WERN - Earnings call transcript Q2 2021 | Werner Enterprises, Inc.

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Operator

Good afternoon and welcome to the Werner Enterprises second quarter 2021 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]. company results earnings presentation. and the second for afternoon, XXXX quarter posted this issued release an its Earlier a slide materials the at are at These Werner.com. company's website available being for is Today's be and this later available webcast evening. replay recorded beginning will

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

and company using and GAAP President included attached facilitate reports of the Additionally, sir. Please the to turn performance. table which to the help appendix information measures is presentation. would past of Mr. to release results comparable to present and Chairman, it over earnings additional the believes Derek now directly the I the provide Leathers, comparison to A CEO. the like slide the measures, ahead, in investors for reconciliation non-GAAP go conference most

Derek Leathers

and through second today which capacity good that to unprecedented challenges. delivered me am worked and the our everyone. team earnings With tirelessly pleased CFO, and execution outstanding Werner creatively robust on-time provide our a freight you and market with in Steele. Thank to John achieved afternoon superior report was solutions in driver is record I quarter, best-in-class with The Werner performance. customers

bodes thrive sales in retail Werner industry lanes seen. supply truckload in rest industry-leading dedicated demand to XXXX. our this fleets, including this another freight time, inventories business, of which the preferred recruiting this Werner in as sales a retail Retail challenges segment cross-border Strong severe Logistics. will trucking quarter. is time XX-year low continue replenishing the life. ever setting strong We in persistent as have At through capacity well our environment same inventory freight the with solutions I and year is require Mexico headwinds to expect for result into for to new well resulted forward. driver one-way shortage the demand and and Traditional remain, ratio of going combined comprehensive freight consumer-oriented significant the as driver our well-positioned demographics aging base, business within engineered take

has which Werner carriers trucks In to an professional XXX Group. with in the provides customers trucks fleet one-way X. addition, XX% after family ECM four include of Transport acquiring added and and short-haul by truckload just drivers completed we addition trailers of quarter-end, Slide the of Werner fleet provides to to of the adds skilled July a acquisition, the we snapshot updated regional ECM on XXX presence to regional combined ECM markets. the customers to XX and us X,XXX food truckload retail Ohio our are have serve top with drivers Mid-Atlantic, top Werner skilled ECM XX% from XX. driver and of growing and and our beverage. safety highly and continues half with strong a and base almost with and outstanding in Werner service revenues and turnover. Northeast Nearly our companies. geographic with over low relationships XX% successful revenues our long-standing the and acquisition, performance team After freight and ECM consumer-centric have leadership extremely

summary slide our financial move of second Let's for quarter a five to performance.

total strong to XXX fuel, mile, safety points increased income sales. sales our margin, inflation EPS improvement grew TTS strong generate operating share, continued cost revenues grew in execution. to much XX% second per XX.X%. pricing from robust We and increased XX% continued on million million, of revenues $X.XX better demand For $XXX net adjusted as than of generated beverage due to basis XX% while trailers management $XX.X to despite improved strong anticipated adjusted largest home the remained higher to retail, dedicated sales expense customers discount gains in to operating continued quarter effective and margin and performance, quarter, adjusted expansion per and Dedicated our trucks freight

well. improved recruiting to second gross quarter. selective other income. up in truckload and labor drivers once freight we quarter team competition business, our in strides retain in also pricing are one-way industries margin our and became rapidly our demand retention quarter, percentage revenues higher and logistics the address stepping second for led our quarter. results. increasingly in driver several capacity the efficiency with find dedicated economy, growth To was better more markets conditions in carriers operating which operational contract harder again the to our costs, from further Our and in executed turnover, market One-way the Despite impacted performed freight second additional constrained. driver factors in team The well compensation much resulted intense growing The are truckload with High-quality limiting capacity, industry increases. We combined segment strong. logistics both made and excellent implemented that challenging

pay XX% Our year-over-year. per mile increased TTS nearly driver company

strengthen equity for the trucks autonomous last In years improving realizing team are achieved IPO I Werner Fleet Werner TuSimple of TuSimple, and trailer experienced equipment completed business sales our substantially discuss which a sales a our on second deploy a the premium will In by market price truck XX made fleet company. driver addition, continue capitalized used we gains core in through in June. and a first and and in to well average few pricing April gains minority fleet of quarter, in its stock million. and we sales minutes. technology as trailers the appreciation significantly quarter well. part innovative our $XX.X strategies performed an to for quarter our and higher In positioning, investment strategic for

XXXX. trucks last XX% a We reconciliation. EPS we with a item EPS quarter sequentially. game our in of second reduced during our five based future was XX% recruiting on In share, $XX.X TTS, one-way The XX year mark-to-market GAAP our quarter X,XXX We stock-price. the unrealized which ended on of this truckload. or in income in difficult second prevented quarters, in change organically recognize second extremely goal quarter. At driver we the non-operating our will TTS our our than quarter-end, quarter our grown this investment result, fewer and achieving adjusted As dedicated in market TuSimple's investment increased and fleet fleet million for fewer from us the truck was in $X.XX

to and quarter more financial XX% will to I detail. ECM dedicated our results the and one-way Following truckload At acquisition, turn discuss this John? second percentages in respectively. point, call to over John XX% our changed fleet the

John Steele

plus-XX%. Derek seven, afternoon. to quarter revenues total you increased Beginning good Thank and million million on or $XX $XXX slide second

on truck decline Adjusted truck In mid Our driver shorter XX% increased revenues XX% review improved haul by Beginning a of were TTS mix XX%. in point due average length of and XX%, X% And fewer to income or per our percentage per single by per our quarter, XX% increased Adjusted per a dedicated by higher mile, greater per basis operating training growth a was $XX.X $X.XX, double drivers. lower continued versus eight, financial growth and miles revenues grew strengthen income XX% net fewer truck X.X% our in and trucks. miles truckload year-over-year. revenues increase fuel. digit let's growing slide team a low from on services second improvement school a digit up for in TTS Adjusted in based truckload per operating performance per logistics caused adjusted revenues million driven to earnings week mile TTS, operating segment. in logistics XX% one-way offset total of revenues XXX by results expansion on network. share transportation margin,

show adjusted with Our to XX.X% an strong operating OR. continued ratio improvement

slide TTS to fleet Turning metrics on nine.

Dedicated we per to dedicated, to fuel, increased and rates revenues, per trucks to X% grew XX% were revenues week miles range and million. of truck changes. truck guidance For lower per Dedicated mix average increased X% increased by of fleet X% above X.X%. net our trucking due $XXX

and net miles decreased challenging truck week we wages anticipate others, of of to higher mile, market. fuel, strong. XX.X%. was a offset Our a dedicated XX% $XXX pressure This by X% Like pipeline dedicated of partially increased million. inflationary grew and decrease truck X.X% drivers. our truckload revenues per which Revenues fuel, due trucks per per ongoing result sourcing. customer main trucks total driver team fewer Average specifically per into for the remains as One-way to XX.X% due decreased costs, moved to that driver revenues, driver

gain We attempting operational to including drive from suppliers will customers excellence efficiency with wherever these cost recover address greater continue initiatives possible. and our issues to to working cost and

the a for by Power- more shipment the and grew XX% in total in revenues revenues in to supported XX% revenues second In logistics a revenue grew project and XX. doubling shipment slide business a Logistics on XX% XX% increase increase growth continued XX%. ago. $XXX than Logistics XX%. Global Werner Intermodal increased and second strong revenues a of to million a only prior per in of grew quarter Adjusting XX% generate year shipments. driven shipments. from increase logistics by revenues per XX%, quarter, revenues in Werner quarter, logistics Truckload increase Moving sale

our cost intermodal contractual basis Our the XXX which truckload gross shipments. and second of of due dwell to locations cost customer and capacity rail points quarter, XX%. to for brokerage decreased truckload logistics capacity, higher address shipments logistics we XX% Also, the much truck increased margin time year-over-year profitability. increasing reduced impacted intermodal the percentage contractual during from To

through and of variable growing in margin from to margins over expect operations, Logistics slide years. cash net forward, flow flow resulted we As a five move the last continued we four our is free flow and less past growth years. from net during expansion. Expanded and revenue expenditures the operating free cash performance improvement Werner On CapEx cash higher see summary capital XX

expect cash free flow We meaningful continued generate going forward. to

continue solutions out net arm years EDGE, maintain with safety that assumes to new are to continue million and be comparable by to we XXXX, enhanced more range two in fleet guidance security. platform This trailer CapEx the last million. truck to range we expect Werner, building a productive $XXX $XXX technology and we our in to and with of the our For advanced, innovation Werner invest more of and

half. of On in new a second XX assumes net Our delivery disciplined slide is and CapEx allocation. capital summary no significant trailers strategy our delays guidance for of the in trucks

feature-rich with the The our leased replaces The terminal Valley, smaller and fuel-efficient a opened our facility new located is priority trailers facility. in this second we month, is strategically Earlier XXXX. and and driver-friendly capabilities. safety, Pennsylvania terminal fleet first reinvestment of with latest trucks in Lehigh new

we our would we by And during quarterly and platform. progress meaningful and and initiatives XX%. strategic quarter, making are said dividend that consider We quarters, the In prior sustainable our technology Werner accretive. enhancing acquisitions we EDGE, additive are raised

experienced Just margins with business the were its acquisition to excited truckload the ECM the after team in a industry-leading we carriers ECM and quarter-end, as accomplished Transport operating and announce leadership of stand-alone of elite operates Group. remains unit. place regional

customers We new to levels. will leverage serve our generate at and and strengths even existing higher collective synergies our

We are a strong financial position. committed flexible to and maintaining

goal acquisition rate at X.X loan on debt We debt did On eight to forma annual of long-term our and day. ECM as regions acquisition. benefits net map. of occur following partially the the was fund turn. Our shown pro of rate X.X expands day. $XXX the in the to at is until Since to terminals summary ECM added XX June drop our to acquisition and of following ratio quarter, XX yards XX the X.X footprint, interest a X ECM the on adding EBITDA increase fixed net leverage a an third Northeast the by X.X% times ratio operations our the a times not a to slide the of EBITDA beginning and Ohio strategically quarter-end is Mid-Atlantic, to million

one. transaction is shares prepared our our similar standards smoothly the of X%. accretive the remarks on the combination turn to will and and based I Derek. The service will cultures safety to expected and adjusted is to portion final year fleet going company Derek? size the now in integration Our of EPS be highest nearly boost back on-time by

Derek Leathers

Thank you John.

modern, drivers five years, more sustainable to standards delivered structural and for hiring past we We fleet. high-quality, commitment our the best-in-class safe Over a upgrades implemented and and professional with retention raised segment and on service. to efficient safer our customer TTS our

market years, tablet-based is X.X cameras Our truck continue very untethered average technology, fuel driver trailers transmissions, The and to respectively. and mitigation ages advanced young forward-facing with have an safety industry-leading dynamic. telematics solution. fleet trucks systems, collision two emissions is Werner Every and competitive and automated of equipped manual mileage and

our and we the addition year, implementing advantage more to expanding XXXX. an have planned strategic additional This of XX driver leveraging three from have locations we school in increases, XX three and our In network. and driver XXXX competitive for grown training to and attractive industry-leading pay are openings

Our a total of end XX the goal by driver is to of locations school achieve March strategic training XXXX.

action building our daily acquisition also strategy achieve sense, acquire when We goal. our fleet highly-skilled XXX over than drivers IT strategic to and Similar took to truckload who another growth software trucks rather XXX ECM enabled of buying makes to us it have our home time. regional

weekly the with time attractive stringent a Werner the Despite truckload trailer Lake and modern market, truck variety the we choice, attracting driving be and employer and Valley, focused This equipment drivers. professional and to and home City, compensation, and best technology, tight wide recruiting latest by to two Florida including and remain In providing an in standards strives opened driver new addition opportunities fleet flagship program. training maintaining driver of hiring driver we of retaining Lehigh we daily year, a our terminals are on positions industry-leading the Pennsylvania. safety

attract part Our strength in for ability is an and drivers minimize and downtime network retain the of best to fleet terminal our issues. maintenance integral

On we with innovative by products strategy ways the work competitive on to our provide advantages. now cloud continue them that first, technology combining developing third-party and to execute solutions SaaS in cloud front,

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year. with equipment to a to loads them recovery provides the view of We This also recently additional end process an rolled platform. in time. simplified realize projected digital out new warranty EDGE book savings this is carriers a by to freight portal Logistics that launched real Carrier's our dollars and enables self-service XX% XX% that warranty our Werner

launched Drive to Werner which the mobile For offers improve enhanced features on app our our drivers, road. we Pro our lives drivers'

and and cloud-based are solution modernize our systems carriers. migrated continue exciting provides to quarter to XXX% information SaaS second shippers with more our easily and IT that that applications. We to and update One core is a we milestone EDI connects timely accurate

is of Werner to but platform. this first the which and logistics sauce secret platform SaaS that truckload strategy We also teams This on selection makes with platform to our software began with year and the full modernization enhanced combined is transportation MasterMind, and incremental are on our with same Mastery. features of the committed logistics rollouts. new our our step management our have and successful. rollout financial one systems first applications Workday thrilled with many the accounting systems the we are of testing HRM dovetails We with to Workday existing And our Finance

last am provide continue as we On our as a sustainability information progress. responsibility specific updates report week status we to And published ES&G social announce of slide strategy. new year, excited of that goals. this corporate to XX, our amount inaugural with element significant will a added key and we I We

diversity, commitment they leader formally actions to program we and we Vice our ESG in Vice pillar position And a like launched highlight important decisions. we as inclusion strategic we of are publicly President our I in President of hired in industry, November, would new appointed a In embed business including becoming as Associate created learning. to an our taken we January, into adding because Some an our Associate demonstrate and have sustainability that sustainability March, ESG and and organizationwide sustainability.

back and sustainability We are This inequalities decent UN SDGs development support a reduced economic week, published inaugural of action. we work and milestone in which well-being, The outlined most and November. specific Werner now that the have our we and Compact values, a good growth, Global are signatory strategy our health goals and aligned report with was climate CSR aspirations. specific

our SASB Standards You report website adopted Sustainability disclosure framework. werner.com. We a can find Accounting or Board at the on

sustainability that will to the into here. from keep on months hard we will working will for formally work and our build past our have went communicate be comprehensive over a I develop of we our We program progress. journey strategy all our branded a proud am WernerBlue eight ESG and important and progress milestones. team more these the to It's and foundation achieving building which great as

milestones week. are and Next the this goals ESG earlier XX on we slide announced that new

X Scope greenhouse disclose XXXX. and will emissions X we gas Scope environmental, For by

double our our greenhouse a reaffirm will We will achieve goal by to and gas XX% we aggressive emissions XXXX. by XXXX usage intermodal in reduction

For women in and elevate are team social, our plan we an retention and advancement in to diverse increase management talent creating pipeline.

volunteer program the will we We hours impact and are instituting employee by the hours XXXX. Brigade successful Blue volunteer XXXX our communities of Werner by serve an we doubling program add by greater of

to trafficking also hours are We doubling human training devoted awareness.

For of establish to Board and for committee WernerBlue will the Directors. we Also, our of ESG goals strategy. a governance, next by a further we ESG of standalone associates our will task members force Board leaders, establish year,

While our am leading we to are the do impact of everything will I at associates the And early are like engagement positive inspired still committed example. in we have, we of stages and excitement by by Werner, we the drivers. and

updates progressing of Moving against framework, are to XXXX guidance our how that a slide and outlook. to review XX guidance we and our

a and Werner growth taking second now to fleet X% expectations higher X% X% we in fleet this our in are for updating recruiting We Pricing fleet. this remainder trailer we the to of year to are was the down resulting market. used in account, driver market for the for challenging million. full ECM dynamic the extremely range expect challenge into of of equipment and persist our quarter, declined gains second and the X%, year-to-date in the due truckload sales including the During be year. believe the quarter, stronger-than-expected We will truck $XX.X truck

capital third of gains million. resulting quarter, expected $X to $XXX For strong million first we of in sold with the million were continued range half pricing Net in $XX the expect XXXX. fewer for units expenditures

ages truck We Dedicated year deliveries. per trailer million of the maintain CapEx our net $XXX million and which new of full fleet revenue in week due were OEM continue lower $XXX per miles increased to to rates changes X.X% in will partially XQ expect truck trailer truck the range XQ in and XXXX to XXXX timing truck. in second higher range, offset truck versus lower to due rates mix. quarter however per miles by fleet Dedicated to our were guidance above subject per

We range. above annual per increased execution quarter second X% XX% week the revenues in a customers. to core at expect as continue to truck likely of the growth One-way end to with revenue which the but XX.X%, XX% our result range, of total for range mile per guidance bottom per of truckload strong more our the X% was

half, truckload including due second ECM increase are per revenues to of one-way now expecting the we contract impact the and rates For XX% total acquisition. favorable XX% mile higher the to to

In our and of the Going one-way freight will remained trends truckload strong. ECM forward, truckload four report have first unit metrics. demand one-way July, weeks our we in within results

range. percentage double in digit percentage contract season to our are XX% the in increases one-way high rate recently, increases rate contract also the contract are year-to-date rates More further low to digit through Dedicated double negotiations bid Contract are far, favorably. tracking So range. about we have truckload. annual mid strengthened tracking

sustainable rate age well-positioned pipeline XX.X% our year. years, that effective remains and beginning average the what fleet team continue active a to and in truck yield we the Werner assumption XX.X% to two of are our guided superior consistent of with with reaffirming and of We strong tax will an of to talent results.

over and believe would I this our We Q&A. into to for call to time, XXXX demand very operator to good looks well begin XXXX. freight turn runway At like the continue the to the for

Operator

Hoexter Ken our [Operator will of America. Instructions]. go Bank from Please question today ahead. come with And first

Ken Hoexter

that John, for and the detailed overview. Good afternoon. for Hi. thanks Derek, thanks

just guess in of am follow-up half. that comment It see of look want that So I I going like gather we signs your timing? weak that more for in that looks Rail looks the kind of demand, looking for to we guess, last like some what is what to out. flattened is do trying terms sales are really carloads have second data. you two continuation? Amazon to are at continuing. It to I peak? acceleration questions. or CapEx accelerate Those guess, on just my had I look I

able So the the for in just one streak CapEx, on that those continued trucks what then confidence on you being and of in look your get second terms to half?

Derek Leathers

today. for thanks Great us question. joining Yes. Ken,

So a right. few things,

to I So about I start six months. actual on we the actual the with demand having next are conversations their side, with customers the relative guess will expectations

So conversations it's private everybody having on that both retailers, particular. based a combination can of data our macro its then and with we see in data are

successful retailers growth. of economy macroeconomy. still still retail a of have GDP overall that with maybe the what X.X% with the base below outsized Even doing was having inside some it's results is well. that significant are expected, The had growth We itself sort

that now XX-year low. are with you to a ratio is You sales new couple at inventories then that

a certainly is of just that that there overlooked get I involve last And lot is, does far. place. some supply on those replenishment then side, to you So supply the thing are have think reported that where And so publicly got this. has play the might take

versus got that fleet X% You Werner a decline net X%. have of a decline of

winning and sort battle. bullish we our into we the of makes half. to there of something negatively are been ever on basis, it's us combination And on being a that flooding or look in have I OEM market. capacity think schedules better continue proud forward. and fleet, the But as won't the impacted negative. back supply coming be line my production demand we point a But on So not the isn't been certainly of. relative It are holding

things the back yes, received delays, up is just it intent our back schools during the of based for are our little get seen is to support we bit as online side market, have we that. trailer. better as It's less in are to them, in of provide we so. peak impacted to the truck when going truck to range. the we be somewhere to also a originally opportunity relates timing. additional When on the section to as the supply-constrained is know and do customer that profile chain it side that But grow half. by on is the maybe and that CapEx, be the The based both that hedge that with half simple expected versus if we It's trailer than base in a there As expect some very end coming by demand sell through our clearly equipment now of going what we our around are better stated that Two that supply and will fleet think remarks what also reasons prepared there. a in to continue we belief One receipt may equipment. with disruptions to the is what on it's some

Operator

Group question next come go from Research. with our Wolfe Please will ahead. Scott And

Scott Group

Hi. Thanks. Good afternoon.

of the there? Any perspective up keep Or margin back give or a normal just such about some seasonality? can that the think of in thoughts how get year? thoughts us at We So maybe you we are progression sort the half tougher? great does the level. starting to Can on

Derek Leathers

which not can that is pointing question, we is awful second I seasonality had seasonality I the not by react or looked period peak tougher Scott we to begin the ways people mean normal intended. that happens, read may that are out. you starting really moment that with. because I point, really what affected The that mean lot recall a be into like it Yes. never to appreciate I in that have the say than quarter an any seasonality,

better environment. in So it and job us in existing as acquisition what itself creative infrastructure our oversold and count opportunity our based intermodal, ECM seasonality, is, the well you back further team our is If to get of have starting doing through gives such continue won't increasing as half. forward, capacity an go around more seated the expectation simply throughput a count to as we our get tractor to then on can normal job creation But expand the you through margins. our brokerage,

rates. about XX% are We about was XX% yet that in some still earlier. implemented But XX% is the go through We talked July. contract to only that there and of

implemented not the in it's to So will we it. it's but QX results of see now numbers being start the and

quarter. because as have to strength the won't of not be opportunity So the of will the see opportunity strong, we more half, might in by, back we not people of come you the second tougher gains because bottomline topline is sequential because there in but incremental won't in years as think robust half, that back the the with opportunity, be project both normal prior

Scott Group

think just back half you the utilization year? means the Right. when think that Can per in the mile. of That ECM, rate us then just I helps implications it about what we makes for the the about And from models, think sense. of our help

John Steele

jump I Scott. How you in, can doing? are

Scott Group

John. Hi Good.

John Steele

ECM that's the where and one-way will it's it XX% going about acquisition, truckload our fleet On forward. be of reported

So because hauls our in like is the lower length existing of they mid-XXXs. are the haul the substantially fleet, one-way than the

will lower. rate one-way pretty truck what are result, deadhead our in As revenue the percentage higher. we week help. then is per mile, truck it And be the to miles realizing comparable will per fleet. will a per The The a be per be

in our truckload So percentage there a percentage give few increase points is will one-way of rate ECM help per the fleet to that mile.

Operator

Stephens. Please from will Jack with Atkins next come our And question ahead. go

Jack Atkins

taking if us help curious this question. I think the for to maybe Great. don't tractor Derek, because impact you that this Good through be or John. guys I you my Hopefully, acceleration But recruiting year year. could and would of perhaps is I the margins the know challenges, are evening. I that on take be year. Thanks position tailwind the more this if efficiency to of driver that for for would your want lower-than-expected guess some we we thinking XXXX? see impact on just is next very into having go TTS within the fleet segment? helpful. a next to thoughts And am that Any on a the in forward as count

Derek Leathers

difficult, predict we into point nature. is our in clearly, XXXX have their this to It are with of at Yes. But fixed a out so that all unknowns. way many costs portion Jack,

in incremental happening is a look minimum, level. is new cost caveat count half. fixed and that have of road there expiration investments We would is And public some and around flip the ideally other what's as fuel OEM could have with the being way of an all and of impact unemployment schools, up go we of the We to, us working front to adds during observed relative But cautious opportunity way. some of to feelings on. us things throughput congestion great continuing in The that, at are the stop the the that we there. the up on actually cost Utilization putting side addition We making. expiration up the spikes another added through production COVID know those see some the general pick back like net out costs hopeful is XX.X% rates terminals form of TTS of the to time of of should fixed to give and all to more the over attrition certainly the on get of benefits, an over of a against additional the motoring the infrastructure. at that as truck is in vaccine

about macro higher a number builds time, at would I XXX,XXX year I the in level, At some QX they thought XXX,XXX or in the cases. where be. said was had that experts starting that most this So have in even

I we to when think settles the I don't. XXX,XXX year. get really won't dust on the

COVID overcome so fight and exists of there. fight for to the out still for trucks, And it's that drivers difficult hesitancy fight some to

ongoing, I those kind feasible gong have. to in through that little to want we in yes, to through need do more building, too believe, to enhance some terms yield the as cost takeouts And We of so mind that do to XXXX day. half early the in right share both the that customers, every grow to now all But have to work to we continue with is the the of talked if well continue back and of that as but at away say our about are be it's that's then obstacles for exercises chip stated will bit I of type we our where that just about margins look mindset XXXX.

Jack Atkins

a for Okay. investments going lot into That I of business. question, my makes Obviously, logistics sense. Derek. And the follow-up guess

Werner come How think portion to the driver from payoff several do we and lot revenue there next logistics and call it, now? were think a out, years to you represent as business that over five of years? thinking when the of profit a look you those the EDGE. revenue What think your opportunity three if could we on with around Mastery frankly I is from are investment partnership strategically your about the about

Derek Leathers

Yes.

that and macro time, we At enhancing want our are a the systems, would right aggressive right Jack, growth to certainly growth to in make processes handle infrastructure while logistics more the say properly their the group. they sure able be same to margins. looking at be So level, are right with with to I tooled we

the then We increased taking be of from the ability But needle tip seeing the are the moving have and right of our relative you we to really a or so productivity The couple And implementing a no internally with we or are that those knothole, investment we utilizing think are more we with volumes of the rollout am well and as I is the we as of grow away our as expense little little. starts the gains those get more the excited about will, going that companywide our spear impact this second fact if you really now interested recent rate the ease seen the we until on getting on the to that sauce, kind more start of phases in actually make that but front direction happen. some, work through start rate get developed place to things, to secret volumes taken with revenue. end you on ability things having tools to logistics a a can where kind kind is to of that's with the of of further. implementation And strategic effort comfortable new lot TMS it. That's day-to-day thing as has quarter, to

five ready as I be. aggressively big predict am forward. percent I all expect certainly out not how So exactly internally look if more grow of yet look larger think I expectations But total. the to to to that that would are be we logistics years, three a to

Operator

Morgan next question come our from Shanker Ravi And with go Please ahead. will Stanley.

Ravi Shanker

of Thanks. clearly color side the afternoon the interest next what shift gentlemen. of lot business you to Great. of you going to looks guaranty in Derek, Are a of customer the some customers still in quarters on like? truck couple is count us was at Kind dedicated to like of of trying Good there what mean, like, the ago, pipeline organic seeing terms the capacity. give couple in I least to what's momentum that? look quarters? dedicated kind of can

Derek Leathers

Yes. Sure, question. for Thank Rabi. you the

So in quarter. I about I first going to what extremely start the with excited able to am dedicated accomplish was this. off, am

the so that's in where right. yet being least, If you revenue the per X.X% per once were with it very And the that to of revenue even act perform with were per dedicated of think a only TTS still XX.X%. point strong many markets in truck predominance truck week about see that. to that's that number, like per to can that number again fleet, well like proves because mean muted a want able people out week I post X.X% of. we fearful our not I say the and it we not anchor gains, OR

in As strong I on as it's other calls. is today the of prior dedicated multiple been as look any forward, quarters pipeline

are are seats obstacle still and one-way very calls. open is drivers prior fact, two are are and looking very, better they fill the job, and truckload those As on than to fill that find fill it those moment to of of to this we easy a to difficult more source although looking bids The that nonetheless. already a jobs landed than matter is actually was as greater

We the we So their were must is treat jobs them do the to drivers how gain we to equip seeing with And pay to battle driver. front our clearly our and how traction drivers, we momentum. give themselves effectively. continue on then tools the

schools we I good the online, about schools very that's because know will before I earlier impact are it coming already year. say it excited I we said have the opened but the have again, the additional those So seen news. we from in

a about some trucks lift. gives XXX us dedicated quarter. excited plus grew that something year-over-year think That's in that to all. it's to hard tough, it's says, in the We we in because So be grow market at

as the and fill up. land, new that profitably start to So shows then ability operate those fleets the

there are like to into going lean to So continue as XXXX. lot into there is and a we we to it go

Ravi Shanker

Great. want follow-up. to I just

drivers, in acquisition, you of the of an acquired to the cases see can them? or those most M&A, you you Clearly, at onboard. retain confident XXX involuntary from drivers pretty acquisition is the look reason of DL either you Are get asset. you part the ECM On this when made recent exodus history voluntary

Derek Leathers

terms that great a right strong. the far. the in been morale, work happy across diligence due the It's very deciding far frankly, to The and this with would question. front. the relates I you driver very true something customer nature and as am finish the that of driver thus the getting ECM proven probably has retention the one most And has cautious was and it thus line Yes. of I something on the Werner Same been tell acquisition then is

like we having growth moment and home attrition some momentum the jobs in all. the say, desirability not at nightly, are having we have based because would but of repeatable have, opportunity leadership not truckload end with on types one-way been In conversations up feel of we grow high an within are they group lot stable And think that their and conversations regional, may with we we the about or that work ECM fact, a pay, have with residing early fleet retention of returns half, actually growth back their we the I of at the this acquisition that directly. and ECM to have

And So, better far so good. anything, than if good. little a so

pretty are excited. we So

Operator

question come Jon ahead. will go from And our Chappell next Please with Evercore.

Jon Chappell

the on follow-up to just Derek, dedicated. you. Thank

think maybe John mentioned I it.

a the optimistic how the think long and that and about speak? business How trade-off service one-way in sound you term And and long-term Do in onboard about I the the of do shifted between give that for customer torque, strength that decent to pretty Some given do from view year. so us of a But seating there. you to get know trucks some back just the one-way were because term dedicated the come long you making of want trucks. take more term. it's them you about to half still decision you a of today? short

Derek Leathers

I couple Jon. of Yes. guess, a things,

might a others. have we some produce in First in replicate more results that that to has isn't network, of model the expect. dedicated trade-off able one-way than operate our what off, and Both well many those closely been very divisions that evidently

dedicated focus as can. are And as to we that fleet going operating continue so we on to efficiently

level, at wanted a multiyear driver's piece of is be level the am bid-to-bid. profile investors truck do losing back just I to to I one-way versus in over stabilize provides keep factor a And same dedicated and an then the make expect. give the opening that give one that of the players can driver. I a a returns bit cycle if year term investor we with last that fits even decision, It's to and it stability is so how other not driver's the our pretty be The nature fact there. to to cycle I driver that exciting stability, that the to community As you in out Frankly, compare can clearly the think of based have but through return the going premier stuff is if truckload level if that risk it. we longer defensive dedicated, preference needs view, that when that dedicated the is in would and deciding those obviously little bigger driver

right to So a every and fleet if that's now. around to driver do each can are build how in are what we that's the case, they going we because bubble important this

Jon Chappell

sense. one-way. it. up think glad know I that you brought the upmarkets. how and That brought a makes in it focus in some just showing And Maybe big I the as am upside it up well. is have people of even don't know you way. ECM part I it's yours defensive Got of still things up

the as of well. business it's given haul, like However, just a length defensive it sounds more

So little long to any you would you future, think a per being to haul at and as out acquisition be what defensive less the in little that get is? X.X not into still as make stickier, se about other the dedicated, look truckload look forma other of ECM traditional pro as like levered times you cyclical market businesses but may

Derek Leathers

fleet and of and In looking our one not are important in we drivers customers business. long we work. our our sustainable short, that the going But haul have business answer are always from across mean we more would are that be defensible everyone repeatable profitable, yes. I fleet sense that for haul to run long to are that in makes in us,

their And to so actually because the their multiple it cases if are contracts, customer has is talking be and proved relationships. do to very multi-multi-year after. We decade difficult. go type And what we sticky at in want are we think things the you that those many relationships, business, ECM very look they

at business, we in more difficult have complex, the of the is of we tremendous If team a our Mexico, commoditized more for customers our amount tremendous that business And of works expedited business. have faint for end We amount is on a high you the that's do defensible. then look lanes also business one-way a the one-way outside spectrum. expectation and more we interest cross-border is not do which engineered heart. of very component of least furthest The that that stuff decent of in

that fruitful there the at that business price, understand but is when comes market And it know when and and times yes, highly turns. so a are we that

put that that all results proud of even so of with that's fact most through, forth in and our exposure X%. of miles talked spot the our well a with XX% one-way just total quarter's means to about this OR we that in network, type exposure probably market And is side result spot the the which was under only I am

so, not way in didn't penalized spot exposure get space. And that limited and turns, market we when there we a, because to we going way that that it's get very are the frankly, not have quite

Operator

Amit from our will And Mehrotra come with next question Bank. Deutsche go Please ahead.

Amit Mehrotra

trucking Thanks impressive. operator. Hi X% John. obviously Derek. OR in performance Hi very was The XX

that come saw of has at in dedicated And of hoping trucking inflation versus impacted that some in kind dedicated? companies repricings. other this, us. of bit of the cost last those revisited if one-way faster answered You profitability Derek, than you for there is the all? can deconstruct as some in has that in a you contracts light is the are guys performing level cost opportunity if for was I business, heard step-up the Wondering a from the at What inflation? as been question. have the But contract And some is on we dedicated

John Steele

is This John. Amit. Hi Yes.

we report As you margin and dedicated don't one-way separately. know,

see in strong you and market. am XX.X% specific in answer in And give a that one-way as the OR. margins one. a as margins a of at didn't But were a driver to result I enabled both us So going general we pay dedicated dedicated opposed deterioration to to achieve

we with us good and as certain it happens. our driver driver are and specific before geography pay needed for to the customer, challenge big We out get increases it to able when go compensate is customers for rate in relationships the a happens or a have

The dedicated problem us. margins, of has last the not year. solid that obviously, one-way has freight been strength So improved of the because year a from both for The market. been

Derek Leathers

up as business answer the defensible at pay more empty They the when you and that. only simply customers of what we that is of look our it. tell dedicated, certainly us us support percentages warrants that The to Yes. mode. is they just also better cost aggressively It's I want to combination dedicated have because and that a fill back go ship when, creativity need you each about need think don't our those that to to optimize work impression performance to to our haul increased But would those where our I thing add do what we eliminate of freight better with they miles, customers and fleets, to it. and

and in business it does into up that's play at as come you things that retain North these of all XX% come renewal. how so cases or for And many that

perspective but don't better markets the think is it future. effort us, collaborative in serves that market and the a see when well we a us one we one strong profit us very it outcome, it's So like for even serves turning in turns, although profile foreseeable this this if and

Amit Mehrotra

Okay. of just the And one-way fully truckload counts follow-up. dynamic That's for coming helpful. understand my I down.

across seeing I think industry. that was the we the But magnitude are of significant. the decline pretty

to in back you XXXX XXX wondering, I think in sequential usually in this outlook decline that know that. I the in was the of maybe And go level have that half to to third of ECM to have continue tractor John, the decline a just in understand forward we to average second, for trucks type for but the to I helpful will add have back trying truckload put down right you been expectation the the to see if lower counts. pretty What's seen were go organic your. a the we quarter. of But counts side there? at worst

Derek Leathers

on the the take XXX end at we And flat. down upper of we June, are Well, out of we guidance, of range, said the the end as at end you about the range, from our ECM are if are trucks. bottom we

here So that driver counter to of the locations is drivers may taking that does with harder It's better difficult market to for make recruiting than get or the the like the most for school risks more market on, the change and market in entering drivers. of the have get in give steps fleet. factors not? it We I it to to are that But If really the driving us addition drivers and marketplace for depends conditions, from to comes other drivers example. difficult Amit. easier than infrastructure new there to the get my bill, starts bear career, seen numbers

Operator

with question from next Bert our ahead. Stifel. come Please And Subin will go

Bert Subin

nature. the thank appreciate highlighted. H. views are well. supply be to changed seems Good XX clearly the going structural Derek, the you that? however, Just Drivers, days? and truck to It you those as about probably in slipping little Have afternoon thinking your getting with aren't all this John time. curious your a at it's last but Do I and as how easier early since changed more maybe for transitory. how comment, That deliveries in right over any find, maybe like the year? that's agree you

Derek Leathers

progressed. the Yes. I course the to on only years change the over more in with of supply pessimistic become going the what's terms is, as would say supply side, year it's happen

as has market out. driver the played the worse has become year think I

Now see of customer benefits, we mentioned going delays because lack we I may for that earlier, impactful the unemployment it of some be that the exists. is to impactful nature. some loading really because and jobs levels will of as staffing from seen think there, our hope more dock we have at of relief, We additional increased the locations expiration although at of the customers be that

might on for And so people yes, realize it. don't problem. is a that good transitory word I But the front, how But transitory a last. truck that's OEMs long think period probably

end far I through the of of out disruption into point get and more my issues going shortages. it's chip state early robust than be think we the for of. list be the to the hole of further And frankly It's to point tough toward that. opinions I year. think It's are this dig going as parts year to at beyond we in would next a a disrupted all of

right I proud negative horizon capacity basis, a you of very And time. sight the most here carrier relative large fleet approaching and so, if now of large see small front. are the end shrinkage yes, And group on thing X% look are that. cycles, is And small through no the of don't recent carrier again, one seven you is, lot fleet there prior data, negative almost good of I never both versus then we X%. at And see seeing shrink unique on that's at ATA's same public a North think we they see. I on and being that have that of shrinkage can And now, of real and the in news

Bert Subin

a maybe Yes. you that. similar be I plan the infrastructure. do vein, it like more operator seems appreciate more in perspective, that? how tangible. looks could effect mentioned little be It you From of exposure. Maybe becoming Thank for side, would That supply sort demand like thinking a based about an side issue? for real side job you, that on you. guys competition how probably just just a you curious on so less know But becomes the that, on if the are your to

Derek Leathers

Yes.

supply you move demand and that it's a demand where because waiting, is issue side of of market wheels affecting terms the is. have there in than But more think a to I right, trucks us they for Bert, side. are

of do, flexibility net further trucks projects infrastructure which demand to said means further have other more are or our increases will the constraints but to type they it mean doesn't trucks that those the it work in life transitory so capacity us. flow And maybe live differently or

a competing there drivers up leaving certainly So perspective. up drivers we is the overall not actually new previously tied just on that freight but supply from being available, with demand with construction pursue industry now but net and hauling impact freight both jobs on to were think an drivers the demand side, tied we then

infrastructure efficient. know, do doing that's congestion and from just business increasing gaining all projects, a last thing it, infrastructure you doesn't we cars will this road. what spend look of But it the The multi-your take is, in about massive when momentum. I rollout. returning some increase about the time which think So driver projections thinking we looks But in is we both like something is like thinking suspect sometime is all start but year. training as our all to it also that one place already I and will know piece

that there we XXXX. have network And be in velocity as plan about and for think to will price for so some got slowdowns we

Operator

with Please come ahead. next question our go will Goldman from Sachs. Alliger And Jordan

Jordan Alliger

Yes. Hi.

to saying, you customers potential for desire quick larger question. or or come perspective, Just when a trucks, a I from drivers are curious contracts and the am chains more and in fleet with actually tightness a customer, dedicated supply outsourced?

Derek Leathers

Yes.

suddenly now fleet larger is the I that into it or both that been dedicated, increasing look looking is designated but But everything profile. pipeline, will, at say are biggest So build should type the and true is its replacement our has by we you I cycle at can run up after and implementation. can things then those through market to the in term work service the the size on are the dedicated think it's we these frequency the an be do to which so to through in you Right try fleets we it puzzle every five a the we through may fits we look dedicated dedicated think propensity some certainly are only might pursue fits work have not Jordan, and really as, to filter, it dedicated of defensive XX if when because and a as truck need that blow stuff opportunities. be want fleet, opportunities when of fleets That's we cases, turns and characteristics because relative right, capacity difficult pipeline opportunities. in if defensible, greater day, you all. now, those well want is right levels. defensive really the opportunities we number things way is opportunities, forms and it it important that piece capacity one-way stuff the trying avoid When We seeing of just to accomplished for bid doesn't long that position in constrained that the we

the opportunities very we can those through as those those through sift we we that So we we eye can can cycle. and critical look have those try a and that that sustain to through seat, serve

Jordan Alliger

Great. Thank Okay. you,

Derek Leathers

you. Thank

Operator

come will question next from Chris our And Wetherbee go with Please Citi. ahead.

Chris Wetherbee

ask Obviously Good think Thanks. just John. afternoon, Maybe per could the dedicated Hi. on on there? detail is you and what the you And think that? way outlook the just Yes. mix impacted quickly Derek bit I was right lower issue. of said, the more that revenue it to full year I Can little range driving tractor. the give maybe a end towards about

Derek Leathers

more mix other wanted any than that driving to just it fleet clear We what's factor. is Yes. it make

may not negative to does same structure. low on have dedicated of but the fleets, ends negative could we truck a truck up, that new at incremental cost existing nearly week amounts same because on nor per And our it be a dedicated where profitability have it that the be grow so mileage as all produce fleets on it per effect revenue with count bring overall fleet depending or that simply revenue can doesn't we

perfect seated, that landed in revenue fleets projected both had per than not going that incremental truck It it And as what the well that be growth existing so just happened that metric. so fleets on quarter, may second as greater were originally forward. implemented metric impacts the of we per and a were couple week just

to are to to think on that now visibility that But some best quarters. still sort give metric quarter-to-quarter quarter We guys is into certainly mix it. the business you use We to was And fleet from it's based those discussions the play try having second one running. that. of of actually anomalies there the for are about how can

Chris Wetherbee

the side on That's And it. follow to it. Got helpful. just of pay super driver up then

in mentioned increases. the XX% of I think wage neighborhood you

on year, to you of If organic? more think you need line do the the the see after back the half of sort to those hold of continue

Derek Leathers

Yes.

about are we So XX%.

quarter. were from I second That's to up. think quarter accelerated the year-over-year TTS first driver the wages

still and half As into the the are we effect, in have look that going dedicated driver raises one-way. we at back in pay targeted year, strategic of both some

customer to in the continue that's that insulated going are with the increases we side. Those be funded dedicated are collaboratively worked as our in through somewhat to half. approach and out are battle the We that back

On mile be agreements our targeted we end landing perspective will out with rolling up what's are efforts cognizant at well of increases. as side, on does we as what from our we pay a the as, overall yield per as rate where think about very going one-way and peak

very could fleet-specific. Some very, be

could that of and run seasonal nature. specific, Some be i.e. things bonuses peak

the So July be know well have we we pressure wage line thoughtful information landed yield we that half currently certainly, all bids will through more be in and as based some rate in the on will increase back initiatives. very believe will as be there on we offset but overall

Operator

And come from will our Research Partners. go Jeff next Please Kauffman Vertical question ahead. with

Jeff Kauffman

very you in. much squeezing and thanks for Thank me

picture follow-up. and broader a question Just

insurance stood me. How was looks Your still claims business, did and logistics, truckers. for you like it was both in the out a for manage little transportation the of bit relative anomalous purchase down PT so I about the look it well to trucking quarter? me I related kind to that And other out X% and of those purchase transportation know expense to surprised then ago. If back year fantastic. a And

Derek Leathers

Yes.

be, a line, insurance first year. simplest half the the strong had of very on we answers So of the would

aggressively training programs. working revamped been much have We on

training, procedures, come using way paying have they interacting simulation usage in been learning about as We our evolving think leaders our replacement and we the drivers fleet. with the And and driver onboarding our our into it's dividends.

a have a major that. part accidents. in seen We reduction in also significant Technology plays

are I And tech All message is that very it's that we of that's think one to important. redundant but this I were quarter-after-quarter, the remarks because important. know one realized, things we prepared in are very trying our that

paid. that the those that's of so And some dividends are

clear, to Now market want very is be with. market I ugly. as The renewals tough deal to insurance go very, we still look forward, still

we obviously insurance go to as work we to sure through headwinds now. right that to We relates as cost make in-house. that risk we process have of through we the portion actual There are the that it are speak of offset hold that as performance be that going will of forward

an to ongoing So that's going be evolution.

make all some we want We probably stand than to for As for market We overall. money for conversion we is to our an be far competitors to that environment owner-operator is. administration. We to trying environment But that's believe forward exposure years. regulatory that We we That's capacity view going out owner-operator next the drivers that go tough. trans several be of also on cautious are we company the the increase live there current drivers able more to in given framework owner, that of a want current the that so purchase fleet know desire. as that provide those the over they It's become tougher actively to by opportunities in a and as have. issue. the part tough have our not a owner-operators. and that if thing, owner-operator that's We

one so that grow. forward. go further And PT will line it's And decrease not we as looking therefore to probably

John Steele

Yes.

So XXX. a Jeff, our year went ago from count to XXX owner-operator

the decline due TTS to The right. owner-operator in side reason transportation cost in purchase for of Derek's the So, is owner-operators. the reduction rent fewer

Jeff Kauffman

Okay.

OTR have line So to folks And there. into about was quarter. been in Ors, A out fleets we lot dedicated I and improvements are dedicated industry most and had surprised a trend? terrific it's on operation other most basis, struggled interesting an on pretty running your at Did in reading follow-up. this just mean really running healthy of But business just reporting basis? the not reporting there were much the look going how had go dedicated was this commentary a PT with a hung they margin it and a OTR the It I have did you cost I Was in businesses. decline that really owner-operator guess folks quarter. dedicated buck quarter if outside drivers with just I OR truckers down? how shift. then pretty of year-on-year just it up the

Derek Leathers

that do quality I we was for terms, a And the don't you in easily in that's performed quarter. are are quality that It it's Again, not breakout will Yes. dedicated the yes, But a know general our specifically mean and and of work not I we combination with asking customers this top say not bucked that. to business top we execution, well the the disclose the this replaceable. drag that group we think that trend. quarter. I difficult very I

continue opportunity discussions and to it lot good that So with to asking for you have more this to provide we be a to And rational the did quarter. we customers that have gives service. think what your we about need I

the I if some that I heard So question read many the differ our but, in of your in quarter same our don't same results certainly answers calls particular I seem that aspect. the know of comments competitors to from fully and yes, and have

Operator

would I like this the closing Mr. Leathers back any the Derek for will to conference conclude And session. remarks. to turn question-and-answer over

Derek Leathers

Thank you. Yes.

quarter. make the I to it associates corner for So on thank thank they to call the and possible. want did we you for to appreciated just everybody all want I being Werner We again tuning in. this the appreciate

strong as what challenging we are labor a an quarter extremely view market. very We very in of proud

that several speaking have kind cycle. proud it well to the times, the and line we in have hold the proves perform been fleet performed Dedicated through differentiation I will our we on of I very think market. of. to ability our well it As are said of And continue

takes on being and cycle if when further to display, well place, that put indicators we turn to constraints than supply XXXX, follow. that think that's that something And able based current demand not although that the we so forward we on look the on is to current if out and

We are acquisition. the ECM with happy

integration been how has with going more this innings. We that the are early probably happy still at It's in point.

work lot do mile also accident million X,XXX make have we that. week mention, driver. We to prove will free we we to I but this our want a hard to driver had sure

one So progresses. X,XXXth fact the forward we some achieve the that celebrations looking Enterprises free are person to as miles to and around million at week accident Werner

flow free generating Lastly, through to the cash committed are cycle. we

remain about talking committed time. been to have We some We for it that.

could to I we return doing been that special And utilizing cash organically, but so the demonstrating free for in M&A going our been think flow till for forward. capital looking growing has business value accretive we be to and additive up ESG have will same the never in back more when time something now, committed commitment importantly, are we shareholders allocation that discipline stronger. our our to our that exist investing to that do we appropriate place to look to and think and continue fleet,

are work is. that proud are journey we community to to to it it continue and you and going a going think a I going continue hard But make It's trip. are We not results Werner on can work the what journey the short at that's to going here investor this see of at Enterprises.

thanks joining So again. for Thanks us.

Operator

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

You may now disconnect lines your this at time.

Werner Enterprises (WERN) 30 Jul 212021 Q2 Earnings call transcript