NASDAQ:WERN Werner Enterprises Q1 2025 Earnings Report $25.91 -0.15 (-0.56%) As of 10:41 AM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast Werner Enterprises EPS ResultsActual EPS-$0.12Consensus EPS $0.12Beat/MissMissed by -$0.24One Year Ago EPS$0.14Werner Enterprises Revenue ResultsActual Revenue$712.11 millionExpected Revenue$738.41 millionBeat/MissMissed by -$26.30 millionYoY Revenue Growth-7.40%Werner Enterprises Announcement DetailsQuarterQ1 2025Date4/29/2025TimeAfter Market ClosesConference Call DateTuesday, April 29, 2025Conference Call Time5:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Werner Enterprises Q1 2025 Earnings Call TranscriptProvided by QuartrApril 29, 2025 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good afternoon, and welcome to the Werner Enterprises First Quarter twenty twenty five Earnings Conference Call. All lines are in a listen only mode until after the presentation. Please note that this event is being recorded. I would now like to turn the conference over to Chris Neal, SVP of Pricing and Strategic Planning. Please go ahead. Speaker 100:00:37Good afternoon, everyone. Earlier today, we issued our earnings release with our first quarter results. The release and a supplemental presentation are available in the Investors section of our website at wanner.com. Today's webcast is being recorded and will be available for replay later today. Please see the disclosure statement on Slide two of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Speaker 100:01:01Today's remarks contain forward looking statements that may involve risks, uncertainties and other factors that could cause actual results to differ materially. The company reports results using non GAAP measures, which we believe provides additional information for investors to help facilitate the comparison of past and present performance. A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. On today's call with me are Derek Leathers, Chairman and CEO and Chris Wyckoff, Executive Vice President, Treasurer and CFO. I'll now turn the call over to Derek. Speaker 200:01:39Thank you, Chris, and good afternoon, everyone. We appreciate you joining us today. Let me start by saying clearly, our first quarter results did not meet our expectations. We faced several challenges during the quarter, some industry wide, some specific to Werner, but we were acting decisively to address them. At the same time, the underlying progress we're making in growing Dedicated, advancing our technology transformation and more aggressively tightening our cost structure puts us in a stronger position as the environment stabilizes. Speaker 200:02:10Today, I'll address our Q1 performance, provide our perspective on the fluid operating environment, walk through the actions we are pursuing and why we are confident in the long term trajectory of the business. Let's turn to Slide five and discuss our first quarter results. During the quarter, revenues were 7% lower versus the prior year. Adjusted EPS was negative $0.12 Adjusted operating margin was negative 0.3% and adjusted TTS operating margin was 0.4% net of fuel surcharges. Our performance was negatively impacted by four factors. Speaker 200:02:45First, we experienced elevated insurance costs and claims. This accounted for $09 of the adjusted EPS impact, with one verdict late in the quarter representing $08 related to a 2019 incident, which we are appealing. Adverse nuclear verdicts remain an industry wide issue. We, along with our peers, continue to advocate for reform with state and federal government officials. We will continue to do our part to ensure that a more pragmatic approach lawsuits will prevail. Speaker 200:03:14Second was extreme weather, which was more pronounced in the areas in which we operate. This represented approximately a $04 impact to our first quarter EPS. Third, our IT spend was more elevated to progress our technology strategy and transformation. And fourth, were isolated operating inefficiencies and lower utilization stemming from select customer decisions and stop and go activity from tariff induced uncertainty. The net effect of these headwinds was adjusted EPS being down $0.25 year over year. Speaker 200:03:45While our results do not reflect our expectations, there are areas where we continue to see momentum and strength that will position us well as we progress through the rest of the year. In Dedicated, we were awarded several fleet contracts from new and existing customers during the quarter, representing over 200 trucks that are scheduled to be implemented in late Q2 and early Q3. Awards signed this quarter were the highest since the second quarter of twenty twenty two. Our dedicated expertise is a competitive advantage that has and will drive growth over the long run. Our customer retention remains strong and interest in our dedicated solutions from new customers in attractive verticals is on the rise. Speaker 200:04:23Our dedicated business excels when reliability matters most amongst large enterprise shippers. We expect that supply chain uncertainty in 2025 will continue to play well to our strengths. In One Way Truckload, revenue per total mile was up for the third consecutive quarter despite weather disruptions, increased deadhead and network inefficiencies. Over half of the One Way bid season is complete. Business retention has been good so far. Speaker 200:04:48We secured several One Way awards with some of our largest customers. Contractual rate adjustments have been mixed, although are generally up low to mid single digit percent on average. While our One Way fleet is smaller versus prior years, we've continued to invest strategically. We remain committed to serving specific specialized segments within One Way, including Mexico cross border, expedited and highly engineered lanes. Our scale, including one of the largest trailer fleets, provides flexibility and a simplified approach for large enterprise shippers, which is critical during these uncertain times. Speaker 200:05:23Logistics adjusted operating income continues to be positive. While revenue was down 3% and gross margin was down 5% year over year, operating expenses excluding purchase freight were down 11%. Sequentially, we saw softer volume in truckload logistics, driven by small and midsized customers. Gross margin was squeezed the first half of the quarter, but improved in March. Moving to Slide six. Speaker 200:05:46While macro volatility remains, our plan and ability to generate earnings power and drive value remains unchanged. We remain focused around three priorities. First is driving growth in core business, which includes expanding TTS and Logistics operating income margins, increasing one way rates and growing our dedicated fleet given a pipeline that remains strong. We've been awarded numerous new dedicated fleets, and we are seeing positive results on several large one way bids with strategic customers. We are realizing rate increases on one way bids. Speaker 200:06:17And within logistics, we are growing PowerLink and intermodal. Second is driving operational excellence as a core competency, which we will deliver by maintaining a resolute focus on safety, providing industry leading reliability, solutions and service to our customers, continuing to advance our technology roadmap and continuing to control cost. Our commitment to excellence was recently recognized as the Truckload Carriers Association, named Warner, a 2025 TCA Elite fleet. This designation highlights our commitment to providing a top tier workplace for professional drivers. We are progressing our technology strategy and the transition to our Edge TMS platform. Speaker 200:06:57Today, all logistics loads except Final Mile are running through Edge TMS. We are making progress in TTS with more than half of One Way Truckload volume and a quarter of Dedicated volume in Edge. We remain focused on transitioning remaining customers and volume to Edge, building out execution capabilities and realizing the anticipated synergies at greater scale. On the cost containment front, over the last two years, we have taken out $100,000,000 in cost and continue to execute against our cost savings goal for 2025, which we are increasing from $25,000,000 to $40,000,000 Chris will cover our actions here and how we are controlling what we can without sacrificing future opportunities. The final priority is driving capital efficiency. Speaker 200:07:41This includes maintaining strong operating cash flow, remaining disciplined and thoughtful in how we allocate capital and maximizing equipment fleet sales. Capital proceeds exceeded capital expenditures for the quarter as we sold more used equipment than we purchased. We are seeing increased values on used equipment as pricing on new equipment is fluid and recently being influenced by tariffs. We will continue to invest in trucks, trailers, terminal, technology and talent, while maintaining optionality when it comes to evaluating the impact from tariffs on our equipment cost. We reduced debt since year end. Speaker 200:08:15Our liquidity is at a new high point as we closed late in the quarter on a new and incremental $300,000,000 credit facility. As a result, we are well positioned to be opportunistic relative to share repurchase and M and A. Regarding tariffs, our conversations with suppliers and customers reflect a muddied outlook. The environment is fast moving and ever changing. We think about the impact of tariffs on our business in three categories: CapEx and used equipment gains, exposure to Mexico freight and the broader impact on retail and consumer demand. Speaker 200:08:48Relative to CapEx and used equipment gains, our average tractor age of two point two years provides flexibility on equipment purchases and sales. We work with several OEMs with varying levels of supply chain exposure to Mexico and Canada and are in close contact as they assess potential tariff impacts on their products. As information becomes clearer, we are considering several strategies to mitigate the impact of higher prices. This includes delaying new tractor purchases and sales, which is feasible given our low age fleet and or shifting purchases between OEMs to those less impacted by tariffs. In the event that tariffs stick, we expect low single digit percent increases to the cost of equipment and parts, but with favorable offsets with growing demand and improved resale values of used equipment, which we are seeing now as an early development in April. Speaker 200:09:36Relative to cross border freight, approximately 10% of total revenues are from cross border Mexico shipments. This includes both U. S. Linehaul as well as revenues generated within Mexico. Most of our cross border business is executed in one way trucking and logistics. Speaker 200:09:52Shipments consist primarily of manufacturing, industrial and food and beverage products. Even though there may be some short term impact from tariffs, supply chains that have been expanding in the region will not change overnight. With over twenty five years of experience in cross border operations, we have developed strong partnerships with customers and partner carriers. As one of the largest transportation providers in The U. S. Speaker 200:10:14With a strong presence in Mexico, we are firm believers that our expertise in this region is a competitive advantage over the long term, and we plan to continue to operate and grow this business. And lastly, relative to the broader impact on consumer sentiment and spending, through all the noise and challenges of the last few years, the consumer has remained engaged and resilient. We are seeing stable volumes across our discount retail customer base, 62% of our revenues in 2024 from the retail vertical. Our more concentrated exposure to non discretionary retail from our relationships with discount and large value retailers is a differentiator and has held up well in past economic slowdowns. As the current difficult environment lingers, we anticipate ongoing capacity attrition. Speaker 200:10:58Long haul truckload employment is below the prior peak in 2019 and additional exits could be accelerated, providing a more favorable backdrop for larger carriers like Werner, and we stand at the ready. In summary, while elevated insurance and claims expense and challenging weather negatively impacted our results this quarter and tariff uncertainty looms, we continue to execute our long term strategy while taking near term decisive action to position Werner for success. Our 13,000 hardworking talented team members are committed to move this company forward. And while our hard work is not yet showing up in the bottom line, we have clear line of sight to structural improvements that are being made to position this company for stronger earnings power. With that, I'll turn it over to Chris to discuss our first quarter results in more detail. Speaker 300:11:43Thank you, Derek. Let's continue on Slide eight. Our performance comparisons here are year over year unless otherwise noted. Adjusted operating loss was $1,800,000 and adjusted operating margin was negative 0.3%. Adjusted EPS of negative $0.12 was down $0.25 As Derek noted, this includes a $09 headwind during the quarter from increased insurance costs and another approximately $04 due to the impact of adverse weather resulting in lower one way miles per truck. Speaker 300:12:13Elevated technology spend is also contributing year over year, a reflection of further progress in our technology strategy and transformation. Turning to Slide nine. Truckload Transportation Services total revenue for the quarter was $5.00 $2,000,000 down 9%. Revenues net of fuel surcharges declined 7% to $444,000,000 TTS adjusted operating income was $2,000,000 Adjusted operating margin net of fuel was 0.4%, a decrease of four thirty basis points, of which 160 basis points was due to higher insurance and claims referenced earlier. During the quarter, consolidated gains on sale of property and equipment totaled $2,800,000 Net of fuel surcharges, insurance and gains, TTS operating expenses declined 5%. Speaker 300:13:01Let's turn to Slide 10 to review our fleet metrics. TTS average trucks declined to 7,415 during the quarter. We ended the first quarter with TTS fleet down 5% year over year, but only down 10 trucks or 0.1% sequentially. TTS revenue per truck per week net of fuel decreased 1.4%, primarily due to lower one way miles per truck negatively impacted by adverse weather conditions. Within TTS for the first quarter, Dedicated revenue net of fuel was $279,000,000 down 7%. Speaker 300:13:35Dedicated represented 64% of TTS trucking revenues consistent with a year ago. Dedicated average trucks decreased 7.1% year over year, but was only down sequentially by 1.1% to 4,783 trucks. At quarter end, the Dedicated fleet was down only five trucks or a tenth of a percent from year end '20 '20 '4. This is well above our more seasonal trend that averages a 30 truck reduction during the first quarter. At quarter end, Dedicated represented 65% of the TTS fleet. Speaker 300:14:09Dedicated revenue per truck per week decreased slightly, down 0.3%, but has increased for 27 of the last 29 quarters and was impacted by one fewer business day versus the prior year quarter. In our One Way business for the first quarter, trucking revenue net of fuel was $154,000,000 a decrease of 9%. Average truck count of 2,632 declined 5.5% year over year and sequentially by 1%. Revenue per truck per week decreased 3.2%, mostly due to 3.5% lower miles per truck per week. Revenue per total mile increased 0.3%, representing the third consecutive quarter of improvement. Speaker 300:14:51One way freight conditions were more stable early in the quarter, but weakened in March as trade policy resulted in a more uncertain and cautious environment. Weaker One Way volumes have lingered in April. Total miles decreased 9% versus prior year with 5.5% fewer average trucks. Increased miles in PowerLink mitigated some of the decline in One Way Truckload miles, ultimately resulting in combined miles that were down just under 6%. Now turning to Logistics on Slide 11. Speaker 300:15:22In the first quarter, Logistics revenue was $196,000,000 representing 27% of total first quarter revenues. Revenues were down 3% year over year and 8% sequentially. Revenue in truckload logistics declined 5% and shipments decreased 4%, a narrowing year over year trend compared to the past several quarters. Intermodal revenues, which make up approximately 14% of logistics revenue, increased 14% year over year due to 16% more shipments, partially offset by a 1% decrease in revenue per shipment. Final Mile revenues decreased 12% year over year and 11% sequentially. Speaker 300:15:59Logistics adjusted operating margin of 0.3% improved 90 basis points year over year, driven by double digit percent OpEx improvement. Moving to Slide 12 and our cost savings program. As macro uncertainty remains, as we have less control over weather disruptions and as litigation and nuclear verdicts remain an industry challenge, we are committed to controlling what we can to expand margins and earnings. As Derek mentioned, two years ago, we set out to achieve a more cost efficient operating model, identifying and executing on $100,000,000 in savings, helping to partially offset softness in rate and volume as well as select inflationary factors. As we enter 2025, we announced an additional $25,000,000 cost savings program. Speaker 300:16:44Today, we are increasing our 2025 cost savings target to $40,000,000 In the first quarter, we achieved $8,000,000 in savings towards that goal. We are underway with more aggressive restructuring efforts to drive out additional cost. These savings are aimed at more accelerated pace of realizing synergies from our technology investments, further optimizing headcount and pursuing savings in procurement spend, facilities and real estate, all without sacrificing our readiness and ability to grow as the backdrop improves. The next phase of structural changes should result in enhanced operating leverage as demand returns. Let's review our cash flow and liquidity on Slide 13. Speaker 300:17:21Operating cash flow was $29,000,000 for the quarter or 4% of total revenue. As expected, net CapEx continues to trend down, yet we maintain a modern fleet and continue to reinvest strategically. First quarter net CapEx was a cash flow positive $8,000,000 as we sold more used equipment than we purchased. Free cash flow was $37,000,000 or 5% of total revenues. Total liquidity at quarter end was $777,000,000 up nearly 70% from year end and including 52,000,000 of cash on hand. Speaker 300:17:53During the quarter, we closed on a new $300,000,000 committed receivable securitization facility. This facility is priced at a rate below our revolving credit facility and will result in interest expense savings going forward. At quarter end, we had six seventy nine million dollars of availability on a revolver and $46,000,000 on the receivables facility. Moving to Slide 14. We ended the quarter with $640,000,000 of debt, down $10,000,000 sequentially. Speaker 300:18:21Our net debt to EBITDA as of March 31 was 1.7x. We have a strong balance sheet, access to capital, relatively low leverage and no near term maturities in our debt structure. Let's turn to Slide 15. While CapEx in the quarter was light, strategic reinvestment in the business is a top priority. Our track record shows consistency in reinvesting in the business, maintaining a low mile modern fleet and extending our solutions and capabilities. Speaker 300:18:48Over the long term, we will remain balanced, including returning capital to shareholders, maintaining appropriate leverage and being disciplined and opportunistic with share repurchase and M and A. We have 3,900,000.0 shares remaining under our Board approved share repurchase authorization. Let's review our guidance for the year on Slide 16. We are maintaining our full year fleet guidance of up 1% to 5%. Fleet growth this year is expected to be driven more by Dedicated versus One Way. Speaker 300:19:16The TTS fleet overall is nearly flat year to date, but we have visibility to Dedicated wins implementing late in second quarter and early third quarter with some added startup costs along the way. Growth in our One Way fleet is more uncertain given the combination of downside risk from West Coast volumes upside with increased driver recruitment. Our full year net CapEx guidance range is between 185,000,000 and $235,000,000 lower than historical ranges as our portfolio evolves to be more asset light. Year to date net CapEx is net cash flow positive. We will have more normalized net spend in the second quarter. Speaker 300:19:51While we are not changing the full year guidance range at this point, tariffs on OEM purchases will have an impact on our purchase decisions for the rest of the year. Have some ability to pull back on CapEx spend later in the year if appropriate, although we could also accelerate CapEx if presented with attractive OEM price concessions in the near term. Dedicated revenue per truck per week decreased 0.3% year over year, but is expected to remain within our full year guidance range of zero percent to 3%. One way Truckload revenue per total mile increased 0.3% despite elevated deadhead of more than 100 basis points, offsetting $02 of rate per mile year over year benefit. Network inefficiencies occurred due to higher freight volatility than usual caused by tariff related uncertainty. Speaker 300:20:37We are updating our rate per total mile guide to flat to up 3% in the second quarter compared to the prior year period. Our effective tax rate was 23.7% in the first quarter. Our 2025 guidance range between twenty five percent and twenty six percent is unchanged. We are maintaining the full year guide and expect elevated effective tax rate in future quarters. The average age of our truck and trailer fleet at the end of the first quarter was two point two and five point four years respectively. Speaker 300:21:06Regarding several modeling assumptions, equipment gains were $2,800,000 in the quarter, which was consistent with our expectations. We are maintaining our expectation for full year equipment gains in the range of 8,000,000 to $18,000,000 Recently for April, we are seeing select equipment values and gains that are at two year highs as a result of tariff uncertainty. While positive, it's too early to predict any lasting impact on the rest of the year. We expect net interest expense this year will be flat to down year over year, absent any outsized capital allocation, but higher in first half than lower in second half. With that, I'll turn it back to Derek. Speaker 200:21:43Thank you, Chris. Tariff impact remains fluid and adverse insurance settlements continue to pressure results. Disruptive weather was a headwind during the quarter. Technology spend is elevated and used equipment values remained low versus prior years, but are improving more recently. In parallel to these trends, we've been making structural improvements and strategic investments to bolster long term growth and profitability for Werner. Speaker 200:22:07While we wait for demand to normalize, we are aggressively managing costs. What remains constant during these uncertain times is our competitive advantage. We are a large scale, award winning, reliable partner with diverse and agile solutions to support customers' transportation and logistics needs. We have a modern fleet and continue to invest in our equipment, leading to safety DOT preventable accidents per million miles near twenty year lows over the last two years. We've been making considerable operational improvements in building a leaner, but more powerful organization. Speaker 200:22:38We're a cycle tested team and our historical results demonstrate our ability to generate earnings power as the market improves. With that, let's open it up for questions. Operator00:23:04Session. And your first question today will come from Jason Seidl with TD Cowen. Please go ahead. Speaker 100:23:21Thank you, operator. Derek and team, afternoon here. You walk us through sort of dedicated margins and how you view them versus OTR? And sort of what we should think about the most recent dedicated wins in terms of long term impacts to the margins in that division? Speaker 200:23:40Sure, Jason. I'll start. So I guess I'll start by maybe attacking one of the misnomers that we constantly hear about, which is dedicated being some sort of a drag as this market progresses further from here. We've studied this pretty closely. If you look back over the last ten years, about eight out of ten years, Dedicated does outperforms our one way margins. Speaker 200:24:06We don't disclose margins individually for a variety of reasons, but I can tell you that it stands up very well in both good markets and bad. As it relates to recent wins, clearly it's a competitive environment right now. And so those wins are operating margin they are contributing to operating margin. Those are not implemented yet. Those will improve the health of the overall network. Speaker 200:24:33Those are implemented in Q2 and currently scheduled to be completely launched or at least started in Q2, but some are late enough that we felt it prudent to indicate there could be some drift into early Q3. The pipeline in Dedicated is particularly strong at the moment, So that is exciting. The win rate will be continued to be pressured based on the competitive environment we're in, but we like the momentum. The trucks closed year to date exceeded sort of new business truck closes through 2024 for the entirety of the year. And that trend has continued in conversations with customers as we advance in the year. Speaker 200:25:13So overall from a positioning perspective, I like where we're sitting there. I like the ads in that part of the network. And I think it positions us well as we build from here. Speaker 100:25:24Derek, Jason go ahead. Speaker 300:25:28Sorry, Jason. I think you were also asking just about the TTSOI and some color on the operating So we've talked about in the past of getting back to long term double digit margins, 2015 to 2022, '6 of those eight years, we are in the double digit margin territory. 2023 was high single digits. So we have not changed our view in terms of double digit OI margins being our long term target. Obviously, we're a ways off from that. Speaker 300:26:00We've had multiple years being impacted of the decline in the one way rate per mile, softer dedicated demand, softer used equipment values and some inflationary pressures. And those continue to be the levers that we're focused on and that will get us back to more of that long term range. With each of those levers, we're seeing improvement now in all areas, albeit slow. If you we just roll back first half of last year in those areas, one way rate, dedicated demand, equipment market, those were working against us. It was then in the third quarter of last year that we saw for the first time in seven quarters, favorable year over year improvement in the one way rate. Speaker 300:26:48Now we're seeing this momentum that Derek just mentioned in Dedicated, also recently seeing some improvement in equipment gains. So we're still focused on the long term, still focused on those being the levers that will get us there and starting to see some gradual improvement. Speaker 100:27:05And so my follow-up guys is, I know you're not you don't disclose the actual margins, but if we look at 1Q, would you say the margin discrepancy between Dedicated and One Way expanded? Speaker 200:27:20I would say the yes, that's fair to say, and it's because of the duress of the One Way portion of the portfolio. One Way has been the most competitive section of the portfolio. It remains so today. And so when you think about performance across the quarter, One Way certainly was a drag on the quarter. Dedicated has had pressure, but still is outperforming by a larger mark today than it would have been even in some recent quarters. Speaker 200:27:51All of both of those groups obviously are impacted by some of the comments we've made through the prepared remarks relative to weather in particular. And then obviously, the insurance claims is an outlier that we hope to put in the rearview mirror as we go forward. Speaker 100:28:11Understood. I really appreciate all that color. Speaker 200:28:14Thank you, Jason. Operator00:28:16And your next question today will come from Ari Rosa with Citigroup. Please go ahead. Speaker 400:28:22Hey, good afternoon. So I wanted to understand, Derek, just kind of continuing on that point about putting the insurance issue in the rearview mirror. It seems like there's really not anything structurally changing. What causes that to change? Or what causes that insurance concern to mitigate outside of legislation kind of resolving that and kind of taking away this prospect of nuclear verdicts? Speaker 200:28:50Yeah, I'll start and then I'll have Chris fill in some detail that we think is pertinent. So biggest of big picture is you're right. We need tort reform and we need state by state legislation to continue to make its way through so that there can be a fair and appropriate playing field in the case of litigation. We've seen that recently in Georgia. There are several other states that are working on it as we speak. Speaker 200:29:11We're going to continue to stay active in that space. And it really is both the sort of nuclear verdict and outsized settlement side when you're trying to avoid said nuclear verdict. This particular quarter was marred by a case that is a great example of what can go wrong will sometimes. We're talking about a case with video evidence, body camera footage of a claimant clearly stating that they were not injured, that they did not need medical attention, a case that was a low impact accident by all accounts where actual checks of the equipment was going on to see where the damage was. But the change of judge in Q1 and a series of adverse verdicts within that court case led us to an outcome where that injury became a multimillion dollar jury decision. Speaker 200:30:07I'd like to believe that we're we can get past those days and not see these sort of rainy day moments. But clearly, is an outsized on a per unit basis, per accident basis. It's a headwind just given what's happened with the ongoing trend in that direction with outsized verdicts. We're going to continue to focus most importantly on the core issue, which is lowering our preventable accident rate, lowering our total incident rate and working to develop better and better drivers as well as advent of technology, but that will only get you so far. So I can't promise or guarantee or predict the future. Speaker 200:30:44What I can tell you is that we do believe we're taking the right steps and preparing our drivers to be the best they can be on the road, But these outcomes are both unexpected and unsavory. Speaker 300:30:57And Ari, maybe just to give you a bit more color and perspective. It was $44,000,000 for the quarter, north of our eight quarter average, obviously, two consecutive quarters of being above $40,000,000 not our expectation, although we would still look at Q4 and Q1 as being outliers just for different reasons. Fourth quarter was a year end reserve remeasurement. Q1 having this isolated verdict with some unique circumstances that Derek just walked through. So I would still point to the quarter average, whether you want to look at the last eight quarters or the last twelve quarters, either way, it continues to be in a range of about 35,000,000 to $36,000,000 reflective of a cost per claim issue, not a frequency of claim issue. Speaker 300:31:44We continue to be pleased with our DOT preventable accident per million miles, which over the last two years was at a twenty year low. And really don't feel like that has yet to reflect in the trend of that particular line item. Speaker 400:32:00Okay. Understood. That's helpful. And then just for my follow-up, it seems like every call we're talking about the kind of supply demand issue, overcapacity problem. You mentioned that driver counts have come down, but maybe you could just give your perspective on kind of where the market is, what gets it to finally correct? Speaker 400:32:20Could this be kind of the catalyst that maybe gets the market to finally correct and get some of the excess capacity out? Or do you really see it as more of a demand issue or kind of a retransition from an issue of oversupply to an issue of kind of insufficient demand with the tariffs? Thanks. Speaker 200:32:41Yes, Ari, I think it's a great question. Let me back up and just start by saying as we entered the year, we obviously had some optimism relative to where the market was going. We saw that optimism starting to play out in January leading to February and into March. January and February were muted, so the demand was there, but the weather was not in our favor. And I would remind everyone that although we're a national carrier, our footprint is very heavy Midwest, South, Southeast, and the storm systems that we endured through the quarter were predominantly in those areas. Speaker 200:33:15As we got into March, we saw something different, which was although demand indicators, forward looking indicators were strong, the tariff uncertainty and some of the network disruptions that came with that became more pronounced. And so it was less about total demand but more about the significant network disruptions that come with people holding freight for a day or two, then shipping larger than normal quantities and the inverse of that. You know, rushing to get freight across the border before a potential tariff impact. Our exposure, both West Coast as well as the Mexico border, both are about 10% each. And so that impact was felt in our network. Speaker 200:33:53It was more disruptive on the North South moves because you can make more shorter term decisions than they were. But as we look forward now, I do believe this is a catalyst relative to washing some folks out more aggressively that are unable to compete at these levels that could and should lead to a more rapid cleansing of the capacity roles. BLS employment data is already now below twenty nineteen levels, pre COVID levels, if you will. And so there's a lot of trends that look good there. We do have to caution and not we can't own the macro and with the issues going on with that same economic uncertainty, there's certainly some concerns and a lot of contingency planning on our part relative to kind of a bull base and bear case relative to demand. Speaker 200:34:41The last thing I would add to all of the above is this sort of air pocket that's been largely talked about over the last several days, whereby we all know there is a significant reduction of inbound freight headed to the West Coast and really East Coast as well from ports in Asia. That air pocket will have to be filled to some extent and I think it's only a matter of monitoring and staying close to consumer sentiment and consumer confidence overall to know how much of that pocket gets filled on the backside. Inventory levels are in good shape or even in certain cases in our network in conversations with customers on the leaner end of where they'd like to be. So that freight has to get made up for at some point or resourced from elsewhere. All of those are catalysts where we think the large scale network capabilities that we have can be brought to bear in ways that are more interesting than sort of the aggregate of a bunch of small carriers that might be competing in certain lanes. Speaker 200:35:37So we will prepare for that. We'll be ready to respond regardless of which direction that demand side of the equation goes. But yes, I think capacity and that attrition can only accelerate from here based on the backdrop. Speaker 400:35:53Got it. Okay. That's very helpful context. Thanks for the time, Derek and Chris. Speaker 500:35:59Thank you, Ari. Operator00:36:02And your next question today will come from Scott Group with Wolfe Research. Please go ahead. Speaker 600:36:08Hey, thanks. Good afternoon. So Derek, with respect to that sort of import cliff you just sort of talked about, is there any way to sort of frame like what percentage of your volume at some point originates overseas? I'm guessing the like the direct port stuff is easy, but some of the more inland stuff that maybe starts overseas is harder. But if you have any sort of ballpark, I think that'd be helpful. Speaker 600:36:36And just and given that sort of volume air pocket you're talking about, like what's realistic in terms of improving in margin in Q2? Can we get back to profitability? I don't know. Any thoughts? Speaker 300:36:53Scott. This is Chris. Yes, I'll start on maybe both of those topics. First, on the West Coast import exposure, it's roughly about 10% of our one way volume, is exposed to the West Coast. That has been steady as of late with some of our large customers. Speaker 300:37:11But obviously, it's something we're very focused on and could be impactful broadly for North America freight. So but right now, that continues to be steady, and our exposure there is somewhat limited. In terms of your other question on just I think you were asking how to think about second quarter. Maybe from a revenue perspective, the on the One Way side, more uncertainty there, for topics that we're discussing here. On a rate per total mile basis, that could be up or down on a sequential basis based on the year over year 0% to 3% guide for the second quarter. Speaker 300:38:00However, we do have optimism with the dedicated fleet growth that we've talked about, the wins there. Also optimism broadly in logistics quarter over quarter and seeing some favorable trends into the second quarter. We have a solid line of sight on awards in PowerLink and intermodal, and both those businesses just continuing to have momentum and strength. But also in the truckload brokerage, which has had periods of being soft, last year and also in January, February, but where we came out of the quarter, truckload brokerage is seeing some positive momentum. We have a high had a high point in March of certain award counts and volume. Speaker 300:38:43April also appears to be strong. There's also some Q2 pop up in food and beverage within the truckload brokerage space. So some puts and takes there from a revenue perspective. And then from an OpEx perspective, we will have some dedicated startup costs with implementing some of those fleet wins in the second quarter and early third quarter. Of course, insurance is an area that has some volatility. Speaker 300:39:08But we're seeing momentum in gains. And on the equipment values, we also expect to have an accelerated pace of cost reductions in the quarter and some decelerated IT spend in second quarter relative to the first quarter. Yes. Scott, the Speaker 200:39:22only thing I would add is to the question about direct versus indirect, it is difficult, as you stated. We know that if you look across our book of business, our large retail customers and discount retailers in particular have anywhere from, call it, a 10% to 30% exposure rate to China, but that does not include some of the secondary exposures they may have from vendors that they buy from who are ultimately sourcing either pieces or parts or the actual finished goods from China as well. The positive side of that is that air pocket becomes more relevant for them when they've got to once once we get through this and their need to restock and reload. And the other thing that I would remind everybody is within that spectrum or that basket of goods, we are heavily exposed in the non discretionary low cost end of the spectrum where not reloading isn't really an option. They have to have those goods on the shelf and have committed with confidence that that is their go forward plan. Speaker 200:40:25So positioning as well as we can, trying to be as close to the breaking news, which is difficult at times. But I still believe, maybe with more conviction now than even previously, that for instance our Mexico exposure is a net positive over time. Yes, it's going to have interruptions and hurdles to get over in the short term, but that is an ongoing reassuring near shoring kind of opportunity that customers are leaning into. I recently completed a trip down there and heard loud and clear that they're not blinking on their plans. Speaker 600:41:07Okay. And then maybe just, Derek, bigger picture, our model can go goes back to like the early '90s. I don't think you've ever had an operating loss before. And I'm just trying I understand that, obviously, the environment is challenging. I mean maybe one thing that felt a little different this cycle, you did more M and A. Speaker 600:41:28How are those acquisitions performing? And I don't know, I mean to get out of this sort of whole, like are there more drastic changes that we need to be making in order to get back to the margins we want to get? Or is it just sort of waiting for a better cycle? Speaker 200:41:47No, Scott, I think your question is well stated. Yes, several things, right? So yes, we had M and A take place at a time where immediately preceding one of the largest freight recessions that we've seen. So we haven't been able to capitalize to the extent that we had modeled and planned to on some of those assets. We still feel very good about customer receptivity, customer acceptance and actually growth with core customers within each of those acquired businesses. Speaker 200:42:18But it is an opportunity that yet unleveraged, so to speak. We haven't been able to see the operating leverage in that to the extent we would like. The quarter is in fact an outlier, so your model is correct. And yes, it does require us to take more immediate and more dramatic action, which we referenced in the opening remarks. We are taking this seriously. Speaker 200:42:43This does not represent who we are, and we are going to make both appropriate near term moves but always with an eye toward the reality of this too shall change. Said differently, I don't want to wake up in a world where the large network of complex solution sets that we provide to customers post air pocket, post tariff overhang, etc, isn't able to be deployed. So I've got to make sure that we've got the core competencies in place, the capabilities and the people to do the job. But make no mistake, yes, we're going to dig deeper. We've raised our cost cutting initiative. Speaker 200:43:20It is well known internally that we're going to have to do things different. We take it very seriously. Speaker 600:43:28Okay. Thank you, guys. Appreciate it. Operator00:43:32And your next question today will come from Bascome Majors with Susquehanna. Please go ahead. Speaker 700:43:38Following up on the other conversation about pricing and discussions with customers and that sequentially potentially in one way being up or down. Can you talk a little bit about the dynamic in that discussion with 60% of your business coming from retail and that being an industry really in the crosshairs of the China uncertainty? How has that impacted maybe the content of discussions, but also the way bid season has played out versus normal? And how much visibility do you have into pricing net net being neutral this year? Yes. Speaker 200:44:14I'll let Chris get into some of the pricing detail. But as it relates to the conversations, I would point you to the reality that these uncertainties are significant for our retail customers. But with those same uncertainties, what they look for in wherever they can find it is certainty in execution. And so that's the kind of the point we're trying to make. The conversations have actually been pretty solid relative to them knowing that what will be needed on the other side of this will be different than what they needed going in. Speaker 200:44:45Large scale trailer pools, multiple delivery modes, the ability to move quantities of freight in shorter order are things that large, well capitalized carriers like Werner can do. That has led to discussions around moving more from spot to contract. That's led to some of the ability to close out on long standing dedicated conversations that have been lingering for way too long. That has led to our ability to talk about this business needing to be reinvestable for us to be able to sign up to support them as we get later into the summer and clearly prior to peak. So all of that set up from a conversation perspective is materially different than it was a year ago, and I would say in a positive way. Speaker 200:45:33But we've got a lot of work to do. We've got a lot of rates that yet to that we have to work through. And Chris has some probably additional color and detail that he can share. Speaker 100:45:44Yes, Bascome. We have now reported three consecutive quarters of year over year improvement. Certainly, this quarter at 0.3 in One Way was not a significant move. It would have been better had we been able to maintain deadhead a little bit better. Mean, rate per loaded mile was up over 1%. Speaker 100:46:01So we are continuing to make progress through the bid season. We're over halfway complete with one way bid season with about well, over 50% of our existing business will be repriced and will become effective sometime in the first half. I would point out that our retention on existing business has been pretty good. We've actually had less churn this year than last churn. I think that's just reflective of an environment where customers are leaning into stable asset backed logistics partners, who will maintain commitments and have the scale to deal with the volatility out there. Speaker 100:46:41In general, results have been a little mixed depending on the customer, depending on the lane. But on average, they've been relatively consistent with our expectation that we described during our last call of increased low single to mid single digit percent increases. So those things have played out as we expected. We did think the spot rates earlier in the year coming off of some relatively positive indicators in January and early February, we were expecting spot to improve a little bit in March. And then with the volatility that we've got with the tariffs, we just didn't see that. Speaker 100:47:21And that weakness in spot rates will certainly impact our rate per total mile in the second quarter. And I don't mean that ominously. I mean, could be positive, it could be negative, just depending on how things go. But it will be impactful to some degree, But we feel good about where we're at with contractual rate increases. Speaker 700:47:43And from a planning perspective, as you talk through these retailers and cycle through bid expectations, have the volumes underlying those bids and what you're bidding to change in any material way? Just any information you have to maybe plan capacity around the air pocket that's coming would be helpful. Thank you. Speaker 200:48:06Yes, great question. I would tell you that interestingly, volumes have held up between bid expectation and actual better this year than we've seen in the last couple of years, whether that's better planning or better tech on their side or better execution on our side in terms of staying on top of it every single minute of every day, which is the fight we're in right now. But in either case, bid outcomes or awards and bid actuals are tracking much more close this year than they were a year ago. I think that's also an indication, though, of aligning yourself with quality carriers, knowing that this too shall change. And so we'll continue to track despite all of the noise in the news and for the consumer to have to endure every day, has actually remained very strong with several of our largest customers. Speaker 200:48:57We expect and they expect that to continue. I think that is more reflective than anything of our heavy concentration with discount retail. So you have some migration downstream from customers that might have shopped elsewhere previously, offsetting the overall impact on the end consumer. But the consumer has continued, as we all know, to be more resilient than I think we would have expected given what all of the noise that they've been living through. Speaker 500:49:23Thank you both. Speaker 200:49:25Thank you. Operator00:49:27And your next question today will come from Chris Wetherbee with Wells Fargo. Please go ahead. Speaker 800:49:33Hey, thanks. Good afternoon, guys. Maybe first I want to drill down on the new dedicated wins. Just maybe get a little bit of color there, whether either from a magnitude of the size of the wins, the amounts, the kind of trucks that you might be adding there, the types of verticals you're seeing. We've seen Dedicated come under a decent amount of pressure over the course of the last couple of quarters. Speaker 800:49:53Kind of curious if there's something changing there that was driving the wins on your side. Speaker 200:49:58Yes, I think there's a few different things. One, we have aggressively pursued new talent in that arena, and we've put new bodies to work. That's part of it. We've also launched a pretty aggressive internal team that's cross functional across the organization to make sure that we kind of pick winners off the assembly line, take them off the conveyor belt, so to speak, and really attack those that we think are best fits in our network more than perhaps we did previously or more effectively anyway than maybe we were previously. And to your point on verticals, it has been a conscious effort to expand outside of kind of our traditional sweet spot of discount retail and really aggressively get after some new verticals. Speaker 200:50:41And we've seen early success with ongoing really positive, I would say, conversations with others in the similar verticals. So we're excited about it. It's tough to be overly optimistic or excited given obviously the Q1 results. But if you look at, and I'm talking financial results, but if you look at win rate, you look at diversification of wins, and most importantly, if you look at new blood or new customer logos on that list, all of those things are cause for excitement. Speaker 800:51:13Okay. That's helpful. And then just a follow-up to come back to kind of 2Q and forgive the short term question here, but just sort of want to get a sense, obviously, this is a relatively unique quarter with 1Q. It sounds like there's some moving parts, but maybe revenue skews positive sequentially in 2Q. Just trying to get a sense. Speaker 800:51:29It sounds like maybe some of the weather costs and insurance maybe normalizes to some extent in 2Q. Is that enough to get us to kind of from a breakeven perspective or into the positive side of the ledger on EPS in 2Q? Speaker 300:51:42Yes. Chris, we would certainly be working to get back to positive. If you look over the last four or five years, the Q1 to Q2 EPS has been up and down. It's a range of about $0.45 between the high and low. Again, some of those down, some of those up sequentially. Speaker 300:52:01But these are uncertain times and I don't know that normal seasonality is fully going to apply here. So we're focused on getting from negative back positive territory. That would require over $0.12 of sequential adjusted EPS improvement. I think you heard it right from a revenue perspective of more optimism from a dedicated standpoint as well as logistics, just more uncertainty on the one way rate per total mile and just overall one way on the top line. From an OpEx perspective, we will have some dedicated startup, but we are expecting some accelerated pace of cost reduction in the quarter. Speaker 300:52:43We mentioned cost savings target being raised to $40,000,000 8 million dollars of that was realized in the first quarter. So call it over $10,000,000 on average for the next three quarters to go. And if we can continue to find opportunity and even exceed the $40,000,000 in the year, then we will do that. Obviously, we're not going to adversely affect our ability to grow and we're not going to place safety and service and reliability at risk. But where we can leverage technology, where we can lean into operational excellence and innovation and find more benefit there that structural sustainable will clearly do that. Speaker 800:53:25Got it. Thanks for the details. Thank you. Speaker 200:53:28Thank you, Chris. Operator00:53:30And your next question today will come from Daniel Imbro with Stephens. Please go ahead. Speaker 500:53:36Hey, good evening guys. Thanks for taking our questions. Maybe just want to follow-up, making sure I understand the fleet growth comment, the guide of 1% to 5%. It sounds like that's all going to be in Dedicated. To the comment earlier, Derek, you made on one way margin pressures, we just expect one way fleet to keep producing through 2Q and 1Q or 2Q and 3Q sequentially. Speaker 500:53:54I'm just trying to understand how CapEx is reiterated given the returns in this environment are probably lighter than you expected them to be. Speaker 200:54:02I wouldn't necessarily plan on it reducing, at least not materially. Our focus is clearly dedicated. Our focus will be to remain in the one way game. There are certain precursors to why we need to have a one way presence. It's both sort of the training ground and proving ground, not training in the driver capability sense, but in the culture sense for drivers before they're placed in a dedicated. Speaker 200:54:27But maybe more importantly, it's really the entree to get to know customers, to get to build relationships and to be able to do business with them that then expands across the portfolio into everything from intermodal to final mile to dedicated, etc. Our focus on growth will be billing the already closed needs that we've talked about on the call as well as the pipeline that's coming forth from other dedicated opportunities that we see. Everything is fluid on the CapEx side, just to be clear. We are also navigating tariffs as it relates to original equipment values and or from OEMs. And we will be cautious to sign up for large increases or really increases at this time relative to equipment, and our fleet is in a great position to be able to allow us to do so. Speaker 500:55:20Helpful. I appreciate it. And then for my follow-up, just wanted to ask on the tech side. I believe you guys use Nestle for your Edge platform and you've talked about those investments for a while here. Guess maybe it's just hard to see in the consolidated results. Speaker 500:55:32But what kind of benefits and when would you expect to start seeing the benefits from these investments financially? And then broadly, I guess, just your thoughts on the industry, the growth of these better TMS offerings and systems out there, is that part Speaker 700:55:45of what's making small carriers more efficient? Speaker 500:55:47Could that be keeping capacity in the market because they're just getting better and more efficient with routing? Just trying to think about the longer term implications of these tech offerings do improve and get rolled out to the industry. Speaker 200:55:57Yes. I'll start with Mastery and our edge conversion. We are at the point right now in the edge conversion where the spend is kind of outsized compared to what we believe the long term run rate may look like, but it's necessary. We're at the most vulnerable stage, call it the red zone, you will, to use a football analogy, where a lot of really good things are imminent to happen, but we can't afford a mistake. And so where we sit today is logistics is fully converted and we're starting to see the productivity gains and you can really see it in the OpEx savings and the ability to do more with less in logistics. Speaker 200:56:37That is not true yet in One Way or Dedicated. We significantly progressing in One Way and Dedicated, but we're still operating out of multiple systems. We also had to bear the difficult choice knowing that we were converting to a totally new tech platform to not even not yet at this point fully integrate some of the acquired companies because we didn't want to integrate them twice. And so there are a lot of synergies ahead of us as we get to the final innings and this whole conversion is really scheduled to be complete by this time roughly next year. The predominance of those productivity gains will start to be visible late Q3 into Q4 this year, and so we're excited to get there. Speaker 200:57:18Right now what we have is sort of more of a headwind than a tailwind, both in terms of spend but also in productivity, and so we think this too shall pass. But I'm excited about those places where we can see what it looks like with full implementation, and it's clearly flowing through to productivity gains and efficient more efficient outputs. Speaker 300:57:40Yes. And maybe just to give you a bit more color there. In terms of the synergies, Derek mentioned the cost reduction in logistics, which outside of Final Mile is 100% on Edge TMS. We mentioned that the operating expenses are down 11%. We don't disclose the other ratios like load per employee ratios, but those are also on the rise. Speaker 300:58:03So we're definitely seeing on the expense side, the productivity gains there from the technology. But also, while it's early, we're all seeing top line synergies, greater visibility to freight, greater ability to optimize freight selection. That is showing up on the top line, but it's early, it's small. As we go forward, I think we've really hit a new gear here in 2025 relative to the pace of this transformation. So that means a couple of things. Speaker 300:58:33It does mean some periods of some elevated cost. We would quantify the first quarter impact on EPS of year over year kind of general IT spend to be about $05 So there will be some pockets of some elevated IT costs. I think as we go through the year, we would look for that to decelerate. But the synergies will also grow from here as we continue to stay focused on the finish line. Speaker 200:58:57And to address the second part of your question quickly, Daniel, yes, technology is an enabler, but I don't think that's the core enabler of what's happening with the small to midsize carrier. I think it's been a combination of bank leniency and the reality of how long it takes to kill a trucker. You can run a truck at below profitability for a very, very long time if you're willing to run it out and generate the cash with no ability to then reinvest or to renew. We've seen that as of late, even with multiple bankruptcies just in the last couple of weeks of 200, three hundred, one hundred and 50 truck carriers. And I think you're going to see a lot more of that in the news as we go forward from here. Speaker 500:59:41Thanks so much for all the color. Best of luck. Operator00:59:45And your final question today will come from Richa Harnane with Deutsche Bank. Please go ahead. Speaker 900:59:52Hey, thanks for squeezing me in. You guys can hear me? Speaker 200:59:56Yes, we can. Go ahead, Richa. Speaker 900:59:57Okay, great. So Derek, I appreciated your point on the dedicated win rate. A lot of excitement there with respect to that, with respect to the diversification, the new blood, all of that. Should we also be excited about margin potential, I. E, is that new business going to be margin accretive over time? Speaker 901:00:16And then just I know this might be silly. I appreciated your commentary around the supply dynamic in the industry big picture. But making national news is Trump requiring truck drivers to speak English and test literally tests as communication problems mount. So curious if you had any feedback on that too. Do you think that that could be another enabler of supply out for the industry? Speaker 201:00:41Yes. Thank you. I mean, the margin enhancing, the answer there would be yes for a couple of reasons. The most basic level is just as we can continue to put more trucks as a percent of fleet into Dedicated. That business is in fact profitable today, will continue to be profitable and we're able to spread fixed cost over more a larger truck count. Speaker 201:01:03We're also in that mix adding trucks to existing fleets and that's always very desirable. Whenever we can add trucks to existing fleets, we already have the infrastructure in place personnel and a large portion of the fixed cost accounted for. So that's also exciting. So when we think about that 1% to 5% TTS truck growth this year, that's why the heavy focus on greater density growth with existing and new verticals with new logos all gets us optimistic as we look forward. As it relates to the movement on the English speaking requirement, I would remind everybody it's always been a federal regulation. Speaker 201:01:42It's never been removed. It just simply had enforcement guidance changed in the Obama era. We at Werner have chosen to continue to keep that as a requirement as we bring drivers into our fleet. We continue to test for English proficiency. So we're in great shape no matter where the enforcement may go from here. Speaker 201:02:01It is difficult to change enforcement overnight at roadside levels. It's harder than people may think, But I think if you tie it back to the core reason why that regulation existed, which was safety, then we certainly support that. The principle behind the original regulation was that drivers need to be able to communicate to first responders at the scene of an accident. They need to be able to communicate whether others are in the cab and what cargo they may be hauling, and they need to be able to interact with and read roadside instructions. So for all of those reasons, we are a proponent of the concept that it is a different standard than driving a private vehicle and it should be held as one, no different than pilots are required to be able to be proficient in English worldwide. Speaker 201:02:46So the question mark though comes at what will change tomorrow. And and honestly, I think it would be inappropriate for me to guess. I think you will see enforcement levels different around the country, but I think any enforcement leads to decisions that customers are gonna have to make. Whether you have three loads stopped somewhere in the country or you've got 30, you still have freight not moving if a driver was to be put out of service. And I think leaning in once again to well capitalized, well developed with great training program carriers is a place that customers can look to for that support. Speaker 201:03:20And therefore, we think that is a net tailwind as we go forward from here. Speaker 901:03:27Thank you so much. Quick follow-up. Do you think that the industry does comprise a lot of non English speaking truck drivers? Just thinking about it as a potential tailwind. Speaker 201:03:38Yes, do believe there's there's a decent percentage of the industry that cannot communicate in English. It's very difficult for me to try to give you a number. I've done some soul searching and conversations around the industry and I think most people come back with 10% to 15%. That doesn't mean 10% to 15% of capacity leaves tomorrow because of all of the enforcement issues I've already described, but I think that is a safe kind of range or bookend of what that population may look like. It's predominantly Latin American, but not exclusively by any stretch. Speaker 201:04:13And depending on pockets of the country, there are certain regions where it's it's it's that isn't even the predominant primary language. We again are well positioned for this, and so it's not a great concern of ours relative to our freight moving down the road, but I do think it could have some ripple effects. It's just too early to know how great of an impact it ultimately will be. Speaker 901:04:39Thank you so much for all that. Speaker 201:04:42Thank you, Regent. Operator01:04:44I'll now turn the call back over to Mr. Derek Leathers, who will provide closing comments. Please go ahead, sir. Speaker 201:04:51Thank you, Nick. We want to thank you for taking the time to be with us today. The freight recession is still looming and the uncertainty of tariffs and their impact across the economy remain. However, we're not deterred and our focus on continuous improvement remains. We are focusing on structurally improving Werner for the long haul. Speaker 201:05:09And we have contingency plans for a variety of tariff and economic outcomes moving forward, and we'll be aggressively looking to take out costs in the meantime. We have a resilient portfolio and a significant competitive advantage to help cause or help solve our customers' transportation and logistics needs. And again, I'd just like to close by thanking our customers to whom we are committed to serve as a trusted solution provider, as well as our 13,000 associates for their dedication as we keep America moving. Thanks again for your time today, everyone. Operator01:05:40The conference has 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 202500:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) 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.comElon Reveals Why There Soon Won’t Be Any Money For Social SecurityElon Musk's Near-Death Experience Sparks Dire Warning for Americans After cheating death twice—once in a terrifying supercar crash with billionaire Peter Thiel, then from a deadly strain of malaria—Elon Musk emerged with a stark warning for Americans about looming financial dangers. Discover the little-known Trump IRS loophole that thousands are now using to safeguard their retirement from inflation and market turmoil—before it's too late.May 5, 2025 | Colonial Metals (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 Is Reddit Stock a Buy, Sell, or Hold After Earnings Release?Warning or Opportunity After Super Micro Computer's EarningsAmazon Earnings: 2 Reasons to Love It, 1 Reason to Be CautiousRocket Lab Braces for Q1 Earnings Amid Soaring ExpectationsMeta 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 Plan 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 10 speakers on the call. Operator00:00:00Good afternoon, and welcome to the Werner Enterprises First Quarter twenty twenty five Earnings Conference Call. All lines are in a listen only mode until after the presentation. Please note that this event is being recorded. I would now like to turn the conference over to Chris Neal, SVP of Pricing and Strategic Planning. Please go ahead. Speaker 100:00:37Good afternoon, everyone. Earlier today, we issued our earnings release with our first quarter results. The release and a supplemental presentation are available in the Investors section of our website at wanner.com. Today's webcast is being recorded and will be available for replay later today. Please see the disclosure statement on Slide two of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Speaker 100:01:01Today's remarks contain forward looking statements that may involve risks, uncertainties and other factors that could cause actual results to differ materially. The company reports results using non GAAP measures, which we believe provides additional information for investors to help facilitate the comparison of past and present performance. A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. On today's call with me are Derek Leathers, Chairman and CEO and Chris Wyckoff, Executive Vice President, Treasurer and CFO. I'll now turn the call over to Derek. Speaker 200:01:39Thank you, Chris, and good afternoon, everyone. We appreciate you joining us today. Let me start by saying clearly, our first quarter results did not meet our expectations. We faced several challenges during the quarter, some industry wide, some specific to Werner, but we were acting decisively to address them. At the same time, the underlying progress we're making in growing Dedicated, advancing our technology transformation and more aggressively tightening our cost structure puts us in a stronger position as the environment stabilizes. Speaker 200:02:10Today, I'll address our Q1 performance, provide our perspective on the fluid operating environment, walk through the actions we are pursuing and why we are confident in the long term trajectory of the business. Let's turn to Slide five and discuss our first quarter results. During the quarter, revenues were 7% lower versus the prior year. Adjusted EPS was negative $0.12 Adjusted operating margin was negative 0.3% and adjusted TTS operating margin was 0.4% net of fuel surcharges. Our performance was negatively impacted by four factors. Speaker 200:02:45First, we experienced elevated insurance costs and claims. This accounted for $09 of the adjusted EPS impact, with one verdict late in the quarter representing $08 related to a 2019 incident, which we are appealing. Adverse nuclear verdicts remain an industry wide issue. We, along with our peers, continue to advocate for reform with state and federal government officials. We will continue to do our part to ensure that a more pragmatic approach lawsuits will prevail. Speaker 200:03:14Second was extreme weather, which was more pronounced in the areas in which we operate. This represented approximately a $04 impact to our first quarter EPS. Third, our IT spend was more elevated to progress our technology strategy and transformation. And fourth, were isolated operating inefficiencies and lower utilization stemming from select customer decisions and stop and go activity from tariff induced uncertainty. The net effect of these headwinds was adjusted EPS being down $0.25 year over year. Speaker 200:03:45While our results do not reflect our expectations, there are areas where we continue to see momentum and strength that will position us well as we progress through the rest of the year. In Dedicated, we were awarded several fleet contracts from new and existing customers during the quarter, representing over 200 trucks that are scheduled to be implemented in late Q2 and early Q3. Awards signed this quarter were the highest since the second quarter of twenty twenty two. Our dedicated expertise is a competitive advantage that has and will drive growth over the long run. Our customer retention remains strong and interest in our dedicated solutions from new customers in attractive verticals is on the rise. Speaker 200:04:23Our dedicated business excels when reliability matters most amongst large enterprise shippers. We expect that supply chain uncertainty in 2025 will continue to play well to our strengths. In One Way Truckload, revenue per total mile was up for the third consecutive quarter despite weather disruptions, increased deadhead and network inefficiencies. Over half of the One Way bid season is complete. Business retention has been good so far. Speaker 200:04:48We secured several One Way awards with some of our largest customers. Contractual rate adjustments have been mixed, although are generally up low to mid single digit percent on average. While our One Way fleet is smaller versus prior years, we've continued to invest strategically. We remain committed to serving specific specialized segments within One Way, including Mexico cross border, expedited and highly engineered lanes. Our scale, including one of the largest trailer fleets, provides flexibility and a simplified approach for large enterprise shippers, which is critical during these uncertain times. Speaker 200:05:23Logistics adjusted operating income continues to be positive. While revenue was down 3% and gross margin was down 5% year over year, operating expenses excluding purchase freight were down 11%. Sequentially, we saw softer volume in truckload logistics, driven by small and midsized customers. Gross margin was squeezed the first half of the quarter, but improved in March. Moving to Slide six. Speaker 200:05:46While macro volatility remains, our plan and ability to generate earnings power and drive value remains unchanged. We remain focused around three priorities. First is driving growth in core business, which includes expanding TTS and Logistics operating income margins, increasing one way rates and growing our dedicated fleet given a pipeline that remains strong. We've been awarded numerous new dedicated fleets, and we are seeing positive results on several large one way bids with strategic customers. We are realizing rate increases on one way bids. Speaker 200:06:17And within logistics, we are growing PowerLink and intermodal. Second is driving operational excellence as a core competency, which we will deliver by maintaining a resolute focus on safety, providing industry leading reliability, solutions and service to our customers, continuing to advance our technology roadmap and continuing to control cost. Our commitment to excellence was recently recognized as the Truckload Carriers Association, named Warner, a 2025 TCA Elite fleet. This designation highlights our commitment to providing a top tier workplace for professional drivers. We are progressing our technology strategy and the transition to our Edge TMS platform. Speaker 200:06:57Today, all logistics loads except Final Mile are running through Edge TMS. We are making progress in TTS with more than half of One Way Truckload volume and a quarter of Dedicated volume in Edge. We remain focused on transitioning remaining customers and volume to Edge, building out execution capabilities and realizing the anticipated synergies at greater scale. On the cost containment front, over the last two years, we have taken out $100,000,000 in cost and continue to execute against our cost savings goal for 2025, which we are increasing from $25,000,000 to $40,000,000 Chris will cover our actions here and how we are controlling what we can without sacrificing future opportunities. The final priority is driving capital efficiency. Speaker 200:07:41This includes maintaining strong operating cash flow, remaining disciplined and thoughtful in how we allocate capital and maximizing equipment fleet sales. Capital proceeds exceeded capital expenditures for the quarter as we sold more used equipment than we purchased. We are seeing increased values on used equipment as pricing on new equipment is fluid and recently being influenced by tariffs. We will continue to invest in trucks, trailers, terminal, technology and talent, while maintaining optionality when it comes to evaluating the impact from tariffs on our equipment cost. We reduced debt since year end. Speaker 200:08:15Our liquidity is at a new high point as we closed late in the quarter on a new and incremental $300,000,000 credit facility. As a result, we are well positioned to be opportunistic relative to share repurchase and M and A. Regarding tariffs, our conversations with suppliers and customers reflect a muddied outlook. The environment is fast moving and ever changing. We think about the impact of tariffs on our business in three categories: CapEx and used equipment gains, exposure to Mexico freight and the broader impact on retail and consumer demand. Speaker 200:08:48Relative to CapEx and used equipment gains, our average tractor age of two point two years provides flexibility on equipment purchases and sales. We work with several OEMs with varying levels of supply chain exposure to Mexico and Canada and are in close contact as they assess potential tariff impacts on their products. As information becomes clearer, we are considering several strategies to mitigate the impact of higher prices. This includes delaying new tractor purchases and sales, which is feasible given our low age fleet and or shifting purchases between OEMs to those less impacted by tariffs. In the event that tariffs stick, we expect low single digit percent increases to the cost of equipment and parts, but with favorable offsets with growing demand and improved resale values of used equipment, which we are seeing now as an early development in April. Speaker 200:09:36Relative to cross border freight, approximately 10% of total revenues are from cross border Mexico shipments. This includes both U. S. Linehaul as well as revenues generated within Mexico. Most of our cross border business is executed in one way trucking and logistics. Speaker 200:09:52Shipments consist primarily of manufacturing, industrial and food and beverage products. Even though there may be some short term impact from tariffs, supply chains that have been expanding in the region will not change overnight. With over twenty five years of experience in cross border operations, we have developed strong partnerships with customers and partner carriers. As one of the largest transportation providers in The U. S. Speaker 200:10:14With a strong presence in Mexico, we are firm believers that our expertise in this region is a competitive advantage over the long term, and we plan to continue to operate and grow this business. And lastly, relative to the broader impact on consumer sentiment and spending, through all the noise and challenges of the last few years, the consumer has remained engaged and resilient. We are seeing stable volumes across our discount retail customer base, 62% of our revenues in 2024 from the retail vertical. Our more concentrated exposure to non discretionary retail from our relationships with discount and large value retailers is a differentiator and has held up well in past economic slowdowns. As the current difficult environment lingers, we anticipate ongoing capacity attrition. Speaker 200:10:58Long haul truckload employment is below the prior peak in 2019 and additional exits could be accelerated, providing a more favorable backdrop for larger carriers like Werner, and we stand at the ready. In summary, while elevated insurance and claims expense and challenging weather negatively impacted our results this quarter and tariff uncertainty looms, we continue to execute our long term strategy while taking near term decisive action to position Werner for success. Our 13,000 hardworking talented team members are committed to move this company forward. And while our hard work is not yet showing up in the bottom line, we have clear line of sight to structural improvements that are being made to position this company for stronger earnings power. With that, I'll turn it over to Chris to discuss our first quarter results in more detail. Speaker 300:11:43Thank you, Derek. Let's continue on Slide eight. Our performance comparisons here are year over year unless otherwise noted. Adjusted operating loss was $1,800,000 and adjusted operating margin was negative 0.3%. Adjusted EPS of negative $0.12 was down $0.25 As Derek noted, this includes a $09 headwind during the quarter from increased insurance costs and another approximately $04 due to the impact of adverse weather resulting in lower one way miles per truck. Speaker 300:12:13Elevated technology spend is also contributing year over year, a reflection of further progress in our technology strategy and transformation. Turning to Slide nine. Truckload Transportation Services total revenue for the quarter was $5.00 $2,000,000 down 9%. Revenues net of fuel surcharges declined 7% to $444,000,000 TTS adjusted operating income was $2,000,000 Adjusted operating margin net of fuel was 0.4%, a decrease of four thirty basis points, of which 160 basis points was due to higher insurance and claims referenced earlier. During the quarter, consolidated gains on sale of property and equipment totaled $2,800,000 Net of fuel surcharges, insurance and gains, TTS operating expenses declined 5%. Speaker 300:13:01Let's turn to Slide 10 to review our fleet metrics. TTS average trucks declined to 7,415 during the quarter. We ended the first quarter with TTS fleet down 5% year over year, but only down 10 trucks or 0.1% sequentially. TTS revenue per truck per week net of fuel decreased 1.4%, primarily due to lower one way miles per truck negatively impacted by adverse weather conditions. Within TTS for the first quarter, Dedicated revenue net of fuel was $279,000,000 down 7%. Speaker 300:13:35Dedicated represented 64% of TTS trucking revenues consistent with a year ago. Dedicated average trucks decreased 7.1% year over year, but was only down sequentially by 1.1% to 4,783 trucks. At quarter end, the Dedicated fleet was down only five trucks or a tenth of a percent from year end '20 '20 '4. This is well above our more seasonal trend that averages a 30 truck reduction during the first quarter. At quarter end, Dedicated represented 65% of the TTS fleet. Speaker 300:14:09Dedicated revenue per truck per week decreased slightly, down 0.3%, but has increased for 27 of the last 29 quarters and was impacted by one fewer business day versus the prior year quarter. In our One Way business for the first quarter, trucking revenue net of fuel was $154,000,000 a decrease of 9%. Average truck count of 2,632 declined 5.5% year over year and sequentially by 1%. Revenue per truck per week decreased 3.2%, mostly due to 3.5% lower miles per truck per week. Revenue per total mile increased 0.3%, representing the third consecutive quarter of improvement. Speaker 300:14:51One way freight conditions were more stable early in the quarter, but weakened in March as trade policy resulted in a more uncertain and cautious environment. Weaker One Way volumes have lingered in April. Total miles decreased 9% versus prior year with 5.5% fewer average trucks. Increased miles in PowerLink mitigated some of the decline in One Way Truckload miles, ultimately resulting in combined miles that were down just under 6%. Now turning to Logistics on Slide 11. Speaker 300:15:22In the first quarter, Logistics revenue was $196,000,000 representing 27% of total first quarter revenues. Revenues were down 3% year over year and 8% sequentially. Revenue in truckload logistics declined 5% and shipments decreased 4%, a narrowing year over year trend compared to the past several quarters. Intermodal revenues, which make up approximately 14% of logistics revenue, increased 14% year over year due to 16% more shipments, partially offset by a 1% decrease in revenue per shipment. Final Mile revenues decreased 12% year over year and 11% sequentially. Speaker 300:15:59Logistics adjusted operating margin of 0.3% improved 90 basis points year over year, driven by double digit percent OpEx improvement. Moving to Slide 12 and our cost savings program. As macro uncertainty remains, as we have less control over weather disruptions and as litigation and nuclear verdicts remain an industry challenge, we are committed to controlling what we can to expand margins and earnings. As Derek mentioned, two years ago, we set out to achieve a more cost efficient operating model, identifying and executing on $100,000,000 in savings, helping to partially offset softness in rate and volume as well as select inflationary factors. As we enter 2025, we announced an additional $25,000,000 cost savings program. Speaker 300:16:44Today, we are increasing our 2025 cost savings target to $40,000,000 In the first quarter, we achieved $8,000,000 in savings towards that goal. We are underway with more aggressive restructuring efforts to drive out additional cost. These savings are aimed at more accelerated pace of realizing synergies from our technology investments, further optimizing headcount and pursuing savings in procurement spend, facilities and real estate, all without sacrificing our readiness and ability to grow as the backdrop improves. The next phase of structural changes should result in enhanced operating leverage as demand returns. Let's review our cash flow and liquidity on Slide 13. Speaker 300:17:21Operating cash flow was $29,000,000 for the quarter or 4% of total revenue. As expected, net CapEx continues to trend down, yet we maintain a modern fleet and continue to reinvest strategically. First quarter net CapEx was a cash flow positive $8,000,000 as we sold more used equipment than we purchased. Free cash flow was $37,000,000 or 5% of total revenues. Total liquidity at quarter end was $777,000,000 up nearly 70% from year end and including 52,000,000 of cash on hand. Speaker 300:17:53During the quarter, we closed on a new $300,000,000 committed receivable securitization facility. This facility is priced at a rate below our revolving credit facility and will result in interest expense savings going forward. At quarter end, we had six seventy nine million dollars of availability on a revolver and $46,000,000 on the receivables facility. Moving to Slide 14. We ended the quarter with $640,000,000 of debt, down $10,000,000 sequentially. Speaker 300:18:21Our net debt to EBITDA as of March 31 was 1.7x. We have a strong balance sheet, access to capital, relatively low leverage and no near term maturities in our debt structure. Let's turn to Slide 15. While CapEx in the quarter was light, strategic reinvestment in the business is a top priority. Our track record shows consistency in reinvesting in the business, maintaining a low mile modern fleet and extending our solutions and capabilities. Speaker 300:18:48Over the long term, we will remain balanced, including returning capital to shareholders, maintaining appropriate leverage and being disciplined and opportunistic with share repurchase and M and A. We have 3,900,000.0 shares remaining under our Board approved share repurchase authorization. Let's review our guidance for the year on Slide 16. We are maintaining our full year fleet guidance of up 1% to 5%. Fleet growth this year is expected to be driven more by Dedicated versus One Way. Speaker 300:19:16The TTS fleet overall is nearly flat year to date, but we have visibility to Dedicated wins implementing late in second quarter and early third quarter with some added startup costs along the way. Growth in our One Way fleet is more uncertain given the combination of downside risk from West Coast volumes upside with increased driver recruitment. Our full year net CapEx guidance range is between 185,000,000 and $235,000,000 lower than historical ranges as our portfolio evolves to be more asset light. Year to date net CapEx is net cash flow positive. We will have more normalized net spend in the second quarter. Speaker 300:19:51While we are not changing the full year guidance range at this point, tariffs on OEM purchases will have an impact on our purchase decisions for the rest of the year. Have some ability to pull back on CapEx spend later in the year if appropriate, although we could also accelerate CapEx if presented with attractive OEM price concessions in the near term. Dedicated revenue per truck per week decreased 0.3% year over year, but is expected to remain within our full year guidance range of zero percent to 3%. One way Truckload revenue per total mile increased 0.3% despite elevated deadhead of more than 100 basis points, offsetting $02 of rate per mile year over year benefit. Network inefficiencies occurred due to higher freight volatility than usual caused by tariff related uncertainty. Speaker 300:20:37We are updating our rate per total mile guide to flat to up 3% in the second quarter compared to the prior year period. Our effective tax rate was 23.7% in the first quarter. Our 2025 guidance range between twenty five percent and twenty six percent is unchanged. We are maintaining the full year guide and expect elevated effective tax rate in future quarters. The average age of our truck and trailer fleet at the end of the first quarter was two point two and five point four years respectively. Speaker 300:21:06Regarding several modeling assumptions, equipment gains were $2,800,000 in the quarter, which was consistent with our expectations. We are maintaining our expectation for full year equipment gains in the range of 8,000,000 to $18,000,000 Recently for April, we are seeing select equipment values and gains that are at two year highs as a result of tariff uncertainty. While positive, it's too early to predict any lasting impact on the rest of the year. We expect net interest expense this year will be flat to down year over year, absent any outsized capital allocation, but higher in first half than lower in second half. With that, I'll turn it back to Derek. Speaker 200:21:43Thank you, Chris. Tariff impact remains fluid and adverse insurance settlements continue to pressure results. Disruptive weather was a headwind during the quarter. Technology spend is elevated and used equipment values remained low versus prior years, but are improving more recently. In parallel to these trends, we've been making structural improvements and strategic investments to bolster long term growth and profitability for Werner. Speaker 200:22:07While we wait for demand to normalize, we are aggressively managing costs. What remains constant during these uncertain times is our competitive advantage. We are a large scale, award winning, reliable partner with diverse and agile solutions to support customers' transportation and logistics needs. We have a modern fleet and continue to invest in our equipment, leading to safety DOT preventable accidents per million miles near twenty year lows over the last two years. We've been making considerable operational improvements in building a leaner, but more powerful organization. Speaker 200:22:38We're a cycle tested team and our historical results demonstrate our ability to generate earnings power as the market improves. With that, let's open it up for questions. Operator00:23:04Session. And your first question today will come from Jason Seidl with TD Cowen. Please go ahead. Speaker 100:23:21Thank you, operator. Derek and team, afternoon here. You walk us through sort of dedicated margins and how you view them versus OTR? And sort of what we should think about the most recent dedicated wins in terms of long term impacts to the margins in that division? Speaker 200:23:40Sure, Jason. I'll start. So I guess I'll start by maybe attacking one of the misnomers that we constantly hear about, which is dedicated being some sort of a drag as this market progresses further from here. We've studied this pretty closely. If you look back over the last ten years, about eight out of ten years, Dedicated does outperforms our one way margins. Speaker 200:24:06We don't disclose margins individually for a variety of reasons, but I can tell you that it stands up very well in both good markets and bad. As it relates to recent wins, clearly it's a competitive environment right now. And so those wins are operating margin they are contributing to operating margin. Those are not implemented yet. Those will improve the health of the overall network. Speaker 200:24:33Those are implemented in Q2 and currently scheduled to be completely launched or at least started in Q2, but some are late enough that we felt it prudent to indicate there could be some drift into early Q3. The pipeline in Dedicated is particularly strong at the moment, So that is exciting. The win rate will be continued to be pressured based on the competitive environment we're in, but we like the momentum. The trucks closed year to date exceeded sort of new business truck closes through 2024 for the entirety of the year. And that trend has continued in conversations with customers as we advance in the year. Speaker 200:25:13So overall from a positioning perspective, I like where we're sitting there. I like the ads in that part of the network. And I think it positions us well as we build from here. Speaker 100:25:24Derek, Jason go ahead. Speaker 300:25:28Sorry, Jason. I think you were also asking just about the TTSOI and some color on the operating So we've talked about in the past of getting back to long term double digit margins, 2015 to 2022, '6 of those eight years, we are in the double digit margin territory. 2023 was high single digits. So we have not changed our view in terms of double digit OI margins being our long term target. Obviously, we're a ways off from that. Speaker 300:26:00We've had multiple years being impacted of the decline in the one way rate per mile, softer dedicated demand, softer used equipment values and some inflationary pressures. And those continue to be the levers that we're focused on and that will get us back to more of that long term range. With each of those levers, we're seeing improvement now in all areas, albeit slow. If you we just roll back first half of last year in those areas, one way rate, dedicated demand, equipment market, those were working against us. It was then in the third quarter of last year that we saw for the first time in seven quarters, favorable year over year improvement in the one way rate. Speaker 300:26:48Now we're seeing this momentum that Derek just mentioned in Dedicated, also recently seeing some improvement in equipment gains. So we're still focused on the long term, still focused on those being the levers that will get us there and starting to see some gradual improvement. Speaker 100:27:05And so my follow-up guys is, I know you're not you don't disclose the actual margins, but if we look at 1Q, would you say the margin discrepancy between Dedicated and One Way expanded? Speaker 200:27:20I would say the yes, that's fair to say, and it's because of the duress of the One Way portion of the portfolio. One Way has been the most competitive section of the portfolio. It remains so today. And so when you think about performance across the quarter, One Way certainly was a drag on the quarter. Dedicated has had pressure, but still is outperforming by a larger mark today than it would have been even in some recent quarters. Speaker 200:27:51All of both of those groups obviously are impacted by some of the comments we've made through the prepared remarks relative to weather in particular. And then obviously, the insurance claims is an outlier that we hope to put in the rearview mirror as we go forward. Speaker 100:28:11Understood. I really appreciate all that color. Speaker 200:28:14Thank you, Jason. Operator00:28:16And your next question today will come from Ari Rosa with Citigroup. Please go ahead. Speaker 400:28:22Hey, good afternoon. So I wanted to understand, Derek, just kind of continuing on that point about putting the insurance issue in the rearview mirror. It seems like there's really not anything structurally changing. What causes that to change? Or what causes that insurance concern to mitigate outside of legislation kind of resolving that and kind of taking away this prospect of nuclear verdicts? Speaker 200:28:50Yeah, I'll start and then I'll have Chris fill in some detail that we think is pertinent. So biggest of big picture is you're right. We need tort reform and we need state by state legislation to continue to make its way through so that there can be a fair and appropriate playing field in the case of litigation. We've seen that recently in Georgia. There are several other states that are working on it as we speak. Speaker 200:29:11We're going to continue to stay active in that space. And it really is both the sort of nuclear verdict and outsized settlement side when you're trying to avoid said nuclear verdict. This particular quarter was marred by a case that is a great example of what can go wrong will sometimes. We're talking about a case with video evidence, body camera footage of a claimant clearly stating that they were not injured, that they did not need medical attention, a case that was a low impact accident by all accounts where actual checks of the equipment was going on to see where the damage was. But the change of judge in Q1 and a series of adverse verdicts within that court case led us to an outcome where that injury became a multimillion dollar jury decision. Speaker 200:30:07I'd like to believe that we're we can get past those days and not see these sort of rainy day moments. But clearly, is an outsized on a per unit basis, per accident basis. It's a headwind just given what's happened with the ongoing trend in that direction with outsized verdicts. We're going to continue to focus most importantly on the core issue, which is lowering our preventable accident rate, lowering our total incident rate and working to develop better and better drivers as well as advent of technology, but that will only get you so far. So I can't promise or guarantee or predict the future. Speaker 200:30:44What I can tell you is that we do believe we're taking the right steps and preparing our drivers to be the best they can be on the road, But these outcomes are both unexpected and unsavory. Speaker 300:30:57And Ari, maybe just to give you a bit more color and perspective. It was $44,000,000 for the quarter, north of our eight quarter average, obviously, two consecutive quarters of being above $40,000,000 not our expectation, although we would still look at Q4 and Q1 as being outliers just for different reasons. Fourth quarter was a year end reserve remeasurement. Q1 having this isolated verdict with some unique circumstances that Derek just walked through. So I would still point to the quarter average, whether you want to look at the last eight quarters or the last twelve quarters, either way, it continues to be in a range of about 35,000,000 to $36,000,000 reflective of a cost per claim issue, not a frequency of claim issue. Speaker 300:31:44We continue to be pleased with our DOT preventable accident per million miles, which over the last two years was at a twenty year low. And really don't feel like that has yet to reflect in the trend of that particular line item. Speaker 400:32:00Okay. Understood. That's helpful. And then just for my follow-up, it seems like every call we're talking about the kind of supply demand issue, overcapacity problem. You mentioned that driver counts have come down, but maybe you could just give your perspective on kind of where the market is, what gets it to finally correct? Speaker 400:32:20Could this be kind of the catalyst that maybe gets the market to finally correct and get some of the excess capacity out? Or do you really see it as more of a demand issue or kind of a retransition from an issue of oversupply to an issue of kind of insufficient demand with the tariffs? Thanks. Speaker 200:32:41Yes, Ari, I think it's a great question. Let me back up and just start by saying as we entered the year, we obviously had some optimism relative to where the market was going. We saw that optimism starting to play out in January leading to February and into March. January and February were muted, so the demand was there, but the weather was not in our favor. And I would remind everyone that although we're a national carrier, our footprint is very heavy Midwest, South, Southeast, and the storm systems that we endured through the quarter were predominantly in those areas. Speaker 200:33:15As we got into March, we saw something different, which was although demand indicators, forward looking indicators were strong, the tariff uncertainty and some of the network disruptions that came with that became more pronounced. And so it was less about total demand but more about the significant network disruptions that come with people holding freight for a day or two, then shipping larger than normal quantities and the inverse of that. You know, rushing to get freight across the border before a potential tariff impact. Our exposure, both West Coast as well as the Mexico border, both are about 10% each. And so that impact was felt in our network. Speaker 200:33:53It was more disruptive on the North South moves because you can make more shorter term decisions than they were. But as we look forward now, I do believe this is a catalyst relative to washing some folks out more aggressively that are unable to compete at these levels that could and should lead to a more rapid cleansing of the capacity roles. BLS employment data is already now below twenty nineteen levels, pre COVID levels, if you will. And so there's a lot of trends that look good there. We do have to caution and not we can't own the macro and with the issues going on with that same economic uncertainty, there's certainly some concerns and a lot of contingency planning on our part relative to kind of a bull base and bear case relative to demand. Speaker 200:34:41The last thing I would add to all of the above is this sort of air pocket that's been largely talked about over the last several days, whereby we all know there is a significant reduction of inbound freight headed to the West Coast and really East Coast as well from ports in Asia. That air pocket will have to be filled to some extent and I think it's only a matter of monitoring and staying close to consumer sentiment and consumer confidence overall to know how much of that pocket gets filled on the backside. Inventory levels are in good shape or even in certain cases in our network in conversations with customers on the leaner end of where they'd like to be. So that freight has to get made up for at some point or resourced from elsewhere. All of those are catalysts where we think the large scale network capabilities that we have can be brought to bear in ways that are more interesting than sort of the aggregate of a bunch of small carriers that might be competing in certain lanes. Speaker 200:35:37So we will prepare for that. We'll be ready to respond regardless of which direction that demand side of the equation goes. But yes, I think capacity and that attrition can only accelerate from here based on the backdrop. Speaker 400:35:53Got it. Okay. That's very helpful context. Thanks for the time, Derek and Chris. Speaker 500:35:59Thank you, Ari. Operator00:36:02And your next question today will come from Scott Group with Wolfe Research. Please go ahead. Speaker 600:36:08Hey, thanks. Good afternoon. So Derek, with respect to that sort of import cliff you just sort of talked about, is there any way to sort of frame like what percentage of your volume at some point originates overseas? I'm guessing the like the direct port stuff is easy, but some of the more inland stuff that maybe starts overseas is harder. But if you have any sort of ballpark, I think that'd be helpful. Speaker 600:36:36And just and given that sort of volume air pocket you're talking about, like what's realistic in terms of improving in margin in Q2? Can we get back to profitability? I don't know. Any thoughts? Speaker 300:36:53Scott. This is Chris. Yes, I'll start on maybe both of those topics. First, on the West Coast import exposure, it's roughly about 10% of our one way volume, is exposed to the West Coast. That has been steady as of late with some of our large customers. Speaker 300:37:11But obviously, it's something we're very focused on and could be impactful broadly for North America freight. So but right now, that continues to be steady, and our exposure there is somewhat limited. In terms of your other question on just I think you were asking how to think about second quarter. Maybe from a revenue perspective, the on the One Way side, more uncertainty there, for topics that we're discussing here. On a rate per total mile basis, that could be up or down on a sequential basis based on the year over year 0% to 3% guide for the second quarter. Speaker 300:38:00However, we do have optimism with the dedicated fleet growth that we've talked about, the wins there. Also optimism broadly in logistics quarter over quarter and seeing some favorable trends into the second quarter. We have a solid line of sight on awards in PowerLink and intermodal, and both those businesses just continuing to have momentum and strength. But also in the truckload brokerage, which has had periods of being soft, last year and also in January, February, but where we came out of the quarter, truckload brokerage is seeing some positive momentum. We have a high had a high point in March of certain award counts and volume. Speaker 300:38:43April also appears to be strong. There's also some Q2 pop up in food and beverage within the truckload brokerage space. So some puts and takes there from a revenue perspective. And then from an OpEx perspective, we will have some dedicated startup costs with implementing some of those fleet wins in the second quarter and early third quarter. Of course, insurance is an area that has some volatility. Speaker 300:39:08But we're seeing momentum in gains. And on the equipment values, we also expect to have an accelerated pace of cost reductions in the quarter and some decelerated IT spend in second quarter relative to the first quarter. Yes. Scott, the Speaker 200:39:22only thing I would add is to the question about direct versus indirect, it is difficult, as you stated. We know that if you look across our book of business, our large retail customers and discount retailers in particular have anywhere from, call it, a 10% to 30% exposure rate to China, but that does not include some of the secondary exposures they may have from vendors that they buy from who are ultimately sourcing either pieces or parts or the actual finished goods from China as well. The positive side of that is that air pocket becomes more relevant for them when they've got to once once we get through this and their need to restock and reload. And the other thing that I would remind everybody is within that spectrum or that basket of goods, we are heavily exposed in the non discretionary low cost end of the spectrum where not reloading isn't really an option. They have to have those goods on the shelf and have committed with confidence that that is their go forward plan. Speaker 200:40:25So positioning as well as we can, trying to be as close to the breaking news, which is difficult at times. But I still believe, maybe with more conviction now than even previously, that for instance our Mexico exposure is a net positive over time. Yes, it's going to have interruptions and hurdles to get over in the short term, but that is an ongoing reassuring near shoring kind of opportunity that customers are leaning into. I recently completed a trip down there and heard loud and clear that they're not blinking on their plans. Speaker 600:41:07Okay. And then maybe just, Derek, bigger picture, our model can go goes back to like the early '90s. I don't think you've ever had an operating loss before. And I'm just trying I understand that, obviously, the environment is challenging. I mean maybe one thing that felt a little different this cycle, you did more M and A. Speaker 600:41:28How are those acquisitions performing? And I don't know, I mean to get out of this sort of whole, like are there more drastic changes that we need to be making in order to get back to the margins we want to get? Or is it just sort of waiting for a better cycle? Speaker 200:41:47No, Scott, I think your question is well stated. Yes, several things, right? So yes, we had M and A take place at a time where immediately preceding one of the largest freight recessions that we've seen. So we haven't been able to capitalize to the extent that we had modeled and planned to on some of those assets. We still feel very good about customer receptivity, customer acceptance and actually growth with core customers within each of those acquired businesses. Speaker 200:42:18But it is an opportunity that yet unleveraged, so to speak. We haven't been able to see the operating leverage in that to the extent we would like. The quarter is in fact an outlier, so your model is correct. And yes, it does require us to take more immediate and more dramatic action, which we referenced in the opening remarks. We are taking this seriously. Speaker 200:42:43This does not represent who we are, and we are going to make both appropriate near term moves but always with an eye toward the reality of this too shall change. Said differently, I don't want to wake up in a world where the large network of complex solution sets that we provide to customers post air pocket, post tariff overhang, etc, isn't able to be deployed. So I've got to make sure that we've got the core competencies in place, the capabilities and the people to do the job. But make no mistake, yes, we're going to dig deeper. We've raised our cost cutting initiative. Speaker 200:43:20It is well known internally that we're going to have to do things different. We take it very seriously. Speaker 600:43:28Okay. Thank you, guys. Appreciate it. Operator00:43:32And your next question today will come from Bascome Majors with Susquehanna. Please go ahead. Speaker 700:43:38Following up on the other conversation about pricing and discussions with customers and that sequentially potentially in one way being up or down. Can you talk a little bit about the dynamic in that discussion with 60% of your business coming from retail and that being an industry really in the crosshairs of the China uncertainty? How has that impacted maybe the content of discussions, but also the way bid season has played out versus normal? And how much visibility do you have into pricing net net being neutral this year? Yes. Speaker 200:44:14I'll let Chris get into some of the pricing detail. But as it relates to the conversations, I would point you to the reality that these uncertainties are significant for our retail customers. But with those same uncertainties, what they look for in wherever they can find it is certainty in execution. And so that's the kind of the point we're trying to make. The conversations have actually been pretty solid relative to them knowing that what will be needed on the other side of this will be different than what they needed going in. Speaker 200:44:45Large scale trailer pools, multiple delivery modes, the ability to move quantities of freight in shorter order are things that large, well capitalized carriers like Werner can do. That has led to discussions around moving more from spot to contract. That's led to some of the ability to close out on long standing dedicated conversations that have been lingering for way too long. That has led to our ability to talk about this business needing to be reinvestable for us to be able to sign up to support them as we get later into the summer and clearly prior to peak. So all of that set up from a conversation perspective is materially different than it was a year ago, and I would say in a positive way. Speaker 200:45:33But we've got a lot of work to do. We've got a lot of rates that yet to that we have to work through. And Chris has some probably additional color and detail that he can share. Speaker 100:45:44Yes, Bascome. We have now reported three consecutive quarters of year over year improvement. Certainly, this quarter at 0.3 in One Way was not a significant move. It would have been better had we been able to maintain deadhead a little bit better. Mean, rate per loaded mile was up over 1%. Speaker 100:46:01So we are continuing to make progress through the bid season. We're over halfway complete with one way bid season with about well, over 50% of our existing business will be repriced and will become effective sometime in the first half. I would point out that our retention on existing business has been pretty good. We've actually had less churn this year than last churn. I think that's just reflective of an environment where customers are leaning into stable asset backed logistics partners, who will maintain commitments and have the scale to deal with the volatility out there. Speaker 100:46:41In general, results have been a little mixed depending on the customer, depending on the lane. But on average, they've been relatively consistent with our expectation that we described during our last call of increased low single to mid single digit percent increases. So those things have played out as we expected. We did think the spot rates earlier in the year coming off of some relatively positive indicators in January and early February, we were expecting spot to improve a little bit in March. And then with the volatility that we've got with the tariffs, we just didn't see that. Speaker 100:47:21And that weakness in spot rates will certainly impact our rate per total mile in the second quarter. And I don't mean that ominously. I mean, could be positive, it could be negative, just depending on how things go. But it will be impactful to some degree, But we feel good about where we're at with contractual rate increases. Speaker 700:47:43And from a planning perspective, as you talk through these retailers and cycle through bid expectations, have the volumes underlying those bids and what you're bidding to change in any material way? Just any information you have to maybe plan capacity around the air pocket that's coming would be helpful. Thank you. Speaker 200:48:06Yes, great question. I would tell you that interestingly, volumes have held up between bid expectation and actual better this year than we've seen in the last couple of years, whether that's better planning or better tech on their side or better execution on our side in terms of staying on top of it every single minute of every day, which is the fight we're in right now. But in either case, bid outcomes or awards and bid actuals are tracking much more close this year than they were a year ago. I think that's also an indication, though, of aligning yourself with quality carriers, knowing that this too shall change. And so we'll continue to track despite all of the noise in the news and for the consumer to have to endure every day, has actually remained very strong with several of our largest customers. Speaker 200:48:57We expect and they expect that to continue. I think that is more reflective than anything of our heavy concentration with discount retail. So you have some migration downstream from customers that might have shopped elsewhere previously, offsetting the overall impact on the end consumer. But the consumer has continued, as we all know, to be more resilient than I think we would have expected given what all of the noise that they've been living through. Speaker 500:49:23Thank you both. Speaker 200:49:25Thank you. Operator00:49:27And your next question today will come from Chris Wetherbee with Wells Fargo. Please go ahead. Speaker 800:49:33Hey, thanks. Good afternoon, guys. Maybe first I want to drill down on the new dedicated wins. Just maybe get a little bit of color there, whether either from a magnitude of the size of the wins, the amounts, the kind of trucks that you might be adding there, the types of verticals you're seeing. We've seen Dedicated come under a decent amount of pressure over the course of the last couple of quarters. Speaker 800:49:53Kind of curious if there's something changing there that was driving the wins on your side. Speaker 200:49:58Yes, I think there's a few different things. One, we have aggressively pursued new talent in that arena, and we've put new bodies to work. That's part of it. We've also launched a pretty aggressive internal team that's cross functional across the organization to make sure that we kind of pick winners off the assembly line, take them off the conveyor belt, so to speak, and really attack those that we think are best fits in our network more than perhaps we did previously or more effectively anyway than maybe we were previously. And to your point on verticals, it has been a conscious effort to expand outside of kind of our traditional sweet spot of discount retail and really aggressively get after some new verticals. Speaker 200:50:41And we've seen early success with ongoing really positive, I would say, conversations with others in the similar verticals. So we're excited about it. It's tough to be overly optimistic or excited given obviously the Q1 results. But if you look at, and I'm talking financial results, but if you look at win rate, you look at diversification of wins, and most importantly, if you look at new blood or new customer logos on that list, all of those things are cause for excitement. Speaker 800:51:13Okay. That's helpful. And then just a follow-up to come back to kind of 2Q and forgive the short term question here, but just sort of want to get a sense, obviously, this is a relatively unique quarter with 1Q. It sounds like there's some moving parts, but maybe revenue skews positive sequentially in 2Q. Just trying to get a sense. Speaker 800:51:29It sounds like maybe some of the weather costs and insurance maybe normalizes to some extent in 2Q. Is that enough to get us to kind of from a breakeven perspective or into the positive side of the ledger on EPS in 2Q? Speaker 300:51:42Yes. Chris, we would certainly be working to get back to positive. If you look over the last four or five years, the Q1 to Q2 EPS has been up and down. It's a range of about $0.45 between the high and low. Again, some of those down, some of those up sequentially. Speaker 300:52:01But these are uncertain times and I don't know that normal seasonality is fully going to apply here. So we're focused on getting from negative back positive territory. That would require over $0.12 of sequential adjusted EPS improvement. I think you heard it right from a revenue perspective of more optimism from a dedicated standpoint as well as logistics, just more uncertainty on the one way rate per total mile and just overall one way on the top line. From an OpEx perspective, we will have some dedicated startup, but we are expecting some accelerated pace of cost reduction in the quarter. Speaker 300:52:43We mentioned cost savings target being raised to $40,000,000 8 million dollars of that was realized in the first quarter. So call it over $10,000,000 on average for the next three quarters to go. And if we can continue to find opportunity and even exceed the $40,000,000 in the year, then we will do that. Obviously, we're not going to adversely affect our ability to grow and we're not going to place safety and service and reliability at risk. But where we can leverage technology, where we can lean into operational excellence and innovation and find more benefit there that structural sustainable will clearly do that. Speaker 800:53:25Got it. Thanks for the details. Thank you. Speaker 200:53:28Thank you, Chris. Operator00:53:30And your next question today will come from Daniel Imbro with Stephens. Please go ahead. Speaker 500:53:36Hey, good evening guys. Thanks for taking our questions. Maybe just want to follow-up, making sure I understand the fleet growth comment, the guide of 1% to 5%. It sounds like that's all going to be in Dedicated. To the comment earlier, Derek, you made on one way margin pressures, we just expect one way fleet to keep producing through 2Q and 1Q or 2Q and 3Q sequentially. Speaker 500:53:54I'm just trying to understand how CapEx is reiterated given the returns in this environment are probably lighter than you expected them to be. Speaker 200:54:02I wouldn't necessarily plan on it reducing, at least not materially. Our focus is clearly dedicated. Our focus will be to remain in the one way game. There are certain precursors to why we need to have a one way presence. It's both sort of the training ground and proving ground, not training in the driver capability sense, but in the culture sense for drivers before they're placed in a dedicated. Speaker 200:54:27But maybe more importantly, it's really the entree to get to know customers, to get to build relationships and to be able to do business with them that then expands across the portfolio into everything from intermodal to final mile to dedicated, etc. Our focus on growth will be billing the already closed needs that we've talked about on the call as well as the pipeline that's coming forth from other dedicated opportunities that we see. Everything is fluid on the CapEx side, just to be clear. We are also navigating tariffs as it relates to original equipment values and or from OEMs. And we will be cautious to sign up for large increases or really increases at this time relative to equipment, and our fleet is in a great position to be able to allow us to do so. Speaker 500:55:20Helpful. I appreciate it. And then for my follow-up, just wanted to ask on the tech side. I believe you guys use Nestle for your Edge platform and you've talked about those investments for a while here. Guess maybe it's just hard to see in the consolidated results. Speaker 500:55:32But what kind of benefits and when would you expect to start seeing the benefits from these investments financially? And then broadly, I guess, just your thoughts on the industry, the growth of these better TMS offerings and systems out there, is that part Speaker 700:55:45of what's making small carriers more efficient? Speaker 500:55:47Could that be keeping capacity in the market because they're just getting better and more efficient with routing? Just trying to think about the longer term implications of these tech offerings do improve and get rolled out to the industry. Speaker 200:55:57Yes. I'll start with Mastery and our edge conversion. We are at the point right now in the edge conversion where the spend is kind of outsized compared to what we believe the long term run rate may look like, but it's necessary. We're at the most vulnerable stage, call it the red zone, you will, to use a football analogy, where a lot of really good things are imminent to happen, but we can't afford a mistake. And so where we sit today is logistics is fully converted and we're starting to see the productivity gains and you can really see it in the OpEx savings and the ability to do more with less in logistics. Speaker 200:56:37That is not true yet in One Way or Dedicated. We significantly progressing in One Way and Dedicated, but we're still operating out of multiple systems. We also had to bear the difficult choice knowing that we were converting to a totally new tech platform to not even not yet at this point fully integrate some of the acquired companies because we didn't want to integrate them twice. And so there are a lot of synergies ahead of us as we get to the final innings and this whole conversion is really scheduled to be complete by this time roughly next year. The predominance of those productivity gains will start to be visible late Q3 into Q4 this year, and so we're excited to get there. Speaker 200:57:18Right now what we have is sort of more of a headwind than a tailwind, both in terms of spend but also in productivity, and so we think this too shall pass. But I'm excited about those places where we can see what it looks like with full implementation, and it's clearly flowing through to productivity gains and efficient more efficient outputs. Speaker 300:57:40Yes. And maybe just to give you a bit more color there. In terms of the synergies, Derek mentioned the cost reduction in logistics, which outside of Final Mile is 100% on Edge TMS. We mentioned that the operating expenses are down 11%. We don't disclose the other ratios like load per employee ratios, but those are also on the rise. Speaker 300:58:03So we're definitely seeing on the expense side, the productivity gains there from the technology. But also, while it's early, we're all seeing top line synergies, greater visibility to freight, greater ability to optimize freight selection. That is showing up on the top line, but it's early, it's small. As we go forward, I think we've really hit a new gear here in 2025 relative to the pace of this transformation. So that means a couple of things. Speaker 300:58:33It does mean some periods of some elevated cost. We would quantify the first quarter impact on EPS of year over year kind of general IT spend to be about $05 So there will be some pockets of some elevated IT costs. I think as we go through the year, we would look for that to decelerate. But the synergies will also grow from here as we continue to stay focused on the finish line. Speaker 200:58:57And to address the second part of your question quickly, Daniel, yes, technology is an enabler, but I don't think that's the core enabler of what's happening with the small to midsize carrier. I think it's been a combination of bank leniency and the reality of how long it takes to kill a trucker. You can run a truck at below profitability for a very, very long time if you're willing to run it out and generate the cash with no ability to then reinvest or to renew. We've seen that as of late, even with multiple bankruptcies just in the last couple of weeks of 200, three hundred, one hundred and 50 truck carriers. And I think you're going to see a lot more of that in the news as we go forward from here. Speaker 500:59:41Thanks so much for all the color. Best of luck. Operator00:59:45And your final question today will come from Richa Harnane with Deutsche Bank. Please go ahead. Speaker 900:59:52Hey, thanks for squeezing me in. You guys can hear me? Speaker 200:59:56Yes, we can. Go ahead, Richa. Speaker 900:59:57Okay, great. So Derek, I appreciated your point on the dedicated win rate. A lot of excitement there with respect to that, with respect to the diversification, the new blood, all of that. Should we also be excited about margin potential, I. E, is that new business going to be margin accretive over time? Speaker 901:00:16And then just I know this might be silly. I appreciated your commentary around the supply dynamic in the industry big picture. But making national news is Trump requiring truck drivers to speak English and test literally tests as communication problems mount. So curious if you had any feedback on that too. Do you think that that could be another enabler of supply out for the industry? Speaker 201:00:41Yes. Thank you. I mean, the margin enhancing, the answer there would be yes for a couple of reasons. The most basic level is just as we can continue to put more trucks as a percent of fleet into Dedicated. That business is in fact profitable today, will continue to be profitable and we're able to spread fixed cost over more a larger truck count. Speaker 201:01:03We're also in that mix adding trucks to existing fleets and that's always very desirable. Whenever we can add trucks to existing fleets, we already have the infrastructure in place personnel and a large portion of the fixed cost accounted for. So that's also exciting. So when we think about that 1% to 5% TTS truck growth this year, that's why the heavy focus on greater density growth with existing and new verticals with new logos all gets us optimistic as we look forward. As it relates to the movement on the English speaking requirement, I would remind everybody it's always been a federal regulation. Speaker 201:01:42It's never been removed. It just simply had enforcement guidance changed in the Obama era. We at Werner have chosen to continue to keep that as a requirement as we bring drivers into our fleet. We continue to test for English proficiency. So we're in great shape no matter where the enforcement may go from here. Speaker 201:02:01It is difficult to change enforcement overnight at roadside levels. It's harder than people may think, But I think if you tie it back to the core reason why that regulation existed, which was safety, then we certainly support that. The principle behind the original regulation was that drivers need to be able to communicate to first responders at the scene of an accident. They need to be able to communicate whether others are in the cab and what cargo they may be hauling, and they need to be able to interact with and read roadside instructions. So for all of those reasons, we are a proponent of the concept that it is a different standard than driving a private vehicle and it should be held as one, no different than pilots are required to be able to be proficient in English worldwide. Speaker 201:02:46So the question mark though comes at what will change tomorrow. And and honestly, I think it would be inappropriate for me to guess. I think you will see enforcement levels different around the country, but I think any enforcement leads to decisions that customers are gonna have to make. Whether you have three loads stopped somewhere in the country or you've got 30, you still have freight not moving if a driver was to be put out of service. And I think leaning in once again to well capitalized, well developed with great training program carriers is a place that customers can look to for that support. Speaker 201:03:20And therefore, we think that is a net tailwind as we go forward from here. Speaker 901:03:27Thank you so much. Quick follow-up. Do you think that the industry does comprise a lot of non English speaking truck drivers? Just thinking about it as a potential tailwind. Speaker 201:03:38Yes, do believe there's there's a decent percentage of the industry that cannot communicate in English. It's very difficult for me to try to give you a number. I've done some soul searching and conversations around the industry and I think most people come back with 10% to 15%. That doesn't mean 10% to 15% of capacity leaves tomorrow because of all of the enforcement issues I've already described, but I think that is a safe kind of range or bookend of what that population may look like. It's predominantly Latin American, but not exclusively by any stretch. Speaker 201:04:13And depending on pockets of the country, there are certain regions where it's it's it's that isn't even the predominant primary language. We again are well positioned for this, and so it's not a great concern of ours relative to our freight moving down the road, but I do think it could have some ripple effects. It's just too early to know how great of an impact it ultimately will be. Speaker 901:04:39Thank you so much for all that. Speaker 201:04:42Thank you, Regent. Operator01:04:44I'll now turn the call back over to Mr. Derek Leathers, who will provide closing comments. Please go ahead, sir. Speaker 201:04:51Thank you, Nick. We want to thank you for taking the time to be with us today. The freight recession is still looming and the uncertainty of tariffs and their impact across the economy remain. However, we're not deterred and our focus on continuous improvement remains. We are focusing on structurally improving Werner for the long haul. Speaker 201:05:09And we have contingency plans for a variety of tariff and economic outcomes moving forward, and we'll be aggressively looking to take out costs in the meantime. We have a resilient portfolio and a significant competitive advantage to help cause or help solve our customers' transportation and logistics needs. And again, I'd just like to close by thanking our customers to whom we are committed to serve as a trusted solution provider, as well as our 13,000 associates for their dedication as we keep America moving. Thanks again for your time today, everyone. Operator01:05:40The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.Read morePowered by