Werner Enterprises (WERN) 5 Feb 202019 Q4 Earnings call transcript

Company Profile

Participants

Derek Leathers	President & CEO
John Steele	EVP, Treasurer & CFO
Todd Fowler	KeyBanc Capital Markets
Adam Kramer	Cowen and Company
Allison Landry	Crédit Suisse
Kenneth Hoexter	Bank of America Merrill Lynch
Scott Group	Wolfe Research
Jack Atkins	Stephens Inc.
Jordan Alliger	Goldman Sachs Group
David Ross	Stifel, Nicolaus & Company
Michael Triano	UBS Investment Bank
Christian Wetherbee	Citigroup
David Zazula	Barclays Bank

Call transcript

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Operator

Good afternoon, and welcome to the Werner Enterprises' Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. Earlier this afternoon, the company issued an earnings press release for its fourth quarter and full year 2019 results as well as posted a slide presentation to accompany today's discussion. These materials are available on the Investors section of the company's website at werner.com by clicking on Investors, then News and Events and then Webcasts and Presentations.

recorded evening. be being beginning for is this later webcast and available will replay Today's

begin, direct as that other we related statements Slide to disclaimers Before that please results in could to X statement the included materially. risks, remarks differ of cause on forward-looking disclosure may statements. actual the contain press involve factors presentation the well Today's the your as release attention forward-looking to and uncertainties

believes results past included using directly information non-GAAP of A Additionally, provide the the slide it facilitate of additional measures in investors which comparison reconciliation company to appendix attached and the presentation. earnings help to is reports tables comparable GAAP most for and measures, release the performance. the to the the present in

to over Derek now to go CEO. turn and I'd conference Mr. Please the President Leathers, ahead. like

Derek Leathers

me afternoon, good and you, everyone. Steele. Thank our With CFO, John is

some may a our information X. Slide background for updated to items. key few and who those story, We've Turning to new I'll included be highlight

were remainder X segment, with Services, For XXXX, Logistics. Transportation Truckload of the primary our generated from quarters in Werner coming over revenues

the Looking category, of over are reflects the by in half continued industrial, in customers, retail of focus at were with XX and XX% just is in vertical for our strength about selling consumers, retailers North our revenues beverage and necessity-based revenues and the American on the XX% which in top these more remaining manufacturing XX% discount revenues food that products. other XX% were of and category. and Logistics

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

adjusted at In $X.XX to EPS financial let's quarter, of lower Slide Adjusted operating income basis million. was the per to to $XXX Adjusted a $XX.X margin to performance. XX.X%. X brief X% Next, our and declined XX% decreased move XX% operating decreased XXX our fourth for overview share. revenues million points

Considering a total margin double-digit 'XX. the have quarter in more proud to operating market we're challenging delivered conditions, company fourth

$X increased execution, the flat rate quarter XXXX to revenue to exceptional $X.X increased cost a nearly was $X.XX to at to by established XXXX were per year total, $X.XX revenues Adjusted stellar operating freight model generate income X% We're per year high. highest EPS successfully share to share. in and in year reported compared second billion. share X.X%. million margin $XXX.X operating our adjusted and balanced rate results. full freight and For our the strong nearly was Adjusted earnings Adjusted in and fourth a us below-average declined pleased adjusted a per XXXX. our XXXX in management and record earnings that the enabled ever effective weather XXXX, new storm we've and financial million,

XXXX due midweek Year's. were was reflects XXXX compressed later timing timing perform The lower as freight Thanksgiving fourth fourth markets third operational New quarter Our and fourth Pricing of seasonality, was due strengths freight to quarter cycles. quarter period, quarter improved of and XXXX the quarter the XXXX. for in from operationally volume us base a Results fourth fourth the Logistics, an truckload as well was comparable quarter demand to and excellent position diversified and and the surge the shipping XXXX. revenue quarter result different pricing fourth than and One-way difficult in that sequentially significantly than of challenging Truckload more to of a place in Christmas to projects holiday and

probable carriers still coverage insurance above our the period coverage XXXX, of investigating of self-insures it has this that The liability adversely is $XX serious will company this a first and earnings. quarter The it company for involved insurance is XXXX excess in amount. January accident. with liability for first million policy impact but was trucks X the In accident, appropriate

expense would of result XXXX $XX Additional claims a million diluted in insurance per first of $X.XX and quarter charge share. in

As company, emphasize is nothing that we or hurt a do constantly hurting worth others. we getting

We will reduce by we those strive eliminate live continue to to accidents. and as words

of extremely fleet, XXXX Truckload year challenges in the trucks proud Transportation investments the fleet our we Services our XXXX an Reflecting year-over-year a and amid or down within Werner's performance of segment, our XX, and of faced. growth X,XXX in in execution sequentially. Dedicated. newer increase total I'm ended XXX with trucks TTS Most best-in-class came we

and XXXX. our conditions in are positioned quickly themselves to team business whatever well present model to Our adjust

commitment who all flexible superior a have their all effectively are I'll I'd and call this financial mechanics our turn continuing point, manage to like controllable of more to to in safety strong John? for service. discuss thank portfolio, and detail. professional over and John dedication broad-based a more to to employees, we sincerely contributed adaptable this of office At hard work, associates, the drivers, We our costs. revenue the performance our results and to

John Steele

truck our Thank quarter Beginning per relative good truck Truckload trucks of per during by increased number X.X% revenues partially off by by soft performance pricing. mile. total TTS we decreased average and afternoon. net design. more due dedicated segment. pricing to and X.X% Year-over-year, market truck some strength than tapered then and and financial on TTS count the Derek, slightly by A fuel drivers for fourth offset per quarter. Slide 'XX One-way deliberately was our miles offset provide fourth you, and Starting week higher Revenue lower we X, additional of with per lackluster

Logistics In lower. XX% were segment, revenues our

freight primarily due Our due income pricing XXX declined our in market operating adjusted to XX%, adjusted and basis to point challenging operating decline the more margin conditions.

per share XX% a year $X.XX in earnings than a lower record $X.XX earned share adjusted or quarter the Our were we fourth ago.

X. Slide to Turning

had In XXX increased of which data. competition. declined revenues more softer a per Logistics full nearly fuel revenues truck TTS, an per flat. average of our trucks, X.X% net at increase. was freight year with look in market week Let's We X% a was

year declined operating income adjusted slightly margin decreased adjusted operating for slightly. Our and X%, consolidated our by the

Our on adjusted truck Slide increased Transportation per Services specifically results In fourth to look TTS the revenues Truckload at in Beginning per week. decrease segment. by let's to quarter million, X% quarter, driven X, share primarily X.X% a the prior earnings our $X.XX. per year for $X.XX declined revenue versus $XXX

fuel declining operating quarter basis decrease points XXXX million, XX%. our was strong a Adjusted challenges, fourth due operating primarily Despite of of operating ratio XX.X%. $XX.X income in XXX margin the adjusted was to XX% the adjusted to surcharge net

TTS a billion. $X.X million income despite operating ratio full operating year operating net year X% XX.X% year, the full full revenues increased industry basis XX.X%. of fuel XXXX. conditions contraction the adjusted to was And our due declined XX to X% challenging of trucking for margin solid For to in points Adjusted $XXX.X to market

to metrics Slide Turning XX. fleet on

for For trucks to X% fuel trucks net year fuel trucking One-way of quarter the Dedicated, Dedicated One-way Truckload for XXXX revenue the the for fuel X% Further Fourth revenue changes, decreased Truckload the quarter. out One-Way year increased per million. and for due XXXX Truckload week X% One-way per by of X% in net year revenues components of XXXX revenues by revenue total trucking Dedicated for grew increased part per the quarter. 'XX the quarter. trucks and Fourth of of XX% year Fourth of year year-end for XXXX quarter declined exceeded revenue and week to Truckload the per and for for trucking $XXX December. X.X% truck declined average million. full per truck One-way the fuel trucks we to the the Dedicated X% the Truckload and the decreased revenues grew the full revenues year decline of per million. increased for X% XX% quarter. net for $XXX $XXX XXXX XX trucks truck year average million. average Dedicated quarter the mile for post-holiday to breaking latter X% quarter. $XXX X% net X% to retail week truck X.X% dedicated the typical of per

for for and truck per declined X.X% miles quarter. Truckload One-way X.X% the the year

and share experienced trucks in and temporary market estimate truck communications November This We that One-way caused Truckload our rectified $X.XX During by miles was incurred our thousands the issue in per by a reduced per subsequently our XXXX, negatively this the in by of satellite quarter provider December. drivers impacted GPS unplanned of our to per $X.XX trucks earnings approximately for the XXXX quarter. outage tens for industry-wide fleet our fourth affected cost share. outage X%

Truckload to brokers. logistics opportunities, contract digital Logistics $XXX on Slide XX. results fewer the pricing Logistics had competition XX% declined decline We a Logistics transactional in from Werner driven to less revenues and primarily including by competitors, XX% million, fourth Moving increased revenues. attractive and transactional quarter, In

basis margin less percentage gross driven significantly Our XXX surge project and declined opportunities. by points

we profits X% in basis a decline point in our percentage and other by to operating achieved operating gross While our XXX declined expenses, X.X%. reduction a resulted in XX%, margin

continuing Logistics $X.X Logistics clearly is XX% in invest our million. improving are to to productivity. decreased income We which operating decision-making IT, employee and

X% year, For and lower, declined was XX%. operating revenues X% income full were gross logistics the profit lower

generation strategy, to and points operating cover basis portion Logistics Derek, CapEx final I'd the back of to now our remarks Our XXXX guidance. free turn will Derek? margin cash to and XX X.X%. our flow like declined prepared who

Derek Leathers

Thank you, John.

Moving update wanted strategy. to to XX. you on five T's Slide I our

sustainable structural management drivers efficient years, Over modern we created past our and with professional execution. fleet, the and improvements few high-quality strong more and

delivered generate to more We year. in expect results, challenging and we exactly that's a what consistent

driver capabilities. locations new, the labor truck X.X improve average X.X equipment retention highest respectively. remain we to significantly upgraded expanded the and trailer continue to market, training of our of Our and XX driver rates We our X and years. Despite and competitive in years, achieve in fleet strategic multiple ages maintenance an last network terminal very the with

and provides This the facilities need every drivers our and investment with infrastructure deserve day. they keep to America moving also

our customers that participate dry This were Quest our we survey, five from to recognition that validates working. shippers this a van categories. thousands service measure Award winner security And priorities, the infrastructure We the they our strong We business rank as T and are goal is support data to of while strategy award of five every by time. in both business generate annual independent our continually August, further both solid upgrading truckload superior Last for of IT recognized IT. value strategy, long-standing to initiatives T as our Quality The and our logistics part with time on of results, Logistics strengthening our T to delivering Management financial five customers in our and safely strategies ROIs. and the operational technology prioritize ensure is modernizing drivers. ultimate and strategy align and service along

XX in strategically Slide a high resulting and investment the On flow the years. relatively focusing period, From XXXX on capital organization. expenditures operations, a improving cash free of net we is X flow summary to cash over strengthening from and our past fleet our were XXXX,

significant $XXX million, With to million, investment $XX fleet the net cash our and we a of cash behind and XXXX, normalized in flow or flow in generation $XXX terminals us, free million free CapEx our increase in generated year-over-year.

a XX% reinvest fleet We the to CapEx and are long be of in XX% in range term. the the new gross are of to future net revenues targeting over more continuing consistently for to

free XXXX. generate expect again cash to once significant also flow in We

conditions our improve. not plan our grow We do Looking ahead guidance on market fleet XXXX truck Slide to to until XX.

to slightly XXXX. for change in to $XX decline to fleet will be $XX negative on count and fewer XXXX, be X% from expected in to million XXXX of a $X decelerating to the expected the Gains expect be used to demand XXXX, in the we and to range the in in fleet trailers Our equipment X% due positive sales to truck flat of million of year-end of our are count pricing first sold. year. likely From range lower million half

the in mile same period a million. capital of Truckload net the expected first X-month to of to for is in be Truckload half in per quarters. the revenue we've trend $XXX to One-way XXXX in range million compared to total year-over-year of to We to One-way X% X% two rate expect XXXX the $XXX experienced expenditures last similar decrease the range

XX%. will We effective tax expect to range in our XX% of rate the be

our average We levels. current and trailer expect at to of the or age maintain near fleet truck

far and normal first and the freight volumes unit than in The XXXX, in the XXXX. weeks so based Pricing remains seasonally have Truckload rate far of season remains rate One-way our lower pricing. lower bid XXXX challenging. So market in period on been in challenging five contract year-over-year negotiations the slightly customer difficult same spot

dynamics earnings more of Currently, comparisons of fleet growth rates expect turn. the XXXX. are nearly market. revenue of of Depending Dedicated, Werner we half industry our exact the difficult. the exposure to opportunities although less difficult XXXX, the half could predict XX% more is half Year-over-year develops, second with of improve and positioned the in well it in of of timing and the stable to first in XX% XXXX and business, in segment to a from One-way fleet how Logistics on predictable second be year Truckload the our there is

and comes success environment and Following expected constrain the our to new in in supply effectively truck result as expected company available I'm the drivers the that XXXX fewer truckload Drug of contraction whatever for future. industry Clearinghouse, we're buildup way navigate confident of industry develops. truck a are economic positioned industry to factors first other Lower supply and production, failures the trucking as half. accelerating Alcohol

refreshed, Our is our team And commitment is our to rebuilt. fleet unwavering. is excellence

the like to At this time, I'd to operator begin over our the to call turn Q&A.

Operator

And Capital Instructions]. Markets. first . from Todd KeyBanc of question [Operator Fowler our comes

Todd Fowler

to mid-single get with growth around Dedicated that seen that saw what about growth the kind bit 'XX? fleet a first in digits the numbers playing Can fourth flat the might what you the XXXX the the you're little bit like in maybe little pipeline in the seems Dedicated to of from part versus to for Dedicated and the first comments of decelerate level just quarter. why a you're half little of back Derek, It fleet year. growth, expecting of on you've bit half you of in seeing slower a the talk in

Derek Leathers

Yes.

the believe rate One-Way have be rather not, products from and as Dedicated either is still is bleed quarter. an One-way to needs and The over we that network. question, our off at on to fleet forward. our will on keep a more Dedicated flat market fairly we of little there, a So we additional we maybe mind in netting demand we even to -- the down looks right One-Way good be willingness, what the in don't do we'll year-over-year we're or about tenable into pipeline think more have out to first go it's that we that move there's opportunity as hesitance slightly the end as off. sense may of Todd. I'd cycle, has And where bit think And our Actually, my for about a situation the and available adding believe bid there in the robust. rather simply pipeline. now. to in all, the now if thanks really assumption, from trucks up we in Dedicated going perspective, our trucks it expectation mind customers. in move needed right and to if The growth the supply what's capacity where in I'd overall to really in But as in our from to with that We

Todd Fowler

Okay.

like lock So versus the a to more of anything it it's is on a reluctancy in right the like pipeline little now where bit side? contract market sounds to

Derek Leathers

season. truck execution to that. Yes, that's mean, if just move rate than to I perspective. disciplined about to situations we ourselves find rather in chase where We about to know it. of myself need rate, a happening doing this with we fair think I'd have of structure. where a bid Dedicated We to find what's a be way is going in we And from think We're cost be it thinking our really discipline. sort I know the

Todd Fowler

follow-up. comparisons, the The just a expected then pressure mile. on per the And is on helpful commentary revenue understood. total Okay,

particularly did year good half. You of costs and environment, in in a this a job kind the controlling the margin back of controlling challenging

still controlling As in rates? in with high the margins right the can you on what think pressure you're of do in side? have where you would And what now you margins kind how on leverage look that for right about cost XXs, environment be to do you XXXX, the we're now? seeing expectation your And that be the

John Steele

from culture to I the will when year both we savings, get the the savings start range efficiency, the benefits, expect driver cost in to cost And we've that you X, make programs to first where improvements saving to made over categories cost And and non-driver say the items is bit We've We're little expand This more cost-saving difficult maintenance, claims. our rate that broad half. meaningful communications, the the cost The the in biggest the the low-hanging continuing initiated a Todd. insurance into based. difficult it's the Thanks, company. labor with variable throughout last expect and we the negotiations year margins year. you on than supplies, that fruit widespread. are the the out. side. our to John. They're The be does side, but shake X, on to improvement is to side

half. freight We to to challenging and second in expect then the improve in the in the compared to half market the half and easier due relatively comps first to first market be second the begin half, the rate partially

to quarters. If in the quarter, total mile negative that negative last a in increase first revenue and you X.X%, One-way X.X% and Truckload year, X.X% we gradually next the per negative remember in then deteriorated had three down X.X%

but So hard be half. improvements continue challenging to we're will to first work it make to we can, going as a

Operator

of comes Deutsche question Bank. from Mehrotra next Amit Our

Unidentified Analyst

This is Sal [ph] on Amit. for

supply-demand down what from a does move rate to get of bit you for down into as Obviously, implies XQ just of assume perspective the easier XQ from market overall? X% it do XXXX. the this of and half of comps step your to -- relates guidance it X% first in As a a guidance

Derek Leathers

on have we negative happened turn that accelerated determined than X% with bankruptcy exposure that that really renewals our been. down for going if number as guidance. thoughts clearly we Alcohol coming at, out better see That's It obvious the than We're is looking take current and spot is you prolonged or our the the are what as of taken rate now. being the it's clearly the a over rates they've in feel truck in market are variety think, where that. seeing of are ways. in put It's supply a exposure a the of spot of negative first and is than but effect that and the mix, comfortable X% demand what's as Drug to The think sooner rate translating kind now place supply at. we're We and we be difficult into up. mean, on an What's year-over-year has I guidance be with conservative bankruptcies builds, think The bigger that commentary that our finally, make more we've signs seeing right think Clearinghouse -- lower when be are spot going and in the all that's So The rate capacity -- spot given. that the of effect going to project in opportunity, just range. constrained. the of is currently we that's to to last could rates, year, by for and and a environment like are half of not what the like? We to it's continuation of opportunities course lapping bulk market where been where took levels it where in to more that as well of really be what I midyear, orders place

to it of think pressure trying you're make see going other to to on through the people the tunnel. I end continue

Unidentified Analyst

QX just we we maybe an basis mile QX? What bit as Okay. per the does to because kind to little of Then don't different a to relative rate QX have way move on this actual assume of from anymore. absolute

John Steele

We the when that month the not at year. rate was have did that quarter down expect are this rate little some expect we fourth quarter where same to 'XX. and quarter a that we at the in for year. lower not strongest time seasonal in had freight and weakest thus the traditionally, on that and the year, the rate step yes, fact move saw opportunities, Well, project you surge from of seasonal last hoped based traditional we the far a that of January seeing we at we're the bit it is of But fully below

Unidentified Analyst

Okay.

of assumes normal kind So just seasonality.

Derek Leathers

Correct.

Operator

Our Cowen Seidl Jason comes Company. & from . next question of

Adam Kramer

This Jason. on is Adam for

deeper try wanted and current kind the now. Just bit right dig of little to on environment a

kind maybe what look contract little now now? bit getting challenged, if like? the bit a ask about able increases you're are a us mentioned What that around a to just still and little how You be to getting increases you'd wanted I those more you're contract give contracts -- obviously. number things numbers right color, of what

Derek Leathers

of thanks first early So all, process. for Adam. the in We're question, the

seen to outcomes, So continue in of exceptions and a There few here yet. in first be of of bids completely of to from fits and 'XX got going -- are to sit down on as variety of our half efficiencies have that that XX% the network finished -- We're flat of of in be renewals And in either those a -- are probably that to in-house many to XX% are over roughly process. XX% very first business Those points. sorry. we've based half not will the hard about or to today, settled We'll or finishing 'XX we freight. we've range. work

I year doing lines things of a individual X to much is last years, better customers. think we're job operational and understanding the freight the cost the individual over of of One

process. bid the into weigh does that so And

fits of guidance come issued. -- But of X the well as the outcomes the all the with is where up we've no as there's that it net market we bid size So answer. spot

John Steele

and was, One-way to And add Adam, relates our trucks, the Truckload remember, Dedicated. commentary want not of X% I X to One-way thing Truckload, and to X% to

Adam Kramer

down Truckload? to One-way there, few a flat the points The rate was number

John Steele

covered the Truckload. Yes, to relates One-way commentary we all just

has also is guidance Derek down the to made Truckload. One-way that X% X%. comments to down relate And Our

Derek Leathers

the As does guidance.

Adam Kramer

you Understood, Yes, understood, thank color. the understood. for

recovery, a you're as When it quick kind in. of like kind half follow-up. seems everyone's the Just back pricing of that thinking about

mentioned you I do think the of bankruptcy, do timing quarter anticipate mean, second insurance you the about kind into that some You we right? What catalysts as the et get will kind of continue first to the the guess, do of we I quarter get . in the be half? challenged, how the and to quarter between breakdown of kind earlier, that, recovery second cetera. as second see you

Derek Leathers

mean, Sure. this. start I'd Well, I with

The normal best this challenged we're are still takes and different. been first I quarters be challenging are equilibrium a we've of looser a headwinds, today over below said, in builds than coming in replacement think of way I With levels even situation will, in times, where quarters where if the a you than you've kind in has from It's that seasonality now. to off, closer although off been negotiation hold. general. mean, quarter are and got of We are the will no saw last while. couple orders in Europe, capacity we 'XX.

in meaningful to being up 'XX going I now over not We're As some well. affected fivefold larger talking by we're mentioned, are mean, I rising way. about bankruptcies and bankruptcies talking already up XX%. 'XX as of players a

It's going shops larger. of So it's just business. are small that out not

over to the X% and market people and take is renewal we a with of are pushing data the continuing to The X% cost ones two hardening new has item insurance lot to the that, been you the mentioned mean, into Clearinghouse to when And day cost Drug insurance on in X reliable that what Alcohol that with. the really see -- thin the edge names clearinghouse. Clearinghouse. to a into the think operating X line of we're XXX increases are it's was that insurance XX% Alcohol I XX% big -- ones they're of and Drug because can't begin and they of know margins insurance, other I razor XXX receiving

that's cast the support, why over forward. fully about but entering been the testing if that and and would more have to It's we thing capacity so will free, about just will some we drug over make a year, industry fleet good take course for safety. the is think a the that our hold And That's this Clearinghouse many years of something drivers sure Drug as it to project we be constraints alcohol pace talking you Alcohol to year. over out move you're for that XX,XXX

On the the outside, of quarter. second I it's think latter in fully felt the part

the On us, and we it early of to and and I can right think But our control, filling times the continue our inside, late which got our choppy our now, QX. ahead going QX, could we on keep for we've head focus start and execution we what we're service is to provide cost down customers.

Operator

question Our next Suisse. comes from Allison Crédit Landry of

Allison Landry

see contract just that? bid rates you're from the you question thinking how latter is, the upcoming season, the progression expect if could And then on perhaps how delineate out part. start my on another Sorry, Maybe to side? of jumped but weaker I about do towards you strengthen just call, the would you

Derek Leathers

X going goes we on. to year that's Yes. market as the the tighten as Thanks, Clearly, Allison. view

faced that's And tactical terms little is change at the progresses quarter. to in aggressive long-term I contract, as year shortsighted bids as going a Hopefully, high a be so to the XX, backwards on fact the a level, level, frank, And a At more going may is go right a is me, money would is, market hold on a that we've knowing there mean, well. the of afford to to industry outcomes the customers majority we the me line of discussions vast got to professional of mean in headwinds. discussing to going in they're margins with open, and can't the horizon approach. have more save industry that. things the But under to all Because days be out now. what's relevant overly the the cost out, with, a be to fact. that to overcapacity there a the -- on very undersized versus bit than look we're XX, and longer-term happening our that we're overall with frankly, of rates, just the XX fact or to turning, market maybe

One-way see We view, some you be have that's others customers play that outcomes option. Dedicated more that that's we to commentary the the only earlier transactional. strong, opportunity take pipeline and the bad trucks and and And to into versus out in from pretty . our missed other of we where move will have that there Dedicated the taking could movement call that comes if because to of is we have more more bids,

Allison Landry

terms helpful. in really maybe across historical then of the end you talk retail trends high-end low what of end That's trends? you're to seeing customer seeing your base, in relative those Okay. markets about of retail that you're some versus each And could just specifically

Derek Leathers

several don't about talk we've we individual general terms. over Yes, talk it winners, I will about We've that. customers, do with last years in aligned the but ourselves hard and to worked

with it's opportunity that home of by share continue winning think the have to losing us. going be successful their as to continue them own winning and level closely with in retailers we e-commerce reality and And ready aligning put with they've they and We're are the align with out gaining our to kind footprint. the models their retail to folks that and grow to them and At to strong very and maybe them. the So up expand discount and particular, who's grow to around to strategies. successful follow results continue improvement products, who's solid to execution given see we us retailers, continued very, stories losing that's

good. end the real market of looks that So

of ends in that the precisely their keep over with are of what approach now the in several we've our weather sufficient not and what's of model by see that's for we're strategy business helped minimized that, on in, up with last market the and market their storm to to this year. other much, exposure play us we the this or squeeze years that maybe market, that in as Some happening And particular, we don't and design. folks frankly, see and caught occurring the squeeze the it's the e-commerce,

Operator

Our America. from next question . Hoexter Ken Bank comes of of

Kenneth Hoexter

the of could pricing keep on discussion. of Derek, just you going kind maybe some

to on One-way? You given the your that through about year, mile One-way. specifics lot per that Dedicated does on you're through now bit little thoughts of kind obviously a And a us come focused feeling XXXX maybe through ramp? talk slower just the One-way. you've through Maybe pain in to on of than how on Dedicated the Or lot a rolls revenue maybe the and longer

Derek Leathers

high talk carried to expectation, appropriately having we it's it's the of grow. Dedicated can them. not seeing To adverse of we've difficult Dedicated well So and are for And Dedicated, given. another out we than with utilization X charge that that that look some fleet. We certain overcapacity do to belief beyond them behind have think the under We're in had the this have years, kind had do did. risk about we to we as feel best equilibrium as I still that going certainly you're we're focus what that capacity already amount the fair freight. effects and us decline we worsen a serve do provide. largely heavy sophistication. Ken, we that of and they it's some XXXX folks that, you're We cycle like especially to not asked for be a reasons be of lot or implementation have do and sit the going design, closer do same to is where could doesn't story to across off, first point about good them anything we of the at market, based relief year services One-way that for currently and on its of the That the news Dedicated, There's for do has mean, us. situation with or those in It it come on But with across the but spot customers, seeing the pretty movement exits to on multitude we that going just that on to thought longer, to is spot. to well. were the in optimization, not another that's an in a resemble if you it pressure the

think model. we're So pretty how our of in confident we about Dedicated future the

Kenneth Hoexter

One-way terms X%, I not built-in, turning you're saying was kind expectation you're is of Dedicated of the in terms but what in minus of minus So think side? the X%, negative of the

Derek Leathers

That's to in point. need pipeline right Dedicated this is reason correct. negative at The plenty about robust there or that turning isn't now think a

Kenneth Hoexter

can the on get outage. I follow-up If a right. All

anything kept that? you've guess, said on know that gone now -- And supplier? outage experience you you own cyber the beefing cyber-attack I I in differently IT. it through You to mentioned little on that was there want went talking maybe the quarter on doing? the driving, backup? the about impact Is around? that were this done you've So your impact, just and up mileage. you're John, or ensure they was a to drivers was little just you're anything what it I bit out Or longer a the that bit understand EPS

Derek Leathers

was was Yes, just anything event like not GPS it update/ that supplier a scheduled do be than And just global more GPs this or to [indiscernible]. that a frankly It took had rollover place with cyber-attack to our impact that. fair. affected that a rollover

of world we different affected so What is on tech days. affected the revert relied devices it variety old-fashioned that well. And for information, to the meant were a to that had as us it we around

routing, next, a that course over big evening had the and to logs, an atlases the trip we revert day to and is paper X planning, from paper So X of pretty undertaking.

and incredible. effort and here we at nothing that what hours amount because through work It all and I Werner would short folks of put don't it. the was amount if the into it, made of of. of the specifically fleet proved got time of keep So But to over effort me moving extra remiss they really thank to I it be really

come on kind think the ability it of several have software not what able completely being already took our delayed and weeks impact use to to and to we to visibility, It you we've EPS have through back clear because online, commented don't get visibility to optimization of the delayed on. between something us differently and telecommunication That's major that can explain the fleet. the link it do is our you kind why, than we pretty when as what but to just hard that how it's of fleet. It was And would redundancy isn't have to it dispatch, works.

do we not allowed when with built way most We dispatch for we proud were send driver that all of stay for and to reasons dark, of other this so the communication and apps, in drivers reason we've the went things I'm X us have our receive -- is And dark. constant still information.

specifically in just the widespread, across the because had service places, most our it impacted. or So continue technical our solutions impacted move this for it was pockets worked We avenue outage and in goods was for other to without were we but provided workarounds fleet, Werner. kind us customers. already even but impacts not of built entirety . had fleet just mind their spectrum of were of more an others it There at to kind than of whereas

Operator

Research. next comes Group question Our of from Scott Wolfe

Scott Group

spot the 'XX? to realistic you low down what we expect, lower do do what the the trying half rates you in of X%. that think single, second than just if to are you mid-single, same second what of you X% are think? seeing recovery? then market half in as And are from rate headwinds to Derek, lower half, project bridge business, turns, it I'm the Is saw sorts first we

Derek Leathers

question. changed we were environment answer from currently part has in the latter the first your the from of not seeing first part the of quarter what 'XX. in So dramatically To

are quarter and even fourth would surge be quarter. there Now the a quarter or in most I projects there year fundamentally and second the first you than opportunities will tell in less good third in of the

will, isn't great. as if the that environment So you of impact,

We of on through community. upon I built recognized relates a that's shipper, in it's heavily we're season product lot bid will back around that And we're continue least generally and completely And not are those turn the and going project, the investor to have with rates do is standing. really at to well. where happens the and to but the we battle half, to it of fact carrier and visible as think us, that, what across very the dependent it type we lines because be opportunities surge from

stands prediction Phase -- to news looks and given you've the too good, than you We on good. a available We've and does what in need relative early certainly or knows confidence way that looks I where of to that it's come dealing they're pretty just Mexico. a -- feel like. better to but were me we that that now, got back what But all presence half, like the China, right deal got makes side, what election other. staying so consumer and flip be our coming, on try consumer throughout to stuff 'XX. an USMCA, confidence who in X, with trade the give one engaged to

to doing a recover. rates be out our we'll And So assure early. But need recover, can We'll bit part. that for to there you it's quarter-to-quarter. when update I it's them time

Scott Group

I to then ask can X And John. if Okay.

that didn't full X% they year think, about rate? least, or run of salaries And be well? the But good answer are costs question you I the impact want else to if the first as So X% fourth in were you I asked sequentially. that get the half someone similar rates Is down, in margin a earlier. similar should do half, first back down were 'XX, margin as at half think quarter

John Steele

we in the fourth quarter. of outage, We compared X.X million miles and Yes, we X productivity payroll came third. logistics partially salary wages we X shorter third got a bit some to fourth dedicated because fourth And quarter quarter, haul had more in holidays non-driver partially gain because GPS the little in sequentially improvements. efficiency and and as had company are from quarter in help fewer the improvements side,

going also those a little comp to fourth had as to much We Those quarter. costs. there, improvements to predict somewhat and made to but that changes like experienced for your work subject the claims We we've are that's be improved you're always make harder forward. in to going insurance sustainable health how

work know trend now. to continue and comp experience wages to claims on our salary good So what in fourth based quarter But expect pretty the favorably would I insurance. was health right for we

predict want all So to of we'll that wouldn't it that. I keep

Derek Leathers

in of said. did things quarter have the would the thing that And tailwinds John I in fourth that other only keep is comp. is The to incentive add some mind all the we then from to factor

news some we this of in the great certainly meet did terms expectation. was Although in it not how performed quarter our respects for

higher incentive that. were and will goals internal reflect comp Our

going our to so And exceed goals as headwinds it that that our exist relates will some we expectations. next and into hope there be exceed as will to year

Operator

of Our Jack Atkins Stephens. next comes question from

Jack Atkins

just rate belabor go so guess, it. just in a the Truckload, but to back for the moment, to trying point, I'm not to One-way to John, expectations to I bridge

saw got in the a I think rates I other X%, flattish of less are to as folks year-over-year special The project business. be roughly market headwind you've appear to at X% well. down from in it just business down first half. seems a that steep the to slightly. like flat easier public published rates rates and are contract decline comparison, an year-over-year On the One-way pretty

to put X%, sort be that So could down I of you how would for context the to kind you're getting helpful just a think little maybe around bit folks? more of X%

Derek Leathers

think Yes. is were overlooked thing up X% be Well, year. last the first might that QX over getting for we I

the on -- effect And and spot exposure Higher in spot lower much year, experiencing if at right? X miles so been we've throughout spot and you that renew just anything, the both as contracts do don't effects, nothing a already rate. you

which Still You you're you're what gate. then only end that to may happened. first be a they up most than slow in issue, spot. that renewed right experiencing quarter, of now, down. with the first going to can may contracts out pound to be although better flat slightly negative It's right that Those normal like add seasonally has renewing quarters

June. too the perhaps we now conservative in time will first they perhaps, around are crystal even The early upside project happens but second with at years, quarter and second it's estimate, a second just the to and predicting of get an to quarter. spot year, opportunities. fruition is the the back probably end really right ball surge good that earlier question being only and or the And half it's so be really as into in half of come what -- And our the in to in looking

So is One-way lapping, range to and assume start what what and and we total of we're Truckload, for what we're lapping this know, a going being that company we year. we're based on reality not in plan as

our best that's now. right view it So on

Jack Atkins

Okay. And extra makes No, sense. that I the appreciate there. color

think you guy. you OR workers' it's of So the we from important short-term How [ph] questions, just some expectations health sorry, the disruptions should What relatively negatively conversely, you I'm sort -- had two impacted trends was a within correctly, the there, and comp for think question, quarter. everything follow-up hearing the John, think saying segment. that But for supplier calibrated a had if trends. the you but are care about have quarter, comp I'm good sequential everyone fourth when other I for to their correctly. about tailwinds guys TTS in fourth OR which incentive

right than the bit -- way fourth on you puts XXX points, are Is to year? little see that point You quarter. . that think first Or about degradation, more about a typically side? to XXX quarter basis basis maybe takes either a this a there and

John Steele

challenges variable to that rate Well, talked Derek and I X% the X% think biggest One-way. down about is the being in

second and to When special not rates, in this contract going environment. significant it's to and likely quarter. second in up business more least you we're we're at time. this flat But forecasting sledding thinking tough surge quarter, at in difficult point. pretty XX% to second be and We're project in than in rates be on the to It Derek not range we're X% down at going slightly first still it's quarter And forecasting spot be combine at this think point, I first quarter. could which project June. fairly negative, a about, talked show that quarter business of planning

relates margins. into enter as all thought to process it factors those So the

Operator

Alliger . comes Our Sachs. of Goldman question next from Jordan

Jordan Alliger

and the side can any environment Brokerage? so, Truckload, to a maybe there see talk And Just bit the rightly thought most Logistics Brokerage to the trickle-down question. was the for a a year? later start of conversation, business the Obviously, quick on improved that little you is this of about equation Truckload. you But

Derek Leathers

Yes.

and that where being down, our that enter on So customer demand and to leave if my we making in rates to additional to some that in you in what for supply then despite a have going are going here's new a be the market both has of that pressure. were them than our think We're as challenges, warrant, rates of underlying revenues tell product. up a Volumes and seen will, i.e., went are try spot we even rip position just that's supply entrants deals. netting stick disciplined. to to going of business in actually and back reflection to Jordan, more bad Logistics terms And the when we've got view. are into We now contracts question. to right them the in thanks demand believe the market go continue and going of not new competitive up with market where turns, based, market walking rate we're to sort we're it and is putting to happen from relates to and that ourselves the would rate and

power customers what build we to see entered think compete to head-to-head will the might is can of gain will of and In and and with much instead where they they continue that. business. We're how to I of tech, digital have. we the pricing. of hope that that efficiencies in going the sure space price make understand products any they going we're meantime, want how them, continuing to continuing on have the think much staying build to focus regardless our a to price long can test try frankly, be lose little And to brokers it with sustainable a bit some this And to

our be as able then they it to every execute what have up that bit all We with as to operationalize back and and assets. well do

makes our to aggressive pretty yet response The some more us these customers. think, And being has get. that down the come put on where think sense to of much I be going prop, story for been together, And we're But defensive value to positive. I folks around to we written willing with so it's when go is that how rate.

Operator

next Our from Stifel. question of comes Ross David

David Ross

got T's. questions some of I the some on

terminal is First, much expansion talked expanded the network year? you grow XXXX? in Do how One-way for mainly to that plan any over And that XXXX support about, more that or the this that did Dedicated both? of the you operation operation,

Derek Leathers

thinking plan don't ranges that we're point stay make they continue Yes, multiyear cost we expand or it's our in our to do we've expansion because It's out this the to lower and overall worried there's sense within people guided to. all multiyear be a CapEx expanding. the and we that numbers, where still and I and plan terminal terminals I want Yes, only this can business structure. to year. that unnecessarily happening think support

terminal the building and in Pennsylvania. expanding are We

is existing cases, expand support some appropriate. widespread case, XX% to with In One-way, to a than we've to where And continuing and a in almost difference new is fleet true terminals do been. network. terminals and concentrated that we're both. Dedicated are time terminals for that and more it traditionally more support We both. long that's that regionally Actually, be inverse has building has might terminal the really support case, the In they other terminals incumbent every it the better between long, it focused had in in they a every XX%

David Ross

to many that how does earlier? compare end XXXX terminals you year did So with? how a And

Derek Leathers

X 'XX, trying have be difficult. Tier added in -- I'm So to not X, we would it's have we evasive, terminals. X Tier Tier but to and

X a I adding And are at stats can of years. of you so but there also multitude tell X are the just each around terminal of we've a each year takeaways. terminal that in the Tier there this We're level, those. a last added

process, the at about network. a net So similar X X large the downsized net there's up XX are that number probably plus number we'll the Tier and be net either the or of Tier -- would of be effect being that of And net. Tier end from is X. terminals And terminals, X removed

Operator

Our Wadewitz next question UBS. comes of from Tom

Michael Triano

need picks This do inventory I inventory update if at some for is was Are drawdown we build looking Mike you an Tom. Or this customers on more provide wondering up? Triano could see on levels. activity customer before to to point?

Derek Leathers

when and on that. anybody very than follows So about I be I'm him and have a but omnichannel say we John is some inventory think, been that a macro takes and level, on closer know to this fulfillment inventory, in would robust continue the going more have expert little to it this, just grow to I standards, continue for we contemplate know. because pulled to they probably he still more we to strategy. quick people elevated. model to to down this think turn a go and historical it -- e-commerce I recent to look They've And by reports. e-commerce very,

I I'll that, for think strategy. color. having With a over it they relates e-commerce turn to as stay to have John it elevated more to somewhat best-in-class

John Steele

retail a for bit our to October got retail on ended general, better. it their customer quarter vary inventory from the strategy. customer, retail with base, So But depending customer little in does levels

a margin growth had customer From slow Our standpoint, mode. a base in they're in October. pretty solid quarter

more So on the tariff are have situation. saying on eye inventory. And sales they not But close they they're I'm now a that significantly. clarity little keeping a expanding their

to think I manage them effectively. more inventories has their helped that

an not So we're lean I think standpoint, inventory not excess, either. significantly good position from in a

a we're situation. fairly balanced in inventory I think

Michael Triano

Okay. recent Mexico expecting change term? business Yes. Are your One-way And guess, within with USMCA. impact you or guys ratification longer the to any I of Truckload

Derek Leathers

Mexico, our there already. bullish both network we've down believe on still for what what industry-leading having we're built to mean, position I own and we the be store Yes. and

had exits gives folks is we've with well last to exit of that burner plans on put XX confidence market, over have couple had expansion. that bodes for the decided back go multiple that and -- front You the that us. can the they for fact USMCA now which carriers they the months

year things either those maybe question, slightly in positive. 'XX It to GDP flat come will of is say, XXXX the at other would I all negative X% so for Mexico and growth of And to is expectations looks to Mark, are X%. for -- have this for the

eyes on general with bullish to what footprint. leverage to our to Mexico overall ability have economy. general their we keep our terms, But on So our in I'm happens continue

Operator

question comes Our next from Wetherbee Citi. Chris of

Christian Wetherbee

always about of of I stagnation? be to to Just it like. more I sort into versus demand of want little early sequentially January what January there But a difficult wanted color signs sort this maybe to kind is you of bit get Is true a we'd kind read to on when comments fourth know of maybe on some you improvement the expect to where saw in the your quarter. XQ? comments? or could any around around you dig elaborate think see of what if looks

Derek Leathers

Sure.

has had QX, in what than continued. of of we're that it what So to It's to improve network. favorably beyond would we the started but not seasonally, QX, compares with seeing and saw terms obviously, I line give in non lower that prior in surge us surge say, the trend freight in the that sequentially But overall obviously, to we environment years. from seen strength QX surprising, other exist. most QX, still opportunities

I yet, shareholders. again way a lot our make for the to we'll try core our few the to going And it most customers that weeks a really think it's -- what look more since soon, where was the matter like. to out continue going think but are and We matter it's think to clear. of they're we things when they and position to assets too QX very early 'XX of say assets next and than those again we've is environment woods we're commented still become lesser

Christian Wetherbee

appreciate recovery that's maybe know I into Okay. a that. do leads out think of was there helpful. I will and we half challenging you second year, kind just sort of the that of How of conceptually, 'XX be the 'XX, coming And very XXXX. back a coming question, about sort of maybe in One-way for particularly which assume sort real when or Or forward? should any for where and Dedicated go run Truckload? of is rate really forth cycle? and fleet you the bit the the flexibility sort of going be going to a back split capacity is forth back of type given we How between XX-XX-ish about that One-way can and maybe think in much the swing to of Truckload,

Derek Leathers

Yes.

and it's think to in way I are from outcomes negotiations depending So progressing place. to are bid how and relatively just easy to a Dedicated fairly They One-way X-year customers. that on contracts, trucks a fluid sometimes dedicated One-way move taking do little for more from the longer. also our they're because for are It's very sticky sticky to move deals, usually to Dedicated reason difficult us, or they're simply bid

and going to -- generally trucks commitments are have are been remain. those Our made,

CapEx is have believe be ultimately, really want what expensive Those for But about continue there to far ought internally. best-in-class their and from -- to assets, to As operate mix, I is to XX-XX think competition we be. service. it we are where I it's are asset compete people to perspective as a takes mean, we do about the a going fleet. for that that the belief when

fleet fleet from going all they fleet retention should to grow well assets up. of why discipline our rates. and so were where in one-way disciplined. the and and we're That's we supports if Truckload, will their Dedicated, in returns But to growth. our about now, half And that high us But XX-XX Mexico, as why to boost we to really we outside. high market dictate a Good end to us to where be -- think as it go goal the over we're thinking area, open guideline, right has having the rewarded back I'd division be expectations the you a to achieve drivers arguing up able be be about truckload fleet those serves on if stay going being That Van and our market to forward. One-way commented with been general guide help they're tell folks, have would to

Operator

Brandon Our from Barclays. next question Oglenski comes of

David Zazula

for do if have on on rates, a This I Brandon. apologize, question that's okay? is QX Zazula I not David

Derek Leathers

Perfect.

David Zazula

started XXXX. So guys the when in you strategy X-X

to with And goal of it elements by to try pick most the all be in recovering as maybe XXXX? strategy think that contrast X was judging [indiscernible] those results strategy environments. think critical investors you was a XXXX, in most XXXX? to you outperform think Can fruit. the the bearing I to try the rate And of rate the be will environment critical in out rate you environment evaluate maybe seems of in declining in

Derek Leathers

Yes.

Werner that in decline upon and I the our So the and C. early throughout delivered our our of culture clear the to made we commitment kind L. of with drivers. starting Chairman, think market,

day. change T really But with that So and carry change will culture some other in the to and the talent an but you organization, really back T's. have of it you up momentum to the carried allow you

investment more will lot so started it lot returns and tech a to technology there has and really be our on in lines. spent, tangible tangible pay and has got we've but will of a and money And be to more kind based do dividends, time spent

the X that we way trailers, think, he that forward, that the infrastructure a and has as trucks is of tools are she and do The to envelop and in we to type look so job. driver needs And honestly, really their terminal and more opportunity.

drivers, To excited us. our invest ahead improve in about as better with to have measures, of finding we go we organization mechanics internally. we interact And like environment the some and more tech we a what looks that productivity forward. continue with runway customers, throughout those the 'XX, to We they -- frictionless culture some tech I'm as achieve to we continuing we even and it's the tools our with was best up we kind That drivers think backing them capable really it enable into go of that were of 'XX on we in and knew up industry, as have And these some had focus. of. about. and that how left was game But what but of what

David Zazula

what performance that Judging this XX% to would kind for you? Is margins the Just spur quick by conversation a internal it revisit if the or of the better through And time average in now follow-up. not, year. cycle?

Derek Leathers

we've Well, with make to We turn certainly, new to we're, of of ways a kind of are continue towards maybe environment. culture better I that year team through full improve, future. cycle sure And in new and understand progresses. that through evolution operational we a kind this my want find focus. think to create have at as the continue look to to those and fact, my for and to expectations new the how we But on leadership performed updates this and Werner

we're think our I on way.

excited us I think on. to we that, the -- of think, in of number the better we EPS remarkable. yet earnings I'm I continue to have shows things fourth And is about pretty that posting quarter front year-over-year execute increase even

to just looking not change that yet, it's our tell you that on I So mind. but goal can

Operator

provide will session. the who turn concludes This to Leathers, comments. our Please question-and-answer over ahead. call closing I now Mr. will go Derek

Derek Leathers

our we've to I going that understand taking going We're If best-in-class time Appreciate for the time have are story. call out years. that those you to being work Yes, be recently. really for more us been spend would to first put stay several to thank to us going faith it comments, was the to to doing we're time a that just best-in-class what I off, to with we're We're been with customers. best-in-class and today going to for want over on and there. -- the expect last had going the product everybody leave And those committed returns. with coming some to

few keep that a last through is are last inning innings Assets as we and will matter was to sit of going what turn the again continue environment. discipline rate here tough us upon perhaps today, or we to

challenged. half will first be The

we're And second The all to in and you to forward proud you the meantime, the put find execute can results to half to our continue more going in We more for promising. call. of. to that we up be look Again, looks talking ways attending future. thank

Operator

you The presentation. attending conference today's has Thank for now concluded.

disconnect. You may now

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