LSTR - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to Landstar System Incorporated Third Quarter 2020 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 Missy. welcome call. earnings Landstar's conference third 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

freight the continuing gradual decrease period the company. end mid-March the other the experienced history significant improvements company's to unpredictable filings business of risks, such that sequential in objectives, we unlike in call, make months XX-K through to year, third that to materially These was on relates XXXX may in fiscal risks obligation undertakes Such time. to information by anticipated. for quarter the to no cause the Landstar's any section update May not detailed we one risks from strategies Landstar described or and and During and history. sudden Form the April not the is uncertainties this Risk results revise facing conference The results of historical Landstar dramatic reliance the legal Investors to, information forward-looking forward-looking the plans, the differ time other to from challenging XXXX the bottoming contain should information, or statements financial expectations. of including, events and place and subject out in and could information. to forward-looking and limited undue in any operational, the Landstar's those environments nature through demand SEC or actual from in Factors September publicly in uncertainties entered most but swing summer and and

as base of from cost and over, model, highly pandemic economy quarter exceeded manage the the we customer this financial Although the quarter Landstar resiliency our third on third-party guidance diversified and through business of July agents results time. far truck network we to on in presented release COVID-XX XX. independent Landstar's the variable second provided company's unprecedented flexibility XXXX all first and impact geographically we recognize dispersed earnings the is far third capacity that quarter financial

initial Form guidance Our the to third million to September SEC. diluted that range $XXX earnings $X.XX with $XXX On $X.XX. revenue updated anticipated per of million X-K and XXXX be filed to in be X, quarter share a we in a of range to guidance in a

of load experienced of billion range the anticipated we September. in through updated revenue $X.XX sequential $X.XX. $X.XX guidance, was a in per improvements $X.XXX due to per revenue Our diluted share share loads be is Actual share and in earnings loads a end of of hauled and from on the via truck third number per quarter X XXXX in earnings range and revenue further to guidance billion our and Revenue the diluted primarily earnings $X.XX. $X.XX diluted also exceeded to billion updated to per September

hauled readily volume below Our be range. that expectation on per guidance July, of load loads our and via our of would reflected fundamentals truck the initial continue XXXX rate quarter third on a provided the mid-single services soft third This number expectation industry both truck XX quarter third the through of that quarter the of an few and trends digit most guidance initial demand based weeks was capacity first July through and would in quarter. of percentage available revenue

via range. in per per guidance X%. in loads X%. hauled truck loads exceeded for early demand Landstar load both hauled hauled via hauled number experienced July the rates increased van would And the per provided of seen and huge loads the quarters, in quarter load quarter second number XXXX through truck July X, X% via compared September revenue September closed truck respectively third during hauled same the of And to anticipated to respectively. loads experienced below Overall a below low-single the September load updated business with compared In X% via the demand and XXXX via number improve XXXX. have load percentage September we digit third X% of third continued and number XXXX XX July by and As and the that truck and quarter. XXXX. the the overall from of August increase overall quarter revenue period. and of corresponding via and third third the July exceeded hauled our by XXXX Along loads services truck of for August via services in revenue X% and only truck with per in tremendous third X% to quarter XX% truck XXXX during revenue volume truck equipment August XXXX months the August, over truck prior-year loads XXXX turned positive and increased a swings the and XXXX

for moved side, provided equipment remained sequentially third the improving through flip although third On we the the as quarter. to quarter XXXX XXXX by the third demand soft, compared services in quarter, unsided

for quarter. equipment to the September via to and XXXX, and van September unsided via in August equipment, or continue lag September per respectively. July August haul July, in Similar in XXXX plus we recovering for XXXX August, loads X%, in loads XX% Revenue XXXX of of In hauled X% from durable XXXX typically services a transportation in September Automotive September were supply equipment outpaced compared equipment equipment new third XXXX, September network the durable was August, provided via quarter. was quarter. hauled environment where load what second demand of was the using hauled line while More quarter levels, in quarter. and in Revenue July, total to in second X% quarter. obtaining And unsided for XXXX. while XX% July in August which services about unsided resulted the per and July, to XXXX consumer occurred services the revenue XXXX XXXX, second the quarter continue XXXX during both quarter. XXXX provided to from in to X%, surge XX% down loads X% third overall demand July products the of loads experience below number from XXXX XXXX sector July and XXXX and and XXXX via August July, over and X% X% at XX% approximately X% of in increased contrast, August, quarter production equipment load below and the number on to hauled respectively. and decrease van via chain below quarter. Building levels XX% XXX% continued of equipment the the capacity X% van above and unsided was was specifically, equal to such, the were plus manufacturing second extremely the to As in increased X% and company's September strength X% compared of fluctuated XXXX packets services to XXXX XXXX and quarter metal haul line the and sector. revenue second XX% compared XXXX the quarter, performance which XX% how was revenue for quarter, third exceeded in third in quarter. driven the And third services the durables, XX% existing quarter that in building consumer compared companies. by third in serviced growth growth parcel Machinery in the substitute the in improved improvement, renovation prior helped in third revenue a the decrease Likewise, to metals, agent Demand US XX% our and sequentially XXXX line is to increased products, the by refers provided contributed well up third down the year that quarter. quarter XXXX XXXX machinery were manufacturers, prior quarter third quarter was consumer both compared In the business be awards boom from businesses XXXX comparing in decrease industry XXXX third sector, small XXXX third third parts, are XXXX the sourcing truckload experienced XX% but the transportation in plus prior-year that sector the More new significantly second the self-drive, quarter, substitute product to significantly quarter other and sector. business demand respectively. over the new XX% second XX% below growth XXXX the executed from third for parts in by and in during the The specifically, three sector substitute company's second XXXX trends automotive the by the ecommerce the building sectors. accounts automotive driven from and increased disruption. services, quarter Revenue year, compared in second over revenue growth while large sector in third parts Landstar below big quarter haul volume in outside home improved The revenue of prior-year in automotive

others and their the sectors sectors across While of broad lagged, the expand to of with array our the critical performance. appeared quarter a efforts and strong strong in driving business company's economy of third agents new existing customers certain US was

week grow owner but a sits low and to with the BCOs. third As April now trucks at all-time second levels of qualified August XXX to historical below at model. improved October operators the provided in an July, truck in or We and XX,XXX in of continued BCO by trucks, number per remained through continue to and May, BCO first of the at the increased than more the BCO was loads June quarter. significantly XXXX count capacity, weeks September. record and per utilization attract to end truck we XX-year few ended quarter

party third and an haul as carrier Landstar. an count, load increased Landstar in count all-time from of third hauled record Active all-time that of XXXX of improvement truck the quarter. quarter BCO BCO a increased the the XXXX count began in XXXX the compared Record the BCO truck in as loadings quarter and led increased, BCO record Also, to in increased of to past second days, XXX have increased July, the high. carriers X% to Approved demand quarter. we a in at the saw by number utilization result third who quarterly a active loads number continuing XXXX hauled XX,XXX third third for XXXX broker over defined in approximately an utilization capacity is third carriers As quarter. XX,XXX

increased relates to party compared of the purchase it October. inflection to in load hauled volume transportation but carriers, As decreased the increase paid our to of X%, X% began third in in on third the sudden per demand in truck in rate capacity that that The resulted XXXX drove profit truck by as August had the revenue quarter, in in the third trends party strong first per and XXXX truckloads carriers the tightening continued In carriers. an truck quarter. gross weeks third-party services load third several rate

level We the through demand to expect service continue quarter. our of the for fourth

expect of potentially our exceed look to continues, record we XXXX XXXX that and revenue level similar demand fourth fourth revenue. quarter quarter to Assuming

similar the in we to XXXX per We fourth the quarter quarter. load expect the XXXX be fourth record in revenue to load fourth truck reported per quarter revenue

volume currently slightly We XXXX quarter truck via fourth in to hauled in quarter. reported exceed the fourth XXXX equal the or loads expect record number to be quarter fourth of also the

As billion. such, to of in to quarter I expect fourth billion the $X.X range be revenue $X.XXX

enhance that the recruiting agent as arrangements. a their for million. recently pay diluted to in company's operator it support in the the of United our a incentive network. approximately the operations $XX company of and its quarter several legacy announced arrangements in statement efforts, diluted fourth annual initiative, recruiting centers buyout of annual BCO its and share charge, located and retention earnings anticipated BCO per have the recruiting Included charge retention further enhance is rate or anticipates pretax earnings initiative share Canada Payments regional Including of the commission its $X.XX one-time $X.XX the XXXX agents As commission a efforts to per relates estimate and fourth quarter States the via incentive $X.XX. $XX of to XXXX this for buyout reported agents BCO to one-time services. estimates, million retention to guidance this under these is quarter in certain further XXXX those current run an commissions fourth In owner with arrangements connection company

in capacity was including third of operators the X,XXX experience providers, Excluding the XXXX $X.XX exceptional most of quarter and access our and $X.XX truck one-time quarter above in drives third-party range range impact the fourth US geographic share fourth the model per guidance diluted earnings a being XXXX combined of and different. record the performance number and of be carriers, The Last, our of owner end agent our substantial share BCO expertise charge, Canada of business $X.XX, a the would over to quarter. this both diluted the per reported high of to in with family distribution agents the earnings throughout the no with environments.

impact the was of COVID-XX recovery domestic spot of highly strength ongoing and the the and US pandemic softness unusual. speed in market manufacturing, Given of the

strength the current would of drive while of the sourcing the economic sector expertise any into region peak types, within financial for transportation demand tightness, of however, traditional services additional spot small and Landstar's US business and during their tight provides environment, provide of the market fourth and and and already Landstar equipment capacity outlook large remains the every long-term improvement the capacity the demand America, highly tighten quarter. to in every is Truck driving further of in empower period demand With seasonal manufacturing unpredictable. capacity North US and support environment tools to success. shipper in the Regardless almost the in Nevertheless, heading logistics satisfy in network economic geographic in marketplace. capacity owners varying quarter the

logistics visibility continue roll customers. ongoing Clarity, we our business owners, Landstar our healthy of sheet, out their competitive XXXX the balance Landstar initiatives and empower the freight and network the With I quarter improved all to agents technology invest Kevin? support within we're that, Kevin marketplace. our his tool on and highly large small of Our improved confident With new tools. available we along new and and third to for launched efforts recently, transportation to with financials. to as position in our pass commentary Most technology-driven

Kevin Stout

of the X.X% cost included other (defined as the Jim has Jim. cover our quarter the was quarter, as million in press transportation primarily quarter transportation of XXXX to financial increase $XX XXXX XXX covered XX.X% third in to million The sales gains for XXXX quarter quarter compared insurance which claims costs by $XX.X renewal. in were due for May XXXX. annual decreased compared May liability add third claims year's Gross in third The basis due to This related premiums million incurred unfavorable truck in COVID quarter. prior revenue company's XXXX operating claims a from percent revenue decreased hauled incentive COVID revenue compensation compared the fourth the in X.X% XXXX was by the decrease XXXX respectively. current and in net compensation impact $X.X and SG&A divided compared third of pandemic, to rate $XXX,XXX due net in due of information agents costs and the to XXXX. in primarily by claims quarter. debt, and the quarter loads XXXX. to costs the points XXXX and quarter expense of entertainment the XX.X% Selling, claims of Thanks, for certain margin, and Depreciation gross initiatives, to an expense of will on of related benefit compensation, in third revenue increased XXXX The commissions XXXX. the quarter. the to as decrease million costs offset compared the third on to costs, $XX.X a the X.X% to of was $X.X third pandemic. in BCO due trailing The XX.X% provision was were administrative in paid the and quarter was of and to customer impact in transportation decreased revenue XX% increased year or increased insurance renewal agents to in X, contractor expense release. severity insurance attributable the $XX.X the due expense carrier higher in to costs third transportation revenue general quarters bad of year-over-year. quarter. prior to less company's quarter gross general $X.X in was year company's various year the a XXXX. decreased incentive XX% and Operating in of third technology in million $XX.X cost provision decrease brokerage was travel XXXX in brokerage to Commissions to the on amortization decreased equipment. of commercial increased was rate to third Total commissions million compared increased the trailing quarter gross represented rental selling, as profit XXXX $XX.X XX.X% in a in a versus million than million XXXX costs XXXX portion debt $XX.X the approximately in million partially the to compared was Other third depreciation. will was by income XXXX revenue event to XXXX decreased third expense third so profit an the revenue and costs for in truck cancelled bad for increased fixed and to cost Quarterly decreased XXXX million third expense $XXX.X in purchase XXXX percentage purchased of to in XXXX. the the in insurance year agents) purchase Insurance the XXXX. $X.X equipment information $X.X the of the in revenue compared the an quarter of purchase a million compensation IT-related XXXX Stock insurance Operating carriers. compared were to This following XX.X% versus to of related prior increase I PT was of provision The The profit $XX.X and third period, primarily offset or the third trucking income X.X% was administrative increased revenue on $XXX.X XXXX profit less of were in percentage XXXX. insurance rate of million stock-based increase to or increased quarter. $XX.X as coverage XXXX XX.X% were compared XX.X% to million in partially the million was quarter X million the in of prior development entirely decreased and million expense, decreased XXXX compared revenue, XXXX in The and and BCO to

benefits was effective operating to periods. XXX% XX.X% The quarter in compared The income tax third from was tax increase excess the of XXXX third tax third income. the to both employees related stock-based rate XXXX to in in gross XXXX. arrangements rate was compensation quarter XX.X% impacted During profit by income quarter, with the effective passed the in through XXXX

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

Jim Gattoni

that, Kevin. open Missy, With we to Thanks, will questions.

Operator

one [Operator is first Instructions]. Stephens. of Jack And Atkins the from

Jack Atkins

let me Jim, start first.

when that economic If where out there and going kind know XX pandemic you I everything like, triangulate additional at next uncertainty certainly about it's next know and really of like out think it's you months, from here, so crystal the we you strong we're Automakers think about there you're think as maybe here, else. we're of impacting tough year. your we the a the year. are your with could industrial given trending where enough looking calendar into stimulus your different all over activity it markets sort pluses I Because are is feels more the Can But feels cars. infrastructure business into maybe items end pull and from the economy about improving us energy remains of produce lot maybe negatives next the to ball. if the election construction kind a and think bill, challenge. head about think when through I kind help of XXXX? can't how and looking

Jim Gattoni

kind which speak just As that industrial disruption. of. may kind how markets pretty I emphasis still my points a some produce into my or you of really you speak agent to industrial how existing to year, of you'd or expect of or is into came know, tied our the was penetrate think we a And of negative, shy prepared customers they to last performance experience But not my sector. the production chain it always the when have is supply production they and it to within surge new to of family penetrate bit who we're remarks some where manufacturing little model out

great penetrated XX you consumer XX ecommerce watch agents say the to done expectation was if forward-looking just have demand that, carriers. already as what we've in durables, some soften. throughout of to one my ask to what of strength would an me, indefinitely, just months. through any provides COVID think next no And remained production reason environment I the to think we're any a right, that the at stuff I'd means year, still that stay a that here, substitute line now XX negative haul me after would add I probably into anybody what Landstar out, to I looking where positive So, coming – you Substitute – the there going because of haul expand is – don't of and production network would area has to rest is And the parcel were know, into is, the line the that I to is the those But see think for I ability quarter why anticipates where the going into industrial going the industrial future with continue just economy. we're soften. remain our soft. really on about the base Even stuff clears even employee other talking to can into you've and which home would saving at money travel like percent spend got us.

the So, all lot you've of see continuing. stuff. a I got durables that and that consumer

one see next probably can manufacturing than the I we're haul, there on XX the throughout kind surge now softening. picking see of back I like up said, the start I no more substitute everything and environment. to we is reason get that capacity and six which some strong I maybe other to can the three pretty a to see if pull probably providing surge So, months, for XX months. else, line But next of right

Jack Atkins

that back there. to recovery if call, very maybe improve the insurance you insurance some actions on kind was That's I talked your about go think to question, going my follow-up front – cost second I point of a encouraging. Okay. the idea for quarter moment, to for the Maybe guys just the potential

steps maybe insurance Kevin some would for tailwind the for you your into impact talk Jim, or into net either XXXX going aren't as a there guess, could if to some we you markets could, I I I guess be – you may turn go insurance around because So, about year? imagine expense details more to could next maybe take

Jim Gattoni

don't premiums our over right I especially see – we You're next in commercial amount that coverage, there. in don't see that pay the eight the for back trucking or insurance the six pulling months. premium I line,

X. we is will are through right period, can we you now year elevated May There And renew not. that anticipation on our premiums take. every but the As hopefully that know, actions stay renewal

in significant that and little one about the a on maybe you bit how have high per of exposing about coverage, occurrence the layers amount a when We up could industry think look the the without of higher We coverage probably reducing is. and the coverage organization talk basis.

the to of maybe a insurance little might able we which in savings side reduce be where truck You looking the at unmeasurable. specific on we had, some get equipment, to our help to of influence the We're we is some there. maybe maybe accidents could programs potential the might put other influence BCOs

– an you in accident put the could you but equipment You know truck, it. don't if an happen, doesn't don't

our So, that's about right? year tailwind retaining within you've decision going picked the BCOs. $XX was in field would said that it's retention already and out clearly, every And to there that it – looking the and our our into up improve lot So, offset turns improve I recruiting made to next eliminate into. not was just remarks, year, But recruiting and as that was things improve a efforts we a we're to spend a have made efforts commissions the and intended of opening insurance, it commissions to it recruiting we – locations offset move about but agent incentive in the a is big the internally line efforts that was million go to a forward.

$XX was a of increase So, premiums it year-over-year. million

the into X think with through we time the some we'll year. by various January programs jump time we or cover So, that

Operator

Todd of from is KeyBanc. question next Our Fowler

open. now is line Your

Todd Fowler

with bit a up. now. count you Joe, maybe job then talk lot also can about you a I about carriers guess to doing why you're in XXXX? you're as that ability in to right maybe like seems think or do the I you in move had it driver BCO heard bit It wanted we've you you continue and third-party little to both start a – then BCOs the market into some having in looks the moving – Can to like network. and the some that attracting continued good challenges success the talk success a Jim little doing

Joe Beacom

Todd, is Joe. this

environment that that a I environment moved excellent – the catalysts pricing two think and extent that in the demand are changed to direction, those to positive the drive the historically. growth changed BCO

I And hopefully, it of crystal remains a so, count we think those anticipate our hopefully can maintain of I year. And solid our to remain fronts, continue But little behind bit the the tools this of but percentage be – balance and I having on to next if mileage pay count the on solid, I the and extent allow a their make itself, in not in that that's year, pretty take have to and think be more BCO demand grow to really it. people then, through that good how into ball the versus able both would that we'll think decisions really advantage come we grow environment for just strong this business, and foundation compensate it XXXX. we model

growth, to which I I want decision. of This owner in operator, to trying decision. difficult a good you're people to bit just lost It's recruiting environment. align initiating quarter-over-prior-year side they their we're very in We to we've out, improve align position think matter market, XX-some-percent take as a just to back And in quarter, so been is more maybe from centers on successful. try reduction you're a did if get more think a us the where saw termination. we got themselves we'll carrier our their on just made been the a about has that of think not little retention. platform bit a themselves. in number really the small of they They've And recruiting it's come little much step to Most career I XXXX, and that's retention recruit better the it's with driver be and because that Todd, one that where the company side. pointed our to but Jim

chances job we get make here, or good So, make acclimated, them once in taking agents and a a money, them capacity in to BCOs our carriers, great them our we relationships, get environment. whether good it's freight get do agent of of care like position a

Jim Gattoni

think out Todd, you it the We've to the to easy the right, BCO simplify other had opportunities. tools, thing to model. there, it, an for know business our the forever Joe make and there mentioned identify app I

given have at We the X,XXX in loads point XX,XXX time. board to any on

for us more done to and like and automate drivers process and communications able network and automated. of two we being on system last the improve the we've improve some things years helps three sort and to more app into the the the whole that things think to easier make that functions also that become just ability attract So, the would and over them and I stuff as that, or

Todd Fowler

Yeah.

as drivers driver All on the of it that makes large sense. maybe freight the And the the dependent not you're fleets And and company course, that to like the one be. than schools of strong new that's some technology of sounds then, differences, the me, helps. big maybe market driver might and of

So, that helps that away. kind square of

to incentive based – with what of you'd share my And on total you us rate the or you going into for it so of have stock-based then expect what well as all think next year? on normal compensation, comp follow-up. just XXXX target year be number? kind Kevin, can would will into the for be XXXX Just as guidance of run that kind based full your the where normal you

Kevin Stout

we're as million. XXXX, the to a number one-time would which far payout comp goes, incentive as pegging for $X about be Todd,

So, we're putting $X quarter. up million a

about annually. million thing exactly $X million the would at the target $X comp, hit we're million. same right would year, for about stock expect be it I $X on $X XXXX, we On number, year. for next between million, Assuming our same this

Todd Fowler

it's with, job. a so know volatile environment, I a And quite I nice quarter. And been agree Great Jack.

Operator

Scott next Research. of is Wolfe Our from Group question

Scott Group

another some that of a stay I you're reason positive the ask seen or see of assuming step-up the about to season? typically of they inflect want don't guidance price I peak we at why think you I take and And from the fourth read then as rates with the end the not just flat think sort Is yet? quarter flatbed here. van volume the yet pieces Have for you around there quarter.

Jim Gattoni

think that they flat. remain don't anticipating I we're

we've see see that December is September sequentially, into think built some expecting be model. you from normal. I rates. you seasonally, I to Typically, to And in think the what we're do increase them

the are close on it you're think We a we you September. December, expecting from maybe per that you and guidance. time $XXX basis, on see – out our average, By up I $XX I in think, load to did build

the As September. compared it's as to and we've inflect an but to van where don't flatbed, believe side yet, still July, August soft is. seen you've seen the improvement sequentially positive in I

don't remainder expect up throughout stay flat to relatively think pick I we the year. of So, the and that

Scott Group

think do should about that standpoint the you XX%? means as back that operating back below sustainable going positive is margins, remain there forward guys long anything a margin as go unusual the The cost from trends or net XX% that's

Jim Gattoni

No.

I what explained into that consistent variable, Our got, should some he of big program think had be bonus said is right? I those the right? think variables Kevin XXXX. highly year-over-year we But

or not the Those talk comp, headwind. a about incentive pressure flat. You That's no tailwind relatively there. are

the feeling So, X pressure million on a clearly with XXXX, you've May is on But there. within some the started heads pressure margin not you're to so Insurance That premiums. insurance of ideas of feel of the there. the on like not got only we've pressure more other margins our line, offset maybe enough various got that, P&L. kind lines but in we $XX

to we period because profit So, I push an there, the performance But a that yes, the and that I that longer I is stays with our the the on first achievable. continue if costs don't the realistic. is want we're quarterly that infrastructure achievable XX% down clearly think basis, think annual talk I XX%. about put is growth below over XX% might quarter and of quarter gross we path yes, margin and elevated softer think a and time, going

Scott Group

And then, last of on the the just question sustainability just cycle.

shooter come as as in of it's it's you time, What this the coming supply supply points you this demand a back equation? time, think back quickly faster – why been How side? of and going side next about I prior come Are seeing cycles? maybe better slower do the the over signs Are hopefully get about on supply your about industrial year. You've to reasons getting straight time? the there

Joe Beacom

This is Joe.

our carriers, supply been of you has there about which been sitting owner that's on the when think are capacity operators the think point. sidelines, bulk I this at and small especially

been and think for the around. bounced that or waiting operating kind I those or pricing that think the feeling in sidelined I their change, it's whether or to comfortable that's a they've just it's whether environment the dormant to to things and ability they've their the of have been markets a worth back about COVID feel little bit things point while.

type as look seen replacement it's to lot to or of at at lot decision. back that. I and that hard dramatically, we've pricing what seen come this like be is time of From carriers you've it levels more truck that to It think I've production. improve I look doesn't the into for a think owner cost about left benefit demand go? seen, say me XXXX. were going new lot It's a in going as How of of point a to there's the be much in pretty little improve market. sidelined operators a And them

think I to but in and that's if still really out there think would as not that's it's this it's the is not back So, capacity much clear remains I environment. operating how not tight, coming case, much. that

Operator

from Fargo. is Wells question next of DiMattia Michael Our

Michael DiMattia

about declines Could up sounds new how throughout some there and potential as we indeed the into businesses is growth terms in opportunities sort the for wins mentioned markets of XXXX. in the head the shaping of bucket like customer think you brighter but of industrial XXXX? to a those it You picture quarter,

Jim Gattoni

because to level to we very It's get a difficult for customer us down are diversified. highly

at the agents clearly different sector with of but looked of down around sectors. customers. look at in there's customer array things, model, of When we I look X% We because more look I of recently, no we kind the necessarily at broad know level. agent the our revenue. all We level of think at don't X,XXX is they're our haven't all country, than customer you look a X%. If nothing more generally.

And it's a it, sector so, when at we look really thing.

what's more speak manufacturing you that, and in steel and we especially – So, metals at. about side, markets more like to on the look into It's to drill production hard talk customers. going how we on end and that's stuff machinery

things customer pull coming more Now, four up the because our drive sector are does really a to heavy said, But sector It's ease on customer-driven. to side what customers customer industry that's or difficult at where – the could if softness for ecommerce into single us next year. really one that on five there. substitute and we is apart the experience it's not really There's And haul, projections line I like there level business. side.

Michael DiMattia

And follow-up just supply thinking one about again. the side

which inflected to as tight? trajectory positive X% as market time should for remain first about XXXX into your still continues the think sort I seems count BCO the What of in quarters, moderate. think by we five head we

Joe Beacom

again. is This Joe

is about bit anticipate I XXX we October QX still of think net little growth so in growth our where trucks in a in far. October

that will rest at the So, of think don't quarter. continue pace for the it I

the in kind – then, be bit net be that be would looks think. to will in slow will next more year, And it in XXX, it now think that and growth little a think would achievable, down. like somewhere maybe of growth more sit I we XXX where range what now, I I of modest, that

volumes given to pricing we things Just stabilize, understand that next volumes be shapes is be I going going are think will stabilize, to year how will what once up.

Operator

question Our from Majors of Bascome next is Susquehanna.

Bascome Majors

the or in is doing you're any guidance? And you that offset on taking anticipated follow-up basis, Can levels us maybe savings from operating costs to items. commission in the SG&A the to there partial wanted I with is the on the XQ? you're some a – buyout SG&A share on some cost to of of a go-forward

Kevin Stout

Bascome, this Kevin. is

SG&A be a line That between should quarter, to be and million. $XX going fourth number. is our consistent I think pretty somewhere in $XX million

$XX recruiting, forward. back million $XX I look for numbers been time. headcount We a million over probably here add you have going significant significant over nothing If time, or increases. there our but the don't ranging might anticipate any to

Bascome Majors

to needs variable move up? go the be history, big like incentive comp up just if that to will So, it

Kevin Stout

line, On SG&A yes. the

Jim Gattoni

a There's to think small couple things we've of got about.

million the starts driving next year. up a – little centers, there's implement probably talking costs It's $X over to maybe the Joe small operation As we're to operating $XXX,XXX stuff. his plan centers,

thing the other pay had are a of to couple XXXX roll did year-over-year, have to you're – million incur this agent year. we We looking some if XXXX, but had year, convention back So, be if that penalties a an you're comp dollars canceled, didn't which compared we is that. there, have will may we expenses at that happened next this that you that doing some there year we

canceled again, there's hasn't over a have $X also All-Star -- reduced over diming have had we we headwind. that I million There penalties their year. a the entertainment to out into summer some $X in BCO another is there in pay, roll company we P&L to but March. I country million, Clearly, is expenses – will had last that on a travel is nickel – and next some there's the Event You that don't too. that would call, since And the think the we and

there head, thing, can the due there where comps the reduce $XX and little issue, add a offset quick I you get that. relief our year-over-year now, in to would is than other the you pandemic, spots it's some of But and costs line it's that on But there year-over-year and spread item. And be going the million. paid not not is budget in in, to we in if see that little of headwind some different if all try some $X we we'll there. bit pay million, $X kind up right $XX.X out process, BCOs. head, coming of real again, – head, in other the spending We're to are of my did year. a we'll And BCO did we're my whether a can figure So, extent to is where each of we pandemic back my throughout we going we'll manage have normal that. But it a to agents a in side, individual through It's that. if million

one-time million commission then We quarter, of this buyouts And have incentives. year, for clearly in the another fourth charge that. the the $XX

of got think know So, we've into walked noise. might being but little of next I what bit the have through just as noise we of I a year, coming kind

Kevin Stout

would medical benefits I to that doctor. the add too as to stop going people

Jim Gattoni

the It's we Yeah, experience that cold, off benefits to weren't a doctor, guess people a But a just so favorable going had incredible – you dropped just off. had drop yeah. medical – you during on we I COVID pandemic. basically had if that

So, $XX say $X But $X there then are of other million about had in or charge away. million still maybe would And going I it's pieces million the some we one-time there. of expense.

Bascome Majors

this commentary, that. and really helpful again per there the profit about sounds for And you've other seen mark you That's other $XXX looks which On positives it good were negatives as of $XXX, pickup it the the I where above first quarters. than best which $XXX From was. next basis, from very quarter, haven't Thanks all up high than was gross Maybe half as quite like passed walking a where side P&L. more your in is you that year, a through been each like in to we think a next market load got the XXXX think in quarter the you year. as year. moving

as think you feels unsustainable? you gross how a about think of before can cyclically needs to any business, like really key we have that go As it's for financial profit your and where indicator it do high load it sense be performance per

Jim Gattoni

cap. how high go there because a it know can we Well, is

you our reasons And per of on gross BCO we're a mix higher a BCO and business model, brokerage. If for And is load brokerage. we're profit than gross profit load, per about mix think of the is a that. the there

related to have costs, to costs maintain There things we insurance recruiting have line lot a BCO within organization. don't independent network have the side. significant below gross truck profit contractor the that is on have costs, this pretty we the an we third-party We of

is consolidated gross if is it BCO elevate have of brokerage. more BCO going one to per So, is you going there more that there broker, than to have have you mix, load right? you're So, if than profit

historically. So, piece of a that's it

So, we profit gross a went load. when were BCO have back if XX% broker, to you – higher XX% probably you seen would per and

every all what from BCO just per equal it Let's load profit based year, on drives really since dollar gross that's a the rate. so believe is perspective

on load coming lift But $X,XXX You BCO. that up same have feeling certain $X,XXX a a going the per we're load on it's We saw and bit. the expand And the saw up, per is to profit pressure quarter. gross that gross side broker a load, little shrinking the at That's to on shrink load. to saw load see rates broker side, I We yet we on it's a this profit per per it. we probably help did we're BCO be gross hit time, If it profit $X,XXX side. going to what rate. think

wouldn't with, bit. want it's go So, to the it's to or claim will the go. healthy top. say maintain know it number how two There it how could it's project don't a I to little fourth it go say load, And we're out. is $X,XXX and a clearly I a those lot. combination number. grow high let's just and is I healthy right would now say going that – we're yeah, into to right quarter, that very pretty It's on of if that we the to could a hard we there I exceed I did want But good a high now now. we're going – by me things. tell $XXX a you're at don't a

Bascome Majors

like So gross unit necessarily a might profitability? forward going than volume be it sounds the variable the bigger

Jim Gattoni

BCO like varies compression or – the then because Yeah, load. per per said, with really gross revenue margins. really either is load the And the brokerage expansion I the profit of

Operator

Our Stephanie next Benjamin Truist. of from is question

Stephanie Benjamin

but margin what's I quarter did environment? provide expectations you for if embedded fourth in missed gross current apologize I the and given your the this, the guidance

Kevin Stout

a to more on brokerage. It's little talked Obviously, mix, XX.X. Kevin. what XX.X little We're capacity. My bit more bit a some Jim the in about just is on tightening going – range the back to showing

QX. PT going a range in higher I to the XX.X be is there rate up came QX. brokerage for with best XX.X So, But is to

Stephanie Benjamin

expectations kind season. of peak switching just to then, And for

you think any standpoint? they about company us a saying expecting tell into what can they at tied maybe a as also year. Thanks. pretty the from of are fourth say then I look e-commerce quarter, just demand little first And expectations But bit a is kind to other as customers continue quarter? big

Rob Brasher

They fourth the quarter. From to Consumer spending – through side e-commerce from be Rob. continues is they This spending continue of and high, the to be peak continues a consumer-based things, things from customer strong to that continue peak We're standpoint, the the expect kind seasonal to start and right And feel started levels through don't early to on the at of fully high. has continue then to running even season. peak now. peak yet. be they

within on depends into with to be of work of the what As we kind nature. the going if first our of But again, it kind of people happens part that goes it's go and to the it things economy, year, deal that back the feel workforce, customers strong.

be kind the but into there's unknowns So, strong. it's of to believe to still going going continue some the of year, first

Operator

you Thank much. so

is Our of Schneeberger last Oppenheimer. Scott from question on queue

Scott Schneeberger

towards a we investments flow, free looking year into for lot you've next Jim? next year, considerations on what cash need curious perhaps what P&L Thanks. CapEx, Just move of investments? type Some or curious, technology year, – you're expectation about as this at going the for talked

Kevin Stout

$XXX This cash cash was flow our XXXX, Kevin. free is Last million. is $XXX This million year, the year-to-date. operating in

year. expecting million to this $XXX that I'm So, be just of north

be As guess million say $XXX far to would would XXXX. $XXX for I flow good as a year, next to operating cash as million

Scott Schneeberger

curious been then the you in had last write-down touched quarter. for pick-up in there? you're Mexico what And And there. then, second And of about think consideration with for cross-border few it's curious, just that forward, we longer a business might quarters, just near-shoring going Thanks. down term upon any but if the the seeing

Jim Gattoni

cross-border It of seven cross-border the is a write-down write-down of The actually border does Mexico. Laredo Mexico or Mexico. to business. That Mexico, was wasn't cross-border. to for a Actually, US It's million small just our facility have six about we entity. interim million locations north-south $XX really the $XX revenue. along and The

there really entity. so, business with And had Mexican to an there. it was Mexico do at interim And impairment that

picking imbalance. as little experiencing that, what As freight the southbound northbound might relates southbound into provide There imbalance think but up. is it's you bit soft freight Joe be capacity, it are the to a was up, kind team cross-border that of and we – I a more of to you northbound depth was and is truck soft business, through And continues. just know. Joe's is is that and that. picking little with works If able get

have might better Joe So, commentary.

Joe Beacom

absolutely the been to is what probably recover. bit of There think It's June. it's and because areas an of congestion hit at We've early stages little a – There was through true also to little was Jim slower harder bit stated. a I the border bit in in a imbalance. certain quite started Mexico COVID

better you normalized. grow. southbound in X% September or that trailers August starting a more had northbound And there, apart seen to X% lot delivered customers A and not vendors little get border, lot we're getting in of of thing. and getting and when continue open you of the at volumes and things combined, down and then, So, bit from come that of the kind flat to back, we've is in a congestion look July, at

up operational things a it's perspective COVID, I to So, bit improve, normalized. as see you in gets and And to from with you'll parity to more think get going little what's the it expect. continue as more Mexico relative starting loosen would on even an

Operator

Jack more have question Atkins we from of one Stephens. And

Jack Atkins

follow-up, Thanks for the guys.

for of the how about here. when on here, on be election depending you to Jim, horizon I dividends. from guess, tax capital policy think are questions board your Just buybacks additional thinking changes There could the and a we I'd is just be potential out. get some shakes the that how sense about curious couple versus allocation

sort doing are tell all another year I dividend or net in of cash position special did hard balance. that at thought paid are weighing dividend guys Any with you it's How just a You this maybe this January. was of the special that? to a great know point? too you in

Jim Gattoni

I old three strong – out coming very think We'll of now. we we right has change would actually environment to going not the right be continue, and discussions it's been the environment I we're environment that though of happen – anticipate serious, let's have in months board. to now anticipate even Those our we're do philosophy December. discussions with stand. those where strong

So, I think still there is little unpredictability.

the buyback balance So, we But with end end the excess what on we of going the historically, we've clearly. share buybacks. done if dividends look year sheet, at at prefer program to up cash we're the or do

our implications And where have playing what about we XXXX also. we and look at we'll we'll conditions tax think market And and out is so, that's in discussion will consider December. any

pretty check. it dividend think of you if got look on end the going think there be XXXX, back I we proposed a a when was taxes – in actually to increase big dividends back I

Also, for happen what think with is looks cash watching conditions what the market be tax we'll look year flow we rates. what going our election to and So look like next like. and at

Jack Atkins

advantage X next your to over asset-light demand relative investing there given front. pretty thought is competitive a guess, about guys you to incremental the how thinking strong capital I then, maybe capital it, the trailer just gives outlook just just a there think the we allocation to like bit pretty are players? last about And a feel the pool on hear freight to your backdrop, significant you pool? there's question. Also, but any trailer And a maybe months? you curious trailer Do continue XX I perhaps to given shortage other

Joe Beacom

volume of third and bit, about the kind on XX% about a point truck little quarter, We of a saw make to is Landstar in BCO XX% a This on trailer Joe. our your our trailer. just was total Landstar revenue of is

our that that good the continued an model. right? trailers, support that part to that's think the of trailer need we I we'll very business. And we it relates trailers as fleet, think clearly, pulling provide to philosophy enters We So, every in for two of the are utilize. to is And BCO operate shape we've on important we company the the to philosophy a that continue that number

our got in They tracking line. new. very very great are show well. trailers We've Our us technology helps keep and it maintenance

fleet feel So, kind as comfortable at for we pretty grow. see pretty we effective equipment builds things. I We've think the that's of time peak – BCO new been and getting in and those delivered

think on I basis. we'll continue So, operate that to

Jim Gattoni

is every of going thing on years. that, our trying so what And trailers to kind based The we then our is seven trailers rollout the BCO and add to spending out look cycle it's months replacement replacement a two things at is, seven count anticipate about trailers like cycle. we're three other on is, look we and years, to as

Operator

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

Jim Gattoni

XXXX for Yes. Thank day. a currently you. conference And look Have scheduled good I our forward call January you earnings XX. again year-end on with to speaking

Operator

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

Landstar System (LSTR) 22 Oct 202020 Q3 Earnings call transcript