UPDATE - Landstar System Reports Record Second Quarter Revenue of $1.975B and Diluted Earnings Per Share of $3.05

Rhea-AI Summary

Landstar System, Inc. (NASDAQ: LSTR) reported record revenue of $1.975 billion for Q2 2022, marking a 26% increase from Q2 2021. Net income rose to $112.6 million with diluted earnings per share (DEPS) of $3.05, up 27%. Gross profit reached $208.1 million, a 19% increase. The company returned significant capital to shareholders, buying back 703,000 shares for $103.3 million. A quarterly dividend of $0.30 per share was also declared, reflecting a 20% increase. However, concerns over economic conditions and higher insurance costs were noted.

Positive

• Record revenue of $1.975 billion in Q2 2022, up 26% YoY.
• Net income increased by 22% to $112.6 million.
• Diluted EPS rose to $3.05, a 27% increase.
• Gross profit set a record at $208.1 million, up 19% YoY.
• Significant return of capital to shareholders with $103.3 million in stock buybacks.
• Quarterly dividend increased by 20%, the largest in company history.

Negative

• DEPS fell below guidance, down 5% from expectations.
• Higher insurance and claims costs at 4.9% of BCO revenue due to accidents.
• Truck revenue per load decreased approximately 4% from April to May 2022.

JACKSONVILLE, Fla., July 20, 2022 (GLOBE NEWSWIRE) -- Landstar System, Inc. (NASDAQ: LSTR) reported revenue of $1.975 billion in the 2022 second quarter, a 26 percent increase over revenue of $1.571 billion in the 2021 second quarter; quarterly net income of $112.6 million, an increase of 22 percent over net income of $92.3 million in the 2021 second quarter; and quarterly diluted earnings per share (“DEPS”) of $3.05, an increase of 27 percent compared to $2.40 in the 2021 second quarter. 2022 second quarter revenue, net income and DEPS each established new all-time second quarter records for Landstar.

Gross profit in the 2022 second quarter was $208.1 million, a second quarter record and 19 percent above 2021 second quarter gross profit of $174.8 million. Variable contribution (defined as revenue less the cost of purchased transportation and commissions to agents) in the 2022 second quarter also reached a second quarter record of $267.5 million, 21 percent above 2021 second quarter variable contribution of $220.8 million. A reconciliation of gross profit to variable contribution and gross profit margin to variable contribution margin for the 2022 and 2021 second 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 second quarter, Landstar purchased approximately 703,000 shares of its common stock at an aggregate cost of $103.3 million, bringing the total number of common shares purchased during the twenty-six weeks ended June 25, 2022 to 1,397,000 shares at an aggregate cost of approximately $212.6 million. The Company is currently authorized to purchase up to an additional 1,603,239 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 August 26, 2022, to stockholders of record as of the close of business on August 8, 2022. This quarterly dividend includes a $0.05 per share increase, or 20 percent, over the amount of the Company’s regular quarterly dividend declared following each of the prior four quarters. The $0.05 per share increase is the largest increase in the Company’s regularly scheduled quarterly dividend in the Company’s history. It is currently the intention of the Board to pay dividends on a quarterly basis going forward.

Also, as previously disclosed in a Form 8-K filed with the SEC on July 8, 2022, Landstar entered into a Second Amended and Restated Credit Agreement, dated July 1, 2022, with a bank syndicate led by J.P. Morgan Chase that, among other things, extended the termination date of the credit facility to July 2027, and increased the size of the facility from $250 million to $300 million (with an “accordion” feature providing for possible increase up to an aggregate amount of $600 million). As of June 25, 2022, Landstar had no outstanding borrowings under its revolving credit facility.

Truck transportation revenue hauled by independent business capacity owners (“BCOs”) and truck brokerage carriers in the 2022 second quarter was $1,747.2 million, or 88 percent of revenue, compared to $1,444.2 million, or 92 percent of revenue, in the 2021 second quarter. Truckload transportation revenue hauled via van equipment in the 2022 second quarter was $1,026.9 million, compared to $854.5 million in the 2021 second quarter, an increase of 20 percent. Truckload transportation revenue hauled via unsided/platform equipment in the 2022 second quarter was $474.3 million, compared to $391.9 million in the 2021 second quarter, an increase of 21 percent. Revenue from other truck transportation, which is largely related to power-only services, in the 2022 second quarter was $209.1 million, compared to $168.7 million in the 2021 second quarter, an increase of 24 percent. Revenue hauled by rail, air and ocean cargo carriers was $202.3 million, or 10 percent of revenue, in the 2022 second quarter, compared to $104.6 million, or 7 percent of revenue, in the 2021 second quarter, an increase of 93 percent.

“Customer demand for our freight transportation services remained strong during the 2022 second quarter,” said Landstar President and CEO Jim Gattoni. “The number of loads hauled via truck in the 2022 second quarter increased 10 percent over the 2021 second quarter. Although slightly below the low end of our second quarter 2022 guidance issued in our 2022 first quarter earnings release on April 20, 2022, truck load volume growth continued to be impressive given tough year-over-year comparisons and an overall shift of consumer spending from goods to services. Similarly, revenue per truck load in the 2022 second quarter was 10 percent above the 2021 second quarter and remained very strong compared to historical levels. Revenue per load on loads hauled via truck also came in below our April 20 second quarter guidance, mostly due to a deceleration in the rate of year-over-year growth beginning in May. Truck revenue per load decreased approximately 4 percent sequentially from April to May, which was not anticipated in the 2022 second quarter guidance. It should also be noted that the year-over-year increase in revenue per truck load was partly impacted by a 6 percent decrease in the average length of haul in the 2022 second quarter compared to the 2021 second quarter.”

Gattoni continued, “Landstar’s business model continued to perform well during the 2022 second quarter. The Company achieved a 27 percent increase in DEPS on a 26 percent increase in revenue, in both cases as compared to the 2021 second quarter. DEPS was 5 percent below the low-end of the second quarter guidance we provided on April 20, 2022. In addition to the impact of the shortfalls versus expectations in truck loads and revenue per load discussed above, Landstar also experienced higher than expected insurance and claims cost of 4.9 percent of BCO revenue in the 2022 second quarter, driven mostly by two tragic vehicular accidents that occurred during the quarter.”

Gattoni further commented, “There is a lot of unease regarding U.S. economic conditions as we head into the third quarter. On a macroeconomic level, the record low level of consumer confidence and high level of inflation being reported along with possible further action by the Federal Reserve to address inflation at the risk of causing further recessionary pressure all add significant uncertainty to the performance of the overall domestic freight environment. Additionally, comparisons to prior year results become more challenging for Landstar as we move through the back half of 2022, given the strength our business experienced during the back half of fiscal year 2021. Historically, in most years truck revenue per load in July has slightly exceeded that of June. Through the first several weeks of July, overall truck revenue per load has been fairly consistent with the truck revenue per load we experienced in fiscal May and June 2022. Given the current operating environment, I view Landstar’s relatively stable revenue per load since May as a positive. Given this backdrop and recent revenue trends, I expect truck revenue per load in the 2022 third quarter to be essentially equal to that of the 2021 third quarter and the number of loads hauled via truck to increase over the 2021 third quarter in a range of 3 percent to 5 percent. As such, I anticipate revenue for the 2022 third quarter to be in a range of $1.80 billion to $1.85 billion.”

Gattoni concluded, “Based on the range of revenue estimated for the 2022 third quarter, I would anticipate DEPS to be in a range of $2.75 to $2.85. This range of DEPS includes insurance and claims expense estimated at 4.2 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 Second 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-Q for the 2022 first fiscal quarter, 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)
						Twenty Six Weeks Ended						Thirteen Weeks Ended
						June 25,			June 26,			June 25,			June 26,
						2022			2021			2022			2021
Revenue						$	3,945,663		$	2,858,252		$	1,975,064		$	1,570,718
Investment income							1,307			1,432			586			748
Costs and expenses:
	Purchased transportation						3,096,018			2,226,526			1,545,688			1,228,241
	Commissions to agents						311,634			221,702			161,856			121,693
	Other operating costs, net of gains on asset sales/dispositions						21,522			16,545			10,381			8,903
	Insurance and claims						64,820			45,629			34,052			24,124
	Selling, general and administrative						111,680			99,522			58,967			54,114
	Depreciation and amortization						28,045			24,244			14,288			12,143
		Total costs and expenses					3,633,719			2,634,168			1,825,232			1,449,218
Operating income							313,251			225,516			150,418			122,248
Interest and debt expense							2,228			2,009			1,105			967
Income before income taxes							311,023			223,507			149,313			121,281
Income taxes							73,629			53,973			36,758			28,987
Net income						$	237,394		$	169,534		$	112,555		$	92,294
Diluted earnings per share						$	6.39		$	4.41		$	3.05		$	2.40
Average diluted shares outstanding							37,162,000			38,403,000			36,905,000			38,402,000
Dividends per common share						$	0.50		$	0.42		$	0.25		$	0.21

Landstar System, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share amounts)
(Unaudited)
							June 25,				December 25,
							2022				2021
ASSETS
Current assets:
	Cash and cash equivalents						$	78,220			$	215,522
	Short-term investments							41,549				35,778
	Trade accounts receivable, less allowance
		of $9,940 and $7,074						1,216,518				1,154,314
	Other receivables, including advances to independent
		contractors, less allowance of $9,856 and $8,125						114,794				101,124
	Other current assets							54,190				16,162
		Total current assets						1,505,271				1,522,900
Operating property, less accumulated depreciation and amortization of $369,344 and $344,099								314,191				317,386
Goodwill								40,977				40,768
Other assets								156,628				164,411
Total assets							$	2,017,067			$	2,045,465
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Cash overdraft						$	113,603			$	116,478
	Accounts payable							670,534				604,130
	Current maturities of long-term debt							36,827				36,561
	Insurance claims							53,971				46,896
	Dividends payable							-				75,387
	Other current liabilities							102,956				130,531
		Total current liabilities						977,891				1,009,983
Long-term debt, excluding current maturities								73,999				75,243
Insurance claims								53,303				49,509
Deferred income taxes and other non-current liabilities								55,004				48,720
Shareholders' equity:
	Common stock, $0.01 par value, authorized 160,000,000
		shares, issued 68,376,934 and 68,232,975						684				682
	Additional paid-in capital							252,045				255,148
	Retained earnings							2,535,997				2,317,184
	Cost of 31,946,616 and 30,539,235 shares of common
		stock in treasury						(1,919,535	)			(1,705,601	)
	Accumulated other comprehensive loss							(12,321	)			(5,403	)
		Total shareholders' equity						856,870				862,010
Total liabilities and shareholders' equity							$	2,017,067			$	2,045,465

	Landstar System, Inc. and Subsidiary
	Supplemental Information
	(Unaudited)
					Twenty Six Weeks Ended									Thirteen Weeks Ended
					June 25,				June 26,					June 25,				June 26,
						2022				2021					2022				2021
Revenue generated through (in thousands):
	Truck transportation
		Truckload:
			Van equipment		$	2,108,143			$	1,583,911				$	1,026,938			$	854,509
			Unsided/platform equipment			883,032				689,378					474,274				391,893
		Less-than-truckload				70,651				54,732					36,931				29,062
		Other truck transportation (1)				436,656				309,655					209,055				168,723
			Total truck transportation			3,498,482				2,637,676					1,747,198				1,444,187
	Rail intermodal					86,110				76,068					43,422				44,360
	Ocean and air cargo carriers					310,904				107,840					158,847				60,240
	Other (2)					50,167				36,668					25,597				21,931
					$	3,945,663			$	2,858,252				$	1,975,064			$	1,570,718
	Revenue on loads hauled via BCO Independent Contractors (3)
		included in total truck transportation			$	1,415,963			$	1,209,056				$	688,389			$	648,942
Number of loads:
	Truck transportation
		Truckload:
			Van equipment			763,750				678,253					387,482				357,041
			Unsided/platform equipment			279,345				248,262					147,516				133,999
		Less-than-truckload				96,828				85,095					48,985				44,403
		Other truck transportation (1)				166,747				127,160					80,817				67,497
			Total truck transportation			1,306,670				1,138,770					664,800				602,940
	Rail intermodal					24,220				26,800					11,590				15,100
	Ocean and air cargo carriers					22,890				19,460					11,330				10,230
						1,353,780				1,185,030					687,720				628,270
	Loads hauled via BCO Independent Contractors (3)
		included in total truck transportation				527,830				510,150					265,590				264,200
Revenue per load:
	Truck transportation
		Truckload:
			Van equipment		$	2,760			$	2,335				$	2,650			$	2,393
			Unsided/platform equipment			3,161				2,777					3,215				2,925
		Less-than-truckload				730				643					754				655
		Other truck transportation (1)				2,619				2,435					2,587				2,500
			Total truck transportation			2,677				2,316					2,628				2,395
	Rail intermodal					3,555				2,838					3,747				2,938
	Ocean and air cargo carriers					13,583				5,542					14,020				5,889
	Revenue per load on loads hauled via BCO Independent Contractors (3)				$	2,683			$	2,370				$	2,592			$	2,456
Revenue by capacity type (as a % of total revenue):
	Truck capacity providers:
		BCO Independent Contractors (3)				36	%			42	%				35	%			41	%
		Truck Brokerage Carriers				53	%			50	%				54	%			51	%
	Rail intermodal					2	%			3	%				2	%			3	%
	Ocean and air cargo carriers					8	%			4	%				8	%			4	%
	Other					1	%			1	%				1	%			1	%
														June 25,				June 26,
															2022				2021
Truck Capacity Providers
	BCO Independent Contractors (3)														11,023				10,778
	Truck Brokerage Carriers:
	Approved and active (4)														70,649				53,891
	Other approved														29,454				24,098
															100,103				77,989
	Total available truck capacity providers														111,126				88,767
	Trucks provided by BCO Independent Contractors (3)														11,887				11,557
(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)
							Twenty Six Weeks Ended								Thirteen Weeks Ended
							June 25,				June 26,				June 25,				June 26,
							2022				2021				2022				2021
Revenue							$	3,945,663			$	2,858,252			$	1,975,064			$	1,570,718
Costs of revenue:
			Purchased transportation					3,096,018				2,226,526				1,545,688				1,228,241
			Commissions to agents					311,634				221,702				161,856				121,693
		Variable costs of revenue						3,407,652				2,448,228				1,707,544				1,349,934
			Trailing equipment depreciation					18,363				17,747				9,280				8,840
			Information technology costs (1)					9,039				6,084				4,993				3,146
			Insurance-related costs (2)					66,441				47,673				34,786				25,051
			Other operating costs					21,522				16,545				10,381				8,903
		Other costs of revenue						115,365				88,049				59,440				45,940
		Total costs of revenue						3,523,017				2,536,277				1,766,984				1,395,874
Gross profit							$	422,646			$	321,975			$	208,080			$	174,844
Gross profit margin								10.7	%			11.3	%			10.5	%			11.1	%
		Plus: other costs of revenue						115,365				88,049				59,440				45,940
Variable contribution							$	538,011			$	410,024			$	267,520			$	220,784
Variable contribution margin								13.6	%			14.3	%			13.5	%			14.1	%
(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.

Contacts: Jim Gattoni (CEO)
Jim Todd (CFO)
Landstar System, Inc.
www.landstar.com
904-398-9400 

FAQ

What were Landstar's earnings results for Q2 2022?

Landstar reported Q2 2022 revenue of $1.975 billion, net income of $112.6 million, and diluted EPS of $3.05, all record highs.

How much is the quarterly dividend declared by Landstar for Q2 2022?

Landstar declared a quarterly dividend of $0.30 per share, reflecting a 20% increase over the previous dividend.

What challenges did Landstar face in Q2 2022?

Landstar faced challenges including higher insurance costs and truck revenue per load declining from April to May.

What is the anticipated revenue for Landstar in Q3 2022?

Landstar anticipates Q3 2022 revenue to be between $1.80 billion to $1.85 billion.

What was the impact of economic conditions on Landstar's performance?

Economic uncertainties, including consumer confidence and inflation, create risks for Landstar's future performance.