Werner Enterprises, Inc.

Good afternoon, and welcome to the Werner Enterprises first quarter 2024 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. 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 conference over to Chris Neal, Senior Vice President of Pricing and Strategic Planning. Please go ahead.

Good afternoon, everyone. Earlier today, we issued our earnings release with our first quarter results. The release and a supplemental presentation are available in the investor section of our website at Warner.com. Today's webcast is being recorded and will be available for replay later today. 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. On today's call with me are Derek Weathers, Chairman and CEO, and Chris Wyckoff, Executive Vice President, Treasurer, and CFO. Derek will provide an overview of our Q1 results and update on our strategic priorities for 2024 and our market outlook. Chris will cover our financial results in more detail and provide an update on our guidance for the year. I'll now turn the call over to Derek.

Thank you, Chris, and good afternoon everyone. We appreciate you joining us. Before we get started on our first quarter update, I would like to acknowledge the very difficult time many of our associates and fellow citizens of Omaha are enduring as a result of the catastrophic tornadoes that took place this past Friday. It is truly inspirational to see both the Warner and broader community come together to support those in need. Miraculously, there are no reported fatalities locally at this time, but there remains a path of devastation that is hard to even describe. Regrettably, the devastation continued throughout the weekend in Iowa, Kansas, and Oklahoma. Our thoughts, prayers, and ongoing support go out to those impacted by this horrible disaster that has impacted so many. I will now turn my attention to the results of the quarter. Our first quarter results reflect the reality that the freight market continues to be challenging and was further compounded by adverse weather in Q1. Despite these industry-wide headwinds, our focus remained on controlling the controllables. We realized another favorable quarter for one-way production, increased revenue per truck and dedicated, and maintained high customer retention. We generated solid operating cash flow, are proactively managing expenses, executed on additional cost savings, reduced our debt, and repurchased shares during the quarter. While we cannot control the macro, we are focused on our long-term strategy and structural improvements to position Warner for success in an eventual tighter market. Let's move on to slide five and highlight our first quarter results. During the quarter, revenues were 8% lower versus the prior year. Adjusted EPS was 14 cents. Adjusted operating margin was 2.4%. Adjusted TTS operating margin was 4.7% net of fuel surcharges. In dedicated, there's more noise from competition. Despite losing a few fleets to changes in the supply chain approach for select customers, and isolated competitive undercutting, Dedicated remains solid and resilient and delivered another quarter of year-over-year revenue per truck growth. We are maintaining price discipline in Dedicated, particularly given our long-term agreements. Our Dedicated offering is superior in scale, service, and reliability. Accordingly, we look to large enterprise customers that value their supply chain as strategic, mission-critical, and not left to less sophisticated or inexperienced carriers. As expected, one-way truckload volume was steady and seasonally consistent, but revenues remained challenged by ongoing rate pressure. Despite setbacks from weather, miles per truck increased 11%, marking the fourth consecutive quarter of improvement. Our total miles were nearly similar to prior year, down less than 3% despite 13% fewer trucks. We are pleased with the operational excellence that has been building to achieve similar volume with less capital intensity. Within logistics, First quarter volume reflected normal seasonality, while results were impacted by further rate pressure. Still, we maintained a 15% gross margin, saw meaningful increases in both domestic and cross-border power-only volume, drove strong customer retention, and realized new business wins in higher volume and intermodal. In short, despite seasonably stable customer demand, lower rates caused freight conditions to remain challenged. Inclement weather further negatively impacted one-way and logistics, and the limited driver throughput for our school network. This combined with higher than usual health and workers' comp benefits and elevated insurance expense resulted in lower operating income. That said, we are proud to have achieved a first quarter 20-year record low for preventable accidents in addition to a high level of service to our customers, improved one-way miles per truck, and progress on our cost savings initiative. Moving to slide six, despite the challenging environment, we continue to push forward with implementing structural improvements that will position Warner for success as rate normalizes. Our DRIVE framework continues to inform our decisions over the long term, representing our commitment to durability, results, innovation, values, our associates, and the environment. Last week, we announced that Warner made it to Forbes' list of America's best large employers for 2024. Forbes selected 600 outstanding companies for its list, and Warner placed number 10 in transportation and logistics categories. This honored award highlights Warner's quality, employee satisfaction, and industry leadership. Relative to our 2024 objectives, last quarter we communicated three overarching priorities to generate earnings power and drive value creation in 2024 and beyond. They are driving growth in core business, driving operational excellence as a core competency, and driving capital efficiency. Relative to our first priority, driving growth in core business, Top-line improvement depends on time and pace of market inflection. In dedicated, we see increased pressure as the down cycle continues and other carriers seek shelter. We continue to see a strong dedicated pipeline of opportunities to first backfill isolated fleet reductions and then focus on net growth. To achieve our long-term TTS range of 12% to 17% adjusted operating margin, we are executing on our cost savings plan, which is going well. We purposely set this as a long-term target knowing certain years could be exceptionally up or down, but most years would fall within the range. From an operational and cost basis perspective, Warner is in a much stronger position and with increased demand, better rates, a stronger used equipment market, and further reining in of insurance costs per claim, we are confident we will achieve this and see operating leverage come through. However, in the current day, the freight environment remains very challenging to forecast. If the market stays lower for longer, It may serve as a headwind to reach this goal by the end of 2024. Relative to our second priority, driving operational excellence as a core competency, we are maintaining a favorable safety record, advancing our technology strategy, and progressing our cost savings program. Transitioning to our Edge TMS platform is a multi-year journey, and we remain encouraged by the synergies and value of a single freight platform, enhancing our customers' experience and our visibility while providing additional opportunities to grow revenue and reduce cost. And finally, our third priority, driving capital efficiency. We had another strong quarter of operating cash flow. We continue with intentionality in our capital allocation. Net leverage, capex spend, and fleet age all remain low. Despite lower used equipment values, we are on track with our expectations and continue to anticipate a greater pace of gains later in the year. You will hear more about these priorities on quarterly calls going forward. Before passing it over to Chris to discuss our financial results for the quarter, I want to provide our current view of the market. Turning to slide seven, we expect a challenging freight market to continue through second quarter and into the second half of 2024. While inventory levels have normalized and destocking is largely behind us, we haven't seen signs of significant restocking. Attrition is happening, but at a slower pace, and as a result, competitive pricing pressure remains. We have experienced more seasonal freight trends in April, specifically better demand on the West Coast related to certain spring projects. Recent isolated fleet losses in dedicated will put pressure on our full-year fleet guidance. We perform well in dedicated, continue to maintain a 93% customer retention rate, and we can see a pathway to truck growth with a more normal supply-demand environment, although our focus is first on backfilling losses while managing yield. The one-way operating environment remains challenging and led to a competitive early bid season with mixed results. We will continue to exercise pricing discipline. The environment and logistics is still very competitive, and margins will continue to be pressured. Longer term, our portfolio of customers, our deep network of qualified carriers, our investment in technology, and our operational improvement initiatives position us well for long-term profitable growth in this segment. With that, let me turn it over to Chris to go through our first quarter results in more detail.