Landstar System (NASDAQ:LSTR) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Landstar System reported a 25% year-over-year increase in revenue for the third quarter of 2026, with truck revenue reaching $1.407 billion, up 29% from the prior year.
The company faced challenges with insurance and claims costs, incurring approximately $22 million in net unfavorable adjustments to prior-year claim estimates, impacting overall profitability.
Strategic initiatives include ongoing investments in technology and AI solutions, aiming to enhance productivity and service capabilities across the network, with significant AI deployment efforts in agent offices.
Landstar observed strong performance in its heavy haul service, generating $185 million in revenue, a 25% increase year-over-year, and an increase in net BCO truck count by 165, the highest since Q3 2021.
Despite the challenges, the company maintains a strong balance sheet, returning $175 million to shareholders through dividends and share repurchases, and continues to support its agents and BCOs.
Management expressed optimism about the freight market, noting improved conditions favoring transportation providers and a positive outlook for the fourth quarter, although no formal guidance was provided.
Full Transcript
OPERATOR
Good afternoon and welcome to Landstar System’s third quarter earnings release conference call. All lines will be in a listen-only mode until a formal question-and-answer session. Today’s call is being recorded. If you have any objections, you may disconnect at this time. Joining us today from Landstar are Mr. Frank A. 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 Clement, Vice President and Chief Commercial Officer.
Now I’d like to turn it over to Mr. Jim Todd. Sir, you may begin.
James Todd (Chief Financial Officer)
Thanks, Elmer. Good afternoon, and welcome to Landstar’s 2026 third 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 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 2026 second quarter described in the section Risk Factors and our other SEC filings. From time to time, these risks and uncertainties could cause actual results or events to differ materially from historical results or those anticipated.
Investors should not place undue reliance on such forward-looking statements, and Landstar undertakes no obligation to publicly update or revise any forward-looking statements. I’ll now pass it to Landstar CEO Frank A. Lonegro for his opening remarks.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks, JT, and good afternoon, everyone. I’d like to thank our BCOs and agents and all the Landstar 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 eight different field meetings throughout the country over the past three months.
One of the highlights of the BCO event was Landstar’s 54th truck giveaway, where I had the honor of awarding BCO Dean Webb of Pelzer, S.C., a new 2027 Freightliner Cascadia as part of our Deliver 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 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 the 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 haul 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 of 2021. 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 adjustment to prior year claim estimates.
As noted in the press release, the highly elevated insurance and claim cost quarter was primarily attributable to: one, approximately $13 million, or $0.29 per share, of unfavorable actuarial adjustments to insurance and claims reserves as compared to the last actuary 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 claim in 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 a subsidiary of the company. It’s no secret the truck transportation industry has been under attack of late by an incredibly aggressive plaintiff’s 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 five 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 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 for 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. AgentIQ AI workflows are now actively deployed in eight 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 17th.
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. JT will get into the details on revenue, loadings, and rate per load in a few minutes. Safety is crucial to our continued success. Our safety performance is a direct result of the professionalism of the thousands of Landstar 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, 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 provides 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 $4–$57 million agents based on 2025 fiscal year results, a number we would expect to increase in 2026. Importantly, retention within the Million Dollar Agent network continues to be extremely high.
Turning to Slide 8, on a year-over-year basis, BCO truck count 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 twelve-month BCO truck turnover rate drop from 31.4% as of fiscal year-end 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 four 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 JT to walk you through the 2026 third quarter financials in more detail.
James Todd (Chief Financial Officer)
Thanks, Frank. Turn to Slide 10. As Frank mentioned earlier, overall truck revenue per load increased 25% in the 2026 third quarter compared to the 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 trucks a pure reflection of market pricing as it excludes fuel surcharges billed to customers that are paid 100% to the BCO. In the 2026 third quarter, revenue per mile on unsided platform equipment hauled by BCOs was 19% above the 2025 third quarter, and revenue per mile on van equipment hauled by BCOs was 23% above the 2025 third quarter.
Delving deeper into seasonal trends, revenue per mile on loads 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 pre-pandemic seasonal trends, while the July-to-August increase outperformed pre-pandemic historical trends. Turn to van freight. Revenue per mile on van equipment hauled 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 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 particularly pleased with the sustained strong performance of our heavy haul service offering. Heavy haul 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 2026 third quarter was 13%, or $13 million, below the 2025 third 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.
Turn to Slide 11. We 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 five 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 in machinery increased 1%, 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.
Turn to Slide 12. In the 2026 third quarter, gross profit was $126.5 million compared to gross profit of $111.1 million in the 2025 third quarter. Gross profit margin was 8.4% of revenue in the 2026 third quarter compared to gross profit margin of 9.2% in the corresponding period of 2025. In the 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 2026 third 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 decreased 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 the 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 non-cash impairment charges during the 2025 period. Operating income increased as a percentage of variable contribution, similarly due to the impact of the non-cash impairment charges during the 2025 period and the 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 2026 third quarter compared to $33 million in 2025. The increase in insurance and claims costs as compared to 2025 was primarily attributable to (1) approximately $13 million of adverse actuarial adjustments to reserves as compared to the last actuarial review conducted as of year-end 2025, and (2) approximately $8 million of prior-year development attributable to settlements of two accidents during the 2026 period. During the 2026 and 2025 third quarters, insurance and claims costs included $21.9 million and $9.2 million of net unfavorable adjustments to prior-year claim estimates, respectively.
Selling, general and administrative costs were $62.4 million in the 2026 third quarter compared to $57 million in the 2025 third quarter. The increase in selling, general and 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 to 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 System model. Back to you, Frank.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks, J.T. Given the highly fluid freight transportation backdrop and a dynamic geopolitical and macroeconomic environment, coupled with a highly volatile litigation and claims 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, pre-pandemic 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 hauled 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 processed 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 as slightly outperforming normal seasonality. We’re excited to build upon the positive momentum generated during the first nine 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 four years appears to have turned in our favor.
With that, operator, we’d like to open the line for questions.
OPERATOR
Thank you very much, sir. At this time, we will begin the question-and-answer session. If you would like to ask a question, please press star one on your touchtone phone. Once again, that is star one to ask a question, and to cancel your request, please press star two. We have a question on the line from Jonathan Chappell from Evercore ISI. Your line is open. You may begin.
Jonathan Chappell (Analyst at Evercore ISI)
Thank you. Good afternoon. Hey Jim, can you help us understand the two different pieces of this insurance increase? It feels like that $8 million completely one-time, don’t extrapolate that going forward. But this $13 million of adverse actuarial adjustments, is there a reason you didn’t kind of strip it out in a 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 one-time in nature and how much of it may be repeatable as we try to model that line item going forward.
James Todd (Chief Financial Officer)
Yeah, no, John, it’s a great question. I’ll take a shot at it. So as you are probably well aware, Landstar System has a long-standing policy of engaging a third-party actuary to review essentially the entire population of claim reserves twice a year, both at 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. We felt like for a period of years that we were sufficient.
That is, our incurred but not reported reserves were up 27% gross dollars from 4Q22 to 4Q25. And that’s on a declining truck count. If you look at those reserves on a per-truck basis, they had increased 73% 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 you can see the inflationary pressure that’s hit us along with the industry. You know, if you look at it, John, on a trailing four-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 it kind of a trailing four-quarter average, you’re at about $46 million a quarter. A trailing six-quarter average is about $41–$42 million a quarter. The actuary adjustments—we certainly had to increase our loss burn rates for 2026. And to your good point, we’ll have to continue to book to those higher loss estimates prospectively on the settlements. You may recall we had adjusted three truck brokerage claims in the second quarter. Two of those claims were in jurisdictions where we previously had F4A federal preemption that, of course, was impacted by the Montgomery decision. 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 claim. On the $3 million BCO accident, you may recall we recorded an $11 million reserve attributable to two significant BCO accidents in 4Q25.
Our best guess now, with nine more months of experience, is $14 million for those two crashes.
Jonathan Chappell (Analyst at Evercore ISI)
I’m going to burn my follow-up here. Just to make it perfectly clear and not change topics, you would add $47 million in that insurance and claims line if we strip out that $5 million and the $3 million. Completely understand. Again, not repeatable. But you mentioned that 41 to 42 kind of six-quarter run rate. Is that where 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 to $48 million quarterly basis going forward?
James Todd (Chief Financial Officer)
I get your question, John. I’m smiling through the phone, buddy. As you know, we stopped giving insurance and claims guidance. 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. $55 million a quarter probably feels too heavy. And you’ve got a bigger brain than I do. I think you’ll probably land closer to a reasonable spot.
Jonathan Chappell (Analyst at Evercore ISI)
All right, I appreciate it, Jim. Thanks.
James Todd (Chief Financial Officer)
Thanks, buddy.
OPERATOR
Thank you. Next one is from Chris Redeby with Wells Fargo. Your line is open. You may begin.
Chris Redeby (Analyst at Wells Fargo)
Yeah. Hey, thanks. Good afternoon, guys. Maybe picking up on the line of questioning and just maybe zooming out of it, thinking big picture. You know, Frank, as you think about Montgomery and the dynamics there, maybe bringing agents to the business, maybe, you know, 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 System 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 A. Lonegro (President and Chief Executive Officer)
Yeah, look, I think, Chris, the opportunity set for us—kind of uniquely given the agent model—is a positive. We signed up Shomi Global, an entity out in the Midwest that joined us, about a $20 million independent brokerage that sort of 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 Landstar 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 two for the impact of Montgomery to hit 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 a lawsuit and have to pay attorney’s fees and ultimately have to settle or stomach a verdict.
I think people are going to get religion pretty quickly and realize that being with a scale player is a really important phenomenon.
Chris Redeby (Analyst at Wells Fargo)
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 relatively low watermark 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 (Chief Financial Officer)
Yes, Chris, I’d be happy to. I think Landstar’s all-time high new agent revenue year was something like $180 million, and we’ve had a couple of years as high as $140–$160. We’ve been in kind of that $30 to $50, 2023, 2024, 2025. Freight recession periods. To Frank’s point, you know, when you get $18 million at one bite. We had another decent-sized 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 torque back to kind of strong years, there’s probably a $100 million tailwind. And I would agree with Frank. I think the setup for Landstar right now is very nice.
Chris Redeby (Analyst at Wells Fargo)
Okay, very helpful, guys. Thank you. Appreciate it.
James Todd (Chief Financial Officer)
Thanks, Chris.
OPERATOR
Thank you. Our next one is from Jason Seidl with TD Cowen. Your line is open. You may begin.
Jason Seidl (Analyst at TD Cowen)
Hey, thanks, operator. Hey, Frank. Hey, team, appreciate you guys taking the time today—wanted to look at the BCO thing and maybe getting 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, 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 A. Lonegro (President and Chief Executive Officer)
Yeah, I’ll get started on it. 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 four or five 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 existing BCO community and the existing agent community as kind of lines in the water.
Right? You catch more fish 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 loads 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 let me let Matt pick that up.
Matt Miller (Vice President and Chief Safety and Operations Officer)
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-water mark 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 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 do I have it?—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 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.
Jason Seidl (Analyst at TD Cowen)
Gentlemen, I really appreciate the time and the color there.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks, Jason.
OPERATOR
Thank you. Our next one is from Scott Group with Wolfe Research. Your line is open. You may begin.
Scott Group (Analyst at Wolfe Research)
Hey, thanks. Afternoon. So I want to ask about the revenue per load trends. July was up 26, 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: this 29% in October—if we just hold that, that’s a lot better than the normal seasonality of up slightly Q3 to Q4.
What do you think is a better way to think about Q4—that 29, or up slightly sequentially, which would be less than that 29?
James Todd (Chief Financial Officer)
Yeah. No, hey 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 System, this was only the third time in 16 years that August rates at Landstar System were higher than July. 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 the first four 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, so 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 (Analyst at Wolfe Research)
And how does that BCO like Rev Pro look in October relative to the 29 for the full business?
James Todd (Chief Financial Officer)
Scott, it’s a great question. It’s day two of close and I don’t have that number in front of me.
Scott Group (Analyst at Wolfe Research)
Okay, all good. 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 all this 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 A. Lonegro (President and Chief Executive Officer)
Hey 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 account down because of some of the fraud in play. And I think Matt’s done a really good job of the vetting 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.
Matt Miller (Vice President and Chief Safety and Operations Officer)
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 vetting 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 2Q26. 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 they’re 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 one other thing.
Frank A. Lonegro (President and Chief Executive Officer)
I think it’s worthwhile, Matt, is just to let him know that we don’t take newly minted MCs as owner-operators. I mean our standards are higher than that.
Matt Miller (Vice President and Chief Safety and Operations Officer)
No, 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 relate to identity-oriented things where there’s fraud being perpetuated in the industry where other folks are taking possession of their operating authority unbeknownst to the underlying carrier.
So there’s a lot of things on the carrier vetting 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 A. Lonegro (President and Chief Executive Officer)
And a lot of good work by FMCSA and DOT for sure.
Scott Group (Analyst at Wolfe Research)
Very helpful. Thank you guys.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks Scott.
OPERATOR
Thank you. Our next one is from Tom Wadowitz with UBS. Your line is open. You may begin.
Tom Wadowitz (Analyst at UBS)
Yes, good afternoon. 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 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?
Frank A. Lonegro (President and Chief Executive Officer)
Hey Tom, I’m happy to lead off and then I’ll let our sales team chime in. But just in terms of the quarter, you know, 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, a lot of momentum. As we sit here kind of late October and we think about peak season, we’ve seen some good demand out of the gate the first four 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 clip across.
Yeah, we’ll let Bill talk a little bit about the data center ecosystem between the hyperscalers and the AC providers and 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 a third 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 brag about heavy haul.
We’ll continue to do a good job there. But maybe Bill, a little bit on the data center side.
Bill Clement (Vice President and Chief Commercial Officer)
Yeah, 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 picked up. The data center business continues to be strong and shows a lot of legs. You know, we’re seeing a little bit of softness on volumes on the automotive side and some of the government business. But building materials, energy and power, industrial machinery, consumer goods, consumer durables, as 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. 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 see some softness there relative to where interest rates are.
Tom Wadowitz (Analyst at UBS)
Okay, yeah, 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 2017? 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 A. Lonegro (President and Chief Executive Officer)
Yeah, I mean, I think JT 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 volumes. 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 ELD and the non-domiciled CDL and all the work that’s being done on the mills as well as the ELDs and things like that, I don’t think that’s anywhere near complete. 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.
Tom Wadowitz (Analyst at UBS)
Great, thank you.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks Tom.
OPERATOR
Thank you. Next one is from Jordan Allagar with Goldman Sachs. The line is open. You may begin.
Paul Stoddard (Analyst at Goldman Sachs)
Hi, this is Paul Stoddard. I’m for Jordan. Thanks for taking our question. I guess as we start to think about where we are in this 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 this cycle? Are we starting to see more of that demand side come through to push those spot rates higher? Are we still more on the supply side?
Frank A. Lonegro (President and Chief Executive Officer)
Yeah, 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 and 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 shift the narrative a little bit more to the demand side, which is something that’s certainly welcome to all of us who are in the freight hauling 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 (Analyst at Goldman Sachs)
That’s helpful. And then I guess as a follow up, I guess my question is 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 load growth than normal seasonality? How long could that cycle last?
James Todd (Chief Financial Officer)
Yes, Paul, I’m happy to talk about kind of pre-pandemic 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 in the second quarter, I think we slightly beat normal seasonality in the second quarter. So you got about six months now where it’s been pretty tight. Pre-pandemic typical up cycles were in a range of 24 to 30 months.
So if you’re a believer that the cycle started halfway through the fourth quarter of 25, you know, you could do the math. We should have still a good way to run.
Paul Stoddard (Analyst at Goldman Sachs)
Great. Thanks for the questions.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks, Paul.
OPERATOR
Thank you. Next one is from Brian Ostenbeck with J.P. Morgan. Your line is open. You may begin.
Brian Ostenbeck (Analyst at J.P. Morgan)
Hey guys. Afternoon. Thanks for taking the question. So I guess one follow-up on all the insurance, the $8 million. I know these are accidents that happened 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 cost. Is there anything that you can… it’s not just Landstar System issue, of course. Is this industry-wide?
Is there anything you can fill us in 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 A. Lonegro (President and Chief Executive Officer)
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 the state level. And obviously you can see the positions that TIA, TCA, ATA 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’ve 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, then we’re going to fight it because we can’t shape the law otherwise unless we take something to court. Now, we may fight one 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.
You know, 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 Ostenbeck (Analyst at J.P. Morgan)
Understood. And then I guess relatedly, it’s not quite 100% tied to your business given just the unique model you have. But any thoughts on the Crane vs. Penske case 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, to my understanding, but certainly it seems like there are some 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. Thank you.
Frank A. Lonegro (President and Chief Executive Officer)
Yeah, we look at all of the marquee 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, you know, the $604 million plus interest Robinson case. And then, you know, there are others out there that we’re watching, both in terms of, you know, verdicts and settlements and wins, for that matter. There’s been quite a few wins as well in the industry, so we certainly cheer 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, you know, we ought to resolve.
Brian Ostenbeck (Analyst at J.P. Morgan)
Okay. Thank you, Frank.
Frank A. Lonegro (President and Chief Executive Officer)
Appreciate it.
OPERATOR
Thank you. Our next question is from Brandon Oglensky with Barclays. The line is open. You may begin.
Brandon Oglensky (Analyst at Barclays)
Hey, good afternoon and thanks for taking the question. 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 three months ago, you guys had just renewed your coverage. Right. And I think for not a lot of increase in your underlying rates. So I don’t know, how do you compare those two there?
Frank A. Lonegro (President and Chief Executive Officer)
Yeah, 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—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 let the policies. What I’m saying is not everybody’s 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 an umbrella like Landstar’s and be a safe driver for them or be a great agent for them.
Thank you. Yeah, I think in the safety side and security, for that matter, there are some workings 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 agent 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 onto the sales side.
Applegate, talk a little bit more about that.
James Applegate (Chief Strategy and Innovation Officer)
Yeah. As it relates to safety, that’s also going to have an impact over there as well too. I think anytime that you put in technology and you get standard business processes, standard practices, it just tightens up how you execute and 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 grabbed a partner that’s very well known in the space and is really kind of helping us implement AI, agentic AI, 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?
Brandon Oglensky (Analyst at Barclays)
Thank you.
Frank A. Lonegro (President and Chief Executive Officer)
Thanks, Brandon.
OPERATOR
Thank you. Next one is from Ravi Shanker with Morgan Stanley. Your line is open. You may begin.
Madison (Analyst at Morgan Stanley)
Hi, this is Madison, passing the check 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 move to kind of asset-based companies in an environment like this?
Frank A. Lonegro (President and Chief Executive Officer)
Yeah. Hey, Madison, I’ve never thought that a customer was sympathetic to rate increases regardless of the reason. 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 or 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 vet them every 24 hours. They rerun through the algorithm to make sure that they are still up to our standards. That’s probably the largest way, the most important way, that 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 broker carriers.
Madison (Analyst at Morgan Stanley)
Got it, thank you. And then if I could ask a follow-up, just wondering on any prospective pivots on end markets or customers to kind of avoid the more maybe higher-risk customers, if you guys have been seeing any kind of patterns in that.
Frank A. Lonegro (President and Chief Executive Officer)
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 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.
Matt Miller (Vice President and Chief Safety and Operations Officer)
Sure, sure, 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.
Madison (Analyst at Morgan Stanley)
Got it. Thanks so much for the color, guys.
OPERATOR
Thank you. Next one is from Bascome Majors. Your line is open. You may begin.
Bascome Majors (Analyst at Susquehanna)
Yeah, thanks for taking my questions. 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 there was 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.
Thank you.
James Todd (Chief Financial Officer)
Hey, Bascome, this is James Todd. I’m not aware of a short-term blip in agent count. You know, we tend to focus more on the million-dollar agent count. We had 400 million-dollar agents in 2025. 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. Happy to connect offline if you’re seeing something else.
Bascome Majors (Analyst at Susquehanna)
Yeah, I was just looking at the total agent count in the slide deck, but you’ve answered the question there. Thank you.
OPERATOR
Thank you. Our next one is from Bruce Chan with Stifel. The line is open. You may begin.
Bruce Chan (Analyst at Stifel)
Hey, good evening, guys. Just want to come back to some of your comments around the supply side. You mentioned, I think, Frank, the Montgomery overtones. I’d imagine that could be fairly material as shippers and brokers start to, you know, maybe take a harder look at the selection criteria. I think, you know, several quarters ago you talked about something around 15% impact to the OTR market from, you know, 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 A. Lonegro (President and Chief Executive Officer)
Yeah, that’s a really difficult one to answer, to be honest with you, Bruce. More than zero. I know that doesn’t really help you, but, you know, my sense is this will take another year or two to play out because of what will happen on the insurance side of things. If you’ve been a broker in an FAAAA jurisdiction, you didn’t really have any liability. Not that you could operate with impunity, but it was a really difficult hill to climb for the plaintiff’s lawyers to sue and be successful at suing 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’ll 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 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.
Bruce Chan (Analyst at Stifel)
Okay, fair enough. Thank you.
Frank A. Lonegro (President and Chief Executive Officer)
Thank you.
OPERATOR
Thank you. And we have Stephanie Moore from Jefferies. The line is open. You may begin.
Stephanie Moore (Analyst at Jefferies)
Great. Good afternoon. Thank you. I guess just looking at your balance sheet sitting here, pretty nice net cash position, a lot of balance sheet capacity. Obviously, we’ve seen some more aggressive M&A in the asset light 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. Thanks.
Frank A. Lonegro (President and Chief Executive Officer)
Yes, that’d be a good question. Yeah, we’re proud of the balance sheet, and it gives us the ability to have optionality. You know, when you see a situation like Robinson/RXO, a lot of people ask, well, are you going to do something similar? 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 from, for example, the protections on the insurance side and access to the BCO network and the 40,000 or so carriers that you just heard Matt Miller talk about?
Yeah, 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 the post-Montgomery world for us to grow the million-dollar agent count through the little M&A that I referenced.
Stephanie Moore (Analyst at Jefferies)
Absolutely. Thank you, guys.
Frank A. Lonegro (President and Chief Executive Officer)
Appreciate it. Thanks a bunch.
OPERATOR
Thank you. 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 A. Lonegro (President and Chief Executive Officer)
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 asset-light platform and heavy haul service offerings in our industry. And regardless of the economic environment, Landstar System’s 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.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.