Financial Data and Key Metrics Changes - In Q4 2022, revenues increased by 13% to $861 million, while adjusted EPS decreased by 13% to $0.99 [11] - For the full year, revenues rose by 20% to $3.3 billion, and adjusted EPS increased by 7% to a record $3.70 [11] - Adjusted TTS operating margin for Q4 was 15.8%, while for the year it was 15.1% [11] Business Line Data and Key Metrics Changes - Dedicated freight demand in Q4 was solid, with revenues net of fuel increasing by 9% and average trucks up by 4% [25] - One-Way Truckload revenues net of fuel increased by 2%, with average trucks increasing by 7% due to the Baylor acquisition [25] - Logistics revenues grew by 15% in Q4, driven by the acquisition of ReedTMS, with truckload logistics revenues increasing by 20% [26] Market Data and Key Metrics Changes - The freight market in Q4 was seasonally soft compared to the previous year, impacting One-Way Truckload and Logistics [12][20] - The company expects the freight market to be challenging in the first half of 2023, with gradual improvement anticipated in the second half [7] - Retail and food and beverage sectors accounted for 75% of the revenue base in the past year [19] Company Strategy and Development Direction - The company has built a resilient business model that performs well in both strong and challenging freight markets [8] - The introduction of the "Drive" strategy focuses on sustainability, capital allocation, and innovation [16] - The company aims to enhance shareholder value through dividends and share repurchases while maintaining a strong financial position [36] Management's Comments on Operating Environment and Future Outlook - Management anticipates a challenging freight market in early 2023, with expectations for improvement in the latter half of the year [7][42] - The company is focused on integrating recent acquisitions and capitalizing on synergies [37] - Management expressed confidence in the ability to navigate economic challenges due to a diversified business portfolio [8][42] Other Important Information - The company achieved the lowest DOT preventable accident rate per million miles in the last 10 years, reflecting a strong focus on safety [9][31] - The company ended the year with net debt of $587 million and equity of over $1.4 billion, maintaining a net debt-to-EBITDA ratio within its long-term target [33] - The company plans to invest in fleet modernization and technology to enhance operational efficiency [35] Q&A Session Summary Question: Thoughts on earnings power entering 2023 - Management acknowledged headwinds affecting EPS but emphasized ongoing integration efforts and improvements in safety metrics to mitigate these challenges [48][50] Question: Outlook on retail customer inventories - Management noted that while retail inventories are being rightsized, they are optimistic about working with successful retailers who are nearing the end of their inventory adjustments [56][58] Question: Impact of acquisitions on length of haul and margins - Management indicated that acquisitions have contributed to a shorter length of haul but expect this trend to stabilize moving forward [62][64] Question: Thoughts on acquisitions in a downturn - Management expressed openness to future acquisitions but emphasized the importance of focusing on integration and execution of recent acquisitions first [86] Question: Pricing dynamics in the current market - Management indicated a willingness to engage in shorter contract durations if beneficial, while maintaining a focus on long-term contracts for stability [88][91]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [Mark one] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 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 inc ...

3Q 2022 EARNINGS PRESENTATION November 2, 2022 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 current only ...

Financial Data and Key Metrics Changes - Revenues increased by 18% year-over-year to $828 million, adjusted operating income rose by 8% to $79.5 million, and adjusted EPS increased by 14% to $0.90 per share [9][12][30] - Adjusted operating income by segment showed TTS grew by $11 million, while logistics declined by $2 million and corporate and other declined by $3.8 million [12][19] Business Line Data and Key Metrics Changes - Dedicated segment ended the quarter with 5,430 trucks, adding 110 during the quarter and 310 year-over-year, with strong demand from long-term customers [9][10] - One-Way Truckload had 3,150 trucks, up 50% year-over-year, but faced fewer project and surge freight opportunities [10][14] - TTS revenues increased by 18% due to 4% more trucks and 8% higher rates, while One-Way Truckload revenues net of fuel declined slightly [13][14] Market Data and Key Metrics Changes - The freight market is experiencing a softening, with fewer premium pop-up freight opportunities and a decline in project and surge freight [10][31] - The logistics segment saw a significant decline in premium pricing opportunities, expected to be down 60% to 70% in the fourth quarter compared to the previous year [50][81] Company Strategy and Development Direction - The company is focused on maintaining a strong and flexible financial position, with a net debt-to-EBITDA ratio of 0.7x and ongoing evaluations for acquisitions in North America [21][26] - The strategy includes careful acquisition processes, emphasizing complementary businesses and strong management teams [23][26] Management's Comments on Operating Environment and Future Outlook - Management noted rising macroeconomic headwinds but achieved year-over-year growth in adjusted earnings per share for the ninth consecutive quarter [6][30] - The company anticipates a subdued peak season in the fourth quarter compared to the previous year, with ongoing inflationary pressures expected to continue [31][30] Other Important Information - The company has made significant investments in its driver training schools, expanding from 13 to 22 locations, although some temporary issues affected performance this quarter [12][60] - The company is committed to ESG initiatives, including partnerships for autonomous truck technology and hydrogen engine purchases [27] Q&A Session Summary Question: Outlook on smaller carriers and spot rates - Management noted a significant increase in deactivations of small carriers, with 3,500 to 4,000 trucks exiting the market weekly, indicating a potential bottoming out of the market [40] Question: Performance of Dedicated segment - Management expressed confidence in the Dedicated segment's resilience, highlighting long-term relationships with customers and the ability to manage inflationary pressures [42] Question: Update on long-term agreements in One-Way business - Management reported that approximately 25% of One-Way business is now tied to long-term agreements, providing stability in a slowing economy [47] Question: Logistics operating margins and future expectations - Management acknowledged that logistics margins were impacted by a lack of project opportunities and startup costs, but expressed optimism for stabilization in the future [81] Question: Capacity exiting the market and brokerage side - Management indicated that while some carriers are exiting, the overall number of carriers in the network is still growing due to recruitment efforts [70] Question: Inflationary cost increases and contract renewals - Management emphasized the importance of discipline in contract renewals and the ability to pass on cost increases to customers [56][78]

INVESTOR PRESENTATION August 2022 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 current only as of the da ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements based on current management information, which are subject to various known and unknown risks, uncertainties, and assumptions - Forward-looking statements are based on currently available information but involve risks, uncertainties, and assumptions that could cause actual results to differ materially[10](index=10&type=chunk) - Readers should not unduly rely on these statements, which speak only to the date they were made, and the company has no obligation to update them unless required by applicable securities laws[10](index=10&type=chunk) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This chapter presents the unaudited consolidated financial statements for Werner Enterprises, Inc, including statements of income, comprehensive income, balance sheets, cash flows, stockholders' equity, and detailed notes [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) **Consolidated Statements of Income (Three Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $836,276 | $649,814 | 28.7% | | Total operating expenses | $761,353 | $572,951 | 32.9% | | Operating income | $74,923 | $76,863 | (2.5)% | | Net income attributable to Werner | $72,290 | $72,032 | 0.4% | | Basic EPS | $1.12 | $1.06 | 5.7% | | Diluted EPS | $1.12 | $1.06 | 5.7% | **Consolidated Statements of Income (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Operating revenues | $1,600,881 | $1,266,260 | 26.4% | | Total operating expenses | $1,442,447 | $1,126,926 | 28.0% | | Operating income | $158,434 | $139,334 | 13.7% | | Net income attributable to Werner | $126,039 | $118,524 | 6.3% | | Basic EPS | $1.94 | $1.74 | 11.5% | | Diluted EPS | $1.93 | $1.74 | 10.9% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) **Consolidated Statements of Comprehensive Income (Three Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income | $73,609 | $72,032 | | Other comprehensive income (loss) | $1,236 | $2,225 | | Comprehensive income attributable to Werner | $73,526 | $74,257 | **Consolidated Statements of Comprehensive Income (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net income | $128,644 | $118,524 | | Other comprehensive income (loss) | $6,020 | $1,960 | | Comprehensive income attributable to Werner | $132,059 | $120,484 | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) **Consolidated Condensed Balance Sheets (as of June 30, 2022 and December 31, 2021):** | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total current assets | $772,405 | $631,213 | | Property and equipment, net | $1,670,680 | $1,613,243 | | Total assets | $2,848,587 | $2,603,713 | | Total current liabilities | $470,980 | $268,683 | | Total liabilities | $1,466,163 | $1,240,216 | | Total stockholders' equity | $1,343,872 | $1,327,550 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) **Consolidated Statements of Cash Flows (Six Months Ended June 30):** | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $267,527 | $189,464 | | Net cash used in investing activities | $(169,680) | $(104,605) | | Net cash provided by (used in) financing activities | $(97,941) | $77,847 | | Net increase in cash and cash equivalents | $228 | $162,794 | | Cash and cash equivalents, end of period | $54,424 | $192,128 | [Consolidated Statements of Stockholders' Equity and Temporary Equity - Redeemable Noncontrolling Interest](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20and%20Temporary%20Equity%20-%20Redeemable%20Noncontrolling%20Interest) **Stockholders' Equity Changes (Three Months Ended June 30, 2022):** | Item | Amount (in thousands) | | :--- | :--- | | Balance, March 31, 2022 | $1,341,464 | | Net income attributable to Werner | $72,290 | | Other comprehensive income | $1,236 | | Purchases of common stock | $(65,933) | | Dividends on common stock | $(8,244) | | Balance, June 30, 2022 | $1,343,872 | **Stockholders' Equity Changes (Six Months Ended June 30, 2022):** | Item | Amount (in thousands) | | :--- | :--- | | Balance, December 31, 2021 | $1,327,550 | | Net income attributable to Werner | $126,039 | | Other comprehensive income | $6,020 | | Purchases of common stock | $(102,113) | | Dividends on common stock | $(16,051) | | Balance, June 30, 2022 | $1,343,872 | [Notes to Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [(1) Basis of Presentation and Recent Accounting Pronouncements](index=10&type=section&id=(1)%20Basis%20of%20Presentation%20and%20Recent%20Accounting%20Pronouncements) - The unaudited interim consolidated financial statements are prepared in accordance with SEC instructions to Form 10-Q and U.S. GAAP, reflecting all normal recurring adjustments[28](index=28&type=chunk) - The adoption of ASU No 2020-04, Reference Rate Reform (Topic 848), in Q1 2022 did not have a material impact on the consolidated financial statements[31](index=31&type=chunk) [(2) Business Acquisitions](index=10&type=section&id=(2)%20Business%20Acquisitions) - Acquired an **80% ownership interest in ECM Associated, LLC** on July 1, 2021, for **$141.3 million**, expanding regional truckload carrier services[32](index=32&type=chunk) - Acquired **100% of NEHDS Logistics, LLC** on November 22, 2021, for **$62.3 million**, enhancing final mile residential delivery services[33](index=33&type=chunk) **Amortization Expense on Intangible Assets:** | Period | Amount (in millions) | | :--- | :--- | | Three months ended June 30, 2022 | $1.4 | | Six months ended June 30, 2022 | $2.7 | [(3) Revenue](index=11&type=section&id=(3)%20Revenue) - Revenues are recognized over time as control of promised services is transferred to customers, reflecting the consideration expected for those services[35](index=35&type=chunk) **Revenues by Segment (Three Months Ended June 30):** | Revenue Source | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $613,616 | $491,200 | | Werner Logistics | $203,861 | $141,673 | | Other revenues | $19,424 | $17,134 | | Total revenues | $836,276 | $649,814 | **Revenues by Geographic Area (Six Months Ended June 30):** | Geographic Area | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | United States | $1,481,753 | $1,157,385 | | Mexico | $94,752 | $78,081 | | Other | $24,376 | $30,794 | | Total revenues | $1,600,881 | $1,266,260 | [(4) Leases](index=12&type=section&id=(4)%20Leases) - The company primarily enters into operating leases for real estate, with terms ranging from 1 to 18 years, and recognizes right-of-use assets and lease liabilities on the balance sheet[41](index=41&type=chunk)[42](index=42&type=chunk) **Operating Lease Information (as of June 30, 2022):** | Metric | Value | | :--- | :--- | | Right-of-use assets | $34,143 thousand | | Total operating lease liabilities | $35,233 thousand | | Weighted-average remaining lease term | 7.40 years | | Weighted-average discount rate | 2.6% | **Operating Lease Expense:** | Period | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Three months ended June 30 | $5.3 | $3.5 | | Six months ended June 30 | $10.4 | $7.1 | [(5) Fair Value](index=13&type=section&id=(5)%20Fair%20Value) - The fair value hierarchy prioritizes observable inputs (Level 1 and 2) over unobservable inputs (Level 3) for measuring fair value[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Financial instruments not recorded at fair value, such as cash, accounts receivable, accounts payable, and long-term debt, are carried at amounts that approximate fair value (categorized as Level 2)[55](index=55&type=chunk)[56](index=56&type=chunk) **Fair Value of Equity Securities (Other non-current assets):** | Date | Fair Value (in thousands) | Level in Hierarchy | | :--- | :--- | :--- | | June 30, 2022 | $2,818 | 1 | | December 31, 2021 | $17,166 | 1 | [(6) Investments](index=14&type=section&id=(6)%20Investments) - The company invested **$20.0 million in Mastery Logistics Systems, Inc (MLSI)** preferred stock in June 2022, with the investment value increasing to **$86.8 million** as of June 30, 2022, from $38.2 million at December 31, 2021[57](index=57&type=chunk) - An **unrealized gain of $28.6 million** was recognized on the MLSI investment for the three and six months ended June 30, 2022, due to third-party investments[57](index=57&type=chunk) **Unrealized Gains/Losses on Equity Investments with Readily Determinable Fair Values:** | Period | 2022 (in millions) | 2021 (in millions) | | :--- | :--- | :--- | | Three months ended June 30 | $(4.5) (loss) | $20.2 (gain) | | Six months ended June 30 | $(14.3) (loss) | $20.2 (gain) | [(7) Debt and Credit Facilities](index=14&type=section&id=(7)%20Debt%20and%20Credit%20Facilities) - Entered a new credit agreement with Wells Fargo for a **$300.0 million unsecured revolving line of credit** and a **$100.0 million unsecured term loan**, both expiring May 14, 2024[59](index=59&type=chunk) - Amended the BMO Harris credit agreement, increasing the revolving line of credit from **$200.0 million to $300.0 million**, expiring May 14, 2024[61](index=61&type=chunk)[62](index=62&type=chunk) **Outstanding Debt and Borrowing Capacity (as of June 30, 2022):** | Metric | Amount (in millions) | | :--- | :--- | | Total outstanding debt | $445.0 | | Outstanding under revolving lines of credit | $250.0 | | Outstanding under Wells Term Loan | $100.0 | | Outstanding under BMO Term Loan | $95.0 | | Total available borrowing capacity (revolving) | $291.6 | [(8) Commitments and Contingencies](index=15&type=section&id=(8)%20Commitments%20and%20Contingencies) - Committed to property and equipment purchases of approximately **$182.4 million** as of June 30, 2022[65](index=65&type=chunk) - A **$92.0 million adverse jury verdict** from a 2014 accident is under appeal; the company recorded a **$31.4 million liability** and a **$79.2 million receivable** from insurers[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) - A **$150.0 million settlement** for a 2020 motor vehicle accident resulted in **$9.5 million insurance and claims expense** in Q2 2022, with a **$140.0 million receivable** from insurers[70](index=70&type=chunk) [(9) Earnings Per Share](index=16&type=section&id=(9)%20Earnings%20Per%20Share) - Basic earnings per share is computed by dividing net income attributable to Werner by the weighted average number of common shares outstanding[73](index=73&type=chunk) - Diluted earnings per share includes the effect of dilutive potential common shares (outstanding restricted stock awards) using the treasury stock method[73](index=73&type=chunk) **Earnings Per Share (Three Months Ended June 30):** | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income attributable to Werner (in thousands) | $72,290 | $72,032 | | Basic earnings per share | $1.12 | $1.06 | | Diluted earnings per share | $1.12 | $1.06 | [(10) Segment Information](index=16&type=section&id=(10)%20Segment%20Information) - The company has two reportable segments: Truckload Transportation Services (TTS), comprising Dedicated and One-Way Truckload, and Werner Logistics, including Truckload Logistics, Intermodal, and Final Mile[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) **Revenues by Segment (Three Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $613,616 | $491,200 | | Werner Logistics | $203,861 | $141,673 | | Other | $18,946 | $16,725 | | Corporate | $478 | $409 | | Total | $836,276 | $649,814 | **Operating Income (Loss) by Segment (Six Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Truckload Transportation Services | $140,097 | $130,736 | | Werner Logistics | $21,171 | $8,501 | | Other | $906 | $2,529 | | Corporate | $(3,740) | $(2,432) | | Total | $158,434 | $139,334 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This chapter provides management's perspective on the company's financial condition, results of operations, and liquidity, discussing performance across its segments and analyzing key financial trends [Overview](index=19&type=section&id=Overview) - The company operates in two reportable segments: Truckload Transportation Services (TTS), focusing on consumer nondurable products, and Werner Logistics, providing broader transportation management and alternative modes[85](index=85&type=chunk) - TTS segment revenues are primarily per-mile, with fuel surcharges mitigating fuel price increases, while Werner Logistics is less asset-intensive and relies on qualified third-party capacity providers[86](index=86&type=chunk)[89](index=89&type=chunk) - Financial results are significantly affected by company driver and independent contractor availability, markets for new and used revenue equipment, and self-insurance costs for claims[87](index=87&type=chunk)[88](index=88&type=chunk) [COVID-19](index=20&type=section&id=COVID-19) - The transportation industry was designated essential during the COVID-19 pandemic, and the company's focus on essential products helped manage through the difficult economic environment[90](index=90&type=chunk)[91](index=91&type=chunk) - Demand for the company's services is expected to continue to moderate during the remainder of 2022[91](index=91&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) [Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021](index=23&type=section&id=Three%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202021) - Trucking revenues, net of fuel surcharge, **increased 13.9%** due to an **8.1% increase in average tractors** and a **5.4% increase in average revenues per tractor per week**, partially offset by lower length of haul[101](index=101&type=chunk) - Average diesel fuel prices were **$2.21 per gallon higher** in Q2 2022 than in Q2 2021, leading to a **106.6% increase** in trucking fuel surcharge revenues[103](index=103&type=chunk)[110](index=110&type=chunk) **Operating Revenues (Three Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $836,276 | $649,814 | 28.7% | | TTS segment revenues | $613,616 | $491,200 | 24.9% | | Werner Logistics revenues | $203,861 | $141,673 | 43.9% | **Key Operating Expenses (Three Months Ended June 30):** | Expense Category | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Salaries, wages and benefits | $253,639 | $210,095 | 20.7% | | Fuel | $125,446 | $58,503 | 114.4% | | Insurance and claims | $41,071 | $20,739 | 98.0% | | Rent and purchased transportation | $197,116 | $150,920 | 30.6% | | Operating income | $74,923 | $76,863 | (2.5)% | [Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021](index=26&type=section&id=Six%20Months%20Ended%20June%2030,%202022%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202021) - Average diesel fuel prices were **$1.74 per gallon higher** in the first six months of 2022 compared to the same period in 2021[130](index=130&type=chunk) - Gains on sales of assets (primarily used tractors and trailers) were **$41.1 million** in the first six months of 2022, up from **$25.0 million** in 2021, driven by significantly improved pricing in the used equipment market[135](index=135&type=chunk) **Operating Revenues (Six Months Ended June 30):** | Segment | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $1,600,881 | $1,266,260 | 26.4% | | TTS segment revenues | $1,172,033 | $954,149 | 22.8% | | Werner Logistics revenues | $392,869 | $279,526 | 40.5% | **Key Operating Expenses (Six Months Ended June 30):** | Expense Category | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Salaries, wages and benefits | $495,635 | $414,948 | 19.4% | | Fuel | $213,867 | $109,341 | 95.6% | | Insurance and claims | $68,563 | $42,795 | 60.2% | | Rent and purchased transportation | $382,353 | $297,413 | 28.6% | | Operating income | $158,434 | $139,334 | 13.7% | [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, the company maintained a strong financial position with **$54.4 million in cash and cash equivalents** and over **$1.3 billion in stockholders' equity**[139](index=139&type=chunk) - Cash flow from operations **increased by 41.2% to $267.5 million** for the six months ended June 30, 2022, compared to the prior year[141](index=141&type=chunk) - Net capital expenditures for 2022 are estimated to be in the range of **$275 million to $325 million**, primarily for revenue equipment, to be funded by operations and existing credit facilities[142](index=142&type=chunk) - The company repurchased **2,495,100 shares of common stock for $102.1 million** during the six months ended June 30, 2022, with 2,527,014 shares remaining available under the current authorization[144](index=144&type=chunk) [Regulations](index=29&type=section&id=Regulations) - There have been no material changes in the status of proposed regulations previously disclosed in the 2021 Form 10-K[145](index=145&type=chunk) [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) - No material changes have occurred to the critical accounting estimates, such as accrued liabilities for insurance and claims, from those discussed in the 2021 Form 10-K[147](index=147&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This chapter discusses the company's exposure to market risks, including commodity price risk (diesel fuel), foreign currency exchange rate risk, and interest rate risk [Commodity Price Risk](index=29&type=section&id=Commodity%20Price%20Risk) - The company is exposed to diesel fuel price fluctuations, with a majority of increases recovered through customer fuel surcharge programs, though not all costs are offset[149](index=149&type=chunk) - As of June 30, 2022, the company had no derivative financial instruments to reduce its exposure to fuel price fluctuations[149](index=149&type=chunk) [Foreign Currency Exchange Rate Risk](index=29&type=section&id=Foreign%20Currency%20Exchange%20Rate%20Risk) - Business in foreign countries, primarily Mexico, is conducted with most foreign revenues denominated in U.S. Dollars to reduce direct foreign currency risk[150](index=150&type=chunk) - Foreign currency translation losses were **$47 thousand** for Q2 2022, compared to gains of **$1.9 million** for Q2 2021, primarily related to changes in the value of revenue equipment in Mexico[150](index=150&type=chunk) [Interest Rate Risk](index=29&type=section&id=Interest%20Rate%20Risk) - Interest rate exposure is managed through a mix of variable interest rate debt and interest rate swap agreements[151](index=151&type=chunk) - **$150 million** of variable interest rate debt was effectively fixed at **2.31%** through May 2024 with two interest rate swap agreements[151](index=151&type=chunk) - A hypothetical one-percentage point increase in the SOFR interest rate would increase annual interest expense by approximately **$2.0 million** on the remaining $200 million variable rate debt[151](index=151&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures, concluding they are effective at a reasonable assurance level - Management, including the CEO and CFO, concluded that disclosure controls and procedures are **effective at a reasonable assurance level**[152](index=152&type=chunk) - **No material changes** in internal control over financial reporting occurred during the most recent fiscal quarter[153](index=153&type=chunk) - Internal control systems provide reasonable, not absolute, assurance and are subject to inherent limitations, meaning they may not prevent all errors or intentional fraud[154](index=154&type=chunk) [PART II – OTHER INFORMATION](index=31&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) This section refers readers to Note 8 in the Notes to Consolidated Financial Statements for detailed information regarding the company's legal proceedings - Information regarding legal proceedings is provided in Note 8 of the Notes to Consolidated Financial Statements (Unaudited)[157](index=157&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This chapter states that there have been no material changes from the risk factors previously disclosed in the company's 2021 Form 10-K - There have been **no material changes** from the risk factors disclosed in the 2021 Form 10-K[159](index=159&type=chunk) - Readers should consider the risk factors from the 2021 Form 10-K and additional unknown risks that may adversely affect the business[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This chapter details the company's stock repurchase program, authorizing the repurchase of up to 6,000,000 shares of common stock - The Board of Directors approved a new stock repurchase program on November 9, 2021, authorizing the repurchase of up to **6,000,000 shares** of common stock[160](index=160&type=chunk) **Stock Repurchases (Q2 2022):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | April 1-30, 2022 | — | $— | 4,177,014 | | May 1-31, 2022 | 1,001,909 | $40.49 | 3,175,105 | | June 1-30, 2022 | 648,091 | $39.14 | 2,527,014 | | Total | 1,650,000 | $39.96 | | [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This chapter lists all exhibits filed with the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and iXBRL formatted financial information - Exhibits include organizational documents (Restated Articles of Incorporation, Revised and Restated By-Laws) and certifications from the CEO and CFO (Sections 302 and 906 of Sarbanes-Oxley Act)[165](index=165&type=chunk) - Unaudited financial information for the quarter ended June 30, 2022, is provided in iXBRL format as Exhibit 101[165](index=165&type=chunk) [SIGNATURES](index=33&type=section&id=SIGNATURES) This section confirms the official signing of the Quarterly Report on Form 10-Q by authorized officers of Werner Enterprises, Inc on August 8, 2022 - The report was signed on August 8, 2022, by John J Steele (Executive Vice President, Treasurer and Chief Financial Officer) and James L Johnson (Executive Vice President, Chief Accounting Officer and Corporate Secretary)[169](index=169&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2022, revenues increased by 29% to $836 million, while adjusted operating income declined by 2% to $77.6 million, and adjusted EPS increased by 1% to $0.87 per share [15][20][25] - The increase in insurance and claims expense was significant, rising over $20 million year-over-year, impacting adjusted EPS negatively by $0.19 per share [9][15] Business Line Data and Key Metrics Changes - The Dedicated segment ended the quarter with 5,320 trucks, achieving 6% truck growth year-over-year, while One-Way Truckload had 3,080 trucks, including a 14% increase in average trucks due to the ECM acquisition [16][17] - Dedicated revenues, net of fuel, increased by 14%, and revenue per truck per week increased by 9.1% [23][34] - One-Way Truckload revenues, net of fuel, increased by 13%, but revenue per truck per week declined nearly 1% due to a decrease in miles per truck [24] Market Data and Key Metrics Changes - The consumer-oriented freight base performed well, with nearly three-quarters of freight revenues coming from retail and food and beverage sectors [13][31] - The freight market for One-Way Truckload moderated from strong to seasonally normal levels, while Dedicated freight demand remained strong and steady [57][59] Company Strategy and Development Direction - The company introduced the Werner DRIVE strategy, focusing on durable financial positioning, exceptional service, and innovation to enhance customer value [42][46] - The strategy emphasizes a balanced revenue portfolio and a commitment to high-quality customers, particularly in consumer staples [30][41] Management Comments on Operating Environment and Future Outlook - Management noted that the current market is returning to a more normalized setting after a period of hyperinflation in metrics like spot market pricing [74] - Concerns about the economy and truckload freight market have increased, with expectations of moderating demand for discretionary goods [61][63] Other Important Information - The company is facing challenges in receiving new trucks and trailers due to supply chain issues, impacting fleet refreshment [19][38] - The CFO announced retirement after 33 years, with a search for a successor underway [64][66] Q&A Session Summary Question: Discussion on Dedicated revenue outlook - Management highlighted a strong pipeline for Dedicated, with significant interest from customers, allowing for selective growth despite economic conditions [72] Question: Market cycle perspective - Management expressed confidence that the supply side is more constrained than in previous cycles, which may prevent a significant decline in the overall environment [76] Question: Capacity in Dedicated market - Management noted that Dedicated is a unique market with high service requirements, and the pipeline remains strong, indicating resilience in demand [84] Question: Impact of AB5 legislation - Management indicated that while Werner is minimally impacted, the legislation could disrupt the industry and negatively affect overall capacity [100] Question: ESG initiatives and new ventures - Management emphasized a commitment to lowering carbon emissions and exploring new technologies, including electric and hydrogen fuel options [107]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [Mark one] ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 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 incorpo ...

Financial Data and Key Metrics Changes - Revenues increased 24% to $765 million in Q1 2022, with adjusted EPS growing 40% to $0.96 per share and adjusted operating income rising 37% to $86.2 million [9][12][21] - TTS revenues per truck per week increased by 8.8%, with adjusted operating income growing 33% in TTS and 158% in logistics [12][21] Business Line Data and Key Metrics Changes - Dedicated segment achieved 5% truck growth year-over-year, with revenues net of fuel increasing 13% and revenue per truck per week rising 7.3% [9][14] - One-way Truckload revenues net of fuel increased 19%, with average trucks growing by 7% and revenue per truck per week rising 11% [14][21] - Logistics revenues grew 37% to $189 million, with Truckload Logistics revenues increasing by 46% [21] Market Data and Key Metrics Changes - Economic uncertainties are increasing due to inflation and interest rate tightening, but the business model is positioned to adapt and perform in disruptive markets [10][33] - Retail inventory levels have begun to increase, but inventory-to-sales ratios remain at historically low levels [32] Company Strategy and Development Direction - The company focuses on maintaining strong relationships with customers, particularly in the discount retail and food and beverage sectors, which are less sensitive to economic cycles [8][18] - Investments in technology and emerging cloud technology, including cybersecurity and predictive maintenance, remain a top priority [28][29] - The company aims to expand its dedicated fleet and improve driver satisfaction through targeted driver school networks [26][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning despite potential economic slowdowns, citing a resilient business model and strong customer relationships [33][50] - The company anticipates a moderation in freight demand but remains optimistic about dedicated customer demand and logistics growth [31][33] Other Important Information - The company reduced its net capital expenditures guidance for 2022 by $25 million due to expectations for lower new truck deliveries [23] - The average age of the truck and trailer fleet is expected to be 2.2 and 4.8 years, respectively, by year-end [31] Q&A Session Summary Question: Impact of China on Supply Chain - Management indicated that the situation in China could lead to a temporary slowdown in freight before improving, with expectations for a significant uptick in freight as restrictions ease [36][38] Question: Driver Turnover and Capacity Costs - Management noted that driver turnover has increased slightly due to lifestyle changes and the impact of Omicron, but they are expanding dedicated services to address this [39][40] Question: Market Characterization - Management characterized the current market as "very good" rather than "strong," emphasizing the stability of their customer base and the importance of consistent demand [44][45] Question: Contractual Negotiations - Management reported that they have not seen significant impacts on contractual negotiations despite moderation in the spot market, as most of their business is based on long-term contracts [56][58] Question: Margin Progression - Management provided insights on margin progression, indicating that while Q1 margins were strong, they expect some moderation in Q2 due to market conditions [60][61]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 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 47-0648386 (S ...