Landstar System Reports All-Time Quarterly Record Diluted Earnings Per Share Of $2.58 in the 2021 Third Quarter

Rhea-AI Summary

Landstar System, Inc. (NASDAQ:LSTR) reported record quarterly revenue of $1.734 billion for Q3 2021, marking a 60% increase from Q3 2020's $1.086 billion. Net income also reached a record $98.7 million, with diluted EPS at $2.58, compared to $61.9 million and $1.61 respectively from the previous year. Operating income grew to $131.4 million, up 60% year-over-year. The company anticipates continued strong performance in Q4, projecting revenue between $1.70 billion and $1.75 billion.

Positive

• Record quarterly revenue of $1.734 billion, a 60% increase from Q3 2020.
• Record net income of $98.7 million, EPS at $2.58, up from $1.61.
• Increased operating income to $131.4 million, a 60% rise year-over-year.
• Anticipated Q4 revenue projected between $1.70 billion and $1.75 billion.
• Record load volume growth of 22% compared to Q3 2020.

Negative

• Truck transportation revenue from independent BCOs decreased to 91% of total revenue from 93% in Q3 2020.

JACKSONVILLE, Fla., Oct. 20, 2021 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ:LSTR) reported record quarterly revenue of $1.734 billion in the 2021 third quarter, a 60 percent increase over revenue of $1.086 billion in the 2020 third quarter. Net income was a quarterly record of $98.7 million, or diluted earnings per share of $2.58, in the 2021 third quarter compared to net income of $61.9 million, or diluted earnings per share of $1.61, in the 2020 third quarter. Operating income grew to an all-time quarterly record of $131.4 million in the 2021 third quarter, 60 percent above operating income of $82.4 million in the 2020 third quarter. To put the strength of our 2021 third quarter performance in perspective, revenue, operating income, net income and diluted earnings per share increased 60 percent, 60 percent, 59 percent and 60 percent, respectively, over the 2020 third quarter, which at the time included the second highest amounts achieved of each of these financial metrics in any third quarter in the Company’s history.

Please note that commencing with the release of our financial results for the 2021 third quarter, the Company revised its definition of the term “gross profit”. Gross profit is now defined as revenue less costs of revenue. In conjunction with this change, the Company has initiated the use of the term “variable contribution”, a non-GAAP financial measure, to refer to the amount represented by revenue less the costs of purchased transportation and commissions to agents that we formerly referred to as gross profit. In addition, the Company now defines “gross profit margin” to refer to gross profit divided by revenue and “variable contribution margin”, a non-GAAP financial measure, to refer to variable contribution divided by revenue. Gross profit in the 2021 third quarter was $189.2 million, an all-time quarterly record, compared to $119.8 million in the 2020 third quarter. Variable contribution also reached an all-time quarterly record of $242.3 million in the 2021 third quarter compared to $160.9 million in the 2020 third quarter. A tabulation of the expenses identified as costs of revenue as well as a reconciliation of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2021 and 2020 third quarters and year-to-date periods is provided in the Company’s accompanying financial disclosures.

Trailing twelve-month return on average shareholders’ equity was 43 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 38 percent. During the 2021 third quarter, Landstar purchased 167,000 shares of its common stock bringing the year-to-date number of shares purchased to 317,000 at an aggregate cost of $50 million. The Company is currently authorized to purchase up to approximately 1,504,000 additional shares of the Company’s common stock under its previously announced share purchase program. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.25 per share payable on December 3, 2021, to stockholders of record as of the close of business on November 9, 2021. 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 2021 third quarter was $1.581 billion, or 91 percent of revenue, compared to $1.006 billion, or 93 percent of revenue, in the 2020 third quarter. Revenue hauled by rail, air and ocean cargo carriers was $128.6 million, or 7 percent of revenue, in the 2021 third quarter compared to approximately $62 million, or 6 percent of revenue, in the 2020 third quarter.

The supplemental information schedule included as a table to this press release includes changes to the historical classification of truck services and equipment type. Power-only, expedited, straight truck, cargo van and miscellaneous other truck transportation services that were formerly included in revenue from van or unsided/platform services have been classified in a single line item named “other truck transportation” as demand for these types of truck services increased significantly during the pandemic. Other truck transportation revenue was 13.2 percent and 10.8 percent of total truck transportation revenue in the 2021 and 2020 third quarters, respectively.

Truckload transportation revenue hauled via van equipment in the 2021 third quarter was $918.1 million, an increase of 59 percent compared to $578.2 million in the 2020 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2021 third quarter was $423.0 million, an increase of 44 percent compared to $294.3 million in the 2020 third quarter. Other truck transportation revenue, which includes power only, expedited, straight truck, cargo van and miscellaneous other truck transportation revenue, in the 2021 third quarter was $208.8 million, an increase of 92 percent compared to $108.6 million in the 2020 third quarter.

“Following a record-breaking 2021 second quarter, the 2021 third quarter reset the standard as the best quarterly financial performance in Landstar history. 2021 third quarter revenue, gross profit, variable contribution, net income and diluted earnings per share each set all-time quarterly records,” said Landstar President and CEO Jim Gattoni. “Our load volume hauled by truck in the third quarter grew 22 percent compared to the 2020 third quarter, which at the time was the second highest third quarter load volume hauled by truck in Landstar history. Additionally, third quarter truck loadings increased from the 2021 second quarter by 3.5 percent, the second largest ever increase in truck loadings from the second to the third quarter in Landstar history behind only 2020 when the second quarter included the most significant volume declines caused by the COVID-19 pandemic. Our 2021 third quarter performance was particularly impressive considering we were following an already record-setting second quarter, and, in most years, load volume hauled by truck experiences a slight decrease sequentially from the second quarter to the third quarter. We attribute this unseasonal increase in volume to ongoing, broad-based demand for freight transportation services, with particular strength in sectors benefiting from consumer spending that has continued to be a big driver of freight activity.”

Gattoni continued, “In our 2021 second quarter earnings release on July 21, 2021, we provided third quarter revenue guidance of $1.55 billion to $1.60 billion and third quarter diluted earnings per share guidance of $2.20 to $2.30. On August 17, 2021, we filed a Form 8-K with the SEC that revised our initial guidance based on trends in volume and rates through the first seven weeks of the third quarter. Our updated 2021 third quarter guidance reflected our expectation that on a sequential basis revenue per load on loads hauled via truck would exceed the 2021 second quarter in a mid-single-digit percentage range and the number of loads hauled via truck in the 2021 third quarter would exceed the 2021 second quarter in a low single-digit percentage range. Actual sequential growth in truck revenue per load was 5.8 percent and actual sequential growth in load volume hauled via truck was 3.5 percent, each at the high end of our August 17th revised guidance. Based on our expectations as to volume and pricing on loads hauled by truck, our August 17th updated guidance anticipated that revenue would be in the range of $1.68 billion to $1.72 billion and diluted earnings per share would be in the range of $2.45 to $2.55. Actual 2021 third quarter revenue was $1.734 billion and diluted earnings per share was $2.58, each slightly exceeding the top end of our August 17th updated guidance ranges.”

Gattoni continued, “As we look to the 2021 fourth quarter, we anticipate continued solid performance on the expectation that broad-based economic strength will support a strong freight environment for the near future. In addition, we will likely continue to be in a capacity-constrained environment, which should continue to support elevated truck revenue per load in the fourth quarter.”

Gattoni further stated, “Overall, I expect the 2021 fourth quarter financial results to be similar to the 2021 third quarter. Through the first few weeks of October, revenue per load on loads hauled via truck and the number of loads hauled via truck are trending fairly consistent with historical third to fourth quarter sequential patterns. I expect normal seasonal trends in revenue per load and load volume on loads hauled via truck as we move through the final months of 2021. At those levels, both revenue per load and load volume on loads hauled via truck would establish new fourth quarter records in the 2021 fourth quarter. As such, I anticipate revenue for the 2021 fourth quarter to be in a range of $1.70 billion to $1.75 billion. Based on that range of revenue and assuming insurance and claims costs of 4.3 percent of BCO revenue, I anticipate diluted earnings per share to be in a range of $2.55 to $2.65 in the 2021 fourth quarter.”

Gattoni concluded, “Landstar’s performance so far this year has been outstanding. The Company’s agent family is executing on all cylinders and we continue to add qualified truck capacity. We ended the 2021 third quarter with a record number of trucks provided by BCOs and a record active third-party truck brokerage carrier count. Given the exceptional performance by Landstar year-to-date plus the revenue and earnings estimates we have provided for the 2021 fourth quarter, we anticipate establishing new all-time fiscal year records in 2021 with annual revenue expected to be in excess of $6 billion and diluted earnings per share expected to be in excess of $9.55. Both of these figures would be well above Landstar’s existing record performance in any year in our history and would represent remarkable achievements to cap an extraordinary year for the Company, its employees and the thousands of business owners who participate in the Landstar network.”

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 Third Quarter 2021 Earnings Release Conference Call.”

About Landstar:
Landstar System, Inc. is a worldwide, 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 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; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; catastrophic loss of a Company facility; intellectual property; unclaimed property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10K for the 2020 fiscal year, 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)
				Thirty Nine Weeks Ended						Thirteen Weeks Ended
				September 25,			September 26,			September 25,			September 26,
				2021			2020			2021			2020
Revenue				$	4,592,551		$	2,836,626		$	1,734,299		$	1,085,546
Investment income					2,138			2,716			706			714
Costs and expenses:
	Purchased transportation				3,583,197			2,183,143			1,356,671			838,753
	Commissions to agents				356,997			236,490			135,295			85,848
	Other operating costs, net of gains on asset sales/dispositions				27,117			23,035			10,572			7,361
	Insurance and claims				75,198			66,563			29,569			21,855
	Selling, general and administrative				158,720			124,779			59,198			38,851
	Depreciation and amortization				36,532			34,212			12,288			11,240
	Impairment of intangible and other assets				-			2,582			-			-
		Total costs and expenses			4,237,761			2,670,804			1,603,593			1,003,908
Operating income					356,928			168,538			131,412			82,352
Interest and debt expense					2,974			2,936			965			1,008
Income before income taxes					353,954			165,602			130,447			81,344
Income taxes					85,745			38,567			31,772			19,458
Net income				$	268,209		$	127,035		$	98,675		$	61,886
Diluted earnings per share				$	7.00		$	3.28		$	2.58		$	1.61
Average diluted shares outstanding					38,342,000			38,673,000			38,218,000			38,386,000
Dividends per common share				$	0.67		$	0.58		$	0.25		$	0.21

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
					September 25,				December 26,
					2021				2020
ASSETS
Current assets:
	Cash and cash equivalents				$	230,564			$	249,354
	Short-term investments					36,644				41,375
	Trade accounts receivable, less allowance
		of $6,543 and $8,670				1,010,538				764,169
	Other receivables, including advances to independent
		contractors, less allowance of $7,696 and $7,239				109,007				134,757
	Other current assets					25,375				18,520
		Total current assets				1,412,128				1,208,175
Operating property, less accumulated depreciation
	and amortization of $332,785 and $299,407					301,373				296,996
Goodwill						40,980				40,949
Other assets						159,561				107,679
Total assets					$	1,914,042			$	1,653,799
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft				$	88,958			$	74,748
	Accounts payable					548,385				380,505
	Current maturities of long-term debt					34,617				35,415
	Insurance claims					64,958				149,774
	Dividends payable					-				76,770
	Other current liabilities					110,394				88,925
		Total current liabilities				847,312				806,137
Long-term debt, excluding current maturities						62,724				65,359
Insurance claims						46,914				38,867
Deferred income taxes and other non-current liabilities						57,402				51,601
Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,231,013 and 68,183,702				682				682
	Additional paid-in capital					246,302				228,875
	Retained earnings					2,288,754				2,046,238
	Cost of 30,122,427 and 29,797,639 shares of common
		stock in treasury				(1,633,109	)			(1,581,961	)
	Accumulated other comprehensive loss					(2,939	)			(1,999	)
		Total shareholders' equity				899,690				691,835
Total liabilities and shareholders' equity					$	1,914,042			$	1,653,799

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)
					Thirty Nine Weeks Ended									Thirteen Weeks Ended
					September 25,				September 26,					September 25,				September 26,
					2021				2020					2021				2020
Revenue generated through (in thousands):
	Truck transportation
		Truckload:
			Van equipment		$	2,502,025			$	1,485,553				$	918,115			$	578,166
			Unsided/platform equipment			1,112,358				807,966					422,979				294,273
		Less-than-truckload				85,551				70,984					30,819				25,125
		Other truck transportation (1)				518,472				249,584					208,817				108,614
			Total truck transportation			4,218,406				2,614,087					1,580,730				1,006,178
	Rail intermodal					120,540				81,747					44,472				30,432
	Ocean and air cargo carriers					191,951				89,002					84,111				31,752
	Other (2)					61,654				51,790					24,986				17,184
					$	4,592,551			$	2,836,626				$	1,734,299			$	1,085,546
	Revenue on loads hauled via BCO Independent Contractors (3)
		included in total truck transportation			$	1,899,313			$	1,312,003				$	690,257			$	502,224
Number of loads:
	Truck transportation
		Truckload:
			Van equipment			1,037,516				822,422					359,263				296,427
			Unsided/platform equipment			381,594				338,696					133,332				118,026
		Less-than-truckload				135,038				119,533					49,943				41,454
		Other truck transportation (1)				208,402				141,669					81,242				56,693
			Total truck transportation			1,762,550				1,422,320					623,780				512,600
	Rail intermodal					40,420				33,410					13,620				11,900
	Ocean and air cargo carriers					29,650				22,720					10,190				8,290
						1,832,620				1,478,450					647,590				532,790
	Loads hauled via BCO Independent Contractors (3)
		included in total truck transportation				773,270				693,860					263,120				250,030
Revenue per load:
	Truck transportation
		Truckload:
			Van equipment		$	2,412			$	1,806				$	2,556			$	1,950
			Unsided/platform equipment			2,915				2,386					3,172				2,493
		Less-than-truckload				634				594					617				606
		Other truck transportation (1)				2,488				1,762					2,570				1,916
			Total truck transportation			2,393				1,838					2,534				1,963
	Rail intermodal					2,982				2,447					3,265				2,557
	Ocean and air cargo carriers					6,474				3,917					8,254				3,830
	Revenue per load on loads hauled via BCO Independent Contractors (3)				$	2,456			$	1,891				$	2,623			$	2,009
Revenue by capacity type (as a % of total revenue):
	Truck capacity providers:
		BCO Independent Contractors (3)				41	%			46	%				40	%			46	%
		Truck Brokerage Carriers				50	%			46	%				51	%			46	%
	Rail intermodal					3	%			3	%				3	%			3	%
	Ocean and air cargo carriers					4	%			3	%				5	%			3	%
	Other					1	%			2	%				1	%			2	%
														September 25,				September 26,
														2021				2020
Truck Capacity Providers
	BCO Independent Contractors (3)														10,955				9,866
	Truck Brokerage Carriers:
		Approved and active (4)													58,676				41,246
		Other approved													24,602				22,181
															83,278				63,427
	Total available truck capacity providers														94,233				73,293
	Trucks provided by BCO Independent Contractors (3)														11,746				10,571
(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)
				Thirty Nine Weeks Ended								Thirteen Weeks Ended
				September 25,				September 26,				September 25,				September 26,
					2021				2020				2021				2020
Revenue				$	4,592,551			$	2,836,626			$	1,734,299			$	1,085,546
Costs of revenue:
		Purchased transportation			3,583,197				2,183,143				1,356,671				838,753
		Commissions to agents			356,997				236,490				135,295				85,848
	Variable costs of revenue				3,940,194				2,419,633				1,491,966				924,601
		Trailing equipment depreciation			26,362				26,342				8,615				8,397
		Information technology costs (1)			9,534				7,021				3,450				2,722
		Insurance-related costs (2)			78,175				68,839				30,502				22,657
		Other operating costs			27,117				23,035				10,572				7,361
	Other costs of revenue				141,188				125,237				53,139				41,137
	Total costs of revenue				4,081,382				2,544,870				1,545,105				965,738
Gross profit				$	511,169			$	291,756			$	189,194			$	119,808
Gross profit margin					11.1	%			10.3	%			10.9	%			11.0	%
	Plus: other costs of revenue				141,188				125,237				53,139				41,137
Variable contribution				$	652,357			$	416,993			$	242,333			$	160,945
Variable contribution margin					14.2	%			14.7	%			14.0	%			14.8	%
(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.

 

FAQ

What are Landstar's earnings for Q3 2021?

Landstar reported net income of $98.7 million for Q3 2021, with diluted EPS of $2.58.

How did Landstar's revenue perform in Q3 2021 compared to Q3 2020?

Landstar's revenue in Q3 2021 was $1.734 billion, a 60% increase from $1.086 billion in Q3 2020.

What guidance did Landstar provide for Q4 2021?

Landstar anticipates Q4 2021 revenue to be between $1.70 billion and $1.75 billion.

What was the increase in Landstar's operating income for Q3 2021?

Operating income for Q3 2021 increased to $131.4 million, a rise of 60% from the previous year.

What was the load volume growth for Landstar in Q3 2021?

Load volume grew by 22% compared to Q3 2020.