Landstar System, Inc.

Good afternoon and welcome to Landstar System, Inc.'s work 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, please connect at this time. Journeys releasing Landstar are Frank Lonegro, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Fright Officer, Jim Todd, Vice President and CFO, and Matt Dannegger, 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. Thanks, Elmer. Good afternoon and welcome to Landstar's 2025 Fourth 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 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 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. Thanks, JT, and good afternoon, everyone. I'd like to thank our VCOs and agents and all of the Landstar employees who support them every day.

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. Before we jump into fourth quarter results, I'd like to take a few minutes to provide a brief reflection on my first two years leading this great organization. Despite the unprecedented freight recession continuing longer than many of us had expected, we achieved some significant accomplishments over the past two years. We created our key priorities, what we call the five points of the star, to guide our business, accelerating the model, executing on our growth strategy, managing risk, leveraging our financial strength, and enhancing our support. The one at the top of the star is accelerating the model, which is all about our agents and BCOs. When they are strong and growing and equipped with the tools and support they need to succeed, the Landstar model really shines. We double down on the company's strategic growth initiatives, with two of those, Heavy Hall and U.S.-Mexico cross-border, representing approximately 20% of our business. While the cross-border business has been impacted by geopolitics, we are more than ready to leverage our new cross-border leadership, as well as our strong agent presence and market position when the environment improves. On the Heavy Hall side, with new leadership and strong agent focus, not to mention our ability to do the hard things well, Landstar's Heavy Hall set a new revenue record of $569 million during the 2025 fiscal year, approximately 14% above 2024's record-setting year. We're continuing to build the leadership team of the future with our executives and VPs, what we call our top 60, with nearly half of that team new to their role, new to their responsibilities, or new to the company. That group is collectively focused and incented to drive Landstar's growth and profitability and to maintain our industry-leading transportation and logistics business premised on three key elements, safety, security, and service. We've reduced the time it takes to become a Landstar VCO while maintaining our highly stringent qualification standards. Huge thanks go to Matt Miller for his efforts here. This year, we will also implement a redesigned VCO onboarding and training program to ensure the delivery of relevant, high-quality instruction and to support Landstar BCOs in upholding the highest standards of service for our customers. We're leaning into the future in deploying technology and specifically AI to benefit our agents, BCOs and Landstar employees. It's all about enhancing our support for the Landstar network. You'll hear more this afternoon about our AI strategy and specific initiatives like the Contact Center, our path to deploying an ERP and AI enhanced tools focused on pricing, BCO retention, trailer requests and credit approvals You'll also hear about our new web portal featuring embedded agentic AI that was built specifically for the needs of Landstar freight agents and that we believe is unique in the industry. As we continue our efforts to find new ways to embed AI in our business, I'm pleased to report that approximately 50% of our IT CapEx budget for 2026 is dedicated to AI enablement and solutions. And importantly, we've continued Landstar's rich tradition of strong capital returns to our shareholders. Over the last two years, Landstar returned approximately $261 million to shareholders in the form of share repurchases and another $245 million in cash dividends. We remain committed to our capital return program while continuing to invest capital to improve and grow our business and making our network of entrepreneurs as successful as possible. We've been busy these last two years, we're excited about the future, and we look forward to sharing more with you down the road. Turning back to the 2025 fourth quarter results, the challenging demand conditions experienced in the truckload freight environment over the past three years continued during the 2025 fourth quarter. Global federal trade policy and lingering inflation concerns continued to generate supply chain uncertainty. Nevertheless, the Landstar team of independent business owners and employees performed well. Truck transportation revenue in the fourth quarter was nearly flat year over year, as the slight decrease in total revenue was primarily attributable to decreased ocean revenue. Moreover, as previously disclosed, we are in the process of selling Landstar Metro, the company's Mexican logistics subsidiary, excluding the revenue contribution from Landstar Metro for both 2025 and 2024 fourth quarters as well as approximately $16 million in reported revenue during the 2024 fourth quarter that was associated with the previously disclosed agent fraud matter Total revenue decreased approximately 1% year-over-year in the 2025 fourth quarter. As disclosed in our pre-release 8 file with the SEC on January 21st, the 2025 fourth quarter financial results were negatively impacted by several discrete items impacting insurance and claims expense. First, the company recorded pre-tax charges of $11 million or 24 cents per share related to two separate tragic vehicular accidents involving VCOs leased on with subsidiaries of the company. Second, the company recorded a pre-tax charge of $5.7 million, or 13 cents per share, in connection with the court entry of a judgment in January 2026 that Landstar intends to appeal and which related to a trial that ended in August 2025 relating to an accident that occurred in fiscal 2022. Third, the company recorded a $5.3 million pre-tax charge, or 12 cents per share, related to an increase in the company's actuarially determined claim reserves. JT will cover these items in greater detail during his prepared remarks. Nevertheless, we are encouraged by several positive signs. One consistent highlight is the continued strength in the unsighted platform equipment business, which posted another strong quarter with an 11% year-over-year revenue increase driven by the performance of Landstar's heavy haul service offering. We generated approximately $170 million of heavy haul revenue during the 2025 fourth quarter, or a 23% increase over the 2024 fourth quarter. and many more. Turning to slide 5, the freight environment in the 2025 fourth 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, while the industrial economy remains soft, as evidenced by an ISM index below 50 for the entire 2025 fourth quarter. We were pleased to see sequential outperformance by our overall truck revenue per load compared to pre-pandemic normal seasonal patterns despite fiscal October underperforming pre-pandemic seasonal trends. As noted in the press release, we were encouraged to see our overall truck revenue per load increase approximately 6% from fiscal October to fiscal December and appreciate everything the U.S. DOT is doing to support the American trucker. Considering that backdrop, Landstar's revenue performance was admirable in the 2025 fourth quarter, with the number of loads hauled via truck down approximately 1%, almost entirely offset by an approximately 1% increase in truck revenue per load compared to the 2024 fourth 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 2025, we deployed approximately $180 million of capital toward buybacks and repurchased approximately 1.3 million shares of our common stock. And yesterday afternoon, our board declared a 40-cent quarterly dividend payable on March 11th to shareholders of record as of the close of business on February 18th. We continue to invest through the cycle. In leading technology and AI solutions for the benefit of our network of independent business owners, and have allocated a significant amount of capital this year towards refreshing our fleet of trailing equipment with a particular focus on investment in new van equipment. At this stage of the call, I would normally hand it off to JT, but we felt it was important to provide analysts and investors with an update on our AI-related activities. I'll now pass the call to Jim Applegate for a discussion of in-flight and planned AI-related initiatives going on at Landstar. Jim?