Landstar System, Inc.

Good afternoon and welcome to Lansar System Incorporated's third quarter earnings release conference call. All lines will be in listenable 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 Lansar are Franklin Negra, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Fright Officer, Jim Todd, Vice President and CFO, Matt Daniger, Vice President and Chief Field Sales Officer, and Matt Miller, Vice President and Chief Safety and Operations Officer. Now I'd like to turn the call over to Mr. Jim Todd. Sir, you may begin.

Thank you. Thank you, Elmer. Good afternoon and welcome to Landstar's 2025 Third Quarter Earnings Conference Call. Before we begin, let me read the following statement. The following is a safe harbor statement on 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 relate 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 2024 fiscal year, described in the section Risk Factors, Landstar's Form 10-Q for the 2025 first quarter, and our 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 CEO, Franklin Negro, for his opening remarks.

Thanks, JT, and good afternoon, everyone. I'd like to thank our BCOs and agents and all of the Landstar employees who support them every day. It was great to spend time with our BCO independent contractors at our annual Appreciation Days in Bossier City, Louisiana, recently, and to celebrate their incredible achievements. We were extremely pleased with the turnout, and it was my honor to preside over Landstar's 52nd truck giveaway, awarding Christian Sanchez Cantu from Laredo, Texas, with a new 2026 Freightliner Cascadia. The capability, resiliency, and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry. Their adaptability and dedication to safety, security, and service for our customers is truly impressive. They are exceptional business leaders and key to driving the continued success of Landstar's business model. The challenging conditions experienced in the truckload freight environment over the past 10 quarters continued during the 2025 third quarter. Volatile federal trade policy and lingering inflation concerns continue to generate supply chain uncertainty. However, even as overall company revenue decreased approximately 1% year over year, The 2025 third quarter included important positive signs for Landstar, which I'll cover shortly. As JT and I will discuss in greater depth later in our prepared remarks, and as disclosed in our earnings release, the 2025 third quarter financial results were impacted by three discrete non-cash, non-recurring items. As we disclosed via the 8K we filed with the SEC on August 13th, the largest of these items related to the decision to actively market for sale Landstar Metro, our wholly owned Mexican logistics subsidiary that is principally engaged in intra-Mexico transportation services. We are working towards a late 2025 or early 2026 sale of Landstar Metro and have thus far experienced a good deal of interest in that company. Excluding the revenue contribution from Landstar Metro from both the 2025 and 2024 third quarters, as well as approximately $15 million in reported revenue during the 2024 third quarter that was associated with the previously disclosed agent fraud matter. The total revenue increased approximately 1% year-over-year in the 2025 third quarter. This is a positive marker for our business. Encouraging signs in our overall performance were highlighted by strength in the unsighted platform equipment business. This service type posted another strong quarter with a 4% year-over-year revenue increase driven by the performance of Landstar's heavy haul service offering. We generated approximately $147 million of heavy haul revenue during the 2025 third quarter, or a 17% increase over the 2024 third quarter. This achievement reflected a 9% increase in heavy haul revenue per load and an 8% increase in heavy haul volumes. And as noted in our earnings release, in representing the collective efforts of many people at Landstar, Matt Miller and I are very pleased to report that the number of trucks provided by BCO independent contractors increased during the 2025 third quarter, representing the first sequential growth quarter since the 2022 first quarter. Our focus continues to be on accelerating our business model and executing on our strategic growth initiatives. We are continuing to invest in the foundational work that will put Landstar in a great position to leverage the freight environment when it eventually 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. As I previously noted, in addition to the decision to sell Landstar Metro, our third quarter financial results reflected two other non-cash, non-recurring charges disposed in our recent 8K. These three discrete items in the aggregate resulted in impairment charges in the quarter of approximately $30.1 million, or 66 cents per share. As a result, gap earnings per share were 56 cents. Excluding the impact of these three items, adjusted earnings per share was $1.22. JT will cover these three impairment charges in greater detail during his prepared remarks. Turning to slide five, the freight environment in the 2025 third quarter was characterized by relatively soft demand from a seasonal perspective. The impact of accumulated inflation remains a drag on 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 as evidenced by an ISM index below 50 for the entire 2025 third quarter. Considering that backdrop, Landstar's revenue performance was admirable. in the 2025 third quarter with both truck revenue per load and the number of loads hauled via truck essentially equal to the 2024 third quarter. Our balance sheet continues to be very strong, and our capital allocation priorities are unchanged. We will continue to patiently and opportunistically execute on our existing buyback authority to benefit our long-term stockholders. As noted in the slide deck, during the first nine months of 2025, we deployed approximately $143 million of capital toward buybacks and repurchased approximately 995,000 shares of common stock. And yesterday afternoon, our board declared a 40-cent dividend payable on December 9th to shareholders of record as of the close of business on November 18th. We continue to invest through the cycle in leading technology solutions for the benefit of our network of independent business owners and have allocated a significant amount of capital this year toward refreshing our fleet of trailing equipment with a particular focus on investment. and unsighted platform 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 2025 third quarter. JT will get into the details on revenue, loadings, and rate per load in a few moments. As noted during previous earnings calls, Landstar's safety first culture is a crucial component of 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 0.60 DOT reportable accidents per million miles during the first nine months of 2025, well below the last available national average DOT reportable frequency released from the FMCSA for 2021, and slightly better than the company's trailing five-year average of 0.61. This long-run average 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. I'd also like to take a moment to recognize Landstar's nearly 500 million dollar agents based on our 2024 fiscal year results. Importantly, retention within the million dollar agent network continues to be extremely high. Turning to slide seven in the capacity side, on a year-over-year basis, BCO truck count decreased approximately 5% compared to the end of the 2024 third quarter. Importantly, as noted earlier in my remarks, BCO count increased by seven trucks on a sequential basis, representing the first increase in sequential quarterly truck count since the 2022 first quarter. BCO turnover continues to be influenced by a persistent relatively low rate-per-load environment, combined with the significant increase in the cost to maintain and operate a truck today compared to before the pandemic. Directionally, we are pleased to see our trailing 12-month truck turnover rate drop from 34.5% as of the fiscal year end 2024 to 31.5% at the end of the 2025 third quarter. Through the first four weeks of the 2025 fourth fiscal quarter, the number of trucks provided by BCO independent contractors is down fractionally versus the ending truck count of Q3. We were encouraged, however, by a recent visit we had with U.S. Secretary of Transportation Sean Duffy. During our meeting, Matt Miller and I discussed several federal regulatory initiatives and administration priorities with the Secretary. With a real focus on issues facing truck drivers and the truck capacity marketplace, we were proud to confirm to Secretary Duffy that Landstar BCOs have had zero violations of the English language proficiency regulation and no reported issues with non-domiciled CDLs. We do not believe we have thus far experienced significant impact to our business from the federal regulatory agenda, but believe there is a potential longer-term positive impact for our BCO business in particular. I will now pass the call back to JT to walk you through the 2025 third quarter financials in more detail.