Landstar System, Inc.

Good afternoon and welcome to Landstar System Incorporated year-end 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 Frank Lonegro, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Freight Officer, Jim Todd, Vice President and CFO, Joe Biko, President of Landstar System Holdings Incorporated. Matt Daniger, Vice President and Chief Field Sales Officer. Matt Miller, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Jim Todd. Sir, you may begin.

Thank you, Arlene. Good afternoon and welcome to Landstar's 2024 Fourth Quarter Earnings Conference Calls. 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 2023 fiscal year. describing 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. I'll now pass it to Landstar's CEO, Franklin Negro, for his opening remarks.

Thanks, JT, and good afternoon, everyone. First, I want to thank our BCOs and agents and the Landstar employees who support them every day. It is unbelievably energizing to engage with our network of entrepreneurs as we work together to position Landstar for the future. During my first year as CEO of Landstar, I traveled extensively throughout the country meeting with agents and BCOs and have been thoroughly impressed with the capability, the uniqueness, the resiliency, and the level of commitment of the independent business owners who comprise the Landstar network. They are exceptional leaders in our industry and are key to driving the continued success of the Landstar business model. 2024 was a challenging year in freight transportation, but it was not without success and accomplishment for Landstar. As we move into 2025, we continue to be laser focused on accelerating our business model and executing on our strategic initiatives. In one major 2024 bright spot, I am extremely pleased with the performance of the heavy haul service offering last year. We generated approximately $498 million of heavy haul revenue during the 2024 fiscal year, record revenue performance for Landstar Heavy Haul. That achievement was driven by a 9% increase in heavy haul revenue per load and a 3% increase in heavy haul volume. Turning more broadly to our core truckload service offering, the foundational work we did in 2024 puts us in a great position to leverage the freight environment when it turns our way. We are also focused on our commitment to continuous improvement in the level of service and support we provide to our customers, agents, BCOs, and carriers each and every day. Turning to slide five, the freight environment in the 2024 fourth quarter continued to be characterized by relatively soft demand and readily available truck capacity. The impact of accumulated inflation on goods continued to impact the amount of truckload freight generated in relation to consumer spending. Truck capacity continued to be readily available with small pockets of supply-demand equilibrium and market conditions continued to favor the shipper amidst choppy conditions in the industrial economy. Considering that backdrop, Landstar's revenue performance was admirable in the 2024 fourth quarter, delivering top-line results just slightly ahead of the midpoint of our fourth quarter guidance, while earnings per share came in modestly below the midpoint of the guidance, primarily due to some variable contribution margin and insurance and claim cost pressures. Our fourth quarter guidance issued in conjunction with our 2024 third quarter earnings release called for the number of loads hauled via truck to be 4% below to 1% above the 2023 fourth quarter and overall revenue per truck load to be flat to 4% above the 2023 fourth quarter. The actual number of loads hauled via truck in the 2024 fourth quarter was 3.4% below the 2023 fourth quarter within the lower half of our guidance range Actual revenue per truckload in the 2024 fourth quarter was 3.1% above the prior year quarter, within the upper half of the guidance range. Our balance sheet continues to be very strong, and our capital allocation priorities are unchanged. I'm a strong believer in the company's stock buyback program and am committed to patiently and opportunistically executing on our existing authority to benefit our long-term stockholders. As noted in the release, we deployed over $82 million of capital toward buybacks and repurchased approximately 452,000 shares of common stock during the 2024 fiscal year. In the fourth quarter, given the shorter open window period and the Trump bump experienced in the equity markets, we did not deploy significant capital toward buybacks in the quarter, but declared a $2 per share special dividend. We continue to invest through the cycle in leading technology solutions for the benefit of our network of independent business owners and allocated a significant amount of capital in 2024 towards refreshing our fleet of trailing equipment. Turning to slide six and looking at our network, the scale systems and support inherent in the Landstar model helped to drive the operating results generated during the 2024 fourth quarter. JT will get into the details on revenue loadings and rate per load in a moment. As noted during previous earnings calls, I've been in the transportation sector for most of my career and realize just how important Landstar's safety culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar BCOs operating safely every day, and the agents and employees who work to reinforce the critical importance of safety at Landstar. I'm proud to report an accident frequency rate of 0.59 DOT reportable accidents per million miles during the 2024 fiscal year, an improvement of approximately 2% as compared to the 2023 fiscal year. This is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our BCOs and provides a point of differentiation our agents are able to highlight in discussions with our freight customers. Turning to slide seven, in the capacity side, BCO truck count decreased sequentially in the fourth quarter from the third quarter by 184 trucks, consistent with our expectations of BCO declines continuing into the fourth quarter. On a year-over-year basis, BCO truck count has decreased approximately 10% since the end of the 2023 fourth quarter, consistent with the year-over-year truck revenue decline experienced in fiscal 2024. It is typical to incur turnover in BCO truck count in a low rate-per-load environment. BCO turnover also continues to be influenced by the significant increase in the cost to maintain and operate a truck today compared to before the pandemic. We would expect BCO count to continue to decline in the first quarter, given the challenging operating environment faced by many truck owner-operators and the typical seasonality in truck count experienced from the fourth quarter to the first quarter. I'm excited about Matt Miller's recent promotion to Chief Safety and Operations Officer and him putting a fresh set of eyes on how we recruit, develop, and retain BCOs. I will now pass the call back to J.T. to walk you through the 2024 fourth quarter financials in more detail.