Landstar System, Inc. 2026 Q1 Earnings Call - Heavy-Haul Strength and AI Integration Drive Margin Expansion

Bruce Chan, Analyst, Stifel0: Good afternoon, and welcome to Landstar System, Inc. first quarter 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 Frank Lonegro, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Jim Todd, Vice President and CFO, Matt Dannegger, Vice President and Chief Field Sales Officer, and Matt Miller, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. Jim Todd. Sir, you may begin.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Thanks, Arlene. Good afternoon, and welcome to Landstar’s 2026 first quarter earnings conference call. Before we begin, let me read the following statement. The following is a safe harbor statement on the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relate to Landstar’s business objectives, plans, strategies, and expectations. Such information is, by nature, subject to uncertainties and risks, including, but not limited to, the operational, financial, and legal risks detailed in Landstar’s Form 10-K for the 2025 fiscal year described in the section Risk Factors in our 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 information, and Landstar undertakes no obligation to publicly update or revise any forward-looking information. I’ll now pass it to Landstar’s CEO, Frank Lonegro, for his opening remarks.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thanks, JT, and good afternoon, everyone. We are excited to discuss our results this quarter, given the overall sense of optimism many in our network are sharing with us. It was great to spend time with many of our BCOs at the Mid-America Trucking Show in March, and to celebrate the success of our agent network earlier this month at our annual agent convention. The tone and positivity I heard from my personal interactions with BCOs and agents at these events was the best I’ve experienced during my tenure at Landstar and provides an emerging sense of confidence as we head further into 2026. Before diving into our results, I’d like to thank our BCOs and agents and all the Landstar employees who support them every day.

The capability, resiliency, and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry. Their adaptability and dedication to safety, security, and service for our customers is truly impressive. They are exceptional business leaders and key to driving the continued success of Landstar’s business model. I’d also like to thank Derek Barrs, the head of the FMCSA, who recently appeared at our agent convention and discussed many of the significant initiatives he is leading at the FMCSA. These regulatory efforts are having a real, tangible impact on the trucking industry and have been very positive for Landstar. We look forward to continuing our dialogue with the USDOT and the FMCSA in support of these efforts. Amidst our improved operating performance, the 2026 first quarter was not without challenges that required our focus and attention.

We are driving to incorporate AI into our business and do everything we can to mitigate any perceived industry-specific AI disintermediation risk. We were pleased to have Jim Applegate and Rick Coro participate in the Goldman Sachs AI and Freight Forum in Chicago in late March, where they shared our AI roadmap and several in-flight initiatives across the network. We continue to be encouraged by the level of engagement we’re seeing among agents and BCOs participating in our beta programs. That collaboration is already yielding tangible progress across a number of workflows, including customer quoting, carrier negotiations, dispatch decision-making, automated tracking, appointment scheduling, network modeling, and bid optimization. Importantly, these tools are being developed alongside our agents and BCOs with early pilots already live in production or in advanced testing.

Initial feedback points to meaningful time savings, higher shipment lifecycle throughput, and improved visibility across the network, empowering our entrepreneurs to spend more time on revenue-generating and relationship-driven activities. At the same time, we are advancing several AI-driven efficiency initiatives at the corporate level, including our tier one ERP modernization, proprietary fraud prevention and detection capabilities, service center workflows, BCO retention models, and self-service analytics for operations and customer management. Across both the agent network and in our corporate offices, our focus remains on disciplined deployment and scalable adoption. We look forward to providing additional updates as these initiatives continue to progress. We, like everyone else, are monitoring the news on the geopolitical conflict in the Middle East and the related volatility in energy and diesel prices.

We also continue to monitor the potential effect of tariff and trade policy on our business, including the impact of the recent Supreme Court decision and tariff refunds from the federal government. Tariffs have certainly already impacted freight flows. For example, the 2025 first quarter reflected a desire by many customers to pull forward shipments in an effort to get ahead of potential tariffs. This contributed to a relatively tough first quarter volume comp for Landstar. We will also be closely monitoring any developments with respect to trade relations among the United States, Canada, and Mexico this year. Against that backdrop, the Landstar business model performed well, with revenue increasing approximately 2% compared to the 2025 first quarter, gross profit increasing approximately 14%, variable contribution dollars increasing approximately 7%, and basic and diluted earnings per share increasing approximately 36%.

As a reminder, earnings per share during the 2025 first quarter were unfavorably impacted by approximately $0.10 per share related to the previously disclosed supply chain fraud matter. As JT will discuss in more detail during his remarks, the 2026 first quarter also experienced lower insurance and claim cost expense compared to the 2025 first quarter, primarily due to the company’s ongoing efforts to address strategic cargo theft. These efforts helped Landstar to achieve both a decrease in the frequency of cargo claims incidents during the 2026 period compared to the 2025 period, as well as decreased severity of cargo claim incidents. One consistent highlight in our results remains the strength of our industry-leading unsided/platform equipment business. This part of our business posted another strong quarter with an 8% year-over-year revenue increase, driven by the performance of Landstar’s heavy-haul service offering.

We generated approximately $134 million of heavy-haul revenue during the 2026 first quarter, representing an 18% increase over the 2025 first quarter. This achievement reflected a 12% increase in heavy-haul revenue per load and a 6% increase in heavy-haul volume. Our focus continues to be on accelerating our business model and executing on our strategic growth initiatives. We are continuing to invest in the foundational work that puts Landstar in a great position to leverage improving freight market conditions. We also remain focused on our commitment to continuous improvement in the level of service and support we provide to our customers, agents, BCOs, and carriers each and every day. Turning to slide 5.

The freight environment in the 2026 first quarter was characterized by relatively strong demand from a seasonal perspective and an improving price environment as we moved through the quarter. We were encouraged to see the ISM index above 50 for each of the three months in the first quarter, a positive sign for our business, as readings from the prior three years too often reflected a far more challenging economic backdrop. We were pleased to see sequential outperformance in the number of loads hauled via truck and truck revenue per load compared to pre-pandemic normal seasonal patterns. As noted in the press release, we were encouraged to see that overall truck revenue per load increased 6% compared to the 2025 first quarter. Our balance sheet continues to be very strong, and our capital allocation priorities are unchanged.

We will continue to patiently and opportunistically execute on our existing buyback authority to benefit our long-term stockholders. As noted in the slide deck, during the 2026 first quarter, the company returned approximately $104 million to shareholders through our capital return programs. The company returned approximately $82 million in dividends to stockholders during the first quarter and deployed approximately $22 million to share repurchases during the first quarter. Yesterday afternoon, our board declared a regular quarterly dividend of $0.40 per share, payable on June 9 to stockholders of record as of the close of business on May 19.

We continue to invest through the cycle in leading technology and AI solutions for the benefit of our network of independent business owners and have allocated a significant amount of capital this year towards refreshing our fleet and trailing equipment, with a particular focus on investment in new van equipment. Turning to slide 7 and looking at our network, the scale, systems, and support inherent in the Landstar model helped to drive the operating results generated during the 2026 first quarter. JT will get into the details on revenue, loadings, and rate per load in a few minutes. Safety is crucial to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar BCOs operating safely every day and the agents and employees who work to reinforce the critical importance of safety, security, and service at Landstar.

I’m proud to report an accident frequency rate of 0.64 DOT-reportable accidents per million miles during the 2026 first quarter, well below the last available national average DOT-reportable frequency rate released by the FMCSA for 2021 and slightly better than the 0.69 DOT accident frequency we reported during the 2025 first quarter. The company’s long-run average is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our BCOs and provides a point of differentiation our agents are able to highlight in discussions with our freight customers. We remain committed to driving a best-in-class safety culture. I’d also like to take a moment to recognize Landstar’s $457 million-dollar agents based on our 2025 fiscal year results. Importantly, retention within the million-dollar agent network continues to be extremely high. Turning to slide eight.

On a year-over-year basis, BCO truck count decreased approximately 2% compared to the end of 2025’s first quarter and approximately 40 basis points sequentially. It is important to note, however, that the 38 BCO truck decline experienced during the 2026 first quarter is significantly better than our experience in other recent first quarters when on average, Landstar experienced a decline of 365 BCO trucks across the first quarters of 2023, 2024, and 2025. We were also very pleased to see our trailing 12-month BCO truck turnover rate drop from 31.4% as of fiscal year-end 2025 to 29.5% at the end of the 2026 first quarter. This is a directionally positive trend that we hope will continue in the second quarter.

Through the first four weeks of 2026 second fiscal quarter, the number of trucks provided by BCO independent contractors is approximately equal to the end of the 2026 first quarter. I’ll now pass the call back to JT to walk you through the 2026 first quarter financials in more detail. JT?

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Thanks, Frank. Turn to slide 10. As Frank mentioned earlier, overall truck revenue per load increased 5.6% in the 2026 first quarter compared to the 2025 first quarter, primarily attributable to a 10.8% increase in revenue per load on loads hauled via unsided/platform equipment and a 5.2% increase in revenue per load on loads hauled via van equipment. On a sequential basis, truck revenue per load increased 0.2% in the 2026 first quarter versus the 2025 fourth quarter. It is an unusual sign for truck revenue per load to be higher in the first quarter than in the immediately preceding fourth quarter, as pre-pandemic normal seasonality would typically be expected to yield a 4% sequential decrease in revenue per load in a given first quarter compared to the immediately preceding fourth quarter.

In comparison to overall truck revenue per load, we consider revenue per mile on loads hauled by BCO trucks a purer reflection of market pricing, as it excludes fuel surcharges billed to customers that are paid 100% to the BCO. In the 2026 first quarter, revenue per mile on unsided/platform equipment hauled by BCOs was 2% above the 2025 first quarter, and revenue per mile on van equipment hauled by BCOs was 3% above the 2025 first quarter. Delving deeper into seasonal trends, revenue per mile on loads hauled by BCOs on unsided/platform equipment declined 6% from December to January, was approximately flat January to February, and increased 2% from February to March.

Importantly, the sequential month-to-month performance as we move through the 1st quarter when compared against typical pre-pandemic trends suggest growing positive momentum in this aspect of our business. In fact, while the December to January change in revenue per mile on BCO loads hauled on unsided/platform equipment underperformed pre-pandemic seasonal trends, January to February’s flat performance outperformed pre-pandemic seasonal trends, and the February to March increase outperformed pre-pandemic seasonal trends. Turning to van freight, revenue per mile on van equipment hauled by BCOs was approximately flat from December to January, outperforming historical trends, increased 3% from January to February, also outperforming these trends, but decreased 1% from February to March, underperforming pre-pandemic February to March historical trends. Based on preliminary April BCO processed revenue per load data, we expect the underperformance experienced from February to March to reverse during fiscal April.

It should be noted that month-to-month seasonal trends on unsided platform equipment are generally more volatile compared to that of van equipment. This relative volatility is often due to the mix between heavy specialized loads and standard flatbed volume. As Frank alluded to, we’ve been particularly pleased with the sustained strong performance of our heavy-haul service offering. Heavy-haul revenue was up an impressive 18% year-over-year in the first quarter, significantly outperforming core truckload revenue. Heavy-haul loadings were up approximately 6% year-over-year, and revenue per heavy-haul load increased 12% year-over-year. This represented a mixed tailwind to our unsided platform revenue per load, as heavy-haul revenue as a percentage of the category increased from approximately 33% during the 2025 first quarter to approximately 36% in the 2026 first quarter.

Non-truck transportation service revenue in the 2026 first quarter was 19% or $16 million below the 2025 first quarter. The decrease in non-truck transportation revenue was mostly due to a 31% decrease in ocean volume, which we believe was partially driven by shipper pull-forward behavior during the first quarter of 2025. Turning to slide 11, we’ve provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation logistics segment revenue was up 2% year-over-year on a 4% increase in revenue per load, partially offset by a 3% decrease in volume compared to the 2025 first quarter. Within our largest commodity category, consumer durables revenue increased 1% year-over-year on a 7% increase in revenue per load, partially offset by a 5% decrease in volume.

Aggregate revenue across our top 5 commodity categories, which collectively make up about 70% of our transportation revenue, increased approximately 4% compared to the 2025 first quarter. While slide 11 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top commodity categories. From the 2025 first quarter to the 2026 first quarter, total loadings of machinery increased 5%. Automotive equipment and parts decreased 4%, building products decreased 10%, and hazmat decreased 6%. Additionally, substitute linehaul loadings, one of the strongest performers for us during the pandemic and one which varies significantly based on consumer demand, increased 1% from the 2025 first quarter.

The decline in automotive, hazmat, and building product loadings noted above was partially offset by a 23% increase in electrical volumes, a 17% increase in energy volumes, and an 8% increase in government volumes. Even with the ups and downs in various customer categories, our business remains highly diversified with over 20,000 customers, none of which contributed over 8% of our revenue in the 2026 first quarter. Turning to slide 12. In the 2026 first quarter, gross profit was $112.5 million compared to gross profit of $98.3 million in the 2025 first quarter.

Gross profit margin was 9.6% of revenue in the 2026 first quarter as compared to gross profit margin of 8.5% in the corresponding period of 2025. In the 2026 first quarter, variable contribution was $172.2 million compared to $161.3 million in the 2025 first quarter. Variable contribution margin was 14.7% of revenue in the 2026 first quarter compared to 14% in the same period last year. The increase in variable contribution margin compared to the 2025 first quarter was primarily attributable to an increase in the percentage of revenue generated from BCO independent contractors.

Turning to slide 13, operating income increased as a percentage of both gross profit and variable contribution as we cycle the impact of the international supply chain fraud matter in the 2025 first quarter, lower insurance and claim costs in the 2026 first quarter, and the impact of the company’s fixed cost infrastructure, principally certain components of selling, general, and administrative costs in comparison to larger gross profit and variable contribution bases. Other operating costs were $14.8 million in the 2026 first quarter compared to $11.8 million in 2025. This increase was primarily due to increased trailing equipment maintenance costs, increased trailing equipment rental costs, and decreased gains on disposal of used trailing equipment. Insurance and claims costs were $35.6 million in the 2026 first quarter compared to $39.9 million in 2025.

Total insurance and claim costs were 7.5% of BCO revenue in the 2026 first quarter as compared to 9.3% in the 2025 first quarter. The decrease in insurance and claim cost as compared to 2025 was primarily attributable to decreased net unfavorable development of prior year claim estimates, decreased severity of current year trucking claims in the 2026 period, and a decrease in both cargo claim frequency and cargo claim severity, which reflects a significant decrease in expense related to strategic cargo theft in the 2026 period, partially offset by increased BCO miles traveled during the 2026 period. During the 2026 and 2025 first quarters, insurance and claims costs included $40.9 million and $11.4 million of net unfavorable adjustment to prior year claim estimates, respectively.

Selling general administrative costs were $61 million in the 2026 first quarter compared to $61.6 million in the 2025 first quarter. The decrease in selling general administrative costs was primarily attributable to the impact of the $4.8 million charge to selling general administrative costs during the first quarter of 2025 in connection with the previously disclosed international supply chain fraud matter and a lower provision for customer bad debt, largely offset by an increased provision for incentive compensation and increased employee benefit costs. The provision for incentive compensation was $3.4 million during the 2026 first quarter as compared to $1 million during the 2025 first quarter. Depreciation and amortization was $10.6 million in the 2026 first quarter compared to $12.2 million in 2025.

This decrease was primarily due to decreased depreciation on software applications and decreased depreciation on our fleet of trailing equipment. The effective income tax rate was 25.2% in the 2026 first quarter compared to an effective income tax rate of 24.7% in the 2025 first quarter. The increase in the effective income tax rate from the 2025 first quarter to the 2026 first quarter was primarily due to an increased provision for state taxes, the impact of tax deficiencies on stock-based compensation arrangements during the 2026 period, and the impact of nondeductible executive compensation on the 2026 income tax provision. Turning to slide 14, looking at our balance sheet, we ended the quarter with cash and short-term investments of $411 million.

Cash flow from operations for the 2026 first quarter was $78 million, and cash capital expenditures were $6 million. The company continues to return significant amounts of capital back to stockholders with approximately $82 million of dividends paid and approximately $22 million of share repurchases during the 2026 first quarter. The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar model. Back to you, Frank.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thanks, JP. Given the highly fluid freight transportation backdrop and a volatile geopolitical and macroeconomic environment, the company will be providing second quarter financial and operational commentary rather than formal guidance. Turning to slide 16 and looking at historical seasonality from Q1 to Q2, pre-pandemic patterns would normally be expected to yield sequential increases of 7% in the number of loads hauled via truck and 2% in truck revenue per load, resulting in a top line that typically increases by a mid-single digit to a high single-digit percentage. It should be noted that with respect to the sequential truck volume increase during more recent history, it has been closer to +3% to +4%.

The number of loads hauled via truck in April 2026 was essentially equal to April 2025 on a dispatch basis, while revenue per load in April was approximately 13% above April 2025 on a profit basis. As a result, we view anticipated truck revenue per load in April as outperforming normal seasonality, while anticipated April truck volumes are trending essentially in line with normal seasonality. Please also note that historically, the company has often experienced a 25 to 45 basis point compression in variable contribution margin from the first quarter to the second quarter, primarily driven by mix, as BCO revenue typically represents a larger percentage of overall revenue in the first quarter of a given year as compared to the immediately following second quarter.

We’re excited to build upon the positive momentum generated during the first quarter and are energized by the opportunity to support the best network of independent business owners in the transportation space in an environment that after nearly four years appears to be turning in our favor. With that, operator, we’d like to open the line for questions.

Bruce Chan, Analyst, Stifel0: Thank you very much, sir. At this time, we will begin the question-and-answer session. Our first question comes from the line of Jonathan Chappell from Evercore ISI. Your line is now open.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Thank you. Good afternoon. Frank or Jim, heavy-haul obviously doing really well and also in the backdrop of a narrative about unsided/platform equipment or flatbed being incredibly strong. But your 1Q volumes were down 2% year-over-year, 2% sequentially. Clearly made up some of that in the rev per load. Can you just help us understand, is that market as strong as it’s being portrayed? If it continues to, say, strengthen or build momentum from here, does that start to show up in the loads as well as in the rev per load? Or is it mostly gonna be represented in the price side?

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Hey, John. Clearly, if we see an incremental uptick in demand, you’re gonna see it on the volume side. I think everything right now is being supply induced on the capacity side and getting us higher rates. We do think we’ve got a competitive advantage in heavy-haul and honestly on the platform side. When you see those ISM numbers and some of the IDP numbers in the kind of low single digits, we’re pretty optimistic about how that’s gonna play through volumes and rate for us going forward into the rest of the year. Maybe either Jim Todd or Jim Applegate can comment on that.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Yeah, John. No, good question. From the heavy-haul side, which did experience year-over-year volume growth, John, I would tell you it continues to be very, very strong broad-based strength. We had 17 individual heavy-haul customers grow volumes with us by at least 50 loads a year-over-year in the 91-day first quarter. Those customers came from, you know, wide degree of industry. Data center customers, energy, government, machinery, aerospace, and defense. I think some of the softness to your point year-over-year, if you look at some of the commodity categories we called out, building products, automotive, that kind of stuff on the standard flatbed standard step has been a little weaker.

One thing I do want to call out, John, from a pricing standpoint, on the side of platform, it’s really been a heavy-haul mix story, and that continued in the first quarter. Standard platform, step deck pricing year-over-year in the fourth quarter was only up 50 basis points. That accelerated to 730 basis points year-over-year. A meaningful lift in yields on the standard flats and standard steps from a pricing standpoint.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Yeah. Jim, I guess you might just want to talk about the designation of heavy-haul as a strategic initiative and the things you guys are doing along with Rob Simon in that particular area.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: This is one of our areas that we really identified as far as Landstar goes, where we do the hard stuff well. This is definitely one of those areas that we can lean in, and we’ve invested quite a bit, not only into leadership, we actually brought in almost 2 years now, a new heavy-haul leader that’s really kind of put his arms around that department, brought in some talent, and laid out a strategy that’s, you know, agent engagement, recruiting BCOs into the model, making sure that we have the right equipment to go ahead and handle that, those agent opportunities, investing in technology, you name it. We’ve got initiatives in place to make sure that our agents can be successful.

Paired on top of that, we have a dedicated sales and marketing effort, where we’re really leaning into those markets with messaging and some sales support for our agents to help them grow in those different industries. I think what’s really nice about what JT laid out is the growth is broad-based. It’s also a mix of new and existing customers. We’re seeing a lot of new customers come into the fold across the different industries that are seeing success right now. We’re seeing industries, even outside of what, you know, the data centers, you know, you’re starting to see oil and gas and some of the other industries that have been historically depressed, starting to come back a little bit.

We see this as an area for continued growth, and we’ve been strengthening up that area over the last couple of years and expect it to continue to be strong for Landstar.

Jonathan Chappell, Analyst, Evercore ISI: Great. Very helpful. Thanks for all the color, team.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Thanks, John.

Bruce Chan, Analyst, Stifel0: Thank you. Our next question comes from Scott Group of Wolfe Research. Your line is now open.

Bruce Chan, Analyst, Stifel2: Hey, thanks. Afternoon. Your rev per load tends to lag industry spot rates by, you know, a matter of months, quarter, whatever. You know, we’re seeing it play out. Do you think is it realistic to think that, you know, we see a meaningful further acceleration from that 13% in April as the rest of the quarter plays out? If that’s what’s happening, how should we think about margin or, yeah, margin in a quarter like that?

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Yeah. Fair questions, Scott, as always. Thanks. I’ll let JT walk you through the sequential pricing through the quarter. I think the month-over-month trends are important to understand, he’s got that detail for you. I think if we look forward, assuming that capacity continues to exit and/or we see demand, you know, in a spring unlock, like we do in many years, if those two things happen, you know, the obvious impact on rates broadly is gonna be favorable. You know, I think when you see what JT is gonna tell you in terms of January to February to March, and honestly March into April, I mean, clearly we’re gonna have some level of lag, we’re seeing that come through the numbers.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: You know, well said, Frank. Scott, we are seeing above seasonal pricing strength here into April, both on the BCO side and the brokerage side. I would point out from a comp standpoint, last year’s second quarter, we got a 320 basis point lift in pricing, and we typically get about 200 basis points. The comps do step up a little bit as we get into May and get into June. Certainly from a margin standpoint, I mean, we just printed the first variable contribution dollar increase since I think the third quarter of 2022. If you do some back of the envelope on adjusting 2025 for the international fraud matter, I think the incremental push-through numbers were well above 70%. That’s where we’ll be judging ourselves.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Obviously, when that comes through as rate, it’s.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: Certainly

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: easier to drop it all the way down.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: Absolutely right. Yeah. The final point there, Scott, the BCO utilization numbers we’ve talked about over the last three quarters, strong third quarter 2025, accelerated into fourth quarter 2025, accelerated further first quarter 2026. We’ll look for that trend to continue. Certainly that has a big impact on the number of BCO loads that capture that rate increase into the second quarter.

Bruce Chan, Analyst, Stifel2: Helpful. Then on the volume side, you know, it’s interesting, you got BCO volume up seven and brokerage volume down nine. What do you think is driving such a big sort of mixed difference? Are the agents or maybe the underlying customer, are they saying, we don’t want to go through brokerage anymore? Maybe tie this into how you think about, like, the outcome of this Supreme Court case, if you think this could exacerbate some of this trend between BCO and brokerage.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: I’ll give you my view, Scott, and then Frank will add on. I think it’s the agents are going to sell what they can sell, and certainly we have some customers that will engage with us only as BCO only, and in the cargo fraud environment, I think that has probably ticked up some. I think it’s a function of the agents are going to market

Matt Dannegger, Vice President and Chief Field Sales Officer, Landstar System, Inc.: Servicing their customers and the BCOs have just really been stepping up in this rate environment, and we’ve seen it the last eight or nine months or so.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: I think I’d like Matt Miller to comment a little bit on the BCO environment and all the things you’re seeing on the BCO front, Matt. Broadly speaking, on your Supreme Court question, we’re watching it like everybody else, and, you know, we’ll be prepared whichever way it goes. You know, I think ultimately, Congress probably looks at this as a result of the Supreme Court decision, whichever way it goes, and, you know, tries to make policy legislative rather than through the court system. We’re actively looking at what’s gonna happen there. You know, I think like many people, we would expect a decision sometime in the June, July time period. Matt, maybe a little bit on the BCOs.

Matt Miller, Vice President and Chief Safety and Operations Officer, Landstar System, Inc.: Yeah, sure. I appreciate it. First quarter, typically the most challenging quarter of the year for us when it comes to BCO truck count. We finished the quarter, as Frank said earlier, down 38 trucks. That was a better first quarter finish than we’ve seen in several years. 100% of that decline happened in January, that was followed by a positive result, net result in February and a positive net result in March. We’re encouraged by the trends that we’re seeing in net truck count, as well as the trends we’re seeing in the net weekly check average going to the BCOs after deductions, which more recently is the highest we’ve seen since the fourth quarter of 2022, and an indicator of improving financial health of the BCOs.

In the quarter, gross truck adds were up 2.7% sequentially and effectively flat year-over-year. Gross truck cancels were down 7.8% sequentially and down 23.5% year-over-year. This marks our 9th consecutive quarter of turnover improvement, where our high water mark on turnover was the fourth quarter of 2023 at 41%. We finished the quarter at 29.5%, just about in line with our long-term average of 29%. As Jim stated, we also saw a very strong BCO utilization in the quarter, up 10% year-over-year, and that comes on the heels of a really strong fourth quarter utilization, which was up 8% compared to the fourth quarter of 2024.

Then finally, sort of anecdotally, I’d like to add that we experienced strong interest from potential BCOs at the Mid-America Truck Show in March. I think should we see sustained pricing, that level of interest and sentiment will be helpful for us as we move through Q2.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Yeah. Good show. Thanks. Thanks, guys.

Bruce Chan, Analyst, Stifel2: Thank you, guys.

Thank you. Our next question comes from the line of Chris Wetherbee from Wells Fargo. Your line is now open.

Chris Wetherbee, Analyst, Wells Fargo: Hey, thanks. Good afternoon, guys. I just wanted to kind of piggyback on the BCO kind of outlook. I guess, you know, maybe what do we need to see from a spot perspective? Have we seen enough, you think, from a spot perspective to begin to actually move that up sequentially? It sounded like maybe April was sort of net flattish, I think, from what you said the end of the first quarter was. Maybe you could elaborate a little bit on how we think about maybe that progress is going to trend throughout the rest of the year.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Hey, Chris. Absolutely. When BCOs see multiple months in a row of sustained rate improvement, the word gets around pretty quick, and the percentage pay model is a really attractive one, as Matt Miller just mentioned. I mean, he and I were both at the Mid-America Truck Show, which is nicknamed MATS. We were out there and, you know, we had a good spot on the expo floor. I think we had, Matt, a sort of a record takeaway there in terms of potential BCO candidates. Obviously, we have people there that are actively recruiting and people who are willing to say, "Yes, I’m interested.

Please follow up with me." I mean, that was a bigger number, at least that we, that we’ve kinda kept on record over a bunch of years. We feel pretty good about the interest. As Matt was just saying a little while ago, you know, we’re continuing to see hundreds of adds every quarter, and the cancels are coming down. What he would tell you is the cancels lead the adds. You see, you know, better cancellations, you see better additions. I’ll let you pick up the thread from there, Matt.

Matt Miller, Vice President and Chief Safety and Operations Officer, Landstar System, Inc.: No, I would just echo what you said, Frank. Generally speaking, if you look back in history, as the cancels slow and utilization picks up, word starts to spread, and it spreads fast. That’s what I would say as a takeaway. This is pretty much a leading indicator for us on when adds start to turn. That first quarter tends to be, as I said, a very challenging quarter, and that finish was pretty strong given the backdrop over the past several years.

Chris Wetherbee, Analyst, Wells Fargo: Okay. That’s very helpful. Appreciate that. Just maybe one quick one on sort of van demand as we think about loads as we go through the second quarter and I guess trends from April standpoint. Any sort of indication of if there is some improvement in various end markets kinda towards the end of the month. Just trying to get a sense of whether or not, you know, obviously the pricing side is really accelerating here. Just wanna get a sense of what your view, broadly speaking, about demand.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Hey, Chris. I think there’s a couple things that happen naturally this time of the year. I mean, building products unlocks on a sequential basis because you’re cycling out the Januarys and the Februaries, and you’re adding in the Mays and the Junes, so to speak. You know, there are certain ones that are much more seasonal in nature, Q1 to Q2, which is why you generally get some of the lift on a sequential basis. There are things that, you know, right now are just not being heavily supported by the interest rate environment. Automotive would be an example of that. Look, I think the demand that we’re seeing right now certainly supports rates where they are, but it’s more a reflection of where the capacity is.

If we happen to get, you know, a couple of points of GDP, IP-type growth when supply is coming down, I like our chances this year.

Chris Wetherbee, Analyst, Wells Fargo: Got it. Perfect. Thanks, guys. Appreciate it.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thanks, Chris.

Bruce Chan, Analyst, Stifel0: Thank you. Our next question comes from the line of Jordan Alliger from Goldman Sachs.

Bruce Chan, Analyst, Stifel1: Hey, everyone. This is Paul Stoddard on for Jordan Alliger. I guess the first question I have is, if the mix gets weaker with BCOs going into the second quarter, how did the mix in the first quarter compare historically? And as rates are increasing in the marketplace, could we see brokers come back into your network and potentially see more compression happening from the first quarter to the second quarter?

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Paul, happy to field that one. If you recall on the January conference call, we did not wanna bake in the full variable contribution margin expansion that typically happens, fourth quarter to first quarter. There were two reasons for that. One was the utilization number in the fourth quarter was very strong. Two, we did not think winter storm activity would negatively impact loadings. However, when a BCO is down for a week ’cause of storms, we have seen in quarters past and years past where that could hurt from a BCM standpoint. That clearly did not happen, right? Utilization accelerated further, we did get our typical or standard fourth quarter, first quarter variable contribution margin expansion.

In the scenario that Frank laid out, right, of what’s normal from a spring peak standpoint and, you know, use round numbers about 7-point lift in volume sequentially, first quarter to second quarter. I would note, the last 2 or 3 years, we’ve not seen that degree of lift. If we were to get that, it would disproportionately come from third-party trucks, right? Because as much as we’d love to grow the fleet, you know, 7%, on 8,500 trucks in 90 days, that’s just not gonna happen. That’s really what drives the historical compression. It’s just there’s more volume flowing into the network, and we’ve gotta utilize brokerage more.

Bruce Chan, Analyst, Stifel1: Makes sense. I guess, kind of a follow-up to the discussion on the Montgomery Supreme Court case, with your unique structure with the BCOs and having insurance already within your model, how does that set you up versus peers depending on how the decision might go?

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Yeah, I mean, I think the insurance tower we have, it covers BCOs while they’re loaded. We also have other insurance programs that cover, you know, BCO type and non-BCO type issues. I think the entirety of the brokerage, you know, population is going to have to look at insurance very differently if the decision goes against the industry than they do today. I mean, right now, they essentially look at F4A and say, "We’re immune." The truth of the matter is, if the Supreme Court goes against it, they’re gonna have to get coverage. I think it likely creates a situation where your smaller players are gonna get priced out of the market because of the cost structure going up.

I think, you know, you got so much fragmentation in our industry on the brokerage side, that may not survive in an environment where you gotta, you know, you gotta have, you know, $5 million or $10 million of insurance just to cover a single incident.

Bruce Chan, Analyst, Stifel1: Awesome. Thanks, guys.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Thank you.

Bruce Chan, Analyst, Stifel0: Thank you. Our next question comes from the line of Bruce Chan from Stifel. Your line is now open.

Bruce Chan, Analyst, Stifel: Yeah. Thanks, Zenda. Good afternoon, everyone. you know, maybe just to start, you talked about the tailwind from data center exposures on, you know, I think at least a couple calls. I know that, you’ve got exposure there in several of your end markets, but I don’t think you’ve ever talked about an explicit revenue percentage. Any sense for what that is today and maybe how that’s trended versus prior periods?

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: Yeah. it’s funny, we’re sort of smiling at each other because we were looking at this earlier today. think about it broadly as a data center ecosystem, and I’ll let Jim Applegate handle this one in a sec. you gotta look at it not just as the data center itself, but all the accoutrements to it. you know, it’s gotta have generators for power. It’s gotta have batteries for power. It’s gotta have chillers to make sure that the raised floor is cooled, and it’s got all the stuff that goes inside of the data centers that you can give a sense of kind of what that business looks like.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: Yeah. With our top 100 customers, we look at this, we look at our exposure. We have nine of our top 100 fall within directly data center related. It represents about 12% of our total revenue. From an exposure standpoint, that’s what you’re looking at. You know, even if you look at this big build-out and what’s been happening and even what’s in place today, you know, it’s not just the constructing and the actual data center players today. There’s real energy needs. There’s real, you know, kind of side benefits that you get as you’re seeing this big build-out happen. From an exposure standpoint, we feel like, you know, it’s a limited exposure from that standpoint.

We’ve got a lot of other, you know, kind of side benefits that are happening just because of the macro environment that’s been created here.

Jim Todd, Vice President and Chief Financial Officer, Landstar System, Inc.: You know, that environment is still growing, and then you have all of the refresh and replacement of all of those things, over time. We’re pretty bullish on, you know, continued investment and maintenance investment on a going forward basis there.

Bruce Chan, Analyst, Stifel: Yeah. That’s super helpful. Then maybe just one final question here on the supply environment. You know, obviously, we’ve heard a lot of commentary about, you know, regulatory changes. I think a few carriers talked about an affected OTR population, you know, somewhere in the 15% range. Any sense for what the non-compliant population would be in unsided and maybe how fungible, you know, those two populations of drivers are in your network?

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Yeah, I don’t know that we have a great read on exactly what that looks like. I mean, the interesting thing from a Landstar perspective is we don’t have language proficiency challenges. We don’t have non-domiciled CDL challenges. All of our folks are professional drivers. Average age is 51 years. I mean, these folks have been driving a long time. They’re owner-operators. I mean, I can go on and on and on. I’m sure Matt Miller will have some commentary here too. You know, at the end of the day, there is capacity coming out of the environment. It’s generally what I believe is coming out of a lower end of the environment. You know, you’re ultimately gonna have a much safer and much more professional environment given the work that USDOT and FMCSA are doing. Matt?

Matt Miller, Vice President and Chief Safety and Operations Officer, Landstar System, Inc.: Yeah, no, I’d agree. You know, when you think about English language proficiency, the non-domiciled CDLs, the CDL mills, the ELD technology, you know, we applaud the actions of Secretary Duffy and FMCSA Administrator Derek Barrs, and we find ourselves virtually unimpacted with our BCOs because of a focus on safety, security, and service. You know, I think there’s more to come here. You know, they’re sort of telegraphing, if you saw the 60 Minutes piece on chameleon carriers, my suspicion is that’s probably the next target, and that just serves us very, very well in the grand scheme of things. Okay. Thank you.

Bruce Chan, Analyst, Stifel0: Thank you. Our next question comes from the line of Stephanie Moore from Jefferies. Your line is now open.

Bruce Chan, Analyst, Stifel3: Hey, everybody. Thank you. I had a question, I’m gonna ask a different one now just based on this prior question. Maybe just for pure visibility here, I guess maybe just talk a little bit, I’m kind of specifically looking at this Dalilah’s Law and really just the use of foreign dispatch and administrative services. I think in the past, you guys have disclosed having some foreign foreign brokerage. Maybe just talk a little bit about that if that’s still the case. I think this was several years ago, I could be out of date here. Maybe just if you could talk a little bit about, you know, any foreign dispatch that you might have. Thanks.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Yeah. Hey, Stephanie. Fair question. All of our agents are U.S. domiciled agents. We do have a handful of agents who do some back office work overseas, but we don’t believe we have any exposure under our reading of any of the drafts of Dalilah’s Law under the phrase that you mentioned.

Bruce Chan, Analyst, Stifel3: That’s really helpful. My actual question here, maybe just talk a little bit about as you think about just your, you know, as you think about this next cycle, if we are in fact at the beginning of an upcycle, maybe just talk a little bit about how you think Landstar is positioned from a competitive standpoint to maybe, you know, gain share or drive better margin and the like, you know, just as we kind of think through investments that have been made over the course of this down cycle, just how you’re in a different position on this upcycle versus past. Thanks.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: No, awesome question. A couple of different reads from my perspective. I think on the last conference call I said it was hard to tell whether or not we were at the beginning of the end or the beginning of the beginning. I feel pretty convinced we’re at the beginning of the beginning as we look at the last few months and our results would prove that out. I think we’ve done a lot in the last couple of years, clearly designating the strategies and the strategic growth areas, you know, that we put forward. You know those as heavy-haul and US-Mexico cross border and things like that.

We’ve done the right work internally to put the right leadership there and the right investments, as Jim Applegate referenced a few moments ago. On the BCO side, the work that Matt Miller has done in looking at BCO qualifications and time to qualify and the sort of redux of orientation and what we call the CABS class. I mean, there’s a lot of things that are happening there. That is showing through in the way that BCOs are sticking with us, even in more difficult times. At the end of last year, the Q1 numbers in terms of the BCO count looked really, really good. I mean, they were 10 times better than they were the last 3 years. That makes you feel pretty good.

I think the work that we’ve done in working with the regulators, over the last year or two, I think our relationships are a lot closer with USDOT and FMCSA than they’ve ever been. I think we have, you know, the ability to talk with them about the realities of our industry and what needs to be done. They’re moving at a pace that I don’t think any of us have ever seen. I’ve said in open company a number of times that, you know, we’ve never had a more favorable administration to the U.S. trucker than we have right now. Again, as I, as I mentioned earlier, it’s making it a safer and more professional environment. I think those are the important things. That’s what Landstar has always been about.

I mean, we are independent owner-operators who are out there, you know, doing a great job for us every single day. Those are the folks who are gonna win in this environment. There’s been a bit of a flight to quality. I mean, we’re getting bids back that and freight back that we maybe lost on rate over the last couple of years because of safety, security, and service, and customers wanting to make sure that their loads get there on time, and the load is secured and not stolen and, you know, the tractor trailer is not turned over in the, you know, side of the road. I mean, those are the things that we’re really good at. I think we’re winning in the marketplace with respect to that.

On the flatbed and heavy-haul side, clearly our numbers over the last two years would indicate that we’re doing really well relative to that market. We’re gonna continue to recruit drivers. We’re gonna continue to invest in the fleet. We’re gonna continue to designate the hard things as strategic initiatives. I look forward to that future.

Bruce Chan, Analyst, Stifel0: Thank you. Our next question comes from the line of Brian Ossenbeck from JP Morgan. Your line is now open.

Matt Miller, Vice President and Chief Safety and Operations Officer, Landstar System, Inc.: Hey, afternoon. Thanks for taking the question.

Brian Ossenbeck, Analyst, JP Morgan: Just wanted to see if you can get a little bit more detail on the AI initiatives that you got listed out here in the back slides. Both maybe separate the Landstar corporate for the, I guess you call it the network of entrepreneurs, maybe more generally, you know, do you feel like you can scale some of these productivity initiatives that we hear about across the industry when you have, you know, some of the business that’s a little bit more centralized with either corporate or brokerage, and then you’ve got agents that are a little bit more decentralized, of course.

Like to hear a little bit more specifics on that and including, you know, you talk about the CapEx budget here being about, AI being about half of the IT capital budget, but what’s also running through the expense line there? Thank you.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: You know, good question, Brian. Thanks. Good to hear your voice. I think the AI work we’re doing as we disclosed in the Q4 call, those two slides are really replicas of what we did, in the main deck in the, in the Q4 call. We wanted to put it in there to make sure that, everybody had an opportunity to see those that may not have been, on the Q4 call. Jim Applegate is the business side of AI. We’ve obviously got Rick Coro, our CIO, that’s on the tech side. As we did mention, to your good point, we sort of laid down the expectation that, more than half of our capital budget on the IT side would be AI. We met that.

My belief is if you look at it in arrears sitting at 12/31/2026, it will probably turn out to be more than that, as we revisit the other half of the capital that IT is spending just to decide whether or not we truly do need systems versus AI on top of existing systems. I think you’ll see that morph over time, and certainly we look at a higher expectation as we turn the page into 2027. Scalability and adoption, as I mentioned in my prepared remarks, are clearly what we’re trying to make sure we’re accomplishing by virtue of, for example, the pilots that we’re doing. Jim Applegate will get you into some details there. We’re doing very active agent pilots.

We’re, you know, working with a half a dozen or so AI companies that some of those will be, I’ll say household names. Some of them will be more on the startup side. I mean, you gotta make sure that you’re playing the field a little bit here. They’re doing pilots with about 12 or so of our agents. Therefore, we are in the agent office working on AI, which clearly gives you the replicability, you know, across the agent environment. There are things that agents do different, but there are an awful lot of things that agents do similarly that have to be part of the shipment lifecycle. I’ll let Jim Applegate pick up the thread.

Jim Applegate, Vice President and Chief Corporate Sales, Strategy and Specialized Freight Officer, Landstar System, Inc.: Thanks, Frank. How you doing, Brian? Hey, I love the way you posed the question, separating the corporate from the agent. As you know, corporate’s a little bit easier to get your arms around. It’s a little bit easier to control, with over 1,000 agents in our network. We gotta be a little bit more deliberate on how we go about it, and it’s gotta be a scalable solution that fits our entrepreneurs, which is really a lot different. You know, I look at a benefit of what Landstar brings to the table, it is our entrepreneurs. Pairing our entrepreneurs with technology, I think, is what wins in this market, is what has won for Landstar in the past.

We feel in this next run-up with AI, it’s gonna help us win even more so with the motivated agents that we have and giving them the right tools to compete. As Frank mentioned, we have several pilots going on right now. We have 7 active pilots. We’re hitting all stages of our shipment lifecycle. We started off with 6. We got about 10 stages that we’re gonna hit within the shipment lifecycle. When I say that, those are things with how our agents market, sell, how they price, how they actually find capacity and manage that capacity, assign that capacity, dispatching that capacity, making sure that they’re tracking and tracing those shipments within the network. And we’re hitting that right now. We’ve got about 12 agents that are in active pilots.

As Frank mentioned, we’ve got household names of, and a lot of new startups, that we’re working with from a, from a pilot standpoint. Those startups are gonna sit up on top of our technology stack, and we’re right now working with our agents to identify the workflows and to implement agentic AI bots, over at the agent office within those different, shipment lifecycle, categories that I mentioned. We’ve got a lot of excitement right now with the agents that are using it. We’re identifying, really a lot of the business cases that you hear out in the industry. That’s applying directly for our agents. We’re getting a lot more, shipment lifecycle throughput. They’re doing things, you know, faster. They’re able to do more.

We’re actually seeing more wins as well too. It’s very early on as far as how that actually deploys across the network. We’re gonna get to a point where we say, "Hey, these pilots are done. We’re building out our use cases, and we’ll identify the right vendors to work with, and then we’ll also identify how we wanna go out to the market to our different agent family." If you really look at it, Brian, it’s a little bit different. You can’t really push that down, you know, into the network. It is more influence than control. Part of our plan is to actively look for agents that are gonna adopt that technology. We’ll do an assessment. We’ve got agents that wanna grow and that wanna use their resources for growth.

We’ll start with them. We’ll do that outreach. We’ll get them excited about what we’re doing. There’s a consultation and design that we need to do at each agent office. We need to take a look at their business, the types of customers that they actually operate with, and we need to design the workflows along with the agentic solutions that we put in place specific for those agents. We’re gonna be sitting behind that. We’re gonna make sure that we do it safely. We’re gonna make sure that they have the right resources in place, and we’re gonna be monitoring along the way. Brian, we’ve done this before. We’ve done this with our rollout, with our different technology tools. We’ve been doing this since 2014.

I don’t see it a big difference from what we’ve done over there, but it’s gonna be a lot more integrated within our agent offices, and it’s very exciting about where we’re going. More to come on that, but thank you for asking the question. I think it’s very fitting for us to be able to tell our story specific to Landstar because I think we’ve got a great story to tell there.

Brian Ossenbeck, Analyst, JP Morgan: No, I appreciate all the details. Thanks very much for the update.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thank you, Brian.

Bruce Chan, Analyst, Stifel0: Thank you. We will take the last question from Harrison Bauer from Susquehanna. Your line is now open.

Harrison Bauer, Analyst, Susquehanna: Great. Thank you for taking my question. You guys have talked extensively about the BCO capacity dynamics, but your third-party brokerage carrier side approved carrier count there was down significantly, around 20% year-over-year, although up a little bit versus last quarter. Can you walk through what’s changed in your carrier vetting and approval process? Then maybe connect that to how you could help decrease your expenses related to cargo theft, fraud, and then maybe insurance costs, and then tie that into how technology might be helping that expense line as well. Thank you.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thanks, Harrison. I think you actually answered your own question. You’re absolutely right. We have, I’d say, put a higher degree of rigor around vetting our carriers, and it is largely because of the advances that we’ve made in technology and AI, and then some of the relationships that we have with some of our vendor partners and what they’re doing to make sure that we have a good understanding of who owns the entity, what is their safety record, whether or not they’ve been involved in double brokering, whether they’ve been involved in cargo theft incidents. Like, all those things and many more are part of that analysis.

I’d say that we probably got religion a little bit earlier than most because we did have, what, JT, about a year or so ago, we had a tough cargo theft quarter. We started down that path before many. Even before that, we had started creating our anti-fraud department and putting resources and technology. It was one of our early AI projects that we deployed to make sure that we could understand what the parameters of a potentially lost load would look like so that we could try to prevent it before it happened. Part of that is making sure that we’re doing business with carriers who are reputable carriers. Matt, why don’t you pick it up from there?

Matt Miller, Vice President and Chief Safety and Operations Officer, Landstar System, Inc.: Sure, sure. I appreciate the question. I would say if you went back in time, we had probably three attributes that we used to determine if a carrier was eligible to be approved in our network. With the advent of fraud and strategic theft and everything that’s happened over the past several years, we’ve invested heavily. We invested in people, stood up a fraud group. We invested in the process and refining that process, and we invested in technology. Don’t expect that to stop anytime soon, we continue to add layers upon layers of attributes. We’re up to, say, dozens of attributes that we’re looking at to scrub that carrier database to do our best to mitigate, to prevent, detect, any sort of anomalies.

The tools that we’ve invested in are proving to be working, as you saw in the first quarter results. This is something that today is a constant defense, and we’re continuing to find ways that we can mitigate against it. It’s very sophisticated bad actors out there, so you have to remain vigilant. The technologies that we’re adopting are proving very valuable and would expect that sort of rigor to continue for the foreseeable future.

Harrison Bauer, Analyst, Susquehanna: Great. Thanks for all the color.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thanks, Harrison.

Bruce Chan, Analyst, Stifel0: At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks.

Frank Lonegro, President and Chief Executive Officer, Landstar System, Inc.: Thank you. In closing, the management team has been energized by our interactions with our BCOs and agents thus far in 2026. We are all encouraged by the current pricing environment and what we believe is the strongest heavy-haul service offering in our industry. Regardless of the economic environment, the Landstar variable cost business model continues to generate significant free cash flow. Landstar has always been a cyclical growth company, and we are well positioned to capitalize on improving conditions and gathering momentum in freight markets. Thank you for joining us this afternoon. We look forward to speaking with you again on our 2026 second quarter earnings conference call in late July. Thank you.

Bruce Chan, Analyst, Stifel0: Thank you for joining the conference call today. Have a good evening. Please disconnect your lines at this time.