Q1 2024 Werner Enterprises Inc Earnings Call
Good afternoon, and welcome to the Werner Enterprises first quarter 'twenty 'twenty four earnings conference call.
Operator: And welcome to the Werner Enterprises first quarter 2024 earnings conference call. All participants will be in listen-only mode.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Chris Neil, Senior Vice President of Pricing and Strategic Planning. Please go ahead.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now let's turn the conference over to Chris Neal Senior Vice President of pricing and strategic planning. Please go ahead.
Chris C. Neil: Good afternoon, everyone. Earlier today, we issued our earnings release with our first quarter results. The release and a supplemental presentation are available in the investor section of our website at warner.com. Today's webcast is being recorded and will be available for replay later today.
Chris C. Neil: Afternoon, everyone earlier today, we issued our earnings release with our first quarter results the release and a supplemental presentation are available in the investors section of our website at Warner Dot Com.
Speaker Change: Today's webcast is being recorded and will be available for replay later today. Please.
Chris C. Neil: Please see the disclosure statement on slide two of the presentation, as well as the disclaimers in our earnings release related to forward-looking statements. Today's remarks contain forward-looking statements that may involve risks, uncertainties, and other factors that could cause actual results to differ materially. The company reports results using non-GAAP measures, which we believe provides additional information for investors to help facilitate the comparison of past and present performance. A reconciliation of the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation.
Chris C. Neil: Please see the disclosure statement on slide two of the presentation as well as the disclaimers in our earnings release related to forward looking statements. Today's remarks contain forward looking statements that may involve risks uncertainties and other factors that could cause actual results to differ materially.
Chris C. Neil: The company reports results using non-GAAP measures, which we believe provides additional information for investors to help facilitate the comparison of past and present performance.
Chris C. Neil: 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.
Chris C. Neil: On today's call with me are Derek Leathers, Chairman and CEO, and Chris Wikoff, Executive Vice President, Treasurer, and CFO. Derek will provide an overview of our Q1 results and an update on our strategic priorities for 2024 and our market outlook. Chris will cover our financial results in more detail and provide an update on our guidance for the year. I'll now turn the call over to Derek.
On today's call with me are Derek Leathers, Chairman, and CEO, and Chris <unk> Executive Vice President Treasurer and CFO.
Derek J. Leathers: Derek will provide an overview of our Q1 results and update on our strategic priorities for 2024, and our market outlook, Chris will cover our financial results in more detail and provide an update on our guidance for the year.
I'll now turn the call over to Derek.
Derek J. Leathers: Thank you, Chris, and good afternoon, everyone. We appreciate you joining us. Before we get started on our first quarter update, I would like to acknowledge the very difficult time many of our associates and fellow citizens of Omaha are enduring as a result of the catastrophic tornadoes that took place this past Friday. It is truly inspirational to see both the Werner and the broader community come together to support those in need. Miraculously, there are no reported fatalities locally at this time, but there remains a path of devastation that is hard to even describe.
Derek J. Leathers: Thank you, Chris and good afternoon, everyone. We appreciate you joining us.
Before we get started on our first quarter update I would like to acknowledge the very difficult time, many of our associates and fellow citizens of Omaha are enduring as a result of the catastrophic tornadoes that took place this past Friday.
Derek J. Leathers: It is truly inspirational to see both the Warner and broader community come together to support those in need.
Derek J. Leathers: Iraqi endlessly there were no reported fatalities locally at this time, but there remains a path of devastation that is hard to even describe.
Derek J. Leathers: Regrettably, the devastation continued throughout the weekend in Iowa, Kansas, and Oklahoma. Our thoughts, prayers, and ongoing support go out to those impacted by this horrible disaster that has affected so many. I will now turn my attention to the results of the quarter. Our first quarter results reflect the reality that the freight market continues to be challenging and was further compounded by adverse weather in Q1. Despite these industry-wide headwinds, our focus remained on controlling the controllable.
Derek J. Leathers: Regrettably the devastation continued throughout the weekend in Iowa, Kansas, and Oklahoma, our thoughts prayers and ongoing support go out to those impacted by this horrible disaster that has impacted so many.
Derek J. Leathers: I will now turn my attention to the results for the quarter.
Derek J. Leathers: Our first quarter results reflect the reality that the freight market continues to be challenging and was further compounded by adverse weather in Q1 despite.
Derek J. Leathers: Despite these industry wide headwinds our focus remains on controlling the controllable.
Derek J. Leathers: We realized another favorable quarter for one-way production, increased revenue per truck and dedicated, and maintained high customer retention. We generated solid operating cash flow, are proactively managing expenses, executed on additional cost savings, reduced our debt, and repurchased shares during the quarter. While we cannot control the macro, we are focused on our long-term strategy and structural improvements to position Werner for success in an eventual tighter market. Now, let's move on to slide five and highlight our first quarter results. During the quarter, revenues were 8% lower versus the prior year, and adjusted EPS was $0.14.
Derek J. Leathers: We realized another favorable quarter for one way production increased revenue per truck in dedicated and maintained high customer retention.
Derek J. Leathers: We generated solid operating cash flow are proactively managing expenses.
Derek J. Leathers: Executing on additional cost savings reduced our debt and repurchase shares during the quarter.
Derek J. Leathers: While we cannot control the macro we are focused on our long term strategy and structural improvements to position Warner for success and an eventual tighter market.
Derek J. Leathers: Let's move on to slide five and highlight our first quarter results.
Derek J. Leathers: During the quarter revenues were 8% lower versus the prior year adjusted EPS was <unk> 14.
Derek J. Leathers: Adjusted operating margin was two 4%.
Derek J. Leathers: The adjusted operating margin was 2.4%; the adjusted TTS operating margin was 4.7% net of fuel surcharge. In Dedicated, there's more noise from competition. Despite losing a few fleets to changes in the supply chain approach for select customers and isolated competitive undercutting, Dedicated remains solid and resilient and delivered another quarter of year-over-year revenue per truck growth. We are maintaining price discipline and dedication, particularly given our long-term agreement. Our dedicated offering is superior in scale, service, and reliability.
Derek J. Leathers: Adjusted TTS operating margin was four 7% net of fuel surcharges.
Derek J. Leathers: In dedicated there's more noise from competition, despite losing a few fleets to changes in the supply chain approach for select customers and isolated competitive undercutting dedicated remains solid and resilient and delivered another quarter of year over year revenue per truck growth.
Derek J. Leathers: We are maintaining price discipline and dedicated particularly given our long term agreements are dedicated offering a superior scale service and reliability. Accordingly, we look to large enterprise customers the value of their supply chain, a strategic mission critical and not left to less sophisticated and experienced carriers.
Derek J. Leathers: Accordingly, we look to large enterprise customers that value their supply chain as strategic, mission critical, and not left to less sophisticated or inexperienced carriers. As expected, one-way truckload volume was steady and seasonally consistent. However, revenues remain challenged by ongoing rate pressure.
Derek J. Leathers: As expected one way truckload volume was steady and seasonally consistent.
Derek J. Leathers: But revenues remained challenged by ongoing rate pressure.
Derek J. Leathers: Despite setbacks from weather, miles per truck increased 11%, marking the fourth consecutive quarter of improvement. Our total miles were nearly similar to the prior year, down less than 3% despite 13% fewer trucks. We are pleased with the operational excellence that has been building to achieve similar volume with less capital intensity. Within logistics, first quarter volume reflected normal seasonality, while results were impacted by further rate pressure. Still, we maintained a 15% gross margin, saw meaningful increases in both domestic and cross-border power-only volume, drove strong customer retention, and realized new business wins in higher volume and intermobile.
Derek J. Leathers: Despite setbacks from weather miles per truck increased 11%, marking the fourth consecutive quarter of improvement.
Derek J. Leathers: Our total miles were nearly similar to prior year down less than 3%. Despite 13% fewer trucks. We are pleased with the operational excellence that has been building to achieve similar volume with less capital intensity.
Derek J. Leathers: Within logistics first quarter volume reflected normal seasonality, while results were impacted by further rate pressure.
Derek J. Leathers: Phil we maintain a 15% gross margin saw meaningful increases in both domestic and cross border power only volume drove strong customer retention and realize new business wins and higher volume in intermodal in short despite seasonally stable customer demand lower rates caused freight conditions to remain challenged.
Derek J. Leathers: In short, despite seasonably stable customer demand, lower rates caused freight conditions to remain shallow. Inclement weather further negatively impacted one way and logistics and the limited driver throughput for our school network. This, combined with higher than usual health and workers' comp benefits and elevated insurance expense, resulted in lower operating income. That said, we are proud to have achieved a first quarter 20-year record low for preventable accidents in addition to a high level of service to our customers, improved one-way miles per truck, and progress on our cost savings initiatives. Moving to slide six.
Derek J. Leathers: Inclement weather further negatively impacted one way and logistics and the limited driver throughput for our school network. This combined with higher than usual health and workers' comp benefits and elevated insurance expense resulted in lower operating income that said, we are proud to have achieved a first quarter 'twenty year record low for preventable accidents. In addition to our high level of <unk>.
Derek J. Leathers: To our customers improve one way miles per truck and progress on our cost savings initiative.
Derek J. Leathers: Moving to slide six despite the challenging environment, we continue to push forward with implementing structural improvements that will position Warner for success as rate normalizes.
Derek J. Leathers: Despite the challenging environment, we continue to push forward with implementing structural improvements that will position Werner for success as rate normalizes. Our DRIVE framework continues to inform our decisions over the long term, representing our commitment to durability, results, innovation, values, our associates, and the environment. Last week, we announced that Werner made it to Forbes' list of America's best large employers for 2024. Forbes selected 600 outstanding companies for its list, and Werner placed number 10 in the transportation and logistics category.
Derek J. Leathers: Our drive framework continues to inform our decisions over the long term, representing our commitment to durability results innovation values, our associates and the environment.
Derek J. Leathers: Last week, we announced that Warner made it to Forbes list of America's Best large employers for 2024.
Derek J. Leathers: Forbes selected 600 outstanding companies, where it's list and Warner place number 10 in transportation and logistics category.
Derek J. Leathers: This honored award highlights Werner's quality, employee satisfaction, and industry leadership. Relative to our 2024 objectives, last quarter, we communicated three overarching priorities to generate earnings power and drive value creation in 2024 and beyond. They are driving growth in core business, driving operational excellence as a core competency, and driving capital efficiency. Relative to our first priority, driving growth and core business, top line improvement depends on time and pace of market inflection. In dedicated, we see increased pressure as the down cycle continues and other carriers seek shelter.
Derek J. Leathers: This honor award highlights Warner's quality employee satisfaction in an industry leadership.
Derek J. Leathers: Relative to our 2024 objectives last quarter, we communicated three overarching priorities to generate earnings power and drive value creation in 2024 and beyond they are driving growth in core business driving operational excellence is a core competency and driving capital efficiency.
Derek J. Leathers: Relative to our first priority driving growth in core business topline improvement depends on time and pace of market inflection in dedicated we see increased pressure as the downcycle continues another carrier seek shelter, we continue to see a strong dedicated pipeline of opportunities to first backfill isolated fleet reductions and then focus on that.
Derek J. Leathers: We continue to see a strong dedicated pipeline of opportunities to first backfill isolated fleet reductions and then focus on that growth. To achieve our long-term TTS range of 12 to 17% adjusted operating margin, we are executing on our cost savings plan, which is going well. We purposely set this as a long-term target knowing certain years could be exceptionally up or down, but most years would fall within the range. From an operational and cost basis perspective, Werner is in a much stronger position, and with increased demand, better rates, a stronger used equipment market, and further reining in of insurance costs per claim, we are confident we will achieve this and see operating leverage come through. However, in the current day, the freight environment remains very challenging to forecast.
Derek J. Leathers: Both.
Derek J. Leathers: To achieve our long term TTS range of 12% to 17% adjusted operating margin we were executing on our cost savings plan, which is going well, we purposely set this as a long term target <unk> in certain years could be exceptionally up or down but most years will fall within the range from an operational and cost basis perspective, Warner is in a much stronger.
Derek J. Leathers: Your position and with increased demand better rates, a stronger used equipment market and further reining in of insurance cost per claim we are confident we will achieve this and see operating leverage come through however in the current day the freight environment remains very challenging to forecast it.
Derek J. Leathers: If the market stays lower for longer, it may serve as a headwind to reach this goal by the end of 2024. Relative to our second priority, driving operational excellence as a core competency, we are maintaining a favorable safety record, advancing our technology strategy, and progressing our cost savings program. Transitioning to our Edge TMS platform is a multi-year journey, and we remain encouraged by the synergies and value of a single freight platform, enhancing our customers' experience and our visibility while providing additional opportunities to grow revenue and reduce costs. And finally, our third priority, driving capital efficiency. We had another strong quarter of operating cash flow. We continue to be intentional in our capital allocation. Net leverage, CapEx spend, and fleet age all remain low.
Derek J. Leathers: If the market stays lower for longer it may serve as a headwind to reach this goal by the end of 2024.
Derek J. Leathers: Relative to our second priority driving operational excellence is a core competency we are maintaining a favorable safety record advancing our technology strategy and progressing our cost savings program.
Derek J. Leathers: Transitioning to our edge DNS platform is a multi year journey and we remain encouraged by the synergies and value of a single freight platform enhancing our customers' experience and our visibility while providing additional opportunities to grow revenue and reduce cost and.
Derek J. Leathers: And finally, our third priority driving capital efficiency, we had another strong quarter of operating cash flow, we continue with intentionality and our capital allocation net leverage capex spend in fleet age all remain low despite lower used equipment values. We were on track with our expectations and continue to anticipate a greater pace of gains later in the year.
Derek J. Leathers: Despite lower used equipment values, we were on track with our expectations and continue to anticipate a greater pace of gains later in the year. You will hear more about these priorities on our quarterly calls going forward. Before passing it over to Chris to discuss our financial results for the quarter, I want to provide our current view of the market. Turning to slide seven, we expect a challenging freight market to continue through the second quarter and into the second half of 2024.
Derek J. Leathers: You'll hear more about these priorities on quarterly calls going forward.
Speaker Change: Before passing it over to Chris to discuss our financial results for the quarter I want to provide our current view of the market.
Speaker Change: Turning to slide seven we expect the challenging freight market to continue through second quarter and into the second half of 2024, while inventory levels are normalized and Destocking is largely behind us we havent seen signs of significant restocking attrition.
Derek J. Leathers: While inventory levels have normalized, and destocking is largely behind us, we haven't seen signs of significant restocking. Attrition is happening, but at a slower pace, and as a result, competitive pricing pressure remains. We experienced more seasonal freight trends in April, specifically better demand on the West Coast related to certain spring projects.
Chris C. Neil: Attrition is happening, but at a slower pace and as a result competitive pricing pressure remains.
Chris C. Neil: We've experienced more seasonal freight trends in April specifically better demand on the west coast related to certain spring projects.
Chris Wikoff: Recent isolated fleet losses and dedicated will put pressure on our full year fleet guidance. We perform well, and dedicated, continue to maintain a 93% customer retention rate. And we can see a pathway to truck growth with a more normal supply and demand environment, although our focus is first on backfilling losses while managing yield. The one-way operating environment remains challenging and led to a competitive early bid season with mixed results. We will continue to exercise pricing power. The environment and logistics are still very competitive, and margins will continue to be pressured.
Speaker Change: Recent isolated fleet losses, and dedicated will put pressure on our full year fleet guidance, we performed well in dedicated continue to maintain a 93% customer retention rate and we can see a pathway to truck growth with a more normal supply and demand environment. Although our focus is first on back filling losses, while managing yield.
Speaker Change: But one way operating environment remains challenging and led to a competitive early bid season with mixed results, we will continue to exercise pricing discipline.
Speaker Change: The environment in logistics, it's still very competitive and margins will continue to be pressure longer term our portfolio of customers. Our deep network of qualified carriers, our investment in knowledge and our operational improvement initiatives position us well for long term profitable growth in this segment with that let me turn it over to Chris to go through our first quarter results.
Chris Wikoff: Longer term, our portfolio of customers, our deep network of qualified carriers, our investment in technology, and our operational improvement initiatives position us well for long-term profitable growth in the sector. With that, I will turn it over to Chris to go through our first quarter results in more detail.
Chris C. Neil: More detail.
Chris Wikoff: Thank you, Derek. Let's continue on slide 9. First quarter revenues totaled $769 million, down 8% versus the prior year. Adjusted Operating Income was $18.6 million, and Adjusted Operating Margin was 2.4%. Down 68% and 450 basis points, respectively. Adjusted EPS of $0.14 was down $0.46, with over 95% of the variance driven by a softer used equipment market and lower gains, combined with rate pressure in one way and logistics. Turning to slide 10.
Chris C. Neil: Thank you Derek let's continue on slide nine.
Chris C. Neil: First quarter revenues totaled $769 million down 8% versus prior year adjusted.
Chris C. Neil: Adjusted operating income was $18 6 million and adjusted operating margin was two 4% down 68% and 450 basis points respectively.
Chris C. Neil: Adjusted EPS of 14 was down 46 cents with over 95% of the variance driven by a softer used equipment market and lower gains combined with rate pressure in one way and logistics.
Chris C. Neil: Turning to slide 10.
Chris Wikoff: Truckload Transportation Services' total revenue for the first quarter was $551 million, down 6%. However, revenue net of fuel surcharges fell 4% to $478 million. TTS Adjusted Operating Income was $22.7 million, down 58% versus the prior year, and Adjusted Operating Margin Net-a-Fuel was 4.7%, down 600 basis points. A decline in equipment gains drove nearly half of the TTS decline in operating income. We continue to see gains, albeit lower, and we are leaning into the expertise and capability of our national fleet sales operations.
Chris C. Neil: Truckload transportation services total revenue for the first quarter was $551 million down 6% revenues net of fuel surcharges fell 4% to $478 million.
Chris C. Neil: TTS adjusted operating income was $22 7 million down 58% versus prior year and adjusted operating margin net of fuel was four 7% down 600 basis points of decline in equipment gains drove nearly half of the TTS decline in operating income, we continue to see gains, albeit lower and we're leaning into.
Chris C. Neil: The expertise and capability of our National fleet sales operation during the quarter consolidated gains on sale of equipment came in line with our expectations totaling $3 6 million a decline of $14 8 million or down 80% from a tough comp last year.
Chris Wikoff: During the quarter, consolidated gains on the sale of equipment came in line with our expectations, totaling $3.6 million, a decline of $14.8 million, or down 80% from a tough comp last year. We are maintaining our view of second-half versus first-half improvement in the used equipment market, although values may be held down for longer. Net of fuel surcharges and equipment gains, TTS operating expenses declined modestly year over year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 2% versus prior year and a 7% smaller fleet size.
Chris C. Neil: We are maintaining our view of second half versus first half improvement in the used equipment market, although values may be held down for longer.
Chris C. Neil: Net fuel surcharges and equipment gains TTS operating expenses declined modestly year over year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 2% versus prior year, and a 7% smaller fleet size.
Chris Wikoff: One-way rate per total mile during the quarter decreased 5.1 percent. In terms of improvements in the quarter in various TTS expense categories, operating supplies and maintenance expense were down 5 million and 8 percent versus the prior year, and non-driver salaries, wages, and benefits were down 2 million or 3 percent. Driver pay was down, excluding fringe benefits. Benefit expense in the quarter increased nearly 2 million versus the prior year, driven by outsized health insurance costs in January that subsided later in the quarter.
Chris C. Neil: One way rate per total mile during the quarter decreased five 1% in terms of improvements in the quarter and various TTS expense categories operating supplies and maintenance expense was down $5 million, an 8% versus prior year and non driver salaries wages and benefits were down $2 million or 3%.
Chris C. Neil: Driver pay was down excluding fringe benefits benefit expense in the quarter increased nearly $2 million versus prior year, driven by outsized health insurance cost in January that subsided later in the quarter.
Chris Wikoff: Dedicated remains steady and durable, generating double-digit operating margins on a trailing 12-month basis, whereas One-way remains especially challenging. As Derek mentioned, achieving our long-term TTS operating margin range is a key priority, and we remain focused on producing higher operating margins, but achieving this goal by the end of the year will be more challenging given first quarter results. Turning to slide 11 to review our fleet metrics, the TTS average truck count was 7,935 during the quarter, down just over 7%.
Chris C. Neil: Dedicated remained steady and durable generating double digit operating margins on a trailing 12 month basis, whereas one way remains especially challenging as Derek mentioned, achieving our long term TTS operating margin range is a key priority and we remain focused on producing higher operating margins, but achieving this goal by end of the year will be more challenging.
Chris C. Neil: First quarter results.
Chris C. Neil: Turning to slide 11 to review our fleet metrics.
Chris C. Neil: TTS average truck count was 7935 during the quarter down just over 7%. We ended the quarter with the TTS fleet down, 2% sequentially and 8% year over year, our TTS revenue per truck per week net of fuel grew during the quarter by two 8% and has increased year over year 20 of the last 25.
Chris Wikoff: We ended the quarter with the TTS fleet down 2% sequentially and 8% year-over-year. However, our TTS revenue per truck per week, net of fuel, grew during the quarter by 2.8% and has increased year-over-year in 20 of the last 25 quarters. Within TTS, for the first quarter, dedicated revenue net of fuel was $301 million, down 3%. Dedicated revenue represented 64% of segment revenue, compared to 63% a year ago. Dedicated average trucks decreased 4% to 5,149 trucks. At quarter end, dedicated represented 65% of the TTS fleet.
Chris C. Neil: <unk> within.
Chris C. Neil: Within T T S for the first quarter dedicated revenue net of fuel was $301 million down 3% dedicated represented 64% of segment revenue compared to 63% a year ago.
Chris C. Neil: Dedicated average trucks decreased 4% to 5149 trucks at quarter end dedicated represented 65% of the TTS fleet.
Chris C. Neil: Dedicated revenue per truck per week increased one 3% year over year growing 24 of the last 25 quarters through all economic conditions.
Chris Wikoff: Dedicated revenue per truck per week increased 1.3% year-over-year, growing 24% in the last 25 quarters through all economic conditions. While our per-truck production is trending well, the impact from isolated fleet losses will continue into the second and third quarters as those reductions are fully realized. As we've said before, the opportunity pipeline in Dedicated remains strong, but competitive.
Chris C. Neil: While our per truck production is trending well the impact from isolated fleet losses will continue into second and third quarter as those reductions are fully realized as we've said before the opportunity pipeline in dedicated remains strong but competitive we are focused on winning with customers that value the reliability scale safety and service of our <unk>.
Chris Wikoff: We are focused on winning with customers that value the reliability, scale, safety, and service of our proven Dedicated model. Demand improvement will naturally expand existing fleets that contracted single-digit percentages over the last year, and with a tighter market, we are positioned well to further penetrate new verticals and other hard-to-serve freight opportunities. In our one-way business, for the first quarter, trucking revenue was $169 million, a decrease of 8% versus the prior year. Average truck count was down 13% to 2,786 trucks. Revenue per truck per week was up 5.6% year-over-year. The one-way bid season is well underway, with mixed results that are customer-specific and reflective of the competitive environment.
Chris C. Neil: Proven dedicated model.
Chris C. Neil: Demand improvement will naturally expand existing fleets that contracted single digit percentages over the last year and with the tighter market. We are positioned well to further penetrate new verticals and other hard to serve freight opportunities.
Chris C. Neil: And our one way business for the first quarter trucking revenue was $169 million a decrease of 8% versus prior year average truck count was down 13% to 2000 and 786 trucks.
Chris C. Neil: Revenue per truck per week was up five 6% year over year.
Chris C. Neil: One way bid season is well underway with mixed results that are customer specific and are reflective of the competitive environment.
Chris Wikoff: As we focus on the controllables, we are pleased with another quarter of production gains, achieving near similar total miles versus the prior year, but with 13% fewer trucks. We expect the favorable production trend to continue throughout the year, although year-to-year improvements will moderate. In addition, our power-only offering within the logistics segment continues to grow. In a tighter market with better rates, this combination of one-way production gains plus double-digit power-only volume growth translates to improved ROI.
Chris C. Neil: As we focus on the controllable we are pleased with another quarter of production gains achieving near similar total miles versus prior year, but with 13% fewer trucks, we expect a favorable production trend to continue throughout the year, although year over year improvements will moderate.
Chris C. Neil: In addition, our power only offering within our logistics segment continues to grow in a tighter market with better rates. This combination of one way production gains plus double digit power only volume growth translates to improved ROI and it provides more options for our one way customers, which we can leverage when the market turns.
Chris Wikoff: And it provides more options for our one-way customers, which we can leverage when the market turns. Our Baylor acquisition continues to maintain shipper brand loyalty, and in terms of our ECM acquisition, our Northeast density is proving valuable to cross-sell and expand business in the region with long-standing Werner customers.
Chris C. Neil: Our Baylor acquisition continues to maintain shipper brand loyalty and in terms of our ECM acquisition. Our northeast density is proving valuable to cross sell and expand business in the region with long standing Werner customers.
Chris Wikoff: Turning now to our logistics segment on slide 12, in the first quarter, logistics revenue declined 26 million, or 11%, representing 26% of total first quarter Werner revenues. Revenue and truckload revenue declined 13%, and volumes decreased 6%.
Chris C. Neil: Turning now to our logistics segment on slide 12.
Chris C. Neil: In the first quarter logistics revenue declined $26 million or 11%, representing 26% of total first quarter when our revenues.
Chris C. Neil: Revenue in truckload logistics declined 13% in volumes decreased 6%.
Chris Wikoff: Shipments declined sequentially from normal seasonality and due to our focus on revenue quality. However, as previously mentioned, our power-only solution again represented a growing portion of the truckload logistics volume in the quarter. Intermodal revenues, which make up approximately 12% of segment revenue, declined year-over-year due to a decrease in revenue per shipment, partially offset by an increase in shipment. However, Final Mile continued to show growth in the first quarter, reporting just under a 5% increase in revenue, despite a softer market for discretionary spending on big and bulky products. The logistics adjusted operating loss was $1.2 million in the first quarter.
Chris C. Neil: Shipments declined sequentially from normal seasonality and due to our focus on revenue quality as previously mentioned our power only solution again represented a growing portion of the truckload logistics volume in the quarter.
Chris C. Neil: Intermodal revenues, which make up approximately 12% of segment revenue declined year over year due to a decrease in revenue per shipment, partially offset by an increase in shipments.
Chris C. Neil: Anil mile continued to show growth in the first quarter reporting just under a 5% increase in revenue despite a softer market for discretionary spending on big and bulky products.
Chris C. Neil: Logistics adjusted operating loss was $1 2 million in the first quarter adjusted operating margin was near breakeven reporting a small loss of <unk>, 6% down 340 basis points year over year, and 190 basis points sequentially driven by rate and gross margin compression.
Chris Wikoff: Adjusted operating margin was near break-even, reporting a small loss of 0.6%, down 340 basis points year-over-year and 190 basis points sequentially, driven by rate and gross margin compression. We expect brokerage margins will remain challenged in the near term, with operating margins expanding later in the year through our cost savings and integration success. The team was able to improve revenue quality as the quarter progressed, resulting in gross margins that were better in February and March.
Chris C. Neil: We expect brokerage margins will remain challenged in the near term with operating margins expanding later in the year through our cost savings and integration success. The team was able to improve revenue quality as the quarter progressed, resulting in gross margins that were better in February and March during.
Chris Wikoff: During the quarter, we further integrated the READ acquisition, along with completing certain technological advancements in Edge TMS and implementation of improved freight payment and audit processes. We are seeing the fruits of these initiatives, and this will aid in sustainable margin improvement in coming quarters. Our strong and growing brokerage refrigerated services should also position us to capitalize on improving seasonal trends related to produce and food and beverage.
Chris C. Neil: During the quarter, we further integrated the read acquisition, along with completing certain technology advancements in etch Tms and implementation of improved freight payment and audit processes.
Chris C. Neil: We are seeing the fruit from these initiatives and this will aid in sustainable margin improvement in coming quarters, our strong and growing brokerage refrigerated services should also position us to capitalize on improving seasonal trends related to produce and food and beverage.
Chris Wikoff: Overall, we remain encouraged about the mid- and long-term benefits of our logistics business, given a strong customer portfolio and growing contract business, a growing power-only solution, advancing our technology strategy, and the long-term opportunity for growing final mile and intermodal. On slide 13, we provide an update on our cost savings program. Executing well on our cost savings program remains key to expanding margin and earnings in 2024 and beyond, given a freight and used equipment market that will continue to be challenging.
Chris C. Neil: Overall, we remain encouraged about the mid and long term benefits of our logistics business, given a strong customer portfolio and growing contract business.
Chris C. Neil: Growing power only solution advancing our technology strategy and a long term opportunity for growing final mile and intermodal.
Chris C. Neil: On slide 13, we provide an update on our cost savings program.
Chris C. Neil: Executing well on our cost savings program remains key to expanding margin and earnings in 2024 and beyond.
Chris C. Neil: Given our freight and used equipment market that will continue to be challenging.
Chris Wikoff: In 2024, we continue to expect to capture over $40 million of savings that are largely structural and sustainable. We have realized $12 million of savings through the first quarter and have a clear line of sight on the rest of the program. Let's look at our cash flow on slide 14. We ended the first quarter with $60 million in cash and cash equivalents. Operating cash flow remained strong at $89 million for the quarter, or 11.5% of total revenue.
Chris C. Neil: In 2024, we continue to expect to capture over $40 million of savings that are largely structural and sustainable we have realized $12 million of savings through the first quarter and have a clear line of sight on the rest of the program.
Chris C. Neil: Let's look at our cash flow on slide 14.
Chris C. Neil: We ended the first quarter was 60 million in cash and cash equivalents operating cash flow remained strong at $89 million for the quarter or 11, 5% of total revenue.
Chris Wikoff: Moving to slide 15, net capex in the first quarter was $19 million, or 2.5% of revenue, down $84 million, or 81% year-over-year. Free cash flow for the quarter was $70 million, or 9% of total revenues, up 130 basis points year-over-year. Our total liquidity at quarter end was very strong at $619 million, including cash and availability on our revolver.
Chris C. Neil: Net capex in the first quarter was $19 million or two 5% of revenue down $84 million or 81% year over year.
Chris C. Neil: Free cash flow for the quarter was $70 million or 9% of total revenues up 130 basis points year over year.
Chris C. Neil: Our total liquidity at quarter end was very strong at $619 million, including cash and availability on our revolver.
Chris C. Neil: Moving to slide 15.
Chris Wikoff: We entered the quarter with $598 million in debt, down $51 million, or 8% sequentially, and down nearly $94 million, or 14% compared to a year earlier. However, net debt to EBITDA was steady at 1.2 times. We are committed to maintaining a strong balance sheet and access to capital to fund growth and investments that are accretive to earnings. On slide 16, let's recap our capital allocation priorities and strategies. We will continue to prioritize strategic reinvestment in the business and returning capital to shareholders. We spent $6.5 million on share repurchases during the quarter and will remain opportunistic.
Chris C. Neil: We ended the quarter with $598 million in debt down $51 million or 8% sequentially and down nearly $94 million or 14% compared to a year earlier net debt to EBITDA was steady at one two times.
Chris C. Neil: We are committed to maintaining a strong balance sheet and access to capital to fund growth and investments that are accretive to earnings.
Chris C. Neil: On slide 16, let's recap our capital allocation priorities and strategy.
Chris C. Neil: We'll continue to prioritize strategic reinvestment in the business and returning capital to shareholders. We spent six naff million on share repurchases during the quarter and will remain opportunistic rig.
Chris Wikoff: Regarding capital expenditures, 2023 was an elevated CapEx year, reflecting lower year-to-year gains and a greater pace of reinvestment in the business. For 2024, we are expecting net capex to be between $250 and $300 million, with 80% going towards trucks and trailing equipment and 20% going towards technology, terminals, and our school network. Next on slide 17 is a review of our guidance for the year. We are lowering our full-year fleet guidance from down 3% to flat to down 6% to down 3%.
Chris C. Neil: Regarding capital expenditures 2023 was an elevated capex year, reflecting lower year over year gains in a greater pace of reinvestment in the business for 2024, we are expecting net capex to be between 250, and $300 million with 80% towards trucks and trailing equipment and 20% towards technology terminals and our school network.
Chris C. Neil: Next on Slide 17 is a review of our guidance for the year.
Chris C. Neil: We are lowering our full year fleet guidance from down 3% to flat to down 6% to down 3% we.
Chris Wikoff: We are down 2% year-to-date, with visibility to additional reductions from known isolated losses in the debt account. Although greater than anticipated, we are not surprised by a more competitive, dedicated environment through this prolonged week market. We are seeing new business wins to assist with backfilling losses, and we see potential for growth and dedicated in the second half, but we recognize the challenge and believe it is reasonable to lower fleet size expectations at this time while we focus on maintaining price and margin discipline across our portfolio.
Chris C. Neil: We are down 2% year to date with visibility to additional reductions from known isolated losses and dedicated although greater than anticipated. We are not surprised by a more competitive dedicated environment through this prolonged weak market. We are seeing new business wins to assist with back filling losses, and we see potential for growth in dedicated in the second half, but we recognize the <unk>.
Chris C. Neil: And believe it is reasonable to lower fleet size expectations at this time, while we focus on maintaining price and margin discipline across our portfolio.
Chris Wikoff: Net capex is being lowered by $10 million on either end to a range of $250 to $300 million. Dedicated revenue per truck grew year-over-year and is expected to remain within our full-year guidance range of zero to three percent. One-way truckload revenue per total mile for the first quarter decreased 5.1% and is within our guidance range for the first half of the year. Equipment gains were $3.6 million in the first quarter, consistent with our expectations.
Chris C. Neil: Net capex is being lowered by $10 million on either end to a range of $250 million to $300 million.
Chris C. Neil: Dedicated revenue per truck grew year over year and is expected to remain within our full year guidance range of zero to 3%.
Chris C. Neil: One way truckload revenue per total mile for first quarter decreased five 1% and is within our guidance range for the first half of the year.
Chris C. Neil: Equipment gains were $3 6 million in the first quarter consistent with our expectations.
Chris Wikoff: We expect similar gains in the second quarter but now anticipate lower equipment values to linger into the second half. As a result, we are lowering the top end of our range and now expect equipment gains in the range of $10 to $20 million, down from $10 to $30 million previously. While our tax rate in the first quarter was 32.9% due to certain one-time discrete items, we expect this... to level out throughout the year.
Chris C. Neil: We expect similar gains in the second quarter, but now anticipate lower equipment values to linger into the second half as a result, we are lowering the top end of our range and now expect equipment gains in the range of $10 million to $20 million down from $10 million to $30 million previously.
Chris C. Neil: While our tax rate in the first quarter was 32, 9% due to certain one time discrete items, we expect this.
Chris C. Neil: To level out throughout the year, our full year guidance range is now 24, 5% to 25, 5%.
Chris C. Neil: The average age of our truck and trailer fleet in the first quarter was $2, one and five years, respectively compared to 2.1 and $4 nine years at the end of 2023, I'll now turn it back to Derek.
Chris Wikoff: Our full-year guidance range is now 24.5% to 25.5%. The average age of our truck and trailer fleet in the first quarter was 2.1 and 5 years, respectively, compared to 2.1 and 4.9 years at the end of 2023. I'll now turn it back to Derek.
Derek J. Leathers: Thank you, Chris. Despite the challenging macro backdrop, our leadership team and nearly 14,000 talented Werner team members stayed the course by executing our strategy. They remain focused on upholding the Werner brand and reputation, making safety our top priority, and providing superior service to our highly valued customers. We are actively taking steps to improve our operations and advance our competitive strength in the marketplace by investing in technology, reducing costs, and optimizing cash flow.
Derek: Thank you, Chris despite the challenging macro backdrop, our leadership team and nearly 14000 talented Warner team members stayed the course by executing our strategy. They remained focused on upholding the Warner brand and reputation, making safety, our top priority and providing superior service to our highly valued customers.
Derek: We're actively taking steps to improve our operations and advance our competitive strength in the marketplace by investing in technology, reducing costs and optimizing cash flow.
Derek J. Leathers: While times have been tough, we're cycle-tested and built to last. Our historical results demonstrate our ability to generate earnings power as demand accelerates, and the proactive actions we have taken position Werner to capitalize on opportunities as they present themselves in the future. With that, let us open it up to questions. We will now begin.
Derek: Well times have been tough where cycle tested and built to last our historical results demonstrate our ability to generate earnings power as demand accelerates and the proactive actions, we have taken a position Warner to capitalize on opportunities as they present themselves in the future.
Speaker Change: With that let us open it up for questions.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. To allow for as many callers as possible to ask questions, we ask you to limit yourself to one question and one follow-up. This call will end at 5 p.m. Central Daylight Time following the company's closing remarks. At this time, we will pause momentarily to assemble our roster. The first question comes from Amit Mehrotra with Deutsche Bank. Please go ahead.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
Amit Singh Mehrotra: Oh, thanks. Hey, everyone. I appreciate the question. Derek, I have a couple questions.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: To allow for as many callers as possible to ask questions. We ask you limit yourself to one question and one follow up this call will end at five P. M. Central daylight time following the company's closing remarks at this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Amit Mehrotra with Deutsche Bank. Please go ahead.
Amit Singh Mehrotra: First and foremost, I know you're a student of supply, and historically, we've talked a lot about supply. And I know that's been stubbornly persistent in the market. I'm wondering if you could just, you know, share your view on kind of where the latest on your view on supply is going to be over the next 12 months. And then, obviously, on the bid season side, it feels like shippers are trying to take one last big bite of the apple. Wondering how you're navigating that, and, you know. Thinking about still keeping the optionality to the upside while obviously navigating utilization of the one-way fleet. Thank you very much.
Amit Singh Mehrotra: Well thanks, everyone I appreciate the question Derrick I guess my couple of questions first and foremost.
Amit Singh Mehrotra: I know, you're a student of supply and historically, you've talked a lot about supply and I know that's been stubbornly persistent in the market I'm wondering if you could just you know.
Amit Singh Mehrotra: Share your view on kind of where the latest.
Amit Singh Mehrotra: On your view on supply is going to be over the next 12 months and then obviously on the <unk>.
Amit Singh Mehrotra: On the on the bid season side it feels like we.
Amit Singh Mehrotra: Shippers are trying to take one last big bite at the Apple I'm wondering how you're navigating that and you know.
Amit Singh Mehrotra: Thinking about still keeping the optionality to the upside while obviously navigating that utilization of the one way fleet. Thank you very much.
Derek J. Leathers: Yeah, thank you, Amit. Thanks for the question. You know, on the supply side, kind of like I indicated last quarter, it's tough to predict any turn at this point. I will tell you that there are some signs of life that are encouraging, but clearly, we've still got some work to do to get this market back in balance. We did see, and we referenced some spring project activity that's sort of new and encouraging.
Speaker Change: Yeah. Thank you Matt. Thanks for the question, they're almost supply side kind of like I indicated last quarter, it's tough to predict any turn at this point.
Speaker Change: We'll tell you that there are some signs of life that are encouraging but clearly we've still got some work to do to get this market back in balance. So we did see.
Amit Singh Mehrotra: We referenced some spring project activity, that's sort of new.
Amit Singh Mehrotra: And encouraging.
Derek J. Leathers: We've seen an uptick in demand as we've kind of got ourselves into Q2, but at the end of the day, we do need capacity to continue to come out of the market. I think we're closer to equilibrium than we've been in a long time. We can see that in a variety of ways through load bookings, customer interactions, and even customer conversations as of late. And so it's just going to take a little bit longer to play out.
Amit Singh Mehrotra: We've seen an uptick in demand.
Amit Singh Mehrotra: We've kind of got ourselves into Q2.
Amit Singh Mehrotra: But at the end of the day, we do need for capacity to continue to come out of the market.
Amit Singh Mehrotra: I think we're closer to equilibrium than we've been in a long time, we can see that in a variety of ways.
Amit Singh Mehrotra: But through load bookings and customer interactions and even customer conversations as of late.
Amit Singh Mehrotra: And so it's just going to take a little bit longer to play out clearly this has been longer than any of us anticipated.
Speaker Change: And extremely frustrating.
Derek J. Leathers: Clearly, this has been longer than any of us anticipated and extremely frustrating. As it relates to the second part of your question, yes, there's clearly a group of customers out there that will always try to take the last bite of the apple, as you indicated.
Speaker Change: As it relates to the second part of your question. Yes. There is clearly a group of customers out there that will always try to take a.
Speaker Change: The last part of the Apple as you indicated.
Derek J. Leathers: I would tell you our focus is really staying disciplined to what we believe, making sure rates are reinvestable, meaning that we can turn around and make a margin that allows us to invest back into the fleet. We're especially going to be disciplined at this point in the cycle, knowing that the end is closer than it's been at any point prior. And so at times, that's going to lead to some frictional conversations, but we've got to stay true to who we are and what our shareholders deserve.
Speaker Change: I would tell you our focus is really staying disciplined to what we believe making sure rates are re investable, meaning that we can we can turn around and make a margin that allows us to invest back into the fleet.
Speaker Change: We're especially going to be disciplined at this point in the cycle knowing that the the the Andrews.
Speaker Change: And is closer than it's been at any point prior and so at times, that's going to lead to some frictional conversations, but we've got to stay true to who we are and what our shareholders deserve and that includes a very disciplined cost focused approach.
Derek J. Leathers: And that includes a very disciplined, cost-focused approach. It includes making sure that we enter into agreements that we feel as though we can honor. And that's why we've indicated the possibility of some further attrition before things get better within our own fleet. We'll see how that plays out. The pipeline is strong, both dedicated, and, frankly, has been encouraging as of late. But the pricing environment is still competitive as people are desperate to find safe havens for their assets.
Speaker Change: That includes making sure that the agreements we enter into that we feel as though we can we can you know honor.
Speaker Change: And that's why we've indicated the possibility of some further attrition of before things get better within our own fleet we'll.
Speaker Change: We'll see how that plays out the pipeline is strong both in dedicated and frankly in one way it has been encouraging as of late.
Speaker Change: But the pricing environment is still competitive as people are desperate to find safe havens for their for their assets.
Unknown Attendee: Unknown Attendee Yeah, and then Chris, I mean, obviously, the first quarter of the OR is typically the weakest, and you have weather challenges. Do we see a pickup in the OR as we progress to 2Q? I certainly hope so. But obviously, it's a different, difficult market. I'm wondering if you could get your latest thoughts on that.
Speaker Change: And then and then Chris I mean does he or I mean, obviously the first quarter of the ore is typically the weakest and you had weather challenges do we see a pickup in the O R. As we progressed through two key I certainly hope so, but obviously, it's a different difficult market, but I'm wondering get your latest thoughts on that.
Chris Wikoff: Yeah, sure, Amit. So yeah, we should see improvement, you know, as we go forward and focus on our long-term strategy that will continue to improve from here.
Chris C. Neil: Yes sure Matt.
Chris C. Neil: <unk>.
Chris C. Neil: So yes, we should have improvement.
Chris C. Neil: You know as we go forward.
Chris C. Neil: Hmm.
Chris C. Neil: You know that the our long long term target continues to be.
Chris C. Neil: In TTS a 12.
Chris C. Neil: 12% to 17%.
Chris C. Neil: But that's going to take some time to get there.
Chris C. Neil: But we do expect with.
Chris C. Neil: With our continued.
Chris C. Neil: Program.
Chris C. Neil: Our cost savings program.
Chris C. Neil:
Chris C. Neil: And continuing to Hum.
Chris C. Neil: Focus on our long term strategy that that will continue to improve from here or would you.
Derek J. Leathers: I would just add, Amit, that the one way to think about it is, you know, each month of the quarter, the OR improved, and we saw margin expand. We obviously are going to work our tails off to keep that trend going forward. We can't control the macro, but what we can control is what we do inside these walls, and the team is committed to that. Execution at the Highest Possible Level.
Chris C. Neil: Just admit that.
Speaker Change: One way to think about it as you know each month of the quarter, the or improved and we saw margin expand.
Speaker Change: Obviously, youre going to work our tails off to keep that trend going forward.
Speaker Change: We can't control the macro but what we can't control what we do inside these walls and the team is committed.
Speaker Change: Execution at the highest possible level.
Unknown Attendee: Very good. Thank you very much, Derek. Chris, I appreciate it. The next question is from Jason Seidel with T.D. Cowan. Please go ahead. Hey, thank you, operator.
Speaker Change: Very good thank you very much Chris I appreciate it.
Operator: The next question is from Jason Seidel with T.D. Cowan.
Speaker Change: The next question is from Jason Seidl with TD Cowen. Please go ahead hey, thank.
Jason H. Seidl: Please go ahead. Hey, thank you, operator. Hey, Derek. Hey, Chris and team. Just a couple quick ones from me. Notice the nice productivity gains in miles per truck per week. Just curious, did that result in any big changes in your...
Jason Seidl: Thank you, operator, Hey, Derek Hey, Chris and team.
Jason Seidl: Just a couple quick ones from me.
Jason Seidl: Noticed the nice productivity gains in miles per truck per week. Just curious did that result in any big mix shift in your business.
Derek J. Leathers: Yeah, Jason, I'll take that. I don't know that I would call it a large mix shift, but clearly, it's intentional. The shift that's taking place is intentional. In order to lower our cost to serve, we're leaning in further and further to things that we do very well and that we think are particular to us. You know, we have a heavy focus on Mexico's cross border, that links the whole lens itself to better productivity.
Chris C. Neil: Yeah, Jason I'll take that I, I don't know that I would call. It a large mix shift, but clearly it's intentional.
Speaker Change: Shift that's taking place is intentional in order to be to lower our cost to serve where lean in further and further to things that we do very well and that we pick a particular.
Speaker Change: To us.
Speaker Change: You know we have a heavy focus on Mexico cross border that link to all lends itself to a better productivity. We've been really aggressively further engineering our own assets, so that they're operating in more and more repetitive kind of repeatable lanes.
Derek J. Leathers: We've been really aggressively further engineering our own assets so that they're operating in more and more repetitive, kind of repeatable lanes where we can extract better productivity, both for our drivers, but also high service levels for our customers. So there's a lot of intentionality about it.
Speaker Change: Where we can extract better productivity both for our drivers, but also our high service levels for our customers.
Speaker Change: There's a lot of intentionality about it some of the tech that we've been building and working on is helping us to be more selective now it's tough to do that in a freight backdrop like the one we have right now, but nonetheless, it is producing increased utilization and that's something that we think we can hold as we go forward the comps will get tougher as we get into the.
Derek J. Leathers: Some of the tech that we've been building and working on is helping us to be more selective. Now, it's tough to do that in a freight backdrop like the one we have right now, but nonetheless, it is producing increased utilization. And that's something that we think we can hold as we go forward. The comps will get tougher as we get into the back half, because you started to see those gains taking place in the back half of 23, but it's exciting.
Speaker Change: Back half because you're starting to see those games, taking place in the back half of 'twenty three.
Speaker Change: But it's exciting and I think it really shows what utilizing our assets specifically from what they're good at.
Speaker Change: And then supplementing it with power only where that's a better solution for our customer can really result in and Thats really where the operating leverage comes from in an up cycle and our ability to then utilize that denser more high velocity network at a higher rate per mile to produce upside in an up cycle.
Derek J. Leathers: I think it really shows what utilizing our assets specifically for what they're good at and then supplementing it with power only where that's a better solution for our customers can really result in. And that's really where the operating leverage comes from in an up cycle and our ability to then utilize that denser, more high-velocity network at a higher rate per mile to produce upside in an up cycle.
Speaker Change: Well that makes sense I guess I'll use my follow up on the comments on unused equipment. Chris I think you mentioned there is expectation for improvement in the back half of the year is that just that you guys plan to sell more.
Chris C. Neil: That pricing is going to improve and if it is on the pricing side I guess, what gives you the confidence in that is that both for.
Chris C. Neil: Both trucks and trailers.
Unknown Attendee: Yeah, we do expect some improvement in the values as we go through the year. I think it's going to be, you know, modest improvement as we go. We are being mindful of equipment and trying to maximize what we can, where it's appropriate, you know, leverage our advantage in having a national... Unknown Attendee, Chris Neil, Unknown Attendee, Chris Neil, Unknown Attendee, Unknown Attendee, Yeah, the only thing I would add is that, you know, all
Chris C. Neil: Yes, we do expect some <unk>.
Chris C. Neil: Improvement in the values as we go through the year I think it's going to be you know modest improvement as we go through we are being mindful of of equipment and trying to maximize what we can where it's appropriate leverage R. R.
Chris C. Neil: Our advantage in having a national.
Chris C. Neil: Our fleet sales network and operation.
Chris C. Neil: So weaning into that to maximize the gains where possible but.
Chris C. Neil: Really we're just looking for the market to improve and it's difficult to say exact timing of that.
Chris C. Neil: But we do look for improvement.
Unknown Attendee: Yeah, the only thing I would add is that all of the public data that's out there where folks that do this for a living also lend their forecast to the same bend as our internal view. And as it relates to the follow-up question that often comes up is that with all of the carriers going out of business, doesn't that put pressure on used? And while it does put pressure on used in the categories that they would be selling or be placing into the market, you know, we're talking about near new or still under warranty higher value equipment that holds up better and really plays well into the pre-buy as people start to think about those that are secondary buyers to begin with needing to refresh their fleet and start that work today. There are a lot of regulatory issues coming at us in trucking, and folks getting their hands on a much fresher fleet, we believe starts taking place later this year.
Speaker Change: Yeah. The only thing I would add is that you all all of the public data. That's out there were folks that do this for a living also lend their forecast due to the same vendors is our internal view.
Speaker Change:
Speaker Change: And as it relates to the follow up question that often comes is that with all of the carriers going out of business doesn't that put pressure on used and while it does put pressure on used in the categories that they would be selling or be placing into the market. We're talking about near new or still under warranty a higher value of equipment that holds up better and really plays well.
Chris C. Neil: And to the pre buy as people start to think about that goes that are secondary buyers to begin with we needed to refresh their fleet and start that work today.
Chris C. Neil: There is a lot of regulatory issues coming at us in trucking and getting.
Chris C. Neil: Folks getting their hands on.
Chris C. Neil: <unk>.
Chris C. Neil: A much fresher fleet, we believe starts taking place later this year.
Speaker Change: Makes sense appreciate the color on time as always.
Speaker Change: Thank you.
Operator: The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.
Chris C. Neil: The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.
Ravi Shanker: So just on the cost side, obviously the structural cost actions are notable and most welcome, but I think a lot of the transportation companies basically decided to not get super aggressive with responding to the down cycle this time because of all the struggles with bringing resources back post-pandemic.
Ravi Shanker: Thanks, Good afternoon.
Ravi Shanker: So just on the on the cost side all of the see the structural cost actions or are notable in and most welcome but I think a lot of the transportation company basically decided to not get super aggressive with responding to the down cycle. This time because of all the struggles with bringing resources back post pandemic, but just given.
Ravi Shanker: How long the down cycle has lasted and how deep its Ben.
Ravi Shanker: Is it time do you think that maybe some of the the range a little bit more of course, some tactical cost actions as well or do you think that would be coming at the wrong time does it but it's like Netflix.
Derek J. Leathers: Yeah, Ravi, I'll take that. First off, I will tell you, I think our ability to rebound, so regardless of where the fleet's at in any given moment, our ability to rebound from that point is advantaged over others with our vertically integrated school network, and so we do believe that we have some elasticity in the fleet that puts us at a competitive advantage. So I'll start with that. That also, therefore, gives us confidence to pull back where we think pulling back is the right decision and really keep that focus on pricing disciplined as we enter the very late stages of this particular cycle.
Speaker Change: Yeah, Ravi I'll take that.
Ravi Shanker: First off I will tell you I think our ability to rebound so regardless of where the fleets added at any given moment, our ability to rebound from that point has advantages over others with our vertically integrated school network and so we do believe that we have some elasticity to the fleet that puts us at a competitive advantage. So I'll start with that that also therefore.
Ravi Shanker: It gives us confidence to pull back where we think pulling back is the right decision.
Ravi Shanker: And really keep that focus on pricing discipline.
Ravi Shanker: As we enter the very late stages of this particular cycle.
Derek J. Leathers: As it relates to cutting back too far, I don't think that's where we are. I think we're prudently trimming where it makes sense. We're eliminating costs that, frankly, we can live without, but it is becoming increasingly difficult to come by incremental cost savings without doing damage to long-term strategic initiatives at Werner, and we're simply not going to do that. This is a long game. We're going to be in this for this cycle and several more, and we're preparing this ship for kind of those future seas, not the ones we're in today.
Ravi Shanker: As it relates to <unk>.
Ravi Shanker: Cutting back too far I don't think that's where we're at I think we're prudently trimming where it makes sense we're eliminating.
Ravi Shanker: <unk> costs that frankly, we can live without.
Ravi Shanker: But there, but it is tougher and tougher to come by incremental cost savings without doing damage to long term strategic initiatives at Warner and we're simply not going to do that this is a long game, we're going to be in this for this cycle and several more.
Ravi Shanker: And we're preparing the ship for kind of those future season, not the ones. We're in today I'm really excited about is the turn takes place our ability for upside operating leverage both in dedicated and one way as.
Derek J. Leathers: I'm really excited about, as the turn takes place, our ability for upside operating leverage, both in dedicated and one-way, as well as now a much larger logistics division to be able to participate both via power only as well as transactional brokerage and final miles. The way the table is set, we feel comfortable with it. Clearly, we need some support from the macro, but as that support comes, our ability to respond to it is, I think, in a better position than it was in the last upside cycle.
Ravi Shanker: As well as now a much larger logistics division to be able to participate both via power only as well as transactional brokerage intermodal and final mile. So the way the table is set we feel comfortable with.
Ravi Shanker: Clearly, we need some support from the macro but as that support comes our ability to respond to it I think is in a better position than even it was in the last up cycle.
Chris Wikoff: Unknown Speaker That's really helpful. And maybe as a follow-up, I think you mentioned something about reining in insurance costs. Is that just, again, tactically on the margins? Or are you guys coming up with ways to significantly pull that down? Because we think that's going to be a meaningful risk to the industry in the coming years.
Speaker Change: Understood that's really helpful and maybe as a follow up you had mentioned something about reining in insurance costs kind of is that just a again directly on the margins or are you guys coming up with ways to significantly pull that down because we think that's going to be a meaningful to the rest of the industry in the coming years.
Chris Wikoff: Yeah, this is Chris. You know, thanks for the question on that. So, you know, the quarter was back to a bit of elevated insurance costs overall, more representative of the first half of last year, not necessarily some of those lower trends that we were seeing in the second half of last year. But again, we still view this as a cost per claim issue, not so much a frequency issue, and certainly doesn't reflect our continued trend and record setting in our safety metrics.
Chris C. Neil: Yes. This is Chris.
Chris C. Neil: Thanks for the question on that so you know the quarter was back to a bit of elevated insurance costs overall more representative of the first half of last year not necessarily some of those lower trends that we're seeing.
Chris C. Neil: In the second half of last year, but again, we still view this as a cost per claim issue not not so much a.
Chris C. Neil: A.
Chris C. Neil: A frequency issue and and certainly doesn't reflect our continued trend and record setting in our safety metrics. We communicated last year that we had a 19 year low in our D O T preventable accidents per million rating.
Chris Wikoff: We communicated last year that we had a 19-year low in our DOT preventable accidents per million rating. And then for the first quarter, in comparison to other first quarters, we hit a 20-year low. So, you know, we continued to see very positive safety metrics. Last year, we had a low single-digit increase in the second half of the year, so that's not really impactful. You know, this is more of a cost per claim issue, and we anticipate that as we continue to focus on safety and have a very low and positive safety record, that that will come through more sustainably in insurance expense.
Chris C. Neil: And then for the first quarter.
Chris C. Neil: In comparison to other first quarters, we hit a 20 year low so we continued to see very positive safety metrics.
Chris C. Neil: Last year, we from a premium perspective, we had a low single digit increase in the second half of the year. So that's not really impactful. It you know this is more of a of a cost for claim issue and we anticipate that as we continue to focus.
Chris C. Neil: Our focus on safety and have a.
Chris C. Neil: A very low and positive safety record that that will come through a more sustainably in the insurance expense line.
Speaker Change: Sounds good thank you.
Speaker Change: Thank you Ravi.
Operator: The next question is from Scott Group with Wolf Research. Please go ahead.
Speaker Change: The next question is from Scott Group with Wolfe Research. Please go ahead.
Speaker Change: Okay.
Scott H. Group: Hey, thanks. Good afternoon.
Scott H. Group: Hey, Thanks, good afternoon, so Derrick.
Scott H. Group: The fleet guidance came down a bunch of the Capex guidance barely budged and any thoughts there and then I'm sure you listen to the night call last week and the discussion around mid cycle margins higher highs lower lows I'm. Just curious how you think about that in mid cycle, just given the starting point for margins being.
Scott H. Group: So, Derek, the fleet guidance came down a bunch. The CAPEX guidance barely budged, and any thoughts there? And then I'm sure you listened to the night call last week and the discussion around mid-cycle margins, higher highs, lower lows. I'm just curious how you think about that in mid-cycle, just given the starting point for margins. So I'm asking that for you guys, I'm not asking for your opinion. I'm nice.
Speaker Change: Some of them, obviously not for you guys.
Speaker Change: Passenger opinion on Knight.
Derek J. Leathers: Well, thank you for that, Scott. I appreciate it.
Speaker Change: Well, thank you for that Scott I appreciate it.
Derek J. Leathers: Look, I do think this cycle is perhaps once-in-a-lifetime. We'll see as time plays out. The COVID highs were higher than any previous upcycle. Clearly, the lows have been lower and longer than anything we've endured.
Speaker Change: Yeah look I do think this cycle is perhaps.
Speaker Change: Perhaps a once in a lifetime, we'll see as time plays out the cobot highs were higher than any previous up cycles, clearly the loans have been lower and longer than anything we've endured.
Derek J. Leathers: We have reiterated affirmatively our long-term guidance relative to TTS margins, and that's not without significant introspection. We believe that the strategy we're putting forth and the execution that we have in place will allow us to return there, although the timing of that return is certainly delayed as this market has lingered lower for longer. I suspect as we go forward with this next up cycle, it is also going to be somewhat unique, not as much as COVID, but unique in that it's combined with significant regulatory headwinds and a significant environmental overlay that's going to cause capital outlays for carriers to be greater than ever before.
Speaker Change: We have reiterated.
Scott H. Group: Permanently our long term guidance relative to TTS margins.
Scott H. Group: And that's not without significant introspection.
Scott H. Group: We believe that with this strategy, we're putting forth and the execution that we have in place will allow us to return there. Although the timing of that return is certainly delayed as this market has lingered lower for longer.
Scott H. Group: Hugh.
Scott H. Group: I suspect as we go forward with this new website. This next up cycle. It is going to be also somewhat unique not not as much as COVID-19, but unique in that it's combined with significant regulatory headwinds significant environmental.
Scott H. Group: Overlay that's going to cause.
Scott H. Group: Capital outlays for carriers to be greater than ever before and that's why we've kind of made our move early to freshen, the fleet and position ourselves.
Derek J. Leathers: That's why we kind of made our move early to freshen up the fleet and position ourselves to be in a really good position as that plays out. I also suspect there are a whole lot of people that have been taught some lessons through the pain of this cycle and that there may be more reluctance for capacity to come back in this next time around, but only time will tell.
Scott H. Group: To be in a really good position as that plays out.
Scott H. Group: I also suspect there is a whole lot of people that have been done some lessons through the pain of this cycle.
Scott H. Group: There may be more reluctance for for capacity to come back in this next time around but only time will tell in the interim our job is to focus relentlessly on getting back to that long term margin guidance guidance range in TTS and as it relates to comparing to prior cycles. When I look at our portfolio, which is significantly different now with.
Derek J. Leathers: In the interim, our job is to focus relentlessly on getting back to that long-term margin guidance range in TTS. And as it relates to comparing the prior cycles, when I look at our portfolio, it's just significantly different now with the acquisition of REIT TMS, the size of logistics as a percentage of the portfolio, and the amount of engineering we've done within one way to produce the increased miles per truck that we've been talking about.
Scott H. Group: The acquisition of <unk>, the size of logistics as a as a percentage of the portfolio the amount of engineering, we've done within one way to produce than.
Scott H. Group: The increased miles per truck that we've been talking about and then Mexico near shoring plays directly into our portfolio very nicely. So we're still bullish on on what it looks like longer term.
Derek J. Leathers: And then Mexico nearshoring plays directly into our portfolio very nicely. So we're still bullish on what it looks like longer term. And that's why we're trying to take a longer term view with how we build this portfolio out and get ready and prepared for the long term when it happens.
Scott H. Group: And that's why we're trying to take a longer term view with how we build this portfolio out and get ready and prepared for the turn when it happens.
Scott H. Group: Okay, um, and then I know, did you have a thought on the CapEx relative to the fleet guy, and then I just, yeah, go ahead.
Speaker Change: Okay, and then did.
Speaker Change: If you had a thought on the capex relative to the fleet.
Speaker Change: No.
Speaker Change: Yes got it.
Derek J. Leathers: I apologize, yeah, on the CapEx part of the equation, I think what you're seeing there is one, some carefulness and thoughtfulness on our part of what the back half could look like. We talked about the opportunity, the fleet guidance range is for the first half, whereas CapEx is for the whole year. And so we talked about the reality that we do have a strong dedicated pipeline for the back half of the year.
Speaker Change: I apologize, yes, capex part of the equation.
Speaker Change: I think what Youre seeing there is one some carefulness some thoughtfulness on our part of what the back half could look like we talked about the opportunity the fleet guidance.
Speaker Change: Range is for the first half.
Speaker Change: Whereas capex is for the whole year.
Speaker Change: And so we talked about.
Speaker Change: We talked about the reality that we do have a strong dedicated pipeline.
Speaker Change: For the.
Derek J. Leathers: That continues to look encouraging, and so we want to be prepared to do that. And it's really just trying to be thoughtful about how we think about that. It's a dramatically reduced CapEx from what you saw a year ago, and so we don't want to starve the fleet, and we want to make sure as Power Only grows or has the opportunity to continue to grow, we have the accompanying equipment to go with it. But at this point, that's the comfort level we have. By the way, I want to make my first statement on fleet guidance clearer: that is a full year range, not a half.
Speaker Change: The back half of the year that continues to look encouraging.
Speaker Change: And so we want to be prepared to be able to do that.
Speaker Change: <unk>.
Speaker Change: And it's really just trying to be thoughtful about how we think about that it's a dramatically reduced capex from what you saw a year ago.
Speaker Change: And so we don't want to starve the fleet when we want to make sure its power only.
Speaker Change: Grows or has the opportunity to continue to grow that we have the trailing equipment to go with it.
Speaker Change: But at this point, that's the comfort level, we have by the way I want to fix my first statement on <unk>.
Speaker Change: Fleet guidance said that is a full year range not a half year range.
Speaker Change: Okay.
Speaker Change: Let me just Oh.
Chris Wikoff: [inaudible] Scott, I was just going to expand on the net capex, you know, historically that's been a 10 to 13 percent of revenue. Net capex, you know, we did guide for that 250 to 300 million, you know, range for the year, not only lower in dollars, but that's also lower as a percentage of revenue. It was $19 million for Q1, so that will increase as we go through the year.
Speaker Change: Oh go ahead, sorry, Scott I was just kind of expand on the net capex.
Speaker Change: Historically, that's been a 10% to 13% of revenue net capex.
Speaker Change: We did guide.
Speaker Change: For that $250 million to $300 million range for the year.
Speaker Change: Not only lower in dollars. That's also a lower as a as a percentage of revenue it.
Speaker Change: It was 19 million for Q1, so that will elevate as we go through the year.
Speaker Change: Okay.
Scott H. Group: And then Derek, this is just a maybe this is a crazy thought. But you know, we're all everyone is saying the same thing that it's just taking longer for this capacity to come out of the market. And it strikes me that this cycle, compared with prior cycles, you and all the asset-based carriers have much bigger brokerage businesses, much bigger power-only offerings that are just sort of feeding volumes to these small carriers.
Speaker Change: Doug. This is just the maybe this is a crazy thought but.
Doug: Well, everyone is saying the same thing that it's just taking longer for this capacity to come out of the market and it strikes me that this cycle versus prior cycles.
Doug: And all of the asset based carriers have much bigger brokerage businesses much bigger power only offerings that are just sort of feeding volumes for these small carriers and again, maybe crazy but.
Scott H. Group: And again, maybe crazy, but, could it make sense for you and maybe others to shrink the brokerage offering shrink the power only offering, maybe stop giving volume to small carriers, and you think that could help accelerate this capacity reduction and get the cycle going again? I don't know.
Speaker Change: Could it make sense for you and maybe others too.
Doug: Just shrink the brokerage offerings shrink the power only offering maybe stop getting volume to small carriers and do you think that could help accelerate this capacity reduction and get the cycle going again I don't know.
Derek J. Leathers: Yeah, Scott, well, I don't think it's a crazy thought. I think the issue just lies in the execution, right? To actually do that, we'd have to assume that the other brokers that don't have asset positions would also somehow magically stop distributing that freight and not take advantage of the vacuum that it would create. And I don't think that's how it would actually play out. I think they would fill that vacuum; they would feed those carriers.
Speaker Change: Yeah, Scott I don't think its a crazy thought I think the issue lies in the execution rate like to actually do that we'd have to assume that the other brokers that don't have asset.
Speaker Change: Positions would also somehow magically stopped distributing that freight in and not take advantage of the vacuum that it would create and I don't think thats, how it would actually play out I think they would fill that vacuum they would feed those carriers and so instead I think it took a while at least here at Warner for us to really execute properly on making sure if we're going to have.
Derek J. Leathers: And so instead, I think it took a while, at least here at Warner, for us to really execute properly on making sure if we're going to have this large non-asset portion of our portfolio, how do we make sure our assets are doing exactly what they're designed to do and in the most optimal performance lanes for our assets, which is different than where a small carrier may be able to operate more effectively. It's a competitive space and truckload logistics market, which includes both asset and non-asset from a market perspective. And so we've got to bring to bear a product that can compete effectively in the long term. And we believe that a mixed approach is the best one, kind of a more asset light, if you will, approach.
Speaker Change: This large non asset portion of our portfolio how do we make sure our assets are doing exactly what they are designed to do and in the most optimal performance lanes for our assets, which is different than where a small carrier may be able to operate more effectively.
Speaker Change: Competitive space.
Speaker Change: In truckload logistics, which includes both asset and non asset at.
Speaker Change: From a market perspective.
Speaker Change: So we've got to bring to bear a product that can compete effectively long term and we believe that mixed.
Speaker Change: Approach is the best one kind of a more asset light if you will approach.
Derek J. Leathers: Finally, I do believe the difference maker in power only, and the reason it's so valuable, is the customer experience. Power only is a completely different experience from a non-asset broker in that we've got trailing equipment already there and in place. We are hauling a portion of that portfolio on our own assets, with the remainder going to power only. The customer gets a seamless experience with seamless interaction, tracking and tracing, and capability.
Speaker Change: Finally, I do believe you know the difference maker in power only and the reason. It's so valuable is the customer experience power only has a completely different experience from a non asset broker in that we've got trailing equipment already there and in place. We are all in a portion of that portfolio on our own assets the remainder going to power.
Speaker Change: Only the customer gets a seamless experience with a seamless interaction track.
Speaker Change: Tracking and tracing and capability and I think it wins in the market and we're seeing that without paced growth in power only inside of a division of Warner Thats also.
Derek J. Leathers: And I think it wins in the market. And we're seeing that with outpaced growth and power only inside of a division of Warner that's also outside outpaced growth, which is logistics overall. We did do some culling in Q1, so you saw an end to the, I believe, 12 plus quarters of double-digit growth in logistics. And that's because of us just simply yielding off the bottom and being aggressive on some of these untenable rates. We're going to keep that pricing discipline front and center as we go forward, especially at the point in the market where we believe we are.
Speaker Change: Outside outpaced growth, which is logistics overall we.
Speaker Change: We did do some culling in Q1, so you saw into the I believe 12 or plus quarters of double.
Speaker Change: Double digit type growth in logistics and Thats because of us just simply yielding off the bottom and being aggressive on some of these untenable rates, we're going to keep that pricing discipline front end.
Speaker Change: Front and center as we go forward, especially at the point in the market, where we believe we are.
Unknown Attendee: Thank you, guys. I appreciate the time. Thank you, Scott.
Speaker Change: Thank you guys appreciate the time thank.
Speaker Change: Thank you Scott.
Operator: The next question is from Brian Ossenbeck with J.P. Morgan. Please go ahead.
Speaker Change: The next question is from Brian Olsen Beck with J P. Morgan. Please go ahead.
Brian Patrick Ossenbeck: Hey guys, this is afternoon. Thanks for taking the time to answer the question. Maybe just wanted to follow up on that conversation there in terms of the 11% utilization and production growth that you see for Werner here, is that something else you think other fleets, larger fleets, maybe mid-size ones are also doing, and therefore there's a bit of a belt tightening on the large fleet side, and so they're able to keep more capacity in the market? And then on the other side, we've speculated on this for a while now, but what do you think is really keeping some of these smaller carriers from going under, at least? Maybe if that would accelerate from here, what do you think would finally move that? Or do we just have to be patient on that front?
Speaker Change: Hey, guys afternoon, and thanks for taking the question.
Speaker Change: Maybe just wanted to follow up on that conversation there in terms of.
Speaker Change: The 11% utilization or production growth that you see for for Warner here is that something else you think other fleets larger fleets, maybe midsized ones are also doing and therefore is a bit of a belt tightening on the large fleet side and so they're able to keep more capacity in the market and then on the other side yeah. We speculate on this for a while.
Speaker Change: I'll now, but what do you think is really keeping some of these smaller carriers from.
Speaker Change: Going under at least.
Speaker Change: Maybe if that would accelerate from here what do you think we're finally moved out or.
Speaker Change: Do we just have to be patient on that front.
Derek J. Leathers: Yeah, thanks Brian. Starting with the utilization question, although other fleets have shown utilization improvement year-over-year, I haven't seen anybody that's hit double digits, to my knowledge. I think it's something that we're, you know, laser focused on. We're executing at levels that I'm extremely proud of our team and the work they're putting in to do that. I think it's sort of the early innings of some of the tech coming to bear on that and some new tools that we're deploying as well as, as I stated earlier, just a simple focus on what we do really well and doing that with our assets and then providing a solution to customers via power only to do some of the remaining work at a still very high level based on the technology that we've deployed to make that happen.
Speaker Change: Yes, Thanks, Brian.
Speaker Change: Starting with the utilization question, although other fleets have shown utilization improvement year over year I haven't seen anybody thats hit double digits to my knowledge.
Speaker Change: I think it's something that we're laser.
Speaker Change: Focused on.
Speaker Change: We're executing at levels that I am extremely proud of with our team and the work they are putting in to do that I think it's sort of the early innings of some of the tech come into bear that in some new tools that we're deploying as well as as I stated earlier, just a simple focus on what we do really well and doing that with our assets and then providing a solution to custom.
Speaker Change: <unk>.
Speaker Change: Our only to do some of the remainder were at still a very high level based on the technology that we've deployed to make that happen.
Derek J. Leathers: So it's hard to come by, it's not easy to achieve, especially in a freight market like the one we're in, but I think all of us are getting more creative with how we can try to stretch the assets further. But again, that 11% is a number that we're extremely proud of.
Speaker Change: So.
Speaker Change: It is hard to come by it's not easy to achieve and especially with the freight market like the one we're in but I think all of us are getting more creative with how we can try to sweat the assets further.
Speaker Change: But again that 11% is the number that we're extremely proud of.
Derek J. Leathers: As it relates to the attrition question, you know, it's tough to predict. We are seeing ongoing attrition. You're now starting to see in recent weeks bankruptcies that are more notable, and the size of fleets that are more impactful, but it's going to have to continue to take place. And unfortunately, or fortunately, I guess depending on how you look at it, customers seem all too willing to continue to push people over that cliff. We're going to maintain our discipline and stay on firm ground, but there will be others that are continuing to sign up for rates that I don't believe are tenable and will find themselves, you know, on the wrong side of the ledger shortly.
Speaker Change: As it relates to the attrition question.
Speaker Change: It's tough to predict we are seeing ongoing attrition you are now starting to see in recent weeks bankruptcies that are more notable size of fleets that are more.
Speaker Change: <unk> four but it's going to have to continue to take place and unfortunately.
Speaker Change: The b or Fortunately I guess, depending on how you look at our customers seem all too willing to continue to push people over that cliff.
Speaker Change: We're going to maintain our discipline and stay on firm ground.
Speaker Change: But there will be others that are continuing to sign up for rates that I don't believe returnable and will find themselves.
Speaker Change: The wrong side of the ledger. Shortly so that's got to play out we got to be patient in the meantime, we cant sit around worrying about it all day, what we have to do instead is redouble our efforts on best in class execution.
Derek J. Leathers: So it's got to play out; we've got to be patient. In the meantime, we can't sit around worrying about it all day. What we have to do instead is redouble our efforts on best-in-class execution.
Brian Patrick Ossenbeck: All right, thanks for that, Derek. And then maybe just on the short term, can you talk more about what you're seeing in April so far, how that compares to seasonality, you know, what visibility you have into the second quarter, just for, you know, probably on the TTS side in terms of the demand there? And I guess ultimately, if you still have an expectation for the spot market to recover here, is that what the demand visibility is? Is that helping drive some of
Speaker Change: Alright, Thanks for that Derek and then maybe just sticking with the short term can you talk more about what youre seeing in April so far how that compares to seasonality what visibility you have into the second.
Derek: Second quarter, just for probably in the TTS side in terms of the demand.
Speaker Change: Demand there.
Speaker Change: And I guess ultimately if you still have an expectation for the spot market too.
Speaker Change: Recover here is that what is that the demand visibility is that helping drive some of that.
Derek J. Leathers: Yeah, so in April or, you know, in April, and then Q2 in general, and I'll keep this fairly high level, but it's a bit of a tale of two cities. We know that some of the fleet attrition we've seen in dedicated will continue to play out in Q2 and Q3. At the same time, we do have a pretty strong pipeline of new opportunities and some new implementations that are already in the books.
Speaker Change: Yes, so in April or.
Speaker Change: In April and in Q2 in general.
Speaker Change: And I'll keep this fairly high level, but it's a bit of a tale of two cities. We're we know that some of the fleet attrition. We've seen in dedicated we will continue to play out in Q2 and Q3 at the same time, we do have a pretty strong pipeline of new opportunities and some new implementations that are already on the books. The net of those those that we believe.
Speaker Change: Youll see some fleet shrinkage as we have remain that.
Speaker Change: Our kept that pricing discipline that I've referenced several times.
Derek J. Leathers: The net of those, though, is that we believe you'll see some fleet shrinkage as we have remained with, or kept that pricing discipline that I've referenced several times. We're simply not able to sign up for a dedicated contract right now that is not reinvestable or not in our margin profile, and we believe that would be short-sighted to do so.
Speaker Change: Were simply not able to sign up for a dedicated contract right now that is not re investable or not at our margin profile and we believe that would be short sighted to do so one way by by contrast has seen limited but still.
Speaker Change: Have appeared.
Speaker Change: Spring activity.
Speaker Change: Some project activity and increased opportunity for for pricing that's encouraging its early early early and so I'm not taking that to the bank just yet, but indications and how we think about network bookings and pre bookings and an overall demand seem encouraging and then just to be.
Derek J. Leathers: One way, by contrast, has seen limited but still appeared spring activity, some project activity, and increased opportunity for pricing. That's encouraging. It's early, early, early, and so I'm not taking that to the bank just yet, but indications and how we think about network bookings and pre-bookings and overall demand seem encouraging. And then just the build I talked about from January to February to March in terms of profitability have, you know, all indicators are that we're on a path for that to continue as we go forward. And so we'll have to see how it plays out, but early signs are encouraging.
Speaker Change: But I talked about from January to February to March in terms of profitability. As you. All indicators are that we're on a path for that to continue as we go forward.
Speaker Change: And so we'll have to see how it plays out but early signs are encouraging.
Brian Patrick Ossenbeck: All right. Thanks very much, Derek. I appreciate it. Thank you.
Speaker Change: Alright, thanks, very much Derek appreciate it.
Derek: Thank you Brian.
Operator: The next question is from Ken Hoexter with Bank of America. Please go ahead.
Speaker Change: The next question is from Kenn Hoekstra with Bank of America. Please go ahead.
Kenneth Scott Hoexter: Hey, great. Good afternoon.
Kenn Hoekstra: Hey, great. Good afternoon. Thanks for the question.
Kenneth Scott Hoexter: Thanks for the time and the question. So, Derek, maybe just to harp on the dedicated a little bit more, you talked about increasing competition. I just want to understand, is that because of a loss of dollar stores, or are there plans to shrink some of the stores? I know maybe not your direct one, but I know there were some out there talking about bringing some of that planned expansion back in or closing some stores. And is that just an absolute shift to now the cross-border opportunity with that fleet? Or is that maybe more of a permanent shift in that fleet? Maybe I could talk a little bit about that dedicated market.
Kenn Hoekstra: So Derek maybe just not to harp on the dedicated a little bit more you talked about increasing competition.
Kenn Hoekstra: I just wanted to understand is that because of the loss of dollar stores or are there plans to shrink some of the stores I know maybe not your direct one but I know there were some that theyre talking about bringing some of that planned expansion back in or closing some stores.
Speaker Change: And is that just an absolute shift to now the cross border opportunity with that fleet. So is that a maybe more of a permanent shift in that fleet, maybe maybe talk a little bit about that dedicated.
Speaker Change: Market.
Derek J. Leathers: Yeah, Ken, I mean, I'll start with this. Every one of our discount retailers, year over year, is up in truck count within Dedicated. So I just want to put to rest this idea that there's some big carnage going on within Dedicated, especially if they've brought this hyper focus on the dollar stores and different announcements of different types. We are up across the board in our discount retail segment, and that includes going beyond the dollar stores. So we feel like that product is one that still has great value. It's one that's certainly appreciated.
Speaker Change: Yes, Ken I mean, I'll start with this.
Speaker Change: Every one of our discount retailers year over year is up in truck count within dedicated so I just want to put to rest of this idea that there is some good carnage going on within dedicated especially a hyperfocus.
Speaker Change: Hyperfocus on the dollar stores and different announcements of different types.
Speaker Change: Were up across the board in our discount retail segment.
Speaker Change: And that includes beyond the dollar stores. So we feel like that product is one that still has great value. It's one that's certainly appreciated and its one that we believe we have a competitive advantage on that that differentiates us from our competitors.
Derek J. Leathers: And it's one that we believe we have a competitive advantage on that differentiates us from our competitors. You know, Dedicated in general is very price competitive right now. So that pipeline I've referenced multiple times is full, and it looks encouraging, but we would be remiss if we didn't just accept that the win rate is going to be, at least in the current market, at historically low levels because of that pricing discipline that we're going to continue to execute against.
Speaker Change: You dedicated in general is very price competitive right now so that pipeline I've referenced multiple times is full in.
Speaker Change: It looks encouraging but we would be remiss. If we don't just accept that the win rate is going to be at least in the current market at historically low levels because of that pricing discipline that we're going to continue to execute against.
Derek J. Leathers: And so where those lines cross is tough to predict right now. It's probably harder in dedicated than anywhere because you're talking about signing up for what you hope to be, not just that initial multi-year term, but in most cases, in dedicated, it becomes a relationship that lasts decades.
Speaker Change: And so where those lines cross is tough to predict right now, it's probably harder in dedicated and anywhere because youre talking about signing up for what you hope to be not just that initial multi year term, but in most cases and dedicated it becomes a relationship that last decades and.
Derek J. Leathers: And so we want to get it right going in. We want to do it with, you know, the right thoughtfulness. And then the last thing I'll mention, because we've talked about some fleet attrition, is that there are certain disadvantages to incumbency and dedication. And the biggest one of all is that you know what the actual work is, whereas competitors bidding on that same work bid based on an RFP and a profile that's been provided that often sounds a little more amenable to your skillset and what it actually is going to be once you enter.
Speaker Change: So we want to get it right going in we want to do it.
Speaker Change: The rate of thoughtfulness.
Speaker Change: And then the last thing I'll mention because we've talked about some fleet attrition is.
Speaker Change: There are certain disadvantages with incumbency in dedicated and the biggest one of all is that you know what the actual work is whereas competitors bidding on that same work bid based on an RFP and a profile that's been provided that often sounds.
Speaker Change: A little more amenable to your skill set and what actually is going to be once you enter.
Derek J. Leathers: And so we've got a lot of new entrants into dedicated that may or may not have full exposure and understanding of what they're signing up for, and we're seeing that in the pricing. So our job is to know when to walk away and push away from the table and make sure that we're still staying focused on the prize, which is long-term shareholder value and making sure we're building a company that's built to last.
Speaker Change: And so we've got a lot of new entrants into dedicated that may or may not have full exposure and understanding of what they are signing up for and we're seeing that in the pricing. So our job is to know when to walk away and push away from the table and make sure that we are.
Speaker Change: Still staying focused on the prize, which is long term shareholder value and making sure. We're building a company that's built to last and I'm excited about.
Derek J. Leathers: And I'm excited about, you know, what this looks like as it plays out and this turn takes place. But in the short term, there is no refuting the fact that there is pain afoot, and we're going to keep fighting through it.
Speaker Change: What this looks like as it plays out in this turn takes place but in the short term. There is no refuting. The fact that there is paying a foot and we're going to keep fighting through it.
Chris Wikoff: Yeah, and I would just add that we do still have high customer retention, and with our average large fleet size on a customer by customer basis, one, two, three losses can be more material, and they can take a bit more time, particularly in this market, to replace them. But we feel good about growing dedicated beyond some of the near-term backfilling of these fleets. It is a large addressable market. There are new verticals.
Speaker Change: Yeah, and I would just add that.
Speaker Change: Yes.
Speaker Change: Yes, we do still have high customer retention.
Speaker Change: And with our on average and large fleet size on a customer by customer basis in 123 losses, Ken can be more material than they can take a bit more time, particularly in this market to replace it but we feel good about growing dedicated beyond some of the near term back filling of these fleets.
Speaker Change: Dedicated is a large addressable market.
Speaker Change: There is new verticals, there's private fleets that we can be well positioned to win in a tighter market.
Chris Wikoff: There are private fleets that we can be well-positioned to win in a tighter market. So we are positioning for the long term, and with these isolated fleet losses that we've been referring to, a little bit less than two-thirds of them really relate to managing the yield in this competitive environment and making sure that we're getting into margin and pricing that's reinvestable long term. And then a little bit more than a third is really related to customers that are changing their approach to supply chain dynamics and parameters and the like.
Speaker Change: So we are positioning for for the long term and with these isolated fleet losses that we've been referring to a little bit less than two thirds of them really relates to managing the yield in this competitive environment and making sure that.
Speaker Change: We're getting into margin and pricing.
Speaker Change: We invest for long term.
Speaker Change: And then a little bit more than a third is really related to customers that are changing their approach to supply chain dynamics and parameters and the like so there remains a very strong pipeline for us to draw from we've continued to price numerous opportunities.
Chris Wikoff: So there remains a very strong pipeline for us to draw from. We've continued to price numerous opportunities, so it's competitive, but we'll continue to be in the mix and be aggressive and focus on pricing discipline for the long term.
Speaker Change: So it's competitive but we will continue to be in the next and being aggressive.
Speaker Change: And and focus on pricing discipline for the long term.
Kenneth Scott Hoexter: I appreciate that and if I could just follow up kind of on that, you mentioned a competitive bid season and noted that some brokerage, I guess maybe either brokerage carriers or particularly guys out there were getting more aggressive on pricing. Is there anything or an industry leader that you would call out or want to talk to? And then it seems like if you kept your revenue per ton mile down three to down six and the first quarter was down five, does that mean maybe the midpoint is kind of looking for a little bit of sequential improvement or stabilization in that rate or is that just, hey, that was the rate we set, we're sticking with it? I just want to understand if there was a message you wanted to add.
Speaker Change: I appreciate that and if I could just get a follow on kind of on that you mentioned a competitive bid season and noted that some brokerage I guess, maybe the brokerage carriers or particularly guys out there. We are getting more aggressive on pricing is there anything or industry or I guess industry leader that you would call out or want to talk to and then it seems like if you kept your revenue.
Speaker Change: Per ton mile down three to down six in the first quarter was down five does that mean, maybe the midpoint kind of looking for a little bit of sequential improvement or stabilization in that rate or is that just hey that was the right. We said, we're just we're sticking with that I just want to understand if there was a message you wanted in there.
Derek J. Leathers: Well, a couple of things. First, I'm not going to call out any industry leaders on their behavior or strategy. I do think when you get deep into a cycle, the one thing you find is customers, even those looking to take another bite at the apple, are aligning themselves more with assets than non-assets. It's just a logical thing to do at this point in the cycle. And so our ability to have those assets matter a little bit more now than they might have a quarter or two ago is upon us, and we're starting to see that with certain bid results. But the white noise that's created by a broker potentially undercutting rates or getting even more aggressive, knowing it's harder to win right now, can be problematic.
Speaker Change: Well a couple of things first I'm not going to call out in the industry leaders.
Speaker Change: Their behavior strategy I do think when you get deep into a cycle, which is one thing you find is customers even those looking to take another bite at the Apple are aligning themselves more with assets than non asset. It's just a logical thing to do at this point in the cycle and so our ability to have those assets matter a little bit more now than they might have a quarter.
Speaker Change: Or two ago is upon us and we're starting to see that with certain bad results, but the white noise. That's created by a broker potentially undercutting rates are getting even more aggressive knowing that is harder to win right now can be problematic and we see that as well and it's a matter of whether you're aligned with the right customer base and in most cases, we are in some cases, we're finding that perhaps we are not.
Derek J. Leathers: And we see that as well. It's a matter of whether you're aligned with the right customer base. And in most cases, we are. And in some cases, we're finding that perhaps we are not.
Speaker Change: <unk>.
Speaker Change: Our job those to again go back to the to the playbook and make sure. We execute the plays is drawn and stay committed to what we know works through <unk> and through a cycle.
Speaker Change: Feel good about what we're doing there. Despite the Q1 results. It's a longer term view with the longer term strategy than just a quarter or so we'll stay we'll stick to our knitting and move forward in an.
Chris Wikoff: Our job, though, is to, again, go back to the playbook and make sure we execute the plays as drawn and stay committed to what we know works through to and through a cycle and feel good about what we're doing there. Despite the Q1 results, it's a longer-term view. It's a longer-term strategy than just a quarter. So we'll stay. We'll stick to our knitting and move forward. And as this plays out, I think we're going to have the right formula for success.
Speaker Change: As this plays out I think we're going to have the right formula for success.
Chris Wikoff: Yeah, and Ken, just to follow up on the last part of your question there on rate per mile, I believe you're referring to the one-way truckload rate per mile and the first half year-over-year guidance of being down six to down three. You're correct.
Speaker Change: Yeah, and Ken just to follow up on the last part of your question there on rate per mile I believe you're referring to the one way truckload rate per mile in the first half year over year guidance of being down 6% down three.
Ken: You are correct I think you referenced.
Chris Wikoff: I think you referenced being down 5% through the first quarter on a year-over-year basis. So still within that range, although trending to the lower end, we're about 30% through the bid season. There's been some mixed results to this point, including some low single-digit reductions, but also some that are flat, and more recently, some that are increasing renewals. So we have a bit more to go in the heavy part of the bid season here, but we'll continue to maintain that pricing discipline and do what we can to stay in the range there.
Ken: Being down 5% through the first quarter on a year over year basis, so still within that range, although trending to the lower end.
Ken: We're about 30% through the bid season.
Ken: There's been some mixed results to this point, including some low single digit reductions, but also some that are flat and more recently some debt that are increasing our renewals so are.
Ken: We had a bit more to go in the heavy part of the bid season here.
Ken: But we'll continue to to maintain that pricing discipline then.
Ken: And do what we can to stay in the range there.
Kenneth Scott Hoexter: I appreciate the thoughts. Thanks for the time, guys. Thank you. The next question is from Tom Wadewitz with UBS. Please go ahead. Hey guys, it's Mike Triano on for Tom.
Speaker Change: I appreciate the thoughts thanks for the time guys.
Speaker Change: Thank you Ken.
Operator: The next question is from Tom Wadewitz with UBF. Please go ahead.
Speaker Change: The next question is from Tom <unk> with UBS. Please go ahead.
Speaker Change: Hey, guys, it's Mike <unk> on for Tom.
Thomas Wadewitz: So, obviously, a tough operating environment, but it's your free cash.
Mike: So obviously tough operating environment, but your free cash flow was up 9% year over year with the step down in Capex. One is one of the largest and best run trucking companies out there, but to what extent is the cash flow resiliency that you had representative of the broader trucking market.
And do you think this is a reason why capacity has been stubborn to exit the market.
Chris Wikoff: Well, and just in terms of maybe the first part of your question on our cash flow and trend, you know, over the past couple of years, our free cash flow has been more in the 2% to 4% range of revenue. In building the plan this year, you know, being mindful of the operating environment, margins, reinvesting in the fleet, lower CapEx, you know, we were gearing towards a free cash flow that, on a percent of revenue basis, was just going to have higher free cash flow conversion.
Mike: Well and just in terms of maybe the first part of your question on <unk>.
Mike: On our cash flow and trend over the past couple of years, our free cash flow has been more in the 2% to 4% of revenue.
Mike:
Mike: In building the plan this year being mindful of the operating environment margins are.
And reinvesting in the fleet lower Capex, we were gearing towards.
Mike: A a free cash flow that on a percent of revenue basis was just going to have higher free cash flow conversion.
Chris Wikoff: We still feel good about that outcome for the year, given all those factors, and managing a CapEx level that still appropriately invests in the fleet. So, you know, we think that, even in this environment, is going to continue to be a positive perspective on free cash flow conversion going forward. And the second part of that, I'll jump in, you know, as it relates to our others.
Mike: We still feel good.
Mike: 'bout that outcome for the year, given all those factors in and managing.
Mike: Our capex level that still appropriately invest in the fleet. So we think that that's even in this environment going to continue to be a positive trend.
Perspective on free cash flow conversion going forward and the second part of them as it relates to our other is able to do that certainly well ran large capitalized fleets I think we're probably putting a lot of diligence towards this I'm not so sure your small to mid sized trucker thinks about free cash flow much until it runs out.
Derek J. Leathers: And the second part of that, I'll jump in, you know, as it relates to, are others able to do that? Certainly, well, you know, RAN, large capitalized fleets, I think, are probably putting a lot of diligence into this. I'm not so sure your small to mid-sized trucker thinks about free cash flow much until it runs out. I think that the difference is, you know, it takes a long time to kill a trucker, and they are out there operating equipment that they're running to the end of life, but they have no ability to reinvest or re-up or even refresh that particular piece of equipment.
Mike: Thank the differences.
Mike: It's a long time to kill a trucker.
Mike: They are out there operating equipment that they are running to the end of life, but no ability to reinvest or or re up or are even refresh that particular piece of equipment, there's regulatory hurdles and other things about to come at them in waves.
Derek J. Leathers: There are regulatory hurdles and other things about to come at them in waves that I think will make that reinvestment even more difficult. And they were flushed with cash coming out of the COVID years, and that's largely burnt off, if not completely burnt off at this point. So I think it's happening, it's going to continue to happen, but no, I do not believe they're managing free cash flow the way people like Werner Enterprises are.
Mike: We will make that reinvestment, even more difficult and they had a they were flushed with cash coming out of the COVID-19 years, and that's largely burned off if not completely burnt off at this point.
Mike: So I think it's happening it's going to continue to happen.
Mike: But no I do not believe they're managing free cash flow the way people like Warner enterprises are but nonetheless, it's just taken a long time for them to kind of burn through the remaining life on that asset and ultimately exit.
Speaker Change: Okay I appreciate the thoughts dark Chris.
Thank you.
Bascome Majors: And the last question today is from Bascome Majors with Susquehanna. Please go ahead.
Speaker Change: And the last question today is from bask of majors with Susquehanna. Please go ahead.
Bascome Majors: Thanks for taking my question. I don't want to get too short term here, but I do think it would be helpful to level set expectations and bring together some of the seasonality commentary you said earlier in the call. So if I look at 1Q to 2Q and you strip out the outliers, operating income, and earnings, they typically grow anywhere from 20 to call it 50%. Is that the kind of range that feels reasonable with the puts and the takes that you've already talked about? Or is it just too early to do that kind of normal historical relationship, getting the uncertainty out of there?
Speaker Change: Yeah. Thanks for taking my question I don't want to get too short term here, but I do think it will be helpful to level set expectations and bring together some of the seasonality commentary you said earlier in the call. So if I look at <unk> and you strip out the outliers operating income and earnings.
Speaker Change: They typically grow anywhere from 20.
Speaker Change: <unk> to call it 50% is.
Speaker Change: That's the kind of range that feels reasonable with the puts and takes that you've already talked about or is it just too early to do that kind of normal historical relationship given the uncertainty out of there. Thank you.
It's asking me I appreciate your question.
Chris Wikoff: Thank you.
Speaker Change: You know, we don't give EPS guidance, but just to give some some color I guess in terms of the business outlook.
Chris Wikoff: Hey Bascome, yeah, I appreciate your question. You know, we don't give EPS, you know, guidance, but I guess, just to give some color, I guess, in terms of the business outlook. You know, as we look forward, kind of, you know, midterm, we would expect, you know, demand to remain steady, the rate pressure is going to be ongoing across the portfolio, no real signs of more meaningful attrition in that excess capacity, which is obviously driving this whole rate environment. It's going to keep the environment competitive.
Speaker Change: As we look forward kind of midterm.
Speaker Change: We would expect demand to remain steady the rate pressure is going to be ongoing across the portfolio.
No real signs of.
More meaningful attrition in that excess capacity, which is obviously driving this whole rate environment, it's going to keep the environment competitive.
We have more to go in kind of the heavy part of the bid season.
Chris Wikoff: We have more to go in kind of the heavy part of the bid season. And we'll be, you know, backfilling some of the dedicated losses, fleet losses into the second quarter. So again, there's a strong pipeline of opportunities that we can draw from.
Speaker Change: And we will be back selling some of the dedicated losses.
Speaker Change: Our fleet losses into the second quarter, although again there's.
Our strong pipeline of opportunities that we can draw from.
Speaker Change:
Speaker Change: We expect that the the revenue per truck per week on TTS to continue to be growing on a year over year basis.
Chris Wikoff: You know, we expect the revenue per truck per week on TTS to continue to be growing on a year-over-year basis. That year-over-year difference might, you know, moderate a bit as we go through the year, but we would continue to expect some year-over-year favorability there. The used equipment market, you know, is important.
Speaker Change: That year over year difference might moderate a bit as we go through the year.
Speaker Change: But we would continue to expect some year over year favorability there.
Speaker Change: The used equipment market is important and as I said earlier I think that will improve modestly throughout the year and we're going to continue to advance our structural changes the cost savings, which are on track and growing we'll continue to progress those will continue to lean into safety and looking for that to Uh huh.
Chris Wikoff: And as I said earlier, I think that will improve modestly throughout the year. And we're going to continue to advance our structural changes, the cost savings, which are on track and growing. We'll continue to progress those. We'll continue to lean into safety and look for that to, you know, show a more favorable trend. And some of those low $30 million per quarter numbers that we were seeing in the second half of last year, we'll continue to lean into, you know, our operational excellence and really get, you know, more of that production improvement on the one-way side. You know, so we can't control the macro.
Speaker Change: Two shell a more favorable trend in some of those are low $30 million per quarter numbers that we're seeing in the second half of last year, we'll continue to lean into our operational excellence and really get more of that production improvement on the one way side.
Speaker Change: So we can't control the macro we can focus on controlling the controllable.
Chris Wikoff: We can focus on, you know, controlling the controllables, you know, continuing to serve our customers safely, reliably, and at scale and execute on the long-term strategy. If we do that, then we're going to be more positioned to, you know, navigate this market well and be, you know, ready for a tighter market and a better market. It was, you know, Q1 is typically our low quarter, coming off the peak.
Speaker Change: Continuing to serve our customers safely reliably and at scale and execute on our long term strategy. If we do that then we're going to be more positioned to.
Speaker Change: Navigate this market well and be ready for a tighter market and a better market.
Speaker Change: It was Q1 is typically our low quarter coming off the peak and there were some compounding factors.
Chris Wikoff: There were some compounding factors in the first quarter, including, you know, call it 5 to 6 cents of, you know, really unique one-offs in terms of the adverse weather, elevated health insurance costs, and some discrete, you know, income tax adjustments in the quarter that aren't necessarily expected to continue. So there was a lot there. I'm probably not being as specific as you would like, but, you know, we would expect, you know, some improvement, and we're just going to continue to be focused on controlling what we can and being, you know, set up for a better market when it comes. So it sounds like you do expect.
In the first quarter and including <unk>.
Call it 5% to six cents of really unique one offs in terms of the adverse weather elevated health insurance costs.
Speaker Change: And some discrete income tax adjustments in the quarter that arent necessarily expect it to continue.
So.
Speaker Change: A lot there I'm, probably not being as specific as you would like.
Speaker Change: But we would expect some some improvement and we're just going to continue to be focused on on controlling what we can and being set up for for a better market when it comes.
Speaker Change: So it sounds like you do expect sequential improvement just it's really hard to peg that versus any historic sort of bogey at this point.
Bascome Majors: So it sounds like you do expect sequential improvement, just it's really hard to peg that versus any historic sort of bogeyman at this point.
Speaker Change: We do.
Thank you very much.
Thank you Ms.
Speaker Change: This concludes our question and answer session I will now turn the call over to Mr. Derek Leathers, who will provide closing comments. Please go ahead sir.
Derek J. Leathers: This concludes our question and answer session. I'll now turn the call over to Mr. Derek Leathers, who will provide closing comments. Please go ahead, sir.
Derek J. Leathers: Thank you Gary I want to thank our nearly 14000 Warner associates for their dedication loyalty and commitment to supporting each other and serving our customers daily I also want to reiterate our support for everyone impacted by the recent tornadoes across Omaha in the Midwest and we will get through this I want to thank our valued customers for choosing Warner and gives.
Derek J. Leathers: Thank you, Gary. I want to thank our nearly 14,000 Werner Associates for their dedication, loyalty, and commitment to supporting each other and serving our customers daily. I also want to reiterate our support for everyone impacted by the recent tornadoes across Omaha and the Midwest. We will get through this. I want to thank our valued customers for choosing Werner and giving us the opportunity to support their businesses, and we will continue to operate with eyes wide open as we navigate the current very challenging environment.
Derek J. Leathers: US the opportunity to support their business and we will continue to operate with eyes wide open as we navigate the current very challenging environment. We are controlling what we can and driving operational improvements managing expenses and driving savings while strategically investing for our future our balance sheet is healthy and our cash flow was strong and our divorce diverse.
Derek J. Leathers: We are controlling what we can and driving operational improvements, managing expenses, and driving savings while strategically investing for our future. Our balance sheet is healthy, and our cash flow is strong, and our diverse portfolio and practice puts us in a great position for the eventual market term. In the meantime, we're going to remain determined in our approach, we're going to remain committed to safety, and we're going to continue to serve our customers. I want to thank you all for being with us today and for joining our call. The conference is now concluded.
Derek J. Leathers: Leo in prep.
Puts us in a great position for the eventual market turn.
Derek J. Leathers: In the meantime, we're going to remain disciplined on our approach we're going to remain committed to safety and we're going to continue to serve our customers. So I'm going to thank you all for being with us today and for joining our call.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: Okay.
Operator: BF-WATCH TV 2021
Speaker Change: [music].