Landstar System Inc 2026 Q3 Earnings Call

Good afternoon and welcome to Landstar's 2026 third quarter earnings conference call. Before we begin, let me read the following statement. The following is a safe harbor statement of 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 statements are 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 2025 fiscal year and Form 10-Q for the 2026 second quarter, described in the section Risk Factors 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 statements, and Landstar undertakes no obligation to publicly update or revise any forward-looking statements. I'll now pass it to Landstar's CEO, Frank Lonegro, for his opening remarks.

Thanks, JT, and good afternoon, everyone. I'd like to thank our BCOs and agents and all the Landstar employees who support them every day. The capability, resilience, and commitment demonstrated day in and day out by our network of independent business owners is truly unique in the freight transportation industry. It was great to spend time with many of our independent owner-operators during our annual BCO Appreciation Days event in Las Vegas in September, and with hundreds of our independent agents at eight different field meetings throughout the country over the past three months. One of the highlights of the BCO event was Landstar's 54th truck giveaway, where I had the honor of awarding BCO Dean Webb of Pelzer, South Carolina, a new 2027 Freightliner Cascadia as part of our Deliver to Win truck giveaway.

Events like this remind us that our success is driven by the independent business owners and employees who make up the Landstar network and the dedication they bring to serving our customers every day. They are exceptional business leaders and key to driving the continued success of Landstar's business model. The freight environment in the 2026 third quarter was characterized by strong year-over-year truck pricing, low single-digit truckload volume growth, and tight truck capacity. Market conditions, which favored the shipper since late 2022, have shifted rather rapidly in favor of the transportation provider. Notwithstanding the geopolitical uncertainty experienced thus far in 2026, 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 puts Landstar in a great position to leverage improving freight market conditions.

We also remain 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 5, Landstar's revenue performance was strong in the 2026 third quarter, with overall revenue up 25% year over year. Importantly, as noted in our earnings release, our network generated truck revenue of $1.407 billion, an increase of 29% compared to the 2025 third quarter, with truck revenue per load 25% above the 2025 third quarter, and the number of loads hauled via truck up 3% over the same period. I continue to be extremely pleased with the performance of Landstar's heavy haul service offering. We generated approximately $185 million in heavy haul revenue during the 2026 third quarter, a 25% increase over the 2025 third quarter.

On the capacity side, our net BCO truck count increased by 165 during the third quarter, the strongest quarterly improvement since the third quarter of 2021. While I was very pleased with our revenue, variable contribution, and net truck count performance during the 2026 third quarter, the quarter was not without challenges that require our focus and attention. We had a challenging insurance and claims cost quarter with approximately $22 million of net unfavorable adjustment to prior year claim estimates. As noted in the press release, the highly elevated insurance and claim cost quarter was primarily attributable to, one, approximately $13 million or $0.29 per share of unfavorable actuarial adjustments to insurance and claims reserves as compared to the last actuary review conducted as of the fourth quarter of 2025.

And two, approximately $8 million or $0.18 per share resulting from the settlement of two claims during the 2026 third quarter. With respect to the $8 million on two specific cases, the company took a $5 million charge during the third quarter related to the settlement of a truck brokerage claim in an adversarial venue and a $3 million charge due to the settlement of a claim related to an accident that occurred during the fourth quarter of 2025 involving a BCO independent contractor leased on with a subsidiary of the company. It's no secret the truck transportation industry has been under attack of late by an incredibly aggressive plaintiffs bar emboldened by the prospect of nuclear verdicts in the Montgomery decision. We're proud of our DOT accident frequency.

We are encouraged by the favorable safety trend over the past five years, and we will continue to work diligently on reducing the frequency of incidents. However, the inflationary pressure on claims severity or cost per crash affecting the transportation industry is something the company and the trucking sector are focused on mitigating to the extent possible. 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 for refreshing our fleet of trailing equipment with a particular focus on investing in new van equipment. We are very encouraged by the pace of our AI initiatives and continue to expand our efforts across Landstar.

Agent AI workflows are now actively deployed in eight independent agent offices, and AI-powered corporate support capabilities have been deployed across our broader agent network. At the same time, we continue to build the technology and operating capabilities needed to scale AI safely and responsibly, with an emphasis on configuring these solutions to fit the unique needs of individual agent offices. While we remain early in our journey, we are excited about the progress we are making and the potential for AI to improve productivity, enhance service, and create additional capacity for growth across our entrepreneurial network. Even with those investments, our balance sheet continues to be 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 39 weeks of 2026, the company returned approximately $175 million to shareholders through dividends and share repurchases. Yesterday afternoon, our board declared a regular dividend of $0.44 per share, payable on December 8th to stockholders of record as of the close of business on November 17th. Turning to slide seven and looking at our network, the scale, systems, and support inherent in the Landstar model helped to drive the operating results, excluding insurance and claims costs, generated during the 2026 third quarter. JT will get into the details on revenue, loadings, and rate per load in a few minutes. Safety is crucial 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, security, and service at Landstar. I am proud to report an accident frequency rate of 0.57 DOT reportable accidents per million miles during the first 39 weeks of 2026, well below the last available national average DOT reportable frequency rate released by the FMCSA for 2021 and lower than the 0.60 DOT accident frequency we reported during the comparable period of 2025. The company's 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. We remain committed to driving best in class safety.

I'd also like to take a moment to recognize Landstar's 457 million-dollar agents based on 2025 fiscal year results, a number we would expect to increase in 2026. Importantly, retention within the million-dollar agent network continues to be extremely high. Turning to slide 8. On a year-over-year basis, BCO truck count increased by 91 or 1% compared to the end of the 2025 third quarter and increased nearly 2% sequentially. As noted above, our net 165 truck count additions during the third quarter was the strongest quarterly improvement since the third quarter of 2021. We were also pleased to see our trailing 12-month BCO truck turnover rate drop from 31.4% as of the fiscal year in 2025 to 26.6% at the end of the 2026 third quarter. This is a positive trend that we hope will continue into the fourth quarter.

Along that line, through the first four weeks of the 2026 fourth fiscal quarter, the number of trucks provided by BCO independent contractors increased by 22 compared to the end of the 2026 third quarter. I'll now pass the call back to JT to walk you through the 2026 third quarter financials in more detail.