Werner Enterprises, Inc.

Good afternoon and welcome to the Warner Enterprise's first quarter 2026 earnings conference call. All lines are in a listen-only mode until after the presentation. To ask a question, you may press star then 1 on your touchtone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Mr. Chris Neal, Senior Vice President of Pricing and Strategic Planning. Please go ahead, sir.

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 to the most directly comparable GAAP 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, CFO, and Treasurer. I will now turn the call over to Derek.

Thank you, Chris, and good afternoon, everyone. We appreciate you joining us today as we cover our first quarter results in the state of the market. In summary, market fundamentals are improving, and we are seeing a positive trajectory in our own numbers, which we'll get into shortly. Throughout this extended freight downturn, we have taken measured steps to position Warner for profitable long-term growth, through our operational excellence and our commitment to safety and service. Executing on these priorities, we've actively managed our portfolio to make the business more resilient, differentiated, and optimized across market conditions. We're leaning further into dedicated and other specialized solutions, including expedited and cross-border Mexico, as well as asset-light offerings in logistics. More specifically, in January, we expanded our dedicated offering through the acquisition of First Fleet, adding scale, density, and exposure to more resilient customer verticals, including grocery and food and beverage. At the same time, we also restructured our one-way business to create a more balanced and higher-producing network that is now set to deliver improved profitability. And in logistics, Intermodal and Final Mile are seeing strong momentum. As a result, Warner is better positioned to capitalize on an improved market. So far, the recovery in rates has been largely supply-driven, as capacity continues to exit at an accelerated pace due to regulatory enforcement. As the supply and demand dynamic tightens, we are seeing rate lift and early positive momentum in the bid season. We expect pricing gains to continue, with more meaningful improvement in the third and fourth quarters. Taking together these actions, including our first fleet acquisition, one-way restructuring, and yield improvements, have strengthened our business and provides a line of sight to earnings growth this year. Turning to slide five to discuss our first quarter highlights. Since acquiring first fleet, we have taken a thoughtful but active approach to integration, prioritizing continuity while moving with intent to enhance value. We are retaining the majority of Firstleet's management team and all drivers, while lining around a shared culture of safety, service, and innovation. Firstleet customers have been receptive with a 98% renewal rate across two-thirds of the portfolio addressed to date. We have strong visibility into the remaining third and expect a similarly strong retention. Our integration of Firstleet is progressing ahead of schedule. At three months in, we have already realized over $1 million in savings and have implemented actions representing over $5 million of our $6 million synergy target for the current year. We remain confident in capturing the full $18 million in cost synergies mid-next year, which we expect will improve First Fleet's operating margin by approximately 300 basis points. We are already seeing revenue synergies, including accelerated fleet startups, project opportunities, and increased backhaul. While still early, these efforts are enhancing customer value and improving returns. Top line metrics show positive inflection with strong improvement in dedicated revenue per truck per week and one-way trucking revenues per total mile. Contract renewals are progressing well. Customers are accepting higher rates and supporting adjustments where needed to dedicated driver pay. Our dedicated customer retention, including first fleet, has climbed to 95%, closer to our historical trends. The result of our one-way restructuring is showing early gains, with first quarter miles per truck up 6% over prior year despite significant disruptions from winter storms and revenues per total mile increasing 3.6%, our strongest pricing inflection in over three years. Strong execution of these initiatives led to one-way revenue per truck per week increasing 9.6%, reflecting the combined effect of our restructuring and pricing actions. Pricing in the quarter departed from seasonal trends as Q1 rates typically declined sequentially after peak season. However, rates were flat sequentially, a pattern we have not seen in the last 10 years. One-way truckload revenue per total mile benefited from a smaller, more targeted fleet, intentionality to replace less profitable freight, stronger spot rates, and contractual rate increases secured through mid-season. In logistics, higher spot rates drove an increase in purchase transportation costs and pressured gross margins in truckload brokerage. The margin pressure is mostly transitory as contract rates are reset, and we saw improvement throughout the first quarter. We expect continued improvement in truckload brokerage margins as bid season progresses, along with widespread implementation of higher contract rates. And lastly, I want to highlight our team's relentless focus on safety and cost discipline. In Q1, our DOT preventable accident rate per million miles was down an impressive 45% year-over-year. Excluding First Fleet, insurance and claims expense was at its lowest quarterly level in over a year. We also continued to lower our cost to serve through technology and disciplined execution. Total operating expenses, excluding gains, insurance, fuel, and purchase transportation, were down by 5% year-over-year, and our logistics division serves as another proof point of tech-enabled savings. Truckload brokerage operating expenses declined over 25% for the two years following the move to edge platform and with relatively stable volumes. Our asset business is now in focus. Building load assignment, equipment management, and planning capabilities takes time but is ramping. We expect all aspects of asset execution to be functional later this year. Moving to slide six, our plan to position the business for long-term growth and generate earnings power remains focused on three overarching priorities. First, driving growth in core business, which includes growing our dedicated fleet, increasing one-way production and rates, and expanding TTS and logistics adjusted operating income margin. Despite Q1 typically being the most challenging in the year, progress continues on these fronts. Our dedicated fleet is growing, with end-of-period tractors up 46% year-over-year with the addition of First Fleet. Within our organic portfolio, we've increased exposure to new verticals like technology and aftermarket auto parts. Our pipeline of opportunities coming out of Q1 is strong. On a year-over-year basis, dedicated revenues per truck per week increase steadily, driven by the value customers place on the high service and reliability at scale as capacity tightens. In one-way truckload, we realized significant improvement in miles per truck. We are securing mid-single-digit increases in one-way bids. Spot rates are higher, and we can be more selective with freight choices, given a better supply-demand backdrop. And truckload logistics margins improved every month in the quarter as contract rates reset and exposure grew to higher spot market pricing. Second is driving operational excellence, which we are executing on by maintaining a resolute focus on safety and service. continue to advance our technology roadmap embedding cost discipline throughout the organization and realizing efficiencies and synergies from acquisitions we've taken out approximately 150 million of cost over three years and continue advancing our technology transformation for some perspective on how our technology investments are beginning to translate into tangible results we've centralized all loads into a single unified platform achieving full network visibility, which is enhancing our ability to optimize, balance, improve yield, and reduce cost to serve. This integrated foundation has been a key enabler of our one-way restructuring efforts over the past two quarters and positions us for continued margin expansion. Building on that foundation, we are increasingly leveraging AI and automation to drive operational excellence across the network. This includes improving load planning and network design, increasing the speed and quality of tender acceptance, and automating routine workflows that historically required manual intervention. We're also seeing benefits in areas like maintenance, coordination, and back office execution, where automation is reducing downtime, improving assay utilization, and allowing our teams to focus on higher value activities. From a customer and safety standpoint, we are deploying real-time technology to provide immediate visibility into events such as weather-related shutdowns. While these actions can temporarily impact productivity, they enhance safety outcomes and help mitigate longer-term risk and insurance costs. Importantly, our approach to AI is disciplined and ROI-focused. We are not pursuing technology for its own sake. We are prioritizing use cases that solve core operational challenges, improve returns, and scale across the enterprise, supported by a strong governance framework. While AI adoption has been more visible in asset-light brokerages, Warner stands out as a second-wave winner among asset carriers, given our significant technology transformation and a unified edge TMS platform. We're rolling out AI in phases, driving efficiency today and enabling growth over time. Later, Chris will provide further details on our final priority of driving capital efficiency. Cash flow for the quarter was up meaningfully year over year, and our capital allocation remains focused on fueling growth and shareholder value. Before Chris discusses our financial results in more detail, let's move to slide seven to provide our current market outlook. Capacity exits continue at an accelerated pace, driven by regulatory enforcement and carrier bankruptcies. Higher fuel prices is another more recent headwind for struggling carriers, and long-haul truckload employment has fallen below pre-COVID levels. As a result, further capacity attrition is likely. Defying typical seasonality, spot rates remained elevated in Q1 and throughout April. We expect seasonal improvement throughout the year as capacity attrition continues. With rate lift currently more supply-side driven, any demand improvement is likely to trigger even greater market momentum. While household balance sheets remain strong, the consumer continues to face a mix of puts and takes, including tax refunds, fuel prices, and interest rates. Regardless, the consumer continues to remain selective yet resilient, which bodes well for our mix of retail being more concentrated in non-discretionary items and discount and value retailers. Lean retail inventories position demand to play a larger role early in the recovery. While trade policy may impact restocking timing, non-discretionary replenishment provides a buffer against near-term volatility. We expect used truck values to improve later in the year. Increased supply from enforcement is likely offset by OEM manufacturing constraints, aging fleets, and higher-priced 2027 engines, supporting demand for high-quality used equipment. With respect to driver availability, we anticipate a tightening market for high-quality drivers. Warner is well positioned as a preferred employer. Our dedicated division offers predictable roles with frequent home time that attracts top-tier drivers. With that, I'll turn it over to Chris to discuss our first quarter results in more detail.