WERN - Earnings call transcript Q1 2022 | Werner Enterprises, Inc.

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Operator

Good afternoon, and welcome to the Werner Enterprises First Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Steele, Warner's CFO. Please go ahead.

John Steele

Earlier this afternoon, we issued our earnings release with our first quarter results. the our are website with Investors in along of section at release, slide available presentation the The werner.com. evening. Today's will webcast this be and available for is replay beginning being recorded later

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

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

I Leathers, turn Derek Now, our Chairman, conference to the and CEO. will over President

Derek Leathers

appreciate excited growth excellent Truckload our I'm for segments. you, first afternoon. Logistics joining our Werner line top call John, achieving of both for quarter quarter the you and another team strong I'm We and today. financial proud share of bottom good and in very Thank our results. to

the X base Services, with set of over X/X X,XXX freight to and to business. our Truckload and and our retail XX% in Transportation food dedicated XX% First, move with a let's has Werner or consumer-oriented a Slide over has beverage mix TTS level trucks fleet One-way verticals. revenues Truckload. of

with customers winning on-time when discount that and perform in name-brand These retailers are customers top that of discount and markets with higher share retailers our our Three expectations. the Warner customers value. growing them. their Within on nearly economic for continues high extremely even home that well to place priorities of is consumers grow market X are retail, focuses business, Warner XX% have improvement delivery

with are to companies. XX of other our home our improvement sensitive X compared beverage industry-leading customers less top durable they in is or the ship in beverage, freight food changes in goods. are and discount nondurable and that X and The repeatable goods customers cycle to business retail top X consumer

our the to from our As our in awards service X the X was carrier top receive of superior top last performance XX. honored Year X Warner of year, validation customers during of

Let's move to a of summary Slide X financial our for performance.

$XX.X first quarter, to grew Adjusted $X.XX million. operating XX% share. adjusted increased $XXX And to to XX% For million. revenues a income rose EPS XX%

trucks TTS. achieved and our income. quarterly For with plans and in nearly relative by has March the ranks fleet the of a trucks X,XXX freight Logistics to the Dedicated X% X% Truckload quarter demand February, strong seventh growth Ukraine, and in truck still year-over-year. with its thrive are growth Dedicated A year-over-year. Dedicated One-way to revenues quarter, EPS. in strong strategic consecutive and grew higher Economic very adjusted unit business record Warn grow we produced its on achieved within another including is moderated largest with and and effects continues consistently customers. high operating then inflation, freight activity trends. January service execute of X,XXX from and with to and bit but good historical which our core continues fuel good engineered tightening rate increasing prices. strong interest dedicated their Morne deliver have bid uncertainties significant March, solutions experienced roughly shipping requirements. demand One-way our to And customers. long-term We Truckload has meet pipeline we and a continue to existing complex new

model business is adapt, perform markets. to well in and Our positioned prosper disruptive even

full to and we trailers and not were quarter, first our receive the has During trucks allotment. challenging, able procuring new been

with the very for OEMs new semiconductor other truck are having component dealing labor deliveries chips, the coordinate and challenges plan with are on to parts, We frequent based issues. our they and discussions difficult

we We are trucks a strong, fewer year and remained In on service well. We driver a due million Equipment OEM to compared trucks quarter maintenance, and ensuring in $XX.X the sales fleet did first in sold million trailers the were satisfaction. impact ago. new the and we our performed million full to production and market of than equipment improve quarter very ago challenges. pricing first minimize to team $XX.X fourth allotment in first gains quarter, our get quarter the used $XX.X year

pressures On are driver and equipment and the maintenance challenging, particularly inflationary and insurance nondriver for cost claims. side, compensation,

our level for are We of highest customers. effectively compromising the and without safety managing service costs these

over our detail. more Now, turn call the I'd like to discuss in John? to John to financial results

John Steele

Thank Beginning and afternoon. Slide good on you, Derek, X.

X% increased expansion. $XX.X First a income increased adjusted By segment, XX%. quarter, and XXX% XX% truck with TTS million steel our week points logistics. margin The by growth. of in higher to and growth, XX% TTS surcharges grew operating X.X%. per million truck operating revenues increased -- rates, grew revenue in In $XXX logistics as per first basis million, strong revenues result income $XXX we of and adjusted EPS XXX increased XX% revenue adjusted growth freight quarter to

X the resulting $XX surcharges, per change from driver length of macro its higher per by by X% offset Here truck on revenues for TTS the haul lower improved XXX operating fewer fuel adjusted net and our ratio drivers PTS turnover, a ECM to by an acquisition are to of regional January fleet July, basis due miles points lower our rates impact Slide increased of truck. team of XX% fuel in million due segment. XX% miles and was to results higher partially TTS The increased XX.X%.

Slide offset to Dedicated with TTS fuel growth X% Revenue Truckload XX%, X. Dedicated net new and X.X% per X%. pay truck of increased and Average One-way of per XX%. net rate in partially revenues and to Truckload increased decline miles mile, a of Revenue week a week from committed driver previously XX% on for truck customers. customers. X.X% our double-digit Truckload per in far of due portion cost trucks trucks average discussed. increases One-Way One-Way Contract with increased is contract rate support increased by the about freight is per metrics XX.X% fleet other per to network truck increases. Spot one-way increases due small for revenues existing turn an year percentages. let's reasons rate fuel increase rose low so XX% the per is Now, freight in to this business our averaging are increased our

network. hugely year-over-year, reduction year-over-year As a overbooked fourth March of mile truck significantly with increased mileage the began overbooked, one-way in less flowing from increase the pay market the per a XX% to moderated quarter the freight company smoother from productivity quarter to disruptive Driver first and XX%. our improve in

a month gallon of the diesel coaster than During ended ride about roller of took March, the month started. it the higher a price and $X.XX

programs these volatile effectively most trends. surcharge mitigated fuel price Our of

During the April, by month of diesel $X.XX [ph]. increased another

Moving to XX. Slide

trailers for to service customers regional customers. better avoid inventory in In and one of typically of for shorter provide dedicated for dedicated, more consistency predictability plant. provides length with fleets on-time customers or our Werner a The and markets. help high executing and largest high surprises extremely out-of-stock drivers distribution trucks, them understand and is their Water specific reliability with safety our to information superior local for haul our a U.S. shipments requirements, service of in typically the manufacturing X is customer, serves we dedicated dedicated fleet. Here exclusively a retail center Dedicated the their

the more with drivers narrower and higher predictable Many deliveries dedicated increases frequency our require Our unloading multistop geographic in satisfaction of their training, time. have assistance dedicated driver with which routes driver customers markets, home a of specialized process.

through weekly are We paid productivity. with for generally stable based revenue adjustments on truck miles and dedicated all steady streams and

the of with the distribution customers the have their dedicated associates and has of developed growth store of the business. spend business to for each look economies X Our highlighting our our business they and a X/X that long-term that have over discretionary service been base. customers a high relationship retail. in become for our less create customers purchases. trade with XX professional discount and their as to grown per supply the stability advantage. of top X every logistics steadily Historically, fleet to retention demonstrating year resulting into down nature for goods when is largest and last Dedicated these of solutions creates a nondurable last grown center years, retail revenue competition value and last relationships deeply has competitive Werner strategy Two our per integrated is discount product income rate slower transportation retailers and than years in customer our better customers, of week dedicated durability X drivers our chain office to and of and truck performed networks, X the XX%. XX, over the customer strong

If size, all freight Werner factors, operating these of strong and base moderation experience we with attractive of places a customer strength in and result operates Dedicated a conditions. margins competitive the trends, variable position. a more us Werner in As of Dedicated less economic market

superior our few relative in earnings a period in produced the one truckload growth last versus freight the only XXXX XXXX market freight that financial XXXX. Warner of XXXX, performance strong of compare moderation against per of Let's was carriers share

XX truck is a Slide fleet. and dive for premium our deeper Moving to trailer

aftermarket the our safety XX years. value business average years an our typically industry drivers expect selling our to We equipment. experienced premium-spec the fleet in features age when provide tracks an resale and in of with used age in our and an in and been We at our for X trucks years our X.X of trailers for advanced X.X comfort remarkets superior team with trucks sell buy climbing. of truck assist and to We've sales

adjusted recent of The and ahead planned our Our freight equipment and we a of gains understanding of average XX%. quarters high income availability. in experienced the customers. levels used selling clear trucks fleet XX-year and and trailers fewer demand pricing the realized due XX% achieved market XXXX, needs in sales operating Despite to of trailer truck market new team and equipment of have record our limited of

demand trailers the moves trucks difficult is predict for the and balance. it and back into of timing used Although when to supply

and normalized gains When more equipment number a trucks this occurs, normalized rate. games of we run from trailers expect more we our history. based current will increase levels decline We the per levels expect to unit on sell to return to and

the less with We and expense fleet. improved we newer on maintenance line, and driver satisfaction retention anticipate a pressure expect

Final expenditures strong to adjusted of $X.X million, to points increased our our In last capital XX increase a $XX.X improvement the due in million, quarter flow customers Mile is margins continued revenues in revenues in increase cash generate grew Slide operating per from expanded Mile and operating and to November a market shipments in support XX%, decrease Logistics revenues X% Intermodal our million XX. $X.X a revenue higher XX% a Logistics less On and X adjusted cash respectively. capacity-constrained resulting net increase the Power shipment or income total CapEx a and from by strong XX% free only Warner Final growth Truckload on the produced operations, business years. in XX% XX%, primarily revenues driven expansion. first operating XX% to cash Logistics flow Werner Slide logistics revenues resulted Moving of and project acquisition and during variable and per grew million. increased X shipments. of in shipment revenues margin to in summary quarter, years. $XXX growth XX% Werner of past free XXX by net and revenues flow XX%, to and by revenue basis grew over supported Nets. XXX% shipments. a

for continue deliveries. free top summary CapEx due of strategy by cash guidance the We reduced range forward. to for to million net a meaningful bottom truck $XX We On allocation. is lower our XXXX our the disciplined expect going and expectations Slide end XX on flow for new capital our of to generate

newer with continues be fuel-efficient trailers our priority latest and driver-friendly the with first in Our safety, for reinvesting to technologies. fleet capital and trucks

million expanded to financial We During capital our diluted or capacity flexibility group opportunity more In right first $XX.X our the million million bank presents we remain with strong stock us to and to of purchased provide when $XXX we March, X.X% itself. from position. a flexible debt existing committed of quarter, allocation our $XXX shares. maintaining

ended turn goal Our of a for my back the a remarks, We Xx. debt-to-EBITDA net long-term and Derek net ratio his I'll ratio EBITDA is That to quarter now debt concludes annual of it over comments. X.Xx. with leverage to remaining X.Xx to

Derek Leathers

Thank John. you,

Slide to Moving XX.

made good slightly. intentionally with X commitments to our to increased first total be truck Since the last During of quarter, of new It trailers school freight expanding and our fleet our enable by age locations, newer to driver quarter, progress number trailer XX. meet we network our our trucks more trucks to sell us we receive customers. bringing to reduced more and the continues and targeted and we trailers, challenging have

well have and Our perform drive the our competitive the carriers with their first schools develop highly continue been a results technology Throughout processes market. customers, non-driver in skills produce quarter, to experienced to to and able trained certified driver graduates associates. drivers, and communication further Warner and better These drivers for enhancements continue leader.

our Warner by them is Drive improving view successful. need drivers' be all they a single Pro app the experience Our with portal safe information providing to to and

board, quarter With we load freight, ongoing provide with a Edge Warner and the the ago. carriers, we compared load alliance experienced XX/X XXX% year to access improvements our for digital to same growth carriers to

network in logistics We now and TMS offices rollout the of all across U.S. live are our WonerEdge in Canada. logistics continued and the our platform

cloud in including cybersecurity, investments technology, a predictive and top maintenance, safety ahead, emerging priority. remain Looking sustainability

first Omaha Finally, new Edge Warner our headquarters. completed at we Innovation quarter, the Center during

Slide Now moving to XX.

for and the El a with Paso. Last we in ESG commercial freight a Aurora innovation, their autonomous company, are technology Fort Here pilot developments month, Worth quarter. the to test between line truck launched

established launched took we use our our our fuel and of X significant large force We further members task leadership with maintenance for senior a with quarter, first compliance. proactive predictive to suppliers our ESG and to Board Blue our and to we associates program expand pilot During improving steps MPG. And strengthen cybersecurity analytics Warner program.

review XX guidance our performance of Slide to versus XXXX move let's a metrics. Now and our

also fleet trucks sequentially fourth with seasonal XXX quarter matters. declined to typical -- year-end, TTS and the by January turnover Omicron variant higher from During were first our driver contributing line of first in quarter, impact quarter factors. the in

to range revenue $XXX cost full X% X.X% to to to CapEx our Net a anticipate million of million. million. the of truck pressures. year, net Dedicated fleet quarter, were first unchanged. $XX in growth first inflationary the increases due in guidance expectations our per the capital For quarter X% remains We rate year increased ahead per offset $XXX week customer expenditures

first a year, For total above revenues One-way the and Truckload we to quarter freight support mile for XX.X% to keep in inflation. market the our will half increased up the expect grow customer X% per guidance first to this strong X% range. with metric due

In history. the demand One-Way period same range revenues XX% For on per total second our unit Truckload increased similar quarter, April, over One-way historical our to and freight model our trends to were we XX% Truckload expect of the in April are in last based freight year. March very good

was Our income in quarter tax rate first XX.X%.

while good respectively. years, the strong. at year, full freight our of XX.X%, and expect high to to X.X Truckload effective trailer are remains the our fleet levels age several XX.X% weeks in truck past For average to has X.X from very Truckload moderated of the we within reaffirming One-Way our fleet and extremely customer levels demand year-end dedicated and be we tax rate

competitive tight increase inventory production to and trucks side supply OEM ongoing remain the the of driver due Retail trailers. and new months. to expect We levels recent challenges began market for to in a

of is significant inventory historically warehouses remain However, in to stuck ratios on inventory due sales low to There retail at ongoing ships a supply levels. bottlenecks. or chain transit in amount

be with freight weeks to about in addition, we last recent back of the weeks, is about largest direction turned splash whenever are by to competitive begun while begin in concerns economy delays capacity to X of gets big In world good a freight impact this dedicated strong freight limited remains continues In the truck new port and faucet moderate at the our the to levels, there one-way that COVID-related shipping very growing expect market. demand market. high in production And on. shutdowns ongoing truckload. a and driver the potential Industry in very freight from has demand the

our our proven to like and confident dedicated begin we very this and model I'd superior our over customers. Truckload provide value segment. stability call our growing to time, are operator of turn business to the our resilience base to We The our with in the of positioning At One-Way logistics freight our Q&A. the durable

Operator

We will Brian comes [Operator question-and-answer the now JPMorgan. first Instructions] Our begin Ossenbeck with from session. question

Brian Ossenbeck

with sticking you. just Maybe

turned near mentioned actually when you in in we as think gets the the You just things faucet a China here your the and has back future do arrive that in negative impact impact that of cadence words, on the were seeing. don't same

bit you better. I as worse gets before What of still gets guess it it perhaps supply So here? gets a a a in little are a expecting whiplash part that chain is of bit the effect way it --

Derek Leathers

the bit taken we're freight way part partly the in meaning that's it's today, of of about it's I would story at of Brian, -- marketplace overall. it, a of explains the Yes, I already is what least a think in the that really I place of bubble there's bit think think a seeing some slowdown

I anchored down think QX get and to of things and on it's going clear take look source uptick though, what's data uptick. you earlier it you will as and vessels strong the China. point, that look At on to you conversations hard you've restrictions argue in about to lot you place. that gains think -- happened be these place would about normal of I a especially into that's much at and to route. than as the more year There's out, start and when the about strong of or conversations decongesting offshore in been freight year, in that deeper it it's clearing about to when lack kind Coast year we There's in as seasonality is like to as move. which any vessels the have it been and productivity not double being are ports to that taken were if related West simply ports inbound was or these clear some depending that's see and would XXX-ish in up got were to the at

labor best restrictions to point. last extended longer. productivity and at prediction on this be June with be But the that slowdown Our seen It case And time case West would place could event the at the worst late work translates Coast take that further a we've to would in if port were in arrival that again exactly stoppage. that time the coincide at actual the ILWU best negotiations.

So we think that look material lot we think about to to to out plays shareholders could and the as structured that a set and and out, as I there into there's what our you QX customers as just be try is our of look out disruptive think that analyze alike. like. to QX up takeaway we very feel able well And serve

Brian Ossenbeck

Okay. Derek, side. one capacity on follow-up maybe the

You cost that increasing Maybe we’ve where fuel, And the side. facing bit. little just capacity, can equipment elaborate maybe higher seen. reasons obviously turnover the mentioned your And of sort for higher other that is you trucking driver do are all is costs, things you who one-way carriers the in especially for overall of marginal higher a maintenance, that. on think

carriers to So I exit guess some where capacity those do point of as or we to tipping where most you of see think the are the more breakeven market tight start spot? the point maybe that

Derek Leathers

Yes, a Yes, slight we did a see uptick in QX. great question. think I it's

general, find they We're local the that's for that that to as every to created, people ongoing I the lead. to are jobs out we those more dedicated. I in day some to and think continue and lifestyle expand part of think, desire lifestyle there's search building continue Omicron pressures jobs a and want the conducive to is of

be -- registrants think absolute QX. as -- seen not entities couple inflated as paid ongoing they was market as it's industry of We've cost, have a to up they in for was. actually or a last spot to it progress operational we've what were I if truck than all And would total they single-vehicle explosion it to is when impacted drivers additional And a to the deflationary in the over high specifics that opportunities to bit So towards common source those source would the especially fuel into equipment. new trucks. seen rates the get They've as concern. front, the many drivers Only they certainly of overpaid as one to have an and with you XX chase overexposure little more uptick in fuel pressures it included, that of of They're When that overall or cases, days. about seen on that the while they're more was the meant call but dramatically. for out spot an years, bearing brunt market here. increasing I in all-in a last has get already point over

severe. industry hard the to there are blood I is or be And blood the that XX% to that is trucks will about less, there’s a isn’t the has the be very little we washout do think be But bearing for conversation the to So, of going I living. bath. at ignore think on or whether water in fact It’s and what a XX to do going that level.

We’re a are. go equipment. dramatically to better who cost and controls. didn’t We used chase with expensive we with true market spot much well-capitalized a stay and equipment rates that We in out fleet more buy large,

last we dedicated time were the We’re than spoke. today we more

last We’re the more were more today we than we defensible. time contractual spoke, we’re

cycles with this bounce this new are strong this think in cycles. comes bottom But interim. a sets the We level event find all used be prior than in aggressively. is portfolio a of you with the quicker that happens play meantime, to you perform they said way think along and information. our And the that out very one that thus, spot next to small results we I’ve and to in will that of us capacity these have than the technology up and in so back what of this of cycle. carrier well advent faster is extremely the couple in seen renewal of market I continues calls faster erode, and And of row a we’ve that that in quicker cleansing of think the a a tightness deeper all

Brian Ossenbeck

Got it. Thanks.

Operator

is question Barclays. next The from Brandon with Oglenski

Brandon Oglenski

and up maybe mean, I this guess those me. semantics, great market both now being as versus is very that, previously. the Derek, I guys to you sound but good following strong characterized on

can you language? So maybe in change that quantify

Derek Leathers

out space, recently think of of XX of them. at are under are an that XX% I year-over-year day, them, looked predominantly growth at network customers the is yes, traded. we appreciated the our It's develop doing XX in aren't of believe, We've gets That balance very end retail some publicly our the home retail with improvement -- They're that of aggressively what winning average extremely why Well, retail network. discount our well. retail. is that very worked or discount with of largest The within that are I customers, relationships their top revenue and customers well. that's XX%. population doing

still just demand unlocking driver the utilization, honestly, the And that in to normalized more whereby demand, advantages business strong start a overall, point in disruption your which and articulate consistent think I on to hard really is this. healthy. can at strong. manage it continuously is strong chasing demand freight all results expectations, actually by like service you you're call the But we inefficiencies have allows market that is we least in com network by strong your in a balanced demand satisfaction. which meet and tail a It's is cover so today to as So strong in network really there productivity be a

chasing So, fish that And our and didn't the strong. not exist with world is I as relates a there now don't that may especially carriers from spot that like much pond boards we're pretty lack market, and are were to or look of in. frankly, there be suffering that customers, back back-to-school load they conversations deny things us. demand if the still that, encouraging that's but QX COVID during we are coming to online out it Where projects things at, and our normalized

Brandon Oglenski

how defensive cycle the you of I know rates you I volatility business. that. characteristics works? appreciate highlighting were can your contract of more and talk I dedicated mean, about guys that

Derek Leathers

Yes.

cycle mechanisms on the need annual place our complex absolute with a ranges to in rate place. modeling years a contract X capabilities customers around X on-time traditionally the to So service. Those an value dedicated really service adjustments with conviction have contracts in else, above or premium all and mature from provider rate and

in as you do rate customers, truck actual work per mitigates to of be batch efficient fleet. results. with that also going the and to we increasing, path. quarter-over-quarter, with it's talk mile week customers. them more but per basis a per them, with We revenue them, often or with that which get might impact So deeper year-over-year, down per continue on but allows and us continue of cost to our We're to going improve might becoming embedded to best think that their We're these deeper interest. we And

Dedicated straight we have we that are to the self-interest in the their so. at can how X for show But XX their metrics time, X That’s on of top earlier because integrated same more it networks. been doing reps. in commented support and more become efficient X in with us we the why we actually that’s years believe So, top financial allows in customers

Operator

The next question from Bascome with is Majors Susquehanna.

Bascome Majors

historically? or think about that talk us looks maybe ranges this like least and about the beyond As at given where going, above we recession the is willing recession been you've freight your margin deep a about deep just what you Can modeling of scenario. in competitors talk your to some have downside

Derek Leathers

question, Yes, it's Bascome. a great

markets talked outlook upmarkets. both you're We've modeled have down and of modeled We being forward. modeling. But despite degree about slowdown to what also done We X-year raised continue is some as that last goals. for do growth our to on certainly see equal and call going as look least things the margin guidance we we we have at a assume all that aggressive some more

the at what midpoint so we margin, cycle for our have that an a cases the new and last end believed at as out we low even Right to we've don't the -- And modeled our we where the with that now, the future, through look we in frankly, TTS, when which high would months, end model of eye guidance is forward. XX with And the The is towards trailing were the that the XX%. averaged eye our range of an be XX.X% in cycle. various we toward raise we've we did in now down chose at a on margins XX% we range. right

we we to us, on in of And scenario. side, decline. the work cards pretty do up accomplish durable customer both now that think of the cycle, -- of as have confident in over this So many we Dedicated, we've Not we at I'm overall but even think we call degree that today. and for in not forward. range just fair any equitable type give the it set that long-term insulation us under agreements site in point, based nature and XX%-ish now we have that's the feel they're but cycle. the we than but scenario one-way a that sides, was both they and spent would more the that on X/X And it, and defensive changing a avoid truckload portfolio the network look worst-case at right much many, point be, the quarters It's more prior don't can

Bascome Majors

something just you Derek, clarify Were the you you there earnings XX%-ish to talking referenced? else? just decline or

John Steele

That XX.X%. margin months based in. on was TTS I can last our at running jump Yes, XX

going TTS it took you current the down better than if we we'll which the level. would a margin think will all decline to XX% level, do go XX% the XX% it way that be that forward. low, don't We think from in So

of roughly estimate XX% reduction. the that's So

Bascome Majors

And customers chain supply some their contracting period just one wallet if let that that your in-sourcing getting talk you where about the -- stands? about to share of you'll some your me of going risk more, largest through -- any forward? talk and And this

Derek Leathers

Yes.

better conversations we our it their served whereby collaborative and especially them honestly, and of We’re parts a heavily effort. pieces There’s network largest going for customers, it’s with be to involved places there’s to and customers, makes are be in-source more where those that positioned. our places with to sense

So at them discussions. these as are collaborative stress all. don’t We view

encouraging a it when fact, to outcomes or of get people lot work understand it’s one outside, it’s to matter wet little. -- it’s them been raining but of that a tell of easy a easier it’s some has they for of very the As talk

labor So applications. but where large efforts appreciation exposure customers they makes strong of greater to OEM we already. we where do goals driver are to it growth to grow. indications them the still have as of be availability, in They more strategic might efforts, and certain have a those where grow for those overall for But we them the we, most want a go fairly they scale beneficial very disruptions versus on have much they be do of market some sense when for

Operator

from Scott question next Wolfe Group is The Research. with

Scott Group

but in of any seeing you the any and the second -- on on And how would know contractual negotiations spot? quarter, directional look that the you have maybe the maybe rate are half Derek, at back year. in I all for would you just mile impact anticipate like at guidance in per guys thoughts all moderation with

Derek Leathers

Yes. Sure, Scott.

already of by you, and mean in level that first, in XX% spot be of inflection relative of their of those rate final. and at in are have accomplished the are I or either that which we've QX. people have the is contractual towards answer, XX% boards some the type conversations. any QX, our happens data kind really all the freight, spot telling to that set about versus the ongoing of really I'll load seeing our data to eyes this of we XX% short of no, They've what load, unload haul that we So imminent kind not, even close. spot roughly There's of negotiations within XX% in closed that we do in. At point, not participate kind live freight. call the live indicative that you we That's freight haul of that would

of that decline So within personally in that market. it really market surprising think market. you've is the kind a a it's I seen don't

freight XXX,XXX-plus whatever the chasing arriving spot registrants, generally X you to time have things more an If return speaking, start all trucks spot showed into X where market you're -- arrivals shippers so situation a out contractual of moved with time levels at of have number spot the all these normalized things the going decreased happen. with new the has of in aggressively population carriers or or market at the X up party end and is that both very right freight to to the elevated markets new like at Werner up.

play, participate specific all. market, participate why in heavily and a we to that's to don't market load bard risky the at we game don't that's that So and

By haul it anywhere already enter you can spot. there doesn't X and to have months that side these time year, got have conversation of in overexposed the see pretty washout another estimation, later general, themselves know in on perhaps. in it seen carriers X in get the then that type of we to at X freight the for overexposed some impact. from and X the the months, from will We level significant you to our So cost takes it

these within And there we so -- of thought in back invest speak, for will that that they we're the much anchor stability, stores, quickly. having and but so we'll last envelope think And more happen of be some more their with more count past after point. I'll at have could have, you network types need on this say, deliver to edges, expected. shippers the the day they seeing as fleet. they around looked we're other the really much not every X extreme know the in push to And dialogues the We'll might leave cycles back years volatility, than I'd bounce that

Scott Group

sort to you’re follow-up. trucking on progression just if And XX.X% margins, out thoughts of power separate? willing QX? just update in that not Any only? Okay. on margin And then on go totally a directional in to Any

Derek Leathers

start I'll quarter. revenue talked Well, XX% spot Power the growth headed. Yes. real on that's in network in only bright power the about easier where it's that's now. right our excited We're about is We of very -- a one. only something

think safe those will ahead really traction structure legs power-only more and and the seeing thought of previously to is only community opportunity reality continue And and that have repeat us the the a number that amenities adding business gaining think to board Werner. in of to to more to at and is the add environment. they as that outlined to sustainable inflated not more think as I I well. carriers reasons I in to as market is power world in make as I find beneficial dramatically we And that treating it be carriers that for We're honestly we're inside go it rates program there. forward. that maybe of was right Warner's network environment all are up haven a the load waking like We're

really appreciate do of kind large-scale and the trailer they to think reinvent desire the rainbow customers not I fleets of past. fleets,

very so power And encouraged by only.

plan. QX do expect going As it to to as relates QX QX to we're ability progression QX. I'd our it we execute not to progression, be but to this to continue our give to to relates generally year on have different estimates, from no

John Steele

as had a and first clearly, a accelerating first as Scott, environment. to as abnormally I’d we quarter fourth quarter, one at had and have look quarter winter good was freight quarter And we nearly add we moderating We mild first -- strong spot quarter do in was an It that, second thing inflation. market. and to

first normal, The timing and of think will do happens progression that improvement. rebound. there the we not of second quarter to quarter with be wildcard the produce strength the So from but China what may beverage as is the as much and be

Operator

Allison next with Wells from question is Fargo. The Poliniak

Allison Poliniak

Just to ask about want dedicated.

you're You has where there of at duration any more color renewing contracts peak? stands color today guess all? longer dedicated of contracts give there? can versus those mentioned contracts duration the today changed contracts. those I Any you and duration And then to average us prior of as Is importantly, as

Derek Leathers

and chased reality Yes. in because always or implementing for fleet. it's and been from I they've agreements, fleets both this of for aspired we've a service you customer general something with that for required, today longer avoid worked say, a always fleets always high were spot complex, the be really and customer. the I just very we requirements and complexity than to that like with I dedicated fulfill growing realize point safe X to haven they're longer full they that and the that longer-term mean been would terms, looking ago because a instead market, diligently the to we've of but true a fleets designated were we'd the relationship years for to that's to the that in little have Around tend for it complexity building opportunity winning would edges, us.

of most thereafter. many, contracts So with retention, these than enter contract the into beyond first XX% well many greater linger and

to so And previous slightly say wouldn't of. huge But perhaps, that it's proud longer we're that's cycles, I than but something movement a point.

Allison Poliniak

think, And to a the what's reduction of understand Or what headwind was? what I in way then transitory it. continuation headwind just X% ECM and you an QX? miles Got to mentioned that as per to trying underlying sort had truck, Any John, there. quantify

John Steele

Yes.

is which relates it the total, ECM to trucks, TTS around $XXX. is X%, as So in the which is X,XXX

would to So point X% due that be of percentage it ECM. less a than has out

and haul our miles have reduces as per That grow a of we dedicated Dedicated We truck. shorter mix length bigger. gets

bit year environment turnover. last little challenging We and higher this than team have driver a more

of factors those rate we outside tell all you it. the as on But So contribute the can achieved of guidance XX%. north to side, range

bit miles to are running we the higher rates anticipated. and due nature the bit are a So a of the nature the freight little trending little where business, lower of than

Derek Leathers

to truck The a other of double-digit the large miles is look carriers, I'd as that think in and all at averaged year-over-year. they public per QX add about decline thing to that and about you you across

length when tend on simply focus truck gets we or that and truck overlooked the consumer on shorter builds product about at as say, or products a want truck. that time customers a We of lot driver miles. focus overlook less haul shippers should the more lower I The to capacity. means basis want think home the miles reality to per focus truck on think I on means closer per in, counts closer

has and Covenas production. return negative to roadways, for abated people As implications the it

And overall. more capacity kind availability year-over-year bill net gets a really against headwinds is all I point, that fact and think a important as we shorter, another in capacity that more actual a it you'll happening trend there think as will of positive increases. And of with to marketplace some systemic of hitting at and see finally infrastructure shovels so And ground, all additional headwind there and at the relates underpinning terms of different gets is that the is I the be lifestyle congestion that growth. work let

Operator

question Wadewitz with is UBS. next The from Tom

Tom Wadewitz

a you're little about read, wanted see could pre-book number progression talked I I a that prebooks you in the one kind think gain John, on bit also, modeling. full then guess, helpful you in the might about, a I of if the that's ballpark talk monthly of don't on know what to if you year basis a market, on just have And way. for in on seeing comment what we sale,

Derek Leathers

prebook take John, don’t gain I’ll and the on jump sale. on why the you in

you’ve heard remind to January calls the many So for prebook trucks what by is off-line. thus that interesting And everybody, because heavily means I And want far other thing is was really as Omicron. us. on impacted

at record type entire the very month. strong some, pretty back levels what not in to at moderated levels. throughout online call February. -- point mostly record being history a any you was the heavily in inflated. back And seat. very, saw exclusively I market number prebook In would in much in February, the So January it almost mean, I due trucks was coming And drivers It and

a got still month saw consistently entire we As but the no exception. moderation further in with into little March, throughout we oversold the prebooks

the next a -- months, in Omicron balanced highly really but it network, month to the the oversold best. up very yes, honestly, was March time if more And the be its which of highly returning started, view. would and into could X March, that’s a with -- January, when if more oversold moderation, relative performs we exciting of there’s was where all because over headwinds hold we a fluidity an network representative from it’s you ended of but in -- was where and point disruptive which so

John Steele

have a As Derek? sorry, do comment April, -- you on

Derek Leathers

the think to out. -- muted Junes, an or looked how opportunity very has Yes. plays we in the there's June years. every last month which many, to end-of-quarter was April push I returning possibility was how a that that similar Thus in strong used previously March. very strong noticeable And as sudden pre-COVID far, were levels with ends because exist years X an see And indicated, May you June many for somewhat for strong, so we to fairly really uptick up didn't we'll booking see that

been think people I back-to-school some of you'll also see more years, and the have pushes in participating we'll couple June. that last that. not of of in as to add the I think that much some fire fuel in the

John Steele

on Tom, we getting to gains, And question trucks that new we've answer want. your and had difficulty all trailers the equipment,

have but market sell truck and been reduced we've in pricing market many quarter. strong trailer and pricing extremely trailers the so how used market, current the we in trucks And first

continuing far, here in pretty trend much So that quarter. second is

of know, giving the on predicting on sales of because in gain changes quarter guidance and As stopped market. And of the pricing. you last valleys difficulty peaks we

one, you when out guidance predicting haven't the really raises is for that difficult. depreciation than are sometimes we're put trucks gets time think like; this the we saw, the market now the about gains the bit year. other would average the new rest trends in increasing a areas. a And have don't we of getting reason we but But that on policies. rest the age of sales what The fewer to because right the have So I of really, number we we to given for of out same is costs because overlooked conservative fleet that equipment. is thing similar at little quarter. current want it year one Number

high production bit our when up bit and year-over-year. is higher. little fleet satisfaction with a -- bit little is older is turnover Our driver were the XX% as fleet. maintenance costs It older, impacts a a little not

it position run years to cost truck produce X will on reduce other currently. average a will production That it begin gains our moderate better us when builds operations smoothly. to the in as in we're So is as but age our side gains, our and down to the new back bring to able more X.X% from the areas put

Tom Wadewitz

So half, may then do XQ bit? you think falls off that… similar XQ it Is second to be and a

John Steele

we're what seen we X. it's -- trend month know a change quarter. in or first on thus April, far next similar here on Based the But to we've not based in now, could what been

Derek Leathers

in an falls We predict able still OEMs obviously unless keep their year too networks, to it that eye later it's don't of causes to new you the to horizon see going on anything this are -- in on me say. that introduction improve the number an in think I in And I But to changes see I fluidity gains for higher trucks, or and the point. going see you're a it. of used the at material to market the volume off it's the trucks. believe are should early

Tom Wadewitz

still Even truck is with think lighter used spot rates, second strong you half? a in

Derek Leathers

truck talking an a wash is not that I for X. ultimately I equipment, had saying what started South, as factor and large or have about in I'm a carriers of they it in second I'm into on as is smaller that now and think carriers half. Clearly, for miles by used things career giving year trucker which happening. with their equipment, an overpaid of the that could But Well, see carriers some have started many you out. of scale predicting those cases, truck influx which trucking new come that under drives used market independent ran XXX,XXX not duress, just I'm the

those trucks end really so the of close to getting are life. And their useful

have see out. it we'll plays to how So

I think us. for it's of all a territory new

it back as demise to used the are to market. the of but truck early I too relates the predict think We cautious half, it's

Operator

The with next of Bank America. Ken question Hoexter from is

Ken Hoexter

Derek. and John

of little out Just to you reconcile trying a threw what bit kind of here.

Derek, you mentioned cleaned speed bath blood some cleaned a of that potentially of kind market, or is of the get smaller placing the it the seeing out. mentioned out you So capacity, gets you're

focused Your on customers access capacity. quality to

mentioned driver which XX%, pays What ability is get the tractors that seeing see already down or you easier? we sequentially. up are drivers to So

cusp Maybe So seeing are that? about we timing of Or occur? the are already on the washout just we of that? that talk

Derek Leathers

Yes.

I think is the it's say I very already probably is but too happening, much early think to pain washout present. the

the consistent call one We have to pretty experience in it, month uptick seen over an X and a applications weeks. last, driver

see I network. previously and only We've to think go in on chase that as to you're seen folks rather now that. of boards forward. more going interest try want do of uptick load more They'd to that that looking power didn't freight stable in maybe become a could and part an that we desiring are

seeing the can like ability provide early levels with into quality increasingly especially of that uniquely in in And become something to going stock retail to fall. the for the going brands, that's predict That's important. of carriers more stability them. for Werner kind we're those for mentioned an ability previously, from them, now looking some So stability from carriers as as uptick ever that as and signs well smaller customers, than of I the inning

Ken Hoexter

on X.Xx a the if for sounded kind buyback? like Maybe mentioned It you you the the it on John, just saving And capital focused for Or thoughts day? you don’t your was know side? leverage. were rainy increasing finance -- of are I more

John Steele

purchases around We last shares we're X million trading at than a the what occurred And X quarters, Yes. for shares purchased higher at quarter. those prices today.

re-upped going production repurchase that for look the to flexibility continue continue OEMs agreements more us X opportunities trucks stock in major to start up with case step truckload million from that look additive our their give we both our we credit to bank opportunities opportunities of will at acquisitions We we banks to their logistics and to case million, business. at our in are accretive $XXX acquisitions, like, to repurchase just for forward. So share $XXX and

those table. are the all So on

Ken Hoexter

given what’s more door? your Is hitting an become that -- maybe talk of already just flow? likely in some is Does acquisition smaller Is about about carriers? that the retalking that more terms -- of stuff

Derek Leathers

increase. to that of that We're don't are that stick it. going want say to portfolio I'd additive to that I records things is be things go on to We're I I knitting to I'd say looking track our and well. frequency causes our but enhanced likelihood that, by want companies know alone and very for opportunities accretive. do the increasing, strong clearly

we -- theory with our you the if at place. that think draft I of just look sticking took the

not for it But have the they're very of we're them. this mean retained traffics last principles. core does where an better. customers, not of If it associates got to you we've dissolve going to ability safety think fit. focused. to take industry all only always grow we've about It but something be started we've kind time. the and from we've those of about actually year, to those small, we It's like eye sort we both and us how of today, got In toward the both to we've X has the Culture have have of it's both mean look got believe and pattern that retained And that make seen we and these doesn't They've they'll retained to some buy have a go grow be within at kind at way. our cases, And to retained businesses. by got excited drivers things.

one the X we'll opportunities that with done only success grown has that of from the themselves, we answer and no but in thus we've as it's far. have the move. acquisitions Werner, over one, right confidence those So year that different see we the present and that's last confidence And

Ken Hoexter

Great. And helpful. is the insight

Operator

The next Sipan question is Stifel. from with Bert

Bert Sipan

consider from markets fragmented? because of portion the different treated it's you intermodal, consolidation. consolidated -- get but they to get actually dedicated be spot like the small way. would a the the that quite truckload market or The valuation I asked of Derek, benefit doesn't same dedicated market LTL, that's

So curious what your thoughts are.

Derek Leathers

Yes.

dedicated much think is overall. the more than I consolidated market truckload

there's definitional a bring of few their perform and what the a we from that. is can in have of product that that X high-quality time, space, duties their every can customer own approach common really of the really to -- to count all enhance fleet fleet, you go in fleet cognizant value and differences about players their private in And to out look the on to and supply placement arena, you time kind be but they there chain people businesses. If kind across and probably on operate a dedicated need and for hands similar actually to

cost a the dedicated of thing those to a digest network, isn't agreement. large it. very a Certainly, do our that of size many the it business. a invest our whole and Mexico. so more portion ability lot also even as point longer-term of is very up of of The absorb the There's players, things ability matters within And kind limit is can which the there much that of and market. people side to and one-way to start-up lot and a the same part is true one-way consolidated I'd ramp

space, the lean to into count view that subset respect smaller Mexico. You that to as a And as number quality doing There truckload providers don't of leader that can need of and going much and and and are ourselves well. both hands to it we're a continue do to business others, well. we it from them, but we in does business that is

the One-Way the part, B to they like inside built probably that the type of small our engineer Other could people one-way engineering but fleets wouldn't we've within implement can network. -- design, we're a network engineered of haul our Just A there's and very then subset doing

we're So look historic what for of us recognize of about is. choose than confidence the gives cycle to we durability like. this being that's market much And it hopefully, and forward building, portfolio the driven it the reward the someday, think what trends part less will as it's defensibility, it all and had

Bert Sipan

as at you’ve talked to to past look asset. that. chain mean, just the maybe Derek, customers that I with So work follow-up about their a trying an supply in

had you assumptions? would how across this And And in longer-term look sort growth If changed your your customer? cycle? to say that you you cycle from high significantly confidence business, exposure last of more does is that that has of to your sort give to

Derek Leathers

easy never percentage than been Yes. ever of that you our as has a part. irrefutably I'll it higher can business been. today. here higher overall than it It's it's with I tell mean sit start the I we is

supply to Now as advantage. our probably certainly book chain That closer there's gray absolutely laser-focused a -- always some shades locked half. the are on that's of what of of on competitive customers -- north of in and those population X/X a probably is

grow others align ourselves total of competitive of that you do. that. If that shipper and due their get and a in decide shippers probably it be. what presence isn't your to with would is advantage, expand that basically them to range. think of might evolved into is big are mean very to viewed as as but where we ability evolution maybe But XX% the want after XX%, part we We lots at win a I diligence they're our best-in-class that strategically up as with their

Operator

next The is with question from Chappell ISI. Evercore Jon

Jon Chappell

industry Is a down? mentioned and earlier Is of tractor If annual at post-covid here of the trend across answers declines. your of look getting as multiyear or your her, kind those worse it the decline some in at phase. bigger in edge some sector? Dedicated? way per declining both capacity, to we you continue back issues numbers, one and we're for plateau gradual a in secular a in that given there one of Does this Derek, at about it point miles in related the to

Derek Leathers

more sort our just But that that's more are and time activity we wouldn't declines we as The freight. more assume the look more at for engaging more beyond we to where lifestyle just think build a inventory home, have the to reality strengths, to truckload be model more I forever. at going not well continue dedicated customer is there or that point continue truck there because is delivering deployed to goes the by per time simply more as the But I forward. truck long-haul reality play predict be that to can't that in are I be people the and to of commoditized that, jobs, real. which Yes. want that just forward this may that grow, going past often means to dramatically as to certain continue that, miles pressure. it are to way. going are only continued The productive that fact which used that lower means headwinds that out truck does in it They

fleets enhancements job, because comes truck. they of those up well of are engaged that and many and it's forthmaking in understand the And lifestyle with drivers that beyond for home trade-off when a sign they that time at it. the Our

moderate. you'll think it I So see

diminishing can haul go of there's some short so only on point, returns. at length You

But see and so, on utilization time was about you to were was which at think pecking And ultimately we the built we that truck how player, alone. about the world more least metric profitability was or per top where And think very at leads which it to There week, of per to is truck per our that you'll the think relative be only day, decline model per I much the ability moderate. leads utilization if a truckload a revenue how our order. not to revenue profitable.

the And dials so with who that metric to it's because of grow one to what on, we're we only on not we find one customers going bring dashboard. the let

Jon Chappell

a follow-up, And parts, helpful. you’ve in had highlighted of third issues quarter, bring you really maintenance, to up stuff. a et then That’s quick the cetera. But bunch not just with old

there been work you in feel there, you some Or last think stand want I to do late quite relates do? the of some to update there is still some to place not the where How Do maintenance in year. was it carryforwards equipment, availability? improvements the February of those right like from as parts part but be. you you’re with

John Steele

available We've Yes. progress challenging. made that chain shortages parts we the in parts still minimize there are definitely are those the issues I to mean and on downtime. supply make how internally acquire

third in quarter made fourth now minimum on there's hiring in driver layover, the and still were we've that cost challenge quarter. third there, and a some good made -- progress the issues challenges to and from we've the significant but progress for pay So incentives of first

items. there place to cost as in much relates we're it those So better a

Jon Chappell

Thank you.

Operator

over remarks. concludes closing would Derek turn Mr. This session. back any our to for I Leathers conference like to question-and-answer the

Derek Leathers

your portfolio to China, just thank our all the of everybody be is while brand to outsized negotiations a I'm and great and spending while chains conviction of this results bottom ready into continues that capabilities Well, we improved the I afternoon. deeper thank again never just support able we of. an have further us we I in supply provide portfolio improved of service, for and the may once strategic in of plays to time XXXX pending our the We've times. ILWU building the today we way weighting the improve as QX these new have of during portfolio needed economic story ongoing marketplace change quarter. in want Werner We attractive for our sequentially as structures that upon into you. achieving cycle. the our the materialize being appreciate quarters. may and want perception again year customers and conditions their and our that dedicated face But prepared Werner, of proud positioning returns for off many always, a we're the and of And story Werner I'm record with interest more shareholders the growing built of stakeholders. to on kick coming The this for cost and to kickoff line at get safety all excited further lastly, thank entrants a The progresses, here as will to top as across And about the out. into variety our associates focused results. both are as and ever-changing move logistics financial the and incredibly industry, that to cyclical are -- achievements me I we a lead durable great to combination that contract in ongoing of feel high we have will disruptions the year results beyond, and the we COVID And proud shutdowns of

Operator

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

now may disconnect. You

Werner Enterprises (WERN) 4 May 222022 Q1 Earnings call transcript