Earnings call transcript Q3 2022

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Operator

Good afternoon and welcome to the Werner Enterprises Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the call over to Chris Neil, Werner’s Senior Vice President of Pricing and Strategic Planning. Please go ahead.

Chris Neil

Earlier this afternoon, we issued our earnings release with our third quarter results. a 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 we GAAP past comparable of Additionally, earnings the the the to non-GAAP believe reconciliation provides 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

rising report in I adjusted consecutive you, afternoon. headwinds, for the am Chris quarter. growth year-over-year macroeconomic achieved ninth to Despite pleased our per we share good and earnings Thank quarterly that

resilient Our well. performed very and dedicated fleet large

to Werner contributions non-driving performance share experienced in like conditions, professionals the in third highest our the produced Truckload earnings our thank driving to Logistics moderating quarter school challenging I’d of welcome to network sincerely quarter team Elite meaningful we Werner While third family. adjusted ever operating and in driving and history. a Trucking our our also for given their talented per the performance and more Baylor One-Way team our

October we reminder, a Baylor on X. As acquired

move to let’s Now, X. Slide

the increase trucks in XXX with in we of quarter, most the added During Dedicated. TTS

count freight peak and the be and added in record One-Way in up XXX Just fleet. One-Way and to trucks, our more the drivers opportunities after during in quarter a year to freight professional acquired Logistics the softening including quarter compared a Peak In fleet trucks expect our Truckload fourth light we season quarter fourth high-performing XXX Baylor in market ago. to Truckload we trucks of market XXX this are quarter. freight fourth end, subdued

to retention pressures insurance, continue see and in cost driver we competitive recruiting to for the inflationary some labor, While maintenance markets. challenging, easing be have and equipment begun particularly

the for staples By staples. our to with design, addition, vertical, shoppers revenues and trading beverage weighted our ship are and repeatable In three-quarters in consumer customers increasingly of consumer necessity-based winning and recurring within value. that down nearly are food freight retail

of highlights. Let’s move to summary Slide a for our financial X

the increased and to revenues customers experience quarter per the For strong opportunities remain of of ended year-over-year. EPS X% third to increased adding trucks, adjusted XX% demand Dedicated long-term continues majority quarter, XXX XX% and and $XX.X with million, to million, strong. increased our the during income operating $X.XX the XXX new adjusted $XXX Dedicated X,XXX from quarter to share. pipeline

the softening customer opportunities due a to second demand final in Logistics. very the lower end, season started rounds in pop-up in cost for a up quarter produced are freight quarter earlier jacks and intermodal of strong far mile. XX% X,XXX third peak Truckload three stimulus in One-Way project startup year-over-year. market ago, freight and In operating of and and quarter market, and At fewer challenges One-Way income fewer and Logistics the August current year surge quarter supply chain shipping in compared had trucks bottleneck Werner opportunities, freight premium performance normal achieved plus XXXX. than that Truckload A XX there to and

remains and it new show during difficult deliveries improvement new to of our obtain While trucks trailers, quarter. to trucks continued third

small to carriers. quickly rapidly truck rising strong cost eroding in due pricing third record rates cash interest rates, severe freight carrier used the spot challenges softened flow. quarter lower much small and facing are Finally, inflation Very the

number quarter Our quarter a we we average a comparable more truck gains sold similar second in and trailers. equipment gain sold were per at third lower of as trucks to

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

John Steele

Derek. increased logistics grew Thank a $XXX quarter more or Beginning third and revenue declined sequentially. million. per million X% increased Adjusted by by and Slide driven $X year-over-year $X.X growth. operating million surcharges $XX revenues XX% X% on in increase trucks, higher million X, Revenues million $XX income X% truck, you, of fuel revenue

training $X For driver adjusted temporary this The which growth affecting operating million. $XX declined substantial segment, and our includes locations issues driving due our other, two million; and income and declined grew million, to in corporate $X.X year-over-year by locations quarter. TTS school logistics schools was decrease school

X% improvement on fuel truck the length increased and adjusted higher revenues more XX X% X% was sequentially. X year-over-year trucks, partially due point rates, improvement a lower XXX XX% per for TTS a are The Slide to due net higher market. X% operating fuel shorter surcharges, TTS miles offset results softer Here by freight TTS. loaded point XX.X%, a of haul and a of basis basis ratio to

and Now, trucks Slide for per Revenue per than X%, X%. miles the company fleet per mile pay inflationary XX%, week a increases of total age X% TTS costs, increase increase which One-Way year-over-year an Truckload nearly mile. and net average ahead increased supplies consistent declined maintenance slightly year in One-way Dedicated declined two-tenths TTS our X. a let’s TTS market, of fuel year-over-year. were year average Dedicated and increased average held with per up increased XX% on The increased to X%, revenues X.X%. increased revenues flat Truckload for The slightly increased mile metrics we compared fleet move to The the sequentially third revenues fuel net truck truck older of as in X%. fleet driver and truck rate Operating in trucks increased per quarter fleet our like the would per X% fleet of ago.

drivers on customers high dedicated specific U.S. serves a and fleets with and The in help manufacturing our provides plant. typically one Dedicated markets. shorter of service customers. update a durable service trucks, consistency we customers avoid their our provide resilient exclusively Dedicated an of trailers length high local for predictability Dedicated, In them reliability executing for Dedicated center haul let superior and on-time with me the or retail regional safety the largest On Slide is their of out-of-stock to four fleet. XX, our customers distribution typically Werner shipments and Werner and provide for requirements in surprises inventory for extremely

is top the last the XX our XX%. that X for value in Nearly our of long-term with in two-thirds nature shoppers slower growth X has of for years, economies over income Our of Dedicated to over store Werner last retail retention discretionary less discount largest to and fleet down money. X customers look relationship of rate the XX business when two-thirds highlighting to Historically, than get is discount retailers. retail in with of dollar have steadily and these their performed much they and as been our business the have competitors customer grown most a Dedicated spend retail years their Dedicated. for customers better trade

on-time Dedicated companies service that products more Another revenues beverage recession-proof are high consumable and discretionary food with are alcohol staples ship one-sixth and soft with than much drinks products. requirements. our Historically, food, of

this Our service the per revenue high freight has and consistent business requirements volumes, truck and because Dedicated less relatively more increased X years. Dedicated is the variability X stable has last predictable metric of and of

As more bad and these factors, with variable of economies. less Werner a operates margins result operating Dedicated and attractive in good

freight dedicated and XXXX, recession trucking positive. base and XXXX last freight in our fleet strong goes to market position. the the in customer revenue resilient where here, compared Dedicated a week us the size, competitive remained of growth of our places and from durable During truck per per is strength Regardless

a revenues increase Slide Moving Truckload third revenues increased grew shipment. to to quarter, XX% by growth second a compared Logistics on in XX. partially revenues X% XX% X%, decrease driven by quarter. in Werner and shipments, in per Logistics In offset X% Logistics

revenue loads market, achieved is to due the to decline year-over-year and power-only result XX% volume. the and XX% and gain softening growth XX% reduction were same freight load principally XX% operating sequentially. time, sequentially. pop-up the fourth continues in increased transactional sequentially. year-over-year income up Year-over-year, premium solution while in expected year-over-year of revenue and The to and logistics XXX% per loads XX% to business priced compared revenues domestic a impact have quarter. loads transactional traction declined in X% pop-up pop-up Contract declined a of on our As and quarter X%, larger At third

lower Mile a XX%, supported by shipments. offset shipment, business increase revenues implementation Declines increased awarded $X.X customer customers by caused business sequentially. XX% volumes demand Slowing decline grew sequentially. the a down per with existing of costs revenues in Final adjusted revenues and at Logistics Intermodal in and $X.X Final decrease. discretionary weighed operating our income products million new for income Mile produced million $X million. on for year-over-year and operating start-up million, $XX XX%

variable our free X the past operating from to years. On years, and and $XXX a expanded is Slide net X summary the resulted last flow Year-to-date, compared operations CapEx million. the previous cash net higher years over capital over free X cash in net flow XX expenditures is margins cash of CapEx less flow

is update. On Slide XX our allocation capital

capital for priority first fleet. in our to reinvesting be Our continues

ratio financial and our ended a accretive purchased strong the with to shares truckload America our and additive we XXX,XXX net business logistics and both maintaining for to are we North debt-to-EBITDA $X.X quarter earnings. We evaluate to X.Xx that of and continue acquisitions quarter, third million. a During remain flexible committed and position in to

to about our I now Derek And remarks. turn over my concludes more it acquisitions. talk to back That will

Derek Leathers

Thank you, John.

XX three business within XX, Moving over and Slide to our negotiated researched, executed we months, units. acquisitions core analyzed, the carefully strategic last

candidates. our needs are our geography have therefore safety and additive accretive a it be to We complementary or must services. portfolio, culture be must similar in be to business superior looking existing service and what It own It for for earnings. our stringent and criteria to acquisition have must to either to our we in

teams a customers. retain that with professional with drivers, expect disciplined remaining its we that are to high for demonstrated focus culture are management associates a company for searching valuing we We companies and carriers, and strong has

is recent NEHDS to exceeded acquisition superior have our home that we compelling final delivery last base. mile our pleased Northeast that the acquired to integrated transactions, freight the ECM network challenging produce resonating seamlessly year are expectations. customers. Regional NEHDS is densely Truckload both that and a Turning profitable, with a we is to existing very the ECM Mile Final share serving markets model acquisition our with driver with populated and

experienced are dedicated existing service with bring to customers alike. we grow and both the an our excited Werner. beginning Great are Trucking team of wanted Baylor company and to of points. and final extremely met that outstanding similar business new we safety impeccable drivers Baylor retain. And and mile associates, to service, proud customers with all leadership history to strategic We new and cultures XX-year touch

customer deliveries. freight additional implementing of with markets specialized the Werner of and better opportunities many in, identifying month experience brings Baylor One we diversity in are base and and make its Baylor already to pharmaceuticals in together. expedited years

refined to qualifying acquisition and with our Werner realize process the integrating We further strengthened from company acquisition quickly researching have synergies. candidates and to

truckload We remain search make and identify to disciplined earnings. and that and logistics better continue us carefully will in accretive to to additive are acquisitions

Now autonomous with letter Kodiak their they Investors to our XX, hydrogen our ESG signed the under available The initiatives. project in Cummins progress to our we at report purchase for werner.com available. to Robotics wanted We to XX-liter section our XXX pilot and intent technology. developments. In to up a time become is update show goals test spend September, CSR ESG. on some on when report engines the commercially Slide I ESG of truck issued announced We

we a we an our to quarter, Truck. to and and the Salesforce tech reporting, on a data test decarbonization the and to with During ESG better solution. Workiva finalized agreement Werner install strengthen cell Remora And formalize subscribed

move Slide Dedicated. Year-to-date, and a XXXX ahead our our X%, let’s in compared Now, review our increased performance to guidance. primarily XX TTS to of fleet truck

expect X, trucks than Baylor our our end-of-year XXX quarter. we at the range guidance narrowed million. of CapEx of for X%. X%. the higher acquisition to this anticipate the truck the year-to-date to our acquired $XXX truck count full Net trucks, on growth to third XXX the $XXX our October of a $XXX net to we year Therefore, be be XXX X,XXX million. Including end capital X With of the were trucks raises expenditures truck growth million in first X% full range to We months year range for to will

Dedicated per year-to-date week revenue X.X% customer per offset higher resulting truck rates increased from inflationary to pressures.

as have more year. range acquisition ECM revenues X.X% in the quarter for expect third to X%, noting lapped we quarter. in comps the July in grow quarter, Truckload total metric fourth difficult increased will fourth One-Way of For this we we X% mile per the last

in For fourth with a compared market of fourth negative our same period year is ago. a range quarter, quarter range One-Way much flat in per mile Truckload revenues this the year freight expected we be premium to pricing total One-Way opportunities to the to quarter fewer year expect due moderating and compared fourth X% difficult ago. the comps to This to

the Our income tax was XX.X%. third rate and in quarter year-to-date

For the be expect to year, in of XX% full XX.X%. range we the to

into our quarter respectively. we at and X.X freight One-Way trend Truckload third to year X quarter, from be fourth moderated average years fleet During expect end truck and quarter has trailer age continued years of the further this October. second demand and to

increased. the economy the truckload has months, last of market the and Over concerned freight direction the about few

Our remainder is current the of for follows. view the year market as

We subdued ago. a in to surge season. in fourth that peak are this peak more premium limited are means year very quarter and pricing season a season peak opportunities a much compared quarter project strong This expecting fourth transactional

driver inflationary and ease carriers continues more expect as used of with remains Pricing continues rates, truck. per for consumer discretionary interest under has are goods intensify XX with on and shown truck continue likely continue. rates. challenges equipment And We increases market pressures truckload gains data Truckload remains and and to resulting capacity truckload equipment, and lower build prices industry staples. XX less fuel to freight the rising last FMCSA net Pressure industry lower to registration cost that older small for demand high constrained trucks continues in for control. carrier to maintenance labor, moderate, for for deactivations deactivation Inflationary weeks. spot cost new the

CFO is discussed progressing John update transition engaged wanted call. well. our our that second his remains process our we during Lastly, to fully responsibilities and I with on provide an quarter plan search

we are we will have an provide strong We update candidates several appropriate. when considering and

freight we We resilience confident superior Truckload driver the of provide positioning our Logistics One-Way are base associate durable the our in our model, value our and and and customers. business to team stability strong proven non-driver The our with of Dedicated and segment. our

would I turn begin like the over operator to that, Q&A. With the our to call to now

Operator

Please [Operator go Instructions] first Our with question ahead. Subin is Bert Stifel. from

Bert Subin

the time. good and afternoon for Hey, thanks

Derek Leathers

Good afternoon, Bert.

Bert Subin

carriers earnings inevitable have would really the first rebound the haven’t this Derek, spot exits, you, but heard what’s How start think question happening exits lot will resume activity side? concerns for fast X months maybe probably we rates seen you we helping a yet, out? freight new season order of not smaller I are about and which think indicate inventory on despite those ultimately the play not some enough. viewpoint do your the or on next And and whether

Derek Leathers

Yes.

So, great question.

meaning opening coming we net their DOT remarks. companies deactivations, more board. back First versus XX registrants off, seen I in the last on out in of the new you weeks, number point of will comments But to have the some XX turning

more those last weeks, say, seen in level. a and We have the X especially I’d count at have the increase importantly, deactivations, the quantity noticeable over sudden we very of truck –

seeing So week X,XXX kind market. net coming to you are a X,XXX out of of trucks the

always is really year, year primary And so that December. and There the is June in it where every is starting is uptick is in a there we that, two one momentum. months and to also think one gain big

you spot high will going as what to I kind with are of the several XX you of that, reaches peak exactly are about the and seeing quarter XX season we cycles if we an interest you a four insurance, that relates line look high into five months we increase underway. to of It’s rising look as when and on hard trend the process and backdrop But equilibrium. see it, from call we of back accelerate kind that’s nearly high kind are fourth you that cycles so commentary a to or already that to last to it we unanimous think And in time fuel, that predict rates, peak now the look and labor over is, think market. row, muted a think at in trough the back see

have fuel to is if I’ve to across in think I had we clearly going only up you They operating I that’s certainly at a And is only next I level, networks real. So costs. last exacerbate something it that run currently. pump grow in are I going are problem bottom, not the which close And we make because it’s the many And that would showing forward people’s seeing America. guess, bottom fuel delinquencies. comment, when as conversations obviously think the load, to below in well. rise it’s And go as to starts is at

Bert Subin

Yes, softening sort business. more thanks. well do follow-up, a case What that’s think And see you’re of went per I Dedicated, truck super then Derek, of up if just freight. of around commentary you really sort to that’s Dedicated all soften. despite to this of week be Baylor helpful commentary, holding you per think curious growing do up? what and seems trend maybe would the of things relevant your for poorly, is I’m Dedicated the instead you volumes revenue more sort hold to. of how in guiding what not just know flattish

Derek Leathers

based to in winning defensible seen fleets. it where work recessionary need those of times, an back is business the type to it prior last continuing complexity, X a how dedicated we’ve with really of looking on even of again, difficult how during and the cycles their we of accomplish, the at mean, couple I is space years, I Yes. type environment are its grow mean, they because at is looking do, we that customers

one-on-one – we they inflationary And frame and guiding trust, us those in greater of I prudent with being ability gets – that cycles what been And how it XX major relationships have through of we it growth long-term out a recent you on and truck as the out that to there years. service see with from see picky your years, But some has in performed and very and to have you’ve on for there. together. will top or they use question through. are seen I’m going perhaps question, in them work profile we customers to high your Baylor right, started momentum four we’re I’ll the five not slow overall well to we so more just expectations growth become I diligently deliver Dedicated you we’ve more to perform to the the question, runs, to and continue very well. the dedicated think and pressures history you’re with than there what case, And with on reiterate continues of have. that the is been don’t supportive And increases terms think the Dedicated the

continue that Our during turn. be will positions as this portfolio we core that and of this to we expectation the well it is us think forward, go

Bert Subin

Derek. Thanks,

Operator

The Brian with question ahead. Please next go Ossenbeck JPMorgan. is from

Brian Ossenbeck

an you are do year as this the of just mentioned you’re us into between for expectations give I bid on a for in what season the any about terms One-Way up, these well? And strategic Derek, cycle you Good to and more afternoon. are get dedicated. your that update progressing, that are think quarters you, those of third year? Can question. Thanks taking a next longer-term, pesos for couple ago, partnerships looking sort and Maybe of as we one how maybe coming tier

Derek Leathers

Yes.

a of years. been working we’ve couple on this several just for quarter It initiative. wasn’t So

tell up we brought And you would it’s recently. progressing You’re right, I it nicely.

etcetera. you If at large, by characteristics, kind a multiyear business, relationship Dedicated it’s entirety, and our look in longer-term of with its stickier

we mechanisms the up and again to strategic same. with long-term our around business agreements those. into have tied of customers in different or kind quarter approximately believe we’re put alignment and LTAs up is place that long-term On futures One-Way our variety with they side, One-Way Those of are the we’re with of guardrails believe a now

been We there our up will economy what variances. the pretty is clearly continue conversations to But bargains, if previously. frank, same going of to we have fulfill because expect set those like is a excited, end into slowing and they that do be we will that I’m haven’t

had of in this our Dedicated fleet now We of XX% haven’t prior in turns. percentage

we We that haven’t certainly of had entire their agreements One-Way is key had XX% One-Way engineered winning kind as in customers up verticals fleet the it amount add of and network. that our to key roughly with of is today, haven’t

the still like know there other stronger and to look our slowing we pressure some out So other going items. is for get the inventory through be come a But time it’s levels end this economy We to it. tougher there is and out as I positioning even forward. on and

Brian Ossenbeck

to quarterly John, year a mentioned? you Great. wanted on can might in if progression you you. too that looks to follow-up, as a Thanks like some today? all the this think Thank us not as or seasonality? because maybe quick expect give said if see off of for given you expectations going bit obviously well be quarter what you typically context. little there you how gains comments the case the to this that’s to fourth look I stronger, context relative sort for tail if seasonally the at high, about any And all it here

John Steele

last And earnings fourth there there Brian. very year. that year. in very it is Typically, a muted of more this sizable Last XX% a occurs. because third quarter, projects, it’s that significant to peak fourth quarter we Yes, up number to season a an was had surge improvement occurred special subdued, during the increase, was from opportunities pricing and quarter third year,

not level some year. expect last that we but at We the nearly opportunities, peak saw season

quarter be We compared expect year ago. in to down a XX% to pricing fourth opportunities to where XX% were premium they

We third the us we environment, typical guidance should quarter it’s quarter. strength dedicated a expect because from business too not we’re from to significant from third expecting that fourth result, a trend, it – but to of increase there. don’t standpoint predict to how help as of fourth will on but a difficult So our improvement a

Brian Ossenbeck

Okay, for time. very thank you much the

Derek Leathers

Thanks, Brian.

Operator

question from Atkins Please Jack ahead. is go Next Stephens. with

Jack Atkins

my great. taking Okay, questions. Thanks for

Derek, business, dedicated your lot of to some a around it’s inflationary you do sort these I your being of quarters, be of commitments, about going a comments contracts cost whether mechanisms able how So that? increases in back able do guess, think or imagine longer-term Do of perspective. the of get earlier cost to sort longer-term to nature that? through with have I would from to Because to several pretty it’s those tough going over be the next you

Derek Leathers

the Yes. and company that from several Clearly, pressures down every P&L. be to We America dealing going know – is up that some be there of it’s in we pressures. through will won’t those something cost inflation the we Jack, of go is as kind quarters, be with next sheltered

doing already that Our prior we dedicated we and delivered that responsiveness are around that our support. trends. that for which good do, kind levels at service their seen deliver in reality have of from goal to and we at the up to with customers, work They have and signed the order need is we through them the

allow but We one tailwinds a through mixed we of news, other One-Way. be all with now that expect on it through that similar is are and growth offset Mexico to of rate. different, always come that opportunities business. little us longer have right able Mexico doesn’t maybe gain Mexico, those and length to productive, back some of It’s consistency pressures this in more out haul there in resilience to this some That’s some things some seeing cross-border

this of environment. the that’s increasing looking into to year are and a offset we’re production. always to an but that it of operating team relates do peak, We that as in percentage going that to fleet doing We our time hold

P&L normalized standpoint our continue on some help hope we’re be they into operation production more as and their able leverage a to we the as that seeing decongestion some well. We’re in to work to going with to from get customers,

going So be and takes. It’s there is going to puts be difficult. to

that pressure it’s within been customer, to will We agreement. And guiding through labor relative more Certainly, are to have prudent customer we’ve going dedicated. will the the well very that margins. about just confident overall kind be by to be to it than we One-Way by And I to time and that as of out we it’s agreement on something heavy we of well. with with a going into truck we’re market know business We very that that the what size and the growth. And us to point on going should not do going be ranges leaning you’re we’re prudent fleet. mean, be going rational that we’re in I instead, terms. see under on

Jack Atkins

the with for Got Are the then of it. And issues the schools little guess would there? question I just driver maybe, a okay. Okay, I had additional bit sort what John, you. Thank And on on you? guys a you was appreciate the kind you maybe behind color in third quarter. challenge exactly those give some there? Can of you issues color more

John Steele

schools. about at made the Yes. and in Jack. Thanks, investments On talked Okay. previous driving calls, the facilities equipment and personnel that we’ve we’ve

time XX back the very a that. difficult to with of the had to schools. quarter ‘XX, we integrate driver remember to very, school to you XXXX, end vertically market accomplished so we of XX schools. our And were needed we we first help get like network If end we We the up by felt to and

are to training Our new driver that the our in driver high-quality the so right training to geography. great really markets targeted establishing team schools expand capacity, produce a school job did

of Our network one really school the is crown jewels at Werner.

really achieved. have proud what they We’re of

results we gradually Those of a profitable say locations impact. we’re XX going and not XX lastly, I’d they a working expect developing don’t this school new typically to During the location, are issues months time. first about nonrecurring their couple over a typically will had And they we temporary improved had occur that some school through are share that quarter $X.XX forward. of financial and

Jack Atkins

Thank great. you for time. Okay, the

Derek Leathers

days, thing but total, lesser weeks. not impacted it’s have, did much in to a for we only to five add I’d extent, The that, schools

as So but impacted it’s Ian. related to in quarter not a nonetheless, Hurricane the issue, major it

Jack Atkins

Okay.

thank makes That as you. well. Okay. sense Derek,

Derek Leathers

Thanks, Jack.

Operator

Please is with question next from Scott The Research. Wolfe Group go ahead.

Scott Group

Hey, thanks. Afternoon.

QX gains Derek, exiting market? about your Just down broker anything share QX brokerage around Any about in to x number network the like number QX now and any clarify, want to of capacity that? we comments carriers x the and on side had it’s commentary for in then the you in numbers can or

Derek Leathers

Yes.

to the clearly consistency. moderating, arrive mean, gains I on gains at are a more time, OEM start same So deliveries I’ll side, but starting are the with little

way But giving you’ll QX. all thing at OEM well. going can’t so not on lower gains that for is rate that at, commit be can see to would with run case. I to I think to number functioning much process The see higher I therefore, directionally, probably I point. is we’ve best and to commit can’t approximate we’re trucks gain of slightly But the have slightly this just that may bet been a you us perhaps opportunity still guidance is that the volume we’re too still. about for a gain those arrive So and what the tell

are receive, and and interested equipment moving we available. as still that buyers still we have We’re

fleet the operating opportunity in an us but costs fleet we also on this maintenance line getting an start the overall other the The it as quarters is to maintenance several equipment perspective over next by from get reality new to the refreshed. just get gives both uptime

gains. I Scott, second would of apologize, the the my thoughts that on part be question. So

Scott Group

Yes.

about were just capacity. talking You

Derek Leathers

Yes, Yes. remember. I

our network, power to it’s crack as I we’re because taking time. we’re a brokerage strategy well the that’s of all growth the only a the seeing us within that metric on the the we’re – for combination the tough adding So carrier carriers count, overall mean, in as tough

in are mean others. that perhaps And less and can that the it’s of but see level so carriers than numbers because that I long-term. what now of yes, network in the not, were this believe I my setting duration are belief subdued still cycle ourselves where we’ve regardless we’re that we quarter, shorter fourth of aggregate at in seen we growing recruitment severe for into putting with do is up are the

coming out running. ready end and the prepared be with to hit other want we to so the And ground

Scott Group

we big in will – And a trucking, next into year. question, we downturn cost much It inflation. Okay. cost one cost just see inflation like in typical feels continued don’t see then picture

just and just So correction up costs too negative there being a just just if more a are is that typically from down, up margin it of than outcome? an a severe – – are risk it’s ends or rates that in is of see we

Derek Leathers

a at higher of I rapid small than market right? are for my with at with time XX% rate history, swap interest the rising faced is And peak. spot any rates especially than think perspective, level, in more a fuel backdrop any volatile who a matter you’ve sure. that who it’s larger purchased Well, from a as a cost perspective, of environment got normal than recent So equipment carrier history a its at

correction to So a I for that And population time that of a folks, happens rapidly. some great that’s I not more have it’s this trucker. confidence be think where

still as a will going our the our our basis especially within well we’re with and we level, relationship help work customers, our as in the carrier to out that of large network. asset all them offset the better, system a manage I still is have these to of customers with deeper of which outcome on inflationary pressures, think end Now net of to try the out the longer-term cost come relationships, other stronger looking and bulk as potential on we portfolio. And entrenched with and

to am but certainly I trying lemons, fleets this make not my opportunity distance expectation that turn further, and I’m that here. themselves to is really high-performing for So an out express of to is lemonades trying

Scott Group

perspective. helpful Thank you, That’s Derek.

Derek Leathers

you, Scott. Thank

Operator

Please Next from KeyBanc Fowler ahead. is go Capital Markets. Todd question with

Todd Fowler

Hi, and Derek. good Hi, John. Thanks evening. Great.

Derek Leathers

how you? are Todd, Hi,

Todd Fowler

bid in plan Derek, to the up where where to in if the spot in you may things us come One-Way have well, you of about many range what because the about held significantly, share thanks. am just how share call, rates how could constituents with philosophically you talk address this maybe Derek, same contract truckload renewals rates spot are the and some to bids come you think has truckload. I they approach is ‘XX, season? want as later strengthen you environment don’t start like context there know but it down pricing the can if I in on Or to contract One-Way a do feels

Derek Leathers

to discipline. the that is mean first comes mind I word Sure.

very go We are to this going be as we through disciplined process.

dedicated a robust that my not it is leaning intimated to us pipeline, and strong have be already I’ve growth. We and goal for into fleet

the opportunities, move opportunity core cycle of is have from So fleet, means at we with through as a is process What shaping it not the One-Way better dedicated up. until of the naturally sight the of line appropriate. trucks to bid and how strong to dedicated grow least to looking pipeline

committed do we opportunity our conversations a the we every to stay Now isn’t that to us who to if want rate have choices. to with have customers at reasonable, stand time that’s by we and those afforded One-Way

up wouldn’t through long-term perhaps And us of XX% backdrop bid have. so business it’s the the all resilience having in keeping about that and gives discipline then that a agreement process tied others of further

So can this in we’re well perform and have into as certainly environment. move into we I QX. that’s as season as forward early and expectation and – I continue the feel like QX late we’re to we well the in up to set bid be execute,

Todd Fowler

operating and leverage a margins little kind think in either maybe I about negative here some range fourth around correct help But helpful to the That’s trends John, on nuances us comments quarter kind a the And any of certainly here follow-up, if into margins you I not surprised at okay. third the you third with opportunities. quarter. saw normalized ability for context. quarter, for we just margins just that I the in sooner? the less the early my logistics transactional think the operating Can into Yes, and was ‘XX, had understand of Logistics bit

Derek Leathers

that. We take I’ll this. Sure, – with let’s start

logistics, So can those That is QX also are our – going opportunities that was a more an was a amount pop-up of unit. quarter difficult only perspective. in margin logistics. – power We outsized lucrative had from in type on project tremendous specifically some of sort within be but freight us for to do,

continuing into into we lesser QX a As that type there QX, far is work. of of degree got and

big to a a The I’m of grow really contractual although from transactional that’s to is business contractual like piece of see. still QX the the transactional next – sorry, to at it. even It’s percent yet QX. not mix of as piece to so continued total has sequentially So we’d percentage

to XX% at we’d we’re like number north so of today, And be or that that. XX% contractual,

in percentage but plays into that it quarter, We’re gains of and well. made one several have on our way just as points

don’t mixed the $X because doesn’t in news the short-term that of piece that’s good then that third Final dedicated we is And have and of that great, going Final that product start-up that and there honestly, certainly we of last endured and – in in success look million reap forward. the about of benefit so that to start implementations then the the quarter number that’s in Mile start costs Mile in QX

The project the little out I So project logistics much But that to this there in but based existed of opportunity point to Those things played of our the part that yes, major lack of is make comp sequentially, bit peak logistics opportunities improvements a the subdued in that too feel be a QX the of year because lot in. more high answer. probably on will opportunities. unit. QX, out have a sight is line I is tough stabilizing year-over-year a logistics, hill globally, is QX comp make also year. about QX in better of to and up must we But that ago, a

Todd Fowler

Yes, Thanks, okay. lot, Derek. a John. Thanks Understood.

Derek Leathers

Todd. Thanks,

Operator

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

Jon Chappell

around Thank owner you. for the the market equipment operators are Good capacity and afternoon. who struggling Derek, leaving buying the fuel and insurance prices. question on and under incredibly higher

capacity may some modern of have think as the market. discounts but some and into that not equipment expects of bought OEMs the with get had. just some leaning newer you hands in prices worse an But relative fleet lot your everyone just opportunity older I expect struggling you’re the you that as than the opportunities, there be a queue you to there that’s of stick may bargains relatively elevated that equipment I think of is in and for or for at growth, do be be and to wait is some I bigger well, know owners that players, that? a to are in

Derek Leathers

Yes.

way the the – be based our Our our happen way a determined. quickly which has capacity drivers belief for going model that little It’s long been setup it’s the use used is do the stated, is cleanse benefits up, as clarity something itself the warranties buying frank, but to place. it all there, takes this moderate, still really market spec it it trucks. have us truck presents the to I our that better expect. holds my on expect want of stabilized on, more previously our operate reasons is late. than outlined opportunity for How of the delivered, to We isn’t pressure with people you how gains To extended actually rapidly be of we to is and is yet on relatively that question down because the to trucks like But under new own as there to an what comes and always our puts opportunity sales. it to be hope expect and just

Jon Chappell

scale or do intermodal term, Okay. leaned focus bit on portfolio? a you in a be that intermodal of with to longer your dedicated, prices, there but really portfolio My a where there fit an are bit, where done off is obviously, opportunity there maybe Is be there? a It Final in the might transactions your into does some cross-selling you the opportunities? Mile, like have has follow-up there fit Is had reservation lot you where that at transactions, some seems scale? maybe to some decent been does

Derek Leathers

Yes.

path and we in one we astute are some be make which forward, that able might to that, ground. is go you intermodal by as up reality committed We the to

growth from is well product now. today a perspective. perspective, Our and space from where performed more difficult at which it player has their intermodal well perform disadvantages. service right we does does And a The – It margin smaller a of field, have share of us disruptions rails is is certain but are it out the larger and today, put competitive being had more customer a interruptions. than

So, a working we of now through intermodal strategy. right term the are process in longer

that have – some gain as of to it’s or get share have to to issues I to order face fair think grow in that shore continue efficiencies. got relevancy as operational we the to we we up got well say our increase and

for not helps We just a ability are that efficiently. is to service our percent fleet perspective. a dray for continues which increase, challenged deliver to and space, of now us, our right our more from growing grade everybody But

If do. have the is, how intermodal about is that within now and way mode and it delivery that incongruent and customer times is our certainly at long, we But it portfolio cross-sell, of and existed it with challenges and we where and too portfolio exist fits think the service-oriented have. for kind of retail-oriented kind you can where we mix how the that

Jon Chappell

Understand. Okay. Derek. Thanks

Derek Leathers

you. Thank Yes.

Operator

ahead. is Hoexter Your Ken of America. from go question Please Bank next with

Ken Hoexter

And of a sequential does in in you XXX the Is inflation, a rates In best afternoon rates? your out when reality deflation down just of driver on the the past last on throw can thoughts Is spot inflation. soon. luck that rates we down. Derek, Derek mean But And date or you earnings Good think in have and you typically basis seen have chance. past, no and then Great. years. improvement John on talked of came ever operating the bit the basis. about over Maybe I about that I that come points Hey. this a talking ratio, come given what’s driver John. you John know about John, were whenever an I now couple backdrop downturn,

it give be improvement? thoughts can or flattish, to you on the you about, if load your high I guess is see continued talked you us maybe do backdrop the OR? Given possible

Derek Leathers

goes so there not low as with time. to are people a and is it with about and get think that often trade-off and can Yes. compensation opportunities and that very question. get a taking the home wages opportunities market And consistently inflationary many lifestyle opportunity difficult, as especially we we jobs. this for find in start environment on row in of think line the people way I or is more you as is driver better that unemployment will moderate. daily. level. going pressures household really down toe at the It’s us. our bit at seen better of the are line certainly front they is a a we have But quarters hold for have to part the slope started driver inflationary home if to to Often plans think to not in the create along be is continue more engineered There upward you What impossible. a the there if wages to Look, I as

So, equation, the other far are is than including we fleet across fleets the the equipment of trucking companies. our to major going the side lifestyle of many the side to equation, continue country, less aged more on heavily many focus

there. And desirability factor is so the

turnover And We some the as more driving stay. create the have tend and corner to fleet. these experiences jobs, within better turned issues the sticky are we on they

moderates better it is have it to think from driver for – way think We we worst with about opportunity been there the is us. talking think capacity and the behind is the is about here relates applications very it up So, we reasons that to the certainly as exiting.

about through to our door, stay careful to who very Now, standards very we going have and high. the within left to that we be continue and opportunity, selective are have we

matter a picking just larger pile applications it’s to of of that so a is. And

John Steele

fourth XX.X% in on fourth That an performance Last did expectation is of all opportunities third a of the I income fourth logistics quarter. improve will would last in I Ken, quarter than year. fuel. probably I year strong stellar net that year. what And project fuel level a for but last did level achieved premium quarter, third fourth and margin, in very at in But an closer in probably XX.X% was XX.X% quarter. operating And pricing we surge from quarter we My income had net of to quarter TTS don’t year, the approach wouldn’t that an saw maybe likely. we better operating pretty we or the match that to on ago it’s think are the the with year slightly that’s and Okay. slightly last currently, to we was quarter. be we achievable that logistics side, third we think

Ken Hoexter

helpful. specifically Yes. real to was TTS. talking That’s I

down and mix or run as in that’s And there. more So, on customers? market it’s X% real to your business just bad your the your not do is stable You rate And than about of X% think talked flat, the given dedicated that’s you the end-user on Derek, staples. the more helpful. thoughts decline

stability I So, there more guess is there?

Derek Leathers

with think lack think of It’s is peak. rate renewals way biggest and the at the it less about do to all. to I project

matter year-over-year year. a issue almost relative the rate of with renewals it’s immaterial do of literally comp nothing to it’s relative to and and fact, As even to spot. completely It’s the subdued peak this

agreements Our are core customers this extremely at holding and point. our up well core

to from them are service continue hold and a by perspective. up going We to stand

our so year lack expectation just it, less opportunity the in than is ago. that neighborhood a this XX% was our framework the about somewhere of peak to opportunity it’s And what around it year it’s of put some

year ago. year mile versus QX per rate that about was to that of is portion specifically lower that project this QX peak attributable So, in XX% a

portion all per this per we year up this year-over-year year ago. point our the week fleet, other is to of truck that fourth will X% despite of versus our to quarter largest would talking backdrop expectation have I it’s dedicated thing about, you X% expect The to still still, a revenue be do we been

Ken Hoexter

Thanks Great. Derek. John. Thanks

Derek Leathers

Thank you.

Operator

question Please from next is ahead. Suisse. The Ari go with Credit Rosa

Ari Rosa

Derek. afternoon Good Hey.

I So, theme. stay kind that on want to of

I cost a mentioned behind Typically, think but I little still X%, from you of you are mentioned And do lags pretty bit, you. standpoint, pretty in just earnings up conditions the robust, see the down to think turn still X% a dedicated cycle, inflation a kind negative. worst pricing which So, had maybe inflation robust. we of is

takes turn a meaningfully earnings see Here, negative if up? pick start so, before see that where you And we think you of do of we what’s what’s or of that continued to are kind through earnings mechanism down negative, even still view Do it pressure Is period, rates we happens? kind kind posting plays the have maybe by growth. double-digit to out? and adjusted higher go of come puts on your that how which there cost, cost do – the or

Derek Leathers

the – right, Yes. first, thing I the more to relevant will turns, one that further negative think I the turns, the to company. going they exposed that’s to industry with this, is not certainly One-Way. start like they going to more be so are And mean see some industry, earnings it’s spot. exposed this just especially on when And more are I more

that’s and already made less is or negative happening of industry where speak XX% just they not of year-over-year, negative trucks in this many up so just as XX carriers And we flat and of were cases. but

continue it way and perform that job and I have think continue and So, the turn against about. the that is talking the as line to does embrace that what that and hold allow washout you negative continues, One-Way to portion to are line our of to hold portfolio guard in our in dedicated big we

‘XX, everybody most year-over-year a to ‘XX time we to up back go you at down. that X% If was were

saying decline the was in versus If if from there our than our was or you fundamentally you What this five absolutely perspective. were or am that go it ‘XX back not to guiding back cycles an is time around, further that, I different. ‘XX that traditional just in case ‘XX. EPS is a where least I am over decline, the cards four not look be won’t at portfolio

defensibility portfolio Our our different, is stronger. is

dedicated long-term much of is agreements more and portion Our are simply the larger a robust pie.

continue chip will we away it. to at So,

there not not at color more to much to to on are that. you call. going a uncertainty QX be to to ‘XX We than just guide – this point, But able know is especially too much give

Ari Rosa

color. That’s with especially resiliency just it’s terrific been to impressed the And impressive the No. watch. so results of far, certainly dedicated,

follow-up. quick a for Just

have We at On guys you seen maybe some at in of looking areas Is do mostly point, expanding of peers LTL, are logistics, looking opportunity? that mentioned M&A truckload it’s really other asset intermodal. kind intermodal? your or base outside as you there think thinking the you an of M&A about anything

Derek Leathers

would it’s I to and is not mostly by there – start important anything, note. that’s Yes. saying

wide at opportunities. least and to M&A – We have do are open business, got to be all our – really we believe believe I network appropriately, really our within that to eyes we

current into in is and Baylor type brings and tougher freight. that So, The better. look it I fit a very although ECM sort fits really if by done on have our makes of piece you set puzzle leadership important philosophy look and the and it us a that still hand a far at paper, they so team expert but longer term, mattered the glove expedited three this our that of to we of all a us. a do large was was skill of dedicated not they through Mile acquisition uniquely the dedicated Northeast really was Mile, acquisition bend provider means, field in Final but dedicated dedicated region and think towards offerings us way And with then being in isn’t NEHDS done that capable a their Mile, philosophical pharmaceutical acquisition. management solidified for just any Final to building a a different, Final

look answered broad forward, question up about about intermodal. we things think that bring are of intermodal, we a same As I and to going I didn’t kind as net we have

opportunities. because to organically, that, that that be find as better, believe going thing we be it I foremost so ourselves, in and will to up remind objective looking believe everyone So, our Enterprises other we that’s is that’s focus narrow relates first certainly or to that are that this and makes at when want lastly, play women invest right Werner relates to heavy grow any as on it. want we And are But don’t Logistics not are to band our I acquisitions. the we some I to the opportunity quality invest best it found. in to anybody as of kind just and in as across proud where to and us men think return pass in is

Ari Rosa

Thanks color. Derek. great That’s

Derek Leathers

you. Thank

Operator

last Amit Bank. go from be the Please Deutsche with ahead. question Mehrotra will And

Amit Mehrotra

of if front? on on note anything Derek. the of trying on because the am anything move, Hey have I going shipper lower there amount the wanted just bid I relative seen to there to is ask that either out opportunities volume contracts? demand maybe snip if they John. any market of to Thanks. spot Hey or or One-Way the in terms side are you tendering inflections compliance to

Derek Leathers

Amit. Sure, I it’s Yes. easy the measure, too off, customer really sophisticated understand it’s customer to to mean first And commitments harder we why. difficult, have tools compliance. it’s manage and to

to an because and inventory backdrop consumer there And say cases, clearly in combined that manage is to But so when the cases, I impact greater two it’s what volumes that economic decrease is just of other sentiment. is clearly, some than impact shippers of, simply we those the in causing try excess items.

to it And address so mechanisms have attention. it. We their when that happens, to we bring

you we have work a chosen somewhere commitment, of And been with response tell history of has positive. pretty it, about astray we their business. that. and their that how have majority happens, that they because might a have have folks when occasionally, work would long over – somebody the And manage the We dialogues I the with and conversations. people’s of networks, in integrity run those approach to to little we to

happening. and catch address comfortable will continue our our when very had, ability we good have see So, our it resolve continue and it. to conversation needs to it team ability be to I with I to that feel if to it’s them. about as manage we them will am

cycle will every sure customers was is low, turn. part always it see that we understand are to peak the That’s now market any relative confidence differently on the make It’s out part others stood during every feel manage to I to behaving market COVID, the low-double to that virtually forward. going you still our some. that that – by its I I and and will at One-Way commitment exposure have digits, that and voice going no may that customer just process. we spot of and than converse have is is with think our have showing that our always we And like is and our job them which them. loosened of

Amit Mehrotra

guys Okay. this TTS. book-ended in margins And my for put then just you for out follow-up, range

kind with wondering you of it just in about guys it last low Do range, the end a of was, next selection going comfortable year even the I necessarily to as the you were think But makes raised opportunities, freight I potential not forget think surge remind the that year high and at I what I I quarter you freight opportunities? very maybe exceeded, you think range to due end was. sounds in environment, so. XX% downturn. that price, year. even we more but that think XXXX, of bottom selection Maybe end it am forget sense, that of or within the the X%, just still range last XX% the operate are what was to can you feel you to or us. like XX% it

Derek Leathers

something that in be to we tested XX%. many that low It range. of the ways one range would end our to now. well our tougher. so how half growing cycle expecting in to not my low have will its with belief, word. right it’s tightening. be the season, with depending increase to range XX% probably because a that in for So, Dedicated the scale the I And economic accepting equilibrium rather within of up sets that I a We itself certainly the are history belief ‘XX but next back expectation of sticking importance season I the that stress at range than that to far would One-Way by itself year, like. would not could end its of for and that our But on we the as looks range, this you how QX, and in sound comfortable market ability find comfortable and But period And increase that corrected, against the of perform change not are worse we backdrops, like middle out, and strong yearly range its dedicated the That us and have think than go plays bid And normal a my even through again, or quarters. for be to if is a the is of is and we to freight depending ensuing that in started year, of the enter be relationships through goes. going from I scenario, dedicated on record, simply migrating. with only defensibility in migration in lends obviously, pipeline broken combination and I you expect more on this probably even bid a a better strong can One-Way, of it’s in QX know the longevity and point what execution, long-term back to especially, thing

Amit Mehrotra

Okay. Derek. the Thank Appreciate thoughts. you,

Derek Leathers

Thank you.

Operator

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

Derek Leathers

are today. macro develop. I same of to And dedicated while and and schools, the And want mix overall its Yes. business the despite steady designed portfolio to advertised. cost time, dealt am to execute of team with in high-performance investments level, and joining as with industry economy, excited puzzle is direction relative customer size, this about just acquisition I Baylor. to our at relatively allows small the We thank other capabilities that the us we the to model at pieces landscape, in of added to increasing although challenges well. our uncertainty the further our logistics the for perform quarter our a verticals super At and call everybody time we continued durable our face industry our entering the shifting business the of the with

strong, our and go remains as show continues forward. less to pipeline promise power-only asset-intensive dedicated we offering Our

the importantly, this be me even be remain this team team’s will just you day. remain, carriers side. most the thank rise Deactivations cycle only excellence capacity for perhaps is as duration work and while to with the this capacity makes Thank will and you correction out And far, and team And us entire that hasten time part view Werner of listening already and this your year that confident to finally, underwhelming in season to for I lending thus commitment other dedication are for and stronger shortened and severe. the peak to our through underway. spending correction I execute we come confidence is on every thank of it today. their want tireless on that constraints proud ability to less

Operator

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

You may now disconnect.

Werner Enterprises (WERN) 2 Nov 222022 Q3 Earnings call transcript