Financial Data and Key Metrics Changes - The actual number of loads hauled via truck in Q1 2025 was 1.2% below Q1 2024, slightly above the high end of guidance range [12] - Actual revenue per truckload in Q1 2025 was 0.6% below the prior year quarter, comfortably within the lower half of the guidance range [12] - Earnings per share (EPS) came in below the low end of guidance primarily due to a $4.8 million pretax charge related to a supply chain fraud matter and elevated insurance and claims costs [12][13] - Gross profit was $98.3 million in Q1 2025 compared to $113.9 million in Q1 2024, with a gross profit margin of 8.5% [28] - Variable contribution margin was 14% of revenue in Q1 2025 compared to 14.4% in the same period last year [29] Business Line Data and Key Metrics Changes - Heavy haul revenue increased by approximately $113 million in Q1 2025, a 6% increase year-over-year, driven by a 3% increase in heavy haul revenue per load and volume [10][24] - Non-truck transportation service revenue in Q1 2025 was 8% or $6 million above Q1 2024, primarily due to a 14% increase in ocean revenue per shipment [24] - Transportation Logistics segment revenue was down 1% year-over-year on a 1% decrease in loadings, while revenue per load was approximately flat compared to Q1 2024 [25] Market Data and Key Metrics Changes - U.S.-Mexico cross-border revenue was approximately 11% of consolidated revenue during the 2024 fiscal year, while U.S.-Canada cross-border revenue was approximately 4% [8] - The freight environment in Q1 2025 was characterized by soft demand, weather impacts, and readily available truck capacity [11] - The number of loads hauled via truck in April 2025 was approximately 2% below April 2024, while revenue per load in April was approximately 1% above April 2024 [35] Company Strategy and Development Direction - The company continues to focus on accelerating its business model and executing on strategic growth initiatives despite macroeconomic challenges [9] - Investments in technology solutions and fleet refreshing are ongoing to benefit the network of independent business owners [15] - The company is committed to continuous improvement in safety, service, and support for customers, agents, and carriers [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the freight transportation backdrop is highly fluid amid political and macroeconomic uncertainty, impacting trade and tariffs [6][34] - The company expects below-normal sequential movements in loads from April to May, with specific weaknesses noted in the automotive sector due to tariff impacts [85] - Management indicated that while the supply chain fraud matter has been addressed, the company does not expect significant additional charges in Q2 2025 [36] Other Important Information - The company deployed approximately $61 million of capital toward buybacks and repurchased approximately 386,000 shares during Q1 2025 [15] - The effective income tax rate was 24.7% in Q1 2025 compared to 23.5% in Q1 2024 [32] - The company ended the quarter with cash and short-term investments of $473 million [33] Q&A Session Summary Question: Can you elaborate on the insurance developments and expected future trends? - Management indicated that the year-over-year difference in prior year development was significant, with about $11 million unfavorable development in Q1 2025, primarily from cargo programs [41][42] - The normal run rate for insurance and claims is just below 5% of BCO revenue, but the current environment suggests this may be low [48] Question: What are the trends in heavy haul and which end markets are performing well? - Heavy haul has been a bright spot, with growth across machinery, electrical, building products, and the energy industry [58] Question: How will the new English proficiency requirements for CDL operators impact the driver supply market? - Management does not expect an impact on the BCO fleet due to high qualification standards, but it may affect overall industry capacity positively [61] Question: What is the current state of capacity in the market? - Management noted an uptick in third-party capacity but expects this to decrease as they become more selective with carriers [72] Question: Can you provide insights on the near-term outlook and areas of strength or weakness? - Management highlighted that automotive and U.S.-Mexico cross-border business were weak, while heavy haul and platform business showed strength [87]

Financial Data and Key Metrics Changes - The first quarter of 2025 saw earnings per share (EPS) come in below the low end of guidance due to a $4.8 million pretax charge related to a supply chain fraud matter and elevated insurance and claims costs [12][13][30] - Gross profit decreased to $98.3 million from $113.9 million year-over-year, with a gross profit margin of 8.5% compared to 9.7% in the previous year [28] - Variable contribution margin was 14% of revenue in the first quarter of 2025, down from 14.4% in the same period last year [29] Business Line Data and Key Metrics Changes - Heavy haul revenue increased by 6% year-over-year, driven by a 3% increase in both heavy haul revenue per load and heavy haul volume [10][25] - Overall truck revenue per load decreased by 0.6% year-over-year, primarily due to a 2.1% decrease in revenue per load on loads hauled by truck brokerage carriers [21] - Non-truck transportation service revenue was up 8% or $6 million compared to the first quarter of 2024, mainly due to a 14% increase in ocean revenue per shipment [25] Market Data and Key Metrics Changes - U.S.-Mexico cross-border revenue accounted for approximately 11% of consolidated revenue during the 2024 fiscal year, while U.S.-Canada cross-border revenue was about 4% [7] - The number of loads hauled via truck in April 2025 was approximately 2% below April 2024, while revenue per load was about 1% above April 2024 [34] - The overall revenue performance in the first quarter was within the top half of the guidance range, despite a relatively soft demand environment [11] Company Strategy and Development Direction - The company is focused on accelerating its business model and executing strategic growth initiatives amidst macroeconomic challenges [9] - Investments in technology solutions and fleet refreshment are ongoing to support independent business owners [16] - The company aims to improve safety performance, with a reported accident frequency rate of 0.69 DOT reportable accidents per million miles, below the national average [17] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing challenges in the freight environment, including soft demand and inflation impacting truckload freight generation [11] - The company is not providing formal guidance for the second quarter but is monitoring business activity closely [33] - Management expressed optimism about the heavy haul business and other strategic areas, despite challenges in the automotive sector due to tariffs [86] Other Important Information - The company repurchased approximately $61 million worth of shares during the first quarter and increased its quarterly dividend by 11% [16] - The balance sheet remains strong, with cash and short-term investments totaling $473 million at the end of the quarter [32] - The company identified a supply chain fraud issue that does not involve its core North American truckload services, with investigations ongoing [12][13] Q&A Session Summary Question: Can you elaborate on the insurance developments and their impact? - Management indicated that the year-over-year difference in prior year claims development was significant, with about $7 million of the $11 million unfavorable development coming from cargo programs [38][40] - The normal run rate for insurance and claims is just below 5% of BCO revenue, but the current environment suggests this may be low [47] Question: What are the trends in heavy haul and end markets? - Heavy haul has been a bright spot, with growth across various sectors including machinery, electrical, and energy [56][58] Question: How will the new English proficiency requirements for CDL operators impact driver supply? - Management does not expect a significant impact on their BCO fleet due to high qualification standards, but it may affect overall industry capacity positively [60][62] Question: What is the outlook for capacity and the broader industry landscape? - Management noted an uptick in third-party capacity but expects to become more selective with carriers, which may lead to a decrease in capacity in the coming quarters [70][72]

Core Insights - Landstar System, Inc. reported a basic and diluted earnings per share (EPS) of $0.85 for Q1 2025, down from $1.32 in Q1 2024, with total revenue of $1.153 billion compared to $1.171 billion in the previous year [1][3][14] - The company experienced a $4.8 million pre-tax charge related to a supply chain fraud incident, impacting EPS by $0.10 [1][5] - Despite challenges, the number of loads hauled via truck in Q1 2025 exceeded the previous quarter for the first time in fifteen years, indicating a positive trend in operational performance [1][4] Financial Performance - Revenue for Q1 2025 was $1,153 million, a decrease of 1.5% from $1,171 million in Q1 2024 [3][14] - Gross profit for Q1 2025 was $98 million, down from $114 million in Q1 2024, while variable contribution decreased from $168 million to $161 million [6][14] - Operating income fell to $39.4 million in Q1 2025 from $60 million in Q1 2024 [14] Operational Highlights - Truck transportation revenue accounted for 91% of total revenue in Q1 2025, totaling $1,050 million, compared to $1,069 million in Q1 2024 [3][18] - The number of loads hauled via truck decreased by 1.2% year-over-year, which was better than the company's guidance range [4] - Truck revenue per load decreased by 0.6% compared to the previous year [4] Capital Return to Shareholders - In Q1 2025, Landstar repurchased approximately 386,000 shares at a cost of $60.9 million and paid $83.3 million in cash dividends [2] - The Board of Directors declared a quarterly dividend of $0.40 per share, an increase of 11% from the previous quarter [2] Balance Sheet Strength - As of March 29, 2025, Landstar had cash and short-term investments totaling approximately $473 million [7] - The trailing twelve-month return on average shareholders' equity was 18%, and return on invested capital was 17% [7]

Core Viewpoint - Landstar System, Inc. is under investigation for potential securities fraud and unlawful business practices following the disclosure of significant supply chain fraud that may impact its earnings [1][2]. Group 1: Company Financial Impact - On April 2, 2025, Landstar identified a significant supply chain fraud that could adversely affect its first quarter 2025 earnings per share by $0.35 to $0.50, leading to the withdrawal of its previous earnings guidance [2]. - Following this announcement, Landstar's stock price dropped by $13.30, or 8.75%, closing at $138.63 on April 3, 2025 [2]. - On April 25, 2025, Landstar announced it would be unable to file its quarterly report on time due to ongoing evaluations of accounting and internal control matters related to the fraud, resulting in a further stock price decline of $4.92, or 3.52%, to close at $135.00 [3]. Group 2: Legal Investigation - Pomerantz LLP is investigating claims on behalf of Landstar investors regarding potential securities fraud and unlawful business practices by the company and its officers or directors [1]. - Pomerantz LLP is recognized for its expertise in corporate, securities, and antitrust class litigation, having a long history of fighting for victims of securities fraud and corporate misconduct [4].

Core Viewpoint - Landstar System, Inc. is under investigation for potential securities fraud and unlawful business practices following the disclosure of significant supply chain fraud that may impact its earnings [1][3]. Financial Impact - On April 2, 2025, Landstar announced that the identified fraud could adversely affect its first quarter 2025 earnings per share by $0.35 to $0.50, leading to a stock price drop of $13.30, or 8.75%, closing at $138.63 on April 3, 2025 [3]. - On April 25, 2025, Landstar revealed it would be unable to file its quarterly report on time due to ongoing evaluations related to the fraud, resulting in a further stock price decline of $4.92, or 3.52%, closing at $135.00 [4]. Legal Proceedings - Pomerantz LLP is investigating claims on behalf of Landstar investors, indicating potential class action litigation related to the alleged fraud [1].