Q1 2025 Landstar System Inc Earnings Call

Today's call is being recorded if you have any objections you may disconnect at this time, joining us today from one star our Franklin Nigro, President and CEO, Jim Applegate, Vice President and Chief scope corporate sales strategy and specialized REIT officer, Jim Todd Vice President and CFO, Matt Danziger, Vice President and Chief field sales off.

Unknown Executive: This concludes the formal question and answer session.

Unknown Executive: Today's call is being recorded.

Unknown Executive: If you have any objections, you may disconnect at this time.

Unknown Executive: Joining us today from Landstar are Frank Lonegro, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Freight Officer, Jim Todd, Vice President and CFO, Matt Dannegger, Vice President and Chief Field Sales Officer, Matt Miller, Vice President and Chief Safety Officer.

Speaker Change: Sure Matt.

Speaker Change: Miller, Vice President and Chief Safety and officers Safety Officer, now I would like to turn the call over to Mr. Jim Todd. Thank you. Sir you may begin. Thank you good morning, and welcome to <unk> 2025 first quarter earnings Conference call.

James Todd: Now I would like to turn the call over to Mr. Jim Todd. Thank you for your time. Thank you all.

Frank Lonegro: Good morning and welcome to Landstar's 2025 First Quarter Earnings Conference.

Jim Todd: We begin let me make one statement.

Unknown Executive: Before we begin, let me read the following statement.

Jim Todd: If harbor statement of the private Securities Litigation Reform Act of 90 95 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 <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.

Unknown Executive: The following is a Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relates to Landstar's business objectives, plans, strategies, and expectations. Such information is by nature subject to uncertainties and risks, including but not limited to the operational, financial, and legal risks detailed in Landstar's Form 10-K for the 2024 fiscal year described in the section Risk Factors 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.

Jim Todd: And legal risks detailed in <unk> Form 10-K for the 2020 for 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 investors should not place undue reliance on such forward looking information and Landstar undertakes no obligation to publicly update or revise any.

Unknown Executive: Investors should not place under reliance on such forward-looking information, and Landstar undertakes no obligation to publicly update or revise any forward-looking information.

Jim Todd: Let me information.

Jim Todd: Now asset and last our CEO Franklin <expletive> for his opening remarks, thanks, J T and good morning, everyone, we'd like to thank our investors and analysts for their patients with us as we work through the previously disclosed supply chain fraud matter, resulting in the postponement of first quarter earnings we will be sharing the details at a high level with you shortly.

Frank Lonegro: I'll now pass it to Landstar CEO Franklin Agarow for his opening remarks. Thanks, JT, and good morning, everyone.

Frank Lonegro: We'd like to thank our investors and analysts for their patience with us as we've worked through the previously disclosed supply chain fraud matter resulting in the postponement of first-quarter earnings. We will be sharing the details at a high level with you shortly. I'd also like to thank our BCOs and agents and all of the Landstar employees who support them every day.

Jim Todd: Also like to thank our <unk> agents and all of the Landstar employees, who support them every day. It was great to spend time with our <unk> team in La at the mid America truck show recently and to celebrate the success of our agent network in Hollywood, Florida at our annual agent Convention.

Frank Lonegro: It was great to spend time with our BCO team in Louisville at the Mid-America Truck Show recently and to celebrate the success of our agent network in Hollywood, Florida at our annual agent convention. The capability, resiliency, and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry. Their adaptability and dedication to service for our customers in this highly fluid freight transportation backdrop is truly impressive. They are exceptional business leaders and key to driving the continued success of Landstar's business model.

Jim Todd: The capability resiliency and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry.

Jim Todd: <unk> ability and dedication to service for our customers and it's highly fluid freight transportation backdrop is truly impressive they are exceptional business leaders and key to driving the continued success of Landstar is business model for 2025 first quarter presented a unique set of macroeconomic challenges with the inauguration of new press.

Frank Lonegro: The 2025 first quarter presented a unique set of macroeconomic challenges with the inauguration of a new president and the uncertainties associated with aggressive U.S. trade and tariff policies. We continue to monitor the impact of tariffs and other federal trade policies on international trade relationships between the United States and many countries throughout the world, most notably China, Mexico, and Canada very closely. As a reminder, U.S.-Mexico cross-border revenue was approximately 11% of consolidated revenue during the 2024 fiscal year, while U.S.-Canada cross-border revenue was approximately 4% of consolidated revenue during the same period. Our direct exposure to, freight to, and from China is diminishing.

Jim Todd: And the uncertainties associated with aggressive U S trade and tariff policies we.

Jim Todd: We continue to monitor the impact of tariffs and other federal trade policies on international trade relationships between the United States in many countries throughout the world, most notably China, Mexico, and Canada very closely.

Jim Todd: As a reminder, U S. Mexico Cross border revenue was approximately 11% of consolidated revenue during the 2020 for fiscal year, while U S. Canada Cross border revenue was approximately 4% of consolidated revenue during the same period.

Jim Todd: Our direct exposure to freight to and from China is de Minimis.

Jim Todd: Amidst ongoing challenges in the freight environment compounded by a highly volatile federal trade policy for 2025 first quarter included several important positive developments for Landstar.

Frank Lonegro: Amidst ongoing challenges in the freight environment compounded by a highly volatile federal trade policy, the 2025 first quarter included several important positive developments for Landstar. As noted in our earnings release, the number of loads hauled via truck exceeded the high end of our guidance issued in connection with our fourth quarter 2024 earnings release on January 29, 2025. This was the first time in at least 15 years where the number of loads hauled via truck in the first quarter exceeded the immediately preceding fourth quarter. Although it is hard to determine how much of our first quarter load count was related to efforts by shippers to get ahead of tariffs, we certainly saw this as a positive sign to start 2025.

Jim Todd: As noted in our earnings release, the number of loads hauled via truck exceeded the high end of our guidance issued in connection with our fourth quarter 2024 earnings release on January 29 2025.

Jim Todd: This was the first time in at least 15 years, where the number of loads hauled via truck in the first quarter exceeded the immediately preceding fourth quarter.

Jim Todd: Although it is hard to determine how much of our first quarter load count was related to efforts by shippers to get ahead of tariffs. We certainly saw this as a positive sign to start 2025 knots.

Jim Todd: Notwithstanding the political and macro uncertainty thus far in 2025, our focus continues to be on accelerating our business model and executing on our strategic growth initiatives and one continued major bright spot I am extremely pleased with the performance of Landstar is heavy haul service offerings.

Frank Lonegro: Notwithstanding the political and macro uncertainty thus far in 2025, our focus continues to be on accelerating our business model and executing on our strategic growth initiatives.

Frank Lonegro: In one continued major bright spot, I am extremely pleased with the performance of Landstar's Heavy Haul service offerings. We generated approximately $113 million of heavy haul revenue during the 2025 first quarter, or a 6% increase over the 2024 first quarter. This achievement was driven by a 3% increase in heavy haul revenue per load and a 3% increase in heavy haul volume.

Jim Todd: We generated approximately $113 million of heavy haul revenue during the 2025 first quarter or a 6% increase over the 2024 first quarter. This achievement was driven by a 3% increase in heavy haul revenue per load and a 3% increase in heavy haul volume.

Jim Todd: Turning more broadly to our core truckload service offering the foundational work we invested in during 2024 puts us in a great position to leverage the freight environment. When it eventually turns our way. We are also focused on our commitment to continuous improvement in the level of safety service and support we provide to our customers agents <unk> carrier.

Frank Lonegro: Turning more broadly to our core truckload service offering, the foundational work we invested in during 2024 puts us in a great position to leverage the freight environment when it eventually turns our way. We are also focused on our commitment to continuous improvement in the level of safety, service, and support we provide to our customers, agents, VCOs, and carriers each and every day.

Jim Todd: Each and every day.

Jim Todd: Turning to slide five the freight environment in the 2025 first quarter was characterized by relatively soft demand weather impacts and readily available truck capacity.

Frank Lonegro: Turning to slide 5, the freight environment in the 2025 first quarter was characterized by relatively soft demand, weather impacts, and readily available truck capacity. The impact of accumulated inflation remains a drag on the amount of truckload of freight generated in relation to consumer spending. Truck capacity continues to be readily available with small pockets of supply-demand equilibrium and market conditions continue to favor the shipper amidst choppy conditions in the industrial economy.

Jim Todd: Impact of accumulated inflation remains a drag on the amount of truckload freight generated in relation to consumer spending.

Jim Todd: Capacity continues to be readily available with small pockets of supply demand equilibrium and market conditions continue to favor the shipper amidst choppy conditions in the industrial economy.

Jim Todd: Considering that backdrop and stars revenue performance was admirable in the 2025 first quarter delivering top line results within the top half of our first quarter guidance range issued on January 29.

Frank Lonegro: Considering that backdrop, Landstar's revenue performance was admirable in the 2025 first quarter, delivering top-line results within the top half of our first quarter guidance range issued on January 29th. Our first quarter guidance called for the number of loads hauled via truck to be 7% below to 2% below the 2024 first quarter, and overall revenue per truckload to be 2% below to 3% above the 2024 first quarter. The actual number of loads hauled via truck in the 2025 first quarter was 1.2% below the 2024 first quarter, slightly above the high end of our guidance range. Actual revenue per truckload in the 2025 first quarter was 0.6% below the prior year quarter, comfortably within the lower half of the guidance range.

Jim Todd: Our first quarter guidance call for the number of loads hauled via truck to be 7% below the 2% below the 2021st quarter and overall revenue per truckload to be 2% below to 3% above the 2024 first quarter. The actual number of loads hauled via truck in the 2025 first quarter was one 2% below the two.

Jim Todd: <unk> thousand 24 first quarter slightly above the high end of our guidance range.

Jim Todd: <unk> revenue per truckload in the 2025 first quarter was 6% below the prior year quarter comfortably within the lower half of the guidance range. As we previously indicated in our recent 8-K earnings per share came in below the low end of the guidance. We provided in conjunction with our 2020 for fourth quarter earnings release, primarily for two reasons.

James Todd: As we previously indicated in our recent 8Ks, earnings per share came in below the low end of the guidance we provided in conjunction with our 2024 fourth quarter earnings release, primarily for two reasons. First, as discussed in our earnings release issued earlier today, and as previously disclosed in Form 8Ks filed with the SEC on April 2nd and April 25th of this year, during the last week of Landstar's 2025 first quarter, we identified a supply chain fraud relating to the company's international rate-forwarding operation. This fraud matter does not involve our core North American truckload services. While investigation, remediation and collection efforts continue, the 2025 first quarter results included a $4.8 million pre-tax charge or 10 cents per share relating to this matter.

Jim Todd: First as discussed in our earnings release issued earlier today and as previously disclosed in form 8-K filed with the SEC on April 2nd in April 25th of this year. During the last week of Landstar is 2025 first quarter, we identified a supply chain broad relating to the company's international freight forwarding operations.

Jim Todd: This broad better does not involve our core North American truckload services, while investigation remediation and collection efforts continue to 2025 first quarter results included a $4 $8 million pre tax charge or <unk> 10 per share relating to this matter. This charge reflects the total currently anticipated adverse financial impact.

James Todd: This charge reflects the total currently anticipated adverse financial impact to Landstar relating to this fraud, net of certain actual and anticipated recoveries. And before taking into account the cost of legal and other professional fees, as well as additional potential recoveries. This charge is reflected in selling general and administrative costs as bad debt expense.

Jim Todd: <unk> landstar relating to this broad net of certain actual and anticipated recoveries and before taking into account the cost of legal and other professional fees as well as additional potential recoveries.

Jim Todd: This charge is reflected in selling general and administrative costs and bad debt expense. It is important to note. We believe the inception of the fraud dates back to at least 2019.

James Todd: It is important to note, we believe the inception of the fraud dates back to at least 2019. We have no evidence currently of any internal employee involvement. We have our arms all the way around the matter and are vigorously pursuing recovery. And the fraud was isolated to a single satellite agent office created through a unique arrangement dating back over 10 years.

Jim Todd: We have no evidence currently have any internal employee involvement we have our arms all the way around the matter and are vigorously pursuing recoveries.

Jim Todd: And the fraud was isolated to a single satellite agent office created through a unique arrangement dating back over 10 years.

Speaker Change: While the situation is very disappointing landstar leaders across accounting finance international sales and operations and legal worked tirelessly over the past six weeks since we discovered the fraud to investigate this matter and secure both actual and probable future recoveries that reduced the impact from the approximately $20 million worst case scenario, we reported in the 8-K.

James Todd: While this situation is very disappointing, Landstar leaders across accounting, finance, international sales and operations, and legal worked tirelessly over the past six weeks since we discovered the fraud to investigate this matter and secure both actual and probable future recoveries that reduced the impact from the approximately $20 million worst case scenario we reported in the 8Ks to the roughly $5 million we reported in the first quarter.

Jim Todd: As to the roughly $5 million, we reported in the first quarter.

Jim Todd: Second as previewed by the 8-K, we filed on April 2nd 2025 first quarter EPS also reflected highly elevated insurance and claims costs of nine 3% of <unk> revenue. This amount of insurance and claims as a percentage of <unk> revenue is well above the companys average historical experience a four 9% from the.

James Todd: Second, as previewed by the 8K we file on April 2, 2025, first-quarter EPS also reflected highly elevated insurance and claims costs of 9.3% of BCO revenue. This amount of insurance and claims as a percentage of BCO revenue is well above the company's average historical experience of 4.9% from the 2019 fiscal year through the 2024 fiscal year, and as will be discussed further by JT, is primarily due to cargo theft and truck accident adverse claim development. Absent the supply chain item and the elevated insurance and claims costs, our EPS would have finished comfortably within the 2025 First Quarter Prior Guidance, even with the corresponding incentive compensation adjustment.

Jim Todd: 2019 fiscal year through 2020 for fiscal year and as will be discussed further by J T is primarily due to cargo theft and truck accident adverse claim development.

Jim Todd: Absent the supply chain item and the elevated insurance and claims costs. Our EPS would have finished comfortably within the 2025 first quarter prior guidance, even with the corresponding incentive compensation adjustments.

Jim Todd: Our balance sheet continues to be very strong and our capital allocation priorities are unchanged. We will continue to patiently and opportunistically execute on our existing buyback authority to benefit our long term stockholders as noted in the release, we deployed approximately $61 million of capital towards buybacks and repurchased approximately 386000 shares of common stock.

James Todd: Our balance sheet continues to be very strong, and our capital allocation priorities are unchanged. We will continue to patiently and opportunistically execute on our existing buyback authority to benefit our long-term stockholders. As noted in the release, we deployed approximately $61 million of capital toward buybacks and repurchased approximately 386,000 shares of common stock during the 2025 first quarter.

Jim Todd: During the 2025 first quarter. In addition, we were excited to announce this morning, the acceleration of the increase to our regularly scheduled quarterly dividend, resulting in the 11% increase over the amount of the company's regular quarterly dividend declared following each of the prior three quarters.

James Todd: In addition, we were excited to announce this morning the acceleration of the increase to our regularly scheduled quarterly dividend, resulting in an 11% increase over the amount of the company's regular quarterly dividend declared following each of the prior three quarters.

Jim Todd: We continue to invest through the cycle and leading technology solutions for the benefit of our network of independent business owners and have allocated a significant amount of capital this year towards refresh refreshing our fleet of trailing equipment, specifically focusing on unsighted platform equipment.

James Todd: We continue to invest through the cycle in leading technology solutions for the benefit of our network of independent business owners and have allocated a significant amount of capital this year towards refreshing our fleet of trailing equipment, specifically focusing on unsighted platform equipment.

Speaker Change: Turning to slide six and looking at our network scale systems and support inherent in the Landstar model helped to drive the operating results generating during the 2025 first quarter J T will get into the details on revenue loadings in rate per load shortly as.

James Todd: Turning to slide 6 and looking at our network, the scale, systems, and support inherent in the Landstar model help to drive the operating results generating during the 2025 first quarter. JT will get into the details on revenue, loadings, and rate-per-load shortly.

Jim Todd: As noted during previous earnings calls I've been in the transportation sector for most of my career and realized how important Landstar safety culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar <unk> operating safely every day and the agents and employees, who work to reinforce the critical importance of safety Atlanta.

Frank Lonegro: As noted during previous earnings calls, I've been in the transportation sector for most of my career and realized how important Landstar's safety culture is to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar BCOs operating safely every day and the agents and employees who work to reinforce the critical importance of safety at Landstar. I'm proud to report an accident frequency rate of 0.69 DOT reportable accidents per million miles during the 2025 first quarter, well below the last available national average DOT reportable frequency released from the FMCSA for 2021.

Jim Todd:

Jim Todd: Rather report an accident frequency rate of 0.69 dot reportable accidents per million miles during the 2025 first quarter well below the last available national average Dot reportable frequency released from the FM CSA for 2021.

Jim Todd: We continue to be committed to driving down that number closer to the company's trailing five year average of 0.61 or lower this long run average is an impressive operating metric that speaks to the strength skill talent and dedication of our <unk>.

Frank Lonegro: We continue to be committed to driving down that number closer to the company's trailing five-year average of 0.61 or lower. This long-run average is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our BCOs and provides a point of differentiation our agents are able to highlight in discussions with our freight customers.

Jim Todd: And provides a point of differentiation our agents, who are able to highlight and discussions with our freight customers. I'd also like to take a moment to recognize landstar nearly $500 million agents based on the 2020 for fiscal year results as mentioned earlier in the prepared remarks. It was our pleasure to celebrate their success in April at our annual agent Convention.

Frank Lonegro: I'd also like to take a moment to recognize Landstar's nearly 500 million dollar agents based on the 2024 fiscal year results. As mentioned earlier in the prepared remarks, it was our pleasure to celebrate their success in April at our annual agent convention. Importantly, retention within the million dollar agent network continues to be extremely high.

Jim Todd: Italy retention within $1 million agent network continues to be extremely high.

Jim Todd: Turning to slide seven and the capacity side on a year over year basis, <unk> truck count decreased approximately 8% compared to the end of the 2024 first quarter on a sequential basis <unk> truck count decreased in the first quarter from the 2020 for fourth quarter by approximately 223 trucks consistent with our expectations of BCE.

Frank Lonegro: Turning to slide 7 in the capacity side, on a year-over-year basis, BCO truck count decreased approximately 8% compared to the end of the 2024 first quarter. On a sequential basis, BCO truck count decreased in the first quarter from the 2024 fourth quarter by approximately 223 trucks, consistent with our expectations of BCO truck declines continuing into the first quarter.

Jim Todd: Truck declines continuing into the first quarter I would remind folks however that the first quarter is historically, the most challenging quarter from a net truck count standpoint going back in history in the aggregate during the first quarter of every year over the last 15 years. We have added a total of 10445 Bcf trucks and had a total of <unk> <unk>.

Frank Lonegro: I would remind folks, however, that the first quarter is historically the most challenging quarter from a net truck count standpoint. Going back in history, in the aggregate, during the first quarter of every year, over the last 15 years, we have added a total of 10,445 BCO trucks and had a total of 11,412 BCO trucks to part Landstar. It is typical to incur turnover in BCO truck count in a low rate per load environment. BCO turnover continues to be influenced by the significant increase in the cost of maintained and operated truck today compared to before the pandemic.

Jim Todd: 11412 Bcf trucks depart landstar.

Jim Todd: It is typical to incur turnover in <unk> truck count and a low rate per load environment.

Jim Todd: <unk> turnover continues to be influenced by the significant increase in the cost to maintain and operate a truck today compared to before the pandemic.

Jim Todd: Directionally, we are pleased to see our trailing 12 month turnover rate dropped from 34, 5% as our fiscal year end to 33% at the end of the 2025 first quarter through the first six weeks of the 2025 second fiscal quarter. The number of trucks provided by <unk> independent contractors has declined by less than 20 trucks.

Frank Lonegro: Directionally, we are pleased to see our trailing 12-month truck turnover rate drop from 34.5% as of fiscal year end to 33% at the end of the 2025 first quarter. Through the first six weeks of the 2025 second fiscal quarter, the number of trucks provided by BCO independent contractors has declined by less than 20 trucks.

Jim Todd: If that trend continues through the final seven weeks of the quarter. It would be the best quarter over quarter net truck performance in 12 quarters I will now pass the call back to Jay to walk you through the 2025 first quarter financials in more detail. Thanks, Brian turning to slide nine as Frank mentioned earlier overall truck revenue per load decreased <unk>, 6% in 2020.

Frank Lonegro: If that trend continues through the final seven weeks of the quarter, it will be the best quarter-over-quarter net truck performance in 12 quarters.

James Todd: I will now pass the call back to JT to walk you through the 2025 first quarter financials in more detail. Thanks, Frank. Turning to slide nine, as Frank mentioned earlier, overall truck revenue per load decreased 0.6% in the 2025 first quarter compared to the 2024 first quarter, primarily attributable to a 2.1% decrease in revenue per load on loads hauled by truck brokerage carriers, partially offset by a 1.5% increase in revenue per load on loads hauled by BCO independent contractors. Revenue per load on loads hauled by truck brokerage carriers was negatively impacted by a year-over-year decline in diesel prices.

Jim Todd: First quarter compared to the 2024 first quarter, primarily attributable to a two 1% decrease in revenue per load on loads hauled by truck brokerage carriers, partially offset by one 5% increase in revenue per load on loads hauled by <unk> independent contractors revenue per load on loads hauled by truck brokerage carriers was negatively impacted by a year over year decline in diesel prices.

Jim Todd: Overall truck revenue per load in the 2025 first quarter was negatively impacted by a 1% decline in average length of haul as compared to the 2024 first quarter on a sequential basis truck revenue per load decreased four 6% in 2025 first quarter versus the 2020 for fourth quarter slightly softer than the typical pre pandemic normal seasonality.

James Todd: Overall truck revenue per load in the 2025 first quarter was negatively impacted by a 1% decline in average length of haul as compared to the 2024 first quarter. On a sequential basis, truck revenue per load decreased 4.6% in the 2025 first quarter versus the 2024 fourth quarter, slightly softer than the typical pre-pandemic normal seasonality decline of 3%. In comparison to overall truck revenue per load, we consider revenue per mile on BCO loads hauled by BCO trucks a pure reflection of market pricing as it excludes fuel surcharges billed to customers that are paid 100% of the BCO.

Jim Todd: On a 3% in comparison to overall truck revenue per load, we consider revenue per mile on bto loads hauled by <unk>.

Jim Todd: You show trucks, a pure reflection of market pricing is it excludes fuel surcharges billed to customers that are paid 100% of the bcl.

Jim Todd: In 2025 first quarter revenue per mile and onside of platform equipment hauled by <unk> was 14% above the 2020 for first quarter and revenue per mile on.

James Todd: In the 2025 first quarter, revenue per mile on unsighted platform equipment hauled by PCOs was 14% above the 2024 first quarter. And revenue per mile on van equipment hauled by PCOs was 2% above the 2024 first quarter. Delving deeper into seasonal trends, revenue per mile and loads hauled by BCOs on unsighted platform equipment declined 9% from December to January, was approximately flat January to February, and increased 1% from February to March. The December to January decline underperformed pre-pandemic seasonal trends, while the February and March trend was generally in line with pre-pandemic historical trends. With respect to loads hauled by BCOs on van equipment, performance versus pre-pandemic typical seasonal patterns was choppier.

Jim Todd: And van equipment hauled by <unk> was 2% above the 2024 first quarter delving deeper into seasonal trends revenue per mile on loads hauled by <unk> on one side of the platform equipment declined 9% from December to January was approximately flat January to February and increased 1% from February to March to December to January declined underperformed pre pandemic seasonal.

Jim Todd: Trends, while the February and March trend was generally in line with pre pandemic historical trends with respect to loads hauled by <unk> on van equipment performance versus pre pandemic typical seasonal patterns was choppy or revenue per mile and van equipment hauled by <unk> increased 1% from December to January outperforming these trends decreased 3% from January to February.

James Todd: Ribbon per mile on van equipment hauled by BCOs increased 1% from December to January, outperforming these trends, decreased 3% from January to February, underperforming these trends, and decreased 1% from February to March, again underperforming. It should be noted that month-to-month seasonal trends on unsighted platform equipment are generally more volatile compared to that of van equipment. This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volume. As Frank alluded to, we've experienced strong recent performance in our heavy haul service offering. Heavy haul revenue was up an impressive 6% year-over-year in the first quarter, significantly outperforming core truckload revenue.

Jim Todd: Performing these trends and decreased 1% from February to March again underperforming.

Jim Todd: It should be noted that month to month seasonal trends on inside of platform equipment are generally more volatile compared to that of van equipment is relative volatility is often due to the mix between heavy specialized loads and standard flat with volume as Frank alluded to we have experienced strong recent performance in our heavy haul service offering have you all revenue was up an impressive 6% year over year in the first quarter significantly.

Jim Todd: <unk> core truckload revenue, having all loadings were up approximately 3% year over year and revenue per heavy haul load increased 3% year over year. This represented a mixed tailwind to our unsighted platform revenue per load is heavy haul revenue as a percentage of the category increase from approximately 31% during the 2024 first quarter to approximately 33% in 'twenty.

James Todd: Heavy haul loadings were up approximately 3% year-over-year, and revenue per heavy haul load increased 3% year-over-year. This represented a mixed tailwind to our unsighted platform revenue per load as heavy haul revenue Non-truck transportation service revenue in the 2025 first quarter was 8% or $6 million above the 2024 first quarter. The increase in non-truck transportation revenue was mostly due to a 14% increase in ocean revenue per shipment and a 19% increase in air revenue per shipment, partially offset by a 23% decrease in intermodal revenue, primarily driven by a 10% decline in revenue per load and a 14% decline in loadings.

Jim Todd: First quarter non truck transportation service revenue in the 2025 first quarter was 8% or $6 million above the 2024 first quarter. The increase in non truck transportation revenue was mostly due to a 14% increase in ocean revenue per shipment and a 19% increase in air revenue per shipment, partially offset by 23% decrease.

Jim Todd: And intermodal revenue, primarily driven by a 10% decline in revenue per load and a 14% decline in loadings turning to slide 10, we have provided revenue share by commodity and year over year change in revenue by commodity transportation logistic segment revenue was down 1% year over year on a 1% decrease in loadings, while revenue per load was approximately flat compared to the <unk>.

James Todd: Turning to slide 10, we've provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation logistic segment revenue was down 1% year-over-year on a 1% decrease in loadings while revenue per load was approximately flat compared to the 2024 first quarter. Within our largest commodity category, consumer durables, revenue increased 2% year-over-year on a 5% increase in revenue per load, partially offset by a 3% decrease in volume. Aggregate revenue across our top five commodity categories, which collectively make up about 69% of our transportation revenue, was approximately equal to the 2024 first quarter.

Jim Todd: 2024 first quarter within our largest commodity category consumer durables revenue increased 2% year over year on a 5% increase in revenue per load, partially offset by 3% decrease in volume aggregate revenue across our top five commodity categories, which collectively make up about 69% of our transportation revenue was approximately equal.

Jim Todd: So the 2024 first quarter, while slide 10 displays revenue share by commodity we thought it would also be helpful to include some color on volume performance within our top five commodity categories from the 2020 for first quarter 2025 first quarter total loadings of machinery increased 6% automotive equipment and parts decreased 15% building products increased.

James Todd: While slide 10 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top five commodity categories. From the 2024 first quarter to the 2025 first quarter, total loadings of machinery increased 6%, automotive equipment and parts decreased 15%, building products increased 1%, and electrical increased 36%. Additionally, substitute line haul loadings, one of the strongest performers for us during the pandemic, and one which varies significantly based on consumer demand, increased 24% from the 2024 first quarter.

Jim Todd: 1% and electrical increased 36%. Additionally, substitute line haul loadings, one of the strongest performers for us during the pandemic and one which vary significantly based on consumer demand increased 24% from the 2020 for first quarter.

Jim Todd: As we've mentioned many many times before Lance arts of truck capacity provider to other trucking companies three pls and truck brokers during periods of tight truck capacity. Those other freight transportation providers reached out to landstar to provide truck capacity more often than during times of more readily available truck capacity.

James Todd: As we've mentioned many times before, Landstar is a truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those other freight transportation providers reach out to Landstar to provide truck capacity more often than during times of more readily available truck capacity. The amount of freight hauled by Landstar on behalf of other truck transportation companies is reflected in almost all of our commodity groupings, including our substitute line haul service offerings. Overall, revenue hauled on behalf of other transportation companies in the 2025 first quarter was 13% below the 2024 first quarter, a clear indicator that capacity is readily accessible in the market.

Jim Todd: A free call by Landstar on behalf of other truck transportation companies as reflected in almost all of our commodity groupings, including our substitute line haul service offering.

Jim Todd: We're all revenue Paul on behalf of other truck transportation companies in the 2025 first quarter was 13% below the 2024 first quarter a clear indicator of the capacity is readily accessible in the marketplace revenue hauled on behalf of other transportation companies was 12% and 14% of transportation revenue in the 2025 and 2024 first quarters respectively.

James Todd: Revenue hauled on behalf of other truck transportation companies was 12% and 14% of transportation revenue in the 2025 and 2024 first quarters, respectively.

Jim Todd: Even with the ups and downs in various customer categories. Our business remains highly diversified with over 23000 customers, none of which contributed over 7% of our revenue in 2025 first quarter.

James Todd: Even with the ups and downs in various customer categories, our business remains highly diversified with over 23,000 customers, none of which contributed over 7% of our revenue in 2025 first quarter.

Jim Todd: Turning to slide 11, 2025 first quarter gross profit was $98 3 million compared to gross profit of $113 9 million in the 2024 first quarter gross profit margin was eight 5% of revenue in 2025 first quarter as compared to gross profit margin of nine 7% in the corresponding period of 2024.

James Todd: Turn to slide 11. In the 2025 first quarter, gross profit was $98.3 million compared to gross profit of $113.9 million in the 2024 first quarter. Gross profit margin was 8.5% of revenue in the 2025 first quarter as compared to gross profit margin of 9.7% in the corresponding period of 2024. In the 2025 first quarter, variable contribution was $161.3 million compared to $168.2 million in the 2024 first quarter. Variable contribution margin was 14% of revenue in the 2025 first quarter compared to 14.4% in the same period last year.

Jim Todd: The 2025 first quarter variable contribution was $161 3 million compared to $168 2 million in the 2020 for first quarter.

Jim Todd: Contribution margin was 14% of revenue in the 2025 first quarter compared to 14, 4% in the same period last year the.

Jim Todd: The decrease in variable contribution margin compared to the 2020 for first quarter was primarily attributable to a mix headwind as the number of loads hauled by <unk> decrease quarter over prior year quarter by approximately 7% slightly better than the quarter over prior year quarter decline in the average number of trucks provided by <unk> independent contractors of 9% given the two person.

James Todd: The decrease in variable contribution margin compared to the 2024 first quarter was primarily attributable to a mixed headwind, as the number of loads hauled by BCOs decreased quarter over prior year quarter by approximately 7%, slightly better than the quarter over prior year quarter decline in the average number of trucks provided by BCO independent contractors of 9%, given the 2% improvement in BCO utilization over the same time period, whereas the number of loads hauled by truck brokerage carriers increased approximately 3% compared to the Turn to slide 12.

Jim Todd: The improvement in <unk> utilization over the same time period.

Jim Todd: Or is the number of loads hauled by truck brokerage carriers increased approximately 3% compared to the prior year quarter turn.

Jim Todd: Turning to slide 12, operating income declined as a percentage of both gross profit and variable contribution primarily due to one highly elevated insurance and claim costs of nine 3% of <unk> revenue to the $4 $8 million charge related to the previously disclosed freight forwarding supply chain fraud matter and three the impact of the company's fixed cost infrastructure.

James Todd: Operating income declined as a percentage of both gross profit and variable contribution, primarily due to, one, highly elevated insurance and claim costs of 9.3% of BCO revenue, two, the $4.8 million charge related to the previously disclosed freight forwarding supply chain fraud matter, and three, 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. The highly elevated insurance and claims costs drove an approximately 31 cent unfavorable variance as compared to the estimated amount included in the 2025 first quarter prior guidance, while the freight forwarding supply chain matter reduced first quarter EPS by approximately Other operating costs were $11.8 million in the 2025 first quarter compared to $14.9 million in 2024.

Jim Todd: Principally certain components of selling general and administrative costs in comparison to smaller gross profit and variable contribution basis, the highly elevated insurance and claims costs drove an approximately 31 <unk>.

Jim Todd: <unk> variance as compared to the estimated amount included in the 2025 first quarter prior guidance, while the freight forwarding supply chain matter reduced first quarter EPS by approximately <unk> 10.

Jim Todd: Other operating costs were $11 $8 million in the 2025 first quarter compared to $14 9 million in 2020 for this decrease was primarily due to a decreased provision for contractor bad debt and increased gains on sale of used trailing equipment.

James Todd: This decrease was primarily due to a decreased provision for contractor bad debt and increased gains on sale of used trailing equipment. Insurance and claims costs were $39.9 million in the 2025 first quarter, compared to $26.3 million in 2024. Total insurance and claims costs were 9.3% of BCO revenue in the 2025 first quarter, compared to 5.8% in the 2024 first quarter. The increase in insurance and claims costs as compared to 2024 was primarily attributable to increased net unfavorable development of prior year claimants. increased severity on cargo claims, primarily due to cargo theft and carrier imposter scams, and increased severity of trucking accidents during the 2025 period, partially offset by decreased BCO miles traveled during the 2025 period, and a decreased frequency in cargo claims as compared to the 2024 period.

Jim Todd: Insurance and claims costs were $39 9 million in the 2025 first quarter compared to $26 3 million in 2024 total insurance and claims costs were nine 3% of <unk> revenue in the 2025 first quarter compared to five 8% in 2020 for first quarter.

Jim Todd: Increase in insurance and claims costs as compared to 2024 was primarily attributable to increased net unfavorable development of prior year claim estimates increased severity on cargo claims primarily due to cargo theft and carrier imposture scams and increased severity of trucking accidents. During the 2025 period, partially offset by decreased <unk> miles.

Jim Todd: Traveled during the 2025 period and a decreased frequency and cargo claims as compared to the 2024 period.

Jim Todd: The 2025, and 2024 first quarter's insurance and claims costs included $11 4 million and $1 1 million of net unfavorable adjustments to prior year claim estimates respectively selling.

James Todd: During the 2025 and 2024 first quarters, insurance and claims costs included $11.4 million and $1.1 million of net unfavorable adjustments to prior claim estimates. Selling General Administrative Costs were $61.6 million in the 2025 first quarter compared to $56.4 million in the 2024 first quarter. The increase in selling general and administrative costs were primarily attributable to the $4.8 million charge related to the supply chain fraud discussed earlier in the call by Frank. Excluding the impact of the charge for the supply chain fraud, selling general and administrative costs were essentially flat as compared to the 2024 period.

Jim Todd: Selling general and administrative costs were $61 $6 million in the 2025 first quarter compared to $56 4 million in 2024 first quarter the increase in selling general and administrative costs were primarily attributable to the $4 $8 million charge related to the supply chain fraud discussed earlier in the call by Frank excluding the impact of the charge for the supply chain fraud.

Jim Todd: Selling general and administrative costs were essentially flat as compared to the 2024 period.

Jim Todd: <unk> and amortization was $12 $2 million in the 2025 first quarter compared to $14 1 million in 2020 for this decrease was primarily due to decreased depreciation on software applications effective income tax rate was 24, 7% in 2025 first quarter compared to an effective income tax rate of 23, 5% in the 2020 for first quarter.

James Todd: Depreciation and amortization was $12.2 million in the 2025 first quarter compared to $14.1 million in 2024. This decrease was primarily due to decreased depreciation on software applications. The effective income tax rate was 24.7% in the 2025 first quarter compared to an effective income tax rate of 23.5% in the 2024 first quarter.

Jim Todd: The increase in the effective income tax rate was due to the favorable impact of net excess tax benefits from stock based compensation arrangements during the 2024 period.

James Todd: The increase in the effective income tax rate was due to the favorable impact of net excess tax benefits from stock-based compensation arrangements during the 2024 period.

Speaker Change: Turning to slide 13, and looking at our balance sheet. We ended the quarter with cash and short term investments of $473 million cash flow from operations for the 2025 first quarter was $56 million in cash capital expenditures were $2 million the company.

James Todd: Turning to slide 13 and looking at our balance sheet, we ended the quarter with cash and short-term investments of $473 million. Cash flow from operations for the 2025 first quarter was $56 million, and cash capital expenditures were $2 million.

Speaker Change: And use to return significant amounts of capital back to stockholders with $83 million of dividends paid and approximately $61 million of share repurchases. During the 2025 first quarter. The strength of our balance sheet is a testament to the cash generating capabilities of the Landstar model back to you Frank.

James Todd: The company continues to return significant amounts of capital back to stockholders with $83 million of dividends paid and approximately $61 million of share repurchases during the 2025 first quarter. The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar model.

Frank: Thanks, Stacy given the highly fluid freight transportation backdrop amid the uncertain political and macro environment together with the recent industry trends in insurance and claims costs. The company will be providing second quarter revenue commentary rather than a formal guidance.

Frank Lonegro: Back to you, Frank. Thanks, JT.

Frank Lonegro: Given the highly fluid freight transportation backdrop amid the uncertain political and macro environment, together with the recent industry trends in insurance and claims costs, the company will be providing second quarter revenue commentary rather than formal guidance. As we are already a couple of weeks into fiscal May, we thought it would be helpful to provide some insight into April business activity. The number of loads hauled in April was approximately 2% below April 2024, while revenue per load in April was approximately 1% above April 2024. As a result, we view April's truck volumes as slightly below normal seasonality, where April truck revenue per load was slightly ahead of normal seasonality.

Frank: We are already a couple of weeks into fiscal May we thought it would be helpful to provide some insight into April business activity.

Frank: The number of loads hauled via truck in April was approximately 2% below April 2024, while revenue per load in April was approximately 1% above April 2024, as a result, we we view april's truck volumes is slightly below normal seasonality, where April truck revenue per load was slightly ahead of normal seasonality.

Frank: It should be noted that the launch point of the first quarter from a sequential volume perspective was relatively high given the anomaly of 2025 first quarter truck loadings exceeding 2020 for fourth quarter truck loadings.

Frank Lonegro: It should be noted that the launch point of the first quarter from a sequential volume perspective was relatively high, given the anomaly of 2025 first quarter truck loadings exceeding 2024 fourth quarter truck loads. Looking at historical seasonality from Q1 to Q2, pre-pandemic patterns would normally yield an 8% increase in the number of loads hauled via truck and a 2% increase in truck revenue per load, yielding a higher top line sequentially. As noted above, fiscal April truck volumes trend slightly below normal seasonality.

Frank: Looking at historical seasonality from Q1 to Q2 pre pandemic patterns would normally yield an 8% increase in the number of loads hauled via truck and a 2% increase in truck revenue per load, yielding a higher topline sequentially as noted above fiscal April truck volumes trended slightly below normal seasonality.

Frank: When combined with the potential negative impact of truck transportation activity, resulting from tariff and trade uncertainty. We believe it is unlikely that we would achieve normal seasonality with respect to the number of loads hauled via truck in the 2025 second quarter.

Frank Lonegro: When combined with the potential negative impact of truck transportation activity resulting from tariff and trade uncertainty, we believe it is unlikely that we would achieve normal seasonality with respect to the number of loads hauled via truck in the 2025 second quarter. With respect to variable contribution margin, the company typically experiences a 30 to 40 basis point sequential compression in variable contribution margin from the first quarter to the second quarter.

Frank: With respect to variable contribution margin the company typically experiences a 30 to 40 basis points sequential compression in variable contribution margin from the first quarter to the second quarter.

Frank: Turning to slide 15, although we're not providing guidance there are a few points regarding 2025 second quarter, we want to bring to everyone's attention.

James Todd: Turning to slide 15, although we are not providing guidance, there are a few points regarding the 2025 second quarter we want to bring to everyone's attention. As discussed earlier in the call, while investigation, remediation, and collection efforts continue with respect to the supply chain fraud matter, the $4.8 million pre-tax charge we incurred in the 2025 first quarter reflects the total currently anticipated adverse financial impact to Landstar, net of certain actual and anticipated recoveries. Other than additional costs for legal and other professional fees relating to this matter, we do not expect significant additional charges during the 2025 second quarter or thereafter relating to this matter.

Frank: As discussed earlier in the call while investigation remediation and collection efforts continue with respect to the supply chain fraud matter the $4 8 million pre tax charge, we incurred in the 2005 first quarter reflects the total currently anticipated adverse financial impact of Landstar.

Frank: Net of certain actual and anticipated recoveries other than additional costs for legal and other professional fees relating to this matter. We do not expect significant additional charges during the 2025 second quarter or thereafter relating to this matter.

Frank: 2025 second quarter SG&A will include our typical $2 million to $3 million charge related to our annual agent convention and finally in connection with a multiyear excess liability reinsurance program maintained by Landstar a no claims bonus of $12 million became payable to Landstar in April 2025, a certain claims.

James Todd: 2025 second quarter SG&A will include our typical $2 to $3 million charge relating to our annual agent convention.

James Todd: And finally, in connection with a multi-year excess liability reinsurance program maintained by Landstar, a no-claims bonus of $12 million became payable to Landstar in April 2025. As certain claims relevant to this excess liability program remain pending, it is anticipated that the receipt of this no-claims bonus payment will be recorded on our balance sheet in the deferred game until such time as all underlying claims with exposure under the applicable excess layer insurance arrangement are resolved.

Frank: Relevant to this excess liability program remain pending it is anticipated that the receipt of this no claims bonus payment will be recorded on our balance sheet in the second quarter as a deferred gain until such time as all underlying claims with exposure under the applicable excess layer insurance arrangements are resolved with that operator wed like to open the line for questions.

Unknown Executive: With that, operator, we'd like to open the line for questions. Thank you very much, sir.

Speaker Change: Thank you very much Sir at this time, we will begin the question and answer session. If you would like to ask a question. Please press star one on your Touchtone phone once again that is par one to ask a question to cancel your request. Please press Star then the number to you. Our first question comes from Jordan Alger from Goldman Sachs. Your line is now open.

Unknown Executive: 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.

Unknown Executive: To cancel your request, please press star and then the number 2.

Jordan Alliger: Our first question comes from Jordan Alliger from Goldman Sachs, your line is now open. Yeah, hi, morning. So I wonder if you could talk a little bit more about the insurance and the insurance developments. And I don't know if you could pinpoint, like, I know you gave sort of the unfavorable variants, but how much of these prior period claims, you know, the actual dollar amount, sort of like maybe one time in nature, and then how do you think about sort of what's normal for insurance going forward, just because it seems like, you know, these types of things recur frequently.

Jordan Alger: Yes, hi, good morning, So I wonder if you could talk a little bit more about the insurance and the insurance developments I don't know if you could pinpoint like I know you gave sort of the unfavorable unfavorable variance but.

Speaker Change: How much of these.

Speaker Change: Prior period claims the actual dollar amount sort of like maybe onetime in nature and then how do you think about sort of what's normal for insurance going forward just because it seems like these.

Speaker Change: These types of things recur frequently.

Speaker Change: Hey, Jordan, Thanks, and obviously it is an industry phenomenon not just a landstar phenomenon.

Frank Lonegro: Thanks. Yeah, hey, Jordan. Thanks. And obviously, it's an industry phenomenon, not just a Landstar phenomenon. I would say, and you'll see it in the in the 10 Q a little bit later today, but the year over year difference in prior year development was significant, like 10 or $11 million. JT will get into the details. So I do think it was a unique quarter. I mean, our normal run rates, you know, just below 5% of BCO revenue on that insurance and claims line. There's always some prior year development. In that line, but this was a pretty unique quarter for JT.

Speaker Change: I would say and you'll see it in the 10-Q, a little bit later today, but the the year over year difference in prior year development was significantly like 10 or $11 million you will get into the details.

Speaker Change: Do think it was a unique quarter I mean, our normal run rates just below 5% of <unk> revenue on that insurance and claims line. There's always some prior year development in that line, but this was a pretty unique quarter for us.

Jordan Alger: Yes, hi, good morning, Jordan.

Jordan Alger: Franks point, so $11 million unfavorable development in the 2025 first quarter about $7 million came from our cargo programs.

James Todd: Yeah, good morning, Jordan.

James Todd: To Frank's point, so of the $11 million unfavorable development in the 2025 first quarter, about $7 million came from our cargo programs. We had two incidents in the 2024 fourth quarter that weren't reported until the 2025 first quarter. Very timely, I think, Courtney Reagan did a nice job on Friday on CNBC, a special on freight fraud in the supply chain, and it's impacting, you know, it's impacting Landstar, it's impacting the entire industry.

Jordan Alger: With two incidents in the 2020 for fourth quarter that Werent reported until the 2025 first quarter very timely I think Courtney Reagan did a nice job on Friday on CNBC.

Speaker Change: Special on Frey fraud in the supply chain and it's impacting landstar its impacting the entire industry I'll, let Matt Miller talk about some of the things we're doing from a from a technology and in people standpoint.

Matt Miller: I'll let Matt Miller talk about some of the things we're doing from a technology and a people standpoint. You know, 2023 full year insurance as a percent of VCO revenue was 570 basis points. Jordan, it stepped up to 630 in the 2024 fourth quarter. We're working on a lot of things as evidenced by the decrease in cargo claims frequency. It's just when these folks are hitting, they're hitting on high value loads as evidence. I think our severity on cargo claims was up something like 155% year over year in the 2025 first quarter. Yeah, thanks, Jim.

Speaker Change: 2023 full year insurance as a percent of <unk> revenue was 570 basis points, Jordan that stepped up to $6 32.

Speaker Change: 2020 for fourth quarter, we're working on a lot of things as evidenced by the decrease in cargo claims frequency. It's just when these folks are hitting their hitting on high value loads as evidenced I think our severity on cargo claims was up something like 155% year over year in the 2025 first quarter, Matt Yes. Thanks, Jim Thanks, Frank So we.

Speaker Change: We are seeing a decrease in the frequency, but as Jim alluded to an increase in severity and that really speaks to the sophistication of the networks and the bad actors out there.

Matt Miller: Thanks, Frank. So we are seeing a decrease in the frequency. But as Jim alluded to, an increase in severity, and that really speaks to the sophistication of the networks and the bad actors out there. We've seen that happen from 23 to 24.

Speaker Change: We've seen that happen from 23 to 24 importantly, Reagan I agree with Jim did a really nice job going into detail about what's really going on in the space that said.

Matt Miller: And Courtney Reagan, I agree with Jim, did a really nice job going into detail about what's really going on in the space. That said, we're investing significantly, we stood up a fraud department and continuing to add people to that, subject matter expertise to that. We're educating our constituents out there, whether it's the agents or the capacity. And then we're investing in technology. So we've stood up various vendors that are helping us attack on really all fronts, whether it's people, education or technology. But this is an area where you got to remain vigilant. And you're really always playing defense here.

We're investing significantly we stood up a fraud department and continuing to add people to that subject matter expertise to that we're educating our constituents out there whether it's the agents or the capacity and then we're investing in technology. So we've stood up.

Speaker Change: Various vendors that are helping us attack on really all fronts, whether it's people education our technology, but this is this is an area where <unk> got to remain vigilant.

Speaker Change: We're really always playing defense here.

Speaker Change: Just as a quick follow up then I'm realizing that these things pop up and get the severity is there a way to think about.

Frank Lonegro: Just as a quick follow-up then, I'm realizing that these things pop up and I get the severity. Is there a way to think about the baseline percent of BCO revenue going forward, you know, just what, like if it was a normalized number? Thanks. Yeah, that was a bit difficult, just given the environment that we're in, you know, I think that the historical run rate that we mentioned in the prepared remarks of 4.9%, given the current environment is probably low. But then again, I look at the first quarter result in the, you know, nine, nine and a half percent range, and to me, that's high.

Speaker Change: The baseline percent of <unk> revenue going forward just.

Speaker Change: Like if it was a normalized number thanks.

Speaker Change: Yes that was a bit difficult just given the environment that we're in.

Speaker Change: I think that the historical run rate that we mentioned in the prepared remarks of four 9% given the current environment is probably low, but then again I look at the first quarter result in the.

Speaker Change: 99, 5% range and to me that's high and one of the things that happened in the 2025 first quarter as J P mentioned.

Frank Lonegro: And one of the things that happened in the 2025 first quarter, as JT mentioned, you know, usually these are short cycle events where you find out pretty quickly that there's something that's happening. In the couple of incidents that JT mentioned, we didn't find out, you know, for 30, 60, 90 days in some cases. So it was a little surprising. There have been arrests in one of these particular incidents that we're alluding to. And so I see that as a good thing. It is going to take not just the industry and the people in the process, the technology that Matt mentioned, but also a fair amount of government help.

Speaker Change: Usually these are short cycle events, where you find out pretty quickly that there is something that's happening in the couple of incidents that J P mentioned, we didn't find out.

For 30, 60 90 days in some cases, so little surprising there had been a rests in one of these particular incidents that were alluding to and so I see that as a good thing it is going to take not just the industry and the people and the process. The technology that Matt mentioned, but also a fair amount of government health. So I do think the fact that.

Speaker Change: CNBC came out with their <unk>.

Frank Lonegro: So I do think the fact that CNBC came out with their piece on fraud, I do think that's going to help elevate the concerns of the industry. And it's not just in trucking. I mean, good Lord, it's happening in, you know, in rail and in intermodal and in shipping and in truck transportation as well.

Speaker Change: On fraud, I do think thats going to help elevate the concerns of the industry and it's not just in trucking and the good Lord is happening.

Speaker Change: Rail and intermodal and in shipping and transportation as well. So this is something that we collectively need to get our arms around and we are going to need government help to get there.

Jordan Alliger: So this is something that we collectively need to get our arms around, and we are going to need government help to get there. Thank Thanks, Jordan. Thank you.

Speaker Change: Thank you.

Laura: Thanks, Laura.

Speaker Change: Thank you. Our next question will be from Jason Seidl of Cowen.

Jason Seidl: Our next question will be from Jason Seidl of Cody Colvin. Your line is now open.

Colin: Colin Your line is now open.

Jason Seidl: Thank you operator, Hey, Frank Hey team. Good morning wanted to dive in a little more on the heavy haul obviously loads volumes up 3% seems like a pretty decent result for the quarter I Wonder if you could break out sort of the end markets within heavy haul that are doing better for you guys and then I have a follow up.

Unknown Executive: Thank you, Robert.

Jason Seidl: Hey, Frank, hey, team. Good morning.

Jason Seidl: Wanted to dive in a little more on the heavy haul. Obviously, loads volumes up 3%. Seems like a pretty decent result for the quarter.

Frank Lonegro: I wonder if you could break out sort of the end markets within heavy haul that are doing better for you guys. And then I have a follow Yeah, sure thing, Jason. You know, Heavy Hall has been a bright spot for us, you know, pretty much since we designated it as a strategic area of focus. It's nice to see an area where we have, I think, a competitive advantage. We have a lot of legacy. We've got some great agents and some internal folks. We, you know, we hired somebody from the outside who is an industry expert in Heavy Hall.

Colin: Yes sure thing Jason.

Colin: Heavy haul has been a bright spot for us.

Colin: Pretty much since we designated as a strategic area of focus.

Colin: Nice to see an area, where we have I think a competitive advantage. We have a lot of legacy we've got some great agents and some internal folks.

Colin: We hired somebody from the outside who is an industry.

Colin: <unk> expert in heavy haul Rob Simon is his name you'll hear his name from time to time on these calls as we continue to improve the service offering there and the <unk> who are capable of doing this in approaching customers who have that is maybe not the main stay of their business, but certainly a piece that we can participate in as you know Jim Applegate.

James Applegate: Rob Simon is his name. You'll hear his name from time to time on these calls as we continue to improve the service offering there and the BCOs who are capable of doing this and approaching customers who have that as maybe not the mainstay of their business, but certainly a piece that we can participate in.

James Applegate: As you know, Jim Applegate has got this Heavy Hall area, so let me let him provide some commentary on the end market question you had, Jason. Yeah, and how are you doing, Jason? From a Heavy Hall standpoint, to Frank's point, we've really leaned into this whole area, and we're engaging our agents. We've got additional resources over within our corporate office to kind of help them work through the opportunities. We've got a dedicated sales focus. So, our growth in that area has actually been pretty broad-based. We've got machinery, electrical, building products, the energy industry. You know, we're kind of seeing it in multiple areas with multiple customers.

Colin: It's got this heavy haul areas. So let me let him provide some commentary on the end market question your hedges and how are you.

Jason.

Jason Seidl: Our heavy haul standpoint to Frank's point, we've really leaned into this whole area and we're engaging our agents we've got additional resources over within our corporate office to kind of help them work through the opportunities. We've got a dedicated sales focus to our growth in that area has actually been pretty broad based we've got.

Colin: Machinery electrical building products.

Jason Seidl: The energy industry.

Jason Seidl: We're kind of seeing it in multiple areas with multiple customers. So we view this as a bright spot here not only.

Jason Seidl: So, we view this as a bright spot here, not only, you know, from 2024, I think it's carried over here into 2025, and our pipeline is very strong. So, to Frank's point, we're a very strong player in this market, and it seems like the end markets are really kind of turning in our favor, and we've got the right support system too. To make sure that we grow. I appreciate that color, guys.

Jason Seidl: From 2024, I think it's carried over here into 2025, and our pipeline is very strong so.

Jason Seidl: Frank's point, where a very strong player in this market and it seems like the end markets are really kind of turning in our favor and we've got the right support system to want to make sure that we grow.

Jason Seidl: And I appreciate that color guys I wanted to switch over to sort of the sort of the new requirements or I guess the requirements that were brought back for English proficiency for CDL operators.

Frank Lonegro: I wanted to switch over to sort of the sort of the new requirements, or I guess the the requirements that were brought back for English proficiency for CDL operators. I wanted to get sort of your thoughts on how that would impact the overall driver supply market, not only in sort of enforcement, but also in maybe new CDL applicants going Yeah, Jason, great question. I'll let Matt chime in here in a second. I mean, the good thing is that we don't expect any impact on our BCO fleet. Our standards here are extremely high, as you might imagine.

Jason Seidl: I wanted to get sort of your thoughts on how that would impact the overall driver supply market.

Jason Seidl: Not only in sort of enforcement, but also and maybe new CDL applicants going forward.

Jason Seidl: Yes, Jason Great Great question, and I'll, let Matt chime in here in a second I mean, the good thing is that we don't expect any impact on our Bcl fleet our standards here.

Jason Seidl: Our extremely high as you might imagine our qualification process, our orientation process certainly fair to all folks who are unable to comply with the federal.

Matt Dannegger: Our qualification process, our orientation process, certainly fair to folks who are unable to comply with that federal requirement. I don't think that every company is as stringent as we are, and so I think it is going to impact capacity in what I'll say is a favorable way for the industry and certainly for Landstar, and I think we're going to see that in a couple of different ways through standard road checks, but also in the use of what we call B-1 Visa folks who were previously anyway involved in a lot of cross-border business.

Jason Seidl: Federal requirements I don't think that every company as stringent as we are and so I think it is going to impact capacity and what I'll say is a favorable way for the industry and certainly for Landstar and I think we're going to see that in a couple of different ways through standard wrote checks, but also in the use of what we call B one visa folks.

You were previously anyway involved in.

Jason Seidl: A lot of cross border business. So I do think it's going to be an overall positive for us, but Matt can fill in the gaps there sure.

Matt Dannegger: So I do think it's going to be an overall positive for us, but Matt can fill in the gaps here. Sure, and I appreciate the question. You know, this relates to the executive order on English language proficiency that Trump put out April 28th, and that was followed May 1 by CVSA indicating that English language proficiency was going to be considered an out-of-service criteria. That's really the big change here. English language has been required. It's the out-of-service element here that can impact shippers as well as the drivers when they're out there on the road, and really the big question that we have is the enforcement guidance.

Speaker Change: I appreciate the question.

Speaker Change: As it relates to the executive order on English language proficiency that Trump put out April 28, and that was followed.

Speaker Change: May one by Cvs a.

Speaker Change: Indicating that English language proficiency was going to be considered an out of service.

Speaker Change:

Speaker Change: Criteria that that's really the big change here English language has been required it's the out of service element here that can impact shippers as well as the drivers when they're out there on the road and really the big question that we have is.

Speaker Change: The enforcement guidance. So we're waiting on that Sam FMC USA. They have about 60 days to put out.

Matt Dannegger: So we're waiting on FMCSA. They have about 60 days to put out guidance in terms of enforcement for law enforcement, but we've heard upwards of 100,000 drivers could be impacted. That's an industry number. That's not my number that we've heard, and I just recently got back from Laredo, and there's a lot of chatter down there about those B-1 Visa drivers and a large preponderance of them using the various apps, right, apps to translate, and so how does that enforcement translate the use of those apps? Are those folks out-of-service could having a meaningful impact to overall capacity?

Speaker Change: Guidance in terms of enforcement for law enforcement.

Speaker Change: But we've heard upwards of 100000 drivers could be impacted.

Speaker Change: It's an industry number that is not my number that we've heard and I. Just recently got back from Laredo, and Theres a lot of chatter down there about those be one visa drivers.

Speaker Change: A large preponderance of them.

Speaker Change: Using the various apps right apps to translate and so how does that enforcement translate the use of those apps are those folks out of service could having a meaningful impact to overall capacity.

Speaker Change: I appreciate that color guys I appreciate the time as always.

Jason Seidl: I appreciate that color guys, appreciate the time as always. Thank you.

Speaker Change: Thanks, guys.

Jon Chappell: Thank you next is Jon Chappell of Evercore ISI. Your line is now open.

Jonathan Chappell: Next is Jon Chappell of Evercore ISI. Your line is now open.

Jon Chappell: Thank you good morning, I'm going to stick with the capacity theme Frank start with you obviously, the PCL count's been kind of in the crosshairs and it sounds like this quarter trends remain the best quarter over quarter and 12 months I'm.

Jonathan Chappell: Thank you.

Frank Lonegro: Good morning. I'm going to stick with the capacity team.

Frank Lonegro: Frank, start with you. Obviously, the VCO count's been kind of in the crosshairs, and it sounds like this quarter, the trends remain the best quarter over quarter in 12 months. Sorry, 12 quarters. Looking at slide 7, the total truck brokerage carriers lapped up about 15 percent quarter over quarter, over 10 percent year over year. Can you maybe explain what's going on there and what that may be indicative of in the broader industry capacity landscape? Yeah, good, good question, John. And on the BCO count, yeah, we are actually pretty excited about the trends that we've seen in April, and even more so in the first couple of weeks of May.

Jon Chappell: Sorry, 12 quarters looking at slide seven the total truck brokerage carriers.

Jon Chappell: Up 15% quarter over quarter over 10% year over year.

Jon Chappell: Let me explain what's going on there and what that may be indicative of broader industry capacity landscape.

Jon Chappell: Yes. Good good question John on the Bcl Count, Yes, we are actually pretty excited about the trends that we've seen in April and even more so in the first couple of weeks of May.

Jon Chappell: So I'll, let <unk> cover.

Speaker Change: Cover that one you are right there has been an uptick on the capacity side. The third party capacity side. There are reasons behind that and also given the the question that Jason just asked an excellent answer I mean, I do think that capacity number is probably going to come down, but let met filling the gaps sure sure and that's a great point it did jump about.

Matt Dannegger: And so I'll let Matt cover that one. You are right, there has been an uptick on the capacity side, the third-party capacity side. There are reasons behind that. And also, you know, given the question that Jason just asked, and Matt's excellent answer, I mean, I do think that capacity number is probably going to come down, but let Matt fill in the gaps. Sure, sure. And that's a great point. It did jump about 10,000 carriers. And that really relates to our partnership with a industry-leading vendor on the carrier vetting and oversight. They're partnered with many other carriers or brokers, I should say, in our space.

10000 carriers and that really relates to.

Speaker Change: Our partnership with a <unk>.

Speaker Change: Industry, leading vendor on the carrier vetting and oversight, they're partnered with many other carriers or brokers I should say in our space.

Speaker Change: Therefore, we got access to more approved carriers that qualify for our criteria as a result of that implementation, which took place in the first quarter.

Matt Dannegger: Therefore, we got access to more approved carriers that qualify for our criteria as a result of that implementation, which took place in the first quarter. That said, this is going to give us the ability to become more and more selective with those that we do business with as it relates to fraud, as it relates to really choosing those high-quality carriers to partner with. And so I would expect those numbers to come in in the second and third quarter as we look ahead and we become more selective going forward.

Speaker Change: That said that this is going to give us the ability to become more and more selective with those that we do business with as.

Speaker Change: As it relates to fraud as it relates to really choosing those high quality carriers to partner with.

Speaker Change: And so I would expect those numbers to come in in the second and third quarter. As we look ahead and we become more selective going forward on the <unk> side I would really echo what Frank said on his remarks, we went from on the retention side. We went from a high watermark fourth quarter of 'twenty three at $40.

Frank Lonegro: On the BCO side, I would really echo what Frank said on his remarks. We went from – on the retention side, we went from a high-water mark fourth quarter of 23 at 41 percent, and we've seen – this is our fifth quarter of improvement there where we're sitting at 33 percent now at the end of the first quarter. So the model has the ability to lend itself to us adding net trucks in a meaningful way, given a favorable environment. Great, that's really helpful, Matt.

Speaker Change: 1% and we've seen this is our fifth quarter of improvement there, where we're sitting at 33%.

Speaker Change: Now at the end of the first quarter long term average is 29%. So we're much closer to that long term average than we are to that high watermark.

Frank: As Frank alluded to.

Speaker Change: Fewer than 20 net truck losses.

Frank: In the first six weeks of the second quarter is a trend that we like.

Frank: And should that move forward, we would have.

Speaker Change: As Frank said that the trend can be the best and the most recent.

Speaker Change: Quarters on the AD side love to see a little bit more help on rate, we're focusing on what we control what we can control improvements to recruiting improvements to qualifications improvements to orientation all of those things without sacrificing safety safety is one of those things that we view as a big diversified.

Speaker Change: For us.

Speaker Change: A big differentiator I should say not different higher supplier, a big differentiator, we're not going to sacrifice safety.

Speaker Change: Model is proven in a good environment, we're able to.

Speaker Change: AG trucks in a meaningful way.

Speaker Change: We added net trucks in 2021 roughly.

Speaker Change: Roughly 870 net truck adds in 2021, roughly 750 net truck adds in 2020.

Speaker Change: Roughly 900 net truck adds in 2018 and 500 net truck adds in 2015. So the model has the ability.

Speaker Change: To lend itself to us adding.

Speaker Change: Net trucks in a meaningful way given a favorable environment.

Speaker Change: Great. That's really helpful. Matt My follow up is going to be to GM.

Jim Todd: Jim application, maybe stick with you Matt.

Matt Dannegger: My follow up is going to be to Jim Applegate, but maybe stick with you, Matt, or either one. Just overall capacity, you know, it was noticeable to me, both Frank and Jim Todd, in the prepared remarks, used the phrase readily available. I know there's a lot of hope that English proficiency is going to, you know, call a lot. I was, I was thinking before this weekend, there was probably some hope that recession would help call a lot of this excess capacity, but do you have any estimate on what the overcapacity is in the market? When do we go and what does it take to get from readily available to balance?

Speaker Change: Either one.

Speaker Change: Just overall capacity.

Speaker Change: But to me, both Frank and Jim Todd in the prepared remarks, you used the phrase readily available I know theres a lot of hope that English proficiency is going to call. A lot I was I was thinking before this weekend. There was probably some hope that recession would help call a lot of effective capacity, but do you have any estimate on what the overcapacity.

Speaker Change: <unk> is in the market and when do we go and what does it take to.

Speaker Change: From readily available to balance.

John: Yeah, Hey, John good follow up.

Matt Dannegger: Yeah, hey, John, good, good follow up. You know, you can look at the FMCSA databases, and it's going to give you a view, but not a perfect view, of what's happening, and part of the reason is you don't actually know how many trucks are associated with those authorities. We are continuing to see capacity come out. I think the fact that we are, I'm going to say bottoming, but obviously there's a lot of uncertainty still out there, but the fact that our trends have improved meaningfully from Q1 to Q2, and even from April to May. Now some of that is the good work that Matt and his team are doing to improve all of the qualifications and the recruiting, and then, you know, a little bit of hope of better rate obviously keeps people in the game, which we saw when we entered into the year.

John: You can look at the FMC CSA databases, and it's going to give you a view, but not a perfect view of what's happening in part of the reason is you don't actually know how many trucks are associated with that.

John: Authorities, we are continuing to see capacity come out.

I think the fact that we are I'm going to say bottoming, but obviously theres a lot of uncertainty still out there, but the fact that our trends have improved meaningfully from Q1 to Q2 and even from April to May know some of that is the good work that Matt and his team are doing.

John: Prove all of the qualifications and the recruiting and then a little bit of hope of better rates, obviously keeps people in the game.

We saw when we entered into the year I mean, we had a good feeling about the year and then obviously a fair amount of uncertainty got injected.

Frank Lonegro: I mean, we had a good feeling about the year, and then obviously a fair amount of uncertainty got injected, you know, through the tariff and trade policy. So, look, I think we are getting there. I don't think we're all the way there. The first thing we're going to see are pockets. My guess is if there is real enforcement on English proficiency, you're probably going to see, you know, that equilibrium achieved in, you know, Texas and places like that, perhaps Florida, perhaps Southern California, places that are border-ish related. You're going to see impacts there probably first, and that will give you an indication that we're nearing there.

John: Through the tariff and trade policy.

John: Look I think we are getting there I don't think we're all the way there. The first thing we're going to see.

John: Our pockets my guess is if there is real enforcement on English proficiency youre, probably going to see.

John: That equilibrium achieved in.

John: Texas and places like that perhaps Florida, perhaps southern California places that are border ish.

John: Related youre going to see impacts there probably first and that will give you an indication that we're nearing that.

Speaker Change: Great. Thanks, Frank Thank you Matt.

John: Yeah.

Frank Lonegro: Great. Thanks, Frank. Thanks, Matt.

Speaker Change: Thank you. Our next question will be from Daniel Embrown Stephens, Inc. Your line is now open.

Frank Lonegro: Thank you.

Daniel Imbro: Our next question will be from Daniel Imbro of Stevens Inc.

Daniel Imbro: Your line is now open. Yeah, hey, good morning, guys. Thanks for taking our questions. Frank, I wanted to start maybe a little bit more near-term focus. I think the slide that you offered a little bit on April and what normal seasonality looks like, but in your preparedness script, I think you said you expect maybe below normal sequential movements and loads from April to May. I guess, can you just walk through a little more detail kind of where you're seeing any relative strength or weakness? I think automotive was a big weak category in 1Q. And just what can you lean into to outgrow the market during this continued malaise on the demand side as you look across the portfolio?

Speaker Change: Yeah, Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: Hi, Dan.

Speaker Change: I wanted to start maybe a little bit more near term focused I think of that slide you offered a little bit on April and then what normal seasonality looks like but in your prepared script. I think you said you expect maybe below normal.

Speaker Change: Sequential movement, then load from April to May I guess can you just walk through a little more detail kind of where you are seeing relative strength or weakness I think automotive was the big weak category and <unk> and just what can you win it lean into to outgrow the market. During this continued malaise on the demand side.

Speaker Change: As you look growth portfolio.

Speaker Change: Yeah, Hey, Dan a good good set of questions I'll, let Jason get into the specifics on AR.

Frank Lonegro: Yeah, hey Daniel, good set of questions.

Frank Lonegro: I'll let JT get into the specifics on a kind of line-by-line basis. We went through a fair amount of it on the preparers' remarks, but to your point, I mean, automotive, given the tariff overtones and the fact that rates spiked up a little bit, meaning interest rates spiked up a little bit, you know, during the quarter, that was not our friend. The impact of tariffs in Mexico, our own Mexico products coming across, that obviously didn't help us either. So I would say the automotive piece was a bit of a drag, and U.S.-Mexico cross-border more broadly was a bit of a drag, as was U.S.-Canada.

Speaker Change: Kind of a line by line basically we went through a fair amount of it on the on the prepared remarks, but to your point I mean automotive given the tariff overtones and the fact that rates spiked up.

Speaker Change: A little bit meeting interest rates spiked up a little bit.

Speaker Change: During the quarter that was not our friend.

Speaker Change: Impact of tariffs in.

Speaker Change: The mix of our own Mexico products coming across that obviously didn't help us either so I would say the.

Speaker Change: Automotive piece was a bit of a drag and U S Mexico Cross border.

Speaker Change: More broadly was a bit of a drag as well as the U S. Canada. So the things that were tariff impacted clearly impacted.

Frank Lonegro: So the things that were tariff-impacted clearly impacted us as well. You know, the fact that we saw some better numbers in April, I mean, that felt pretty good, but it also had a fair chance that U.S.-Mexico business do a little bit better in April, but we saw the U.S.-Canada business do a little worse. So I think the thing that we need to focus on are the areas that we have the most control over, and clearly that's getting the BCO count where it needs to be, doubling down on the strategic areas of focus. The investments that we've made in Laredo and other places along the border for U.S.-Mexico trade, they are the absolute right investments for the long term.

Speaker Change: As well.

Speaker Change: The fact that.

Speaker Change: We saw some some better numbers in April.

Speaker Change: Felt pretty good but it also had a fair amount of nuance in there as well we did see the U S. Mexico business do little bit better in April, but we saw the U S. Canada business do a little worse. So I think the thing that we need to focus on the areas that we have the most control over and clearly thats getting the bcl count where it needs to be.

Speaker Change: Doubling down on the strategic areas of focus the investments that we've made in Laredo and other places along the border for U S Mexico trade.

Speaker Change: Right investments for the long term the short term, obviously thats going to get impacted by tariffs as well as where the automotive businesses. When that comes back we're very well situated to do a good job there, but I think what you're seeing is the heavy haul business doing well the overall platform business doing pretty well.

James Todd: The short term, obviously that's going to get impacted by tariffs as well as where the automotive business is. When that comes back, we're very well situated to do a good job there. But I think what you're seeing is the heavy haul business doing well, the overall platform business doing pretty well. You're seeing all the data center and the power and things like that doing well for us. So there's a lot of bright spots in there, but you've got to put it in the context of all the rest of the business, and there are some areas that are doing well and some areas that aren't.

Speaker Change: Seeing the all of the data center and the power and things like that doing doing well for us. So there's a lot of bright spots in there, but you've got to put it in the context of all the rest of the business and there are some areas that are doing well in some areas that arent.

Speaker Change: No I think that's fair Frank Daniel to your question on seasonality. So April typically drops off about 260 basis points on our loads per workday and we finished April down $5 40, So thats whats driving April volumes, 2% below prior year April when we were down one 2% year over year in the first quarter to Franks.

James Todd: J.T.? No, I think that's fair, Frank. Daniel, to your question on seasonality, so April typically drops off about 260 basis points on a loads per workday, and we finished April at down 540. So that's what's driving April volumes 2% below prior year April when we were down 1.2% year over year in the first quarter. To Frank's point, our U.S.-Mexico business was down 9% year over year in the first quarter through the first six weeks of the second quarter. It's basically been cut in half to where U.S.-Mexico revenue was only down 5% year over year.

Speaker Change: Our U S. Mexico business was down 9% year over year in the first quarter through the first six weeks of the second quarter basically been cut in half to our U S. Mexico revenue was only down 5% year over year.

Speaker Change: Great and then if I could just for my follow up just sticking on the <unk> outlook I know youre not going to give <unk> to.

James Todd: Great. And then if I could just say from our follow up to stick on the 2Q kind of outlook, I know, JT, you're not going to give a 2Q, both the EPS guide, but I guess what are the puts and takes if you walk through the expenses, you know, incentive costs, I think you talk about how those should trend, Frank mentioned two to three million from the aging convention, maybe insurance steps down, given these but not sure what the claims just anything to help us bridge kind of operating expenses from 1Q to 2Q would be helpful.

Speaker Change: The EPS guide, but I guess, what are the puts and takes time to work through the expenses.

Speaker Change: Incentive costs I think you talked about how those should trend Frank mentioned $2 million to $3 million from the agent Convention, maybe insurance stepped down given these but not sure what the claims just anything to help US bridge kind of operating expenses won't do you think it would be helpful.

Speaker Change: When we walk you walk you down just a little bit more than what's in the it's in the slides because.

James Todd: Why don't we walk you down just a little bit more than what's in the slides because it's important for us to give you as much commentary as we can. We're not trying to set guidance. We're not trying to give you a set of boundaries that you're going to take the midpoint of. As we entered the year, we did see some early signs of a recovery, and that was a pretty good environment. We were excited about the year. In looking at Q1, absent insurance and claims, we would have hit our guidance, and so we felt really good about the core operating performance of the business.

Speaker Change: It's important for us to give you as much commentary as we can we're not we're not trying to set guidance, we're not trying to give you.

Speaker Change: Set of boundaries that youre going to take the midpoint of.

Speaker Change: As we entered the year, we did see some early signs of a recovery and that was that.

Speaker Change: Was a pretty good environment, we're excited about the year.

Speaker Change: And looking at Q1 absent insurance and claims we would have hit our guidance and so we felt really good about the core operating performance of the business.

Speaker Change: Mid quarter, we post inauguration, we encountered the unprecedented tariff and trade environment that you all are very familiar and very well briefed on.

James Todd: Mid-quarter, post-inauguration, we encountered the unprecedented tariff and trade environment that you all are very familiar and very well briefed on because we saw that in the impacts on Mexico and Canada, as we mentioned. Even though the direct U.S.-China exposure is limited, we probably did benefit somewhat in the first quarter from pull-forward. We don't know how much of that. I think the concern we have is, will there be an air pocket in the blank ships and things like that, the impact of that on demand for trucking, but also on supply. If there's more supply because there are fewer loads coming off of import-export, then that obviously is impactful to us.

Speaker Change: Because we saw that and the impacts on Mexico, and Canada, as we mentioned and even though the direct U S. China exposure is limited, we probably did benefit somewhat in the first quarter from from pull forward, we don't know how much of that.

Speaker Change: So I think the concern we have is will there be an air pocket in the black ships and things like that.

Speaker Change: The impact of of that on demand for trucking, but also on on supply. If there is more supply because there are fewer loads coming off of <unk>.

Speaker Change: <unk> export than that obviously.

Speaker Change: As impactful to us.

Speaker Change: Counterbalanced by the English proficiency that we talked about earlier.

Speaker Change: I think all of that aside and I'll put a huge caveat that we're not giving Q2 guidance.

James Todd: I think all that aside, and I'll put a huge caveat that we are not giving Q2 guidance, I think at our current course and speed and sub-seasonal volumes, I'd expect us to finish above Q1 revs. but below Q2 24 reps. So that gives you a fairly wide range, but I think that's where we're trying to guide you toward. And then on variable contribution margin, we finished 14% in Q1. We would generally see a 30 to 40 basis point decline in that from a sequential perspective. But then again, if we're gonna be sub-seasonal on volumes, we might end up a little bit better than that, down 30, down 40.

Speaker Change: I think at our current course and speed.

Speaker Change: And sub seasonal volumes I'd expect us to finish above Q1 ribs.

Speaker Change: Below Q2 dollars 24 reps. So that gives you a fairly wide range, but I think that's where we're trying to.

Speaker Change: To guide you toward.

Speaker Change: And then on variable contribution margin, we finished 14% in <unk>.

Speaker Change: Q1, we would generally see a 30 to 40 basis point decline in that from a sequential perspective.

Speaker Change: But then again, if we're going to be sub seasonal volumes, we might end up a little bit better than that down 30 down 40, JC has got a bunch on the expenses. So let me let you know.

James Todd: And JT's got a bunch on the expenses, so let me let you hit that. All fair. So on other operating costs, Daniel, Matt and the team did a really nice job in the first quarter, 800,000 gains on disposal. If that pace is not achieved in the second quarter, you could have some modest uptick on other operating costs sequentially. Insurance, you know the deal there. The trend has not been the industry's friend. 9.3 is a high watermark in first quarter of 25. Hope to beat that in the second quarter. On G&A, really the big one, Daniel, is the 4.8 falling off, and then potentially 2.5, 3 million coming on board.

Speaker Change: All fair so another operating cost annual Matt and the team did a really nice job in the first quarter 800000 gains on disposal.

Speaker Change: That pace is not achieved in the second quarter, you could have some modest uptick in other operating costs sequentially insurance you know that.

Speaker Change: Deal there the trend has not been the industry's friend 93 is a high watermark in first quarter of 'twenty five hoped.

Speaker Change: <unk> in the second quarter on G&A really the big one Daniel as the four eight falling off.

Speaker Change: And then potentially to five $3 million coming onboard I know you witnessed first week in April convention.

James Todd: I know you were with us first week in April at convention. Depreciation, I don't anticipate anything significant sequentially, 1Q to 2Q. On the question around incentive compensation and stock compensation, we had about $3 million included in the first quarter of 25 on those lines. I would expect, if our overall expectations play out in the second quarter, I would expect a similar charge reflected in second quarter SG&E.

Speaker Change: Depreciation I don't anticipate anything significant sequentially <unk> to <unk> on the question around incentive compensation and stock comp stock compensation, we had about $3 million included in the first quarter of 'twenty five on those lines I would expect if our overall expectations.

Speaker Change: Lay out in the second quarter I would expect a similar charge reflected in the second quarter SG&A.

Speaker Change: Great really appreciate all the color thanks, guys.

Speaker Change: Thanks, Dan.

Daniel Imbro: Great. Really appreciate all the color. Thanks, guys. Thank you.

Speaker Change: Thank you. Our next question will be from Brian <unk> of Jpmorgan. Sir Your line is now open.

Brian Ossenbeck: Our next question will be from Brian Ossenbeck of J.P. Morgan. Sir, your line is now open. Hey, good morning, guys. Thanks for taking questions. Maybe as a very near-term one, we have road check going on this week, right?

Speaker Change: Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: Maybe just a very.

Speaker Change: Near term, we have road check going on this week right. So maybe Matt you can.

Speaker Change: Talk about expectations for that where we see any sort of.

Matt Dannegger: So, maybe, Matt, you could... Talk about expectations for that. Will we see any sort of, it doesn't sound like FMCSA has their guidance out there, but could we actually see some sort of out-of-service impact from all this language proficiency focus? Yeah, appreciate the question, Brian. I don't think just yet we're going to see anything too meaningful until we get that guidance, that enforcement guidance. I have not heard or seen from anybody that's indicating we'll see any elevated enforcement just yet. Yeah, Brian, these are going to be judgmental until we get the guidance. So my guess is it's going to have to be blatant non-English proficiency in order for somebody to be taken out of service.

Speaker Change: And it doesn't sound like FMC CSA is there guidance out there but can.

Speaker Change: Could we actually see some sort of.

Speaker Change: Service impact from all of this language proficiency focus.

Speaker Change: Yes, I appreciate the question, Brian I don't I don't think just yet we're going to see anything too meaningful until we get that guidance that enforcement guidance I have not heard or seen from anybody that's indicating we will see any elevated.

Speaker Change: Enforcement just yet yes, Brian this is youre going to be judgmental until we get the guidance. So my guess is it's going to have to be latent.

Speaker Change: Non English proficiency in order for somebody that would be taken out of service. So I think this is a good a good barometer of whether there are truly folks out there who.

Matt Dannegger: So I think this is a good barometer of whether there are truly folks out there who are very sub-proficient in English.

Speaker Change: Our very sub proficient in English, but remains to be seen but we'll certainly keep an eye on them.

Matt Dannegger: But it remains to be seen, but we'll certainly keep an eye on that. All right, it makes sense.

Speaker Change: Alright, it makes sense.

Speaker Change: And then just more broadly I know you talked about all the puts and takes and pull forward, which is quite difficult.

Frank Lonegro: And then just more broadly, you talked about all the puts and takes and pull forward, which is quite difficult to pull apart and to figure out what's actually going on. But maybe, Frank, is there a possibility that we could see maybe an acceleration here in the short term as we have another 90-day window with a lot more clarity? Maybe if you didn't pull forward, you will. If you already did, you'd do some more. Are you hearing or seeing anything along those lines across the different verticals and maybe even across the geographies as you look at the cross-pollination?

Speaker Change: To pull apart and figure out what's actually going on but.

Speaker Change: Maybe Frank is is there a possibility that we could see.

Speaker Change: Maybe an acceleration.

Speaker Change: Here in the short term as we have another 90 day window with with a lot more clarity and maybe if you didn't pull forward you will see already did you do some more you're hearing or seeing anything along those lines across the different.

Speaker Change: Different verticals and maybe even across the geographies as you look at the cross border.

Speaker Change: Yes.

36 hours post.

Frank Lonegro: Yeah, with 36 hours post the 90-day pause, nothing yet, but look, academically, in the first quarter, it's hard to believe that we didn't see something associated with pull forwards. And my guess is if the 90 days continues to progress and people become more and more worried that maybe there won't be a deal, my guess is there'll be some people who try to get things across the finish line before the 90 days expires. So academically, I see your point and can certainly support it. It's just hard in this early going to actually put some numbers behind the Right, understood.

Speaker Change: Posted a 90 day pause nothing yet but look academically in.

Speaker Change: In the first quarter, it's hard to believe that we didn't see the see something.

Speaker Change: Associated with pull forwards and my guess is if the 90 days continues to progress and people become more and more worried that maybe there won't be a deal. My guess is there'll be some people who try to get things across the finish line before the 90 days expires. So academically I see your point and can certainly support it it's just.

Speaker Change: And this early going to actually put some numbers behind that.

Speaker Change: Alright understood.

Speaker Change: Hi, guys. Thanks for the time.

Speaker Change: Thank you Brian.

Brian Ossenbeck: All right guys, thanks for your time. Thank you, Brian.

Speaker Change: Thank you our next would be Scott group of Wolfe Research. Your line is now open.

Unknown Executive: Thank you.

Scott Grip: Our next would be Scott Grip of Wolf Research.

Scott Grip: Your line is now open. Hey, thanks. Weaker Imports. I'm wondering, are you seeing that in your volume yet? Meaning, if April was down 2% on volume, is May meaningfully different than that?

Speaker Change: Hey, thanks.

Speaker Change: I know Frank you were talking about just like the uncertainty with these blank sailings.

Speaker Change: Weaker imports I'm wondering are we seeing are you seeing that in your volume yet.

Speaker Change: April was down 2% on volume as may meaningfully different than that.

Speaker Change: Yes, let me hit the high level, and then I'll, let Jason talk to specifics on Mei.

James Todd: Yeah, let me hit the high level. And then I'll let JC talk the specifics on May When you look at the sale time, and you know this probably better than anybody, Scott, so I think that the sale time measured depending on your port could be, you know, four, five, six, seven weeks, depending on where you're sailing from and where you're sailing to. So I don't think we have seen the blank ships coming in, so to speak. But that obviously is going to hit us at some point in time. The nice thing is we don't have a ton of direct exposure to China import, export.

When you look at the sale timing.

Speaker Change: Probably better than anybody Scott, So I think that the sale time measured depending on your port could be.

Speaker Change: 4567 weeks, depending on where you are selling from a where you're selling to so I don't think we have seen.

Speaker Change: The black ships coming in so to speak.

But that obviously is going to hit us at some point in time. The nice thing is we don't have a ton of direct exposure to China import export we have a little bit in the international business.

Speaker Change: And then it's hard to figure out whether or not we participate in any.

James Todd: We have a little bit in the international business, and then it's hard to figure out whether or not we participate in any meaningful consolidation in the 53 footers, you know, after they get to inland ports. My guess is it's some, but it's probably quite small. But there's going to be some pocket, and the question to Brian's point, a question to go is are we going to see that counterbalance by any pull forward associated with the expiration of the 90 days?

Speaker Change: Any meaningful consolidation into 53 floaters.

Speaker Change: After they get to inland ports.

Speaker Change: Is it some but it's probably quite small, but theres going to be some pocket and the question to Brian's point of a question ago is are we going to see that counterbalanced by any pull forward associated with the exploration of the 90 days.

Speaker Change: Yes, so through the first two weeks of fiscal May truck loads per workday, Scott are running almost right on top of fiscal April such that we're clipping about 20 basis points ahead of prior year may and I would just remind folks last year may 2024 that truck loadings versus April which is unusual.

James Todd: Let me let you hit April, May. Yeah, so through the first two weeks of fiscal May, truckloads per workday, Scott, are running almost right on top of fiscal April, such that we're clipping about 20 basis points ahead of prior year May. And I would just remind folks, last year, May 2024 dipped truckloadings versus April, which is unusual. That's why the slight improvement versus the down 2% year over year. That's helpful. And I know it's a small part of your business. But just curious. Ocean and Air, the Ocean and Air segment, like, had a lot of growth and Q4 and Q1.

Speaker Change: Why.

Speaker Change: Slight improvement versus the down 2% year over year in April.

Speaker Change: Okay. That's helpful.

Speaker Change: I would say small part of your business, but just curious.

Mike: Ocean and Air Ocean and Air segment Mike.

Mike: A lot of growth in Q.

Mike: Q4 and Q1.

Mike: And then is that what youre seeing more in real time there.

James Todd: And has that, you know, what you're seeing more in real time there, I'm just curious. You talking about in terms of Q1, Q2 trends, Scott? Yeah. Yeah, well, obviously, rate was a huge positive for everybody in that space in the preceding handful of quarters as that ticked up, and JT's just pulling up a couple of numbers here that'll hopefully be able to help you out as we think about last year and this year. Yeah, so we've definitely seen our ocean revenue per shipment slide on a sequential basis, Scott, from running a little bit over $11,000 in the fourth quarter of 24 down to, if I was good with numbers, about $7,500 an ocean load in first quarter 25, so while it was still positive year over year in the first quarter, we are seeing that.

Mike: Curious.

Mike: You're talking about in terms of Q1 Q2 trends Scott Yeah.

Mike: Obviously rate right with a huge positive for everybody in that space in.

Mike: In the preceding handful of quarters is that ticked up Jacob just pulling up a couple of numbers here that hopefully would be able to to help you out as we think about last year and this year. So we've definitely seen our ocean revenue per shipment slide on a sequential basis, Scott from running a little bit over 11000 in the fourth quarter of 2004 down too.

Mike: It's always good to the numbers about 7500 Bucks an ocean loading first quarter 'twenty five so while it was still positive year over year in the first quarter, we are seeing that sequential slide.

Mike: Okay.

Mike: If I could just ask one just bigger picture question it sounds like hopefully the BC.

Frank Lonegro: And then if I could just ask one just bigger picture question, it sounds like hopefully the the BCO declines are starting to moderate Do you think, is there anything about this that in any way feels... Structural to you, where when we get an upcycle at some point, we're not going to see. A big uptick in BCOs or is this purely a cyclical dynamic and when the cycle turns we'll get all the BCOs coming back and we'll get all the volume growth back? Yeah, Scott, I don't see anything structural. I mean, obviously, we've been looking at BCO count extremely heavily here in the last, certainly since I've been here, and I'm sure the team before as things started to roll over in the early part of 2022.

Speaker Change: Declines are.

Mike: Starting to moderate.

Mike: Do you think is there is there anything about this that in any way fields.

Mike: Structural to you where when we get an up cycle at some point, we're not going to see.

Mike: A big uptick in <unk> or is this purely a cyclical.

Mike: Dynamic and when the cycle turns will get all the <unk> coming back and we will get all the volume come back.

Scott: Yes, Scott I don't I don't see anything structural I mean, obviously, we've been looking at <unk> count.

Mike: Streaming heavily here in the last sort.

Mike: Since I've been here and I'm sure the team before as things started to rollover in the early part of 2022 I think we've mentioned this before.

Frank Lonegro: I think, and we've mentioned this before, just the sheer length of time associated with this freight recession, it really is unprecedented. And so, you know, we always go back and look at history and say, well, what if this recession had only been 18 to 20 months like prior ones? And I think we would have snapped the line in like 10,000 trucks. So, that would feel pretty good. We should expect capacity, not just at Landstar, but more broadly, to continue to bleed out as the rate environment bounces along the bottom. So, that doesn't really surprise us.

Mike: The sheer length of time associated with this freight recession. It really is unprecedented and so we always go back and look.

Mike: At history, and say well what if this recession had only been 18 to 20 months like prior ones and I think we would have snapped the line I'd like 10000 trucks. So.

Mike: Feel pretty good we should expect capacity not just at Landstar, but more broadly to continue to bleed out as the rate environment bounces along the bottom so that doesn't really surprise us.

Mike: That we are seeing.

Frank Lonegro: The fact that we are seeing, you know, continuing to see a significant number of ads on a quarter over quarter basis, and Matt, you may have the numbers for Q1. I just happen to remember the numbers from Q4. In Q4, we added 500 trucks, but we lost 700 trucks. So, the fact that 500, you know, new folks are coming to us tells us that the model is quite sound and quite resilient. And when things go the other way for us, the positive way, then you're going to see more ads than cancels, because in a rising rate environment with a percentage pay model, more people are going to want to stay in a rising rate environment than they do in a declining environment.

Speaker Change: <unk> to see a significant number of adds on a quarter over quarter basis, and Matt you may have the numbers for Q1, I just happen to remember the numbers from Q4 and Q4, we added 500 trucks, but we lost 700 trucks. So the fact that 500.

Mike: New folks are coming to us tells us that the model.

Mike: Is quite sound and quite resilient and when things go the other way for us to positive way, then youre going to see more ads in Kansas because in a row.

Mike: Great environment with a percentage pay model more people are going to want to stay in a rising rate environment than they do in a declining environment.

Mike: Quarter, one quarter, one was 568, so up 12% sequentially Q4 to Q1, yes. So we're continuing to add significant trucks, which tells me it's as much about continuing to see that number increase and a positive rate environment as well as more people wanting to stay so it's both sides of the equation and again message.

Frank Lonegro: So, Matt, quarter one? Yeah, quarter one was 568. So, up 12% sequentially, Q4 to Q1. Yeah. So, we're continuing to add significant trucks, which tells me it's as much about continuing to see that number increase in a positive rate environment, as well as more people wanting to stay. So, it's both sides of the equation. And again, Matt's doing a really good job of digging into all of this and looking not just at how we add more fully qualified folks, but also how we improve retention through all the work that we're doing on safety, security, service, what we call the CAHPS class, securement training, all of the things that are really good.

Mike: A really good job of digging into all of this and looking not just at how we add more.

Mike: Fully qualified folks, but also how do we improve retention.

Mike: All the work that we're doing on safety security service, what we call the <unk> class.

Mike: <unk> training all of the things that are really good and ultimately the agents.

Mike: Getting the best loads that are out there as you all know we generally don't play the bottom of the freight part so it's important for us to continue to get the right business for the <unk>.

Frank Lonegro: And ultimately, the agents... Getting the best loads that are out there, as you all know, we generally don't, you know, play the bottom of the freight pie, so it's important for us to continue to get the right business for the VCOs to haul.

Speaker Change: Thank you guys Super helpful.

Scott Grip: Thank you guys, super helpful. Thank you.

Speaker Change: Thank you. Your next question will be from Ravi Shanker of Morgan Stanley. Sir Your line is now open.

Ravi Shanker: Next question will be from Ravi Shanker of Morgan Stanley. Sir, your line is now open. Great, thanks.

Ravi Shanker: Great. Thanks, good morning, everyone.

Ravi Shanker: Just a follow up on the cargo theft topic I was struck by your cards I think Matt said that this is a topic there it'd be probably play more defense than offense at this point.

Matt Dannegger: Good morning everyone. Just to follow up on the cargo theft topic, I was struck by your comment, I think Matt said that this is a topic where we probably play more defense than offense at this point. How many quarters do you think will it take to get in front of it? What are some of the tech tools you're using? Are there any kind of AI-type applications you can use to maybe predict some of this? And also, in the meanwhile, what recourse do you have? Can you work with some of your customers, maybe share some of these losses?

Ravi Shanker: How many quarters do you think will it take to get in front of it.

Ravi Shanker: What are some of the tech those are you thinking of are there any kind of AI.

Ravi Shanker: Type applications, you can use to many predict some of this.

Ravi Shanker: And also in the Meanwhile, like what recourse do you have can you work with some of your customers maybe share some of these losses.

Ravi Shanker: Is this something that insurance will even consider because in our conversation with the insurance analyst doesn't feel like cargo. That's African claims is a huge topic for them relative to maybe some of the accident claims here.

Frank Lonegro: Is this something that insurance will even consider? Because in our conversation with insurance analysts, it doesn't feel like cargo theft and claims is a huge topic for them relative to maybe some of the accident claims. Yeah, hey, Ravi. So a couple of good thoughts inside of that. I think that, you know, the theft environment, similar to cyber security, like you're always going to be on some level of defense, given the fact that the attack vector, so to speak, always is changing. As you put up better defenses, people try to find a way around those. Matt mentioned, and I'll reinforce, the technologies that we are investing in, both as an industry through some of the vendors that we all do business with, as well as some of the things we're working on internally, do, in fact, utilize AI, and they certainly do a nice job when they're fully deployed, which they're not quite yet, but as they're fully deployed, they're going to be able to either catch things in advance, and, I mean, we literally just talked yesterday about a load that, you know, was in the process of being diverted, and we caught it.

Ravi Shanker: Yeah, Hey, Ravi So couple good thoughts inside of that.

Ravi Shanker: I think that.

Ravi Shanker: The theft environment similar to cyber security like Youre always going to be on some level of defense given the fact that the attack vectors. So to speak always is changing as you put a better defense as people try to find a.

Ravi Shanker: A way around those Matt mentioned and I'll reinforce the technologies that we are investing in both as an industry through some of the vendors that we all do business with as well as some of the things we're working on internally do in fact utilize AI.

Ravi Shanker: And they certainly do a nice job when they are fully deployed which they're not quite yet, but as they're fully deployed they're going to be able to either catch things in advance.

Ravi Shanker: We literally just talked yesterday about a load that.

Ravi Shanker: It was in the process of being <unk>.

Ravi Shanker: Diverted and we call. It so we are seeing successes.

Frank Lonegro: So, you know, we are seeing successes in those tools playing good defense in preventing things, but at the end of the day, we're going to continue to have to watch what the bad actors are doing, and do everything we can to catch them really, really quickly. In terms of recourse, it depends, obviously, it depends on whether it's a BCO load or a brokered load, and on the insurance side, yes, we do have, you know, insurance that plays here. It's got a, you know, a fairly healthy deductible, so a lot of it's going to depend on exactly what the circumstances were, as well as what the value of that load was.

Ravi Shanker: In those tools, playing good defense and prove anything.

Ravi Shanker: But at the end of the day, we're going to continue to have to watch what the bad actors are doing and do everything we can to catch them really really quickly in terms of recourse. It depends obviously it depends on whether its a <unk> loan or a brokered load.

Ravi Shanker: And on the insurance side, yes, we do have.

Ravi Shanker: Insurance that place here, it's got a.

Ravi Shanker: Fairly healthy deductible, so a lot of it's going to depend on exactly what the circumstances were as well as what the value of that load was yeah I would just add Ravi.

James Todd: Yeah, I would just add, Robbie, we just got past our May 1 insurance renewal. The insurers are absolutely taking it on the chin, and they're getting more creative in the policies they're willing to write, some of which you've got to sign your right over, and the insurer will fight your customer to look for ways on a legal basis to not pay the claim. Clearly, from a service perspective, we would not want to do that from a service provider Understood.

Ravi Shanker: <unk> got just got past our May one insurance renewal the insurers are absolutely taking it on the chin and Theyre getting more creative in the policies. They are willing to write some of which you've got assigned youre right over in the insurer will fight your customer to look for ways on a legal basis to not pay the claim clearly from a from a service perspective.

Ravi Shanker: We would not want to do that for me.

Ravi Shanker: Service provider perspective.

Speaker Change: Understood, maybe a really quick follow up here.

Frank Lonegro: Maybe a really quick follow up here. If we dream the dream, what's the scope of upside potential in these next 90 days? If shippers decide that they want to build inventory through holiday season and through the end of the year in the next 90 days, do you think the market could get tight enough that we could maybe see some flashbacks to the pandemic and maybe some supply chain chaos and like, you know, like really high truck rates here? Yeah, good question. Obviously multifaceted. We, Landstar, generally do well in more volatile times and obviously if you look at our core results relative to others who have reported, I think you would reach the conclusion that we did pretty well.

Speaker Change: We dream the dream.

Speaker Change: Whats the scope of upside potential in these next 90 days if shippers decide that they wanted to build inventory through holiday season, and then through the end of the year in the next 90 days.

Speaker Change: Do you think the market could get tightened up that we could maybe see some flashbacks to the pandemic and maybe some supply chain chaos and like really.

Speaker Change: Really high correct me too.

Speaker Change: Yes, good questions, obviously multifaceted.

Speaker Change: Landstar generally do well in more volatile times and obviously, if you look at our core results relative to others, who have reported I think you would reach the conclusion that we did pretty well.

Speaker Change: So I think.

Speaker Change: In a volatile next 90 days.

Frank Lonegro: So I think in a volatile next 90 days, I'm also coupling that with English proficiency enforcement and things like that that might tighten up capacity. That's going to help Landstar. We have business on predominantly in the spot market. So when folks can't cover loads, they generally look for bigger players in the spot market, i.e. us. And so I look forward to that volatility. The question is whether or not there's going to be more certainty in trade policy here and not just vis-a-vis U.S. China, but also U.S. Mexico, U.S. Canada. Because as I mentioned in the prepared remarks, you're talking about 15 plus percent of our business that right now in some respects people are sitting on their hands waiting to see exactly what's going to happen.

Speaker Change: Coupling that with English proficiency enforcement and things like that that might tighten up.

Speaker Change: <unk>, that's going to help landstar.

Speaker Change: We have business on.

Speaker Change: Predominantly in the spot market, so when folks can't cover loads. They generally look for bigger players in the spot market E us.

Speaker Change: And so I look forward to that volatility. The question is whether or not there's going to be more certainty and trade policy here and not just vis vis U S. China, but also U S Mexico U S Canada.

As I mentioned in the prepared remarks, you were talking about.

Speaker Change: 15, plus percent of our business that right now in some respects people are sitting on their hands waiting to see exactly what's going to happen. So.

Speaker Change: I'm trying not to gauge the business on the next 90 days I do think the strategies that we are focused on are absolutely the right ones and that universe is continuing.

James Applegate: So I'm trying not to gauge the business on the next 90 days. I do think the strategies that we are focused on are absolutely the right ones and that universe is continuing to expand.

Speaker Change: To expand maybe Jim I forget you can talk a little bit about what's what's coming up that we cover with some of the analysts.

James Applegate: And maybe, Jim Applegate, you can talk a little bit about what's coming up that we covered with some of the analysts at our meeting at convention. But we're going to continue to look for things that are arguably hard to do and that there are fewer competitors out there, which obviously gives us a competitive advantage if we're good at and certainly helps us on the rate and the VC side. Yeah. So Robbie, from a strategic initiative standpoint, you guys have heard a lot about heavy haul. You've heard a lot about cross-border. We put those in flight last year and we've had great results.

Speaker Change: At a meeting at convention, but we're going to continue to look for things that are arguably hard to do and that there are fewer competitors out there, which obviously gives us a competitive advantage. If we're good at and certainly helps us on the rate and the visa.

Speaker Change: Ravi from.

Speaker Change: From a strategic initiative standpoint, I mean, you guys have heard a lot about heavy haul you've heard a lot about cross border, we put those in flight last year.

Speaker Change: And we've had great results I mean, we've really gotten our agents engaged we've gotten a lot more strength around those different.

James Applegate: I mean, we've really gotten our agents engaged. We've gotten a lot more strength around those different services that we provide. And as that's really kind of played itself out, to Frank's point, there's a lot of other things that our agents are really well suited for in this market where we do the really hard stuff well. We pulled in cold chain expedite. We pulled in hazmat. We're executing a very similar way. We're getting the right leaders around it. We're getting the right strategies in place to go ahead and engage the agents to recruit the capacity and sales and marketing from a direct customer approach.

Speaker Change: Those different services that we provide.

Speaker Change: And as that's really kind of played itself out to Frank's point, there's a lot of other things that our agents are really well suited for this market, where we do not really hard stuff well, we pulled in cold chain expedite we pulled in hazmat.

Speaker Change: We're executing a very similar way, we're getting the right leaders around it we're getting the right strategies in place to go ahead and engage agents to recruit the capacity in sales and marketing from a direct.

Speaker Change: Customer approach.

Speaker Change: And we're starting to really kind of get some good momentum around from a corporate standpoint, putting our arms around our agents and directing them into the right areas, where they can be successful on one of the things that.

James Applegate: And we're starting to really kind of get some good momentum from a corporate standpoint, putting our arms around our agents and directing them into the right areas where they can be successful. One of the things that didn't come out in our call today is the performance that we're starting to get around our top 100 customers. We actually grew 5% within our top 100 customers in this first quarter. And I do attribute that to not only the strategic initiatives, but a lot of the other efforts that we're doing, Matt Danninger, Matt Miller, and myself, as far as trying to get our arms around agents, pushing them to grow within their existing customer share wallet, and giving them the right support that they need to go ahead and grow, not only within the strategic initiatives, but as an organization.

Speaker Change: That didn't come out.

Speaker Change: In our call today.

Speaker Change: Is the performance that we're starting to get around our top 100 customers. We actually grew 5% within our top 100 customers in this first quarter and I do attribute that to not only the strategy strategic initiatives, but a lot of the other efforts that we're doing at Danaher, Matt Miller and myself as far as trying to get our arms around agents pushing them to grow within their existing customers.

Sure.

Speaker Change: And given them the right support that they need to go ahead and grow not only within our strategic initiatives, but as an organization. So we'll continue to do that.

Frank Lonegro: So we'll continue to do that. To Frank's point, 90 days, is it going to make or break the company? I think we've got a really good long-term game plan in place to make sure that we can continue to grow in these, what we feel are real competitive advantages for our agents. And as the market corrects, we'll be in really good shape. Very helpful, thank you. Thank you.

Speaker Change: Frank's point 90 days isn't going to make or break the company.

Speaker Change: We've got a really good long term game plan in place to make sure that we can continue to grow in these what we feel are real competitive advantages for our agents and.

Speaker Change: And as the market corrects, we'll be in really good shape.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you. Your next question will be from Bruce Chan of Stifel. Your line is now open.

Bruce Chan: Next question will be from Bruce Chan of CFO. Your line is now open. Hey, good morning, everybody. Sorry to ask another one here on the fraud issue. I know it's under investigation. But you've called out a 10 cent impact here. And there's an implication that you know, it's more one time in nature, outside of just the magnitude of this charge.

Bruce Chan: Hey, good morning, everybody.

Speaker Change: Alright, asking another one here on the fraud issue I know, it's under investigation, but.

Speaker Change: You called out a 10 cent impact here and there is an implication that it's more onetime in nature.

Speaker Change: Outside of just the magnitude of this charge and the fact that it's in forwarding is is this a separate.

James Todd: And the fact that it's in forwarding is, is this a separate issue, because it's more preventable than the, you know, double brokering and imposter scam? Yeah, this one is extremely unique. I mean, this was a relationship which was created 10, 15 years ago, which over a period of time, there were some ownership changes and things like that in this satellite environment. And then there was a very unique set of circumstances. This is not your typical double brokering or anything like that. And that's one of the reasons why we feel comfortable that we've got our arms all the way around it, as I mentioned, and that the charge, if you took the gross and then looked at the actual and probable recoveries, that's how we get down to the net.

Speaker Change: Issue because its more preventable.

Speaker Change: Double brokering in a posture stance.

Speaker Change: Yes. This one is extremely unique I mean, this was a relationship which was created 10 15 years ago.

Speaker Change: <unk> over a period of time.

Speaker Change: There were some some ownership changes and things like that in the satellite environment.

Speaker Change: And then.

Speaker Change: The.

Speaker Change: There was a very unique set of circumstances. This is not your typical double brokering or anything like that and Thats. One of the reasons why we feel comfortable that we've got our arms all the way around it as I mentioned in that.

Speaker Change: The charge if you took the gross and then looked at the actual and probable recoveries thats, how we get down to the net we've got a fair amount of I'll say security around that.

James Todd: We've got a fair amount of, I'll say, security around that gross to net changeover. Is it possible that we get some additional recoveries over time? Sure. We obviously are going to spend some money and invest and go after the bad guys through both civil and potentially criminal means as well. So we're upset about this, to be candid, both in the way that the relationship developed years ago, but also the fact that somebody arguably stole from us. So we're going to go after the bad guys. And I think it's going to make us all sit up a little straighter and look at any additional unique opportunities that come our way in the future.

Speaker Change: The gross to net changeover is it possible.

Speaker Change: That we get some additional recoveries over time sure.

Speaker Change: We obviously are going to spend some money and invest and go after the bad guys.

Speaker Change: Through both civil and potentially criminal means as well. So we are we're upset about this to be candid both in the way that the relationship.

Speaker Change: Chip developed years ago, but also.

Speaker Change: The fact that somebody arguably sulfur almost so we're going to go after the bad guys.

Speaker Change: I think it's going to it's going to make us all set up a little straighter and look at any additional unique opportunities.

Speaker Change: That come our way in the future, we're going to look really really hard to.

Speaker Change: Okay. That's good to hear and really helpful. And then just a quick follow up here I know you gave some color on the near term trends with Mexico Cross border, maybe any commentary there on what youre hearing from shippers in terms of the long term outlook, there and whether or not you are considering additional investments.

Bruce Chan: We're going to look really, really hard at. Okay, that's, that's good to hear and really helpful.

Frank Lonegro: And then just, you know, quick follow up here. I know, you gave some color on the near term trends with Mexico cross border, maybe any commentary there on, you know, what you're hearing from shippers in terms of, you know, the long term outlook there. And, you know, whether or not you're considering additional investments, you know, on an M&A standpoint, or maybe on an organic basis. Yeah, so good, good set of questions. Again, we do believe that this is the right long term play. You know, M&A is probably not the first thought that comes to my mind when I think about the US-Mexico cross-border business.

Speaker Change: M&A standpoint, or maybe on an organic basis.

Speaker Change: Yes. So good good set of questions again, we do believe that this is the right long term play.

Speaker Change: M&A is probably not the first thought that comes to my mind, when I think about the U S. Mexico Cross border business. We've got some great agents, who do a fabulous job for us and shepherding northbound southbound.

Frank Lonegro: We've got some great agents who do a fabulous job for us in shepherding freight northbound, southbound. We are looking at whether or not we are penetrated enough in other gateways. We feel like Laredo is a wonderful footprint for us. You know, do we need whether it's joint venture lease owned, do we need other facilities along that border as you think further west? It obviously picks up different lanes, it picks up different commodities, things like that. But we are looking at whether or not we should be more penetrated in some of those other locations.

Speaker Change: We're looking at whether or not we are penetrated enough in other gateways, we feel like Laredo.

Speaker Change: A wonderful footprint for us.

Speaker Change: Do we need whether it's joint venture lease owned do we need other facilities along that border as you think.

Speaker Change: Further west it obviously picks up.

Speaker Change: Different lanes it picks up different commodities things like that but we are looking at whether or not we should be more penetrated some of those other locations, but I'll, let Jim Applegate touch on some of them from a from a Mexico market standpoint, I mean, obviously the tariffs I think I've kind of put a cloud over some of these longer term investment decisions I think there needs to be a little bit more clarity before you start hearing about any kind of wholesale.

Frank Lonegro: But I'll let Jim Applegate touch on some of that. You know, if you see what's happening with these tariffs, and trying to kind of push more manufacturing back here to North America, I think Mexico does still come out a clear winner. And, you know, we're doing everything we can to make sure that we're in the right position to capitalize. Okay, great, thank you. Thank you.

Speaker Change: Decisions to deploy capital, but I think from a long term perspective.

Speaker Change: Mexico is going to come out of here I think is a good winter and I think youre hearing that from shippers youre hearing that from other people within the industry that are trying to position themselves.

Speaker Change: Over the next three 510 years.

Speaker Change: If you see what's happening with these tariffs I'm trying to kind of push more manufacturing back here in North America, I think Mexico does still come out a clear winner and.

Speaker Change: We're doing everything we can to make sure that we're in the right position to capitalize on that.

Okay, great. Thank you.

Thank you our last question will be from Vasco measures of Susquehanna. Sir Your line is now open.

Bascome Majors: Our last question would be from Bascome Majors of Susquehanna.

James Todd: Sir, your line is now open. Thanks for taking my question. Jim, you walked us through some of your cost items or directional thoughts into the second quarter. Can we zoom out a little bit on that discussion? Where is your accrual for incentive comp and stock comp for the year relative to where you thought it would be when you started the year? Ultimately, if we get the recovery year we're all hoping for into 2026, how much of that needs to come back to get you back to a normal level? Thank you.

Vasco: Thanks for taking my question, Jim you walked us through your some of your cost item sort of directional thoughts into the second quarter.

Speaker Change: Can we assume out a little bit on that discussion.

Where is your accrual for incentive comp and stock comp for the year relative to where you thought it would be when you started the year and I think ultimately if we get the recovery year, we're all hoping for.

Speaker Change: 2026, how much of that needs to come back to get you back to a normal level. Thank you.

Speaker Change: Great to hear from you. So on our year end 'twenty four earnings conference call I gave a $21 million normalized figure between incentive comp and stock compensation were currently accruing to about $12 million. This year bascom its about $4 million from the cash plan and about $8 million from the stock plan.

James Todd: Bascom, great to hear from you. On our year-end 24 earnings conference call, I gave a $21 million normalized figure between incentive comp and stock compensation. We're currently accruing to about $12 million this year, Bascom. It's about $4 million from the cash plan and about $8 million from the stock plan. And if we went back to normal in 26, would that be reflective of where you start at 25? Or there'd be something different that we need to consider there? There'd be a little bit of impact on, you know, merit wages. But I would tell you, Bascom, it's probably a nine, let's say 12 million is base case for 25.

Speaker Change: And if we went back to normal in 2006, so that would be reflective of where you started 25 or there'll be something different and we need to consider there.

Speaker Change: It would be a little bit of impact on merit.

Speaker Change: Wages, but I would tell you Boston was probably let's say $12 million as base case for 25, I would tell you a hypothetical for 26 would be that $9 million headwind of $21 million on a full year.

James Todd: I would tell you a hypothetical for 26 would be that $9 million headwind or 21 million on a full Thank you so much. Take care. Thank you.

Speaker Change: Thank you so much stickier.

Speaker Change: Thank you at this time I show no further questions I would like to turn the call back over to you Sir for closing remarks.

Unknown Executive: At this time, I show no further questions.

Frank Lonegro: I would like to turn the call back over to you, sir, for closing remarks. Thank you all. In closing, while the freight environment remains challenging, we do see some positives in the near term. We were encouraged by first quarter truck volume performance, and with a choppy industrial economic backdrop, we were pleased with the 6% year-over-year revenue increase in our heavy haul service offering. I was also pleased to see the impact of some cost performance on items within our control. For example, the first quarter was positively impacted by increased gains on sales of used trailing equipment, decreased appreciation on IT software projects, a decreased provision for contractor bad debt, and decreased expenses on the company's trailing equipment fleet.

Speaker Change: Thank you in closing while the freight environment remains challenging we do see some positives in the near term we were encouraged by first quarter truck volume performance and with a choppy industrial economic backdrop, we were pleased with the 6% year over year revenue increase in our heavy haul service offering I was also pleased to see the impact of some cost performance on items with.

Speaker Change: And our control for example, the first quarter was positively impacted by increased gains on sales of used trailing equipment decreased depreciation on the IC software projects a decreased provision for contractor bad debt decreased expenses on the companys trailing equipment fleet.

Speaker Change: And regardless of the economic environment, the resiliency of the Landstar variable cost business model continues to generate significant free cash flow Landstar has always been a cyclical growth company and we are well positioned to navigate the coming months as we continue to look forward to higher highs when the freight market terms our way. Thank you for joining us. This morning, we look forward to speaking with you again on our 2012.

Frank Lonegro: And regardless of the economic environment, the resiliency of the Landstar variable cost business model continues to generate significant free cash flow. Landstar has always been a cyclical growth company, and we are well positioned to navigate the coming months as we continue to look forward to higher highs when the freight market turns our way. Thank you for joining us this morning.

Speaker Change: Five second quarter earnings conference call in late July Thank you.

Unknown Executive: We look forward to speaking with you again on our 2025 second quarter earnings conference call in late 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.