Landstar System Reports Second Quarter Revenue of $1.374B and Second Quarter Diluted Earnings Per Share of $1.85

07/26/23

04:15 PM EDT

2Q 2023 Presentation Slides 1.5 MB

JACKSONVILLE, Fla., July 26, 2023 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported diluted earnings per share (“DEPS”) of $1.85 in the 2023 second quarter on revenue of $1.374 billion. Landstar reported DEPS of $3.05 on revenue of $1.975 billion in the 2022 second quarter.

Gross profit in the 2023 second quarter was $139.7 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2023 second quarter was $198.2 million. Gross profit in the 2022 second quarter was $208.1 million and variable contribution in the 2022 second quarter was $267.5 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2023 and 2022 second quarters and year-to-date periods are provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 37% and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 34%. The Company is currently authorized to purchase up to 2,910,339 shares of the Company’s common stock under its previously announced share purchase programs. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.33 per share payable on August 25, 2023, to stockholders of record as of the close of business on August 10, 2023. This quarterly dividend includes a $0.03 per share increase, or 10%, over the amount of the Company’s regular quarterly dividend declared following each of the prior four quarters. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2023 second quarter was $1,246.9 million, or 91% of revenue, compared to $1,747.2 million, or 88% of revenue, in the 2022 second quarter. Truckload transportation revenue hauled via van equipment in the 2023 second quarter was $703.0 million, compared to $1,026.9 million in the 2022 second quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2023 second quarter was $394.8 million, compared to $474.3 million in the 2022 second quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2023 second quarter was $118.0 million, compared to $209.1 million in the 2022 second quarter. Revenue hauled by rail, air and ocean cargo carriers was $100.7 million, or 7% of revenue, in the 2023 second quarter, compared to $202.3 million, or 10% of revenue, in the 2022 second quarter.

“Landstar’s business model performed well in the 2023 second quarter considering the challenging freight environment,” said Landstar President and Chief Executive Officer Jim Gattoni. “After a record-setting 2022, we entered 2023 knowing we would face very difficult year-over-year comparisons, especially during the first two fiscal quarters. On top of these tough comparisons and contrary to typical seasonal patterns common to the freight transportation industry, the domestic freight environment softened sequentially from the 2023 first fiscal quarter to the 2023 second fiscal quarter. Reflective of these tough dynamics, the number of loads hauled via truck in the 2023 second quarter decreased by 16% compared to the 2022 second quarter. On a sequential basis compared to the 2023 first quarter, we estimate that truck load volumes in the 2023 second quarter underperformed seasonal historical patterns experienced during pre-pandemic periods by 9%. The atypical sequential decrease in demand for truck load services also caused additional downward pressure on rates, especially in the spot market where the Company primarily operates. As a result, revenue per load on loads hauled via truck in the 2023 second quarter decreased 15% compared to the 2022 second quarter. We estimate that truck revenue per load during the quarter underperformed sequential historical patterns experienced during pre-pandemic periods by 6%.”

Gattoni further commented, “Through the first several weeks of July, the number of loads hauled via truck has trended below historical, pre-pandemic second quarter to the beginning of third quarter sequential patterns, while truck revenue per load has thus far trended slightly below these historical, pre-pandemic sequential patterns. Assuming that these trends continue, I expect revenue per load on loads hauled via truck to be in a range of 10% to 12% below the 2022 third quarter and the number of loads hauled via truck to be in a range of 16% to 18% below the 2022 third quarter. As such, I anticipate revenue for the 2023 third quarter to be in a range of $1.275 billion to $1.325 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2023 third quarter, I would anticipate DEPS to be in a range of $1.65 to $1.75. The anticipated range of DEPS for the 2023 third quarter includes estimated insurance and claims costs of approximately 5.4% of BCO revenue. These costs were 5.5% of BCO revenue over the first half of 2023. The anticipated range of DEPS for the 2023 third quarter also reflects an estimated effective income tax rate of 24.5%.”

Landstar will provide a live webcast of its quarterly earnings conference call tomorrow morning at 8:00 a.m. ET. To access the webcast, visit the Company’s website at www.landstar.com; click on “Investor Relations” and “Webcasts,” then click on “Landstar’s Second Quarter 2023 Earnings Release Conference Call.”

About Landstar:
Landstar System, Inc., a Fortune 500 company, is a worldwide, technology-enabled, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. Landstar transportation services companies are certified to ISO 9001:2015 quality management system standards and RC14001:2015 environmental, health, safety and security management system standards. Landstar System, Inc. is headquartered in Jacksonville, Florida. Its common stock trades on The NASDAQ Stock Market® under the symbol LSTR.

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

Forward Looking Statements Disclaimer:
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this press release that are not based on historical facts are “forward-looking statements”. This press release contains forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2022 fiscal year; the impact of the coronavirus (COVID-19) pandemic; an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; U.S. trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; potential changes in taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2022 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Q for the 2023 first fiscal quarter, described in Item 1A Risk Factors, and in other SEC filings from time to time. These risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated. Investors should not place undue reliance on such forward-looking statements, and the Company undertakes no obligation to publicly update or revise any forward-looking statements.

Landstar System, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share amounts)
(Unaudited)


			Twenty Six Weeks Ended					Thirteen Weeks Ended
			July 1,			June 25,		July 1,			June 25,
				2023			2022		2023			2022

Revenue			$	2,809,532		$	3,945,663	$	1,373,857		$	1,975,064
Investment income				3,852			1,307		2,484			586

Costs and expenses:
	Purchased transportation			2,154,491			3,096,018		1,053,197			1,545,688
	Commissions to agents			248,153			311,634		122,478			161,856
	Other operating costs, net of gains on asset sales/dispositions			25,840			21,522		13,462			10,381
	Insurance and claims			57,431			64,820		29,784			34,052
	Selling, general and administrative			108,096			111,680		54,529			58,967
	Depreciation and amortization			30,139			28,045		14,941			14,288

		Total costs and expenses		2,624,150			3,633,719		1,288,391			1,825,232

Operating income				189,234			313,251		87,950			150,418
Interest and debt (income) expense				(1,033	)		2,228		(307	)		1,105

Income before income taxes				190,267			311,023		88,257			149,313
Income taxes				45,513			73,629		21,698			36,758

Net income			$	144,754		$	237,394	$	66,559		$	112,555

Diluted earnings per share			$	4.03		$	6.39	$	1.85		$	3.05

Average diluted shares outstanding				35,962,000			37,162,000		35,941,000			36,905,000

Dividends per common share			$	0.60		$	0.50	$	0.30		$	0.25

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)


			July 1,			December 31,
				2023			2022
ASSETS
Current assets:
	Cash and cash equivalents		$	360,528		$	339,581
	Short-term investments			58,574			53,955
	Trade accounts receivable, less allowance
		of $12,715 and $12,121		848,839			967,793
	Other receivables, including advances to independent
		contractors, less allowance of $13,673 and $10,579		64,079			56,235
	Other current assets			41,667			21,826
		Total current assets		1,373,687			1,439,390

Operating property, less accumulated depreciation
		and amortization of $417,364 and $393,274		297,066			314,990
Goodwill				42,166			41,220
Other assets				124,846			136,279
Total assets			$	1,837,765		$	1,931,879

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft		$	57,216		$	92,953
	Accounts payable			478,688			527,372
	Current maturities of long-term debt			31,560			36,175
	Insurance claims			45,160			50,836
	Dividends payable			-			71,854
	Other current liabilities			80,202			98,945
		Total current liabilities		692,826			878,135

Long-term debt, excluding current maturities				53,149			67,225
Insurance claims				57,240			58,268
Deferred income taxes and other non-current liabilities				40,989			41,030

Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,497,324 and 68,382,310		685			684
	Additional paid-in capital			253,486			258,487
	Retained earnings			2,759,128			2,635,960
	Cost of 32,550,852 and 32,455,300 shares of common
		stock in treasury		(2,009,327	)		(1,992,886	)
	Accumulated other comprehensive loss			(10,411	)		(15,024	)
		Total shareholders' equity		993,561			887,221
Total liabilities and shareholders' equity			$	1,837,765		$	1,931,879

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)


				Twenty Six Weeks Ended						Thirteen Weeks Ended
				July 1,			June 25,			July 1,			June 25,
					2023			2022			2023			2022
Revenue generated through (in thousands):

	Truck transportation
		Truckload:
			Van equipment	$	1,458,124		$	2,108,143		$	703,041		$	1,026,938
			Unsided/platform equipment		772,336			883,032			394,772			474,274
		Less-than-truckload			62,673			70,651			31,115			36,931
		Other truck transportation (1)			277,520			436,656			118,017			209,055
			Total truck transportation		2,570,653			3,498,482			1,246,945			1,747,198
	Rail intermodal				50,889			86,110			25,232			43,422
	Ocean and air cargo carriers				136,534			310,904			75,441			158,847
	Other (2)				51,456			50,167			26,239			25,597
				$	2,809,532		$	3,945,663		$	1,373,857		$	1,975,064

	Revenue on loads hauled via BCO Independent Contractors (3)
		included in total truck transportation		$	1,034,881		$	1,415,963		$	515,355		$	688,389

Number of loads:

	Truck transportation
		Truckload:
			Van equipment		655,036			763,750			323,082			387,482
			Unsided/platform equipment		263,185			279,345			135,613			147,516
		Less-than-truckload			93,066			96,828			46,874			48,985
		Other truck transportation (1)			110,373			166,747			52,311			80,817
			Total truck transportation		1,121,660			1,306,670			557,880			664,800
	Rail intermodal				15,390			24,220			7,630			11,590
	Ocean and air cargo carriers				16,750			22,890			8,310			11,330
					1,153,800			1,353,780			573,820			687,720

	Loads hauled via BCO Independent Contractors (3)
		included in total truck transportation			463,910			527,830			231,360			265,590

Revenue per load:

	Truck transportation
		Truckload:
			Van equipment	$	2,226		$	2,760		$	2,176		$	2,650
			Unsided/platform equipment		2,935			3,161			2,911			3,215
		Less-than-truckload			673			730			664			754
		Other truck transportation (1)			2,514			2,619			2,256			2,587
			Total truck transportation		2,292			2,677			2,235			2,628
	Rail intermodal				3,307			3,555			3,307			3,747
	Ocean and air cargo carriers				8,151			13,583			9,078			14,020

	Revenue per load on loads hauled via BCO Independent Contractors (3)			$	2,231		$	2,683		$	2,228		$	2,592

Revenue by capacity type (as a % of total revenue):

	Truck capacity providers:
		BCO Independent Contractors (3)			37	%		36	%		38	%		35	%
		Truck Brokerage Carriers			55	%		53	%		53	%		54	%
	Rail intermodal				2	%		2	%		2	%		2	%
	Ocean and air cargo carriers				5	%		8	%		5	%		8	%
	Other				2	%		1	%		2	%		1	%


										July 1,			June 25,
											2023			2022
Truck Capacity Providers

	BCO Independent Contractors (3)										9,748			11,023
	Truck Brokerage Carriers:
		Approved and active (4)									58,303			70,649
	Other approved										29,503			29,454
											87,806			100,103
	Total available truck capacity providers										97,554			111,126

	Trucks provided by BCO Independent Contractors (3)										10,548			11,887

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

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

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

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

Landstar System, Inc. and Subsidiary
Reconciliation of Gross Profit to Variable Contribution
(Dollars in thousands)
(Unaudited)


			Twenty Six Weeks Ended						Thirteen Weeks Ended
			July 1,			June 25,			July 1,			June 25,
				2023			2022			2023			2022

Revenue			$	2,809,532		$	3,945,663		$	1,373,857		$	1,975,064

Costs of revenue:
		Purchased transportation		2,154,491			3,096,018			1,053,197			1,545,688
		Commissions to agents		248,153			311,634			122,478			161,856

	Variable costs of revenue			2,402,644			3,407,652			1,175,675			1,707,544

		Trailing equipment depreciation		16,519			18,363			8,150			9,280
		Information technology costs (1)		13,493			9,039			6,742			4,993
		Insurance-related costs (2)		58,382			66,441			30,122			34,786
		Other operating costs		25,840			21,522			13,462			10,381

	Other costs of revenue			114,234			115,365			58,476			59,440

	Total costs of revenue			2,516,878			3,523,017			1,234,151			1,766,984

Gross profit			$	292,654		$	422,646		$	139,706		$	208,080

Gross profit margin				10.4	%		10.7	%		10.2	%		10.5	%

	Plus: other costs of revenue			114,234			115,365			58,476			59,440

Variable contribution			$	406,888		$	538,011		$	198,182		$	267,520

Variable contribution margin				14.5	%		13.6	%		14.4	%		13.5	%

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

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

Contact: Jim Todd (CFO)
Landstar System, Inc.
www.landstar.com
904-398-9400

Source: Landstar System, Inc.