the 2021 first quarter. As to the number of loads hauled via truck, our initial guidance on January 26 called for truck load volume to increase over the 2021 first quarter in a 12 to 14 percentage range. Our February 20th update reported that January and February truckload volume increased 24% over January and February 2021. In total, first quarter truckload volume increased 20% over the 2021 first quarter, in line with our April 5th update. Our February 4th MK included discussion regarding two of our largest independent sales agents who each have administrative operations in the Ukraine. At the onset of the Russian invasion, the administrative operations of one of those agents was significantly disrupted. Remarkably, by the end of March, load volumes arranged by that agency had almost fully recovered. Nevertheless, as both of these agencies continue to main administrative operations in Ukraine, no assurances can be provided that these agencies will not be significantly disrupted by future developments in the ongoing conflict in Ukraine. Overall, truck load volume in January, February, and March increased 17%, 30%, and 14% over January, February, and March of 2021. The February increase in the year-over-year volume growth rate over the January year-over-year growth rate resulted from a shift in truckloads from February to March in 2021 due to storms that impacted the U.S. in late February 21. We estimate that storms decreased truckload volume in February 21 by 7,000 to 8,000 loads and believe most of those loads were hauled in March. March of 2020, two lower year-over-year growth rate was attributable to the tougher comp in March 21 due to these 7,000 to 8,000 loads, as well as a disruption of one of the Ukraine agents early in the month. Continued strong demand for consumer doorables and small packages via e-commerce helped drive 2022 first quarter volume 17% over the 2021 first quarter. The number of loads hauled via unsighted platform equipment grew 15% over the 2021 first quarter, mostly due to improving demand for our services within the US manufacturing sector over the 2021 first quarter. We continue to track qualified agent candidates to the model. Revenue from new agents was $25 million in the 2022 first quarter, the second highest revenue from new agents over the past 17 quarters. The agent pipeline remains full. We ended the quarter with a record 11,935 trucks provided by BCO capacity owners, 71 trucks above our year-end 2021 count. Overall, the net increase in the number of BCO trucks in the 2021 to first quarter speaks to Landstar's ability to track quality capacity in a tight truck capacity market. Lows hauled via BCOs increased 7% in the 2020 first quarter over the 2021 first quarter on higher truck count. We ended the first quarter with a record number of approved third-party carriers in our network. The number of third-party carriers hauling freight in the 2022 first quarter increased 39% over the 2021 first quarter. I'll now pass it to Fred for his comments on a few specific line items within the company's first quarter financial statements. Fred? Thanks, Jim.