LSTR - Earnings call transcript Q4 2019

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Operator

Good morning, and welcome to Landstar System Incorporation’s Year End 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; Rob Brasher, Vice President and Chief Commercial 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 Eunice. welcome call. earnings Landstar’s conference fourth XXXX

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

other business risks, that objectives, anticipated. we call, from These filings make that in relates may risks place Risk should Such the to revise XX-K to to Landstar’s time information is the cause results publicly and to Landstar’s not detailed strategies any those During nature, section this conference update and described Form or legal to undue risks on for information Landstar plans, contain statements materially forward-looking financial information. expectations. including and or subject Factors or Investors obligation forward-looking time. differ XXXX results and actual information the limited no events could year forward-looking in and operational, by uncertainties such undertakes not uncertainties reliance historical but to from SEC and fiscal

as sector. revenue US move Throughout conditions slowing were impacted impacted loads deeper particular, in In the per XXXX, by into by manufacturing the volume we both hauled truckload and was Landstar softening on XXXX load via truck spot market.

During believe relatively the were first of environment. healthy half XXXX, I freight a we in

continued led softness the the volumes. weaker through to quarter. US second XXXX XXXX. the Landstar’s Company’s in best and of end by the mostly less began only second in manufacturing through the January especially truckload however, in the of June fourth was year the first September conditions, XXXX second seasonal of half performance Throughout first sector The half of far half The softness the in economic history, our

quarters, by the compared volumes in X%, first truckload by X% next due model third fourth exceeded XXXX XXXX. to truck volumes challenging second, these relatively the decreased of Landstar business cost well XXXX the conditions quarter year-over-year exceptional to three comparisons quarters difficult financial in XXXX XXXX over and spite and results, variable and respectively. XXXX performed quarter first very While X%, the In Landstar’s X%, market

income Full year profit, in financial XXXX million, performance second XXXX. earnings cash share $XXX was history record. only revenue, free and behind gross were diluted operating each an per and in annual Landstar XXXX, flow Also best

Landstar paid $XXX stock XXXX, of of million, XXXX. totaling which During million purchased and common $XX over declared its $XX dividends was million in January

in XXXX and million grew Cash at $XXX during fiscal investments $XXX year XXXX. over million to

or part the call, on quarter, conference guidance. million fourth to the issued billion, XXXX previously midpoint $XXX our the XXXX provided million our Focusing XX% of to earnings XXXX $X.XX or guidance third quarter below XX% we quarter XX% the revenue XXXX at of quarter. revenue $XXX fourth of was fourth XXXX fourth as quarter revenue below

X% in XXXX via a hauled XXXX equipment, guidance the below via of hauled volume fourth hauled of X% offset range. decrease hauled equipment loads unsided/platform in in loads fourth due single-digit van in XXXX increase load X% less X% be compared number than decrease quarter the quarter decrease a truckload high truck fourth to the by to partially loads a a revenue the truck Our quarter. loads in was below to X% number fourth percentage truck a XXXX actual The This volume. truck was in via quarter anticipated via and

believe We the quarter fourth back X% increasing from quarter quarter. during XXXX was fourth quarter years, XXXX past relatively to the weakness we XXXX in quarter. over slightly almost experienced have volume to can sector the volumes flat in truckload the historically From a sequential US the viewpoint, third to five fourth the while the the be traced manufacturing this third weakness sequential below truckload

XX%, XXXX decrease the basis, on XX% per the also the to XXXX quarter load truck single-digit the Revenue truck load than revenue compared On was XXXX lower third hauled high on a to revenue October, of below was a the XXXX in our November when be hauled X% consistent each XXXX month in and loads fourth of comparing fourth X%, third guidance monthly XXXX. and load the fourth range. percentage via below to in anticipated Our and quarter X% via with loads December per quarter. per quarter corresponding quarter better XXXX expectations

We diluted XXXX the or XX% $X.XX $X.XX, per quarter share fourth below XX% the to share of guidance per fourth XX% XXXX earnings was also or quarter. earnings provided $X.XX XXXX below diluted fourth quarter. to

the and per the revenue, earnings X.X% a average costs as and diluted insurance guidance quarter Our BCO over five XXXX approximate in revenue costs claim percent share years. on the of BCO that assume of of insurance would preceding claims based fourth

well fourth fourth Insurance million assumption. and included claims above the quarter revenue BCO cost was Insurance $X.X X.X% claims. or per of $X.XX and year’s unfavorable X.X% quarter, share our claims in of prior diluted of XXXX development in XXXX

operators filled but the claims consistent, accidents. and remained plague safe continue unpredictable claims. carriers and believe of the industry The of though an our of magnitude elevated occurrences and of of In challenges relatively of been experiencing We by motor insurance Landstar Company’s been nature the volatility related insurers single claims their one verdicts a news low high recent we’ve is cost the was occurrence. Landstar the retention not recent even our of our driven In self-insured the and estimating faced cost of entire will stories only each cost large unusually by years a in settling accident with the in industry. and has to costs. the in industry in frequency on periods, The has frequency the based

average costs our as for costs back BCO year year five appropriate claims quarterly is estimate and believe a in environment. of current of guidance. percent rather a period look first more We to have quarterly than the a of the purpose we begun As XXXX revenue of insurance a claims to shorter insurance and quarter, use average three annual

As the over the will quarter diluted first first The first of most difficult income we ahead, share. comparison quarter earnings the XXXX Seasonally, quarter gross operating look profit year per the be quarter fiscal strongest quarter XXXX first XXXX. and delivered we quarter quarter prior the year. believe of year record was

earnings quarters, readily and revenue, first XXXX revenue from late the per diluted started share that gross In Subsequent XXXX quarter, Based to decreased available XXXX. percentage in the began recent of growth. earnings to the subsequent expect January capacity in profit softening slow in Landstar’s more and demand and effects a the sequentially quarter XXXX quarter the single-digit we the the lower first quarter XXXX trends, third mid second truck first again fourth quarter decreased loadings in than range. to quarter and on of be to

in the respect the continuing load middle and revenue of With XXXX quarter through somewhat historical per truck beginning of to month-to-month fluctuated December, second consistent rate patterns. price with at

$XXX range. the load, XXXX in expect experienced quarter quarter the in for first a in X% pricing somewhat long-term to trend environment Based near to This through revenue first quarter we improvement be the calls percentage first load would revenue expectations quarter. the mid unpredictable, below per XXXX guidance hauled quarter. we the single-digit per of $XXX compared term, Although decrease $X.XX an the XXXX we on of macro revenue first represent see truck stable Accordingly, the fourth expect to XXXX number of fourth from million XXXX from quarter in million first to to loads XXXX billion trend quarter. relatively those makes continue current the XXXX revenue the a via to

the in XXXX and guidance Our in quarter. diluted continue first first a in environment XXXX quarter diluted is guidance XXXX $X.XX earnings soft a results decrease will to first $X.XX to I of quarter comparing per relatively share diluted to expect quarter through and calls record per share the XXXX to that quarter. the The when $X.XX macro XXXX first compared earnings range earnings per Landstar’s due for share revenue first the

our any from BCO involving a of Also year. gross in of through guidance other and quarter quarter. and a any keep than the anticipates somewhat for than a softer guidance revenue seasonal in other moving first tragic in perspective, in early earnings respect to XXXX January a insurance XXXX seasonally claims per typically the that quarter share, diluted is decrease From accident mind fourth was profit the involved fatality. quarter year sequential XXXX, With normal and first our in the our

determining we the a Company’s are adversely this the impact process financial investigating Although of that of accident probable first it cost. is XXXX ultimate will in still quarter, relative to range the accident

$X pre-tax While retention loss an continues still million and up self-insured time this our our preliminary included to annual above losses investigation Company’s exposure the $X.X to at our period. aggregate our policy self-insured retention million during of and relating is valuation the accident

revenue, few share As what reduce ultimate to guidance likely include accident the insurance the includes have over higher it amounts claim note, cost first does of that accident, not are guidance. of this an estimated all and years. we highly cost quarter once our first specifically and I related however, for below estimate our of Please amount diluted this facts the that is X% earnings estimate in XXXX discussed end first our estimate guidance quarter is which earlier, quarter been to of will past BCO than per quarter our an first using tragic determined, low of

expect softness it readily in capacity. the to truck environment US be I available first and manufacturing continue year, to of the to continued with As challenging the half relates operating full in XXXX

in to the quarter. begin financial the economic half Although predict with to XXXX, the it year-over-year ease is comparisons starting our environment second of difficult back

those sheet, business of performing as owners volume with profitable efforts Additionally, believe environment. could market, in XXXX, the macro on Company’s I that well later invest business our in year Landstar combined soft asset capacity a healthy growth our increasing loads. I model along haul market. in empower capacity ongoing the an and With current and line expect began cost a to -- relatively the variable late remains with balance ongoing combined trucks to insurance tighten our leave load focused is network the hardening environment with with in small

within transportation positioning our in the confident be logistics to marketplace. continues Landstar

stock returning stock We’re also market, to dividends. to combination stockholders our historic with basis. of through intent buyback on our buybacks approach to our open capital continue opportunistic It is and our for the known an on a well

Kevin. with And will pass it I to that

Kevin Stout

Thanks, Jim.

certain has our on covered information fourth Jim XXXX quarter.

in revenue cover transportation purchased $XXX.X and the of XXXX press quarter commissions quarter profit as $XXX.X defined and or included cost agents represented of XX.X% various million, will information of XX% million revenue less I Gross XX.X% financial other to in in the to release. the fourth So decreased fourth to compared revenue XXXX.

percent rate in Commissions the XXXX in truck brokerage to brokerage points in The fourth transportation decrease cost paid in revenue X.X% purchased XX.X% The X.X% the in in XX was quarter and XXXX transportation of the a was BCO was versus revenue quarter basis increase of the XXXX. transportation The fourth purchased paid the quarter quarter. in by revenue decreased primarily carriers contractors agents purchased to XX.X% to in due paid percentage lower contributed fourth the as to than of truck was revenue of an XXXX of XXXX independent versus XXXX. carriers. rates rate

reduced to to on to brokerage XXXX were by by carriers costs due Other as of of X.X% on cost the compared as as partially revenue XXXX divided costs. to Total trailing and was to in unfavorable claims fourth increase period debt and XXXX claims primarily $XX revenue development compared margin, incentives transportation revenue XXXX carriers. million purchased an and brokerage prior decrease period. of due compared Insurance on increased generated XXXX. commission to in increased hauled revenue $XX.X fourth the increased in the million less was claims $X.X compared in net increased This commissions insurance truck BCO in loads for due primarily commission quarter and BCO by by increase The to revenue to revenue rates costs million a XXXX $X.X BCO of agents XXXX in year were in was million the insurance and contractor revenue, bad XXXX. in truck provision operating X.X% was equipment an due percentage increased the offset The claims. to costs of revenue quarter

the in Selling, million Company’s in in fourth bonuses partially in decreased incentive fourth were was the general increased from and compensation $X.X attributable quarter. the a for fourth both XXXX and prior decrease in offset and for Quarterly Stock a under XXXX SG&A for profit provision as wages. XXXX. In the $XX.X XX.X% cost compensation insignificant expense year a provision the and by $X.X compensation expense $XX.X decrease administrative compensation stock was compared XXXX. quarter to were decrease costs incentive SG&A provision million million XX% compensation was The mostly expense in expense stock to the incentive percent the gross in in compensation million. to quarter, XXXX of the plans,

and due upgraded was capacity. and to deployment new of the for million from $XX.X amortization in resulting technology by quarter depreciation to entirely XXXX. Depreciation on This million fourth XXXX $XX.X in recent agents increased and increase use compared was tools applications the

XXXX XX.X% by profit effective XXXX favorably quarter The items to XX.X% year-over-year. certain gross $XX.X in Operating rate $XX.X fourth The effective was quarter XX.X% income tax arrangements. or XX% rate decreased million tax equity of of periods was income in of in and resulting income compared both XXXX. -- was from in Operating compensation gross XXXX. income XXXX in XX% tax versus tax resolution million profit the the or impacted benefits

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

Jim Gattoni

open that to Eunice, Kevin. Thanks, And will with we questions.

Operator

of the Stephens. Our first Atkins line Jack from is Instructions] question of [Operator

now Your line open. is

Jack Atkins

the side are January, sense expectations? I maybe when really to of a you in just bit the if weeks, tightening to four and van commentary flatbed, just trying unsided business you’re then with I three equipment Jim, it’s get seeing a first on it, weeks better And you relative how market. the just maybe on one January. seeing have little to call of you’re about of So, seeing gone could the sort market of you additional any kind than other, what start of think could and relative side month comment performing the the the in if know the

just conclusions would be to hard any any it’s So on draw but there. curious commentary

Jim Gattoni

talk to every Flats a want you softer almost if January But, vans bit flatbeds. and Yes. little year. in are

with in first in. seeing on to January, pricing, trends what volumes our comfortable four we’re you But plus we think out we’re week it’s, the is period load for what we’re So rates, look where with consistent three that it’s say just you a four average years. that’s actually when consistent seeing And we’re of I situation. what you weeks slightly a four but put that trend pricing the of on in January that to kind our because difficult that volume, trend better, a you comp -- guidance for be in a this seen want traveling know, the with our we a stability see I what over from the at guidance sitting And weeks similar is in the saw past. sequentially then forecasted we’ve what in it might slight rate December -- on we better a to the lot don’t last it’s

trend to bit quarter from see Our quarter on what first trend better little is a than you’d volumes. a fourth

coming really results, instability off it’s we’re volume Well, believe to right So, some price that environment. which stability and seeing a the guided I we is sluggish we our, now. what think January in

Jack Atkins

but that that you’re show No, Sure. seeing stability encouraging that’s up.

of cost quarter. first that just seeing the the comp provided additional outlook, guidance there a maybe in through to the walk there the through moment? thinking kind kind side, Kevin, guess you for guidance I about some feels the G&A certainly range different present items? on of of kind at are that for Could maybe Could is earnings maybe Are talk of moment, coming that your us revenue like relative is it you, could some when are the back. you you for costs earnings you pressure look some I a to those So incentive numbers bridge

Kevin Stout

Kevin. to annually annually. of We $XX line, two -- is That that just let’s increase is say, in This SG&A Jack. the pieces. Sure, into split million in I expect do talk let’s range the Annually, million first. an $XX

The comp to and million first $XX that’s the being of $XX half stock incentive and comp about million.

rest, about Okay. $X Everybody say, knows I’d increase the spend. in that. half remainder. tech about And remaining The $XX say wage evenly million increases, inflationary million million the split that’s $X to also to A, and $X increases let’s between, of million

$XX a run a $XX at if quarterly to million. my say basis, rate SG&A bit. up on Obviously, looking So, million you’re depreciation’s little let’s

I in million QX. $XX.X like are think we

million Your probably of $XX best $XX.X number XXXX. the rest to there is million for

Jack Atkins

Thank Okay. That’s you great. for that.

like quick the of the one enough comment do Could that going almost of happening arms you the an like with keep Just like tech on sort you’re just tech feel Do you on feel race maybe you spend. of sort it’s mean front that’s sort spend, up IT on follow-up what side within the -- I projects to investing logistics. on there? what’s competitive toward,

Jim Gattoni

Absolutely.

we Next No, we’re spending break from IBM, we were until iSeries on, about know, the down ‘XXs, question. years we sitting you if right. up are on five ago, what

two is organization years So efficiencies middle new built a we’re rollout to bit going when of we, of announced in into we’re maybe ago, we a TMS, four that. or, years doing or the little remember there the in three about years

right, into iSeries to the the into to systems from cloud, of app and functioning phase your a all flexible, on world and where top a of the carriers is is converting where stuff legacy that is Middleware, the spending right. all out more where significant agile, pieces shippers better out apps, the rolling that On that So our TMS. moving there the off in linked into and customers the we’re have you our

that spending to play So the any atmosphere, take it any feed plug create environment source and want. and data just -- systems our we to where and got infrastructure app to create plug the want play you and into can you that plug we, you

Loads So so atmosphere in there carriers in half, year Available the spending the the as and and our link over up and last some that the of the Middleware, of Maximizer. create is that is and hands building can just plug our a in in year tool, place on that us actually play of we gives that capability was new new app today and our which released our that’s pricing last mobile there

So, But it’s information board. model, the think since between always it’s, this agents when you across our were, customers latest of capacity we’ve been the we’ve and inception. And we sharing technology. used

So we had what weren’t to on of about you curve a lot talk do. the we what do, behind far we when that

You didn’t pricing know, was really tool. pricing one thing, a have good we

We now. have one

it’s out, So like can pricing directly we things that. push

not So although we’re more cheap. technology is

So and a agile having the our we to our the are, applications best legacy to worry tools system environment and as creating can about all future into that’s we’re this play iSeries. where more more in opposed tweaking and we flexible plug

Operator

Thank you. The next Group question is from Research. Wolfe of Scott

now line open. Your is

Scott Group

So, you I it second with in TLs year. Do going the is market agree the tighten view from start to to normal understand feels sort quarter. is the this that? of the There maybe

Jim Gattoni

And when don’t manufacturing. the it we you in XX certain reverse in second at is way going don’t -- in shoots to this where I we’re six I’ll took are And in times look one sitting any, probably the that the look manufacturing seven manufacturing now. jump tell I negative, negative quarters probably, quarter. green you April in were This catalysts and really anywhere it at last is to the the we a started, sitting see was happened, or consistently July, you things, or environment to years, call the from the -- four but know US, I three in started when to they’re as why. shrinking itself. all

are you’re if quarters, we end quarters, So the toward it’s counting XXXX. if somewhere, six of I’m

So I’m one what of right. side that’s saying,

we’re what’s going a been July really and you’re it’s looking manufacturing in impacted US So, on to that and at the I’m by manufacturing at happen environment year-over-year. since shrinking looking because

side, got On you’ve the other trucks, the right.

XX our So and be and the even to you bender, dealing large trucks impact smaller year, you trucking verdicts, look had that to and even so with verdicts is, where that in you’re dollars. when from truck like some is what’s the couple trucks fact know and What’s what’s it’s -- large of to to industry verdicts is you direction last going not reduce months happen of small may it’s then, do going in see, should how these area, have and some fender lower of on help the million coming thing it’s the to thought in of cost the six over settlements, the you do a their we’re with orders the it had to next the where number the here system that the a going these And insurance insurance guys going renew. with. going renewals you capacity next months,

does than see -- the am a turning? wait it it’s see. on I I sooner I let’s, does. and So But economy happen that think

Scott Group

Okay.

that to what are The better down I so far sequentially, it. So, seeing a was than supply you start bunch demand. you feel BCO about get count XXXX?

Joe Beacom

we think XX, we coming is just trucks. the January, think the Yes. yes, were not seven still environment door a unusual, in, but number, way in which look and first We that negative quickly. in able pretty created we XX% wouldn’t change ‘XX, it grew an adapt quarter, we January. switched some adds in the is we’ve we that really had, And that ‘XX. that are that you remains me, and environment But in retain What small in and trucks such to able is XXXX. in just last were unusual. see and to hopefully ‘XX to we and quarter, trucks We the in I is to think we businesses, of Scott, I X,XXX have And retained and XX% XX so. lost the But somewhere different or quarter XXX change. at others think this demand it that declined something strong. that comes second else. expect trucks interest those I are but Not more. And one quarter didn’t to first said, of quickly couldn’t back about and I’ll too hang the doing years about don’t But dovetail I not Jim less much big in is I been in year. of I that’s doing this And Excuse that it adapt there ‘XX back, them in pretty XX of think comes Joe. pretty in or first either the what off in

I going demand out to net grow again. capacity be think the and dynamic before begins changes that it’s supply further than to

Scott Group

to do third Okay. Any of in so earnings can rest operating too how positive if to guidance you about see XX% for of last is cost of think think or some XX% longer? we margin inflects that And think then on the one, things revenue that the positive thoughts the takes inflect the the inflection net because range. year quarter you that, quarter, the what first and in earnings

Kevin Stout

have what quarters looking but gross number. when Yes. demand the out that do about pressures this to Obviously, lines, Kevin. in at. I first it we QX, is out toughest we’re yes, again, there, other number. profit about But And is all where are it’s cost if the gave demand increase comes SG&A Scott, margin number. Obviously, comes back you on that and help in some will like the that laid QX, number

Operator

Seidl Thank from Jason Company. Cowen of you. The line the is question and next of

open. is line Your now

Jason Seidl

comments continue? of over trend why When -- down Is drill to active that a sequentially seeing at and Have out you’re look approved XXX truck I marketplace? your the on expect you guys do you your brokerage little heard, higher I think on at you’re capacity capacity. insurance wanted business, this just your over down that and cost? the bit expected I reflection dropped the all of this is to X,XXX. And coming X year-over-year,

Joe Beacom

is this Yes. Jason, Joe.

dropped While or don’t putting demand opportunities about What out X,XXX on -- is because in that there’s is you’re in loads for the reasons of and their we that reduction through attribute the being a the transported those as I a largely I marketplace. freight, public because carriers. the necessarily capacity carriers see to to year-over-year year. qualified we’re fewer fact many us environment, just there that with carriers haul of fewer not load order keep insurance remain broader boards of as and by to up base correct,

So, do I I volume to as yet, volume and be but to going see our are to it as, going as exodus there see an our necessarily don’t number is it decline. declines that carriers the of haul,

at count, our look you If down really X%. it’s active was far less, about

intact. And certain so that’s I much think where we have carriers, good I think on relationships business pretty reliant and where we have

it maybe other much the no have we didn’t provide that reup overflow us exercise. their to go don’t for had and through or be the insurance additional we and stuff a may those carriers today that year volume that other to it’s them us. who is affecting that haul think ago I for that need There is

of that’s would what, think how kind at this I I point. it interpret

Jason Seidl

was look GM some at I the When assuming obviously, of end your Okay. ton, down markets, strike. automotive that’s a I’m all

know how post now of XQ? the strike and that Just to wanted into looks sort

Rob Brasher

Yes.

go. it quite you we kind didn’t We our and automotive we chase look Jason. chase downward, take pricing Rob, out -- XXXX, at Automotive, rates we didn’t we we frankly to didn’t agents, The tremendously. XXXX chase bid, came -- their put this manufacturers the of down price. didn’t to So, a we -- quarter, is from on chase of that an of kind more through more of the the could that’s the move the where contracted think levels, in and rates in moving year. freight we impact bid focus was have again but through profitable strike rebid I ahead. our The did the, at it saw automotive the fourth Go

Jason Seidl

you no? guys for a have -- do financial that strike do impact And have any guys or you

Jim Gattoni

what of can’t drop-off negative direct as was off. the Only dropped has revenue We relates strike, to related it the really to revenue. impact quantify the which in

Jason Seidl

Okay. lastly, out I about stay law California that that a like other the catching makes looks on industry that’s potentially about going from in guess Well, you Any that that forward thoughts it guys there. states? got sense. from and

Jim Gattoni

a the it And happened industry they a Federal limit side injunction can’t regs. overrule mean negative Yes. legislation and place for I jumped not Federal a put -- make ruling an was was they’re over on -- to at rules independent Federal kind of basically the it about although going was, rules roll was was they the and wasn’t transportation the Interstate of comply from California what makes coming resulting in out to they saying the states that injunction specifically but actually, was Actually the within have various that Commerce with Federal us how the think that look with take ruling out to while, coming may for the fact really rules And what an that kind to there Federal January truck industries of and Interstate in what contractor says you for injunction. of the work for put states, out close the although positive handle and the other decision sure other over about on us. Commerce. things negative the of I kind positive to that out there That Commerce. California are Interstate

Jason Seidl

least a regulations. now Federal So, cover can this at provide with for is pretty much blanket

really what that the doesn’t put So out? much other it matter states

Jim Gattoni

Right.

Federal where that’s be probably to and should states yet. we sure going to haven’t is the expect other California not what going conflict that watching the kind anything and regs appeal, with -- heard they’re that make are we of The

So next over plays the of we’ll out years. see couple how this

Operator

is next of question The you. line Fowler KeyBanc. Thank of from the Todd

Your now line is open.

Todd Fowler

So, is experience margins of I’m you’re ask you’re wanted of kind seeing in about up to you pure but obviously, can transactional profit in the marketplace the what I from related seeing and your $XX.X on more loads. specifically, of standpoint? gross what impacts respect fourth some is competition and again in quarter, the kind margins brokerage to the the gross And million from brokers ‘XX, with pressure there. $XX.X question any million some a the the quarter talk was to of seeing curious are the on what

Kevin Stout

They throughout then Todd. better move as in QX, is better buy-rate the in Kevin. QX, on basis year Hey, points. And points This in points QX, XXX XXX XXX XX only basis points brokerage, are we Yes. XXXX. basis in the The in QX. it’s better basis

Does -- definitely obviously if know don’t mix your back. much QX. would how your depends comes carrier guess that the for BCO answer to My I margin profit I I million gross paying for tightening. this best QX million But a more. on and is But as lot much characterize now So that right as and it and we’re $XX.X range broker how brokerage use $XX.X question? would

Todd Fowler

historically. of I you’ve what within And you’re the it follow-up. Kevin, I like you’re piece, so still range a on just Yes. guess, experienced the seeing what just brokerage mean with sounds that

unusual that’s anything seeing not from a standpoint. brokerage You’re margin

Kevin Stout

no. No,

Jim Gattoni

Kevin it it got deceleration a think it’s And quarter basis that the in true that bit because decelerating started is was the Right? tougher. and little pickup point fourth the the that reason I

Kevin Stout

That’s correct.

Jim Gattoni

we Not it��s, necessary because tightening. are not

We’re quarter. the comp a fourth got in not tightening that little just a tougher, seeing

Kevin Stout

That is correct.

Todd Fowler

That year good. from I to the looks shifting be on it the going And there’s impact like to just that year, Okay, and insurance piece and then understand versus some helps. that. three five

Is be costs As that that pressure do for it to to that of the side. XXXX cost into can cost? there on like you’re you are something about based BCOs? think can you I know rate cost qualifying that you But going something, how could the that Is if don’t either know an on trends do that it think rolling anything Is how work kind it going about just you mitigate mitigating business. incremental or the you feels you up, going forward and forward. have, the approving beyond with incremental that insurance insurance that’s

Jim Gattoni

otherwise ours like certain running benefit the organization, is right. you thing when contractors rules or one them organization would and Well independent for difficult that you’re can’t safety enforce safety equipment that’s an

So and we we in industry buy safe programs now our to high the get really we right standards have the already. rely equipment We best they on make do their inspected, that safety sure qualification them the are believe equipment.

It and the we it’s pretty happen I of one going be guy perspective, which it’s frequency guy it’s to hard believe that said on truck pop determine we could already industry happen. years could to with not standpoint. like from do that going can we be with safe it accidents, sure and or we years two it’s So two necessary, everything a how accidents reduce are, going do accident, I’m to experience. when to XX a that’s right remain an now just the from experience, to which those low It’s you, that’s

around hands insurance get on the little it. And years. been bit got of the going I’ll the of there a market, a exposure in So to eyes couple challenge to trying over has on limit to our admit how we what’s our last

over contractor We’re out what come to on line do the trying figure can stepping independent the we equipment more to without to there’s and that.

used or if our million occurrence $XX layer. know, or we to per you a over didn’t $X able know, insure That you covered. self-insured million be to As be losses is to our $X million to

we’re insurance $XX there from policy million we for last $X period. bit companies covered time year, away that’s uptick that to cost every of it accident within the as layer. So, million a why everyone took so an to an seeing The little the was relates

is you will the, shrink. some rates and that the going I -- maybe the dollar than going into capacity where industry we’re trucks get gets it other controlled it’s to, coming are you’re to maybe line. benders drive the they shrink, seeing you’re how -- the mean, through turning up of through get that’s by are So think sitting the to eventually million going how to we’re market when not it from. and fender pressure and And out trucks and revenue figure I accidents, you hard

Todd Fowler

I’d in makes like in of Jim, most, good feel the all that to thoughts there’s side does and the problem. the of you are to have those cost Yes. sense. I it think kind positioned that mean does pressure solution a Okay. definitely guys interim are here but until a better

Jim Gattoni

Right.

Operator

Thank you.

have our line And is of from next queue. five the question We questions Susquehanna. of Bascome more in Majors

open. now is line Your

Bascome Majors

may don’t Yes. on the to some But precisely do Can detailed just be want how Thanks for or cost. like to pretty we’re XQ a forward even year-over-year. on the item-by-item the components. more dead would or of from to up I for the taking might the more from explanation operating bottoms be SG&A to walk XQ baked horse after my Kevin, understand spend the other we kind B? to getting first based beat A you questions into I little here. just, quarter, getting it gave, helpful it this guidance there think I be feels a

Kevin Stout

Sure.

million. an insurance revenue know QX QX assuming in to going That’s pick on $X about slightly Let’s we and get to $XX revenue, going gross $X versus million start $XX.X million, million And going have then profit, versus just decline higher sequentially forward. of $XX.X million down say the but That you from about depreciation million the of the quarterly $XX of on BCO once probably basis given the other income we’re we to that $XX.X we’re to up in the decline that that’s operating flows you’re you to SG&A, say, had million probably let’s million in we you’re million increase then will excuse to have say, looking QX. because a operating, tune the underneath to had at to $XX million, looking at QX. probably at our in $XX looking QX million, line you’re the of with at midpoint range X% let’s me, QX, for to $X $X

slight So as be decline a well. that’s going to

underneath net each to you gross profit flow profit much pretty So to gross the through And operating get down then items income. decline other. the those

Bascome Majors

more the that through. $X XQ one piece, all $X XQ, million, to line that. is even Thanks year. I have increase text typically that reasons, does that and And ground? to years spend of -- mean, stuff been of that million million $X maybe The increase piece on What around. people increase? I lot down three a on get and history, because kind different is the trying for I you considering The back this XXXX for structural some sequential with way just to SG&A are spin look of out $X incremental just or temporal that weren’t think sort of tax Thanks. Jim, what could to is that walk now. gave needs if million, on that is project-related comp guys the for step-up -- of really about their than that’s focus from talking arms it, just that’s elevated you $X a of incentive appreciate like million, the come you

Jim Gattoni

No.

the might the I spend slightly. think, first not quarter to mean mean tech I from it’s coming be quarter, I fourth up there. the wages from the

here’s fourth trend went lot from $XX the and have up -- bonuses first throughout SG&A year, only it’s sense the it I the fourth we at to a and quarter good quarter we’re have thing catch look in quarter, I the if not the with I of would it’s have to quarter the that end now seems and more saying, the, At bonuses going the million, equity better, booked the lot bonus bonuses that we of going we here, that like fourth see paid So you happened in then a looking are equally It’s first of up in playing first program look had we’re of create right. because in lot always the In the we’re bonus and a a bonus quarter, bonus year, have as to the you of, because a it’s there up and you tech. have love the That big quarter, from, that. million quarter $X to to incentive significant a you when drop-off about million. comp. by that times lot $XX going then do mean put we get year up fourth your equity history. put comp make years million. In we’re a and is second $XX the you of the of true -- quarter, a has time to $X and is the million

Bascome Majors

Okay. That helps quite a bit.

Jim Gattoni

Yes.

I saying due little is the piles toward the historical it’s up trends at lot. comp catch-up the think, the look way what I’m play we incentive to a difficult a and you when year

to grows, got As accrual. the year keep the the, catching up to we to

catch-up So zero. end and QX. you for goes the quarter the number historical big first create to huge like it spread zero QX of a fourth a then look could have And of doesn’t the between and could the that year ICP seen pretty quarter, we’ve the good, in years, at some

because year. we’re now, not We’re necessarily didn’t quarter this looking at we bonuses of the it have fourth really in

Bascome Majors

buyback. Okay. what’s used thought the the are the feeling and the here one, you special dividend stock is after last Last How about to paying year? capital

Jim Gattoni

million, available. to think now I react $X.X $XX on million philosophy some is from, changed think this I I available the has based you know the think I I have the the see what sitting the people don’t While on to up plans -- the in we the and might was cycle the prepared, think Board. I we’re shares Board where buybacks. our think under would activity a we’re on would after-hours, saw Yes, purchases, would, I I willing going we’re how on

Operator

from you. of Schneeberger Scott the next The Oppenheimer. Thank line question of is

open. line is now Your

Daniel Hultberg

guys Good a we could consumer seeing What the what Daniel forward? visibility Could the for are presently vertical? expect on on you morning, you it’s Scott. durables elaborate and little going there bit within

Jim Gattoni

XX category. don’t up that we of our and only but about XX% over of business That’s the largest have durables is makes consumer customers very it’s, category, because customers any top difficult, X% our

our our pull commodity tough bit in we the manufacturing is than And I everybody it it’s the hard specific to kind XX%. durables stronger down at we I off drilling of And of apart draw quarter consumer into in down the looking a down talking down if is quarter at mean it being When we market consumer durables. we consumer we just believe is sector, there a that yes, where further you our quarter-over-quarter, basis So sector. if in yes, from are sector. that mid-month the XQ the look manufacturing and it the, little But, was is on you’re us. the numbers in durables, of where that the charts or said tie was on XX% you volume ‘XX, ‘XX that conclusions, and the numbers. for I fell can a mix consumer only most durables break believe were rate. actually, we in that see X% XQ little revenue about when consumer fourth down

little better a did actually it in the So organization.

a So it, that’s we into because look probably continuing would weeks expect diversified we in how at such it couple And can January. customers portfolio first that’s the got. is of there I within what that’s of and

Daniel Hultberg

in cash XXXX. Thank Got Free flow you. about helpful. please? do it. you How that, you. guys Thank That’s think

Kevin Stout

out let’s an $XXX $XXX a to get I million early better once say $XXX a we pinpoint put just QX, that. let’s and have to feel of million, million estimate But as obviously midpoint. conservative for I’ll

Operator

SunTrust Benjamin Stephanie Thank the of And line of Humphrey. question next Robinson is from you. the

is open. Your line now

Stephanie Benjamin

business then Thanks. the hoping prior how you was the volumes XXXX. and could kind the about saw is quarter fourth you start your holding just business, as really hook to during to little And to a I of drop bit what related talk up related just year? it that

Joe Beacom

and piece, XX% year with on Yes. company prior consistent And hook of and largely that’s full We year. pretty with trailer drop drop the the about pretty and Stephanie, hook. business this consistent our Joe. saw quarter that’s in is was

demand does And that to the vital really count customers. goes, a a like BCOs and is of a it offering as be part and in see the that’s in that drop aspects part we and other that are we the large trailers place So kind that offering hook, it’s can continuing of of of service service thing. so number at

percentage in prior put capacity into quarters grows right and the we to grows, pretty fleet if grows, into year. and demand a kind consistent of the now segment. of for it’s as and trailers we’re those So on demand customers the clearly the standpoint, But more will we’re, grow volume year that

Operator

line the Thank you. from is next the of Hartford Ben question And of Baird.

now line Your is open.

Ben Hartford

Thanks it some perspective, insurance an got for here Kevin, maybe just also as claim level getting but in. tech. you to higher perspective, from relates obviously me expenses

you As the issued the model lower. and early net it’s the fundamentally and that has to revenue about is of anything -- XX% a the that layering it as model then XXXX, What to percent did in cost here March talk out of that changed prevent past, that think little of back margin moved been then and that’s with of you EBIT XX% thrown margin in the model whether should back or changed a overall to the about simply aggregate profile and a this you as comes that in and comes cycle, in revenue that’s incremental is the net bit here? resume, can natural beyond and kind

Kevin Stout

my theoretically, have This levers lot going drive Yes. Ben, all gross of that’s to in it’s some gross profit underneath I the that don’t, gross but perspective, pull. growth increase I don’t that right, profit, see down do spend that We higher changed that’s road. in the at a There all. about we is profit. from aren’t can

about, way net was see XX% but And spend, about we gross incremental was it’s I the that’s growth. seen. don’t that we be of So, structurally any look it all put profit haven’t we that’s definitely the change that it, tech at no, we always said XX%, I as right. should temporary when out where that

Ben Hartford

manner independent potentially and think are on to And of regardless the you other California, years you for kind to several seen board. yourself seen late legislation see broadly about in being, state against enough understanding will injunction in that year changing But concerned in we’re seeing I be business. guys injunction the But guys potentially conduct the go going of ABX about protect particularly of movement have New contractors you then, enough be to over which know preliminary elsewhere coming with that viewed in next the of time California? helped how whether actions there, in it. to the some you Jim, we forward context but with took have and the the Jersey states

Jim Gattoni

Well, always ABX, at think in and it XXXX. factor our a first wasn’t it’s risk We’ve that mean I had in there, XX-K. XX-K our if conversation just we since I you look issued

a to from the the stay line of always whether and state mindset things further do is the or the level. it’s here there Federal So we further around can regardless

other any to shifts we have We watching come ideas to possible. with that. of on, out to move ideas response a attorneys was guys attention So with but the how country don’t or up months of we just time regulations, had our at the and are it’s was you ABX, it’s to California, the kind almost of they enough four on not own. had their And or Not and we either answer, pay it. and haul And if out impossible model rule, that yes, it. did model? didn’t stuff of back looking in with best California on get was And make radar always look sit to are plans always out. that rest there change rapidly to are of, any such everybody I you and to to when in react to on know came what’s months working haul three and is That best mean slight strict up the get ways maybe or the these out avoid it. about of to have going it we to this our freight state

Ben Hartford

anything in at you similar the doing Are moment? New Jersey

Jim Gattoni

are not. No, we

not with were to going to happen just in are Jersey. probably We strong companies attention as and to not they’re be allow it operate commerce. on as -- B to of of the going was rule sitting might continue exposed back that paying California But interstate I we it. for as see what’s as to California And trucking California. there waiting -- we’re to and implement Prong would back, If not have we in number they’re the in kind drivers think

Ben Hartford

I Yes, agree.

did number for XXXX? you CapEx provide Kevin, a Okay.

Kevin Stout

That’s $XX this cap be, this to I’m going again $XX was we million, million cash million. are about year. guessing $XX to year, spend

Operator

Thank is you. Asset Management. And the of our from Haimes Barry final line question Sage of

Your line now open. is

Barry Haimes

three one sense. lot the or and think you. One, be years XX incident, insurance Makes that five on Thank But per Good the is to two year than say this, maybe was look-back. that about afterwards, I words going moment a had a questions. enough in is understating? issue three that in let’s and morning. still back just appreciate for other ‘XX higher from how have other back look you one curious ‘ such the then and even year ‘XX unrelated. So I severity

Jim Gattoni

various that started say at cost bad it just pretty, indicator. industry which it but think conditions I We looked per the I We that was ‘XX than pretty the hasn’t year, different is good And just one looked ways. in the changed a at that. really say I earlier year, would truck would of a

consistent the So the insurance at the relatively of you average per the basis year three over cost that’s truck period. when why I for think look And year years. three

was you If per little go a the cost further on a lighter trucks. little probably back

look we how that’s that. at So

-- think three a X% I that’s years. than we came up That’s little still using bit we how a the believe. three is year three, less we with I could, think I have So could anything

big range, is X%. are now of like But with stick the going occurrences. if know, any we and these we right You to be trend that more we don’t safe it to X.X% looks just have X.X%

Barry Haimes

you. seeing look January, Thanks thanks. you color are flatbed, you machinery versus markets I or if at related So through on for then it, question have at to within look Got down? up end fourth steel And what and the if or that. versus you had changes particularly the any a wellpatch quarter

you’re any changes months. the if last curious seeing Thanks. three four Just in months,

Rob Brasher

market. out. predict is Rob. this we mean, mean, I little it’s in really of do what of to it a I as tend space. entry hard the we kind Barry, that to It’s flatbed think harder far

manufacturing great name of going to not deal pretty We’ve of rate our we’re wind, So quarter a position it infrastructure at partners generation, wise, We to good it. few. growth, feel and but in capacity coming in depends great we got feel about a ag, on kind flat the where wise again first forward. power

Barry Haimes

and the Thanks. of materially those months you four just down, either My end is backwards, not the have materially terms seen or of last looking months, over markets change. move volume or for looking question it forwards, any was up freight three in

Jim Gattoni

No.

or other looking way no swings the one We’re big back... seeing

Kevin Stout

it’s tough is because is soft. a And usually -- soft is flatbed January indicator, was there a January typically --

Operator

Thank this you. point, At on we have don’t queue. more questions any

Jim Gattoni

I this wait Well, can’t And to will honestly tell Eunice. thank first through you, I you, get quarter.

quarter be quarter first the April to most with currently earnings speaking I And Have look our think a year. forward it I will scheduled conference XXrd. of you on And challenging again for good our thank you. day. XXXX

Operator

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

Landstar System (LSTR) 30 Jan 202019 Q4 Earnings call transcript