Landstar System, Inc. Q4 FY2025 earnings call

• Reflected on first 2 years leading the organization, highlighting accomplishments like creating key priorities, growth in heavy haul and cross-border business, and building a new leadership team.
• Discussed AI strategy, with 50% of 2026 IT CapEx budget dedicated to AI enablement, and initiatives like contact center, ERP deployment, and AI-enhanced tools for pricing, BCO retention, etc.
• Safety performance was strong, with an accident frequency rate of 0.59 DOT reportable accidents per million miles in 2025, below national average and company's trailing 5-year average.
• Reduced time to become a Landstar BCO and planned to implement a redesigned onboarding and training program.
• Continued strong capital returns to shareholders, with $261 million in share repurchases and $245 million in cash dividends over 2 years.

Truck transportation revenue in the fourth quarter was nearly flat year-over-year. The unsided platform equipment business posted an 11% year-over-year revenue increase, driven by heavy haul service. Heavy haul revenue in the 2025 fourth quarter was $170 million, a 23% increase over the 2024 fourth quarter, with a 16% increase in revenue per load and 7% increase in volume. Non-truck transportation service revenue in the 2025 fourth quarter was $30 million below the 2024 fourth quarter, a 28% decrease.

• First quarter revenue commentary provided, noting truck revenue per load in January modestly outperformed normal seasonality, while truck volumes trended essentially in line. Estimated sequential revenue change in first quarter could be down low single digits vs Q4 2025 if February and March outperform normal seasonality.
• Variable contribution margin typically expands 40-60 basis points from Q4 to Q1, but winter storm activity in January could impact BCO utilization, affecting VCM performance.
• Expect to grow the fleet in 2026 with help from rate improvement, AI initiatives, and BCO onboarding efforts.

• Insurance and claim costs were highly elevated in Q4 2025, including charges related to accidents, court judgments, and increased claim reserves.
• Geopolitical impact on cross-border business and volatile federal trade policy creating supply chain uncertainty.
• Economic uncertainties and inflation concerns impacting truckload freight demand.

Q: Maybe sticking on that last comment, in terms of maybe a sequential decline in utilization for your BCOs, where are you standing right now with the big storm that just swept through the country?

A: Yes, that's a good question. We had folks with equipment challenges and some customers not open. Storm impact to fourth week of fiscal January and first week of fiscal February was 5,000-6,000 knockdown impacted dispatch loads, but hope to recover as weather clears.

Q: On the AI stuff, obviously, 1 of your competitors out there, Robinson has been talking a lot about AI and really showing some results to the bottom line. Where are you guys in AI helping you get more bids out there in the marketplace in general?

A: AI for us is different due to business mix and model. We focus on enabling agent offices to work smarter/faster, giving agents info for pricing, and investing in AI for complex freight segments like permitting and routing. Our model is about giving agents confidence to price quickly and support capacity.