Landstar System Reports Record Third Quarter Revenue of $1.816B and Record Third Quarter Diluted Earnings Per Share of $2.76

Rhea-AI Summary

Landstar System reported record revenue of $1.816 billion in Q3 2022, a 5% increase from Q3 2021, with diluted earnings per share (DEPS) rising 7% to $2.76. Gross profit fell 2% to $185.7 million, but variable contribution reached a record $245.7 million, up 1%. The company returned $73.3 million in stock buybacks and declared a quarterly dividend of $0.30 per share. However, Landstar anticipates a 2-4% decrease in truck loads for Q4 due to economic uncertainty and expects DEPS to drop to between $2.60 and $2.70.

Positive

• Record revenue of $1.816 billion in Q3 2022, a 5% increase year-over-year.
• Diluted EPS rose 7% to $2.76, establishing a new record.
• Variable contribution reached a record $245.7 million in Q3.
• Returned $73.3 million in stock repurchases during Q3.

Negative

• Gross profit decreased by 2% compared to Q3 2021.
• Anticipated truck loads to decrease by 2-4% in Q4 2022.
• Projected DEPS to be between $2.60 and $2.70 in Q4, down from $2.76.

JACKSONVILLE, Fla., Oct. 19, 2022 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported revenue of $1.816 billion in the 2022 third quarter, a 5 percent increase over revenue of $1.734 billion in the 2021 third quarter and quarterly diluted earnings per share (“DEPS”) of $2.76, an increase of 7 percent compared to $2.58 in the 2021 third quarter. 2022 third quarter revenue and DEPS each established new all-time third quarter records for Landstar.

Gross profit in the 2022 third quarter was $185.7 million, 2 percent below 2021 third quarter gross profit of $189.2 million. Variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2022 third quarter reached a third quarter record of $245.7 million, 1 percent above 2021 third quarter variable contribution of $242.3 million. A reconciliation of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2022 and 2021 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 52 percent and return on invested capital, representing net income divided by the sum of average equity plus average debt, was 46 percent. Landstar continues to return significant amounts of capital to stockholders through the Company’s stock purchase program and dividends. During the 2022 third quarter, Landstar purchased approximately 504,000 shares of its common stock at an aggregate cost of $73.3 million, bringing the total number of common shares purchased during the thirty-nine weeks ended September 24, 2022 to 1,901,000 shares at an aggregate cost of approximately $286.0 million. The Company is currently authorized to purchase up to an additional 1,099,174 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 $0.30 per share payable on December 2, 2022, to stockholders of record as of the close of business on November 8, 2022. 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 third quarter was $1,598.8 million, or 88 percent of revenue, compared to $1,580.7 million, or 91 percent of revenue, in the 2021 third quarter. Truckload transportation revenue hauled via van equipment in the 2022 third quarter was $914.2 million, compared to $918.1 million in the 2021 third quarter. Truckload transportation revenue hauled via unsided/platform equipment in the 2022 third quarter was $453.9 million, compared to $423.0 million in the 2021 third quarter, an increase of 7 percent. Revenue from other truck transportation, which is largely related to power-only services, in the 2022 third quarter was $195.3 million, compared to $208.8 million in the 2021 third quarter, a decrease of 6 percent. Revenue hauled by rail, air and ocean cargo carriers was $191.9 million, or 11 percent of revenue, in the 2022 third quarter, compared to $128.6 million, or 7 percent of revenue, in the 2021 third quarter, an increase of 49 percent.

“Customer demand for our freight transportation services was solid in most sectors of our business during the 2022 third quarter,” said Landstar President and CEO Jim Gattoni. “Overall, the number of loads hauled via truck in the 2022 third quarter increased 1 percent over the 2021 third quarter, a good performance given a tough year-over-year comparison. In particular, demand for unsided/platform services was strong while demand for van services moderated compared to earlier in 2022. The increase in the number of truck loads hauled via unsided/platform equipment together with a modest increase in the number of loads hauled via van equipment more than offset a decrease in the number of loads hauled by other truck transportation services. The less robust growth in the number of truck loads hauled via van equipment and the decrease in loads hauled by other truck transportation services was largely attributable to reduced demand from certain parcel and less-than-truckload carriers for our truckload services, as volumes from those customers have returned to more normalized levels since peaking in 2021 and early 2022. Revenue per truck load in the 2022 third quarter was essentially equal to that of the 2021 third quarter, with strength in revenue per load on truck loads hauled by unsided/platform equipment being offset by small decreases in revenue per load on truck loads hauled by van equipment and other truck transportation services.”

Gattoni further commented, “There continues to be a lot of unease regarding U.S. economic conditions as we head into the fourth quarter. On a macroeconomic level, continuing inflation concerns along with possible further action by the Federal Reserve to address these concerns at the risk of causing further recessionary pressure, as well as current geopolitical tensions and the corresponding volatility in the international energy markets, add significant uncertainty to the performance of the overall domestic freight environment. Moreover, high inventory levels being reported by large retailers corresponds with what we anticipate will be decreased seasonal demand for freight services in connection with the 2022 holiday shipping season. Additionally, comparisons to the 2021 fourth quarter results will be challenging for Landstar, given the unprecedented strength our business experienced during the 2021 fourth quarter.”

Gattoni continued, “Through the first several weeks of October, the number of loads hauled via truck was below the corresponding period of 2021 in a mid-single-digit percentage range; and overall truck revenue per load trended reasonably in-line with historical third to fourth quarter sequential patterns. However, with expectations of a more muted peak shipping season and, relatedly, a more challenging demand environment for loads hauled by van equipment and other truck transportation services, I expect truck revenue per load to underperform historical fourth quarter trends in the 2022 fourth quarter, and as such, to be below the 2021 fourth quarter by 5 to 7 percent. With respect to volumes, please note that Landstar’s fiscal year ends on the last Saturday of the calendar year, which this year is December 31, 2022, resulting in fiscal year 2022 representing a 53-week period. As such, the Company’s 2022 fourth quarter includes an extra week of operations, during which the Company anticipates it will haul approximately thirty to forty thousand truck loads. Taking into account the extra week of operations, I expect the number of loads hauled via truck to decrease compared to the 2021 fourth quarter by 2 to 4 percent.  As such, I anticipate revenue for the 2022 fourth quarter to be in a range of $1.775 billion to $1.825 billion.”

Gattoni continued, “Based on the range of revenue estimated for the 2022 fourth quarter, I would anticipate DEPS to be in a range of $2.60 to $2.70. This range of DEPS includes insurance and claims expense estimated at 4.5 percent of BCO revenue.”

Gattoni concluded, “Landstar’s performance through the first three quarters of 2022 has been outstanding. The Company’s agent family has continued to execute regardless of a shifting macroeconomic backdrop. Given the exceptional performance by Landstar year-to-date plus the revenue and earnings estimates we have provided for the 2022 fourth quarter, we anticipate establishing new all-time fiscal year records in 2022 with annual revenue expected to be in excess of $7.5 billion and DEPS expected to be in excess of $11.75. 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 another tremendous 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 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 2021 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)
				Thirty Nine Weeks Ended						Thirteen Weeks Ended
				September 24,			September 25,			September 24,			September 25,
				2022			2021			2022			2021
Revenue				$	5,761,795		$	4,592,551		$	1,816,132		$	1,734,299
Investment income					2,023			2,138			716			706
Costs and expenses:
	Purchased transportation				4,512,341			3,583,197			1,416,323			1,356,671
	Commissions to agents				465,759			356,997			154,125			135,295
	Other operating costs, net of gains on asset sales/dispositions				34,878			27,117			13,356			10,572
	Insurance and claims				96,265			75,198			31,445			29,569
	Selling, general and administrative				165,199			158,720			53,519			59,198
	Depreciation and amortization				42,627			36,532			14,582			12,288
		Total costs and expenses			5,317,069			4,237,761			1,683,350			1,603,593
Operating income					446,749			356,928			133,498			131,412
Interest and debt expense					3,275			2,974			1,047			965
Income before income taxes					443,474			353,954			132,451			130,447
Income taxes					105,862			85,745			32,233			31,772
Net income				$	337,612		$	268,209		$	100,218		$	98,675
Diluted earnings per share				$	9.15		$	7.00		$	2.76		$	2.58
Average diluted shares outstanding					36,886,000			38,342,000			36,334,000			38,218,000
Dividends per common share				$	0.80		$	0.67		$	0.30		$	0.25

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
				September 24,				December 25,
				2022				2021
ASSETS
Current assets:
	Cash and cash equivalents			$	177,796			$	215,522
	Short-term investments				50,637				35,778
	Trade accounts receivable, less allowance
		of $10,464 and $7,074			1,133,681				1,154,314
	Other receivables, including advances to independent
		contractors, less allowance of $9,877 and $8,125			87,241				101,124
	Other current assets				35,493				16,162
		Total current assets			1,484,848				1,522,900
Operating property, less accumulated depreciation
			and amortization of $383,458 and $344,099		321,585				317,386
Goodwill					41,004				40,768
Other assets					141,103				164,411
Total assets				$	1,988,540			$	2,045,465
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft			$	97,686			$	116,478
	Accounts payable				644,054				604,130
	Current maturities of long-term debt				37,375				36,561
	Insurance claims				58,131				46,896
	Dividends payable				-				75,387
	Other current liabilities				104,272				130,531
		Total current liabilities			941,518				1,009,983
Long-term debt, excluding current maturities					72,095				75,243
Insurance claims					55,765				49,509
Deferred income taxes and other non-current liabilities					45,989				48,720
Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,380,565 and 68,232,975			684				682
	Additional paid-in capital				255,486				255,148
	Retained earnings				2,625,290				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				(15,401	)			(5,403	)
		Total shareholders' equity			873,173				862,010
Total liabilities and shareholders' equity				$	1,988,540			$	2,045,465

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)
					Thirty Nine Weeks Ended									Thirteen Weeks Ended
					September 24,				September 25,					September 24,				September 25,
					2022				2021					2022				2021
Revenue generated through (in thousands):
	Truck transportation
		Truckload:
			Van equipment		$	3,022,297			$	2,502,025				$	914,154			$	918,115
			Unsided/platform equipment			1,336,956				1,112,358					453,924				422,979
		Less-than-truckload				105,994				85,551					35,343				30,819
		Other truck transportation (1)				632,001				518,472					195,345				208,817
			Total truck transportation			5,097,248				4,218,406					1,598,766				1,580,730
	Rail intermodal					113,762				120,540					27,652				44,472
	Ocean and air cargo carriers					475,156				191,951					164,252				84,111
	Other (2)					75,629				61,654					25,462				24,986
					$	5,761,795			$	4,592,551				$	1,816,132			$	1,734,299
	Revenue on loads hauled via BCO Independent Contractors (3)
		included in total truck transportation			$	2,043,772			$	1,899,313				$	627,809			$	690,257
Number of loads:
	Truck transportation
		Truckload:
			Van equipment			1,130,263				1,037,516					366,513				359,263
			Unsided/platform equipment			420,436				381,594					141,091				133,332
		Less-than-truckload				142,740				135,038					45,912				49,943
		Other truck transportation (1)				243,341				208,402					76,594				81,242
			Total truck transportation			1,936,780				1,762,550					630,110				623,780
	Rail intermodal					31,940				40,420					7,720				13,620
	Ocean and air cargo carriers					34,410				29,650					11,520				10,190
						2,003,130				1,832,620					649,350				647,590
	Loads hauled via BCO Independent Contractors (3)
		included in total truck transportation				777,250				773,270					249,420				263,120
Revenue per load:
	Truck transportation
		Truckload:
			Van equipment		$	2,674			$	2,412				$	2,494			$	2,556
			Unsided/platform equipment			3,180				2,915					3,217				3,172
		Less-than-truckload				743				634					770				617
		Other truck transportation (1)				2,597				2,488					2,550				2,570
			Total truck transportation			2,632				2,393					2,537				2,534
	Rail intermodal					3,562				2,982					3,582				3,265
	Ocean and air cargo carriers					13,809				6,474					14,258				8,254
	Revenue per load on loads hauled via BCO Independent Contractors (3)				$	2,629			$	2,456				$	2,517			$	2,623
Revenue by capacity type (as a % of total revenue):
	Truck capacity providers:
		BCO Independent Contractors (3)				35	%			41	%				35	%			40	%
		Truck Brokerage Carriers				53	%			50	%				53	%			51	%
	Rail intermodal					2	%			3	%				2	%			3	%
	Ocean and air cargo carriers					8	%			4	%				9	%			5	%
	Other					1	%			1	%				1	%			1	%
														September 24,				September 25,
														2022				2021
Truck Capacity Providers
	BCO Independent Contractors (3)														10,742				10,955
	Truck Brokerage Carriers:
		Approved and active (4)													71,207				58,676
	Other approved														30,222				24,602
															101,429				83,278
	Total available truck capacity providers														112,171				94,233
	Trucks provided by BCO Independent Contractors (3)														11,644				11,746
(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 24,				September 25,				September 24,				September 25,
				2022				2021				2022				2021
Revenue				$	5,761,795			$	4,592,551			$	1,816,132			$	1,734,299
Costs of revenue:
		Purchased transportation			4,512,341				3,583,197				1,416,323				1,356,671
		Commissions to agents			465,759				356,997				154,125				135,295
	Variable costs of revenue				4,978,100				3,940,194				1,570,448				1,491,966
		Trailing equipment depreciation			27,760				26,362				9,397				8,615
		Information technology costs (1)			13,868				9,534				4,829				3,450
		Insurance-related costs (2)			98,821				78,175				32,380				30,502
		Other operating costs			34,878				27,117				13,356				10,572
	Other costs of revenue				175,327				141,188				59,962				53,139
	Total costs of revenue				5,153,427				4,081,382				1,630,410				1,545,105
Gross profit				$	608,368			$	511,169			$	185,722			$	189,194
Gross profit margin					10.6	%			11.1	%			10.2	%			10.9	%
	Plus: other costs of revenue				175,327				141,188				59,962				53,139
Variable contribution				$	783,695			$	652,357			$	245,684			$	242,333
Variable contribution margin					13.6	%			14.2	%			13.5	%			14.0	%
(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 Q3 2022 earnings results?

Landstar reported record revenue of $1.816 billion and diluted EPS of $2.76 in Q3 2022.

What is the revenue guidance for Landstar in Q4 2022?

Landstar anticipates Q4 2022 revenue between $1.775 billion and $1.825 billion.

How much did Landstar return to shareholders in Q3 2022?

Landstar returned $73.3 million through stock repurchases in Q3 2022.

What challenges does Landstar anticipate for the fourth quarter of 2022?

Landstar expects a decrease in truck loads by 2-4% and a potential decline in DEPS.

What is the significance of Landstar's variable contribution in Q3 2022?

Variable contribution reached a record $245.7 million, indicating strong operational performance.