Werner Enterprises, Inc.

Good afternoon and welcome to Werner Enterprises' second quarter 2026 earnings conference call. All lines are in a listen-only mode until after the presentation. 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 a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Neil, SVP of Pricing and Strategic Planning. Please go ahead.

Good afternoon, everyone. Earlier today, we issued our earnings release with our second quarter results. The release and a supplemental presentation are available in the investor section of our website at werner.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 Wikoff, 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. In the second quarter, we delivered 24% revenue growth and 80 basis points of adjusted operating margin expansion. Throughout this prolonged downturn, we stayed focused on safety, streamlined our operations, invested in technology, and expanded our portfolio and in markets. These strong second quarter results show that our strategy is working, especially as the broader market starts moving in our direction. The structural capacity attrition we've been talking about for several quarters is playing out as predicted. This tightness is being driven by intensifying regulatory pressure, specifically around non-domiciled CDLs, English language proficiency, and cabotage enforcement. On top of that, there has also been a sharp reduction in ELD providers, with approximately one-third exiting or having their certifications revoked. This reduction in ELD options is dismantling shadow capacity and compounding structural supply contractions. Increased enforcement along with the recent Montgomery verdict has resulted in shippers and brokers taking an even more cautious view of who they do business with. That plays directly into Warner's strengths given our strong track record and reputation and validates our strategic direction. Our core technology initiatives continue to progress. 100% of Warner's legacy freight is now being ingested into our single edge TMS platform, creating better visibility for our associates, expanding solutions for our customers, and establishing the foundation for increased automation. We continue to see measurable benefits from AI and automated workflows across shipment, optimization, load planning, maintenance, safety, and driver recruiting. While many of these initiatives remain in the early stages, others are already delivering meaningful results in areas such as road breakdown support, Carrier Payments, and Appointment Scheduling. Our focus is now on scaling the most successful use cases across the enterprise to drive further operational efficiencies and structural cost savings through the remainder of this year and into 2027. In short, the structural improvements and portfolio management decisions we've made over the past few years are gaining momentum. Our ability to anticipate these supply shifts, execute our restructuring plan, and add first fleet to our dedicated business gives us clear line of sight to sustained earnings growth and validates our strategic direction. We are building a leaner, more resilient portfolio that is spring-loaded for this upcycle, and we are increasingly confident in our ability to maximize fleet utilization and deliver a more pronounced step-up in our financial results as we move into the second half of the year. Turning to slide five, let's discuss our second quarter highlights in more detail. In one-way truckload, Our recent restructuring efforts over the past two quarters are delivering tangible results. Revenue per truck per week growth is the strongest we've delivered in the last decade, driven by exceptional productivity improvement coupled with a double-digit increase in revenue per total mile. Recently, we have been securing upper single to double-digit contractual increases in one-way bids, in addition to ongoing yield management within the portfolio where appropriate. As a result, adjusted one-way truckload OI margins improved over 700 basis points year over year. More benefit will be realized in the second half from recent repriced business and increasing spot exposure. Our dedicated business remains a resilient cornerstone of Werner's portfolio. We've delivered customer retention of over 95% and been successful in securing rate increases on renewals. Dedicated bid activity has been increasing as the one-way market tightens and more shippers search for long-term reliable capacity. Dedicated bid volume in the second quarter was the highest of any quarter since 2020. Revenue per truck per week reached the strongest year-over-year improvement since the third quarter of 2022. Overall, these results showcase the value customers place on the high service and reliability at scale that our dedicated solution provides. It has now been six months since we acquired First Fleet. I am pleased to report that the business is progressing very well. Continuity with drivers, associates, and customers has been outstanding, and synergy realization is ahead of schedule. Given First Fleet's strong service and customer relationships, we've achieved a 98% renewal rate on over 80% of the portfolio that has renewed so far. We expect similar results on the remaining fleets scheduled to renew in Q3 and Q4. and lastly, while the spike in spot rates during the second quarter put further margin pressure on our logistics business, we remain proactively engaged with customers and are focused on resetting to higher contract rates. As a result, we expect logistics margins to improve as the year progresses. As a large asset-backed brokerage company with high quality standards and a mature vetting process, we expect added momentum from shippers looking to consolidate around larger asset-backed brokers following the Montgomery ruling. Before Chris discusses our financial results in more detail, let's move to slide 7 to summarize our current market outlook for the remainder of the year. First, while we are encouraged to see the supply-driven market recovery strengthening as discussed in the outset of the call, the reality is that carrier exits are still in the early innings. Enforcement efforts are continuing, and in our view, greater agency collaboration and exchange of data combined with utilization of technology will further accelerate enforcement from here. Long-haul truckload employment has dropped to below pre-COVID levels. Upward pressure on fuel, insurance, and equipment replacement costs will also force additional capacity off the road, reinforcing a highly favorable supply environment. Tender rejections remain elevated relative to recent years. This, combined with an anticipation for further capacity attrition plus peak volumes, points to ongoing rate lift through the remainder of the year. And with a predominantly supply-side driven turn to this point, Any demand improvement would lead to even greater market momentum. Looking beyond some of the headline noise from such things as elevated fuel prices and interest rates, household balance sheets remain resilient but mixed. Budget pressures on lower-income consumers continues to drive value-seeking behavior, which bodes particularly well for our mix being more concentrated in discount and value retailers, grocery, and non-discretionary freight. Lean retail inventories position demand eventually play a larger role in the recovery. While trade policy may impact restocking timing, non-discretionary replenishment provides a buffer against near-term volatility. As expected and previously communicated, our gains on the sale of used equipment in Q2 were lower sequentially and year-over-year. However, we continue to expect used truck values to improve in the second half of 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. Regarding driver availability, competition for high-quality drivers has increased. However, Werner is well-positioned, given our vertically integrated Roadmaster school network. While not immune from the market environment, our dedicated exposure offers predictable roles with frequent home time that in turn attracts top-tier drivers. We are also using AI to increase recruiting capacity and allow our teams to focus on higher value interactions with candidates and more effectively match candidates with regional demand. With that, I'll turn it over to Chris to discuss our second quarter results in more detail.