NASDAQ:WERN Werner Enterprises Q1 2024 Earnings Report $26.06 +1.16 (+4.66%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$25.62 -0.44 (-1.69%) As of 05:52 AM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Werner Enterprises EPS ResultsActual EPS$0.14Consensus EPS $0.28Beat/MissMissed by -$0.14One Year Ago EPS$0.60Werner Enterprises Revenue ResultsActual Revenue$769.08 millionExpected Revenue$788.30 millionBeat/MissMissed by -$19.22 millionYoY Revenue Growth-7.60%Werner Enterprises Announcement DetailsQuarterQ1 2024Date4/30/2024TimeAfter Market ClosesConference Call DateTuesday, April 30, 2024Conference Call Time5:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Werner Enterprises Q1 2024 Earnings Call TranscriptProvided by QuartrApril 30, 2024 ShareLink copied to clipboard.There are 11 speakers on the call. Operator00:00:01Good afternoon, and welcome to the Werner Enterprises First Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. 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. Speaker 100:00:42Good afternoon, everyone. Earlier today, we issued our earnings release with our Q1 results. The release and a supplemental presentation are available in the Investors section of our website atwarner.com. Today's webcast is being recorded and will be available for replay later today. Please see the disclosure statement on Slide 2 of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Speaker 100:01:07Today'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 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, Treasurer and CFO. Derek will provide an overview of our Q1 results and update on our strategic priorities for 2024 and our market outlook. Speaker 100:01:50Chris 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. Speaker 200:01:59Thank you, Chris, and good afternoon, everyone. We appreciate you joining us. Before we get started on our Q1 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 Werner 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. Speaker 200:02:29Regrettably, 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 Q1 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. Speaker 200:02:58We 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 Werner for success in an eventual tighter market. Let's move on to Slide 5 and highlight our first During the quarter, revenues were 8% lower versus the prior year. Adjusted EPS was $0.14 Adjusted operating margin was 2.4%. Speaker 200:03:39Adjusted TTS operating margin was 4.7 percent net of fuel surcharges. In Dedicated, there is more noise from competition. Despite losing a few fleets to changes in the supply chain approach for select customers and isolated competitive undercutting, Dedicated remained solid 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. Speaker 200:04:08Accordingly, 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 loaded volume was steady and seasonally consistent. The revenues remain challenged by ongoing rate pressure. Despite setbacks from weather, miles per truck increased 11%, marking the 4th consecutive quarter of improvement. Our total miles were nearly similar to prior year, down less than 3% despite 13% fewer trucks. Speaker 200:04:38We are pleased with the operational excellence that has been building to achieve similar volume with less capital intensity. Within logistics, Q1 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 the limited driver throughput for our school network. Speaker 200:05:17This 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 Q1 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 6. Despite the challenging environment, we continue to push forward with implementing structural improvements that will position Werner for success as rate normalizes. Our DRiV framework continues to inform our decisions over the long term, representing our commitment to durability, results, innovation, values, our associates and the environment. Speaker 200:05:58Last week, we announced that Werner 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 category. This honored award highlights Warner's quality, employee satisfaction and industry leadership. Relative to our 2024 objectives, last quarter we communicated 3 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. Speaker 200:06:34Relative 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 that growth. To achieve our long term TTS range of 12% 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. Speaker 200:07:11From an operational and cost basis perspective, Werner is in a much stronger position and with increased demand, better rates, a stronger used equipment market and further reining in of insurance cost 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 HDMS platform is a multiyear journey and we remain encouraged by the synergies and value of the single freight platform, enhancing our customers' experience and our visibility while providing additional opportunities to grow revenue and reduce cost. Speaker 200:08:04And finally, our 3rd 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. Speaker 200:08:25You 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 7, we expect a challenging freight market to continue through Q2 and into the second half of twenty twenty four. 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. Speaker 200:08:56We've 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 performed 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. Speaker 200:09:27We will continue to exercise pricing discipline. The environment in 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 Q1 results in more detail. Speaker 300:09:53Thank you, Derek. Let's continue on Slide 9. First quarter revenues totaled $769,000,000 down 8% versus prior year. Adjusted operating income was 18 point $6,000,000 and adjusted operating margin was 2.4 percent, down 68% and 4.50 basis points respectively. Adjusted EPS of $0.14 was down $0.46 with over 95% of the variance driven by a softer used equipment market and lower gains combined with rate pressure in one way and logistics. Speaker 300:10:23Turning to slide 10. Truckload transportation services total revenue for the Q1 was $551,000,000 down 6%. Revenues net of fuel surcharges fell 4% to 478,000,000 dollars TTS adjusted operating income was $22,700,000 down 58% versus prior year and adjusted operating margin net of fuel was 4.7 percent, down 600 basis points. A decline in equipment gains drove nearly half of the TTS decline in operating income. We continue to see gains, albeit lower, and we are leaning into the expertise and capability of our national fleet sales operation. Speaker 300:11:02During the quarter, consolidated gains on sale of equipment came in line with our expectations, totaling $3,600,000 a decline of $14,800,000 or down 80% from a tough comp last year. We are maintaining our view of second half versus first half improvement in the used equipment market, although values may be held down for longer. Net of fuel surcharges and equipment gains, TTS operating expenses declined modestly year over year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 2% versus prior year and a 7% smaller fleet size. One way rate per total mile during the quarter decreased 5.1%. In terms of improvements in the quarter in various TTS expense categories, operating supplies and maintenance expense was down $5,000,000 8% versus prior year and non driver salaries, wages and benefits were down $2,000,000 or 3%. Speaker 300:11:58Driver pay was down excluding fringe benefits. Benefit expense in the quarter increased nearly $2,000,000 versus prior year, driven by outsized health insurance costs in January that subsided later in the quarter. Dedicated remains steady and durable, generating double digit operating margins on a trailing 12 month basis, whereas one way remains especially challenging. As Derek mentioned, achieving our long term TTS operating margin range is a key priority and we remain focused on producing higher operating margins, but achieving this goal by end of year will be more challenging given Q1 results. Turning to Slide 11 to review our fleet metrics. Speaker 300:12:37TTS average truck count was 7,935 during the quarter, down just over 7%. We ended the quarter with the TTS fleet down 2% sequentially and 8% year over year. Our TTS revenue per truck per week net of fuel grew during the quarter by 2.8% and has increased year over year 20 of the last 25 quarters. Within TTS for the Q1, dedicated revenue net of fuel was $301,000,000 down 3%. Dedicated represented 64% of segment revenue compared to 63% a year ago. Speaker 300:13:11Dedicated average trucks decreased 4% to 5,149 trucks. At quarter end, dedicated represented 65% of the TTS fleet. Dedicated revenue per truck per week increased 1.3% year over year, growing 24 of the last 25 quarters through all economic conditions. While our per truck production is trending well, the impact from isolated fleet losses will continue into 2nd and third quarter as those reductions are fully realized. As we've said before, the opportunity pipeline in dedicated remains strong, but competitive. Speaker 300:13:44We are focused on winning with customers that value the reliability, scale, safety and service of our proven dedicated model. Demand improvement will naturally expand existing fleets that contracted single digit percentages over the last year. And with a tighter market, we are positioned well to further penetrate new verticals and other hard to serve freight opportunities. In our one way business for the first quarter, trucking revenue was $169,000,000 a decrease of 8% versus prior year. Average truck count was down 13% to 2,780 6 trucks. Speaker 300:14:18Revenue per truck per week was up 5.6% year over year. One way bid season is well underway with mixed results that are customer specific and reflective of the competitive environment. As we focus on the controllables, we are pleased with another quarter of production gains, achieving near similar total miles versus prior year, but with 13% fewer trucks. We expect the favorable production trend to continue throughout the year, although year over year improvements will moderate. In addition, our power only offering within logistics segment continues to grow. Speaker 300:14:50In a tighter market with better rates, this combination of one way production gains plus double digit power only volume growth translates to improved ROI, and it provides more options for our one way customers, which we can leverage when the market turns. Our Bayoure acquisition continues to maintain shipper brand loyalty and in terms of our ECM acquisition, our Northeast density is proving valuable to cross sell and expand business in the region with long standing Werner customers. Turning now to our logistics segment on Slide 12. In the Q1, logistics revenue declined $26,000,000 or 11%, representing 26% of total 1st quarter Werner revenues. Revenue in truckload logistics declined 13% and volumes decreased 6%. Speaker 300:15:36Shipments declined sequentially from normal seasonality and due to our focus on revenue quality. As previously mentioned, only solution again represented a growing portion of the truckload logistics volume in the quarter. Intermodal revenues, which make up approximately 12% of segment revenue, declined year over year due to a decrease in revenue per shipment, partially offset by an increase in shipments. Final Mile continued to show growth in the Q1, reporting just under a 5% increase in revenue despite a softer market for discretionary spending on big and bulky products. Logistics adjusted operating loss was $1,200,000 in the 1st quarter. Speaker 300:16:14Adjusted operating margin was near breakeven reporting a small loss of 0.6%, down 3.40 basis points year over year and 190 basis points sequentially, driven by rate and gross margin compression. We expect brokerage margins will remain challenged in the near term, with operating margins expanding later in the year through our cost savings and integration success. The team was able to improve revenue quality as the quarter progressed, resulting in gross margins that were better in February March. During the quarter, we further integrated the REIT acquisition along with completing certain technology advancements in Edge TMS and implementation of improved freight payment and audit processes. We are seeing the fruit from these initiatives and this will aid in sustainable margin improvement in coming quarters. Speaker 300:16:59Our strong and growing brokerage refrigerated services should also position us to capitalize on improving seasonal trends related to produce and food and beverage. Overall, we remain encouraged about the mid and long term benefits of our logistics business, given a strong customer portfolio and growing contract business, a growing power only solution, advancing our technology strategy and long term opportunity for growing final mile and intermodal. On Slide 13, we provide an update on our cost savings program. Executing well on our cost savings program remains key to expanding margin and earnings in 2024 and beyond, given a freight and used equipment market that will continue to be challenging. In 2024, we continue to expect to capture over $40,000,000 of savings that are largely structural and sustainable. Speaker 300:17:46We have realized $12,000,000 of savings through the Q1 and have a clear line of sight on the rest of the program. Let's look at our cash flow on Slide 14. We ended the Q1 with $60,000,000 in cash and cash equivalents. Operating cash flow remained strong at $89,000,000 for the quarter or 11.5 percent of total revenue. Net CapEx in the Q1 was $19,000,000 or 2.5 percent of revenue, down $84,000,000 or 81 percent year over year. Speaker 300:18:13Free cash flow for the quarter was $70,000,000 or 9% of total revenues, up 130 basis points year over year. Our total liquidity at quarter end was very strong at $619,000,000 including cash and availability on our revolver. Moving to Slide 15. We ended the quarter with $598,000,000 in debt, down $51,000,000 or 8% sequentially and down nearly $94,000,000 or 14% compared to a year earlier. Net debt to EBITDA was steady at 1.2 times. Speaker 300:18:43We are committed to maintaining a strong balance sheet and access to capital to fund growth and investments that are accretive to earnings. On slide 16, let's recap our capital allocation priorities and strategy. We will continue to prioritize strategic reinvestment in the business and returning capital to shareholders. We spent $6,500,000 on share repurchases during the quarter and will remain opportunistic. Regarding capital expenditures, 2023 was an elevated CapEx year, reflecting lower year over year gains and a greater pace of reinvestment in the business. Speaker 300:19:14For 2024, we are expecting net CapEx to be between 2 $50,000,000 $300,000,000 with 80% towards trucks and trailing equipment and 20% towards technology terminals and our school network. Next on Slide 17 is a review of our guidance for the year. We are lowering our full year fleet guidance from down 3% to flat to down 6% to down 3%. We are down 2% year to date with the visibility to additional reductions from known isolated losses in dedicated. Although greater and we see potential for growth in Dedicated in the second half, but we recognize the challenge and believe it is reasonable to lower fleet size expectations at this time while we focus on maintaining price and margin discipline across our portfolio. Speaker 300:20:07Net CapEx is being lowered by $10,000,000 on either end to a range of $250,000,000 to $300,000,000 Dedicated revenue per truck grew year over year and is expected to remain within our full year guidance range of 0% to 3%. One way truckload revenue per total mile for Q1 decreased 5.1% and is within our guidance range for the first half of the year. Equipment gains were $3,600,000 in the first quarter, consistent with our expectations. We expect similar gains in the Q2, but now anticipate lower equipment values to linger into the second half. As a result, we are lowering the top end of our range and now expect equipment gains the range of $10,000,000 to $20,000,000 down from $10,000,000 to $30,000,000 previously. Speaker 300:20:50While our tax rate in the Q1 was 32.9% due to certain one time discrete items, we expect this to level out throughout the year. Our full year guidance range is now 24.5% to 25.5%. The average age of our truck and trailer fleet in the Q1 was 2.1 5 years respectively, compared to 2.1 4.9 years at the end of 2023. I'll now turn it back to Derek. Speaker 200:21:16Thank you, Chris. Despite the challenging macro backdrop, our leadership team and nearly 14,000 talented Werner team members stayed the course by executing our strategy. They remain focused on upholding the Werner brand and reputation, making safety our top priority and providing superior service to our highly valued customers. We are actively taking steps to improve our operations and advance our competitive strength in the marketplace by investing in technology, reducing costs and optimizing cash flow. While times have been tough, we're cycle tested and built to last. Speaker 200:21:48Our historical results demonstrate our ability to generate earnings power as demand accelerates and the proactive actions we have taken position Werner to capitalize on opportunities as they present themselves in the future. With that, let us open it up for questions. The Operator00:22:43first question comes from Amit Mehrotra with Deutsche Bank. Please go ahead. Speaker 400:22:49Thanks. Hey, everyone. I appreciate the question. Derek, I guess my couple of questions. 1st and foremost, I know you're a student of supply and historically you've talked a lot about supply and I know that's been stubbornly persistent in the market. Speaker 400:23:03Wondering if you could just share your view on kind of where the latest on your view on supply is going to be over the next 12 months? And then obviously, on the bid season side, it feels like shippers are trying to take one last big bite of the apple. Wondering how you're navigating that and thinking about still keeping the optionality to the upside while obviously navigating utilization of the one way fleet? Thank you very much. Speaker 200:23:32Thank you, Amit. Thanks for the question. On the supply side, kind of like I indicated last quarter, it's tough to predict any turn at this point. I will tell you that there are some signs of life that are encouraging, but clearly we've still got some work to do to get this market back in balance. We did see and we referenced some spring project activity that's sort of new and encouraging. Speaker 200:24:01We've seen an uptick in demand as we've kind of got ourselves into Q2. But at the end of the day, we do need capacity to continue to come out of the market. I think we are closer to equilibrium than we have been in a long time. We can see that in a variety of ways through load bookings and customer interactions and even customer conversations as of late. And so it's just going to take a little bit longer to play out. Speaker 200:24:30Clearly, this has been longer than any of us anticipated and extremely frustrating. As it relates to the second part of your question, yes, there's clearly a group of customers out there that will always try to take a last bite of the apple as you indicated. I would tell you our focus is really staying disciplined to what we believe, making sure rates are reinvestable, meaning that we can turn around and make a margin that allows us to invest back into the fleet. We're especially going to be disciplined at this point in the cycle knowing that the end is closer than it's been at any point prior. And so at times that's going to lead to some frictional conversations, but we got to stay true to who we are and what our shareholders deserve. Speaker 200:25:15And that includes a very disciplined cost focused approach that includes making sure that agreements we enter into that we feel as though we can honor. And that's why we've indicated the possibility of some further attrition before things get better within our own fleet. We'll see how that plays out. The pipeline is strong, both in dedicated and frankly in one way has been encouraging as of late. But the pricing environment is still competitive as people are desperate to find safe havens for their assets. Speaker 400:25:52Yes. And then Chris, I mean, does the OR I mean, obviously, the Q1 of the OR is typically the weakest and you had weather challenges. Do we see a pickup in the OR as we progress to 2Q? I certainly hope so, but obviously, it's a different difficult market. I wanted to get your latest thoughts on that. Speaker 300:26:09Yes, sure, Amit. So yes, we should have improvement as we go forward. Our long term target continues to be in TTS 12% to 17%, but that's going to take some time to get there. But we do expect with our continued program in our cost savings program and continuing to focus on our long term strategy that we'll continue to improve from here. Speaker 200:26:56I would just add, Amit, that one way to think about it is, each month of the quarter, the OR improved and we saw margin expand. We obviously are going to work our tails off to keep that trend going forward. We can't control the macro, but what we can control is what we do inside these walls and the team is committed to executing at the highest possible level. Speaker 400:27:19Very good. Thank you very much, Derek, Chris. Appreciate it. Operator00:27:24The next question is from Jason Seidl with TD Cowen. Please go ahead. Speaker 100:27:28Hey, thank you, operator. Hey, Derek. Hey, Chris and team. Just a couple of quick ones from me. Notice the nice productivity gains in miles per truck per week. Speaker 100:27:37Just curious, did that result in any big mix shift in your business? Speaker 200:27:42Yes, Jason, I'll take that. I don't know that I would call it a large mix shift, but clearly it's intentional. The shift that's taking place is intentional. In order to be to lower our cost to serve, we're leaning in further and further to things that we do very well and that we think are particular to us. You know we have a heavy focus on Mexico cross border. Speaker 200:28:03That link to all lends itself to better productivity. We have been really aggressively further engineering our own assets, so that they are operating in more and more repetitive kind of repeatable lanes that where we can extract better productivity both for our drivers, but also high service levels for our customers. So there's a lot of intentionality about it. Some of the tech that we've been building and working on is helping us to be more selective. Now it's tough to do that in a freight backdrop like the one we have right now, but nonetheless it is producing increased utilization and that's something that we think we can hold as we go forward. Speaker 200:28:42The comps will get tougher as we get into the back half because you started to see those gains taking place in the back half of 'twenty three. But it's exciting. I think it really shows what utilizing our assets specifically for what they're good at and then supplementing it with power only where that's a better solution for our customer can really result in. And that's really where the operating leverage comes from in an up cycle and our ability to then utilize that denser, Speaker 500:29:08more Speaker 200:29:08high velocity network at a higher rate per mile to produce upside in an up cycle. Speaker 100:29:14That makes sense. I guess I'll use my follow-up on the comments on used equipment. Chris, I think you mentioned there is expectation for improvement in the back half of the year. Is that just that you guys plan to sell more or you think that pricing is going to improve? And if it's on the pricing side, I guess, A, what gives you the confidence in that? Speaker 100:29:32Is that both for both trucks and trailers? Speaker 300:29:38Yes, we do expect some improvement in the values as we go through the year. I think it's going to be modest improvement as we go through. We are being mindful of equipment and trying to maximize what we can, where it's appropriate, leverage our advantage in having a national fleet sales network and operation. So weaning into that to maximize the gains where possible, but really we're just looking for the market to improve. And it's difficult to say exact timing of that, but we do look for improvement. Speaker 200:30:20Yes. The only thing I would add is that all of the public data that's out there where folks do this for a living also lend their forecast to the same vendors as our internal view. And as it relates to the follow-up question that often comes is that with all of the carriers going out of business, then that put pressure on used. And while it does put pressure on used in the categories that they would be selling or be placing into the market, We are talking about near new or still under warranty higher value equipment that holds up better and really plays well into the pre buy as people start to think about those that are secondary buyers to begin with, we are needing to refresh their fleet and start that work today. There's a lot of regulatory issues coming at us in trucking and getting folks getting their hands on a much fresher fleet, we believe starts taking place later this year. Speaker 100:31:17Makes sense. Appreciate the color and time as always. Thank you. Operator00:31:22The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Speaker 600:31:26Thanks. Good afternoon. So just on the cost side, obviously, the structural cost actions are notable and most welcome. But I think a lot of the transportation companies basically decided to not get super aggressive with responding to the down cycle this time because of all the struggles with bringing resources back post pandemic. But just given how long the down cycle has lasted and how deep it's been, is it time do you think to maybe pull some of the reins in a little bit more for some tactical cost actions as well? Speaker 600:31:58Or do you think that would be coming in the wrong time just for the second flex? Speaker 200:32:03Yes, Ravi, I'll take that. First off, I will tell you, I think our ability to rebound, so regardless of where the fleet is at at any given moment, our ability to rebound from that point is advantaged over others with our vertically integrated school network. And so we do believe that we have some elasticity to the fleet that puts us at a competitive advantage. And so I'll start with that. That also therefore gives us confidence to pull back where we think pulling back is the right decision and really keep that focus on pricing discipline as we enter the very late stages of this particular cycle. Speaker 200:32:40As it relates to cutting back too far, I don't think that's where we are at. I think we're prudently trimming where it makes sense. We're eliminating costs that frankly we can live without. But there but it is tougher and tougher to come by incremental cost savings without doing damage to long term strategic initiatives at Werner and we're simply not going to do that. This is a long game. Speaker 200:33:05We're going to be in this for this cycle and several more And we're preparing this ship for kind of those future seas, not the ones we're in today. I'm really excited about as the turn takes place, our ability for upside operating leverage both in dedicated and one way, as well as now a much larger transactional brokerage intermodal and final mile. So the way the table is set, we feel comfortable with. Clearly, we need some support from the macro. But as that support comes, our ability to respond to it, I think, is in a better position than even it was in the last upcycle. Speaker 600:33:44Understood. That's really helpful. And maybe as a follow-up, I think you had mentioned something about reining in insurance costs kind of. Is that just, again, tactically on the margins? Or are you guys coming up with ways to significantly pull that down because we think that's going to be a meaningful rest of the industry in the coming years? Speaker 300:34:05Yes, this is Chris. Thanks for the question on that. So the quarter was back to a bit of elevated insurance costs overall, more representative of the first half of last year, not necessarily some of those lower trends that we were seeing in the second half of last year. But again, we still view this as a cost per claim issue, not so much a frequency issue and certainly doesn't reflect our continued trend and record setting in our safety metrics. We communicated last year that we had a 19 year low in our DOT preventable accidents per million rating. Speaker 300:34:51And then for the Q1, in comparison to other first quarters, we hit a 20 year low. So we continue to see very positive safety metrics. Last year, we from a premium perspective, we had a low single digit increase in the second half of the year. So that's not really impactful. This is more of a cost per claim issue. Speaker 300:35:16And we anticipate that as we continue to focus on safety and have a very low and positive safety record that that will come through more sustainably in the insurance expense line. Speaker 600:35:33Sounds good. Thank you. Speaker 200:35:35Thank you, Ravi. Operator00:35:37The next question is from Scott Group with Wolfe Research. Please go ahead. Speaker 700:35:43Hey, thanks. Good afternoon. So, Derek, the fleet guidance came down a bunch. The CapEx guidance barely budged and any thoughts there? And then I'm sure you listened to the night call last week and the discussion around mid cycle margins, higher highs, lower lows. Speaker 700:36:01I'm just curious how you think about that in mid cycle just given the starting point for margins being so low? Obviously, I'm asking that for you guys. I'm not asking for opinion on Nike. Speaker 200:36:14Well, thank you for that, Scott. I appreciate it. Look, I do think this cycle is perhaps a once in a lifetime. We'll see as time plays out. The COVID highs were higher than any previous upcycle. Speaker 200:36:28Clearly, the lows have been lower and longer than anything we've endured. We have reiterated affirmatively our long term guidance relative to TTS margins and that's not without significant introspection. We believe that with the strategy we're putting forth and the execution that we have in place will allow us to return there, although the timing of that return is certainly delayed as this market has lingered lower for longer. I suspect as we go forward with this new up this next up cycle, it is going to be also somewhat unique, not as much as COVID, but unique in that it's combined with significant regulatory headwinds, significant environmental overlay that's going to cause capital outlays for carriers to be greater than ever before. That's why we kind of made our move early to freshen the fleet and position ourselves to be in a really good position as that plays out. Speaker 200:37:27I also suspect there's a whole lot of people that have been talking some lessons through the pain of this cycle and there may be more reluctance for capacity to come back in this next time around, but only time will tell. In the interim, our job is to focus relentlessly on getting back to that long term margin guidance range in TTS. And as it relates to comparing the prior cycles, when I look at our portfolio, it's just significantly different now with the acquisition of REIT TMS, the size of logistics as a percentage of the portfolio, the amount of engineering we've done within one way to produce the increased miles per truck that we've been talking about. And then Mexico near shoring plays directly into our portfolio very nicely. So, we're still bullish on what it looks like longer term, and that's why we're trying to take a longer term view with how we build this portfolio out and get ready and prepared for the term when it happens. Speaker 700:38:22Okay. And then, I know if you had a thought on the CapEx relative to the fleet guidance. I apologize. Yes, go ahead. Speaker 200:38:32I apologize. Yes, on the CapEx part of the equation, I think what you're seeing there is 1, some carefulness and thoughtfulness on our part of what the back half could look like. We talked about the opportunity, the fleet guidance ranges for the first half, whereas CapEx is for the whole year. And so we talked about the reality that we do have a strong dedicated pipeline for the back half of the year that continues to look encouraging. And so we want to be prepared to be able to do that. Speaker 200:39:08And it's really just trying to be thoughtful about how we think about that. It's a dramatically reduced CapEx from what you saw a year ago. And so we don't want to starve the fleet and we want to make sure as power only grows or has the opportunity to continue to grow that we have the trailing equipment to go with it. But at this point, that's the comfort level we have. By the way, I want to fix my first statement on fleet guidance. Speaker 200:39:31That is a full year range, not a half year range. Speaker 300:39:35Okay. Speaker 700:39:36And then, let me just go ahead. Speaker 300:39:39Sorry, Scott. I was just going to expand on the net CapEx. Historically, that's been a 10% to 13% of revenue net CapEx. We did guide for that $250,000,000 to $300,000,000 range for the year, that not only lower in dollars, that's also lower as a percentage of revenue. It was $19,000,000 for Q1, so that will elevate as we go through the year. Speaker 700:40:09Okay. And then, Derek, I don't know, this is just a maybe this is a crazy thought, but everyone is saying the same thing that it's just taking longer for this capacity to come out of the market. And it strikes me that this cycle versus prior cycles, you and all the asset based carriers have much bigger brokerage businesses, much bigger power only offerings that are just sort of feeding volumes to these small carriers? And again, maybe crazy, but could it make sense for you and maybe others to shrink the brokerage offering, shrink the power only offering, maybe stop giving volume to small carriers? And do you think that could help accelerate this capacity reduction and get the cycle going again? Speaker 700:40:53I don't know. Speaker 200:40:55Yes, Scott. Well, I don't think it's a crazy thought. I think the issue just lies in the execution, right? Like to actually do that, we'd have to assume that the other brokers that don't have asset positions would also somehow magically stop distributing that freight and not take advantage of the vacuum that it would create. I don't think that's how it would actually play out. Speaker 200:41:16I think they would fill that vacuum. They would feed those carriers. And so instead, I think it took a while at least here at Warner for us to really sure our assets are doing exactly what they're designed to do and in the most optimal performance lanes for our assets, which is different than where a small carrier may be able to operate more effectively. It's a competitive space and truckload logistics, which includes both asset and non asset from a market perspective. And so we've got to bring to bear a product that can compete effectively long term and we believe that mixed approach is the best one kind of a more asset light, if you will, approach. Speaker 200:42:05Finally, I do believe the difference maker in Power Only and the reason it's so valuable is the customer experience. Power only is a completely different experience from a non asset broker in that we've got trailing equipment already there and in place. We are hauling a portion of that portfolio on our own assets. The remainder going to power only. The customer gets a seamless experience with a seamless interaction, tracking and tracing and capability. Speaker 200:42:32And I think it wins in the market and we're seeing that with outpaced growth and power only inside of a division of Werner that's also in outsides outpaced growth, which is logistics overall. We did do some culling in Q1. So you saw into the, I believe, 12 or plus quarters of double digit type growth in logistics. And that's because of us just simply yielding off the bottom and being aggressive on some of these untenable rates. We're going to keep that pricing discipline front and center as we go forward, especially at the point in the market where we believe we are. Speaker 700:43:11Thank you, guys. Appreciate the time. Speaker 200:43:13Thank you, Scott. Operator00:43:15The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 800:43:21Hey, guys. Good afternoon. Thanks for taking the question. Maybe just wanted to follow-up on that conversation there in terms of the 11% utilization and production growth that you see for Warner here. Is that something else you think other fleets, larger fleets, maybe a mid sized ones are also doing and therefore there's a bit of belt tightening on the large fleet side and so they're able to keep more capacity in the market. Speaker 800:43:45And then on the other side, we've speculated on this for a while now, but what do you think is really keeping some of these smaller carriers from going under at least maybe if that would accelerate from here, what do you think would finally move that or do we just have to be patient on that front? Speaker 200:44:04Yes. Thanks, Brian. Starting with the utilization question, although other fleets have shown utilization improvement year over year, I haven't seen anybody that's hit double digits to my knowledge. I think it's something that we're laser focused on. We're executing at levels that I'm extremely proud of with our team and the work they're putting in to do that. Speaker 200:44:26I think it's sort of the early innings of some of the tech coming to bear that and some new tools that we're deploying as well as, as I stated earlier, just a simple focus on what we do really well and doing that with our assets and then providing a solution to customers via power only to do some of the remainder work at still a very high level based on the technology that we've deployed to make that happen. So, it's hard to come by. It's not easy to achieve, especially with the freight market like the one we're in. But I think all of us are getting more creative with how we can sweat the assets further. But again, that 11% is a number that we're extremely proud of. Speaker 200:45:05As it relates to the attrition question, it's tough to predict. We are seeing ongoing attrition. You are now starting to see in recent weeks bankruptcies that are more notable, size of fleets that are more impactful, but it's going to have to continue to take place. And unfortunately, the or fortunately, I guess, depending on how you look at it, customers seem all too willing to continue to push people over that cliff. We're going to maintain our discipline and stay on firm ground, but there will be others that are continuing to sign up for rates that I don't believe are tenable and will find themselves on the wrong side of the ledger shortly. Speaker 200:45:44So it's got to play out. We got to be patient. In the meantime, we can't sit around worrying about it all day. What we have to do instead is redouble our efforts on best in class execution. Speaker 800:45:57All right. Thanks for that, Derek. And then maybe just sticking to the short term, can you talk more about what you're seeing in April so far? How that compares to seasonality? What visibility you have into the Q2 just for probably in the TTS side in terms of the demand there? Speaker 800:46:14And I guess ultimately, you still have an expectation for the spot market to recover here. Is that what is that the demand visibility? Is that helping drive some of that? Speaker 200:46:27Yes. So in April or in April and then Q2 in general, and I'll keep this fairly high level, but it's a bit of tale of 2 cities. We know that some of the fleet attrition we've seen in dedicated will continue to play out in Q2 and Q3. At the same time, we do have a pretty strong pipeline of new opportunities and some new implementations that are already on the books. The net of those, those that we believe you'll see some fleet shrinkage as we have remained that or kept that pricing discipline that I've referenced several times. Speaker 200:46:58We're simply not able to sign up for a dedicated contract right now that is not reinvestable or not at our margin profile and we believe that would be shortsighted to do so. OneWave by contrast has seen limited, but still have appeared spring activity, some project activity and increased opportunity for pricing. That's encouraging. It's bookings and overall demand, February to March in terms of profitability has all indicators are that we are on a path for that to continue as we go forward. And so we'll have to see how it plays out, but early signs are encouraging. Speaker 800:47:54Great. Thanks very much, Derek. Appreciate it. Thank you, Brian. Operator00:47:58The next question is from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:48:04Hey, great. Good afternoon. Thanks for the time and the question. So, Derek, maybe just harp on the dedicated a little bit more. You talked about increasing competition. Speaker 900:48:15I just want to understand, is that because of the loss of dollar stores or are there plans to shrink some of the stores? I know maybe not your direct one, but I know there were some out there talking about bringing some of that planned expansion back in or closing some stores. And is that just an absolute shift to now the cross border opportunity with that fleet? So is that a maybe more a permanent shift in that fleet? Maybe talk a little bit about that dedicated market? Speaker 200:48:41Yes, Ken. I mean, I'll start with this. Every one of our discount retailers year over year is up in truck count within dedicated. So I just want to put to rest this idea that there's some big carnage going on within dedicated, especially if they've rolled this hyper focus on the dollar stores and different announcements of different types. We are up across the board in our discount retail segment and that includes beyond the dollar stores. Speaker 200:49:09So we feel like that product is one that still has great value. It's one that's certainly appreciated and one that we believe we have a competitive advantage on that differentiates us from our competitors. Dedicated in general is very price competitive right now. So that pipeline I've referenced multiple times is full and it looks encouraging, but we would be remiss if we don't just accept that the win rate is going to be at least in the current market at historically low levels because of that pricing discipline that we're going to continue to execute against. And so, where those lines cross is tough to predict right now. Speaker 200:49:49It's probably harder in Dedicated than anywhere because you're talking about signing up for what you hope to be, not just that initial multi year term, but in most cases, in dedicated, it becomes a relationship that lasts decades. And so, we want to get it right going in. We want to do it with the right thoughtfulness. And then the last thing I'll mention, because we've talked about some fleet attrition is, there were certain disadvantages with incumbency and dedicated and the biggest one of all is that you know what the actual work is, whereas competitors bidding on that same work bid based on an RFP and a profile that's been provided that often sounds a little more amenable to your skill set and what actually is going to be once you enter. And so we've got a lot of new entrants in the dedicated that may or may not have full exposure and understanding of what they're signing up for and we're seeing that in the pricing. Speaker 200:50:37So, still staying focused on the prize, which is long term shareholder value and making sure that we're still staying focused on the prize, which is long term shareholder value and making sure we're building a company that's built to last. And I'm excited about what this looks like as it plays out and this turn takes place. But in the short term, there is no refuting the fact that there is pain afoot and we're going to keep fighting through it. Yes. Speaker 300:51:06And I would just add that yes, we do still have high customer retention. And with our on average, a large fleet size on a customer by customer basis, 1, 2, 3 losses can be more material and they can take a bit more time, particularly in this market to replace it. But we feel good about growing Dedicated beyond some of the near term back filling of these fleets. Dedicated is a large addressable market. There's new verticals. Speaker 300:51:38There's private fleets we can be well positioned to win in a tighter market. So we are positioning for the long term. And with these isolated fleet losses that we've been referring to, a little bit less than competitive environment and making sure that we're getting into margin and pricing that's reinvestable long term. And then a little bit more than a third is really related to customers that are changing their approach to supply chain dynamics and parameters and the like. So there remains a very strong pipeline for us to draw from. Speaker 300:52:19We've continued to price numerous opportunities. So it's competitive, but we'll continue to be in the mix and be aggressive and focus on pricing discipline for the long term. Speaker 900:52:32I appreciate that. And if I could just get a follow on kind of on that, you mentioned a competitive bid season and noted that some brokerage, I guess maybe either brokerage carriers or particularly guys out there were getting more aggressive on pricing. Is there anything or industry or I guess industry leader that you would call out or want to talk to? And then it seems like if you kept your revenue per ton mile down 3 to down 6 and Q1 was down 5, does that mean maybe the midpoint kind of looking for a little bit of sequential improvement or stabilization in that rate? Or is that just, hey, that was the rate we set, we're just sticking with that. Speaker 900:53:05I just want to understand if there was a message you wanted in there. Speaker 200:53:10Well, a couple of things. First, I'm not going to call out any industry leaders on their behavior or strategy. I do think when you get deep into a cycle, which one thing you find is customers, even those looking to take another bite at the apple are aligning themselves more with assets than non asset. It's just a logical thing to do at this point in the cycle. And so our ability to have those assets matter a little bit more now than they might have a quarter or 2 ago is upon us, and we're starting to see that with certain bid results. Speaker 200:53:39But the white noise that's created by a broker potentially undercutting rates are getting even more aggressive knowing it's harder to win right now can be problematic and we see that as well. And it's a matter of whether you're aligned with the right customer base. And in most cases, we are and in some cases, we're finding that perhaps we are not. Job though is to again go back to the playbook and make sure we execute the plays as drawn and stay committed to what we know works through to and through a cycle and feel good about what we are doing there despite the Q1 results. It's a longer term view. Speaker 200:54:13It's a longer term strategy than just a quarter. So we'll stay to our knitting and move forward And as this plays out, I think we're going to have the right formula for success. Speaker 300:54:26Yes. And Ken, just to follow-up on the last part of question there on rate per mile. I believe you're referring to the one way truckload rate per mile and the first half year over year guidance of being down 6 to down 3. You're correct. I think you referenced being down 5% through the Q1 on a year over year basis. Speaker 300:54:46So still within that range, although trending to the lower end, we're about 30% through the bid season. There's been some mixed results to this point, including some low single digit reductions, but also some that are flat and more recently some that are increasing our renewals. So we have a bit more to go in the heavy part of the bid season here, But we'll continue to maintain that pricing discipline and do what we can to stay in the range there. Speaker 900:55:22Appreciate the thoughts. Speaker 500:55:22Thanks for the time guys. Speaker 200:55:24Thank you, Ken. Operator00:55:26The next question is from Tom Wadewitz with UBS. Please go ahead. Speaker 500:55:32Hey, guys. It's Mike Traiano on for Tom. So obviously, tough operating environment, but your free cash flow was up 9% year over year with the step down in CapEx. Werner is one of the largest and best run trucking companies out there, but what extent is the cash flow resiliency that you've had representative of the broader trucking market? And do you think is a reason why capacity has been so stubborn to exit the market? Speaker 300:56:02Well, and just in terms of maybe the first part of your question on our cash flow and trend, over the past couple of years, our free cash flow has been more in the 2% to 4% of revenue. In building the plan this year, being mindful of the operating environment, margins, reinvesting in the fleet, lower CapEx. We were gearing towards a free cash flow that on a percent of revenue basis was just going to have higher free cash flow conversion. We still feel good about that outcome for the year, given all those factors and managing a CapEx level that still appropriately invests in the fleet. So we think that that's even in this environment going to continue to be a positive trend perspective on free cash flow conversion going forward. Speaker 200:57:00And the second part of that, I'll jump in. As it relates to our others able to do that, certainly well ran large capitalized fleets, I think we're probably putting a lot of diligence towards this. I'm not so sure your small to midsize trucker thinks about free cash flow much until it runs out. I think the difference is, it takes a long time to kill a trucker and they are out there operating equipment that they are running to the end of life, but no ability to reinvest or re up or even refresh that particular piece of equipment. There's regulatory hurdles and other things about to come at them in waves that I think will make that reinvestment even more difficult And they had a they were flushed with cash coming out of the COVID years and that's largely burnt off, if not completely burnt off at this point. Speaker 200:57:46So, I think it's happening. It's going to continue to happen. But no, I do not believe they're managing free cash flow the way people like Werner Enterprises are. But nonetheless, it's just taken a long time for them to kind of burn through the remaining life on that asset and ultimately exit. Speaker 500:58:06Okay. Appreciate the thoughts, Derrick and Chris. Speaker 200:58:09Thank you. Operator00:58:10And the last question today is from Bascome Majors with Susquehanna. Please go ahead. Speaker 1000:58:16Yes, thanks for taking my question. I don't want to get too short term here, but I do think it would be helpful to level set expectations and bring together some of the seasonality commentary you said earlier in the call. So if I look at 1Q to 2Q and you strip out the outliers, operating income and earnings, they typically grow anywhere from 20% to call it 50%. Is that the kind of range that feels reasonable with the puts and the takes that you've already talked about? Or is it just too early to do that kind of normal historical relationship given the uncertainty out of there? Speaker 1000:58:53Thank you. Speaker 300:58:55Hey, Bascome. Yes, I appreciate your question. You know, we don't give EPS guidance, but you know, just to give some color, I guess, in terms of the business outlook. As we look forward kind of mid term, we would expect demand to remain steady. The rate pressure is going to be ongoing across the portfolio. Speaker 300:59:21No real signs of more meaningful attrition in that excess capacity, which is obviously driving this whole rate environment. It's going to keep the environment competitive. We have more to go in kind of the heavy part of the bid season, and we'll be back filling some of the dedicated losses, fleet losses into the Q2. Although again, there's a strong pipeline of opportunities that we can draw from. We expect the revenue per truck per week on TTS to continue to be growing on a year over year basis. Speaker 301:00:02That year over year difference might moderate a bit as we go through the year, but we would continue to expect some year over year favorability there. The used equipment market is important. And as I said earlier, I think that will improve modestly throughout the year. And we're going to continue to advance our structural changes, the cost savings, which are on track and growing, we'll continue to progress those. We'll continue to lean into safety and looking for that to show a more favorable trend in some of those low $30,000,000 per quarter numbers that we are seeing in the second half of last year. Speaker 301:00:41We'll continue to lean into our operational excellence and really get more of that production improvement on the one way side. So we can't control the macro. We can focus on controlling the controllables, continuing to serve our customers safely, reliably and at scale and execute on the long term strategy. If we do that, then we're going to be more positioned navigate this market well and be ready for a tighter market and a better market. It was Q1 is typically our low quarter coming off the peak. Speaker 301:01:21There were some compounding factors in the Q1, including call it $0.05 to $0.06 of really unique one offs in terms of the adverse weather, elevated health insurance costs, and some discrete income tax adjustments in the quarter that aren't necessarily expected to continue. So a lot there, I'm probably not being as specific as you would like, but we would expect some improvement and we're just going to continue to be focused on controlling what we can and being set up for a better market when it comes. Speaker 1001:02:01So it sounds like you do expect sequential improvement, just it's really hard to peg that versus any historic sort of bogey at this point? Speaker 201:02:10We do. Speaker 1001:02:12Thank you very much. Speaker 201:02:14Thank you, Vasquez. Operator01:02:16This concludes our question and answer session. I'll now turn the call over to Mr. Derek Leathers, who will provide closing comments. Please go ahead, sir. Speaker 201:02:24Thank you, Gary. I want to thank our nearly 14,000 Werner associates for their dedication, loyalty and commitment to supporting each other and serving our customers daily. I also want to reiterate our support for everyone impacted by the recent tornadoes across Omaha and the Midwest and we will get through this. I want to thank our valued customers for choosing Werner and giving us the opportunity to support their business and we will continue to operate with eyes wide open as we navigate the current very challenging environment. We are controlling what we can and driving operational improvements, managing expenses and driving savings while strategically investing for our future. Speaker 201:03:00Our balance sheet is healthy and our cash flow is strong and our diverse portfolio puts us in a great position for the eventual market turn. In the meantime, we're going to remain disciplined on our approach. We're going to remain committed to safety and we're going to continue to serve our customers. I'm going to thank you all for being with us today and for joining our call. Operator01:03:22The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallWerner Enterprises Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Werner Enterprises Earnings HeadlinesWerner Enterprises (NASDAQ:WERN) Stock Rating Lowered by Evercore ISIMay 3 at 1:42 AM | americanbankingnews.comThe Goldman Sachs Group Issues Pessimistic Forecast for Werner Enterprises (NASDAQ:WERN) Stock PriceMay 3 at 1:42 AM | americanbankingnews.comWarning: “DOGE Collapse” imminentElon Strikes Back You may already sense that the tide is turning against Elon Musk and DOGE. Just this week, President Trump promised to buy a Tesla to help support Musk in the face of a boycott against his company. But according to one research group, with connections to the Pentagon and the U.S. government, Elon's preparing to strike back in a much bigger way in the days ahead.May 5, 2025 | Altimetry (Ad)Stifel Nicolaus Cuts Werner Enterprises (NASDAQ:WERN) Price Target to $24.00May 3 at 1:42 AM | americanbankingnews.comWells Fargo & Company Issues Pessimistic Forecast for Werner Enterprises (NASDAQ:WERN) Stock PriceMay 3 at 1:42 AM | americanbankingnews.comTD Cowen Issues Pessimistic Forecast for Werner Enterprises (NASDAQ:WERN) Stock PriceMay 3 at 1:42 AM | americanbankingnews.comSee More Werner Enterprises Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Werner Enterprises? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Werner Enterprises and other key companies, straight to your email. Email Address About Werner EnterprisesWerner Enterprises (NASDAQ:WERN), together with its subsidiaries, engages in transporting truckload shipments of general commodities in interstate and intrastate commerce in the United States, Mexico, and internationally. The company operates through two segments, Truckload Transportation Services and Werner Logistics. The Truckload Transportation Services segment operates a fleet of medium-to-long-haul vans that transports various consumer nondurable products and other commodities in truckload quantities using dry van trailers; the expedited fleet, which offers time-sensitive truckload services using driver teams; a regional short-haul fleet that provides truckload van service in the United States; and temperature-controlled fleet, which offers truckload services for temperature-sensitive products using temperature-controlled trailers. This segment provides truckload services to retail distribution centers or manufacturing facilities using dry vans or trailers to transport retail store merchandise, consumer products, food and beverage products, and manufactured products. As of December 31, 2023, it had a fleet of 8,000 trucks, which included 7,740 company-operated, as well as 260 owned and operated by independent contractors; and 30,810 trailers that comprised dry vans, flatbeds, temperature-controlled, and other trailers. The Werner Logistics segment provides non-asset-based transportation and logistics services, including truck brokerage; logistics management services and solutions; rail transportation through alliances with rail and drayage providers; and residential and commercial deliveries of large or heavy items using liftgate straight trucks. As of December 31, 2023, this segment operated 35 drayage tractors and 115 delivery trucks. It also sells used trucks and trailers; and trades used trucks to original equipment manufacturers. The company was founded in 1956 and is headquartered in Omaha, Nebraska.View Werner Enterprises ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Amazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousMeta Takes A Bow With Q1 Earnings - Watch For Tariff Impact in Q2Palantir Earnings: 1 Bullish Signal and 1 Area of ConcernVisa Q2 Earnings Top Forecasts, Adds $30B Buyback PlanMicrosoft Crushes Earnings, What’s Next for MSFT Stock?Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay AwayAMD Stock Signals Strong Buy Ahead of Earnings Upcoming Earnings Advanced Micro Devices (5/6/2025)American Electric Power (5/6/2025)Constellation Energy (5/6/2025)Marriott International (5/6/2025)Energy Transfer (5/6/2025)Mplx (5/6/2025)Brookfield Asset Management (5/6/2025)Arista Networks (5/6/2025)Duke Energy (5/6/2025)Zoetis (5/6/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 11 speakers on the call. Operator00:00:01Good afternoon, and welcome to the Werner Enterprises First Quarter 20 24 Earnings Conference Call. All participants will be in listen only mode. 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. Speaker 100:00:42Good afternoon, everyone. Earlier today, we issued our earnings release with our Q1 results. The release and a supplemental presentation are available in the Investors section of our website atwarner.com. Today's webcast is being recorded and will be available for replay later today. Please see the disclosure statement on Slide 2 of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Speaker 100:01:07Today'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 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, Treasurer and CFO. Derek will provide an overview of our Q1 results and update on our strategic priorities for 2024 and our market outlook. Speaker 100:01:50Chris 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. Speaker 200:01:59Thank you, Chris, and good afternoon, everyone. We appreciate you joining us. Before we get started on our Q1 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 Werner 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. Speaker 200:02:29Regrettably, 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 Q1 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. Speaker 200:02:58We 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 Werner for success in an eventual tighter market. Let's move on to Slide 5 and highlight our first During the quarter, revenues were 8% lower versus the prior year. Adjusted EPS was $0.14 Adjusted operating margin was 2.4%. Speaker 200:03:39Adjusted TTS operating margin was 4.7 percent net of fuel surcharges. In Dedicated, there is more noise from competition. Despite losing a few fleets to changes in the supply chain approach for select customers and isolated competitive undercutting, Dedicated remained solid 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. Speaker 200:04:08Accordingly, 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 loaded volume was steady and seasonally consistent. The revenues remain challenged by ongoing rate pressure. Despite setbacks from weather, miles per truck increased 11%, marking the 4th consecutive quarter of improvement. Our total miles were nearly similar to prior year, down less than 3% despite 13% fewer trucks. Speaker 200:04:38We are pleased with the operational excellence that has been building to achieve similar volume with less capital intensity. Within logistics, Q1 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 the limited driver throughput for our school network. Speaker 200:05:17This 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 Q1 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 6. Despite the challenging environment, we continue to push forward with implementing structural improvements that will position Werner for success as rate normalizes. Our DRiV framework continues to inform our decisions over the long term, representing our commitment to durability, results, innovation, values, our associates and the environment. Speaker 200:05:58Last week, we announced that Werner 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 category. This honored award highlights Warner's quality, employee satisfaction and industry leadership. Relative to our 2024 objectives, last quarter we communicated 3 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. Speaker 200:06:34Relative 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 that growth. To achieve our long term TTS range of 12% 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. Speaker 200:07:11From an operational and cost basis perspective, Werner is in a much stronger position and with increased demand, better rates, a stronger used equipment market and further reining in of insurance cost 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 HDMS platform is a multiyear journey and we remain encouraged by the synergies and value of the single freight platform, enhancing our customers' experience and our visibility while providing additional opportunities to grow revenue and reduce cost. Speaker 200:08:04And finally, our 3rd 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. Speaker 200:08:25You 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 7, we expect a challenging freight market to continue through Q2 and into the second half of twenty twenty four. 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. Speaker 200:08:56We've 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 performed 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. Speaker 200:09:27We will continue to exercise pricing discipline. The environment in 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 Q1 results in more detail. Speaker 300:09:53Thank you, Derek. Let's continue on Slide 9. First quarter revenues totaled $769,000,000 down 8% versus prior year. Adjusted operating income was 18 point $6,000,000 and adjusted operating margin was 2.4 percent, down 68% and 4.50 basis points respectively. Adjusted EPS of $0.14 was down $0.46 with over 95% of the variance driven by a softer used equipment market and lower gains combined with rate pressure in one way and logistics. Speaker 300:10:23Turning to slide 10. Truckload transportation services total revenue for the Q1 was $551,000,000 down 6%. Revenues net of fuel surcharges fell 4% to 478,000,000 dollars TTS adjusted operating income was $22,700,000 down 58% versus prior year and adjusted operating margin net of fuel was 4.7 percent, down 600 basis points. A decline in equipment gains drove nearly half of the TTS decline in operating income. We continue to see gains, albeit lower, and we are leaning into the expertise and capability of our national fleet sales operation. Speaker 300:11:02During the quarter, consolidated gains on sale of equipment came in line with our expectations, totaling $3,600,000 a decline of $14,800,000 or down 80% from a tough comp last year. We are maintaining our view of second half versus first half improvement in the used equipment market, although values may be held down for longer. Net of fuel surcharges and equipment gains, TTS operating expenses declined modestly year over year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 2% versus prior year and a 7% smaller fleet size. One way rate per total mile during the quarter decreased 5.1%. In terms of improvements in the quarter in various TTS expense categories, operating supplies and maintenance expense was down $5,000,000 8% versus prior year and non driver salaries, wages and benefits were down $2,000,000 or 3%. Speaker 300:11:58Driver pay was down excluding fringe benefits. Benefit expense in the quarter increased nearly $2,000,000 versus prior year, driven by outsized health insurance costs in January that subsided later in the quarter. Dedicated remains steady and durable, generating double digit operating margins on a trailing 12 month basis, whereas one way remains especially challenging. As Derek mentioned, achieving our long term TTS operating margin range is a key priority and we remain focused on producing higher operating margins, but achieving this goal by end of year will be more challenging given Q1 results. Turning to Slide 11 to review our fleet metrics. Speaker 300:12:37TTS average truck count was 7,935 during the quarter, down just over 7%. We ended the quarter with the TTS fleet down 2% sequentially and 8% year over year. Our TTS revenue per truck per week net of fuel grew during the quarter by 2.8% and has increased year over year 20 of the last 25 quarters. Within TTS for the Q1, dedicated revenue net of fuel was $301,000,000 down 3%. Dedicated represented 64% of segment revenue compared to 63% a year ago. Speaker 300:13:11Dedicated average trucks decreased 4% to 5,149 trucks. At quarter end, dedicated represented 65% of the TTS fleet. Dedicated revenue per truck per week increased 1.3% year over year, growing 24 of the last 25 quarters through all economic conditions. While our per truck production is trending well, the impact from isolated fleet losses will continue into 2nd and third quarter as those reductions are fully realized. As we've said before, the opportunity pipeline in dedicated remains strong, but competitive. Speaker 300:13:44We are focused on winning with customers that value the reliability, scale, safety and service of our proven dedicated model. Demand improvement will naturally expand existing fleets that contracted single digit percentages over the last year. And with a tighter market, we are positioned well to further penetrate new verticals and other hard to serve freight opportunities. In our one way business for the first quarter, trucking revenue was $169,000,000 a decrease of 8% versus prior year. Average truck count was down 13% to 2,780 6 trucks. Speaker 300:14:18Revenue per truck per week was up 5.6% year over year. One way bid season is well underway with mixed results that are customer specific and reflective of the competitive environment. As we focus on the controllables, we are pleased with another quarter of production gains, achieving near similar total miles versus prior year, but with 13% fewer trucks. We expect the favorable production trend to continue throughout the year, although year over year improvements will moderate. In addition, our power only offering within logistics segment continues to grow. Speaker 300:14:50In a tighter market with better rates, this combination of one way production gains plus double digit power only volume growth translates to improved ROI, and it provides more options for our one way customers, which we can leverage when the market turns. Our Bayoure acquisition continues to maintain shipper brand loyalty and in terms of our ECM acquisition, our Northeast density is proving valuable to cross sell and expand business in the region with long standing Werner customers. Turning now to our logistics segment on Slide 12. In the Q1, logistics revenue declined $26,000,000 or 11%, representing 26% of total 1st quarter Werner revenues. Revenue in truckload logistics declined 13% and volumes decreased 6%. Speaker 300:15:36Shipments declined sequentially from normal seasonality and due to our focus on revenue quality. As previously mentioned, only solution again represented a growing portion of the truckload logistics volume in the quarter. Intermodal revenues, which make up approximately 12% of segment revenue, declined year over year due to a decrease in revenue per shipment, partially offset by an increase in shipments. Final Mile continued to show growth in the Q1, reporting just under a 5% increase in revenue despite a softer market for discretionary spending on big and bulky products. Logistics adjusted operating loss was $1,200,000 in the 1st quarter. Speaker 300:16:14Adjusted operating margin was near breakeven reporting a small loss of 0.6%, down 3.40 basis points year over year and 190 basis points sequentially, driven by rate and gross margin compression. We expect brokerage margins will remain challenged in the near term, with operating margins expanding later in the year through our cost savings and integration success. The team was able to improve revenue quality as the quarter progressed, resulting in gross margins that were better in February March. During the quarter, we further integrated the REIT acquisition along with completing certain technology advancements in Edge TMS and implementation of improved freight payment and audit processes. We are seeing the fruit from these initiatives and this will aid in sustainable margin improvement in coming quarters. Speaker 300:16:59Our strong and growing brokerage refrigerated services should also position us to capitalize on improving seasonal trends related to produce and food and beverage. Overall, we remain encouraged about the mid and long term benefits of our logistics business, given a strong customer portfolio and growing contract business, a growing power only solution, advancing our technology strategy and long term opportunity for growing final mile and intermodal. On Slide 13, we provide an update on our cost savings program. Executing well on our cost savings program remains key to expanding margin and earnings in 2024 and beyond, given a freight and used equipment market that will continue to be challenging. In 2024, we continue to expect to capture over $40,000,000 of savings that are largely structural and sustainable. Speaker 300:17:46We have realized $12,000,000 of savings through the Q1 and have a clear line of sight on the rest of the program. Let's look at our cash flow on Slide 14. We ended the Q1 with $60,000,000 in cash and cash equivalents. Operating cash flow remained strong at $89,000,000 for the quarter or 11.5 percent of total revenue. Net CapEx in the Q1 was $19,000,000 or 2.5 percent of revenue, down $84,000,000 or 81 percent year over year. Speaker 300:18:13Free cash flow for the quarter was $70,000,000 or 9% of total revenues, up 130 basis points year over year. Our total liquidity at quarter end was very strong at $619,000,000 including cash and availability on our revolver. Moving to Slide 15. We ended the quarter with $598,000,000 in debt, down $51,000,000 or 8% sequentially and down nearly $94,000,000 or 14% compared to a year earlier. Net debt to EBITDA was steady at 1.2 times. Speaker 300:18:43We are committed to maintaining a strong balance sheet and access to capital to fund growth and investments that are accretive to earnings. On slide 16, let's recap our capital allocation priorities and strategy. We will continue to prioritize strategic reinvestment in the business and returning capital to shareholders. We spent $6,500,000 on share repurchases during the quarter and will remain opportunistic. Regarding capital expenditures, 2023 was an elevated CapEx year, reflecting lower year over year gains and a greater pace of reinvestment in the business. Speaker 300:19:14For 2024, we are expecting net CapEx to be between 2 $50,000,000 $300,000,000 with 80% towards trucks and trailing equipment and 20% towards technology terminals and our school network. Next on Slide 17 is a review of our guidance for the year. We are lowering our full year fleet guidance from down 3% to flat to down 6% to down 3%. We are down 2% year to date with the visibility to additional reductions from known isolated losses in dedicated. Although greater and we see potential for growth in Dedicated in the second half, but we recognize the challenge and believe it is reasonable to lower fleet size expectations at this time while we focus on maintaining price and margin discipline across our portfolio. Speaker 300:20:07Net CapEx is being lowered by $10,000,000 on either end to a range of $250,000,000 to $300,000,000 Dedicated revenue per truck grew year over year and is expected to remain within our full year guidance range of 0% to 3%. One way truckload revenue per total mile for Q1 decreased 5.1% and is within our guidance range for the first half of the year. Equipment gains were $3,600,000 in the first quarter, consistent with our expectations. We expect similar gains in the Q2, but now anticipate lower equipment values to linger into the second half. As a result, we are lowering the top end of our range and now expect equipment gains the range of $10,000,000 to $20,000,000 down from $10,000,000 to $30,000,000 previously. Speaker 300:20:50While our tax rate in the Q1 was 32.9% due to certain one time discrete items, we expect this to level out throughout the year. Our full year guidance range is now 24.5% to 25.5%. The average age of our truck and trailer fleet in the Q1 was 2.1 5 years respectively, compared to 2.1 4.9 years at the end of 2023. I'll now turn it back to Derek. Speaker 200:21:16Thank you, Chris. Despite the challenging macro backdrop, our leadership team and nearly 14,000 talented Werner team members stayed the course by executing our strategy. They remain focused on upholding the Werner brand and reputation, making safety our top priority and providing superior service to our highly valued customers. We are actively taking steps to improve our operations and advance our competitive strength in the marketplace by investing in technology, reducing costs and optimizing cash flow. While times have been tough, we're cycle tested and built to last. Speaker 200:21:48Our historical results demonstrate our ability to generate earnings power as demand accelerates and the proactive actions we have taken position Werner to capitalize on opportunities as they present themselves in the future. With that, let us open it up for questions. The Operator00:22:43first question comes from Amit Mehrotra with Deutsche Bank. Please go ahead. Speaker 400:22:49Thanks. Hey, everyone. I appreciate the question. Derek, I guess my couple of questions. 1st and foremost, I know you're a student of supply and historically you've talked a lot about supply and I know that's been stubbornly persistent in the market. Speaker 400:23:03Wondering if you could just share your view on kind of where the latest on your view on supply is going to be over the next 12 months? And then obviously, on the bid season side, it feels like shippers are trying to take one last big bite of the apple. Wondering how you're navigating that and thinking about still keeping the optionality to the upside while obviously navigating utilization of the one way fleet? Thank you very much. Speaker 200:23:32Thank you, Amit. Thanks for the question. On the supply side, kind of like I indicated last quarter, it's tough to predict any turn at this point. I will tell you that there are some signs of life that are encouraging, but clearly we've still got some work to do to get this market back in balance. We did see and we referenced some spring project activity that's sort of new and encouraging. Speaker 200:24:01We've seen an uptick in demand as we've kind of got ourselves into Q2. But at the end of the day, we do need capacity to continue to come out of the market. I think we are closer to equilibrium than we have been in a long time. We can see that in a variety of ways through load bookings and customer interactions and even customer conversations as of late. And so it's just going to take a little bit longer to play out. Speaker 200:24:30Clearly, this has been longer than any of us anticipated and extremely frustrating. As it relates to the second part of your question, yes, there's clearly a group of customers out there that will always try to take a last bite of the apple as you indicated. I would tell you our focus is really staying disciplined to what we believe, making sure rates are reinvestable, meaning that we can turn around and make a margin that allows us to invest back into the fleet. We're especially going to be disciplined at this point in the cycle knowing that the end is closer than it's been at any point prior. And so at times that's going to lead to some frictional conversations, but we got to stay true to who we are and what our shareholders deserve. Speaker 200:25:15And that includes a very disciplined cost focused approach that includes making sure that agreements we enter into that we feel as though we can honor. And that's why we've indicated the possibility of some further attrition before things get better within our own fleet. We'll see how that plays out. The pipeline is strong, both in dedicated and frankly in one way has been encouraging as of late. But the pricing environment is still competitive as people are desperate to find safe havens for their assets. Speaker 400:25:52Yes. And then Chris, I mean, does the OR I mean, obviously, the Q1 of the OR is typically the weakest and you had weather challenges. Do we see a pickup in the OR as we progress to 2Q? I certainly hope so, but obviously, it's a different difficult market. I wanted to get your latest thoughts on that. Speaker 300:26:09Yes, sure, Amit. So yes, we should have improvement as we go forward. Our long term target continues to be in TTS 12% to 17%, but that's going to take some time to get there. But we do expect with our continued program in our cost savings program and continuing to focus on our long term strategy that we'll continue to improve from here. Speaker 200:26:56I would just add, Amit, that one way to think about it is, each month of the quarter, the OR improved and we saw margin expand. We obviously are going to work our tails off to keep that trend going forward. We can't control the macro, but what we can control is what we do inside these walls and the team is committed to executing at the highest possible level. Speaker 400:27:19Very good. Thank you very much, Derek, Chris. Appreciate it. Operator00:27:24The next question is from Jason Seidl with TD Cowen. Please go ahead. Speaker 100:27:28Hey, thank you, operator. Hey, Derek. Hey, Chris and team. Just a couple of quick ones from me. Notice the nice productivity gains in miles per truck per week. Speaker 100:27:37Just curious, did that result in any big mix shift in your business? Speaker 200:27:42Yes, Jason, I'll take that. I don't know that I would call it a large mix shift, but clearly it's intentional. The shift that's taking place is intentional. In order to be to lower our cost to serve, we're leaning in further and further to things that we do very well and that we think are particular to us. You know we have a heavy focus on Mexico cross border. Speaker 200:28:03That link to all lends itself to better productivity. We have been really aggressively further engineering our own assets, so that they are operating in more and more repetitive kind of repeatable lanes that where we can extract better productivity both for our drivers, but also high service levels for our customers. So there's a lot of intentionality about it. Some of the tech that we've been building and working on is helping us to be more selective. Now it's tough to do that in a freight backdrop like the one we have right now, but nonetheless it is producing increased utilization and that's something that we think we can hold as we go forward. Speaker 200:28:42The comps will get tougher as we get into the back half because you started to see those gains taking place in the back half of 'twenty three. But it's exciting. I think it really shows what utilizing our assets specifically for what they're good at and then supplementing it with power only where that's a better solution for our customer can really result in. And that's really where the operating leverage comes from in an up cycle and our ability to then utilize that denser, Speaker 500:29:08more Speaker 200:29:08high velocity network at a higher rate per mile to produce upside in an up cycle. Speaker 100:29:14That makes sense. I guess I'll use my follow-up on the comments on used equipment. Chris, I think you mentioned there is expectation for improvement in the back half of the year. Is that just that you guys plan to sell more or you think that pricing is going to improve? And if it's on the pricing side, I guess, A, what gives you the confidence in that? Speaker 100:29:32Is that both for both trucks and trailers? Speaker 300:29:38Yes, we do expect some improvement in the values as we go through the year. I think it's going to be modest improvement as we go through. We are being mindful of equipment and trying to maximize what we can, where it's appropriate, leverage our advantage in having a national fleet sales network and operation. So weaning into that to maximize the gains where possible, but really we're just looking for the market to improve. And it's difficult to say exact timing of that, but we do look for improvement. Speaker 200:30:20Yes. The only thing I would add is that all of the public data that's out there where folks do this for a living also lend their forecast to the same vendors as our internal view. And as it relates to the follow-up question that often comes is that with all of the carriers going out of business, then that put pressure on used. And while it does put pressure on used in the categories that they would be selling or be placing into the market, We are talking about near new or still under warranty higher value equipment that holds up better and really plays well into the pre buy as people start to think about those that are secondary buyers to begin with, we are needing to refresh their fleet and start that work today. There's a lot of regulatory issues coming at us in trucking and getting folks getting their hands on a much fresher fleet, we believe starts taking place later this year. Speaker 100:31:17Makes sense. Appreciate the color and time as always. Thank you. Operator00:31:22The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Speaker 600:31:26Thanks. Good afternoon. So just on the cost side, obviously, the structural cost actions are notable and most welcome. But I think a lot of the transportation companies basically decided to not get super aggressive with responding to the down cycle this time because of all the struggles with bringing resources back post pandemic. But just given how long the down cycle has lasted and how deep it's been, is it time do you think to maybe pull some of the reins in a little bit more for some tactical cost actions as well? Speaker 600:31:58Or do you think that would be coming in the wrong time just for the second flex? Speaker 200:32:03Yes, Ravi, I'll take that. First off, I will tell you, I think our ability to rebound, so regardless of where the fleet is at at any given moment, our ability to rebound from that point is advantaged over others with our vertically integrated school network. And so we do believe that we have some elasticity to the fleet that puts us at a competitive advantage. And so I'll start with that. That also therefore gives us confidence to pull back where we think pulling back is the right decision and really keep that focus on pricing discipline as we enter the very late stages of this particular cycle. Speaker 200:32:40As it relates to cutting back too far, I don't think that's where we are at. I think we're prudently trimming where it makes sense. We're eliminating costs that frankly we can live without. But there but it is tougher and tougher to come by incremental cost savings without doing damage to long term strategic initiatives at Werner and we're simply not going to do that. This is a long game. Speaker 200:33:05We're going to be in this for this cycle and several more And we're preparing this ship for kind of those future seas, not the ones we're in today. I'm really excited about as the turn takes place, our ability for upside operating leverage both in dedicated and one way, as well as now a much larger transactional brokerage intermodal and final mile. So the way the table is set, we feel comfortable with. Clearly, we need some support from the macro. But as that support comes, our ability to respond to it, I think, is in a better position than even it was in the last upcycle. Speaker 600:33:44Understood. That's really helpful. And maybe as a follow-up, I think you had mentioned something about reining in insurance costs kind of. Is that just, again, tactically on the margins? Or are you guys coming up with ways to significantly pull that down because we think that's going to be a meaningful rest of the industry in the coming years? Speaker 300:34:05Yes, this is Chris. Thanks for the question on that. So the quarter was back to a bit of elevated insurance costs overall, more representative of the first half of last year, not necessarily some of those lower trends that we were seeing in the second half of last year. But again, we still view this as a cost per claim issue, not so much a frequency issue and certainly doesn't reflect our continued trend and record setting in our safety metrics. We communicated last year that we had a 19 year low in our DOT preventable accidents per million rating. Speaker 300:34:51And then for the Q1, in comparison to other first quarters, we hit a 20 year low. So we continue to see very positive safety metrics. Last year, we from a premium perspective, we had a low single digit increase in the second half of the year. So that's not really impactful. This is more of a cost per claim issue. Speaker 300:35:16And we anticipate that as we continue to focus on safety and have a very low and positive safety record that that will come through more sustainably in the insurance expense line. Speaker 600:35:33Sounds good. Thank you. Speaker 200:35:35Thank you, Ravi. Operator00:35:37The next question is from Scott Group with Wolfe Research. Please go ahead. Speaker 700:35:43Hey, thanks. Good afternoon. So, Derek, the fleet guidance came down a bunch. The CapEx guidance barely budged and any thoughts there? And then I'm sure you listened to the night call last week and the discussion around mid cycle margins, higher highs, lower lows. Speaker 700:36:01I'm just curious how you think about that in mid cycle just given the starting point for margins being so low? Obviously, I'm asking that for you guys. I'm not asking for opinion on Nike. Speaker 200:36:14Well, thank you for that, Scott. I appreciate it. Look, I do think this cycle is perhaps a once in a lifetime. We'll see as time plays out. The COVID highs were higher than any previous upcycle. Speaker 200:36:28Clearly, the lows have been lower and longer than anything we've endured. We have reiterated affirmatively our long term guidance relative to TTS margins and that's not without significant introspection. We believe that with the strategy we're putting forth and the execution that we have in place will allow us to return there, although the timing of that return is certainly delayed as this market has lingered lower for longer. I suspect as we go forward with this new up this next up cycle, it is going to be also somewhat unique, not as much as COVID, but unique in that it's combined with significant regulatory headwinds, significant environmental overlay that's going to cause capital outlays for carriers to be greater than ever before. That's why we kind of made our move early to freshen the fleet and position ourselves to be in a really good position as that plays out. Speaker 200:37:27I also suspect there's a whole lot of people that have been talking some lessons through the pain of this cycle and there may be more reluctance for capacity to come back in this next time around, but only time will tell. In the interim, our job is to focus relentlessly on getting back to that long term margin guidance range in TTS. And as it relates to comparing the prior cycles, when I look at our portfolio, it's just significantly different now with the acquisition of REIT TMS, the size of logistics as a percentage of the portfolio, the amount of engineering we've done within one way to produce the increased miles per truck that we've been talking about. And then Mexico near shoring plays directly into our portfolio very nicely. So, we're still bullish on what it looks like longer term, and that's why we're trying to take a longer term view with how we build this portfolio out and get ready and prepared for the term when it happens. Speaker 700:38:22Okay. And then, I know if you had a thought on the CapEx relative to the fleet guidance. I apologize. Yes, go ahead. Speaker 200:38:32I apologize. Yes, on the CapEx part of the equation, I think what you're seeing there is 1, some carefulness and thoughtfulness on our part of what the back half could look like. We talked about the opportunity, the fleet guidance ranges for the first half, whereas CapEx is for the whole year. And so we talked about the reality that we do have a strong dedicated pipeline for the back half of the year that continues to look encouraging. And so we want to be prepared to be able to do that. Speaker 200:39:08And it's really just trying to be thoughtful about how we think about that. It's a dramatically reduced CapEx from what you saw a year ago. And so we don't want to starve the fleet and we want to make sure as power only grows or has the opportunity to continue to grow that we have the trailing equipment to go with it. But at this point, that's the comfort level we have. By the way, I want to fix my first statement on fleet guidance. Speaker 200:39:31That is a full year range, not a half year range. Speaker 300:39:35Okay. Speaker 700:39:36And then, let me just go ahead. Speaker 300:39:39Sorry, Scott. I was just going to expand on the net CapEx. Historically, that's been a 10% to 13% of revenue net CapEx. We did guide for that $250,000,000 to $300,000,000 range for the year, that not only lower in dollars, that's also lower as a percentage of revenue. It was $19,000,000 for Q1, so that will elevate as we go through the year. Speaker 700:40:09Okay. And then, Derek, I don't know, this is just a maybe this is a crazy thought, but everyone is saying the same thing that it's just taking longer for this capacity to come out of the market. And it strikes me that this cycle versus prior cycles, you and all the asset based carriers have much bigger brokerage businesses, much bigger power only offerings that are just sort of feeding volumes to these small carriers? And again, maybe crazy, but could it make sense for you and maybe others to shrink the brokerage offering, shrink the power only offering, maybe stop giving volume to small carriers? And do you think that could help accelerate this capacity reduction and get the cycle going again? Speaker 700:40:53I don't know. Speaker 200:40:55Yes, Scott. Well, I don't think it's a crazy thought. I think the issue just lies in the execution, right? Like to actually do that, we'd have to assume that the other brokers that don't have asset positions would also somehow magically stop distributing that freight and not take advantage of the vacuum that it would create. I don't think that's how it would actually play out. Speaker 200:41:16I think they would fill that vacuum. They would feed those carriers. And so instead, I think it took a while at least here at Warner for us to really sure our assets are doing exactly what they're designed to do and in the most optimal performance lanes for our assets, which is different than where a small carrier may be able to operate more effectively. It's a competitive space and truckload logistics, which includes both asset and non asset from a market perspective. And so we've got to bring to bear a product that can compete effectively long term and we believe that mixed approach is the best one kind of a more asset light, if you will, approach. Speaker 200:42:05Finally, I do believe the difference maker in Power Only and the reason it's so valuable is the customer experience. Power only is a completely different experience from a non asset broker in that we've got trailing equipment already there and in place. We are hauling a portion of that portfolio on our own assets. The remainder going to power only. The customer gets a seamless experience with a seamless interaction, tracking and tracing and capability. Speaker 200:42:32And I think it wins in the market and we're seeing that with outpaced growth and power only inside of a division of Werner that's also in outsides outpaced growth, which is logistics overall. We did do some culling in Q1. So you saw into the, I believe, 12 or plus quarters of double digit type growth in logistics. And that's because of us just simply yielding off the bottom and being aggressive on some of these untenable rates. We're going to keep that pricing discipline front and center as we go forward, especially at the point in the market where we believe we are. Speaker 700:43:11Thank you, guys. Appreciate the time. Speaker 200:43:13Thank you, Scott. Operator00:43:15The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 800:43:21Hey, guys. Good afternoon. Thanks for taking the question. Maybe just wanted to follow-up on that conversation there in terms of the 11% utilization and production growth that you see for Warner here. Is that something else you think other fleets, larger fleets, maybe a mid sized ones are also doing and therefore there's a bit of belt tightening on the large fleet side and so they're able to keep more capacity in the market. Speaker 800:43:45And then on the other side, we've speculated on this for a while now, but what do you think is really keeping some of these smaller carriers from going under at least maybe if that would accelerate from here, what do you think would finally move that or do we just have to be patient on that front? Speaker 200:44:04Yes. Thanks, Brian. Starting with the utilization question, although other fleets have shown utilization improvement year over year, I haven't seen anybody that's hit double digits to my knowledge. I think it's something that we're laser focused on. We're executing at levels that I'm extremely proud of with our team and the work they're putting in to do that. Speaker 200:44:26I think it's sort of the early innings of some of the tech coming to bear that and some new tools that we're deploying as well as, as I stated earlier, just a simple focus on what we do really well and doing that with our assets and then providing a solution to customers via power only to do some of the remainder work at still a very high level based on the technology that we've deployed to make that happen. So, it's hard to come by. It's not easy to achieve, especially with the freight market like the one we're in. But I think all of us are getting more creative with how we can sweat the assets further. But again, that 11% is a number that we're extremely proud of. Speaker 200:45:05As it relates to the attrition question, it's tough to predict. We are seeing ongoing attrition. You are now starting to see in recent weeks bankruptcies that are more notable, size of fleets that are more impactful, but it's going to have to continue to take place. And unfortunately, the or fortunately, I guess, depending on how you look at it, customers seem all too willing to continue to push people over that cliff. We're going to maintain our discipline and stay on firm ground, but there will be others that are continuing to sign up for rates that I don't believe are tenable and will find themselves on the wrong side of the ledger shortly. Speaker 200:45:44So it's got to play out. We got to be patient. In the meantime, we can't sit around worrying about it all day. What we have to do instead is redouble our efforts on best in class execution. Speaker 800:45:57All right. Thanks for that, Derek. And then maybe just sticking to the short term, can you talk more about what you're seeing in April so far? How that compares to seasonality? What visibility you have into the Q2 just for probably in the TTS side in terms of the demand there? Speaker 800:46:14And I guess ultimately, you still have an expectation for the spot market to recover here. Is that what is that the demand visibility? Is that helping drive some of that? Speaker 200:46:27Yes. So in April or in April and then Q2 in general, and I'll keep this fairly high level, but it's a bit of tale of 2 cities. We know that some of the fleet attrition we've seen in dedicated will continue to play out in Q2 and Q3. At the same time, we do have a pretty strong pipeline of new opportunities and some new implementations that are already on the books. The net of those, those that we believe you'll see some fleet shrinkage as we have remained that or kept that pricing discipline that I've referenced several times. Speaker 200:46:58We're simply not able to sign up for a dedicated contract right now that is not reinvestable or not at our margin profile and we believe that would be shortsighted to do so. OneWave by contrast has seen limited, but still have appeared spring activity, some project activity and increased opportunity for pricing. That's encouraging. It's bookings and overall demand, February to March in terms of profitability has all indicators are that we are on a path for that to continue as we go forward. And so we'll have to see how it plays out, but early signs are encouraging. Speaker 800:47:54Great. Thanks very much, Derek. Appreciate it. Thank you, Brian. Operator00:47:58The next question is from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:48:04Hey, great. Good afternoon. Thanks for the time and the question. So, Derek, maybe just harp on the dedicated a little bit more. You talked about increasing competition. Speaker 900:48:15I just want to understand, is that because of the loss of dollar stores or are there plans to shrink some of the stores? I know maybe not your direct one, but I know there were some out there talking about bringing some of that planned expansion back in or closing some stores. And is that just an absolute shift to now the cross border opportunity with that fleet? So is that a maybe more a permanent shift in that fleet? Maybe talk a little bit about that dedicated market? Speaker 200:48:41Yes, Ken. I mean, I'll start with this. Every one of our discount retailers year over year is up in truck count within dedicated. So I just want to put to rest this idea that there's some big carnage going on within dedicated, especially if they've rolled this hyper focus on the dollar stores and different announcements of different types. We are up across the board in our discount retail segment and that includes beyond the dollar stores. Speaker 200:49:09So we feel like that product is one that still has great value. It's one that's certainly appreciated and one that we believe we have a competitive advantage on that differentiates us from our competitors. Dedicated in general is very price competitive right now. So that pipeline I've referenced multiple times is full and it looks encouraging, but we would be remiss if we don't just accept that the win rate is going to be at least in the current market at historically low levels because of that pricing discipline that we're going to continue to execute against. And so, where those lines cross is tough to predict right now. Speaker 200:49:49It's probably harder in Dedicated than anywhere because you're talking about signing up for what you hope to be, not just that initial multi year term, but in most cases, in dedicated, it becomes a relationship that lasts decades. And so, we want to get it right going in. We want to do it with the right thoughtfulness. And then the last thing I'll mention, because we've talked about some fleet attrition is, there were certain disadvantages with incumbency and dedicated and the biggest one of all is that you know what the actual work is, whereas competitors bidding on that same work bid based on an RFP and a profile that's been provided that often sounds a little more amenable to your skill set and what actually is going to be once you enter. And so we've got a lot of new entrants in the dedicated that may or may not have full exposure and understanding of what they're signing up for and we're seeing that in the pricing. Speaker 200:50:37So, still staying focused on the prize, which is long term shareholder value and making sure that we're still staying focused on the prize, which is long term shareholder value and making sure we're building a company that's built to last. And I'm excited about what this looks like as it plays out and this turn takes place. But in the short term, there is no refuting the fact that there is pain afoot and we're going to keep fighting through it. Yes. Speaker 300:51:06And I would just add that yes, we do still have high customer retention. And with our on average, a large fleet size on a customer by customer basis, 1, 2, 3 losses can be more material and they can take a bit more time, particularly in this market to replace it. But we feel good about growing Dedicated beyond some of the near term back filling of these fleets. Dedicated is a large addressable market. There's new verticals. Speaker 300:51:38There's private fleets we can be well positioned to win in a tighter market. So we are positioning for the long term. And with these isolated fleet losses that we've been referring to, a little bit less than competitive environment and making sure that we're getting into margin and pricing that's reinvestable long term. And then a little bit more than a third is really related to customers that are changing their approach to supply chain dynamics and parameters and the like. So there remains a very strong pipeline for us to draw from. Speaker 300:52:19We've continued to price numerous opportunities. So it's competitive, but we'll continue to be in the mix and be aggressive and focus on pricing discipline for the long term. Speaker 900:52:32I appreciate that. And if I could just get a follow on kind of on that, you mentioned a competitive bid season and noted that some brokerage, I guess maybe either brokerage carriers or particularly guys out there were getting more aggressive on pricing. Is there anything or industry or I guess industry leader that you would call out or want to talk to? And then it seems like if you kept your revenue per ton mile down 3 to down 6 and Q1 was down 5, does that mean maybe the midpoint kind of looking for a little bit of sequential improvement or stabilization in that rate? Or is that just, hey, that was the rate we set, we're just sticking with that. Speaker 900:53:05I just want to understand if there was a message you wanted in there. Speaker 200:53:10Well, a couple of things. First, I'm not going to call out any industry leaders on their behavior or strategy. I do think when you get deep into a cycle, which one thing you find is customers, even those looking to take another bite at the apple are aligning themselves more with assets than non asset. It's just a logical thing to do at this point in the cycle. And so our ability to have those assets matter a little bit more now than they might have a quarter or 2 ago is upon us, and we're starting to see that with certain bid results. Speaker 200:53:39But the white noise that's created by a broker potentially undercutting rates are getting even more aggressive knowing it's harder to win right now can be problematic and we see that as well. And it's a matter of whether you're aligned with the right customer base. And in most cases, we are and in some cases, we're finding that perhaps we are not. Job though is to again go back to the playbook and make sure we execute the plays as drawn and stay committed to what we know works through to and through a cycle and feel good about what we are doing there despite the Q1 results. It's a longer term view. Speaker 200:54:13It's a longer term strategy than just a quarter. So we'll stay to our knitting and move forward And as this plays out, I think we're going to have the right formula for success. Speaker 300:54:26Yes. And Ken, just to follow-up on the last part of question there on rate per mile. I believe you're referring to the one way truckload rate per mile and the first half year over year guidance of being down 6 to down 3. You're correct. I think you referenced being down 5% through the Q1 on a year over year basis. Speaker 300:54:46So still within that range, although trending to the lower end, we're about 30% through the bid season. There's been some mixed results to this point, including some low single digit reductions, but also some that are flat and more recently some that are increasing our renewals. So we have a bit more to go in the heavy part of the bid season here, But we'll continue to maintain that pricing discipline and do what we can to stay in the range there. Speaker 900:55:22Appreciate the thoughts. Speaker 500:55:22Thanks for the time guys. Speaker 200:55:24Thank you, Ken. Operator00:55:26The next question is from Tom Wadewitz with UBS. Please go ahead. Speaker 500:55:32Hey, guys. It's Mike Traiano on for Tom. So obviously, tough operating environment, but your free cash flow was up 9% year over year with the step down in CapEx. Werner is one of the largest and best run trucking companies out there, but what extent is the cash flow resiliency that you've had representative of the broader trucking market? And do you think is a reason why capacity has been so stubborn to exit the market? Speaker 300:56:02Well, and just in terms of maybe the first part of your question on our cash flow and trend, over the past couple of years, our free cash flow has been more in the 2% to 4% of revenue. In building the plan this year, being mindful of the operating environment, margins, reinvesting in the fleet, lower CapEx. We were gearing towards a free cash flow that on a percent of revenue basis was just going to have higher free cash flow conversion. We still feel good about that outcome for the year, given all those factors and managing a CapEx level that still appropriately invests in the fleet. So we think that that's even in this environment going to continue to be a positive trend perspective on free cash flow conversion going forward. Speaker 200:57:00And the second part of that, I'll jump in. As it relates to our others able to do that, certainly well ran large capitalized fleets, I think we're probably putting a lot of diligence towards this. I'm not so sure your small to midsize trucker thinks about free cash flow much until it runs out. I think the difference is, it takes a long time to kill a trucker and they are out there operating equipment that they are running to the end of life, but no ability to reinvest or re up or even refresh that particular piece of equipment. There's regulatory hurdles and other things about to come at them in waves that I think will make that reinvestment even more difficult And they had a they were flushed with cash coming out of the COVID years and that's largely burnt off, if not completely burnt off at this point. Speaker 200:57:46So, I think it's happening. It's going to continue to happen. But no, I do not believe they're managing free cash flow the way people like Werner Enterprises are. But nonetheless, it's just taken a long time for them to kind of burn through the remaining life on that asset and ultimately exit. Speaker 500:58:06Okay. Appreciate the thoughts, Derrick and Chris. Speaker 200:58:09Thank you. Operator00:58:10And the last question today is from Bascome Majors with Susquehanna. Please go ahead. Speaker 1000:58:16Yes, thanks for taking my question. I don't want to get too short term here, but I do think it would be helpful to level set expectations and bring together some of the seasonality commentary you said earlier in the call. So if I look at 1Q to 2Q and you strip out the outliers, operating income and earnings, they typically grow anywhere from 20% to call it 50%. Is that the kind of range that feels reasonable with the puts and the takes that you've already talked about? Or is it just too early to do that kind of normal historical relationship given the uncertainty out of there? Speaker 1000:58:53Thank you. Speaker 300:58:55Hey, Bascome. Yes, I appreciate your question. You know, we don't give EPS guidance, but you know, just to give some color, I guess, in terms of the business outlook. As we look forward kind of mid term, we would expect demand to remain steady. The rate pressure is going to be ongoing across the portfolio. Speaker 300:59:21No real signs of more meaningful attrition in that excess capacity, which is obviously driving this whole rate environment. It's going to keep the environment competitive. We have more to go in kind of the heavy part of the bid season, and we'll be back filling some of the dedicated losses, fleet losses into the Q2. Although again, there's a strong pipeline of opportunities that we can draw from. We expect the revenue per truck per week on TTS to continue to be growing on a year over year basis. Speaker 301:00:02That year over year difference might moderate a bit as we go through the year, but we would continue to expect some year over year favorability there. The used equipment market is important. And as I said earlier, I think that will improve modestly throughout the year. And we're going to continue to advance our structural changes, the cost savings, which are on track and growing, we'll continue to progress those. We'll continue to lean into safety and looking for that to show a more favorable trend in some of those low $30,000,000 per quarter numbers that we are seeing in the second half of last year. Speaker 301:00:41We'll continue to lean into our operational excellence and really get more of that production improvement on the one way side. So we can't control the macro. We can focus on controlling the controllables, continuing to serve our customers safely, reliably and at scale and execute on the long term strategy. If we do that, then we're going to be more positioned navigate this market well and be ready for a tighter market and a better market. It was Q1 is typically our low quarter coming off the peak. Speaker 301:01:21There were some compounding factors in the Q1, including call it $0.05 to $0.06 of really unique one offs in terms of the adverse weather, elevated health insurance costs, and some discrete income tax adjustments in the quarter that aren't necessarily expected to continue. So a lot there, I'm probably not being as specific as you would like, but we would expect some improvement and we're just going to continue to be focused on controlling what we can and being set up for a better market when it comes. Speaker 1001:02:01So it sounds like you do expect sequential improvement, just it's really hard to peg that versus any historic sort of bogey at this point? Speaker 201:02:10We do. Speaker 1001:02:12Thank you very much. Speaker 201:02:14Thank you, Vasquez. Operator01:02:16This concludes our question and answer session. I'll now turn the call over to Mr. Derek Leathers, who will provide closing comments. Please go ahead, sir. Speaker 201:02:24Thank you, Gary. I want to thank our nearly 14,000 Werner associates for their dedication, loyalty and commitment to supporting each other and serving our customers daily. I also want to reiterate our support for everyone impacted by the recent tornadoes across Omaha and the Midwest and we will get through this. I want to thank our valued customers for choosing Werner and giving us the opportunity to support their business and we will continue to operate with eyes wide open as we navigate the current very challenging environment. We are controlling what we can and driving operational improvements, managing expenses and driving savings while strategically investing for our future. Speaker 201:03:00Our balance sheet is healthy and our cash flow is strong and our diverse portfolio puts us in a great position for the eventual market turn. In the meantime, we're going to remain disciplined on our approach. We're going to remain committed to safety and we're going to continue to serve our customers. I'm going to thank you all for being with us today and for joining our call. Operator01:03:22The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by