Financial Performance - The company reported record earnings in Q2 2021, with revenues increasing 14% to $650 million and adjusted EPS growing 40% to $0.86 per share [12][19] - Adjusted operating income increased 37% to $79.1 million, with an adjusted operating margin, net of fuel, growing 340 basis points to 17.1% [12][19] - The TTS adjusted operating ratio improved to 82.9% [20][94] Business Segment Performance - TTS revenues increased 10% driven by higher revenues per mile, while dedicated freight revenues grew by 10% to $262 million [20][21] - One-way truckload revenues decreased 1% to $166 million, but revenues per truck per week increased 14.8% due to higher revenues per total mile [21] - Logistics revenues grew 29% to $142 million, with truckload logistics revenues increasing 49% [22] Market Conditions - The retail inventory to sales ratio reached a new 30-year low, indicating strong future freight demand [7] - The driver shortage remains severe, impacting the ability to grow the fleet organically [8][17] - The company added 500 trucks and skilled drivers through the acquisition of ECM Transport Group, enhancing its regional fleet presence [10][28] Strategic Direction - The company aims to leverage its consumer-oriented freight base and enhance its logistics capabilities through technology and strategic acquisitions [9][24] - The acquisition of ECM is expected to be accretive to adjusted EPS in the first year and strategically expands operations in key regions [28] - The company is committed to sustainability and has published its inaugural corporate social responsibility report, outlining specific ESG goals [36][40] Management Commentary - Management expressed confidence in strong freight demand continuing through 2022, supported by retail inventory replenishment needs [6][48] - The company is focused on maintaining a strong financial position with a long-term leverage goal of a net debt to annual EBITDA ratio of 0.5 to 1 turn [26][27] - Management acknowledged challenges in driver recruitment but remains optimistic about future growth opportunities [30][68] Other Important Information - The company plans to maintain net capital expenditures in the range of $275 million to $300 million for 2021 [23][44] - The company is expanding its driver training school network to improve driver recruitment and retention [30] - The company is implementing innovative technology solutions to enhance operational efficiency and reduce maintenance downtime [33][34] Q&A Session Summary Question: What signs do you look for in terms of demand continuation? - Management highlighted customer conversations and macroeconomic data as indicators, noting a low inventory to sales ratio and a net fleet decline in the industry [52][54] Question: How do you view margin progression in the back half of the year? - Management indicated that seasonality may be affected by the strong second quarter, but they expect to continue improving margins through capacity creation and contract rate increases [58][60] Question: What is the impact of the ECM acquisition on utilization? - The ECM acquisition will contribute to rate per mile improvements, but the lower length of haul will result in lower miles per truck [62] Question: How is the dedicated business performing? - Management reported strong performance in dedicated, with a robust pipeline and successful driver recruitment efforts [78][80] Question: How do you manage the trade-off between dedicated and one-way truckload? - Management emphasized the importance of driver preferences and the stability offered by dedicated contracts, which can provide long-term returns [86][88]

Financial Highlights - Revenues increased by 14% to $650 million in 2Q 2021[11] - GAAP EPS increased significantly by 87% to $1.06[12] - Adjusted EPS grew by 40% to $0.86[13] - Adjusted operating income increased by 37% to $79.1 million[14] - Adjusted TTS operating margin increased by 340 bps to 17.1%[15] Truckload Transportation Services (TTS) - TTS revenues increased by 10% to $491.2 million in 2Q 2021 compared to $445.1 million in 2Q 2020[28] - TTS adjusted operating income increased by 33% to $74.4 million in 2Q 2021 compared to $56.1 million in 2Q 2020[28] Werner Logistics - Werner Logistics revenues increased by 29% to $141.7 million in 2Q 2021 compared to $110.2 million in 2Q 2020[34] - Logistics operating income increased by 25% to $3.9 million[24, 34] Strategic Acquisition - Purchased 80% equity ownership interest in ECM Transport Group on 7/1/21 for $142.4 million[15, 40]

| --- | --- | --- | --- | --- | |-----------------------------------------------|-------|-------|-------|---------| | | | | | | | | | | | | | | | | | | | BUILt | | | | | | CROSS THE | | | | | | Investor Presentation, May 2021 TSX/NYSE: CP | | | | 1881 Cb | FORWARD LOOKING STATEMENTS The following investor presentation contains certain forward-looking information within the meaning of applicable securities laws relating, but not limited, to Canadian Pacific's operations, priorities and plans, anticipated fin ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited interim consolidated financial statements, including income, balance sheets, cash flows, equity, and detailed notes, are presented - The interim consolidated financial statements are unaudited and prepared in accordance with SEC instructions to Form 10-Q, reflecting management's opinion that all necessary adjustments for a fair statement are included[11](index=11&type=chunk) - Operating results for the three-month period ended March 31, 2021, are not necessarily indicative of the full year's expected results[12](index=12&type=chunk) [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income and operating income significantly increased in Q1 2021, driven by higher operating revenues and reduced expenses Consolidated Statements of Income (Three Months Ended March 31) | Metric (in thousands, except per share) | 2021 | 2020 | | :-------------------------------------- | :--- | :--- | | Operating revenues | $616,446 | $592,703 | | Total operating expenses | $553,975 | $561,637 | | Operating income | $62,471 | $31,066 | | Income before income taxes | $61,888 | $30,056 | | Net income | $46,492 | $23,058 | | Basic Earnings per share | $0.68 | $0.33 | | Diluted Earnings per share | $0.68 | $0.33 | - Net income increased by **101.6%** from **$23,058 thousand** in Q1 2020 to **$46,492 thousand** in Q1 2021[16](index=16&type=chunk) - Operating income more than doubled, rising from **$31,066 thousand** in Q1 2020 to **$62,471 thousand** in Q1 2021[16](index=16&type=chunk) [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income substantially increased in Q1 2021, driven by higher net income and reduced other comprehensive losses Consolidated Statements of Comprehensive Income (Three Months Ended March 31) | Metric (in thousands) | 2021 | 2020 | | :-------------------- | :--- | :--- | | Net income | $46,492 | $23,058 | | Other comprehensive income (loss) | $(265) | $(15,490) | | Comprehensive income | $46,227 | $7,568 | - Comprehensive income increased significantly from **$7,568 thousand** in Q1 2020 to **$46,227 thousand** in Q1 2021[19](index=19&type=chunk) - Foreign currency translation adjustments improved from a loss of **$9,893 thousand** in Q1 2020 to a loss of **$1,568 thousand** in Q1 2021[19](index=19&type=chunk) - Changes in fair value of interest rate swaps shifted from a loss of **$5,597 thousand** in Q1 2020 to a gain of **$1,303 thousand** in Q1 2021[19](index=19&type=chunk) [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Total assets and stockholders' equity increased as of March 31, 2021, driven by a substantial increase in cash and cash equivalents Consolidated Condensed Balance Sheets (as of) | Metric (in thousands) | March 31, 2021 | December 31, 2020 | | :-------------------- | :------------- | :---------------- | | Total assets | $2,229,526 | $2,156,676 | | Total liabilities | $1,001,800 | $961,636 | | Total stockholders' equity | $1,227,730 | $1,195,040 | | Cash and cash equivalents | $83,130 | $29,334 | - Cash and cash equivalents significantly increased by **$53,796 thousand** from **$29,334 thousand** at December 31, 2020, to **$83,130 thousand** at March 31, 2021[22](index=22&type=chunk) - Current portion of long-term debt decreased from **$25,000 thousand** at December 31, 2020, to zero at March 31, 2021[22](index=22&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated healthy cash, funding increased investing and reduced financing, resulting in a net cash increase for Q1 2021 Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity (in thousands) | 2021 | 2020 | | :-------------------------------- | :--- | :--- | | Net cash provided by operating activities | $135,867 | $133,376 | | Net cash used in investing activities | $(41,291) | $(16,524) | | Net cash used in financing activities | $(40,361) | $(68,960) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $53,796 | $45,819 | | Cash, cash equivalents and restricted cash, end of period | $83,130 | $79,261 | - Net cash provided by operating activities increased by **1.9%** to **$135,867 thousand** in Q1 2021[24](index=24&type=chunk) - Net cash used in investing activities more than doubled to **$41,291 thousand** in Q1 2021, primarily due to higher additions to property and equipment and an investment in equity securities[24](index=24&type=chunk) - Net cash used in financing activities decreased by **41.5%** to **$40,361 thousand** in Q1 2021, mainly due to lower debt repayments[24](index=24&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity increased in Q1 2021, driven by net income and equity compensation, offset by dividends and stock repurchases Consolidated Statements of Stockholders' Equity (Three Months Ended March 31, 2021) | Metric (in thousands) | Balance, Dec 31, 2020 | Comprehensive Income | Purchases of Common Stock | Dividends on Common Stock | Equity Compensation Activity | Non-cash Equity Compensation Expense | Balance, Mar 31, 2021 | | :-------------------- | :-------------------- | :------------------- | :------------------------ | :------------------------ | :--------------------------- | :----------------------------------- | :-------------------- | | Common Stock | $805 | — | — | — | — | — | $805 | | Paid-In Capital | $116,039 | — | — | — | $(3,953) | $2,502 | $114,588 | | Retained Earnings | $1,438,916 | $46,492 | — | $(6,792) | — | — | $1,478,616 | | Accumulated Other Comprehensive Income (Loss) | $(22,833) | $(265) | — | — | — | — | $(23,098) | | Treasury Stock | $(337,887) | — | $(5,507) | — | $213 | — | $(343,181) | | Total Stockholders' Equity | $1,195,040 | $46,227 | $(5,507) | $(6,792) | $(3,740) | $2,502 | $1,227,730 | - Total stockholders' equity increased by **$32,690 thousand** from **$1,195,040 thousand** at December 31, 2020, to **$1,227,730 thousand** at March 31, 2021[26](index=26&type=chunk) - The company repurchased **130,446 shares** of common stock for **$5,507 thousand** during Q1 2021[26](index=26&type=chunk) - Dividends on common stock amounted to **$6,792 thousand** (**$0.10 per share**) in Q1 2021[26](index=26&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes provide critical context and detailed disclosures for interim financial statements, covering policies, revenue, leases, investments, credit, contingencies, EPS, equity, and segment data [(1) Accounting Policies](index=9&type=section&id=(1)%20Accounting%20Policies) ASU 2019-12 was adopted with no material effect, and ASU 2020-04 is being evaluated for LIBOR-related credit facilities and hedging - ASU 2019-12, 'Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,' was adopted on January 1, 2021, with no effect on financial statements[29](index=29&type=chunk) - The company is evaluating ASU 2020-04, 'Reference Rate Reform (Topic 848),' for its applicability to existing credit facilities and hedging relationships that reference LIBOR[30](index=30&type=chunk) [(2) Revenue](index=9&type=section&id=(2)%20Revenue) Revenues are recognized over time, disaggregated by source (TTS, Werner Logistics) and geography, with contract assets and liabilities detailed Revenues Disaggregated by Source (Three Months Ended March 31, in thousands) | Revenue Source | 2021 | 2020 | | :--------------- | :--- | :--- | | Truckload Transportation Services | $462,949 | $464,863 | | Werner Logistics | $137,853 | $112,164 | | Inter-segment eliminations | $(134) | $(11) | | Transportation services | $600,668 | $577,016 | | Other revenues | $15,778 | $15,687 | | Total revenues | $616,446 | $592,703 | Revenues Disaggregated by Geographic Area (Three Months Ended March 31, in thousands) | Geographic Area | 2021 | 2020 | | :---------------- | :--- | :--- | | United States | $555,239 | $530,071 | | Mexico | $38,756 | $43,421 | | Other | $22,451 | $19,211 | | Total revenues | $616,446 | $592,703 | - Contract assets increased from **$6.9 million** at December 31, 2020, to **$8.9 million** at March 31, 2021[34](index=34&type=chunk) - Contract liabilities increased from **$1.5 million** at December 31, 2020, to **$1.7 million** at March 31, 2021[35](index=35&type=chunk) [(3) Leases](index=10&type=section&id=(3)%20Leases) Operating leases for real estate are primary, with lease liabilities and right-of-use assets recognized; the company also leases tractors and trailers Operating Lease Liabilities (as of March 31, 2021, in thousands) | Metric | Amount | | :-------------------------------------- | :----- | | Total undiscounted operating lease payments | $10,599 | | Present value of operating lease liabilities | $9,966 | | Right-of-use assets | $9,506 | | Current lease liabilities | $3,408 | | Long-term lease liabilities | $6,558 | | Weighted-average remaining lease term | 3.70 years | | Weighted-average discount rate | 3.30 % | - Operating lease expense increased from **$2.0 million** in Q1 2020 to **$3.6 million** in Q1 2021[44](index=44&type=chunk) - Revenues from lessor operating leases for tractors and trailers decreased from **$3.3 million** in Q1 2020 to **$3.1 million** in Q1 2021[45](index=45&type=chunk) [(4) Investments](index=12&type=section&id=(4)%20Investments) Strategic equity investments in MLSI and TuSimple were made, with TuSimple's converting to Class A shares post-IPO - Invested **$5.0 million** in Mastery Logistics Systems, Inc. (MLSI) in 2020 for approximately **5% ownership**, accounted for under ASC 321[47](index=47&type=chunk) - Made a **$5.0 million** equity investment in TuSimple in January 2021, representing less than **1% ownership**, also accounted for under ASC 321[48](index=48&type=chunk) - TuSimple completed its IPO in April 2021, converting the company's equity investment to Class A common shares, with future value changes to be recorded in other expense (income)[49](index=49&type=chunk) [(5) Credit Facilities](index=12&type=section&id=(5)%20Credit%20Facilities) Unsecured credit facilities total $500.0 million, with $175.0 million outstanding, largely fixed by interest rate swaps, and the company is covenant compliant - Total unsecured committed credit facilities amount to **$500.0 million**, expiring May 14, 2024[50](index=50&type=chunk) - Outstanding debt decreased from **$200.0 million** at December 31, 2020, to **$175.0 million** at March 31, 2021[51](index=51&type=chunk) - **$150.0 million** of the outstanding debt is effectively fixed at **2.32%-2.36%** through interest rate swap agreements[51](index=51&type=chunk) - The company was in compliance with all financial covenants as of March 31, 2021[51](index=51&type=chunk) Aggregate Future Maturities of Long-Term Debt (as of March 31, 2021, in thousands) | Year | Amount | | :--- | :----- | | 2021 | $— | | 2022 | $— | | 2023 | $— | | 2024 | $175,000 | | 2025 | $— | | Total | $175,000 | [(6) Commitments and Contingencies](index=13&type=section&id=(6)%20Commitments%20and%20Contingencies) Commitments include $164.4 million in property purchases; litigation includes a $92.0 million jury verdict under appeal, with a $24.9 million liability and $79.2 million insurer receivable - Committed to approximately **$164.4 million** in property and equipment purchases[54](index=54&type=chunk) - Accrued a liability of **$24.9 million** as of March 31, 2021, for a **$92.0 million** adverse jury verdict, with a maximum liability of **$10.0 million** (plus interest) under insurance policies and a corresponding **$79.2 million** receivable from insurers[56](index=56&type=chunk)[57](index=57&type=chunk) - The company is appealing the **$92.0 million** jury verdict[58](index=58&type=chunk) - A class action lawsuit for unpaid wages (FLSA) was dismissed in the trial court in June 2020, with plaintiffs' counsel filing an appeal in July 2020[59](index=59&type=chunk) [(7) Earnings Per Share](index=14&type=section&id=(7)%20Earnings%20Per%20Share) Basic and diluted EPS significantly increased in Q1 2021, reflecting higher net income and slightly fewer weighted-average common shares Earnings Per Share (Three Months Ended March 31, in thousands, except per share amounts) | Metric | 2021 | 2020 | | :---------------------------------- | :--- | :--- | | Net income | $46,492 | $23,058 | | Weighted average common shares outstanding | 67,932 | 69,253 | | Dilutive effect of stock-based awards | 291 | 356 | | Shares used in computing diluted earnings per share | 68,223 | 69,609 | | Basic earnings per share | $0.68 | $0.33 | | Diluted earnings per share | $0.68 | $0.33 | - Basic and diluted EPS both increased by **$0.35**, from **$0.33** in Q1 2020 to **$0.68** in Q1 2021[63](index=63&type=chunk) [(8) Equity Compensation](index=14&type=section&id=(8)%20Equity%20Compensation) The Equity Plan grants restricted and performance awards, with $16.1 million in unrecognized compensation cost over 2.0 years, vesting by time or performance - **6,537,930 shares** were available for granting additional awards under the Equity Plan as of March 31, 2021[64](index=64&type=chunk) - Total unrecognized compensation cost related to non-vested equity compensation awards was approximately **$16.1 million**, with a weighted average recognition period of **2.0 years**[65](index=65&type=chunk) Equity Compensation Expense (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Restricted awards pre-tax compensation expense | $1,549 | $1,398 | | Performance awards pre-tax compensation expense | $946 | $1,010 | Restricted Award Activity (Three Months Ended March 31, 2021, in thousands of awards) | Activity | Number of Restricted Awards | | :------------------------ | :-------------------------- | | Nonvested at beginning of period | 367 | | Granted | 114 | | Vested | (107) | | Forfeited | (2) | | Nonvested at end of period | 372 | Performance Award Activity (Three Months Ended March 31, 2021, in thousands of awards) | Activity | Number of Performance Awards | | :------------------------ | :--------------------------- | | Nonvested at beginning of period | 262 | | Granted | 74 | | Vested | (100) | | Forfeited | — | | Nonvested at end of period | 236 | [(9) Segment Information](index=16&type=section&id=(9)%20Segment%20Information) The company operates in two segments: Truckload Transportation Services (TTS) and Werner Logistics; WGL freight forwarding services were sold in Q1 2021 Segment Revenues (Three Months Ended March 31, in thousands) | Segment | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Truckload Transportation Services | $462,949 | $464,863 | | Werner Logistics | $137,853 | $112,164 | | Other | $15,399 | $15,068 | | Corporate | $379 | $619 | | Inter-segment eliminations | $(134) | $(11) | | Total | $616,446 | $592,703 | Segment Operating Income (Three Months Ended March 31, in thousands) | Segment | 2021 | 2020 | | :-------------------------- | :--- | :--- | | Truckload Transportation Services | $57,628 | $29,089 | | Werner Logistics | $4,574 | $1,085 | | Other | $866 | $2,900 | | Corporate | $(597) | $(2,008) | | Total | $62,471 | $31,066 | - Werner Logistics operating income increased significantly from **$1,085 thousand** in Q1 2020 to **$4,574 thousand** in Q1 2021[79](index=79&type=chunk) - The sale of Werner Global Logistics (WGL) freight forwarding services was completed in Q1 2021, realizing a **$1.0 million** gain[77](index=77&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 financial condition, operations, and liquidity, including business overview, COVID-19 impact, operating results, capital, obligations, regulations, and critical estimates [Overview](index=18&type=section&id=Overview) Operating in truckload and logistics, the company focuses on consumer nondurables, managing resources and demand; profitability is measured by TTS operating ratio and Werner Logistics gross margin - The company's two reportable segments are Truckload Transportation Services (TTS) and Werner Logistics[81](index=81&type=chunk) - TTS segment revenues are typically generated on a per-mile basis, with fuel surcharge revenues used to mitigate fuel price increases[82](index=82&type=chunk) - The operating ratio (operating expenses as a percentage of operating revenues) is a key profitability measure for the TTS segment[84](index=84&type=chunk) - Werner Logistics segment is less asset-intensive, relying on associates, information systems, and third-party capacity providers, with financial performance evaluated by gross margin and operating income percentages[86](index=86&type=chunk) [COVID-19 Impact](index=19&type=section&id=COVID-19) As an essential industry, the company prioritized safety and adapted operations during COVID-19, achieving strong Q1 2021 results due to freight demand and a tight driver market, maintaining a strong balance sheet and liquidity - The transportation industry was designated an essential industry during the COVID-19 pandemic, allowing the company to continue operations[87](index=87&type=chunk) - Q1 2021 results reflect seasonally strong freight market conditions in a strengthening economy and tight driver market, with strong demand in both One-Way Truckload and Dedicated fleets[89](index=89&type=chunk) - The company ended Q1 2021 with a strong balance sheet, low debt (**$175 million**), and available liquidity of **$357 million**[91](index=91&type=chunk) - Net capital expenditures in 2021 are expected to be in the range of **$275 million** to **$300 million**[91](index=91&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Operating income increased by 101.1% and net income by 101.6% in Q1 2021, driven by a 4.0% rise in operating revenues and a 1.4% decrease in total operating expenses Consolidated Operating Results (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :-------------------------- | :--- | :--- | :------- | | Operating revenues | $616,446 | $592,703 | 4.0% | | Total operating expenses | $553,975 | $561,637 | (1.4)% | | Operating income | $62,471 | $31,066 | 101.1% | | Net income | $46,492 | $23,058 | 101.6% | | Operating ratio | 89.9% | 94.8% | (4.9) pts | [Operating Revenues Analysis](index=22&type=section&id=Operating%20Revenues%20Analysis) Total operating revenues increased by 4.0% in Q1 2021, driven by Werner Logistics growth offsetting a slight TTS decrease, with improved pricing per tractor per week - Total operating revenues increased by **4.0%** to **$616.4 million** in Q1 2021[101](index=101&type=chunk) - Werner Logistics revenues increased by **$25.7 million** (**22.9%**), while TTS segment revenues decreased by **$1.9 million** (**0.4%**)[101](index=101&type=chunk) - Trucking revenues, net of fuel surcharge, increased **0.4%** due to a **1.3%** increase in average revenues per tractor per week, partially offset by a **0.9%** decrease in average tractors in service[104](index=104&type=chunk) - Werner Logistics revenues increased primarily due to higher pricing in Truckload Logistics (**22%** increase in revenues per load) and Intermodal (**6%** higher revenues per load, **23%** volume growth)[107](index=107&type=chunk) [Operating Expenses Analysis](index=23&type=section&id=Operating%20Expenses%20Analysis) Total operating expenses decreased by 1.4% in Q1 2021, improving the operating ratio to 89.9%, driven by lower insurance, depreciation, and higher asset sale gains, partially offset by increased rent, purchased transportation, and driver pay - Operating ratio improved to **89.9%** in Q1 2021 from **94.8%** in Q1 2020[108](index=108&type=chunk) - Salaries, wages and benefits decreased by **0.6%** due to fewer company truck miles and improved workers' compensation costs, despite increased driver pay rates (nearly **7%** per company driver mile)[109](index=109&type=chunk) - Fuel expense increased by **4.2%** due to higher average diesel fuel prices, partially offset by fewer company truck miles[113](index=113&type=chunk) - Insurance and claims decreased by **38.8%** (**$14.0 million**) primarily due to lower expense for new large dollar claims, despite higher liability insurance premiums[118](index=118&type=chunk) - Depreciation expense decreased by **7.1%** due to a prior year accounting estimate change for trucks sold in 2020[120](index=120&type=chunk) - Rent and purchased transportation expense increased by **15.9%**, mainly driven by higher spot truckload and dray rates in the Werner Logistics segment[123](index=123&type=chunk) - Other operating expenses decreased by **$9.8 million**, primarily due to higher gains on sales of used trucks and trailers (**$10.5 million** in Q1 2021 vs. **$2.5 million** in Q1 2020) and a **$1.0 million** gain from the WGL sale[126](index=126&type=chunk) [Other Expense (Income)](index=27&type=section&id=Other%20Expense%20(Income)) Total other expense (income) decreased by **$0.4 million** in Q1 2021, primarily due to lower interest expense from reduced average outstanding debt - Interest expense decreased by **$0.8 million** in Q1 2021 compared to Q1 2020, attributed to lower average outstanding debt[127](index=127&type=chunk) [Income Taxes](index=27&type=section&id=Income%20Taxes) The effective income tax rate increased to **24.9%** in Q1 2021 from **23.3%** in Q1 2020, mainly due to fewer favorable discrete income tax items - Effective income tax rate increased to **24.9%** in Q1 2021 from **23.3%** in Q1 2020[128](index=128&type=chunk) - The increase in tax rate was primarily due to a lower amount of favorable discrete income tax items[128](index=128&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Strong operating cash flow of **$135.9 million** in Q1 2021 funded capital expenditures, debt repayment, dividends, and stock repurchases, maintaining a strong financial position - Cash flow from operations increased by **1.9%** to **$135.9 million** in Q1 2021[129](index=129&type=chunk) - Net cash used in investing activities increased to **$41.3 million**, with net property additions of **$37.9 million**[130](index=130&type=chunk) - Net capital expenditures for 2021 are estimated to be in the range of **$275 million** to **$300 million**[131](index=131&type=chunk) - Repaid **$25.0 million** of debt in Q1 2021, reducing outstanding debt to **$175.0 million**[132](index=132&type=chunk) - Repurchased **130,446 shares** of common stock for **$5.5 million** in Q1 2021, with **2,686,562 shares** remaining available under authorization[132](index=132&type=chunk) - As of March 31, 2021, the company had **$83.1 million** in cash and cash equivalents and **$325.0 million** in available credit under its facilities[133](index=133&type=chunk) [Contractual Obligations and Commercial Commitments](index=29&type=section&id=Contractual%20Obligations%20and%20Commercial%20Commitments) No material changes occurred in contractual obligations and commercial commitments during Q1 2021 compared to the 2020 Form 10-K disclosures - No material changes in contractual obligations and commercial commitments from the 2020 Form 10-K[134](index=134&type=chunk) [Regulations](index=29&type=section&id=Regulations) No material changes occurred in the status of proposed regulations from the 2020 Form 10-K that may affect company operations - No material changes in the status of proposed regulations from the 2020 Form 10-K[135](index=135&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates, particularly accrued liabilities for insurance and claims, remain unchanged from the 2020 Form 10-K, requiring significant judgment - Estimates of accrued liabilities for insurance and claims for bodily injury, property damage, and workers' compensation are critical accounting estimates[137](index=137&type=chunk) - No material changes to critical accounting estimates from those discussed in the 2020 Form 10-K[138](index=138&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity prices, foreign currency, and interest rates, mitigating them with fuel surcharges and interest rate swaps, and preparing for LIBOR discontinuation - The company is exposed to commodity price risk from diesel fuel, recovering a majority of price increases through customer fuel surcharges[140](index=140&type=chunk) - Foreign currency exchange rate risk primarily relates to the Mexican Peso, with foreign currency translation losses of **$1.6 million** in Q1 2021[141](index=141&type=chunk) - Interest rate risk is managed through a mix of variable rate debt and interest rate swap agreements, with **$150 million** of debt effectively fixed at **2.34%** through May 2024[142](index=142&type=chunk) - The company is communicating with banks regarding the transition from LIBOR, which is expected to cease publication by June 2023[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management deemed disclosure controls effective at a reasonable assurance level, with no material changes in internal control over financial reporting, acknowledging inherent limitations - Disclosure controls and procedures were evaluated and deemed effective at a reasonable assurance level[144](index=144&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[145](index=145&type=chunk) - Management acknowledges that internal control systems provide only reasonable, not absolute, assurance due to inherent limitations[146](index=146&type=chunk) [PART II – OTHER INFORMATION](index=32&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **130,446** common shares in February 2021 under an authorized program, with **2,686,562** shares remaining available for repurchase as of March 31, 2021 - The Board of Directors authorized a stock repurchase program for up to **5,000,000 shares** on May 14, 2019[148](index=148&type=chunk) Issuer Purchases of Equity Securities (Q1 2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :----------------- | :----------------------------- | :------------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | January 1-31, 2021 | — | — | — | 2,817,008 | | February 1-28, 2021 | 130,446 | 42.22 | 130,446 | 2,686,562 | | March 1-31, 2021 | — | — | — | 2,686,562 | | Total | 130,446 | 42.22 | 130,446 | 2,686,562 | - As of March 31, 2021, **2,686,562 shares** remained available for repurchase under the current authorization[148](index=148&type=chunk)[151](index=151&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, compensation plans, officer certifications, and iXBRL financial information - Key exhibits include Restated Articles of Incorporation, Revised and Restated By-Laws, Amended and Restated Equity Plan, Change in Control Severance Plan, and CEO/CFO certifications[153](index=153&type=chunk) - Exhibit 101 provides the unaudited financial information from the 10-Q in iXBRL format[153](index=153&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2021, revenues increased by 4% to $616 million, adjusted EPS grew by 72% to $0.68 per share, and adjusted operating income rose by 68% to $62.7 million [13][24][25] - The adjusted operating margin net of fuel for Truckload Transportation Services (TTS) grew by 570 basis points to 14.2% [13][25] - Equipment gains from truck and trailer sales reached $10.5 million, an increase of $8 million compared to the previous year [21] Business Line Data and Key Metrics Changes - TTS revenues were flat year-over-year due to a decrease in miles per truck, while adjusted operating income for TTS increased by 67% to $58.9 million [25] - Dedicated revenues net of fuel increased by 10% to $254 million, with average trucks growing by 7.5% [26] - One-Way Truckload revenues net of fuel decreased by 12% to $157 million, with average trucks decreasing by 12.7% [27] - Logistics revenues grew by 23% to $138 million, with truckload logistics revenues increasing by 20% [28] Market Data and Key Metrics Changes - Retail inventories are at a 30-year low, indicating strong demand for truckload freight [8] - The driver market remains tight, impacting the supply of truckload capacity [9] - The company expects strong truckload freight demand to continue through 2022 [8] Company Strategy and Development Direction - The company is focused on a consumer-centric freight base, with over 70% of revenues coming from retail and food and beverage [12] - The 5T's plus S strategy emphasizes operational efficiency, safety, and driver retention [35] - The company is investing in technology and infrastructure, including new terminals and a modern fleet [31][32] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued strong freight demand and inventory restocking in the coming quarters [52] - The company is optimistic about maintaining elevated rates in the spot market through the end of the year and into 2022 [59][51] - Management acknowledges challenges in inventory levels and supply chain disruptions affecting restocking efforts [68][70] Other Important Information - The company repurchased 130,000 shares and raised its quarterly dividend rate by 11% [33] - The company is committed to maintaining a strong financial position with a long-term leverage goal of a net debt to annual EBITDA ratio of 0.5 to 1 turn [34] Q&A Session Summary Question: Rate growth dynamics and future expectations - Management expressed confidence that rates will remain elevated, with spot market rates expected to outpace contract rates through 2022 [59] Question: Fleet mix and growth expectations - Management aims to stabilize the One-Way Truckload fleet while expecting growth primarily in the Dedicated segment [62] Question: Customer inventory levels and restocking timelines - Management indicated that inventory restocking will take several more quarters due to low levels and various supply chain challenges [68][70] Question: Cross-border business outlook - Management noted that the cross-border business faced temporary pressures but remains optimistic about its potential for growth [75] Question: Logistics segment performance and future expectations - Management highlighted improvements in the logistics segment and expects continued progress throughout the year [82] Question: Dedicated contracts and rate increases - Management stated that a significant portion of Dedicated contracts will be renegotiated this year, with expectations for rate increases [111] Question: Wage pressures and equipment gains - Management clarified that the deceleration in equipment gains is volume-related and not indicative of a peak in wage pressures [114]

ARRETSES 1Q 2021 EARNINGS PRESENTATION April 28, 2021 DISCLOSURE STATEMENT This presentation may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on information presently available to the Company's management and are curre ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [Mark one] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number: 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Nebraska ...

Financial Data and Key Metrics Changes - In Q4 2020, revenues were flat at $620 million, adjusted EPS grew 33% to $0.89 per share, and adjusted operating income increased 30% to $82.7 million [12][19] - For the full year 2020, revenues decreased 4% to $2.4 billion, adjusted EPS increased 8% to $2.59 per share, and adjusted operating income grew 7% to $241.9 million [12][20] - The adjusted TTS operating margin net of fuel for 2020 was 14%, exceeding the long-term goal range of 10% to 16% [13] Business Line Data and Key Metrics Changes - TTS revenues decreased 2% in Q4 due to lower fuel surcharges, but adjusted operating income increased 32% with a 420 basis point expansion of operating margin [21] - Dedicated freight revenues grew by 9% to $258 million in Q4, while One-Way Truckload revenues decreased 7% to $176 million [22][23] - Logistics revenues increased 8% to $130 million in Q4, with truckload logistics revenues up 2% despite a 12% volume decline [24] Market Data and Key Metrics Changes - Over 70% of revenues are generated from retail or food and beverage sectors, with nearly half of revenues coming from the top 10 customers [10] - Revenues from top 10 customers increased to 49% in 2020, up from a 3-year average of 43% [11] Company Strategy and Development Direction - The company is focused on enhancing its 5 T's + S strategy, emphasizing sustainability and operational execution [7][38] - The company plans to modestly grow its truck fleet in 2021, primarily in Dedicated, while maintaining a strong financial position [42][32] - The sale of the Global Logistics freight forwarding business is expected to close soon, allowing the company to focus on enhancing North American logistics capabilities [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong freight demand for 2021, driven by customer sales growth and low inventory levels [4][5] - The company anticipates challenges in driver availability and capacity growth due to ongoing industry constraints [5][49] - Management expects continued strong contract pricing opportunities in the upcoming bid season [50] Other Important Information - The company achieved its lowest accident rate in 28 years and the lowest work injury rate in 15 years in 2020 [18] - The company repurchased 1.2 million shares for $48 million in Q4, with a total of $171 million in share repurchases over the last three years [31] Q&A Session Summary Question: Insights on One-Way guidance for the first half - Management indicated that January and February have been seasonally stronger than normal, with expectations for project opportunities in Q2 [56][57] Question: Margins and expectations for 2021 - Management is optimistic about exceeding guidance, with potential for margins to improve based on market dynamics and capacity constraints [62][63] Question: Performance of Logistics segment - Management acknowledged that Logistics did not perform as expected but noted foundational progress and plans for improvement in 2021 [86][87] Question: Final mile capabilities - Management highlighted the growth in final mile operations and the focus on building a national presence while maintaining strong margins [90][91]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [Mark one] For the quarterly period ended September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Nebraska 47-0648386 (State or other jurisdiction of inc ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-14690 WERNER ENTERPRISES, INC. (Exact name of registrant as specified in its charter) Nebraska 47-0648386 (State or other jurisdiction of incorporation or organization) FORM 10-Q [Mark one] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly peri ...