Werner Enterprises(US:WERN)2021-10-29 00:56Financial Data and Key Metrics Changes - Total revenues for Q3 increased by 19% to $703 million, with adjusted EPS growing by 14% to $0.79 per share [10][24] - Adjusted operating income rose by 15% to $73.9 million, while the adjusted operating margin net fuel declined by 150 basis points to 14% [10][12] - TTS revenues per truck per week increased by 3.2%, driven by a 15% year-over-year improvement in revenues for total miles, offset by a 10% decline in miles per truck [20] Business Line Data and Key Metrics Changes - Dedicated freight demand remained strong, with dedicated average trucks growing over 10% year-over-year and 2% sequentially [13] - One way truckload revenues net of fuel increased by 10% to $190 million, with revenues per truck per week rising by 7.8% [28] - Logistics segment revenues grew by 35%, with truckload logistics revenues increasing by 63% [34][23] Market Data and Key Metrics Changes - Employment in the trucking industry remains 1% below pre-COVID levels, while the cast truckload freight index is 16% higher [5] - The truckload industry capacity is significantly constrained due to a competitive driver market and shortages in new truck builds [6] - The average age of the truck fleet slightly increased due to OEM build challenges [44] Company Strategy and Development Direction - The company is focused on strategic investments in driver sourcing and pay to address the competitive labor market [3][7] - The acquisition of ECM is expected to enhance fleet growth and profitability, with strong performance noted since the acquisition [4][41] - The company aims to achieve a long-term adjusted operating margin goal range of 12% to 17% [60] Management's Comments on Operating Environment and Future Outlook - Management expects a strong freight market to continue through the end of the year and into 2022, despite challenges in the driver market [6] - The company is addressing cost pressures related to health insurance and liability insurance, which are expected to normalize [90] - Management is optimistic about restoring productivity and improving margins in the upcoming quarters [90][94] Other Important Information - The company has made significant progress in its ESG initiatives, including the launch of its corporate social responsibility report [54] - Werner was awarded the 2021 SmartWay Excellence Award for outstanding environmental performance [58] - The company is committed to maintaining a strong financial position, with a net debt to EBITDA ratio of 0.5 [42] Q&A Session Summary Question: Can you provide a breakdown of cost impacts on TTS profitability? - Management indicated that miles were a major issue due to parts availability, leading to increased costs in driver lodging and layover pay [75][79] Question: What are the expectations for operating ratio improvement in Q4? - Management expects to see operating ratio improvement in Q4, with adjustments made to address transitory costs [100][101] Question: How is the company preparing for potential vaccine mandates? - The company is pro-vaccine and is setting up vaccination clinics, while also preparing for potential impacts on the workforce [102][106] Question: What are the expectations for contractual rate increases in 2022? - Management anticipates double-digit rate increases for renewals, reflecting inflationary pressures across the P&L [116] Question: How are shippers responding to the current freight cycle? - Shippers are looking for longer-term partnerships with carriers that can provide consistent service and capacity [120][121]