LSTR

Market Environment

• Freight demand in Q2 2026 was solid on a seasonal basis, with truck load volume slightly outpacing normal seasonal patterns for the first time in a Q2 since 2021, aligning with ISM index readings above 50 for all six months of 2026.
• Truck capacity tightened significantly during the quarter, with a 129 basis point sequential compression in brokerage net revenue margin. Market conditions, which favored shippers since late 2022, are shifting rapidly to favor transportation providers.

Safety Performance

• H1 2026 accident frequency rate was 0.62 DOT reportable accidents per million miles, below the 2021 FMCSA national average and lower than the 0.67 rate reported in H1 2025. Strong safety performance is a key competitive differentiator for the business.

Network Growth and Agent Expansion

• Landstar added a large new Midwest-based $18 million annualized freight broker to its independent agent network, one of the largest new agent signings in 15 years. Inbound interest from potential new agents has accelerated since the May 2026 Montgomery Supreme Court decision, particularly from small and medium-sized brokers concerned about existential litigation risk.
• Retention within the million-dollar agent network remains extremely high, with 457 million-dollar agents based on 2025 results, a number expected to increase in 2026.

Capital Allocation and Balance Sheet

• The balance sheet remains very strong. In H1 2026, the company returned $120 million to shareholders via dividends and share repurchases. The board declared a 10% increased quarterly dividend of 44 cents per share, payable September 9.
• The company continues to opportunistically execute its existing share buyback program for long-term shareholder benefit.

Strategic Investments

• The company is investing in leading technology and AI solutions to benefit its network of independent business owners, and has allocated significant 2026 capital to refresh its trailing equipment fleet, with a focus on new van equipment.
• Executive leadership changes: Bill Clement joins as new Vice President and Chief Commercial Officer effective August 1, and Jim Applegate moves to the newly created role of Chief Strategy and Transformation Officer to drive innovation and strategic growth.

• Management is providing only informal third quarter operational commentary rather than formal full guidance, due to the highly fluid freight environment, evolving macro/geopolitical conditions, and volatile litigation/claims landscape.
• Pre-pandemic historical seasonality expects a ~1.5% sequential increase in truck revenue per load from Q2 to Q3, and a ~1.5% sequential decrease in truck load volume, resulting in a relatively flat sequential top line, with historically minimal variance in variable contribution margin between the two quarters.
• Early Q3 2026 (July 2026) results: total truck loads were ~5% above July 2025, and revenue per load was ~26% above July 2025, outperforming normal seasonal trends for both metrics. Year-over-year load growth was 1.5% to 3.5% in the last three weeks of July, after a strong first week boosted by 4th of July holiday timing.
• Demand has been near 15-year historical averages since March 2026, and July 2026 load volume was 60 basis points above typical seasonal trends. Pricing has significantly outperformed normal seasonal trends throughout Q2 2026, and remained ~150 basis points above normal trends in July 2026.

Overall: Total revenue increased 18% year-over-year (YoY) to $1.44 billion (calculated from 9.2% gross profit margin on $132.3 million gross profit). Gross profit was $132.3 million vs. $109.3 million YoY, with a gross profit margin of 9.2% vs. 9% YoY. Variable contribution was $199.4 million vs. $170.5 million YoY, with a variable contribution margin of 13.9% vs. 14.1% YoY.

Truck Transportation: Truck revenue per load increased 17% YoY and 14.4% sequentially from Q1 2026 (the largest sequential increase in 15 years). Revenue per load for unsighted platform equipment rose 19.9% YoY, and 15.8% YoY for van equipment. BCO revenue per mile (excluding fuel surcharges) was 10% above YoY for unsighted platform, and 11% above YoY for van equipment. Load volume hauled by truck increased nearly 2% YoY, and outperformed pre-pandemic seasonal trends. Net BCO truck count increased 80 basis points sequentially, with 68 net truck additions (the strongest quarterly improvement since Q1 2022); trailing 12-month BCO turnover fell to 28.3% from 31.4% at end-2025.

Heavy Haul: Heavy haul generated $164 million in Q2 2026 revenue, an 18% increase YoY. Load volume rose 9% YoY, and revenue per load increased 8% YoY. Heavy haul contributes ~11.4% of total company revenue.

Non-Truck Transportation: Non-truck transportation revenue increased 6% ($5 million) YoY, driven by a 50% increase in air revenue per load and 16% higher intermodal pricing.

By Commodity: Transportation logistics total revenue increased 18% YoY, on a 16% increase in revenue per load and 2% increase in volume. The top five commodity categories collectively account for ~69% of total transportation revenue, with aggregate revenue up ~20% YoY: consumer durables (largest category) +24% YoY, machinery +2% volume YoY, automotive equipment/parts -1% volume YoY, building products +8% volume YoY, electrical +31% volume YoY. The business is highly diversified: over 20,000 total customers, no customer contributed more than 8% of revenue in H1 2026.

• Post-Montgomery Supreme Court ruling, half of U.S. states that previously recognized the F4A framework allowing early dismissal of broker liability cases now require full litigation, leading to higher legal costs and increased risk of large verdicts. Plaintiffs' bar has become emboldened to pursue more broker liability claims, and the impact of this new legal landscape will take 2-5 years to play out through appellate courts.
• Insurance and claims costs are rising industry-wide due to increasing claim severity: Q2 2026 insurance and claims costs were $39.4 million vs. $30.4 million YoY, including a $10.5 million net unfavorable adjustment to prior year claims estimates (three of the five driving claims were brokerage-related). Insurance costs as a percentage of BCO revenue rose to 7% in Q2 2026 vs. 6.6% YoY.
• Small and medium-sized brokers face increased existential risk from higher litigation costs and potential large verdicts in the post-Montgomery environment, though this creates growth opportunities for Landstar.
• Negative free cash flow occurred in Q2 2026, driven by sharp sequential revenue growth (only the third negative free cash flow quarter in the past decade, aligned with prior strong recovery periods).
• Freight demand and pricing momentum remain dependent on broader macroeconomic conditions, and geopolitical uncertainty creates forward-looking visibility challenges.

Q: What are the impacts of the Montgomery ruling on insurance costs and broker risk, and how does the ruling affect your ability to gain share from smaller brokers?

A: Landstar renewed its insurance tower effective June 1, 2026 (post-Montgomery) with favorable terms: auto liability pricing was flat, and broker liability rose only 3%. Management notes that scale and strong safety performance put Landstar at a competitive advantage. Small and medium-sized brokers face heightened existential risk from increased litigation costs, leading to a growing pipeline of larger potential new agent recruits (beyond Landstar's historical sub-$5 million new agent range), with the recent $18 million Midwest broker signing as an example. Landstar has reduced its approved third-party carrier count from 100,000 in Q2 2022 to 64,000 at end-Q2 2026 to improve vetting and reduce fraud and safety risk.

Q: Will BCO truck count accelerate meaningfully in the back half of 2026 following improving rate trends?

A: BCO net count improved 68 trucks in Q2 2026, the best quarterly result since Q1 2022, and net count rose 49 trucks in the first four weeks of July. Turnover has fallen for 10 consecutive quarters to 28.3%, below Landstar's long-term average, with gross cancellations down 13.6% sequentially. Gross additions are up 4.2% sequentially, and improving cancellation trends typically precede accelerating additions, matching historical patterns of strong net growth during upcycles. Management expects the positive trend to continue in the back half.

Q: Is heavy haul strength driven by AI/data center infrastructure, and are you seeing a slowdown in this end market?

A: Heavy haul growth is broad-based, not limited to data centers, but management continues to see strong, sustained demand from the entire data center ecosystem (including energy, cooling, and construction components), with no observed pullback in demand over the past 3-4 months. 22 customers in heavy haul end markets grew their volumes by at least 50 loads in Q2, including aerospace, defense, and power/energy in addition to data center infrastructure. The heavy haul pipeline remains strong through the end of 2026 and into 2027.

Q: Why are brokerage volumes negative year-over-year, and how will BCO mix impact variable contribution margin going forward?

A: BCO utilization is at an all-time high (101.9 annualized loads per BCO in Q2 2026, 5 loads above the prior record), so as BCOs haul more loads amid improving rates, there is less freight left to route to third-party brokerage carriers. Elevated supply chain fraud has also reduced customer preference for third-party brokerage. BCO revenue as a share of total dipped sequentially in Q2, a normal seasonal pattern, and variable contribution margin compression reflects tightening capacity pushing up carrier rates more than mix shifts.