WERN - Earnings call transcript Q4 2018 | Werner Enterprises, Inc.

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Operator

Good afternoon, and welcome to the Werner Enterprises Fourth Quarter and Full-Year 2018 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Earlier today, the company issued an earnings press release for its fourth quarter and full-year 2018 results, as well as posted a slide presentation to accompany today’s discussion. These materials are available on the Investor Relations section of the company’s website at werner.com. recorded the be supporting evening, being beginning for slides. is in later along webcast and available will replay This with the

statement statutory Today’s disclaimers included Before to materially. summary the press the factors direct please SEC. to in forward-looking uncertainties could as cause filings on company’s forward-looking statements related disclosure differ may statements. presentation, and the we of of contain to Slide brief as a other company’s your that statements well release X is remarks begin, This the attention risks, which is involve results disclaimer the disclaimer, included forward-looking the actual in the with that

facilitate note A and President measures is at ahead event over presentation. Additionally, most using believes of appendix slide in your measures, the recorded. GAAP in additional Mr. it reconciliation directly is the the release Enterprises. Please reports past comparable And Werner the in which the non-GAAP the CEO results and present with I Leathers, now comparison Derek earnings to the of to turn like that, the performance. to being information attached tables company help included provide conference to for today’s and And would go please presentation. investors

Derek Leathers

good and you, afternoon, Thank everyone.

will CFO, results On this presentation our joined our excited guidance. positioning, here at accompany and a financial into provide by additional today’s strategies a start business future the you Werner today, conference of hope our John reviewing finish followed for XXXX and believe add Werner capital is I earnings financial additional our insights Steele. is full-year. address our earnings providing to call I’m prepared highlights then what to by your we insight an to optimistic welcome call. our discussion, I’ll then We’re brief questions. Enterprises our John and into I’ll will and context Werner. Since quarter inaugural the first financials. by and We an by John overview earnings the to summary call, and allocation will current

Slide some included Werner may key our I’ll turning background story, highlight Now, information for We few a and those to new items. to on be who X.

was over three Services, primary from in quarters our XXXX, continue For Logistics, of to with revenue grow. Truckload which generated remainder Transportation segment, we Werner coming the

Looking by retail industrial, North remaining in were in manufacturing at in of just other XX% XX% the category, over category. and half logistics which of revenues vertical, food XX% with the and continuing consumers. revenue in is beverage the our were strength reflects American and and

while our to with growth, XX% stream. We XX. We outsized have their half XX our revenue spread a core remain diversified vertical supporting seasonal any and customers customer coming of and across from customer, single our top than to base top less committed exposure or customers mitigating revenue

million, margin to In $X.XX to move X to let’s Adjusted financial our adjusted $XX.X increased EPS to and income operating overview million. quarter, a for basis by $XXX brief our On adjusted we XX.X%. Slide XX% share. company grew XX% the points basis, expanded XXX total per Next, an fourth increased operating revenues of performance.

of by Along fourth quarter capacity increasing in with to entire contributed ended more trend a share. in that which in and segment, tightening tractors and the the the TTS Reflecting X.X%. Services, continue year-over-year with fourth in the we’ve and income not best-in-class as points but economic a as million, for our major adjusted and XXX our strong carrier best-in-class our $XXX freight high revenues quarter and But Werner total annual normal, our within to $X.XX moderate more The that the recall operating was hurricanes Truckload you’ll These with in could achievement to than increase. operating XXX in total two The future. of been largest volumes. to a year strong to also customers, planned following history. stronger to income August cycle. adjusted more consistent in The full-year X,XXX operating XXXX demand fourth investments economic believe largest resilient XXXX peak dedicated newer the reflects a a EPS. structure in forecasting the was increased the margin, billion. trucks deliberate growth with plan will XX% a XX% regardless demand operating as XX% margin our increase sequentially. The an increased or of an of across as orderly truckload making also environment, or favorable our a September ever quarter was in occurred of the XXXX as million annual we ever towards positioned highest year. be basis year-over-year resulting could EPS our economy reflected cycles. communication the grew season, our For unit, $X.X Adjusted factors fleet, growth, typically slow the increase other Adjusted able we’ve saw XXXX, revenue was Transportation increased throughout in total, of XX trends company part that adjusted improving services to robust we $XXX due Results what XX-year increase

commitment of for cry, John? detail. discuss the to historic in people. to their hard year other to over associates, that represent greatly all our constant beyond. thank to and and providing revenue like rallying Our mechanics drivers, safety. for with to point, portfolio and our sincerely shareholders office eye who dedication work, an improved I’d On all turn is expanded, mix average contributed results At the internal XXXX look professional service with this I’ll towards our John reminder more this They and results our a call financial quality more note, consistent and our is our to we reallocated, customers has been as

John Steele

and some drivers performance Thank afternoon, period. It’s items you, in Beginning X, few versus here segment. the be the everyone. quarter with year financial great today. to you additional A good we the noteworthy in prior on Slide Derek, TTS provide

truck In Our by week revenue number of Logistics increased trucks segment, revenues fuel our X.X%. average we net XX%. X.X%, the and of per increased per grew

shares Moving a to other adjusted of increase that of TTS and EPS. growth business tax and that consisted contributed growth the units. rate, well The as $X.XX, XX% our logistics year-over-year as benefit $X.XX fewer outstanding lower contributed

continue we full-year number XX%. invest TTS X.X%. increasing of increased income the fuel, in by expanded improvement, XXX over of Logistics X.X%, driver professional drivers X, operating the grew trucks at per basis our grew operating Turning revenue per XX%. Adjusted At to week XXXX per led time, Slide pay increased segment company truck average by versus XX% we by In points. net double-digit let’s rate same average and and mile revenue look to TTS, margin XXXX. by

Looking quarters the results $XXX at Transportation adjusted quarter, $X.XX outstanding a XX.X%. income consecutive business the quarter that revenue of million, led EPS. specifically segment. growth X, X.X%, XX% per versus The to operating per Slide in our by This lower grew primarily prior year by benefit look increase represents other logistics for XXX increase an operating to $X.XX, truckload of let’s mile fourth and by margin. an XX.X%. our revenue contributed points on TTS tax one-way which strength seventh the million, total increase margin operating Services Adjusted $XX to In driven plus our in per TTS revenue of of week our units. was XX% of that rose TTS and added Truckload rate, at Beginning included growth of fewer increase driven shares truck adjusted expanding basis

net XXX to basis of by declined fuel ratio, surcharge points XX.X%. operating adjusted Our

Adjusted mile led XXX operating in XXX net to grew of basis for For of expansion $X.X XX% by the by which was the full-year. in fuel grew billion. in driven total margin $XXX declined operating basis per to per growth points points The Adjusted revenues of one-way XX% of XX.X% ratio, to increase revenue revenue per week XX.X%. income truck full-year, by million, truckload TTS resulted to XX.X%. increases X.X%,

XX. to metrics fleet Slide on Turning

began both length within operating a transparency section. into for TTS one-way. pricing our the in segment You each that providing to may that we of of and the operating is believe have better key noted segment We our evaluate and truckload metrics one-way disclosing different and dynamics by the dedicated statistics the dedicated release way given of of earnings components performance, haul

to TTS revenue continue and operating truck, statistics. report segment we forward, trailer will per Going truck

Given now that truckload and report one-way revenue operating will we clarity dedicated TTS transparency and no the providing, additional longer statistics. for certain we’re

the our historical last quarters operating werner.com. For excel of at file Relations your dedicated both with reference, for for an posted and the data section on one-way statistics the truckload comparable we XX website Investor

now, dedicated look truckload and the one-way let’s So at metrics.

trucking XX% of net For dedicated, fuel million. we for grew the revenues, by to $XXX year,

the and $XXX year average for quarter. dedicated For X% net million. to for per and truck per week grew fuel trucking One-way XX% tractors $XXX truckload trucking Dedicated X% to dedicated X% net fuel increased the quarter, the quarter, increased million. revenues, revenue for increased year XX% of the for of revenues, year the

revenue revenue increased year XX% and One-way For per quarter, the average net Werner truckload due mile. for Within one-way truckload XX% $XXX and declined are the truckload our to for increased week the for X% strengths. fleet quarter, X% X% truckload total offerings per two primarily improved of to year fuel for trucking One-way one-way the truck that revenues, our service tractors million. quarter. per the

and markets, XX% that one-way a been truckload cross-border combined we’ve our years, in up the XX over make expedited serving revenues. on team of Mexico both For a leader over basis

stream effectively longer stable provides truckload highly-specialized of see statistics. Both can commoditized one-way that team and than more nature in point-to-point our drive van. expertise length managing haul, complex, a which expedited revenue time-sensitive a operating inherently of have traditional you these and experience and businesses cross-border less is the and Our

XX. five International growth. a and growth Management, basis XXX% peak to strong driven In the to season of execution, X.X%. to our XX% Moving points Slide Final to operating Mile, on revenue in by by XXX margin Freight by All logistics income the driven brokerage. contributing primarily Logistics grew increased million, Operating units, Werner to million, expansion and $X.X fourth quarter, $XXX operational results experienced logistics Intermodal, improved revenue of Brokerage,

surpassed increase million Operating million. X.X% XXXX the Derek? XX% Derek, to logistics I’d and strategy, in priorities revenue grew which million, portion $XXX to who’ll full-year, now of XXX and the basis mark operating the allocation prepared turn $XX.X to income capital a $XXX to XXX% in remarks led our our to XXXX. grew cover outlook. to margin final like For point

Derek Leathers

Thank you, John.

positioned has I beginning the best-in-class the XX, believe into XXXX, last cycle. background to getting will demand Werner provide in execution in years, carrier a Beginning our on high Before some of as over in wanted our be that are and where important Slide June which several strategy the by expanded to outlook, developing At our regardless we X Werner, realizing on I role by role shifted and direction I pathway in T Operating became as strategy, my time, followed announcing Officer, of our T’s resuming X the Chief May XXXX, CEO. President Founder, his to objectives. as CEO. the company C.L. include the that And we

greater and our made our driver for one-third network of and criteria representing roughly Over next service with network customer people our levels; finally, included: the metrics-driven a organization market; we efficiency truck These largest driver mix better years, integrating pay-for-performance consistent hiring the substantial reengineering initiatives; our XX% logistics; school and interest averages in number and resulting the goal revenue industry; our Werner streamlining for by and streams, and portfolio asset amenities; to the drivers, expanding necessary implemented increasing towards the move shareholders the of organization our one-third nationwide implementing shifting revenue terminal other positions reducing fleet. aligning balanced tight of establishing for capital future changes the cyclical, initiative investments to dedicated, raising aggressively success. management one-third despite to position a labor vertically existing our for to more program; one-way in to team of by the launching executive by VP truckload, XX%; three less our comprehensive best-in-class now terminals dedicated efforts

to proposition regained best-in-class structural XX, Werner T’s more a with further with would tier to demand our in me provider Since ourselves our expect and that periods we Moving as that differentiated strategy carrier X logistics the growth. has to top and the place in Werner transportation financial as believe We let wanted We combined economic are we’re value by implemented new consistent market. of a rightful out more industry. our excel portfolio roll improvements strategy. review position slowing to markets, and succeeding that Slide as drivers, and both high-quality high-capacity our strategy, sustainable a as of well put reinvent its creating in initial any forth balance be to efficient fleet, and in professional results. high I and generate the

In addition, and balances diversifies focus in of portfolio, on our offering better investing growing our variety our Logistics and customer conditions. our market our further segment, a in strengthens returns

we As a just our truckload significant strong in reinvestment a begin completed market, macro of in broader we core with the relatively XXXX third-year but business. uncertainty,

Werner time, deliver bar with to raise meaningfully combined continuously unwavering investments, few points. are A Our allowing time for on the results. our service, commitment better to every customer proof

your to these need and and provided XX years, capabilities. expanded new, tripled fleet every average facilities about This significantly maintenance Since we’ve and fleet minute. going competitive locations two America or measure efforts drivers operational delivering our terminal as at network and forward. and market, important improve in achieved resulted capabilities Truckload training in new On for the and equipment very the with In to ages more an driver deserve and turnover T’s. best near everyday speak I’ll IT respectively, operational of our financial of multiple last in to our industry strategy, every our IT one and why In on priorities terms, these keep our years XX, XXXX. X.X are align This a the to maintain generating nearly with truck years. and our and investments X.X the our prioritize keep in sincerely they they results driver to ensure and customers earn talent business and X.X also in part improving support investment our with trailer aspect X their upgraded average age each each customers and age our our and with professional X to percentages of to lowest in initiatives the of years. to and XXXX, offerings. of infrastructure introducing Werner. of moving Our vote day. vote Slide thank T technology Werner labor We points We freight strategic focus truck trust service compares the the These history across we rank efficiencies drivers, you Logistics, Transportation every customers service and levels Despite the business and our they an intend we I’d shipment. like simple value the strategies. are we’ve of the for

of proud low industry, best experienced very work the As in retaining extremely the of recently hiring, team forces one is challenging I’m has you our know, industry. and most build done in truckload we skilled the a job training particularly reached XX-year drivers the to unemployment given, management rate. domestic and

attract the and our and with efficient tractors ways trailers. keep top drivers we One modern is of and

Our technology XXX% aggressively nearly we and full truck has cameras. active braking and mitigation auto-manual are transmissions implementing forward-facing fleet collision

frequently, while We our of not get top offers if quality multiple a life and least within grown once a operating XX% home drivers have characteristics. week driver of and of driving nearly drivers home XX% dedicated, week, margins, offering at which get pay our times jobs nightly. better

the school We driver as training by owned largest graduates. have network professional measured driver

earn were the Award, organizations in support United the recognition serving States Reserve. driver employees and XXXX, one the for company an their only to awarded the the retention in transportation employers of to highest Guard have Freedom program of And outstanding military the We by recruiting government former in personnel. XX for industry-leading we U.S. National and

the drivers driver and are gears. And the expenditures X quarter we free period. capital also on years. On XX twice the had from last of in our team. have industry Werner the tight proud we rate lowest resulting turnover flow is to net Even fourth the turnover labor years. cash same third lowest the flow XX-year female market, in over a XX with We over cash of the the second XXXX, achieved Shifting average for past operations, our summary Slide driver

earlier, and XXXX, relatively focusing noted a I fleet in investment improving strengthening on our been we’ve since period, As our high strategically organization.

over of With and the long-term. significant we revenues in XX% of investment gross fleet our behind are be net terminals the within us, XX% now range targeting largely to consistently more the CapEx to

We also significant follows. million cash XX expect generate as Slide on increased to With generation, cash more. allocation flow this are or capital $XXX of priorities our free year

invest first to priority productivity. in continue Our is growth and to

deviate to technology fleet, network to commitment our maintain We and a platform. our associates not and from drivers, will customers best-in-class

will will million logistics fleet. well as invest noted, and We continue But to and million. moderate IT, $XXX $XXX operational be initiatives, forward to as technology commercial across our as our the in in CapEx net going

Second, regular we to of to cycles, and has well excess dividends cash a repurchases across quarterly shareholders. cash to share will as paying Werner consistent, dividends history return utilizing long to shareholders. return continue economic special as

During the million. shares $X.XX a quarter, cash of we purchased and declared XXX,XXX share $XX dividend we for per quarterly regular

million For per the we million. shares repurchased X.X $XX full-year, nearly

to increases. continued including increase buybacks shareholder dividend options We value, all viable and will continue to evaluate

$XXX million our EBITDA equity, to financial low to stockholders’ Finally, a committed strong of flexible equating and times, over balance remains shareholder and billion With flexible position we’re of debt deliver maintaining value. a to to debt sheet. ratio only $X.X of X.X outstanding

Slide Looking ahead XX. to XXXX on outlook

year. the compared the range the Revenue to of in to mile our more X% to increase full-year which year with add XXXX. expected the We remainder and million for for the expected to on to TTS The $XX comps mile, X% X% is increase revenue X% to growth consistent dedicated this truck of sales due at be and to similar in the strengthened should equipment per year truckload end first-half, XXXX minimal the fleet of of for are to in in approximately per the through total expect planned quarter-to-quarter. moderate part Gains XXXX in total XXXX.

in Our XX% year. effective tax rate the range the for will to XX% of be

$XXX the us $XXX years, fleet to will and near our million. current in of maintain to and trailer truck X.X We million of or level at expenditures respectively. the capital This allow range expect X.X be age to

five the our the from So two device weeks time the XXXX, XXXX: of strong for the Slide year, been robust a far a log outlined XX, On we’ve end driver growth first the first benefited in mandate has as strengthened than not U.S. at unusually normal this better of quarter events hours, truckload and same demand unit year which freight one-way in during limited of freight tax but which reform, that period for demand significant ago. Remember, electronic couple scenarios. demand supply. XXXX occurring the of service as

in would per mile by this high market. percentage past year-over-year. Over we in a case, GDP growth case, economy be the truckload which years, increases and tight we our in the greater bullish growing worked structure domestic increase to one total revenue growth we several single-digit pay which supply or assume and both driver In our company driver one-way our moderates. very a In solid freight to mid GDP range hard to to succeed than characterized expect X.X%,

stable, and services demand. logistics the driver range to for the moderation and the in consistent likely availability that some percentage to would X.X%. the total in and revenue moderate below truckload continues single-digit increases high to see results domestic mid freight low mile allows portfolio are improvement We and Truckload diversified falls pay Our demand. dedicated prosper, year-over-year. would In to in per driver provide businesses event, GDP one-way while likely

for to one-way portfolio to diversified logistics our risk help Our truckload and the economy. should prosper, businesses mitigate a dedicated while moderating allows exposure reduced in

van. in more in robust cross-border remains team economy, constant. resilient enables in our drive less performance addition, In scenarios, In a our expedited commitment unique strengths traditional one-way and Mexico truckload, compared one-way both to services

our operational is one-way given well-positioned, to We business; performance. of to more fleet, In experienced of will and Werner predictable segment; dedicated, in the truck our and a from customers, we drivers whatever rapidly larger our XX% comes best-in-class our support over summary, with continued our economic XX% Logistics than to revenue ability future. and our strong exposure our new stable of growing that fleet environment competitors. continue are a offer to market and nearly in less way navigate many success truckload effectively confident positioned I’m the for

Our call is our fleet to At team turn I’d to time, is over excellence to begin this like rebuilt the our our and to commitment is operator the refreshed, unwavering. Q&A.

Operator

questioner will go [Operator you. with will now remarks. session. Time, end will today Thank Stephens. And we Instructions] question. And This the X:XX be Central PM company’s at Please Daylight your with the our question-and-answer call ahead begin following Brad closing Delco first

Brad Delco

Good guys. Hey, John. and Derek afternoon,

Derek Leathers

Brad. Hi,

John Steele

Hi, Brad.

Brad Delco

I move should X% necessarily you well. doing then up question the to? dedicated pressures? too? First the X% be will that What ask should asking pretty us as guess, call about your this But – you so guidance. inflationary a good assume guidance really how your of to I buckets Glad color we you attention provided congrats range. we rate that all are be all, rates on that be the paying we guys quarter. to I driver that and to and wanted should think and consistently, appreciate drag guess, about about And continue significant wouldn’t environment, cost is to

Derek Leathers

question. Good is Brad. Okay, Derek. This

first my inflationary And perspective, from so the side. on

we As year. strong case bullish inflation, of but our scenario, there GDP more and where starting the if we’ve position and get growth, be the like may outlined in sort bearish we’re we wage

very Our driver wages are today. competitive

ability with. to the in pain the our specific be will To portion And allows country. question tightening in that got what and network, our about feel faced as the wasn’t think, is as this programs reality of We’ve record turnover region drag was a provide of we good through to results. to is, paid the with commiserate is driver XXXX, rate to be manage certainly lot Their the through through and take dedicated and that of mitigate is at partition near it labor wage cycle. we that and relationships feel ability is across we’re and stickiness delivering. a the have we freight the lows. least we’ve our comfortable customers deliver medicine that built at in the the at dedicated, hard in we the a value And event packages the pressures, to kind pay of and pay that going are markets business – they’re our a it’s characteristics place us of proven, contributor I Our such XX-year we’re services to where for the others apply and

guidance dedicated view a our rate as overall with overall. don’t I that through how Clearly, be not returns. concerns in drag is in some of our drag rate we can you think can our to dedicated collaboration mitigate growth I rates a operational dedicated, the inclusive about customer. designed is in But So and you assure our

John Steele

guidance to just this The per is year-over-year X%. mile truckload one-way revenue X% is And to clarify, of John. Brad, increases

Brad Delco

I rates X% expect in I appreciate a to I given X% you don’t follow-up, year-over-year envision margins imagine environment, guess, have And get John. could scenario mind. that, a if margins to would increases a and you’d decline but on basis? a your doubt where in to truckload Yes, one-way as guidance you you you X% would don’t then X% I decline. rate that, to

John Steele

call, all the market the earnings play safety trucking of earnings other rate Brad, include freight not with we performance, will the out. market, in variables the part difficult guidance of used factors as market, to it’s market, pay this how driver predict and truck the did the

performance I some our question, earnings expectation metrics you you give know the it’s will because to some answer some But wanted different to modeling. provided guidance factors set where hard your in our we to we the out. don’t guidepost that for going forward, play help doing continue we goal. mean, to with So that’s improve it’s cost six and of that really to Werner’s

Derek Leathers

buoyed as knowing we excellence, be Nevertheless, that, focus clearly our we side just laser be upside. add as is will same have year focus about the on be a the a improvement. controllable that’s to environment XXXX, but would have cost was focus to believe equation. will by rate what XXXX the and our I this rate of operational going on not think And on still and has strong everyday. year XXXX we the cost that

Brad Delco

No, had that like to I I And I the guys. the I call. but again, for had I doing – appreciate appreciate felt try, thanks color.

Derek Leathers

Brad. Thanks,

John Steele

you. Thank

Operator

questioner Bank. And Mehrotra the Amit next ahead. today with will go Deutsche Please be

Amit Mehrotra

the impact on on miss going the more line hoping pay was could just I’m John, respect the you and income for comp given that thanks well. I I case. talked the on line that call Congrats bear maybe the again as good marathon wage from results inflation us mix guess, bear help you’re you Thanks. bridge and driver to dedicated actual to sure the with sessions. those benefits about callback in I mix. – statement wages and to

XXXX about you you line want absolute basis, there think that item help think? thoughts how you in any in total anyway on Can that? think us basis or dollar either do So maybe trend mile on to a should

John Steele

$XX.X summarize, that benefits just roughly I’ll Okay. or million, were was due salary – driver and two-thirds wages $XX pay. million, of to not two-thirds up quite

pay that growth our also a significant is to in fleet then performance on logistics had less growth, and merit increasing non-driver logistics salary The items wages. impact is a paid other increases in paid increase the

when our driver customers working are customer for of as discussion, our one For fleet. It’s pay driver with XX% a market. nearly dedicated, to increases our obtain a we being difficult drivers in

as where one-way truckload, a as multiple complex customers are not it’s So involved. it’s process that

with us in they driver proper increases rate allow for going supported the and driver forward. past, do have justification that we that dedicated with customers increases increases would our expect with So pay in pay will –

Derek Leathers

development other thing curve, to is with that that curve I you grew of a lead logistics in only that and is, north thing often labor. The have would benefit from will the XXXX There’s learning XX%, have we some place. training business logistics curve takes add as our

Our up of rear. we it to tech productivity now better investments new look the our have look tech as as And our and ability to was out that. to hires gain forward than is catching to are we

So in part we’ve I as what of look that better I spoke that do forward XXXX. believe, about the John component seen than looks

Amit Mehrotra

Okay, guess, a that length and X% X% higher pressure utilization. on as overall dedicated, follow-up. overall to continue that’s just truck the helpful. to in And as guess, obviously I a count, then of will I haul result the

in XXXX? even think that X% You obviously truck X.X%, given pressure the even utilization growth more Is – have should XXXX. that can we in about almost down in dedicated Is XXXX, see count? the how we

Derek Leathers

a good haul? truck why is metrics, does broken reality transparent What – or how length is week to what providing, you and What question. the the where truckload truck a Well, productivity. that with three not happening is is – only month. a looking the haul we more from is of of years length but chosen on combined per more per our translate of out And how operating some production? on give of not for with per operating? comparable and revenue happening obviously combined But is metrics, we’re to, we’ve the rather, But one-way think revenue metrics appropriate part be that’s also of we’re

On side, and in the all shapes dedicated fleets come sizes.

are inclusive. So fleets. can We high miles we fleets for productivity appropriately that high-yield productivity, priced have have that the can are low

metrics, dedicated, truck of week our that or really per revenue per per it comes in type in per revenue define success. we And truck to really internally case, down so believe kind day

fleet a metrics So would less providing. results because to more broken the meaningful people is new would less have prefer that focus ultimate indicator on of transparent less combined of that blended prefer, than it’s an we’re kind than we I average, or out what

John Steele

Amit, of there’s clearly, And lengths miles truck, on truckload characteristics and significantly mile per one-way rate provided different with haul per dedicated increased transparency based one-way we the the metrics. between

Amit Mehrotra

Great.

the lot, back appreciate hop Thanks I’ll a it. guys. I Okay, in queue.

Operator

with will And Hartford Baird. the today Please Ben next questioner be ahead. go

Ben Hartford

margin, so thanks well XX% Good having Derek, all at full thanks. getting in margins TTS we afternoon, talked at level. about an call. in Yes. as Hey, done this cycle so XX.X%, to all for a look and you’ve the

still that think the for the done? these of more of Thanks. forward, mix provide you all margin perspective And there XX%? the of at rate in should is irrespective Is we in little – Could having should profile talked opportunity improvement full about work As a about to path a think environment, from this we there? margin business on cycle the still tripped how leverage? be you the shift the think that? Kind about levels about business bit the is that we XX% as and

Derek Leathers

Ben. It’s to in, talk Sure. Thanks to you. good calling for

lot we get margin. we goals work off, had the to said a would to of First we short-term of couple to last get that it out – do of be had years knew, And XX% there. operating to

our we arrived status sit to that that You’re achieved as as on correct, rest or here quo. margin our we’ve goal and today. we’ve not Certainly, is accept laurels

And the obviously, I through think, word we about tough. get we the the it trucking, cycle. can think cycles about think is sometimes very in margins forward, as going use way

our I aim margins as expand periods than But years predict like – we that, out. better cycle. future. to commitment I our the is through can’t do that it’s a the on U.S. better cycle. And there what on go throughout the forward economy and XX% can’t average the But predict or so, looks clearly, two and is

so year. to by to margin not I’m a commit willing And

expectations our Looking execution forward, rising, is commit improving, our that will I are to.

John Steele

clarify, let And add, fuel. margins me of to these Ben, inclusive are that

the also our margins. some a potentially did fuel another fuel of it XXX competitors we’ve points of if you of on higher, net basis impact to basis. net disclosed That So of – XXX be would and

Ben Hartford

That’s helpful. a got quick I Thanks. follow-up.

some comps, side, but tough the great facing logistics growth. obviously, On

any asset-backed that you then think the tending XXXX comps? you what here logistics revenue that like winning or of kind Here, with for business of consolidate should business included business given two, in line accelerate to pace that first, you’re particular, volume perhaps Derek, providers. to the does business against from shippers you going could who win larger about do in in sense these XXXX, in And some guess, provide and growth logistics when forward, us look specifically, that reason? I as in can

Derek Leathers

Okay.

a question. a lot but there, So good there’s

overall segment. clearly, will TTS that we have the as First outsized an growth, we’ve logistics about compared think it revenue indicated to growth off,

Our is in is market and of right, us. focus there, front the there’s opportunities

aggressively. to continue going pursue to We’re those

our logistics about unit. in inside of brokerage think two-thirds is business business, roughly that you As our of

more learning this, is us execute to to To different biggest out investment in technology, of unit that able compete, head-to-head multitude to include our to of brokerage with automating the compete the more business That Our avenues. brokers winning the from small big with and business brokers across it’s able AI in using coming some of allows processes, be efficiently. or we’re there. machine traditional more

point shippers built think with increasing you relates would latter excited and to to feel And new – to this it – that should to And those growth many part, about I cases, we’ve as the business anything work got or there predominantly so, is, in to as trends. one is Werner that only we’ve but customers. I in smaller that midsized you was about, accelerating do the

has business and are longstanding it’s business that entry top into this the business we that of to now with that execution that Now and that grow people of at we book traditional now have is relationships scaled, relevant gaining our with. level, tier starting more now

that, time the for at opportunity the in the adding start seen internalized on door sort have we’ve very about us. coming revenues in gain revenue lumpy And examples executed been new is of and that of think well. larger So momentum that recent least of you as over quantities to more perhaps to front in then and or

Ben Hartford

the for time. you Thank

Operator

will Please ahead. today Wadewitz And next go with be questioner Tom UBS. the

Thomas Wadewitz

you’ve the you see all and that in market. for offer afternoon, some information if capacity provided. on Wanted also Good good and the thank Yes. call Derek, you thoughts – doing the to could for

I think that we private see points expansion. fleet some data of

from I’d if your think are small brokerage think, you I fleets the side, be expanding. curious thoughts

capacity? at truck of if trucks, prices maybe on used off, weave you think because falling you tractors. overall on in really kind if if I new think, So also, replacement be just And can something then tractors an slowing used or look some might the point, the

some So little a capacity? longwinded, on sorry, that’s but thoughts

Derek Leathers

Yes, no too. be I’d happy, problem, Tom.

side. capacity the on First

builds been that, not anticipated. were not builds. the truck with And the as same XXXX truck truck we’ve that are messaging truck builds our – consistent So higher previously throughout than are replacement orders level

see to as I’ll the the you despite a is, group having we miles congestion, quarter. capacity out short factors need go ran back to an traded of same to we the like of more amount quarter did fleets have than trucks that make deliver because relatively they And across for flat less logs don’t reasoning impact data, is, more From freight. that for levels. quarter, shortening continue year third the electronic more point third the prior, Our their of everybody X.X% fourth released yet and other from there hauls, length publicly

I how levels believe market, came do chunk described, the into simply the some eats needed replacement tonnage and is, of truck Now do inefficiencies question I due up a that do. think capacity I much to it. was just The to I

more as been is majority indicated, remained as freight we of in not and as orderly. strong strong XXXX, years has we preceding also stronger than As It’s the January, so. as five said the but

think. feel I capacity people than tighter is So

and capacity more with conversations be continue not our about to conversations about have abundance overcapacity. Our securing continue to we of customers positive an

I that our through effort total put younger through really cycle market then spent although, of and in ourselves fleet selling with age, lot the there we’re our automated positioning market, age position network frankly, some collision a transmissions market. we a that low selling to market. manual truck more back-half used a time our the by retail network. be feel there’s one of in a refresh currently, even to as of through our and warranty that technology good indication ownership about is a you when we’ve though, still younger our o a at may to fleet with trucks for the within the to mitigation softening miles available, feel via and and retail no As lower-cost the And way, outperform

Thomas Wadewitz

that’s great. if a bid in think single-digit, on don’t that the low out what of the How pricing, so you you that’s of Yes, or get maybe of more The full-year a that kind of what what that And X% it’s – season? How Is – just I number. view know That’s to single-digit? X% quick helpful. you XXXX bid about kind of part coming do Okay. translate get you kind mid a does detail. to clarification season?

Derek Leathers

I have And our not it that that QX the been enough reality is Well, we’re really conversations positive continue economic the are bid may above to can signs or mostly with year, into indicated at you – call season you’ll We about. that currently building or look that we’re into be yet. throes I in experiences be have tell as at and ranges into that it’s increases as or – can’t do that hence an ranges earlier positive, potential you very macro But like in of that it. or just anything the those further of expect mitigate recent it unfortunate those you exactly range. early QX get the above provided. rate within renewals that, happens as year, predict talking the broader eye exists. to effects positive. are is year-over-year some secular We what year will some it than that early comp effects mitigate structural the that our would and uncertainty early are further get more the But lapping toward

comment your to that seeing so something is single about not digits, And currently. low we’re

Thomas Wadewitz

Okay, time. great. Thank you for the

John Steele

Thanks, Tom.

Operator

questioner with be Fowler Please ahead. the today And go next Capital Todd Markets. will KeyBanc

Todd Fowler

if a grow? the And maybe to provide – me, excuse that’s hold side. the getting logistics. afternoon. talk over just time, you in a getting with towards strategy? on it third or the dedicated, that to to businesses kind that Can fleet while could Great. continue truckload one-way or XXXX is good a of on you shrink fits other lot some and one-way about Is third it March how one-way on understanding the the third the that fleet of XXXX, steady, we on truckload? and growth expect dedicated What should Thanks thoughts truckload Derek, some to

Derek Leathers

Yes.

a our – to is, wanted just we we on to what we off, truckload with do strengths. one-way first purposes history right-size So it, needed to to needed from focus

so They’re business. profiles. We’ve top time of are that to that the serve to and very, just are expedited right-size and and in specific our of able of harder be the that cycles. wanted portfolio. They both businesses very have Mexico delivery And our do to expectations cross-border haul strengths We that. emphasize to longer length done type portion at service fleet

really better we one-third, As you our do want that of both revenue a allows think a our one-third, to drivers. it about the opportunity for is, more grow one-third, a associates a we the serve path continue and opportunities down us customers, for to for comes pie look forward pursue What jobs growth to growing and overall. driving to our high-quality provide

that really our be. focus So is where will

to have in logistics other work logistics, some to to we’re as the comparison continue two-thirds We to that. do doing outgrow and

portfolio, the and returns. Over wavering try to adds to Our continue growth will. determined by of and to are TTS time, to going sort – you are to future round that commitments asset be accelerate out in if

will those first-half end for is in we the over the trucks ongoing year, or near opportunities although, the we trucks. build of will those cycle, and because where where But of for And compete trucks to that grow, and need fleets will that closed dedicated we closed prepare, so, those say either up. that’s is –

very Our people internally understand well. this

If be we going we opportunities what are down believe we’re by does decided the to and a on upon, can’t, will what be will to do we we strength back we do than best-in-class. space? will opened believe budgets acquisition it. CapEx to best-in-class it we return what’s trucks we for come in better focusing pursue As that fall If profile, can play can, both those and to it come And parts. really

Todd Fowler

that a helps. just follow-up. Okay, And then for

dedicated dedicated get in market market And or capacity kind where loosen points then accounts forward? your to general demand commitments when the for shifts some of we’ve when dedicated and I seen that and not increases may walk What cycles think the things we we on dedicated in the the you happen, they’ve those dedicated really made. from then view up may maybe tight if that would to of points now? – is in shift to going prior market away be some see that loosening why where

Derek Leathers

it��s all, to biggest your of the is much It assessment – if is it it’s let first have how doesn’t start account, but you my – allow you you happen it and you. really correct, only to the So once view in door.

was masquerading And win dedicated wanted the rate let to at specific that what our growing, year, is levels, last so in over we historically arguably dedicated into the although, were because low about we fleet to What referring our not were to which diligently fleets, designated and is in as into – very portfolio. and this work I what that cycle dedicated, you’re we really let happen.

one So removed or year, that as that the other on fleets had the well in of fence. that we’ve we’ve as fleets fell the added side

were variable things with pricing was designated avoid provide capacity and or that try demand. were fixed take-or-pay to What pursuing service. we what go to rate best-in-class fleets had together to our fleets rate customer starts away, we fleets that in So we where exceed or structures, it as is variable do fixed

for better throughout fact. is opening why spoke ever it’s positioning the our think And that’s than I so been. to that And continuously cycle our we remarks,

designated, have it. starts So dedicated, in they could pressure goes be. one-way, spot, will find and there in There pressure? you up to But be ends if will

be our And may defensibility our positioning chains structured our portfolio so any and we we’ve that how forthcoming. like cycle for across

Todd Fowler

Thanks the nice time, quarter Okay. Very helpful. tonight. for and

John Steele

Thanks, Todd.

Todd Fowler

Thanks, John.

Operator

Please Wolfe questioner And go be will our Scott today with research. ahead. Group next

Scott Group

Hey, afternoon, guys thanks. Good

John Steele

How you? Scott. are Hi,

Scott Group

for call. the Thanks Good.

just around that as smaller the guessing a so on I’m the think numbers us of through of last can think about for typical we is can peak-to-trough wanted anyway increasingly put variability dedicated. dedicated that, the you lot Is help mix cycle range? you there anyway about margins Derek, sort like can…? it’s but a dedicated, follow-up point, we So to over-the-road versus some of there

Derek Leathers

variability so to and on it’s we XXX we one-way, advance operate to what what space more basis sector. defensibility in question – a position to operate it. of the call ourselves your believe is Obviously, cycle customers or that XXX that to the has Scott. believe area part It time do too and the of answer is still, aggressively. it, hard has and XXX the range. points But in Sure, XXX been those recession-proof in that. the and the tighter Frankly, It’s peak-to-trough can the be live traditional and points, to dedicated, of perhaps XXXX range often great retail than expectations that in going within much we basis more even characteristics, deliver spent that is with of a to to economic we early we of we too question fact in in

of XX% generally assets focused range. aside Mexico our with focus those have on of and less expedited being one-way However, increased operated set cross-border sort now our services, and better over and or have

look traditional one-way certainly we we it’s side. should with our will one-way otherwise, be the as forward, proven that apply. the current But points range expectation the until XXX case So our think not to XXX on for still basis structure probably that,

Scott Group

length Okay, sort driving going that’s is What’s sustainable? The do one very think of And smaller haul over-the-road helpful. question. And maybe of you higher. just that? then

Derek Leathers

service. and sustainable, team what’s and driving is – focus it cross-border it is think our expedited is I on our Mexico

we more and equal. of because of that in about network break can why and of length to over-the-road you part what are do all otherwise that when again, our created be and white noise want the So think created haul, metrics over-the-road transparent truckers sort thinking of be our out our show we is, one-way

for because nature. its sensitive. importantly, playing niches, defensible expedited I’ve for Mexico been different by conversion, long XX doing long doing has length it’s Mexico more Team against similar nature service been in to Team and also haul as of is have Cross-border years. different transit more We its as strengths, and consistently business, very and I’ve ours. in is expedited intermodal we’re sensitive business been

we that’s where to and that’s and So to done focus upon build efforts, to want it. we’ve our put continue going our what we’re

is it think I yes, So sustainable.

Scott Group

appreciate you, Thank I guys. Okay. it.

Operator

with Please Stifel. questioner ahead. today next is Ross David go the And

David Ross

afternoon, gentlemen. Good Yes.

John Steele

Dave. Hi,

David Ross

guess, say, five, to XXXX six the if you in compare conversations December? just customers started here it on you would off have comment weeks I the that in been, with first for So business about have can their does How where year-to-date, year. thought levels, outlook would the

Derek Leathers

from that look I January December. view, say going my mean, wasn’t expected would like of I Well, we to point certainly

but that. it And if five and tell then and seasonality the take than but variety We quickly that’s eyes normal, different. weeks expectation have you slice it than first January, opening I understanding not driven little stronger the a the think, I which things, of rebounded a from little suffered be wide more and that that in finite, weeks, so some have I were there but the the people the XXXX. first of we consistently you to and came were it relative two with some management, pull other supply couple would was open of two year all extent the to place margin have into remained perhaps was And would and might chain the weeks around of that may think of by slower a you expected, items the weeks. took we forward one

drivers weekend holiday was hit anomaly it’s back year That but of the both back, larger been than Christmas balance. very in And as what off. last the and in following other to in network at was stronger consistently especially. it truly The times quickly bounced last an cadence with New Year thing has is actual we’ve more year this week. and the our said, And year. year created terms every from inopportune bridges And just was, January, within the

David Ross

in of where position talked wanted right was a focuses be to How on you the company made? Derek, the get get the little the measure them? service color one years margins you then, And you you to bit you add got How and last improvements more them? that to about the you Could few around service.

Derek Leathers

glad great a I’m that’s you asked. Absolutely, question.

a whole it product be high-quality. to in process be demand. starts to want for to part to of high buy really has In and this be it order to have that with that people has yes, real, have the you So

we’ve down the to our to where the it and throughout to We’ve expectation we make a organization. had levels metrics, So needed focus always deep of acceptable commitment it, always we be. improve and had measured did service the so but wasn’t

compete for looking two far each at customer won vote Werner have And the XXXX, recognition. XX something was our to case, use very It we than them and easier across head-to-head. years side the one makes now governmental in XX with over easier years yesterday. our this service five of. It That I awards would we it in and proud our at for major to greater anybody even months, mean, seen and last it’s the they best-in-class we’re I note, a increased combined. we’ve as across specifically we’ve employment different preceding last spread I awards, and awards, over is So service what But believe each on in levels of us. can levels operating makes customers units. are

We still to So people do. are work noticing. have

it committed thought, forward. stay having beats I and to this, we’re in stay going to what drivers We’re tell better do. fleet, choose on that your last a But tenure nothing gain going they to high-quality drive will this you is and get and at to continue

to one been multiple high-quality the about of quarters roost last service. for our drivers we’ve just And so form row, really talking low time a XX-year in home in I want turnover that coming that it’s plug to

haven’t with of at something and and we the levels delivering tracking women Of at wrap day, so professional tracing. But systems there the out and long a course, that’s service very proud technology time, doing and of. it long, men the the in we and seen end I’m are

David Ross

Thank great. That’s you.

Operator

SIG. go with And today your question. ahead the questioner Bascome be Please for Majors with will last

Bascome Majors

curious, do Yes. you some corners out is Thank on and P-based, talked constructive it have tolerance valuing Thanks your attractive more outlook how was you I you and sounds for and you. of you itself for leverage maybe about Is capital you’ve what pretty conceptually, like CapEx. buyback? put And about if in flow I the And shares? cash the here constructive mean, think on to bit how marketplace. quantitative? it certainly, squeezing and I asses aggressive be opportunistic lower own buyback today free returning presents a me in opportunity is the here. do little mean, your the

Derek Leathers

So about let’s balance on start with the or the debt for the first part leverage of question sheet. tolerance

today. strong balance proud of committed very sheet we and have are the We very

have to should opportunistic like right we in flexibility capacity that on to also the We be situation balance arrive. that sheet able the the be

We to are got open-minded to it’s leverage but sense. that remain make and will way,

opportunities even throughout forward There’s And think ratios a look are the opportunity front cycle, low. us, so our in leverage we them and as we conservative – to in of at obviously for shareholder utilize as expanded will our and we nature, fit the in best sheet we concisely opportunity think see is to and still what value. balance current based be on create

The second part of your question, buybacks.

things think is to of special about in year. buybacks past throughout employed M&A we as the Obviously, about participated So one well. simply on cash in think some menu we’ve you we buybacks. the are that and we returning shareholders, as that and something dividends Buybacks saw the dividends the

continue to to and strength time. open we We the look evaluate our continue makes market sense those think of the conditions, those each We’ll to most options. what we sense and current be at what will balance makes given sheet current at think the

it I more we work and time. lot that to and can’t give give internally serious that, will because over color, will decision debate a consideration on you a Beyond be

Bascome Majors

Derek. you, Thank

Operator

to the our back ahead, Please will Mr. go provide would turn conference now this And will closing I Leathers, Derek who over to conclude comments. question-and-answer session. sir. like

Derek Leathers

you. Thank

we’re be to a with Slide of you. investing part call today. and in company us all proud spent in to last you you It’s earnings to be to XX, of strategically all variety We’ve perform that if I cycles. of to first calling historic our for first want a have doing the our to So years, and off, across a go and three day thank proud economic something for transforming

are behind The high are technology. expected ahead. commitment Werner team benefits fleet, associates with us provides customer new to investments heavy are resulting levels cash that free of to Our flow increasing service the the our industry-leading to and strengthen our experienced and

higher finally, margin better have than what we long-term than return expectations and ahead, past. we past. recent in As our our And look the today been are they’ve been we’re in positioned

the committed to We’re shareholder cycle. delivering value cross

your As it’s in I everyone been Enterprises. tell I our call calls In transparency drivers blue. our interest our our and our increasing efforts. a for to investor all the underscores and begin want Werner effort time, never earnings hosting there’s better time closing, decision commitment our quarterly enhance for drive relations in to first participating thank earnings to to concerted to

have follow-up questions, reach to you us. to any If hesitate please out don’t

Operator

your now and you And today’s has for now presentation, Thank you attending disconnect may lines. today’s conference concluded.

Werner Enterprises (WERN) 6 Feb 192018 Q4 Earnings call transcript