Creating a three-sided trucking marketplace – Landstar System | Summer Series

Bryce: [00:00:16] Welcome to the Equity Summer Series, proudly brought to you by CommSec, the home of investing over 12 episodes where deep diving into some of the most exciting, interesting and well known companies from around the world. Each episode will be unpacking one company with one expert who will learn from their process and hear why they like the company. My name is Bryce and as always, I'm joined by the equity buddy, Ren. How are you?  Alec: [00:00:38] Bryce I'm good. I'm excited for this episode. I'm excited for this whole series. But we always love speaking to the team at Fairlight Asset Management. Nick Cregan We've spoken to a number of times on the show. Will Dowd is our expert joining us today. He is a partner and portfolio manager at Fairlight Asset Management. In your introduction, you said we're speaking about some of the most well-known companies. Yes. Whenever we speak to Fairlight, it's not a well-known company, but it is a fascinating one. So fascinating that I've asked them multiple times if they'll let me invest in that. Bryce: [00:01:13] And I always say, yes, it's all new.  Alec: [00:01:17] And I'm sure this interview will be no different because we're speaking about a company that I hadn't heard of until they sent it through. It is a Landstar system.  Bryce: [00:01:26] Yes, Landstar system. So before we jump in, we must say a huge thank you to CommSec, the proud partner of the Equity Mates Summer series and the home of investing. Often we get frustrated with the lack of access to international markets, particularly when there are so many great opportunities outside of Australia. However, with CommSec, those opportunities are a reality. With access to 13 international markets from the US to Norway, Germany and Japan invest in shares on the US market from just $5 US day brokerage. Download the CommSec app today or visit CommSec Ecom trader. CommSec Tase in sales and other fees and charges apply. Investing in overseas markets exposes you to additional risk. [00:02:06][39.6] Alec: [00:02:07] Now, Bryce, before we get stuck in, we need to remind everyone that whilst we are licensed, we're not aware of your personal financial circumstances. Any information on this show is for education and entertainment purposes only. Any advice is general? [00:02:19][12.4] Bryce: [00:02:21] Alright Ren, well, before we bring Will in, which I'm very excited about love talking to the Fairlight guys, let's take a look at Landstar System. What are they? [00:02:30][8.9] Alec: [00:02:30] So Landstar is the trucking company that owns no trucks. And to take a step back, we really need to talk about trucking in America. And it is just in America. This this isn't a global company. 90% of America's truckers are owner operators or small businesses that own six or fewer trucks. So when we think about trucking in Australia, well, like when I look at this company, in my mind I was thinking Linfox, toll. Bryce: [00:03:02] DHL.  Alec: [00:03:02] DHL one. Bryce: [00:03:04] Yeah, that's it.  Alec: [00:03:05] I honestly wasn't thinking about DHL is thinking about the first two. That's not what we're talking about here. We're talking about an incredibly fragmented market. Yeah. And that is where Landstar have sort of come in and they have tried to, I guess, unify this fragmented market.  Bryce: [00:03:24] How fragmented are we talking, though?  Alec: [00:03:25] So there are 4.06 million semi trucks operating in the U.S. as of 2021 and 3.5 million employed truck drivers. So if you just say 90% of that. Bryce: [00:03:37] Yeah, a lot. Very fragmented. So where does Landstar fit into this then? Alec: [00:03:44] So Landstar, think of them as a marketplace, essentially. And there are two side of marketplace with the third side sort of hanging it all together. Now, this is probably the easiest way to explain it. On one side are the millions of small businesses and different agencies and everything they need to move stuff around America. And on the other side of the marketplace are all of the truck truckers. Landstar tries to connect the two. But the way that they connect the two is with this third tier is I think it's like it's over a thousand agents who are essentially small businesses or, you know, their own operators. And their whole job is to act as a broker. They're like a freight broker. And before Landstar, these freight brokers existed. And, you know, they would have a Rolodex with a bunch of truckers in the area and businesses would call them and say, Hey, I need to get this to there. And then they would find drivers. Now they use the Landstar system to post jobs and to get truckers and to manage it all. So, yeah, I guess their key customer is the agent. But the beauty of the Landstar business, you know, they're the trucking company that owns no trucks is that they don't employ anyone in that three sided marketplace. They take a commission on each load, so from the driver, and they take a commission from the agent as well.  Bryce: [00:05:12] What I'm more interested in with this company is they do have a tech platform. I can't remember what it's called, the load, load something where essentially it cuts out the agent.  Alec: [00:05:23] Interesting you see Okay, you go on, make your case, and then I'll.  Bryce: [00:05:26] Because it still seems I'm still surprised that this is how it's done. In a world of technology, it feels like they should be able to soon get rid of the agents and really just rely on a tech product that says, Hey guys, we are two sided marketplace truckers putting your load, your availability and where you're going. And we've got all of these small businesses or people trying to shift weird things around the country and will provide the tech offer that joins the two. Like I feel I find it amazing that the agents still form such an integral part to this.  Alec: [00:06:06] Let me let me give you my rebuttal. So when something goes wrong, you need someone that you can speak to and get it sorted out. Landstar, they say they've got over 50,000 truckers who drive for them, and they've got 1200 agents making those connections. You're going to need that many agents doing customer service and like managing it and being the person that calls when things go wrong or something like that. It's either you can outsource the responsibility to the agents and the agents can, you know, drive your business for you and do all that, or you have to bring it in-house. But then you just like Uber and like every time food doesn't get delivered for Uber. So every time a mobile phone is left in a car, Uber is employing someone to deal with that.  Bryce: [00:06:55] AI Alec: [00:06:56] No Bryce: [00:06:57] I still robably I think there's a portion of I, I reckon there'd be a portion in there that.  Alec: [00:07:01] Maybe. Bryce: [00:07:02] You could justify.  Alec: [00:07:03] A policy. Like if we're sending like 40 shirts to pay for.  Bryce: [00:07:08] I don't need an agent.  Alec: [00:07:09] Yeah, but it's like I think this is so elegant because it's like you have 1200 people, the agents out there who are running their own businesses. But all of their incentive is to make you more money, to get more volume through your business. Like you lose that if you go to a two sided marketplace, you have to pay for your marketing and you have to be your customer service. But this model, the 1200 agents that you don't employ, they're your marketing, they're driving your business and they're your customer service if something goes wrong. So for me, it's like it's, it's elegant.  Bryce: [00:07:46] I think the other part as well is that they're not doing the 50 shirts for the Etsy guy. They kind of positioned themselves as doing the the larger unusual deliveries that otherwise, you know, might not get on the DHL plane or whatever it may be. So let's talk about some of the numbers.  Alec: [00:08:07] Yeah, well, here's a number for you. Okay. Since it listed in 1993, it's up 10,500%. Bryce: [00:08:16] Now. I'm not going to give it away, but there are a number of companies in the summer series this year that have been 100 baggers since IPO. So stay tuned.  Alec: [00:08:25] Yeah. So it listed in 1993 and it's 100 bags since then. If our parents hadn't, you born in 91, I was born 92. If our parents had hadn't had us and taken the money, they would have spent on us as kids and invested it in Landstar.  Bryce: [00:08:42] If our parents had just put a grant into Landstar when we were born as a gift. Thank you. Present. Alec: [00:08:51] We worth over $100,000.  Bryce: [00:08:53] Yeah, we're loaded. Anyway, phenomenal performance, however.  Alec: [00:08:57] Yeah, but more recently, the numbers don't look so great. Landstar has seen revenue fall five quarters in a row. The sequentially. Down, down, down, down, down. But it sounds like a Kohl's ad and profit has fallen six quarters in a row sequentially. Just every quarter. Step down, down, down, down, down, down, down at the end of the month. And so I guess the question is what's going on here? One note to give them credit is that in those six quarters, as profit has fallen, profit margin has stayed relatively stable all around like the middle five. So it's like their costs, their revenue has stepped down and their costs have stepped down as everything scales together. Yeah, And I, I suspect Will can talk to us about it more, but I suspect it's part of the elegance of their business model. It's not like Uber where they have to have their marketing team employed and they have to have their customer service team employed. If it's just that they're getting less commission from drivers and agents. But that's okay because their profit margin is pretty steady. Like they have, there are high variable cost, low fixed cost businesses. It's like the exact opposite of a company with operating leverage. And operating leverage is all the buzzword these days because of software as a service businesses. Yeah, they have high fixed costs but low variable costs. So as you add incremental revenue, it just flows straight down to the bottom line. This is the exact opposite company. It's got low operating leverage, but that might make it resilient.  Bryce: [00:10:37] What an elegant company. Now, before we bring in Will, if you've just joined us but are feeling a little overwhelmed with where to start or confused about some of the investing lingo in today's episode, then CommSec's Stocked Content Hub could help stock up on tips and tools to help you find and research a stock and understand the stock market. Is it com secondary youth or more?  Alec: [00:11:00] We'll be back with Wil right after this short break.  Bryce: [00:11:14] We're here with Will Dowd. Will, welcome to equity mates.  Will: [00:11:17] Good morning, guys. Glad to be here.  Bryce: [00:11:18] Now, we can't wait to get stuck into this fascinating company. Take us to the top for those that haven't come across Landstar Systems before. What does Landstar do? Will: [00:11:29] Yes. And Landstar, US based. It's a freight brokerage company classified as the trucking company, but it doesn't own any trucks. And that's kind of the magic of the business. So it's a two sided marketplace. Many too many two sided marketplace. The US freight market, incredibly complex, massive, and fragmented. So on one side you have a million plus trucking companies. And interestingly, those trucking companies, 90% of them are all effectively small businesses over three or less trucks. Quite an unusual industry structure. Yes. So if you are driving down the road and you see a truck, that guy who's driving is running his own business, he's got a laptop in there and he runs it from the cab. Very interesting.  Alec: [00:12:05] Hopefully not while he's driving.  Will: [00:12:09] And then obviously, on the other side, you've got this 30 million plus small businesses in the U.S. They all need to move goods from A to B, And if you're a small business, you don't have the capacity to have a logistics team. And if you know you're only moving things every now and then, you don't have the resources, the time to try and find a truck to move your goods. And so sitting between those two parts maker systems is Landstar or freight brokers. So, again, another massively fragmented industry. There's 100,000 freight brokers in the U.S. 1200 of those work under the Landstar umbrella. And effectively, their job is for customers to call them up. They need to move goods from A to B. The freight broker looks after finding the truck, making sure it gets on the truck, making sure it gets their insurance, and takes care of all those things. And so that's effectively Landstar. Alec: [00:12:53] Wow. It's such a fascinating company.  Bryce: [00:12:55] A million trucking company.  Will: [00:12:57] Yeah. So it's about 30 million trucks and about a million companies in total. And I think the biggest company has a 1% market share. So there's this hugely, hugely fragmented industry. Alec: [00:13:06] Yeah. So it's like, you know, we talk about two sided marketplaces and, you know, the classic example is something like Uber or Airbnb, but this feels like a two sided marketplace that existed well before all of this technology. And it was just that these freight brokers sat in the middle and connected the two sides of the marketplace pretty manually. And Landstar has come in and I guess made their life a lot easier.  Will: [00:13:29] Yeah, exactly right. So they've been around for a decade. So it listed back in 93 and the traditional business model is on the phone. It's relationships. They're in a small town, they've got a Rolodex of all their customers and that's how they work. A lot of them work out of their garage. You can make a lot of money as a free broker if you're quite good at it. But it is interesting because you talk about technology, but over the last couple of decades, Landstar actually has been at the forefront of building. They now have an online load board. So for example, if you're an agent, you get a job, you put it up on a loadboard. And then of the Landstar 30,000 truckers, they can look up and say, I'm planning a route from X to Y, and here are all the lows that I can pick up along the way. So Landstar actually does it's got an app now, it's got that low board. So it is sort of bringing technology to bear in the business as well.  Alec: [00:14:16] Compare like the American market to Australia, because when I think about Australia, I think of like trucking companies like Toll and stuff like that. Linfox Yeah, yeah. So, is my perception of Australia's market just wrong and it's also incredibly fragmented, or is there something unique about America that it's a lot more small businesses and fragmented than some other markets? Will: [00:14:36] I suspect Australia's is definitely smaller. So yeah, I think yeah, you do have those bigger companies. To be honest, I'm not fully sure.  Alec: [00:14:44] Fair enough. I was asking you about a completely different market. Yeah. Yeah. Okay. It is interesting one. Obvious question with America is if it's 90% small business like has, has there been attempts to roll it up? And like other people who are trying to, you know, I guess.  Bryce: [00:15:02] Try to roll up.  Alec: [00:15:02] Yeah, yeah, yeah. Private equity truck roll up. Yeah.  Will: [00:15:05] Yeah. I think the challenge is is just the returns are not that great and it's quite hard. So it's a hard life being a trucker. And so you've got to pay depreciation on the truck and insurance and you know you're doing a lot of hours. And the big benefit which we can get into later when we talk about the competitive advantages. But when you work for Landstar, you're not an employee of Landstar as a trucker. You control your own hours, you control which loads you do and don't pick up. And so I think companies that are out there, if they want to do a roll up, the idea of trying to then enforce the truck is to do certain hours. And bay employees, they're not going to want to do it. And so you know, the truckers, they value that flexibility being their own boss, being out of drive when they do when they want.  Alec: [00:15:47] I assume also and set their own price. Will: [00:15:50] Well, I mean, this is a really exciting part of the business, which we can get into later. But effectively, there's a kind of a freight price which fluctuates based on supply and demand. And so there's a very predictable tracking cycle that occurs over sort of 3 to 4 years. And what happens is the price goes up. It attracts more truckers into the industry. They buy more trucks. Overcapacity that then drives the price down. People leave the industry. And so as a trucker, you can't necessarily choose the price. But what you can decide is whether you're going to take it or not. And the price will move until someone chooses to take that particular load and you'll get paid more for unusual freight. And Landstar actually specialises in difficult and unusual freight. So part of the market, when people think about freight, they sort of think about, you know, we're moving from one Amazon warehouse to another. But Landstar specialises in it's called Massey Freight. And so you should be for these guys, you should be thinking about moving, for example, a Caterpillar excavator from one construction site to another, or one of their biggest customers is actually the Department of Defence. So you're moving a missile from an air base to another airbase. So these are the kinds of weird and esoteric freight that they're moving. Alec: [00:17:03] Wow. Yeah. Wow. Bryce: [00:17:05] So when you're looking at a two sided marketplace business model, what are the key sort of metrics that you use to analyse it?  Will: [00:17:12] Yeah, so Landstar is an interesting one. When you do look at the panel it's very different from a lot of other companies. So it looks and this is kind of where we think part of the opportunity is, it looks like it's got a very low margin. So if you think about your customer and you're paying $100 to move goods from A to B, Landstar recognises that $100 as revenue, but $80 of that goes to the truck driver, $5 goes to the agent as commission, and then Landstar takes $15. Alec: [00:17:42] And for context, for people like that's quite unusual. Like if you looked at Uber's, they wouldn't recognise the full Uber order as revenue. It would be like gross bookings and then their revenue would come under that. Will: [00:17:54] That's right. And so if you pull up, Landstar pay and it looks like they have about a seven or 8% operating margin. But in our view, the price paid to the truck, that's 100% variable based on the volume. So that's not really a cost to Landstar either is the commission to the broker. So we view it more as the $15 is the revenue to Landstar. And then they have about that $7 cost. So it's actually got about a 50% operating margin.  Alec: [00:18:19] Why do they count it that way? Will: [00:18:21] It would just be the accounting rules they have to.  Alec: [00:18:23] Yeah.  Will: [00:18:24] And then I guess it's up to sort of young enterprising analysts to pick it apart and figure out what's going on. But then from there. So that's kind of the secrets within the profit and loss statement. But the two key things for Landstar, which drive their revenues is the volumes and and price. And what makes this business really interesting is that it's probably the most cyclical business that fella owns. We try to avoid cyclical businesses where we can, and it's also very volatile. So quarter to quarter, the revenues can move quite a lot. But it's a business where if you can zoom out and take a five year or ten year view, there's actually really strong tailwinds behind it. So if you think about those two metrics, on one side, you've got volume. US freight volume growth is pretty much in line with GDP 2 to 3% per annum. And then on top of that, you've got Landstar gaining market share as a two sided marketplace. As the marketplace gets better, they gain more market share. So volume is sensitive to the economy, but if you take a ten year or 20 of you very reliable 2 to 3% per annum growth. On the other hand, you've got a price, which as I said before, operates on kind of that 3 to 4 year cycle. Capacity comes in and out of the market and moves up and down. But ultimately the underlying driver behind price is inflation. And so Landstar actually has an amazing inflation hedge inside its pay, now baked in effectively. So the business performed really well. For example, have lost 18 months because of that inflation tailwind. And so then again, the price over 2-3 year period will vary quite a lot. But zooming out and taking a ten or 20 year view, the things are going to drive it. Tracker wages, the cost of trucks, the cost of insurance. These are all going to go up over a long period of time. And so you look at the tailwinds behind Landstar as revenues, you know, GDP, market share gains, inflation, and that's how you get to over long period of time. It's done kind of that high single digit organic growth.  Alec: [00:20:15] Hmm. Yeah. When you when you think about it and you think, yes, like the top line revenue might be volatile and, you know, this is why we love getting experts in to talk about these companies, because I never would have thought the trucking industry was so cyclical or so volatile.  Bryce: [00:20:29] Makes sense, though.  Alec: [00:20:30] Yeah, to an extent. But like the volatility surprises me because it's like the same volume of like goods probably needs to be transported most quarters. It's like businesses aren't massively varying how much they're moving, christmas. You know, Department of Defence has a set number of missiles that move around and Wal-Mart as a set number of, you know, stores that they supply. Yeah.  Will: [00:20:54] Yeah, that is true. I think now this is both a pro and a couple of Landstar that Landstar has effectively kind of the overflow capacity because their agents are incentivised based on gross commission. The agents are always trying to find the highest price loads. So the way it works is that if you are if you're a Woolworths and you have a you know, you know you're moving X amount of capacity per week, you'll you'll contract out that line at a fixed price. And so that's that kind of steady, really regular freight. What Landstar was trying to find is where they have got more than what they need and they need a truck there today to move it and they get paid a premium for that. Yeah, but what that means is that when there is that volatility, it's the overflow capacity that's the first to go and also the price. So I think to kind of illustrate in the most recent quarter, earnings of the business are down sort of 20 or 30%. So it can move a lot on a on a quarter to quarter basis. But the great thing about the business is the way they've designed the model actually gives it a lot of resilience to that volatility because the challenge with volatility in revenue is if you've got a lot of fixed costs is you can before you know it, you're losing money. And if you've got debt as well, then the business is in trouble from a solvency perspective. But Landstar, as we said before, all of its costs are variable. So revenues go down, costs go down, the lockstep margins are protected. It doesn't have any capital requirements. So it doesn't own any trucks. So it doesn't matter where in the environment it is, it's still generating cash. So no issues from that and that doesn't carry any debt. So management know that it's volatile so they don't take on any debt to give that extra layer of protection. So whilst it's volatile in the near-term, if you take a long term view and then you say it's got all these protections as well, that's really where the opportunity is.  Alec: [00:22:34] Yeah, Yeah. Fascinating. So we've spoken a little bit about the bull case, why you like it, but let's really unpack that a little bit more and also talk about, I guess, the long term, I guess, sustainable competitive advantage it's built or it's trying to build. How does it stop another platform coming at its launch?  Will: [00:22:55] Yeah. So I think the key competitive advantage for this business is the network. I think the best way to understand that is to just step through the different parties in the network and then understand the value that Landstar delivers to them. So it's kind of three, three parties in there, truckers on one side, agents and then shippers on the other. And so if we start with truckers, I mean, this is really interesting. So we said before, you know, there's about a million plus companies in the U.S. so 13,000 ops, two whole freight exclusively for Landstar. So most are independent and can pick and choose 30,000 decide to haul exclusively for Landstar, and they actually take a lower cut. So for your average independent trucker, they get $0.85 on the dollar last, I guess, $0.75 in the dollar. But in the trucking industry, the average turnover is about 100%. So people stay at one company for less than a year on average, but at last it's 25%. So truckers love working there relatively.  Alec: [00:23:55] Is up because the turnover is lower and they take less of each dollar. But is that because these are higher value loads and so the total amount is more?  Will: [00:24:05] Yes. But also the two other key factors is first of all, Landstar. I'll use this scale to help truckers get discounts on things like maintenance, tires, fuel, so saves you costs and they can use scale to do that. And then the second big one is if you're a truck hauling for Landstar, agents will use you preferentially first. So you've got 1200 agents that are out there working to make sure that your truck is always utilised. And if you're doing a return trip across the States and you've only got your truck full for the outward leg and you have to drive back, empty your profits gone. Yeah. So the most important thing for them is making sure that at every point of the journey the truck is full and utilised. So that effectively what they do is they say, well I'm happy to take a little bit less on an individual job knowing that I'll save some money on costs. And also I have the 1200 agents working for me all the time. So that's that part of the network that is still growing. They add more truckers every year. And then on the other side, you've got shippers. So as your average shipper trying to move goods, the most important thing for them, obviously, is you want to be able to get a truck there as quickly as possible, and then you want to get your goods delivered on time and in one piece. And so Landstar effectively uses that brand to deliver that promise to shippers. And also, you know, you've got those 1200 agents.  Alec: [00:25:24] So on that, when I was looking at the Landstar revenue line, they split out insurance division revenues. So this might be a time to talk about that, is that they offer insurance to the shippers. Will: [00:25:37] That's right. So Landstar actually takes care of the insurance on behalf of the agents. So, again, they use their scale. This is quite important. So as an agent, you can opt to just operate in your garage as a one man show. You then need to arrange insurance for all of the goods that you  Alec: [00:25:53] Also, as the agent, you're responsible for. Will: [00:25:55] Exactly the goods. Alec: [00:25:56] Getting from A to B? Will: [00:25:57] Yeah. So what Lance I can do is diversify that across their entire book. And it's quite a big cost because unfortunately that can be quite large. Crashes at a few every year and the payouts in the US court system can be hundreds of millions of dollars. And so insurance is actually a critical part of the. The Landstar office so they can diffuse that cost amongst everybody.  Alec: [00:26:17] So 2016 they did about 47 million in revenue for that and then 2020 to 80 million. So obviously tiny in comparison to the broader business. But it's just, you know, any time a number almost doubles in five or six years.  Will: [00:26:31] Or so, that would actually be a reflection, which is more of a risk for Landstar, that the payouts are getting bigger for the insurers. So the cost of insurance is going up. So that's effectively a pass through cost. They're not making any money from that.  Alec: [00:26:43] Yeah, right. Okay. Will: [00:26:45] So that is actually one thing that's driving up the inflation of the price we talked to before.  Alec: [00:26:50] Higher insurance. Will: [00:26:51] Exactly.  Alec: [00:26:52] Yeah, right. Okay. Yeah, I'm now just imagining what it would cost to insure a Department of Defence missile. Will: [00:27:00] Yeah. So in terms of the agents, it's actually quite interesting. As an agent, you can if you're a successful agent operating a garage, you can make quite a bit of money. But to kind of contextualise Landstar got 1200 agents. Over 500 of them are doing more than $1,000,000 in revenue. Okay. So these guys are doing very, very well. And as an agent, when you join Landstar, Landstar looks, after all your back office compliance, they provide you obviously access to 30,000 trucks. The brand. They do help you with your receivables as well. So helping you get your cash flow moving. And so as an agent, effectively you make the decision, I'll give some of my revenues to Landstar, but it means that I can spend all day on the phone maximising my selling capacity. And then when you think about these guys that are making $1,000,000 in revenue, there's no incentive to leave this system. And so people say that and Landstar adds agents to the model every year. So you can think about kind of bring it all the way back to that three side model. We've got truckers want to join because it's the best place and it's got the lowest turnover. Agents can make the most money there, so they want to join and they never want to leave. And then shippers on the other side, the more agents you got, the more trucks you've got. Landstar is a really great place to move your goods as well. So that's the the flywheel that's running at the moment.  Bryce: [00:28:12] Is there a world where the agents become obsolete if the digitisation process just becomes so good that Landstar, like, we don't actually need you guys out load platform is good enough.  Will: [00:28:25] Yeah. So this is I guess we can talk about risks now. So this would be the key risk on the stock. So you mentioned over before, Uber has a division called Uber freight.  Alec: [00:28:33] Okay. We try and do everything there.  Will: [00:28:36] So in 2016, actually they launched Uber Freight and the idea was disintermediate the freight broker. The shipper can get it on an app and say, I need to move goods from eBay and get a truck move to that location. There's a lot of start-ups in this space at the moment, so quite ones in Australia and in the US as well that are looking to digitise the freight market. There's huge opportunity here and this has been a big risk or kind of bear thesis on the stock for quite some time that effectively agents will be disintermediated. Yeah, because shippers will just use some kind of digital platform to help them move goods from A to B, and that has been to a degree true. So the Woolworths of the world, for example, are using these platforms to reduce the costs down for there to move their shipping. But the thing that works Landstar favour is we talked about for how agents are trying to chase the highest value loads, which are generally unusual and, you know, messy freight. And so that's the absolute last part of the ecosystem. We think that's going to be disintermediated because when you're moving a Caterpillar excavator or as we said, a Department of Defence, the being able to call someone up and and say, when's the truck arriving. It has a lot of value. And so today, so far Landstar has been relatively protected based on the niche they operate in, which is unusual non-routine freight. But that's a risk to think about, that's for sure. We spend a lot of time thinking about that, that risk.  Alec: [00:30:08] Yeah. So aside from that risk, are there any other risks that you think would, you know, if they eventuated, they would break the thesis?  Will: [00:30:18] I guess the thing that we think about a lot is the cycle and the volatility of the business, which is unusual for us it fell a lot. So that's definitely one, you know, earnings can go up or down 30 or 40% in any one quarter. So that's what we look at digital disruption and disintermediation. And then really the last piece would be if you fly, we'll start spinning backwards, then you're in trouble. So if we're losing agents, if a losing trackers or if we're losing market share from a driver perspective, perhaps there's another competitor out there that's doing it better. That would be a big risk as well. So we will always want to be saying every year our network is getting better on both sides. Yeah.  Alec: [00:30:56] Yeah. Bryce: [00:30:57] So then in terms of the long term plans, when you kind of model this out and think about what this company could become, what do you expect it to be in sort of ten years time?  Will: [00:31:06] The great thing about Landstar, it's a very Fairlight stock in this way and that it's listed in. 1993. It's pretty much executing the same business model today as it was then. Okay. So it's never made a large acquisition. It's never tried to move into another industry. Yeah, it's been doing the same thing for 30 years and I expect in a decade's time it'll be doing the same thing again. And so what does that mean for us as investors? So if we kind of zoom out and we think about the demand drivers of this business, we think the freight market grows at GDP. We think that network will get stronger so they can gain market share. So that's kind of 2 to 3% per annum as well. Price goes up in inflation 2 to 3%. So if you just do the same thing every year and do it a little bit better, you've gone to high single digit organic growth. The great thing about a platform business is it doesn't require any incremental cost to bring new agents on. So incremental margins are very high. So if you can get to that high single digit organic growth and you're expanding margins, you're able it's growing double digit. And then I said before as well, there's no capital required in this business. So each year, 100% of profits turn into cash, and the management have been buying back 3 or 4% of the the shares on issue for two plus decades now. So you add that on as well. And so if I look out ten years from now, I would expect the business is probably going to grow earnings 10 to 15% per annum, be doing exactly the same thing that it is today, but just be doing it a little bit better every year.  Bryce: [00:32:32] Love it.  Alec: [00:32:32] Well fascinating company and a reminder about how simple investing can be. Like the face doesn't have to be overly complicated. Great management team executing well. Obviously it's not simple to find and analyse the companies, but I think you really summed it up there quite nicely. So Will, thank you for joining us today. We always love speaking to you or Nick or anyone from Fairlight. You guys always have really interesting companies, so thanks for joining us today.  Will: [00:32:59] No worries, guys. Great for the chat.  Bryce: [00:33:00] Thank you. Alec: [00:33:02] Now, before we go, we want to say a massive thank you to our summer series partner, CommSec, the home of investing. If you're looking for more support and resources to build confidence in the market, head to their content hub. Otherwise, you can get $0 brokerage on your first ten trades for Australian markets when you join. You can get $5 USD brokerage on US stocks and you can invest from as little as $50 through the CommBank app. Download the CommBank up today or visit CommBank.com.au.  Bryce: [00:33:31] And stick around because in the next episode we are joined by Mary Manning to discuss one of the world's largest companies, Alphabet. We'll pick it up next week.