WERN - Earnings call transcript Q3 2021 | Werner Enterprises, Inc.

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Derek Leathers

Thank you and good afternoon everyone. With me today is our CFO, John Steele. I’m pleased to report that Werner delivered record third quarter earnings, our fifth consecutive record setting quarter.

During third quarter freight demand remained strong and the driver market remained very challenging.

Our strategic investments in driver sourcing and driver pay in a competitive labor market enabled us to grow our fleet sequentially by 75 trucks.

another at with third the grew acquisition ECM quarter. we closed that beginning addition, XXX the trucks truckload In of the four We during with pleased months first were of ECM’s ownership. very our performance safety and is ECM service record excellent. driver performance stellar financial well tracking and low, going of on is turnover scheduled. post integration Their remains and their acquisition our in trucking industry while freight truckload cast XX% the remains higher. levels, Employment index the X% below is pre-COVID ratios keeping demand historically combined supply retail with which inventory boost low at are were multiple sales consumer levels, Strong quarters for chain to extraordinary replenishment bottlenecks forward. inventory going same is ultra in an truckload the At and truck new time, industry significantly constrained shortfalls market driver capacity by bills. competitive

a We freight quarter we of through market, year grow very were expect able balance to Despite trucks third. the second difficult market from strong in TTS organically driver and a this XX to XXXX. well into

our achieve to engineered lanes driver in benefit base financial with ECM cross Mexico in business Werner preferred and leading recent border Werner school segment, be costs acquisition we for the forward. to new incentives capacity well expect driver in and solutions third we winning dedicated consumer our quarter driver words, schools, lodging. Our due and sourcing oriented continues that driving driver to going way positioned results we Increased investments benefits retailers, higher our to our in hiring driver costs In as for our strong Logistics. from freight sourcing realize hired fleets. from comprehensive locations. other startup truckload made training Industry were planned precede drivers pay one

updated an Moving to Slide X, is snapshot of here Werner.

and with XXXX with continues of XXXX growing half has retail from third base revenues relationships to XX% year-over-year industries. centric our standing dedicated XXXX are in X.X% companies XX. a quarter truckload. Werner a our to grew XX Werner fleet way one and over rate just top consumer beverage. winning trucks food and XX% with revenues their in customers long and in over have our truck About top and Our with and

for to Let’s X our Slide third move financial summary a performance. quarter of

revenues XX% operating quarter, million TTS net EPS XX.X $X.XX adjusted while million, Adjusted increased adjusted basis income per to the fuel increased to share. To operating points grew our For XXX XX% declined to XX%. XXX margin XX%

fleet operating Our strong increases logistics primarily was rate mile growth results. income to per growth due and

cost in operating due Our margin lower comments. increases John some miles declined explain in Dedicated will third truck normal quarter. higher strong per remains demand to and his further than which freight

logistic and beverage startup incurred that during sequentially. expenses retail retail, base our X% miles in strong over food costs pay XX% dedicated in grew increased way results growth. this also significantly the demand load, One ECM quarter, XX% income our in freight of segment in ECM of remained strong lower. fleet. X.X revenues truckload X% trucks truck way and pay per driver truck To for in operating improved results improvement guarantees customer are a home and quarter. included generate and that year-over-year and million XX% third and and truck with period in achieved which growth one sales. fund discount average We As our continues a in Dedicated to increase represents third trucks we were financial

of components, materials, meet planned with fewer OEMs shortages as semiconductor During than raw chips, parts current the and labor. trucks trailers levels received increasingly third quarter, demand we and to are new challenged

market operating the At unit our income and our sold and while million our declined to sales quarter, simple during our results $XX.X continue $X.XX freight and the point us in this industry net into these equipment fleet fleet of trailers team We equity in and trailer organically third number To a truck value quarter over XXXX. quarter adjusted these will million gains I quarter. reduced was and the unrealized the higher our in share, our of of increased the in items quarter in third value our grow turn Significantly meet gain well to John. value quarter. to commitments two expect our We financial a with produce The of to detail. strong investment John continue and non-GAAP equity call for our XX.X customers, In will of the pricing used more trucks market market EPS. changes of discuss net mastery trend investments effect per or we this execution increased. third the enable which we third quarter.

John Steele

increased Derek you, revenues and X, total quarter XXX to XXX third Slide million. good Thank afternoon. million on Beginning

per of miles per truck. per drivers the primary The decrease week a X% quarter, which truck, TTS XX% second acquisition the X.X% were other TTS quarter. a third per fleet increased from for of the truck revenues and by haul market, in in factors due Our in per revenues offset total improvement year-over-year miles shorter has truck XX% to a mile the miles driver decline sequential lower ECM competitive

severe factors contributed per shortages, and lower weren’t driver truck drivers and available due to to The our and that truck work truck downtime due protocols. delays miles quarantine included to quarter caused more trailer COVID significant and other third to by parts

more on revenues in up XX% was ago. $X.XX, third Transportation results per higher top increased continued Slide slightly. despite our is adding quarter year-over-year, growth increase income factors year-over-year top XX% our the quarter although due operating segment. in the by let’s caused the on to surcharges incurring guarantees solid per the XX review Adjusted TTS to network other improvements. adjusted year trucks Beginning In adjusted offset our costs nearly a rates, operating in third in shortages same new of third ratio higher Adjusted our XX.X driver ratio. Adjusted growth to network share X, to in training growth partially quarter school decline In on per strengthen frequently and produced operating income weekly fuel due operating downtime. adjusted increased had corporate for one by miles operating minimum significant XX% the and was to earnings TTS Adjusted Stronger Services other financial strong operating fact And million, year-over-year, logistics we quarter truck our from parts startup performance school truck. for Truckload a increased occur income increased XX% of quarter and XX% increased with third points, increased was locations. earnings XX% that driver share for TTS revenues quarter year quarter pay income and million. a a operating the operating income XXX addition, to ago. In basis logistics income

Turning Slide the X. TTS metrics on fleet

was truck. we with week fleets trucks of last per XXX which increased Dedicated revenues to dedicated growth, the lower seniority slightly, is in shortages. less were miles miles XX and Dedicated dedicated rates truck the per dedicated our For profile. X% X% and due revenues driver’s year-over-year, miles net added year impacts, the million. parts by per a higher truck COVID lower addition new due were truck per XXX lower per to fleet expectations increased fuel XX% below by offset

per the next gradually improve revenue few We over our miles and week our expect quarters. per dedicated per to truck truck

miles guarantees truck, shorter way average on incentive increased increases for expected to remains revenues Our mile truckload per unfavorable lower result net of impact compensated. revenue of week. million, truck expected with an their bonuses impact than increase the truck total per Drivers XXX were year-over-year pipeline of XX.X%. increased an per recruiting parts miles truck. favorable with X.X% higher truck X%. Driver on to very pay pay due truckload in in haul one lower pay driver truckload third One were mile, to mileage and per fuel the had per and impact overall XX% and week an per who fleet way to quarter per dedicated our rate third impacted as total strong. a XX.X% costs miles The declined quarter shortages rate trucks per for addition increased one mileage a ECM minimum expected mile way customer due minimal XXXX Revenues had

a higher reached The to insurance sequentially cost per expense for driver including paid X.X loss year-over-year, and Insurance we expect insurance increased from quarter and were part as expense level quarter. premiums third effect XX%, increased X.X will and primary by increase claims quarter severity. expense The by for our pay less to quarter, claims second insurance improves. in third quarter higher million year-over-year which in stop year-over-year factors third claims per $X.XX primarily claims, higher our second $X.XX company insurance begin second claim going less our favorable and development liability to seven sequentially million and and multiple favorable moderate Health from due that quarter insurance expense and XXXX million in third reduce due forward expense mileage annual increased claims from productivity sequentially due earnings claim, Our to high TTS retention adjusted quarter. Health medical frequency experienced. claims insurance levels health mile to and quarter third increased for member. per of X.X claim share increases insurance above combined cost million

which XX% the X%. XXX Slide excellent shipments. by from on increase were revenue project to XX%, of revenues and quarter strong logistics business million Moving in per produced a freight of improvement in Werner revenues excluding volumes mobile in revenues chassis primarily an million third driven XX. XX%. while operating grew increasing first shipment income a XX% year per and throughout Logistics rail Logistics a shipment, increase continued quarter and customer to and sold networks. we grew in due shipments to decline ago XX% X.X only Truckload Werner third growth, by in XX% supported velocity rail increased In over logistics generate Logistics declined Power revenues increase shortages, strong increased a well quarter, market. Global a and XX% grew revenues off in XXX% Intermodal revenues

resulted expenditures and to CapEx to years. higher years. over summary continue growth expect net logistic the capacity is net in past flow margins free a strong cash of flow five capital We four constraint variable cash achieve through Slide cash free the during and segment operating And XX this from less Expanded flow last period. operations, our our

allocation. trailers net lower of expect continue CapEx. also of to are expect We planned. year free Based We On us CapEx and trucks discipline for generate going net with sales we lowered flow contributing the XX, our strategy recent for million. receive trucks our OEMs to year to meaningful higher capital a discussions are guidance this new for fewer forward. XXXX The our XX than Slide by full to cash prices summary achieving we originally and is trailers on

third Lehigh for priority located In our elite unwavering facility. price investing purchased the Derek is acquisition regional trucks over be we Pennsylvania, latest Cheswick, Our performed feature replaced and subsequent and our of are are XX.XX. driver saving for with On on Xst, capabilities. leased and safety, based synergies an average carriers with and excited the several at our quarter trailers expectations the efficient value facility Valley, driver well very XX% of our discuss and this and our implemented strategically shares July Werner We maintenance quarter the capital exceeded the of smaller ECM ECM how growth in companies fleet, share we continues power expectations, completed truckload Pennsylvania. a progress of buying retention, intrinsic X friendly technology driver the during In equity opened quarter July, the fuel slide in we see in making We with are with together. based new in to long-term working initiatives. growth we fleet cost transport million group of and the in will which stock about and our Edge ECM per profitability. rich

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

one now of to is the to with will ECM debt debt times quarter, long-term to goal and portion annual to Derek. ratio of EBITDA during a we our net the repurchases Our I prepared third Derek. leverage the back ratio remarks with a stock of EBITDA X.X final turn acquisition quarter our of net ended X.X.

Derek Leathers

John. you Thank

is telematics equipped competitive average our the of as challenges. with and inched and technology, facing of market the new driver and is build Werner safety fuel fleet mileage for slightly automated cameras, up quarter, Collision Every based third The Mitigation result leading manual OEM industry dynamic. an tablet systems, transmissions a solution. trailer and truck emissions truck untethered During advanced age

training In are our industry we driver addition of driver strong culture. school advantage based to our leveraging implementing pay inherently network leading and strategic and market increases, expanding the

increased we the at successful. financial five driving were of from proving locations year, These this with cities openings be and locations strong these our are to XX are completed by school far The that more So align XX school demographics our to new schools with selected we quarter and making investments planned XXXX. first news freight network. driver

The end by third sourcing From and hiring not quarter to the the driver our second As join these the decided certified increased X.X%, leaders. end driver we to program who school graduates we through Each proficiency driver have of have drivers the have made working. already investments increased proprietary of in including of develops of the graduates ECM. are addition Werner. Werner with then further our and experienced number of quarter

continues On innovative are the products Cloud with strategy by cloud our SaaS work API’s first, Werner to team integrated technology that third solutions. on EDGE developing front, Now party via our

the building and efficiencies will are that improve drive stack We operational help tech process excellence.

of multiple track volume brokerage rollout is with three of continue will offices. the first that which transactional our years. phases domestic logistics on is daily all over This began increasing at U.S. Our next division mastermind the with

on our We to drivers, shippers, carriers deliver associates. and continue that solutions our products to commitment and create empower

ETA to enhancements drivers, across have We our we has of with process which resulted inspection we have to provided in to our improved time fleet. our response and delivered it in DOT our We shipper contributed improve that Werner’s the accuracy. engine digitized bids, bid streamline daily and that time the improved software comes commitment process sustainability. towards time our cab device efficiency arrival quick drivers to in For new When accurate hours XXX our implemented customers. to our bulk has savings software new

see as is for estimation learning you XX, to delivering and customer carriers We the the participated of winner rate and Management matching and Werner widely logistics. performance transactional the received of utilizes have efficiency. strengthen this This and most overall S survey. truckload categories. once logistics dry public by low plus of increase tools all help excellence And freight again annual each rating and platform XX results the received the important to measure we second is of identify truckload of XXXX to this and by process streamline transportation in the matches only machine dry shippers years. loads highest in carriers. company in our named best shipper carrier last one XT’s August, negotiation, quest for survey Slide freight satisfaction In regarded On quality in both carrier Logistics Werner’s that two truckload can were of five award award these our logistics. improve X,XXX

the In Board. following standards Goals and July, Nations from United continue to Sustainability responsibility Standards progress recognized on ESG program. social our Development inaugural corporate Accounting Next, report the we Slide XX, our we make the in significant published Sustainable

as team. form now our a and that endeavor, members women of launched framework branded ESG force plan by board a FASB for to completion XXXX volunteer with of volunteer website. leadership efforts We nine find employee our goals engagement targeted four our for goals goals our program qualifying sustainability will Werner hours talent and a with senior of reporting and and Werner advancement increase four task the committee adding involvement a with further by create The company and under an to will the Werner book, You of on support in in goals elevate expansion ESG our created associates the milestones this These and commences that their XXXX. set continue and drive We we option charities diverse can management with employee their board our Increase associates. choice. will program. goals increase Blue, branded our in to retention we standalone sustainability company are, ESG engagement accountability across new associate

During new three associate groups. the quarter, added resource we

Award XXXX given year the Excellence the new for This is Outstanding ARGs. SmartWay highest time years. we was the seventh have environmental last our the Protection Agency. Environmental by United the awarded This For the Werner in eight industry for States week, in introduced eight recognition performance

a I discussing business on model. XX, Next spend to Slide would like durable moment our

TTS our TTS the history annual of shows our a is line dedicated, Here TTS bars percentage percentage. operating of annual that of percentage margin operating adjusted is The net margin since and XXXX. chart show fuel the our fleet

range we fleet, meaningful ago, a dedicated During improvement. long-term five our range our year we are XX%. operating margin adjusted to we while strategy, of the After as last achieve TTS goal to increasing to XX% goal a successfully annual implemented XT years annual margin A TTS adjusted XX% modeling margin carefully margin we we our from our calibrating TTS operating XX%. and grew operating established performance, and

range ability confidence XXX the bottom give in our better to perform markets, And We end to allows the basis us perform points. end to XXX points. which raise which markets, we attractive have to the by improvements increased top us have confidence basis and structural the the range stronger allows by ability in in us of made of less raise grade our

optimized dedicated carefully specialization engineered by way time, we to cross same due and At the performance margin generate controlled, achieved and tougher freight good last the are ECM. expedited well operating margin Our with designed we will Mexico one truckload resilient to border markets confident our Tim fleet in in fleets, we increasingly strengthened perform very fleet evidenced fleets is strong the adjusted months. freight in and XX.X% mix markets, XX constructed over TTS as

XX, guidance updates guidance how review outlook. now against framework our to and are we progressing move this XXXX Let’s a to of our and Slide

the acquired count we trucks trucks sequentially, truck ECM. our XXX including increased we from quarter by XXX third During

Our X% slightly we holiday are end or and flat activity. of expect period result to normal a of our in trucks fourth year-to-date, fleet seasonal up as decline quarter remain

full third X% year quarter million, up on million in XXXX, truck XX.X the increase of to was we and in used higher anticipated the expected better from For than market equipment sales, second sales trailer slightly expect quarter. fleet our gains from lower in expected Pricing X%. to in unit resulting than XX.X

full million strong quarter, We to be the a the million year fourth XXXX. months our of of capital continued our and million CapEx trailer Net million million in per that XXX guidance with factors based to deliveries. expect to in million. the Dedicated truck due truck shortfall we XX lowered relative range new come quarter, quarter. sold for a slightly now third fewer expected for expect XX units in XXX nine to range revenue of first in per For were per week increased at expenditures resulting third in XXX The lower and the the XX miles pricing was on to fewer gains truck. to

quarter quarter, For to way in XX% week freight total one of third increase quarter in our trends four fourth for we October, expect fourth our truckload quarter year one mile to strong. total our truck increased revenues to for the growth per begin XX% a remained ago. demand restoring first the above In have way expect progress unit mile X% One to truckload we weeks X% the from fourth per truckload revenues dedicated way to revenue range. make per to XX.X%

turn to average effective of to this yield continue age remains At our the truck tax superior that reaffirming age like begin team a an years be be call the over and will X.X active expect our of pipeline at of are and fleet positioned to operator talent I X.X XX.X% and years XX.X% rate our and Q&A. to well the Werner average year-end. We trailers with strong our would time, to results. sustainable to to

Operator

Thank you.

be a evening. XXXX question-and-answer The These and earnings Company’s our and available session. an is the beginning its like Today’s We replay posted will results for begin know website we to everyone presentation. third at webcast let slide issued earlier werner.com are materials at being available recorded this afternoon. release would this Before quarter for that later company

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

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

question-and-answer p.m. X will We the [Operator Instructions] Central remarks. And come the the will first with our Citi. Chris following now will begin call closing Company’s at session. Also, time from end Wetherbee question

Christian Wetherbee

a guys. want Maybe And to what the quarter. perspective side. good can we from the or a more on was on afternoon of the a maybe better get maybe cost start if breakdown Thanks, in just TTS of on going

tractor. there lack dynamics. sounds profitability impacted miles was cost was was then of And dynamics it So there per some like two also that the there the

So two kind a of what in those was might each can split of you get of a maybe segment? and the ongoing like the impact look sort of sense of made of better apart profitability maybe one the sense what those of if

Derek Leathers

quarter the on ongoing But issues more John so you jump a will and Derek from in word I detail quarter. in parts availability question. for We is suffered problems. and miles thanks parts This in and throughout will then problem the major a start were the sure. with

service resume would some it that incremental to of and if which we support levels, if to or than had the think maybe dedicated infrastructure, be impacted start footprint, greater a our And on of these repositioning fleets, of have late. expectations dealer do normalize relies will, kind I dealers much able incurred those same bit productivity were of been as dedicated mileage networks, to footprints. quite and costs, the has of decentralized, don’t you to given we doing to really others that

that go will away. We pressure of a lot see

through, insurance lot out took quarter liability line had On both sort some period both of address significant do about Parts need us to items few were so. layover in and and that well went in will, OEM were in lodging, bulk a what would of the we of we we the had a health chose we across some in of other as driver material pay, you impacted and Interestingly, work a the if the to place those cases increases quarter, amount we we tolls those like insurance. disruptions to that to issues. up also the that like I as driver refer as do talked cost and through some developments, of

have one steps of and important the supply which those in on the were considerable have we overall issues. see started We have them, those many taken that of several causing to And is most that. parts progress just to made of address improvement

started any of On are a we into saw to those into But had the pay intended more format. on that failsafe, in of in into a come really side, play have a is come leak Because kind pay anticipated. and the in out put we week the to guaranteed we not place, into basis structure based driver significant that it on truly where came play than weekend broad designed effect driver A increase minimum as P&L. lot pay. something

risk some evolved shared protect a more couple have a eye things happening. of better will look or those prevent done have better We toward there plans and as to those obviously But productivity, looked reflect one in which that an situations arise. may of secondarily, from

look is both to we forward, about a in return from one to as going So be perspective, in dedicated productivity way. it and normalcy

you shared the - to that a better bit color have profile hire than of to John a and hire programs risk don’t at attract retain that As times you packages pay well just better QX. as evolved answers fully if having to would like a but I in if know add. put have or was to during little the market basically it us pay any reflect position few and

John Steele

things, of Chris. couple a just Yes,

two insurance of a health Then in impact the $X.XX share back and it normal. the clearly, a year-over-year were basis. and able our There claims to truck per and due growth that So sequential part to items insurance begin was than is quarter. other on $X.XX a higher those and getting impact share the we were a

excludes from second average most truck in trucks that dedicated the ECM added we the trucks were basis, quarter So to third that that up an on quarter. we of XXX XXX and and over

So we few that to get back the invest drivers carriers was are one this quarter. of some in able and growth

a as the was So lodging were driver And share on year-over-year on about layover per and impact incentives, hiring pay pay minimum then a a $X.XX basis. the about $X.XX share well, sequentially a year-over-year about pay basis. share second minimum $X.XX and quarter. and and a a from Sequentially, pay the about hiring sequentially $X.XX, share a incentives lodging layover was a were

So some hopefully that gives you more information to clarify.

Christian Wetherbee

question XQ think to appreciate would and I that there. I you about as just maybe all half of first follow-up next the XQ be really colors. guess detail helpful is Yes, the year. XQ

But still few also quarters. being sound around to supply of cost would the next there is maybe dynamics of the chain of Sounds about like also some able like up. headwinds the be might pick made your some progress being the based there comments productivity, on given just for back

being So you help we can of major do give a terms in of bit as better a understanding getting process XQ, sort or in really this think this issue the us need clears half? maybe to little in about how first of quickly

Derek Leathers

Yes, start I there. will

able with parts we are supply own had on of were we behalf. closely to the have of to we things better more work dealers, issue, them is shortage, that they clearly, parts working availability parts, these quarter are with to the then So it even confined some we to on top their started to

much on come rely We things where already really will on we ourselves into increase go have will started have minimum productivity do has cleared, it aggressive pay others service and to less clearly as so. Those play. to play become more versus of taken out

in But is at that in we obviously, liability, quarter. insurance health because And appear that on normalize don’t not believe trending opportunity third won’t it and the It have us. this to as to to quarter one So is behind saw predict. to are we levels. is tougher that predominantly we and reason those time, difficult have to closer to an be would the return

Now, our simply this lodging. take quarter quarter that is of lot here accounts I those. disclosed, went a that pretty had last behind several it in obviously beginning miss is premiums. believe, insurance on at dedicated of you which to stay. the that we And But we into health did increase the effect in a implement We significant can’t

this, chunk so the least itself, start yield. is look a and quarter. But of fourth more the Driver the there that in at costs the quarter, that line now ongoing. actual line to offset are pay was third And revenues you pay in with you as reflected itself

So again, born with what the prepared that toward salary took in the cost coming business and the on priced of to need to changes place. impact time. the pipe. get and it new be we for it the close has in reality the increases And was deliver a in been there mind. eye to that that dedicated have this with up pipeline down most had That new salary long we referring our business robust, quarter. is But ramped I’m is have an to And

John Steele

get we miles would Because add XX% than it XX% the in per miles I down our higher should and going So mile company Chris, increase trend to that expect is back. the that were forward. pay driver

and it the So we to but mile from basis, fourth will down. think on that is quarter X% next increase in It up moderate we to year-over-year come quarter XX% in year. into we quarter, think XX% quarter third trended percentage will into first as in start second the a per

Christian Wetherbee

Okay. really Thanks so care. much. job. Very helpful Take color That good is guys.

Derek Leathers

you. Thank

Operator

Please Group the Scott from question with will And next be Wolfe ahead. Research. go

Scott Group

Hey guys. thanks, good afternoon

answer and this ratio So, improve know Derek, don’t trying given operating I you people but Any can if typically fourth this on third not? or not. just how understand operating ratio to is the and thoughts quarter quarter or question, just sustainable it

Derek Leathers

So QX. be see operating improvement the to would from expectation in QX ratio

that several about talked just are have We costs transitory.

as many structural. Although are and are ones we speak some addressed more transitory already. Those have being

improvement on see to adjustments them. made or course, changed already have We

about come like That it As come also think some we talk point. would improvement. up is so will it answer, question, going QX the we at to but to now is to QX up I about - sequential never

So take that head let’s on.

to upside on progress comfortable do this that If you QX cost sequential were by year if some improvement, changes some history XX that be number the we improvements look the sequential the in I five that transitory are believe history look of to we availability, as about had XX%. could is some the headwinds to improvement meet At of a make to We further type portions we believe contractual year as of in QX. those as nature. our with and five of that impacted making in at with QX, relates of up there miles can of that. hiring into obligations particular to parts, ramped And incentives it we the that and point

Scott Group

you this about guys how or you it? to And and latest on I what to for are and ask out then are doing are the on Okay. hearing thinking carve not you vaccine, is prepare what the want

Derek Leathers

with, to tough that how lot despite It declare, fleet contingency, at chooses an a much But pin that start to a not will there. asking down exact to contingency point that have we is, is within there of I know because this or be may there pushing. we number, we our unvaccinated. is a so is Yes, that group

get not a But setting little we to probably our even unvaccinated a vaccination certainly higher vaccination are I up that is XX% that industry, vaccine clinics rate and variety that. we than I We range which in the potentially tell pro dissimilar and things up. were are from you think doing onsite would of

Canada. and been test, and taken, a what about look preparing would thinking for it was costs the dialogue modeling, what that relative that to and prohibitive. route very feel like that route to they ongoing, those to encouraged was carve are we to be the did in We are similar potential transportation out If has

come other the and makes are don’t the sense public PPE could that available, entire on nor XX% clearly great very it Werner exodus are world. it was with the vaccine, also based number. workers These in this fragmented the an danger test industry vaccine that and interact wide. think near that the a daily I all is don’t justification and mandate the at a just XX% on is the worst medical is remote also to wide, ours scenario. level of we risk hauling, to supplies when absolutely I nature are But time. under And to saying making as to for chain industry see time a that world of that defend in industry supply XXX at the tasked not be already a their work. that duress, prepare critical a we I’m employee were count case continue this delivering don’t honest, see Scott general going I do the to as possibly with is

out we days. will inside, So hear And be the else. but where react to it to this everybody to are as don’t point get something going a from that ready detail. control go there here, it is it do bit we more standing until next But one call on concern, well, I by know, of two is five we expect our at to a

Scott Group

that Okay helpful. guys. Thank you is

John Steele

Scott. Thanks

Operator

will Jack go The from with ahead. Atkins question Please be Inc. Stephens next

Jack Atkins

my you taking great. Okay, questions. thank for

would kind of And then rate be want capacity, that you in the expect the both for one of in of is it about on update to you I you. side you add within contractual to realistic to margin of It to helpful. to year. if we trends, little the or force do you look maybe carriers that for equipment that, sort in care pivot think guess parameters, next of on truck I potential market there increases thinking demand side. out the the for next side. very So Derek, just put way forward maybe difficult maybe about of XXXX, to the market. more you are with some visibility what that, bit, first half Any got the guess, year. broader Obviously, Thank about expansion maybe for can kind driver into would have think that least framework, is XXXX terms a kind into to Werner, at strong how of think

Derek Leathers

Sure.

will with this. I start So

felt dedicated to have important closed. prior We the set move pipeline to early, ourselves on ready ahead to up is it pay for was and That be is fully us. or that of peak driver then we made staffed and our near landed either

Well, with they capacity ever, variety maybe drivers is important well. today. we to implementation call relates effect inflationary trend seen then organic both our late negotiated in it when we we early have of we asking that ability be and us very than week are now add dates you to were our the of all what going pressures us as that are got through that effects happens this safety to position there beyond. for said, Early needed well confident are ECM nets With with so packages contracts the continue year across and point, late to some have the customers last a and/or with the to as P&L, and lapping we And have demonstrated as more that rate of to full at didn’t whatever support year, that stage XXXX of for inorganically as that get them I be done feel support this because at course, of growth it in got of acquisition, XXXX.

are in and those cases, than above higher certainly in then double-digits scenarios, we some range, the that. and So type

but that about network it term doesn’t haven’t the things whole format As agreements guidance, of rational on mid-single-digit we prevalent sort think term with I in place. think thoughts by turnover we about think renewals. mean is are generally really fleets lot of across other the longer we a lower into the you got That get it of longer the and it that year, have, longer given But is at that some amount, those because and clearly, firm double-digit coupled moves north lower certain lines think are no of pressures also all, rate I to be to more agreements next as in with a P&L.

took think several we passing through money that in this a with guidance we cycle, we range. possible. That is strategic expansion ones. lot most long-term invest it longer got with time, But quarter legs cycle longer to didn’t that expectations, story spent the has is and changed our even what this margin our same the we everybody’s why runs importantly, believe a Yes, a So is and quarter internal at to is do meet decisions each though month.

Jack Atkins

This very continue an you in for is that time been expects question. guess, many such bigger maybe cycle on I helpful freight And to some Okay for everyone Derek. a ways. that. picture Thank unusual has into the us think so future. I

get it like manual trying effect your can prospectively other for closely are be party’s to them from Now, potentially through feedback of I with something take one And would get who partner on through process. change just of feel ways more year. your customers, forward. the capacity curious I’m service to shipper go Werner, and curious consistently kind almost for just Derek to to we levels cycle, you maybe high your the on from every bid can the thoughts like provide are looking moving getting they carriers other

cycle your this given how on free been, the put customers. Just pressure shipper has how and unusual is strong and

Derek Leathers

onus internal sure own have and their the longer term us The or would make Werner their part happens models own you to capabilities. partnerships, we yes, is are and want arrangements, tied longer word that is to aligns runway to be in that with easy obviously looking aggressively in market of that find term and think shippers that to agreements, a use. internal longer that on people establish is The may kind term whatever space

things, to it And matters. we portfolio fit, what bring is that, that people As a shareholders about are that these have want of do size period needs give the us a a we over that and ability of table our buy of open the return longer look sure to we lot we matters make pretty rate time our to to to that. more to across guaranteed

one in logistics are into and to we the needs, are their setting have are peak places in and way, long-term rate. going intermodal capacity with better opportunity also that And beyond we so as put those look deeper as the ourselves as are shippers that to we with get to that align we needs expectations see and dedicated toward

to rate after once not what of is opportunity happens project, sure runway that is that relationship but in has gone and bottlenecks just we of has it what come make and as level of supply So the left. to some want peak a on some the be chain, returns it may particular normalcy

several I the times or in our them kind show again, make they when think an keep They to word. great, we we once So just painful, here we QX the encouraging. commitments, are of had meet of are as and matter. our even investments at made are And those going that in I expensive conversations those haul. long over commitments, example the recently that short-term And

they think sense. I the most business make

Jack Atkins

Okay. Thank you.

Operator

The Bascome next from from comes question Please ahead. Majors Susquehanna. go

Bascome Majors

many talk the about hindsight who the some maybe that I are of some to results. levered, a as pay anything taking admittedly quarters competitors to XXX versus of that, it in Yes. or surprised at but trucks dedicated you. question. and maybe Thank stuck were forward? to a out of more I that Thanks fairly profitability on, so you, fleet that this hearing your wanted my with added back mean, income look and for go are out peers, has little big at you point even peers you and stuck on of so thoughts we was and you carrier, way just flat in sequentially, where operating any one doing anything their

Derek Leathers

remiss, other Yes, our how people’s, may us. look, on mean, we versus quarter our don’t be do that they basis. somewhat performing we Bascome can ourselves it individual great challenge, I model and be would But always didn’t in assure we just you, duties about if really I with an versus question. and derelict challenge

in in sure, can is mind sell now right supply make sale. doubt some We given that want best the customers footprint. of is, the about at buy the mean, And is mid-single-digit think one are. my our the and that is money that no for and a can to we there the example that them have could of we to QX is time to a easy in more is hold of needs an expense of bunch of portfolio I we years ups of you that long-term diversified that and one through to do cycle. this would their organization growth and the the basis made return fact The to do and talked rather chain have I that way very that market and trailers revenue objectives. more through annual truck where and a disruptions dedicated that way that more a can trucks structured downs in diversified, the We and a cyclicality not lot best-in-class money meet to can earnings that and survive on chose gains service, growth, on cycle, it or trailer, especially better have our have double-digit we

XX, have the went carrier, to pay the EPS - penny, but a continue I so. XX our by and were last others missed in up which XX. from XXth one XXXX, were two one the price inside we quarter, consecutive the of those XX of we only the the and EPS higher time we it was So to think of will stands strategy of long-term records With up for new five quarters do one over

So hold our you think that they coming the everybody fleets based place to long-term that you is relationship you benefits and are the and the customer. don’t Werner price. pay we customers. a value about, improve over coming play in continues And you our the Well, enhance you pick, in story. choose quarter you timing but that quarterly is its our choose on and the and implement. outlays pick When with quarter this EPS, involved the results have really of we cycle, you when Occasionally, returns at based the don’t on end that such have got such following the shareholders, is for and with have got to a dedicated talked large get of the which what

not very could you it And of we tone its story tell we written And work at fullest through time, not here. to this proud voice. of But will by same developing probably that extent. the yet my have I’m is so ongoing have the the

Bascome Majors

answer. focus pay that that for local little could is and I you portion realized and bit very in just Thank situational. driver a If I on the dedicated

feel you. paint market forward? in to to some do like you you what to feel XQ ball like back you a have did of really got going do give hard is that is ahead or and you But and to invested you it you market Thank XQ, momentum get So brush. going

Derek Leathers

Yes, great question.

we think ahead One, of we of highest the market, a we some short-term, the it are allows for retain up for just cost are tough some doing. of be couple slightly in are to to have And attract profile we us little a doing. think the need we I not stuff of things. on to and quality in signed in retain type a new and going drivers, ones but might I attract that of those. market the higher But work

reliance, - mean that evolved few of adapt I during just better the the told think packages impact some some of you quarter. learn been circumstances also have guarantees other anybody in you were were it What were of on frank, to our nets. think if safety never that idled now it, a that really is it. again, to is you we of of me from trucks, that adapt it. some To ever have and because I nature there the quarter expect. would the the magnitude in I something part foreseen. improve is had innovative So would quickly do that I thus we be that the And dealer have didn’t to do

coming drivers strong, into So upon to guarantees going we to those how around provide to from and have and still play. viable we through our to safety planning have avoid of got opportunities and are have them we some nets. think still our for improve proactive But

I the The of to about our sign things ended morning long want up. we with angered, team I use it that someday. is may right one are. that telltale frustrated may is And be still told where an think as get you XX or we this frustrated, that are of whatever fact will something something simply as I and ago, this One that It a to to the is carriers on. we us, standards was our where is unacceptable it wasn’t were condition improve that to for in market we many and striving aspire many, word

Bascome Majors

Derek. you Thank

Derek Leathers

Thank you.

Operator

Tom with from UBS. Wadewitz ahead. Next question will go come Please

Michael Triano

Hey this Triano is Tom. on for Mike guys,

to So about drivers. wanted I ask

pay for of that one schools, helpful in lot minimum fleet you about then the the in ability XQ. And potentially the kick in thinking fleet, are one on a retention XXXX? from driver the drivers impact increase the a particular, and your way how and on grow perspective. Was With in way Thanks. to

Derek Leathers

effective. was it pay the impactful definitely minimum Yes and first so the first question on

We we actually better a from guarantees have than of seen minimum will, benefit, a retention fairly, place. in modeled the you some put perspective on if

But us overall take needing those those that the crops with and to as Now we doing directionally not modifications effective I miles need and times often, the on we part, they more we and put fix and to several some on improve That that our that the is is trucks got road running. upon. job. wanted is keep driver or had come their apologize. we expected into that sure it play I to said make not

second question. You your of had a part

John Steele

where able think few driver sequential up we to that. The the really excluding are And quarters, do back Yes, able we last have we XX schools XX locations, haven’t trucks, helping, and get growth quarter to this the ECM. added been to are we new fleet to been we achieve locations. they

are, help five Now with significant job fighting six a that be in and a doing good for we more in sequential to a headwind to I we next train labor. where will continue us think market develop think, our drivers driver have have competitive to program. fully school able we of headwind And months growth the that really planned that

Michael Triano

guys. Thanks it. I appreciate

John Steele

Thanks Mike.

Operator

Please Merrill ahead. will The of go be Hoexter from from next Ken Lynch. Bank America question

Ken Hoexter

to mixed lower way, little or John sequentially the you Great, good up is declined what miles claims, and the I ongoing the just due Can one there understand a afternoon rate that actually Thanks. quick, that to in understand clarify real going is massively was or and that bit the guess, question my is insurance a per Derek. just quarter, revenue tax per the can change mile. is you tractor that into delve just the on is,

John Steele

first the part, claims. the take will insurance and I

and to participants a at If will you We the time, did all year-over-year ago. half which look listen-only in market conditions for got of claims quite are have X.X believe we bit than session. this . roadways due increase overall we Not type a the a After a the premiums last congestion insurance was to in compared was the development, excess mode. And was balance year I to year at a is coverage part of of about reflection more catastrophic that increases where little in claims. this speakers’ due for that million. And that question-and-answer increases on year the insurance. be presentation, for there the claims

still Our strong, little but development. safety is a claim bit record higher

want Derek? second take You the to part,

Derek Leathers

to that revenue is by were as from with into And about we productivity have essentially QX. week, starting of And and is issues some which mileage ask almost by that per the go we faced what truck of about. you already the we one it been flat looks Yes, same has trend that, the I during that QX. reverse much driven is again, is way talking that of in QX to some believe issues the And lot quarter. driven better per improved exclusively would

have we have that as still forward, and got continue to we productivity got ahead us. work move see of that sure moving this We lot at and but to up of keep time a make gain

Ken Hoexter

you. running we as incremental just John. impacted costs the like, I understand a board want Derek new with business scale, your Derek wouldn’t at costs up on you dedicated sounds and to new business thought, have given thoughts the coming I Thanks the on coming end maybe quarter, of the are just of on typically your said. lot

flush us just maybe for bit? a So that little out

Derek Leathers

Sure.

it have at the a difference dedicated, time, you adding dedicated exclusively certain dedicated add right, on are are you you certainly all them related when them want business. the to adding time. to is it So new the to businesses, is drivers, add that But not, you when not are you

hiring there on was hiring account so is some during deadlines a and met those impact truck. costs The from account started you uncertain launches we similar all And already all bonus QX. picture instead But whereby that do and have mileage, by see as is place, plans. dates implementation of in costs. other That in the in the there will And some do significantly met and work were higher higher and profile because those not pay things some both the items fleets. lower QX, goes lodging, and those We start within QX productivity, or that we those you to a I in training started that of incremental advertising critical bounty place and thing have incentives very and fleet no that what lot deadlines do of but most enhancement, cost that is through place no paint launch our means so And were suddenly back very want and that them the bounties, on unique, as finishing either all drivers of moderate having you cost have a QX done to activity is now and case. levels. or a chunks met dedicated have perspective, well two is on-boarding, a to driver training that period. other within and development after are on in then in bonus that to to By the

Ken Hoexter

are business up, I the What old - understand thing Derek we inflators can dedicated the contracts. just on is new your, that your that is the Can timing that so business, right, talk cost seeing? on of the down. that it protects the point you you I thought that and the whole one you you that realign with get on coming but clarify pricing through up just So to

Derek Leathers

fabulous a That is question.

there as in contracts, down, the So and great in a couple first of you is up off, of said, of protection our most dedicated deals there are exceptions.

So when the out operated the trucks, of because it you none, relative down then you region. southeast, any in then move you down region of Even the any the awaiting have is add they or them non-productive have a back profits. when or hurricanes so truck ability and to where but some margin absolutely down truck protections, baseline into absolutely is parts, when to

seen so rebounding. to the were quarter that have impacts unique there that And already is there we

dedicated throughout repricing As business had are we year pay on that it packages success relates incumbent the of pricing the have to referring good new in we to.

to So back spend when of that significant of stuff in. that we is talk level, businesses, fairly lodging, and it. we the can some the into base we in that priced incumbent the increase incentive sudden that those incidentals about valley advertising, driver some not other across quarter price associated the and get on pay

Ken Hoexter

time the got I you. Great, guys. appreciate

Derek Leathers

Thank you Ken.

Operator

be will Partners. Vertical Kauffman go question Jeff ahead. next Research from The Please from

Jeffrey Kauffman

apologize the per that looking way. I in new contracts a we not and the made last Ken’s And there Is going might very just new going effect, per But is year there pricing for haven’t the when what be in the over but at traction nonfuel ago area? revenue something flat looked on Thank and I’m that was obvious XX-months vehicle I else that with dedicated re asking why roughly just much. at understand it you were pricing, explaining more statistic? mixed question to week different with you levels. a

John Steele

has per looking net are you revenue specifically, stat of at What Jeff week truck or? fuel per

Jeffrey Kauffman

Yes.

John Steele

per was last truck. we quarter think third year so was X%, in XX.XX year, XX.XX Okay, that it X%, quarter but this sorry, I’m had I lower In miles third

And productivity. so COVID. drivers is the parts our the startups mileage shortages with and that And fleet reduced new out

Derek Leathers

XXXX, lower Yes, by fleets to XX here. dedicated XX design, of add mileage I XX very in we have fleets. specific are the added will in be just

lower well. So what fleets mix has to on you happens. structures cost those that significant And have as impact a

a are not the of it entirety does of degradation is that component Now talking away mileage But it. we that that explain major about.

to as truck fleet are QX the you if changing QX, our So we dedicated comment was per was per call, significantly. And the about question find it revenue the back made to the go struggling what there fairly both right week to something and and lines mix were along with I knew closed as in and yield, a metric fleet in as is, in and that static revenue implement. is of late. to have, by with landed is fact, had of we per increase we Because as if design, mind driver, you of well mileage significantly those seeing the associated are we about that know can more we fleets or those can lower that

Jeffrey Kauffman

per opening to per to truck X% then is paraphrase the the really that about down. I up think implies XX% said And think way probably so revenue to in Okay, maybe miles mile comments, what John in range, and that it.

John Steele

Yes, it and X% on on and was slightly up miles down netted nine higher. rate

Jeffrey Kauffman

is guys. my great. one. Okay, Thanks that

John Steele

Jeff. you Thank

Derek Leathers

you Jeff. Thank

Operator

Please go Brian question from ahead. JPMorgan. come will next from Ossenbeck The

Brian Ossenbeck

guys, little think here. Derek, taking something bit the imminent what help is sounds Hey Can next. like more, us through question. wanted just into to vaccine you the and dive good back for since evening happens rather it a mandate can thanks

is assuming other that there have we going out Now, ETS we are several out lawsuit OSHA. of be a challenge this, come to maybe as that with seen to

even is your maybe might you is see court. something can a in mandate, challenged want talk it to So you even how are us fleet that preparing to not may who just if make educate about

then is at to least, So it when temporary standard little a it emergency months challenged? know, effect an think And if do this the six me after have happens expires. you will you it secondly, what is unclear,

could front, seems because that if heard to and to So six into place. after don’t it fix, on it it it or put seen be get but months does counterproductive chain anything know when have you supply perhaps trying could certainly also they are if have uncertainty I some like

So helpful? any be thoughts on all would that

Derek Leathers

I sensitivity recommend pro you vaccine anything attempt we and hope with start we I doing weigh and we the are are actively we And and Yes push related and to that in. speak. to obvious relative answer as will can to understand about any Brian, and encourage but I will the vaccine will continue

analyze options this prohibitive at that. tests. It we And routing to chain. supply such relative are have continue We cost extremely will the significant through will were those all point and testing working implications also impact to a available and of on

falls to we that And with well. the no are heads of with point, the interaction general short all groups Labor, of certainly cooler that calls so remote as have too don’t I part emergency question both with predict entire we great there with I’m this just has and group of here, of threshold logic know uncertainties had speak public we action many calls will workers Department have have on. where from had danger hoping OSHA, forward prevail. this we the to other based calls And and of of far said, with at been a heads the move to that and is With trying the

make the remember that national that of remote somewhere and average infections. men kept them it every greater far all the do. And somebody worked day the very very very themselves of they these safe And work I to are this entire safe, women to think during speaks work, remote this that sure and than nature mix, will pandemic, at levels in interestingly, the the of were

fully increase as well. I is will react. sorry, And has that close assessment X.X% to say So community. And was bit with you be to can risk tell all staffed lot Is this prepared on in some I’m the with the there QX. court. is to that loss? it around, I be the it investment we to in buried the I of you Yes. a number driver that a sure is count last believe as challenged that I I QX and is hedge come exclusive we agree even make from driver if question were were will out with stay a of worrisome, thing fully of your equipped drivers. ECM in saw, And tough, to little to why and we do and the it from that year-over-year, understand is forefront, wanted And concern

is difficult cost. So are those I into situation we we things But good be in very a come think can times. in

Brian Ossenbeck

that Derek. I for it. appreciate Thanks all Understood.

Derek Leathers

Thank you.

Operator

ahead. will Jon question Please next come ISI. from The Chappell Evercore go with

Jonathan Chappell

and Derek evening very on ECM just Thanks much guys. integration. quickly good the

this have You cost there the that total the from on it ECM potentially from of business first from had now. entering then anything market either of your because has else integration. a done you with across finally, as in impact integrated ECM? any Was looks of And four or the attractive you anything new come good months quarter, surprising another desk, that or bolt-on have kind have the bad results,

Derek Leathers

in to going at four buying and would some question. diligent the the diligence would very due point equipment is months. Obviously, of and with that after were some what we the integration have we and to everybody’s nearly process, realized synergies we of. liked than much have throughout is has we to pretty we how start we terms I have very not are with, caveat, to We in that in Great OEM synergies. one And pleased that place had everything of liked say but realized and the integration. aware on this with noticeable some, would is chain it with on plan have team or have more progress the a supply do purchasing challenges schedule handle had ahead identified would I major of the category every general well

cost very as So has Morales are that right now. stuff, the have has a big been in side. synergies downside. or expected only would The the acceptance upside the been of at biggest really the about this some better we now. way, driver on purchasing savings and it we point, where market procurement financial levels of great. than Customer constrained really that to we could Their is and is the bear. just been of be one And But inclusive sits when is because expected. thought the service better bring which by right caveat, retention fleet is performance And our excited

be additive, look - pipeline continuing ECM accretive are It other better, will makes knowledge As have, to additive think I a we that that to is of that order our capabilities was and us at relates reputation makes and we those set opportunities the brings a truly because to portfolio we and our we it pipeline pipelines do in we portfolio. put to and stronger. set, bear think brand have

opportunities to and be the looking such that and to We through portfolio, is for is that are important continue pipeline other to additive playing accretive well look are out as this such.

forward. do areas those for we short marketplace where So does I that think in we path the other us will similar at there in go especially both like kind particular think haul well. there operation we to follow headed stronger And look of as the is parts market our quality out in expertise, those of that so relative is a of an portfolio ECM of future of and things making respective that opportunity ECM or

Jonathan Chappell

Derek. hear. to Well Thank great you

Operator

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

Derek Leathers

the quarter believe through we missing your thank expectations. we earnings us Thank work our way quarter you, beyond. own achieved many and QX already joining want game, made long despite paying as the investments that dividends record are I you we just this in and throughout again we are for for of to everyone. multiple third our We But today.

best customers are and and growth grow we number how asked us companies, can Our one with is winners their question them. their

position leaning are further company the for we this We that into future. as

period times into pressure, continue have necessary we through will to that will to and move several the keep to though QX. and And reward is and of We There promises sequentially speak. We on pricing working impacted in bid improve actively the cost is deeper P&L be our quarter the we process. bad this that offset good focus controls. costs are get been already under non-transitory some to year. that are as as rewarded true we measures time have be over into on that we portions and are that it costs, we taken the as seeing we those of And going

through cycle. the model dedicated Our durable remains

growth with are right quarter. higher stated growth. again this put has to capital been more for And but exposure contract to in it terms, And in continue with I high right customers as closing, go only our is business, forward now. to it look it long think never the we balance mutually ready investment. like to peak talking as talk imperative a And more didn’t the requirements smart has are But Logistic right we we to trucking And non-asset we happened we and as you growth our The the we is results next proud look be forward. asset or with is they have is a expensive for right are sensible customers going of here, to to it. about Just all we quarter. up the aligned along the with important are lot right prosper. us today,

with being us So today. for thanks

Operator

And now thank The presentation. for you, conference sir. concluded. Thank you has attending today’s

disconnect. not may You

Werner Enterprises (WERN) 29 Oct 212021 Q3 Earnings call transcript