Landstar System, Inc. Q2 FY2025 earnings call

• Frank thanked BCOs, agents, and employees, and highlighted safety accomplishments at the All-Star event and the 51st Truck Giveaway. - Truck revenue per load was 2.6% above the 2024 second quarter, partially offset by a 1.5% decrease in the number of loads hauled via truck. - Balance sheet was strong, with $103 million deployed towards buybacks in the first 6 months of 2025. - Safety performance: accident frequency rate of 0.67 DOT reportable accidents per million miles in the 2025 first half, below the national average. - Invested in technology solutions and refreshed fleet of trailing equipment, specifically unsided platform equipment. - Jim Todd discussed revenue per load trends by equipment type, seasonal trends, and heavy haul performance, as well as non-truck transportation revenue decline and commodity volume changes.

Overall, truck revenue was up year-over-year for the first time since the third quarter of 2022. Heavy haul revenue in the 2025 second quarter was approximately $138 million, a 9% increase over the 2024 second quarter, driven by a 5% increase in heavy haul revenue per load and a 4% increase in heavy hauled volume. Non-truck transportation service revenue in the 2025 second quarter was 22% or $21 million below the 2024 second quarter, primarily due to decreases in ocean revenue per shipment, ocean volume, and intermodal revenue per load. The Transportation & Logistics segment revenue was down 1% year-over-year on a 2% decrease in loadings partially offset by a 1% increase in revenue per load compared with the 2024 second quarter. Within consumer durables, revenue decreased 3% year-over-year on a 5% decrease in volume, partially offset by a 2% increase in revenue per load. Aggregate revenue across the top 5 commodity categories, making up about 69% of transportation revenue, declined approximately 3% compared to the 2024 second quarter.

The company will provide third quarter revenue commentary instead of formal guidance. July truck volumes were approximately 1% above July 2024 on a dispatch basis, while revenue per load in July was approximately 3% below July 2024. SG&A costs are expected to decline by approximately $3 million sequentially due to cycling the impact of the 2025 agent convention, partially offset by a $1.5 million headwind from the BCO All-Star celebration in fiscal July. Landstar Ranger trial could result in a substantial verdict against Landstar during the 2025 third quarter.

Insurance and claims costs increased due to more severe trucking accidents, increased severity on cargo claims, and net unfavorable development of prior year claim estimates. Regulatory changes such as ELP enforcement and non-domiciled CDL reviews could impact truck capacity. The trial involving Landstar Ranger could result in a substantial financial verdict against the company.

Q: Clarification on SG&A reclassification and 3Q outlook A: The $55.7 million SG&A in 2Q included a P&L reclass, and $3 million convention impact should be considered.

Q: Unsided platform revenue per load sequential increase A: Sequential monthly improvements, with a 8% increase from May to June driven by heavy specialized loads.

Q: End market color for back half A: Automotive is sluggish, while data centers, wind, and heavy haul are positive; cross-border business is impacted by political/trade uncertainty.

Q: 3Q variable contribution margin outlook A: Rate softness could be a tailwind, but BCO utilization headwinds may be present.

Q: BCO count and retention A: Actions taken to be more selective with carriers, BCO count was flat sequentially, and gross adds were up.

Q: Heavy haul headwinds A: Mostly domestic, monitoring impact of the big bill on wind energy.

Q: ELP and capacity A: Limited exposure to ELP enforcement, but FMCSA enforcement review ongoing.

Q: Insurance costs and claims A: Severity of accidents and cargo claims increased, with renewal trends to watch.