Cuộc họp công bố kết quả kinh doanh Quý 3/2026 của Landstar (LSTR): Giá cước xe tải tăng vọt khi chi phí bồi thường gia tăng

Các điểm nhấn chính

• Landstar System (NASDAQ: LSTR) đã báo cáo doanh thu quý 3 năm 2026 tăng 25% so với cùng kỳ năm trước. Doanh thu từ vận tải đường bộ tăng 29% lên 1,407 tỷ USD, nhờ doanh thu trên mỗi chuyến xe tăng 25% và khối lượng vận chuyển tăng 3%.
• Giá cước vận tải đường bộ tiếp tục tăng so với quý trước. Doanh thu trên mỗi chuyến xe tăng 7,5% so với quý 2, đánh dấu mức tăng từ quý 2 sang quý 3 lớn thứ hai trong 15 năm qua.
• Doanh thu vận tải hàng siêu trường siêu trọng đạt khoảng 185 triệu USD, tăng 25% so với cùng kỳ năm trước. Khối lượng vận tải hàng siêu trường siêu trọng tăng 11%, trong khi doanh thu trên mỗi chuyến xe tăng 13%.
• Chi phí bảo hiểm và bồi thường tăng từ 33,0 triệu USD lên 55,3 triệu USD. Trong quý bao gồm khoảng 13 triệu USD điều chỉnh định phí bảo hiểm bất lợi và 8 triệu USD liên quan đến hai khoản bồi thường đã giải quyết.
• Năng lực BCO đã cải thiện với 165 xe bổ sung ròng trong quý—mức tăng theo quý mạnh nhất kể từ quý 3 năm 2021. Tỷ lệ nghỉ việc của BCO trong 12 tháng gần nhất giảm xuống 26,6% từ 31,4% vào cuối năm tài chính 2025.
• Ban lãnh đạo không đưa ra dự báo chính thức cho quý 4. Khối lượng vận chuyển đường bộ trong tháng 10 cao hơn khoảng 7% so với cùng kỳ năm trước, trong khi doanh thu trên mỗi chuyến xe cao hơn khoảng 29%.

Dữ liệu tài chính cốt lõi

Landstar đã hoàn trả khoảng 175 triệu USD cho các cổ đông trong 39 tuần đầu năm 2026, bao gồm khoảng 110 triệu USD tiền cổ tức và 65 triệu USD mua lại cổ phiếu. Hội đồng quản trị cũng tuyên bố cổ tức thường kỳ 0,44 USD/cổ phiếu, thanh toán vào ngày 8 tháng 12 cho các cổ đông có tên trong danh sách chốt quyền vào ngày 17 tháng 11.

Kết quả kinh doanh và hoạt động

Giá cước là động lực thúc đẩy doanh thu chính. Doanh thu trên mỗi chuyến xe tăng 29% đối với thiết bị xe sàn trần và khoảng 23% đối với thiết bị xe thùng kín. Không bao gồm phụ phí nhiên liệu, doanh thu BCO trên mỗi dặm tăng 19% đối với thiết bị xe sàn trần và 23% đối với thiết bị xe thùng kín.

Vận tải hàng siêu trường siêu trọng tiếp tục là mảng tăng trưởng chính. Ban lãnh đạo nêu rõ nhu cầu đến từ các trung tâm dữ liệu, hàng không vũ trụ và quốc phòng, thiết bị điện và máy móc hạng nặng. Công ty cho biết họ đang ở vị thế thuận lợi để đạt năm kỷ lục thứ ba liên tiếp trong phân khúc dịch vụ này.

Doanh thu phân khúc Vận tải & Logistics tăng 26%, phản ánh mức tăng 22% về doanh thu trên mỗi chuyến xe và mức tăng trưởng sản lượng 3%. Doanh thu hàng tiêu dùng lâu bền tăng 34%, với doanh thu trên mỗi chuyến xe tăng 28% và sản lượng tăng 5%. Khối lượng vận chuyển thiết bị điện tăng 44%, trong khi khối lượng vận chuyển phụ tùng và thiết bị ô tô giảm 4%.

Doanh thu vận tải ngoài đường bộ giảm 13%, tương đương 13 triệu USD, chủ yếu do doanh thu trên mỗi chuyến đường biển giảm 18% và sản lượng vận tải đường biển giảm 9%.

Số lượng xe BCO tăng 91 xe, tương đương 1%, so với cuối quý 3 năm 2025 và tăng gần 2% so với quý trước. Tổng số xe bổ sung mới tăng 11% so với quý trước, trong khi tổng số xe hủy đăng ký giảm 6,1%. Tần suất tai nạn phải báo cáo DOT đã cải thiện xuống 0,57 vụ tai nạn trên mỗi triệu dặm trong 39 tuần đầu năm 2026, so với 0,60 vụ trong cùng kỳ năm trước.

Landstar cũng tiếp tục triển khai các công cụ AI. Quy trình làm việc AI cho đại lý đã hoạt động tại 8 văn phòng đại lý độc lập, trong khi năng lực hỗ trợ doanh nghiệp tích hợp AI đã được giới thiệu trên toàn bộ mạng lưới đại lý rộng lớn hơn. Ban lãnh đạo cho biết các sáng kiến này nhằm cải thiện năng suất, quản lý ngoại lệ, dịch vụ và năng lực tăng trưởng.

Triển vọng từ ban lãnh đạo

Do sự biến động trên thị trường vận tải hàng hóa, địa chính trị, tranh chấp pháp lý và bồi thường, Landstar đã đưa ra nhận định vận hành thay vì dự báo chính thức cho quý 4 năm 2026.

Ban lãnh đạo cho biết yếu tố mùa vụ thông thường trước đại dịch cho thấy mức tăng trưởng khoảng 1% so với quý trước ở cả doanh thu vận tải đường bộ trên mỗi chuyến xe và khối lượng vận chuyển từ quý 3 sang quý 4. Trong lịch sử, biên lợi nhuận đóng góp biến đổi thường giảm từ 20 đến 30 điểm cơ bản trong cùng kỳ.

Kết quả hoạt động tháng 10 mạnh mẽ hơn các cột mốc mùa vụ đó. Khối lượng vận chuyển đường bộ cao hơn khoảng 7% so với tháng 10 năm 2025 tính theo cơ sở điều xe, và doanh thu trên mỗi chuyến xe cao hơn khoảng 29% tính theo cơ sở đã xử lý. Do đó, ban lãnh đạo nhận thấy cơ hội để kết quả quý 4 vượt nhẹ so với yếu tố mùa vụ thông thường.

Công ty cũng cho biết việc thực thi quy định, công suất thắt chặt hơn và việc gia hạn bảo hiểm sau quyết định Montgomery có thể tiếp tục hỗ trợ giá cước giao ngay cho đến năm 2027. Ban lãnh đạo mô tả đợt phục hồi vận tải hiện tại ban đầu do nguồn cung thúc đẩy, với mức tăng trưởng sản lượng từ 1 chữ số ở mức thấp đến trung bình bắt đầu bổ sung yếu tố nguồn cầu.

Rủi ro và các mảng cần theo dõi

Mức độ nghiêm trọng của bảo hiểm và bồi thường là rủi ro lợi nhuận trọng tâm. Trong khoảng 22 triệu USD điều chỉnh bồi thường bất lợi ròng từ năm trước, khoảng 13 triệu USD phản ánh thay đổi dự phòng định phí bảo hiểm và khoảng 8 triệu USD đến từ hai khoản bồi thường đã giải quyết. Các mục này đại diện cho khoảng 0,29 USD và 0,18 USD trên mỗi cổ phiếu tương ứng.

Ban lãnh đạo cho rằng chi phí bồi thường tăng lên là do giới luật sư nguyên đơn hoạt động ráo riết, rủi ro từ các phán quyết bồi thường siêu lớn (nuclear verdicts) và các hệ quả pháp lý của quyết định Montgomery. Công ty từ chối đưa ra dự báo chính xác chi phí bảo hiểm hàng quý, đồng thời lưu ý rằng các khoản bồi thường thường phức tạp và không đồng đều.

Biên lợi nhuận gộp giảm 80 điểm cơ bản xuống 8,4%. Biên lợi nhuận đóng góp biến đổi giảm 10 điểm cơ bản, chủ yếu do mức giá chi trả cho các nhà xe môi giới vận tải đường bộ cao hơn 161 điểm cơ bản so với quý 3 năm 2025, được bù đắp một phần nhờ tỷ trọng doanh thu lớn hơn từ các nhà thầu độc lập BCO.

Các rủi ro khác được thảo luận bao gồm sự không chắc chắn về địa chính trị và kinh tế vĩ mô, gian lận hàng hóa, trách nhiệm pháp lý môi giới, trộm cắp hàng hóa giá trị cao và sự suy yếu ở các mảng nhạy cảm với lãi suất như nhà ở dân dụng và ô tô.

Các điểm nhấn trong phần Hỏi & Đáp với chuyên viên phân tích

• Chi phí bảo hiểm: Ban lãnh đạo cho biết các ước tính tổn thất cao hơn trong năm 2026 sẽ được phản ánh trong tương lai. Công ty nhấn mạnh rằng chi phí bảo hiểm và bồi thường hàng quý vẫn khó dự báo do thời điểm giải quyết và mức độ nghiêm trọng của bồi thường.
• Quyết định Montgomery: Landstar coi sự chuyển dịch pháp lý này là cơ hội tăng trưởng tiềm năng trong dài hạn. Ban lãnh đạo kỳ vọng các nhà môi giới và chủ xe độc lập nhỏ hơn đang đối mặt với chi phí bảo hiểm và pháp lý cao hơn sẽ ngày càng tìm kiếm quy mô, hạ tầng an toàn và sự hỗ trợ bảng cân đối kế toán từ các mạng lưới lớn hơn.
• Tăng trưởng đại lý: Công ty gần đây đã bổ sung các hoạt động môi giới độc lập quy mô khá và nhận thấy tiềm năng đạt khoảng 100 triệu USD doanh thu đại lý tăng thêm nếu việc tuyển dụng trở lại mức mạnh mẽ như lịch sử. Ban lãnh đạo ưu tiên các giao dịch nhỏ hơn, có mục tiêu thay vì thâu tóm một công ty môi giới lớn có thể cạnh tranh với các đại lý hiện tại.
• Tuyển dụng BCO: Quy trình xác minh điều kiện nhanh hơn, tuyển dụng mạnh mẽ hơn và tỷ lệ nghỉ việc thấp hơn đã hỗ trợ tăng trưởng số lượng xe trong quý 3. Ban lãnh đạo dự báo an toàn, năng lực dịch vụ và khả năng tiếp cận nguồn hàng sẽ tiếp tục là những lợi thế tuyển dụng then chốt.
• Chu kỳ vận tải: Ban lãnh đạo cho biết các chu kỳ tăng trưởng vận tải trước đại dịch thường kéo dài từ 24 đến 30 tháng. Công ty tin rằng chu kỳ hiện tại vẫn còn dư địa để tiếp tục nếu đợt phục hồi bắt đầu vào khoảng giữa quý 4 năm 2025.
• Kiểm soát năng lực vận tải: Mức tăng số lượng nhà xe môi giới được chấp thuận là nhờ các nhà xe hiện tại đáp ứng các yêu cầu kiểm tra và định danh nghiêm ngặt hơn—không phải do sự gia tăng đột biến của các đơn vị mới tham gia thị trường. Landstar cho biết các nhà xe được kiểm tra lại mỗi 24 giờ theo các tiêu chuẩn của công ty.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good afternoon, and welcome to Landstar Inc.'s Third Quarter Earnings Release Conference Call. [Operator Instructions]. Today's call is being recorded. If you have any objections, you may disconnect at this time.

Joining us on from Landstar, Mr. Frank Lonegro, President and CEO; Mr. Jim Applegate, Vice President and Chief Strategy and Transformation Officer; Mr. Jim Todd, Vice President and CFO; Mr. Matt Miller, Vice President and Chief Safety and Operations Officer; and Mr. Bill Cleman, Vice President and Chief Commercial Officer. Now I'd like to turn it over to Mr. Jim Todd. Sir, you may begin.

James Todd

Thanks, Elmer. Good afternoon, and welcome to Landstar's 2026 Third Quarter Earnings Conference Call. Before we begin, let me read the following statement. Following the safe harbor statement of 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 statements are, 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 2025 fiscal year and Form 10-Q for the 20,262nd quarter describing 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 statements, and Landstar undertakes no obligation to publicly update or revise any forward-looking statements.

I'll now pass it to our CEO, Frank Lonegro, for his opening remarks.

Frank Lonegro

Thanks, J.T., and good afternoon, everyone. I'd like to thank our BCOs and agents and all the line our employees who support them every day. The capability, resilience and commitment demonstrated day in and day out by our network of independent business owners is truly unique in the freight transportation industry. It was great to spend time with many of our independent owner operators during our annual BCO appreciation days event in Las Vegas in September and with hundreds of our independent agents at 8 different field meetings throughout the country over the past 3 months.

One of the highlights of the BCO event was Landstar's 54th truck giveaway where I had the honor of awarding BCO Dean Web of Pelzer, South Carolina, a new 2027 freight line of Cascadia as part of our delivery to win truck giveaway. Events like this remind us that our success is driven by the independent business owners and employees who make up the Landstar network and the dedication they bring to serving our customers every day. They are exceptional business leaders and key to driving the continued success of Landstar's business model. The freight environment in the 2026 third quarter was characterized by strong year-over-year truck pricing, low single-digit truck truckload volume growth and tight truck capacity, market conditions, which favored the shipper since late 2022 have shifted rather rapidly in favor of the transportation provider.

Notwithstanding the geopolitical uncertainty experienced thus far in 2026, 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 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. Landstar's revenue performance was strong in the 2026 third quarter with overall revenue up 25% year-over-year. Importantly, as noted in our earnings release, our network generated truck revenue of $1.407 billion, an increase of 29% compared to the 2025 third quarter with truck revenue per load 25% above the 2025 third quarter and a number of loads hauled via truck, up 3% over the same period. I continue to be extremely pleased with the performance of Landstar's heavy health service offering. We generated approximately $185 million of heavy haul revenue during the 2026 third quarter, a 25% increase over the 2025 third quarter.

And on the capacity side, our net BCO truck count increased by 165 during the third quarter, the strongest quarterly improvement since the third quarter. While I was very pleased with our revenue, variable contribution and net truck count performance during the 2026 third quarter, the quarter was not without challenges that require our focus and attention, we had a challenging insurance and claims cost quarter with approximately $22 million of net unfavorable adjustments to prior year claim estimates. As noted in the press release, the highly elevated insurance and claim cost quarter is primarily attributable to: one, approximately $13 million or $0.29 per share of unfavorable actuarial adjustments to insurance and claves reserves as compared to the last actual review conducted as of the fourth quarter of 2025.

And two, approximately $8 million or $0.18 per share, resulting from the settlement of two claims during the 2026 third quarter. With respect to the $8 million on two specific cases, the company took a $5 million charge during the third quarter related to the settlement of a truck brokerage plan and an adversarial venue and a $3 million charge due to the settlement of a claim related to an accident that occurred during the fourth quarter of 2025 involving a BCO independent contractor leased on with the subsidiary of the company. It's no secret -- the truck transportation industry has been under attack of late by an incredibly aggressive plaintiff bar, emboldened by the prospect of nuclear verdicts and the Montgomery decision.

We're proud of our DOT accident frequency. We are encouraged by the favorable safety trend over the past 5 years, and we will continue to work diligently on reducing the frequency of incidents. However, the inflationary pressure on claim severity or cost per crash affecting the transportation industry is something the company and the trucking sector are focused on mitigating to the extent possible. We continue to invest through the cycle and 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 or refreshing our fleet of trailing equipment with a particular focus on investing in new van equipment. We are very encouraged by the pace of our AI initiatives and continue to expand our efforts across Landstar. Agent AI workflows are now actively deployed in 8 independent agent offices and AI-powered corporate support capabilities have been deployed across our broader agent network.

At the same time, we continue to build the technology and operating capabilities needed to scale AI safely and responsibly with an emphasis on configuring these solutions to fit the unique needs of individual agent offices, while we remain early in our journey, we are excited about the progress we are making and the potential for AI to improve productivity, enhance service and create additional capacity for growth across our entrepreneurial network. Even with those investments, our balance sheet continues to be 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 first 39 weeks of 2026, the company returned approximately $175 million to shareholders through dividends and share repurchases, and yesterday afternoon, our Board declared a regular dividend of $0.44 per share payable on December 8 to stockholders of record as of the close of business on November 17. Turning to Slide 7 and looking at our network, the scale, systems and support inherent in the Landstar model helped to drive the operating results, excluding insurance and claims costs generated during the 2026 third quarter. J.T. 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 BCOs operating safely every day and the agents and employees who work to reinforce the critical importance of safety, security and service at Landstar. I'm proud to report an accident frequency rate of 0.57 DOT reportable accidents per million miles during the first 39 weeks of 2026 and well below the last available national average DOT reportable frequency rate released by the FMCSA for 2021 and lower than the 0.60 DOT accident frequency we reported during the comparable period of 2025. The company's long-run average is an impressive operating metric. It speaks to the strength, skill, talent and dedication of our BCOs and provide a point of differentiation, our agents are able to highlight in discussions with our freight customers.

We remain committed to driving best-in-class safety. I'd also like to take a moment to recognize Landstar's $457 million agents based on 2025 fiscal year results, a number we would expect to increase in 2026, and Importantly, retention within the 1 million agent network continues to be extremely high. Turning to Slide 8. On a year-over-year basis, BCO truck count increased by 91 or 1% compared to the end of the 2025 third quarter and increased nearly 2% sequentially. As noted above, our net 165 truck count additions during the third quarter was the strongest quarterly improvement since the third quarter of 2021. We were also pleased to see our trailing 12-month BCO truck turnover rate drop from 31.4% as of fiscal year in 2025 to 26.6% at the end of the 2026 third quarter.

This is a positive trend that we hope will continue into the fourth quarter. Along that line, through the first 4 weeks of the 2026 fourth fiscal quarter, the number of trucks provided by BCO independent contractors increased by 22% compared to the end of the 2026 third quarter. I'll now pass the call back to J.T. to walk you through the 2026 third quarter financials in more detail.

James Todd

Thanks, Frank. Turning to Slide 10. As Frank mentioned earlier, overall truck revenue per load increased 25% in the 2026 third quarter compared to 2025 third quarter, primarily attributable to a 29% increase in revenue per load on loads hauled by unsided platform equipment and an approximately 23% increase in revenue per load on loads hauled by van equipment. On a sequential basis, truck revenue per load increased 7.5% in the 2026 third quarter versus the 2026 second quarter that represents the second largest second quarter to third quarter sequential increase in truck revenue per load over the past 15 years, second only to the 2020 third quarter when the economy began its rapid recovery from the depths of the COVID-19 pandemic.

In comparison to overall truck revenue per load, we consider revenue per mile on loads hauled by BCO truck a pure reflection of market pricing as it excludes fuel surcharges billed to customers that are paid 100% to the BCO in 2026 third quarter revenue per mile and unsided platform equipment hauled by BCOs was 19% above the 2025 third quarter, and revenue per mile and van equipment hauled by BCOs was 23% above the 2025 third quarter. Delving deeper in the seasonal trends, revenue per mile and those hauled by BCOs on unsided platform equipment increased 3% from June to July and increased 6% from July to August, but decreased 3% from August to September. The June to July increase and the August to September decline both underperformed prepandemic seasonal trends, while the July to August increase outperformed prepandemic historical trends.

Turning to van freight revenue per mile and band equipment all by BCOs increased 7% from June to July, decreased 2% from July to August and increased slightly from August to September. The June to July increase significantly outpaced pre-pandemic historical trends, the July to August decrease was slightly better than the pre-pandemic historical trend while the August to September slight increase was slightly softer than pre-pandemic historical trends, it should be noted that month-to-month seasonal trends on unsided platform equipment are generally more volatile compared to that event 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 particularly pleased with the sustained strong performance of our heavy haul service offering heavy oil revenue was up 25% year-over-year in the 2026 third quarter. Heavy haul loadings were up 11% year-over-year, and revenue per heavy haul load increased 13% year-over-year. Non-truck transportation service revenue in the 20,263rd quarter was 13% or $13 million below the 20,253rd quarter. The decrease in non-truck transportation revenue was primarily due to an 18% decrease in ocean revenue per load and a 9% decrease in ocean volume. Turning to Slide 11. We've provided revenue share by commodity and year-over-year change in revenue by commodity. Transportation & Logistics segment revenue was up 26% year-over-year on a 22% increase in revenue per load and a 3% increase in volume compared to the 2025 third quarter. Within our largest commodity category, consumer durables revenue increased 34% year-over-year on a 28% increase in revenue per load and a 5% increase in volume.

Aggregate revenue across our top 5 commodity categories, which collectively make up about 70% of our transportation revenue increased approximately 28% compared to the 2025 third 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 third quarter to the 2026 third quarter, total loadings of machinery increased 1%, and Automotive equipment and parts decreased 4%. Building Products increased 1% and electrical loadings increased 44% even with the ups and downs in various customer categories, our business remains highly diversified with approximately 20,000 customers, none of which contributed over 8% of our revenue in the 2026 39-week period.

Turning to Slide 12 and the 2026 third quarter gross profit was $126.5 million compared to gross profit of $111.1 million in the 20,253rd quarter. Gross profit margin was 8.4% of revenue in the 20,263rd quarter compared to gross profit margin of 9.2% in the corresponding period of 2025. In 2026 third quarter, variable contribution was $212.1 million compared to $170.2 million in the 2025 third quarter, variable contribution margin was 14% of revenue in the 2016 3rd quarter compared to 14.1% in the same period last year. The 10 basis point decrease in variable contribution margin compared to the 2025 period was primarily due to decrease variable contribution margin on revenue generated by truck brokerage carriers as the rate paid to truck brokerage carriers was 161 basis points higher than the rate paid in 2025 third quarter mostly offset by an increase in the percentage of revenue generated from BCO independent contractors.

Turning to Slide 13. Operating income increased as a percentage of gross profit, primarily due to the impact of the noncash impairment charges during the 2025 period. Operating income increased as a percentage of variable contribution, similarly due to the impact of the noncash impairment charges during the 2025 period and a strong variable contribution performance during the 2026 period partially offset by the increase in insurance and claims costs during the 2026 period. Other operating costs were $21.2 million in the 2026 third quarter compared to $15.6 million in 2025. This increase was primarily due to the impact of the favorable resolution of a value-added sales tax matter during the 2025 period and increased trailing equipment maintenance and rental costs during the 2026 period. Insurance and claims costs were $55.3 million in the 20,263rd quarter compared to $33 million in 2025 the increase in insurance and claims costs as compared to 2025 was primarily attributable to: one, approximately $13 million of adverse actuarial adjustments to reserves as compared to the last actuarial review conducted as of year-end 2025 and two, approximately $8 million of prior year development attributable to settlements of two accidents during the 2026 period, during the 2026 and 2025 third quarter insurance and claims costs included $21.9 million and $9.2 million of net unfavorable adjustment to prior year claim estimates, respectively.

Selling, general and administrative costs were $62.4 million in the 263rd quarter compared to $57 million in the 2025 third quarter. The increase in selling, general, administrative costs was primarily attributable to an increased provision for incentive compensation and increased stock-based compensation, partially offset by a decreased provision for customer bad debt. The provision for incentive compensation was $6.9 million during the 2026 third quarter compared to $1 million during the 2025 third quarter. Depreciation and amortization was $9.9 million in the 2026 third quarter compared to $11.5 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 26.3% in the 2026 third quarter compared to an effective income tax rate of 25.8% in the 2025 third quarter.

The increase in the effective income tax rate from the 2025 third quarter, the 2026 third quarter was mostly due to a higher provision for state income taxes. Turning to Slide 14. Looking at our balance sheet. We ended the quarter with cash and short-term investments of $351 million. Cash flow from operations for the 2026 39-week period was approximately $99 million and cash capital expenditures were approximately $12 million. The company continues to return significant amounts of capital back to stockholders with approximately $110 million of dividends paid and approximately $65 million in share repurchases during the 2026 39-week period. The strength of our balance sheet is a testament to the cash generating capabilities of the Landstar model.

Back to you, Frank.

Frank Lonegro

Thanks, J.T. Given the highly fluid freight transportation backdrop and a dynamic geopolitical and macroeconomic environment, coupled with a highly volatile litigation and claiming environment, the company will be providing fourth quarter financial and operational commentary rather than formal guidance. Turning to Slide 16 and looking at historical seasonality from Q3 to Q4, and prepandemic patterns would normally be expected to yield a sequential increase of approximately 1% in truck revenue per load and an approximately 1% increase in the number of loads hauled via truck, resulting in a slightly higher top line sequentially.

Please also note that historically, the company has experienced a 20 to 30 basis point compression in variable contribution margin from the third quarter to the fourth quarter. The number of loads all via truck in fiscal October 2026 was approximately 7% above October 2025 on a dispatch basis, and revenue per load in October was approximately 29% above October 2025 on a process basis. As a result, we view anticipated truck revenue per load even off of an elevated base and the number of loads hauled via truck in October a slightly outperforming normal seasonality. We're excited to build upon the positive momentum generated during the first 9 months of 2026 and are energized by the opportunity to support the best network of independent business owners in the transportation space, especially in an environment that after nearly 4 years appears to have turned in our favor.

With that, operator, we'd like to open the line for questions.

Operator

[Operator Instructions]. We have a question on the line from Jonathan Chappell from Evercore.

Phần hỏi đáp

Jonathan Chappell

Thank you Jim, can you help us understand the two different pieces of this insurance increase? It feels like that $8 million completely onetime? Don't extrapolate that going forward. But this $13 million of adverse actuarial adjustments? And is there a reason you didn't kind of strip it out in the non-GAAP table. Is that something that's going to be incorporated in that line item going forward? Just trying to figure out how much of this $0.47 in total is completely onetime in nature and how much of it may be repeatable as we try to model that line item going forward?

James Todd

Yes. No, John, it's a great question. I'll take a shot at it. So as you are probably well aware, Lascar has a long-standing policy of engaging a third-party actuary review essentially the entire population of planned reserves twice a year, both in the third quarter balance sheet date and the fourth quarter balance sheet date. As you're probably also aware, claim cost severity has been going up at a decent clip that we felt like for a period of years that we were sufficient, i.e., our incurred but not reported reserves were up 27% gross dollars from fourth quarter '22 to the fourth quarter '25, and that's on a declining truck count.

If you look at those reserves on a per truck basis, they had increased 73% and over a 36-month period. And clearly, we had to true those up a little bit more. So we started with insurance expense guidance back in 2016 at 3.2% of BCO revenue, and I think we concluded about 7% of BCO revenue. So can see the inflationary pressure that hit us along with the industry. If you look at it, John, on a trailing 4-quarter basis, I think that would point you to, and that includes kind of an elevated fourth quarter of '25, where we had two BCO accidents significant accidents and then this third quarter '26. So if you look at kind of the trailing 4 quarter average, you're at about $46 million a quarter, a trailing 6-quarter average is about $41 million, $42 million a quarter. The actuary adjustments, we certainly had to increase our loss burn rates for 2026.

And to your good point, want to continue to book to those higher loss estimates prospectively. On the settlements, you may recall, we had adjusted 3 truck brokerage claims in the second quarter. Two of those claims were in jurisdictions where we previously had a federal preemption that, of course, was impacted by the Montgomery decision. One of those -- two of those three claims were settled at amounts that were inclusive of the reserves established in the second quarter, we had to book $5 million additional dollars to resolve that third truck brokerage plan. The $3 million BCO accident, you may recall, we recorded an $11 million reserve attributable to two accidents significant accident BCO access in the fourth quarter of 25%. Our best guess now with 9 more months of experience is $14 million for those 2 crashes.

Jonathan Chappell

I'm going to burn my follow-up here, just to make it perfectly clear and not change topic. So you would had $47 million in the insurance and claims line if we strip out that $5 million in the 3-month completely understand, again, not repeatable. But you mentioned that 41% to 42% kind of 6 quarter run rate. Is that what you're saying we should be looking going forward? Or because of this new actuarial adjustment, which looks like it would have been 47% on a clean basis, we should now be looking at something like in a $46 million to $48 million quarterly basis going forward. SP999 I get your question.

James Todd

Piling through the phone body. As you know, we stopped giving insurance and claims. That is the most challenging, this is a highly complex environment. to estimate insurance and claim reserves. So we no longer give the percentage of BCO revenue. And to even give the guidance over any 90-day period, it is very lumpy. In a non-sophisticated way, John, I would tell you, $35 million a quarter feels probably too light these days. $5 million a quarter probably feels too heavy, and you got a bigger brand than I do. I think you'll probably land closer to a reasonable spot.

Operator

Next one is from Chris Wetherbee with Wells Fargo.

Christian Wetherbee

Maybe picking up on the line of questioning and just maybe zooming out of the thinking big picture. Frank, as you think about Montgomery and the dynamics there, maybe bringing agents to the business, maybe attracting more BCOs or accelerating that process here. Versus what we're seeing with the insurance, I guess, I think we're still trying to make sure we understand how Landstar fits into this. Is this sort of a net positive in your view? Do you think it's a net negative? I mean I guess, how do you think about sort of the earnings opportunity for the company post Montgomery with all of these moving parts?

Frank Lonegro

Yes. Look, I think, Chris, the opportunity set for us kind of uniquely given the agent model is a positive. We signed up [indiscernible] and into the out in the Midwest that joined us about a $20 million independent brokerage that saw us as a great spot to plant the flag and we've got traction with some others. They haven't crossed the finish line yet, but we've got some traction with others who, for lots of reasons. Not the least of which is the land value proposition, but also then even emboldened by the Montgomery world we're seeing lots of really good conversations where folks are really looking for a safe haven.

They're looking for a company that does things really, really well that prides itself in safety, security and service and doing the hard things well. So I feel like we've got the upper hand in that one. I still think it takes a good year or 2 for the impact of Montgomery to hit sort of the entirety of the brokerage and the owner-operator world because of renewal cycles in the insurance world. I think that what's going to happen is as people understand that this has a real impact on their bottom line and then they go to market on renewal and they end up with a multiple of their insurance costs going forward.

And then Lord forbid they get named in the lawsuit and have to pay its earning fees and ultimately have to settle or some of the verdict, I think people are going to get religion pretty quickly and realize that being with a scale player is a really important phenomenon.

Christian Wetherbee

Okay. Okay. That's really helpful. And I guess maybe just picking up on the agent comment. I think, Jim, in the past, you've given us some context of new agent acquisitions to the business on an annual basis. I think you've been sort of at a relatively low water mark the last couple of years, but have been significantly higher, maybe north of $100 million. Can you just give us a sense of maybe what the opportunity could be from an agent acquisition standpoint?

James Todd

Yes. Chris, I'd be happy to. I think Landstar is all-time high. New agent revenue year was something like $180 million, and we've had a couple of years as high as $140 million, $160 in. We've been in kind of that 30 to 50 2023, 2024, 2025 freight recession periods to Frank's point, when you get $18 million at one bite, we had another decent size one that came across in the last week or so and two more of what I would call pretty good size that I think are in the green zone, call it 10-yard line 15-yard line. So certainly, if we can just tork back kind of strong years, there's probably $100 million tailwind. And I would agree with Frank. I think the setup for Landstar right now is very nice.

Operator

Our next one is from Jason Seidl with TD Cowen.

Jason Seidl

Frank, team. Appreciate you guys taking the time today. wanted to look at the BCO thing and maybe going away from the agents, what kind of opportunity do you see to grow the BCO count in this sort of changing environment as a lot of shippers may be looking to go to more well-established companies. And you might have some trucking companies out there that don't have great overall ratings, but some of the drivers do and maybe they look to go to other places. Maybe you can talk about some of the opportunities going forward.

Frank Lonegro

Yes. I'll get started on and Jason, good to hear from you and let Matt Miller chime in as well. We've been real excited about what we've seen here the last 4 or 5 months on the BCO count. It's a combination of factors, a lot of the great work that Matt and his team are doing on the recruiting and the orientation side and really reducing the time to qualify. And then leveraging honestly, the BCO -- existing BCO community and the existing agent community is kind of lines in the water, right? You catch more cushion when you have more lines in the water. So we've leveraged that as well.

I think what we're going to see as an industry is customers are going to prefer scale. We've already seen some impact -- positive impact from that. That then impacts the ability for smaller brokers to generate loans and revenue, which then impacts generally speaking, smaller owner operators who are the folks that they go to, to handle the freight. So I think we're going to see it work from the bottom up and a lot of the work that Matt's doing is already leveraging that. We've got a really good carrier base that we're tapping into as well. So going let Matt pick that up.

Matthew Miller

Sure. Thanks, Frank, and thanks for the question. I think the historical context is we've been leaning into safety, security and service for quite some time, and that sets us up very well for an environment like we're seeing that said you look at the current quarter, we saw an acceleration in the rate of gross trucks being leased to the company. gross truck adds were up 11% sequentially in the quarter. That's pretty significant. And during the quarter, gross truck cancels were down 6.1% sequentially.

And that third quarter marks our 11th consecutive quarter of turnover improvement where the high watermark during the downturn was in Q4 of '23 at 41%. We're sitting beneath our long-term average of 26.6%. What I would say that tells you is that once those folks can arrive in the door, which there are hurdles that it takes to get in the door, we're very selective on who we let in. They tend to flourish. They tend to be successful. We see that on the utilization where they're hauling where we have a 6.7% more loads in the quarter year-over-year. Also we look at year-to-date BCO 1099. We're pushing on challenging the record that we've seen in the history of the company for BCO-1099, which was recorded in 2022.

So I think, to your -- to the point of your question, a lot of success is being seen -- that tends to be spread both by word of mouth and the growth that we'll see. I anticipate we'll continue to see growth. The fourth quarter and the first quarter historically have been our challenging quarters. just seasonality there, but second and third tend to be our stronger quarters.

Operator

Our next one is from Scott Group with Wolfe Research.

Scott Group

So I want to ask about the revenue per load trends. July was up -- the full third quarter was up 25%. So it slowed a little bit, and now we're back to plus 29%. So is that reacceleration? Is that just the impact of fuel? Or are you seeing underlying rates start to reaccelerate? And I guess, ultimately, what I'm trying to figure out, like this 29% in October, like if we just hold that for -- that's a lot better than like the normal seasonality of up slightly Q3 to Q4. Like what do you think is a better way to think about Q4? Like that 29% or up slightly sequentially, which would be less than that $29 million?

James Todd

Yes. Scott. Great question. 7.5% sequentially in the third quarter is about 5x what we typically do. To your point, some of it was front-loaded, but that strength continued into August. So August for Landstar, this was only the third time in 16 years that August rates at Landstar were higher than July. Now we did see rates back up a little bit, Scott, in September, to your point, but that's reaccelerated. So as I look at October rates, historically, we typically get about 40 basis points of lift September into October. And as we sit here today, we're trending like 180 basis points of lift. So if you get 100 basis points sequentially normally, and I just gave you the outperformance 4 weeks of the 13-week fourth quarter, I think there's opportunity to outperform the benchmark.

Finally, on the last point, I would tell you, if you just look at BCO pricing sequentially, which again is ex the impact of fuel surcharge, BCO revenue per load was up 10.9% sequentially. So there is strong, strong momentum in the business on the pricing side, whether you look at fuel or whether you ex fuel.

Scott Group

And how is that BCO like Rev promote look in October relative to the 29% for the full business?

James Todd

Scott, it's a great question. It's day 2 would close, I don't have that number in front of me.

Scott Group

Okay. Okay. And then just one other on capacity. So if I look like third-party approved truck approved and active brokerage carriers like peaked at around 70,000 troughs around 35,000. It's now like starting to head back up towards 40,000. So I know like there's always talk about like regulatory capacity leaving the market. But are you actually starting to see with higher rates capacity start coming back to the market?

Frank Lonegro

Scott, it's Frank. I'll take a crack at the first level answer on that one and turn it over to Matt here in a second. I don't think that the change in our capacity getting north again has anything to do with new entrants into the market. I think what's happening is the folks who have been in the market for a while are realizing there's a new level of rigor, not just at Landstar but in the industry, and they ultimately have to make some changes in the way that they do business in order to be able to haul freight for the more sophisticated brokers and carriers. So I think it's largely to do with that.

Matt can get into some history. I mean we obviously got a little bit of religion on this one earlier on and taking the carrier count down because of some of the fraud in play. And I think Matt's done a really good job of the betting procedures and some of the new technology and tools and data and things like that. So I feel good about where we are from a capacity perspective. Let me turn it over to Matt.

Matthew Miller

Sure. Thanks for the question. Thanks, Frank. Back in Q2 of '22, we had roughly 100,000 approved carriers in the network. And I think we were really on the front end of bringing more rigor to those carrier betting standards. That was really in response to fraud, but has paid benefits across the board for us, that was taken down from 22% in the second quarter down to the second quarter in we were at 64,000. So a lot of culling of the herd and the additional rigor that we put on, some of those carriers were reluctant to meet the standards that we had placed back then.

What I think you're seeing in the third quarter is others have embraced a similar approach. And as a result, the carriers are beginning to understand, there are certain steps that are going to need to go through in order to get qualified with folks as an approved carrier. That's what I think you're seeing the increase from Q2 to Q3, roughly 3,300 or 5% is relating to.

Frank Lonegro

One other thing I think it's worthwhile, Matt, is just to let me know that we don't take newly-minted as over operated. I mean our standards are higher than that.

Matthew Miller

Absolutely. Our standards are -- there's a certain length of time. We tend not to market exactly what that length of time is, but there's a certain length of time you have to have an MC number in order to get approved, and there's dozens of other requirements that we have in place. A lot of the things that I'm saying those carriers originally weren't necessarily receptive to going through related to identity oriented things where there's fraud being perpetuated in the industry, where other folks are taking possession of their operating authority unbeknown to the underlying carrier. So there's a lot of things on the carrier betting side that are now in place that are going to mitigate all that and that prevented some folks from being willing to take those additional identity-related steps that they are now willing to do.

Frank Lonegro

And a lot of good work by FMCSA at for sure.

Operator

Our next one is from Tom Wadewitz with UBS.

Thomas Wadewitz

I wanted to ask about just the different customer segments and where you're kind of most optimistic on demand remaining strong or even getting stronger and where you see maybe a potential for softness. I guess that could be kind of like dry van versus flatbed or kind of retail versus industrial, but any kind of thoughts on like within the customer mix, how do things feel.

James Todd

Tom, I'm happy to lead off, and then I'll let our sales team chime in. But just in terms of the quarter, heavy haul, I think we're poised to put up our third back-to-back-to-back record year in the heavy haul vertical. If you look into that vertical, we had 20 customers individually grow volumes with us by at least 50 loads heavy haul loads year-over-year. largest one was a data center. There's some aerospace and defense. Electrical, you heard us talk about in the commodities big heavy machinery. So that's really a lot of momentum. As we sit here kind of late October when we think about peak season, we've seen some good demand out of the gate, the first 4 weeks. And really, we've not had a traditional peak season in several years. demand from those customers is performing rather nicely. And then other transportation companies in a tight environment, they bounce back and come back to Landstar as well. So those are some at a high level that we see clients.

Frank Lonegro

I'll let Bill talk a little bit about the data center ecosystem between the hyperscalers and the AC providers in the heavy equipment and generator folks. But before he jumps into that, the other thing that I think has been really helpful is to see the consumer durables element of our business, which is, call it, of the business. When that does well, Landstar generally does well along with it. So I think that's an important thing. And then you heard us frag about heavy haul. We'll continue to do a good job there. But maybe, Bill, a little bit on the data center side.

Unknown Executive

Yes. Sure. Well, Tom, I mean I'll just add that we're really seeing strength across almost all of our verticals, including the 3PL brokerage has really peaked up. The data center business continues to be strong and shows a lot of legs. We're seeing a little bit of softness in volumes on the automotive side and some of the government business. But building materials, energy and power, industrial machinery, consumer goods, the consumer durables just Frank just referred to is all good. I mean the bulk of our verticals are up, and we expect them to continue to be up here into the fourth quarter.

Frank Lonegro

I think on the interest rate sensitive side of things, I mean, the residential housing and the automotive, I mean, you're obviously going to going to see some softness there relative to where interest rates are.

Thomas Wadewitz

Okay. Yes, I appreciate that. And then just -- I mean, I think you have a great pulse on the market and see it from a number of different perspectives. What's your view on just kind of how spot market evolves, would you think that November, December, kind of holiday peak, you get to higher rates than you were at in July for I guess I'm thinking dry van? And then you think there's more momentum in the pipeline for spot rates to be higher in '27? I guess kind of different views on how much of regulatory initiatives have already played out. And obviously, the markets can be -- freight markets can be tricky, but what's your best kind of take on where things go from here in spot rates?

Frank Lonegro

Yes. I mean I think J.T. gave some color to Scott, just a few minutes ago on fourth quarter and where it started and what normal sequentiality would do on a month-over-month-over-month basis. I mean the nice thing is we actually are seeing a bit of a peak. We can read that through the parcel volumes. We can read it through the 3PL volume. So it's nice to actually see that after a couple of years of not really seeing any peak. The length of that peak, as you know, from our old railroad discussions can go from several weeks to several months, just depending on when it started and when the new year is and all of those factors, how long is there between Thanksgiving and Christmas type things.

So obviously, you've got a pretty good read on that one. So I think that's an important thing to understand. When you look at the regulatory impacts, if we assume that the ELP and the nondomiciled CDL and all the work that's being done on the mills as well as the ELDs and things like that. Like I don't think that's anywhere near completed. I think there's still a ton of enforcement out there and then you have the Montgomery overtones as people begin to renew policies on the insurance side. So I feel like there's support for the spot rates as we get into the fourth quarter and into next year.

Operator

Next one is from Jordan Alliger with Goldman Sachs.

Paul Stoddard

This is Paul Stoddard on for Jordan. I guess as we start to think about where we are in the cycle, we're talking about spot rates potentially moving higher into the fourth quarter and into 2027. I guess, where would we tend to think we are in the cycle? Are we starting to see more of that demand side come through do you push those spot rates higher? Or are we still more on the supply side?

Frank Lonegro

Yes. I mean I think it's been supply side for most of the year, just given the regulatory items that I just talked about, Paul. At the same time, when you look at volumes in Q3. And in October, you begin to see things with kind of low single digits to mid-single digits. We'll see what the rest of the quarter looks like then you begin to ship a narrative a little bit more to the demand side, which is something that certainly welcome to all of us who are in the freight oiling business. We want the volume. It's nice to get both volume and rate. You can look down the P&L, and if you skip one line known as insurance and claims, you'd have a lot of good news to write home about from the Landstar P&L in the third quarter.

Paul Stoddard

That's helpful. And then I guess as a follow-up, I guess my question is, so as we start to see a little bit of demand coming in, when we start to see that bounce off the bottom, and we start to see load and demand come in greater than seasonality. How many quarters do you think we could see where there is that greater quarter-over-quarter low growth and normal seasonality? How long could that cycle last?

James Todd

Yes, Paul, I'm happy to talk about kind of prepandemic patterns. What I would tell you is demand in the third quarter hugged normal seasonality pretty tight, right? We're typically down 150. I think we were down 190 or something. If you look back into the second quarter, I think we slightly beat normal seasonality in the second quarter. So you got about 6 months now where it's been pretty tight. Pre-pandemic typical up cycles we're in the range of 24 to 30 months. So if you're a believer that the cycle started halfway through the fourth quarter at 25%, you could do the math, we should have still a good way to run.

Operator

Next one is from Brian Ossenbeck with JPMorgan.

Brian Ossenbeck

So I guess I had one follow-up on all the insurance. The $8 million, I know these are accident a while ago, but given the environment that we're in right now, isn't it reasonable to believe these are more of a cost of doing business? And I guess, Frank, you mentioned doing things to mitigate the costs. Is there anything that you can -- it's not just Landstar issue, of course, is the industry-wide. Is there anything you can listen on how that effort is going, if there's anything in D.C. or anywhere else that the industry is particularly interested in that might be able to provide some relief here?

Frank Lonegro

Well, there's certainly the advocacy, both at the regulatory side as well as the congressional side, and we'll continue to work that both federally and on a state level. And obviously, you can see the positions that IATA are taking on these, and you should assume that we're both aligned with those and helping with those. When you look at things from a more practical level basis what are within our control. It's really on the incident side. We've got to do everything we possibly can to drive the frequency of incidents down.

And so Matt and his team and all of us, honestly, that are helping with the BCO community and the third-party carriers. We got to do ever better on safety, security and service. That's the type of business that we're in the trend lines that I would point to in terms of the things that we do and report on the most significant being the DOT frequency rate that we talked about earlier today, we continue to drive that down. And that's really good news when we have a case that we think we should settle, then we're going to look for opportunities to settle it. If it's a case that we think we're going to fight them we're going to fight it because we can't shape the law otherwise unless we take something to core.

Now we may fight on and miss and lose, and we'll take it on the chin, and we may fight some cases and win and set up good law for both ourselves and for the industry going forward. So it's all of those things wrapped up into one. We've been toying around with how can AI help and things like that, and we'll continue to look for unique ways to get ever better on safety, security and service.

Brian Ossenbeck

Understood. And then I guess relatedly, it's not quite 100% tied to your business given just unique model we have, but any thoughts on the green versus Penske case, I mean related to double brokering essentially, not really sure if there's a way for anybody to prevent that from happening, especially in this case, there was really no knowledge of it, my understanding. But certainly, it seems like there's challenges to see where the liability sits. So I don't know if you guys have any specific views on that, but just wondering where that one sits from your perspective.

Frank Lonegro

We look at all of the market cases in the space, Brian, as you would expect that we would, the same ones you're watching. So we'll watch it go through the process. Every case is different. Every fact and circumstance is different, who knew what, when, who did what and who didn't do what they were supposed to do. Those are all going to be facts and circumstances on a case-by-case basis, but that's a case that we clearly have our eyes on. We have our eyes on the $604 million plus interest Robinson case, and then there are others out there that we're watching both in terms of verdicts and settlements and wins for that matter. There's been quite a few wins as well in the industry. So we certainly tear those on. And like I said earlier, we're going to choose the cases that we think are the right ones for us to fight, and we're going to resolve the ones as appropriately as we can and the ones that we think that we ought to resolve.

Operator

Our next question is from Brandon Oglenski with Barclays.

Brandon Oglenski

Frank, maybe we can come back to this idea that insurance rates are actually going to increase for some of your competitors because I think as we were talking about 3 months ago, you guys had just renewed your coverage, right? And I think for not a lot of increase in your underlying rates. So how do you compare those two there?

Frank Lonegro

Yes. I think we were both lucky and good, to be honest with you, Brandon. Our timing was somewhat impeccable relative to the issuance of the Montgomery opinion. We had already been in deep negotiations with the brokers and the carriers in the insurance world and had the majority of the tower locked down in advance of the Montgomery decision. At the same time, the underwriters knew that Montgomery was out there and could be decided one way or the other, but I felt like our timing was really good. And our loss history was good. I mean that's one of the things that the underwriters always look at is what's our experience been with you over 1 year, 3 year, 5 year, 10 year, et cetera. And so we go through all of that.

They look at our truck count, obviously. They also look at our safety indices. And when we're doing what we can do to drive safety in the appropriate direction, we're making investments in the trailers to reduce the number of rear-end collisions and things like that, like they see what we're doing. They also see that we're a strong company with a strong track record and a strong balance sheet. And those are all things that the underwriters take into consideration when they left the policy. What I'm saying is not everybody is going to have those good facts and circumstances when they go to renew -- and those are the folks that are going to get really significant increases. And then they have to look at their P&L and say, is this a business that I can continue to be in? Or do I want to come underneath of an umbrella like Landstar and be a safe driver for them or be a great agent for them.

Brandon Oglenski

I appreciate that. And I think you guys have brought up AI a number of times, maybe in regard both safety initiatives and efficiency. But how is that playing a part here going forward?

Frank Lonegro

Yes. I think in the safety side and security for that matter, there are some working inside the company to try to make sure that we can predict things or early detect things that are on that safety and security side. I think the big thing that we're doing in the Asian office really has to do with almost sales productivity. If you want to look at it that way, it's how do you take some of the back office burden off of them so that they can deploy their resources more over the sales. I don't know Jim Applegate can talk a little bit more about that.

James Applegate

Yes. As it relates to safety, that's also going to have an impact over there as well, too. I think any time that you put in technology and you get standard business processes, standard practices, it just tightens up how you execute and then how we can execute across our network. So I think that's inevitably going to have an impact as it relates to really kind of driving our agents in the right direction as far as how we want them to behave and how we want them to really kind of manage different situations. As far as our progress over on the AI side, we're making quite a bit of progress.

Over the summer, we grab a partner that's very well known in the space and is really kind of helping us implement AI agent through several workflows within the agent offices. So we're able to deploy it, we're able to configure it specific to those agents and how they want to run their business and how they want to manage their customers. And we're seeing quite good results from an efficiency standpoint, their ability to kind of process calls to get out in front of exceptions, we're really liking what we're seeing as far as how we're deploying that, and we continue to gain steam, and we see this as a huge area, not only for growth, but to your point, how can we strengthen the network as well too as far as how they execute.

Operator

Next one is from Ravi Shanker with Morgan Stanley.

Unknown Analyst

This is Madison Patrick on for Ravi Shanker. We're just wondering how sympathetic the customers are to insurance headwinds in this inflationary environment and wondering how willing they are to raise rates or is there a risk that they moved to kind of asset-based companies in an environment like this?

Frank Lonegro

Madison, I've never thought that a customer was sympathetic to rate increases regardless of the season. But look, when the market has moved up because of secular changes in the market, like fuel is an example or insurance is an example. I mean those have a tendency to raise the market price, the value in the market for those services. And so I think that the market is showing all of us that the costs have increased the supply has come down and therefore, economics 101 says that rates are going to go up. So I feel good about us relative to the competition. We also play in a little bit of a different space in the market than your typical broker asset-based carrier.

Nothing has really changed in the asset-based carrier side. They have thin margins. They have lots of reinvestments. They have low ROIC. You know all this. But we've got to do as good a job as we can as a carrier to be the safest that's out there run the freight securely, run the freight with a high level of service. And then on the brokerage side of our business, we have to do always an excellent job every single day in vetting the carriers, and we've let them every 24 hours, they rerun through the algorithm to make sure that they're still up to our standards. That's probably the largest way, the most important way we can make sure that we don't have broker liability claims is we vet the carriers, and we execute at 100% efficiency every single day in the freight that we tender to the propane carriers.

Unknown Analyst

Got it. And then if I could ask a follow-up. Just wondering on any prospective pivots on end markets or customers that kind of avoid the more maybe higher risk customers if you guys have been seeing any kind of patterns in that?

Frank Lonegro

I'll let Matt Miller talk a little bit about fraud and what we do on that side of things. But there certainly are commodities that we pay much more attention to that are have a higher prevalence of fraud. And every once in a while, we may exclude something and put it on what we call our prohibited list. But usually, we find good ways to make sure that we run that freight securely, and we do it with kind of extra insurance, if you want to look at it that way. But let me let Matt talk about it.

Matthew Miller

Sure. Sure. I appreciate the question. And I think if you went back just a handful of years, the bad actors were less sophisticated and primarily stealing anything that they could possibly steal primarily through fraud, but also traditional theft existed. So it really didn't matter what was being hauled. They were looking to circumvent that load and take possession of that load and do with it what they will. Today, we're seeing much more sophisticated players that are targeting those high-value commodities. And of course, we have a robust risk assessment process where anything that's in excess of a certain value goes through a litany of criteria that we evaluate for additional insurance measures or additional parking requirements with security and things of that nature. So I would say, today, it's much more on that high-value end of the spectrum in terms of commodity value versus just a handful of years back, it was just about anything that was being targeted.

Operator

Next one is from Bascome Majors with Stephens.

Bascome Majors

There's been a couple of questions on the agent side of the business and your responses have been continuously constructive on what's happening in brokerage and small brokers and inflation being a growth opportunity for your business long term. But if we look short term, the agent count was actually down slightly sequentially. Can you talk a little bit or if there's any visibility you have with exit interviews or discussions on whether that was a blip or if there is some pattern to the short-term decrease before we get to the scenario where you should be able to grow the system on the sales side.

James Todd

This is J.T. I'm not aware of a short-term blip in agent count. We tend to focus more on the 1 million agent count. We had $457 million agents. If you go back 15 years or so, we tend to retain those folks at a 97-plus percent retention rate. I think we were a little better than 97% last year. And -- we are on track to grow the number of million-dollar agents, 2026 through 2025. But happy to connect off-line if you're seeing something else.

Bascome Majors

Yes, I was just looking at the total agent count in the slide deck, but you've answered the question there.

Operator

Our next one is from Bruce Chan with Stifel.

J. Bruce Chan

I just want to come back to some of your comments around the supply side. You mentioned Frank the Montgomery overtones I'd imagine that could be fairly material shippers and brokers start to maybe take a harder look at the selection criteria. I think several quarters ago, you talked about something around 15% impact to the OTR market from SP33774137 Some of the regulatory initiatives. Any idea what that maybe looks like for Montgomery. I know it's still early, but just trying to get a ballpark sense of what the magnitude is here.

Frank Lonegro

Yes, that's a really difficult one to answer, to be honest with you, Bruce. More than 0. I know that doesn't really help you. But my sense is this will take another year or 2 to play out because of what will happen in the insurance side of things. If you've been a broker in a an F4A jurisdiction, like you didn't really have any liability. I mean you -- not that you could operate with IMPUNITY, but it was a really difficult hill to climb for the plaintiff lawyers to sue and be successful at doing a broker. I think now a lot more lawsuits probably will be filed. I

don't have any facts to tell you that they've actually gone up in number yet, but you got to think that, that will happen, which means that every broker is going to have to defend itself, and that's just dollars going out that are not in the P&L today. And then when you get sued, then you've got to disclose that to your insurance company or if you don't have insurance, then it's just coming out of your pocket. So I just -- I think there's going to be a little bit of a snowball here in terms of insurance renewals. But I couldn't tell you whether that means it's going to be 30% up or 300% up, I think that's going to be really dependent on the types of renewals that come up and what the loss history looks like. between now and when they do renew. But I think the impact, certainly from our perspective, I think more people will want to become BCOs, and I think more people will want to become Landstar agents.

Operator

And we have Stephanie Moore from Jefferies.

Stephanie Benjamin Moore

Good afternoon. Thank you I guess just looking at your balance sheet, sitting here with a pretty nice net cash position, a lot of balance sheet capacity. Obviously, we've seen some more aggressive M&A in the asset-light space as of late. So I'd love to just get your thought on potentially looking to inorganically grow your business, especially in the face of what seems to be ongoing or potentially ongoing industry consolidation.

Frank Lonegro

Yes, Stephanie, good question. Yes, we're proud of the balance sheet, and it gives us the ability to have optionality. When you see a situation like Robinson RO, a lot of people ask, well, are you going to do something similar? Like we are not going to buy a big brokerage and bring that in-house and compete against our agents, that's not the model that we have. Now are we thinking a lot more about at least what we around this table refer to as little M&A, meaning how do we put a little bit of capital at work to bring on agent candidates into the Landstar network who want to be independent entrepreneurs and grow their business and get some of the benefits, for example, the protections on the insurance side and access to the BCO network in the 40,000 or so carriers that you just heard Matt Miller talked about.

Matthew Miller

Yes, I do think there's real opportunity there, but we have to be respectful of the model when it comes down to large-scale M&A. But I do think there's opportunity in a post Montgomery world for us to grow the $1 million agent count through the little M&A that I referenced.

Operator

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.

Frank Lonegro

Thanks very much. In closing, while we are disappointed with the challenging insurance and claims environment, 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 freight environment in what we believe are the strongest unsided platform in heavy haul service offerings in our industry.

And regardless of the economic environment, 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 capitalize on the improving conditions and positive momentum in freight markets. Thank you for joining us this afternoon. We look forward to speaking with you again on our 2026 fourth quarter earnings conference call in late January. Thank you.

Operator

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