Landstar System Q2 2025 Earnings Report

Landstar System EPS Results

• Actual EPS: $1.20
• Consensus EPS: $1.16
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: $1.48

Landstar System Revenue Results

• Actual Revenue: $1.21 billion
• Expected Revenue: $1.21 billion
• Beat/Miss: Beat by +$4.78 million
• YoY Revenue Growth: -1.10%

Landstar System Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 4:30PM ET

Landstar System (NASDAQ:LSTR) is a transportation services company that provides integrated logistics solutions primarily through an asset-light network of independent freight agents and third-party capacity providers. The company’s operations connect shippers with transportation services without relying primarily on a company-owned fleet of trucks.

Landstar arranges a broad range of freight transportation, including truckload, less-than-truckload, expedited, heavy-haul and specialized shipments. Its services also include intermodal transportation, air and ocean freight, warehousing, and other logistics solutions. The company serves industries with general freight as well as oversized, time-sensitive, or otherwise specialized transportation needs.

Founded in 1968 and headquartered in Jacksonville, Florida, Landstar serves customers across the United States, Canada and Mexico, as well as selected international markets through its global logistics operations. Its network includes independent owner-operators, leased capacity providers and business capacity owners, supported by Landstar’s transportation management, safety, insurance and technology systems.

Landstar System Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2, truck revenue per load rose 2.6% year-over-year despite a 1% revenue decline, delivering the best sequential net BCO truck performance in 12 quarters.
• Positive Sentiment: Heavy haul revenue jumped 9% year-over-year in Q2, driven by a 5% increase in load count and 4% higher revenue per load.
• Positive Sentiment: The company ended Q2 with $426 million in cash and short-term investments, deployed $103 million to share repurchases and repaid dividends of $97 million in H1 2025.
• Negative Sentiment: Insurance and claims costs rose to 6.6% of BCO revenue in Q2 amid higher accident severity and cargo theft trends, and a pending third-quarter trial could result in a substantial verdict.
• Neutral Sentiment: BCO truck count was essentially flat sequentially in Q2 with turnover improving to 31.9%, reflecting stabilization after prior declines.

Presentation

[Operator]

Good afternoon and welcome to Landstar System, Inc. 2nd Quarter Earnings Release Conference Call. All lines will be in a listen-only mode until the formal question and answer session. Today's call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Frank Lonegro, President and CEO; Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Freight Officer; Jim Todd, Vice President and CFO; Matt Dannegger, Vice President and Chief Field Sales Officer; and Matt Miller, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. Jim Todd. Sir, you may begin.

[Jim Todd, VP and CFO at Landstar System]

Thank you, Bill. Good afternoon and welcome to Landstar's 2025 Second Quarter Earnings Conference Call. Before we begin, let me read the following statement. The following is a safe harbor statement under 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 information is 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 2024 fiscal year described in the section Risk Factors, Landstar's Form 10-Q for the 2025 first quarter, and our other SEC filings from time to time.

[Jim Todd, VP and CFO at Landstar System]

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 information, and Landstar undertakes no obligation to publicly update or revise any forward-looking information. I'll now pass it to Landstar CEO Frank Lonegro for his opening remarks.

[Frank Lonegro, President and CEO at Landstar System]

Thanks JT and good afternoon everyone. I'd like to thank our BCOs and agents and all of the Landstar employees who support them every day. It was great to spend time with our BCO Million Milers and Road Stars at our annual All-Star Event in Savannah, Georgia recently and to celebrate their incredible safety accomplishments. It was my honor to preside over Landstar's 51st truck giveaway awarding newly inducted Million Mile Safe driver George Eason from Owensboro, Kentucky with a new 2026 Freightliner Cascadia. The capability, resiliency, and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry. Their adaptability and dedication to safety, security, and service for our customers is truly impressive. They are exceptional business leaders and key to driving the continued success of Landstar's business model.

[Frank Lonegro, President and CEO at Landstar System]

Amidst ongoing challenges in the freight environment, compounded by volatile federal trade policy and lingering inflation concerns, the 2025 second quarter included several important positive developments for Landstar. While overall revenue was down 1% year over year, truck revenue was up year over year for the first time since the third quarter of 2022. As noted in our earnings release, our second quarter revenue per truckload outperformed pre-pandemic typical seasonality and the number of trucks provided by BCOs and was approximately equal to the 2025 first quarter, representing the best sequential net BCO truck performance in 12 quarters. Notwithstanding the political and macro-economic uncertainty thus far in 2025, our focus continues to be on accelerating our business model and executing on our strategic growth initiatives. In one continued major bright spot, I am extremely pleased with the performance of Landstar's heavy haul service offering.

[Frank Lonegro, President and CEO at Landstar System]

We generated approximately $138 million of heavy haul revenue during the 2025 second quarter, or a 9% increase over the 2024 second quarter. This achievement was driven by a 5% increase in heavy haul revenue per load and a 4% increase in heavy haul volume. Turning more broadly to our core truckload service offering, the foundational work we continue to invest in puts us in a great position to leverage the freight environment when it eventually turns our way. We are also 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 fivr, the freight environment in the 2025 second quarter was characterized by relatively soft demand from a seasonal perspective.

[Frank Lonegro, President and CEO at Landstar System]

Admittedly, comping off a seasonally strong first quarter, the impact of accumulated inflation remains a drag on the amount of truckload freight generated in relation to consumer spending. Truck capacity continued to be readily available, with small pockets of supply-demand equilibrium, and market conditions continue to favor the shipper amidst choppy conditions in the industrial economy, as evidenced by an ISM index below 50 for the entire 2025 second quarter. I would note, however, that the combination of sequential truck revenue per load improvement, coupled with the sequential compression of our brokerage net revenue margins, would indicate a market that we believe is working its way back toward being balanced.

[Frank Lonegro, President and CEO at Landstar System]

Considering that backdrop, Landstar's revenue performance was admirable in the 2025 second quarter, with truck revenue per load 2.6% above the 2024 second quarter, partially offset by a 1.5% decrease in the number of loads hauled via truck over the same period. Our balance sheet continues to be very 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 release, during the first six months of 2025, we deployed approximately $103 million of capital towards buyback and repurchased approximately 686,000 shares of common stock. We continue to invest through the cycle in leading technology solutions for the business benefit of our network of independent business owners and have allocated a significant amount of capital this year towards refreshing our fleet of trailing equipment, specifically on unsighted platform equipment.

[Frank Lonegro, President and CEO at Landstar System]

Turning to slide six and looking at our network, the scale, systems, and support inherent in the Landstar model help to drive the operating results generated during the 2025 second quarter. JT will get into the details on revenue, loadings, and rate per load in a few moments. As noted during previous earnings calls, Landstar's safety culture is a crucial component of 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 at Landstar. I'm proud to report an accident frequency rate of 0.67 DOT reportable accidents per million miles during the 2025 first half, well below the last available national average released from the FMCSA for 2021.

[Frank Lonegro, President and CEO at Landstar System]

We continue to be committed to driving down that number closer to the company's trailing five-year average of 0.61 or lower. This 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. I'd also like to take a moment to recognize Landstar's nearly $500 million agents based on our 2024 fiscal year results. Importantly, retention within the million dollar agent network continues to be extremely high. Turning to slide seven on the capacity side. On a year-over-year basis, BCO truck count decreased approximately 6% compared to the end of the 2024 second quarter.

[Frank Lonegro, President and CEO at Landstar System]

On a sequential basis, BCO truck count was essentially flat, decreasing only 9 trucks in the second quarter from the first quarter, representing the best net truck count performance in 12 quarters. It is typical to incur turnover in BCO truck count in a low rate per load environment. BCO turnover continues to be influenced by a persistent low rate per load environment combined with the significant increase in the cost to maintain and operate a truck today compared to before the pandemic. Directionally, we are pleased to see our trailing 12-month truck turnover rate drop from 34.5% as of fiscal year-end 2024 to 31.9% at the end of the 2025 second quarter.

[Frank Lonegro, President and CEO at Landstar System]

Through the first four weeks of our 2025 third quarter, the number of trucks provided by BCO independent contractors has declined by 23 or approximately 1/4 of 1% sequentially, directionally consistent with the trend in truck revenue per load experienced during fiscal July. I will now pass the call back to JT to walk you through the 2025 second quarter financials in more detail.

[Jim Todd, VP and CFO at Landstar System]

Thanks Frank. Turning to slide nine, as Frank mentioned earlier, overall truck revenue per load increased 2.6% in the 2025 second quarter compared to the 2024 second quarter, primarily attributable to a 3.2% increase in revenue per load on loads hauled by unsighted platform equipment and by a 1.2% increase in revenue per load on loads hauled via van equipment. On a sequential basis, truck revenue per load increased 3.2% in the 2025 second quarter versus the 2025 first quarter, stronger than the typical pre-pandemic normal seasonality increase of approximately 2%. In comparison to overall truck revenue per load, we consider revenue per mile on loads hauled by BCO trucks a pure reflection of market pricing as it excludes fuel surcharges billed to customers that are paid 100% to the BCO.

[Jim Todd, VP and CFO at Landstar System]

In the 2025 second quarter, revenue per mile on unsighted platform equipment hauled by BCOs was 14% above the 2024 second quarter, and revenue per mile on van equipment hauled by BCOs was 3% above the 2024 second quarter. Delving deeper into seasonal trends, revenue per mile on loads hauled by BCOs on unsighted platform equipment declined 1% from March to April, was approximately flat April to May, and increased 8% from May to June. The March to April decline and the April to May approximately flat performance both underperformed pre-pandemic seasonal trends, while the May to June increase outperformed pre-pandemic historical trends. With respect to loads hauled by BCOs on van equipment, revenue per mile was more stable, grinding slightly higher as we move through the second quarter.

[Jim Todd, VP and CFO at Landstar System]

Revenue per mile on van equipment hauled by BCOs was approximately flat from March to April, outperforming these trends, increased 1% from April to May, outperforming these trends, and increased another 1% from May to June, underperforming pre-pandemic May to June historical trends. It should be noted that month-to-month seasonal trends on unsighted platform equipment are generally more volatile compared to that of van equipment. This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volume. As Frank alluded to, we've been pleased with the recent performance in our heavy haul service offering. Heavy haul revenue was up an impressive 9% year over year in the second quarter, significantly outperforming core truckload revenue. Heavy haul loadings were up approximately 4% year over year and revenue per heavy haul load increased 5% year over year.

[Jim Todd, VP and CFO at Landstar System]

This represented a mixed tailwind to our unsighted platform revenue per load as heavy haul revenue as a percentage of the category increased from approximately 33% during the 2024 second quarter to approximately 35% in the 2025 second quarter. Non-truck transportation service revenue in the 2025 second quarter was 22% or $21 million below the 2024 second quarter. The decrease in non-truck transportation revenue was mostly due to a 20% decrease in ocean revenue per shipment, a 14% decrease in ocean volume, and a 9% decrease in intermodal revenue per load. Turning to slide 10, we've provided revenue share by commodity and year-over-year change in revenue by commodity. 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 to the 2024 second quarter.

[Jim Todd, VP and CFO at Landstar System]

It should be noted that our U.S.-Mexico and U.S.-Canada cross-border businesses both underperformed our domestic revenue performance during the 2025 second quarter. Within our largest commodity category, 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 our top five commodity categories, which collectively make up about 69% of our transportation revenue, declined approximately 3% compared to the 2024 second quarter. While slide 10 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top five commodity categories. From the 2024 second quarter to the 2025 second quarter, total loadings in machinery increased 4%, automotive equipment and parts decreased 16%, building products decreased 6%, and hazmat decreased 7%.

[Jim Todd, VP and CFO at Landstar System]

Additionally, substitute line haul loadings, one of the strongest performers for us during the pandemic and one which varies significantly based on consumer demand, increased 24% from the 2024 second quarter. As we've mentioned many times before, Landstar is a truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those other freight transportation providers reach out to Landstar and provide truck capacity more often than during times of more readily available truck capacity. The amount of freight hauled by Landstar on behalf of other truck transportation companies is reflected in almost all of our commodity groupings, including our substitute line haul service offering. Overall revenue hauled on behalf of other truck transportation companies in the 2025 second quarter was 19% below the 2024 second quarter, a clear indicator that capacity is readily accessible in the marketplace.

[Jim Todd, VP and CFO at Landstar System]

Revenue hauled on behalf of other truck transportation companies was 11% and 13% of transportation revenue in the 2025 and 2024 second quarters, respectively. Even with ups and downs in various customer categories, our business remains highly diversified with over 23,000 customers, none of which contributed over 8% of our revenue in the 2025 first half. Turning to slide 11, in the 2025 second quarter, gross profit was $109.3 million compared to gross profit of $120 million in the 2024 second quarter. Gross profit margin was 9% of revenue in the 2025 second quarter compared to gross profit margin of 9.8% in the corresponding period of 2024. In the 2025 second quarter, variable contribution was $170.5 million compared to $175.1 million in the 2024 second quarter. Variable contribution margin was 14.1% of revenue in the 2025 second quarter compared to 14.3% in the same period last year.

[Jim Todd, VP and CFO at Landstar System]

The decrease in variable contribution margin compared to the 2024 second quarter was primarily attributable to a decreased variable contribution margin on revenue generated by truck brokerage carriers as the rate paid to truck brokerage carriers was 46 basis points higher than the rate paid in the 2024 second quarter. Turn to slide 12. Operating income declined as a percentage of both gross profit and variable contribution primarily due to the impact of the company's fixed cost infrastructure, principally certain components of selling, general, and administrative costs in comparison to a smaller gross profit and variable contribution basis. Other operating costs were $19.6 million in the 2025 second quarter compared to $14.1 million in 2024.

[Jim Todd, VP and CFO at Landstar System]

This increase was primarily due to the reclassification of the $4.8 million supply chain fraud charge established during the 2025 first quarter from customer bad debt to contractor bad debt during the 2025 second quarter as a result of the finalization of certain financial responsibility related agreements with the affected independent commission sales agencies. Excluding the $4.8 million P&L reclassification. Other operating costs increased approximately $700,000 as compared to the 2024 second quarter, primarily attributable to increased trailing equipment maintenance costs, partially offset by increased gains on disposal of used trailing equipment. Insurance and claims costs were $30.4 million in the 2025 second quarter compared to $27.2 million in 2024. Total insurance and claims costs were 6.6% of BCO revenue in the 2025 second quarter as compared to 5.8% in the 2024 second quarter.

[Jim Todd, VP and CFO at Landstar System]

The increase in insurance and claims costs as compared to 2024 was primarily attributable to increased severity of trucking accidents during the 2025 period, increased severity on cargo claims, primarily due to strategic cargo theft, and increased net unfavorable development of prior year claim estimates, partially offset by decreased BCO miles traveled during the 2025 period and a decreased frequency of cargo claims during the 2025 period. During the 2025 and 2024 second quarters, insurance and claims costs included $2.3 million and $1 million of net unfavorable adjustment to prior year claim estimates, respectively. Selling, general and administrative costs were $55.7 million in the 2025 second quarter compared to $54.9 million in the 2024 second quarter. Excluding the favorable impact of the previously mentioned $4.8 million reclassification from selling, general and administrative costs, those costs increased approximately $5.6 million as compared to the 2024 second quarter.

[Jim Todd, VP and CFO at Landstar System]

The increase in selling, general and administrative costs was primarily attributable to an increased provision for incentive compensation, increased information technology cost, increased wages and employee benefit costs, and increased costs associated with our annual Agent convention. The provision for incentive compensation was approximately $1 million during the 2025 second quarter compared to a $1.4 million reversal of previously recorded incentive compensation costs during the 2024 second quarter. Depreciation and amortization was $12.1 million in the 2025 second quarter compared to $14.5 million in 2024. This decrease was primarily due to decreased depreciation on software applications. The effective income tax rate was 24.6% in the 2025 second quarter compared to an effective income tax rate of 24.5% in the 2024 second quarter. Turning to slide 13 and looking at our balance sheet, we ended the quarter with cash and short-term investments of $426 million.

[Jim Todd, VP and CFO at Landstar System]

Cash flow from operations for the 2025 first half was $63 million and cash capital expenditures were $4 million. The company continues to return significant amounts of capital back to stockholders with $97 million of dividends paid and approximately $102 million of share repurchases during the 2025 first half. The strength of our balance sheet is a testament to the cash generating capabilities of the Landstar model. Back to you, Frank.

[Frank Lonegro, President and CEO at Landstar System]

Thanks, JT. Given the highly fluid freight transportation backdrop and an uncertain political and macro-economic environment, as well as challenging industry trends with respect to insurance and claims costs, the company will be providing third quarter revenue commentary rather than formal guidance. Turning to slide 15, the number of loads hauled via truck in July was approximately 1% above July 2024 on a dispatch basis, while revenue per load in July was approximately 3% below July 2024 on a process basis. As a result, we view July's truck volumes as slightly better than normal seasonality, whereas July truck revenue per load was below normal seasonality. It should be noted that the launch point of the second quarter from a sequential pricing perspective was relatively high given the strong seasonal performance of 2025 second quarter truck revenue per load.

[Frank Lonegro, President and CEO at Landstar System]

Looking at historical seasonality from Q2 to Q3, pre-pandemic patterns would normally yield a slight decrease in the number of loads hauled via truck, almost entirely offset by a slight increase in truck revenue per load, yielding a relatively flat top line sequentially. As noted above, fiscal July truck volumes trended slightly above normal seasonality while fiscal July truck pricing trended slightly below. With respect to variable contribution margin, the company typically experiences a relatively flat variable contribution margin from the second quarter to the third quarter. Although we are not providing guidance, there are three points regarding the expense side in the 2025 third quarter that we want to bring to everyone's attention.

[Frank Lonegro, President and CEO at Landstar System]

First, assuming a normalized provision for customer bad debt and normalized employee benefit costs, we would assume SG&A costs would decline by approximately $3 million sequentially as we cycle the impact of the 2025 agent convention held during fiscal April 2. That approximately $3 million sequential tailwind to SG&A will be partially offset by the impact of our BCO All-Star Celebration in fiscal July, which we expect to result in a $1.5 million sequential headwind on the other operating costs line. Third, one of Landstar's operating companies, Landstar Ranger, is a defendant in a trial currently underway in El Paso, Texas involving a tragic accident between an RV occupied by a family and a small independent trucking company that at the time of the accident was hauling a load brokered to it by Landstar Ranger.

[Frank Lonegro, President and CEO at Landstar System]

The plaintiffs assert that with respect to the accident, Landstar Ranger acted as the responsible motor carrier and not a broker. Although it is hard to predict the potential outcome of this matter, the trial could result in a substantial verdict against Landstar during the 2025 third quarter. Landstar intends to preserve its rights to appeal any such verdict. Additional information regarding this matter is included in Landstar's second quarter 10-Q filed today with the SEC. With that bell, we'd like to open the line for questions.

[Operator]

Thank you very much, sir. At this time, we will begin the question and answer session. If you would like to ask a question, please press star one on your touchtone phone. Once again, that is star one to ask a question. To cancel your request, please press star two. We have the first question coming from the line Jonathan Chappell of Evercore ISI. Your line is now open.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Thank you. Good afternoon, Jim. Hate to start off with super minutia question, but here we go. You know, Frank gave us that SG&A outlook for 3Q. You had mentioned earlier the $4.8 million impact to the good guy in second quarter SG&A. So when we think about that $3 million minus the $1.5 million sequential decline, is that off the $55.7 million that was actually. Reported in 2Q, or is that the $55.7 million plus the $4.8 million and then make the seasonal adjustment?

[Jim Todd, VP and CFO at Landstar System]

Hey John, all good? Yes. The $55.7 million on an as reported basis was inclusive of a P&L reclass out of G&A into other operating costs. That favorably impacted the customer bad debt line in second quarter of 2025. I would tell you to put that back and then have the $3 million fall off from convention.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Great. Helpful. Another one maybe a bit in the weeds. The unsighted platform revenue per load really stepped up sequentially. You'd mentioned kind of the monthly cadence and then that big 8% move from May to June. How do we kind of put those two together? Did you just have a phenomenal June kind of exit rate that helped you both from a volume perspective and a pricing perspective at the same time? Is that the right kind of launch point as we think about seasonal trends in the 3Q?

[Jim Todd, VP and CFO at Landstar System]

No John, it's a great question. That comment was specific to BCO van rate per mile on unsighted platform. Our BCO as a percentage of that category is probably 30% or so. The folks that play in that space, the BCOs, they tend to skew more on the heavy specialized side. To your point, on a sequential basis our unsighted platform revenue per load stepped up about 7% sequentially. It was steady, John. It was a 320 basis point good guy March to April, 620 April to May, and 440 basis points May to June. It was impressive. Each month of the quarter, I would tell you van revenue per load as well wasn't as pronounced but +0.8%, +0.6%, and +1.1% April, May to June. We felt good about rates on both equipment types all the way through the quarter.

[Jonathan Chappell, Senior Managing Director at Evercore ISI]

Great. Thanks a lot, Jim.

[Jim Todd, VP and CFO at Landstar System]

For sure, John.

[Operator]

Thank you. We'll move on to the next person coming from the line of Daniel Imbro of Stephens. Your line is now open.

[Daniel Imbro, Research Analyst at Stephens]

Hey good evening thanks for taking the questions.

[Frank Lonegro, President and CEO at Landstar System]

Sure.

[Daniel Imbro, Research Analyst at Stephens]

Maybe starting on a higher level one, Frank, I feel like a few months ago a lot of uncertainty from shippers as we think about some of your bigger movers. This quarter, I think auto down 17%, energy electrical up meaningfully. Can you offer some color by end market on how you're thinking about the back half of the year? Any updated thoughts and how they're changing maybe by those big end markets you're exposed to?

[Frank Lonegro, President and CEO at Landstar System]

Yeah, no, good question. Nice to hear your voice and I'll kick it over to Jim Applegate here in a second. When you look at the second quarter and then think about the translation into the third quarter, I think you're largely going to see the same trends. I would say, you know, automotive, absent a move in interest rates or incentives or something like that to stimulate demand, I would continue to see auto as being something that is a bit sluggish until we see interest rates and tariffs find their equilibrium. Housing hasn't been our friend either. On the construction side that's obviously going to impact building products and things like that. On the other side of building products is going to be the data center business and things like that which have done fairly well in JT's remarks.

[Frank Lonegro, President and CEO at Landstar System]

He did mention the cross-border business, both U.S.-Mexico and U.S.-Canada, and again until I, until we see something that shows a level of stability politically and through trade, I do think we're going to continue to see that on a year-over-year probably trend to the negative side. I think that on the positive side the data centers, the wind business, the government, the heavy haul that we mentioned are all things that we are seeing on the positive side and I think you're continuing to see that into the third quarter.

[Jim Applegate, VP and Chief Corporate Sales Strategy and Specialized Freight Officer at Landstar System]

Yeah, no, I think, I mean, Frank, well said. You know, we do look at, you know, kind of the data centers and everything. It's kind of powering that whole infrastructure build with AI. You know, the electrical equipment, any of the power generation type stuff has really been a positive, and that's going to continue. We see a pretty long runway, and I think a lot of that infrastructure build out is just in its infancy. I think you kind of tack on just some of the administration things now that they're doing with the big beautiful bill and trying to spur domestic investment. It plays very nicely into additional infrastructure type investment. We're very positive about that. I think Frank touched on kind of some of the negatives around the tariff-related impacted industries. Automotive obviously very down.

[Jim Applegate, VP and Chief Corporate Sales Strategy and Specialized Freight Officer at Landstar System]

Until you get some clarity as far as where some of these tariffs are going to shake out, I think that continues, same thing with other metals and kind of some of the consumer-related products. I think you're going to continue to see some choppiness over on that end.

[Daniel Imbro, Research Analyst at Stephens]

That's helpful. JT, maybe a near term one on the 3Q kind of setup, I guess. I think Frank mentioned variable contribution margins typically flat sequentially from 2Q to 3Q. Obviously, rates have underperformed seasonality. I would think that's helping variable contribution margin. How should we think about BCM relative to that historical flat? Is there any offset we should be aware of for mix or something else that would keep us from being better than that seasonally normal?

[Jim Todd, VP and CFO at Landstar System]

It's a good question, Daniel. To Frank's point, I mean we're essentially flat. If you go back 15 years and walk 2Q to 3Q, to your point, if the rate softness today—full disclosure, today is day two of July close—I don't have perfect visibility. To your point, if the rate revenue per load softness we're seeing in July results in wider spreads on the brokerage side, that could be a tailwind to BCM outperformance. The other thing I would call out that Miller can speak to better than me, the BCO utilization number was a good number in the second quarter. I think it ticked up 3% year over year. Now, that could face a little bit of a headwind with the direction we see rates going in July. If that continues at a strong clip, that could help.

[Jim Todd, VP and CFO at Landstar System]

Conversely, if rates fade a little bit, that could be a headwind from the utilization side. That's how I'm thinking about it.

[Daniel Imbro, Research Analyst at Stephens]

Great. Appreciate the color, guys. Good luck.

[Operator]

Thank you. We'll move now to the next person coming from the line of Scott Group of Wolfe Research. The line is now open.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Hey, thanks. Afternoon, guys. I just want to clarify one thing about Q2 just to start, right? There was a reclassification of that, what, $4.8 million or whatever of costs from one line to another, but the net of it is clean. Right. The $1.20 is a clean quarter, and we just take the earnings from Q2 and then add back $1.5 million for the net of the agent convention. Is that right? Do we need to? Is that right?

[Frank Lonegro, President and CEO at Landstar System]

Yeah. When you think about the agent matter that we talked about last quarter, as you think about the classification on the P&L, we had to move a couple of things around, but you're correct, the net number is zero in terms of that reclass. I'll let JT hit the other moving parts.

[Jim Todd, VP and CFO at Landstar System]

Yeah, no, that's absolutely right, Scott. You're thinking about it the right way. It was a $0.00 impact in the second quarter, just P&L geography. The Convention falls off, $3 million tailwind. BCO All-Star is probably $1.2 million-$1.5 million headwind, discrete to the third quarter.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Okay, perfect. Okay, that's what I thought. The BCO count flat sequentially, that's good to see. The number of approved and active brokerage carriers fell off a decent amount. Are you seeing accelerated paces of bankruptcies? Is that what's causing that or any additional color there?

[Frank Lonegro, President and CEO at Landstar System]

One of the things we telegraphed, Scott, on the last call was we mentioned on the last call that there would be a pretty significant change as a result of some things that Matt's doing there. It did exactly what we thought it was going to do. Let Matt pick up the color on it.

[Matt Miller, VP and Chief Safety and Operations Officer at Landstar System]

A great deal of efforts that's happening on the fraud front and really becoming more selective on who we're choosing to do business with is a result of all the work that's going on there to really cull through the carriers that are in the database and make sure we're partnering with those we want to partner with.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Okay. Just last one, you talked about the revenue per load finally inflecting positive in Q2 and I guess July is back negative again. Do we think this is, is there something unusual about July from a comp standpoint or is this just we can't get a sustained inflection yet?

[Frank Lonegro, President and CEO at Landstar System]

I think the short answer is the last thing that you said. When I look at the sequential improvement, which literally started March to April, April to May, May to June, we thought maybe we were catching a bid there. When you look at it in retrospect, I think there's a couple of things. There were some unique items in Q2. You've got certainly the road checks and Memorial Day, and then you had the very late quarter implementation of the English language proficiency, which we got what, maybe weeks of or something like that.

[Matt Miller, VP and Chief Safety and Operations Officer at Landstar System]

Yeah, like 10 days.

[Frank Lonegro, President and CEO at Landstar System]

That will remain to be seen what actually happens there. We probably had some tariff pull forwards in the first half of the year, which probably gave it a little bit of bid. The launch point, you know, from June to July, it was a pretty good June number for us and a pretty good July 2024 number. I think you're coming off of some headier comps and, you know, demand is just okay. Inventory levels are probably a little higher based on some of the pull forward. You've got the tariff uncertainty, and I think it's too early to tell what the ultimate impact is going to be from the Big Bill, but we're certainly favorable on the things that we saw in there.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Thank you. Appreciate it, guys.

[Operator]

Thank you. We'll move now to the next person coming from the line of Bruce Chan of Stifel. Your line is now open.

[Bruce Chan, Director and Senior Equity Analyst at Stifel]

Hey, good evening, guys. Appreciate the time here. Maybe just a follow-up on some. Of the end markets. You mentioned that substitute linehaul was up nicely this quarter. Wondering if that was related to post pause restocking at the end of the quarter, and maybe get your thoughts on whether that sustains into 3Q or maybe that falls off a little bit. I know it's early, but any kind of early read on what the sort of peak season looks like, especially with that line.

[Jim Todd, VP and CFO at Landstar System]

Hey Bruce. Substitute line haul for us is probably our least diversified end market. We had some pretty good demand in the first quarter from one of the big parcel players. In the second quarter we had pretty solid demand from the other parcel player along with one of the LTLs. It is just less diversified and you could have one or two shippers really move the needle there. For thoughts on read through to the back half, I'll let the sales team comment.

[Matt Dannegger, VP and Chief Field Sales Officer at Landstar System]

Hey Bruce, this is Matt Dannegger. In regards to peak, we're right at that time of year where we start looking into that and to JG's point it's really just on our part a handful of the parcel players and substitute line haul. We're starting to look into that now. We don't have a full look at what that's going to be yet.

[Matt Dannegger, VP and Chief Field Sales Officer at Landstar System]

We normally firm that up September, October and have a better look at rates and volumes, but the early is we're not looking for a huge peak just like last year. A lot's changed since the post-COVID over the last couple years. I think there's more people going back into the stores. You got e-commerce. They're finding different ways to manage their own transportation so we're just not seeing the same amount of that substitute line haul from our traditional customers that we've seen in the past. Early estimation, like I said, probably a little bit flat. I think last year we were 1% or 2% over 2023 and we're probably looking pretty similar this year. Flat, maybe up a little, maybe down a little bit, but no huge swings like we've seen in some of the years past. We'll have better information on that later on in the fall.

[Bruce Chan, Director and Senior Equity Analyst at Stifel]

Okay, yes, super helpful. Just a quick follow up on the forwarding side. I know it's a smaller part of the business, but obviously a big drop off in the second quarter. I'd imagine related to tariff kerfuffle. Any line of sight on that improving so far in 3Q?

[Jim Todd, VP and CFO at Landstar System]

Bruce, I do not have a view based on July thus far. We saw ocean rates probably start to roll over a quarter or two ago, and I think on a year over year basis that continued and sequential. I believe it continued as well. To your point, not a huge piece for us, and some project type stuff can influence that from quarter to quarter.

[Bruce Chan, Director and Senior Equity Analyst at Stifel]

Got it. Thank you.

[Operator]

Thank you. We'll move now to the next person coming from the line of David Zazula of Barclays. The line is now open.

[David Zazula, Senior Equity Research Analyst at Barclays]

Hey, thanks for taking my question. You answered the question about the brokerage capacity providers, but sequentially the BCO count, the losses seem to have stemmed. Were there any actions you took to be able to better recruit or better retain BCOs during the quarter?

[Frank Lonegro, President and CEO at Landstar System]

Yeah, no David, good question. A quarter ago we mentioned that as the rate environment stabilized and as the actions that Matt and his team have started to take took hold, we would see fewer cancellations and more adds. Obviously, being in the second quarter versus the first quarter is helpful just from a seasonal perspective. We were delighted to see effectively a flat quarter over quarter BCO count and continuing to do everything we can on the recruiting and the qualifications and the orientation and everything we do from a retention perspective. I'll let Matt sing his own praises because he's done a heck of a job for us here in the last six months.

[Matt Miller, VP and Chief Safety and Operations Officer at Landstar System]

Appreciate that, Frank. Appreciate the question. Yeah, ads are tough in this environment. Would love to get a little bit more help on rate. That said, as Frank mentioned, we have a number of strategic initiatives focusing on. How we recruit, how we qualify, how. We onboard without sacrificing safety. Safety is one of those things we hold near and dear to the heart, a big differentiator for us. That said, best gross adds in seven quarters. Sequentially, the gross adds were up 9.5% and year over year the gross adds were up 12.5%. Overall, pleased with the improvement we've seen.

[David Zazula, Senior Equity Research Analyst at Barclays]

Thanks. If I squeeze one in on heavy haul, it seems like a very positive environment for you out there. Are there any headwinds on the horizon? Is that segment exposed to tariffs or anything else that would keep that from continuing the momentum?

[Frank Lonegro, President and CEO at Landstar System]

I think on the heavy haul side, not necessarily tariff related. There's a little bit that goes cross border, which we'll keep our eyes on, but a lot of that's domestic. I think the question on everybody's mind as we look at the big bill is what the impact of that's going to be on wind energy and some of the things that have been subsidized. Let me let Jim Applegate talk a little bit more about that.

[Jim Applegate, VP and Chief Corporate Sales Strategy and Specialized Freight Officer at Landstar System]

As it relates to kind of near term, no, I think we're hearing from all of our customers and it's pretty broad based. We're not just kind of pigeonholed in one customer or one industry. We're seeing it in wind machinery, electrical equipment, data centers, even 3PLs that kind of specialize in that type of movement of equipment. We're seeing it across the board. We feel we're pretty well insulated from a customer and industry standpoint. There are some things in the bill to Frank's point, the alternative energy credits, we're keeping an eye on that. We do feel no matter what happens, people need energy, people need power. We're going to see that business just kind of move to different customers and different providers depending on where they're going to need to build their power to power all this investment that's happening across North America right now.

[Jim Applegate, VP and Chief Corporate Sales Strategy and Specialized Freight Officer at Landstar System]

So. We still remain bullish on it, but we're keeping a good eye on what customers might benefit from this bill.

[Scott Group, Managing Director and Senior Analyst at Wolfe Research]

Thanks so much.

[Operator]

Thank you so much. We will move now to the next person coming from the line of Brian Ossenbeck of JPMorgan. Your line is now open.

[Brian Ossenbeck, Managing Director and Senior Equity Research Analyst at JPMorgan]

Hey, thanks. Appreciate you taking the question. Just to go back to the comment on the ELP. I know there's a lot of other different implications from that, and there's a few other truckload regulations out there as well that might tighten some capacity. I just want to get your thoughts having some exposure to that, especially down around the border where I imagine a lot of the focus is. Any thoughts in terms of what you've seen so far and any trends you expect, is that going to be a big impact to capacity or not?

[Frank Lonegro, President and CEO at Landstar System]

Good question, Brian. I'll let Matt fill in some of the numbers that we've been looking at. Obviously, the FMCSA is publishing in arrears their experience with ELP enforcement. We think from a BCO fleet perspective that we don't have any exposure. We have a very disciplined approach to qualifying, recruiting, and retaining our BCO. We don't feel like we have any unique exposure at Landstar. If there are any other capacities that happen to come out, we see that as a benefit to us, certainly regionally if not nationally depending on the size of the Let Matt take over.

[Matt Miller, VP and Chief Safety and Operations Officer at Landstar System]

Hey Brian, appreciate the question. To Frank's point, we really don't see that as a Landstar specific challenge and to this point we've not received any violations that relate to that. That said, this was implemented June 25th coming out of the executive order on April 28th. The data that we have so far from FMCSA really covers 10 days, June 25th through July 4th. So far, 349 out of service violations. The big change here is that it's now an out of service violation. You wouldn't have likely seen any out of services prior to June 25th. That 349, it's hard to read into 10 days with the potential enforcement ramp up. We think come next quarter we'll have a much better read on that.

[Matt Miller, VP and Chief Safety and Operations Officer at Landstar System]

Coming out of that executive order on April 28th, there's also a review of non-domiciled CDLs and that has the potential to have an impact. Right now Secretary Duffy announced an FMCSA compliance review of the states issuing non-domiciled CDLs. That's kind of a wait and see right now. I think there is potential there, Brian.

[Brian Ossenbeck, Managing Director and Senior Equity Research Analyst at JPMorgan]

Okay, thanks for the rundown there. Maybe as a follow up for Jim, can you just talk about the insurance costs and claim trends? It sounds like you've got a potential settlement coming out, so you can talk a little bit more about that. Also, just the underlying trends that you're seeing when it comes to claims and then what you think renewals are going to start to look like before we get there, before too long.

[Jim Todd, VP and CFO at Landstar System]

Sure, Brian. Just to be clear, you're looking for color on the second quarter.

[Brian Ossenbeck, Managing Director and Senior Equity Research Analyst at JPMorgan]

Claim, the one coming up you mentioned that could hit in the third quarter. I think the accident claim, and then just more broad comments about just severity, instance premiums, just generally about the backdrop.

[Frank Lonegro, President and CEO at Landstar System]

Yeah, on the first one, Brian, let me take that one. Obviously, we were alerting investors and analysts to the fact that we have an ongoing trial. Given the fact that it's an ongoing trial, we probably shouldn't go into any level of detail. If you go back to my prepared remarks and look at a couple of the disclosures in the 10Q, you'll get a sense of what we're talking about. I'll let JT hit the trends as well as potential impact on renewal as we get into next year.

[Jim Todd, VP and CFO at Landstar System]

Thanks, Frank. Yeah, Brian. You heard Frank in his preparedness talk about a little slightly higher DOT accident frequency. As a result of that, we've seen our severity or cost per crash on the trucking side run hotter thus far in 2025 than 2024. We wrapped up our insurance renewal back on May 1. On an apples to apples basis, we actually achieved a slight decrease, but we procured some additional risk transfer on some other policies that basically brought it to flat year over year, which, if you go back two years, three years, five years, we were pleased to achieve a flat renewal. Despite the fact clearly exposure is running lower and truck revenue for loads has continued to run soft as compared to 2022, which then pressures your insurance as a percentage of that BCO revenue number.

[Frank Lonegro, President and CEO at Landstar System]

I gotta think, Brian, that that's flat. Year over year compares really well against peer group,

[Jim Todd, VP and CFO at Landstar System]

credit to the safety profile and the professionalism of the BCOs.

[Frank Lonegro, President and CEO at Landstar System]

Amen.

[Brian Ossenbeck, Managing Director and Senior Equity Research Analyst at JPMorgan]

Right, okay, thanks very much, guys.

[Frank Lonegro, President and CEO at Landstar System]

Thanks, Brian.

[Operator]

Thank you. We will have the last person to ask the question coming from the line of Stephanie Moore of Jefferies. Your line is now open. Stephanie Moore from Jefferies, your line is now open.

[Frank Lonegro, President and CEO at Landstar System]

No, we can go ahead and close out.

[Operator]

I see. That is noted. At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks.

[Frank Lonegro, President and CEO at Landstar System]

Thank you, Bill. In closing, while the freight environment remains challenging, we do see some positives in the near term. We were encouraged by the sequential pricing trends during the second quarter, and with a choppy industrial economic backdrop, we were pleased with the 9% year-over-year revenue increase in our heavy haul service offering. Regardless of the economic environment, the resiliency of the Landstar variable cost business model continues to generate significant free cash flow. Landstar has always been a cyclical growth company, and we are well positioned to navigate the coming months as we continue to look forward to higher highs when the freight market turns our way. Thank you for joining us this afternoon. We look forward to speaking with you again on our 2025 third quarter earnings conference call in late October. Thank you.

[Operator]

Thank you for joining the conference call today. Have a good afternoon. Please disconnect your lines at this time.

Participants

Executives

• Matt Miller, VP and Chief Safety and Operations Officer
• Jim Todd, VP and CFO
• Matt Dannegger, VP and Chief Field Sales Officer
• Jim Applegate, VP and Chief Corporate Sales Strategy and Specialized Freight Officer
• Frank Lonegro, President and CEO

Analysts

• Bruce Chan, Director and Senior Equity Analyst at Stifel
• David Zazula, Senior Equity Research Analyst at Barclays
• Jonathan Chappell, Senior Managing Director at Evercore ISI
• Daniel Imbro, Research Analyst at Stephens
• Scott Group, Managing Director and Senior Analyst at Wolfe Research
• Brian Ossenbeck, Managing Director and Senior Equity Research Analyst at JPMorgan