Q1 2024 Landstar System Inc Earnings Call

April 25, 2024

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Operator: Good morning, and welcome to the Landstar System first quarter earnings release conference call. All lines will be in a listen-only mode until the formal question and answer session begins.

Good morning, and welcome to Landstar system first 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 Franco <expletive> President and CEO.

Operator: 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 Todd, Vice President and CFO; and Joe Beacom, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Jim Todd. Sir, you may begin.

Speaker Change: Todd Vice President and CFO, Joe Beacom, Vice President and Chief Safety and operations Officer.

Speaker Change: Now I would like to turn the call over to Jim Todd. Sir you May begin. Thank you Bill good morning, and welcome to Landstar is 2024 first quarter earnings Conference call before we begin let me read the following statement. The following is a safe Harbor statement under private Securities Litigation Reform Act of 1095 statements made during this conference call that are not based on historical facts.

James P. Todd: Thank you, Bill. Good morning, and welcome to Landstar's 2024 First Quarter Earnings Conference. Before we begin, let me read the following statement. This is a Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.

James P. Todd: 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 2023 fiscal year, described in the section Risk Factors and Other SEC Filings from Time to Time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated.

James P. Todd: Our forward looking statements. During this conference call. We may make statements that contain forward looking information that relates to <unk> 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 land stores Form 10-K for the 2023 fiscal year <unk>.

James P. Todd: Bribed in the section risk factors and other SEC filings from time to time, 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 with me. This morning are frankly.

James P. Todd: 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. With me this morning are Frank Lonegro, Landstar's President and Chief Executive Officer, and Joe Beacom, Landstar's Chief Safety and Operations Officer. It's my privilege to pass it to Landstar CEO Frank Lonegro for his opening remarks. Thanks, JT, and good morning, everyone.

Franklin: He wrote Landstar, as President and Chief Executive Officer, and Joe Beacom, less our Chief safety and operations Officer, It's my privilege to pass it to Lance our CEO Franklin <expletive> for his opening remarks, thanks, Jackie and good morning, everyone first I want to express my sincere gratitude and excitement to lead this great company.

Frank A. Lonegro: First, I want to express my sincere gratitude and excitement to lead this great project. I've had the pleasure of meeting so many of our network constituents these past several months. At our annual agent convention in early April, I had the opportunity to interact with hundreds of agents with the entrepreneurial spirit that helps make Landstar so great. Well, they are all unique.

Unknown Attendee: Had the pleasure of meeting so many of our network constituents. These past several months.

Unknown Attendee: At our annual agent Convention in early April I had the opportunity to interact with hundreds of agents with the entrepreneurial spirit that helps make landstar successful well.

Speaker Change: While they are all unique these agents take great pride in what they do every day, helping move the freight that drives the American economy.

Frank A. Lonegro: These agents take great pride in what they do every day, helping move the freight that drives the American economy. They are a talented group of business owners, and I'm proud to be working alongside them to help Landstar grow. I've also been out on the road meeting with many of our VCO owner-operators in Florida, Georgia, and Kentucky at our monthly safety meetings, field operations center visits, and the Mid-America Trucking Show.

Speaker Change: They are a talented group of business owners and I'm proud to be working alongside them to help landstar growth.

Speaker Change: I've also been out on the road meeting with many of our Bcl owner operators in Florida, Georgia and Kentucky.

Speaker Change: Our monthly safety meetings field operations center visits and the mid America trucking chip.

Frank A. Lonegro: I look forward to seeing our Million Mile Safe Driver and Roadstar BCOs at the annual All-Star event in July, and know we share a common passion. I'm incredibly energized to work with our agents, BCOs, and carriers through our proven business model to continue Landstar's track record of success. I've also inherited a strong executive team at Landstar, and we've been actively working together to drive Landstar forward. I'm excited by the recent changes we've made in our sales leadership with Jim Applegate and Matt Daniger.

Speaker Change: I look forward to seeing a million miles safe driver and <unk> at the annual all star event in July and know we share a common passion.

Speaker Change: To safely deliver freight for our customers every day I am incredibly energized to work with our agents <unk> and carriers through our proven business model. The continued landstar his track record of success.

Speaker Change: I'm also inherited a strong executive team at Landstar and we've been actively working together to drive Landstar forward.

Speaker Change: I'm excited by the recent changes we've made in our sales leadership with Jim Applegate and met Danaher. This combination of strategy and execution will serve landstar in its agents well as we align for growth.

Frank A. Lonegro: This combination of strategy and execution will serve Landstar and its agents well as we align for growth. While JT, Joe, and I will handle the call today, we'll be sure to showcase Jim and Matt on some of our future earnings calls. We are laser focused on executing on our strategic initiatives.

Speaker Change: While J T, Joe and I will handle the call today, we will be sure to showcase Jim and Matt on some of our future earnings calls.

Speaker Change: We are laser focused on executing on our strategic initiatives Cross border, Mexico and heavy haul are two areas. We have identified where we already have scale and believe we have significant opportunities for growth.

Frank A. Lonegro: Cross-border Mexico and Heavy Haul are two areas we have identified where we already have scale and believe we have significant opportunities for growth. We also remain committed to continuously improving the level of service and support we provide to our customers, agents, VCOs, and carriers each and every day. Turning to slide five, Landstar performed well in the first quarter of 2024, considering that the freight environment was characterized by soft demand and readily available truck capacity.

We also remain committed to continuously improving the level of service and support we provide to our customers agents <unk> and carriers each and every day.

Speaker Change: Turning to slide five Landstar performed well in the 2024 first quarter considering that the freight environment was characterized by soft demand and readily available truck capacity.

Frank A. Lonegro: I believe our results speak to the strength and resiliency of the Landstar business model. I am fully committed to fostering and safeguarding this unique model moving forward. Our balance sheet continues to be very strong. We remain committed to investing in leading technology solutions for our network of small business owners, and we'll be refreshing a significant portion of our trailing equipment fleet this year. Our capital allocation priorities remain unchanged.

Speaker Change: I believe our results speak to the strength and resiliency of the Landstar business model I am fully committed to fostering and safe guarding this unique model moving forward.

Speaker Change: Our balance sheet continues to be very strong we remain committed to investing in leading technology solutions for our network of small business owners and we'll be refreshing a significant portion of our trailing equipment fleet. This year.

Speaker Change: Our capital allocation priorities remain unchanged.

Frank A. Lonegro: I'm a believer in the company's stock buyback program and am committed to opportunistically executing on our existing authority to benefit our long-term stock. In the 2024 first quarter, the freight environment continued to be challenging, manufacturing levels trended below the level of the corresponding prior year period, and inflation continued to have an impact. Consumer Spending on Goods; We remain in a loose capacity environment when measured by historical standards, and market conditions continue to favor the shipper.

Speaker Change: We're a believer in the company's stock buyback program and are committed to opportunistically executing on our existing authority to benefit our long term stockholders and.

Speaker Change: In 2024 first quarter, the freight environment continued to be soft manufacturing levels trended below the level of the corresponding prior year period and inflation continued to have an impact on consumer spending on goods.

Speaker Change: We remain in a loose truck capacity environment, when measured by historical standards and market conditions continue to favor the shipper.

Frank A. Lonegro: Even with that backdrop, Landstar's 2024 first quarter top line results were better than expected, and our earnings performance was generally in line with what we expected. I was pleased to see heavy haul loadings, which, as mentioned above, is one of our strategic growth priorities, grow 2% year over year. On the other hand, our substitute line hall service offering declined more than the company average and continued to be soft after an incredibly strong run during the capacity constrained period coming out of the pandemic.

Speaker Change: Even with that backdrop Landstar is 2024 first quarter top line results were better than expected and our earnings performance was generally in line with what we expected.

Speaker Change: Was pleased to see heavy haul loads, which as mentioned above was one of our strategic growth priorities grow 2% year over year.

Speaker Change: On the other side, our substitute line haul service offerings declined more than the company average and continued to be soft as an incredibly strong run during the capacity constrained period coming out of the pandemic.

Frank A. Lonegro: Our first quarter guidance, set forth in our 2023 fourth quarter earnings release, called for the number of loads hauled via truck to be 14 to 16% below the 2023 first quarter, and overall revenue per truckload to be 8% to 10% below the 2023 first quarter. The actual number of loads hauled via truck for the first quarter was 13% below the 2023 first quarter, slightly better than the high end of our truckload volume guidance.

Speaker Change: Our first quarter guidance set forth in our 2023 fourth quarter earnings release also the number of loads hauled via truck to be 14% to 16% below the 2023 first quarter and overall revenue per truckload to be 8% to 10% below the 2023 first quarter. The actual number of loads hauled via truck from the 2002.

Speaker Change: For first quarter was 13% below the 2023 first quarter slightly better than the high end of our truckload volume guidance.

Frank A. Lonegro: The actual revenue per truckload in the 2024 first quarter was 7% below the prior year quarter, again slightly better than the high end of our guidance. The slightly favorable variance on revenue compared to guidance was mostly driven by a stronger fiscal February. The fiscal January results were in line, and fiscal March came in slightly above our expectations.

Speaker Change: Actual revenue for truckload and the 2020 for first quarter was 7% below the prior year quarter again slightly better than the high end of our guidance.

Speaker Change: The slightly favorable variance on revenue compared to guidance was mostly driven by a stronger fiscal February as fiscal January results were in line in fiscal March came in slightly above our expectations.

Frank A. Lonegro: Turning to slide six and looking at our network, the scale, systems, and support we provide help drive the operating results generated during the 2024 first quarter. JT will get into the details on revenue, loadings, and rate per load, but I wanted to take a moment to touch on our aging community. I was very excited to meet many of our 524 million dollar agents in Orlando earlier this morning at the Annual Agent Convention.

Speaker Change: Turning to slide six and looking at our network the scale systems and support we provide.

The operating results generated during the 2024 first quarter.

Speaker Change: J P will get into the details on revenue loadings in rate per load, but I wanted to take a moment to touch on our agent community.

Speaker Change: I was very excited to meet many of our $524 million agents in Orlando earlier this month at the annual agent Convention.

Frank A. Lonegro: This group of million-dollar agents collectively generated approximately 95 percent of Landstar's Consolidated Revenue during the 2023 fiscal year. Their relentless drive for results in any business environment is impressive. I've been in the transportation sector for most of my career and have realized how important Landstar's safety-first culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar VCOs operating safely every day, our continued investment in safety technology and trailing equipment, and our recruiting, qualification, and maintenance practices.

Speaker Change: This group of $1 billion agents collectively generated approximately 95% of Landstar is consolidated revenue during the 2023 fiscal year their relentless drive for results in any business environment is impressive.

Speaker Change: I've been in the transportation sector for most of my career and realized how important landstar is a safety first culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar BCE OS operating safely every day, our continued investment in safety technology and trailing equipment and a recruit.

Speaker Change: <unk> qualification and maintenance practices I'm proud to report a 0.52.

Frank A. Lonegro: I'm proud to report a 0.52 DOT accident frequency per million miles in the first quarter, which decreased approximately 12%. Compared to the 2023 first quarter, this is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our VCOs and provides a point of differentiation our agents are able to highlight in discussions with our Turning to slide 7 in the capacity section, BCO truck count decreased by 399 trucks in the first quarter on a sequential basis and has decreased approximately 13% since the end of the 2023 first quarter, consistent with the year-

Speaker Change: The accident frequency per million miles in the first quarter, which decreased approximately 12% as compared to the 2023 first quarter.

Speaker Change: This is an impressive operating metric that speaks to the strength skill talent and dedication of our <unk>.

Speaker Change: It provides a point of differentiation our agents are able to highlight and discussions with our freight customers.

Speaker Change: Turning to slide seven and the capacity side <unk> truck count decreased by 399 trucks in the first quarter on a sequential basis and has decreased approximately 13% since the end of 2023 first quarter consistent with the year over year decline in truckload volumes it.

Frank A. Lonegro: It is typical to incur turnover in BCO truck counts when truck rates decrease. BCO turnover continues to be influenced by the significant increase in the cost of repairs. For an extended period of time, trucks are out of service awaiting repairs.

Speaker Change: It is typical to incur turnover in PCR truck count when truck rates decrease desio turnover continues to be influenced by the significant increase in the cost of repairs and the extended period of time trucks are out of service awaiting repairs. We would expect the bcl count to continue to decline in the coming months, given the rate environment, but at a slower pace than we saw.

James P. Todd: We would expect the BCO count to continue to decline in the coming months, given the rate environment, but at a slower pace than we saw in the first quarter. I will now pass the call back to JT to walk you through the 2024 first quarter financials in more detail.

Speaker Change: In the first quarter I will now pass the call back to J P to walk you through the 2024 first quarter financials in more detail Jackie Thanks Frank.

James P. Todd: Thanks, Frank. Frank has covered certain information on our 2024 first quarter, so I will cover various other first quarter financial information included in the press release and slide presentation. Turning to slide 9, as Frank mentioned earlier, both the number of loads hauled by a truck and truck revenue per load each slightly exceeded the high end of our previously issued guidance. Non-truck transportation service revenue in the 2024 first quarter was 12%, or $10 million, below the 2023 first quarter. The decrease in non-truck transportation revenue was mostly due to a 58% decrease in air revenue per shipment.

J P: Frank has covered certain information on our 2020 for first quarter. So I will cover various other first quarter financial information included in the press release and slide presentation.

Turning to slide nine as Frank mentioned earlier, but the number of loads hauled via truck and truck revenue per load each slightly exceeded the high end of our previously issued guidance non truck transportation service revenue in the 2020 for first quarter was 12% or $10 million below the 2023 first quarter. The decrease in non truck transportation revenue was <unk>.

J P: Due to a 58% decrease in air revenue per shipment.

J P: As to the breakdown in truck transportation revenue per load on loads hauled via <unk> platform equipment held up considerably better in revenue per load on loads hauled via van equipment and other truck transportation services, we consider revenue per mile on loads hauled by Bcl trucks, a relatively pure pricing number as it excludes fuel surcharges billed to customers that are paid 100% tenant.

J P: <unk> <unk>.

J P: Revenue per mile on van equipment hauled by <unk> and the 2020 for first quarter was 7% below the 2023 first quarter revenue per mile and onsite platform equipment hauled by <unk> and the 2020 for first quarter was 5% below the 2023 first quarter. It should be noted that although the market has softened significantly from a year ago Landstar revenue per.

J P: While on <unk> van and onsite platform equipment, both remain above the pre pandemic 2021st quarter by approximately 21% and 23% respectively. We believe that rates will stay relatively higher than pre pandemic levels, given the significant amount of incremental costs to operate a truck today as compared to five years ago.

James P. Todd: Revenue per mile and unsighted platform equipment hauled by BCOs in the 2024 first quarter was 5% below the 2023 first quarter. It should be noted that although the market has softened significantly from a year ago, Landstar's revenue per mile on BCO van and unsighted platform equipment both remain above the pre-pandemic 2020 first quarter by approximately 21 and 23 percent, respectively. We believe that rates will stay relatively higher than pre-pandemic levels given the significant amount of incremental cost to operate a truck today as compared to five years ago.

Revenue per mile on van equipment called <unk> remained sequentially flat from December to January and from January to February before decreasing 2% from February to March.

J P: December to January in January to February month to month changes are stronger than pre pandemic typical patterns with the exception of the beginning of 2018 when rates were favorable favorably impacted by the mid December 2017. The mandate. However, the sequential change in <unk> revenue per mile on van equipment from February to March underperformed. These pre pandemic.

J P: <unk> historical patterns.

James P. Todd: Revenue per mile on van equipment hauled by BCOs remains sequentially flat from December to January and from January to February before decreasing 2% from February to March. These December to January and January to February month-to-month changes are stronger than pre-pandemic typical patterns, with the exception of the beginning of 2018, when rates were favorably impacted by the mid-December 2017 ELD mandate. However, the sequential change in VCO revenue per mile on van equipment from February to March underperformed these pre-pandemic historical patterns.

Our revenue per mile and onsite platform equipment hauled by <unk> revenue per mile decreased 2% from December to January increased 1% from January to February and increased 2% from February to March the month to month sequential trends on unsighted platform equipment are generally more unpredictable compared to that of an equipment. This relative volatilities.

J P: And due to the mix between heavy specialized loads and standard flatbed volume to 2024 unsighted platform volume trends are somewhat favorable as compared to typical pre pandemic trends when excluding 2018 for the reasons mentioned above.

J P: The whole revenue one of our areas of increased strategic focus was up approximately 1% year over year in the first quarter heavy haul loadings were up approximately 2%, partially offset by a 1% decrease in revenue per load. This represented a mixed tailwind to our <unk> platform revenue per load as heavy haul revenue as a percentage of the category increase from approximately.

James P. Todd: As to revenue per mile on unsighted platform equipment hauled by VCOs, revenue per mile decreased 2% from December to January, increased 1% from January to February, and increased 2% from February to March. The month-to-month sequential trends on unsighted platform equipment are generally more unpredictable compared to that of antivirus.

J P: 25% during the 2023 first quarter to approximately 28% in 2024 quarter.

J P: Turning to slide 10, we provided revenue share by commodity and year over year change in revenue by commodity transportation logistic segment revenue was down 19% year over year on a 13% decrease in loadings and a 7% decrease in revenue per load as compared to the 2023 first quarter within our largest commodity category consumer durables revenue declined.

James P. Todd: This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volumes. The 2024 unsighted platform volume trends are somewhat favorable as compared to typical pre-pandemic trends when excluding 2018 for the reasons mentioned above. Heavy haul revenue, one of our areas of increased strategic focus, was up approximately 1% year-over-year in the first quarter. Heavy haul loadings were up approximately 2%, partially offset by a 1% decrease in revenue per load.

J P: 20% year over year on a 15% decline in volumes and a 6% decline in revenue per load.

J P: Revenue in our top five commodity categories, which collectively make up about 70% of our transportation revenue were down a combined 17% compared to the 2023 first quarter shifting gears from revenue to loadings within the remaining top five commodity groupings from the 2023 first quarter to the 2020 for first quarter.

James P. Todd: 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 25% during the 2023 first quarter to approximately 28% in the 2024 quarter. Turning to slide 10, we provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation Logistics Segment revenue was down 19% year over year on a 13% decrease in loadings and a 7% decrease in revenue per load as compared to the 2023 first quarter. Additionally, within our largest commodity category, consumer durables, revenue declined 20% year-over-year on a 15% decline in volumes and a 6% decline in revenue per load.

J P: Total loadings of machinery decreased 15% automotive equipment and parts were relatively flat building products decreased 2% and hazardous materials decreased 14%. Additionally, substitute line haul loadings, one of the strongest performers for us through the pandemic and one which vary significantly based on consumer demand decreased 36% from the two.

J P: 23 first quarter.

J P: Also landstar is the truck capacity provided other trucking companies three pls and truck brokers during periods of tight truck capacity those free transportation providers reached out to landstar to provide truck capacity more often than during times of more readily available truck capacity the.

J P: The freight hauled by Landstar on behalf of other truck transportation companies include almost all of our commodity groupings, including our substitute line haul service offering.

J P: Overall revenue hauled on behalf of other truck transportation companies in the 2020 for first quarter was 36% below the 2023 quarter a clear indicator in our model the capacity is more readily accessible.

James P. Todd: Revenue in our top five commodity categories, which collectively make up about 70% of our transportation revenue, was down a combined 17% compared to the 2023 first quarter. Shifting gears from revenue to loadings within the remaining top five commodity groupings, from the 2023 first quarter to the 2024 first quarter, total loadings of machinery decreased 15%, automotive equipment and parts were relatively flat, building products decreased 2%, and hazardous materials decreased 14%. Additionally, substitute line haul loadings, one of the strongest performers for us through the pandemic and one which varies significantly based on consumer demand, decreased 36% from the 2023 first quarter.

J P: Revenue hauled on behalf of other truck transportation companies was 14% and 18% transportation revenue in the 2024 and 2023 first quarters respectively.

J P: Even with the ups and downs in various customer categories. Our business remains highly diversified with over 25000 customers, none of which contributed over 6% of our revenue in the 2020 for first quarter.

J P: Turning to slide 11, and in 2024 first quarter gross profit was $113 9 million compared to gross profit of $152 9 million in the 2023 first quarter gross profit margin was nine 7% of revenue in the 2020 for first quarter as compared to gross profit margin of 10, 7% in the corresponding period of 2023.

J P: And the 2024 first quarter variable contribution was $168 2 million compared to $208 7 million in the 2023 first quarter variable contribution.

James P. Todd: Also, Landstar is a truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those freight transportation providers reach out to Landstar to provide truck capacity more often than during times of more readily available truck capacity. Freight hauled by Landstar on behalf of other truck transportation companies includes almost all our commodity groupings, including our substitute line haul service offerings.

J P: <unk> margin was 14, 4% of revenue in the 2024 first quarter compared to 14, 5% in the same period last year. The decrease in variable contribution margin compared to 2023 first quarter was primarily attributable to a decreased variable contribution margin on revenue generated by truck brokerage carriers as the rate paid.

J P: Truck brokerage carriers in the 2020 for first quarter was 149 basis points higher than the rate paid in the 2023 first quarter, partially offset by mix as an increased percentage of revenue was generated by <unk> independent contractors, which typically has a higher variable contribution margin and revenue generated by other modes of transportation.

James P. Todd: Overall, revenue hauled on behalf of other truck transportation companies in the 2024 first quarter was 36% below the 2023 quarter, a clear indicator in our model that capacity is more readily accessible. Revenue hauled on behalf of other truck transportation companies was 14% and 18% of transportation revenue in the 2024 and 2023 first quarters, respectively. Even with the ups and downs in various customer categories, our business remains highly diversified, with over 25,000 customers, none of which contributed over 6% of our revenue in the first quarter of 2024.

J P: Turning 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 administrative costs in comparison to smaller gross profit and variable contribution basis. Other operating costs were $14 9 million in the 2002.

J P: For first quarter compared to $12 4 million in 2023. This increase was primarily due to an increased provision for contractor bad debt and decreased gains on sale of used trailing equipment.

J P: Insurance and claims costs were $26 3 million in the 2024 first quarter compared to 27.

James P. Todd: Turning to slide 11, in the 2024 first quarter, gross profit was $113.9 million compared to gross profit of $152.9 million in the 2023 first quarter. Gross profit margin was 9.7% of revenue in the 2024 first quarter as compared to 10.7% in the corresponding period of 2023.

J P: $6 million in 2023.

J P: Total insurance and claims costs were five 8% of <unk> revenue in the 2024 period and five 3% of <unk> revenue in the 2023 period. The decrease in insurance and claims cost as compared to 2023 was primarily attributable to decreased net unfavorable development of prior year claim estimates and a decreased accident frequency part.

J P: We offset by increased severity of accidents during the 2024 period.

James P. Todd: And the 2024 first quarter variable contribution was $168.2 million, compared to $208.7 million in the 2023 first quarter. The variable contribution margin was 14.4% of revenue in the 2024 first quarter, compared to 14.5% in the same period last year. The decrease in variable contribution margin compared to the 2023 first 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 in the 2024 first quarter was 149 basis points higher than the rate paid in the 2023 first quarter, partially offset by mix, as an increased percentage of revenue was generated by BCO independent contractors, which typically has a higher variable contribution margin than revenue generated by other modes

J P: During the 2024 and 2023 first quarters insurance and claims cost included $1 $1 million and $1 $9 million, respectively of net unfavorable adjustments to prior year claim estimates.

Selling general and administrative costs were $56 4 million in the 2024 first quarter compared to $53 6 million in the 2023 first quarter the increase in selling general and administrative costs was primarily attributable to increased employee benefit costs and increased provision for incentive and equity compensation.

J P: <unk> under our variable compensation programs and the impact of $1 2 million of CEO transition costs, partially offset by decreased project consulting costs in the 2024 first quarter the provision for compensation under variable programs was $4 $6 million compared to $3 3 million in the 2023 first quarter wed.

J P: I'd like to note. Despite some moderate wage inflation pressure and selective human capital investment in certain areas, principally heavy haul cross border and fraud prevention total wages from the 2023 first quarter to the 2024 first quarter declined slightly as the company continues to be very disciplined with respect to managing head count.

James P. Todd: Turning 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 administrative costs in comparison to smaller gross profit and variable contribution basis. Other operating costs were $14.9 million in the 2024 first quarter, compared to $12.4 million in 2023. This increase was primarily due to an increased provision for contractor bad debt and decreased gains on the sale of used trailing investments. Insurance and claims costs were $26.3 million in the 2024 first quarter, compared to $27.6 million in 2023.

J P: Depreciation and amortization was $14 1 million in the 2024 first quarter compared to $15 2 million. In 2023. This decrease was primarily due to decreased depreciation on the Companys trailer fleet, partially offset by increased depreciation on software applications, resulting from continued investment in new and upgraded tools for use.

J P: By agents and third party capacity providers.

J P: The effective income tax rate was 23, 5% in 2024 first quarter compared to an effective income tax rate of 23, 3% in 2023 first quarter, primarily attributable to larger net excess tax benefit benefits from stock based compensation arrangements. During the 2023 first quarter turning to slide 13.

James P. Todd: Total insurance and claims costs were 5.8% of BCO revenue in the 2024 period and 5.3% of BCO revenue in the 2023 period. The decrease in insurance and claims costs as compared to 2023 was primarily attributable to decreased net unfavorable development of prior year claim estimates and a decreased accident frequency, partially offset by increased severity of accidents during the 2024 period. During the 2024 and 2023 first quarters, insurance and claims costs included $1.1 million and $1.9 million, respectively, of net unfavorable adjustment to prior year claims. Selling General and Administrative Costs were $56.4 million in the 2024 first quarter compared to $53.6 million in the 2023 first quarter.

J P: And looking at our balance sheet, we ended the quarter with cash and short term investments of $530 million cash flow from operations for the 2020 for first quarter was $94 million in cash capital expenditures were $9 million the strength of our balance sheet is a testament to the cash generating capabilities of the Landstar model back to you Frank.

Frank: Thanks Katie.

Frank: As we progressed through the 2024 second quarter year over year comparisons should begin to ease in the 2023 second quarter. The number of loads hauled via truck and truck revenue per load both significantly underperformed pre pandemic seasonal patterns.

Frank: In 2024, as we moved from March into the first few weeks of April our truck volumes seem to have moved more in line with what we would view as normal sequential month to month patterns based on pre pandemic seasonal performance trends.

Frank: Truck revenue per load is slightly underperform is pre pandemic patterns.

James P. Todd: The increase in selling general and administrative costs was primarily attributable to increased employee benefit costs, an increased provision for incentive and equity compensation under our variable compensation programs, and the impact of $1.2 million of CEO transition costs, partially offset by decreased project consultant costs. In the 2024 first quarter, the provision for compensation under our variable programs was $4.6 million compared to $3.3 million in the 2023 first quarter. We'd like to note, despite some moderate wage inflation pressure and selective human capital investment in certain areas, principally heavy haul, cross-border, and fraud prevention, total wages from the 2023 first quarter to the 2024 first quarter declined slightly as the company continues to be very disciplined with respect to managing headcounts.

Frank: The sequential week to week trends and truck revenue per load in the first three weeks of April have been favorable.

Frank: Turning to slide 15, our year over year expectations for the 2024 second quarter are the truck load volumes will be 5% to 9% below the 2023 second quarter and truck revenue per load will be in a range of flat to down 4% versus the 2023 second quarter.

Frank: Looking at the 2024 second quarter on a sequential basis pre pandemic patterns with normally yield an 8% improvement in truckload volumes and a 2% improvement in truck revenue per load.

Frank: Our guidance for the second quarter implies a 4% to 8% sequential improvement in truckload volumes and truck revenue per load ranging from down 1% to up 3% sequentially.

Frank: We also expect revenue for our non truckloads to be similar to what we experienced in the 2020 for first quarter.

Frank: Based on these assumptions, we expect revenue in the 2024 second quarter to be in a range of $1 2 billion to $1 3 billion and earnings to be in a range of $1 35 per share to $1 55 per share.

James P. Todd: The depreciation and amortization was $14.1 million in the 2024 first quarter, compared to $15.2 million in 2023. This decrease was primarily due to decreased depreciation on the company's trailer fleet, partially offset by increased depreciation on software applications resulting from continued investment in new and upgraded tools for use by agents and third-party capacity providers. The effective income tax rate was 23.5% in the 2024 first quarter, compared to an effective income tax rate of 23.3% in the 2023 first quarter, primarily attributable to larger net excess tax benefits from stock-based compensation arrangements during the 2023 first quarter.

Frank: For 2024 second quarter guidance incorporates a variable contribution margin range of 13, 9% to 14, 2% in insurance and claims costs of approximately five 5% of estimated <unk> revenue.

We also want to highlight some specific items embedded in the 2024 second quarter EPS guidance range of $1 35 per share to $1 55 per share compared to the 2024 first quarter actual EPS of $1 32 per share.

Frank: SG&A in the second quarter is expected to be above the first quarter due in part to the cost of Landstar is annual agent Convention in April.

Frank: We expect variable contribution to be 20 to 50 basis points below the 2024 first quarter, which is in line with pre pandemic historical sequential patterns.

Frank A. Lonegro: Turning to slide 13 and looking at our balance sheet, we ended the quarter with cash and short-term investments of $530 million. Cash flow from operations for the 2024 first quarter was $94 million, and cash capital expenditures were $9 million. The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar model. Back to you, Frank. Thanks, JT. As we progress through the 2024 second quarter, year-over-year comparisons should begin to ease.

Frank: Third the second quarter tax rate is expected to be approximately 100 basis points higher than the first quarter in line with our normal tax rate assumptions driving a <unk> <unk> per share unfavorable variance compared to the first quarter.

Frank: We also want to note that the company has widened the guidance range for both revenue and earnings per share. While these ranges reflect the fact that economic and freight conditions are still quite dynamic we believe the strength and resiliency of the Landstar model position us well to successfully navigate this environment.

Frank A. Lonegro: In the 2023 second quarter, the number of loads hauled via truck and truck revenue per load both significantly underperformed pre-pandemic seasonal patterns. In 2024, as we moved from March into the first few weeks of April, our truck volumes seem to have moved more in line with what we would view as normal sequential month-to-month patterns based on pre-pandemic seasonal performance trends. Truck Revenue Per Load has slightly underperformed these pre-pandemic patterns, though the sequential week-to-week trends in truck revenue per load in the first three weeks of April have been favorable. Turning the slide.

Speaker Change: With that bill we'd like to open the line for questions.

Speaker Change: Okay.

Bill: Thank you very much Sir at this time well begin the question and answer session. If you would like to ask a question. Please press star one on your tax time selling once again that is tier one to ask a question. The counter request. Please pass prior to we do have the first question is coming from the line of Scott Group of Wolfe Research. Your line is now open.

Scott H. Group: Hey, Thanks, Good morning, Frank Nice to speak with you again welcome back the transports.

Scott H. Group: You guys gave more color on some of the monthly trends that was helpful.

Scott H. Group: But it was growing quick so it sounded like March deteriorated and then maybe Frank at the end of your comments around pricing in April were a little bit better maybe just a little bit more color on sort of what happened in March and what you're seeing in April.

Frank A. Lonegro: Our year-over-year expectations for the 2024 second quarter are that truck load volumes will be five to nine percent below the 2023 second quarter. [inaudible] Looking at the 2024 second quarter on a sequential basis, pre-pandemic patterns would normally yield an 8% improvement in truckload volumes and a 2% improvement in truck revenue per load. Our guidance for the second quarter implies a 4% to 8% sequential improvement in truckload volume. [inaudible] We also expect revenue for our non-truck modes to be similar to what we experienced in the 2024 first quarter. Based on these assumptions, we expect revenue in the 2024 second quarter to be in a range of $1.2 billion to $1.3 billion and earnings to be in a range of $1.35 per share to $1.50.

Frank: Hey, Scott, Thanks, and good to hear your voice again for sure.

Scott H. Group: We're watching this thing on a daily and weekly basis as you would imagine just given.

The desire to see an inflection and so what we don't want to do is over index on a day or two we want to look at the trends over time.

Scott H. Group: And I think the point that I was making towards the end was the week by week view in April on rate was beginning to show some positivity.

Speaker Change: And so we're hopeful that that is the beginning of an inflection is not going to be kind of a rapid rebound as maybe we saw in the immediate post COVID-19 time period, but a little bit of sign of green shoots as always thoughtful of J T fill in some color there, yes, absolutely Frank So Scott the good guide top line to the model really was a strong February so February.

James P. Todd: Versus the model was about plus 8% as both the number of loads hauled via truck and truck revenue per load in February outpaced.

Frank A. Lonegro: 2024 Second Quarter Guidance incorporates a variable contribution margin range of 13.9% and Insurance and Claims Costs of approximately 5.5% of estimated VCO revenue. We also want to highlight some specific items embedded in the 2024 second quarter EPS guidance range of $1.35 per share to $1.55 per share compared to the 2024 first quarter actual EPS of $1.32. First, SG&A in the second quarter is expected to be above the first quarter, due in part to the cost of Landstar's annual agent convention in April.

James P. Todd: Typical seasonality March was about three 5% good guide of the model on the top line.

James P. Todd: Both loadings and Rev per load in March seasonally underperformed typical February to March again off a stronger base starting point of our fiscal February.

James P. Todd: And then any thoughts about April there.

James P. Todd: To Frank's point, we saw a truck revenue per load probably peak in the middle of fiscal March and then started starting to starting to slide on us a little bit to Frank's point in fiscal April week, one to week two truck revenue per load improve week two week, three and improved such that we don't have April close, but our best guess is we're going to be may be.

Frank A. Lonegro: Second, we expect variable contribution to be 20 to 50 basis points below the 2024 first quarter, which is in line with pre-pandemic historical sequential patterns. Third, the second quarter tax rate is expected to be approximately 100 basis points higher than the first quarter, in line with our normal tax rate assessment, driving a two cent per share unfavorable variance compared to the first quarter.

Frank: Flattish March to April and that compares with a historical plus 100 basis point good Guy on truck revenue per load historically March to April.

Speaker Change: Okay. That's helpful and then Frank just bigger picture right.

Frank: And if you look net revenue is coming back to.

Frank: Where it used to be pre pandemic, but the cost structure is just so much higher is there anything you could do.

Operator: We also want to note that the company has widened the guidance range for both revenue and earnings per share. While these ranges reflect the fact that economic and freight conditions are still quite dynamic, we believe the strength and resiliency of the Landstar model position us well to successfully navigate this environment. With that, Bill, we'd like to open the line for questions. 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 1 on your touchtone phone. Once again, that is star 1 to ask a question. To cancel your request, please press star 2.

Frank: Or any initiatives to meaningfully reduce cost one and then <unk>.

Frank: Secondly, we've had a view that there is and there should be an opportunity to meaningfully accelerate the pace of a buyback here.

Frank: Any thoughts on that and your new role, yes for sure.

All good questions as always.

Frank: So on the cost side. It is always going to be something that we're focused on is JP went through.

Frank: The math, especially in the in the first quarter year over year I mean, we are very disciplined on.

Frank: Head count and J J T has got the labor on that one and holding the organization accountable. So what you're really seeing our selective investments that are that are really.

Scott H. Group: We do have the first question coming from the line of Scott Group of Wolf Research. Your line is now open. Hey, thanks. Good morning, Frank. Nice to speak with you again. Welcome back to transports. You guys gave more color on some of the monthly trends. That was helpful, but it was going quick.

Frank: Driving the year over year change and whether thats on the depreciation side or adding some selective positions in those strategic areas that we called out on the phone technology is always going to be an area that we continue to invest in our job is to support.

Frank: The agents in the <unk> and the carriers out there. So there is.

Frank: There is no initiative to really go hard at cost right now it's more around the growth side of the equation, we think we're going to come out stronger.

Frank A. Lonegro: So it sounded like March deteriorated, and then maybe, Frank, at the end, your comments around pricing in April were a little bit better. Maybe just a little bit more color on sort of what happened in March and what you're seeing in April. Hey Scott, thanks. And it's good to hear your voice again, for sure. You know, we're watching this thing on a daily and weekly basis, as you would imagine, just given the desire to see an inflection. And so, you know, what we don't want to do is over-index for a day or two.

Frank: When we start to inflect. So I think we're in good position there with sales organizational changes are going to be helpful. There. We do have some real focus on things like the cross border, Mexico as well as heavy haul and those are areas that we haven't scaled business already being.

Frank: Being able to focus on those areas that are more secular growth in nature rather than cyclical.

Frank: And then on your buyback question.

Frank: Obviously, we're just getting started.

Frank: Joining mid quarter, we got a pristine balance sheet as you know and it's wonderful to inherit that from.

Jim get Tony and obviously the board has had a big hand in that one and the company's really got a kind of a long and successful history of returning cash to shareholders thats not changing.

Frank: The company has been very selective about when it's in the market and we're going to continue to evaluate where we are in the market.

Frank A. Lonegro: We want to look at the trends over time, and I think the point that I was making toward the end was, you know, the week-by-week view in April on rates was beginning to show some positivity. And so, you know, we're hopeful that this is the beginning of an inflection. It's not going to be kind of a rapid rebound, as maybe we saw in the immediate post-COVID time period. But a little bit of sign of green shoots is always helpful. I'll let JT fill in some color there. Yeah, no, absolutely not, Frank.

Frank: On a price basis pretty much every day being patient clearly hasnt advantages you look at where we traded in the in the first quarter between about 180, and 200 and obviously, it's come down since then for a lot of different reasons, including with the fed's going to do.

Frank: And we want to be great stewards of the shareholders' money. So we're going to be selective in the market, but we're going to return capital to shareholders.

Speaker Change: Okay makes sense. Thank you guys appreciate the time thanks.

Speaker Change: Thanks Scott.

Speaker Change: Thank you will note that our next question comes from the line of Tom <unk> of UBS. Your line is now open.

Tom: Yes, good morning, and yes.

Tom: So kind of we'll come back to the transports Frank.

Tom: To talk with you again.

James P. Todd: So, Scott, the good guy top line to the model really was a strong February. So, February versus the model was about 8 percent, as both the number of loads hauled by a truck and truck revenue per load in February outpaced typical seasonality. March was about 3.5 percent, a good guy to the model on the top line. But both loadings and rev per load in March seasonally underperformed typical February to March, again, off a stronger base, the starting point of the fiscal year.

Tom: How do you think about the dynamic on <unk> and <unk> I think you said that the decline in <unk> is slowing a bit.

So when do you I mean do you think that's just kind of like spot rates bottoming youll.

Youll see that bottom out or what do you think the dynamic will be and kind of.

Tom: Against key levers for how the BCS Bto Count goes and also the $1 million agent count.

James P. Todd: And then any thoughts about April there? Yeah, to Frank's point, you know, we saw truck revenue per load probably peak in the middle of fiscal March and then start, start to slide off us a little bit. To Frank's point, in fiscal April, week one to week two, truck revenue per load improved week two to week three and improved such that, you know, we don't have April closed, but our best guess is we're going to be maybe flattish March to April. And that compares with a historical plus 100 basis point, good guy on truck revenue per load historically March to April. Okay, that's helpful. And then Frank, just the bigger picture, right?

Tom: If you think about that in let's say <unk> <unk>.

Speaker Change: Yeah, Hey, Tom and Great to hear from you again as well I think the first impression I would give you on the agents and the <unk> I mean these folks are awesome. They are out their scratching everyday.

Speaker Change: On the agent side to go sell the extra load of freight in the <unk>.

Speaker Change: To haul and extra loads for us so it's been great to see just the resiliency of the folks out there and the fact that there.

Speaker Change: They are all commission based on the agent side and low based on the on the BCS side. So these are folks who are putting dinner on the table.

Speaker Change: Bye bye load by load. So that's really important to note there not on salary and these folks are out there fighting every day for us.

Speaker Change: In terms of the $1 million agent count I mean, it was down year over year, just because of the rate environment.

I think as the rates inflect that number will go up.

Frank A. Lonegro: If you look, net revenue is coming back to where it used to be pre-pandemic, but the cost structure is just so much higher. Anything you could do or any initiatives to meaningfully reduce costs, one. And then, you know, secondly, we've had a view that there should be an opportunity to, you know, meaningfully, you know, accelerate the pace of buyback here. Any thoughts on that in your new role? Yeah, for sure.

Speaker Change: On a full year over full year type basis, certainly the exit rate if the rates cooperate with us the exit rate will be higher this year than.

Speaker Change: Then it was at the end of 2023.

Speaker Change: <unk> is one of the things Thats really important and Joe can get into the numbers, but even though the bcl count effectively declined in line with where volumes with the.

Speaker Change: The actual productivity of.

Speaker Change: The <unk> went up they hold more loads per person.

Speaker Change: And then when they were doing last year. So that tells us that they are out their scratching for for every loan, but Jo Malone again.

Frank A. Lonegro: And all good questions, as always. So, on the cost side, it is always going to be something that we're focused on as JT went through, you know, the math, especially in the first quarter, year over year. I mean, we are very disciplined on headcount, and JT's got the laboring oar on that one in holding the organization accountable.

Joseph J. Beacom: Yes, Tom so.

Joseph J. Beacom: In the first quarter net declines were about 10% better than the fourth quarter. So we're seeing some improvement there.

Joseph J. Beacom: And to Greg's point utilization votes per truck per week for <unk> was up 3% in the first quarter. It was flat in January 6% better than February and then 4% better in March so we kind of like the trend that we're seeing there.

Frank A. Lonegro: So what you're really seeing are selective investments that are really driving the year-over-year change, whether that's on the depreciation side or adding some selective positions in those strategic areas that we called out on the phone. Technology is always going to be an area that we continue to invest in. I mean, our job is to support, you know, the agents and the BCOs and the carriers out there. You know, there's no initiative to really go hard at cost right now.

Joseph J. Beacom: And that continues to I think move in the right direction through April and again. It is a function of just loading opportunities and rate and I think we'll see.

Joseph J. Beacom: The bcl kind of come back as kind of the volume that's been rate come back in line.

Joseph J. Beacom: Okay.

Speaker Change: Do you think that Youll see good responsiveness on that or would you do you think it's going to be tougher to add <unk>.

Speaker Change: If you have kind of a gradual improvement in rates.

Speaker Change: I think that.

Speaker Change: I think they'll bounce back in our history really speaks to that if you look back in years, where we've come in kind of come out of a trough.

Speaker Change: In 2017 going into 2018, we added 250 trucks in 2017, we added over 900 in 2018.

Speaker Change: We added we were down 130, or so in the first quarter of 2020, but we added a net $7 48 for the year.

Frank A. Lonegro: And those are areas that, you know, we have a scale business already and are able to focus on those areas that are more, I'd say, secular growth in nature rather than cyclical. And then on your buyback question, you know, obviously, we're just getting started, you know, joining mid-quarter. We've got a pristine balance sheet, as you know, and it's wonderful to inherit that from, you know, Jim Gattoni.

Speaker Change: Added.

Speaker Change: A bunch of 870 in 2021, so I think the model speaks to the fact that when there is opportunity.

Speaker Change: These guys really flock to Landstar and I think it is.

Speaker Change: Not different now.

Speaker Change: We're waiting for that inflection point for that to happen and I think it's.

Speaker Change: Capacity comes out of the market and things turn I mean, I think we're still at home for owner operators, who want to have the freedom to make decisions and provide for themselves.

Frank A. Lonegro: And obviously, the board's had a big hand in that one. And the company's really got a long and successful history of returning cash to shareholders. That's not changing.

Speaker Change: It's going to be a gradual thing in my opinion.

Speaker Change: Rates and volumes come back.

Frank A. Lonegro: The company's been very selective about when it's in the market, and we're going to continue to evaluate where we are in the market on a price basis pretty much every day. Being patient clearly has its advantages. You look at where we traded in the first quarter between about 180 and 200, and obviously, it's come down since then for a lot of different reasons, including what the Fed is going to do. And we want to be great stewards of the shareholders' money, so we're going to be selective in the market, but we are going to return capital. Thank you guys, I appreciate the time.

They'll come back.

Speaker Change: Or is this not a systemic issue I don't think.

Speaker Change: It's more about when and at what pace that happens and it's we're as anxious as anybody.

To see that happen rather quickly.

Speaker Change: Yes, okay. So it's about kind of cycle duration and profile not structural change.

Speaker Change: Thank you for the time I appreciate it thanks Tom.

Speaker Change: Okay.

Speaker Change: Thank you we will move now to the next question coming from the line of Jon Chappell of Evercore. Your line is now open.

Jonathan B. Chappell: Thank you and good morning.

Jonathan B. Chappell: I want to circle back to February and March, especially Jimmy noted February 8%. Good guide to the model <unk> $3. Five I mean that is very contrary to everything we've heard throughout this earnings season for the last week and a half. So is there any way you can kind of dig a little deeper on what are the relative outperformance came from how things change to the positive.

Operator: Thank you. We will move now to the next question coming from the line at Tom Wadewitz of UBS. Your line is now open.

Thomas Richard Wadewitz: Yeah, good morning. And also, you know, a kind of welcome back to Transports Frank. Nice to talk with you again.

Jonathan B. Chappell: It seem to be changing the negative for most of the rest of the industry post the January conference call.

Thomas Richard Wadewitz: How do you think about the dynamic between agents and BCOs? I think you said that, you know, the decline in BCOs is slowing a bit. So when do you think that's just kind of like, Spot Raids bottoming, you know, you'll see that bottom out, or what do you think the dynamic will be and kind of, I guess, key levers for how the BCO count goes and also the million dollar agent count, you know, if you think about that in, let's say, 2Q, 3Q? Yeah, hey, Tom, and great to hear from you again as well.

Jonathan B. Chappell: John I'm happy to so in February the biggest good Guy was truck revenue per load in February was 60 basis points higher than January that compares to a down to 'twenty. Historically, if you look at 2019 to 2015 pre pandemic patterns. In addition truck volume.

Jonathan B. Chappell: We beat on seasonality as well I would tell you John we saw this too in not just on the revenue side, but we saw it on the net revenue side on the brokerage side of the house. So from the from the fourth quarter of 2023. The first eight weeks of the first quarter of 2024, we saw our net revenue margin compressed one one.

Frank A. Lonegro: I think the first impression I would give you about the agents and the BCOs is that these folks are awesome. They're out there scratching every day, you know, on the agent side to go sell the extra load of freight, and the BCOs to haul an extra load, you know, for us. So it's been great to see just the resilience of the folks out there. And, you know, the fact that they're all commissioned based on the agent side and load based on the BCO side.

Jonathan B. Chappell: Five basis points.

Jonathan B. Chappell: And then from the first eight weeks of first quarter 'twenty for the last five weeks. It widened back out 85 basis points right. So I think that's consistent with kind of that underperformance on the topline that we saw relative to pre pandemic seasonality off that tougher launch point in February.

Frank A. Lonegro: So these are folks who are putting dinner on the table, you know, by load by load. So it's really important to know they're not on salaries and these folks are out there fighting every day for us.

Speaker Change: Okay, and then I don't want to extrapolate over the last couple of weeks or whatever but if you were in kind of a real good guy in February March and people are kind of looking for green shoots it sounds like maybe February was a little bit worse in the back half, but typical seasonality, but April a little bit better are there any signs that you're seeing that there is really a.

Frank A. Lonegro: In terms of the million dollar agent count, I mean, it was down year over year just because of the rate environment. You know, I think as the rates inflect, that number will go up, you know, on a full year or full year type basis. Certainly, the exit rate, if the companies cooperate with us, the exit rate will be higher this year than it was at the end of 2023. On the BCOs, one of the things that's really important, and Joe can get into the numbers, but, you know, even though the BCO count effectively declined in line with where volumes went, the actual productivity of the BCOs went up. They hauled more loads per person than they did last year, so that tells us that they're out there scratching for every load. But Joe, fill in the gap.

Speaker Change: More sustainable uplift in demand or a more accelerated removal of capacity thats, putting a floor below rates or do you think that this is pretty specific to kind of your business your business model and your customer base.

Speaker Change: Yes, John let me take a shot at that one.

Speaker Change: Harkens back to the conversation we were having was Scott a moment ago.

Speaker Change: We're watching this thing very very closely.

John: We've got as we said in our prepared remarks, we've got areas, which are doing quite well relative to the broader market and relative to the corporate average and then we've got other areas like power only in some of the <unk> business is not doing as well and you would expect that kind of super cyclical side of things to be really good in good times and more difficult and more difficult times when I look at.

Joseph J. Beacom: Yeah, Tom, so in the first quarter, net declines were about 10% better than the fourth quarter, so we're seeing some improvement there. And to Frank's point, utilization loads per truck per week for BCOs were up 3% in the first quarter. That was flat in January, 6% better in February, and then 4% better in March.

John: The commodity groups.

Joseph J. Beacom: So we kind of like the trend that we're seeing there, and, you know, that continues to, I think, move in the right direction through April. And, again, it is a function of just loading opportunities and rate, and I think we'll see the BCO count come back as volumes and rates come back in line. Do you think that you'll see good responsiveness on that, or do you think it's going to be tougher to add BCOs if you have some kind of gradual improvement in rate?

Speaker Change: That are performing well in April.

Speaker Change: There are things like the automotive business metals electronic packaging building materials. The government business. I mean, these are things that are more on the industrial side of the economy and more of that have.

Speaker Change: Kind of a secular.

Speaker Change: Item of things I mean data centers wind energy.

Speaker Change: Electronic vehicles things like that and.

Speaker Change: Very well positioned to do well in those markets. I mean, these are sort of our sweet spots. So we're seeing those things do well I think that they are reflective of early cycle. How early is a good question to ask the consumer durable side is still not where we'd like it to be.

Joseph J. Beacom: You know, I think that, uh, I think they'll bounce back, and our history really speaks to that. If you look back at years when we've come and kind of come out of a trough, um, in 17 going into 18, we added, you know, 250 trucks in 17. We added over 900 in 2018.

Speaker Change: Our view in many I think share. This view there was a fair amount of durable goods that were pulled forward during the pandemic and thats got to kind of get back to equilibrium before we see that turn.

Joseph J. Beacom: We added, you know, we were down 130 or so in the first quarter of 2020, but we added a net 748 for the year, and, um, added, um, a bunch of 870 in 2021. So I think the model speaks to the fact that when there's opportunity, these guys really flock to Landstar. And I think that it's not different now.

Speaker Change: Turn positive for us.

Speaker Change: J D. You can get any more color on some of the known.

J D: Frank I think I think you hit the nail on the head we're watching very very closely and we get a little bit of Easter impact that was that was a headwind to the end of the first quarter tailwind of the April and we're carving that out and we're looking John.

Joseph J. Beacom: I just think we're waiting for that inflection point for that to happen. And I think, you know, as capacity comes out of the market and things turn, I mean, I think we're still the home for owner operators who want to have the freedom to make decisions and provide for themselves. It's going to be a gradual thing, in my opinion, as rates and volumes come back. They will come back. This is not a systemic issue, I don't think so.

Speaker Change: From our vantage point the reasonably in line on the volume side and Ripper load has just taken a little bit below.

Speaker Change: I appreciate it thanks, Brian Thanks, Tim Yeah for sure John.

Speaker Change: Thank you we will move now to the next question coming from the line of Bruce Chan of Stifel. Your line is now open.

Jizong Chan: Hey, good morning, gentlemen, I appreciate the time here just want to come back to some of the comments that you made around cross border I know, it's still early days there but.

Joseph J. Beacom: But, you know, it's more about when and at what pace it happens, and we're as anxious as anybody to see that happen quickly. Yeah, okay. So it's about the kind of cycle duration and profile, not structural change. Okay, thank you for the time.

Jizong Chan: Maybe you can help us to quantify the size of that business now relative to the opportunity.

Jizong Chan: What kind of growth you've seen there.

Operator: I appreciate it. Thank you. We will move now to the next question coming from the line of John Chappell of Evercore. Your line is now open. Thank you. Good morning.

Jizong Chan: Yes.

Jizong Chan: All cross border and I think the important thing is we were an early mover in cross border.

Jizong Chan: The facility, we call <unk>, which is a facility a cross dock facility.

Jonathan B. Chappell: I want to circle back to February and March, especially, Jim, you noted, February 8% good guy to the model March three and a half. I mean, that is very contrary to everything we've heard throughout this earnings season for the last week and a half. So is there any way you can kind of dig a little deeper on where the relative outperformance came from and how things changed to the positive when they seemed to be changing to the negative for most of the rest of the industry, you know, post the January conference call? John, I'm happy to.

Jizong Chan: Yard and actually we have a big claim down there with all Lf base.

Jizong Chan: A really slick facility, our customers and agents really like that we've got a shelf shuttle service that goes across the border. We got a small intra Mexico carrier.

Jizong Chan: Metro So we're well positioned in that environment, clearly, we're trying to capitalize on near shoring.

Jizong Chan: So we've got a good facility down there we're going to continue to look for opportunities to grow that business to introduce more and more agents to help us sell the cross border.

James P. Todd: So, in February, the biggest good guy was truck revenue per load in February was 60 basis points higher than January. That compares to a down 220 historically if you look at 2019 to 2015 pre-pandemic patterns. In addition, truck volume beat seasonality as well. And I would tell you, John, we saw this too on not just the revenue side, but we saw it on the net revenue side on the brokerage side of the house.

Jizong Chan: We think it's we think it's a good business and again as I mentioned in my opening remarks, I will turn it over to J T for numerical color, but we're already scale a scale player here. So it's really about taking a business that's already performing well and really thinking about ways to grow.

James P. Todd: Frank I would just in terms of revenue performance. It was down about 14, 5% of our cross border Reds <unk> 24 versus <unk> 23 was about 400 basis points better than what we saw here at the core.

James P. Todd: So, from the fourth quarter of 2023 to the first eight weeks of the first quarter of 2024, we saw our net revenue margin compress by 105 basis points. And then from the first eight weeks of the first quarter of 2024 to the last five weeks, it widened back out by 85 basis points, right? So I think that's consistent with kind of that underperformance on the top line that we saw relative to pre-pandemic seasonality off that tougher launch point in February. Okay, and then I don't want to, you know, again, extrapolate the last couple of weeks or whatever.

James P. Todd: Yeah, No I'd just say.

James P. Todd: Last year, we did a little over $600 million, what we're looking to move to almost 200000 loads across the border this year.

James P. Todd: It's a tremendous facility that serves us well it provides for a great trans loading environment to allow us to take advantage of that imbalance in the cross border business. There is more of a lot more northbound and southbound.

James P. Todd: We've got a very solid core Mexican group of carriers that help us service the interior.

James P. Todd: And then to the earlier emphasis around cross border. We've got a dedicated sales team now working on developing opportunities south of the border as well as some agent development initiatives trying to train up and bring agents up to speed on the core capabilities that we have a multitude of crossing points across the border and that's a really I think going very very.

James P. Todd: But if you were kind of a real good guy in February, March, and you know, people are kind of looking for green shoots, sounds like, you know, maybe February was a little bit worse in the back half, but that's typical seasonality, but April was a little bit better. Are there any signs that you're seeing that there's really a more sustainable uplift in demand or a more accelerated removal of capacity that's putting a floor below rates? Or do you think that this is pretty specific to the kind of your business, your business model, and, you know, your customer base? Yeah, John, let me take a shot at that one.

James P. Todd: Well, so again, a strength that we have and have had that one is to continue to lean on to grow and what we think is a great opportunity not only in 'twenty four but into the future.

Speaker Change: Okay, Great I appreciate it.

Speaker Change: Thank you. The next question coming from the line of Stephanie Mark of Jefferies. Your line is now open.

Stephanie Lynn Benjamin Moore: Hi, good morning, Thank you.

Stephanie Lynn Benjamin Moore: I wanted to maybe circle back on a prior question talking about maybe the cost the cost structure and from select investments that you've called out.

Frank A. Lonegro: And it a little bit harkens back to the conversation we were having with Scott a moment ago. We're watching this thing very, very closely. You know, as we said in our prepared remarks, we've got areas which are doing quite well relative to the broader market and relative to the corporate average. And then we've got other areas like power only and some of the 3PL business that aren't doing as well.

Stephanie Lynn Benjamin Moore: Just kind of expand a little bit on those you know you called out some sales organization changes and Jeff mentioned, having a dedicated sales team to go after cross border and you can kind of maybe expand on that a little bit more just key areas of investment.

Frank A. Lonegro: And you would expect that kind of super-cyclical side of things to be really good and good times and more difficult and more difficult times. When I look at the commodity groups that are performing well in April, you know, there are things like the automotive business, you know, metals, electronic packaging, building materials, the government business. I mean, these are things that are more on the industrial side of the economy and more that have, you know, kind of a secular item.

Stephanie Lynn Benjamin Moore: Which I think are clearly you're trying to position yourself well then the upturn, but love to get a little bit more color. There and then maybe on the cost side areas, where youre, making.

Speaker Change: Thank you.

Speaker Change: Probably click accident sit today costs out of it right.

Speaker Change: Hey, Stephanie Thanks for the good questions. Let me, let me do them in reverse.

Stephanie Lynn Benjamin Moore: I would say we are looking hard at every position that comes open whether we need to fill that whether we need to fill it right now can we wait until we see additional volume inflections and again I give a lot of kudos to JP in terms of how we manage this things.

Frank A. Lonegro: I mean, data centers, wind energy, you know, electronic vehicles, things like that. And we're very well positioned to do well in those markets. I mean, these are sort of our sweet spots. So we're seeing those things do well. I think that they are reflective of an early cycle. How early is a good question to ask.

Stephanie Lynn Benjamin Moore: The whole leadership organization, everybody understands that we are in a freight recession that's been.

Stephanie Lynn Benjamin Moore: Couple of years in difficult.

Stephanie Lynn Benjamin Moore: Circumstances, so we're being very very judicious about about filling positions that have some level of volume variability to them in terms of strategic investments I'm a believer that.

Frank A. Lonegro: The consumer durable side is still not where we'd like it to be. You know, our view, and many, I think, share this view, there was a fair amount of durable goods that were pulled forward during the pandemic. And that's got to kind of get back to equilibrium before we see that, you know, turn positive for us. JT, if you've got any more color on some of that. No, Frank, I think you hit the nail on the head.

Stephanie Lynn Benjamin Moore: When a company embarks on a strategy, it's got to align a lot of things, including capital and human capital resources to be able to bring those to fruition.

Stephanie Lynn Benjamin Moore: So when we talk about strategic initiatives like cross border in heavy haul you should expect that we're going to invest both capital and people into those areas to make sure that what.

James P. Todd: We're watching very, very closely. We got a little bit of Easter impact. It was a headwind at the end of the first quarter, a tailwind in April, and we're carving that out, John, and from our vantage point, reasonably in line on the volume side, and rip or load is just ticking a little bit below. Okay, appreciate it.

Stephanie Lynn Benjamin Moore: What we're saying is followed through with real action and can deliver the value that we think is there. So we.

Stephanie Lynn Benjamin Moore: And we're not talking large dollars or large numbers of people, but the fact that we're adding salespeople into cross border, we're adding salespeople and some leadership positions in heavy haul like these are these are important decisions for us and remember that.

Stephanie Lynn Benjamin Moore: The headquarters and Barbara core environment within Landstar.

Jonathan B. Chappell: Thanks, Frank. Thanks, Jim. Yes, for sure, John. Thank you. We will move now to the next question coming from the line of Bruce Chen of Stiefel. Your phone is now open.

Stephanie Lynn Benjamin Moore: Is quite small relative to the agents. So we're investing there to educate them and to provide them the tools that they need and kick open some doors with customers that can help us get into that business in a more fulsome manner, but.

Bruce Chen: Yeah, good morning, gentlemen. I appreciate the time here. Just want to come back to some of the comments that you made about crossing the border. I know it's, you know, still early days there.

Stephanie Lynn Benjamin Moore: We've got 1100 agents are so that we're trying to introduce into into heavy haul and into cross border. They are not all going to want to do it they're going to be some who have one of the opportunity to try that business out we know there's a bunch of freight out there. We know we're good at it we know our safety and our service capabilities and the performance that we put up year on year out.

Frank A. Lonegro: But maybe you can help us to quantify the size of that business now relative to the opportunity or maybe, you know, what kind of growth you've seen there. Yes, Bruce, on cross-border, I think the important thing is that we were an early mover in cross-border. We built the facility we call LMO, which is a cross-docking facility in a yard, and actually, we have a big crane down there we call El Jefe, so it's a really slick facility. Our customers and agents really like that. We've got a shuttle service that goes across the border.

Stephanie Lynn Benjamin Moore: I can give a lot of credit to Joe in terms of the way that he is running the operation.

Stephanie Lynn Benjamin Moore: It's important for us to keep those as great selling points and it takes a couple of people extra in order to really go out and sit with the agents and help them understand how to go out and sell that piece of business. So anything you'd add to that yeah. It's definitely we've kind of got a mantra that we attribute to cross border and that is Mexico made simple and I think that over the years.

Frank A. Lonegro: We've got a small intra-Mexico carrier called Metro, so we're well-positioned in that environment. Clearly, we're trying to capitalize on near-shoring, so we've got a good facility down there. We're going to continue to look for opportunities to grow that business, to introduce more and more agents to help us sell across borders, so we think it's a good business, and again, as I mentioned in my opening remarks, and I'll turn it over to JT for numerical color, but we're already a scale player here, so it's really about taking a business that's already performing well and really thinking about ways to grow.

Stephanie Lynn Benjamin Moore: We really work to make it that way so that agents aren't intimidated or art.

Stephanie Lynn Benjamin Moore: At all reluctant to bring it up with a customer we've got over 500 agents of our 1100 that will do a cross border shipment last year and going forward and so what we're trying to do is just deepen the understanding increase the confidence to do so and from an investment standpoint, we continue to put shuttle trailers down there that allow us and our.

Stephanie Lynn Benjamin Moore: Same carrier partners too.

Stephanie Lynn Benjamin Moore: Utilize those trailers and provide seamless service timely service across all of the gateway. So we're just trying to do a lot of things the sales effort.

James P. Todd: I would just, in terms of revenue performance, it was down about 14.5%. Our cross-border revs, 1Q24 versus 1Q23, were about 400 basis points better than what we saw here at the core. Yeah, no. I'll just say, you know, last year we did a little over $600 million.

Stephanie Lynn Benjamin Moore: The interior not every agent wants to go into the interior and make sales calls. So landstar provides resources that will be embedded in the anterior making calls uncovering opportunities that will then be managed by those agents and our teams at the border. So.

Stephanie Lynn Benjamin Moore: I think it's a good recipe looking forward.

Speaker Change: And then thank you I appreciate the answer and then just one follow up here maybe on the technology side I think I think for years a lot of the technology investments are geared towards upgrading some legacy systems are we at the point now where maybe some of these investments are positioning you guys to play a little bit more often.

James P. Todd: We're looking to move to almost $200,000 loads across the border this year. And it's a tremendous facility that serves us well. It provides for a great transloading environment to allow us to take advantage of that imbalance in the cross-border business. There's a lot more northbound than southbound.

James P. Todd: We've got a very solid core group of Mexican carriers that help us service the interior. And then, to the earlier emphasis on cross-border, we've got a dedicated sales team now working on developing opportunities south of the border, as well as some agent development initiatives trying to train up and bring agents up to speed on the core capabilities that we have, a multitude of crossing points across the border. And that's really, I think, going very, very well. So, again, a strength that we have and have had that we'll just continue to lean on to grow. Okay, great. I appreciate it.

Speaker Change: Yes internally, Stephanie we sometimes say well we were the original tech enabled.

Speaker Change: Logistics provider, so we're going to continue to stay on.

Speaker Change: On the leading edge of that I think we have to it's really table Stakes. These days. So we may not have marketed near.

Speaker Change: Nearly as much to the investment community as others have done, but we think it's it's not a single leg stool right. It's not just technology. It's the brand has to scale as the relationships. It's the safety. It's the security. It's all of those things wrapped up into one it's not just.

Speaker Change: A bunch of people sitting in front of a computer trying to do.

Speaker Change: Business in a digital manner that is clearly something that we do but it's not the only thing that we do one of the things that we will start looking at US technology I'll say inside the building.

Operator: Thank you. We will move now to the next question coming from the line of Stephanie Moore of Jeffries. Your line is now open. Hi, good morning.

Speaker Change: We still do some things that are more legacy related inside the building.

Stephanie Lynn Benjamin Moore: Thank you. I wanted to maybe circle back on a prior question talking about maybe the cost structure and some select investments that you've called out. If you could maybe kind of expand a little bit on those, you know, you called out some sales organization changes. You just mentioned having a dedicated sales team to go after cross-border. If you could kind of, you know, maybe expand on that a little bit more and just key areas of investments, which, you know, I think are clearly you're trying to position yourself well and then the upturn, but I would love to get a little bit more color there.

Speaker Change: Call Center modernization will be an idea there that we're talking about in the.

Speaker Change: Building and settlements area for us inside the buildings. So we've got some things that are going to generate I would say better levels of support maybe some efficiencies over the next couple of years I think we've done a lot and I'll give Jim good Tony a ton of credit one of the hallmarks of his tenure has been putting great technology and tools in front of the agents in the <unk> and I think we're sort of come.

Speaker Change: Two.

Speaker Change: More of a maintenance mode for that over the next couple of years and again, we'll start to reinvest inside the inside the building.

Speaker Change: Thank you really appreciate it.

Speaker Change: Thank you we will move that to the next question coming from the line of Daniel aimed browse Stephens incorporated your line is now open.

Stephanie Lynn Benjamin Moore: And then maybe on the cost side areas where you're taking, you know, making some, you know, probably quick actions to take costs out of business. Thanks. Hey, Stephanie, thanks for the good questions. Let me do them in reverse.

Speaker Change: Hey, guys. This is Joe <unk> on for Daniel Thanks for taking the question.

Joseph J. Beacom: Just wanted to ask about the cadence of variable contribution margin could you maybe talk about how the exit rate compared to the beginning of the quarter and then wherever you seen that trend during April.

Frank A. Lonegro: You know, I'd say we are looking hard at every position that comes open, whether we need to fill it, whether we need to fill it right now, or can we wait until we see additional volume inflections? And again, I give a lot of kudos to JT in terms of how he manages things. And really, the whole leadership organization, everybody understands that we're in a freight recession that's been, you know, a couple of years in difficult circumstances.

Speaker Change: So we put out Joe Bcm guide for the first quarter of 14, 5% to 14, 7% and clearly with the revenue be a little bit more brokerage and theyre in spreads compressing on us a little bit more than we would've anticipated missed.

Speaker Change: Missed the low end by 13 bps or so as we move into the second quarter with that call for sequential load volume that's going to be handled by a third party trucks right and given what we're seeing in truck count. So you've got kind of embedded mix headwind and then we did bake in a little bit.

Frank A. Lonegro: So, you know, we're being very, very judicious about filling positions that have some level of volume variability to them. In terms of strategic investments, I'm a believer that when a company embarks on a strategy, it needs to align a lot of things, including, you know, capital and human capital resources to be able to bring those to fruition. So when we talk about strategic initiatives, like cross-border and heavy haul, you should expect that we are going to invest both capital and people into those areas to make sure that, you know, what we're saying is followed through with real action and can deliver the value that we think is there. So we, you know, and we're not talking about large amounts of money or large numbers of people.

Speaker Change: More anticipation of spread compression similar to what we saw third quarter fourth quarter fourth quarter first quarter and as such.

Speaker Change: The guide calls for a very very close to normal seasonality with respect to <unk> expectations for <unk>.

Speaker Change: Got it makes sense. Thank you as a follow up it sounds like you guys are seeing an improvement in industrial end markets and commodity groups.

Speaker Change: Do you have any thoughts on when you expect consumer durables demand could pick up or have you seen any green shoots of improvement there.

Frank A. Lonegro: But the fact that we're adding salespeople into cross-border, we're adding salespeople and some leadership positions in heavy haul, like these are important decisions for us. And remember that the headquarters environment, the core environment within Landstar, is quite small relative to the agents. So we're investing there to educate them and provide them with the tools that they need and kick open some doors with customers that can help us get into that business in a more fullsome manner.

Speaker Change: Yes, it's a good question.

Speaker Change: It is getting a little bit better, but it's off of an awfully low base.

Speaker Change: I'd hate to call the ball on that one I think it's going to come down to the consumer has had a lot of opportunity in the last couple of years as Covid has kind of roll into it and you spent the first two years of the Covid period spending money on things at home and renovating things that you Couldnt go out you couldn't travel.

Frank A. Lonegro: But, you know, we've got eleven hundred agents or so that we're trying to introduce into heavy haul and into cross-border. They're not all going to want to do it, but there are going to be some who have wanted the opportunity to try that business out. We know there's a bunch of freight out there. We know we're good at it.

Speaker Change: Couldn't do the things.

Speaker Change: That otherwise you might want to want to do out in about just given the the concern around contagiousness. So I think we're now in that period, where folks are pivoting toward more of the services and going out to dinner rather than eating at home or taking a vacation instead of buying a new dishwasher or something like that so I just think we got to go.

Speaker Change: Through the pull forward a little bit I still think we're several quarters away from seeing that come back into equilibrium.

Frank A. Lonegro: We know our safety and our service capabilities and the performance that we put up year in, year out. You know, give a lot of credit to Joe in terms of the way that he's running the operation. It's important for us to keep those as great selling points. And it takes a couple of extra people in order to really go out and sit with the agents and help them understand how to go out and sell that piece of business.

Speaker Change: Got it. Thank you guys Thats all for us.

Speaker Change: Thank you we will move that to the next question comes from the line of Bascom majors of Susquehanna. Your line is now open.

Bascome Majors: Hey, Jim.

Bascome Majors: Current outlook can you just.

Bascome Majors: Tell us how much is embedded in the full year accrual for variable comp, including the share base piece.

Joseph J. Beacom: Yeah. And Stephanie, we've kind of got a mantra that we attribute to crossing the border, and that is Mexico made simple. And I think that, you know, over the years, we've really worked to make it that way so that agents aren't intimidated or aren't at all reluctant to bring it up with a customer. We've got over five hundred agents of our eleven hundred that did a cross-border shipment last year and going forward.

Bascome Majors: You returned to growth in 2025, how much needs to come back to.

Bascome Majors: Get you back to that level. Thank you Hey, Baskin.

Jim: Based on my 90, <unk> III kind of best estimate as I sit here today, I would anticipate about a 15% to $17 million headwind full year 24 versus 23.

Bascome Majors: If you're looking at 25 versus 24 I'd say.

Bascome Majors: And kind of threshold, you would expect about $1 million tailwind given some of those transition costs are included in the first quarter 'twenty for that won't won't repeat in FY 'twenty five.

Joseph J. Beacom: And so what we're trying to do is just deepen the understanding, increase the confidence to do so. And from an investment standpoint, we continue to put shuttle trailers down there that allow us and our Mexican carrier partners to utilize those trailers and provide seamless service, timely service across all the gateways. So we're just trying to do a lot of things. You know, the sales effort. On the interior, you know, not every agent wants to go into the interior and make sales calls. So Landstar provides resources that will be embedded in the interior, making calls, and uncovering opportunities that will then be managed by those agents and our teams at the border. So I think it's a good recipe.

Speaker Change: Thank you for that and.

Frank: Frank Welcome back.

Frank: High level I know, you've only been here less than three months, but this is a business that has done really well for stakeholders and shareholders by doing things pretty similarly for a very long time and obviously the cycle has has challenge things at least from a peak in a way that we haven't seen.

Frank: Before but but structurally as you come in with a fresh perspective do you see any pieces of the model that could maybe be tweaked I don't know how.

Joseph J. Beacom: Looking forward to it. And then thank you; I appreciate the answer. And then just one follow-up here, maybe on the technology side. I think for years, a lot of the technology investments were geared towards upgrading some legacy systems. Are we at the point now where, you know, maybe some of these investments are positioning you guys to play a little bit more often? Yeah, you know, internally, Stephanie, we sometimes say, well, we were the original tech-enabled logistics provider.

Frank: How they relate with agents or how you compensate Bcf, just really anything where you might be able to turn some knobs around the dials and generate.

Frank: Kind of growth we've seen historically for the next 10 years. Thank you.

Speaker Change: Hey, bathroom and nice to hear your voice and look forward to connecting with you later in the year I'd say the early impressions and again, it's only been a little less than three months I mean, the model is an extremely powerful model. It's unique it's resilient. It obviously its attributes which are.

Speaker Change: Our wonderful wonderfully successful the tech enablement, the asset light strong cash flow.

Speaker Change: You are harnessing the power of literally thousands of people who are.

Joseph J. Beacom: So, you know, we're going to continue to stay on the leading edge of that. I think we have to; it's really table stakes these days. So, you know, we may not have marketed nearly as much to the investment community as others have done. But you know, we think it's, It's not a single-legged stool, right?

Frank: Putting food on the table every day through the agent the Bcl community. So.

Frank: Certainly they do no harm to the model mantra.

Frank: In terms of the future I'd say its evolution not revolution.

Frank: To take advantage of an already really good company and try to make it better. It's a fresh set of eyes on everything that we do and sort of no preconceived notions of.

Frank A. Lonegro: It's not just technology. It's the brand. It's the scale. It's the relationships. It's the safety.

Frank A. Lonegro: It's security. It's all of those things wrapped up into one. It's not just, you know, a bunch of people sitting in front of a computer trying to do business in a digital manner. That is clearly something that we do, but it's not the only thing that we do. One of the things that we will start looking at is technology, I'll say, inside the building, you know, where we still do some things that are more legacy-related inside the building. Call center modernization would be an idea there that we're talking about, and the building and settlements area for us inside the building.

Frank: That we do things as good as we can do so clearly I'm going to be looking for opportunities to improve things again from an already already good base and I think the two themes that maybe youre hearing come through is one how can we accelerate the model.

Frank: And then how can we really focus on some of the strategic investments I mean, you've heard us talk about cross border and heavy haul those aren't going to be the last two areas that we focus on and those are just the first two areas.

Frank: I give the board and Jim Good Tony a lot of credit I mean, they started down this path, maybe a year or so ago.

Frank A. Lonegro: So we've got some things that are going to generate, you know, I'd say better levels of support and maybe some efficiencies over the next couple of years. I think we've done a lot, and I give Jim Gattoni a ton of credit. One of the hallmarks of his tenure has been, you know, putting great technology and tools in front of the agents and the VCOs, and I think, you know, we're sort of coming to, you know, more of a maintenance mode for that over the next couple of years, and again, we'll start to re Thank you; I really appreciate it.

Frank: So on the beneficiary of that work and firmly believe that those two are real opportunities for us I'm going to be looking at the secular shifts in bit of a follow the money type of a strategy. So as you think about things like near shoring Thats clearly an area that we want to play in infrastructure whenever that money on blocks from the government I mean, that's an area that.

Frank: Really fits well with heavy haul so we're going to be able to do a lot more work in that area Green energy would be another area.

Frank: The power generation needs of the country, especially with AI and data processing and <unk>.

Operator: Thank you. We will move now to the next question coming from the line of Daniel Ambrose, Stevens Incorporated. Your line is now open. Hey guys, this is Joe Winterland. I'm on behalf of Daniel.

Frank: Mining for cyber currency and things like that.

Frank: As a gargantuan amount of power that's required to do that which means we've got to have alternative sources of energy and data centers for all the competing.

Daniel Ambrose: Thanks for taking the question. I just wanted to ask about the cadence of the variable contribution margin. Could you maybe talk about how the exit rate compared to the beginning of the quarter and then where you saw that trend during April? Yeah, so we put out Joe, a BCM guide for the first quarter of 14.5 to 14.7. And clearly, with revenue being a little bit more brokerage in there and spreads compressing on us a little bit more than we would have anticipated, you know, missed a low end by 13 bits or so.

Frank: Power Thats necessary like those are all things that we do really well.

Frank: And I think youre going to continue to see us look for those secular opportunities and then invest the capital and the people in order to unlock those.

Speaker Change: Thank you.

Speaker Change: Thank you we will take the last question coming from the line of would they kind of break out 30 Cowen. Your line is now open.

Speaker Change: Hi. Thank you this is on for Jason Seidl.

Speaker Change: I guess can you talk a little bit about the rate environment, specifically in the onsite in market.

Daniel Ambrose: As we move into the second quarter, you know, with that call for sequential load volume, that's going to be handled, you know, by third-party trucks, right, given what we're seeing in truck count. So you've got kind of an embedded mix headwind.

Cowen: I believe flatbed spots had a better quarter than Ben I guess, I guess I'm wondering are we seeing a different capacity dynamic in that part of the market or any color there would be helpful.

Speaker Change: Yes, I think one of the things that we talked about was that the.

Speaker Change: The platform environment is holding up better.

James P. Todd: And then we did bake in a little bit more anticipation to spread compressions similar to what we saw in the third quarter, fourth quarter, fourth quarter, first quarter. And as such, the guide calls for a very, very close to normal seasonality with respect to BCM expectations for Got it. Makes sense. Thank you. Um, as a follow-up, it sounds like you guys are seeing an improvement in industrial and markets and commodity groups. Do you have any thoughts on when you expect consumer durables demand to pick up, or have you seen any green shoots of improvement there? Yeah, that's a good question. I mean, it's getting a little bit better, but it's off of an awfully low base, so I'd hate to call it a ball on that one.

Speaker Change: The Nevada environment some of it is simply the.

Speaker Change: The supply demand dynamic in that area. There is fewer flats up and there are bands out there. It is an area that supports heavy haul as well so it's an area that we've been.

Speaker Change: Focused on so I think there is part of it there as well we don't we don't bottom feed we're certainly looking for premium freight and a lot of the platform.

Speaker Change: Items or are a little bit higher revenue per <unk>.

Speaker Change: Absolutely Frank and as I mentioned, there was a bit of a mixed good guy there. So we saw increased demand for that heavy haul service offering plus 2% on loadings.

Speaker Change: And down 1% Rev per load, if you kind of strip out the heavy haul mix good guy from the inside of the platform category. You'll go from a down one 7% as reported year over year to a down four 2% kind of onsite platform ex the impact of heavy haul.

Frank A. Lonegro: I think it's going to come down to, you know, the consumer has had a lot of opportunity in the last couple of years as COVID has, you know, kind of relented. And, you know, you spent the first two years of the COVID period spending money on things at home and renovating things that you couldn't go out, you couldn't travel, you couldn't do the things that you otherwise you might want to do out and about, just given the concern around, you know, contagiousness.

Speaker Change: Alright, that's very helpful. I guess, just as a follow up.

Speaker Change: Just on the year on year truckload guidance, just I'm looking at the model it implies a modest sequential uptick.

Frank A. Lonegro: So I think we're now in that period where folks are pivoting toward more services and, you know, going out to dinner rather than eating at home or taking a vacation instead of, you know, buying a new dishwasher or something like that. So, you know, I just think we've got to go through the pull forward a little bit. I still think we're, you know, several quarters away from seeing that come back into equilibrium.

Speaker Change: Down at the low end I guess I'm wondering how does that guide metro relative to normal seasonality.

Speaker Change: Initial basis.

Speaker Change: I'm sorry can you the guide with respect to anticipated operating margin for second quarter.

Speaker Change: The truckload.

Speaker Change: 1% to 9%.

Speaker Change: Okay, Gary relative to season year over year, just saw slightly slightly below I think on.

Speaker Change: On a sequential basis, we called for 4% to 8% tailwind <unk> so call. It six at the mid and Thats, that's lagging by a point or two of what we would call a defined normal seasonality.

Daniel Ambrose: Thank you guys. That's all for us. Thank you, we will move now to the next question coming from the line of Bascome Majors of Susquehanna. Your line is now open. Hey, Jim, in your current outlook, can you just tell us how much is embedded in the full-year accrual for Variable Comp, including the share-based piece? And if you return to growth in 2025, how much needs to come back to get you back to that level? Hey, Bascom.

Speaker Change: Alright, great. Thanks, a lot gentlemen, thanks.

Speaker Change: At this time I'm showing no further questions I would like to turn the call back over to you Sir for closing remarks.

Bascome Majors: Based on my nine plus three kind of best estimate, as I sit here today, I'd anticipate about a 15 to $17 million headwind, full year 24 versus 23. If you're looking at 25 versus 24, I'd say at that kind of threshold, you'd expect about a million dollars of tailwind given some of those transition costs are included in the first quarter of 24 that won't, you know, won't repeat in FY 25 Thank you for that. You know, Frank, welcome back, at a high level.

Speaker Change: Thanks, Paul in closing, while the freight environment remains challenging we do see some positives in the near term. We expect the 2024 second quarter to deliver Landstar is first quarter to quarter sequential revenue increase since the second quarter of 2022.

Paul: So we are encouraged that truck revenue per load seems to have stabilized at a level well above pre pandemic norms and truckload volumes appear to be trending reasonably in line with pre pandemic normal seasonal patterns, which is potentially a positive sign for the rest of 2020 for regardless of the economic environment. The resiliency of the Landstar variable cost business model.

James P. Todd: I know you've only been here for less than three months, but this is a business that has done really well for stakeholders and shareholders by doing things pretty similarly for a very long time. And obviously, the cycle has challenged things, at least from the peak, in a way that we haven't seen before. But structurally, as you come in with a fresh perspective, do you see any pieces of the model that could maybe be tweaked?

Paul: To generate significant free cash flow.

Speaker Change: Istar has always been a cyclical growth company and we are well positioned to navigate these dynamic times and look forward to higher highs in the freight market turns are way. Thank you for joining us. This morning, we look forward to speaking with you again on our 2024 second quarter earnings Conference call in July. Thank you.

Bascome Majors: I don't know how they relate to agents or how you compensate BCOs, just really anything where you might be able to turn some knobs on the dials and generate the kind of growth we've seen historically for the next 10 years. Thank you. Hey Bascome, nice to hear your voice and look forward to connecting with you later in the year. I'd say the early impressions, and again, it's only been a little less than three months. I mean, the model is an extremely powerful tool.

Speaker Change: Thank you for joining the conference call today have a good morning. Please disconnect your lines at this time.

Bascome Majors: It's unique, it's resilient, it obviously has attributes which are wonderful and have been wonderful successes, you know, the tech enablement, the asset light, the strong cash flow, you know, you're harnessing the power of literally thousands of people who are, you know, putting food on the table every day through the agent and VCO community. So, you know, there's certainly a "do no harm" mantra. You know, in terms of the future, I'd say it's evolution, not revolution.

Frank A. Lonegro: It's how to take advantage of an already really good company and try to make it better. It's a fresh set of eyes on everything that we do, and sort of no preconceived notions of, you know, that we do things as well as we can. So, you know, clearly, I'm going to be looking for opportunities to improve things, again, from an already good base. And I think that the two themes that maybe you're hearing come through are, one, how can we accelerate the model?

Frank A. Lonegro: And then how can we really focus on some of the strategic investments? I mean, you heard us talk about cross-border and heavy haul, like those aren't going to be the last two areas that we focus on. Those are just the first two areas, you know, and I give the board and Jim Gattoni a lot of credit. I mean, they started down this path maybe a year or so ago.

Frank A. Lonegro: And so I'm the beneficiary of that work and firmly believe that those two are real opportunities for us. You know, I'm going to be looking at the secular shifts, you know, in a bit of a follow the money type of strategy. So, you know, as you think about things like near shoring, that's clearly an area that we want to play in.

Frank A. Lonegro: You know, infrastructure, whenever that money unlocks from the government, I mean, that's an area that really fits well with heavy haul. So we're going to be able to do a lot more work in that area. Green energy would be another area. You know, the power generation needs of the country, especially with AI and data processing and, you know, mining for cyber currency and things like that. I mean, it's just there's a gargantuan amount of power that's required to do that, which means we've got to have alternative sources of energy and data centers for all the computing power that's necessary.

Bascome Majors: Like those are all things that we do really well in. And I think you're going to continue to see us look for those secular opportunities and then invest, you know, the capital and the people in order to unlock them. Thank you. Thank you. We will take the last question coming from the line of Uday Kanapurkar on behalf of Teddy Cowen. Your line is now open. Hi, thank you. This is Odeon for Jason Seidl.

Unknown Attendee: I guess, can you talk a little bit about the rate environment, specifically in the unsighted market? I believe flatbed spots had a better quarter than vans. I guess I'm wondering, are we seeing a different capacity dynamic in that part of the market, or any other color that would be helpful? I think one of the things that we talked about was that the platform environment is holding up better than the van environment. Some of it is simply the supply-demand dynamic in that area. There are fewer flats out there than there are vans out there.

Frank A. Lonegro: It is an area that supports heavy haul as well, so it's an area that we've been focused on, so I think there's part of it there as well. We don't bottom feed. We're certainly looking for premium freight, and a lot of the platform items are a little bit higher revenue per load. I'll let Jay keep going again. Absolutely, Frank. As I mentioned, there was a bit of a mixed bag there

Speaker Change: [music].

James P. Todd: We saw increased demand for that heavy haul service offering, plus 2% on loadings, and down 1% in revenue per load. All right, that's very helpful. I guess just as a follow-up, just on the year-on-year truckload guidance, just as I'm looking at the model, it implies a modest sequential uptake or, you know, even slightly down at the low end. I guess I'm wondering how that guidance measures relative to normal seasonality on a sequential basis. I'm sorry, can you please give me the guide with respect to the anticipated operating margin for the second quarter? Did the truck load? down five to nine percent. You're over here, right? Oh, you're over here.

Unknown Attendee: Just slightly, slightly below. So I think on a sequential basis, we called for 4 to 8% tailwind, 1Q to 2Q. So call it 6 at the midpoint, and that's lagging by a point or two of what we would. All right, great. Thanks a lot, gentlemen. At this time, I have no further questions.

Operator: I would like to turn the call back over to you, sir, for your closing remarks. Thanks, Bill. In closing, while the freight environment remains challenging, we do see some positives in the near term. For example, we expect the 2024 second quarter to deliver Landstar's first quarterly to quarterly sequential revenue increase since the second quarter of 2022. Also, we are encouraged that truck revenue per load seems to have stabilized at a level well above pre-pandemic norms, and truck load volumes appear to be trending reasonably in line with pre-pandemic normal seasonal patterns, which is potentially a positive sign for the rest of 2024.

Operator: 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 these dynamic times and look forward to higher highs when the freight market turns our way. Thank you for joining us this morning.

Frank A. Lonegro: We look forward to speaking with you again on our 2024 second quarter earnings conference call in July. Thank you. Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.

Operator: .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good morning and welcome to Landstar System first quarter earnings release conference call. All lines will be in a listen-only mode until the formal question and answer session.

James P. Todd: Thank you, Bill. Good morning and welcome to Landstar's 2024 First Quarter Earnings Conference. Before we begin, let me read the following statement. This is a Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995.

Frank A. Lonegro: First, I want to express my sincere gratitude and excitement for leading this great project. I've had the pleasure of meeting so many of our network constituents these past several months. At our annual agent convention in early April, I had the opportunity to interact with hundreds of agents with the entrepreneurial spirit that helps make Landstar. Well, they are all unique. These agents take great pride in what they do every day, helping move the freight that drives the American economy.

Frank A. Lonegro: They are a talented group of business owners, and I'm proud to be working alongside them to help Landstar grow. I've also been out on the road meeting with many of our BCO owner-operators in Florida, Georgia, and Kentucky at our monthly safety meetings, field operations center visits, and the Mid-America Trucking Show.

Speaker Change: [music].

Frank A. Lonegro: I'm a believer in the company's stock buyback program, and I'm committed to opportunistically executing on our existing authority to benefit our long-term stock. In the 2024 first quarter, the freight environment continued to be challenging, manufacturing levels trended below the level of the corresponding prior year period, and inflation continued to have an impact. Consumer Spending on Goods; We remain in a loose capacity environment when measured by historical standards, and market conditions continue to favor the shipper.

Frank A. Lonegro: Even with that backdrop, Landstar's 2024 first quarter top line results were better than expected, and our earnings performance was generally in line with what we expected. I was pleased to see heavy haul loadings, which, as mentioned above, is one of our strategic growth priorities, grow 2% year over year. On the other hand, our substitute line hall service operating declined more than the company average and continued to be soft after an incredibly strong run during the capacity constraint period coming out of the pandemic.

Frank A. Lonegro: Our first quarter guidance, set forth in our 2023 fourth quarter earnings release, called for the number of loads hauled via truck to be 14 to 16 percent below the 2023 first quarter, and overall revenue per truckload to be 8 to 10% below the 2023 first quarter. However, the actual number of loads hauled via truck,,.......

Frank A. Lonegro: The actual revenue per truckload in the 2024 first quarter was 7% below the prior year quarter, again slightly better than the high end of our guide. The slightly favorable variance on revenue compared to guidance was mostly driven by a stronger fiscal February. Fiscal January results were in line, and fiscal March came in slightly above our expectations.

Speaker Change: Good morning, and welcome to Landstar system first 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 Franklin that girl, President and CEO, Jim Todd Vice President and CFO.

Frank A. Lonegro: Turning to slide six and looking at our network, the scale, systems, and support we provide help drive the operating results generated during the 2024 first quarter. JT will get into the details on revenue, loadings, and rate per load, but I wanted to take a moment to touch on our agent community. I was very excited to meet many of our 524 million dollar agents in Orlando earlier this morning at the Annual Agent Convention.

Speaker Change: So Joe Beacom, Vice President and Chief Safety and operations Officer.

Speaker Change: Now I would like to turn the call over to Jim Todd Sir you may begin.

James P. Todd: Thank you Bill good morning, and welcome to Landstar is 2024 first quarter earnings Conference call before we begin let me read the following statement. Following is a safe Harbor statement under private Securities Litigation Reform Act of 1095 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 <unk>.

Frank A. Lonegro: This group of million-dollar agents collectively generated approximately 95... Landstar's consolidated revenue during the 2023 fiscal year. Their relentless drive for results in any business environment is impressive. I've been in the transportation sector for most of my career and have realized how important Landstar's safety-first culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar VCOs operating safely every day, our continued investment in safety technology and trailing equipment, and our recruiting, qualification, and maintenance practices.

James P. Todd: <unk> forward looking information that relates to <unk> 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 <unk> Form 10-K for the 2023 fiscal year described in the section risk factors and other SEC filings from time to time. These.

James P. Todd: <unk> 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 with me. This morning are frankly <expletive> Landsource, President and Chief Executive Officer, and Joe Beacom, less our chief <unk>.

Frank A. Lonegro: I'm proud to report a 0.52 DOT accident frequency per million miles in the first quarter, which decreased approximately 12% compared to the 2023 first quarter. This is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our VCOs and provides a point of differentiation our agents are able to highlight in discussions with our customers. Turning to slide 7 in the capacity BCO truck count decreased by 399 trucks in the first quarter on a sequential basis and has decreased approximately 13% since the end of the 2023 first quarter, consistent with the year-over-year decline in truckload volume.

James P. Todd: Dean operations Officer, it's my privilege to pass it to Landstar CEO Franklin <expletive> for his opening remarks, thanks, Jackie and good morning, everyone first I want to express my sincere gratitude and excitement to lead this great company.

James P. Todd: I've had the pleasure of meeting so many of our network constituents. These past several months at.

Unknown Attendee: At our annual agent Convention in early April I had the opportunity to interact with hundreds of agents with the entrepreneurial spirit, that's make landstar successful well.

Unknown Attendee: While they are all unique these agents take great pride in what they do every day, helping move the freight that drives the American economy. They.

James P. Todd: We would expect the BCO count to continue to decline in the coming months given the rate environment, but at a slower pace than we saw in the first quarter. I will now pass the call back to JT to walk you through the 2024 first quarter financials in more detail.

James P. Todd: They are a talented group of business owners and I'm proud to be working alongside them to help landstar growth.

James P. Todd: I've also been out on the road meeting with many of our Bcl owner operators in Florida, Georgia, and Kentucky, and our monthly safety meetings field operations Center visits and the mid America trucking show.

James P. Todd: I look forward to seeing our 1 million miles safe driver and <unk> at the annual all star event in July and know we share a common passion to.

James P. Todd: To safely deliver freight for our customers every day I am incredibly energized to work with our agents <unk> and carriers through our proven business model. The continued landstar his track record of success.

James P. Todd: Im also inherited a strong executive team at Landstar and we've been actively working together to drive Landstar forward.

James P. Todd: I am excited by the recent changes we've made in our sales leadership with Jim Applegate and met Danaher. This combination of strategy and execution will serve landstar in its agents well as we align for growth.

James P. Todd: While J T, Joe and I will handle the call today will be sure to showcase Jim and Matt on some of our future earnings calls.

James P. Todd: As to the breakdown in truck transportation, revenue per load on loads hauled via unsighted platform equipment held up considerably better than revenue per load on loads hauled via van equipment and other truck transportation services. We consider revenue per mile on loads hauled by BCO trucks a relatively pure pricing number as it excludes fuel surcharges billed to customers that are paid 100% to the BCO, revenue per mile on van equipment called by VCOs in the 2024 first quarter was 7% below the 2023 first Revenue per mile and unsighted platform equipment hauled by BCOs in the 2024 first quarter was 5% below the 2023 first, It should be noted that although the market has softened significantly from a year ago, Landstar's revenue per mile on VCO van and unsighted platform equipment both remain above the pre-pandemic 2020 first quarter by approximately 21 and 23% respectively.

James P. Todd: We are laser focused on executing on our strategic initiatives.

James P. Todd: Border, Mexico, and heavy haul are two areas, we have identified where we already have scale and believe we have significant opportunities for growth.

James P. Todd: We also remain committed to continuously improving the level of service and support we provide to our customers agents <unk> and carriers each and every day.

James P. Todd: Turning to slide five Landstar performed well in the 2024 first quarter considering that the freight environment was characterized by soft demand and readily available truck capacity.

James P. Todd: I believe our results speak to the strength and resiliency of the Landstar business model I am fully committed to fostering and safe guarding this unique model moving forward.

James P. Todd: Our balance sheet continues to be very strong we remain committed to investing in leading technology solutions for our network of small business owners and we will be refreshing a significant portion of our trailing equipment fleet. This year.

James P. Todd: Our capital allocation priorities remain unchanged.

James P. Todd: A believer in the company's stock buyback program and are committed to opportunistically executing on our existing authority to benefit our long term stockholders and.

James P. Todd: We believe that rates will stay relatively higher than pre-pandemic levels given the significant amount of incremental cost to operate a truck today as compared to five years ago. Revenue per mile on van equipment hauled by BCOs remains sequentially flat from December to January and from January to February, before decreasing 2% from February to March. These December to January and January to February month-to-month changes are stronger than pre-pandemic typical patterns, with the exception of the beginning of 2018, when rates were favorably impacted by the mid-December 2017 ELD mandate.

James P. Todd: In the 2024 first quarter the freight environment continued to be soft manufacturing levels trended below the level of the corresponding prior year period and inflation continued to have an impact on consumer spending on goods.

James P. Todd: We remain in a loose truck capacity environment, when measured by historical standards and market conditions continue to favor the shipper.

James P. Todd: Even with that backdrop Landstar is 2024 first quarter top line results were better than expected and our earnings performance was generally in line with what we expected.

James P. Todd: However, the sequential change in BCO revenue per mile on van equipment from February to March underperformed these pre-pandemic historical patterns. As to revenue per mile on unsighted platform equipment hauled by BCOs, revenue per mile decreased 2% from December to January, increased 1% from January to February, and increased 2% from February to March. The month-to-month sequential trends on unsighted platform equipment are generally more unpredictable compared to that of antiques. This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volumes.

James P. Todd: Was pleased to see heavy haul loads, which as mentioned above as one of our strategic growth priorities grow 2% year over year.

James P. Todd: On the other side, our substitute line haul service offerings declined more than the company average and continued to be soft as an incredibly strong run during the capacity constrained period coming out of the pandemic.

James P. Todd: Our first quarter guidance set forth in our 2023 fourth quarter earnings release also the number of loads hauled via truck to be 14% to 16% below the 2023 first quarter and overall revenue per truckload to be 8% to 10% below the 2023 first quarter. The actual number of loads hauled via truck from the 2002.

James P. Todd: The 2024 unsighted platform volume trends are somewhat favorable as compared to typical pre-pandemic trends when excluding 2018 for the reasons mentioned above. Heavy haul revenue, one of our areas of increased strategic focus, was up approximately 1% year-over-year in the first quarter. Heavy haul loadings were up approximately 2%, partially offset by a 1% decrease in revenue per load.

James P. Todd: For first quarter was 13% below the 2023 first quarter slightly better than the high end of our truckload volume guidance.

James P. Todd: Actual revenue for truckload and the 2020 for first quarter was 7% below the prior year quarter again slightly better than the high end of our guidance.

James P. Todd: The slightly favorable variance on revenue compared to guidance was mostly driven by a stronger fiscal February as fiscal January results were in line in fiscal March came in slightly above our expectations.

James P. Todd: 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 25% during the 2023 first quarter to approximately 28% in the 2024 quarter. Turning to slide 10, we provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation Logistics Segment revenue was down 19% year-over-year on a 13% decrease in loadings and a 7% decrease in revenue per load as compared to the 2023 first quarter. Additionally, within our largest commodity category, consumer durables, revenue declined 20% year over year on a 15% decline in volumes and a 6% decline in revenue per load.

James P. Todd: Going to slide six and looking at our network scale systems and support we provide help drive the operating results generated during the 2024 first quarter J.

Speaker Change: J P will get into the details on revenue loadings that rate per load, but I wanted to take a moment to touch on our agent community.

James P. Todd: I was very excited to meet many of our $524 million agents in Orlando earlier this month at the annual agent Convention.

James P. Todd: This group of $1 million agents collectively generated approximately 95% of Landstar is consolidated revenue during the 2023 fiscal year their relentless drive for results in any business environment is impressive.

Speaker Change: I've been in the transportation sector for most of my career and realized how important landstar is a safety first culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar <unk> operating safely everyday our continued investment in safety technology and trailing equipment and a recruit.

James P. Todd: <unk> qualification and maintenance practices I'm proud to report a 0.52.

James P. Todd: Accident frequency per million miles in the first quarter, which decreased approximately 12% as compared to the 2023 first quarter. This is an impressive operating metric that speaks to the strength skill talent and dedication of our Acos and provides a point of differentiation. Our agents are able to highlight and discussions with our freight customers.

James P. Todd: Turning to slide seven and the capacity side <unk> truck count decreased by 399 trucks in the first quarter on a sequential basis and has decreased approximately 13% since the end of 2023 first quarter consistent with the year over year decline in truckload volumes it.

James P. Todd: Also, Landstar is a truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those freight transportation providers reach out to Landstar to provide truck capacity more often than during times of more readily available truck capacity. Frake hauled by Landstar on behalf of other truck transportation companies includes almost all our commodity groupings, including our substitute line haul service offer.

James P. Todd: It is typical to incur turnover in PCR truck count when truck rates decrease <unk> turnover continues to be influenced by the significant increase in the cost of repairs and the extended period of time trucks are out of service awaiting repairs. We would expect the bcl count to continue to decline in the coming months, given the rate environment, but at a slower pace than we saw.

James P. Todd: Saw in the first quarter I will now pass the call back to Jay to walk you through the 2024 first quarter financials in more detail Jackie Thanks Frank.

Speaker Change: Frank has covered certain information on our 2020 for first quarter. So I will cover various other first quarter financial information included in the press release and slide presentation.

James P. Todd: Turning to slide nine as Frank mentioned earlier, but the number of loads hauled via truck and truck revenue per load each slightly exceeded the high end of our previously issued guidance.

James P. Todd: Non truck transportation service revenue in the 2020 for first quarter was 12% or $10 million below the 2023 first quarter. The decrease in non truck transportation revenue was mostly due to a 58% decrease in air revenue per shipment.

James P. Todd: As to the breakdown in truck transportation revenue per load on loads hauled via <unk> platform equipment held up considerably better in revenue per load on loads hauled via van equipment and other truck transportation services, we consider revenue per mile on loads hauled by Bcl trucks, a relatively pure pricing number as it excludes fuel surcharges billed to customers that are paid 100% to the beef.

James P. Todd: Revenue per mile and van equipment hauled by <unk> and the 2020 for first quarter was 7% below the 2023 first quarter revenue per mile and onsite platform equipment, followed by <unk> in the 2020 for first quarter was 5% below the 2023 first quarter. It should be noted that although the market has softened significantly from a year ago Landstar revenue per.

James P. Todd: A mile on Bcl van and onsite platform equipment, both remain above the pre pandemic 2021st quarter by approximately 21% and 23% respectively. We believe that rates will stay relatively higher than pre pandemic levels, given the significant amount of incremental cost to operate a truck today as compared to five years ago.

James P. Todd: Revenue per mile on van equipment called <unk> remained sequentially flat from December to January and from January to February before decreasing 2% from February to March. These December to January in January to February month to month changes are stronger than pre pandemic typical patterns with the exception of the beginning of 2018 when rates were favorable favorably.

James P. Todd: <unk> by the mid December 2017, the mandate.

James P. Todd: The sequential change in <unk> revenue per mile on van equipment from February to March underperformed. These pre pandemic historical patterns.

James P. Todd: Turning 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 Administrative Costs in Comparison to Smaller Gross Profit and Variable Contribution Basis.

James P. Todd: So revenue per mile and onsite platform equipment hauled by <unk> revenue per mile decreased 2% from December to January increased 1% from January to February and increased 2% from February to March.

James P. Todd: To month sequential trends on unsighted platform equipment are generally more unpredictable compared to that of van equipment. This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volume to 2024 unsighted platform volume trends are somewhat favorable as compared to typical pre pandemic trends when excluding 2018 for the reasons mentioned above.

James P. Todd: Other operating costs were $14.9 million in the 2024 first quarter, compared to $12.4 million in 2023. This increase was primarily due to an increased provision for contractor bad debt and decreased gains on the sale of used trailing equipment. Insurance and claims costs were $26.3 million in the 2024 first quarter, compared to $27.6 million in 2023.

James P. Todd: <unk>.

James P. Todd: Heavy haul revenue one of our areas of increased strategic focus was up approximately 1% year over year in the first quarter heavy haul loadings were up approximately 2%, partially offset by a 1% decrease in revenue per load. This represented a mixed tailwind to our onsite platform revenue per load as heavy haul revenue as a percentage of the category increase from approximately.

James P. Todd: 25% during the 2023 first quarter to approximately 28% in 2024 quarter.

James P. Todd: Turning to slide 10, we provided revenue share by commodity and year over year change in revenue by commodity transportation logistic segment revenue was down 19% year over year on a 13% decrease in loadings and a 7% decrease in revenue per load as compared to the 2023 first quarter within our largest commodity category consumer durables revenue declined.

James P. Todd: 20% year over year on a 15% decline in volumes and a 6% decline in revenue per load revenue and our top five commodity categories, which collectively make up about 70% of our transportation revenue were down a combined 17% compared to the 2023 first quarter shifting gears from revenue to loadings within the remaining top five.

James P. Todd: Commodity groupings from the 2023 first quarter to the 2024 first quarter total loadings of machinery decreased 15% automotive equipment and parts were relatively flat building products decreased 2% and hazardous materials decreased 14%. Additionally, substitute line haul loadings, one of the strongest performers for us.

James P. Todd: The increase in selling general and administrative costs was primarily attributable to increased employee benefit costs, an increased provision for incentive and equity compensation under our variable compensation programs, and the impact of $1.2 million of CEO transition costs, partially offset by decreased project consulting costs. In the 2024 first quarter, the provision for compensation under our variable programs was $4.6 million compared to $3.3 million in the 2023 first quarter. We'd like to note, despite some moderate wage inflation pressure and selective human capital investment in certain areas, principally heavy haul, cross-border, and fraud prevention, total wages from the 2023 first quarter to the 2024 first quarter declined slightly as the company continues to be very disciplined with respect to managing headcounts.

James P. Todd: Through the pandemic and one which vary significantly based on consumer demand decreased 36% from the 2023 first quarter.

James P. Todd: Also landstar as truck capacity provided other trucking companies three pls and truck brokers during periods of tight truck capacity those freight transportation providers reached out to landstar to provide truck capacity more often than during times of more readily available truck capacity.

James P. Todd: Freight hauled by Landstar on behalf of other truck transportation companies include almost all of our commodity groupings, including our substitute line haul service offering.

James P. Todd: Overall revenue hauled on behalf of other truck transportation companies in the 2020 for first quarter was 36% below the 2023 quarter a clear indicator in our model the capacity is more readily accessible.

James P. Todd: <unk> hold on behalf of other truck transportation companies was 14% and 18% transportation revenue in the 2024 and 2023 first quarters respectively.

James P. Todd: With the ups and downs in various customer categories. Our business remains highly diversified with over 25000 customers, none of which contributed over 6% of our revenue in the 2020 for first quarter.

James P. Todd: The depreciation and amortization was $14.1 million in the 2024 first quarter, compared to $15.2 million in 2023. This decrease was primarily due to decreased depreciation on the company's trailer fleet, partially offset by increased depreciation on software applications resulting from continued investment in new and upgraded tools for use by agents and third-party capacity providers. The effective income tax rate was 23.5% in the 2024 first quarter compared to an effective income tax rate of 23.3% in the 2023 first quarter, primarily attributable to larger net excess tax benefits from stock-based compensation arrangements during the 2023 first quarter.

James P. Todd: Turning to slide 11, and in 2024 first quarter gross profit was $113 9 million compared to gross profit of $152 9 million in the 2023 first quarter gross profit margin was nine 7% of revenue in the 2020 for first quarter as compared to gross profit margin of 10, 7% in the corresponding period of 2023.

James P. Todd: And the 2024 first quarter variable contribution was $168 2 million compared to $208 7 million in the 2023 first quarter.

James P. Todd: Variable contribution margin was 14, 4% of revenue in the 2024 first quarter compared to 14, 5% in the same period last year. The decrease in variable contribution margin compared to 2023 first quarter was primarily attributable to a decreased variable contribution margin on revenue generated by truck brokerage carriers as the <unk>.

Frank: Rate paid to truck brokerage carriers in the 2020 for first quarter was 149 basis points higher than the rate paid in the 2023 first quarter, partially offset by mix and an increased percentage of revenue was generated by <unk> independent contractors, which typically has a higher variable contribution margin and revenue generated by other modes of transportation.

Frank: Turning 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 smaller gross profit and variable contribution basis. Other operating costs were $14 $9 million in there.

Frank A. Lonegro: In 2024, as we moved from March into the first few weeks of April, our truck volumes seem to have moved more in line with what we would view as normal sequential month-to-month patterns based on pre-pandemic seasonal performance trends. However, Truck Revenue Per Load has slightly underperformed these pre-pandemic patterns, though the sequential week-to-week trends in truck revenue per load in the first three weeks of April have been favorable. Turn

Frank A. Lonegro: 2024 first quarter compared to $12 4 million in 2023. This increase was primarily due to an increased provision for contractor bad debt and decreased gains on sale of used trailing equipment.

Frank A. Lonegro: Insurance and claims costs were $26 3 million in the 2024 first quarter compared to 27.

Frank A. Lonegro: Our year over year expectations for the 2024 second quarter are that truck load volumes will be five to nine percent below the 2023 second quarter. [inaudible] 3-2-3-2-4, Looking at the 2024 second quarter on a sequential basis. Pre-pandemic patterns would normally yield an 8% improvement in truckload volumes and a 2% improvement in truck revenue per load. Our guidance for the second quarter implies a 4% to 8% sequential improvement in truckload volume. Truck Revenue for Load ranged from down 1% to up 3% sequentially.

Frank A. Lonegro: $6 million in 2023.

Frank A. Lonegro: Total insurance and claims costs were five 8% of <unk> revenue in the 2024 period and five 3% of <unk> revenue in the 2023 period. The decrease in insurance and claims cost as compared to 2023 was primarily attributable to decreased net unfavorable development of prior year claim estimates and a decreased accident frequency part.

Frank A. Lonegro: We offset by increased severity of accidents during the 2024 period.

Frank A. Lonegro: During the 2024 and 2023 first quarters insurance and claims cost included $1 $1 million and $1 $9 million, respectively of net unfavorable adjustments to prior year claim estimates.

Frank A. Lonegro: We also expect revenue for our non-truck modes to be similar to what we experienced in the 2024 first quarter. Based on these assumptions, we expect revenue in the 2024 second quarter to be in a range of $1.2 billion to $1.3 billion, and earnings to be in a range of $1.35 per share to $1.50 per share. 2024 Second Quarter Guidance incorporates a variable contribution margin range of 13.9%...

Frank A. Lonegro: Selling general and administrative costs were $56 4 million in the 2024 first quarter compared to $53 6 million in the 2023 first quarter the increase in selling general and administrative costs was primarily attributable to increased employee benefit costs and increased provision for incentive and equity compensation.

Frank A. Lonegro: <unk> under our variable compensation programs and the impact of $1 $2 million of CEO transition costs, partially offset by decreased project consulting costs in the 2024 first quarter the provision for compensation under variable programs was $4 $6 million compared to $3 $3 million in the 2023 first quarter wed.

Frank A. Lonegro: , and Insurance and Claims Costs of approximately 5.5% of estimated VCO revenue. We also want to highlight some specific items embedded in the 2024 second-quarter EPS guidance range of $1.35 per share to $1.55 per share, compared to the 2024 first-quarter actual EPS of $1.32. First, SG&A in the second quarter is expected to be above the first quarter, due in part to the cost of Landstar's annual agent convention in April.

Frank A. Lonegro: I'd like to note. Despite some moderate wage inflation pressure and selective human capital investment in certain areas, principally heavy haul cross border and fraud prevention total wages from the 2023 first quarter to the 2024 first quarter declined slightly as the company continues to be very disciplined with respect to managing head count.

Frank A. Lonegro: Depreciation and amortization was $14 $1 million in the 2024 first quarter compared to $15 2 million. In 2023. This decrease was primarily due to decreased depreciation on the Companys trailer fleet, partially offset by increased depreciation on software applications, resulting from continued investment in new and upgraded tools for you.

Frank A. Lonegro: Grabbing a two cent per share unfavorable variance compared to the first quarter, we also want to note that the company has widened the guidance range for both revenue and earnings per share. While these ranges reflect the fact that economic and freight conditions are still quite dynamic, we believe the strength and resiliency of the Landstar model position us well to successfully navigate this environment. With that, Bill, we'd like to open the line for questions.

Frank A. Lonegro: By agents and third party capacity providers. The effective income tax rate was 23, 5% in the 2024 first quarter compared to an effective income tax rate of 23, 3% in the 2023 first quarter, primarily attributable to larger net excess tax benefit benefits from stock based compensation arrangements during the two.

Speaker Change: 23 first quarter, turning to slide 13, and looking at our balance sheet. We ended the quarter with cash and short term investments of $530 million cash flow from operations for the 2020 for first quarter was $94 million in cash capital expenditures were $9 million.

Frank A. Lonegro: 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 1 on your touch-tone phone. Once again, that is star 1 to ask a question. To cancel your request, please press star 2.

Frank A. Lonegro: The strength of our balance sheet is a testament to the cash generating capabilities of the Landstar model back to you Frank.

Speaker Change: Thanks, J T as.

Scott H. Group: As we progressed through the 2024 second quarter year over year comparisons should begin to ease in the 2023 second quarter. The number of loads hauled via truck and truck revenue per load both significantly underperformed pre pandemic seasonal patterns.

Scott H. Group: So it sounded like March deteriorated, and then maybe, Frank, at the end, your comments around pricing in April were a little bit better. Maybe just a little bit more color on sort of what happened in March and what you're seeing in April. Hey, Scott, thanks. And good to hear your voice again, for sure.

Frank A. Lonegro: You know, we're watching this thing on a daily and weekly basis, as you would imagine, just given the desire to see an inflection. And so, you know, what we don't want to do is over-index on a day or two; we want to look at the trends over time. And I think the point that I was making toward the end was, you know, the week by week view in April on rate was beginning to show some positivity.

Frank: The sequential week to week trends and truck revenue per load in the first three weeks of April have been favorable.

Frank A. Lonegro: Turning to slide 15, our year over year expectations for the 2024 second quarter are the truck load volumes will be 5% to 9% below the 2023 second quarter and truck revenue per load will be in a range of flat to down 4% versus the 2023 second quarter looking at the 2024 second quarter on a sequential.

Frank A. Lonegro: And so, you know, we're hopeful that that is the beginning of an inflection. It's not going to be a kind of rapid rebound, as maybe we saw in the, you know, immediate post-COVID time period. But a little bit of sign of green shoots is always helpful. Let JT fill in some color there. Yeah, no, absolutely, Frank.

JT: You'll basis pre pandemic patterns with normally yield an 8% improvement in truckload volumes and a 2% improvement in truck revenue per load or.

JT: Our guidance for the second quarter implies a 4% to 8% sequential improvement in truckload volumes and truck revenue per load ranging from down 1% to up 3% sequentially.

James P. Todd: So Scott, the good guy, the top line to the model really was a strong February. So February versus the model was about plus 8%, as both the number of loads hauled by a truck and truck revenue per load in February outpaced typical seasonality. March was about three and a half percent good guy to the model on the top line. But both loadings and rev per load in March seasonally underperformed typical February to March, again, off a stronger base, a starting point for fiscal.

JT: We also expect revenue for our non truckloads to be similar to what we experienced in the 2024 first quarter based.

James P. Todd: Based on these assumptions, we expect revenue in the 2024 second quarter to be in a range of $1 2 billion to $1 3 billion.

James P. Todd: And earnings to be in a range of $1 35 per share to $1 55 per share.

James P. Todd: The 2024 second quarter guidance incorporates our variable contribution margin range of 13, 9% to 14, 2% in insurance and claims costs of approximately five 5% of estimated <unk> revenue.

James P. Todd: And then any thoughts about April there? Yeah, to Frank's point, you know, we saw truck revenue per load probably peak in the middle of fiscal March and then start starting, starting to slide off us a little bit. To Frank's point, in fiscal April, week one to week two, truck revenue per load improved week two to week three and improved such that, you know, we don't have April closed, but our best guess is we're going to be maybe flattish March to April. And that compares with a historical plus 100 basis point, good guy on truck revenue per load historically March to April. Okay, that's helpful. And then Frank, just the bigger picture, right?

James P. Todd: I want to highlight some specific items embedded in the 2024 second quarter EPS guidance range of $1 35 per share to $1 55 per share compared to the 2024 first quarter actual EPS of $1 32 per share.

James P. Todd: First SG&A in the second quarter is expected to be above the first quarter due in part to the cost of Landstar is annual agent Convention in April 2nd we expect variable contribution to be 20 to 50 basis points below the 2024 first quarter, which is in line with <unk> historical sequential patterns third.

Speaker Change: The second quarter tax rate is expected to be approximately 100 basis points higher than the first quarter in line with our normal tax rate assumptions driving a <unk> <unk> per share unfavorable variance compared to the first quarter.

Frank A. Lonegro: We also want to note that the company has widened the guidance range for both revenue and earnings per share. While these ranges reflect the fact that economic and freight conditions are still quite dynamic we believe the strength and resiliency of the Landstar model position us well to successfully navigate this environment.

Speaker Change: With that we'd like to open the line for questions.

Speaker Change: Thank you very much at this time well begin the question and answer session. If you would.

Frank A. Lonegro: To ask a question. Please press star one on your tax time, selling once again that is tier one to ask a question. The counter request. Please press star two.

Frank A. Lonegro: The first question coming from the line of Scott Group of Wolfe Research. Your line is now open.

Frank A. Lonegro: Hey, Thanks, Good morning, Frank Nice to speak with you again welcome back to transport.

Frank A. Lonegro: <unk>.

Frank A. Lonegro: You guys gave more color on some of the monthly trends that was helpful.

Frank A. Lonegro: So what you're really seeing are selective investments that are really driving the year-over-year change, and whether that's on the depreciation side or adding some selective positions in those strategic areas that we called out on the phone, technology is always going to be an area that we continue to invest in. I mean, our job is to support, you know, the agents and the BCOs and the carriers out there. You know, there's no initiative to really go hard at cost right now.

Frank A. Lonegro: It was growing quick so it sounded like March deteriorated and then maybe Frank at the end of your comments around pricing in April were a little bit better maybe just a little bit more color on sort of what happened in March and what you're seeing in April.

Speaker Change: Hey, Scott, Thanks, and good to hear your voice again for sure.

Frank A. Lonegro: We're watching this thing on a daily and weekly basis as you would imagine just given.

Frank A. Lonegro: The desire to see an inflection and so what we don't want to do is over index on a day or two we want to look at the trends over time and I think the point that I was making toward the end was.

Frank A. Lonegro: It's more around the growth side of the equation. We think we're going to come out stronger, you know, when we start to inflect. So I think we're in a good position there. The sales organizational changes are going to be helpful. You know, we do have some real focus on things like cross-border Mexico as well as heavy haul. And those are areas that, you know, we have a scale business already and are able to focus on those areas that are more, I'd say, secular growth in nature rather than cyclical.

Frank A. Lonegro: The week by week view in April on rate was beginning to show some positivity.

Frank A. Lonegro: And so we're hopeful that that is the beginning of an inflection is not going to be kind of a rapid rebound as maybe we saw in the immediate post COVID-19 time period, but a little bit of sign of green shoots as always <unk> fill in some color there, yes, absolutely Frank So Scott the good guide topline to the model really was a strong February so February.

Frank A. Lonegro: Versus the model was about plus 8% as both the number of loads hauled via truck and truck revenue per load in February outpaced.

Frank A. Lonegro: And then on your buyback question, you know, obviously, we're just getting started, you know, joining mid-quarter. We've got a pristine balance sheet, as you know, and it's wonderful to inherit that from, you know, Jim Gattoni, and obviously, the board's had a big hand in that one. And the company's really got a long and successful history of returning cash to shareholders. That's not changing.

Frank A. Lonegro: Typical seasonality March was about three 5% good guide of the model on the topline.

Frank A. Lonegro: Both loadings and Rev per load in March seasonally underperformed typical February to March again off a stronger base starting point of fiscal February.

Frank A. Lonegro: And then any thoughts about April there.

Frank A. Lonegro: To Frank's point, we saw a truck revenue per load probably peak in the middle of fiscal March and then started starting to starting to slide on us a little bit to Frank's point in fiscal April week, one to week two truck revenue per load improve week two week, three and improved such that we don't have April close, but our best guess is we're going to be may be.

Frank A. Lonegro: Flattish March to April and that compares with a historical plus 100 basis point good Guy on truck revenue per load historically March to April.

Operator: Thank you. We will move now to the next question coming from the line at Tom Wadewitz of UBS. Your line is now open.

Thomas Richard Wadewitz: Okay. That's helpful and then Frank just bigger picture right.

Thomas Richard Wadewitz: Yeah, good morning. And also, you know, a kind of welcome back to Transports Frank. Nice to talk with you again. What how do you think about the dynamic between agents and BCOs? I think you said that, you know, the decline in BCOs is slowing a bit. So when do you think that's just kind of like, Spot Raids, spotting, you'll see that bottom out, or what do you think the dynamic will be and kind of, I guess, key levers for how the BCO count goes and also the million-dollar agent count, you know, if you think about that in, let Yeah, hey, Tom, and great to hear from you again as well.

Thomas Richard Wadewitz: And if you look net revenue is coming back to.

Speaker Change: Where it used to be pre pandemic, but the cost structure is just so much higher is there anything you could do.

Speaker Change: Or any initiatives to meaningfully reduce cost one and then <unk>.

Speaker Change: Secondly, we've had a view that there is an up there should be an opportunity to meaningfully.

Speaker Change: Meaningfully accelerate the pace of buyback here.

Speaker Change: Any thoughts on that and your new role, yes for sure.

Speaker Change: Good questions as always.

Speaker Change: So on the cost side. It is always going to be something that we're focused on is J T went through.

Speaker Change: The math, especially in the in the first quarter year over year I mean, we are very disciplined on <unk>.

Speaker Change: Head count and J J T has got the labor on that one and holding the organization accountable. So what you're really seeing our selective investments that are that are really.

Frank A. Lonegro: Driving the year over year change and whether thats on the depreciation side or adding some selective positions in those strategic areas that we called out on the phone technology is always going to be an area that we continue to invest in our job is to support the.

Frank A. Lonegro: The agents in the <unk> and the carriers out there. So there is.

Frank A. Lonegro: There is no initiative to really go hard at cost right now it's more around the growth side of the equation, we think we're going to come out stronger.

Frank A. Lonegro: So it's really important to know they're not on salary and these folks are out there fighting every day for us. In terms of the million dollar agent count, I mean, it was down year over year just because of the rate environment. You know, I think as rates inflect, that number will go up, you know, on a full year over full year basis. Certainly, the exit rate, if the universities cooperate with us, will be higher this year than it was at the end of 2023.

Frank A. Lonegro: When we start to inflect. So I think we're in good position there with sales organizational changes are going to be helpful. There. We do have some real focus on things like the cross border, Mexico as well as heavy haul and those are areas that we haven't scaled business already in being able to to focus on those areas that are more secular growth in nature rather than cyclical.

Frank A. Lonegro: And then on your buyback question.

Frank A. Lonegro: On the BCOs, one of the things that's really important, and Joe can get into the numbers, but, you know, even though the BCO count effectively declined in line with where volumes went, the actual productivity of the BCOs went up. They hauled more loads per person than they were doing last year. So that tells us that they're out there scratching for every load.

Speaker Change: Obviously, we're just getting started.

Frank A. Lonegro: Joining mid quarter.

Frank A. Lonegro: Got a pristine balance sheet as you know and it's wonderful to inherit that from.

Frank A. Lonegro: Jim get Tony and obviously the board has had a big hand in that one and the company has really got a kind of a long and successful history of returning cash to shareholders thats not changing.

Frank A. Lonegro: The company has been very selective about when it's in the market and we're going to continue to evaluate where we are in the market.

Frank A. Lonegro: On a price basis pretty much every day being patient clearly hasnt disadvantages, you look at where we traded in the in the first quarter between about $180 200, and obviously, it's come down since then for a lot of different reasons, including what the fed's going to do and.

Joseph J. Beacom: Yeah, Tom, so in the first quarter, net declines were about 10% better than the fourth quarter, so we're seeing some improvement there. And to Frank's point, utilization of loads per truck per week for VCOs was up 3% in the first quarter. That was flat in January, 6% better in February, and then 4% better in March.

Speaker Change: And we want to be great stewards of the shareholders' money. So we're going to be selective in the market, but we are going to return capital to shareholders.

Speaker Change: Okay makes sense. Thank you guys appreciate the time thanks.

Speaker Change: Thanks Scott.

Joseph J. Beacom: Thank you Matt. The next question comes from the line of Tom <unk>.

Joseph J. Beacom: So we kind of like the trend that we're seeing there, and, you know, that continues to, I think, move in the right direction through April. And, again, it is a function of just loading opportunities and rate, and I think we'll see the VCO count come back as volumes and rates come back in line. Do you think that you'll see good responsiveness on that, or do you think it's going to be tougher to add BCOs if you have some kind of gradual improvement in rate?

UBS: UBS Your line is now open.

Speaker Change: Yes, good morning, and also kind of what I'll come back to the transport shrank nice to talk with you again.

Joseph J. Beacom: How do you think about the dynamic on <unk> and <unk> I think you said that the decline in <unk> is slowing a bit.

Joseph J. Beacom: So when do you I mean do you think that's just kind of like spot rates bottoming youll.

Joseph J. Beacom: You know, I think that, uh, I think they'll bounce back, and our history really speaks to that. If you, if you look back on years where we've come and kind of come out of a trough, um, in 17 going into 18, we added, you know, 250 trucks in 17, we added over 900 in 2018, uh, we added, you know, we were down 130 or so in the first quarter of 2020, but we added a net 748 for the year, um, added, um, a bunch of 870 in 20 So I think the model speaks to the fact that when there's an opportunity, these guys really flock to Landstar. And I think that it's not different now.

Joseph J. Beacom: Youll see that bottom out or what what do you think the dynamic will be and kind of I guess key levers for how the Bcl two bcl count goes and also the $1 million agent count.

Joseph J. Beacom: If you think about that in let's say Q3 Q.

Joseph J. Beacom: On the agent side to go sell the extra load of freight in the BC owes to haul and extra load for us. So it's been great to see just the resiliency of the folks out there and the fact that there are.

Joseph J. Beacom: All commission based on the agent side and low based on the on the BCS side. So these are folks who are putting dinner on the table.

Joseph J. Beacom: Bye bye load by load. So that's really important to know theyre not on salary and these folks are out there fighting everyday for us.

Joseph J. Beacom: I just think we're waiting for that inflection point for that to happen. And I think, you know, as capacity comes out of the market and things turn, I think we're still the home owner operators who want to have the freedom to make decisions and provide for themselves. It's going to be a gradual thing, in my opinion, as rates and volumes come back. They will come back.

Joseph J. Beacom: In terms of the $1 million agent count I mean, it was down year over year, just because of the rate environment.

Joseph J. Beacom: I think as the rates inflect that number will go up.

Joseph J. Beacom: On a full year over full year type basis, certainly the exit rate if the rates cooperate with us the exit rate will be higher this year than than it was at the end of 2023.

Joseph J. Beacom: <unk> is one of the things Thats really important and Joe can get into the numbers, but even though the bcl count effectively declined in line with where volumes with.

Joseph J. Beacom: The actual productivity of.

Joseph J. Beacom: It's not a systemic issue, I don't think. But, you know, it's more about when and at what pace it happens. And we're as anxious as anybody to see that happen quickly. Yeah, okay. So it's about the kind of cycle duration and profile, not structural change. Okay, thank you for the time.

Joseph J. Beacom: The Bcl went up they hold more loads per person.

Joseph J. Beacom: And then they then they were doing last year. So that tells us that they are out their scratching for for every load, but Joe filling again, yes.

Speaker Change: Yes, Tom so.

Joseph J. Beacom: In the first quarter.

Joseph J. Beacom: Declines were about 10% better than the fourth quarter. So we're seeing some improvement there.

Joseph J. Beacom: To Frank's point utilization votes per truck per week for <unk> sales was up 3% in the first quarter. It was flat in January 6% better than February and then 4% better in March so we kind of like the trend that we're seeing there.

Operator: I appreciate it. Thank you. We will move now to the next question coming from the line of John Chappell of Evercore. Your line is now open. Thank you. Good morning.

Jonathan B. Chappell: I want to circle back to February and March, especially. Jim, you noted February 8% was a good guy to the model, and March 3.5. I mean, that is very contrary to everything we've heard throughout this earnings season for the last week and a half. So is there any way you can kind of dig a little deeper on where the relative outperformance came from, how things changed to the positive when they seemed to be changing to the negative for most of the rest of the industry, you know, post the January conference call?

Jonathan B. Chappell: And that continues to I think moving the right direction through April and again. It is a function of just loading opportunities and rate and I think we'll see.

Jonathan B. Chappell: The bcl kind of come back as kind of the volume and rate come back in line.

Jonathan B. Chappell: Do you think that Youll see good responsiveness on that or would you do you think it's going to be tougher to add <unk>. If you have kind of a gradual improvement in rates.

Jonathan B. Chappell: I think that.

Jim: I think they'll bounce back in our history really speaks to that if you look back in years, where we've come in kind of come out of a trough.

Jonathan B. Chappell: John, I'm happy to. So, in February, the biggest good guy was truck revenue per load in February was 60 basis points higher than January. That compares to a down 220 historically if you look at 2019 to 2015 pre-pandemic patterns.

Speaker Change: 17 going into 2018, we added 250 trucks in 2017, we added over 902018.

Jonathan B. Chappell: Added were down 130, or so in the first quarter of 2020, but we added a net $7 48 for the year.

Jonathan B. Chappell: <unk> added.

James P. Todd: In addition, truck volume beat seasonality as well. And I would tell you, John, we saw this too on not just the revenue side, but we saw it on the net revenue side on the brokerage side of the house. So, from the fourth quarter of 2023 to the first eight weeks of the first quarter of 2024, we saw our net revenue margin compress by 105 basis points. And then from the first eight weeks of the first quarter of 2024 to the last five weeks, it widened back out by 85 basis points, right?

John: A bunch of 870 in 2021, so I think the model speaks to the fact that when there is opportunity. These guys really flock to Landstar and I think it's not different now.

James P. Todd: Just think we're waiting for that inflection point for that to happen and I think.

James P. Todd: As capacity comes out of the market and things turn I mean, I think we're still at home for owner operators, who want to have the freedom to make decisions and provide for themselves.

James P. Todd: It's going to be a gradual thing in my opinion.

James P. Todd: Rates and volumes come back.

James P. Todd: They'll come back.

James P. Todd: So I think that's consistent with kind of that underperformance on the top line that we saw relative to pre-pandemic seasonality off that tougher launch point in February. Okay, and then I don't want to, you know, again, extrapolate the last couple of weeks or whatever.

John: It's not a systemic issue I don't think.

James P. Todd: It's more about when and at what pace that happens and it's we're as anxious as anybody.

Speaker Change: That happened quickly.

John: Yes, okay. So it's about kind of cycled duration and profile not structural change.

Speaker Change: Okay. Thank you for the time I appreciate it thanks Tom.

James P. Todd: Thank you we will move now to the next question coming from the line of Jon Chappell of Evercore. Your line is now open.

James P. Todd: But if you were kind of a real good guy in February, March, and you know, people are kind of looking for green shoots, sounds like maybe February was a little bit worse in the back half, but that's typical seasonality, but April was a little bit better. Are there any signs that you're seeing that there's really a more sustainable uplift in demand or a more accelerated removal of capacity that's putting a floor below rates? Or do you think that this is pretty specific to the kind of your business, your business model, and, you know, your customer base? Yeah, John, let me take a shot at that one.

Speaker Change: Thank you and good morning.

Speaker Change: I wanted to circle back to <unk>.

Speaker Change: February and March, especially Jimmy noted February 8%. Good guide to the model March three and a half that is very contrary to everything we've heard throughout this earnings season for the last week and a half. So is there any way you can kind of dig a little deeper on what are the relative outperformance came from how things change to the positive when it seem to be changing the negative.

Speaker Change: For most of the rest of the industry post the January conference call.

Speaker Change: John I'm happy to so in February the biggest good Guy was truck revenue per load in February was 60 basis points higher than January that compares to a down to 'twenty. Historically, if you look at 2019 to 2015 pre pandemic patterns. In addition truck volume.

Frank A. Lonegro: We beat on seasonality as well and I would tell you John we saw this too in not just on the revenue side, but we saw it on the net revenue side on the brokerage side of the house.

Frank A. Lonegro: From the from the fourth quarter of 2023, the first eight weeks of the first quarter of 2024, we saw our net revenue margin compressed 105 basis points.

Frank A. Lonegro: And then from the first eight weeks of first quarter 'twenty for the last five weeks. It widen back out 85 basis points right. So I think that's consistent with kind of that underperformance on the topline that we saw relative to pre pandemic seasonality off that tougher launch point in February.

Frank A. Lonegro: I mean, data centers, wind energy, you know, electronic vehicles, things like that. And we're, you know, very well positioned to do well in those markets. I mean, these are sort of our sweet spots. So we're seeing those things do well. I think that they are reflective of an early cycle. How early is a good question to ask.

Speaker Change: Okay, and then I don't want to extrapolate the last couple of weeks or whatever but if you were in kind of a real good guy in February March and people are kind of looking for green shoots it sounds like maybe February was a little bit worse in the back half, but typical seasonality, but April a little bit better are there any signs that youre seeing that theres really.

Frank A. Lonegro: The consumer durable side is still not where we'd like it to be. You know, our view, and many, I think, share this view, there was a fair amount of durable goods that were pulled forward during the pandemic, and that's got to kind of get back to equilibrium before we see that, you know, turn positive for us. JT, if you've got any more color on some of that.

JT: <unk>, a more sustainable uplift in demand or a more accelerated removal of capacity thats, putting a floor below rates or do you think that this is pretty specific to kind of your business your business model and your customer base.

JT: Yes, John let me take a shot at that one.

Frank A. Lonegro: Harkens back to the conversation we were having was Scott a moment ago.

James P. Todd: No, Frank, I think you hit the nail on the head. We're watching very, very closely. We've got a little bit of Easter impact that was a headwind at the end of the first quarter and a tailwind in April, and we're carving that out, and we're looking, John. And from our vantage point, reasonably in line on the volume side, and RIPR load is just ticking a little bit below. Okay. I appreciate it.

James P. Todd: We're watching this thing very very closely.

James P. Todd: We've got as we said in our prepared remarks, we've got areas, which are doing quite well relative to the broader market and relative to the corporate average and then we've got other areas like the power only in some of the <unk> business is not doing as well and you would expect that kind of super cyclical side of things to be really good in good times and more difficult and more difficult times when I look at.

Jonathan B. Chappell: Thanks, Frank. Thanks, Jim. Yep.

Operator: For sure, John. Thank you. We will move now to the next question coming from the line of Bruce Chen of STIFO. Good morning, gentlemen. I appreciate the time here. Just want to come back to some of the comments that you made about cross-border cooperation. I know it's still early days there.

Bruce Chen: The commodity groups that are performing well in April.

Bruce Chen: There are things like the automotive business metals electronic packaging building materials. The government business. I mean, these are things that are more on the industrial side of the economy and more of that have.

Bruce Chen: But maybe you can help us to quantify the size of that business now relative to the opportunity or maybe, you know, what kind of growth you've seen there. Yeah, so Bruce, on cross-border, I think the important thing is we were an early mover in cross-border. You know, we built the facility we call LMO, which is a facility, a cross-docking facility in a yard, and actually, we have a big crane down there we call LFA, so it's a really slick facility. Our customers and agents really like that. We've got a shuttle service that goes across the border.

Bruce Chen: Kind of a secular item of things I mean data centers wind energy.

Bruce Chen: Electronic vehicles things like that and.

Bruce Chen: Very well positioned to do well in those markets. I mean, these are sort of our sweet spots. So we're seeing those things.

Bruce Chen: Well I think that they are reflective of early cycle. How early is a good question to ask the consumer durable side is still not where we'd like it to be.

Bruce Chen: Our view in many I think share. This view there was a fair amount of durable goods that were pulled forward during the pandemic and thats got to kind of get back to equilibrium before we see that.

Frank A. Lonegro: We've got a small intra-Mexico carrier called Metro, so we're well-positioned in that environment. It relies on near-shoring, you know, so we've got a good facility down there. We're going to continue to look for opportunities to grow that business, to introduce more and more agents to help us sell across borders. So we think it's a good business, and again, as I mentioned in my opening remarks, and I'll turn it over to JT for numerical color, but we're already a scale player here, so it's really about taking a business that's already performing well and really thinking about ways to grow it. JT? Yeah, no, thanks, Frank. In terms of revenue performance, it was down about 14.5 percent.

JT: Turn positive for us.

JT: Just to give you any more color on some of the known.

JT: Frank I think I think you hit the nail on the head we're watching very very closely and we get a little bit of Easter impact that was that was a headwind to the end of the first quarter tailwind of the April and we're carving that out and we're looking John.

JT: From our vantage point the reasonably in line on the volume side and Ripper load has just taken a little bit below.

JT: I appreciate it thanks, Frank Thanks, Jim Yes for sure.

Frank A. Lonegro: Thank you we will move now to the next question coming from the line of Bruce Chan of Stifel. Your line is now open.

JT: Hey, good morning, gentlemen, I appreciate the time here just want to come back to some of the comments that you made around cross border I know, it's still early days there but.

JT: Maybe you can help us to quantify the size of that business now relative to the opportunity.

James P. Todd: Our cross-border revs, 1Q24 versus 1Q23, were about 400 basis points better than what we saw here at the core. Yeah, no. I'd just say, you know, last year we did a little over $600 million. We're looking to move to almost $200,000 loads across the border this year. And it's, you know, a tremendous facility that serves us well. It provides for a great transloading environment to allow us to take advantage of that imbalance in the cross-border business. There's a lot more northbound traffic than southbound.

James P. Todd: What kind of growth you've seen there.

James P. Todd: Yes.

James P. Todd: Bruce on cross border and I think the important thing is we were an early mover in cross border. We built the facility we call <unk>, which is a facility a cross dock facility.

James P. Todd: Yard and actually we have a big claim down there with all Lf basis.

James P. Todd: It's a really slick facility, our customers and agents really like that we've got a shelf shuttle service that goes across the board, where we've got a small intra Mexico carrier.

James P. Todd: Metro So we're well positioned in that environment clearly, we are trying to capitalize on near shoring.

James P. Todd: So we've got a good facility down there we're going to continue to look for opportunities to grow that business to introduce more and more agents to help us sell the cross border.

James P. Todd: We think it's we think it's a good business and again as I mentioned in my opening remarks, I will turn it over to J T for numerical color, but we're already scale a scale player here. So it's really about taking a business that is already performing well and really thinking about ways to grow.

Speaker Change: Frank I would just in terms of revenue performance. It was down about 14, 5% of our cross border Reds <unk> 24 versus <unk> 23 was about 400 basis points better than what we saw here at the core.

Operator: Thank you. We will move now to the next question coming from the line of Stephanie Moore of Jefferies. Your line is now open. Hi, good morning.

James P. Todd: Joe If you had anything yes, no I'd just say.

Stephanie Lynn Benjamin Moore: Last year, we did a little over $600 million.

Stephanie Lynn Benjamin Moore: Looking to move to almost 200000 loads across the border of this year.

Stephanie Lynn Benjamin Moore: It's a tremendous facility that serves us well it provides for a great trans loading environment to allow us to take advantage of that imbalance in the cross border business. There is more a lot more northbound and southbound we've got a very solid core Mexican group of carriers that help US service. The interior and then to the earlier emphasis around <unk>.

Stephanie Lynn Benjamin Moore: Border, we've got a dedicated sales team now working on developing opportunities south of the border as well as some agent development initiatives trying to train up and bring agents up to speed on the core capabilities that we have a multitude of crossing points across the border and Thats really I think going very very well, so again a strength that we.

Stephanie: Have and have had that will just continue to lean on to grow and what we think is a great opportunity not only in 'twenty four but into the future.

Stephanie: Okay, Great I appreciate it.

Stephanie Lynn Benjamin Moore: Thank you. The next question coming from the line of Stephanie Mark <unk> of Jefferies. Your line is now open.

Speaker Change: Hi, good morning, Thank you.

Frank A. Lonegro: I wanted to maybe circle back on a prior question talking about maybe the cost the cost structure and select investments that you've called out.

Frank A. Lonegro: Have you kind of expand a little bit on those you know you called out some sales organization changes you just mentioned, having a dedicated sales team to go after cross border and you could kind of maybe expand on that a little bit more just key areas of investment.

Frank A. Lonegro: So, you know, we're being very, very judicious about filling positions that have some level of volume variability to them. In terms of strategic investments, I'm a believer that when a company embarks on a strategy, it needs to align a lot of things, including, you know, capital and human capital resources to be able to bring those to fruition. So when we talk about strategic initiatives like cross-border and heavy haul, you should expect that we are going to invest both capital and people into those areas of business.

Frank A. Lonegro: Which I think are clearly you're trying to position yourself well the upturn, but would love to get a little bit more color. There and then maybe on the cost side areas, where you are taking.

Frank A. Lonegro: Probably quick actions to take cost out of it.

Speaker Change: Hey, Stephanie Thanks for the good questions. Let me, let me do them in reverse.

Frank A. Lonegro: I'd say, we are looking hard at every position that comes open whether we need to fill it whether we need to fill it right now can we wait until we see additional volume inflections and again I give a lot of kudos to JP in terms of how we.

Frank A. Lonegro: And we're going to invest in those areas to make sure that, you know, what we're saying is followed through with real action and can deliver the value that we think is there. So we, you know, and we're not talking large amounts of money or large numbers of people, but the fact that we're adding salespeople into cross-border, we're adding salespeople and some leadership positions in heavy haul, like these are important decisions for us. And remember that, you know, the headquarters environment, the core environment within Landstar, is quite small relative to the agents.

Frank A. Lonegro: Manages things and really the whole leadership organization everybody understands that we're in a freight recession. That's been a couple of years in difficult circumstances. So we're being very very judicious about about filling positions that have some level of volume variability to them in terms of strategic investments I'm, a believer that when a.

Frank A. Lonegro: Company embarks on a strategy, it's got to align a lot of things including.

Frank A. Lonegro: Capital and human capital resources to be able to bring those to fruition.

Frank A. Lonegro: So we're trying to educate them and provide them with the tools that they need and kick open some doors with customers that can help us get into that business in a more fulsome way. But, you know, we've got 1,100 agents or so that we're trying to introduce into heavy haul and into cross-border. They're not all going to want to do it, but there are going to be some who have wanted the opportunity to try that business out.

Frank A. Lonegro: So when we talk about strategic initiatives like cross border heavy haul you should expect that we're going to invest both capital and people into those areas to make sure that.

Frank A. Lonegro: What we're saying is followed through with real action and can deliver the value that we think is there. So we.

Frank A. Lonegro: We're not talking large dollars or large numbers of people, but the fact that we're adding salespeople in the cross border, we're adding salespeople and some leadership positions in heavy haul like these are these are important decisions for us and remember that the headquarters and Barbara core environment within Landstar.

Frank A. Lonegro: We know there's a bunch of freight out there and we know we're good at it. We know our safety and our service capabilities and the performance that we put up year in, year out. You know, I give a lot of credit to Joe in terms of the way that he's running the operation. It's important for us to keep those as great selling points, and it takes a couple of extra people in order to really go out and sit with the agents and help them understand how to go out and sell that piece of business. Joe, anything you'd add to that?

Joe: It is quite small relative to the agents. So we're investing there to educate them and to provide them the tools that they need and kick open some doors with customers that can help us get into that business in a more fulsome manner, but.

Joe: We've got 1100 agents are so that we're trying to introduce into into heavy haul and into cross border, they're not all going to want to do it they're going to be some who have one of the opportunity to try that business out we know there's a bunch of freight out there. We know we're good at it.

Joseph J. Beacom: Yeah, Stephanie, we've kind of got a mantra that we attribute to cross-border, and that is, Mexico made simple. And I think that, you know, over the years, we've really worked to make it that way so that agents aren't intimidated or aren't at all reluctant to bring it up with a customer. We had over 500 agents of our 1,100 that will do a cross-border shipment last year and going forward

Joseph J. Beacom: Our safety and our service capabilities and the performance that we put up year on year out.

Joseph J. Beacom: But give a lot of credit to Joe in terms of the way that he is running the operation.

Joseph J. Beacom: It is important for us to keep those as great selling points and it takes a couple of people extra in order to really go out and sit with the agents and help them understand how to go out and sell that piece of business. So anything you'd add to that yes. It's definitely we've kind of got a mall.

Joseph J. Beacom: And so what we're trying to do is just deepen the understanding, increase the confidence to do so. And from an investment standpoint, we continue to put shuttle trailers down there that allow us and our Mexican carrier partners to utilize those trailers and provide seamless service and timely service across all the gateways. So we're just trying to do a lot of things. You know, the sales effort. On the interior, you know, not every agent wants to go into the interior and make sales calls.

Joseph J. Beacom: Entre that we attribute to cross border, Mexico made simple and I think that over the years, we've really worked to make it that way so that agents aren't intimidated or arent.

Joseph J. Beacom: It all reluctant to bring it up with our customer we've got over 500 agents of our 1100 that will do a cross border shipment last year and going forward and so what we're trying to do is just deepen the understanding increase the confidence to do so.

Joseph J. Beacom: From an investment standpoint, we continue to put shuttle trailers down there that allow us and our Mexican carrier partners to utilize those trailers and provide seamless service timely service.

Joseph J. Beacom: So, Landstar provides resources that will be embedded in the interior, making calls, and uncovering opportunities that will then be managed by those agents and our teams at the border. So, I think it's a good recipe, looking forward. And then, thank you, I appreciate the answer. And then, just one follow-up here, maybe on the technology side, you know. I think, I think for years, a lot of the technology investments were geared towards upgrading some legacy systems.

Joseph J. Beacom: Cross all the gateway so.

Joseph J. Beacom: Just trying to do a lot of things the sales effort on the interior not every agent wants to go into the interior and make sales calls. So landstar provides resources that'll be embedded in the anterior making calls uncovering opportunities that will then be managed by those agents and our teams at the border. So I think it's a good recipe.

Joseph J. Beacom: Looking forward.

Joseph J. Beacom: Are we at the point now where, you know, maybe some of these investments are positioning you guys to play a little bit more often? Yeah, you know, internally, Stephanie, we sometimes say, well, we were the original tech-enabled logistics provider. So, you know, we're going to continue to stay on the leading edge of that. I think we have to; it's really table stakes these days. So, you know, we may not have marketed nearly as much to the investment community as others have done. But you know, we think it's, It's not a single-legged stool, right?

Joseph J. Beacom: Yes.

Joseph J. Beacom: Internally, Stephanie we sometimes say well we were the original tech enabled.

Joseph J. Beacom: Logistics provider so.

Joseph J. Beacom: To continue to stay on the leading edge of that I think we have to it's really table Stakes. These days. So we may not have have marketed.

Joseph J. Beacom: Nearly as much to the investment community as others have done, but we think it's it's not a single leg is still right. It's not just technology. It's the brand has to scale as the relationships. It's the safety. It's the security. It's all of those things wrapped up into one it's not just.

Frank A. Lonegro: It's not just technology. It's the brand. It's the scale. It's the relationships. It's the safety.

Frank A. Lonegro: It's security. It's all of those things wrapped up into one. It's not just a bunch of people sitting in front of a computer trying to do business in a digital manner. That is clearly something that we do, but it's not the only thing that we do. One of the things that we will start looking at is technology, I'll say, inside the building, where we still do some things that are more legacy-related inside the building. Call center modernization would be an idea there that we're talking about, and the building and settlements area for us inside the building.

Frank A. Lonegro: A bunch of people sitting in front of a computer trying to do business in a digital manner that is clearly something that we do but it's not the only thing that we do one of the things that we will start looking at his technology I'll say inside the building.

Frank A. Lonegro: We still do some things that are more legacy related inside the building.

Frank A. Lonegro: Call Center modernization will be an idea there that we're talking about in the building and settlements area for us inside the building. So we've got some things that are going to generate I'd say better levels of support maybe some efficiencies over the next couple of years I think we've done a lot and I'll give Jim good Tony a ton of credit one of the hallmarks of his tenure has been putting great.

Frank A. Lonegro: We've got some things that are going to generate, I'd say, better levels of support, maybe some efficiencies over the next couple of years. I think we've done a lot, and I give Jim Gattoni a ton of credit.

Frank A. Lonegro: One of the hallmarks of his tenure has been putting great technology and tools in front of the agents and the VCOs, and I think we're coming to more of a maintenance mode for that. Thank you, I really appreciate it. Thank you. We will move now to the next question coming from the line of Daniel Ambrose, Stevens Incorporated. Your line is now open. Hey guys, this is Joe Winterland. I'm on behalf

Unknown Attendee: Technology and tools in front of the agents in the <unk> and I think we're sort of coming to.

Unknown Attendee: More of a maintenance mode for that over the next couple of years and again, we'll start to reinvest inside the inside of the building.

Daniel Ambrose: Thank you really appreciate it.

Frank A. Lonegro: So.

Unknown Attendee: Thank you we will move that to the next question coming from the line of Daniel aimed browse Stephens incorporated your line is now open.

Unknown Attendee: Hey, guys. This is Joe <unk> on for Daniel Thanks for taking the question.

Daniel Ambrose: Just wanted to ask about the cadence of variable contribution margin could you maybe talk about how the exit rate compared to the beginning of the quarter and then where have you seen that trend during April.

Daniel Ambrose: Yes, so we put out Joe Bcm guide for the first quarter of 14, 5% to 14, 7% and clearly with the revenue be a little bit more brokerage and theyre in spreads compressing on us a little bit more than we would have anticipated.

James P. Todd: And clearly, with revenue being a little bit more brokerage in there and spreads compressing on us a little bit more than we would have anticipated, you know, missed a low end by 13 bps or so. As we move into the second quarter, you know, with that call for sequential load volume, that's going to be handled, you know, by third-party trucks, right, given what we're seeing in the truck count. So you've got kind of an embedded mix headwind.

James P. Todd: <unk> low end by 13 bps or so as we move into the second quarter with that call for sequential load volume that's going to be handled by a third party trucks right given what we're seeing in truck count. So you've got kind of embedded mix headwind and then we did bake in a little bit.

James P. Todd: More anticipation of spread compression similar to what we saw third quarter fourth quarter fourth quarter first quarter and as such.

James P. Todd: The guide calls for a very very close to the norm.

James P. Todd: Seasonality with respect to <unk> expectations for <unk>.

Speaker Change: Got it makes sense. Thank you as a follow up it sounds like you guys are seeing an improvement in industrial end markets and commodity groups.

James P. Todd: Thank you. Um, as a follow-up, it sounds like you guys are seeing an improvement in industrial and markets and commodity groups. Do you have any thoughts on when you expect consumer durables demand to pick up, or have you seen any green shoots of improvement there? Yeah, that's a good question. I mean, it's getting a little bit better, but it's off of an awfully low base, so I'd hate to call the ball on that one.

James P. Todd: Do you have any thoughts on when you expect consumer durables demand could pick up or have you seen any green shoots of improvement there.

Speaker Change: Yes, it's a good question.

James P. Todd: It is getting a little bit better, but it's off of an awfully low base.

James P. Todd: So I'd hate to call the ball on that one I think it is going to come down to the consumer has had a lot of opportunity in the last couple of years as Covid has kind of relented and you spent the first two years of the Covid period spending money on things at home and renovating things that you Couldnt go out you Couldnt travel you.

Frank A. Lonegro: Couldnt do the things that otherwise you might want to want to do out in about just given the the concern around contagiousness. So.

Frank A. Lonegro: I think we're now in that period, where folks are pivoting toward more of the services and going out to dinner rather than eating at home or taken a vacation instead of buying a new dishwasher or something like that so I. Just think we got to go through the pull forward a little bit I still think we're several quarters away from seeing that come back into equilibrium.

Speaker Change: Got it. Thank you guys Thats all for us.

Daniel Ambrose: Thank you, we will move now to the next question coming from the line of Bascome Majors of Susquehanna. Your line is now open. Hey, Jim, in your current outlook, can you just tell us how much is embedded in the full-year accrual for variable comp, including the share-based piece, and if you return to growth in 2025, how much needs to come back to get you back to that level. Thank you.

Bascome Majors: Thank you we will move that to the next question comes from the line of Bascom majors from Susquehanna. Your line is now open.

Bascome Majors: Hey, Jim.

Speaker Change: Current outlook can you just.

Daniel Ambrose: Tell us how much is embedded in the full year accrual for variable comp, including the share base piece.

Bascome Majors: If you return to growth in 2025, how much needs to come back to.

Daniel Ambrose: Get you back to that level. Thank you.

Daniel Ambrose: Baskin.

Bascome Majors: Just on my 90, <unk> III kind of best estimate as I sit here today, I would anticipate about a 15% to $17 million headwind full year 24 versus <unk> 23.

Bascome Majors: If you're looking at 25 versus <unk> 24, I'd say.

Speaker Change: At kind of threshold, you would expect about $1 million tailwind.

Bascome Majors: Tailwind given some of those transition costs are included in the first quarter 'twenty for that won't repeat in FY 'twenty five.

Frank: Thank you for that and.

Frank: Frank Welcome back.

Bascome Majors: But this is a business that has done really well for stakeholders and shareholders by doing things pretty similarly for a very long time. And obviously, the cycle has challenged things, at least from the peak, in a way that we haven't seen before. But structurally, as you come in with a fresh perspective, do you see any pieces of the model that could maybe be tweaked?

Bascome Majors: As challenge things at least from the peak in a way that we haven't seen before but but structurally as you come in with a fresh perspective do you see any pieces of the model that could maybe be tweaked I don't know how.

Frank A. Lonegro: I don't know how they relate to agents or how you compensate VCOs, just really anything where you might be able to turn some knobs on the dials and generate, you know, the kind of growth we've seen historically for the next 10 years. Thank you. Hey Bascome, nice to hear your voice and look forward to connecting with you later in the year. I'd say the early impressions, and again, it's only been a little less than three months. I mean, the model is an extremely powerful tool.

Bascome Majors: How they relate with agents or how you compensate <unk>, just really anything where you might be able to turn some jobs around the dials and generate.

Frank A. Lonegro: Kind of growth we've seen historically for the next 10 years. Thank you.

Frank A. Lonegro: It's unique, it's resilient, it obviously has attributes which are, you know, are wonderful and have been wonderful successes, you know, the tech enablement, the asset light, the strong cash flow, you know, you're harnessing the power of literally thousands of people who are, you know, putting food on the table every day through the age of the BCO community. So, you know, there's certainly a "do no harm" You know, in terms of the future, I'd say it's evolution, not revolution.

Frank A. Lonegro: Our wonderful wonderfully successful the tech enablement, the asset light strong cash flow your.

Frank A. Lonegro: You are harnessing the power of literally thousands of people who are.

Frank A. Lonegro: Putting food on the table everyday through the agent the Bcl community. So.

Frank A. Lonegro: Certainly they do no harm to the model mantra.

Frank A. Lonegro: Sure.

Frank A. Lonegro: In terms of the future I would say its evolution not revolution.

Frank A. Lonegro: To take advantage of an already really good company and try to make it better. It's a fresh set of eyes on everything that we do and sort of no preconceived notions of.

Frank A. Lonegro: That we do things as good as we can do so clearly I'm going to be looking for opportunities to improve things again from an already already good base and I think that the two themes that maybe youre hearing come through is one how can we accelerate the model.

Frank A. Lonegro: And then how can we really focus on some of the strategic investments and you've heard us talk about cross border and heavy haul those aren't going to be the last two areas that we focus on and those are just the first two areas and I give the board and Jim Good Tony a lot of credit I mean, they started down this path, maybe a year or so ago.

Frank A. Lonegro: I mean, you heard us talk about cross-border and heavy haul, like those aren't going to be the last two areas that we focus on. Those are just the first two areas, you know, and I give the board and Jim Gattoni a lot of credit. I mean, they started down this path maybe a year or so ago.

Frank A. Lonegro: And so on the beneficiary of that work and firmly believe that those two are real opportunities for us I'm going to be looking at the secular shifts and bit of a follow the money type of a strategy. So as you think about things like near shoring Thats clearly an area that we want to play in infrastructure whenever that money on blocks from the government I mean thats an error.

Frank A. Lonegro: That really fits well with heavy haul so we're going to be able to do a lot more work in that area Green energy would be another area.

Frank A. Lonegro: The power generation needs of the country, especially with.

Frank A. Lonegro: AI and data processing and <unk>.

Frank A. Lonegro: Mining for cyber currency and things like that.

Frank A. Lonegro: As a gargantuan amount of power that's required to do that which means we've got to have alternative sources of energy and data centers for all the competing.

Frank A. Lonegro: Power thats necessary, but those are all things that we do really well.

Frank A. Lonegro: Like those are all things that we do really well in. And I think you're going to continue to see us look for those secular opportunities and then invest, you know, the capital and the people in order to unlock them. Thank you. Thank you. We will take the last question coming from the line of Uday Kannapurkar of Teddy Cowen.

Frank A. Lonegro: And I think youre going to continue to see us look for those secular opportunities and then invest the capital and the people in order to unlock those.

Unknown Attendee: Thank you.

Unknown Attendee: Thank you we will take the last question coming from the line of what they can afford 30 Cowen. Your line is now open.

Unknown Attendee: Your line is now open. Hi, thank you. This is Odeon for Jason Seidl.

Unknown Attendee: Hi. Thank you this is on for Jason Seidl.

Unknown Attendee: I guess, can you talk a little bit about the rate environment, specifically in the unsighted market? I believe flatbed spots had a better quarter than VAN. I guess I'm wondering, are we seeing a different capacity dynamic in that part of the market, or any other color that would be helpful? I think one of the things that we talked about was that the platform environment is holding up better than the van environment. Some of it is simply the supply-demand dynamic in that area. There are fewer flats out there than there are vans out there.

Unknown Attendee: I guess can you talk a little bit about the environment, specifically in the onsite and market I believe.

Unknown Attendee: Spots had a better quarter than Ben I guess, I guess I'm wondering are we seeing a different capacity dynamic in that part of the market or any color there would be helpful.

Unknown Attendee: I think one of the things that we talked about was the.

Unknown Attendee: The platform environment is holding up better than.

Unknown Attendee: Nevada environment some of it is simply the.

Unknown Attendee: The supply demand dynamic in that area. There is fewer flats up and there are bands out there. It is an area that supports heavy haul as well so it's an area that we've been.

Jay: Focused on so I think there's part of it there as well we don't we don't bottom feed.

Jay: We are certainly looking for premium freight in light of the platform.

Jay: Items or are a little bit higher revenue per load relative to <unk>.

Jay: Absolutely Frank as I mentioned, there was a bit of a mix. Good guy there. So we saw increased demand for that heavy haul service offering plus 2% on loadings.

James P. Todd: We saw increased demand for that heavy haul service offering plus 2% on loadings and down 1% rev per load. If you strip out the heavy haul mixed good guy from the unsighted platform category, you go from a down 1.7% as reported year over year to a down 4.2% unsighted platform X the impact of heavy haul. All right, that's very helpful. I guess just as a follow-up, just on the year-on-year truckload guidance, just as I'm looking at the model, it implies a modest sequential uptake or, you know, even slightly down at the low end. I guess I'm wondering how that guide measures up relative to normal seasonality on a sequential basis?

James P. Todd: Down 1% Rev per load, if you kind of strip out the heavy haul mix good guy from the inside of the platform category. You go from a down one 7% as reported year over year to a down four 2% kind of on side of the platform ex the impact of heavy haul.

Speaker Change: Alright, that's very helpful. I guess, just as a follow up.

Speaker Change: Just on the year on year truckload guidance, just looking at the model it implies a modest sequential uptick or even slightly down at the low end I guess I'm wondering how does that guide metro relative to normal seasonality on a sequential basis.

Unknown Attendee: I'm sorry, can you give me the guide with respect to anticipated operating margin for the second quarter? Did the truck load down five to nine percent. You're over here. Oh, you're over here.

Speaker Change: I'm sorry can you guide with respect to anticipated operating margin for second quarter.

Speaker Change: The truckload down 5% to 9%.

Speaker Change: Hi, Gary Bob relative to season year over year.

Unknown Attendee: Just slightly below. So I think on a sequential basis, we called for 4 to 8% of a tailwind, 1Q to 2Q, so call it 6 at the midpoint, and that's lagging by a point or two of what we would, you know, call, define normal seasonality. All right, great. Thanks a lot, gentlemen. At this time, I have no further questions.

Speaker Change: Slightly slightly below so I think.

Speaker Change: On a sequential basis, we called for 4% to 8% tailwind <unk> so call it six at the mid and Thats.

Speaker Change: Lagging by a point or two of what we would call define normal seasonality.

Speaker Change: Alright, great. Thanks, a lot gentlemen.

Speaker Change: At this time I'm showing no further questions I would like to turn the call back over to you Sir for closing remarks.

Bill: Thanks, Paul in closing, while the freight environment remains challenging we do see some positives in the near term we expect the 2024 second quarter to deliver the Landstar is first quarter to quarter sequential revenue increase since the second quarter of 2022 also we are encouraged that truck revenue per load seems to have stabilized at a level well above pre pandemic.

Operator: Norms and truckload volumes appear to be trending reasonably in line with pre pandemic normal seasonal patterns, which is potentially a positive sign for the rest of 2020 for regardless of the economic environment. The resiliency of the Landstar variable cost business model continues to generate significant free cash flow.

Operator: Landstar has always been a cyclical growth company and we are well positioned to navigate these dynamic times and look forward to higher highs in the freight market turns are way. Thank you for joining us. This morning, we look forward to speaking with you again on our 2024 second quarter earnings Conference call in July. Thank you.

Frank A. Lonegro: Thank you for joining us this morning. We look forward to speaking with you again on our 2024 second quarter earnings conference call in July. Thank you. Thank you for joining the conference call today. Have a good morning. Please disconnect your lines at this time.

Speaker Change: Thank you for joining the conference call today have a good morning. Please disconnect your lines at this time.

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