Werner Enterprises, Inc.

Good afternoon and welcome to the Werner Enterprise fourth 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 fourth quarter and full year 2024 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. We 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 to 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 Leathers, Chairman and CEO, and Chris Wyckoff, Executive Vice President, Treasurer, and CFO. I'll now turn the call over to Derek.

Thank you, Chris, and good afternoon, everyone. We appreciate you joining us today. There's a saying that everyone has a plan until they get punched in the mouth. In 2024, it's pretty clear that the whole industry took it on the chin as everyone continued to fight through what many have stated is the worst freight recession in their careers. The challenging operating environment of 2023 persisted into and throughout 2024, as supply and demand imbalances resulted in a second consecutive year of depressed rate levels. This was coupled with ongoing inflationary cost pressures and lower resale values for used equipment. While capacity has continued to exit the market, the pace has been slow. However, positive signs began to emerge throughout the year, which we believe point to the early stages of an improving environment. One-way rates turned favorable in the second half and West Coast imports remained strong. Peak season was better than expected with higher rates and double the peak volume versus last year. Post-peak season, we have seen additional green shoots that fuel optimism, such as tender rejection rates that remain seasonally elevated. Spot rates are off the bottom and at a two-year high. Customer sentiment remains positive while consumers remain resilient. And while there are previously negotiated rates with our customers that remain effective throughout the first quarter, we are also seeing clear opportunities and early wins to positively influence rate. As a result, as 2025 gets underway, we anticipate a challenging but improving environment. During this downturn, we have focused on controlling what we can by investing in ourselves and making strategic decisions that position us to excel in the future. Our portfolio of solutions is more diversified now than at any time in our history. We have invested in maintaining a modern fleet, made operational improvements toward a leaner, more nimble organization through discipline around cost, operational innovation, and M&A integration. Advanced our technology roadmap leading to improved decision-making, better visibility, and operational efficiencies. Improved one-way miles per truck, which increased 8% year over year. grown our power link product within logistics, adding more scale and flexibility, and invested in our driver's school network to ensure a dependable pipeline of high quality professional drivers. Thanks to the discipline, grit, and commitment of Warner's nearly 13,000 talented team members, Warner has never been better positioned for long-term value creation as the market improves. Let's turn to slide five and highlight our fourth quarter results. During the quarter, revenues were 8% lower versus the prior year. Adjusted EPS was $0.08. Adjusted operating margin was 1.6% and adjusted TTS operating margin was 3.1% net of fuel surcharges. During the quarter, we had higher than normal insurance expense that included 19 million from unfavorable development on prior period claims. This resulted in a 22 cent negative impact to adjusted EPS. In contrast, our focus on safety continues to drive a near 20 year record low in DOT, preventable accidents per million miles. Safety is a high priority and a core value for Werner. which is demonstrated through our continued safety investments and initiatives, such as investing in equipment with the latest collision mitigation systems, leveraging new side view camera technology, implementing in-cab and desktop technologies aimed at improving weather alerts, rerouting, and other situational awareness for our professional drivers and fleet managers when it matters most, and collaborating with our vendors and other market participants to bring tour reform and future safety innovations to bear. Despite the uptick in insurance and claims expense in the quarter and an ongoing difficult operating environment, we are seeing positive signs across our business. Dedicated continued to demonstrate its resiliency and durability during the quarter as revenue per truck per week increased year over year. Average fleet size grew sequentially and our customer retention rate remained strong at over 90%. Our dedicated offering excels when reliability matters the most among large enterprise shippers. And our commitment to quality and service was recognized as we received numerous Carrier of the Year awards in 2024 from dedicated customers. While one-way truckload remains more pressured relative to dedicated, we continue to focus on operational excellence and are pleased to report another quarter of improved production. For the second quarter in a row, revenue per total mile was positive year over year. Our pricing discipline, combined with better freight options and execution, led to revenue per truck per week that increased 5.1% in the quarter and 6.4% for the year. Our logistics division reported adjusted operating income that improved sequentially and represented the best quarter of the year. Gross margins were steady, while volumes improved sequentially in truckload logistics and intermodal. Our logistics business continues to represent a key component of our strategy as it complements one-way trucking, provides a greater portfolio of solutions to our larger customers, and expands our reach to small and mid-sized customers. Moving to slide six, our plan to generate earnings power and drive value creation remains unchanged and is centered around three priorities. First is driving growth in core business, which comprises expanding TTS and logistics operating income margins, increasing one-way rates, and growing our dedicated fleet given a pipeline that remains strong. On TTS margins, while we cannot predict the timing of a return to our long-term range, we are encouraged by the modest incremental expansion we've seen over the past few quarters. This was particularly true in the fourth quarter, absent the impact of insurance reserve adjustments. Second is driving operational excellence as a core competency, which we will deliver on by maintaining resolute focus on safety. continuing to advance our technology roadmap through the transition of our one-way business to our Edge TMS platform, providing industry-leading reliability, solutions, and service to our customers, and continuing to control cost. Our focus to improve efficiency along with rate improvement, steady volume, and a focus on growth with existing and new customers on a lower fixed cost base should reflect margin improvement in 2025. I'm proud of TeamBlue for their continued focus on operational excellence. Our safety metrics are near record lows. More volume has transitioned to our future tech platform where we are seeing momentum in top and bottom line synergies. Our customers are recognizing our superior reliability at high scale, and we are controlling costs where we can. The final priority is driving capital efficiency. This includes maintaining strong operating cash flow through working capital optimization, remaining disciplined and thoughtful in how we allocate capital, and maximizing equipment fleet sales. We have proven our ability to generate earnings power as demand accelerates. 2025 will be a year of growth and improvement from 2024. We will provide you with updates on our progress against our 2025 priorities as the year progresses. Moving to slide seven to highlight our current view of the market. We expect truckload fundamentals to gradually improve throughout 2025. We are not placing bets on a specific pace and timing of a market turn, but we are confident that rates will continue to trend in a positive direction. Carriers continue to exit while at the same time demand continues to improve. We expect the consumer to show ongoing resiliency resulting in non-discretionary spending holding up while discretionary spending picks up. Retail inventory levels have mostly normalized and as a result should no longer be a headwind to freight volumes. The pace at which inventories are replenished on a go-forward basis will likely be impacted by factors such as trends in consumer demand and how the new administration ultimately decides to implement its policy initiatives. Spot rates that have already moved to higher levels are expected to improve throughout the year as supply and demand continues to rebalance. As a result of an improving operating environment, along with upcoming regulations such as EPA 27, we expect used equipment demand and pricing to improve in the second half of 25, as carriers look to upgrade their fleets and prepare for the upcoming mandates. Potential tariff policy continues to be a moving target. Implementation of tariffs on goods imported from China, Mexico, and Canada is expected to impact supply chains, although it is difficult to comment specifically on depth and duration as information is changing real time. Regardless of the tariff impacts, we are prepared for supply chain disruptions and to meet our customer needs with agile solutions. With that, I'll turn it over to Chris to discuss our fourth quarter results in more detail.