Werner Enterprises (NasdaqGS:WERN) Conference December 02, 2025 10:30 AM ET Company ParticipantsChris Wikoff - CFODerek Leathers - CEOConference Call ParticipantsTom Wadewitz - AnalystTom WadewitzAll right. We're going to go ahead and get started with the next presentation. I'm Tom Wadewitz I cover Freight Transports at UBS. It's a pleasure to have Werner with us today, Derek Leathers, and Chris Wikoff. Derek is CEO and Chris is CFO. We're going to follow with the fireside chat format. I guess just to get t ...

Financial Data and Key Metrics Changes - Revenues for Q3 2025 totaled $771 million, an increase of 3% year-over-year, with revenues net of fuel increasing by 4% [16] - Adjusted EPS was negative $0.03, impacted by discrete tax items which negatively affected adjusted EPS by $0.08 [11][28] - Adjusted operating margin was 1.4%, with TTS adjusted operating margin at 1.9% net of fuel surcharge, a decrease of 340 basis points year-over-year [16][11] Business Line Data and Key Metrics Changes - In Dedicated Truckload Services, revenue net of fuel was $292 million, up 2.5%, representing 65% of TTS trucking revenues [18] - One-Way Truckload Services saw trucking revenue net of fuel decrease by 3% to $160 million, with revenue per truck per week decreasing by 4.3% due to lower miles per truck [20][12] - Logistics revenue increased by 12% year-over-year to $233 million, with truckload logistics revenues up 13% and shipments increasing by 12% [22] Market Data and Key Metrics Changes - Demand in Q3 was below normal seasonality for most of the quarter, but improvement in one-way trucking demand was noted through September and into October [13] - Retail inventories have mostly normalized, with non-discretionary goods experiencing consistent replenishment cycles [14] - Spot rates trended higher starting in September and are expected to follow normal seasonal patterns for the remainder of the year [14] Company Strategy and Development Direction - The company focuses on three priorities: driving growth in core business, operational excellence, and capital efficiency [6] - The company is investing in technology transformation, creating a modern, scalable, secure cloud-based platform to enhance operational efficiency and customer experience [8][9] - The company aims to maintain a balanced capital allocation strategy, investing in growth while returning capital to shareholders [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in business fundamentals despite challenges in the one-way business, highlighting steady momentum in dedicated services [4][5] - Concerns about consumer health persist, but rising retail sales and moderate inflation relief are seen as supportive signs for retail [13] - The company expects continued improvement in one-way production and a more favorable position as the market stabilizes [12][15] Other Important Information - The company achieved $36 million in savings towards its $45 million cost savings goal for 2025, with expectations to reach the full goal by year-end [23] - Operating cash flow was $44 million for the quarter, representing 5.7% of total revenue, with total liquidity at quarter-end amounting to $695 million [24] Q&A Session Summary Question: Expectations for TTS operating ratio improvement from Q3 to Q4 - Management expects some operating income upside due to startup expenses dropping off and one-way production rebounding, but logistics gross margin pressure may offset this [31] Question: Impact of regulatory enforcement on capacity reduction - Management noted that the pace of capacity reduction related to regulatory enforcement is increasing, with projections suggesting about 30,000 drivers could be placed out of service annually [32][33] Question: Thoughts on mid-season rates for 2026 - Management believes enforcement issues could lead to better bid season outcomes compared to the previous year, with expectations for improved rates due to increased enforcement [35][37] Question: Peak season expectations - Management anticipates peak season to look similar to the previous year, with discount retail holding up well and projections for same-store sales remaining stable [44][45] Question: Regional tightness and its impact - Management confirmed that while some regions are tightening, there is evidence of avoidance behavior among drivers, but overall, the impact on the market is significant [47]

Summary of Werner Enterprises (WERN) 2025 Conference Call Company Overview - **Company**: Werner Enterprises - **Industry**: Transportation and Logistics - **Key Metrics**: - Founded nearly 69 years ago - Operates with approximately 13,000 associates, 7,500 trucks, and 28,000 trailing assets - One of the largest trucking and logistics companies in the U.S. with a dedicated fleet ranking sixth in size - Logistics segment accounts for nearly 30% of total revenues [6][5][22] Core Business Segments - **Trucking Transportation Services (TTS)**: - Represents about 70% of total revenues - Two-thirds of TTS is dedicated business, characterized by long-term contracts and high service requirements [7][6] - Remaining third focuses on One Way Truckload business, including expedited services and cross-border operations with Mexico [8][6] - **Logistics Segment**: - Fastest growing segment, contributing about 30% of total revenues - Includes truckload brokerage, intermodal, and dedicated final mile solutions [9][6] - Truckload logistics constitutes 75% of the logistics segment [9][6] Financial Performance - **2024 Revenue**: $3 billion, with a diverse customer base including top U.S. retailers and manufacturing sectors [13][6] - **Q2 2025 Results**: - Revenues of $753 million, down 1% year-over-year - Adjusted EPS of $0.11, improved from Q1 [16][6] - Notable improvements in logistics lines of business and gains on sale of nearly $6 million, marking the first year-over-year improvement in nine quarters [17][6] Strategic Priorities - **Growth in Core Business**: Focus on dedicated fleet growth and winning new customers [18][6] - **Operational Excellence**: Emphasis on safety and hiring quality drivers [20][6] - **Capital Efficiency**: Strong operating cash flow and optimized working capital [21][6] Demand Environment - **Demand Trends**: - Seasonally stable demand in One Way, with rising demand in Dedicated and Logistics [26][6] - Notable increase in logistics driven by technology investments and cross-selling opportunities [28][6] - **Customer Sentiment**: Shift towards quality and reliability, with customers seeking dependable providers [34][6] Supply Chain Dynamics - **Supply Side**: - Employment data returning to pre-COVID levels, with rising bankruptcies in the industry [44][6] - Regulatory enforcement expected to impact supply positively [50][6] Technology and Innovation - **Technological Advances**: - Development of Edge TMS platform to improve visibility and customer service in logistics [12][6] - Transitioning One Way and Dedicated business to the same platform for better load visibility [63][6] Cost Management - **Cost Reduction Initiatives**: - Increased cost-cutting target to $45 million for 2025, with $20 million achieved in the first half [79][6] - Operational expenses in logistics down 9% year-over-year [80][6] Capital Allocation - **Share Repurchase Plan**: - Announced an increase in share repurchase plan amounting to 8% of market cap, with $55 million in repurchases in Q2 [96][6] Conclusion - **Outlook**: - Confidence in achieving low double-digit margins in the long term through structural changes and technology investments [94][6] - Positive trends in demand and operational efficiency expected to continue [95][6]

Financial Data and Key Metrics Changes - In Q4 2024, revenues totaled $755 million, down 8% year-over-year [19] - Adjusted EPS was $0.08, a decrease of $0.31 compared to the previous year [19] - Adjusted operating margin was 1.6%, a decrease of 69% year-over-year [19] Business Line Data and Key Metrics Changes - Truckload Transportation Services (TTS) revenue for the quarter was $527 million, down 9% [20] - TTS adjusted operating income was $14.6 million, a 60.1% decrease year-over-year [20] - Logistics revenue was $213 million, representing 28% of total revenues, down 6% year-over-year but up 3% sequentially [27] Market Data and Key Metrics Changes - Spot rates have improved, reaching a two-year high, with tender rejection rates remaining seasonally elevated [7] - The logistics division reported improved adjusted operating income, marking the best quarter of the year [12] - The company expects truckload fundamentals to gradually improve throughout 2025 [16] Company Strategy and Development Direction - The company is focused on driving growth in core business, operational excellence, and capital efficiency [13][15] - Investments have been made in maintaining a modern fleet and advancing technology for better decision-making and operational efficiencies [9] - The company aims to improve TTS margins and return to double-digit operating margins over time [22] Management's Comments on Operating Environment and Future Outlook - Management noted that the freight recession has persisted but positive signs are emerging, indicating an improving environment [6][7] - The company anticipates a challenging but improving environment as 2025 begins, with expectations for better rates and demand [7][16] - Management emphasized the importance of controlling costs and focusing on operational excellence to navigate the current market [14][40] Other Important Information - The company achieved over $50 million in cost savings in 2024, with a total of nearly $100 million over two years [29] - The effective tax rate for Q4 was 7%, with a full-year rate of 21% [38] - The company ended the year with $41 million in cash and cash equivalents, and total liquidity of $460 million [30] Q&A Session Summary Question: What actions are being taken regarding tariff threats in Mexico? - Management indicated ongoing conversations with shippers in Mexico, noting that there hasn't been significant change in shipping patterns despite tariff rhetoric [45][46] Question: How is the company balancing fleet growth with rate insulation in Dedicated services? - Management highlighted a robust pipeline for dedicated opportunities and emphasized the importance of selecting true dedicated opportunities that ensure high retention rates [52][54] Question: What is the outlook for insurance costs and margin trajectory? - Management acknowledged the outlier nature of recent insurance costs and indicated that claims are trending down, with expectations for improved margins moving forward [79][82]