LSTR - Earnings call transcript Q1 2019

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Operator

Good morning, and welcome to Landstar System Incorporation's First Quarter 2019 Earnings Release Conference Call. All lines will be in a listen-only mode until the formal question-and-answer session. Today's call is being recorded.

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

Joining us today from Landstar are; Jim Gattoni, President and CEO; Kevin Stout, Vice President and CFO; Pat O'Malley, Vice President and Chief Commercial and Marketing Officer; Joe Beacom, Vice President and Chief Safety and Operations Officer.

to call like to would I turn over the Mr. Now, Gattoni. Jim may Sir, you begin.

Jim Gattoni

Good to and quarter you, morning, Thank Prema. welcome call. earnings Landstar's conference first XXXX

Before Statements statement based are under statement. Private Securities are the the me not Act on is this the we forward-looking of conference Reform statement that XXXX. following Harbor facts following during statements. -- following Safe a Litigation begin, let made historical The read call

information nature forward-looking Risk from relates including may obligation differ had to quarter actual expectations. no results Form including place and forward-looking make gross uncertainties environment undertakes of Landstar and for XXXX. set in first historical should financial financial and was from exceptional the statements cause business successful freight fiscal or operating the softened the detailed Landstar time. any uncertainties first information a to legal During plans, quarter to and forward-looking on SEC and not we per XXXX anticipated. undue revise information. reliance operational could to limited Investors events overall the publicly as income, net XX-K this such as materially numerous income share. even conference update objectives, contain to Landstar's call, risks profit, we Such that or filings records earnings achieved performance This freight from and those These Factors environment information subject other results the risks, that risks time year Landstar's strategies and section not is but by or XXXX described in to

company's comparison first Nevertheless, load first be in XXXX we revenue, with the a financial XXXX XXXX revenue revenue guidance communicated the in were growth slightly in difficult attributable quarter along the nine the with January more call fourth This growth generally quarter quarter. deceleration to XXXX to XXXX's capacity be year-over-year with revenue XXXX results months strong provided loadings. on than to appeared in line below that our as conference performance truck truck expectations XXXX during very in available quarter the first fourth first decelerating first relates in held earnings resulted it Short and XX. were rates rates our of during quarter XXXX. ended As in per readily quarter to

compared As first XXXX as on truck capacity to readily anticipated, quarter downward continued spot quarter to be XXXX first more putting pressure the available rates.

of We comparisons trucks the increase quarter. challenging in driven of was a number XXXX Landstar XXXX quarters, XX% volumes growth as growth quarter quarter the to the softening first pleased XXXX annual quarter considering market decades from volume the During rate the put quarter, compared slowed growth and average the of XXXX loadings via to cumulative first during for XXXX increased difficult operating best volume truck XXXX To truckload first over quarter year-over-year by partly hauled of in recent growth quarter, XXXX the made in first in loads XXXX That first first loadings quarters. experienced the XXXX. environment the significant XXXX X%. our growth to comparisons. see in truck to I first and perspective, the first

while readily under on gross more increased contracted profit gross pressure revenue the margin on the During gross to shift available at the capacity to led profit gross profit truck reduced fixed downward services margin gross XXXX arrangements. variable first profit a quarter, rates margins are company's improved on and that

profit quarter revenue. each gross compared first the XXXX During the to to first Overall, contributed increased The XX% margin rate under quarter, of to gross gross XXXX margin a to XX.X% quarter. brokerage due arrangements, variable variable due in profit a and profit margin gross XX paid point on increase truck arrangements first transportation mostly lower mostly profit revenue was fixed XX.X% XXXX purchased under services basis carriers. the to to increase provided margin

Revenue XXXX profit call, slightly to $X.XXX first earnings billion while guidance. quarter be was prior year-end in below increased gross XXXX on the provided first XXXX range profit we quarter quarter first billion. of margin guidance $X.XXX XXXX within X% a revenue the conference explained in first was XXXX previously. gross quarter to was than first XXXX billion range our of During revenue an the quarter, the as $X.XXX higher

in quarter $X.XX. Our called of per to the earnings for share diluted first guidance $X.XX also was per be Actual range to $X.XX. share earnings diluted

guidance, included and effective was expected, in below the to rate, As driving quarter. rate share per tax $X.XX the in approximately annual first quarter income our earnings effective XXXX first our

the to Additionally, BCO insurance first and to performance the and cost incentive earnings X.X% and The compensation in costs of BCO The quarter costs to insurance of X.X% while financial of revenue. the with were variance guidance. designed annual included at nature share compared claim model. revenue of claim added company's the are with the as coincide vary XXXX diluted $X.XX nature quarter guidance programs per variable and in favorable equity

As expected, first below and incentive XXXX was first the XXXX provided compensation quarter. amount in equity quarter far the

earnings the minute. will that of records established the quarter more during Overall, above to this in expect quarter. established market remainder XX% first share speak -- record a current trend XXXX persist also a conditions Assuming first we continue. Kevin other XXXX, first We $X.XX, per quarter. quarter diluted XXXX was through we the to

in we than quarter first any quarter of As mentioned and other BCO at quarter income company. the and the profit, above, operating trucks were end history gross the with more income net ended also records

of the load in Revenue month corresponding X%, X% month of below and loads quarter, XXXX. and hauled in revenue per via the hauled of month. growth on via first February per truck XXXX number loads X% the load over rate both March During year January, slowed prior and each truck were

February in months growth the through XXXX compared XXXX XXXX. of freight loads remain the will increased the month environment in as began number XXXX, X% each outstanding and of first softening given and the of corresponding that and of X%, first X% the During quarter, to nine difficult via least late comparisons performance in at March hauled XXXX. Year-over-year January, truck

truck and first of few the to volumes continued the March weeks rates April, follow During trends.

We expect the more and through March early trends recent XXXX continue experienced quarter. to April second in the

below we expect I and to in XXXX hauled million. truck be percentage quarter As upper those of be per via billion the XXXX XXXX expectations, the similar anticipate range the second number an second of to such, single-digit second to range $X.XXX truck load in on in revenue quarter XXXX $X.XXX in the second to quarter. be revenue Based the to quarter loads

by gross robust company's be estimated especially first range be knew months what in any diluted range of Add profit in less to income in and at the that history. to and freight during looser the earnings ever first $X.XX. We nine the share the to that softening per environment quarter anticipate that, I operating financial Landstar marketplace capacity time Assuming to U.S. of to the appears year. year-over-year manufacturing. difficult comparisons XXXX XXXX were in $X.XX truck highest of by the revenue, a be quarter achieved was going driven

time first points The share XXX cost quarter first the during with cash margin free over basis history well above We per in cash XXXX, model $XXX the of seen exceptionally XXXX climbed flow. with -- performs investments operating the XX%, quarter $XXX during quarter model first operating XX%. quarter quarter well variable first quarter $XXX first company's to XXXX freight short-term the quarter performed the margin approximately higher in ended and earnings first million. the million the XXXX million highly margin, As was than record first environments. in and business most

volume We those increasing load focus our to available continue growth capacity to on profitable loads. and haul

and to remain and focused the We enhanced independent support year. all also provide our in being of sales priority business XXXX on owners network. operations to look We another successful forward Landstar technology to our industry-leading

Here the additional on provide quarter XXXX commentary is financials. first to Kevin

Kevin Stout

quarter. has information our Jim Jim. first certain Thanks XXXX covered on

were claims first of XXXX driven in unfavorable XXXX. versus in trailers. Insurance to XXXX. amortization reduced decrease revenue first quarter. prior the basis XX% quarter paid hauled the in in SG&A in in in was prior operating agents the to million were information number revenue in and was $XX increase quarter of was truck gross attributable were million decreased gross increase the costs purchased costs, XXXX in year by general rate rate as the the the XXXX million in XXXX revenue was claims and increase XX.X% million SG&A $XX.X less $XX.X mostly incentive The the administrative in respectively. quarter truck in revenue This primarily in of brokerage wages XXXX. quarter included $X.X points or Selling, by the an $X.X million increased quarter increased the partially the by on to compared decrease The to release. XXXX. The in quarter in $X.X insurance were claims $XXX.X or decrease XXXX the both in XX.X% transportation million in So bad XXXX to was first $X expense claims million costs income profit quarter the revenue a costs to I offset revenue quarter in of various effective the to for less in to increase provision quarter Gross primarily, press of in net in $XX.X XX.X% company-owned first X.X% XXXX XX.X% of compared compensation XX or transportation the operating the SG&A million increased of million commissions was cost quarters X.X% $XX.X Stock decreased expense in for partially and in profit The XXXX. Operating company's to first XXXX decreased quarter points and was first to and The under versus the compared XXXX income million Quarterly XXXX and quarter. tax offset the in XX.X% million of of were was was XXXX costs. a rate in This development of trailing The represented quarter revenue and other XXXX. XXXX XXXX. to million to compared as compared incentive XX% the the and bonuses to expense, in carriers. million in XXXX equity as in defined XXXX, was percentage in of the to $XX.X severity. insurance and XX.X% of a profit profit Total margin Commissions and Depreciation due and debt. vesting XXXX and to agents will compared first XXXX XX.X% was XXXX. the in margin $X.X XXXX cover excess the loads first due $X.X Operating cost compared bad decreased XX.X% and lower in costs purchased percent due basis than related XXXX compared paid income $XX.X the equipment to revenue net The BCO period, million transportation $XX was to year-over-year. to by X% cost The to increased benefits million quarter and quarter in XXXX. to Other compared plans as the income was impacted purchased $XXX.X financial first of effective higher by tax stock XXXX. million gross tax rate employees. decrease provision XXXX compensation carriers compensation from periods attributable brokerage a XXX for claims first decreased costs customer in contractor awards expense compensation first first in of was year compared insurance to debt.

purchase quarter capital for ended $X the we shares cash with to short-term expenditures cash investments flow the for you, and sheet, $XXX Back Jim. first million. the under were operations balance stock There and purchase available million was are $XXX XXXX our at of Cash million. quarter currently company's programs. from X,XXX,XXX Looking

Jim Gattoni

Kevin. Prema Thanks, we'll With questions. to that open

Operator

from begin session. comes sir. Stephens. the we Instructions] Thank first time, [Operator will At of question much, you very Our question-and-answer Jack Atkins this

is line now Your open.

Jack Atkins

operating tough guys. good Congratulations a environment. morning. a Hey, Good in on quarter

Jim Gattoni

Yeah. Thanks, Jack.

Kevin Stout

Good morning, Jack.

Jack Atkins

volume to spot Jim as guess start are a to question, Landstar I rest with a certainly generally when a a were And me for that's you ask outperforming you when people So, at certain volumes guys the guys you were I the spot bigger guess, X.X% the up of volumes but market both in picture down and let I truck and loads think spot about correct market first and year-over-year quarter, your a look when player think perspective. guess they I market from market. but about rate tend degree, the

help saw down through we're So market Landstar XXXX/XXXX Just it this of can really helpful driving kind be would kind outperformance? we drive allowing us it what's again? think and of you these think because cycle I share what's seeing gains the to it in walk through sort of to

Jim Gattoni

specialized and you would has it started of where mix business, going think fallout routing remember through of freight. -- to do offer overflow do. slowing XX ago guide some be the to there'd be that down Jack, business back years I everybody would traffic we and us and people routing if the with be guide an that referred things no as the all things we

was overflow necessarily So But that's that of not how there stuff. model today none right. works the

We have that businesses which is of XX% our of XX% heavy flatbed haul. of

fall spot dynamic. that trailers, rate So under of our handling businesses. is a about doesn't XX% drop-and-hook trailers that we van the special really When

be We needs equipment out sitting to have there that and loaded moved.

is bit a more this that there. sticky -- So is little

So there's our within business. other dynamics

mix our that within relates So to business. it of spot the business

we There many agreements on or different tend in of all move. spot? aren't a our is. Now to locked they do yes. like committed location daily. in we to trailing attracting services have spot equipment are hold Are Are do we specialized spot variations up an the the because kind flatbed on shipper or this, provide into have business We an necessarily we some market? that negotiate environment what and we so expedite it's rates pay side, but capacity But Yeah. paid the

makes than that's a true little think what us spot market different I the world.

Jack Atkins

And on I about just that can through of particular kind you and verticals. areas of Okay. seeing your up following end talk guess weakness? maybe That's walk kind moment, different great. you're a of then, strength of And some market for what

Jim Gattoni

with that Well, you you makes comes a the top out our foodstuff sectors, about -- that XX that I we the out shows foodstuff that. sector, one But And jumps when look chart if is customers XX% up think really release. the sector. put the the at of

freight that. they I have weakness in XX% we believe it. bit we don't And specialize little some freight, core that's -- to and that you look But when was in as agents do so of at tend do guide there's carriers that one where that that the as of seem hauling -- their a when of talked more And we primarily one there lot that be routing I customer it they off it one where a overflow more to softness’s where were about area. was

which specific to a identify was. during that what a customer specific heavy is or those strength our area well bit probably Automotive, the where haul soft. exactly quarter the little other bit and did On weaknesses, hard

there the is see and that board production where and stuff where like areas in see but Texas little down. regions coming of down there's like you doing the coming geographic Other that down counts maybe a area softness As well. the coming maybe bit across that we are out relatively strength of than been lines certain

Jack Atkins

and it margin But quarters guys That's One row and quarter question would above been XX%, Okay. the second your turn goal have to goals years? you you see had great. about over. the you guide over operating quarter last a margin where I'll net where in two have now the point out third And line you row. three that it look How in to as do we thinking next a internally? two are guys a call want to

Jim Gattoni

the -- we -- annual it's our of out know You never an goal of coming XX%. we're hit

XX.X% number. of end XXXX are We at I the believe was the

we that more it will hit you margin. to we But gets a this difficult goal. year, expand and more Jack new know goal as So, as establish that

hit progresses. was a we've And first the hasn't in any first through was XX% quarter don't direction a XX% good get we'll -- -- it's is target think something. I out probably going as quarter been year that the to we'll there or work But been new end XX% as think in everything right year last year. I through and towards the year above it the I think and put to target the somewhere maybe we progress which of this

Jack Atkins

Okay you. that’s great. Thank

Jim Gattoni

One thing invest our so we're limit on. technology the the and you on to Jack too to don't working focus ability target is in much want

of one during XX that's the the things down bit it XX, pulling little years. So were a that

Jack Atkins

understood. for the Understood, time. Thank you

Operator

you. Thank

Our comes Susquehanna. from next question Bascome of Majors

now is line Your open.

Bascome Majors

my the today. how for Hey thanks Based set is question the the taking second annual shared XQ? quarter for the you you for Can projections you business here. share, in yourselves on versus tracking planning

Jim Gattoni

tracking it's say way I relatively March anticipated did. the we it don't would the I drop-off think close.

we As I in was not digits to X% first projected single say. to projected I we down be think in down the rates year would said, Compared prior That I -- X% the anticipated. low March or X%. was to quarter

April. bit probably And above the based coming our thought say where anticipated, they a we rates volumes are we out I'd So were little lower annual where that than continued on into would.

a So thought annually. I'd what heads about softer. thinking annual we're little I'd softer probably out coming we bit from was, were an annual number it's we're our projection a we where say our little In say

Bascome Majors

just to wanted that the incentive clearly for tailwind. is annual where lever Great, of a are. big margin to the kind like It is line? still sense I on an get on I appreciate a that. And accruing pretty translating basis? mean, that Are comp you I you the sounds

Kevin Stout

we hit target, million to going we really in quarter. exactly up million If thought $X put We be at right the $X QX. were would we Bascome. Yes, on in

we how another So obviously difference, either QX, we'll of $XXX have the we'll rest million up see year QX progresses. If QX. that put into or the make we

So...

Bascome Majors

to clear things Is flex trying there that at lower, just if is any pretty plan? point? the deteriorate I'm below if think this

Kevin Stout

Well. take a directly that's of We're have earning. a comp It not more company sales It's tied little to can that. bit the going could incentive down flex incentive. of zero. to type We to

zero, small go region, yes. have amount overall comp regardless, but a we'll by to in So the there could

Bascome Majors

a share the bought Thank you. Is and you the around price-driven mean, on you lastly, in XQ. be I back year? there as just else thoughts do that? XQ And it Can market, you versus in deeper fewer lot into the will we get shares think anything it going

Jim Gattoni

we In most Yes. more quarter, first have -- than has shut quarters. quarter other opportunity the generally the first most closed

So was there stock quarter. the volatility during the the in days and of number little a

through opportunistic this in we the see we while jumped be unchanged and we we'd So yes share That a shareholders back And to is changed. locked got hovering if on price range for be to here they buybacks. stays if our it But philosophy then in. providing out. hasn't in

Bascome Majors

results. on congrats and Thanks the

Jim Gattoni

Yes.

Operator

Thank you.

next Seidl. Our Jason comes question from

Company. By and now way you. is open. line Thank the Your Cowen

Jason Seidl

strength little outlook? Hi, Couple commentary Yes. quick on some a of side overall flatbed of a Could division? guys. Do of little flatbed Hope on you all sort wanted talk in is mentioned the flat. your bit truckloads I about well. things. to expect more be your touch You things. you of the to

Patrick O'Malley

Pat. Yes. is this Jason,

in think side the that van significantly I think they about are to barriers are market capacity greater the on writ you the than entry side. if large,

the see side. going lot I platform coming market, not the the is you think into of on a it's So capacity

So one thing. I think that's

peers to an that to few platform relates don't Secondly, execution execute business. in I our is standpoint, think that ability have we as there it from --

it optimistic to very remain of at Landstar. we business segment as that So relates

Jason Seidl

load weaker about bit So the to, side? be van and that it in a would platform the we think division growth in you the as added overall little stronger

Patrick O'Malley

Yes.

are the side. I different coming side to platform the than on significantly van the think on the marketplace relative in capacity challenges

Jason Seidl

the assume for we Should per load? same revenue

Patrick O'Malley

has load on side. revenue side you platform If on van been look flatbed than per higher the the historically, side,

think about different the than thinking number marketplace, on think about pressures again just the the the van that be the competitors thinking will I the impact side platform side. I of

into raise from I flatbed think is going the pricing floor on the side than think side van have some to the factors but industry platform a are the to bottom do side. side, the going is the on come that of in play van for cost subject a what or be the price I everybody greater to volatility

Jason Seidl

you Okay. pretty guys you and That's expect environment going fair a enough. forward? good are current Can at talk what job And a you follow-up about question BCOs, doing this truck. a the

Joe Beacom

that the of is know looking looking There you we're is a of this this Jason, occur. to that there's at April. -- Joe. second similar to of we churn is and pricing looking something that pipeline grew you XX the here on of change, demand/supply It's a trucks strong the quarter, there's little in in change and going kind Yes. the so continuously, bit anytime candidates as tends at but BCO it do quarter get we're end way dynamic

growth our little years, probably was last be than to bit slower QX. will the in nonetheless of in in XX it range but XX a that couple growth So

Jason Seidl

appreciate the you. time Okay. as gentlemen. always Thank I

Joe Beacom

Yes.

Operator

Thank you.

Amit Bank. next comes Deutsche from question Our of Mehrotra

open. Your is line now

Amit Mehrotra

or recently, earnings thought, little Jim, Obviously, guess the I’m have setup pricing would've about you come weaker How bit, the pricing Hi, in and company's on pricing incrementally March your I expectations $X.XX. being comment as my those past they environment for are you you the question. as could to that relative in if think Thanks strong expectations? terms a wondering comment company more do to environment. of down expectations. on operator. those you've in not you meeting in the everybody. expectations mentioned, taking confidence Thanks, for willing been environment

Jim Gattoni

the but be that estimate where we We're is with comfortable within think don't the -- Street I down I wouldn't think is pricing -- $X.XX. it's $X.XX. I down, think

Amit Mehrotra

Okay. Great.

Jim Gattoni

we're Yeah, comfortable.

Amit Mehrotra

the Landstar cost All hallmarks right. Thanks. model, guess one And variable I the to, then, structure. is respect the with of

Jack's do in times, or margins the all year as this operating decremental is issues as not with for upside in kind to of the might there environment. comp leverage noise obviously the But on not weak stock incentive-related but is expenses. good many respect you There if just the that, You capture normalize some not much with decelerating going how I perspective? environment change think accelerate, is rate revenue of of of on to back that if us from the we model terms but you positioned guess kind question, can educate revenue is the margin? EBIT this margin an about maybe how EBIT down, should of the kind in Should just

Jim Gattoni

talking and our about there's downward think on impacts you're about talk us? we So a if we trend, ICP what how about million I it $X is targets, payout. hit an

Our actually target. a can half it where there if that which we works slightly lower level we below hit hit, -- of we plan is is pay if

Amit Mehrotra

that. overall asking here. asking looking consolidated apologize. profitability I'm sorry. at that's I'm not I revenue what just really model in really the and about a of I'm I'm the gross about down environment,

Kevin Stout

question? the is What

Jim Gattoni

stop? revenue gross the Whether

Kevin Stout

That's what understood. I

Amit Mehrotra

Maybe... I'm sorry.

Jim Gattoni

We're question. not your following

Amit Mehrotra

if and revenue, are margins and cost gross given pricing should structure? of the If margins the apologize. trend how I EBIT gross volume negative, variability

Kevin Stout

do depends how pricing obviously, down the have share that the that will to we tailwinds goes degree on buybacks. It cost but far a and offset

Amit Mehrotra

that call arena. me, in that you quarter quarter in that or business, in-sourcing. Okay. or developments something just from then any the the And lastly operate of on been like that? there from e-commerce wondering out the off-line. any headwinds if some Wondering customers to were re-sourcing if you want I'll it from on There's felt take lower

Patrick O'Malley

Pat. is this Amit,

the an what of I -- a at quarter referring and all. is know felt was did think in so lot that you're we first to, and the impact account not business with that I not

Amit Mehrotra

Excellent.

appreciate I guys. Thanks, Okay. it.

Jim Gattoni

XXXX. mean your feels there, on a this Amit question And little I like to

what margins be XXXX we it's of see through feeling of number and that kind the we're there. pushed but can will bit. You revenue XXXX, Clearly, that a to XXXX how than little kind operated, larger

Amit Mehrotra

of Yeah. perspective. great talking I what a a I upside Like you margin guess things model that's from lot the of that, about your might the not was capture is one about.

pretty are stable, what but downside, margins stable also and quite at. get Your trying they're that's the I on to was really

Jim Gattoni

gross decline Yeah. go $XX could profit have programs, we Like million variable the favorable and the because income have we still up, compensation operating can insurance. with cost of

So a reality at XXXX And see income little a to down saw you I grow up. number shrink of from how like to XXXX environment, profit the operating and model. a good gross say, XXXX the was that That's because back right. could to held in said, we look

Amit Mehrotra

buy you'll as appreciated. just And well? more stock That’s

Jim Gattoni

Yeah.

Operator

Thank you.

Our next question comes Capital of from Todd KeyBanc Markets. Fowler

Your is now open. line

Todd Fowler

Hey, Jim or guidance, expectations morning, some profit gross Kevin, can help everyone. if thanks. the Good a second for margin maybe within quarter Hey, with you just percentage.

the or the with with in right just XX.X% Kevin, quarter? and SG&A that think compensation, I it as SG&A year incentive around the the rest the is was quarter think in is about it to of second for first the

Kevin Stout

the annual XXXX. $X similar that decrease in year. with at which also other in $X lower of booked bps our Yeah. million is then right in runs in buy only comp, QX. it will QX. We're was million for got SG&A incentive million $X.X This in XXX And last is that similar modeled going range. which the compares That's our in QX we rate, Kevin. was in the item XX.X%, QX. looking the be numbers have we're I've Yeah, but to If -- the similar. gross cost convention, profit million probably That on margin XX.X% in we Yes, range brokerage another to QX $X.X QX, annually

that does SG&A? question the on answer your So

Todd Fowler

of both for those. helpful very that's Yes,

Kevin Stout

Okay.

Todd Fowler

track questions. the had agents into this next going have point the expectations how is see couple years? how IT what timing at about that's mean, of the technology you're long just of you your other the couple talk if we're on Jim, And were kind I go of kind that can with And a many And the rollout with at where rollout? guess I agents? then on to of the what to or

Jim Gattoni

actually Yes. There's offices we're TMS, whether agent our and within things operating to office better the a too. on, working the efficiencies lot of it'd within be build the is system really which

TMS, new we agencies So, using there's which have efficiencies gained a to today. it with about XXX be

rolling Now, new the months, we're brand-new my is the things pricing boards, out process. years months other load a Maximizer, last rolled we'll the out out, But we've tools our next credit rolling three keep to XX within estimation. over new Landstar automating XX

just one on the it's So focused thing. not

already delivered things about the we talking So a two started on number years of we've ago. significant

make TMS So And fees the is and one, the should million effective that the -- we're costs agents without is there that continue. on with through But paying some both most said, us what big doing to the as now I over like -- license things stuff back that's we're build we to more the on $X you still the million more have about of opposed P&L. the the outs. build will one where have spending $XX a spent and spent working this capacity. would we and we But rolling have incrementally little

Todd Fowler

Okay. you've just better and Very it. the is reception cost some it track, Got of off helpful. from ultimately The like sounds rolling from is then more more technology? the the I agents it at got though, mean, with productive. that all mean, roll productive then benefit point, agents I but But that agents, out become from on would

Jim Gattoni

Yes.

Todd Fowler

that marketplace? you seen or given the Thanks. -- Freight freight that different you thoughts in anything but last specifically, and any could Uber from startups, the one just some some let's you'd from then of marketplace? with just this of technology Uber the comments the go the from my you're Freight fact how seen something say, with of nature that Okay. the know head-to-head Have any impact of any of we've kind impact with about some have particular, on the moving, I not is of financials just And kind that do

Jim Gattoni

getting can't is their XXX-plus agent our if be technology every from about our Convoys have of you Do to Yes. accounts from or a carriers move technology we the differentiator. a shippers built lot of convention just Well, that And can help accept -- I from number very discussion differentiator, the came their they it's accept Very, pitching small eye and -- very, let the and what know think. those pretty I the But and an have And because in are or guys any shipper that's public, you entities. it? it, accounts to rapidly. stuff to know keep Ubers don't business a the process there not we probably very or there. us Look, those already all number Convoy small built really we seen the agents, the getting it, It's on be it. it's your getting to -- around right.

talk a a want They've load. go about still that pull They call before. still into to knowledge spot to the before more location. make to never us. want world. carriers location the live call phone We in a in they want been Our They little

So hauling the other there's than goes point that point tool. to on lot B a from freight A

the driver but have we or our a do tool, shipper the driver the between the agent. phone We it, via can communication lot stuff and call goes of and and the

Todd Fowler

was and that and of then for also some Yes, no. color just a I was the looking the agents both on helpful the market. from perspective Understood. just

So, thanks for guys. Good time. the quarter

Operator

you. Thank

of Research. question comes Scott next from Our Wolfe Group

now is open. line Your

Scott Group

Good morning thanks. guys. Hey,

Jim Gattoni

Good morning.

Kevin Stout

morning. Good

Scott Group

this get perspective. single-digit you the that's to market it's Jim thinking views going as about think So, your just to you Do decline do high about in you rate? about wanted your get? bad think comps, as think as and just on

Jim Gattoni

is -- slight on say, would I we've a actually into uptick a Yes. little a seen positive bit, slight seen a March the rates, from April sign. We've which

– a April be February, see to decrease it's we March very As saw from slight not starting when look, continuing to decline. we're little better,

see or actually September that. after start this would to bit when a August might single-digit So rates slow say, about through down high I little we

Scott Group

XXXX. you to the comparison helpful. And then That's Okay. made

down look XXXX and Now was revenue if X% earnings X%. down were at I

than better or up now doing you're X% earnings So that because X% or X%. down revenues and X%

just bunch anything is So real talked or different XXXX? a if you've time to the comp what else incentive that's this on relative there around the about difference

Jim Gattoni

wasn't it didn't Well, right. XXXX just way It's target. right. a talking the It's the hit was the a about And model that year necessarily little the percentages. very low was we our environment it's how -- that But that very million, perspective. in very how drops -- model year-over-year XXXX. of is remember range low roll $XX performed in operating the would a being I and think margin-EBIT the was which Insurance incentive I from kind out margin comp about was a performed in

Scott Group

a see just the question, fourth I are case lot to fell is starting market? quarter really point -- last leave is the much of the then the like and supply active Do environment that you actually And carriers BCO exit? maybe could the start anymore. of number think your broker we supply a from growing see bad to Okay. is really is where enough not Like there to

Joe Beacom

Joe. is this Scott

did attribute spot demand that out Our little be The year, used little drop is there. a being a a active obviously than less last the that to of there year. a function to is was just less the market a record it in just bit choices count few fact bit. versus carrier I which

really exodus. dropped a means sure it not I'm So slightly. big that

of much couple in to we that services it the that require As years. just growth the degree did means as didn't prior of their we

Scott Group

is, I I'm guess, help to ask enough the think trying that like retighten market? to do what you like is

Joe Beacom

don't No. the I that's case. think necessarily

kind the for the year. tight, hang this us more think with readily market capacity little of balance going is I of least a to available at less

Scott Group

very Thank you guys. Okay. much

Operator

you. Thank

of from comes Ben question next Our Hartford Baird.

now line open. Your is

Ben Hartford

than quarter come you'd clarify to talked -- Hi, to good more guys, you supply felt the in a ago van just regard morning spot a issue. just I demand wanted that the with side. to think a like I softness And to on made the dry Pat you back said comment capacity

months? market van be past to the three side over clear, enter the incremental of the course on particularly Just the have seen supply dry we

Pat O’Malley

supply/demand quarter. demand, was again first O'Malley would I quarter report that unscientific, was XX% would to that XX% -- gut say mix I Pat fourth and more here in the Ben. probably the say feeling that in that's believe I you, a similar I Ben of flip the the it would demand capacity.

can rolled barriers thesis we the think the I the on that but but do platform it think coming you barriers and and side incremental the entry more there, the is capacity side. van platform call in entry I to is but concerning to take is there van on So -- what than for worth that out earlier the in

Ben Hartford

I helpful. publish you hope that That good. be index would That's forward. going

Pat O’Malley

I'll do the best I can, Ben.

Ben Hartford

some discussion XXXX of and changes spot of technology you in the these talked up a net Jim the about like. about it versus business of growth in the today, the meaningfully is tools obviously, little revenue context being some opening the and less in in that

market maybe in three and over share past or could the of two sources years? two the to the an down add that then you years onto three gains pipe course So develop of next about gains have the over talk you years the as the you that look your realized as these three that agents past accelerant share can technology seemingly tools, or be the the

Jim Gattoni

an on XX% about their years coming four been or speak business is Well, it's one part market -- thing vans the where hook right. five vans. own three on three BCOs drop of one XX-XX, our the four when of now just our years over last We or guys would -- and just in into the three the ago, come recruiting with of see were that's we to the or -- the XX% company to where and into used needed

are for heavy of relates have We in we're clearly flatbed market more tend special there. gains and to was new. and instead use, the special use doing had pricing automated -- -- doing them this stuff. processes that was of had from for has a doing. We tweaking iPhones, the we're we've something laptops been building it people We technology, very late we're shift flatbed long as turned technologies be on, we're what opposed tablets. XXXXs way That's that We're agents been out. that a in you look digital the these could did a That's the time to as that side pagers and picking them now to have around project pitching. here manual. And on in us and some it. now lot going to XXXXs, we've automated not to we always so went on best where for back of the always when tool We have and But up of that. business the to fastest and more the guys a early looking the information there's the one you're do doing our first guys a to In into it do manual sharing

whether for years is the to a talking and converted being tracking -- and everybody about together. the up trip pull thing Maximizer access of one The on -- have we to you been to delivered able and tool have apps for has see that picked pricing loads, visibility. it one access have all time So all is all our we round loads where the safe. the big Everybody multiple XX thing their to it sudden wants to into the is last freight it regardless we one stuff and

where in We're is we So this where the at exactly have point time. another should that thing summer see have rolling any rollout building who sometime that's that freight That for out. out. to we any wants agent

the we're -- on is the are getting automation it way just those was things we're that of manual the working guys. freight entire some before, the these used to to from that those but be building -- digital So pitched automating we process

Ben Hartford

Okay.

the over will basis? can convert Landstar attract per next you the So come just you platform? it the a on you the you net talked as making do more agents existing onto bulk agent and/or just years, Or few model growth, think the and do agents as new of loads account bigger your growing you about from productive think revenue about think

Jim Gattoni

we agents tools them big -- more making to on. in grow each still of a It's X% the guys have then them look both, you that X,XXX like giving we and them to like better and bringing And by I'd charge network. I'd but have efficient. do new one

both. turn When them coming and take into clearly but and it technology good of our guy the into should only $X guys, spending We're But additional efficiencies focused a is good per I on guys $XXX a a million new us them into it's say year. million million both. the $XXX help existing guys them year revenue and to on million into turn they're averaging should turn existing the year. agents, draw that's $X.X for million those guy, business. billion in We that's goal $XXX so the you're existing on do take $XXX build a a million $XX company, the not guys Our agents

Ben Hartford

Sure. That’s for you the time. Thank great.

Operator

you. Thank

comes next Our of Oppenheimer. Schneeberger question from Scott

open. now line Your is

Daniel Hultberg

bit a on for CapEx see you little general Scott. for Daniel cash year? cash flow cash how this free question. is project talk the flow This and in about or taking you Thanks Could flow

Kevin Stout

million We million did of flow $XXX, QX. $XXX is cash Kevin. This free in a Yeah.

a be expect Our revenue bit that generate cash. I slows rest When works. we lot the And a the same more of model volume to year.

million, my million. be And question your So what was point $XXX $XXX there? this guess would at second

Daniel Hultberg

On the CapEx.

Kevin Stout

million probably the CapEx. Yeah, $XX would That number best CapEx. year a do be cash We there. in

Daniel Hultberg

Got it. Thank you.

what throughout cadence monthly and any into seeing volume On the per on showing and you the -- cadence flatbed on metrics the the load April? are side, how you're quarter revenue

Jim Gattoni

We can.

On the flatbed, it. if look Kevin read the you confirm I as will -- it at

on back platform he'll say the prior that's XX%, X%, X%. these come and load growth But over So on count and not are was if wrong, year right.

Kevin Stout

That's correct, Jim.

Jim Gattoni

the X%, And flat was rate down X%. up on

Daniel Hultberg

That’s Got it. helpful.

Operator

you. of Instructions] from Thank Stifel. next And question [Operator our comes Bruce Chan

Your line is now open.

Bruce Chan

the Good for morning time. Thanks gents.

side. capacity the on question quick a Just

these ARB something elsewhere. You year about and further on measures the a capacity look the the of of yourself? out drug horizon in front. conversion, ELD a And some you terms But little of we've environment any as the that and the final testing but little has adoption. tightening experimenting the and to the in you've what we've looming been with a going that few testing from you clearinghouse the certainly bit I'm experience meaningful seen the if talked you've these follicle when result a in hair regulatory on some Maybe your anticipate also wondering that's drug issues loosening of alcohol and round less into got heard got things and

Joe Beacom

that that on people happen matter the large why owner behalf encourage of that to on the on to hit ELD our I'll that for seeing we small in AOBRD truck process the way make that no strongly require truck order the they in owner or them. will is DOT which bit is could get those to a to are you're and hi, I'm Joe. of out this perform? because and just familiar upgrade huge mentioned we're the are Bruce that the won't that anticipate I be an into that a of well industry worried The it time conversion bumps you react How Yes, quarter. drug clearinghouse in The conversion I internally would capacity speed it alcohol order little kind bump a that to which the vendors in but with regard. lot as require fourth will a a with does the create of be speed not and able there vendors action say you most think vendors does tightener. not software larger making that get

a able they'll a the I for expense which the for difficult. the testing. little carriers a follicle with carriers be of go process there'll have be think think a clearinghouse a bit going and speed and on-boarding I be hair results provide unclear to -- as in may process it's participate an make little process that it's to little to is which to last as a more the we that to then the And centralized bit

not think going don't from conversion to might the clearinghouse ELD but I from do follicle impact hard the some much implemented, that over less but bump AOB capacity if would be tested But think I others from to speed not you're would be think the little a to I that, think don't not have and you to perspective, I process. you to see a from fallout there fallout We AOBRD were have I from We're -- perspective. some that measure bit, have. lose a ELD. who familiar so that hair from with capacity think,

Bruce Chan

one final Great Okay. perspective. really question. And that's just helpful

wondering seeing traditionally terms quarter, more you're also experience You safety meaningful your insurance in insurance nice of And impact that had this you some or on if any rate indicated as result churn this a but of I'm capacity or is development churn? a accident bit providers. you there rate little

Jim Gattoni

really. I I think thoroughly. not guys No mean vet door pretty the the in coming we

at not -- we is a lesser than performance we're here. don't in So somebody who already safety who somebody recruiting is

isn't seek a the It's whatever. way. they grass bring and people going industry on like protective to Landstar environment maybe see And there we're somewhere They down the else get for are see of to owner/operators think kind that of a just that come safe lot out change, of I speak. side it function us here is in a So change think BCOs the greener so want of bet. that's or the the so other the the to

of that referring So was to. kind that's I churn the

Bruce Chan

Okay, you. great. Thank

Operator

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

Jim Gattoni

and you Thank a quarter we with you our scheduled Okay. second on Have XX. earnings day. conference look July for forward currently to speaking again call good XXXX

Operator

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

Landstar System (LSTR) 26 Apr 192019 Q1 Earnings call transcript