Summary of Werner Enterprises FY Conference Call Company Overview - **Company**: Werner Enterprises (NasdaqGS: WERN) - **Date**: February 18, 2026 - **Speakers**: Derek Leathers (Chairman and CEO), Chris Neal (Senior VP in Pricing and Strategic Planning) Key Industry Insights - **Market Conditions**: Spot rates have increased by 20%-30% compared to the previous year, indicating a potential market turnaround [2][3] - **Rejection Rates**: Daily rejection rates are currently between 13%-14%, which is considered a positive sign for supply-demand equilibrium [3][5] - **Regulatory Enforcement**: Increased enforcement of regulations is contributing to supply constraints, with ongoing efforts to address non-compliance in the driver school sector [4][56] Financial Performance and Projections - **EPS Growth**: The expectation is that EPS growth for Werner will be above or in line with peers [2] - **Acquisition Impact**: The recent acquisition of FirstFleet is expected to be immediately accretive, with identified synergies of approximately $18 million, enhancing operating income by about 300 basis points [12][18] - **Dedicated Business**: The dedicated segment is projected to perform well in a tightening market, with historical data suggesting a potential 300-500 basis point improvement in operating ratios during upcycles [26][39] Strategic Initiatives - **One-Way Restructuring**: The company is focusing on a one-way restructuring strategy, targeting expedited services in Mexico and leveraging technology to enhance operational efficiency [30][32] - **Logistics Strategy**: Werner is prioritizing margin recovery over growth in logistics, with ongoing efforts to reset sell rates and reduce operational expenses [61][62] - **Technology Integration**: The transition to a cloud-based tech stack is nearing completion, which will facilitate the application of AI across operations, leading to improved efficiency and reduced costs [70][72] Demand Outlook - **Stable Demand**: Current demand is stable, with inventory levels returning to pre-COVID levels, indicating a need for replenishment [33][35] - **Potential Stimulus Effects**: Anticipated tax refunds and potential interest rate adjustments could positively impact overall demand, particularly in the retail sector [36][37] Capital Allocation and Financial Strategy - **Debt Management**: Post-acquisition, the focus will be on debt paydown while remaining open to M&A opportunities and reinvestment in the business [68] - **Earnings Recovery**: The company aims to return to double-digit margin ranges by the end of the year, supported by rate increases and operational efficiencies [39][40] Additional Considerations - **Supply Constraints**: Ongoing enforcement actions and production challenges at OEMs may limit supply growth despite elevated order levels [56][59] - **Market Competitiveness**: The logistics landscape is expected to become more competitive, necessitating continued investment in technology and operational improvements [62] This summary encapsulates the key points discussed during the Werner Enterprises FY conference call, highlighting the company's strategic direction, market conditions, and financial outlook.

Core Insights - Werner Enterprises is restructuring its one-way truckload business to enhance fleet utilization and profitability, with changes expected to be completed in Q1, but financial impacts may not be evident until Q2 [1] Financial Performance - The company reported a net loss of $27.8 million, or 46 cents per share, for the quarter, which included $44.2 million in restructuring and impairment charges, primarily noncash [2] - Adjusted net income, excluding these charges, was $3.3 million, or 5 cents per share, which was below consensus estimates by 5 cents and down 3 cents year-over-year [2] - Consolidated revenue for the quarter was $738 million, a 2% decrease year-over-year and below the consensus estimate of $761 million [5] Business Strategy - Werner is transitioning its one-way business to more profitable services such as expedited, cross-border, and long-haul delivery using driver teams, while exiting unprofitable regional and short-haul operations [3] - The company is also integrating past fleet acquisitions to improve operational efficiency [3] - A significant move into dedicated trucking is underway, characterized by multiyear contracts with shippers, following the acquisition of dedicated carrier FirstFleet for $283 million, which added over 2,400 tractors and $615 million in revenue [4] Operational Metrics - Total truckload (TL) revenue decreased by 3% year-over-year to $513 million, with an adjusted operating ratio of 97.2%, which is 30 basis points worse than the previous year [5] - One-way revenue fell by 8% year-over-year, with average trucks in service declining by 10%, although revenue per truck per week increased by 2% [6] - The one-way fleet decreased from nearly 3,300 tractors in 2022 to less than 2,400 units, a 28% decline, yet the company anticipates participation in an improving spot market [7] - Dedicated revenue increased by 1% year-over-year, supported by a 2% rise in average truck count, despite a 1% decline in revenue per truck per week [7]

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [26] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [26] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [27] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [27] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, up from 63% a year ago [28] - One-way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [30] Market Data and Key Metrics Changes - Logistics revenue was $208 million, representing 28% of total fourth quarter revenues, with revenues decreasing 3% year-over-year [34] - Intermodal revenues increased 24% almost entirely from higher volume, while final mile revenues increased 4% year-over-year [35] - The overall portfolio is increasingly more durable and resilient, improving revenue stability and enhancing the ability to produce steady revenue and earnings growth [21] Company Strategy and Development Direction - The company is focused on executing its strategy to position the business for revenue and earnings growth as demand returns, including restructuring its one-way trucking business [6][9] - The acquisition of FirstFleet is expected to enhance the company's dedicated business and provide a more scalable platform for sustainable growth [7][18] - The company aims to drive growth in core business, operational excellence, and capital efficiency as part of its strategic priorities [12][15] Management's Comments on Operating Environment and Future Outlook - Management sees signs of encouragement for the industry and expects a more positive outlook for 2026 due to ongoing capacity attrition and early signs of demand improvement [6][21] - The company acknowledges challenges in the first quarter due to significant storms and ongoing restructuring but anticipates a material inflection in earnings by Q2 [55][103] - Management remains confident in the company's strategy and execution, focusing on controlling what can be controlled to create long-term value [46] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [14] - The acquisition of FirstFleet was completed for a total purchase price of $282.8 million, expected to be cash flow accretive [39] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [44] Q&A Session Summary Question: What is the normalized earnings power expected for the company? - Management acknowledges the complexity of the current situation but sees opportunities for earnings growth in 2026, particularly from the restructuring and the acquisition of FirstFleet [50][52] Question: Can you elaborate on the one-way restructuring and its impact on rates? - Management explains that contract rate renewals have a lag effect, and the guidance reflects this. The focus is on yield and optimizing the fleet for better service outcomes [60][62] Question: What are the expected benefits from the FirstFleet acquisition? - Management anticipates $18 million in cost synergies, with a significant portion expected to be realized within 2026, leading to margin improvements [78][80] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to the Mexico cross-border business, which is expected to perform well [95] Question: What are the expectations for Q1 margins and operating income? - Management acknowledges challenges in Q1 due to weather and restructuring but views these as temporary and expects improvements as the year progresses [102][103]

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [26] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [26] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [27] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [27] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, up from 63% a year ago [28] - One-Way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [29] Market Data and Key Metrics Changes - The Dedicated business is expected to grow significantly with the acquisition of FirstFleet, which will increase Dedicated's share of TTS revenue from approximately 43% to over half [20] - Intermodal revenues increased by 24%, while Final Mile revenues increased by 4% year-over-year [35] - Spot rates performed consistent with seasonal trends, with expectations for an upward trend throughout the year as capacity exits and demand improves [24] Company Strategy and Development Direction - The company is focusing on restructuring its One-Way trucking business to enhance profitability and fleet utilization [33] - The acquisition of FirstFleet is aimed at accelerating the shift towards higher-margin, more resilient Dedicated business [18] - The company plans to drive growth in core business, operational excellence, and capital efficiency as part of its strategy for 2026 [12][15] Management's Comments on Operating Environment and Future Outlook - Management sees signs of encouragement for the industry and expects a more positive outlook for Werner in 2026 due to ongoing capacity attrition and early signs of demand improvement [6] - The restructuring actions taken in Q4 are expected to yield noticeable profitability enhancements by Q2 2026 [53] - Management acknowledges the challenges posed by recent storms but remains optimistic about the company's ability to generate operating leverage and improved earnings performance as demand normalizes [44] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [14] - The total purchase price for FirstFleet was $282.8 million, funded through a combination of cash and debt [39] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [43] Q&A Session Summary Question: What is the normalized earnings power expected for the company? - Management sees opportunities for earnings growth in 2026, emphasizing that the restructuring of One-Way will not hinder participation in market inflections [50][52] Question: Can you elaborate on the One-Way restructuring and its impact on rates? - The restructuring is aimed at improving profitability and fleet utilization, with a focus on specialized freight [57][60] Question: What is the expected impact of FirstFleet on profitability? - FirstFleet's margins are lower than Werner's Dedicated margins, but identified cost synergies of $18 million are expected to improve margins significantly over time [76][78] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to the Mexico cross-border business, which is performing well [93] Question: What are the expectations for Q1 margins and operating income? - Management acknowledges challenges from severe weather but anticipates some degree of margin improvement compared to the previous year [100]

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [19] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [19] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [19] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [19] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, an increase from 63% a year ago [21] - One-way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [22] Market Data and Key Metrics Changes - The dedicated business continues to perform well, with a strong pipeline of opportunities and early realization of rate increases [6] - Logistics revenue was $208 million, representing 28% of total fourth quarter revenues, with intermodal revenues increasing by 24% [25] - Spot rates performed consistent with seasonal trends, with expectations for an upward trend throughout the year as capacity exits and demand improves [17] Company Strategy and Development Direction - The company is focusing on restructuring its one-way trucking business to enhance profitability and fleet utilization [24] - The acquisition of FirstFleet is expected to accelerate the shift towards higher-margin, more resilient dedicated business [14] - The company aims to drive growth in core business, operational excellence, and capital efficiency as part of its strategic priorities [10] Management's Comments on Operating Environment and Future Outlook - Management sees a more positive outlook for 2026, with signs of demand improvement and ongoing capacity attrition [4] - The restructuring actions taken are expected to result in noticeable profitability enhancements by the second quarter of 2026 [6] - Management acknowledges the challenges posed by recent storms but remains optimistic about the company's ability to adapt and grow [63] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [10] - The total purchase price for FirstFleet was $282.8 million, funded through a combination of cash and debt [29] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [32] Q&A Session Summary Question: What is the normalized earnings power expected for 2026? - Management sees opportunities for earnings growth and believes the restructuring will lead to a more agile operation, complemented by the acquisition of FirstFleet [37] Question: Can you explain the one-way restructuring and its impact on rates? - The restructuring is aimed at improving profitability and fleet utilization, with a focus on specialized services [40] Question: What is the expected impact of FirstFleet on profitability? - FirstFleet's margins are lower than the company's dedicated margins, but identified cost synergies of $18 million are expected to improve margins significantly over time [50] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to packaging and e-commerce, which are expected to drive demand [60]

Core Viewpoint - Werner Enterprises reported a cost-burdened fourth quarter with results falling short of estimates, even after adjusting for nonrecurring items [1][2]. Financial Performance - The company reported a fourth-quarter net loss of $27.8 million, or 46 cents per share, which included $44.2 million in restructuring and impairment charges, primarily noncash items [2]. - Adjusted net income, excluding these charges, was $3.3 million, or 5 cents per share, which was 5 cents below consensus and 3 cents lower year-over-year [2]. - Consolidated revenue for the quarter was $738 million, a 2% decrease year-over-year, and below the consensus estimate of $761 million [4]. - Total truckload (TL) revenue decreased by 3% year-over-year to $513 million, with an adjusted operating ratio of 97.2%, which was 30 basis points worse than the previous year [4]. Operational Changes - The company initiated a restructuring of its one-way truckload unit during the quarter to enhance fleet utilization, eliminate unprofitable freight, and restore profitability to the segment [3]. - The average number of one-way trucks in service was reduced by 10% year-over-year, while revenue per truck per week increased by 2%, leading to an overall 8% revenue decline [5]. - Miles per truck per week improved by 2%, although revenue per total mile experienced a slight decline [5]. Future Guidance - The company provided guidance indicating that revenue per total mile in one-way is expected to be flat to up 3% year-over-year in the first half of 2026 [6]. - For the full year of 2026, revenue per truck per week in dedicated services is anticipated to decline by 1% to increase by 2% year-over-year [6].