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DATE

Tuesday, April 28, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

  • President and CEO — Frank A. Lonegro
  • Vice President and CFO — James P. Todd
  • Vice President & Chief Corporate Sales Strategy and Specialized Freight Officer — James M. Applegate
  • Vice President and Chief Field Sales Officer — Matthew M. Dannegger
  • Vice President and Chief Safety and Operations Officer — Matthew Miller

TAKEAWAYS

  • Total revenue -- Increased approximately 2% year over year, indicating modest topline growth amid freight market variability.
  • Gross profit -- Rose approximately 14% to $112.5 million, with gross profit margin expanding to 9.6% from 8.5% in the prior-year period.
  • Variable contribution dollars -- Increased approximately 7% to $172.2 million, while variable contribution margin improved to 14.7% from 14% year over year.
  • Earnings per share -- Basic and diluted EPS rose approximately 36%, with prior-year EPS impacted by a $0.10 per share supply chain fraud charge.
  • Insurance and claims cost -- Decreased to $35.6 million from $39.9 million, or 7.5% of BCO revenue versus 9.3% last year, attributed to reduced frequency and severity of cargo claims largely related to lower strategic cargo theft.
  • Heavy haul revenue -- Achieved $134 million, representing an 18% year-over-year increase driven by a 12% rise in revenue per load and 6% higher heavy haul volume.
  • Total truck revenue per load -- Increased 5.6% year over year and 0.2% sequentially from fiscal Q4 2025, defying normal seasonal declines for fiscal Q1.
  • Van equipment revenue per load -- Saw a 5.2% year-over-year increase; van revenue per mile for BCOs rose 3% while unsided platform equipment revenue per mile rose 2% year over year.
  • Non-truck transportation revenue -- Decreased $16 million, primarily due to a 31% year-over-year decline in ocean volume linked to prior-year shipper pull-forward behavior.
  • Commodity revenue mix -- Consumer durables revenue up 1% with a 7% revenue per load increase offset by 5% lower volume; machinery loadings up 5%, automotive down 4%, building products down 10%, hazmat down 6%, offset by increases in electrical (23%), energy (17%), and government (8%) volumes.
  • Customer concentration -- Over 20,000 customers, with none contributing more than 8% of revenue for the quarter.
  • Accident frequency -- DOT-reportable accident frequency improved to 0.64 per million miles, below both the company's 2025 figure (0.69) and the latest national average reported by the FMCSA.
  • BCO truck count -- Decreased approximately 2% from the prior year and 40 basis points sequentially, but the net decline of 38 trucks was significantly below the recent three-year fiscal Q1 average of 365 trucks.
  • BCO turnover -- Trailing twelve-month BCO turnover rate decreased to 29.5%, down from 31.4% at 2025 year-end and aligning with the company's long-term average.
  • Capital returns -- Returned approximately $104 million to shareholders ($82 million in dividends, $22 million in share repurchases); declared a $0.40 per share quarterly dividend payable June 9, 2026.
  • Cash position -- Ended the quarter with $411 million in cash and short-term investments; generated $78 million in cash flow from operations and invested $6 million in capital expenditures.
  • AI and technology investments -- Management affirmed "over half of our capital budget on the IT side will be AI"; multiple active AI pilots are underway in both agent and corporate workflows.
  • Carrier vetting/anti-fraud initiatives -- Management highlighted a "higher degree of rigor around vetting our carriers" enabled by recent AI and technology advances, contributing to decreased expenses from strategic cargo theft.
  • April sequential update -- Preliminary April 2026 data indicates truck volumes are level with last April, while processed revenue per load is up approximately 13%, with management calling out "anticipated truck revenue per load in April as outperforming normal seasonality."

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RISKS

  • CEO Lonegro stated, "We are driving to incorporate AI into our business and do everything we can to mitigate any perceived industry-specific AI disintermediation risk," directly acknowledging potential disruption from AI adoption in freight transportation.
  • Management noted "continue to monitor the potential effect of tariff and trade policy on our business," and described fiscal Q1 as "a relatively tough first quarter volume comp" due in part to prior shipment pull-forward from tariff uncertainty.
  • Non-truck transportation revenue decline attributed to a 31% drop in ocean volume, which "was partially driven by shipper pull-forward behavior during 2025," reflecting ongoing volatility in this revenue stream.
  • Management expects "25 to 45 basis point compression in variable contribution margin from the first quarter to the second quarter" due to mix shift, a recurring historic pattern that could pressure fiscal Q2 profitability.

SUMMARY

Landstar System (LSTR +1.27%) delivered expanded gross profit margins and double-digit earnings per share growth, supported by notable improvements in heavy haul operations and effective cost control, particularly in insurance and claims. Strategic investment in AI and technology—including a majority allocation of the IT capital budget—reflects management’s emphasis on operational scalability and competitive differentiation. April volume and pricing trends suggest improving freight market conditions, with management highlighting sequential outperformance in revenue per load versus pre-pandemic seasonal norms and indicating initial benefits from ongoing recruitment and BCO retention efforts not seen in recent first quarters.

  • Management disclosed data center-related customers represent "about 12% of our total revenue," illustrating segment exposure to ongoing infrastructure trends.
  • Over 1,000 agents are active in the Landstar System network, and pilots are engaging "about a dozen agents" with AI workflow solutions, highlighting a deliberate phased rollout targeting agent buy-in.
  • Insurance programs are positioned to absorb regulatory impacts related to the Supreme Court’s upcoming F4A ruling; CEO Lonegro said, "the entirety of the brokerage population is going to have to look at insurance very differently if the decision goes against the industry than they do today."
  • Agent retention at the "agents responsible for $457 million in revenue based on our 2025 fiscal year results" milestone remains "extremely high," supporting business stability during market shifts.
  • The company maintains a highly diversified customer base, with no single client exceeding 8% of quarterly revenue, underscoring limited customer concentration risk amid sector volatility.

INDUSTRY GLOSSARY

  • BCO: Business Capacity Owner — independent owner-operators contracted to provide trucking capacity within the Landstar System network.
  • Unsided platform equipment: Flatbed trailers (including specialized variants) without fixed sides, used for hauling heavy or oversized cargo.
  • Variable contribution margin: A profitability metric calculated as (Revenue minus direct variable costs), reflecting incremental profit from core operations before fixed and non-operating costs.
  • F4A: The Federal Aviation Administration Authorization Act, central to litigation and regulatory risk in transportation brokerage insurance requirements.
  • BCO turnover: The annualized rate at which Business Capacity Owner trucks leave or join the Landstar System fleet.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to Landstar System, Inc. first quarter earnings release conference call. All lines will be in a listen-only mode until the formal question and answer session. Today’s call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar System, Inc. are Frank A. Lonegro, President and CEO; James M. Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Freight Officer; James P. Todd, Vice President and CFO; Matthew M. Dannegger, Vice President and Chief Field Sales Officer; and Matthew Miller, Vice President and Chief Safety and Operations Officer. Now I would like to turn the call over to Mr. James P. Todd. Sir, you may begin.

James P. Todd: Thanks, Arlene. Good afternoon, and welcome to Landstar System, Inc.’s 2026 first quarter earnings conference call. Before we begin, let me read the following statement. The following is a Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. Statements made during this conference call that are not based on historical facts are forward-looking statements. During this conference call, we may make statements that contain forward-looking information that relate to Landstar System, Inc.’s business plans, strategies, and expectations.

Such information is, by nature, subject to uncertainties and risks including, but not limited to, the operational, financial, and legal risks detailed in Landstar System, Inc.’s Form 10-K for the 2025 fiscal year described in the section Risk Factors and our 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 information, and Landstar System, Inc. undertakes no obligation to publicly update or revise any forward-looking information. I will now pass it to Landstar System, Inc.’s CEO, Frank A. Lonegro, for his opening remarks.

Frank A. Lonegro: JT, and good afternoon, everyone. We are excited to discuss our results this quarter given the overall sense of optimism many in our network are sharing with us. It was great to spend time with many of our BCOs at the Mid-America Trucking Show in March and to celebrate the success of our agent network earlier this month at our annual agent convention. The tone and positivity I heard from my personal interactions with BCOs and agents at these events was the best I have experienced during my tenure at Landstar System, Inc., and it provides an emerging sense of confidence as we head further into 2026.

Before diving into our results, I would like to thank our BCOs and agents and all the Landstar System, Inc. employees who support them every day. The capability, resiliency, and level of commitment exhibited day in and day out by our network of independent business owners is unique in the freight transportation industry. Their adaptability and dedication to safety, security, and service for our customers is truly impressive. They are exceptional business leaders and key to driving the continued success of Landstar System, Inc.’s business model. I would also like to thank Derek Barsh, the head of the FMCSA, who recently appeared at our agent convention and discussed many of the significant initiatives he is leading at the FMCSA.

These regulatory efforts are having a real tangible impact on the trucking industry and have been very positive for Landstar System, Inc. We look forward to continuing our dialogue with the U.S. DOT and the FMCSA in support of these efforts. Amidst our improved operating performance, the 2026 first quarter was not without challenges that required our focus and attention. We are driving to incorporate AI into our business and do everything we can to mitigate any perceived industry-specific AI disintermediation risk. We were pleased to have James M. Applegate and Rick Cora participate in the Goldman Sachs AI and Freight Forum in Chicago in late March, where they shared our AI roadmap and several in-flight initiatives across the network.

We continue to be encouraged by the level of engagement we are seeing among agents and BCOs participating in our beta programs. That collaboration is already yielding tangible progress across a number of workflows, including customer quoting, carrier negotiations, dispatch decision making, automated tracking, appointment scheduling, network modeling, and bid optimization. Importantly, these tools are being developed alongside our agents and BCOs with early pilots already live in production or in advanced testing. Initial feedback points to meaningful time savings, higher shipment life cycle throughput, and improved visibility across the network, empowering our entrepreneurs to spend more time on revenue-generating, relationship-driven activities.

At the same time, we are advancing several AI-driven efficiency initiatives at the corporate level including our Tier 1 ERP modernization, proprietary fraud prevention and detection capabilities, service center workflows, BCO retention models, and subservice analytics for operations and customer management. Across both the agent network and in our corporate offices, our focus remains on disciplined deployment and scalable adoption. We look forward to providing additional updates as these initiatives continue to progress. We, like everyone else, are monitoring the news on the geopolitical conflict in the Middle East and the related volatility in energy and diesel prices.

We also continue to monitor the potential effect of tariff and trade policy on our business, including the impact of the recent Supreme Court decision and tariff refunds from the federal government. Tariffs have certainly already impacted freight flows. For example, the 2025 first quarter reflected a desire by many customers to pull forward shipments in an effort to get ahead of potential tariffs. This contributed to a relatively tough first quarter volume comp for Landstar System, Inc. We will also be closely monitoring any developments with respect to trade relations among the United States, Canada, and Mexico this year.

Against that backdrop, Landstar System, Inc.’s business model performed well, with revenue increasing approximately 2% compared to the 2025 first quarter, gross profit increasing approximately 14%, variable contribution dollars increasing approximately 7%, and basic and diluted earnings per share increasing approximately 36%. As a reminder, earnings per share during the 2025 first quarter were unfavorably impacted by approximately $0.10 per share related to the previously disclosed supply chain fraud matter. As JT will discuss in more detail during his remarks, the 2026 first quarter also experienced lower insurance and claim cost expense compared to the 2025 first quarter primarily due to the company’s ongoing efforts to address strategic cargo theft.

These efforts helped Landstar System, Inc. to achieve both the decrease in the frequency of cargo claims incidents during the 2026 period compared to the 2025 period as well as decreased severity of cargo-related incidents. One consistent highlight in our results remains the strength of our industry-leading unsided platform equipment. This part of our business posted another strong quarter with an 8% year-over-year revenue increase driven by the performance of Landstar System, Inc.’s heavy haul service offering. We generated approximately $134 million of heavy haul revenue during the 2026 first quarter, representing an 18% increase over the 2025 first quarter. This achievement reflected a 12% increase in heavy haul revenue per load and a 6% increase in heavy haul volume.

Our focus continues to be on accelerating our business model and executing on our strategic growth initiatives. We are continuing to invest in the foundational work that puts Landstar System, Inc. in a great position to leverage improving freight market conditions. We also remain focused on our commitment to continuous improvement in the level of service and support we provide to our customers, agents, BCOs, and carriers each and every day. Turning to Slide 5, the freight environment in the 2026 first quarter was characterized by relatively strong demand from a seasonal perspective and an improving price environment as we moved through the quarter.

We were encouraged to see the ISM index above 50 for each of the three months in the first quarter, a positive sign for our business, as readings from the prior three years too often reflected a far more challenging economic backdrop. We were pleased to see sequential outperformance in the number of loads hauled via truck and truck revenue per load compared to pre-pandemic normal seasonal patterns. As noted in the press release, we were encouraged to see that overall truck revenue per load increased 6% compared to the 2025 first quarter. Our balance sheet continues to be very strong, and our capital allocation priorities are unchanged.

We will continue to patiently and opportunistically execute on our existing buyback authority to benefit our long-term stockholders. As noted in the slide deck, during the 2026 first quarter, the company returned approximately $104 million to shareholders through our capital return programs. The company returned approximately $82 million in dividends to stockholders during the first quarter and deployed approximately $22 million to share repurchases during the first quarter. And yesterday afternoon, our Board declared a regular quarterly dividend of $0.40 per share, payable on June 9 to stockholders of record as of the close of business on May 19.

We continue to invest through the cycle in leading technology and AI solutions for the benefit of our network of independent business owners and have allocated a significant amount of capital this year towards refreshing our fleet of trailer equipment with a particular focus on investment in new van equipment. Turning to Slide 7 and looking at our network, the scale, systems, and support inherent in the Landstar System, Inc. model drove the operating results generated during the 2026 first quarter. JT will get into the details on revenue, loadings, and rate per load in a few minutes. Safety is crucial to our continued success.

Our safety performance is a direct result of the professionalism of the thousands of Landstar System, Inc. BCOs operating safely every day and the agents and employees who work to reinforce the critical importance of safety, security, and service at Landstar System, Inc. I am proud to report an accident frequency rate of 0.64 DOT-reportable accidents per million miles during the 2026 first quarter, well below the last available national average DOT-reportable frequency rate released by the FMCSA for 2021 and slightly better than the 0.69 DOT accident frequency we reported during the 2025 first quarter.

The company’s long-run average is an impressive operating metric that speaks to the strength, skill, talent, and dedication of our BCOs and provides a point of differentiation our agents are able to highlight in discussions with our freight customers. We remain committed to driving a best-in-class safety culture. I would also like to take a moment to recognize Landstar System, Inc.’s $457 million agents based on our 2025 fiscal year results. Importantly, retention within the million-dollar agent network continues to be extremely high. Turning to Slide 8, on a year-over-year basis, BCO truck count decreased approximately 2% compared to the end of the 2025 first quarter and approximately 40 basis points sequentially.

It is important to note, however, that the 38 BCO truck decline experienced during the 2026 first quarter is significantly better than our experience in other recent first quarters when, on average, Landstar System, Inc. experienced a decline of 365 BCO trucks across 2023, 2024, and 2025. We were also very pleased to see our trailing twelve-month BCO truck turnover rate drop from 31.4% as of fiscal year-end 2025 to 29.5% at the end of the 2026 first quarter. This is a directionally positive trend that we hope will continue in the second quarter.

Through the first four weeks of the 2026 second fiscal quarter, the number of trucks provided by BCO independent contractors is approximately equal to the end of the 2026 first quarter. I will now pass the call back to JT to walk you through the 2026 first quarter financials in more detail. JT?

James P. Todd: Thanks, Frank. Turn to Slide 10. As Frank mentioned earlier, overall truck revenue per load increased 5.6% in the 2026 first quarter compared to the 2025 first quarter, primarily attributable to a 10.8% increase in revenue per load on loads hauled by unsided platform equipment and a 5.2% increase in revenue per load on loads hauled by van equipment.

On a sequential basis, truck revenue per load increased 0.2% in the first quarter versus the fourth quarter, which is an unusual sign for truck revenue per load to be higher in the first quarter than in the immediately preceding fourth quarter, as pre-pandemic normal seasonality would typically be expected to yield a 4% sequential decrease in revenue per load in a given first quarter compared to the immediately preceding fourth quarter. In comparison to overall truck revenue per load, we consider revenue per mile on loads hauled by BCO trucks a pure reflection of market pricing as it excludes fuel surcharges billed to customers that are paid 100% to the BCO.

In the first quarter, revenue per mile on unsided platform equipment hauled by BCOs was 2% above the prior-year first quarter, and revenue per mile on van equipment hauled by BCOs was 3% above the prior-year first quarter. Delving deeper into seasonal trends, revenue per mile on loads hauled by BCOs on unsided platform equipment declined 6% from December to January, was approximately flat January to February, and increased 2% from February to March. Importantly, the sequential month-to-month performance as we move through the first quarter, when compared against typical pre-pandemic trends, suggests growing positive momentum in this task of our business.

In fact, while the December-to-January change in revenue per mile in BCO loads hauled on unsided platform equipment underperformed pre-pandemic seasonal trends, January-to-February’s flat performance outperformed pre-pandemic seasonal trends, and the February-to-March increase outperformed pre-pandemic seasonal trends. Turning to van freight, revenue per mile on van equipment hauled by BCOs was approximately flat from December to January, outperforming historical trends, increased 3% from January to February, also outperforming these trends, but decreased 1% from February to March, underperforming pre-pandemic February-to-March historical trends. Based on preliminary April BCO processed revenue per load data, we expect the underperformance experienced from February to March to reverse during fiscal April.

It should be noted that month-to-month seasonal trends on unsided platform equipment are generally more volatile compared to that of van equipment. This relative volatility is often due to the mix between heavy specialized loads and standard flat volume. As Frank alluded to, we have been particularly pleased with the sustained strong performance of our heavy haul service offering. Heavy haul revenue was up an impressive 18% year over year in the first quarter, outperforming core truckload revenue. Heavy haul loadings were up approximately 6% year over year, and revenue per heavy haul load increased 12% year over year.

This represented a mix tailwind to our unsided platform revenue per load as heavy haul revenue as a percentage of the category increased from approximately 33% during the 2025 first quarter to approximately 36% in the 2026 first quarter. Non-truck transportation service revenue in the 2026 first quarter was $16 million below the 2025 first quarter. The decrease in non-truck transportation revenue was mostly due to a 31% decrease in ocean volume, which we believe was partially driven by shipper pull-forward behavior during 2025. Turning to Slide 11, we have provided revenue share by commodity and year-over-year change in revenue by commodity.

Revenue increased 2% year over year on a 4% increase in revenue per load, partially offset by a 3% decrease in volume compared to the 2025 first quarter. Within our largest commodity category, consumer durables revenue increased 1% year over year on a 7% increase in revenue per load, partially offset by a 5% decrease in volume. Aggregate revenue across our top five commodity categories, which collectively make up about 70% of our transportation revenue, increased approximately 4% compared with the 2025 first quarter. While Slide 11 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top commodity categories.

From the 2025 first quarter to the 2026 first quarter, total loadings in machinery increased 5%, automotive equipment and parts decreased 4%, building products decreased 10%, and hazmat decreased 6%. Additionally, substitute linehaul loadings, one of the strongest performers for us during the pandemic and one which varies significantly based on consumer demand, increased 1% from the 2025 first quarter. The decline in automotive, hazmat, and building products loadings noted above was partially offset by a 23% increase in electrical volumes, a 17% increase in energy volumes, and an 8% increase in government volumes.

Even with the ups and downs in various customer categories, our business remains highly diversified, with over 20,000 customers, none of which contributed over 8% of our revenue in the 2026 first quarter. Turn to Slide 12. In the 2026 first quarter, gross profit was $112.5 million compared to gross profit of $98.3 million in the 2025 first quarter. Gross profit margin was 9.6% of revenue in the 2026 first quarter as compared to gross profit margin of 8.5% in the corresponding period of 2025. In the 2026 first quarter, variable contribution was $172.2 million compared to $161.3 million in the 2025 first quarter.

Variable contribution margin was 14.7% of revenue in the 2026 first quarter compared to 14% in the same period last year. The increase in variable contribution margin compared to the 2025 first quarter was primarily attributable to an increase in the percentage of revenue generated from BCO independent contractors.

Turning to Slide 13, operating income increased as a percentage of both gross profit and variable contribution as we cycle the impact of the international supply chain fraud matter in the 2025 first quarter, lower insurance and claim costs in the 2026 first quarter, and the impact of the company’s fixed cost infrastructure, principally certain components of selling, general and administrative costs, in comparison to larger gross profit and variable contribution bases. Other operating cost was $14.8 million in the 2026 first quarter compared to $11.8 million in 2025. This increase was primarily due to increased trailing equipment maintenance costs, increased trailing equipment rental costs, and decreased gains on disposal of used trailing equipment.

Insurance and claims costs were $35.6 million in the 2026 first quarter compared to $39.9 million in 2025. Total insurance and claim costs were 7.5% of BCO revenue in the 2026 first quarter as compared to 9.3% in the 2025 first quarter. The decrease in insurance and claim cost as compared to 2025 was primarily attributable to decreased net unfavorable development of prior-year claim estimates, decreased severity of current-year trucking claims in the 2026 period, and a decrease in both cargo claim frequency and cargo claim severity, which reflects a significant decrease in expense related to strategic cargo theft in the 2026 period, partially offset by increased BCO miles traveled during the 2026 period.

During the 2026 and 2025 first quarters, insurance and claims costs included $4.9 million and $11.4 million of net unfavorable adjustments to prior-year claim estimates, respectively. Selling, general, and administrative costs were $61 million in the 2026 first quarter, compared to $61.6 million in the 2025 first quarter. The decrease in selling, general, and administrative costs was primarily attributable to the impact of the $4.8 million charge to selling, general, and administrative costs during 2025 in connection with the previously disclosed international supply chain fraud matter and a lower provision for customer bad debt, largely offset by an increased provision for incentive compensation and increased employee benefit costs.

The provision for incentive compensation was $3.4 million during the 2026 first quarter as compared to $1 million during the 2025 first quarter. Depreciation and amortization was $10.6 million in the 2026 first quarter compared to $12.2 million in 2025. This decrease was primarily due to decreased depreciation on software applications and decreased depreciation on our fleet of trailing equipment. The effective income tax rate was 25.2% in the 2026 first quarter compared to an effective income tax rate of 24.7% in the 2025 first quarter.

The increase in the effective income tax rate from 2025 to 2026 was primarily due to an increased provision for state taxes, the impact of tax deficiencies on stock-based compensation arrangements during the 2026 period, and the impact of nondeductible executive compensation on the 2026 income tax provision. Turn to Slide 14. Looking at our balance sheet, we ended the quarter with cash and short-term investments of $411 million. Cash flow from operations for the 2026 first quarter was $78 million, and cash capital expenditures were $6 million. The company continues to return significant amounts of capital back to stockholders with approximately $82 million of dividends paid and approximately $22 million of share repurchases during the 2026 first quarter.

The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar System, Inc. model. Back to you, Frank.

Frank A. Lonegro: Thanks, JT. Given the highly fluid freight transportation market and a volatile geopolitical and macroeconomic environment, the company will be providing second quarter financial and operational commentary rather than formal guidance. Turning to Slide 16 and looking at historical seasonality from Q1 to Q2, pre-pandemic patterns would normally be expected to yield sequential increases of 7% in the number of loads hauled via truck and 2% in truck revenue per load, resulting in a top line that typically increases by a mid-single-digit to a high-single-digit percentage. It should be noted that with respect to the sequential truck volume increase, during more recent history, it has been closer to plus 3% to plus 4%.

The number of loads hauled via truck in April 2026 was essentially equal to April 2025 on a dispatch basis, while revenue per load in April was approximately 13% above April 2025 on a processed basis. As a result, we view anticipated truck revenue per load in April as outperforming normal seasonality, while anticipated April truck volumes are trending essentially in line with normal seasonality.

Please also note that historically, the company has often experienced a 25 to 45 basis point compression in variable contribution margin from the first quarter to the second quarter primarily driven by mix, as BCO revenue typically represents a larger percentage of overall revenue in the first quarter of a given year as compared to the immediately following second quarter. We are excited to build upon the positive momentum generated during the first quarter and are energized by the opportunity to support the best network of independent business owners in the transportation space in an environment that, after nearly four years, appears to be turning in our favor. With that, operator, we would like to open the line for questions.

Operator: Thank you very much, sir. At this time, we will begin the question and answer session. If you would like to ask a question, please press 1 on your touch-tone phone. Once again, that is 1 to ask a question. To cancel your request, please press 2. Our first question comes from the line of Jonathan Chappell from Evercore ISI. Your line is now open.

Jonathan B. Chappell: Thank you. Good afternoon. Frank or Jim, heavy haul, obviously, doing really well and also in the backdrop of a narrative about unsided platform or flatbed being incredibly strong. But your first quarter volumes were down 2% year over year and 2% sequentially. Clearly made up some of that in the revenue per load. So can you just help us understand, is that market as strong as it is being portrayed? And if it continues to strengthen or build momentum from here, does that start to show up in the loads as well as in the revenue per load, or is it mostly going to be represented in price?

Frank A. Lonegro: Hey, John. So clearly, if we see an incremental up in demand, you are going to see it on the volume side. I think everything right now is being supply induced on the capacity side and getting us higher rates. We do think we have got a competitive advantage in heavy haul and honestly in unsided platform. So when you see those ISM numbers and some of the IPP numbers in the low single digits, we are pretty optimistic about how that is going to play through volumes and rate for us going forward into the rest of the year. Maybe either James P. Todd or James M. Applegate can comment on that.

James M. Applegate: Yes, John. Good question. From the heavy haul side, which did experience year-over-year volume growth, I would tell you it continues to be very, very strong, broad-based strength. We had 17 individual heavy haul customers grow volumes with us by at least 50 loads year over year in the 91-day first quarter. Those customers came from a wide degree of industries: data centers, energy, government, machinery, aerospace, and defense. I think some of the softness to your point year over year, if you look at some of the commodity categories we called out—building products, automotive—that kind of stuff on the standard flatbed, standard step, has been a little weaker.

One thing I do want to call out, John: from a pricing standpoint, on the unsided platform it has really been a heavy haul mix story, and that continued in the first quarter. But standard platform step-deck pricing year over year in the fourth quarter was only up 50 basis points. That accelerated to 730 basis points year over year in the first quarter. So a meaningful lift in yields on the standard flats and standard steps from a pricing standpoint.

Frank A. Lonegro: Jim, you might just want to talk about the designation of heavy haul as a strategic initiative and the things you guys are doing along the drop side in that particular area.

James M. Applegate: Yes. This is one of our areas that we really identified as far as Landstar System, Inc. goes, where we do the hard stuff well. This is definitely one of those areas that we can lean in, and we have invested quite a bit not only into leadership—we actually brought in, almost a couple of years now, a new heavy haul leader that has really put his arms around that department, brought in some talent, and laid out a strategy that is agent engagement, recruiting BCOs into the model, making sure that we have the right equipment to handle those agent opportunities, investing in technology—you name it.

We have initiatives in place to make sure that our agents can be successful. Paired on top of that, we have a dedicated sales and marketing effort. We are really leaning into those markets with messaging and some sales support for our agents to help them grow in those different industries. And I think what is really nice about what JT laid out is the growth is broad based. It is also a mix of new and existing customers. So we are seeing a lot of new come into the fold across the different industries that are seeing success right now.

We are seeing industries even outside of the data centers; you are starting to see oil and gas and some of the other industries that have been historically depressed start to come back a little bit. So we see this as an area for continued growth, and we have been strengthening that area over the last couple of years and expect it to continue to be strong for Landstar System, Inc.

Jonathan B. Chappell: Great. Very helpful. Thanks for all the color, team.

Operator: Thank you. Our next question comes from Scott H. Group of Wolfe Research. Your line is now open.

Scott H. Group: Hey. Thanks. Afternoon. So your revenue per load tends to lag industry spot rates by, you know, a matter of months, quarter, whatever. We are seeing it play out. Do you think it is realistic to think that we see a meaningful further acceleration from the approximately 13% in April as the rest of the quarter plays out? And if that is what is happening, how should we think about margin in a quarter like that?

Frank A. Lonegro: Fair questions, Scott, as always. Thanks. I will let JT walk you through the sequential pricing in the quarter. I think the month-over-month trends are important to understand, and he has that detail for you. I think if we look forward, assuming that capacity continues to exit and/or we see demand in a spring unlock like we do in many years, if those two things happen, then the obvious impact on rates broadly is going to be favorable. I think when you see what JT is going to tell you in terms of January–February, February–March, and, honestly, March into April, clearly we are going to have some level of lag, and we are seeing that come through the numbers.

James P. Todd: Well said, Frank. And, Scott, we are seeing above seasonal pricing strength here into April, both on the BCO side and the brokerage side. I would point out from a comp standpoint, last year’s second quarter got a 320-basis-point lift in pricing, and we typically get about 200 basis points. So the comps do step up a little bit as we get into May and get into June. Certainly, from a margin standpoint, we just printed the first variable contribution dollar increase since, I think, 2022. And if you do some back-of-the-envelope on adjusting 2025 for the international fraud matter, I think the incremental push-through numbers were well above 70%. So that is where we will be judging ourselves.

And, obviously, when that comes through as rate, it is certainly easier to drop it all the way down.

Frank A. Lonegro: Absolutely right. And the final point there, Scott, the BCO utilization numbers—we have talked about it in the last three quarters. Strong third quarter 2025, accelerated into fourth quarter 2025, accelerated further first quarter 2026. So we will look for that trend to continue. Certainly, that has a big impact on the number of BCO loads that capture that rate increase in the second quarter.

Scott H. Group: Okay. Helpful. And then on the volume side, it is interesting. You have got BCO volume up 7% and brokerage volume down 9%. What do you think is driving such a big sort of mix difference? Are the agents, or maybe the underlying customer, saying we do not want to go brokerage anymore? And maybe tie this into how you think about the outcome of this Supreme Court case—if you think this could exacerbate some of this trend between BCO and brokerage.

James P. Todd: I will give you my view, Scott, and Frank will add on. I think it is pure—the agents are going to sell what they can sell, and, certainly, we have some that will engage with us only as BCO only. And then the cargo fraud environment—I think that has probably ticked up some. But I think it is a function of the agents are going to market servicing their customers, and the BCOs have just really been stepping up in this rate environment, and we have seen it the last eight or nine months.

Frank A. Lonegro: And I think I would like Matthew Miller to comment a little bit on the BCO environment and all the things you are seeing on the BCO front, Matt. But broadly speaking on your Supreme Court question, we are watching it like everybody else, and we will be prepared whichever way it goes. I think ultimately, Congress probably looks at this as a result of the Supreme Court decision, whichever way it goes, and tries to make policy legislatively rather than through the court system. But we are actively looking at what is going to happen there. And I think, like many people, we would expect a decision sometime in the June–July time period.

But, Matt, maybe a little bit on the BCOs.

Matthew Miller: Yeah. Sure. I appreciate it. First quarter is typically the most challenging quarter of the year for us when it comes to BCO truck count, and we finished the quarter, as Frank said earlier, down 38 trucks. That was a better first quarter finish than we have seen in several years. One hundred percent of that decline happened in January, followed by a positive net result in February and a positive net result in March.

So we are encouraged by the trends that we are seeing in net truck count as well as the trends we are seeing in the net weekly check average going to the BCOs after deductions, which more recently is the highest we have seen since 2022 and an indicator of improving financial health of the BCOs. In the quarter, gross truck adds were up 2.7% sequentially and effectively flat year over year. Gross truck cancels were down 7.8% sequentially and down 23.5% year over year.

And this marks our ninth consecutive quarter of turnover improvement, where our high watermark on turnover was 2023 at 41%, and we finished the quarter at 29.5%, just about in line with our long-term average of 29%. As Jim stated, we also saw very strong BCO utilization in the quarter, up 10% year over year, and that comes on the heels of a really strong fourth quarter utilization, which was up 8% compared to the prior-year fourth quarter. And then finally, sort of anecdotally, I would like to add we experienced strong interest from potential BCOs at the Mid-America Truck Show in March.

I think should we see sustained pricing, that level of interest and sentiment will be helpful for us as we move through Q2.

Scott H. Group: Thank you, guys.

Operator: Our next question comes from the line of Chris Wetherbee from Wells Fargo. Your line is now open.

Chris Wetherbee: Yeah. Hey. Thanks. Afternoon, guys. Just want to kind of piggyback on the BCO outlook. I guess, maybe what do we need to see from a spot perspective? Have we seen enough, you think, from a spot perspective to begin to actually move that up sequentially? It sounded like maybe April was sort of net flattish, I think from what you said the end of the first quarter was. But maybe you could elaborate a little bit on how we think about maybe that progress is going to trend throughout the rest of the year?

Frank A. Lonegro: Chris, so yes, absolutely. When BCOs see multiple months in a row of sustained rate improvement, the word gets around pretty quick. And the percentage pay model is a really attractive one. As Matthew Miller just mentioned, he and I were both at the Mid-America Truck Show, which is nicknamed MATS, so we were out there, and we had a good spot on the expo floor. And I think we had, Matt, sort of a record takeaway there in terms of potential BCO candidates. Obviously, we have people there that are actively recruiting and people who are willing to say, yes, I am interested, please follow up with me.

That was a bigger number, at least that we have kept on record over a bunch of years. So we feel pretty good about the interest. As Matt was just saying a little while ago, we are continuing to see hundreds of adds every quarter, and the cancels are coming down. So what he would tell you is the cancels lead the adds. So you see better cancellations, and then you see better additions. But I will let him pick up the thread from there.

Matthew Miller: No, I would just echo what you said, Frank. Generally speaking, if you look back in history, as the cancels slow and utilization picks up, word starts to spread and it spreads fast. And that is what I would say as a takeaway. This is a leading indicator for us on when adds start to turn, and that first quarter tends to be, as I said, a very challenging quarter, and that finish was pretty strong given the backdrop over the past several years.

Chris Wetherbee: Okay. That is very helpful. Appreciate that. And then just maybe one quick one on sort of van demand as we think about loads as we go through the second quarter and, I guess, trends from April standpoint. Any sort of indication of if there is some improvement in various end markets kind of towards the end of the month? Just trying to get a sense whether or not, obviously, the pricing side is really accelerating here. Just want to get a sense of what your view, broadly speaking, about demand?

Frank A. Lonegro: Chris, so I think there are a couple of things that happen naturally this time of the year. Building products unlock on a sequential basis because you are cycling out the Januarys and Februarys and you are adding in the Mays and the Junes, so to speak. So there are certain ones that are much more seasonal in nature Q1 to Q2, which is why you generally get some of the lift on a sequential basis. But then there are things that right now are just not being heavily supported by the interest rate environment. Automotive would be an example of that.

But I think the demand that we are seeing right now certainly supports rates where they are, but it is more a reflection of where the capacity is. If we happen to get a couple of points of GDP/IP-type growth when supply is coming down, I like our chances this year.

Chris Wetherbee: Got it. Perfect. Thanks, guys. Appreciate it.

Operator: Thank you. Our next question comes from the line of Jordan Alliger from Goldman Sachs. Your line is now open.

Paul Stoddard: Hey, everyone. This is Paul Stoddard on for Jordan Alliger. I guess the first question I have is, if the mix gets weaker with BCOs going into the second quarter, how did the mix in the first quarter compare historically? And as rates are increasing in the marketplace, could we see brokers come back into your network and potentially see more compression happening from the first quarter to the second quarter?

James P. Todd: Yes, Paul. Happy to field that one. If you recall in the January conference call, we did not want to bake in the full variable contribution margin expansion that typically happens fourth quarter to first quarter. There were two reasons for that. One was the utilization number in the fourth quarter was very strong. And two, we did not think winter storm activity would negatively impact loadings. However, when a BCO is down for a week because of storms, we have seen in quarters past and years past where that could hurt from a VCM standpoint. That clearly did not happen. Utilization accelerated further, and we did get our typical or standard fourth quarter-to-first quarter variable contribution margin expansion.

In the scenario that Frank laid out, of what is normal from a spring peak standpoint, and use round numbers about a 7-point lift in volume sequentially first quarter to second quarter, I would note the last two or three years we have not seen that degree of lift. But if we were to get that, it would disproportionately come from third-party trucks. Because as much as we would love to grow the fleet 7% on 8,500 trucks in 90 days, that is just not happening. So that is really what drives the historical compression. It is just there is more volume flowing into the network, and we have got to utilize brokerage more.

Paul Stoddard: Makes sense. And then, I guess, kind of a follow-up to the discussion on the Montgomery Supreme Court case. With your unique structure with the BCOs and having insurance already within your model, how does that set you up versus peers depending on how the decision might go?

Frank A. Lonegro: Yeah. I mean, I think the insurance tower we have covers BCOs while they are loaded. We also have other insurance programs that cover BCO-type and non-BCO-type issues. I think the entirety of the brokerage population is going to have to look at insurance very differently if the decision goes against the industry than they do today. Right now, they essentially look at F4A and say, we are immune. And the truth of the matter is if the Supreme Court goes against it, they are going to have to get coverage. I think it likely creates a situation where your smaller players are going to get priced out of the market with the cost structure going up.

And you have got so much fragmentation in the industry on the brokerage side that may not survive in an environment where you have got to have $5 million or $10 million of insurance just to cover a single incident.

Operator: Thank you. Our next question comes from the line of Bruce Chan from Stifel. Your line is now open.

J. Bruce Chan: Yes. Thanks, and good afternoon, everyone. Maybe just to start, you have talked about the tailwind from data center closures on, I think, at least a couple of calls. And I know that you have got exposure there in several of your end markets, but I do not think you have ever talked about an explicit revenue percentage. Any sense for what that is today and maybe how that has trended versus prior periods?

Frank A. Lonegro: Yeah. So it is funny. We are sort of smiling at each other because we were looking at this earlier today. Think about it broadly as a data center ecosystem, and I will let James M. Applegate handle this one in a sec. But you have got to look at it not just as the data center itself, but all the accoutrements to it. So it has got to have generators for power. It has got to have batteries for power. It has got to have chillers to make sure that the raised floor is cooled, then it has got all the stuff that goes inside of the data centers.

Jim, you can give a sense of what that business looks like.

James M. Applegate: Yeah. With our top 100 customers—and we look at this—we look at our exposure. We have nine of our top 100 that fall within directly data center related. It represents about 12% of our total revenue. So, from an exposure standpoint, that is what you are looking at. But even if you look at this big buildout and what has been happening and even what is in place today, it is not just the constructing and the actual data center players today. There are real energy needs. There are real side benefits that you get as you are seeing this big buildout happen.

So from an exposure standpoint, we feel like it is a limited exposure from that standpoint, and we have got a lot of other side opportunities that are happening just because of the macro environment that has been created here.

Frank A. Lonegro: That environment is still growing, and then you have all of the refresh and replacement of all of those things over time. So we are pretty bullish on continued investment and maintenance investment on a going-forward basis there.

J. Bruce Chan: Okay. Yeah. That is super helpful. And then maybe just one final question here on the supply environment. Obviously, we have heard a lot of commentary about regulatory changes. I think a few carriers talked about an affected OTR population somewhere in the 15% range. Any sense for what the noncompliant population would be in unsided and maybe how fungible those two populations of drivers are in your network?

Frank A. Lonegro: Yeah. I do not know that we have a great read on exactly what that looks like. I mean, the interesting thing from a Landstar System, Inc. perspective is we do not have language proficiency challenges. We do not have non-domiciled CDL challenges. All of our folks are professional drivers. Average age is 51 years. These folks have been driving a long time. They are owner-operators. I could go on and on. I am sure Matthew Miller will have some commentary here too. But at the end of the day, there is capacity coming out of the environment. It is generally what I believe is coming out of the lower end of the environment.

And you are ultimately going to have a much safer and much more professional environment given the work that USDOT and FMCSA are doing. Matt?

Matthew Miller: Yeah. No. I would agree. When you think about English language proficiency, the non-domiciled CDLs, CDL mills, the ELD technology—we just applaud the actions of Secretary Duffy and FMCSA, Derek Barsh, and we find ourselves virtually unimpacted with our BCOs because of a focus on safety, security, and service. And I think there is more to come here. They are sort of telegraphing—if you saw the 60 Minutes piece on chameleon carriers—my suspicion is that is probably the next target, and that just serves us very, very well in the grand scheme of things.

J. Bruce Chan: Okay. Thank you.

Operator: Thank you. Our next question comes from the line of Stephanie Moore from Jefferies. Your line is now open.

Stephanie Benjamin Moore: Hey, everybody. Thank you. I actually had a question, but I am going to ask a different one now just based on this prior question. Maybe just for pure visibility here, I am kind of specifically looking at this Delilah’s Law and really just the use of foreign dispatch and administrative services. So I think in the past, you guys have disclosed having some foreign brokerage. So maybe just talk a little bit about that if that is still the case. I think this was several years ago, so I could be out of date here. But maybe just if you could talk a little bit about any foreign dispatch that you might have. Thanks.

Frank A. Lonegro: Yeah. Thanks, Stephanie. Fair question. All of our agents are U.S.-domiciled agents. We do have a handful of agents who do some back-office work overseas, but we do not believe we have any exposure under our reading of any of the drafts of the Delilah’s Law under the phrase that you mentioned.

Stephanie Benjamin Moore: Okay. That is really helpful. Well, then my actual question here: maybe just talk a little bit about, as you think about this next cycle, if we are in fact at the beginning of an up cycle, how you think Landstar System, Inc. is positioned from a competitive standpoint to maybe gain share or drive better margin and the like? Just as we think through investments that have been made over the course of this down cycle, how you are in a different position in this up cycle versus past? Thanks.

Frank A. Lonegro: Yeah. Awesome question. A couple of different reads from my perspective. I think on the last conference call, I said it was hard to tell whether or not we were at the beginning of the end or the beginning of the beginning. I am pretty convinced we are at the beginning of the beginning as we look at the last few months, and our results would prove that out. I think we have done a lot in the last couple of years—clearly designating the strategies and the strategic growth areas that we put forward, such as heavy haul and U.S.–Mexico cross-border and things like that.

I think we have done the right work internally to put the right leadership there and the right investments, as James M. Applegate referenced a few moments ago. I think on the BCO side, the work that Matthew Miller has done in looking at BCO qualifications, the time to qualify, and the redux of orientation and what we call “the class”—there are a lot of things that are happening there. I think that is showing through in the way that BCOs are sticking with us even in more difficult times at the end of last year. The Q1 numbers in terms of the BCO count looked really, really good.

They were 10 times better than they were for the last three years, so that makes you feel pretty good. I think the work that we have done in working with the regulators over the last year or two—I think our relationships are a lot closer with USDOT and FMCSA than they have ever been. I think we have the ability to talk with them about the realities of our industry and what needs to be done. And they are moving at a pace that I do not think any of us have ever seen.

I have said in open company a number of times that we have never had a more favorable administration to the U.S. trucker than we have right now. And, again, as I mentioned earlier, it is making it a safer and more professional environment, and I think those are the important things. That is what Landstar System, Inc. has always been about. We are independent owner-operators who are out there doing a great job for us every single day, and those are the folks who are going to win in this environment. There has been a bit of a flight to quality.

We are getting bids back and freight back that we maybe lost on rate over the last couple of years because of safety, security, and service, and customers wanting to make sure that their loads get there on time and the load is secured and not stolen, and the tractor-trailer is not turned over on the side of the road. Those are the things that we are really good at. So I think we are winning in the market with respect to that. On the flatbed and heavy haul side, clearly, numbers over the last two years would indicate that we are doing really well relative to that market, and we are going to continue to recruit drivers.

We are going to continue to invest in the fleet. We are going to continue to designate the hard things as strategic initiatives, and I look forward to that future.

Operator: Thank you. Our next question comes from the line of Brian Ossenbeck from JPMorgan. Your line is now open.

Brian Patrick Ossenbeck: Hey, afternoon. Thanks for taking the question. Just want to see if you can get a little bit more detail on the AI initiatives that you have got listed out here in the back slides. Both maybe separate the Landstar corporate from the, I guess, you are calling the network of entrepreneurs. But maybe more generally, do you feel like you can scale some of these productivity initiatives that we hear about across the industry when you have some of the business that is a little bit more centralized with either corporate or brokerage, and then you have got agents that are a little bit more decentralized, of course?

So a little bit more specifics on that, including—you talked about the CapEx budget here, AI being about half of the IT capital budget, but what is also running through the expense line there? Thank you.

Frank A. Lonegro: Good question, Brian. Thanks. Good to hear your voice. I think the AI work we are doing—we disclosed in the Q4 call—those two slides are really replicas of what we did in the main deck in the Q4 call. We wanted to put it in there to make sure that everybody had an opportunity to see those that may not have been on the Q4 call. James M. Applegate is the business side of AI. We have obviously got Rick Cora, our CIO, on the tech side. As we did mention to your good point, we laid down the expectation that more than half of our capital budget on the IT side will be AI. We have met that.

My belief is if you look at it in arrears sitting at 12/31/26, it will probably turn out to be more than that as we revisit the other half of the capital that IT is spending just to decide whether or not we truly do need systems versus AI on top of existing systems. So I think you will see that more over time, and certainly we will look at a higher expectation as we turn the page into 2027. Scalability and adoption, as I mentioned in my prepared remarks, are clearly what we are trying to make sure we are accomplishing by virtue of, for example, the pilots that we are doing. James M.

Applegate will get you into some details there. We are doing very active agent pilots. We are working with a half dozen or so AI companies—some of those will be, I will say, household names; some of them will be more on the start-up side. You have got to make sure that you are playing the field a little bit here. They are doing pilots with about a dozen or so of our agents, and therefore we are in the agent office working on AI, which gives you the replicability across the agent environment. There are things that agents do different.

But there are an awful lot of things that agents do similarly that happen to be part of the shipment life cycle.

James M. Applegate: Thanks, Frank. How are you doing, Brian? I love the way you posed the question—separating the corporate from the agent. As you know, corporate is a little bit easier to get your arms around. It is a little bit easier to control. With over a thousand agents in our network, we have got to be a little bit more deliberate on how we go about it, and it has got to be a scalable solution that fits our entrepreneurs. The benefit of what Landstar System, Inc. brings to the table is our entrepreneurs, and pairing our entrepreneurs with technology is what wins in this market and what has won for Landstar System, Inc. in the past.

We feel in this next run-up with AI, it is going to help us win even more so, with the motivated agents that we have and giving them the right tools to compete. As Frank mentioned, we have several pilots going on right now. We have seven active pilots. We are hitting all stages of our shipment life cycle. We started off with six. We have about 10 stages that we are going to hit within the shipment life cycle.

And when I say that, those are things like how our agents market and sell, how they price, how they actually find capacity and manage that capacity, assign that capacity, dispatch that capacity, making sure that they are tracking and tracing those shipments within the network. We are hitting that right now. We have got about a dozen agents that are in active pilots. And as Frank mentioned, we have got household names and a lot of new startups that we are working with from a pilot standpoint.

Those startups are going to sit up on top of our technology stack, and we are right now working with our agents to identify the workflows and to implement agentic AI bots over at the agent office within those different shipment life cycle categories that I mentioned. We have got a lot of excitement right now with the agents that are using it. We are identifying a lot of the business cases that you hear out in the industry that are applying directly for our agents. We are getting a lot more shipment life cycle throughput. They are doing things faster. They are able to do more. And we are actually seeing more wins as well.

It is very early on. As far as how that actually deploys across the network, we are going to get to a point where we say, hey, these pilots are done. We are building out our use cases. We will identify the right vendors to work with. And then we will also identify how we want to go out to the market to our different agent family. If you really look at it, Brian, you cannot really push that down into the network. It is more influence than control. So part of our plan is to actively look for agents that are going to adopt that technology. We will do an assessment.

We have got agents that want to grow and that want to use their resources for growth. We will start with them. We will do that outreach. We will get them excited about what we are doing. And then from there, there is a consultation and design that we need to do at each agent office. We need to take a look at their business, the types of customers that they actually operate with. We need to design the workflows along with the agentic solutions that we put in place specific for those agents. And then behind that, we are going to make sure that we do it safely.

We are going to make sure that they have the right resources in place. We are going to be monitoring along the way. Brian, we have done this before. We have done this with our rollout with our different technology tools. We have been doing this since 2014. I do not see a big difference from what we have done over there, but it is going to be a lot more integrated within our agent offices, and it is very exciting about where we are going. So, more to come on that, but thank you for asking the questions.

I think it is very fitting for us to be able to tell our story specific to Landstar System, Inc. because I think we have got a great story to tell there.

Brian Patrick Ossenbeck: No. I appreciate all the details. Thank you very much for the update.

Operator: Thank you. We will take the last question from Harrison Bauer from Susquehanna. Your line is now open.

Harrison Bauer: Great. Thank you for taking my question. You guys have talked extensively about the BCO capacity dynamics, but your third-party brokerage carrier side approved carrier account was significantly down—around 20% year over year—although up a little bit versus last quarter. Can you walk through what has changed in your carrier vetting approval process? And then maybe connect that to how you could help decrease your expenses related to cargo theft, fraud, and then maybe insurance costs, and then tie that into how technology might be helping that expense line as well. Thank you.

Frank A. Lonegro: Thanks, Aaron. I think you actually answered your own question. You are absolutely right. We have a higher degree of rigor around vetting our carriers, and it is largely because of the advances that we have made in technology and AI and then some of the relationships that we have with some of our vendor partners and what they are doing to make sure that we have a good understanding of who owns the entity, what is their safety record, whether or not they have been involved in double brokering, whether they have been involved in cargo theft incidents—all those things, and many more, are part of that analysis.

I would say that we probably got religion a little bit earlier than most because we did have—what, JT, about a year or so ago—we had a tough cargo theft quarter. And so we started down that path before many. And even before that, we had started creating our anti-fraud department and putting resources in technology with one of our early AI projects that we deployed to make sure that we could understand what the parameters of a potentially lost load would look like so that we could try to prevent it before it happens. Part of that is making sure that we are doing business with carriers who are reputable carriers. Matt, why do you not pick it up?

Matthew Miller: Sure. I appreciate the question. And I would say if you went back in time, we had probably three attributes that we used to determine if a carrier was eligible to be approved in our network. And with the advent of fraud and strategic theft and everything that has happened over the past several years, we have invested heavily. We invested in people—stood up a fraud group. We invested in process and refining that process, and we invested in technology. Do not expect that to stop anytime soon.

But we continue to add layers upon layers of dozens of attributes that we are looking at to scrub that carrier database to do our best to mitigate, to prevent, to detect any sort of anomalies. And the tools that we have invested in are proving to be working, as you saw in the first quarter results. But this is something that today is a constant defense, and we are continuing to find ways that we can mitigate against it. There are very sophisticated bad actors out there, so you have to remain vigilant. But the technologies that we are adopting are proving very, very valuable and we would expect that sort of rigor to continue for the foreseeable future.

Harrison Bauer: Great. Thanks for all the color.

Operator: At this time, I show no further questions. I would like to turn the call back over to you, sir, for closing remarks.

Frank A. Lonegro: Thank you. In closing, the management team has been energized by our interactions with our BCOs and agents thus far in 2026. We are all encouraged by the current pricing environment and what we believe is the strongest heavy haul service offering in our industry. And regardless of the economic environment, the Landstar System, Inc. variable-cost business model continues to generate significant free cash flow. Landstar System, Inc. has always been a cyclical growth company, and we are well positioned to capitalize on improving conditions and gathering momentum in freight markets. Thank you for joining us this afternoon. We look forward to speaking with you again on our 2026 second quarter earnings conference call in late July. Thank you.

Operator: Thank you for joining the conference call today. Have a good evening. Please disconnect your lines at this time.