Landstar System, Inc.

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 and for the 2024 fiscal year, described in the section Risk Factors, Lansar's Form 10-Q for the 2025 first quarter, and our other SEC filings from time to time. These risks and uncertainties could cause results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking information, and Lansar undertakes no obligation to publicly update or revise any forward-looking information. I'll now pass it to Lansar's 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. 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 doubled 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 haul side, with new leadership and strong agent focus, not to mention our ability to do the hard things well, Landstar's heavy haul 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. Volatile federal trade policy and lingering inflation concerns continue 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 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 8K 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, and related to two separate tragic vehicular accidents involving BCOs 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 reported 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 offerings We generated approximately $170 million of heavy haul revenue during the 2025 fourth quarter, or a 23% increase over the 2024 fourth quarter. This achievement reflected a 16% increase in heavy haul revenue per load and a 7% increase in heavy haul volume. 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 as 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, VCOs, and carriers each and every day. Turning to slide five, 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?

Thank you, Frank. Since 2016, Landstar has been executing a digital transformation strategy to ensure our network of agents and BCOs remains highly competitive in an increasingly technology-driven freight environment. Our goal from the outset was not simply modernization but enablement, delivering tools that help automate the agent office, simplify the experience of operating as a Landstar business capacity owner, and scale the efficiency and effectiveness of our entrepreneurs. Those early efforts, branded as Landstar 2020, included the rollout of a new transportation management system, advanced pricing and capacity tools, agent analytics, VCO retention capabilities, mobile applications, and trailer management. Landstar 2020 was never viewed as an endpoint. It is the foundation of a long-term commitment to building and deploying industry-leading technology across our entire ecosystem. As we moved beyond 2020, that commitment expanded. We invested further into digital capabilities within our corporate operation and the support we provided the network, including the rollout of modern contact center technology and significant upgrades to our financial, settlements, and back office systems. These investments strengthen the overall connectivity and support provided to our entrepreneurial network. What truly differentiates Landstar's technology strategy is how it's conceived and deployed. Our approach is not driven by top-down mandates designed solely to reduce costs. Instead, it's built through close collaboration with our agents and BCOs, with a clear focus on enabling growth. By aligning technology investments with the needs of our entrepreneurs, we're able to deliver tools that are adopted and leveraged to drive growth and deliver wins in the highly competitive transportation sector. Our agency model, growth is often constrained by resources. Without technology, a new agent may reach a couple of million dollars in revenue before needing to add headcount. This is a difficult decision given the financial risk involved. Our objective has been to deploy technology to fundamentally change that equation. By automating workflows and improving office efficiency, we have helped agents who embrace our tools to significantly increase their revenue base without adding resources. The same philosophy applies to our BCOs. By eliminating manual and administrative friction, we enable them to be more productive, haul more freight, and better serve our agents and customers. The end result is a differentiated value proposition for customers. a combination of advanced, purpose-built technology and highly motivated professionals with a direct economic stake in delivering freight safely, securely, and with exceptional service. Artificial intelligence represents the next major acceleration of this strategy. The pace of innovation and breadth of potential applications are unprecedented, and we view AI as a powerful enabler of our entrepreneurial ecosystem. Importantly, our AI strategy is evolutionary, not experimental. we're building on the strong digital foundation we already have in place. Today, machine learning is embedded within our pricing and BCO retention tools, allowing them to continuously improve as we scale the available data. Our new contact center platform leverages AI to enhance the knowledge base of the service representatives, analyze sentiment, automate routine tasks, summarize interactions, and free our teams to focus on higher value problem solving. We've embedded AI into our Lansar agent portal, improving access to information providing actionable business insights, and enabling better, faster decision-making. We've also deployed an AI fraud detection solution that analyzes behavioral patterns, documentation, invoice images, and shipment characteristics to identify high-risk freight and reduce shipment losses. Looking ahead, beginning in the first quarter of 2026, our AI task force will work with transportation-focused agentic AI startups and established technology partners to accelerate AI applications across the SHIPA lifecycle and within agent offices. These efforts are focused on driving efficiency, improving decision-making, and further unlocking growth across our network. As technology continues to evolve, Lansar intends to remain at the forefront. We see AI as a strategic enhancement to the competitive advantage of the Lansar business model and the resiliency and capability of our strong network of entrepreneurs. Entering this new era, we believe AI represents another meaningful opportunity to strengthen the safety, security, and service we provide to our customers every day on every load. Back to you, Frank.