Operator: Good afternoon, and welcome to Landstar System Incorporated's Q3 earnings release conference call. All lines will be in a listen-only mode until the formal question and answer session. Today's call is being recorded. If you have any objections, please indicate at this time. Joining us today from Landstar are Frank Lonegro, President and CEO. Jim Applegate, Vice President and Chief Strategy and Transformation Officer. Jim Todd, Vice President and CFO. Matt Miller, Vice President and Chief Safety and Operations Officer, and Bill Clement, Vice President and Chief Commercial Officer. I'd like to turn the call over to Jim Todd. Sir, you may begin.
Jim Todd: Thanks, Elmer. Good afternoon, and welcome to Landstar's 2026 Q3 Earnings Conference Call. Before we begin, let me read the following statement. The following is a safe harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relates to Landstar's business objectives, plans, strategies, and expectations. Such statements are 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 2025 fiscal year and Form 10-Q for the 2026 Q2, described in the section Risk Factors and our 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: Investors should not place undue reliance on such forward-looking statements, and Landstar undertakes no obligation to publicly update or revise any forward-looking statements. I'll now pass it to Landstar's CEO, Frank Lonegro, for his opening remarks.
Frank Lonegro: Thanks, JT, and good afternoon, everyone. I'd like to thank our BCOs and agents and all the Landstar employees who support them every day. The capability, resilience, and commitment demonstrated day in and day out by our network of independent business owners is truly unique in the freight transportation industry. It was great to spend time with many of our independent owner-operators during our annual BCO Appreciation Days event in Las Vegas in September. With hundreds of our independent agents at eight different field meetings throughout the country over the past three months. One of the highlights of the BCO event was Landstar's 54th truck giveaway, where I had the honor of awarding BCO Dean Webb of Pelzer, South Carolina, a new 2027 Freightliner Cascadia as part of our Deliver to Win truck giveaway.
Frank Lonegro: Events like this remind us that our success is driven by the independent business owners and employees who make up the Landstar network and the dedication they bring to serving our customers every day. They are exceptional business leaders and key to driving the continued success of Landstar's business model. The freight environment in the 2026 Q3 was characterized by strong year-over-year truck pricing, low single-digit truckload volume growth, and tight truck capacity. Market conditions, which favored the shipper since late 2022, have shifted rather rapidly in favor of the transportation provider. Notwithstanding the geopolitical uncertainty experienced thus far in 2026, our focus continues to be on accelerating our business model and executing on our strategic growth initiatives. We are continuing to invest in the foundational work that puts Landstar in a great position to leverage improving freight market conditions.
Frank Lonegro: We also remain focused on our commitment to continuous improvement in the level of service and support we provide to our customers, agents, BCOs, and carriers each and every day. Turning to slide 5, Landstar's revenue performance was strong in the 2026 Q3, with overall revenue up 25% year over year. Importantly, as noted in our earnings release, our network generated truck revenue of $1.407 billion, an increase of 29% compared to the 2025 Q3, with truck revenue per load 25% above the 2025 Q3, and the number of loads hauled via truck up 3% over the same period. I continue to be extremely pleased with the performance of Landstar's heavy haul service offering. We generated approximately $185 million of heavy haul revenue during the 2026 Q3, a 25% increase over the 2025 Q3.
Frank Lonegro: On the capacity side, our net BCO truck count increased by 165 during the Q3, the strongest quarterly improvement since the Q3 of 2021. While I was very pleased with our revenue, variable contribution, and net truck count performance during the 2026 Q3, the quarter was not without challenges that require our focus and attention. We had a challenging insurance and claims cost quarter, with approximately $22 million of net unfavorable adjustment to prior year claim estimates. As noted in the press release, the highly elevated insurance and claim cost quarter was primarily attributable to, one, approximately $13 million, or $0.29 per share, of unfavorable actuarial adjustments to insurance and claims reserves as compared to the last actuary review conducted as of the Q4 of 2025.
Frank Lonegro: And two, approximately $8 million, or $0.18 per share, resulting from the settlement of two claims during the 2026 Q3. With respect to the $8 million on two specific cases, the company took a $5 million charge during the Q3 related to the settlement of a truck brokerage claim in an adversarial venue, and a $3 million charge due to the settlement of a claim related to an accident that occurred during the Q4 of 2025 involving a BCO independent contractor leased on with a subsidiary of the company. It's no secret the truck transportation industry has been under attack of late by an incredibly aggressive plaintiffs' bar, emboldened by the prospect of nuclear verdicts in the Montgomery decision. We're proud of our DOT accident frequency. We are encouraged by the favorable safety trend over the past five years.
Frank Lonegro: We will continue to work diligently on reducing the frequency of incidents. However, the inflationary pressure on claims severity or cost per crash affecting the transportation industry is something the company and the trucking sector are focused on mitigating to the extent possible. We continue to invest through the cycle in leading technology and AI solutions for the benefit of our network of independent business owners, and have allocated a significant amount of capital this year for refreshing our fleet of trailing equipment, with a particular focus on investing in new van equipment. We are very encouraged by the pace of our AI initiatives and continue to expand our efforts across Landstar. Agentic AI workflows are now actively deployed in eight independent agent offices, and AI-powered corporate support capabilities have been deployed across our broader agent network.
Frank Lonegro: At the same time, we continue to build the technology and operating capabilities needed to scale AI safely and responsibly, with an emphasis on configuring these solutions to fit the unique needs of individual agent offices. While we remain early in our journey, we are excited about the progress we are making and the potential for AI to improve productivity, enhance service, and create additional capacity for growth across our entrepreneurial network. Even with those investments, our balance sheet continues to be 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 slide deck, during the first 39 weeks of 2026, the company returned approximately $175 million to shareholders through dividends and share repurchases.
Frank Lonegro: Yesterday afternoon, our board declared a regular dividend of $0.44 per share, payable on 8 December to stockholders of record as of the close of business on 17 November. Turning to slide 7 and looking at our network, the scale, systems, and support inherent in the Landstar model helped to drive the operating results, excluding insurance and claims costs, generated during the 2026 Q3. JT will get into the details on revenue, loadings, and rate per load in a few minutes. Safety is crucial 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, security, and service at Landstar.
Frank Lonegro: I am proud to report an accident frequency rate of 0.57 DOT reportable accidents per million miles during the first 39 weeks of 2026, well below the last available national average DOT reportable frequency rate released by the FMCSA for 2021, and lower than the 0.60 DOT accident frequency we reported during the comparable period of 2025. The company’s 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. We remain committed to driving best-in-class safety. I would also like to take a moment to recognize Landstar’s $457 million agents based on 2025 fiscal year results, a number we would expect to increase in 2026. Importantly, retention within the million-dollar agent network continues to be extremely high. Turning to slide 8.
Frank Lonegro: On a year-over-year basis, BCO truck count increased by 91 or 1% compared to the end of the 2025 Q3 and increased nearly 2% sequentially. As noted above, our net 165 truck count additions during the Q3 were the strongest quarterly improvement since the Q3 of 2021. We were also pleased to see our trailing 12-month BCO truck turnover rate drop from 31.4% as of fiscal year-end 2025 to 26.6% at the end of the 2026 Q3. This is a positive trend that we hope will continue into the Q4. Along that line, through the first four weeks of the 2026 Q4 fiscal quarter, the number of trucks provided by BCO independent contractors increased by 22 compared to the end of the 2026 Q3. I will now pass the call back to JT to walk you through the 2026 Q3 financials in more detail.
Jim Todd: Thanks, Frank. Turn to slide 10. As Frank mentioned earlier, overall truck revenue per load increased 25% in the 2026 Q3 compared to the 2025 Q3, primarily attributable to a 29% increase in revenue per load on loads hauled by unsided platform equipment, and an approximately 23% increase in revenue per load on loads hauled by van equipment. On a sequential basis, truck revenue per load increased 7.5% in the 2026 Q3 versus the 2026 Q2. That represents the second largest Q2 to Q3 sequential increase in truck revenue per load over the past 15 years, second only to the 2020 Q3 when the economy began its rapid recovery from the depths of the COVID-19 pandemic.
Jim Todd: In comparison to overall truck revenue per load, we consider revenue per mile on loads hauled by BCO trucks a pure reflection of market pricing, as it excludes fuel surcharges billed to customers that are paid 100% to the BCO. In the 2026 Q3, revenue per mile on unsided platform equipment hauled by BCOs was 19% above the 2025 Q3, and revenue per mile on van equipment hauled by BCOs was 23% above the 2025 Q3. Delving deeper into seasonal trends, revenue per mile on loads hauled by BCOs on unsided platform equipment increased 3% from June to July and increased 6% from July to August, but decreased 3% from August to September. The June to July increase and the August to September decline both underperformed pre-pandemic seasonal trends, while the July to August increase outperformed pre-pandemic historical trends. Turn to van freight.
Jim Todd: Revenue per mile on van equipment hauled by BCOs increased 7% from June to July, decreased 2% from July to August, and increased slightly from August to September. The June to July increase significantly outpaced pre-pandemic historical trends. The July to August decrease was slightly better than the pre-pandemic historical trend, while the August to September slight increase was slightly softer than pre-pandemic historical trends. It should be noted that month-to-month seasonal trends on unsided 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 have been particularly pleased with the sustained strong performance of our heavy haul service offering. Heavy haul revenue was up 25% year-over-year in the 2026 Q3.
Jim Todd: Heavy haul loadings were up 11% year-over-year, and revenue per heavy haul load increased 13% year-over-year. Non-truck transportation service revenue in the 2026 Q3 was 13%, or $13 million below the 2025 Q3. The decrease in non-truck transportation revenue was primarily due to an 18% decrease in ocean revenue per load and a 9% decrease in ocean volume. Turning to slide 11. We have provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation logistics segment revenue was up 26% year-over-year on a 22% increase in revenue per load and a 3% increase in volume compared to the 2025 Q3. Within our largest commodity category, consumer durables revenue increased 34% year-over-year on a 28% increase in revenue per load and a 5% increase in volume.
Jim Todd: Aggregate revenue across our top five commodity categories, which collectively make up about 70% of our transportation revenue, increased approximately 28% compared to the 2025 Q3. While slide 11 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top commodity categories. From the 2025 Q3 to the 2026 Q3, total loadings of machinery increased 1%, automotive equipment and parts decreased 4%, building products increased 1%, and electrical loadings increased 44%. Even with the ups and downs in various customer categories, our business remains highly diversified with approximately 20,000 customers, none of which contributed over 8% of our revenue in the 2026 39-week period. Turn to slide 12. In the 2026 Q3, gross profit was $126.5 million compared to gross profit of $111.1 million in the 2025 Q3.
Jim Todd: Gross profit margin was 8.4% of revenue in the 2026 Q3 compared to gross profit margin of 9.2% in the corresponding period in 2025. In the 2026 Q3, variable contribution was $212.1 million, compared to $170.2 million in the 2025 Q3. Variable contribution margin was 14% of revenue in the 2026 Q3, compared to 14.1% in the same period last year. The 10 basis point decrease in variable contribution margin compared to the 2025 period was primarily due to decreased variable contribution margin on revenue generated by truck brokerage carriers, as the rate paid to truck brokerage carriers was 161 basis points higher than the rate paid in the 2025 Q3, mostly offset by an increase in the percentage of revenue generated from BCO independent contractors. Turn to slide 13.
Jim Todd: Operating income increased as a percentage of gross profit, primarily due to the impact of the non-cash impairment charges during the 2025 period. Operating income increased as a percentage of variable contribution, similarly due to the impact of the non-cash impairment charges during the 2025 period and a strong variable contribution performance during the 2026 period, partially offset by the increase in insurance and claims costs during the 2026 period. Other operating costs were $21.2 million in the 2026 Q3 compared to $15.6 million in 2025. This increase was primarily due to the impact of the favorable resolution of a value-added sales tax matter during the 2025 period and increased trailing equipment maintenance and rental costs during the 2026 period. Insurance and claims costs were $55.3 million in the 2026 Q3, compared to $33 million in 2025.
Jim Todd: The increase in insurance and claim costs as compared to 2025 was primarily attributable to, one, approximately $13 million of adverse actuarial adjustments to reserves as compared to the last actuarial review conducted as of year-end 2025. And two, approximately $8 million of prior year development attributable to settlements of two accidents during the 2026 period. During the 2026 and 2025 Q3s, insurance and claims costs included $21.9 million and $9.2 million of net unfavorable adjustment to prior year claim estimates, respectively. Selling general administrative costs were $62.4 million in the 2026 Q3, compared to $57 million in the 2025 Q3. The increase in selling general administrative costs was primarily attributable to an increased provision for incentive compensation and increased stock-based compensation, partially offset by a decreased provision for customer bad debt.
Jim Todd: The provision for incentive compensation was $6.9 million during the 2026 Q3, compared to $1 million during the 2025 Q3. Depreciation and amortization was $9.9 million in the 2026 Q3, compared to $11.5 million in 2025. This decrease was primarily due to decreased depreciation on software applications and decreased depreciation on our fleet of trailing equipment. The effective income tax rate was 26.3% in the 2026 Q3, compared to an effective income tax rate of 25.8% in the 2025 Q3. The increase in the effective income tax rate from the 2025 Q3 to the 2026 Q3 was mostly due to a higher provision for state income taxes. Turning to slide 14, looking at our balance sheet. We ended the quarter with cash and short-term investments of $351 million.
Jim Todd: Cash flow from operations for the 2026 39-week period was approximately $99 million, and cash capital expenditures were approximately $12 million. The company continues to return significant amounts of capital back to stockholders with approximately $110 million of dividends paid and approximately $65 million of share repurchases during the 2026 39-week period. The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar model. Back to you, Frank.
Frank Lonegro: Thanks, JT. Given the highly fluid freight transportation backdrop and the dynamic geopolitical and macroeconomic environment, coupled with a highly volatile litigation and claims environment, the company will be providing Q4 financial and operational commentary rather than formal guidance. Turning to slide 16 and looking at historical seasonality from Q3 to Q4, pre-pandemic patterns would normally be expected to yield a sequential increase of approximately 1% in truck revenue per load and an approximately 1% increase in the number of loads hauled via truck, resulting in a slightly higher top line sequentially. Please also note that historically, the company has experienced a 20 to 30 basis point compression in variable contribution margin from the Q3 to the Q4.
Frank Lonegro: The number of loads hauled via truck in fiscal October 2026 was approximately 7% above October 2025 on a dispatch basis, and revenue per load in October was approximately 29% above October 2025 on a process basis. As a result, we view anticipated truck revenue per load, even off of an elevated base, and the number of loads hauled via truck in October as slightly outperforming normal seasonality. We are excited to build upon the positive momentum generated during the first nine months of 2026 and are energized by the opportunity to support the best network of independent business owners in the transportation space, especially in an environment that, after nearly four years, appears to have turned in our favor. With that, operator, we would like to open the line for questions.
Operator: Thank you very much, sir. At this time, we will begin the question and answer session. If you would like to ask a question, please press star one on your touchtone phone. Once again, that is star one to ask a question. To cancel your requests, please press star two. We have a question on the line from Jonathan Chappell from Evercore ISI. Your line is open. You may begin.
Jonathan Chappell: Thank you. Good afternoon. Hey, Jim, can you help us understand the two different pieces of this insurance increase? It feels like that $8 million completely one time. Do not extrapolate that going forward. This $13 million of adverse actuarial adjustments, is there a reason you did not kind of strip it out in a non-GAAP table? Is that something that is going to be incorporated in that line item going forward? Just trying to figure out how much of this $0.47 in total is completely one time in nature and how much of it may be repeatable as we try to model that line item going forward.
Jim Todd: Yeah. No, John, it is a great question. I will take a shot at it. As you are probably well aware, Landstar has a longstanding policy of engaging a third-party actuary to review essentially the entire population of claim reserves twice a year, both at the Q3 balance sheet date and the Q4 balance sheet date. As you are probably also aware, claim cost severity has been going up at a decent clip that we felt like, for a period of years, that we were sufficient, i.e., our incurred but not reported reserves were up 27% gross dollars from Q4 2022 to the Q4 2025, and that is on a declining truck count. If you look at those reserves on a per truck basis, they had reserve, they had increased 73% over a 36-month period. Clearly, we had to true those up a little bit more.
Jim Todd: We started with insurance expense guidance back in 2016 at 3.2% of BCO revenue, and I think we concluded at about 7% of BCO revenue. You can see the inflationary pressure that has hit us along with the industry. If you look at it, John, on a four-quarter basis, I think that would point you to, and that includes an elevated Q4 of 2025, where we had two BCO accidents, significant accidents, and then this Q3 of 2026. If you look at a trailing four-quarter average, you are at about $46 million a quarter. A trailing six-quarter average is about $41, $42 million a quarter. The actuary adjustments, we certainly had to increase our loss burn rates for 2026. To your good point, we will have to continue to book to those higher loss estimates prospectively.
Jim Todd: On the settlements, you may recall we had adjusted three truck brokerage claims in Q2. Two of those claims were in jurisdictions where we previously had F4A federal preemption, that of course, was impacted by the Montgomery decision. Two of those three claims were settled at amounts that were inclusive of the reserves established in Q2. We had to book $5 million additional to resolve that third truck brokerage claim. On the $3 million BCO accident, you may recall, we reported an $11 million reserve attributable to two accidents, significant accident, BCO accidents in Q4 of 2025. Our best guess now with nine more months of experience is $14 million for those two crashes.
Jonathan Chappell: I am going to burn my follow-up here just to make it perfectly clear and not change topics. You would add $47 million in that insurance and claims line if we strip out that $5 million and the $3 million. Completely understand, again, not repeatable. You mentioned that $41 to $42 kind of six-quarter run rate. Is that what you are saying, where we should be looking going forward? Or because of this new actuarial adjustment, which looks like it would have been $47 on a clean basis, we should now be looking at something like in a $46 to $48 million quarterly basis going forward?
Jim Todd: John, I get your question.
Jonathan Chappell: Love it.
Jim Todd: Yeah, I am smiling through the phone, buddy. As you know, we stopped giving insurance and claims guide. That is the most challenging. This is a highly complex environment to estimate insurance and claim reserves. So we no longer give the percentage of BCO revenue. To even give the guidance over any 90-day period, it is very lumpy. In a non-sophisticated way, John, I would tell you $35 million a quarter feels probably too light these days. $55 million a quarter probably feels too heavy, and you got a bigger brain than I do. I think it would probably land closer to a reasonable spot.
Jonathan Chappell: All right. I appreciate it, Jim. Thanks.
Jim Todd: Thanks, buddy.
Operator: Thank you. Next one is from Chris Wetherbee with Wells Fargo. Your line is open. You may begin.
Chris Wetherbee: Yeah. Hey, thanks. Good afternoon, guys. Maybe picking up on the line of questioning and just maybe zooming out a bit, thinking big picture. Frank, as you think about Montgomery and the dynamics there, maybe bringing agents to the business, maybe attracting more BCOs or accelerating that process here versus what we are seeing with the insurance, I guess, I think we are still trying to make sure we understand how Landstar fits into this. Is this sort of a net positive in your view? Do you think it is a net negative? I guess, how do you think about sort of the earnings opportunity for the company post-Montgomery with all of these moving parts?
Frank Lonegro: Yeah, look, I think, Chris, the opportunity set for us kind of uniquely given the agent model, is a positive. We signed up Show Me Global, an entity out in the Midwest that joined us, about a $20 million independent brokerage, that sort of saw us as a great spot to plant the flag. We have got traction with some others. They have not crossed the finish line yet, but we have got some traction with others who, for lots of reasons, not the least of which is the Landstar value proposition, but also then even emboldened by the Montgomery world. We are seeing lots of really good conversations where folks are really looking for a safe haven. They are looking for a company that does things really, really well, that prides itself in safety, security, and service, and doing the hard things well.
Frank Lonegro: So I feel like we have got the upper hand in that one. I still think it takes a good year or two for the impact of Montgomery to hit sort of the entirety of the brokerage and the owner-operator world because of renewal cycles in the insurance world. I think that what is going to happen is, as people understand that this has a real impact on their bottom line, and then they go to market on renewal, and they end up with a multiple of their insurance cost going forward, and then, Lord forbid, they get named in a lawsuit and have to pay attorney's fees and ultimately have to settle or stomach a verdict. I think people are going to get religion pretty quickly and realize that being with a scale player is a really important phenomenon.
Chris Wetherbee: Okay. That is really helpful. I guess maybe just picking up on the agent comment. I think, Jim, in the past, you have given us some context of new agent acquisitions to the business on an annual basis. I think you have been sort of at a relatively low water mark the last couple of years, but have been significantly higher, maybe north of $100 million. Can you just give us a sense of maybe what the opportunity could be from an agent acquisition standpoint?
Jim Todd: Yeah. No, Chris, I would be happy to. I think Landstar's all-time high new agent revenue year was something like $180 million, and we have had a couple of years as high as $140 million, $160 million. We have been in kind of that $30 million to $50 million, the 2023, 2024, 2025 freight recession periods. To Frank's point, when you get $18 million at one bite, we had another decent-sized one that came across in the last week or so and two more of what I would call pretty good size that I think are in the green zone, call it 10-yard line, 15-yard line. So certainly, if we can just torque back to kind of strong years, there is probably a $100 million tailwind, and I would agree with Frank. I think the setup for Landstar right now is very nice.
Chris Wetherbee: Okay. Very helpful, guys. Thank you. Appreciate it.
Frank Lonegro: Thanks, Chris.
Operator: Thank you. Our next one is from Jason Seidl with TD Cowen. Your line is open. You may begin.
Jason Seidl: Hey, thanks operator. Hey, Frank. Hey, team. Appreciate you guys taking the time today. Wanted to look at the BCO thing and maybe coding away from the agents. What kind of opportunity do you see to grow the BCO count in this sort of changing environment, as a lot of shippers may be looking to go to more well-established companies and you might have some trucking companies out there that don't have great overall ratings, but some of the drivers do, and maybe they look to go to other places. Maybe you can talk about some of the opportunities going forward.
Frank Lonegro: Yeah, I'll get started on it, Jason. Good to hear from you. And let Matt Miller chime in as well. We've been real excited about what we've seen here the last four or five months on the BCO count. It's a combination of factors, a lot of the great work that Matt and his team are doing on the recruiting and the orientation side, and really reducing the time to qualify. Then leveraging, honestly, the existing BCO community and the existing agent community is kind of lines in the water, right. You catch more fish when you have more lines in the water. So we've leveraged that as well. I think what we're going to see as an industry is customers are going to prefer scale. We've already seen some positive impact from that.
Frank Lonegro: That then impacts the ability for smaller brokers to generate loads and revenue, which then impacts, generally speaking, smaller owner-operators, who are the folks that they go to to handle the freight. So I think we're going to see it work from the bottom up. And a lot of the work that Matt's doing is already leveraging that. We've got a really good carrier base that we're tapping into as well. So maybe Matt pick that up.
Matt Miller: Sure. Thanks, Frank, and thanks for the question. I think the historical context is we have been leaning into safety and security and service for quite some time, and that sets us up very well for an environment like we are seeing. That said, you look at the current quarter, we saw an acceleration in the rate of gross trucks being leased to the company. Gross truck adds were up 11% sequentially in the quarter. That is pretty significant. During the quarter, gross truck cancels were down 6.1% sequentially. That Q3 marks our 11th consecutive quarter of turnover improvement, where the high-water mark during the downturn was in Q4 of 2023 at 41%. We are sitting beneath our long-term average of 26.6%.
Matt Miller: What I would say that tells you is that once those folks can arrive in the door, which there are hurdles that it takes to get in the door, we are very selective on who we let in. They tend to flourish. They tend to be successful. We see that on the utilization where they are hauling, where do I have it? 6.7% more loads in the quarter year-over-year. Also, we look at year-to-date BCO 1099. We are pushing on challenging the record that we have seen in the history of the company for BCO 1099, which was recorded in 2022. I think, to the point of your question, a lot of success is being seen. That tends to be spread both by word of mouth and the growth that we will see, I anticipate, we will continue to see growth.
Matt Miller: Q4 and Q1 historically have been our challenging quarters. Just seasonality there, but Q2 and Q3 tend to be our stronger quarters.
Jason Seidl: Gentlemen, I really appreciate the time and the color there.
Frank Lonegro: Thanks, Jason.
Operator: Thank you. Our next one is from Scott Group with Wolfe Research. Your line is open. You may begin.
Scott Group: Hey, thanks. Afternoon. I want to ask about the revenue per load trends. July was up 26%, the full Q3 was up 25%, so it slowed a little bit and now we are back to +29%. Is that re-acceleration, is that just the impact of fuel or are you seeing underlying rates start to re-accelerate? I guess ultimately what I am trying to figure out, this 29% in October, if we just hold that is a lot better than the normal seasonality of up slightly Q3 to Q4. What do you think is a better way to think about Q4? Like that 29% or up slightly sequentially, which would be less than that 29%?
Jim Todd: Yeah. No, hey, Scott. Great question. 7.5% sequentially in the Q3 is about 5x what we typically do. To your point, some of it was front-loaded, but that strength continued into August. So August for Landstar, this was only the third time in 16 years that August rates at Landstar were higher than July. Then we did see rates back up a little bit, Scott, in September, to your point, but that is re-accelerated. As I look at October rates historically, we typically get about 40 basis points of lift September into October. As we sit here today, we are trending like 180 basis points of lift. So, if you get 100 basis points sequentially normally, and I just gave you the outperformance the first 4 weeks of the 13-week Q4, I think there is opportunity to outperform the benchmark.
Jim Todd: Finally, on the last point, I would tell you, if you just look at BCO pricing sequentially, which again is X the impact of fuel surcharge, BCO revenue per load was up 10.9% sequentially. So there is strong momentum in the business on the pricing side, whether you look at fuel or whether you X fuel.
Scott Group: How is that BCO revenue per load look in October relative to the 29 for the full business?
Jim Todd: Scott, that is a great question. It is day 2 of close, and I do not have that number in front of me.
Scott Group: Okay. All good. Then just one other on capacity. If I look like third-party approved and active brokerage carriers, like peaked at around 70,000, troughed at around 35,000. It is now starting to head back up towards 40,000. I know there is all this talk about regulatory capacity leaving the market. Are you actually starting to see with higher rates capacity start coming back to the market?
Frank Lonegro: Hey, Scott. It's Frank. I'll take a crack at the first-level answer on that one and turn it over to Matt here in a second. I don't think that the change in our capacity getting north again has anything to do with new entrants into the market. I think what's happening is the folks who have been in the market for a while are realizing there's a new level of rigor, not just at Landstar, but in the industry. They ultimately have to make some changes in the way that they do business in order to be able to haul freight for the more sophisticated brokers and carriers. I think it's largely to do with that. Matt can get into some history.
Frank Lonegro: We obviously got a little bit of religion on this one earlier on in taking the carrier count down because of some of the fraud in play. I think Matt's done a really good job of the vetting procedures and some of the new technology and tools and data and things like that. I feel good about where we are from a capacity perspective. Let me turn it over to Matt.
Matt Miller: Sure. Thanks for the question. Thanks, Frank. Back in Q2 of 2022, we had roughly 100,000 approved carriers in the network. I think we were really on the front end of bringing more rigor to those carrier vetting standards. That was really in response to fraud, but has paid benefits across the board for us. That was taken down from 2022 in the second quarter down to the second quarter of 2026. We were at 64,000. A lot of culling of the herd. The additional rigor that we put on, some of those carriers were reluctant to meet the standards that we had placed back then. What I think you're seeing in the third quarter is others have embraced a similar approach.
Matt Miller: As a result, the carriers are beginning to understand there's certain steps they're going to need to go through in order to get qualified with folks as an approved carrier. That's what I think you're seeing the increase from Q2 to Q3, roughly 3,300 or 5%, is relating to.
Frank Lonegro: One other thing I think it is worthwhile, Matt, is just to let him know that we do not take newly minted MCs as owner-operators. Our standards are higher than that.
Matt Miller: No, absolutely. Our standards are, there is a certain length of time. We tend not to market exactly what that length of time is, but there is a certain length of time you have to have an MC number in order to get approved, and there are dozens of other requirements that we have in place. A lot of the things that I am saying those carriers originally were not necessarily receptive to going through relate to identity-oriented things, where there is fraud being perpetuated in the industry, where other folks are taking possession of their operating authority unbeknownst to the underlying carrier. So there are a lot of things on the carrier vetting side that are now in place that are going to mitigate all that, and that prevented some folks from being willing to take those additional identity-related steps that they are now willing to do.
Frank Lonegro: A lot of good work by FMCSA at DOT.
Matt Miller: For sure.
Frank Lonegro: as well. Yeah.
Matt Miller: For sure.
Scott Group: Very helpful. Thank you, guys.
Frank Lonegro: Thanks, Scott.
Matt Miller: Yeah.
Operator: Thank you. Our next one is from Tom Wadewitz with UBS. Your line is open. You may begin.
Tom Wadewitz: Yeah, good afternoon. Wanted to ask about just the different customer segments and where you are most optimistic on demand remaining strong or even getting stronger and where you see potential for softness. I guess that could be dry van versus flatbed or retail versus industrial. Any thoughts on within the customer mix, how do things feel?
Jim Todd: Hey, Tom. I am happy to lead off, and then I will let our sales team chime in. Just in terms of the quarter, heavy haul, I think we are poised to put up our third back-to-back-to-back record year in the heavy haul vertical. If you look into that vertical, we had 20 customers individually grow volumes with us by at least 50 loads, heavy haul loads year over year. Largest one was a data center. There is some aerospace and defense. Electrical, you heard us talk about in the commodities. Big heavy machinery. So that is really a lot of momentum. As we sit here late October and we think about peak season, we have seen some good demand out of the gate the first four weeks, and really we have not had a traditional peak season in several years. Demand from those customers is performing rather nicely.
Jim Todd: Other transportation companies in a tight environment, they bounce back and come back to Landstar as well. So those are some at a high level that we see across.
Frank Lonegro: Yeah, we'll let Bill Clement talk a little bit about the data center ecosystem between the hyperscalers and the HVAC providers and the heavy equipment and generator folks. Before he jumps into that, the other thing that I think has been really helpful is to see the consumer durables element of our business, which is, call it a third of the business. When that does well, Landstar generally does well along with it. I think that's an important thing. Then you heard us brag about heavy haul. We'll continue to do a good job there. But maybe Bill Clement a little bit on the data center side.
Bill Clement: Well, Tom Wadewitz, I'll just add that we're really seeing strength across almost all of our verticals, including the 3PL brokerage has really peaked up. The data center business continues to be strong and shows a lot of legs. We're seeing a little bit of softness on volumes on the automotive side and some of the government business. But building materials, energy and power, industrial machinery, consumer goods, consumer durables, just Frank Lonegro just referred to, is all good. The bulk of our verticals are up, and we expect them to continue to be up here into Q4.
Frank Lonegro: Yeah, I think on the interest rate sensitive side of things, the residential housing and the automotive, you're obviously going to see some softness there relative to where interest rates are.
Tom Wadewitz: Okay. Yeah, I appreciate that. Then just, I think you have a great pulse on the market and see it from a number of different perspectives. What's your view on just how spot market evolves? Do you think that November, December, holiday peak, you get to higher rates than you were at in July for, I guess I'm thinking dry van. Then you think there's more momentum in the pipeline for spot rates to be higher in 2027? I guess, different views on how much regulatory initiatives have already played out. Obviously the freight markets can be tricky, but what's your best take on where things go from here in spot rates?
Frank Lonegro: Yeah, I think JT gave some color to Scott just a few minutes ago on Q4 and where it started and what normal sequentiality would do on a month-over-month-over-month basis. The nice thing is we actually are seeing a bit of a peak. We can read that through the parcel volumes, we can read it through the 3PL volumes. So, it is nice to actually see that after a couple of years of not really seeing any peak. The length of that peak, as you know from our old railroad discussions, can go from several weeks to several months, just depending on when it started and when the new year is and all of those factors. How long is there between Thanksgiving and Christmas type thing. So, obviously you have got a pretty good read on that one. So I think that is an important thing to understand.
Frank Lonegro: When you look at the regulatory impacts, if we assume that the ELP and the non-domiciled CDL and all the work that is being done on the mills as well as the ELDs and things like that, I do not think that is anywhere near completed. I think there is still a ton of enforcement out there. Then you have the Montgomery overtones as people begin to renew policies on the insurance side. So I feel like there is support for the spot rates as we get into Q4 and into next year.
Tom Wadewitz: Great. Thank you.
Frank Lonegro: Thanks, Don.
Operator: Thank you. Next one is from Jordan Alliger with Goldman Sachs. Your line is open, you may begin.
Paul Stoddard: Hi, this is Paul Stoddard on for Jordan. Thanks for taking our question. I guess as we start to think about where we are in this cycle, we are talking about spot rates potentially moving higher into Q4 into 2027. I guess where would we tend to think we are in this cycle? Are we starting to see more of that demand side come through to push those spot rates higher, or are we still more on the supply side?
Frank Lonegro: Well, I think it has been supply side for most of the year, just given the regulatory items that I just talked about, Paul. At the same time, when you look at volumes in Q3 and in October, and you begin to see things with low single digits to mid-single digits. We will see what the rest of the quarter looks like. Then you begin to shift the narrative a little bit more to the demand side, which is something that is certainly welcome to all of us who are in the freight hauling business. We want the volume. It is nice to get both volume and rate. You can look down the P&L, and if you skip one line known as insurance and claims, you would have a lot of good news to write home about from the Landstar P&L in Q3.
Paul Stoddard: That is helpful. Then, I guess as a follow-up, my question is, as we start to see a little bit of demand coming in, when we start to see that bounce off the bottom and we start to see load and demand come in greater than seasonality, how many quarters do you think we could see where there is that greater quarter-over-quarter low growth than normal seasonality? How long could that cycle last?
Jim Todd: Yeah, Paul, I am happy to talk about pre-pandemic patterns. What I would tell you is demand in Q3 hugged normal seasonality pretty tight. We are typically down 150. I think we were down 190 or something. If you look back into Q2, I think we slightly beat normal seasonality in Q2. So you got about six months now where it has been pretty tight. Pre-pandemic, typical up cycles were in a range of 24 to 30 months. If you are a believer that the cycle started halfway through Q4 of 2025, you could do the math. We should have still a good way to run.
Paul Stoddard: Great. Thanks for the questions.
Frank Lonegro: Thanks, Paul.
Operator: Thank you. Next one is from Brian Ossenbeck with JP Morgan. Your line is open. You may begin.
Brian Ossenbeck: Hey, guys. Afternoon. Thanks for taking the question. I guess one follow-up on all the insurance. The $8 million, I know these are accidents that happened a while ago, but given the environment that we are in right now, isn't it reasonable to believe these are more of a cost of doing business? I guess Frank Lonegro, you mentioned doing things to mitigate the cost. Is there anything that you can, and it is not just Landstar issue, of course, it is industry-wide. Is there anything you can listen on how that effort is going? If there is anything in DC or anywhere else that you or the industry is particularly interested in that might be able to provide some relief here?
Frank Lonegro: Well, there is certainly the advocacy, both at the regulatory side as well as the congressional side, and we will continue to work that both federally and on the state level. Obviously, you can see the positions that TIA, TCA, ATA are taking on these, and you should assume that we are both aligned with those and helping with those. When you look at things from a more practical level basis, what are within our control, it is really on the incident side. We have got to do everything we possibly can to drive the frequency of incidents down. Matt Miller and his team and all of us, honestly, that are helping with the BCO community and the third-party carriers, we have got to do ever better on safety, security, and service. That is the type of business that we are in.
Frank Lonegro: The trend lines that I would point to in terms of the things that we do and report on, the most significant being the DOT frequency rate that we talked about earlier today. We continue to drive that down, and that is really good news. When we have a case that we think we should settle, then we are going to look for opportunities to settle it. If it is a case that we think we are going to fight, then we are going to fight it because we cannot shape the law otherwise unless we take something to court. Now, we may fight one and miss and lose, and we will take it on the chin, and we may fight some cases and win and set up good law for both ourselves and for the industry going forward. It is all of those things wrapped up into one.
Frank Lonegro: We have been toying around with how can AI help and things like that, and we will continue to look for unique ways to get ever better on safety, security, and service.
Brian Ossenbeck: Understood. Then I guess relatedly, it is not quite 100% tied to your business given just the unique model we have, but any thoughts on the Crane v. Penske case? I mean, related to double brokering, essentially. Not really sure if there is a way for anybody to prevent that from happening, because especially in this case, there was really no knowledge of it, to my understanding. But certainly it seems like there are some challenges to see where the liability sits. I do not know if you guys have any specific views on that, but just wondering where that one sits from your perspective. Thank you.
Frank Lonegro: Yeah. We look at all of the marquee cases in the space, Brian, as you would expect that we would. The same ones you are watching. So we will watch it go through the process. Every case is different. Every fact and circumstance is different. Who knew what when, who did what, and who did not do what they were supposed to do. Those are all going to be facts and circumstances on a case-by-case basis. But that is a case that we clearly have our eyes on. We have our eyes on the $604 million plus interest Robinson case. Then, there are others out there that we are watching, both in terms of verdicts and settlements, and wins for that matter. There has been quite a few wins as well in the industry. So we certainly cheer those on.
Frank Lonegro: Like I said earlier, we are going to choose the cases that we think are the right ones for us to fight, and we are going to resolve the ones as appropriately as we can on the ones that we think that we ought to resolve.
Brian Ossenbeck: Okay. Thank you, Frank. Appreciate it.
Frank Lonegro: Thanks.
Operator: Thank you. Our next question is from Brandon Oglenski with Barclays. The line is open, you may begin.
Brandon Oglenski: Hey, good afternoon, and thanks for taking the question. Frank, maybe we can come back to this idea that insurance rates are actually going to increase for some of your competitors, because I think as we were talking about this 3 months ago, you guys had just renewed your coverage, right? I think for not a lot of increase in your underlying rates. I do not know, how do you compare those two there?
Frank Lonegro: Yeah. I think we were both lucky and good, to be honest with you, Brandon. Our timing was somewhat impeccable relative to the issuance of the Montgomery opinion. We had already been in deep negotiations with the brokers and the carriers in the insurance world and had the majority of the tower locked down in advance of the Montgomery decision. At the same time, the underwriters knew that Montgomery was out there and could be decided one way or the other. But I felt like our timing was really good and our loss history was good. That is one of the things that the underwriters always look at is what is our experience been with you over 1 year, 3 year, 5 year, 10 year, et cetera. We go through all of that. They look at our truck count, obviously. They also look at our safety indices.
Frank Lonegro: When we are doing what we can do to drive safety in the appropriate direction, we are making investments in the trailers to reduce the number of rear-end collisions and things like that. They see what we are doing. They also see that we are a strong company with a strong track record and a strong balance sheet. Those are all things that the underwriters take into consideration when they let the policy. What I am saying is, not everybody is going to have those good facts and circumstances when they go to renew.
Frank Lonegro: Those are the folks that are going to get really significant increases. Then they have to look at their P&L and say, "Is this a business that I can continue to be in, or do I want to come underneath of an umbrella like Landstar's and be a safe driver for them, or be a great agent for them?
Brandon Oglenski: Appreciate that. I think you guys have brought up AI a number of times, maybe in regard to both safety initiatives and efficiency, but how is that playing a part here going forward? Thank you.
Frank Lonegro: Yeah. I think in the safety side, and security for that matter, there are some workings inside the company to try to make sure that we can predict things or early detect things that are on that safety and security side. I think the big thing that we're doing in the agent office really has to do with almost sales productivity, if you want to look at it that way. It's how do you take some of the back office burden off of them so that they can deploy their resources more onto the sales side. I'll let Jim Applegate talk a little bit more about that.
Jim Applegate: Yeah. As it relates to safety, that's also going to have an impact over there as well. I think any time that you put in technology and you get standard business processes, standard practices, it just tightens up how you execute, and then how we can execute across our network. So I think that's inevitably going to have an impact as it relates to really driving our agents in the right direction as far as how we want them to behave and how we want them to really manage different situations. As far as our progress over on the AI side, we're making quite a bit of progress. Over the summer, we grabbed a partner that's very well known in the space and is really helping us implement Agentic AI through several workflows within the agent offices. So we're able to deploy it.
Jim Applegate: We are able to configure it specific to those agents and how they want to run their business and how they want to manage their customers. We are seeing quite good results from an efficiency standpoint, their ability to process calls, to get out in front of exceptions. We are really liking what we are seeing as far as how we are deploying that. We continue to gain steam, and we see this as a huge area, not only for growth, but to your point, how can we strengthen the network as well too, as far as how they execute?
Brandon Oglenski: Thank you.
Frank Lonegro: Thanks, Brandon.
Operator: Thank you. Next one is from Ravi Shanker with Morgan Stanley. Your line is open. You may begin.
Madison Pasterchick: Hi, this is Madison Pasterchick on for Ravi Shanker. We are just wondering how sympathetic the customers are to insurance headwinds in this inflationary environment and wonder how willing they are to raise rates, or is there a risk that they move to asset-based companies in an environment like this?
Frank Lonegro: Yeah. Hey, Madison. I have never felt that a customer was sympathetic to rate increases regardless of the reason. But look, when the market has moved up because of secular changes in the market, like fuel as an example or insurance as an example, those have a tendency to raise the market price, the value in the market for those services. I think that the market is showing all of us that the costs have increased, the supply has come down, and therefore, economics 101 says that rates are going to go up. So I feel good about us relative to the competition. We also play in a little bit of a different space in the market than your typical broker or asset-based carrier. Nothing has really changed in the asset-based carrier side. They have thin margins. They have lots of reinvestments. They have low ROIC.
Frank Lonegro: You know all this. But we have got to do as good a job as we can as a carrier to be the safest that is out there, run the freight securely, run the freight with a high level of service. On the brokerage side of our business, we have to do always an excellent job every single day in vetting the carriers. We vet them every 24 hours. They rerun through the algorithm to make sure that they are still up to our standards. That is probably the largest way, the most important way, that we can make sure that we do not have broker liability claims, is we vet the carriers and we execute at 100% efficiency every single day, in the freight that we tender to the broker carriers.
Madison Pasterchick: Got it. Thank you. If I could ask a follow-up. Just wondering on any prospective pivots on end markets or customers to avoid the more maybe higher-risk customers, if you guys have been seeing any patterns in that.
Frank Lonegro: I will let Matt Miller talk a little bit about fraud and what we do on that side of things. But there certainly are commodities that we pay much more attention to that have a higher prevalence of fraud and every once in a while, we may exclude something and put it on what we call our prohibited list. But usually, we find good ways to make sure that we run that freight securely, and we do it with extra insurance, if you want to look at it that way. But let me let Matt talk about it.
Matt Miller: Sure. Appreciate the question. And I think if you went back just a handful of years, the bad actors were less sophisticated in primarily stealing anything that they could possibly steal, primarily through fraud, but also traditional theft existed. So it really did not matter what was being hauled. They were looking to circumvent that load and take possession of that load and do with it what they will. Today, we are seeing much more sophisticated players that are targeting those high-value commodities. And of course, we have a robust risk assessment process where anything that is in excess of a certain value goes through a litany of criteria that we evaluate for additional insurance measures or additional parking requirements with security and things of that nature.
Matt Miller: So I would say today it is much more on that high-value end of the spectrum in terms of commodity value versus just a handful of years back, it was just about anything that was being targeted.
Madison Pasterchick: Got it. Thanks so much for the color, guys.
Matt Miller: Yeah.
Operator: Thank you. Next one is from Bascome Majors with Stephens. Your line is open. You may begin.
Bascome Majors: Yeah. Thanks for taking my questions. There has been a couple of questions on the agent side of the business, and your responses have been continuously constructive on what is happening in brokerage and small brokers and inflation being a growth opportunity for your business long-term. But if we look short-term, the agent count was actually down slightly sequentially. Can you talk a little bit or if there is any visibility you have with exit interviews or discussions on whether that was a blip or if there was some pattern to the short-term decrease before we get to the scenario where you should be able to grow the system on the sales side? Thank you.
Jim Todd: Hey, Bascome, this is JT. I am not aware of a short-term blip in agent count. We tend to focus more on the million-dollar agent count. We had 457 million-dollar agents in 2025. If you go back 15 years or so, we tend to retain those folks at a 97%+ retention rate. I think we were a little better than 97% last year. And we are on track to grow the number of million-dollar agents 2026 through 2025. But happy to connect offline if you are seeing something else.
Bascome Majors: Yeah, I was just looking at the total agent count in the slide deck, but you have answered the question there. Thank you.
Operator: Thank you. Our next one is from Bruce Chan with Stifel. Your line is open. You may begin.
Bruce Chan: Hey, good evening, guys. Just want to come back to some of your comments around the supply side. You mentioned, I think, Frank, the Montgomery overtones. I would imagine that could be fairly material as shippers and brokers start to maybe take a harder look at the selection criteria. I think several quarters ago, you talked about something around 15% impact to the OTR market from some of the regulatory initiatives. Any idea what that maybe looks like for Montgomery? I know it is still early, but just trying to get a ballpark sense of what the magnitude is here.
Frank Lonegro: Yeah, that is a really difficult one to answer, to be honest with you, Bruce. More than zero, I know that does not really help you. My sense is this will take another year or two to play out because of what will happen in the insurance side of things. If you have been a broker in an F4A jurisdiction, you did not really have any liability. Not that you could operate with impunity, but it was a really difficult hill to climb for the plaintiffs' lawyers to sue and be successful at suing a broker. I think now a lot more lawsuits probably will be filed. I do not have any facts to tell you that they have actually gone up in number yet, but you have to think that that will happen, which means that every broker is going to have to defend itself.
Frank Lonegro: That is just dollars going out that are not in the P&L today. When you get sued, then you have got to disclose that to your insurance company, or if you do not have insurance, then it is just coming out of your pocket. So I think there is going to be a little bit of a snowball here, in terms of insurance renewals. But I could not tell you whether that means it is going to be 30% up or 300% up. I think that is going to be really dependent on the types of renewals that come up and what the loss history looks like between now and when they do renew. But I think the impact, certainly from our perspective, I think more people will want to become BCOs, and I think more people will want to become Landstar agents.
Bruce Chan: Okay. Fair enough. Thank you.
Frank Lonegro: Thank you.
Operator: Thank you. We have Stephanie Moore from Jefferies. The line is open. You may begin.
Stephanie Moore: Great. Good afternoon. Thank you. Looking at your balance sheet, sitting here, pretty nice net cash position, a lot of balance sheet capacity. Obviously, we have seen some more aggressive M&A in the asset-light space as of late. Would love to just get your thought on potentially looking to inorganically grow your business, especially in the face of what seems to be ongoing or potentially ongoing industry consolidation. Thanks.
Frank Lonegro: Yeah, Stephanie, good question. Well, we are proud of the balance sheet, and that gives us the ability to have optionality. When you see a situation like Robinson RXO, a lot of people ask, "Well, are you going to do something similar?" We are not going to buy a big brokerage and bring that in-house and compete against our agents. That is not the model that we have. Now, are we thinking a lot more about, at least what we around this table refer to as little M&A, meaning, how do we put a little bit of capital at work to bring on agent candidates into the Landstar network who want to be independent entrepreneurs and grow their business and get some of the benefits?
Frank Lonegro: For example, the protections on the insurance side and access to the BCO network and the 40,000 or so carriers that you just heard Matt Miller talk about. Yeah, I do think there is real opportunity there. We have to be respectful of the model when it comes down to large-scale M&A. I do think there is opportunity in a post-Montgomery world for us to grow the million-dollar agent count through the little M&A that I referenced.
Stephanie Moore: Absolutely. Thank you, guys. Appreciate it.
Frank Lonegro: Thanks a bunch.
Operator: 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. Thank you.
Frank Lonegro: Thanks very much. In closing, while we are disappointed with the challenging insurance and claims environment, the management team has been energized by our interactions with our BCOs and agents thus far in 2026. We are all encouraged by the current freight environment and what we believe are the strongest unsided platform and heavy-haul service offerings in our industry. Regardless of the economic environment, 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 capitalize on the improving conditions and positive momentum in freight markets. Thank you for joining us this afternoon. We look forward to speaking with you again on our 2026 Q4 earnings conference call in late January. Thank you.
Operator: Thank you for joining the conference call today. Have a good evening. Please disconnect your lines at this time, everyone. Thank you very much.
