Good afternoon and welcome to Landstar System Incorporated's four-quarter earnings release conference call. All lines will be in listen-only mode until the formal question-and-answer session. Today's call is being recorded. If you have any objections, meet the clinic at this time. Joining us for reading from Landstar are Frank Lennigar, President and CEO, Jim Applegate, Vice President and Chief Corporate Sales Strategy and Specialized Fright Officer, Jim Todd, Vice President and CFO, and Matt Daniger, Vice President and Chief Field Office Sales Officer, And Matt Miller, Vice President and Chief Safety and Operations Officer. Now I'd like to turn the call over to Mr. Jim Todd. Sir, you may begin.

Good afternoon and welcome to Landstar's 2025 fourth 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 relates to Landstar's business objectives, 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's Form 10-K for the 2024 fiscal year described in the section Risk Factors, Landstar's Form 10-Q for the 2025 first quarter, and our other SEC filings from time to time. These risks and uncertainties could cause 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 undertakes no obligation to publicly update or revise any forward-looking information. I'll now pass it to Landstar CEO, Franklin Negro, for his opening remarks.

Thanks, JT, and good afternoon, everyone. I'd like to thank our VCOs and agents and all of the Landstar 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. They are exceptional business leaders and key to driving the continued success of Landstar's business model. Before we jump into fourth quarter results, I'd like to take a few minutes to provide a brief reflection on my first two years leading this great organization. Despite the unprecedented freight recession continuing longer than many of us had expected, we achieved some significant accomplishments over the past two years. We created our key priorities, what we call the five points of the star, to guide our business. Accelerating the model, executing on our growth strategy, managing risk, leveraging our financial strength, and enhancing our support. The one at the top of the star is accelerating the model, which is all about our agents and BCOs. When they are strong and growing and equipped with the tools and support they need to succeed, the Landstar model really shines. We doubled down on the company's strategic growth initiatives, with two of those, Heavy Hall and U.S.-Mexico cross-border, representing approximately 20% of our business. While the cross-border business has been impacted by geopolitics, we are more than ready to leverage our new cross-border leadership, as well as our strong agent presence and market position when the environment improves. On the Heavy Hall side, with new leadership and strong agent focus, not to mention our ability to do the hard things well, Landstar's Heavy Hall set a new revenue record of $569 million during the 2025 fiscal year, approximately 14% above 2024's record-setting year. We're continuing to build the leadership team of the future with our executives and VPs, what we call our top 60, with nearly half of that team new to their role, new to their responsibilities, or new to the company. That group is collectively focused and incented to drive Landstar's growth and profitability and to maintain our industry-leading transportation and logistics business. The time it takes to become a Landstar BCO while maintaining our highly stringent qualifications go to Matt Dillow for his efforts here. This year, we will also implement a redesigned BCO onboarding and training program to ensure the delivery of relevant, high-quality instruction and to support Landstar BCOs for the future in deploying technology and specifically AI to benefit our agents, BCOs, and Landstar employees. It's all about enhancing our support for the Landstar network. You'll hear more this afternoon about our AI strategy and specific initiatives like the Contact Center, our path to deploying an ERP, and AI-enhanced tools focused on pricing, BCO retention, trailer requests, about our new web portal featuring embedded agentic AI that was built specifically for the needs of Landstar Freight agents and that we believe is unique in the industry. As we continue our efforts to find new ways to embed AI in our business, I'm pleased to report that approximately 50% of our IT CapEx budget for 2026 is dedicated to AI enablement and solutions. And importantly, we've continued Landstar's rich tradition of strong capital returns to our shareholders. Over the last two years, Landstar returned approximately $261 million to shareholders in the form of share repurchases and another $245 million in cash dividends. ends. We remain committed to our capital return program while continuing to invest capital to improve and grow our business and making our network of entrepreneurs a success two years. We're excited about the future, and we look forward to sharing more with you down the road. Turning back to the 2025 fourth quarter results, the challenging demand conditions experienced in the truckload freight environment over the past three years continued during the 2025 fourth quarter. Global federal trade policy and lingering inflation concerns continue to generate supply chain uncertainty. Nevertheless, the Landstar team of independent business owners and employees performed well. Truck transportation revenue in the fourth quarter was nearly flat year-over-year, as the slight decrease in total revenue was to decrease the company's Mexican logistics subsidiary. $16 million in reported revenue during the 2024 fourth quarter that was associated with the previously disclosed agent fraud matter. Total revenue decreased approximately 1% year-over-year in the 2025 fourth quarter. As disclosed in our pre-release, 8K filed with the SEC on January 21st, the 2025 fourth quarter financial results were negatively impacted by several discrete items impacting insurance and claims expense. First, the company recorded pre-tax charges of $11 million, or 24 cents per share, related to two separate tragic vehicular accidents involving VCOs leased on with subsidiaries of the company. Second, the company recorded a pre-tax charge of $5.7 million, or 13 cents per share, in connection with the court entry of a judgment in January 2026 that Landstar intends to appeal, and which related to a trial that ended in August 2025 relating to an accident that occurred in fiscal 2022. Third, the company recorded a $5.3 million pre-tax charge, or 12 cents per share, related to an increase in the company's actuarially determined claim reserve. JT will cover these items in greater detail during his prepared remarks. Nevertheless, we are encouraged by several positive signs. One consistent highlight is the continued strength in the unsighted platform equipment business, which posted another strong quarter with an 11% year-over-year revenue increase, driven by the performance of Landstar's heavy haul service offering. We generated approximately $170 million of heavy haul revenue during the 2025 fourth quarter, or a 23% increase over the 2024 fourth quarter. This achievement reflected a 16% increase in heavy haul revenue per load and a 7% 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 will put Landstar in a great position to leverage the freight environment as it turns our way. We are also 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 five, the freight environment in the 2025 fourth quarter was characterized by relatively soft demand from a seasonal perspective. The impact of accumulated inflation remains a drag on the amount of truckload freight generated in relation to consumer spending, while the industrial economy remains soft as evidenced by an ISM index below 50 for the entire 2025 fourth quarter. We are pleased to see sequential outperformance by our overall truck revenue per load compared to pre-pandemic normal seasonal patterns, despite fiscal October underperforming pre-pandemic seasonal trends. As noted in the Crest release, we were encouraged to see our overall truck revenue per load increase from fiscal October to fiscal December, and appreciate everything the U.S. DOT is doing to support the American trucker. Considering that backdrop, Landstar's revenue performance was admirable in the 2025 fourth quarter, with the number of loads hauled via truck down approximately 1%, almost entirely the offset by an approximately 1% increase in truck revenue per load compared to the 2024. 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 2025, we deployed approximately $180 million and were purchased approximately 1.3 million shares of our common in stock, and yesterday afternoon, our board declared a 40-cent quarterly dividend payable on March 11th to share. We continued 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 trailers, with a particular focus on investment in new van equipment. At this stage of the call, I would normally hand it off to JT, but we felt it was important to provide analysts and investors with an update on our AI-related activities. I'll now pass the call to Jim Applegate for a discussion of in-flight and planned AI-related initiatives going on at Landstar.

Thank you, Frank. Since 2016, Landstar has been executing a digital transformation strategy to ensure our network of agents and BCOs remains highly competitive in an increasingly technology-driven freight environment. Our goal from the outset was not simply modernization but enablement, delivering tools that help automate the agent office, simplify the experience of operating as a Landstar business capacity owner, and scale the efficiency and effectiveness of our entrepreneurs. Those early efforts, branded as Landstar 2020, included the rollout of a new transportation management system, advanced pricing and capacity tools, agent analytics, BCO retention capabilities, mobile applications, and trailer management. Landstar 2020 was never viewed as an end point. It is the foundation of a long-term commitment to building and deploying industry-leading technology across our entire ecosystem. As we moved beyond 2020, that commitment expanded. We invested further into digital capabilities within our corporate operation and the support we provided the network, including the rollout of modern contact center technology and significant upgrades to our financial, settlements, and back office systems. These investments strengthen the overall connectivity and support provided to our entrepreneur. What differentiates Landstar's technology strategy is how it's conceived and deployed. Our approach is not driven by top-down mandates designed solely to reduce costs. Instead, it's built for close collaboration with our agents and BCOs with a clear focus on enabling growth. By aligning technology investments with the needs of our entrepreneurs, we're able to deliver tools that are adopted and leveraged to drive growth and deliver wins and the highly competitive transportation sector. Our agency model, growth is often constrained by resources. Without technology, a new agent may reach a couple of million dollars in revenue before needing to add headcount. This is a difficult decision given the financial risk involved. Our objective has been to deploy technology to fundamentally change that equation. By automating workflows and improving office efficiency, we have helped agents who embrace our tools to significantly increase their revenue base without adding resources. The same philosophy applies to our BCOs. By eliminating manual and administrative friction, we enable them to be more productive, haul more freight, and better serve our agents and customers. The end result is a differentiated value proposition for customers, a combination of advanced purpose-built technology and highly motivated professionals with a direct economic stake in delivering freight safely, securely, and with exceptional service. Artificial intelligence represents the next major acceleration of this strategy. The pace of innovation and breadth of potential applications are unprecedented, and we view AI as a powerful enabler of our entrepreneurial ecosystem. Importantly, our AI strategy is evolutionary. We're building on the strong digital foundation we already have in place. Today, machine learning is embedded within our pricing and VCO retention tools, allowing them to continuously improve as we scale the available data. Our new contact center platform leverages AI to enhance the knowledge base of the service representatives, analyze sentiment, automate routine tasks, summarize interactions, and free our teams to focus on higher-value problem solving. We've embedded AI into our Landstar agent portal, improving access to information, providing actionable business insights, and enabling better, faster decision-making. We've also deployed an AI-powered fraud detection solution, documentation, implementation, invoiced images, and shipment characteristics to identify high-risk rate and reduce shipment losses. Looking ahead, beginning in the first quarter of 2026, our AI task force will work with transportation-focused agentic AI startups and established technology partners to accelerate AI applications across the shipment lifecycle and within agent offices. These efforts are focused on driving efficiency, improving decision-making, and further unlocking growth across our network. Technology continues to involve, Landstar intends to remain at the forefront. Strategic enhancement to the competitive advantage of the Landstar business model and the resiliency and capability of our strong network of entrepreneurs. Entering this new era, we believe AI represents another meaningful opportunity to strengthen the safety, security, and service we provide to our customers every day on every load. Back to you, Frank.

In looking at our network, the scale, systems, and support inherent in the Landstar model helped to drive the operating results generated during the 2025 fourth quarter. JT will get into the details on revenue, loadings, and rate for load in a few minutes. As noted during previous earnings calls, Landstar's safety-first culture is a crucial component of our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar BCOs operating safely every day and the agents and employees who work to reinforce the critical importance of safety at Landstar. I'm proud to report an accident frequency rate of 0.59 DOT reportable accidents per million miles during 2025, well below the last available national average DOT reportable frequency released from the FMCSA for 2021 and slightly better than the company's trailing five-year average of 0.61. This long-run average is an impressive operating metric that's in dedication of our BCOs and and provide the 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'd also like to take a moment to recognize Landstar's 457 million-dollar agents based on our 2025 fiscally results. Importantly, retention within the million-dollar agent network continues to be extremely high. Turning to slide 11, on a year-over-year basis, VCO truck count decreased approximately 4% compared to the end of the 2024 fourth quarter, and approximately 1% sequentially, BCO turnover continues to be influenced by a persistent, relatively low rate-per-load environment, combined with the significant increase in the cost to maintain and operate a truck today compared to before the pandemic. Directionally, we are pleased to see our trailing 12-month truck turnover rate drop from 34.5% as of fiscal year in 2024 to 31.4% at the end of the 2025 fourth quarter. Through the first four weeks of the 2026 first fiscal quarter, the number of trucks provided by BCO independent contractors is down fractionally, consistent with typical first quarter seasonality. I will now pass the call back to JT to walk you through the 2025 fourth quarter financials in more detail.

Thanks, Frank. Turning to slide 13, as Frank mentioned earlier, overall truck revenue per load was up approximately 1% in the 2025 fourth quarter compared to the 2024 fourth quarter, primarily attributable to a 7.5% increase in revenue per load on loads hauled by unsighted platform equipment and a 2% increase in revenue per load on less than truck load loadings, partially offset by a 3.4% decrease in van revenue per load and a 4.2% decrease in revenue per load on other truck transportation loadings. On a sequential basis, truck revenue per load increased 1.5% in the 2025 fourth quarter versus the 2025 third quarter, outperforming typical pre-pandemic normal seasonality increase of approximately 1%, despite a relatively soft start out of the gate with fiscal October underperforming normal seasonality. 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 2025 fourth quarter, both revenue per mile on unsighted platform equipment hauled by BCOs and revenue per mile on van equipment hauled by BCOs were 1% below the 2024 fourth quarter. Delving deeper into seasonal trends, revenue per mile on loads hauled by BCOs on unsighted platform equipment declined 2% from September to October, was flat from October to November, and increased 4% from November to December. The September to October decline underperformed pre-pandemic seasonal trends, while the October to November approximately equal, and the November to December increase both outperformed pre-pandemic historical historical trends. Revenue per mile on van equipment hauled by BCOs sequentially decreased 1% from September to October and an additional 1% from October to November, underperforming pre-pandemic historical trends. However, in what we hope was a possible inflection point, revenue per mile on van equipment hauled by BCOs increased 3% from November to December, slightly above pre-pandemic historical trends. It should be noted that month-to-month seasonal trends on unsighted 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 flatbed volume. As Frank alluded to, we've been pleased with the recent performance in our heavy haul service offering. Heavy haul revenue was up an impressive 23% year-over-year in the fourth quarter, significantly outperforming core truckload revenue. Heavy haul loadings were up approximately 7% year-over-year, and revenue per heavy haul load increased 16% year-over-year. This represented a mixed tailwind to our unsighted platform revenue per load as heavy haul revenue as a percentage of the category increased from approximately 38% during the 2024 fourth quarter to approximately 42% in the 2025 fourth quarter. Non-truck transportation service revenue in the 2025 fourth quarter was 28% or $30 million below the 2024 fourth quarter. Excluding approximately $16 million in revenue reported during the 2024 fourth quarter that was associated with the previously disclosed agent fraud matter, non-truck transportation service revenue in the 2025 fourth quarter decreased by approximately $14 million, or 15%, compared to the 2024 fourth quarter. Turning to slide 14, we've provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation logistics segment revenue was down 2.9% year-over-year on a 2% decrease in revenue per load and a 1% decrease in loads compared to the 2024 fourth quarter. Within our largest commodity category, consumer durables, revenue decreased approximately 2% year-over-year on a 3% decrease in volume, partially offset by a 1% increase in revenue per load. Aggregate revenue across our top five commodity categories, which collectively make up about 71% of our transportation revenue, increased approximately 2% compared to the 2024 fourth quarter. While slide 14 displays revenue share by commodity, we thought it would also be helpful to include some color on volume performance within our top five commodity categories. From the 2024 fourth quarter to the 2025 fourth quarter, total loadings of machinery increased 6%. Automotive equipment and parts decreased 5%. Building products decreased 11%. And hazmat decreased 3%. Additionally, substitute line haul loadings, one of the strongest performers for us during the pandemic and one which varies significantly based on consumer demand, increased 3% from the 2024 fourth quarter. As we've mentioned many times before, Landstar is a truck capacity provider to other trucking companies, 3PLs, and truck brokers. During periods of tight truck capacity, those other freight transportation providers reach out to Landstar to provide truck capacity more often than during times of more readily available truck capacity. The amount of freight hauled by Landstar on behalf of other truck transportation companies is reflected in almost all of our commodity groupings, including our substitute line-off service offering. Overall, revenue hauled on behalf of other truck transportation companies in the 2025 fourth quarter was 15% below the 2024 fourth quarter, an indicator that capacity is reasonably accessible in the marketplace. Revenue hauled on behalf of other truck transportation companies was 11% and 13% of transportation revenue in the 2025 and 2024 fourth quarters, respectively. 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 2025 fiscal year. Turning to slide 15, in the 2025 fourth quarter, gross profit was $85.6 million compared to gross profit of $109.4 million in the 2024 fourth quarter. Gross profit margin was 7.3% of revenue in the 2025 fourth quarter as compared to gross profit margin of 9% in the corresponding period of 2024. In the 2025 fourth quarter variable contribution was $166 million compared to $166.5 million in the 2024 fourth quarter. Variable contribution margin was 14.1% of revenue in the 2025 fourth quarter and 13.8% in the 2024 fourth quarter. Turn to slide 16. Operating income declined as a percentage of gross profit primarily due to the impact of highly elevated insurance and claim costs in the 2025 fourth quarter and the impact of the company's fixed cost infrastructure, principally certain components of selling general administrative costs in comparison to a smaller gross profit base. Operating income declined as a percentage of variable contribution primarily due to the impact of the highly elevated insurance and claim costs in the 2025 fourth quarter and the impact of the company's fixed cost infrastructure, while the variable contribution bases were essentially equal. Other operating costs were $14.6 million in both the 2025 and 2024 fourth quarters. Insurance and claim costs were $56.1 million in the 2025 fourth quarter, compared to $30.1 million in 2024. Total insurance and claim costs were 12.3% of BCO revenue in the in the 2025 fourth quarter as compared to 6.7% in the 2024 fourth quarter. The increase in insurance and claim costs as compared to 2024 was primarily attributable to, one, $11 million of costs related to two separate tragic vehicular accidents involving BCO independent contractors leased on with subsidiaries of the company, each of which occurred during the 2025 fourth quarter, two, a $5.7 million pre-tax charge associated with with a broker liability judgment entered on January 13, 2026, where a trial court in El Paso, Texas found Landstar Ranger responsible for 100% of the $22.8 million of total damages awarded rather than the 15% apportioned to Landstar by the jury during the summer of 2025. Landstar disagrees with the judgment and plans to vigorously appeal this matter. And three, the impact of a $5.3 million increase in actuarially determined IB&R reserves relating specifically to loss exposure in excess of $1 million per claim. During the 2025 and 2024 fourth quarters, insurance and claim costs included $9.2 million and $2.2 million of net unfavorable adjustment to prior year claim estimates, respectively. Importantly, $5.7 million of the $9.2 million of prior year development reported in the 2025 fourth quarter was attributable to the El Paso Broker Liability Judgment entered during January 2026. Selling general administrative costs were $56.2 million in the 2025 fourth quarter compared to $55.1 million in the 2024 fourth quarter. The increase in selling general administrative costs were primarily attributable to an increased provision for incentive compensation, increased stock-based compensation expense, and increased wages, partially offset by a decreased provision for customer bad debt. The provision for incentive compensation was $700,000 during the 2025 fourth quarter compared to a reversal of $200,000 during the 2024 fourth quarter. Stock-based compensation expense was approximately $800,000 during the 2025 fourth quarter as compared to a $100,000 reversal of previously recorded stock-based compensation costs during the 2024 fourth quarter. We continue to manage SG&A in part by closely managing headcount at Landstar. Our total number of employees based in the United States and Canada is down to approximately 45 since the beginning of 2025. Depreciation and amortization was $10.5 million in the 2025 fourth quarter compared to $12.7 million in 2024. This decrease was primarily due to decreased depreciation on software applications and decreased depreciation on trailing equipment. The company recorded an additional $2.1 million, or five cents per share, as a non-cash impairment charge during the 2025 fourth quarter relating to the ongoing sales process of Landstar Metro. The effective income tax rate was 18.3% in the 2025 fourth quarter compared to an effective income tax rate of 21.4% in the 2024 fourth quarter. The decrease in the effective income tax rate was primarily due to the favorable resolution of certain state tax matters during the 2025 fourth quarter. Turning to slide 17 and looking at our balance sheet, we ended the quarter with cash and short-term investments of $452 million. dollars, cash flow from operations for 2025 was $225 million, and cash capital expenditures were $10 million. The company continues to return significant amounts of capital back to stockholders with $125 million of dividends paid and approximately $180 million of share repurchases during fiscal 2025. The strength of our balance sheet is a testament to the cash-generating capabilities of the Landstar model. Back to you, Frank.

Thanks, JT. Given the highly fluid freight transportation backdrop and an uncertain political and macroeconomic environment, as well as challenging industry trends with respect to insurance and claim costs, the company will be providing first quarter revenue commentary rather than formal guidance. Turning to slide 19, the number of loads hauled via truck in January was approximately 1% below January 2025 on a dispatch basis, while revenue per load in January was approximately 4% above January 2025 on a process basis. As a result, we view truck revenue per load in January as modestly outperforming normal seasonality, while January truck volumes are trending essentially in line with normal seasonality. Looking at historical seasonality from Q4 to Q1, pre-pandemic patterns would normally yield a 4% decrease in both the number of loads hauled via truck and truck revenue per load, yielding a top line that typically decreases by a mid-single-digit to a high-single-digit percentage. As just noted, though, fiscal January truck revenue per load outperformed normal seasonality while truck volumes trended essentially in line. It should be noted that we face a challenging year-over-year truck volume comparison during the first quarter as 2025 first quarter truck volumes exceeded the immediately preceding fourth quarter truck volumes for the first time in 15 years, behavior likely driving the strength. Moving through the first quarter, historically truck revenue per load sequentially declines approximately 1.5% from fiscal January to fiscal February before improving approximately 1.8% from fiscal February to fiscal March. We estimate that in the event fiscal February and fiscal March truck revenue per load outperformed normal seasonality in line with the outperformance we experienced in fiscal January, the sequential revenue change experienced during the 2026 first quarter could be down low single digits versus the fourth quarter of 2025. With respect to variable contribution margin, the company typically experiences a 40 to 60 basis point expansion in variable contribution margin from the fourth quarter to the first quarter, typically driven by increased VCO mix. However, I would note we had a very strong VCO utilization in the fourth quarter of 2025 at plus 8% year over year. In addition, winter storm activity experienced in January could have a negative impact to first quarter 2026 VCO utilization resulting in a first quarter 2026 VCM performance that does not necessarily follow normal seasonal patterns. With that, Elmer, we'd like to open the line for questions.

Thank you very much, sir. At this time, we will begin the question and answer session. If you'd like to ask a question, please press star 1 on your touchstone phone. Once again, that is star 1 task question. And to cancel your requests, please press star 2. Our first Chris from Jason Seidel from TD Cowan, your line is open, sir, evening beginning.

Hey, thank you, Operator, afternoon, guys. You know, maybe sticking on that last comment, you know, in terms of maybe a sequential decline in utilization for your BCOs, where are you standing right now with, you know, that big storm that just swept through the country?

Yeah, that's a good question, and look, hats off to the BCOs who are out there and doing it safely every day. We certainly have had, you know, folks with a little bit of equipment challenges and also some customers who aren't open to either allow us to pick up or to allow us to deliver. JT can get into the very specifics on the day-to-day loading challenges that we've had. Typically, if you look back at history, and again, JT will get into more detail, we generally recover that, so we're, you know, kind of early to mid-quarter. So the hope is that we'll be able to recover it. But this is a fairly wide swath of weather that impacts geographically all throughout the country. So let me let JT maybe just chime in on the specifics there because we are watching it very closely, as you would expect.

Yeah, no, absolutely. Hey, Jason. So I would estimate the storm impact to the fourth week of fiscal January and the first week of fiscal February, probably 5,000 to 6,000 knockdown impact to dispatch loads. But to Frank's point, unlike a dedicated carrier or contract carrier, if a plant is shut down and they're not producing and you're not picking up your 15 loads a day, that freight is gone. In our business, we tend to gap back up when the weather eventually clears, so we'll continue to keep an eye on it.

But I do think to the point you made on BCO utilization, and I'll also get Matt Miller to chime in here in a second, we've had a nice run of BCO utilization even with the, you know, the count coming down some in the fourth quarter and as expected in the first So, you know, the folks are out there, you know, responding to the demand, and obviously We're pushing folks to load BCOs as much as possible, and those guys do a really good job on the three things that are really important to customers, meaning safety, security, and service. But maybe, Matt, a little bit on the BCO utilization.

Sure. No, I was definitely encouraged by the utilization we saw in the fourth quarter. When you look at the fourth quarter compared to prior year, we were up 8 percent compared to fourth quarter at 24. And that compares to the third quarter of 25, we were up 6% compared to the third quarter of 24. So that trajectory was absolutely something we were encouraged by.

I appreciate that commentary. If I could slip one more in on the AI stuff, you know, obviously one of your competitors out there, C.H. Robinson, has been talking a lot about AI and really showing some results to the bottom line. Where are you guys in AI helping you get more bids out there in the marketplace in general?

Yeah. I mean, I think the AI for us is a little bit different than Robinson for a couple of different reasons. Obviously, we've got a different business mix. We also have a different model with essentially all of their folks inside the building, and the majority of the folks who support Landstar are 1099s, not W-2s, which is why you heard Jim Applegate talk about here's what we're doing for the network, which would include the agents and the BCOs. And then, obviously, on the inside, what we're doing for Landstar employees to help support the network. I think where you're going to see the benefit for us is not going to be on the cost line, given the fact that we have, you know, 10% of the employee base that Robinson does. So I really did say 10% of. So they have 10 times more employees than we do. So they're certainly going to see it in the cost line. But, you know, what we're doing and going to do is enable the agent offices, the Landstar independent agents, to go out there and be able to work smarter and to work faster. And to one of the points that Jim Applegate raised, to not have to add employees until much later in their growth trajectory, which obviously allows them to grow faster. But let me let, Jim, you pick up on that one.

Jim Applegate Yeah, no, I think it's been a great explanation around the strategy. I think, you know, the specific question was around bids at the very end of that comment. We operate in a much different model, specifically in the spot market as it relates to pricing. And we've been kind of underway, and I mentioned in my opening comments since 2016, pricing was one of the first things that we hit, and we built a big machine learning model with our pricing tools that just give our agents just a wealth of information. And really, you know, the keys for us to winning in the spot market is just making sure that we give our agents the confidence, right, to go out there and price the business and to do it quickly. So they've got to assess a ton of information depending on the types of customers that they're trying to serve in a very short time period, and the winner in that game is the one that can do it quickly and confidently. So we'll continue to invest into that. AI is going to help that. We're doing a lot specifically around our complex freight segments, around permitting, routing, really being able to kind of hone down our pricing down where our agents kind of feel that they have the right information, and they can support that and back that up with the capacity that they're out there looking for within the industry. So I feel like our model's a little bit different. When you start hearing about some of the, you know, kind of numbers that CH is putting out there, I will tell you the investment and growth that we're giving for our agents, a lot has to do with pricing, a lot has to do with, you know, matching of different capacity, getting utilization for our BCOs up, and just being able to kind of operate within that spot market. And I think we're ahead of the game there, and we'll continue to invest there when we to find opportunities to utilize more data sources. And AI should open that up for us.

Thanks, Jake. That's great color. Appreciate the time.

Thank you. Our next one is from Jordan Allager from Goldman Sachs. Elyn is open, you may begin.

Hey, this is Paul Stoddard. I'm for Jordan Allager. I guess one of the questions I have is just with the BCO count. We see that it came down in the fourth quarter. I mean, typically, you tend to see that come down a little bit, I believe, into the first quarter as well. I guess I'm just curious, what are you guys thinking about when it comes to the first quarter, and do you guys think that you can hold on to those BCOs, especially if rates are starting to come up?

Yeah, I think the case for us, as we've talked about many times before, when the rate environment sustainably improves, we generally see an uptick. Obviously, seasonality plays a part of it. But we, you know, I'd say at least half of the time in the fourth quarter, we see a down tick in the BCO count. We almost always see a down tick in the first quarter. You know, so we would expect some season. I think we're only down fractionally in the first month or so of the quarter. So I'd say the trend relative to the prior year feels pretty good so far in the first What's interesting, and I'll let Matt Miller talk more about it because he's living it every day, the additions are still coming in, you know, better than expected. So I feel good about the model and the attraction of VCOs to the model. We just got to make sure that the retention keeps up with that.

Appreciate that, Frank. And, Paul, appreciate the question. So net truck count declined 104 trucks in the quarter. When we compare that to the fourth quarter of last year, we were down 184. So some improvement on a quarter 2024 compared to fourth quarter 2025. The gross truck ads were up 8.9% to Frank's point compared to the fourth quarter of 2024. And the gross truck cancels are down 5.1% compared to the fourth quarter of 2024. And this marks our eighth consecutive quarter of turnover improvement where we hit the high water mark back in the fourth quarter of 2023 at 41%, followed by 2024's fourth quarter at 34.5 and then finished this year at 31.4, approaching our longer-term average of 29% turnover over a longer period of time. And really, our emphasis is on controlling what we can control. We can't control rates, right? We cannot control rates, and rate really hasn't been too big a friend to us of late. But our emphasis is on what we can control, and so we're focusing heavily on recruiting and qualifications and how we get those folks in the door and how we get them in the door when they express interest in coming to the Landstar to the time that they can be out there on the road hauling loads. And so over the course of 2025, we've made significant improvements by focusing on people, by focusing on process and focusing on technology, driving efficiencies into that process without sacrificing safety. That's something we're not going to sacrifice. however, meaningful progress on driving down the time that it takes to get in the door ready to haul your first load, and at the same time, improving the conversion rate on those folks expressing interest to come in the door, hitting a higher bogey when it comes to that conversion rate. What we're intending to do in 2026 is drive that onboarding experience further by refreshing our orientation and our ongoing education, really setting up the BCOs for success within the network once they're out there on the road.

So, Paul, if RAID helps us a little bit this year and the things that Matt is working on, combined with some of the AI things that Jim Applegate talked about, we're certainly expecting to grow the fleet in 2026.

That's great. And if I could follow up, I guess how I understand it is that the BCO trucks tend to have a higher variable contribution margin. So, as we start to see more trucks coming in, can we see that margin improve throughout the year?

Yeah, Paul, you certainly can. To your point, the VCO business tends to be, you know, round numbers over several cycles, about two and a half times more lucrative on the VCM line. But remember that we've got cost in between VCM and operating income with trailers and insurance and claims costs, et cetera, et cetera. So to the extent you get growth in the fleet count in 26 and some spot rate improvement, that will absolutely be supportive of VCM and a high degree of drop-down operating leverage in a rising rate environment. The flip to that, Paul, is when demand comes back, so think about the second quarter historically, you get a 7% to 8% sequential lift in loadings. I'd love for Miller to grow the VCO count 7% to 8% in a quarter, but typically that volume growth would get picked up by third-party trucks, which will, you know, So it's positive variable contribution dollars, but it will work against us a little bit from a variable contribution margin, if that makes sense.

Got it. Thank you, Paul.

Our next one is from Daskin Majors from Susquehanna. Your line is open. You may begin.

Just to put a period on the BCO discussion, has utilization been a leading indicator in your own analysis of fleet growth, or is it really just rate that drives that historically?

Hey, Baskin. We certainly see utilization tend to pick up when rates go up. The only thing I would say to caveat that is in fourth quarters historically, if BCOs are having a good year, they tend to take a little holiday time in the fourth quarter. So utilization acceleration that Miller talked about from plus 6% year over year in the third quarter to plus 8% was a positive surprise for us. But yes, longer term, rising rates tend to drive higher utilization.

And, Jim, while we have you, can you walk us through, you know, some of your expense sort of views in a little more detail, any kind of pacing or cadence, things that we should be considering?

Yeah, no, happy to, Baskin. The big one, as you're aware, if we kind of reset here in 2026 as we start a new year, a new calendar year, and rebuild the variable compensation programs, incentive comp and stock comp, comping off 2025, where we had about $10 million in the P&L for that. We've got a hypothetical $12 million headwind if we hit plan right on the nose in 2026. If we don't hit plan in 2026, that cash comp headwind doesn't come back in, but I would still expect probably a $2 to $3 million headwind on stock-based compensation as a tranche for which we didn't have any compensation recorded in 25 falls off and a new equity tranche comes on board in 2026. We will very much endeavor Bascom, as you're aware, to offset as much of that as possible. We've got a big van trailer – trailing equipment refresh on the books for $26,000. So while that could have about a $750,000 impact on the depreciation line, we typically will ring the register nicely on gains on disposal of used trailers to offset that. And then also, as you'd imagine, maintenance and tires on a brand-new trailer versus a seven- or eight-year-old trailer that we'll be replacing. you typically get $2,000 to $3,000 a trailer, good guy on the maintenance line. So those are kind of the big ones. Clearly, on the insurance line, which is hard to predict, 90 days to 90 days, we had an elevated experience in the fourth quarter, and the cargo claim environment continues to be tough. We'll work to combat that and hopefully have some tailwinds year-over-year in 26 on the insurance line.

Thank you.

Thank you. Our next one is from Stephanie Moore from Jeffries. Your line is open. You may begin.

Hi, good afternoon. Maybe it would be helpful if you could talk a little bit about what you're seeing in the current environment. You noted some, you know, better than seasonal trends to start January. Any green shoots that you're seeing in specific end markets or any other supply commentary that would suggest the above seasonal performance?

Thanks, Stephanie. I mean, I think if you look at the DOT, U.S. DOT and everything that they've done, I think the cumulative effect of all of those things, which you would know as English language proficiency, non-domiciled CDLs, the CDL schools that are otherwise known as CDL mills, some of the ELD providers coming out of the network, I mean, I think the cumulative effect of all All of those have hit at a point in time during the year where you generally see a little bit of either seasonal demand or a little pullback in capacity given the holidays. So I think if you looked at the DAT rates in December relative to November on the VAN side, you saw a pretty significant uptick. It was, you know, flattish on the flatbed side. Our business mix is a little bit different there, but, you know, we saw sequential improvement month over month in the quarter and, you know, so far as JT mentioned, when you look at how we're trending in January, that seems to have a little bit of sustainability to us. We haven't had that type of sustainability in a while, but we do think it is largely supply side driven. The, across your fingers, hope is that we get, you know, the impact of tax refunds and, you know, bonus depreciation and some of the fiscal policies as well as the lower, you you know, monetary rate environment, like all of those things combined, plus all the announcements of investments in the U.S. infrastructure made by both domestic and foreign companies. When that unlocks, there's a lot of freight that comes along with it. Have we seen that yet? No, but there certainly is the prospect for those things to unlock freight, and that would If you look at what was sort of the goods and the bads of the fourth quarter, and JT helped me a little bit on this one, but the data center ecosystem continued to provide real benefits for us that obviously helped us both on the VAM but predominantly on the platform and the heavy haul side. Machinery, some of the AA&E and HAZMAT business units were up, energy was up, but then you look at the flip side, the building products if you exclude the data center business was a challenge given where the housing economy is. The automotive side for the interest rate environment and then some of the cross-border sub-line, all peak-type things, we're also down. We have a bit of a barbell set of commodities there. Some are doing really well, and others aren't doing as well. But when the things that I mentioned earlier that could stimulate demand happen, especially in a lower-rate environment, I'll say the hypothetical bull case is certainly out there. We've just got to see some of that transition from hypothetical to reality.

Oh, absolutely. And then maybe just to follow up, I think we're all very aware of the hypothetical bull case and we've been waiting for it for some time now, but let's just say that bull case doesn't materialize this year. Maybe that'll get pushed into 2027 for whatever reason. What is the strategy or business plan for 2026 if we still see these dynamics on the supply side but the demand just doesn't come through?

Yeah, I think if the supply dynamics still stay there, I think we'll continue to see a little bit of rate positivity on a year-over-year basis. I think that our strategies – so I talked about heavy haul, I talked about cross-border, but I would also mention hazmat and cold chain and some of the other things that we're working on. We're going to continue to double down in those areas, and we're going to make sure that we have, you know, the agents focused on those areas, that we have the BCOs helping in those areas and moving that type of freight. So I wouldn't count against this in 2026. We're going to do everything we possibly can to win in the marketplace in areas that we think we have a competitive advantage. As you heard me talk about doing the hard things well, I mean, that's a Landstar keynote. We do that type of stuff really, really well, and we've got a really good track record of being able to sell safety, security, and service, and that's what our agents go out there to the customers with every single day. Otherwise, you're having a conversation around rate, and that doesn't help anybody.

Great. Thank you.

Thank you. Our next one is from Bruce Chen from Steepville. You line us open. You may begin.

Hi. Good afternoon. It's Andrew Cox on from Bruce. I just wanted to, you know, get some more information and discuss what may be the challenges, if there are any, to disseminating new technologies, particularly the AI tools you guys are building out, you know, through the decentralized agent network. You know, you guys spoke that it's a different model than CH. I just wanted to see, you know, if you guys are coming up against any, you know, incremental challenges in training or in data safety or if there's any additional cost there. And then not, if there's another way to frame this, if there's any data or anecdotes of maybe some early adopting agents of the tools, just trying to understand what the opportunity is here and how quickly it could come to life.

Yeah, no, really, really good set of questions. You know, we've done a bunch of agent segmentation work over the last couple of years, which gives us a sense of, you know, whether it's the size of the agents or the types of businesses that they do, the split between how much spot and how much contract they do, things like that. So we have a pretty good handle of where some tools would apply to everyone. Pricing would be an example of that one. Who doesn't want to have good information around what the market price is? And others are going to be a little bit more segmented to it. One of the unique things is we can't force adoption of tools. We can certainly provide them, and obviously the agent uptake of that is something that we're going to be accountable for ourselves. And most agents, if they believe it will provide them a competitive advantage in the marketplace, they're going to want to use those tools. So I feel pretty good about that one. There are tools that are also fraud-related and BCO-related and things like that. So I think, you know, the tools that we're providing, the first layer is going to be applicable to all, and then there are going to be some other ones that are going to be a little bit more tailored to folks who have certain types of businesses relative to others. And then, obviously, we've got all of the work that we're doing inside the building. The data sources, I mean, one thing we have is a lot of data. You know, when you have two million transactions a year over a long period of time, like you have plenty of data points to be able to figure out trends. We'll also access data sources outside the company to educate those tools. And as you know, AI is all about itself getting smarter as it learns more and more from future data. So I think we're well positioned on the data front. And we're working with some pretty neat folks, you know, in the AI ecosystem that are going to be able to help us understand what others are doing and what the opportunities are that maybe are ideas from outside the building rather than just the ones that we have inside the building.

Yeah, I think it's a great question, right? And I think it goes back to, you know, this is something that we're not new at, right? We've been doing this since 2016 and going through this digital process. I will tell you that the entrepreneurial model does have challenges, but at the end of the day, there's no better resource than you have than an entrepreneur that's armed with all these technology tools that can adjust, pivot, and really utilize them the right way to service the customer. And again, it goes back to that safety, security, and service. You know, these tools that we're building really, you know, allow those agents to do that. I will say we're seeing, you know, success. We've got different groups. We've got our AI task force that I talked about. We've got, you know, certain instances where we've automated data entry off a bill of ladings where we can shoot that information right back to customers, and we're doing that for agents today. We're doing some intelligent load matching. We're optimizing some of our BCOs for some of our larger BCO accounts. I talked about pricing tools and some of the things that we're doing with pricing tools and adding some of that stuff back in. Tracking, you know, we're investigating some things with agents today over on the tracking side and analytics as well, too. So as we go through this, as AI comes about, we've got resources. resources, we've got beta agents, we've got a process in place to make sure that as we're identifying opportunities, we've got a team of people that can really develop those opportunities, work with vendors, and do it safely, and do it in a way that we can really have a meaningful impact across the organization. So the muscle's there, now we've got this great new opportunity with AI that we can actually use the muscles that we've built as we've gone through this digital transformation strategy and just kind of leverage more tools on top of it. So I think it's really exciting to think about all these different areas that we can really impact our agents and really what they're going to do with those tools. It's going to be a neat thing to see. So we're excited about it. We see it as a big opportunity.

I'll leave you with one final thought. We have an annual agent kickoff. So we bring all the agents together virtually and we talk to them about what the plans are for this year and obviously get some feedback from them. And we asked them in advance from us, and the largest by far topic that they wanted to hear was, what are we doing on the technology and the AI side? So the pull is definitely there, and obviously through all the work that you heard Jim Applegate talk about, you know, we are ready, willing, and able to fulfill that need and have some pretty neat things on the deck for this year.

Thank you for the time and the thoughtful answer.

Thank you.

Thank you. Our next one is from Chris Redery from Wells Fargo. Your line is open.

Hey, good evening, guys. It's Rob on for Chris. We're seeing the BCO productivity kind of achieve levels where historically it's kind of peaked out at in the quarter. Maybe could you talk a little bit more about are all your AI initiatives, can they get us above and beyond where we've historically peaked out from the BCO productivity and thoughts about where that can go?

Yeah, I would give you two thoughts on that one and then let others chime in. And can the AI tools help? If it helps match a BCO to a load more quickly, it has them out of route fewer miles to get the next load, of course it can impact BCO productivity. At the same time, we sell what we say is freedom and opportunity for the BCO, so there will be some. Again, the average number of loads really belies the truth. If you've got people who haul many more loads than the average on the BCO side and some who haul less than that, the mix of the business obviously plays into that as well, given some loads are longer hauled than others. So some loads are not long hauled but require a lot of prep work, and therefore it may take you two or three days to reach destination rather than one or two days. So all of those factors play into that. But Matt, commentary or JT?

Yeah, I would just really echo what you said, Frank. I think the tools that we're building allow for the BCO to become more efficient, being able to do paperwork more rapidly, not having to spend time in a truck stop where they otherwise would have to do scanning and emailing things back and forth. The tools allow for more effective load selection, so providing those tools that allow for them to optimize the load opportunities. But again, to Frank's point, you know, we sell that freedom. We sell, you get to haul what you want, when you want, where you want, and so that freedom and opportunity that is there is available to them, but certainly the tools allow for them to become more efficient in their daily lives.

And hey, Rob, just real quick on historical perspective, it is certainly true that this is the highest VCO utilization year at Landstar in the last seven years, but if you go back a little further, trailing 15-year average on VCO loads per year is actually 92.1, and And we finished a little bit better than that at 92.4. If you look back to 18 and 17, we were at 94 and 96, respectively. And then similar, 14 and 13, we were 95 and 94. So if we get the efficiencies that Miller's talking about, plus a good tailwind and great environment, I think you can get another one, two, or three loads a year out.

That's really helpful. Shifting gears a little bit to the million-dollar agents, that's stepped down a decent amount. in 25 off of flattish revenue and flattish loads. What was the big driver of that, and are there a bunch of agents that are just below the million-dollar mark in 25?

Good question. I'm glad you're watching it. We're watching it just as closely. So, yeah, nothing to be concerned about there. Obviously, you know, some agents grow and some agents don't, depending on the environment and some of the business mix that I was talking about earlier. So nothing to be concerned about, but JT will give you the numbers here.

Yeah, Rob, I'm starting to think you've got my office bugged, but no, we had – all kidding aside, we had 37 agents, Rob, that just fell below a million. They're still with us, so that's a 37-count reduction. Then we had $4 million agents that were acquired during 2025 by other million-dollar agents. Our million-dollar agent turnover rate was just over 1% in 2025, so right in line. It was maybe a little slightly better than long-run history.

Appreciate the perspective.

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

Thank you, Elmer. In closing, while the demand for freight transportation services remains challenging, including an unfavorable impact on dispatch loadings at the end of fiscal January, likely driven by winter storm activity, we believe we have seen some positive signals. We were encouraged by the pricing improvement we experienced from fiscal October to fiscal December, and with a choppy industrial economic backdrop, we were extremely pleased with a a 23% year-over-year increase in our heavy haul service offering. We also believe the potential impact of various federal regulatory developments could provide some positive lift to our BCO business in particular. And regardless of the economic environment, the resiliency of the Landstar variable cost business model continues to generate significant free cash flow. Landstar has always been a cyclical growth company, and we are well positioned to navigate the coming months as we continue to look forward to higher highs when freight demand turns Thank you for joining us this afternoon. We look forward to speaking with you again on our 2026 first in late April.

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