Werner at 32nd BofA Conference: Navigating Tariffs and Growth

On Thursday, 15 May 2025, Werner Enterprises (NASDAQ:WERN) participated in the 32nd BofA Industrials, Transportation & Airlines Key Leaders Conference. The discussion, led by BofA analyst Ken Hoexter, provided a strategic overview of the company’s operations, highlighting both challenges and opportunities. Werner is facing a tough macroeconomic environment but is focusing on customer service, technology, and cost control to maintain a strong position.

Key Takeaways

• Werner is managing tariff impacts, particularly related to Mexico and West Coast ports, while maintaining confidence in freight due to its manufacturing and industrial focus.
• The company is experiencing healthy inventory levels among customers, which may result in a steady drawdown rather than a rush to restock.
• Werner reported low to mid-single-digit contract rate increases in its one-way business, with positive momentum in dedicated wins, especially in non-retail sectors.
• The company is targeting operational ratio (OR) improvement in Q2 through dedicated volume increases and cost savings.
• Werner’s fleet size has grown year-over-year, with significant contributions from the dedicated business.

Financial Results

• TTS posted a 99.6% Operating Ratio in Q1, negatively impacted by 200 basis points due to insurance, weather, and IT spend.
• Adjusted EPS was negative $0.12 in Q1, with a typical $0.40 swing from Q1 to Q2 EPS.
• Insurance contributed a $0.09 EPS drag, but the company aims to recover $0.12 in Q2 to return to positive earnings.
• One-way trucking rate per total mile increased by 0.3% in Q1, with contract rates generally 20-30 cents higher than spot rates.
• Logistics revenue fell by 3% year-over-year, while operating expenses and salaries in logistics decreased by 11% and 14%, respectively.
• Werner is targeting $40 million in cost savings for the year.

Operational Updates

• Werner’s fleet consists of approximately 7,500 trucks and nearly 30,000 trailers, with 2,600 tractors in the one-way fleet and 4,800 in dedicated.
• The company achieved 200 truck wins in the quarter, the largest streak in 3-4 years in the Dedicated sector, with 25% in retail.
• Miles per tractor fell by 3.5% in one-way in Q1, with deadhead miles increasing.
• Despite tariff fluidity, inventories remain healthy and elevated.

Future Outlook

• Werner aims to grow the TTS fleet by 1% to 5%.
• Dedicated business is expected to grow as a percentage of the mix.
• The company targets a 0% to 3% increase in dedicated revenue per truck for the full year.
• Uncertainty remains around peak season and inventory evolution, with a focus on the next 60 days.

Q&A Highlights

• Werner believes Mexico freight is stable long-term due to its manufacturing, industrial, and food & beverage focus.
• Elevated inventory levels are noted at the ports.
• An increase in spot market rates in June, without a drop in import volumes, could lead to improved financial outcomes.
• Werner’s fleet with Dollar General has grown year-over-year, reflecting a gain in market share.

For further details, readers are encouraged to refer to the full transcript below.

Full transcript - 32nd BofA Industrials, Transportation & Airlines Key Leaders Conference 2025:

Ken Hoexter, Analyst, BofA: Here in New York. Next up, we’ve got, Werner Enterprises. For those that are new to the room, I’m Ken Hoexter, BofA’s air freight and service transportation and marine shipping analyst. From Werner, we welcome Werner. Joining us here is, EVP, CFO, and Treasurer, Chris Wyckoff and SVP, Pricing and Strategic Planning, Chris Neal.

Well, this is both of Chris’ first time at our conference. This is Werner’s tenth time attending the BofA Conference, so thank you for the commitment to the conference over the years. Chris Wyckoff has been CFO for just over two years. Chris Neil has been with Werner for nearly twenty eight years. We welcome both of you here this morning.

So Happy to be here. On this. Yeah. So, Chris Wyckoff, let me turn it over to you maybe for some opening thoughts on on Werner. Three things you want us to take away from the conference.

We’ve had obviously a lot of news over the past couple of days, not just from the conference, but even from the weekend when when everything outlook wise turned turned on a dime. But let me turn it over to you for some opening comments and key takeaways.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes, sure. Maybe for those that are less familiar with Werner, just a quick overview of who we are. We are a leader in providing supply chain solutions to at scale to customers of scale across North America. We’ve evolved over seven decades from our founder with one truck to an asset pool of approximately 7,500 trucks and nearly 30,000 trailers comprising consolidated revenue of over $3,000,000,000 and associates company wide that are nearly $13,000 So we’ve certainly grown over the years. Our portfolio and solutions have also evolved over the years, being more durable, more diversified, being a multimode provider across both asset and asset light solutions.

We have two operating segments within our business, our Truckload Transportation Services or TTS, as well as logistics. TTS is over $2,000,000,000 in annualized revenue that really houses our dedicated as well as our one way truckload offering, two thirds of that segment being in dedicated, a turnkey, highly integrated offering to large enterprise customers that where reliability is really paramount and at the focus. And then one way houses are expedited, highly engineered lanes as well as cross border and Mexico operations. Within logistics, over $900,000,000 in revenue, 75% of that is in truckload brokerage, including a trailer pool, which shippers that are using a brokerage model at scale, it’s helpful for them to have access to trailers with a single carrier that gives them a more simplified efficient operation. And the other 25% of logistics is in our growing intermodal business, both brokered as well as owned container assets and then a dedicated final mile business.

In terms of just things to highlight, I mean, it’s been a difficult long deep downturn with lots of surprises here and there. But during this time, you know, we focused on our long term strategy and controlling what we can, putting us in the best position as the macro improves. That includes focusing on our customer every day, proving to them that they’ve made the right decision and trusting us with their freight. And that comes down to safety, service solutions as well as our technology and talent. Technology has been a focus for us for a couple of years, investing considerable time and energy and capital.

We see that transforming our business and believe that will continue to do so and have a positive impact on our customers as well as our top and bottom line. We’ve been focusing on our cost profile to put us in a better position to expand margins as we get into a better backdrop. And then continuing to maintain a healthy balance sheet, capital structure give us optionality to continue to invest strategically and invest in ourselves.

Ken Hoexter, Analyst, BofA: So let’s talk about what did change, right, recently. Let’s start off with that, right, in terms of the tariffs, right, just because we’ve talked a lot about the exposure to Mexico, which is about 10% of your consolidated revenues. The West Coast, if you think about the ports, 10% of one way revenue. It saw some network disruptions from tariff related volatility. How are you how did you manage the disruption?

What do you think has changed? Maybe talk about what your customer conversations are have been over the last, you know, two, three days. Yeah.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: I wouldn’t say any permanent disruptions, meaning dramatic changes in in supply chain and among our customers. It’s certainly the entire tariff backdrop and just the fluidity of that has been a distraction for sure. Although, we haven’t seen dramatic changes. Obviously, we were tuned in from a West Coast perspective of just lower imports and the broader impact that can have across the industry. It’s a little bit more directly focused and a bit more line of sight in terms of Mexico.

Although we believe our freight there being largely manufacturing industrial, even food and beverage is uniquely sourced in Mexico or those shippers have considerable investment in manufacturing and infrastructure. So that they’re just not going to abandon in the near term or even midterm. So we feel like while there’s some stops and starts, there can be some inefficiency as shippers are evaluating, pausing, trying to figure it out that over the midterm, you know, that freight is still going to flow and still going to be stable. And over the long term, we still like near shoring and the positive long term benefit that’s going to have in our position in Mexico. On the West Coast, you’re right.

It generally represents about 10% of our One Way business, although that’s what we can quantify as we get more inland and freight that we’re carrying closer to the consumer, it becomes less transparent and visible of exactly where that freight is being sourced. And as we think about imports, know, that doesn’t necessarily translate to, you know, a 10% impact. You know, it’s a percentage of that 10%. And we’ve been staying close to our customers. Inventories are in healthy positions, even for some maybe more elevated than usual.

So there is capability even before the ninety day pause, there was capability for certain of our customers and shippers to draw down on some inventory. That for us would look a bit more normalized just given we have more concentration inland and carrying freight closer to the consumer. But it’s certainly something that we’ve been monitoring and engaging with customers on.

Ken Hoexter, Analyst, BofA: Let me just dig into that. I missed you just said inventories are in healthy positions, but even I missed the second part of that. You said even over some long.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: With having some elevated inventory, maybe that are closer to the ports, closer to the coast. Okay.

Ken Hoexter, Analyst, BofA: Let me dig on that for a second because the Port Of LA said, you know, we asked them about the warehousing, right, as it comes to the ports. How full are those? Think you mentioned, you know, we’re we’re not at COVID levels, right, in terms. But, you know, if normal was, let’s say, fourteen days, you know, COVID was two, three days of excess availability. We’re at, like, four, five days, meaning that we so what what are your customers thinking?

How are you looking at your customers’ inventories? Are are they at at that point where if if we get this, you know, let’s say, couple weeks, three weeks or four weeks of delayed stuff coming in, Is it enough? Or do you look at it as a truck company that we’re gonna have another wave of freight in ninety day or I’m sorry, in four weeks after this blip, this this air pocket that you’re not gonna have a a rush to restock?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: I think it really varies by customer, Ken. What we aren’t hearing is that there’s insufficient inventory. It’s either as expected, healthy or maybe a bit more elevated. Elevated. Even in some cases, you know, shippers saying that they are, running out of some capacity.

So more shippers might have pulled forward a bit more than others.

Ken Hoexter, Analyst, BofA: Okay. So we just wrapped up bid season. Or I guess, well, you got two weeks left in terms of the normal March to May. And I know some of your customers go throughout the year. But I think you mentioned low to mid single digit contract rate increases.

I presume that was a one way discussion, not dedicated. Am I reading that right?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: That’s correct.

Ken Hoexter, Analyst, BofA: Okay. How does that compare with what we see in the spot market rates where spot is still looking below operating cost, right? I mean, I look at DAT’s published data, right, it’s a $1.47 cost is generally about 1.5 dollars if I understand it right. Yeah. How does that how does the contract market faring in that environment?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Well, if you step back for a minute and and just, you know, broadly look at how that’s progressed over the last couple of quarters, we reported a 0.3% increase in our one way trucking rate per total mile in the first quarter. That was the third consecutive quarter of year over year gains, although, you know, rather small at point 3%. It would have been a little better without some deadhead issues or elevated deadhead that we had in the quarter. Rate per loaded mile in the first quarter would have been just over 1%. So that’s reflective of the the statements that we made around contractual rate increases generally increasing low to mid single digits through the bid season.

Back to your bid season question, so we’re well over halfway through. About half of our One Way revenue will be repriced in the first sometime in the first half And we’ll start to see that here flow through in the second quarter with another good chunk then implementing in the third quarter. So, you know, several things would influence one way trucking rate per total mile. Certainly, the contractual rate increases that we’re getting on bids would be an influence there. Business and lane mix, customer and lane mix, you know, will certainly be influential.

And then and then, of course, the spot market, as you mentioned, was a little bit lower. It had started strong in the year. It had declined a bit in in March and then into April and May. Here we are in in road check week this week and and that’s interesting. And so that will also influence where we where we end up here in in rate per total mile in the second quarter.

In terms of spot versus contractual rates, I mean, you know, the the national averages are the national averages, and certainly within some geographies, you have some strength and and some weakness. But in general, yeah, we’re still, you know, 20 to 30¢ higher on a on a contract rate versus the spot rate.

Ken Hoexter, Analyst, BofA: What is the general impact of Roadcheck week? Can can you maybe for those that aren’t familiar, what percent of the fleet literally parks itself for the week or or takes off or and and what is the impact you’ve you’ve historically seen on kind of spot rates? Yeah. You go from?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Well, it it can it can vary by year depending on what the focus of road check is. This year road check is is Tuesday through Thursday. So it’s the the, you know, the kind of the last day here. But you see some changes leading up to road check and some impact then, you know, on on the week following. So it can be an event that lasts of, you know, seven to ten days.

I think typically as you look back over the last, you know, few years for us at least, I can’t speak for others, but ours would be kind of high single digit in of an impact in spot rate from the weeks prior to the week or ten days during road check week. So that’s always been an indication to us because we’ve seen that blip here over the last couple years that the market is relatively balanced when you see a week like that and you see some percentage of of trucks parked. And I don’t know what that percentage is. I think it probably varies from year to year depending again on on kind of what the focus is. And and we’ll see this year to what degree we see drivers off their trucks off the road.

But so far from what we can tell it, it’s it’s impactful this year. I can’t define the percent or not if it’s consistent with prior years, but indications would be it’s at least consistent with what we’ve seen in prior years in terms of disruption and impact on spot.

Ken Hoexter, Analyst, BofA: I asked to get to the point, the exact point you’re talking about when you think about the balance of the market. Right? Because little things like that when you see those spikes, whether it’s coming into the new year and we’ve had a spike at the beginning of twenty three, another one in beverage season of ’23, another one in the beginning of twenty four, didn’t really have a beverage season last year in terms of a spike in spot rates. I know you don’t do too much in spot, but just interesting to see when you get these events, are we seeing the market react because that tells you I think a little bit more about how much capacity has come out, how well we are toward that supply demand. So if I think about you just gave me the contract view and you kind of threw in a little bit of spot up 0.3%, but you’ve got a target on the one way business of zero to three.

Thinking about that, what maybe just give me parameters of what you think drives the upper end of that, what drives the lower end if you’re running at about 1% right now. Is there just trying to think about what happens in the rest of the year. Is it just that demand spike or or now that contracts are set, it kinda sets those rates?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Well, I think it’s a few things. Yes. So our guidance was flat to 3% for the second quarter on a year over year basis. And so the things that’ll drive it on on the upper side would be, you know, some a better spot rate maybe than what we’ve seen here in in March and April and and into the May. So if we can get a lift in in June, you typically see an end of quarter lift with spot and just projects and shippers looking to get inventory out into the stores.

And so business mix and lane mix will definitely be impactful. Clearly, if we see some kind of a drop off in volume due to some of these imports, mean, that could be a little bit on the headwind side. So I think mix and compliance with kind of commitments and what we’ve seen in the last couple of weeks and whether or not that continues at those levels or could be elevated now with maybe some pull forward, maybe not. So I those are the factors that would influence lower versus higher end.

Ken Hoexter, Analyst, BofA: Yeah. Can can you talk about that, the the air pocket? I mean, because it it would be hitting the ports right now. Right? So what do you look at or hear from your customers?

Or as Chris was saying before, it doesn’t matter that air pocket because we’re already staged and ready to go. And so we look at kind of smooth sailing as we go through the quarter.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes. I think it certainly pushes some of the uncertainty out further in the year. As I said earlier, some shippers had pulled forward some inventory that they can draw down for a period of time. I think it’s a bit more of of wait to see with this development and and how shippers react, and it’s it’s probably gonna, you know, continue to to vary by shipper. So when

Ken Hoexter, Analyst, BofA: you say wait to see, I just wanna understand that one because if we get this, let’s say they’ve staged it, then you get the period of, okay. Now we’re drawing it down the excess, we’re drawing it down. We’re getting to a normal thing. Do you feel like in in any discussions, do do people feel like we’ve gotta hurry up in the next ninety days to reset that rebuilt? Right?

Get stuff ordered, get it over here because who knows what happens after the ninety days? Or is the comfort like, alright. They’ve already taken it down to this level. They’re not going back up to one forty five. We can at least base built here and then just smooth planning for for I’m thinking as we go through peak and into the back half of the year.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: I think it’s a little bit early. I think you’re spot on in terms of the real focus is on peak and how much over the next sixty days that’s being pulled forward. Do they have capacity from an inventory perspective? So it’s a little bit early to tell.

Ken Hoexter, Analyst, BofA: Yeah. Okay. You know, Ken, I think one thing I’d add I have the answers, Chris.

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Right. One thing I’d add, I think specific to Warner, you know, we’re we’re two thirds retail in our in our business. And a good chunk of that is discount retail, value retail, and it’s really focused on more non discretionary versus discretionary Yep. Type items. So as you think about imports and some of the impact that that could have on nondiscretionary versus discretionary, I think there could be some differences there.

And so a lot of the business that we do is is replenishment. These are things that are consumed on a on a weekly basis, and it’s it’s that are gonna, you know, continue to hit the store shelves. More setting always. You definitely could have a different answer from someone like like us who’s more focused on on that part of the business versus more more discretionary type retail that might

Ken Hoexter, Analyst, BofA: be more impacted. Let’s talk about the the fleet size. Right? So if you think about the the the TTS fleet as a whole, your your your target is to grow one to 5%. You noted momentum with with some wins outside of your core discount retail focus.

I presume you were talking about dedicated on on that. Yeah. Yeah. So but yet, you noted their reputable logos, so this is potential to really drive some business. Talk about those wins and then I don’t know if you can provide any detail on what kind of type of customer this is and how well it blends in for your expertise?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes. We’re excited about the wins that we papered in the first quarter that we’re now implementing and really will come to bear more so in the second half, but certainly, some of those trucks and fleets implementing you know, late in this quarter. You know, maybe backing up a little bit in the fourth quarter, just the sentiment of customer conversations was more positive, more engaging, more strategic and long term focus, Maybe a a little bit of a bounce back from pockets over this last year where there was just more, you know, price sensitivity that was unique over the long term, you know, that we see in with our dedicated offering. So it’s nice to be able to see reliability coming back into focus. And when reliability matters the most, that’s when our dedicated offering looks out the most.

So I think in the first quarter, we really saw the proof of those conversations from the fourth quarter. You’re right in that of those over 200 truck wins in the quarter, first of all, it was really the largest streak of wins that we’ve seen in three or four years in a quarter in Dedicated. And about 25 of that was retail. The other 75% was other verticals, manufacturing, industrial and some other specialized verticals. So it’s good to see that.

That’s not to say anything about a change in strategy or our view on retail. We’re very happy with our position in retail, our footprint and expertise in that space. But the dedicated offering and the strengths of that offering have other natural applications in other verticals. And so it’s good to see shippers that are focused on reliability, focused on their future growth and having long term reliable partners of scale.

Ken Hoexter, Analyst, BofA: Sticking with that, is there a return criteria we should think about? Obviously, have been impacting the business. We hear a lot more about competition in Dedicated. How do we think about the returns of the business you’re adding?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes. It continues to be competitive. I would say that we haven’t done anything unnatural to source and paper those wins. This is more, again, of the customers’ focus and reliability, you know, swinging back into focus. So, you know, we would expect a consistent, you know, set of parameters and margin profile as these fleets settle in.

Certainly, there’s some startup costs initially. And some of these wins, a portion of them are with new customers in new verticals, others are with existing customers and under similar terms and similar pricing.

Ken Hoexter, Analyst, BofA: Helpful to understand. So the fleet, you mentioned about 7,400 lately, give or take. Is there a minimum size you need to stay active in the One Way business? So One Way is now 2,600 tractors, dedicated is about 4,800. So just thinking about the One Way business, right, which has come down, is there a level you want to stabilize it at and keep just to I think you mentioned on the call, like to be competitive in the business?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes. Wouldn’t get too specific on really putting parameters on the size. Certainly, Dedicated is growing as a percentage of the mix of TTS. That’s intentional given more durability and a higher margin profile and our unique position in Dedicated. But we’ll always have a sleeve and a portion of One Way for a number of reasons.

It provides flexibility and surge capacity for our Dedicated customers. It houses our expedited, highly engineered lanes and freight as well as our operation for Mexico and cross border, which we’re going to continue to lean into. And then it’s also a good entry point for new drivers as well as new customers that want to test drive our solutions and capabilities, whether that be on a transactional basis or a one year contract. So a lot of benefits that will continue to be benefits within one way, although we expect dedicated will continue to grow as a percent of the mix.

Ken Hoexter, Analyst, BofA: Yeah. A few years ago, one of your largest customer, Dollar General, was was focused on building out its own fleet. We were a little nervous about what that meant. You kept saying, hey, don’t worry, we’re going to still grow with them. They’re just growing faster.

It’s kind of a natural evolution that they’d want to bring some more of that in house. When we look back as they and others have expanded their fleets, what have they learned about the trucking market? What have you learned about working with them as they became larger truck owners? And and do you see them absorbing more in house or have they kind of figured it out and now it it’s back to to external growth?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Well, it’s been a journey for sure. And, you know, we’ve gotten our relationship with our general has gone back decades. And so we’re very comfortable with them. We’re very comfortable with where they’re headed and the relationship that we have with them, and we think that’ll continue to evolve. They communicated that they were leaning into their private fleet here a couple years ago and and did grow that.

And consistent with what you just said, Ken, I mean, our our fleet size with them is up on a year over year basis. It’s been relatively steady. So, you know, I think as as they’ve grown, we’ve grown with them. We’ve gained share. We’re a unique provider in the space.

It’s a unique operation that requires driver involvement beyond just driving. So you have you have drivers helping and assisting with the unload there. So it’s, you know, it points back to the resiliency of dedicated, not just anyone can roll in and and hire that kind of driver to do that kind of work and do it at a high level. So we’re comfortable with them and, you know, I I think it it adds some benefit that to work with shippers who have their own private fleet. They understand the driver network.

They understand the capital intensity of the business. They understand the risks associated with it. And so there are some benefits to it and as long as we continue to perform at a high level in terms of service and quality and scale and reliability, then I think it’ll continue to work out both with that customer and others. The other thing that is nice about working with customers who have a private fleet is their private fleet generally doesn’t have the capability to surge much at all. Whereas as Chris was just mentioning with our one way fleet, we can roll in and help provide some additional sources of of capacity, whether that be through our one way system or through our logistics group.

And so I think that’s a unique offering that we can that we can contribute to those to those shippers.

Ken Hoexter, Analyst, BofA: Did you mention you grew share with them or you’ve grown with them?

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Specific our tractor count would be higher on a year over year basis.

Ken Hoexter, Analyst, BofA: Okay. But I presume they if they’re growing their fleet, your share has declined? Respect to Representation of their business, right, the percent or

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: I think our share on the for hire side has grown. Right. Okay.

Ken Hoexter, Analyst, BofA: Dedicated, let’s return to pricing on the Dedicated, right? Your revenue per total mile, you mentioned, was down 0.3% in 1Q, targeting 0% to 3% for the full year. What’s the momentum? I just want to understand the momentum of the contract renewals, pricing in the market.

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: Well, again, stepping back just for a second. So you look back over the years and our revenue per truck per week in Dedicated has been up 10 out of 11 of the last years. It was even up last year, just over a percent. So we’ve shown a strong track record of of continuing to increase. I mean, that’s both a price and a utility metric, but revenue per truck per week.

So that’s that’s been steady. At the same time, we’ve grown the fleet 14 out of 16. So, you know, that’s part of of the interest we have in dedicated that it’s something with some contractual rate inflators in part of our contracts that we can execute and and result in an improved benefit there on a year over year basis in terms of price. And so as the year progresses, even though we were off a little bit in q one, think we probably would have been up on a year over year basis had the the days in both periods been the same. We had one fewer day in this period versus the prior.

That’s always a little bit of a negative impact. And so we would expect over the course of the year as we continue to bring on some of these new accounts as we continue to work through some of the contractual increase escalators that we have in contracts, and then also work with customers where we do or where we maybe don’t have an escalator. But nonetheless, that doesn’t mean that we don’t review pricing on an annual basis. Yeah. And so we’ll continue to work through that with those other shippers, and and we’ve been successful so far the year in in in in getting some increases there also.

Ken Hoexter, Analyst, BofA: Alright. So, Chris, I still have a couple more questions on on the TTS side, but let’s just talk operating ratio for a second. You posted a 99.6% OR in TTS in the first quarter. Normally, a five year trend, if I look back, aim for a couple hundred basis points of improvement from 1Q to 2Q. Although if I look over the past decade, it’s really been all over the map.

I mean, obviously, maybe the cyclicality of the business and whatever is going on in that given quarter. But given the high costs in first quarter, is it rational to think of kind of a two fifty basis point improvement or is it too hard given the volatility in demand?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yes. First, just to pause on the 0.4%. I mean, you’re right in terms of adjusted OI for the first quarter. There were some headwinds in the quarter that drove that down over 200 basis points from a combination of insurance, some outsized weather as well as on a year over year basis, some elevated IT spend as we kind of get into a higher gear relative to our technology journey. So some contributing factors there.

But when you think about Q1 to Q2, I mean, we see more momentum, not less momentum. Dedicated volume is trending up. Obviously, with the wins, it won’t be fully reflected until probably the third quarter. But on a revenue side, there’s some lift there, although there is going to be some more elevated startup cost that will be offsetting a portion of that. We’re also going to have more accelerated cost savings as part of our accelerated and $40,000,000 cost savings target for the year that will benefit in the quarter.

And then, you know, the rest really comes down to rate and some of the backdrop that will uniquely impact One Way. And, you know, that was a little bit softer, you know, coming into this quarter, although, as Chris said earlier, you know, road check has been positive and, you know, we’ll see, you know, how we get through the rest of the quarter. So I would say there’s more relative to the first quarter, there’s more benefit and momentum. Overall, we’re looking to get back to positive on a consolidated basis. Certainly, the first quarter did not reflect where we expect to be, but we do feel good about the momentum and where we’re heading.

Ken Hoexter, Analyst, BofA: So when I think about that momentum, but yet you threw out the pricing was a little bit tougher momentum meetings. Is there a average five year tenure that you look from 1Q to 2Q or is it just too tough for seasonality?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: I guess maybe putting TTS aside, mean, a consolidated basis, maybe from an EPS perspective. I mean, it’s over the last several years, it’s a range of over $0.40 from Q1 to Q2, being down over $0.20 or being up over, call it, maybe $0.15 to $0.20 So it does vary. Now you’ve got COVID that was in there that brought it down one year between Q1 and Q2. So it varies. But we were negative $0.12 in the first quarter on adjusted EPS basis.

So that’s $0.12 correction to get back to positive. Insurance was a big outlier in the quarter that contributed $09 of EPS drag, two consecutive quarters of over $40,000,000 We don’t consider that to be a new normal. So even some sequential retreat in insurance and claims back into upper 30s would be positive in terms of sequential improvement. What’s the timeframe for when you understand those outsized insurance, right?

Ken Hoexter, Analyst, BofA: I mean to go from $30,000,000 40 million big percentage increase, how much through the quarter do you start seeing those roll in?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Well, a lot of what’s being reflected in that line item in our P and L is more so reflective of large prior year claims. I mean, that’s three years old to, you know, up to a decade old, you know, that continues to develop. In the first quarter, there was a particular verdict that goes back to a 2019 incident that was unique and took a different path in the court as it as it came to trial in in the first quarter. And and we would call that a you know, given the circumstances, we would call it a nuclear nuclear verdict that was was not what we expected. So while that’s a six year old claim, you know, there certainly was some new development and that was unexpected during the quarter.

Chris Neal, SVP, Pricing and Strategic Planning, Werner Enterprises: And that was very late very late in the quarter.

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Very late in the quarter.

Ken Hoexter, Analyst, BofA: So what if here we are mid quarter? Are there have there been any nuclear verdicts that have been ruled so far? No. Okay. Is the docket clear through the next six weeks?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: There’s always a lot going on.

Ken Hoexter, Analyst, BofA: Yeah. Okay. Supply side on trucking. We saw ACT net orders down to 7,600 for April. Derek usually has some some good thoughts on the pace of bankruptcies that you’re seeing in the market.

Chris, anything you can throw us? I mean, you know, if if we’re getting net orders now so low, you know, less than half of of replacement rate, what are your thoughts on the the supply balance?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yeah. Well, we’ve certainly seen evidence, you know, even, you know, late Q3 into Q4, you know, with certain whether it’s hurricanes or short lived, know, port strike type of disruptions. And even here with Roadcheck where there’s these opportunities to step back and evaluate and kind of use that as a measure of how much capacity is coming out. So there’s evidence that it’s getting more balanced and capacity has come out. You’re correct.

We continue to see bankruptcies. In fact, there’s a third party report that we recently received specific to March showing that March was up year over year in trucking, bankruptcies of approximately thirty percent and was really higher than any other month bankruptcies over the last couple of years. So, you know, capacity is coming out, and that’s helpful, but more to be seen.

Ken Hoexter, Analyst, BofA: So utilization, you mentioned the deadhead creeping up before. I’m amazed sometimes how high these levels have gotten just from a few years ago when we were looking at that. But miles per tractor, so sticking with utilization, fell 3.5% at one way in the first quarter. I think you mentioned you’re accelerating some disposal of equipment. What do you think of utilization?

Is that a focus as you talk about cost cutting? Is there something you can do in this kind of environment to increase that utilization?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Well, the utilization gains that we reported pretty consistently over the last couple of years have absolutely been intentional through a variety of ways, just having better throughput in our terminal, bringing more repairs, maintenance in house, utilizing technology and other means to really drive that utilization up. There were quarters where we were having double digit year over year improvement. I think last year overall, was a 7% improvement year over year. And so we expected to continue to hold on to those. I think the first quarter was unique with some outsized weather disruption in geographies that just made it more difficult as well as some inefficiencies given just some of the tariff backdrop that reduced that utilization as well as a bit more elevated deadhead on a year over year basis.

But we expect to, you know, continue to see that as at least the utility that we were seeing last year for that to continue.

Ken Hoexter, Analyst, BofA: Last one for me before I wrap up, logistics. So revenues down mid single digits, mid teens gross margin, a breakeven business at this point. What operational do you look to do to adjust that? You talked about the overall company getting to profitability and least getting the $02 back on EPS. What do you need to do with logistics?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yeah. Well, being down in the quarter 3% year over year, while it’s down, it’s an improvement. I mean, the last several quarters, it was down anywhere from 6% to 11% on a year over year basis. So that gap is narrowing. The quarter, particularly late in the quarter, we saw some positive momentum in truckload brokerage that continues into this quarter with some elevated awards, also with some pop up business that looks good in the second quarter.

So, you know, there is some momentum there. And given that it was more so in March, in fact, March was one of the first months in a while where we saw year over year growth in terms of truckload brokerage volume. So that’s positive. We have had four quarters of adjusted OI that was positive despite over this last year the segment and more so in truckload brokerage being a bit softer. And some of that’s really been focused on cost as well as benefiting from being further along in our technology journey within logistics.

You know, our operating expenses were down 11% year over year. Our salaries, wages and benefits in logistics was down 14% year over year in the quarter. So we are staying positive on an adjusted OI basis, but we see some momentum, you know, anytime there’s a change in truckload brokerage that’s going to move the needle a bit more coupled with what has been ongoing strength in our PowerLink intermodal offering. All right. I’m going try

Ken Hoexter, Analyst, BofA: and sum up what we’ve talked about here today. If there’s key things you want to highlight that I missed, fill me in. So you’ve got, you know, if I think the preset on what we talked about kind of the transfer of traffic, customers have brought in preset early, some early inventories. We’re looking at a drawdown steady as she goes. Kinda too early to tell about what happens as peak season if we see another rush or not.

Rates are up about 1% if we adjust do some adjustments on one way. Contract is running about 20 to 30¢ above spot. Dedicated, the wins in 1Q, you’re implementing now. Pricing is still up that 0% to 3% range. The opportunity for the OR improvement, you’re seeing some momentum, your aim is to be positive on the consolidated basis, which gets you the $0.12 back, which fits in with the seasonality, which is a pretty big swing from minus 20%, positive 20%.

So we’re in that range and look forward to continued improvement. And dedicated wins is kind of the growth and the story for Werner. That’s right. Yeah. Anything else you want to toss in?

Chris Wyckoff, EVP, CFO, and Treasurer, Werner Enterprises: Yeah. It’s been a mixed bag, but there is momentum, and we’re excited about the intentional actions that we’ve taken to improve our business and be ready for a better macro.

Ken Hoexter, Analyst, BofA: And I forgot to throw in the cost cuts you mentioned. Mhmm. Chris, Chris, thank you very much. Appreciate your time and thoughts today. Thank you.

Thank you. Thanks, Ken.

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