Landstar System, Inc. Q1 FY2026 earnings call

• Frank Lonegro thanked BCOs, agents, and employees, mentioned positive interactions at events and collaboration with FMCSA. - Discussed incorporating AI into business, with pilots live in production or advanced testing, yielding time savings and improved visibility. - Monitored geopolitical and macroeconomic factors, including Middle East conflict, tariffs, etc. - Landstar business model performed well with various financial metrics up. - Safety performance was strong with an accident frequency rate of 0.64 DOT reportable accidents per million miles in the 2026 first quarter. - Network scale, systems, and support helped drive operating results. - Talked about BCO truck count and turnover rate trends.

Overall revenue increased approximately 2% compared to the 2025 first quarter. Gross profit increased approximately 14%, variable contribution dollars increased approximately 7%, and basic and diluted earnings per share increased approximately 36%. The unsighted platform equipment business had an 8% year-over-year revenue increase, with heavy haul service offering contributing $134 million in revenue, an 18% increase over the 2025 first quarter. Non-truck transportation service revenue in the 2026 first quarter was 19% or $16 million below the 2025 first quarter, mostly due to a 31% decrease in ocean volume. Transportation logistics segment revenue was up 2% year-over-year on a 4% increase in revenue per load, partially offset by a 3% decrease in volume. Within top commodity categories, consumer durables revenue increased 1% year-over-year on a 7% increase in revenue per load, partially offset by a 5% decrease in volume. Aggregate revenue across top five commodity categories increased approximately 4% compared to the 2025 first quarter. Insurance and claim cost expense decreased in the 2026 first quarter compared to the 2025 first quarter, primarily due to efforts to address strategic cargo theft, resulting in a decrease in the frequency and severity of cargo claim incidents.

The company will be providing second quarter financial and operational commentary rather than formal guidance. Historically, pre-pandemic patterns would normally be expected to yield sequential increases of 7% in the number of loads hauled via truck and 2% in truck revenue per load, resulting in a top line that typically increases by a mid-single digit to a high single-digit percentage. Anticipated truck revenue per load in April is outperforming normal seasonality, while anticipated April truck volumes are trending essentially in line with normal seasonality. Historically, the company has often experienced a 25 to 45 basis point compression in variable contribution margin from the first quarter to the second quarter, primarily driven by mix.

Statements made during the call are subject to uncertainties and risks, including but not limited to operational, financial, and legal risks detailed in Landstar's Form 10-K for the 2025 fiscal year and other SEC filings. Geopolitical conflict in the Middle East and related volatility in energy and diesel prices, tariff and trade policy impacts, potential effects of Supreme Court decisions on the business model, and risks associated with the adoption and scalability of AI initiatives are among the risks.

Q: Good afternoon. Frank or Jim? Heavy haul obviously doing really well and also in the backdrop of a narrative about, you know, unsighted platform or flatbed being incredibly strong. But your 1Q volumes are down, you know, 2% year over year, 2% sequentially. Clearly made up some of that in the rep reload. So can you just help us understand, is that market as strong as it's being portrayed? And if it continues to, say, strengthen or build momentum from here, does that start to show up in the loads as well as in the rep per load, or is it mostly going to be represented in the price side?

A: Hey, John. So, clearly, if we see an incremental uptick in demand, you're going to see it on the volume side. I think everything right now is being supply-induced. on the capacity side and getting us higher rates, we do think we've got a competitive advantage in heavy oil and honestly in the platform side. So when you see those ISM numbers and some of the IDP numbers in the kind of low single digits, we're pretty optimistic about how that's going to play through volumes and rate for us going forward into the rest of the year. Maybe either Jim Todd or Jim Applegate can comment on that. Yeah, John, no, good question. From the heavy haul side, which did experience year-over-year volume growth, John, I would tell you it continues to be very, very strong broad-based strength. We had 17 individual heavy haul customers grow volumes with us by at least 50 loads year-over-year in the 91-day first quarter. And those customers came from wide degrees of industries of data center, customers, energy, government, machinery, aerospace, and defense. I think some of the softness, to your point, year over year, if you look at some of the commodity categories we called out, building products, automotive, that kind of stuff on the standard flatbed, standard step, has been a little weaker. One thing I do want to call out, John, from a pricing standpoint on the unsighted platform, it's really been a heavy haul mix story, and that continued in the first quarter for But standard platform step deck pricing year-over-year in the fourth quarter was only up 50 basis points. That accelerated to 730 basis points year-over-year, so a meaningful lift in yields on the standard flats and standard steps from a pricing standpoint. Jim Applegate, you might just want to talk about the designation of Heavy Hall as a strategic initiative and the things you guys are doing along with Rob Simon in that particular area. Yeah, this is one of our areas that we really identified as far as Landstar goes where we do the hard stuff well. This is definitely one of those areas that we can lean in, and we've invested quite a bit not only into leadership. We actually brought in almost a couple of years now a new Heavy Hall leader that's really kind of put his arms around that department, brought in some talent, and laid out a strategy that's agent engagement, recruiting BCOs into the model, making sure that we have the right equipment to go ahead and handle those agent opportunities, investing in technology, you name it. We've got initiatives in place to make sure that our agents can be successful. Paired on top of that, we have a dedicated sales and marketing effort where we're really leaning into those markets with messaging, and some sales support for our agents to help them grow in those different industries. And I think what's really nice about what JT laid out is the growth is broad-based. It's also a mix of new and existing customers. So we're seeing a lot of new customers come into the fold across the different industries that are seeing success right now. And we're seeing industries, even outside of the data centers, you're starting to see oil and gas and some of the other industries that have been historically depressed, starting to come back a little bit. So we see this as an area for continued growth, and we've been strengthening up that area over the last couple of years and expect it to continue to be strong for LionStar. Great. Very helpful. Thanks for all the color team. Thanks. Thank you.

Q: Afternoon. So you're rev per load tends to lag industry spot rates by, you know, matter of months, quarter, whatever. Um, you know, we're seeing it play out. Um, do you think, is it realistic to think that, you know, we see a meaningful further acceleration from the, that 13% in April as the rest of the quarter plays out? And if that's what's happening, how should we think about margin or, um, Yeah, margin in a quarter like that.

A: Yeah, so fair questions, Scott, as always. Thanks. So I'll let JT walk you through the sequential pricing through the quarter. I think the month-over-month trends are important to understand, and he's got that detail for you. I think if we look forward, assuming that capacity continues to exit and or we see demand increase, you know, in a spring unlock like we do in many years. If those two things happen, then, you know, the obvious impact on rates broadly is going to be favorable. You know, I think when you see what JT is going to tell you in terms of January to February, February to March, and honestly March into April, I mean, clearly we're going to have some level of lag, and we're seeing that come through the numbers. Well said, Frank. And Scott, we are seeing above-seasonal pricing strength here into April, both on the BCO side and the brokerage side. I would point out from a comp standpoint, last year's second quarter, we got a 320 basis point lift in pricing, and we typically get about 10%. 200 basis points. So the comps do step up a little bit as we get into May and get into June. Certainly from a margin standpoint, I mean, we just printed the first variable contribution dollar increase since I think the third quarter of 2022. And if you do some back of the envelope on adjusting 2025 for the international fraud matter, I think the incremental pusher numbers were well above 70%. So that's where we'll be judging ourselves. And obviously when that comes through as rate, it's It's easy to drop it all the way down. Absolutely right. Yeah, and the final point there, Scott, the BCO utilization numbers, we've talked about it the last three quarters, strong third quarter 25, accelerated into fourth quarter 25, accelerated further first quarter 26. So we'll look for that trend to continue. Certainly that has a big impact on the number of BCO loads that capture that rate increase in the second quarter. Okay, helpful. And then on the volume side, you know, it's interesting. You got BCO volume up seven and brokerage volume down nine. What do you think is driving such a big sort of mixed difference? Are the agents or maybe the underlying customer, are they saying we don't want to go through brokerage anymore? And maybe tie this into how you think about like the outcome of this Supreme Court case, if you think this could exacerbate some of this trend between BCO and brokerage?

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