Landstar System Reports Fourth Quarter Revenue of $1.675B and Fourth Quarter Diluted Earnings Per Share of $2.60

Rhea-AI Summary

Landstar System, Inc. (NASDAQ: LSTR) reported diluted earnings per share (DEPS) of $2.60 on revenue of $1.675 billion in Q4 2022, down from $2.99 on $1.945 billion in Q4 2021, which included a significant revenue contribution from an additional operational week. Despite these declines, Landstar achieved record annual revenue of approximately $7.4 billion for fiscal year 2022, reflecting a $900 million increase year-over-year. The company faced a softer freight environment entering 2023, with expectations for Q1 revenue ranging between $1.40 billion to $1.45 billion and DEPS projected at $2.05 to $2.15.

Positive

• Record annual revenue of approximately $7.4 billion in fiscal 2022, up $900 million from 2021.
• Record diluted earnings per share of $11.76 for fiscal year 2022, an 18% increase from $9.98 in 2021.
• Trailing twelve month return on average shareholders' equity at 50%.

Negative

• Q4 2022 diluted earnings per share decreased to $2.60 from $2.99 in Q4 2021.
• Revenue per load fell 7% year-over-year in Q4 2022.
• Projected Q1 2023 revenue and DEPS lower than previous year, reflecting a softer freight environment.

JACKSONVILLE, Fla., Feb. 01, 2023 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) (“Landstar” or the “Company”) reported diluted earnings per share (“DEPS”) of $2.60 in the 2022 fourteen-week fourth quarter on revenue of $1.675 billion. Landstar reported diluted earnings per share of $2.99 on revenue of $1.945 billion in the 2021 thirteen-week fourth quarter.

The Company’s fiscal year ends each year on the last Saturday in December. As such, the Company’s 2022 fourth quarter ended on December 31^st and included fourteen weeks of operations, whereas the 2021 fourth quarter ended on December 25^th and included thirteen weeks. As the week following Christmas tends to reflect less demand for the Company’s freight transportation services as compared to the rest of December, we estimate the extra week in 2022 contributed revenue of approximately $65 million.

Gross profit in the 2022 fourth quarter was $180.0 million and variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2022 fourth quarter was $234.0 million. Gross profit in the 2021 fourth quarter was $209.8 million and variable contribution in the 2021 fourth quarter was $263.3 million. Reconciliations of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2022 and 2021 fourth quarters and full fiscal years are provided in the Company’s accompanying financial disclosures.

Trailing twelve month return on average shareholders’ equity was 50 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 44 percent. The Company is currently authorized to purchase up to 3,000,000 shares of the Company’s common stock under its previously announced share purchase programs. Landstar announced today that its Board of Directors has declared a quarterly dividend of $0.30 per share payable on March 10, 2023, to stockholders of record as of the close of business on February 13, 2023. 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 2022 fourth quarter was $1,533.6 million, or 92 percent of revenue, compared to $1,744.8 million, or 90 percent of revenue, in the 2021 fourth quarter. Truckload transportation revenue hauled via van equipment in the 2022 fourth quarter was $869.8 million, compared to $1,023.8 million in the 2021 fourth quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2022 fourth quarter was $423.4 million, compared to $436.7 million in the 2021 fourth quarter. Revenue from other truck transportation, which is largely related to power-only services, in the 2022 fourth quarter was $204.0 million, compared to $252.4 million in the 2021 fourth quarter. Revenue hauled by rail, air and ocean cargo carriers was $115.1 million, or 7 percent of revenue, in the 2022 fourth quarter, compared to $174.6 million, or 9 percent of revenue, in the 2021 fourth quarter.

“The current macroeconomic environment made for challenging comparisons against our record 2021 fourth quarter performance despite the extra week of operations in the 2022 fourth quarter,” said Landstar President and Chief Executive Officer Jim Gattoni. “Softer demand during a weaker than typical peak season resulted in more readily available truck capacity and truck rates and volumes below the record prior year levels. The number of loads hauled via truck decreased 5.5% as compared to the 2021 fourth quarter, below the low end of our fourth quarter guidance issued in our 2022 third quarter earnings release on October 19, 2022. Revenue per load on loads hauled via truck decreased 7% as compared to the 2021 fourth quarter, at the low end of the 2022 fourth quarter guidance. In addition, revenue generated in the aggregate via rail, air and ocean cargo carriers was below the estimated amount included in the fourth quarter guidance.”

Gattoni further stated, “As expected, even with a challenging 2022 fourth quarter, Landstar’s fiscal year financial performance in 2022 was the best in the Company’s history. Revenue in fiscal year 2022 was approximately $7.4 billion, an annual record, and was approximately $900 million higher than the previous record set in 2021. Gross profit and variable contribution in fiscal year 2022 were $788 million and $1.018 billion, respectively, both also representing new annual records. Operating income in fiscal year 2022 was an annual record of $571 million and represented year-over-year growth of 13%. Diluted earnings per share in fiscal year 2022 was an annual record of $11.76, an increase of $1.78, or 18 percent, from our prior fiscal year record of $9.98 in 2021.”

Gattoni continued, “Landstar’s financial performance in 2022, coming off a record-setting 2021 fiscal year, was truly outstanding. The Company’s 2022 achievements speak to the strength and resiliency of the Landstar network and the power of our unique agent and capacity network to execute. I am extremely pleased by our organic annual load volume growth and our continuing ability to attract productive agents and capacity to the network. We now enter 2023 looking forward to another exciting year for the Company, its employees, and the thousands of business owners who participate in the Landstar network.”

As it pertains to the 2023 first quarter, we begin the year with a much softer freight environment as compared to the beginning of 2022. Accordingly, we enter 2023 with very difficult quarter over prior year quarter comparisons. 2022 first quarter truck revenue per load was an all-time Landstar high and truck load volume was the second highest quarterly volume in Company history, lower only than the 2021 fourth quarter. We ended 2022 with fourth quarter truck revenue per load 11 percent below the 2022 first quarter. That lower truck revenue per load will certainly carry forward into the 2023 first quarter along with the expectation that we experience a normal seasonal decrease in rates from the fourth quarter to the first quarter in a mid-single digit percentage range.

Also, in the 2022 first quarter, revenue hauled via rail, air and ocean cargo carriers was near an all-time high of $195 million. We expect that revenue hauled via these non-trucking modes in the 2023 first quarter to be $100 million to $120 million below the 2022 first quarter.

Gattoni further commented, “With respect to recent trends, the number of loads hauled via truck has been 10 to 12 percent below the corresponding period of 2022 and overall truck revenue per load has been 15 to 17 percent below the corresponding period of 2022. Prior to the onset of the pandemic in 2020, truck revenue per load typically experienced, on average, a mid-single digit percentage range seasonal decrease from the fourth quarter to the immediately following first quarter. Thus far through the first four weeks of January 2023, truck revenue per load has trended reasonably in-line with pre-pandemic historical fourth quarter to first quarter sequential patterns. As such, I anticipate revenue for the 2023 first quarter to be in a range of $1.40 billion to $1.45 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2023 first quarter, I would anticipate DEPS to be in a range of $2.05 to $2.15. This range of DEPS includes insurance and claims expense estimated at 4.5 percent of BCO revenue.”

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 Fourth Quarter 2022 Earnings Release Conference Call.”

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

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

Forward Looking Statements Disclaimer:
The following is a “safe harbor” statement under the Private Securities Litigation Reform Act of 1995. Statements contained in this press release that are not based on historical facts are “forward-looking statements”. This press release contains forward-looking statements, such as statements which relate to Landstar’s business objectives, plans, strategies and expectations. Terms such as “anticipates,” “believes,” “estimates,” “intention,” “expects,” “plans,” “predicts,” “may,” “should,” “could,” “will,” the negative thereof and similar expressions are intended to identify forward-looking statements. Such statements are by nature subject to uncertainties and risks, including but not limited to: the impact of the Russian conflict with Ukraine on the operations of certain independent commission sales agents, including the Company’s largest such agent by revenue in the 2022 fiscal year; the impact of the coronavirus (COVID-19) pandemic; an increase in the frequency or severity of accidents or other claims; unfavorable development of existing accident claims; dependence on third party insurance companies; dependence on independent commission sales agents; dependence on third party capacity providers; decreased demand for transportation services; U.S. trade relationships; substantial industry competition; disruptions or failures in the Company’s computer systems; cyber and other information security incidents; dependence on key vendors; changes in fuel taxes; status of independent contractors; regulatory and legislative changes; regulations focused on diesel emissions and other air quality matters; intellectual property; and other operational, financial or legal risks or uncertainties detailed in Landstar’s Form 10-K for the 2021 fiscal year, described in Item 1A Risk Factors, Landstar’s Form 10-Qs for the 2022 first and second fiscal quarters, 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)
	Fiscal Years Ended						Fiscal Quarters Ended
	December 31,			December 25,			December 31,			December 25,
	2022			2021			2022			2021
Revenue	$	7,436,562		$	6,537,568		$	1,674,767		$	1,945,017
Investment income		3,162			2,857			1,139			719
Costs and expenses:
Purchased transportation		5,804,017			5,114,667			1,291,676			1,531,470
Commissions to agents		614,865			507,209			149,106			150,212
Other operating costs, net of gains on asset sales/dispositions		45,192			36,531			10,314			9,414
Insurance and claims		125,835			105,463			29,570			30,265
Selling, general and administrative		221,279			221,278			56,080			62,558
Depreciation and amortization		57,453			49,609			14,826			13,077
Total costs and expenses		6,868,641			6,034,757			1,551,572			1,796,996
Operating income		571,083			505,668			124,334			148,740
Interest and debt expense		3,620			3,976			345			1,002
Income before income taxes		567,463			501,692			123,989			147,738
Income taxes		136,549			120,168			30,687			34,423
Net income	$	430,914		$	381,524		$	93,302		$	113,315
Diluted earnings per share	$	11.76		$	9.98		$	2.60		$	2.99
Average diluted shares outstanding		36,633,000			38,235,000			35,930,000			37,917,000
Dividends per common share	$	3.10		$	2.92		$	2.30		$	2.25

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
	December 31,				December 25,
	2022				2021
ASSETS
Current assets:
Cash and cash equivalents	$	339,581			$	215,522
Short-term investments		53,955				35,778
Trade accounts receivable, less allowance
of $12,121 and $7,074		967,793				1,154,314
Other receivables, including advances to independent
contractors, less allowance of $10,579 and $8,125		56,235				101,124
Other current assets		21,826				16,162
Total current assets		1,439,390				1,522,900
Operating property, less accumulated depreciation
and amortization of $393,274 and $344,099		314,990				317,386
Goodwill		41,220				40,768
Other assets		136,279				164,411
Total assets	$	1,931,879			$	2,045,465
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Cash overdraft	$	92,953			$	116,478
Accounts payable		527,372				604,130
Current maturities of long-term debt		36,175				36,561
Insurance claims		50,836				46,896
Dividends payable		71,854				75,387
Other current liabilities		98,945				130,531
Total current liabilities		878,135				1,009,983
Long-term debt, excluding current maturities		67,225				75,243
Insurance claims		58,268				49,509
Deferred income taxes and other non-current liabilities		41,030				48,720
Shareholders' equity:
Common stock, $0.01 par value, authorized 160,000,000
shares, issued 68,382,310 and 68,232,975		684				682
Additional paid-in capital		258,487				255,148
Retained earnings		2,635,960				2,317,184
Cost of 32,455,300 and 30,539,235 shares of common
stock in treasury		(1,992,886	)			(1,705,601	)
Accumulated other comprehensive loss		(15,024	)			(5,403	)
Total shareholders' equity		887,221				862,010
Total liabilities and shareholders' equity	$	1,931,879			$	2,045,465

Landstar System, Inc. and Subsidiary
Supplemental Information
(Unaudited)
				Fiscal Years Ended								Fiscal Quarters Ended
				December 31,				December 25,				December 31,				December 25,
				2022				2021				2022				2021
Revenue generated through (in thousands):
Truck transportation
Truckload:
Van equipment				$	3,892,085			$	3,525,830			$	869,788			$	1,023,805
Unsided/platform equipment					1,760,357				1,549,037				423,401				436,679
Less-than-truckload					142,438				117,505				36,444				31,954
Other truck transportation (1)					835,959				770,846				203,958				252,374
Total truck transportation					6,630,839				5,963,218				1,533,591				1,744,812
Rail intermodal					145,017				159,974				31,255				39,434
Ocean and air cargo carriers					558,986				327,160				83,830				135,209
Other (2)					101,720				87,216				26,091				25,562
				$	7,436,562			$	6,537,568			$	1,674,767			$	1,945,017
Revenue on loads hauled via BCO Independent Contractors (3) included in total truck transportation				$	2,636,036			$	2,612,188			$	592,264			$	712,875
Number of loads:
Truck transportation
Truckload:
Van equipment					1,496,247				1,422,734				365,984				385,218
Unsided/platform equipment					558,530				521,891				138,094				140,297
Less-than-truckload					191,233				183,975				48,493				48,937
Other truck transportation (1)					320,790				300,710				77,449				92,308
Total truck transportation					2,566,800				2,429,310				630,020				666,760
Rail intermodal					40,710				52,310				8,770				11,890
Ocean and air cargo carriers					41,850				41,450				7,440				11,800
					2,649,360				2,523,070				646,230				690,450
Loads hauled via BCO Independent Contractors (3) included in total truck transportation					1,027,480				1,039,630				250,230				266,360
Revenue per load:
Truck transportation
Truckload:
Van equipment				$	2,601			$	2,478			$	2,377			$	2,658
Unsided/platform equipment					3,152				2,968				3,066				3,113
Less-than-truckload					745				639				752				653
Other truck transportation (1)					2,606				2,563				2,633				2,734
Total truck transportation					2,583				2,455				2,434				2,617
Rail intermodal					3,562				3,058				3,564				3,317
Ocean and air cargo carriers					13,357				7,893				11,267				11,458
Revenue per load on loads hauled via BCO Independent Contractors (3)				$	2,566			$	2,513			$	2,367			$	2,676
Revenue by capacity type (as a % of total revenue):
Truck capacity providers:
BCO Independent Contractors (3)					35	%			40	%			35	%			37	%
Truck Brokerage Carriers					54	%			51	%			56	%			53	%
Rail intermodal					2	%			2	%			2	%			2	%
Ocean and air cargo carriers					8	%			5	%			5	%			7	%
Other					1	%			1	%			2	%			1	%
												December 31,				December 25,
												2022				2021
Truck Capacity Providers
BCO Independent Contractors (3)													10,393				11,057
Truck Brokerage Carriers:
Approved and active (4)													66,745				64,476
Other approved													30,999				25,870
													97,744				90,346
Total available truck capacity providers													108,137				101,403
Trucks provided by BCO Independent Contractors (3)													11,281				11,864
(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)
	Fiscal Years Ended								Fiscal Quarters Ended
	December 31,				December 25,				December 31,				December 25,
	2022				2021				2022				2021
Revenue	$	7,436,562			$	6,537,568			$	1,674,767			$	1,945,017
Costs of revenue:
Purchased transportation		5,804,017				5,114,667				1,291,676				1,531,470
Commissions to agents		614,865				507,209				149,106				150,212
Variable costs of revenue		6,418,882				5,621,876				1,440,782				1,681,682
Trailing equipment depreciation		36,653				35,204				8,893				8,842
Information technology costs (1)		19,834				13,560				5,966				4,026
Insurance-related costs (2)		127,605				109,387				28,784				31,212
Other operating costs		45,192				36,531				10,314				9,414
Other costs of revenue		229,284				194,682				53,957				53,494
Total costs of revenue		6,648,166				5,816,558				1,494,739				1,735,176
Gross profit	$	788,396			$	721,010			$	180,028			$	209,841
Gross profit margin		10.6	%			11.0	%			10.7	%			10.8	%
Plus: other costs of revenue		229,284				194,682				53,957				53,494
Variable contribution	$	1,017,680			$	915,692			$	233,985			$	263,335
Variable contribution margin		13.7	%			14.0	%			14.0	%			13.5	%
(1) Includes costs of revenue incurred related to internally developed software including ASC 350-40 amortization, implementation costs, hosting costs and other support costs utilized to support the Company’s independent commission sales agents, third party capacity providers, and customers, included as a portion of depreciation and amortization and of selling, general and administrative in the Company's Consolidated Statements of Income.
(2) Primarily includes (i) insurance premiums paid for commercial auto liability, general liability, cargo and other lines of coverage related to the transportation of freight; (ii) the related cost of claims incurred under those programs; and (iii) brokerage commissions and other fees incurred relating to the administration of insurance programs available to BCO Independent Contractors that are reinsured by the Company, which are included in selling, general and administrative in the Company’s Consolidated Statements of Income.

FAQ

What were Landstar's earnings results for Q4 2022?

Landstar reported diluted earnings per share of $2.60 on revenue of $1.675 billion for Q4 2022.

How did Landstar perform in fiscal year 2022?

Landstar achieved record annual revenue of $7.4 billion, with diluted earnings per share at $11.76, marking an 18% increase compared to 2021.

What is the expected revenue for Landstar in Q1 2023?

Landstar expects Q1 2023 revenue to range between $1.40 billion to $1.45 billion.

What is the projected diluted earnings per share for Landstar in Q1 2023?

The anticipated diluted earnings per share for Q1 2023 is between $2.05 and $2.15.