Werner Enterprises, Inc.

Good afternoon and welcome to the Werner Enterprises fourth quarter and annual 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. The speakers for today will be Derek Leathers, Chairman and President and CEO, John Steele, CFO, and Chris Neal, Senior Vice President of Pricing and Strategic Planning. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the call over to Chris Neal. Please go ahead.

Earlier today, we issued our earnings release with our fourth quarter and annual results. The release and a supplemental presentation are available on the investor section of our website, at warner.com. Today's webcast is being recorded and will be available for replay later this evening. Please see the disclosure statement on slide two of the presentation, as well as the disclaimers in our earnings release related to forward-looking statements. Today's remarks contain forward-looking statements that may involve risks, uncertainties, and other factors that could cause actual results to differ materially. The company reports results using non-GAAP measures which we believe provides additional information for investors to help facilitate the comparison of past and present performance. A reconciliation of the most directly comparable gap measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. Now I would like to turn the conference over to Derek.

Thank you, Chris, and good afternoon. 2022 was another successful year at Warner. Revenues ex-fuel grew by double-digit percentages in both TTS and logistics, and we also set a new record for adjusted earnings per share. My sincere thanks go out to the talented Warner team who remain resolutely committed to our values by providing superior safety and service to our customers. As we look back on the fourth quarter, freight in our large, dedicated fleet was steady and performed well. One-way truckload and logistics were challenged by a seasonally weaker-than-normal freight market in contrast to the very strong conditions a year ago. We expect that the 2023 freight market will be challenging in the first half and then gradually begin to show improvement in the second half as capacity exits the market and retail inventory resets to normalized levels. Over the last several years, we intentionally built a powerful business model that performs well in both strong and challenging freight markets. Our large and durable dedicated fleet, our diversified one-way truckload fleet, and our growing logistics segment provide us with a resilient portfolio of complementary services and industry verticals. This business model, coupled with our seasoned leadership team who averages 26 years of Warner experience, gives us confidence in our ability to weather any economic environment and positions Warner for success. Now, let's move to slide three. Warner is one of the nation's five largest truckload carriers, safely delivering over 3 million miles each business day with an experienced and increasingly diverse workforce of professional drivers. During 2022, we were proud to achieve the lowest DOT preventable accident rate per million miles in the last 10 years, a testament to our continued focus on improving safety and service across our fleet. During the quarter, our strong balance sheet provided the flexibility to add two stellar companies to the Warner family, Premier Truckload Carrier Baylor Trucking and the elite freight brokerage and dedicated carrier Reed TMS. Warner is a growing logistics provider with an annual revenue run rate exceeding $1 billion. with a large and growing base of over 70,000 qualified carriers and a pool of 30,000 trailers. This large trailer pool and our growing domestic and cross-border Mexico power-only capabilities provide Warner customers with additional solutions and flexibility to effectively manage their supply chain in rapidly changing market conditions. Let's move to slide four for a summary of our fourth quarter and full-year financial highlights. In the fourth quarter, revenues increased 13% to $861 million. Adjusted EPS decreased 13% to 99 cents. Adjusted TTS operating margin for the quarter was 15.8%. For the year, revenues increased 20% to 3.3 billion. Adjusted EPS rose 7% to a record $3.70. Adjusted TTS operating margin for the year was 15.1%. Dedicated freight demand in the fourth quarter was solid and steady. The normal seasonal freight spike for certain dedicated retail customers didn't occur this year. given the increasingly challenging macro environment and relatively muted consumer spending. Fourth quarter freight was seasonally soft in one-way truckload and logistics, with fewer project surge and peak opportunities compared to the record high levels a year ago. On October 1st, we acquired Baylor, a high-performing truckload carrier based in Milan, Indiana, with 200 trucks. Baylor is a 75-year-old company with outstanding leadership, elite drivers, and impeccable customer service. The first week of November, we acquired Reed TMS Logistics, a rapidly growing Tampa-based freight broker and dedicated carrier with a skilled and knowledgeable leadership team. Reed TMS has a 26-year history of developing and expanding long-term customer relationships, supported by a large and growing carrier network, with two-thirds of their revenue coming from the stable food and beverage verticals, including a heavy focus on temperature-controlled freight. We are very pleased to retain the strong management teams and talented associates of Baylor and Reed TMS. Both companies maintain cultures similar to ours with an intense focus on superior safety and service. Our implementation team is rapidly integrating these businesses with ours to capitalize on the synergies and mutual learnings between our companies. Together, our durable, dedicated fleet, which includes 63% of TTS trucks, and our growing logistics business account for 69% of fourth quarter revenues and is expected to exceed 70% in 2023. Next on slide six, I would like to discuss Warner Drive. Last August, we introduced DRIVE, which is the next evolution of our business strategy that delivers our future. DRIVE incorporates sustainability, capital allocation, an outcome-oriented approach to operations, innovation, and a culture that supports and values our team members. Our intentionally designed durable portfolio of asset and asset life solutions serves a diversified client base of industry-leading customers with an emphasis on the transport of necessity-based goods. We relentlessly focus on our results, with the company culture immersed in safety and service. Since 2019, we have received 27 unique Customer Carrier of the Year awards. Warner has committed to innovation through our investment in technology and our Warner Edge cloud-based platform, which is improving the experience of our customers, drivers, non-drivers, carriers, and suppliers. Our core values of safety, service, and integrity are based on an unwavering commitment to inclusion, community, innovation, and leadership. And we embrace ESG and specifically our impact on the environment through the continuous exploration and development of alternative fuels and equipment, executing on our aggressive carbon reduction plan and expanding partnerships through Warner Blue, our company-wide sustainability initiative. Next on slide seven is our revenue snapshot. For the year, revenues were $3.3 billion with 74% in TTS and 24% in logistics. Baylor and Reed TMS added $71 million of revenues to fourth quarter and the year. Including these acquisitions, we forecast logistics revenues in 2023 will grow to over 30% of the total. Three-quarters of our revenue base this past year came from retail and food and beverage, with customers winning in their verticals. We intentionally focus on growing companies that ship recurring and repeatable consumer essential products who have rigorous on-time delivery requirements. We ended the quarter with 8,600 trucks, up 3% for the year, or 260. In the fourth quarter, we held our TTS fleet size flat to adapt to the changing freight market. We intend to limit TTS fleet growth until we see signs of freight improvement, which we expect in the second half of the year. Turning to slide eight and the consolidated fourth quarter results, revenues grew 13% due to 5% growth in average trucks, 1% higher revenues per truck, a $41 million increase in fuel surcharges, and logistics revenues growth of $29 million. which includes eight weeks of the acquired REITMS business. A seasonally soft freight market in fourth quarter compared to a seasonally strong market a year ago was a significant headwind. Despite this freight challenge, strong dedicated performance limited the adjusted operating income decline to 11%. At this time, I would like to turn the presentation over to John, who will discuss our segment results. John?