Werner Enterprises(WERN) - 2022 Q1 - Earnings Call Transcript

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]