Q4 2021 Werner Enterprises Inc Earnings Call

[music].

Good afternoon, and welcome to the Warner Enterprises fourth quarter and full year 2021 earnings conference call.

Speaker 1: Good afternoon and welcome to the Werner Enterprise's fourth quarter and full year 2021 earnings conference call. All participants will be in a listen-only mode.

All participants will be in a listen only mode.

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I would now like to turn the conference over to John Steele Werner's CFO . Please go ahead.

Speaker 1: I would now like to turn the conference over to John Steele, Werner's CFO . Please go ahead.

Earlier. This afternoon, we issued our earnings release with fourth quarter and full year 2021 results.

Speaker 2: Earlier this afternoon, we issued our earnings release with fourth quarter and full year 2021 results.

The release, along with the slide presentation are available at the company's website at Warner Dotcom.

Speaker 2: The release, along with the slide presentation, are available at the company's website at warner.com. Today's webcast is being recorded and will be available for replay beginning later this week.

Today's webcast is being recorded and will be available for replay beginning later this evening.

Before we begin please direct your attention to the disclosure statement on slide two of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Today's remarks contain forward looking statements that may involve risks uncertainties and other factors that could cause actual results to differ materially.

Speaker 2: Before we begin, please direct your attention to the disclosure statement on slide 2 of the presentation, as well as the disclaimers in our earnings release related to forward-looking statements.

Speaker 2: Today's remarks contain forward-looking statements that may involve risks, uncertainties, and other factors that could cause actual results to differ materially.

Additionally, the company reports results using non-GAAP measures, which it believes provide 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.

Speaker 2: Additionally, the company reports results using non-GAAP measures, which it believes provide additional information for investors to help facilitate the comparison of past and present performance.

Speaker 2: 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.

Yes.

I'd now like to turn the conference over to Derek Leathers, Chairman President and CEO .

Speaker 2: I'd now like to turn the conference over to Derek Leathers, Chairman, President, and CEO . Please go ahead, Derek.

Please go ahead Derek.

Thank you and good afternoon, everyone 2021 marked another year of strong performance and financial results.

Speaker 3: Thank you and good afternoon, everyone. 2021 marked another year of strong performance and financial results. We adapted to new and changing developments throughout the year in a market with robust demand and limited supply. I'm extremely proud of our entire Warner team for the resourcefulness determination, persistence and creativity.

We adapted the new and changing developments throughout the year in a market with robust demand and limited supply I'm extremely.

Really proud of our entire Warner team for their resourcefulness determination persistence and creativity, we safely delivered superior service and solutions to Warner customers.

Speaker 3: we safely delivered superior service and solutions to warn our customers.

I'm also pleased to report that Warner delivered record fourth quarter earnings our sixth consecutive record setting quarter and once again, we achieved record annual earnings during.

Speaker 3: I'm also pleased to report that Werner delivered record fourth quarter earnings, our sixth consecutive record-setting quarter. And once again, we achieved record annually.

During 2021 domestic freight economy strengthened increased consumer spending led to depleted inventories.

Speaker 3: During 2021, the domestic freight economy strengthened. Increased consumer spending led to depleted inventory.

Covid issues persist in supply chain became stressed and labor challenges escalated.

Speaker 3: COVID issues persisted, supply chains became stressed, and labor challenges escalated.

This led to a very competitive driver market and increased cost pressure in driver recruiting development and retention.

Speaker 3: This led to a very competitive driver market and increased cost pressure in driver recruiting, development and retention.

New truck and trailer production slowed truckload capacity became constrained in used truck and trailer pricing increase to record levels.

Speaker 3: New truck and trailer production slowed. Truckload capacity became constrained and used truck and trailer pricing increased to record levels.

Despite the significant driver headwinds our strategic investment in sourcing pay and driver amenities enabled us to expand our driver base and grow our TTS fleet during.

Speaker 3: Despite the significant driver headwinds, our strategic investment in sourcing, pay, and driver amenities enabled us to expand our driver base and grow our TTS fleet.

During the fourth quarter, we added 120 trucks and for the year, we added 510.

Speaker 3: During fourth quarter we added 120 trucks and for the year we added 510.

To proactively address the challenging driver market, we are actively leveraging the strength of our industry, leading driver training School network during fourth quarter. We added two strategically located schools for a total of six added this past year.

Speaker 3: To proactively address the challenging driver market, we're actively leveraging the strength of our industry-leading driver training school network. During fourth quarter, we added two strategically located schools for a total of six added this past year. At year end, we had 19 school locations. And during this quarter, three more schools will be added.

At year end, we had 19 school locations and during this quarter three more schools will be at at <unk>.

During 2021, our driver hours increased by 17%.

Speaker 3: During 2021, our driver hires increased by 17%.

<unk> is uniquely positioned to achieve strong financial results going forward, we will benefit from our attractive freight base with winning customers and the stability and consistent performance of our driver preferred dedicated fleets to perform well in all freight markets.

Speaker 3: Warner is uniquely positioned to achieve strong financial results going forward. We will benefit from our attractive freight base with winning customers and the stability and consistent performance of our Driver Preferred Dedicated Fleets that perform well in all freight markets.

Warner also possesses several other attractive businesses, including our industry, leading cross border, Mexico franchise engineered freight lanes and one way truckload, our recent acquisitions of ECM truckload and Ned's final mile and our comprehensive and growing capacity solutions and Warner logistics move.

Speaker 3: Warner also possesses several other attractive businesses, including our industry-leading cross-border Mexico franchise, engineered freight lanes and one-way truckload, our recent acquisitions of ECM truckload and Ned's Final Mile, and our comprehensive and growing capacity solutions inlanders.

Moving to slide four here's an updated snapshot of Warner.

Speaker 3: Moving to slide 4, here's an updated snapshot of Warner. Our TTS truck fleet grew 7% during the past year, to a total of 8,340 trucks.

Our TTS truck fleet grew 7% during the past year to a total of 80 340 trucks.

And even with the fleet mix of 63% dedicated and 37% one way truckload.

Speaker 3: ending with a fleet mix of 63% dedicated and 37% one-way truck.

Warner continues to maintain a consumer centric freight network with over three quarters of our annual revenues in retail and food and beverage near.

Speaker 3: Warner continues to maintain a consumer centric freight network with over three quarters of our annual revenues in retail and food and beverage.

Nearly half our revenues are with our top 10 customers and nearly 80% come from our top 50.

Speaker 3: Nearly half our revenues are with our top 10 customers and nearly 80% come from our top 50.

Warner has long standing and growing relationships with customers that are winning in their industry.

Speaker 3: Warner has long-standing and growing relationships with customers that are winning in their industry.

Let's move to slide five for a summary of our fourth quarter and 2021 financial performance.

Speaker 3: Let's move to slide five for a summary of our fourth quarter and 2021 financial performance.

For the quarter revenues increased 23% to $765 million.

Speaker 3: For the quarter, revenues increased 23% to $765 million.

Adjusted EPS grew 27% to $1 13.

Speaker 3: adjusted EPS grew 27% to $1.13.

Adjusted operating income rose, 22% to 101 million, while our TTS adjusted operating margin net of fuel remained a strong 18, 2%.

Speaker 3: adjusted operating income rose 22% to $101 million, while our TTS adjusted operating margin net of fuel remained a strong 18.2%.

For the year revenues rose, 15% to $2 7 billion adjusted EPS increased 33% to $3 45.

Speaker 3: For the year, revenues rose 15% to $2.7 billion. Adjusted EPS increased 33% to $3.45. And we expanded our full year TTS adjusted operating margin by 190 basis points to 15.9.

And we expanded our full year TTS adjusted operating margin by 190 basis points to 15 nine.

Dedicated freight demand remained robust in the fourth quarter as our winning customers continued to generate strong sales and discount retail home improvement in food and beverage.

Speaker 3: Dedicated freight demand remained robust in fourth quarter as our winning customers continue to generate strong sales and discount retail Home improvement and food and beverage

In fourth quarter dedicated average trucks grew 7% year over year and increased 3% sequentially from third quarter.

Speaker 3: In fourth quarter, dedicated average drops grew 7% year over year and increased 3% sequentially from third quarter.

Bid activity with new and existing customers remains strong dedicated average trucks in fourth quarter grew by 353 trucks year over year, and we expect similar fleet growth in 2022.

Speaker 3: Good activity with new and existing customers remain strong. Dedicated average trucks in fourth quarter grew by 353 trucks year over year, and we expect similar fleet growth in 2022.

One way truckload freight demand also remains strong in fourth quarter, we expect our one way truckload fleet to grow slightly this year.

Speaker 3: One-way truckload freight demand also remains strong at fourth quarter. We expect our one-way truckload fleet to grow slightly this year.

In fourth quarter Warner logistics produced another strong quarter of accelerating growth in revenues and operating income.

Speaker 3: In fourth quarter, Warner Logistics produced another strong quarter of accelerating growth in revenues and operating income.

And a capacity challenge peak season logistics provided enhanced capacity solutions for our brokerage intermodal and final mile customers' logistics actively managed several peak projects for key customers throughout the quarter. During this year, we expect Warner logistics to achieve continued revenue and operating income growth we.

Speaker 3: In a capacity challenge peak season, Logistics provided enhanced capacity solutions for our brokerage, intermodal, and final mile customers.

Speaker 3: Logistics actively manage several peak projects for key customers throughout the quarter. During this year, we expect warmer logistics to achieve continued revenue and operating income growth.

We received fewer new trucks and trailers and planned in fourth quarter due to OEM, new truck and trailer production delays. We expect this trend will continue for the industry during at least the first half of this year.

Speaker 3: We receive fewer new trucks and trailers than planned in fourth quarter due to OEM, new truck, and trailer production delays. We expect this trend will continue for the industry during at least the first half of this year.

Distant with our fourth quarter guidance, we sold one third fewer trucks and one half fewer trailers used truck and trailer pricing strengthened again to new record levels, resulting in higher gains on sales than anticipated.

Speaker 3: Consistent with our fourth quarter guidance, we sold one third fewer trucks and one half fewer trailers.

Speaker 3: Used truck and trailer pricing strengthened again to new record levels, resulting in higher gains on sales than anticipated.

At the same time reduced new truck availability is increasing the percentage of Archrock is not covered by chassis warranties, which is increasing our truck maintenance expenses.

Speaker 3: At the same time, reduced new truck availability is increasing the percentage of our trucks not covered by chassis warranties, which is increasing our truck maintenance expenses.

In late November we closed on the acquisition of <unk> logistics, a leading and growing final mile provider that delivers home furniture and appliances to residential and commercial customers in the northeast and Midwest.

Speaker 3: In late November , we closed on the acquisition of Ned's Logistics, a leading and growing final mile provider that delivers home furniture and appliances to residential and commercial customers in the Northeast and Midwest.

We are pleased to retain the experienced <unk> leadership team and our associates, we've combined our final mile business and Warner logistics with NEDS as Warner final mile.

Speaker 3: We are pleased to retain the experience in Ed's leadership team and their associates.

Speaker 3: We've combined our final mile business and whernologistics with Nedz as Warner final mile

To date integration activities are going very well and we are confident that Warner final mile will generate over $100 million of revenues this year and be accretive to earnings.

Speaker 3: Today, integration activities are going very well. And we are confident that Warner Farm will generate over 100 million of revenues this year and be accretive to earn.

I would like to take this opportunity to welcome the elite team of NEDS final mile professionals to Warner.

Speaker 3: I would like to take this opportunity to welcome the elite team of NED's Final Mile professionals to work.

Now I'd like to turn the call over to John to discuss our fourth quarter and full year financial results in more detail John .

Speaker 3: Now, I'd like to turn the call over to John to discuss our fourth quarter and full year financial results in more detail. John ?

Thank you Derek and good afternoon, beginning on slide seven total fourth quarter revenues increased 145 million to $765 million did at TTS fleet growth higher rates and growth in logistics.

Speaker 2: Thank you, Derek, and good afternoon. Beginning on slide seven, total fourth quarter revenues increased 145 million to 765 million, due to TTS fleet growth, higher rates, and growth in logistics.

<unk> revenues per truck per week increased five 5% year over year, and nearly 4% sequentially from third quarter adjusted.

Speaker 2: TTS revenues per truck per week increase 5.5% year over year and nearly 4% sequentially from third quarter.

Adjusted operating income increased over $18 million or 22% on top of a 30% adjusted operating income growth in the same quarter a year ago.

Speaker 2: Adjusted operating income increased over 18 million or 22%. On top of 30%, adjusted operating income growth in the same quarter a year ago.

Logistics achieved another strong quarter with 42% revenue growth and over $9 million of operating income growth.

Speaker 2: Logistics achieved another strong quarter with 42% revenues growth and over $9 million of operating income.

Adjusted earnings per share in fourth quarter was $1 13 up 27% year over year on top of the 33% adjusted earnings per share growth, we achieved in fourth quarter a year ago.

Speaker 2: Adjusted earnings per share in fourth quarter was $1.13 up 27% year over year. On top of the 33% adjusted earnings per share growth we achieved in fourth quarter a year ago.

Moving to slide eight here are our full year comparative results.

Speaker 2: Moving to slide 8, here are our full year comparative results.

In 2021, we stepped up our revenue growth by $362 million, an increase of 15%.

Speaker 2: In 2021, we stepped up our revenue growth by $362 million, an increase of 15%.

Over the same period, we expanded our adjusted operating margin by 140 basis points, resulting in 31% adjusted operating income growth and 33% adjusted earnings per share growth.

Speaker 2: Over the same period, we expanded our adjusted operating margin by 140 basis points, resulting in 31% adjusted operating income growth, and 33% adjusted earnings per share growth.

TTS and logistics made significant contributions to our improved performance.

Speaker 2: both TTS and logistics made significant contributions to our improved performance.

Beginning on slide nine here our results for our truckload transportation services segment in fourth quarter, TTS revenues increased 19% to $563 million due to average TTS truck relative six 7% revenue per truck growth of five 5% and higher fuel surcharges.

Speaker 2: Beginning on slide nine, here are results for our truck load transportation services segment. In fourth quarter, TTS revenues increased 19% to 563 million due to average TTS truck growth of 6.7%. Revenue per truck growth of 5.5% and higher fuel surcharges. It stretches out through 3 months caused by habitonly???. It stretches out through 3 months caused by habitonly.

Adjusted operating income grew 13% to $90 million.

<unk> produced an adjusted operating ratio of 81, 8%.

Speaker 2: TTS produced an adjusted operating ratio of 81.8%. Turning to TTS sleep methods.

Turning to TTS fleet metrics on slide 10.

For fourth quarter dedicated revenues net of fuel increased 13% average trucks increased by 7% year over year.

Speaker 2: For fourth quarter, dedicated revenues net a fuel increase 13%. Average trucks increased by 7% year over year. Revenues per truck per week increased 5.2%, which was ahead of our expectations and was 490 basis points higher than the increase in third quarter.

Revenues per truck per week increased five 2%, which was ahead of our expectations and was 490 basis points higher than the increase in third quarter.

One way truckload revenues net of fuel increased 12% in fourth quarter to 197 million.

Speaker 2: One way truckload revenues net a fuel increase 12% in fourth quarter to 197 million. Average trucks...

Average trucks increased 6% revenues per truck per week also increased 6% due to a 19, 2% increase in revenues per total mile.

Speaker 2: Revenue's per truck per week also increased 6% due to a 19.2% increase in revenues for total miles.

Driver pay rose in fourth quarter due to driver pay per mile increases incentive recruiting bonuses and minimum pay guarantees our fourth quarter.

Speaker 2: Driver pay rose in fourth quarter due to driver pay per mile increases, incentive recruiting bonuses, and minimum pay guarantees. Our fourth quarter TTS driver pay per company mile increased 22% year over year.

Quarter TTS driver pay per company mile increased 22% year over year.

Insurance and claims expense increased $3 million year over year, and fourth quarter and increased slightly compared to third quarter.

Speaker 2: Insurance and claims expense increase 3 million year over year and fourth quarter and increase slightly Compared to third quarter

Moving to Warner Logistics on Slide 11 in fourth quarter logistics revenues grew by $55 million to $185 million, excluding Warner Global logistics, which we sold in first quarter logistics revenues grew 58%.

Speaker 2: Moving to Werner Logistics on slide 11. In fourth quarter, logistics revenues grew by 55 million to 185 million.

Speaker 2: excluding Warner Global Logistics, which we sold in first quarter, Logistics revenues grew 58%.

Truckload logistics revenues increased 58% driven by a 29% increase in revenue per shipment and a 23% increase in shipments.

Speaker 2: Truckload logistics revenues increase 58% driven by a 29% increase in revenues per shipment and a 23% increase in ship.

Power only in project business continued to generate strong revenue growth.

Speaker 2: Power only in project business continue to generate strong revenue growth.

Intermodal revenues grew 37% supported by a 35% increase in revenue per shipment and a 1% increase in shipments.

Speaker 2: Intermodal revenues grew 37%, supported by a 35% increase in revenues per shipment and a 1% increase in shipping.

Intermodal shipment increases were limited by a decline in rail velocity chassis shortages and increased dwell time throughout the rail in customer networks.

Speaker 2: Intermodal shipment increases were limited by a decline in rail velocity, chassis shortages, and increased well time throughout the rail and customer net.

Warner Logistics produced a $9 1 million improvement in operating income to $11 7 million due to enhanced revenue growth and margin expansion logistics provided needed capacity for our customers during peak season, with creative project and power only solutions our logistics.

Speaker 2: Wernher logistics produced a 9.1 million improvement in operating income to 11.7 million due to enhanced revenue growth and margin expansion. Logistics provided needed capacity for our customers during peak season with creative project and power only solution.

Speaker 2: Our logistics operating margin improved the strong 430 basis points to 6.3%.

Operating margin improved a strong 430 basis points to six 3%.

Final mile produced 9 million of revenue growth with the <unk> acquisition in effect for six weeks of the quarter.

Speaker 2: Final mile produced 9 million revenue growth with the Ned's acquisition in effect for six weeks of the quarter. Ned's was accretive to adjusted earnings per share in fourth quarter.

<unk> was accretive to adjusted earnings per share in fourth quarter.

On slide 12 is a summary of our cash flow from operations net capital expenditures and free cash flow over the past five years.

Speaker 2: On slide 12 is the summary of our cash flow from operations, net capital expenditures, and free cash flow over the past five years. Expanded operating margins and less variable net cap X resulted in higher free cash flow during the last four years. We expect to continue to generate meaningful free cash flow going forward.

<unk> operating margins and less variable net capex resulted in higher free cash flow. During the last four years, we expect to continue to generate meaningful free cash flow going forward.

On slide 13 is a summary of our disciplined strategy for capital allocation. Our first priority for capital continues to be reinvesting in our fleet with feature rich trucks and trailers with the latest safety driver friendly and fuel efficient capabilities and we see intrinsic value in our stock based on our long term growth.

Speaker 2: On slide 13 is the summary of our discipline strategy for capital allocation. Our first priority for capital continues to be reinvesting in our fleet with feature rich trucks and trailers with the latest safety driver friendly and fuel-efficient capability.

Speaker 2: and we see intrinsic value on our stock. Based on our long-term growth expectations, we purchased over 1 million shares in fourth quarter.

Expectations, we purchased over 1 million shares in fourth quarter.

We are committed to maintaining a strong and flexible financial position. Our long term leverage goal is a net debt to annual EBITDA ratio of 0.5 to one times.

Speaker 2: We are committed to maintaining a strong and flexible financial position. Our long-term leverage goal is a net debt to annual EVIDA ratio of 0.5 to one time.

During the fourth quarter with the acquisition of <unk> and stock repurchases. We ended the year with a net debt to EBITDA ratio of 0.6 times.

Speaker 2: During fourth quarter with the acquisition of NEDS and stock repurchases, we ended the year with a net debt to Evidal ratio of 0.6 times.

I'll now turn the final portion of our remarks back to Derek Derrick.

Speaker 2: I'll now turn the final portion of our remarks back to Derek. Derek?

Thank you John moving to slide 15, the <unk> plus that strategy served as our north star guiding us in all aspects of our business during fourth quarter. The age of our newer truck and trailer fleet increased slightly.

Speaker 3: Thank you, John . Moving to slide 15, the 5p's plus S strategy serves our North Star, guiding us in all aspects of our business.

Speaker 3: During fourth quarter, the age of our newer truck and trailer fleet increased slightly.

As it has become more challenging to receive new trucks and trailers in recent months, we've been limiting the number of trucks and trailers, we sell to enable us to meet our capacity commitments to our customers.

Speaker 3: as it has become more challenging to receive new trucks and trailers in recent months. We've been limiting the number of trucks and trailers we sell to enable us to meet our capacity commitments to our customers.

During the fourth quarter, we made good progress expanding our driver school network by two more locations, bringing our total to 19, our schools are performing well and are producing highly trained graduates many of whom we hired a joined Warner.

Speaker 3: During fourth quarter, we made good progress expanding our driver school network by two more locations, bringing our total to nine.

Speaker 3: Our schools are performing well and are producing highly trained graduates, many of whom we hired to join Warner.

These drivers were able to further develop their skills with certified and experienced Warner leader drivers.

Speaker 3: These drivers are able to further develop their skills with certified and experienced one or leader driver.

And the investments in our school network enabled us to organically grow our fleet the last two quarters in a very difficult and competitive driver market.

Speaker 3: And the investments in our school network enabled us to organically grow our fleet the last two quarters in a very difficult and competitive drive remark.

Two weeks ago, the American Trucking Association completed a rigorous selection process named 22 elite professional drivers to be captains for America's Road team for the next two years.

Speaker 3: Two weeks ago, the American Trucking Association completed a rigorous selection process and named 22 elite professional drivers to be captains for America's road team for the next two years.

I'm pleased that three of these industry captains drive for Warner. Thank you, Gina Zeus and Eric for being outstanding Warner leaders and role models for safety and service.

Speaker 3: I'm pleased that three of these industry captains drive for Warner. Thank you Gina, Jesus, and Eric for being outstanding Warner leaders and role models for safety and service.

Our commitment to innovation and investment in technology led to an expanded rollout of mastermind transportation system to most of our logistics offices in fourth quarter. We also successfully converted our driver payroll and human capital management systems to work day in January .

Speaker 3: Our commitment to innovation and investment in technology led to an expanded rollout of Mastermind transportation system to most of our logistics

Speaker 3: We also successfully converted our driver payroll and human capital management systems to work day in January .

And there were multiple updates to our growing ESG program during the quarter.

Speaker 3: and there were multiple updates to our growing ESG program during the quarter. On slide 16 are those...

On slide 16 are those ESG developments in the fourth quarter, we established a stand alone ESG Committee of our board of Directors. We also participated in a commitment to opportunity diversity and equity assessment, focusing on inclusion perspective and company culture.

Speaker 3: In fourth quarter, we established a standalone ESG committee of our Board of Direction.

Speaker 3: We also participated in a commitment to opportunity, diversity, and equity assessment, focusing on inclusion, perspective, and company culture.

We also committed to purchase 10 additional battery electric trucks and the battery diesel hybrid.

Speaker 3: We also committed to purchase 10 additional battery electric trucks and the battery diesel hybrid.

And we were proud to again to be recognized with the 2021 Smartway Excellence Award the highest award level given by the EPA.

Speaker 3: And we were proud to again, to be recognized with the 2021 Smartway Excellence Award, the highest award level given by the EPA. Winner's won this award last five years in eight of the last nine.

Werner has won this award last five years and eight of the last nine.

Next on slide 17, I would like to spend a moment revisiting our durable business model here is the history of our annual TTS adjusted operating margin percentage net of fuel since 2008.

Speaker 3: Next on slide 17, I would like to spend a moment revisiting our durable business.

Speaker 3: Here is a history of our annual TTS adjusted operating margin percentage net of fuel since 2008.

Over the last five years, while we successfully implemented our <unk> strategy and we grew our dedicated fleet, we achieve meaningful TTS operating margin improvement.

Speaker 3: Over the last five years, while we successfully implemented our 5Ts plus S strategy, and we grew our dedicated fleet, we achieved meaningful TTS operating margin improvement.

And our third quarter earnings presentation, we raised our TTS annual adjusted operating margin net of fuel goal from a range of 10% to 16% to a range of 12% to 17%.

Speaker 3: In our third quarter earnings presentation, we raised our TTS annual adjusted operating margin net-of-fuel goal from a range of 10 to 16% to a range of 12 to 17.

Our carefully constructed and optimize fleet mix is designed to generate strong adjusted TTS operating margin performance and good freight markets like the 15, 9% margin we achieved this past year.

Speaker 3: Our carefully constructed and optimized fleet mix is designed to generate strong, adjusted TTS, operating margin performance, in good freight markets, like the 15.9% margin we achieved this past year.

At some point in the future of the freight trends will change in the market will become more challenging.

Yet we are increasingly confident we will performed well in a softer freight market due to our growing and resilient dedicated fleet, which is now 63% of TTS.

Speaker 3: Yet we are increasingly confident we will perform well in a softer freight market due to our growing and resilient dedicated fleet, which is now 63% of TTF.

We also have strengthened and diversified our one way truckload fleet with emphasis on Mexico Cross border expedited engineered lines temperature controlled and short haul regional.

Speaker 3: We also have strengthened and diversified our one-way truckload fleet with emphasis on Mexico cross-border, expedited, engineered lanes, temperature-controlled, and short-haul regions.

You can look to 2019 is a bellwether of our financial performance in a softer freight market.

Speaker 3: You can look to 2019 as a bellwether of our financial performance in a softer frame.

2018 was a strong freight market in the 2019 industry freight shipments and rates in the one way market has declined.

Speaker 3: 2018 was a strong freight market and in 2019 industry freight shipments and rates in the one-way markets declined.

The strength of Warner is execution with our large dedicated and diversified one way fleets produced only a small decline in operating margin in 2019 and in that difficult year, we achieved year over year growth and adjusted earnings per share.

Speaker 3: The strength of Warner's execution with our large, dedicated, and diversified one-way fleets produced only a small decline in operating margin in 2019. And in that difficult year, we achieved year-over-year growth in adjusted earnings per share.

During the decade, ending in 2020, the size of our truck fleet increased slightly.

Speaker 3: During the decade ending in 2020, the size of our truck fleet increased slightly. Going forward, we will have more of an eye to both top and bottom line growth.

Going forward, we will have more of an eye to both top and Bottomline growth.

Revenue growth creates opportunities for our customers associates and shareholders.

Speaker 3: Revenue growth creates opportunities for our customers, associates, and shareholders.

Frank This is not an or this is an and proposition we're not deemphasizing our operating margin. We expect improved top line growth with a strong operating margin.

Speaker 3: Let me be frank, this is not an or, this is an and proposition. We are not de-emphasizing our operating margin. We expect improved top line growth with a strong operating margin.

Over the last five years, we generated average annual revenue growth net of fuel of 6%. This includes two double digit years of revenue growth in 2018, and 2021 over that same five year period, we achieved an adjusted TTS operating margin of 13%.

Speaker 3: Over the last five years, we generated average annual revenue growth net of fuel of 6%. This includes two double-digit years of revenue growth in 2018 and 2021. Over that same five-year period, we achieved an adjusted TTS operating margin of 13%.

We recently completed a rigorous process to develop our comprehensive five year plan over the next five years. It is our goal to achieve annual average revenue growth of 10%.

Speaker 3: We recently completed a rigorous process to develop our comprehensive five-year plan. Over the next five years, it is our goal to achieve annual average revenue growth of 10 percent.

Over the five year period, we also expect to achieve an average TTS adjusted operating margin net of fuel or at least the midpoint of our long term guidance range of 12% to 17%.

Speaker 3: Over the five-year period, we also expect to achieve an average DTS-adjusted operating margin net-of-fuel of at least the midpoint of our long-term guidance range of 12 to 17%.

This takes into consideration an expectation that there will be a variety of freight markets. During this five year timeframe.

Speaker 3: This takes into consideration an expectation that there will be a variety of freight markets during this five year time.

Now, let's move to slide 18, and a review of our performance versus our 2021 guidance metrics as well as our outlook with our 2022 guidance.

Speaker 3: Now let's move to slide 18 in a review of our performance versus our 2021 guidance metrics, as well as our outlook with our 2022 guidance.

During fourth quarter, we increased our truck count by 120 trucks sequentially ahead of expectations, our trucks increased by $5 10 for the year.

Speaker 3: During fourth quarter, we increased our truck count by 120 trucks substantially ahead of expectations. Our trucks increased by 510 for the year.

For 2022, we expect our fleet to increase from 2% to 5% with the majority of the fleet growth in dedicated.

Speaker 3: For 2022, we expect our fleet to increase from 2% to 5% with the majority of the fleet growth and dedication.

Net capital expenditures last year were $193 million based on our expectations for new trucks and trailer purchases. This year, we anticipate a net capex range of $275 million to $325 million.

Speaker 3: Net capital expenditures last year were $193 million. Based on our expectations for new trucks and trailer purchases this year, we anticipate a net capex range of $275 to $325 million.

This guidance is subject to the timing of delivery of new trucks and trailers this year.

Speaker 3: This guidance is subject to the timing of delivery of neutrops and trailers this year.

Dedicated revenue per truck per week increased five 2% in fourth quarter up 490 basis points from the third quarter for this year, we expect our dedicated revenue per truck per week to grow in the 3% to 5% range.

Speaker 3: Dedicated revenue per truck per week increased 5.2% in fourth quarter. Up 490 basis points from the third.

Speaker 3: For this year, we expect our dedicated revenue per truck per week to grow in the 3-5% range.

One way truckload revenue per total mile for the fourth quarter increased 19, 2% slightly above the top end of our guidance range for the first half of 2022, we expect our one way truckload revenue per total mile to increase in a range of 16% to 19% over the same period last year.

Speaker 3: One-way truckload revenues per total mile for the fourth quarter increased 19.2%, slightly above the top end of our guidance range.

Speaker 3: For the first half of 2022, we expect our one-way truck load revenues for total mile to increase in a range of 16 to 19 percent over the same period last year.

So far in the first five weeks of 2022 freight demand trends in our one way truckload unit remains strong.

Speaker 3: So far in the first five weeks of 2022, freight demand trends in our one-way truckload unit remains strong.

Our income tax rate in fourth quarter was slightly lower than expected at 23% due to a few discrete items for 2022, we are reaffirming our effective tax rate of 24, 5% to 25, 5% and we expect the average age of our truck and trailer fleet at year end to be two 2% and four eight years respectively.

Speaker 3: Our income tax rate in fourth quarter was slightly lower than expected at 23% due to a few discrete items. For 2022, we are reaffirming our effective tax rate of 24.5 to 25.5% and we expect the average age of our truck and trailer fleet at year end to be 2.2 in 4.8 years.

We are no longer providing guidance for gains on sales of equipment as there are simply too many variables affecting the number of trucks and trailers, we can sell as well as the used equipment pricing.

Speaker 3: We are no longer providing guidance for gains on sales of equipment, as there are simply too many variables affecting the number of trucks and trailers we can sell, as well as the used equipment price.

We anticipate a continued strong freight market this year, a tight labor market and a rapidly growing economy are contributing to increased cost inflation and we expect higher freight rates in 2022.

Speaker 3: We anticipate a continued strong freight market this year. A tight labor market and a rapidly growing economy are contributing to increased cost inflation, and we expect higher freight rates in 2022.

Our recent elevated Covid case counts from Amazon or a near term temporary headwind for truck productivity and fleet growth.

Speaker 3: Recent elevated COVID case counts from Omicron are a near-term temporary headwind for truck productivity and fleet

The last two years, who presented numerous unexpected challenges and opportunities Warner.

Speaker 3: The last two years have presented numerous unexpected challenges and opportunities.

Warner remains well positioned with a superior team and an active talent pipeline that we believe will continue to yield strong and sustainable results.

Speaker 3: Warner remains well positioned with a superior team and an active talent pipeline that we believe will continue to yield strong and sustainable results.

At this time I'd like to turn the call over to our operator to begin our Q&A.

Speaker 3: At this time, I'd like to turn the call over to our operator to begin our Q&A.

We will now begin the question and answer session.

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To allow for as many callers to ask Pos as possible to ask questions. We ask that callers limit their questions to one question and one follow up.

Speaker 1: To allow for as many colors to ask, as possible to ask questions, we ask that colors limit their questions to one question and one follow-up. This call will end at 5 p.m. Central time following the company's closing remarks. At this time, we will pause momentarily to assemble the roster.

This call will end at five P. M Central time following the company's closing remarks at this time, we will pause momentarily to assemble the roster.

And our first question comes from Todd.

Speaker 1: And our first question comes from Todd Sowler of KeyBank Capital Markets.

<unk> of Keybanc capital markets. Please.

Please go ahead.

Great Thanks, and good evening.

Speaker 2: Great, thanks and good evening. Derek, just to start maybe to spend a little bit more time on the focus on the 10% annual revenue growth. Can you give us a sense, are you thinking about that as being predominantly organic, or are you thinking about acquisitions in there? And then how do you think about, mix of dedicated one way truck load in the context of growing the top line at that rate? Yes, your Todd, great question.

Derek just to start maybe just spend a little bit more time on the focus on the 10% annual revenue growth.

Can you give us a sense are you thinking about that as being predominantly organic or are you thinking about acquisitions in there and then how do you think about mix of dedicated one way truckload in the context of growing the topline at that rate.

Yes, sure Todd Great question, and thanks for calling in.

So first off.

Speaker 3: So first off, the last five years, we were pretty transparent about the focus on the fundamentals. So the whole five T's and the nest strategy was all about getting the foundation in order.

The last five years.

We were pretty transparent about the focus on the fundamentals. So the whole <unk> strategy was all about getting the foundation in order getting a return to excellence from a margin perspective, making sure that our operating teams were executing at the highest of levels and putting safety and service above all else. That's a journey, it's a marathon not a sprint and we've worked hard.

Speaker 3: getting a return to excellence from a margin perspective, making sure that our operating teams were executing at the highest of levels and putting the safety and service above all else.

Speaker 3: That's a journey. It's a marathon, not a sprint, and we've worked hard to get to where we are today.

To get to where we are today and that's led to the six consecutive quarters of earnings growth of EPS.

Speaker 3: And that's led to the six consecutive quarters of earnings of EPS, setting new EPS records, etc.

Setting new EPS records et cetera.

But as we look forward. The time has come that we need to have the end proposition I talked about in the script, which is both.

Speaker 3: But as we look forward, you know, the time is come that we need to have the and for opposition I talked about in the script, which is both focusing on top and bottom line growth and not losing any focus at all on our attention to detail relative to the bottom line execution, both for our customers and our shareholders, but with a little more eye towards the need to grow along with it. So we are going to be more revenue driven than maybe you've seen historically out of us.

Focusing on the top and bottom line growth and not losing any focus at all on our attention to detail relative to the bottom line execution, both for our customers and our shareholders, but with a little more eye towards the need to grow along with it. So we are going to be more revenue driven than maybe you've seen historically out of us.

Speaker 3: It is predominantly organic almost exclusively, let me say it this way, we believe there's a path for us to get there and consistently achieve those results.

It is predominantly organic almost exclusively with let me say it. This way we believe there is a path for us to get there and consistently achieve those results purely from an organic perspective, but I'm not going to rule out the ability to do M&A as part of it and there'll be times and places where as you do certain bolt on op.

Speaker 3: purely from an organic perspective. But I'm not going to rule out the ability to do M&A as part of it and there'll be times and places where

Speaker 3: As you do certain bolt-on opportunistic acquisitions that are additive to the portfolio and accretive to results, that does shift some focus in a particular quarter or two. So there could be some blend.

Opportunistic.

Acquisitions that are additive to the portfolio and accretive to results.

It does shift some focus in a particular quarter or two so it's so there could be some blend but the predominance of the 10% is <unk>.

Speaker 3: But the predominance of the 10% in terms of the takeaway from this call would be we have an organic path to getting to those types of numbers.

The takeaway from this call would be we have an organic path to getting to those types of numbers over that horizon, and averaging that 10% number over the five year period.

Speaker 3: over that horizon and averaging that 10% number over the five year period.

Got it okay. No gerrick that's helpful and that makes a lot of sense just for my follow up and I'm not sure. How granular you want to be on this but as I think about the TTS margins here this year and kind of the range that you've laid out what's your sense on your ability to improve upon that into 'twenty, two and if you don't want to give a specific margin targets or guidance or there's some.

Speaker 4: about it. Okay, no, Derek, that's helpful and that makes a lot of sense. Just for my follow up and I'm not sure how granular you want to be on this, but I think about the TTS margins here this year and kind of the range that you've laid out. You know, what's your sense on your ability to improve upon that into 22? And if you don't want to give a specific margin, targets or guidance, there's some things that you can maybe help us think about that could impact the margins as we move into 22. Thanks. Alright.

Things that you can maybe help us think about.

That could impact our margins as we move into 'twenty two thanks.

Sure.

So as we think about 'twenty two we are we are.

Certainly optimistic as we look out right now and as we have conversations with customers and talk about the kind of quality service that we provide we think it sets up and presents the opportunity for us.

Speaker 3: Certainly optimistic as we look out right now and as we have conversations with customers and talk about the kind of quality service that we provide, we think it sets up and presents the opportunity for us to achieve the necessary rate increases to help offset the inherent cost pressures that we spoke about during the opening remarks.

To achieve the necessary rate increases to help offset.

The inherent.

Cost pressures that we spoke about during during the opening remarks.

We are going to be faced with cost pressures in this industry in most every industry.

Speaker 3: We are going to be faced with cost pressures in this industry and most every industry, but we believe that through increased focus on the costs that are controllable to help offset some of those costs that are simply facing the type of inflationary pressure, as well as looking for our customers to help invest with us.

But we believe that through increased focus on are the costs that are controllable to help offset some of those costs that are that are simply face.

Facing the type of inflationary pressure as well as looking for our customers to help invest with us. So we can continue to provide them the kind of quality service that they expect that there is some opportunity in 'twenty two to at least hold serve if not expand slightly margins on the TTS portion.

Speaker 3: so we can continue to provide them the kind of quality service that they expect, that there is some opportunity in 2022 to at least hold serve if not expand slightly margins on the TTS portion.

We will of course be growing and logistics as well in 'twenty, two and you've seen some outpaced growth on that side of the portfolio and Thats expected to continue as we go forward not necessarily at the percentage rate that you've seen in recent quarters, but it outpaced rate compared to that growth that you might see in TTS.

Speaker 3: We will of course be growing in logistics as well in 22 and you've seen some outpaced growth on that side of the portfolio And that's expected to continue as we go forward Not necessarily at the percentage rate that you've seen in recent quarters But at an outpaced rate compared to that growth that you might see in TTF

Okay got it alright, thanks for the time Derek Thanks, John .

Speaker 5: Yeah, okay, got it. All right, thanks for the time, Derek. Thanks, John .

Thank you.

The next question comes from Ravi Shanker of Morgan Stanley . Please go ahead.

Speaker 1: The next question comes from Robbie Schenker of Morgan Stanley . Please go ahead.

Thanks, Good evening.

Speaker 6: thanks uh... good evening uh... dracon John if i can just kind of follow up on that question that the ten percent sorry if i missed it but did you break that down into price versus volume kind of driving that and like if you are targeting growth in uh... volume growth in excess of gdp kind of where that coming from is it share gain is it converting other modes do you think trucking naturally kind of gain share as the economy grows kind of some long doing

John if I can just kind of follow up on that question. The 10% sorry, if I missed this but did you break that down into price versus volume kind of driving that and if you are targeting growth in volume growth in excess of GDP kind of where's that coming from is it share gain is it converting other mode.

Do you think.

Trucking naturally kind of gain share as the economy grows kind of some color there would be helpful.

Yes. So obviously there is hours of conversation that goes into the number and hard to answer in a one minute soundbite, but.

Speaker 3: Yeah, so obviously there's hours of conversation that goes into the number and hard to answer in a one minute sound bite, but...

<unk>.

Volume growth it makes up volume literally start with this truck growth makes up a little over half of what we believe that where that growth comes from organic truck growth I should say logistics will continue to grow at an outpaced level compared to TTS growth over the same period.

Speaker 3: volume growth makes up a volume will start with this truck growth makes up a little over half of what we believe that that group where that growth comes from organic truck growth i should say uh... logistics will continue to grow to now pace level compared to tts growth over the same period

Those two things added and then added to that would be price.

Speaker 3: Those two things added and then added to that would be price. Price will be a, we'll play a role in it and we have, we are, we have not assumed.

Price will be will play a role in it and we have we are we are.

Not assumed five years of stable freight conditions, our assumptions are that there will be some ups and downs in the freight market over that five year period, and I'd, rather not give more granular than that and the outcome of all of the above is that 10% growth and again predominantly if not exclusively organically relative to the 10, so the upside would be where we file.

Speaker 3: five years of stable freight conditions, we are assumptions are that there will be some ups and downs in the freight market over that five year period, and I'd rather not get more granular than that. And the outcome of all of the above is that 10% growth. And again, predominantly, if not exclusively organically relative to the 10s, so the upside would be where we find opportunistic acquisitions to add onto that as well.

Opportunistic acquisitions to add on to that as well.

Got it that's really helpful. And then for my follow up just your target for 'twenty two on on final mile was was really helpful.

Speaker 6: Got it, that's really helpful. And for my follow up, just your target, 422 on Final Mile was really helpful. What do you think the near term outlook kind of 22 or 23 of that business looks like? I mean, a lot of debate as to...

What do you think the nearer term outlook conduct about 'twenty two 'twenty three of that business looks like I mean, there's a lot of debate as to what some of the <unk>.

Speaker 6: what some of the heavy appliance type end market looks like post pandemic and some mean reversion there do you feel like that's a market that's potentially due for slowdown before resuming long-come growth

Appliance type end market looks like post pandemic and some mean reversion there.

Do you feel like that's a market that's potentially due for a slowdown before resuming welcome Doug.

Well I think there's two different issues. There Ravi there is what happens to industry wide and then what happens on a secular basis with Warner and the product, we're putting out into the market, what we see relative to our runways with our customers who are growing and having great success is an underserved underserved need in the big and bulky.

Speaker 3: Well, I think there's two different issues there, Ravi. There's the what happens industry-wide and then what happens on a secular basis with Warner and the product we're putting into the market.

Speaker 3: What we see relative to our runways with our customers who are growing and having great success

Speaker 3: is an underserved need in the big and bulky.

Final mile marketplace. So we're not in all things to all people provider in that space, we're going to focus heavily on that big and bulky application and in that world with our customer base. We believe the runway is pretty pretty clean as we look forward. There's a lot of opportunity there is.

Speaker 3: final mile marketplace. So, you know, we're not in all things to all people, provider, and that space. We're going to focus heavily on that big and bulky application. And in that world with our customer base, we believe the runway is pretty clean as we look forward. There's a lot of opportunity.

Speaker 3: There's other competitors out there that do a fine job, but nobody has fully solved this whole final mile dilemma. So even with some cooling in the rate of growth in that final mile environment,

Other competitors out there that do a fine job, but nobody is fully solved this whole final mile dilemma, so even with some cooling in the rate of growth in that final mile environment, Theres plenty of share gain as well as <unk>.

Speaker 3: There's plenty of share gain as well as even in a cooling market, there's still net growth.

Even in a cool cooling market theres still net growth of demand in final mile. So we're very opportunity.

Speaker 2: of demand in final mile. So we're very optimistic about it, I should say. And Robbie, I'd add one thing, the existing business for final mile has a greater emphasis on furniture than appliances but going forward, the prospects for both furniture and appliances with our existing customer base are very strong.

Optimistic about it I should say and Ravi I'd add one thing.

Existing business.

Final mile has a greater emphasis on furniture, then appliances, but going forward the prospects for both furniture and appliances with our existing customer base are very strong.

Very helpful. Thank you.

Thank you.

The next question comes from Scott Group of Wolfe Research. Please go ahead.

Speaker 1: The next question comes from Scott Group of Wolf Research. Please go ahead.

Hey, Thanks, good afternoon guys.

Speaker 2: hey thanks good afternoon guys i'm gonna start on i want to start on the buyback it's two quarters in a row of fifty million a quarter do you think this becomes a new sort of normalized run rate and and maybe is there any chance to accelerate it even more just given that you're still at the low end of the leverage target

It's going to start off I want to start on the buyback, it's two quarters in a row of $50 million a quarter do you think this becomes a new sort of normalized run rate in <unk> and maybe is there any chance to accelerate it even more just given that youre still at the low end of the leverage target.

Sure Great question, but look I'm not going to be.

Speaker 3: Sure great question, but look I'm not gonna be

I'd, rather stay away from trying to guide and where we're at on it I'll just give you our mindset as to where we've been and why as we think about a market that is continuously over the last several quarters and frankly, even all the way back to 2020 kind of pre called the cycle turn.

Speaker 3: I'd rather stay away from trying to guide him where we're at on it. I'll just give you our mindset as to where we've been and why. You know, as we think about in market that is continuously over the last several quarters and frankly even all the way back to 2020 kind of pre-called the cycle turn in our mind at least and knowing what we knew about our customer base and what they were doing. It was our belief that our stock was and is undervalued and has been under appreciated for its improved performance. And as long as that stays the case.

In our mind at least in knowing what we knew about our customer base and what they were doing it was our belief that our stock was in is undervalued and has been underappreciated for its improved performance and as long as that stays the case.

Speaker 3: We're going to continue to stay interested in share by back. You know, at some point, if the resilient nature of our portfolio, if the defensive.

We're going to continue to stay interested in share buyback.

Some point to the resilient nature of our portfolio if the defensive.

Hi service.

Speaker 3: high-service kind of structure of our dedicated model is better appreciated. That will certainly weigh into our decision as to win and how much we would buy back.

Structure of our dedicated model is better appreciated.

That will certainly weigh into our decision as to when and how much we would buyback.

Speaker 3: But I think the better way to think about it, Scott, is that we're willing and able.

But I think the better way to think about it Scott is that we're willing enable to do so when we think the time is right just like we've shown a propensity in 'twenty one to be willing to enable to acquire assets that we think make us better both in the form of <unk> and with the case with meds.

Speaker 3: to do so when we think the time is right, just like we've shown a propensity in 21 to be willing and able to acquire assets that we think make us better, both in the form of ECM and with the case with NET.

Okay, and then on the modeling side when I look at the pricing guidance that the comps naturally start getting a little tougher in the second quarter. So do you think you could be at the high end or maybe even above the high end of that pricing guidance to start the year in <unk>.

Speaker 2: And then I'm the modeling side. When I look at the pricing guidance, the cops naturally start getting a little tougher in second quarter. So do you think you could be at the high end, or maybe even above the high end of that pricing guidance to start the year in one queue?

Well were.

Speaker 3: Well, we're a month into the quarter when, as this calls taking place, we're pretty dialed in on where we believe we'll be.

We're a month ended the quarter when as this call is taking place we're pretty dialed in on where we believe we will be.

It's a one.

Speaker 3: It's a one, you know, I'd remind you that it's a one way truckload guidance metric as it relates to price and in that scenario, we feel like that's the right range. We're certainly going to ask to be paid what we think it's worth.

Remind you that it's a one way truckload.

<unk> metric as it relates to price.

And in that.

In that scenario, we feel like that's the right range, we're certainly going to ask to be paid what we think its worth.

And what we think the product we're putting forth is working and we will keep our eyes on spot.

Speaker 3: And we'll think the product we're putting forth is worth and we'll keep our eyes on spot but we'll remind you that

Mind, you that that spot is such a small portion of what we do I mean, we stayed committed even in the fourth quarter with our core customers and to the extent you saw margin expansion in the earn out margin, but the rate expansion outside of the range. It was really just our ability to step up and do more on behalf of our customers.

Speaker 3: that spot is such a small portion of what we do. I mean, we stayed committed even in the fourth quarter with our core customers. And to the extent you saw margin expansion, or not margin, but the rate expansion outside of the range, it was really just our ability to step up and do more on behalf of our customers during their peak season. Right now, the start with, and it's early in the mid season, gives us the confidence to put these kind of numbers up.

During their peak season, right now to start with.

Early in the bid season.

It gives us the confidence to put these kind of numbers up.

And we will continue to work at it and chip away at it every day with our customers.

Speaker 3: and we'll continue to work out it and ship away at it every day with our customers.

Okay. Thank you guys.

You.

The next question comes from Jack Atkins of Stephens. Please go ahead.

Speaker 1: The next question comes from Jack Atkins of Steedons. Please go ahead. OK, great. Good evening. Thanks.

Okay, great. Good evening, thanks for taking my questions.

So I gave me Jay.

Speaker 3: So I guess I'd love to get your thoughts on the driver market. You know, what's recruiting like has it gotten maybe a bit better at the margin here over the last several months. And then you've got, you know, 19 driver schools, I think if you're in adding several more here early in 2022, to what degree is that giving you a competitive advantage? You're thinking about strategically growing your fleet throughout 2022 and beyond. Yes, great question.

So Derek I would love to get your thoughts on the on the driver market.

Like has it gotten maybe a bit better at the margin here over the last several months and then you've got 19 driver schools I think at year end, adding several more here early in 2022 to what degree is that giving you a competitive advantage as you're thinking about strategically growing your fleet throughout 2022 and beyond.

Yes, so great question I appreciate it.

The driver market is tough and I don't think thats going to change I mean, it's ongoing demographic appeal challenge that we face over the next several years and we mean in the industry.

Speaker 3: Driver market's tough and I don't think that's gonna change. I mean, it's an ongoing demographic uphill challenge that we face over the next several years and we mean in the industry.

Within that challenge I, clearly believe that our driver school network as a competitive advantage and that's why we've continued to expand that model, we still do hire from from high quality schools around the country as well as we do a lot more hiring than people realize a experienced drivers in the marketplace that come to Warner defined.

Speaker 3: Within that challenge, I clearly believe that our driver school network is a competitive advantage and that's why we've continued to expand that model. We still do higher from high quality schools around the country, as well as we do a lot more hiring than people realize of experience drivers in the marketplace that come to order to find a home.

At home.

But yes. We've added these schools. These are much more targeted schools I would think about these as sort of strategic rifle shot type locations that are being put up and stood up for very specific regional needs and with a line of sight to what our pipeline looks like a quarter two quarters three quarters out relative to dedicated another.

Speaker 3: But yes, we've added these schools. These are much more targeted schools. I'd think about these as...

Speaker 3: strategic rifle shot type locations that are being put up or stood up for very specific regional needs. And with a line of sight to what our pipeline looks like a quarter, two quarters, three quarters out relative to dedicated another

Speaker 3: other customer opportunities. So it isn't like we're going to add them indefinitely and we're not trying to get to any specific number but as we have found greater and greater success.

Other customer opportunities so it isn't like we're going to add them in.

Indefinitely, and we're not going to we're not trying to get to any specific number but as we have found greater and greater success with some of these smaller locations targeted for very specific customer needs. We will continue to do so as long as that model continues to performance. So far it's performing very well.

Speaker 3: with some of these smaller locations targeted for very specific customer needs. I will continue to do so as long as that model continues to perform and so far it's performing very well.

Okay, that's great to hear and I guess my follow up question.

Speaker 7: Okay, that's great to hear and I guess my follow-up question.

You referenced mastermind being rolled out to I think most of your logistics branches.

Speaker 7: You referenced Mastermind being rolled out to I think most of your logistics branches, I think you said at the end of the year. Could you maybe update us on what the next steps are, whether it's with mastery or with Mastermind, or just your digital journey more broadly within logistics and sort of how that plays into you thinking about your broader top-line growth opportunities over the next several years?

I think you said by at the end of the year could you maybe update us on what the next steps are whether it's with mastery with mastermind or just your digital journey more broadly within logistics.

Sort of how that plays into.

You're thinking about your broader topline growth opportunities over the next several years.

Yes, so first off our.

Speaker 3: Yes, so first off, you know, our partnership with mastery is sort of the foundational or backbones, if you will, the platform tech to which we will hook all of our in-house.

Our partnership with mastery is sort of the.

Foundational or backbones, if you will the platform.

Tac to which we will hook all of our in house.

Developments too so when it comes to like how do we think about optimizing our network, how we think about planning and developing more engineered routes in the future. How we work across logistics to do better and better load matching theres all kinds of things we are focusing our internal efforts on developing so that that that portion.

Speaker 3: developments too. So when it comes to like how we think about optimizing our network, how we think about planning and developing more engineered routes in the future, how we work across logistics to do better and better load matching. There's all kinds of things we're focusing our internal efforts on developing so that that portion of the secret sauce, if you will, stays in our mains exactly that. It's our approach to the market that we believe will differentiate us over time.

Of the secret sauce, if you will stays and remains exactly that.

Our approach to the market that we believe will differentiate us over time logistics was the natural jumping off point and within that it was actually brokerage even more so because that was a little more ready for prime time early in this migration, but this is a three probably four year type total journey by the time, it's completely complete.

Speaker 3: Logistics was the natural jumping off point and within that it was actually brokerage even more so Because that was a little more ready for prime time early in this migration But this is a three, you know, probably four-year type it total journey by the time it's completely complete and we have All of our systems more integrated The focus as I mentioned today is on brokerage and the full rollout as well as the full tie-in with all of our internal optimization tools

And we have all of our systems more integrated.

The focus as I mentioned today is.

Is on brokerage and the full rollout as well as the purple tie and with all of our internal optimization tools.

Speaker 3: As we go forward, we'll continue to focus across our portfolio, rolling in, you know, dedicated in one way at future dates, and most importantly, connecting all three of the above in a way that's better connected than what it is today. It's hard to get too granular because we have several phases to this integration, as well as we're always going to be nimble, depending on where, as the market develops, and we'll make moves where appropriate. But this is going to be a multiyear journey. But a lot of it is happening concurrently, and we do have work underway all the time, even with recent acquisitions as an example.

We go forward, we will continue to focus.

Across our portfolio rolling in.

Dedicated and one way at future dates and most importantly, connecting all three of the above in a way that's better connected than what it is today, it's hard to get too granular because we have several phases to this integration as.

As well as we were always going to be nimble, depending on where as the market develops and we will make moves where appropriate but this is going to be a multiyear journey, but a lot of it is happening concurrently and we do have work under way all the time, even with recent acquisitions as an example to make sure.

Speaker 3: to make sure that we're building wants, not building something that will then be replaced by some future system as we try to bring them on an integrated. Okay, that's great, thank you.

We're building once not building something that will then be replaced by some future system as we try to bring them on and integrate them. Okay. That's great. Thank you.

Thank you.

The next question comes from Jason Seidl of Cowen. Please go ahead.

Speaker 1: The next question comes from Jason Sidal of Cowan. Please go ahead.

Thank you operator, Derek John team. Good afternoon wanted to focus a little bit on pricing and looking out towards 'twenty three as stuff rolls over so my question is once we get past.

Speaker 8: Thank you, operator Derek John team, good afternoon. Wanted to focus a little bit on pricing and looking out towards 23 as stuff rolls over. So my question is, once we get past June , how much of your business will be repriced in the first half of this year? And then are you seeing contracts lengthen out beyond one year? We are starting to hear that from some other people in the market.

June how much of your business will be repriced in the first half of this year and then are you seeing contracts lengthen out beyond one year, we are starting to hear that from some other people in the market.

Yes, so good questions.

Speaker 9: And.

To answer the first part of the question you know roughly 60%, perhaps a little more than that but about 60% of our business will be priced or re priced if you will in the first half of this year.

Speaker 3: To answer the first part of the question, roughly 60% perhaps a little more than that, but about 60% of our business will be priced or reprised if you will in the first half of this year.

As it relates to multi year contracts, we on the dedicated side, which is the majority of our fleet those have always been multi year contracts with a variety of annual renewal <unk>.

Speaker 3: as it relates to multi-year contracts, we on the dedicated side, which is the majority of our fleet, those have always been multi-year contracts with a variety of annual renewal and or rate kickers included. So some are negotiated rates on an annual basis, some are indexed rates, and there's really a mix of all of the above, and that mixes something we paid very close attention to. On the one-way side, we have also entered into In Select.

<unk> Kickers and included so some are negotiated rates on an annual basis. Some are index rates and there is really a mix of all of the above and that mix is something we pay very close attention to on the one way side. We have also entered into in select.

Speaker 3: situations with very high quality, you know, think of kind of the best of the best, if you will, from a customer-based perspective, some multi-year arrangements. Those also have annual...

Situations with very high quality.

Thank you would think of kind of the best of the best if you will from a from a customer base perspective, some multiyear arrangements. Those also have.

Annual.

Right language in them.

Speaker 3: rate language in them. And in those cases, those are more often indexed to a variety of things that we've worked very, very judiciously on to make sure that we're both we and the customer have sort of mutual protections as this market evolves. We think that gives us better stability for what then remains, which is that.

And in those cases, those are more often indexed to a variety of things that we've worked very very judiciously on to make sure that we're both we and the customer.

Have sort of mutual protections as this market evolves, we think that gives us better stability for the what then remains which is that more AD hoc annual rate renewal type world that we're always so focused on.

Speaker 3: more ad hoc annual rate renewal type world that we're always so focused on. But it gives that stability allows us.

But it gives that stability allows us to be even more laser focused on what we will retain year over year, what we're looking to grow and with whom year over year and how we're going to deploy these scarce assets because I don't see a line of sight towards capacity suddenly coming online.

Speaker 3: to be even more laser focused on what will retain your over year, what we're looking to grow in with whom year over year, and how we're going to deploy these scarce assets, because I don't see a line of sight toward capacity suddenly coming online and on a macro level and even here, if you were to look forward to our 2022 guidance, I mean, we're guiding to a...

On a macro level and even here. If you were to look forward to our 2022 guidance I mean, we're guiding to a fairly low number of 2% to 5% and that's that's a day in day out kind of hand site to be able to attract train and retain the best drivers.

Speaker 3: fairly low number of 2 to 5% and that's a day in, day out kind of hand fight to be able to attract train and retain the best driver.

Speaker 3: So it's a little bit of all of the above with a heavy, heavy focus on driver retention, driving, being a leading indicator of our ability to be where we'll follow in that range.

So it's a little bit of all of the above with a heavy heavy focus on driver retention driving.

A leading indicator of our ability to be where we will fall in that range.

That really helps Derrick I wanted to know just.

Speaker 8: Now that really helps, Derek. I want to now just focus to try to understand your out performance here in 4Q. John , I think he said in TTS that the revenue per truck per week was above your expectations. So I want to dig into why was it some of the specialty work that you mentioned that you didn't work?

Focus to try to better understand your outperformance here in <unk>, John I think you said in TTS that the revenue per truck per week was above your expectations.

To dig into why was it some of the specialty work that you mentioned that you did in the quarter.

Yes, So we worked real hard after third quarter and getting our mileage to improve addressing some of the issues part shortages.

Speaker 2: Yes, so we worked real hard after third quarter in getting our mileage to improve, addressing some of the issues, parts shortages, challenges that we faced, and we did make progress. Revenue contract for a week in Dedicated was up 0.3 and third quarter enough 5.2 and

Challenges that we faced and we did make progress.

Revenue per truck per week, and dedicated was up 0.3 in third quarter and up 5.2 in fourth quarter. So we made some really good progress, particularly in dedicated that also made progress.

Speaker 2: 4th quarter, so we made some really good progress, particularly in dedicated, but also made progress.

One way in improving our productivity.

Speaker 2: in one way in improving our productivity. We made good progress in improving our TTS margin. It improved 420 basis points from 14.0 to 18.2.

We made good progress in improving our.

TTS margin improved 420 basis points from 14 point out 18 point to and from third to fourth quarter and that was a combination of improved productivity improved pricing better cost management in an inflationary environment. So we're pleased with the progress, we're making and think that sets us up well.

Speaker 2: from 3rd to 4th quarter and that was a combination of improved productivity, improved pricing, better cost management, and an inflationary environment. So we're pleased with the progress we're making and think that sets us up well for 22. Thank you very much. Thank you very much.

'twenty two.

I appreciate the time as always gentlemen.

Thank you.

The next question comes from Jeff Kauffman of vertical research. Please go ahead.

Speaker 10: The next question comes from Jeff Kaufman of Vertical Research. Please go ahead. Thank you very much. And can...

Thank you very much and congratulations.

You.

So I wanted to ask a little bit about the power only solutions that seems to be something we're seeing more of across the industry.

Speaker 8: So I want to ask a little bit about the power only solutions. That seems to be something we're seeing more of across the industry.

Some people are mixing it in with the truckload. Some people are putting it into the logistics of the brokers can you give us an idea for how big that business is whether you want to use revenue or whether you want to use a number of trailers or something like that that are out there.

Speaker 8: And some people are mixing it in with the truck load. Some people are putting it into the logistics and the brokers.

Speaker 8: Did you give us an idea for how big that business is, whether you want to use revenue or whether you want to use, say, number trailers or something like that that are out there? Just relative to say where it was a year ago so we can get an idea of how that business is grown for you.

Just relative to say, where it was a year ago. So we can get an idea of how that business is growing for you.

Well I'll, probably steer clear of how big it is in total because that would just be yet another breakout that we'd be giving them I already feel like were pretty transparent on how much information, we give but what I will tell you as we've seen.

Speaker 3: Well, I'll probably steer clear of how big it is in total, because that would just be yet another breakout that we'd be giving. And I already feel like we're pretty transparent on how much information we give, but what I will tell you is we've seen significant growth.

Significant growth in power only over the last year.

Speaker 3: in power only over the last year. It's something we've been doing for several years and had really kind of kept it in the background on purpose and intentionally as it related to something we viewed as a competitive advantage, as we were trying to vet that out and expand it faster.

It's something we've been doing for several years and had really kind of kept it in the background on purpose and intentionally.

Is it related to something we viewed as a competitive advantage as we were trying to vet that out and expanded faster.

With that said in the last year, we've seen exponential type growth in power only both in dedicated and in one way.

Speaker 3: With that said in the last year, we've seen exponential type growth

So we have.

Our unique mix of everything from power only brokerage where its truly a brokerage environment, where we're matching them up with transactional freight to power only operating within our dedicated fleets and then power only obviously operating like others in there one way network. So it resides in multiple places.

Speaker 3: a unique mix of everything from power only brokerage, where it's truly a brokerage environment where we're matching them up with transactional freight.

Speaker 3: to power only operating within our dedicated fleets and then power only obviously operating like others in their one way network. So it resides in multiple places. What we know for sure is across all of the above, customers like and appreciate the scale advantages of a large national fleet of-

We know for sure is across all of the above customers like and appreciate the scale advantages of a large national fleet.

Trailers and so we're going to continue to lean into that you've seen our trailer ratios increase you've seen our trailer sales decrease that's intentional we understand that it represents more depreciation on the P&L, but it's an investment in a product that we think will only grow in significance as we move forward.

Speaker 3: And so we're going to continue to lean into that. You've seen our trailer ratios increase. You've seen our trailer sales.

Speaker 3: decrease that's intentional. We understand that it represents more depreciation on the P&L, but it's an investment in a product that we think will only grow and in significance as we look for.

Okay Derrick Thank you Ed.

Speaker 8: Okay, Derek, thank you. And I guess the simple answer is it just complicates our analysis a little because it's not located in just one place, yes, to your point. It's in dedicated, it's in one way and it's in progress. Okay, that's my question.

I guess the simple answer is it just complicates our analysis a little because it is not located in just one place yet to your point yes.

Dedicated with St One way and it's in brokerage okay.

That's my question. Thank you.

Yes, and I do apologize for it being complicated but it's it's.

Speaker 3: Yes, and I do apologize for being complicated, but it's, we wanna put it where the customers need it and where we think it's most profitable.

We want to put it where the customers need it and where we think its most profitable.

Thank you.

Okay.

The next question comes from Jon Chappell of Evercore ISI. Please go ahead.

Speaker 1: The next question comes from Johnnich, Chapel of Evercorder ISI. Please go ahead.

Thank you good afternoon.

Derek I think Jason assets I'm not sure. It was addressed directly obviously dedicated is pretty long in duration in spots known as being kind of the shorter term is there kind of a third tier developing just given some of the elevated demand the capacity constraints, where youre doing one only business that may be longer in duration.

Speaker 11: Derek, I think Jason asked us, I'm not sure it was addressed directly. Obviously dedicated, pretty long duration and spots known as being kind of a much shorter term, is there kind of a third tier developing just given some of the elevated demand and the capacity constraints where you're doing one when we've business that may be longer in duration, maybe a little bit more visibility on pricing, just because of the service you provide, the network you have and the fact that customers have a lot of lock-in capacity to want to stay.

Maybe a little bit more visibility on pricing just because of the service. We provide the network do you have and the fact that customers want to lock in capacity with line of sight.

Yes, I think Jon that's a fair way of thinking about it I would say using your verbiage of tiers, I mean, theres really kind of four tiers. There is the spot that's overly focused on an overly.

Speaker 3: Yeah, I think John , that's a fair way of thinking about it. I would say using your verbiage of tears, I mean, there's really kind of four tears, right? There's the spot that's overly focused on and overly,

Everybody gets overly animated about we do very little of that.

Speaker 3: Everybody gets overly animated about. We do very little of that, less than 5% of total miles in our fleet or really that.

Less than 5% of total miles in our fleet are really that there is the traditional one way annual renewal type business that so a lot more secure and stable than spot.

Speaker 3: There's the traditional one-way annual renewal type business that's a lot more secure and stable than thought, but nonetheless does renew annually.

But nonetheless does renew annually, there's dedicated which would be the longest end of the spectrum, which is multi year with annual rate.

Speaker 3: There's dedicated, which would be the longest end of the spectrum, which is multi-year with annual rate mitigation factors.

Mitigation factors and now there is a growing trend at least in our business for very select and I want to be emphatic about this with very select opportunities with key winning customers to kind of partner over a longer term horizon and we've worked these were months and in one case.

Speaker 3: And now there's a growing trend, at least in our business, for very select, and I want to be emphatic about this, but very select opportunities with key winning customers.

Speaker 3: to kind of partner over a longer term horizon. And we've worked, these were months, and in one case in particular, over a year in the making, they weren't based on any particular point in the cycle. They were strategic decisions we were taking with folks that we think.

In particular over a year in the making they werent based on any particular point in the cycle. They were they are strategic decisions. We are taking with folks that we think.

Aligned with US long term that we believe give us stability.

Speaker 3: align with us long term that we believe give us stability through the cycle and most importantly allow us to build around their successful model and thus dedicate more resources towards the analysis and negotiations and transactional nature of what's left over. So yes it is

Through the cycle and most importantly allow us to build around their successful model.

Thus dedicate more resources towards the analysis and negotiations and transactional nature of what's leftover.

So yes, it is evolving.

And my follow up is somewhat related to that I mean the range.

Speaker 11: and then my follow up is somewhat related to that. I mean, the range you gave on truck roads, 2 to 5%, I imagine the majority of that will be in dedicated, but as far as the demand is concerned, would it be fair to assume that, you know, if you had the drivers and if you had the OEMs, able to meet your demand, that that could be at the high end, if not higher than that range, because the pipeline's so strong, or you starting to feel a little bit of slowing in the demand for dedicated at this point and to go into your demand, that would be hall Forgive County registration notice, so within

The range you gave on truck rose, 2% to 5% I imagine the majority of that will be in dedicated but as far as the demand is concerned would it be fair to assume that.

If you had the drivers and if you had the Oems able to meet your.

Demand.

That would be at the high end, if not higher than that range. Because the pipeline is so strong or are you starting to see a little bit of slowing in the demand for dedicated at this point of the cycle.

No I'll start with the pipeline is very strong so the pipeline is very robust.

Speaker 3: Now I'll start with this, the pipeline is very strong. So the pipeline is very robust.

Speaker 3: And we are very optimistic about what that means for our ability to grow. Yes, you right, the majority of that growth would be indenicated. I'm not as sure about the second part in terms of...

We are very optimistic about what that means for our ability to grow yes, you're right. The majority of that growth would be in dedicated.

Not as sure about.

The second part in terms of its.

Drivers were readily available and if trucks were easy to get then I suspect the durability of some of those opportunities wouldnt be as great. So I don't.

Speaker 3: If drivers were readily available and if trucks were easy to get, then I suspect the durability of some of those.

Speaker 3: opportunities wouldn't be as great. So I don't, you know, it's hard to play in a, you know,

It's hard to play in them.

Hypothetical world right now what I know is drivers are very hard to get trucks or are even tougher and so in that world with the pipeline. We have we're going to push and do everything we can to be at the high end of the range. If those two dynamics were suddenly different we'd be cautious about growth at that point at least as it relates to asset only grow.

Speaker 3: You know, a hypothetical world right now what I know is drivers are very hard to get in trucks or are even tougher.

Speaker 3: And so in that world with the pipeline we have, we're gonna push and do everything we can to be at the high end of the range. If those two dynamics were suddenly different, we'd be cautious about growth at that point.

Speaker 3: at least as it relates to asset only growth, we'd still be bullish obviously on growing logistics. So we have to react to the market, depending on where we're at at any given time. But right now, I think the crux of your question is, what's the overall freight environment like? And the answer is very strong. What's the outlook for that freight environment through 2022? And we believe that outlook is also strong.

We'd still be bullish obviously on growing logistics. So we have to react to the market depending on where we're at at any given time, but but right now I think the crux of your question is what's the overall freight environment like in the answers very strong what's the outlook for that freight environment through 2022, and we believe that that outlook is also strong.

<unk> and <unk>.

And then what is that dedicated pipeline look like and I would say, it's as full today as it has been in the last several quarters and we're equally optimistic about our ability to add trucks in that space, although its just increasingly difficult.

On the driver and OEM side of the equation.

Speaker 3: on the driver and OEM side of the equation. Okay, that's super helpful.

Okay. That's super helpful. Thanks for the insight stack.

Thank you.

The next question comes from Ken Huckster of Bank of America. Please go ahead.

Speaker 1: The next question comes from Ken Hoxter of Bank of America. Please go ahead.

Hey, great Good afternoon, Derek and John I appreciate the details and great discussion on growth. So maybe just dig into that to follow up on your last thought there on your outlook if rates at dedicated you mentioned at five two that's kind of at the top end of your three to five range in revenue per load mile is at 19% the top end of your.

Speaker 8: Hey, great. Good afternoon, Derek and John . I appreciate the details and great discussion on growth. So maybe just dig into that to follow up on your last thought there on your outlook. If rated at dedicated, you mentioned that at 5, 2, that's kind of the top end of your 3-5 range and revenue per load mile is at 19% the top end of your range. Are you then, I mean, it doesn't sound like you're seeing.

Your range or are you then I mean, it doesn't sound like you're seeing softening.

But are you, suggesting that we're now at the peak as this is as good as it gets in and Youre seeing from here on in.

Speaker 8: But are you suggesting that we're now at the peak? Is this as good as it gets? And you're seeing from here on in, it's gonna start decelerating. I just wanna understand your thought on kind of capping the targets at the levels we're at. Let me start.

We're going to start decelerating I just want understand Europe's your thought on kind of capping the targets at the levels. We're at.

Let me, let me start on the dedicated side.

Don't Miss read the 3% to 5% compared to fourth quarter over fourth quarter at $5 two to mean that the rate negotiations or rate activity with those customers has decelerated what it really means is we're continuing the trend that we talked about last quarter, which is <unk> 16 over last 20 dedicated accounts that we've added have been short.

Speaker 3: Don't misread the 3-5% compared to fourth quarter over fourth quarter at 5.2.

Speaker 3: to mean that the rate negotiations or rate activity with those customers is decelerated. What it really means is we're continuing to trend we talked about last quarter, which is 16 of our last 20 dedicated accounts that we've added have been shorter haul in nature with both lower expenses and lower revenue per truck per week because they simply run less miles. And I think that trend continues over.

Hall in nature with lower both both lower expenses and lower revenue per truck per week, because they simply run less miles and I think that trend continues over time as people forward deploy more and more inventory as they continue to raise the bar on their expectations for service Theres more and more opportunity for these shorter haul dedicated fleets and so you could see a muted some muting.

Speaker 3: As people forward to deploy more and more inventories, they continue to raise the bar on their expectations for service.

Speaker 3: There's more and more opportunity for these shorter hull dedicated fleets. And so you could see a muting of your revenue per truck per rig number that does not necessarily reflect.

Of your revenue per truck per week number that does not necessarily reflect a decrease margin or.

Speaker 3: a decrease margin or decrease in up income potential. It just simply means that truck runs a little less miles because of the nature of the work that it's in. And so right now again, the market's as strong as it was. It's continuing to look as strong as we look out into the pipeline.

Decrease in op income potential it just simply means that truck runs a little less miles because of the nature of the work that it's in.

And so right now again the market is as strong as it was it's continuing to look as strong as we look out into the pipeline dedicated as a long tail. So when we talk about pipelines and dedicated we have a multi quarter look.

Speaker 3: dedicated as a long tail. So when we talk about pipelines and dedicated, we have a multi-quarter look at look forward look

Forward look because they take multiple quarters to close and so it's not like it's getting skinnier further out in that pipeline, we've got to continue to serve.

Speaker 3: because they take multiple quarters to close. And so it's not like it's getting skinnier further out in that pipeline. We've got to continue to sift through those opportunities.

Through those opportunities make sure they align with our long term objectives and with the type of customers that we believe will continue to win in their space and will land a.

Speaker 3: make sure they align with our long-term objectives and with the type of customers that we believe will continue to win in their space. And we'll land.

A relatively small percentage by choice by design of those opportunities that we think fit the criteria we're looking for.

Speaker 3: you know, a relatively small percentage by choice by design of those opportunities that we think fit the criteria we're looking for.

One way truckload it has more to do with just comps will get tougher on price as you continue to get deeper into the year and right now we're guiding to the first quarter, which shows sustained momentum. If you will of what we've been seeing and thats reflective of a sustained strong freight market.

Speaker 3: On one way Treclot it has more to do with just, you know, cops will get tougher on price as you continue to get deeper into the year And right now we're guiding to the first quarter which shows sustained momentum if you will of what we've been seeing and that's reflective of a sustained from freight market

So so perfect. So.

Yeah.

The follow up would be you posted an 81 and change operating ratio at a trough this year and last year in the fourth quarter. So I don't Wanna be grateful for the salt level, because it's amazing that to get to low <unk>, but it is flat despite 13% ex.

Speaker 8: I mean, the follow-up would be, you posted an 81 and a change operating ratio at Trump this year and last year in the fourth quarter. So I don't want to be found on grateful for the solid level because it's amazing that you know, to get to low 80s, but it is flat despite 13% x-fuel revenue growth.

Ex fuel revenue growth would you have expected to get ahead.

Speaker 8: Would you have expected to get ahead of that, you know, improve giving that revenue growth or is it, hey, labor and cost inflation, it's just so tough to stay ahead of that with the rate gains that you're putting in. You know, kind of give your thought on what you would have expected looking back at that kind of revenue growth.

That.

Improved given that revenue growth or is it hey, labor and cost inflation. It's just so tough to stay ahead of that with the right rate.

The rate gains that youre, putting in kind of give me your thoughts on what you would've expected looking back at that kind of revenue growth.

I think the first answer and I'm not trying to evade the.

Speaker 3: I think the first answer, and I'm not trying to evade the crux of the question, but the first thing I have to remind you of is

The crux of the question, but the first thing I have to remind you of is.

Q3 was heavily disrupted quarter and we were very vocal about what was happening within our network.

Speaker 3: Q3 was heavily disrupted quarter and we were very vocal about what was happening within our network from a combination of things startups that were that were significant in nature and highly costly in their makeup

From a combination of things.

Startups that were that were significant in nature and highly costly and their makeup.

Speaker 3: parts and OEM shortages that were disruptive in our network and our ability to produce miles.

Parts and OEM shortages that were disruptive in our network and our ability to produce miles.

And the list kind of went on from there. We indicated that we had a line of sight to correct it into and to get back on course, and we did that and when I think about Q4 this year versus Q4 last year and the level of disruption going on right now.

Speaker 3: and the list kind of went on from there. We indicated that we had a line of sight to correct it and to get back on course and we did that. And when I think about Q4 this year versus Q4 last year and the level of disruption going on right now, in Q4.

In Q4.

Speaker 3: and yet the ability to put up the 8180R.

And yet the ability to put up.

81, eight or two.

To be Frank I'm, probably more proud of this one than I am of what we did a year ago.

Speaker 3: To be frank, I'm probably more proud of this one than I am of what we did a year ago.

Speaker 3: So I understand the concern about why not better, but we've given the nature of the underlying disruptive forces within our network.

So I understand the concern about why not better.

But given.

Given the nature of the underlying disruptive.

Forces within our network the team's ability to rally around their execution philosophies in there and their focus on the details.

Speaker 3: the team's ability to rally around their execution philosophies and their focus on the details really was impressive in the corner and I'm proud of them.

Really was impressive in the quarter and I'm proud of them.

Speaker 9: They also did all of the above while having the necessary distractions of

They also did all of the above while having the necessary distractions.

Of pro.

Pro forming another acquisition in the quarter.

Speaker 3: performing another acquisition in the quarter and all of the work and focus that does go into that. And so overall, I think it's a very solid quarter. We're going to always push kin to do better. And as we have this conversation a year from now, we'll do everything in our power to not have to repeat a flat conversation but we'll be equally apologetic about an 81-8.

And all of the work and focus that that does that does go into that.

So overall I think it is a very solid quarter, we're going to always push can to do better and as we have this conversation a year from now we will do everything in our power to not have to repeat a flat conversation with them, but we will be equally unapologetic about an 81 eight.

Can I just get a quick understanding there.

Speaker 8: Can I just get a quick understanding there? You mentioned the dedicated backlog is, is that that's nothing we can ever forecast or see. It just depends on what the scale is. It hits in that quarter, right? It's not like there's...

You mentioned the dedicated backlog is is that that's not nothing we can have our kind of forecast or see it just depends on what the scale is it's in that quarter right. It's not like there is.

Speaker 8: a size of ramp that impacts it more.

Size of ramp that that impacts it more.

No it's more it's more driven Ken by the the makeup.

The actual fleet so its so it would be so difficult to even attempt to answer that would do anything other than further confuse their dedicated fleets. Just as an example that could be 10 to one trailing ratios in the amount of work and effort in and startup costs associated with the fleet of that type of especially depending on where that geography might exist.

Speaker 3: that would do anything other than further confused. There are dedicated plates just as an example that could be 10 to 1 trailer ratios in the amount of work and effort and...

Speaker 3: and start up costs associated with the fleet of that type, especially depending on where that geography might exist.

Could be significant and you'd have all kinds of temporary headwinds as you ramp to that particular fleet. There are other ones that are power only dedicated fleets to begin with their truck only dedicated fleets in which you can get in and engage and ramp up very very quickly. So it's there is a robust pipeline coming down the path at us.

Speaker 3: could be significant and you'd have all kinds of temporary headwinds as you ramp that particular fleet. There are other ones that are power-only dedicated fleets to begin with. They're truck-only dedicated fleets in which you can get in and engage and ramp up very, very quickly. So there's a robust pipeline coming down, you know, the path at us.

It's the type of mix, we're looking for and our sales team has done an incredible job of staying true to the mission. If you will that we've given them.

Speaker 3: It's the type of mix we're looking for in our sales team has done an incredible job of staying true to the mission, if you will, that we've...

Speaker 3: And our job will be to just make sure that everything's rated appropriately for its level of complexity. And every once in a while, like we saw in Q3, you just have the worst of all timing, where all of the costs reside in a quarter and none of the opportunity. And so we've got to that not whole and we've performed in Q4 in a more regular on a more round.

And our job will be to just make sure that everything's related appropriately for this level of complexity and every once in a while like we saw in Q3, you just have the worst of all timing, where all of the costs reside in a quarter and none of the opportunity and so we've got through that knothole.

Formed in Q4 on a more regular.

On a more <unk>.

Normalized basis, and Thats kind of what you see in the results and Ken I would add back it up with the numbers and the stats and dedicated from first quarter to second quarter. We added 15 dedicated trucks on average.

Speaker 3: Normalized basis and that's kind of what you see in the results.

Speaker 2: And Ken, I would add to back it up with the numbers and the stats and dedicated from first quarter to second quarter, we added 15 dedicated trucks on average.

Second quarter to third quarter increased by 103rd quarter to fourth quarter increased by 175 C saw ramping up.

Speaker 8: second quarter to third quarter increased by a hundred third quarter to fourth quarter increased by a hundred seventy five So you saw ramping up of Dedicated growth and that was some of the startups that we were referring to Appreciate comment inside

Dedicated growth and that was some of the startups that we were referring to.

Sure I appreciate the comments thanks, guys have a great. Thank you.

The next question comes from Chris Wetherbee of Citigroup. Please go ahead.

Speaker 10: The next question comes from Chris Weatherby of City Group. Please go ahead. Hey, thanks for taking the class.

Hey, thanks for taking the call.

I guess I wanted to pick up a little bit on the cost side again don't want don't want to nitpick too much here, but im trying to look through some of the very elevated gains that you guys realized on sales in 2021 and get a sense of sort of what the core profitability of the truck business and maybe where the costs are are kind of running so obviously the third quarter was.

Speaker 8: I guess I wanted to pick up a little bit on the cost side again. Don't want to pick too much here, but I'm trying to look through some of the very elevated games that you guys realized on sales in 2021 and get a sense of sort of what the core profitability of the truck business is and maybe where sort of the costs are kind of running. So obviously the third quarter was a challenge and somewhat of anomaly as you talked about, it still sounds like there's disruption going on in 4Q. But we saw sort of core EBIT down, margin down on a year of your basis. I guess when we look out to 2022 and then maybe even thinking longer term, I know you don't want to guide games because it's obviously extraordinarily volatile. But can you give us some help directionally to see sort of when we can start to get that margin expansion maybe on a core X-game basis? I think you guys have built in some costs that are likely to unwind a bit as we go into next year. Just want to understand the cadence of that a little bit.

The challenge in somewhat of anomaly, if you talked about it still sounds like there's disruption going on in <unk>, but we saw a sort of core EBIT down margins are down on a year over year basis, I guess, when we look out to 2022, and then maybe even thinking longer term I know you don't want to guide gains because it's obviously extraordinarily volatile, but can you give us some help directionally to see sort of when we can.

Can start to get that margin expansion, maybe on a core ex gain basis. I think you guys had built in some costs that are likely to unwind a bit as we go into next year, just want to understand the cadence of that a little better.

Hi, Chris This is John Good question, let me start off with we consider.

Speaker 2: Hi, Chris. This is John . Good question. Let me start off with we consider the fleet truck sales and fleet trailer sales side of our business to be a core part of what we do. We've been in the business for 30 years. We have an excellent team and they executed pretty

The plate truck sales in plate trailer sales side of our business to be a core part of what we do we've been in the business for 30 years, we have an excellent team and they executed pretty.

Pretty pretty well in the fourth quarter. When you think about the fact that we sold one third fewer tracks in one half fewer trailers and generated an increase in gains are gains have gone from.

Speaker 2: Pretty pretty well in the fourth quarter when you think about the fact that we sold one-third fewer trucks and one-half fewer trailers and generated an increase in gains. Our gains have gone from

$11 million in first quarter to 13, and second quarter to 15 and third quarter to 21 in fourth quarter. So there's been an acceleration I would say that's because of better pricing more so than than unit sales.

Speaker 2: 11 million in first quarter to 13 and second quarter to 15 and third quarter to 21 and fourth quarter So there's been an acceleration. I would say that's because a better pricing more so than than unit sales

So we considered gains to be the core part of our business on the cost side.

Speaker 2: So we consider gains to be the core part of our business. On the cost side.

I agree completely that it's a more inflationary environment, it's very very competitive for labor both on the driver side and on the non driver side of the business benefit costs are are higher for both health insurance and work comp this year than they were a year ago and we've also made some investments in our school network to be.

Speaker 2: would agree completely that it's a more inflationary environment. It's very, very competitive for labor, both.

Speaker 2: on the driver side and on the non-driver side of the business. Benefit costs are higher for both health insurance and work comp this year than they were a year ago. And we've also made some investments in our school network to be able to bring on more schools.

Able to bring on more schools.

With more instructors hire more placement drivers out of the schools to join our network and that has increased our our cost structure and we think that we're in a good place based on the school development. We have one more significant quarter to go with schools to be added in first quarter, but we are very optimistic.

Speaker 2: with more instructors, higher more placement drivers out of the schools to join our network. And that has increased our cost structure. And we think that we're in a good place based on the school development. We have one more significant quarter to go with schools to be added in first quarter. But we are very optimistic about the opportunity to continue to improve margins in 2022 going forward based on the runway we have right now.

<unk> about the opportunity to continue to improve margins in 2022 going forward based on the runway we have right now.

Okay. That's helpful. I appreciate that call at it and obviously understanding the gains are going to be part of the story going forward as well I guess do you have a number that you guys contemplate when you think about the 12% to 17% long term target range whats embedded in that over a multiyear period of time.

Speaker 8: Okay, that's helpful. I appreciate that call. And obviously understanding the gains are going to be part of the story going forward as well. I guess do you have a number that you guys contemplate when you think about the 12 to 17% long-term target range? What's embedded in that over a multi-year period of time?

What's embedded in terms of what percent comes from gains.

Speaker 3: What's embedded in terms of what percent comes from gains? Yeah.

Yes.

I don't have a number off the top of my head I can tell you that that gain number fluctuates year to year in that five year plan based on the best our best estimate of what we think happens within the market taking into account everything from EPA changes to two back to back years of less than replacement level, followed eventually someday.

Speaker 3: I don't have a number off the top of my head. I can tell you that that game number fluctuates year to year in that five year plan based on the best you are best estimate of what we think happens within the market.

Speaker 3: taking into account everything from EPA changes to two back to back years of less than replacement level followed eventually someday By a year where there will probably be a glut of manufacturing and so all of that type of stuff has been built in

By year, where there will probably be a glut of manufacturing.

So all of that type of stuff has been built into it but.

But in terms of a percent average over the course no I can tell you. It does fluctuate greatly year to year year to year, but it does fluctuate through the five year period, just like many other line items do as well.

Speaker 3: But in terms of a percent average over the course, no, I can tell you it does fluctuate greatly year to year, or not year to year, but it does fluctuate through the five-year period, just like many other line items do as well.

And it is contemplated and Chris we've had gains for the last 20 years every year I think the last year we had.

Speaker 2: And it is contemplated. And Chris, we've had gains for the last 20 years, every year. I think the last year we had.

Speaker 2: losses on equipment sales goes back to the early 2000s.

Losses on equipment sales goes back to the early two thousands.

Got it that's very helpful. I appreciate the color. Thank you. Thank you.

Yeah.

The next question comes from Brandon <unk> Glen Ski of Barclays. Please go ahead.

Speaker 1: The next question comes from Brandon Oglonsky of Barclays. Please go ahead.

Hey, good afternoon, everyone and thanks for taking my question I guess, Eric with John just given where truckload valuations are right now in the equity markets.

Speaker 5: Okay, good afternoon everyone and thanks for taking the question. I guess Derek, which I'm just given where truckload of the H.A.S.S.D.A.R.A.N. equity market.

There's a lot of.

Speaker 5: There's a lot of, I guess, uncertainty with investors that these levels of earnings and margins are sustainable. And Derek, I really appreciate, you know, that the focus here on moving forward and saying in that range. But I guess what can you tell us about, you know, how are you managing the inevitable turn in the cycle when things get a little bit more discolored, you know, past these more abundant? Should we expect the same type of contraction we've seen in the past rear company?

Uncertainty with investors that these levels of earnings and margins are sustainable and Derek I really appreciate you know that the focus here on moving forward and staying in that range.

What can you tell us about how are you managing the inevitable turn in the cycle when things get a little bit more difficult you know pass these more abundant.

Should we expect the same type of contraction we've seen in the past from your company.

Well.

Speaker 3: Well, so first of how we manage it, I mean, it's really a preponderance of what we focus on right now is the ongoing build out and strategy of what I consider to be of the most resilient portfolio in Trump.

So first off how are we managing that I mean, it's really.

A preponderance of what we focus on right now is the ongoing build out and strategy of what I consider to be the most resilient portfolio in trucking.

If you think about what we've been working on communicating speaking about and really.

Speaker 3: If you think about what we've been working on, communicating, speaking about, and really trying to message, it's that our portfolio is different. We are predominantly dedicated in increasing in that ratio all the time. We're...

Trying to message is that our portfolio is different.

We're predominantly dedicated and increasing in that ratio all the time we are.

Continuing to further engineer the one way portion of our network and focusing on franchises within it that we think we're best in class. So cross border Mexico team expedited engineered fleets and now with the addition of ECM and then the expansion of those concepts into engineered regional short haul and.

Speaker 3: continuing to further engineer the one way portion of our network and focusing on franchises within it that we think we're best in class. So cross-border Mexico team expedited, engineered fleets and now with the addition of ECM and then the expansion of those concepts into engineered regional short haul. And so all of the above continues to place us in a position that when it turns and we believe that is further off than most folks probably on this call.

All of the above continues to place us in a position that when it turns and we believe that as further off than most folks probably on this call.

But when it turns our model is built for that in terms of what should we expect and we won't be as bad as it was last time I would call back or call your attention to the 18% to 19 cycle, where you could see in most every portfolio around after we came off a very strong robust year.

Speaker 3: But when it turns, our model is built for that. And in terms of what should we expect and will it be as bad as it was last time, I would call it.

Speaker 3: or call your attention to the 18 and 19 cycle where you could see in most every portfolio around after we came off a very strong robust year.

In trucking and followed by a less stellar.

Speaker 3: of intracting followed by a less stellar freight market and demand environment, REPs actually went up by 1%.

Rate market and demand environment, our EPS actually went up by 1%.

Speaker 3: in that time frame. Now I'm not predicting that our EPS every year, regardless of how bad the cycle gets will go up. What I'm saying is it's remarkably more defensive than it's ever been. And even...

In that timeframe now I'm not predicting that our EPS every year, regardless of how bad the cycle gets will go up what I'm, saying is it's remarkably more defensive than it's ever been and even in.

In prior cycles, it's performed better than most if not all as it relates to how far that fall goes.

Speaker 3: in prior cycles is performed better than most, if not all, as it relates to how far that fall goes. Fourth quarter, which is pertinence and such the call we're on, again, these results were achieved without...

Fourth quarter, which is partnered since since the call. We are on again. These results were achieved without.

Heavy involvement in the spot market and instead it was a heavy focus on our core customers.

Speaker 3: a heavy involvement in the spot market and instead it was a heavy focus on our core customers. We worked with them on what their needs were, we met them where they were and they were willing to invest with us as appropriate to make sure their products were on the shelf. Arguably, I've spent most of the last five years trying to change or focus a culture around a more resilient

Worked with them on what their needs, where we met them where they were.

And they were willing to invest with us as appropriate to make sure their products were on the shelf. So.

Arguably I've spent most of the last five years trying to change.

Our focus a culture around a more resilient portfolio and while it is not complete and never will be I think we're better positioned right now than we've ever been.

Speaker 3: portfolio and while it's not complete and never will be, I think we're better positioned right now than we've ever been.

Thank you Derik I'll leave it there.

Alright, thank you.

This concludes our question and answer session I would like to turn the conference back over to Mr. Derek Leathers for any closing remarks.

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Mr. Derek Leathers for any closing remarks.

Thank you.

Speaker 3: Thank you. Once again, I just want to thank everybody for spending time with us this afternoon. We appreciate sincerely your interest in the Warner story. We're really proud of the record results in the fourth quarter, but I'm more excited about the foundation it provides for 2022.

Once again I just want to thank everybody for spending time with US. This afternoon. We appreciate sincerely your interest in the Warner story, we're really proud of the record results in the fourth quarter, but I'm more excited about the foundation that provides for 2022.

Our portfolio continues to improve and service safety and capabilities, while achieving improved financial results.

Speaker 3: Your portfolio continues to improve in service, safety and capabilities while achieving improved financial results.

As we move into 'twenty, two and beyond we are focused on building upon the great brand, we have today and growing both top and bottom line results for all of our stakeholders.

Speaker 3: As we move into 22 and beyond, we are focused on building upon the great brand we have today and growing both top and bottom line results for all of our stakeholders.

While we may never change the perception of this being a cyclical industry here at Warner we've build a portfolio with incredible resiliency, our alignment with winning customers combined with our focus on strategic dedicated relationships in a fast and growing logistics segment positions us well to prosper in coming years through any economic or other adverse cycle that we may face.

Speaker 3: While we may never change the perception of this being a cyclical industry, here at Warner we have built a portfolio with incredible resiliency. Our alignment with winning customers combined with our focus on strategic dedicated relationships and a fast and growing logistic segment positions us well to prosper in coming years through any economic or other adverse cycle that we may face.

And lastly, I'd like to close with another sincere. Thank you to the men and women of Warner that at mid 2021 possible and to thank you in advance for all of you that I know all that you will achieve in 2022.

Speaker 3: And lastly, I'd like to close with another sincere thank you to the men and women of Warner that have made 2021 possible and a thank you in advance for all of you that I know and all that you will achieve in 2022.

Okay.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker 1: The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

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Speaker 12: Su to pro M.

Okay.

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