Landstar System Inc.

10/29/2024 | Press release | Distributed by Public on 10/29/2024 14:25

LANDSTAR SYSTEM REPORTS THIRD QUARTER REVENUE OF $1.214B AND EARNINGS PER SHARE OF $1.41 Form 8 K

LANDSTAR SYSTEM REPORTS THIRD QUARTER

REVENUE OF $1.214B AND EARNINGS PER SHARE OF $1.41

Jacksonville, FL-Landstar System, Inc. (NASDAQ: LSTR) ("Landstar" or the "Company") today reported basic and diluted earnings per share ("EPS") of $1.41 in the 2024 third quarter on revenue of $1.214 billion. "Consistent with the first half of 2024, the freight environment during the third quarter remained challenging. The Landstar team of independent business owners and employees continued to perform admirably given this backdrop," said Landstar President and Chief Executive Officer Frank Lonegro. "I was encouraged that Landstar achieved a 3.2% sequential increase in truck revenue per load compared to the 2024 second quarter, outperforming typical seasonality. This result was driven by a strong month-over-month truck revenue per load increase in July, but tapered off as we moved through August and September, in part due to tougher prior month comparisons. Regardless of the freight environment, the thousands of Landstar BCOs, agents and employees in our network continue to strive each day to improve our safety performance and deliver great service to our customers."

Landstar continues to return capital to stockholders through the Company's stock purchase program and dividends. During the 2024 third quarter, Landstar purchased approximately 121,000 shares of its common stock at an aggregate cost of $22.4 million. The Company is currently authorized to purchase up to an additional 2,563,081 shares of the Company's common stock under its longstanding share purchase program. Landstar also announced today that its Board of Directors declared a quarterly dividend of $0.36 per share payable on December 10, 2024, to stockholders of record as of the close of business on November 19, 2024.

LANDSTAR SYSTEM/2

3Q 2024 3Q 2023

Revenue

$ 1,213,867 $ 1,289,345

Gross profit

$ 112,693 $ 128,079

Variable contribution

$ 171,359 $ 187,358

Operating income

$ 63,116 $ 80,348

Basic and diluted earnings per share

$ 1.41 $ 1.71
(1)

Dollars above in thousands, except per share amounts

(2)

Please refer to the Consolidated Statements of Income and Reconciliation of Gross Profit to Variable Contribution included below

Total revenue was $1,214 million in the 2024 third quarter, compared to $1,289 million in the 2023 third quarter. Truck transportation revenue hauled by independent business capacity owners ("BCOs") and truck brokerage carriers in the 2024 third quarter was $1,091 million, or 90% of revenue, compared to $1,174 million, or 91% of revenue, in the 2023 third quarter. Truckload transportation revenue hauled via van equipment in the 2024 third quarter was $604 million, compared to $666 million in the 2023 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2024 third quarter was $370 million, compared to $378 million in the 2023 third quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2024 third quarter was $93 million, compared to $102 million in the 2023 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $97 million, or 8% of revenue, in the 2024 third quarter, compared to $89 million, or 7% of revenue, in the 2023 third quarter.

The number of loads hauled via truck declined 7.7% in the 2024 third quarter as compared to the 2023 third quarter, slightly ahead of the mid-point of the Company's guidance included in its 2024 second quarter earnings release slide presentation, dated July 30, 2024. Truck revenue per load increased 0.7% in the 2024 third quarter as compared to the 2023 third quarter, within the lower half of the range of the Company's previously provided guidance.

Gross profit in the 2024 third quarter was $113 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2024 third quarter was $171 million. Gross profit in the 2023 third quarter was $128 million and variable contribution in the 2023 third quarter was $187 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2024 and 2023 third quarters and year-to-date periods are provided in the Company's accompanying financial disclosures.

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The Company's balance sheet continues to be very strong, with cash and short-term investments of approximately $531 million as of September 28, 2024. Trailing twelve-month return on average shareholders' equity was 21%, and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 19%.

Landstar will provide a live webcast of its quarterly earnings conference call this evening at 4:30 p.m. ET. To access the webcast, visit www.investor.landstar.com; click on "Webcasts," then click on "Landstar's Third Quarter 2024 Earnings Release Conference Call." A slide presentation to accompany the webcast presentation is also available on Landstar's investor relations website at https://investor.landstar.com/.

Contact:

Jim Todd

Chief Financial Officer

904-398-9400

About Landstar:

Landstar System, Inc., is a technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. Landstar transportation services companies are certified to ISO 9001:2015 quality management system standards and RC14001:2015 environmental, health, safety and security management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market® under the symbol LSTR.

LANDSTAR SYSTEM/4

Non-GAAP Financial Measures:

In this earnings release and accompanying financial disclosures, the Company provides the following information that may be deemed a non-GAAP financial measure: variable contribution and variable contribution margin. The Company believes variable contribution and variable contribution margin are useful measures of the variable costs that we incur at a shipment-by-shipment level attributable to our transportation network of third-party capacity providers and independent agents in order to provide services to our customers. The Company also believes that it is appropriate to present each of the financial measures that may be deemed a non-GAAP financial measure, as referred to above, for the following reasons: (1) disclosure of these matters will allow investors to better understand the underlying trends in the Company's financial condition and results of operations; (2) this information will facilitate comparisons by investors of the Company's results as compared to the results of peer companies; and (3) management considers this financial information in its decision making.

Forward Looking Statements Disclaimer:

The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this press release that are not based on historical facts are "forward-looking statements." This press release contains forward-looking statements, such as statements which relate to Landstar's business objectives, plans, strategies and expectations. Terms such as "anticipates," "believes," "estimates," "intention," "expects," "plans," "predicts," "may," "should," "could," "will," the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company's largest such agent by revenue in the 2023 fiscal year; decreased demand for transportation services; U.S. trade relationships; substantial industry competition; disruptions or failures in the Company's computer systems; cyber and other information security incidents; dependence on key vendors; potential changes in taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; regulations requiring the purchase and use of zero-emission vehicles; intellectual property; and other operational, financial or legal risks or

LANDSTAR SYSTEM/5

uncertainties detailed in Landstar's Form 10-K for the 2023 fiscal year, described in Item 1A Risk Factors, and in 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 statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

LANDSTAR SYSTEM/6

Landstar System, Inc. and Subsidiary

Consolidated Statements of Income

(Dollars in thousands, except per share amounts)

(Unaudited)

Thirty-Nine Weeks Ended Thirteen Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023

Revenue

$ 3,609,915 $ 4,098,877 $ 1,213,867 $ 1,289,345

Investment income

10,988 6,874 3,922 3,022

Costs and expenses:

Purchased transportation

2,799,384 3,141,234 943,805 986,743

Commissions to agents

295,801 363,397 98,703 115,244

Other operating costs, net of gains on asset sales/dispositions

44,138 40,998 15,144 15,158

Insurance and claims

83,830 86,971 30,398 29,540

Selling, general and administrative

162,613 159,071 51,252 50,975

Depreciation and amortization

44,001 44,498 15,371 14,359

Total costs and expenses

3,429,767 3,836,169 1,154,673 1,212,019

Operating income

191,136 269,582 63,116 80,348

Interest and debt (income) expense

(4,455 ) (2,079 ) (1,169 ) (1,046 )

Income before income taxes

195,591 271,661 64,285 81,394

Income taxes

45,838 65,254 14,252 19,741

Net income

$ 149,753 $ 206,407 $ 50,033 $ 61,653

Basic and diluted earnings per share

$ 4.21 $ 5.74 $ 1.41 $ 1.71

Average basic and diluted shares outstanding

35,608,000 35,958,000 35,420,000 35,951,000

Dividends per common share

$ 1.02 $ 0.93 $ 0.36 $ 0.33

LANDSTAR SYSTEM/7

Landstar System, Inc. and Subsidiary

Consolidated Balance Sheets

(Dollars in thousands, except per share amounts)

(Unaudited)

September 28, December 30,
2024 2023

ASSETS

Current assets:

Cash and cash equivalents

$ 468,830 $ 481,043

Short-term investments

62,451 59,661

Trade accounts receivable, less allowance of $12,134 and $11,738

694,633 743,762

Other receivables, including advances to independent contractors, less allowance of $16,759 and $14,010

51,533 43,339

Other current assets

33,947 24,936

Total current assets

1,311,394 1,352,741

Operating property, less accumulated depreciation and amortization of $456,770 and $436,682

289,248 284,300

Goodwill

41,122 42,275

Other assets

115,491 122,530

Total assets

$ 1,757,255 $ 1,801,846

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Cash overdraft

$ 50,746 $ 61,541

Accounts payable

397,908 395,980

Current maturities of long-term debt

27,672 27,876

Insurance claims

43,370 41,825

Dividends payable

-  71,433

Contractor escrow

30,244 28,498

Other current liabilities

42,712 48,071

Total current liabilities

592,652 675,224

Long-term debt, excluding current maturities

44,834 43,264

Insurance claims

59,861 58,922

Deferred income taxes and other non-current liabilities

43,990 40,513

Shareholders' equity:

Common stock, $0.01 par value, authorized 160,000,000 shares, issued 68,559,269 and 68,497,324

686 685

Additional paid-in capital

255,398 254,642

Retained earnings

2,897,073 2,783,645

Cost of 33,228,096 and 32,780,651 shares of common stock in treasury

(2,128,684 ) (2,048,184 )

Accumulated other comprehensive loss

(8,555 ) (6,865 )

Total shareholders' equity

1,015,918 983,923

Total liabilities and shareholders' equity

$ 1,757,255 $ 1,801,846

LANDSTAR SYSTEM/8

Landstar System, Inc. and Subsidiary

Supplemental Information

(Unaudited)

Thirty-Nine Weeks Ended Thirteen Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023
Revenue generated through (in thousands):

Truck transportation

Truckload:

Van equipment

$ 1,851,237 $ 2,123,693 $ 603,993 $ 665,569

Unsided/platform equipment

1,093,753 1,150,483 369,758 378,147

Less-than-truckload

77,902 90,770 24,195 28,097

Other truck transportation (1)

242,853 379,471 93,178 101,951

Total truck transportation

3,265,745 3,744,417 1,091,124 1,173,764

Rail intermodal

65,981 73,953 20,979 23,064

Ocean and air cargo carriers

201,729 202,358 76,349 65,824

Other (2)

76,460 78,149 25,415 26,693
$ 3,609,915 $ 4,098,877 $ 1,213,867 $ 1,289,345

Revenue on loads hauled via BCO Independent Contractors (3) included in total truck transportation

$ 1,374,915 $ 1,543,634 $ 456,844 $ 508,753
Number of loads:

Truck transportation

Truckload:

Van equipment

887,895 966,867 287,922 311,831

Unsided/platform equipment

362,627 389,471 118,220 126,286

Less-than-truckload

119,346 134,580 36,496 41,514

Other truck transportation (1)

114,552 157,112 43,112 46,739

Total truck transportation

1,484,420 1,648,030 485,750 526,370

Rail intermodal

21,420 22,150 7,040 6,760

Ocean and air cargo carriers

26,120 25,380 8,880 8,630
1,531,960 1,695,560 501,670 541,760

Loads hauled via BCO Independent Contractors (3) included in total truck transportation

620,640 689,260 198,340 225,350
Revenue per load:

Truck transportation

Truckload:

Van equipment

$ 2,085 $ 2,196 $ 2,098 $ 2,134

Unsided/platform equipment

3,016 2,954 3,128 2,994

Less-than-truckload

653 674 663 677

Other truck transportation (1)

2,120 2,415 2,161 2,181

Total truck transportation

2,200 2,272 2,246 2,230

Rail intermodal

3,080 3,339 2,980 3,412

Ocean and air cargo carriers

7,723 7,973 8,598 7,627

Revenue per load on loads hauled via BCO Independent Contractors (3)

$ 2,215 $ 2,240 $ 2,303 $ 2,258
Revenue by capacity type (as a % of total revenue):

Truck capacity providers:

BCO Independent Contractors (3)

38 % 38 % 38 % 39 %

Truck Brokerage Carriers

52 % 54 % 52 % 52 %

Rail intermodal

2 % 2 % 2 % 2 %

Ocean and air cargo carriers

6 % 5 % 6 % 5 %

Other

2 % 2 % 2 % 2 %
September 28, September 30,
2024 2023
Truck Capacity Providers

BCO Independent Contractors (3)

8,266 9,455

Truck Brokerage Carriers:

Approved and active (4)

44,828 51,717

Other approved

25,714 27,925
70,542 79,642

Total available truck capacity providers

78,808 89,097

Trucks provided by BCO Independent Contractors (3)

9,027 10,253
(1)

Includes power-only, expedited, straight truck, cargo van, and miscellaneous other truck transportation revenue generated by the transportation logistics segment. Power-only refers to shipments where the Company furnishes a power unit and an operator but not trailing equipment, which is typically provided by the shipper or consignee.

(2)

Includes primarily reinsurance premium revenue generated by the insurance segment and intra-Mexico transportation services revenue generated by Landstar Metro.

(3)

BCO Independent Contractors are independent contractors who provide truck capacity to the Company under exclusive lease arrangements.

(4)

Active refers to Truck Brokerage Carriers who moved at least one load in the 180 days immediately preceding the fiscal quarter end.

LANDSTAR SYSTEM/9

Landstar System, Inc. and Subsidiary

Reconciliation of Gross Profit to Variable Contribution

(Dollars in thousands)

(Unaudited)

Thirty-Nine Weeks Ended Thirteen Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023

Revenue

$ 3,609,915 $ 4,098,877 $ 1,213,867 $ 1,289,345

Costs of revenue:

Purchased transportation

2,799,384 3,141,234 943,805 986,743

Commissions to agents

295,801 363,397 98,703 115,244

Variable costs of revenue

3,095,185 3,504,631 1,042,508 1,101,987

Trailing equipment depreciation

20,764 24,240 6,930 7,721

Information technology costs (1)

18,115 19,791 6,129 6,298

Insurance-related costs (2)

85,122 88,484 30,463 30,102

Other operating costs

44,138 40,998 15,144 15,158

Other costs of revenue

168,139 173,513 58,666 59,279

Total costs of revenue

3,263,324 3,678,144 1,101,174 1,161,266

Gross profit

$ 346,591 $ 420,733 $ 112,693 $ 128,079

Gross profit margin

9.6 % 10.3 % 9.3 % 9.9 %

Plus: other costs of revenue

168,139 173,513 58,666 59,279

Variable contribution

$ 514,730 $ 594,246 $ 171,359 $ 187,358

Variable contribution margin

14.3 % 14.5 % 14.1 % 14.5 %
(1)

Includes costs of revenue incurred related to internally developed software including ASC 350-40 amortization, implementation costs, hosting costs and other support costs utilized to support the Company's independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company's Consolidated Statements of Income.

(2)

Primarily includes (i) insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight; (ii) the related cost of claims incurred under those programs; and (iii) brokerage commissions and other fees incurred relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by the Company, which are included in selling, general and administrative in the Company's Consolidated Statements of Income.