Q2 2024 Werner Enterprises Inc Earnings Call

Good afternoon, and welcome to the Werner Enterprises second quarter 2024 earnings conference call. 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: This is a Q2 2024 Earnings Conference Call. All participants will be in listen-only mode.

Chris Neil: 1.2524 Earnings Conference Call. 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. After today's presentation, there will 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 like to turn the conference over to Chris Neil, Senior Vice President of Pricing and Strategic Planning. Please go ahead. Good afternoon, everyone. Earlier today, we issued our earnings release with our second quarter results. The release and a supplemental presentation are available in the investor section of our website at warner.com. Today's webcast is being recorded and will be available for replay later today. Please see the disclosure statement on slide two of the presentation, as well as the disclaimers in our earnings release related to forward-looking statements. Today's remarks contain forward-looking statements that may involve risks, uncertainties, and other factors that could cause actual results to differ materially. The company reports results using non-GAAP measures, which we believe provides additional information for investors to help facilitate the comparison of past and present performance. A reconciliation of the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. On today's call with Mayor Derek Leathers, Chairman and CEO, and Chris Wyckoff, Executive Vice President, Treasurer, and CFO, Derek will provide an overview of our Q2 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. Thank you, Chris, and good afternoon, everyone.

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 the star key, then 1 on your telephone keypad.

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.

Operator: 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.

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.

Chris C. Neil: Good afternoon, everyone. Earlier today, we issued our earnings release with our second quarter results. The release and a supplemental presentation are available in the investor section of our website at warner.com. Today's webcast is being recorded and will be available for replay later today.

Chris C. Neil: Good afternoon everyone. Earlier today we issued our earnings release with our second quarter results. The release and a supplemental presentation are available in the investor section of our website at Werner.com. Today's webcast is being recorded and will be available for replay later today.

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.

Speaker Change: Please see the disclosure statement on slide two of the presentation, as well as the disclaimers in our earnings release related to forward-looking statements.

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

Speaker Change: 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.

Speaker Change: 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.

Derek J. Leathers: 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 Q2 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. Thank you, Chris, and good afternoon, everyone.

Speaker Change: On today's call with me are Derek Leathers, Chairman and CEO , and Chris Wikoff, Executive Vice President, Treasurer, and CFO .

Derek J. Leathers: Derek will provide an overview of our Q2 results and update on our strategic priorities for 2024 and our market outlook.

Christopher D. Wikoff: Chris will cover our financial results in more detail, and provide an update on our guidance for the year.

Speaker Change: I'll now turn the call over to Derek.

Derek Leathers: Hope you have a nice summer so far, and we appreciate you joining us today. Despite an operating environment that remains challenging, we are structurally improving the business with a commitment to delivering customer excellence while driving long-term growth. Our earnings improve sequentially in Q2, and while industry-wide headwinds persist, we are encouraged by early signs that the freight market is progressing towards equilibrium. Tough times don't last, but tough people do, and thanks to the resilience and professionalism of Warner, over 13,000 talented team members and their continued focus on controlling the controllables, I'm pleased to report that one-way production increased for the fifth consecutive quarter. Mexico volume is growing.

Derek J. Leathers: Hope you're having a nice summer so far, and we appreciate you joining us today. Despite an operating environment that remains challenging, we are structurally improving the business with a commitment to delivering customers' needs while driving long-term growth. Our earnings improved sequentially in Q2, and while industry-wide headwinds persist, we are encouraged by early signs that the freight market is progressing towards equilibrium. Tough times don't last, but tough people do.

Derek J. Leathers: Thank you, Chris, and good afternoon, everyone. Hope you're having a nice summer so far, and we appreciate you joining us today.

Derek J. Leathers: Despite an operating environment that remains challenging, we are structurally improving the business with a commitment to delivering customer excellence while driving long-term growth.

Derek J. Leathers: Our earnings improved sequentially in Q2, and while industry-wide headwinds persist, we are encouraged by early signs that the freight market is progressing towards equilibrium.

Derek J. Leathers: And thanks to the resilience and professionalism of Werner's over 13,000 talented team members and their continued focus on controlling the controllable, I'm pleased to report that one-way production increased for the fifth consecutive quarter. Mexico volume is growing. Dedicated revenue per truck was up, and we continue to maintain high customer retention. Our logistics segment returned to positive operating income after a challenging first quarter. We continue to identify and execute structural changes to reduce operating costs, and we are increasing our estimated 2024 in-year savings to over $45 million. We generated solid operating cash flow and purchased more than 1.6 million shares during the quarter.

Warner: Tough times don't last, but tough people do. And thanks to the resilience and professionalism of Werner's over 13,000 talented team members and their continued focus on controlling the controllables,

Warner: I'm pleased to report that one-way production increased for the fifth consecutive quarter. Mexico volume is growing. Dedicated revenue per truck was up and we continue to maintain high customer retention.

Derek Leathers: Dedicated revenue for truck was up, and we continue to maintain high customer retention. Our logistics segment returned to positive operating income after a challenging first quarter. We continue to identify and execute structural changes to reduce operating costs, and we are increasing our estimated 2024 in your savings to over 45 million. We generated solid operating cash flow and purchased more than 1.6 million shares during the quarter. We are executing on our strategy to generate long-term value with a focus on safety, service, operational excellence, and innovation. Overall, market challenges linger, but we continue to strengthen an actively positioned wonder to capture operating leverage as the freight market improves. Let's move to slide five and highlight our Q2 results. During the quarter, revenues were 6% lower versus the prior year.

Warner: Our logistics segment returned to positive operating income after a challenging first quarter. We continue to identify and execute structural changes to reduce operating costs, and we are increasing our estimated 2024 in-year savings to over $45 million.

Warner: We generated solid operating cash flow and purchased more than 1.6 million shares during the quarter.

Derek J. Leathers: We are executing on our strategy to generate long-term value with a focus on safety, service, operational excellence, and innovation. Overall, market challenges linger, but we continue to strengthen and actively position Werner to capture operating leverage as the freight market improves. Now, let's move to slide five and highlight our Q2 results. During the quarter, revenues were 6% lower versus the prior year.

Warner: We are executing on our strategy to generate long-term value with a focus on safety, service, operational excellence, and innovation.

Warner: Overall, market challenges linger, but we continue to strengthen and actively position Werner to capture operating leverage as the freight market improves.

Warner: Let's move to slide 5 and highlight our Q2 results.

Warner: During the quarter, revenues were 6% lower versus the prior year. Adjusted EPS was $0.17.

Derek Leathers: Adjusted EPS was 17 cents. Adjusted operating margin was 2.8%, and adjusted TTS operating margin was 5% net of fuel surcharge. Despite a lower-for-longer freight backdrop, dedicated is demonstrated resiliency and durability. The prolonged environment combined with our pricing and margin discipline resulted in a lower dedicated fleet size at the end of the quarter. However, the pipeline of opportunities and dedicated remains strong. One way truckload demand was stable early in the quarter, then improved during and following Road Check, which is, as most of you know, a vehicle inspection and regulatory compliance initiative that is known to sideline some truckers for the week.

Warner: Adjusted Operating Margin was 2.8%, and Adjusted TTS Operating Margin was 5% net of fuel surcharges.

Derek J. Leathers: Adjusted EPS was $176,000. Adjusted Operating Margin was 2.8%, and Adjusted TTS Operating Margin was 5% net of fuel surcharge. Despite a lower-for-longer freight backdrop, Dedicated has demonstrated resiliency and durability. The prolonged environment, combined with our pricing and margin discipline, resulted in a lower dedicated fleet size at the end of the quarter. However, the pipeline of opportunities in dedicated remains strong. One-way truckload demand was stable early in the quarter, then improved during and following road check, which, as most of you know, is a vehicle inspection and regulatory compliance initiative that is known to sideline some truckers for the week. Spot rates and tender rejects increased during the week, reflecting the tightened environment and a market closer to equilibrium.

Warner: Despite a lower-for-longer freight backdrop, Dedicated has demonstrated resiliency and durability. Their prolonged environment, combined with our pricing and margin discipline, resulted in a lower dedicated fleet size at the end of the quarter. However, the pipeline of opportunities in Dedicated remains strong.

Warner: One-way truckload demand was stable early in the quarter, then improved during and following road check, which as most of you know is a vehicle inspection and regulatory compliance initiative that is known to sideline some truckers for the week. Spot rates and tender rejects increased during the week, reflecting the tightened environment and a market closer to equilibrium.

Derek Leathers: Spot rates and tender rejects increased during the week, reflecting the tightened environment and a market closer to equilibrium. One way revenue per truck per week increasingly 8% due to operational excellence and technology tools that have contributed to a favorable production trend. Intentional focus on revenue quality led to sequential gross margin improvement and logistics, and the highest in the last three quarters. In addition, volumes in truckload logistics and intermodal increase sequentially; our only volumes were strong, reporting six straight quarters of sequential volume growth and increasing over 30% year over year. In short, while we are encouraged to see positive signs of an improving market.

Derek J. Leathers: One way revenue per truck per week increased nearly 8% due to operational excellence and technology tools that have contributed to a favorable production trend. Intentional focus on revenue quality led to sequential gross margin improvement in logistics and the highest in the last three quarters. In addition, volumes in truckload logistics and intermodal increased sequentially. Power-only volumes were strong, reporting six straight quarters of sequential volume growth and increasing over 30% year-over-year.

Warner: One-way revenue per truck per week increased nearly 8% due to operational excellence and technology tools that have contributed to a favorable production trend. Intentional focus on revenue quality led to sequential gross margin improvement in logistics and the highest in the last three quarters.

Warner: In addition, volumes in truckload logistics and intermodal increased sequentially. Power only volumes were strong, reporting six straight quarters of sequential volume growth and increasing over 30% year over year.

Derek J. Leathers: In short, while we are encouraged to see positive signs of an improving market, we need more evidence over a longer period before we can call a definitive inflection from the unprecedented breakdown. Challenges remain, and our results continue to reflect a smaller dedicated fleet, pressure on one-way rates as previously negotiated contract renewals become effective, and lower gains on the sale of used equipment. That said, we are pleased with the second quarter improvement and anticipate modest sequential improvement moving forward. Moving to slide six.

Derek Leathers: We need more evidence over a longer period before we can call a definitive inflection from the unprecedented freight downturn. Challenges remain, and our results continue to reflect a smaller dedicated fleet. Pressure on one-way rates has previously negotiated contract renewals become effective and lower gains on the sale of used equipment. That said, we are pleased with the second quarter improvement and anticipate modest sequential improvement moving forward.

Speaker Change: In short, while we are encouraged to see positive signs of an improving market, we need more evidence over a longer period before we can call a definitive inflection from the unprecedented freight downturn.

Speaker Change: Challenges remain and our results continue to reflect a smaller dedicated fleet, pressure on one-way rates as previously negotiated contract renewals become effective, and lower gains on the sale of used equipment.

Speaker Change: That said, we are pleased with the second quarter improvement and anticipate modest sequential improvement moving forward.

Derek Leathers: Moving to slide six, we continue to push forward with implementing structural improvements that will position more than for successes rate improves. 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. We recently 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, we are focused on controlling the controllables and implementing changes that position us to maximize leverage on the market and flex.

Derek J. Leathers: We continue to push forward with implementing structural improvements that will position Werner for success as rates improve. 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. We recently 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 key priority, and driving Capital Efficiency.

Speaker Change: Moving to slide six.

Speaker Change: We continue to push forward with implementing structural improvements that will position Werner for success as rate improves.

Speaker Change: 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.

Speaker Change: We recently 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.

Derek J. Leathers: Relative to our first priority, we are focused on controlling the controllables and implementing changes that position us to maximize leverage on the market. Dedicated trucks represented 65% of our fleet at the end of the quarter, one-way miles per truck increased for the fifth consecutive quarter, and Mexico portfolio volumes increased low teens compared to the prior year period. Our one-way service offering gains strength in the Northeast through our ECM segment, which received several new business awards in the quarter.

Speaker Change: Relative to our first priority, we are focused on controlling the controllables and implementing changes that position us to maximize leverage when the market inflects.

Derek Leathers: Dedicated trucks represented 65% of our fleet at the end of the quarter. One way miles per truck increased for the fifth consecutive quarter. Mexico portfolio volumes increased low teams compared to the prior year period. Our one way service offering gains Frank in the Northeast to our ECM segment that received several new business awards in the quarter. We remain confident in our ability to bridge the gap from recent results to our long term target range, although pace and timing remains difficult to predict. We are making good progress in our second priority of driving operational excellence as a core competency.

Speaker Change: Dedicated trucks represented 65% of our fleet at the end of the quarter.

Speaker Change: One-way miles per truck increase for the fifth consecutive quarter.

Speaker Change: Mexico portfolio volumes increased low teens compared to the prior year period.

Speaker Change: Our one-way service offering gains strength in the Northeast or ECM segment that receives several new business awards in the quarter.

Derek J. Leathers: We remain confident in our ability to bridge the gap from recent results to our long-term target range, although pace and timing remain difficult to predict. We're making good progress in our second priority of driving operational excellence as a core, measurable progress is being made on safety performance due to our investment in quality professional drivers, evolved training programs, and newer equipment. We are starting to realize a new pace of benefit from our technology investment. Our truckload logistics and intermodal business has now migrated to our Edge TMS platform, and the transition of our one-way business is progressing as planned.

Speaker Change: We remain confident in our ability to bridge the gap from recent results to our long-term target range, although pace and timing remains difficult to predict.

Speaker Change: We're making good progress in our second priority of driving operational excellence as a core competency.

Derek Leathers: Measurable progress is being made on safety performance due to our investment in quality professional drivers, evolved training programs, and newer equipment. We are starting to realize a new pace and benefit from our technology investment. Our triple logistics and intermole business is now migrated to our HTMS platform, and the transition of our one way businesses progressing as Land. This is a multi-year journey, and we continue to be encouraged by the results. The synergies and value of a single freight platform will enhance both our customers' experience and our operational capability, as well as provide additional opportunities to grow revenue and reduce costs.

Speaker Change: Measurable progress is being made on safety performance due to our investment in quality professional drivers, evolved training programs, and newer equipment.

Speaker Change: We are starting to realize a new pace of benefit from our technology investment. Our truckload logistics and intermodal business has now migrated to our Edge TMS platform and the transition of our one-way business is progressing as planned.

Derek J. Leathers: This is a multi-year journey, and we continue to be encouraged by the results. The synergies and value of a single freight platform will enhance both our customers' experience and our operational capability, as well as provide additional opportunities to grow revenue and reduce costs. Our cost savings initiatives continue to expand, growing to over $45 million. And finally, our third priority, driving capital efficiency. We had another strong quarter of operating cash flow from ongoing favorable trends and working capital. We continue to allocate our capital with intentionality, including 60 million of share repurchases during the quarter. CapEx spend and fleet age remain low.

Speaker Change: This is a multi-year journey, and we continue to be encouraged by the results.

Speaker Change: The synergies and value of a single freight platform will enhance both our customers' experience and our operational capability, as well as provide additional opportunities to grow revenue and reduce costs.

Derek Leathers: Our cost savings initiatives continue to expand, grow into over 45 million, and finally our third priority driving capital efficiency. We had another strong quarter of operating cash flow from ongoing favorable trends in working capital. We continue with intentionality in our capital allocation, including 60 million of share repurchases during the quarter. Cap expend and fleet age remain low. We will continue to update you on our progress against these priorities.

Speaker Change: Our cost savings initiatives continue to expand, growing to over $45 million. And finally, our third priority, driving capital efficiency.

Speaker Change: We had another strong quarter of operating cash flow from ongoing favorable trends in working capital. We continue with intentionality in our capital allocation, including 60 million of share repurchases during the quarter. CapEx spend and fleet age remain low.

Derek J. Leathers: We will continue to update you on our progress against these priorities. Turning to slide seven, to discuss our current view of the market, while it remains too early to call an inflection, we are encouraged by signs of tightness. Freight demand has been steady but competitive. One-way freight conditions, in particular, improved midway through the quarter and continued into July.

Speaker Change: We will continue to update you on our progress against these priorities.

Derek Leathers: Turning to slide seven to discuss our current view of the market. While it remains too early to call an inflection, we are encouraged by signs of tightening. Freight demand has been steady, but competitive. One-way freight conditions, in particular, improved midway through the quarter and continued into July. We experienced a tighter environment during road check week, which led to improving spot rates, and those gains have held. While we recognize broader spot indices underperformed Q2 seasonality, our one-way segment maintained higher spot rates during the last half of the quarter, enabled by strong execution and freight selection tools.

Speaker Change: Turning to slide 7 to discuss our current view of the market.

Speaker Change: While it remains too early to call an inflection, we are encouraged by signs of tightening.

Speaker Change: Freight demand has been steady, but competitive.

Speaker Change: One-way freight conditions, in particular, improved midway through the quarter and continued into July .

Derek J. Leathers: We experienced a tighter environment during Road Check Week, which led to improving spot rates, and those gains have helped. While we recognize broader spot indices underperformed Q2 seasonality, our one-way segment maintained higher spot rates during the last half of the quarter, enabled by strong execution and freight selection tools. We experience more seasonal freight trends with better demand on the West Coast related to certain projects. We expect typical seasonality leading up to peak season in the fall.

Speaker Change: We experienced a tighter environment during road check week, which led to improving spot rates, and those gains have held. While we recognize broader spot indices underperformed Q2 seasonality, our one-way segment maintained higher spot rates during the last half of the quarter, enabled by strong execution and freight selection tools.

Derek Leathers: We experienced more seasonal freight trends with better demand on the West Coast related to certain projects. We expect typical seasonality leading up to peak season in the fall. Recent conversations with customers are encouraging relative to inventory levels.

Speaker Change: We experience more seasonal freight trends with better demand on the West Coast related to certain projects. We expect typical seasonality leading up to peak season in the fall.

Derek J. Leathers: Recent conversations with customers are encouraging relative to inventory. Moving to slide eight. Before turning it over to Chris to discuss our Q2 results in more detail, I want to take a moment to recognize our Mexico colleagues. July marked the 25th anniversary of our operations in Mexico.

Speaker Change: Recent conversations with customers are encouraging relative to inventory levels.

Derek Leathers: Moving to slide eight. Before turning it over to Chris to discuss our Q2 results in more detail, I want to take a moment to recognize our Mexico colleagues. July marked the 25th anniversary of our operations in Mexico. Together, with our carrier partners, many of whom we have relationships spanning multiple decades, we've built a premium and large-scale Mexico operation with a broad portfolio of services over nearly every crossing location across our southern border. We have a first-class terminal in Laredo that includes a dry and refrigerated transload facility within our property boundaries, providing a high degree of product integrity and security.

Speaker Change: Moving to slide 8. Before turning it over to Chris to discuss our Q2 results in more detail, I want to take a moment to recognize our Mexico colleagues.

Speaker Change: July marked the 25th anniversary of our operations in Mexico.

Derek J. Leathers: Together, with our carrier partners, many of whom we have relationships spanning multiple decades, we have built a premium and large-scale Mexico operation with a broad portfolio of services at nearly every crossing location across our southern border. We have a first-class terminal in Laredo that includes a dry and refrigerated transload facility within our property boundaries, providing a high degree of product integrity and security. Several of our management team members in Mexico have been with us for nearly all of our journey, and they manage a workforce of over 200 associates, with over half of them located in numerous offices throughout Mexico, including Mexico City, Guadalajara, Monterey, and Queretaro.

Speaker Change: Together, with our carrier partners, many of whom we have relationships spanning multiple decades, we've built a premium and large-scale Mexico operation with a broad portfolio of services over nearly every crossing location across our southern border.

Chris: We have a first-class terminal in Laredo that includes a dry and refrigerated transload facility within our property boundaries, providing a high degree of product integrity and security.

Derek Leathers: Several of our management team members in Mexico have been with us for nearly all of our journey, and they manage a workforce of over 200 associates, with over half of them located in numerous offices throughout Mexico, including Mexico City, Guadalajara, Monterrey, and Ceredero. We are uniquely positioned to assist our customers as they expand into Mexico with our 25 years of relevant experience, including cross-border regulatory expertise, expansive footprint, and customer-specific approach. We were recently honored to celebrate this achievement with many of our Mexico-based associates, customers, and partner carriers at our annual transportation forum here in Omaha.

Chris: Several of our management team members in Mexico have been with us for nearly all of our journey, and they manage a workforce of over 200 associates, with over half of them located in numerous offices throughout Mexico, including Mexico City, Guadalajara, Monterrey, and Querétaro.

Derek J. Leathers: We are uniquely positioned to assist our customers as they expand into Mexico with our 25 years of relevant experience, including cross-border regulatory expertise, expansive footprint, and customer-specific approach. We were recently honored to celebrate this achievement with many of our Mexico-based associates, customers, and partner carriers at our annual transportation forum here in Oman. We would not be one of the largest and most reliable cross-border transportation companies without their support, and we look forward to many, many more years of excellent customer service and growth.

Chris: We are uniquely positioned to assist our customers as they expand into Mexico with our 25 years of relevant experience, including cross-border regulatory expertise, expansive footprint, and customer-specific approach.

Chris: We were recently honored to celebrate this achievement with many of our Mexico-based associates, customers, and partner carriers at our annual transportation forum here in Omaha.

Derek Leathers: We would not be one of the largest and most reliable cross-border transportation companies without their support, and we look forward to many, many more years of excellent customer service and growth.

Chris: We would not be one of the largest and most reliable cross-border transportation companies without their support, and we look forward to many, many more years of excellent customer service and growth. I will now turn it over to Chris.

Chris Neil: I will now turn it over to Chris. Thank you, Derek. Let's continue on slide 10. Second quarter revenues totaled 761 million. Six percent lower versus prior year. Adjusted operating income was 21.3 million, and adjusted operating margin was 2.8 percent. A decrease of 58 percent and 350 basis points.

Christopher D. Wikoff: Thank you, Derek. Let's continue on slide 10. Second quarter revenues totaled $761 million, 6% lower versus the prior year. Adjusted Operating Income was $21.3 million, and Adjusted Operating Margin was 2.8%, a decrease of 58% from 350 base points. Adjusted EPS of $0.17 declined $0.35, primarily driven by a softer used equipment market and lower gains, combined with rate pressure in one way and with. Turning to slide 11. Truckload Transportation Service's total revenue for the second quarter was $537 million, down $6.5 million. Revenues net of fuel surcharges fell 5% to $467 million.

Chris: Thank you, Derek. Let's continue on slide 10.

Chris: Second quarter revenues totaled $761 million, 6% lower versus prior year. Adjusted operating income was $21.3 million and adjusted operating margin was 2.8%, a decrease of 58% and 350 basis points.

Chris Neil: Adjust the DPS of 17 cents to client 35 cents, primarily driven by a software-used equipment market, and lower gains, combined with rate pressure in one way, and with... Statistics. Turning to slide 11. Trupload Transportation Services total revenue for the second quarter was 537 million, down 6 percent. Revenue's net-of-fuel surge charges fell 5 percent to 467 million. TTS-adjusted operating income was 23.3 million, 51 percent lower versus prior year. Adjusted operating margin net-of-fuel was 5 percent, a decrease of 470 basis points. A decline in equipment gains drove over 40 percent of the TTS decline in operating income.

Chris: Adjusted EPS of $0.17 declined $0.35, primarily driven by a softer used equipment market and lower gains, combined with rate pressure in one way and logistics.

Christopher D. Wikoff: TTS's Adjusted Operating Income was $23.3 million, 51% lower versus the prior year. Adjusted Operating Margin Net of Fuel was 5%, a decrease of 470 basis points. A decline in equipment gains drove over 40% of the TTS decline in operating income. Werner Fleet Sales, however, continues to produce gains by selling low-mileage, technology-loaded equipment. During the quarter, consolidated gains on the sale of property and equipment were $2.7 million, a decline of $9.2 million, or down over 78% compared to last year.

Chris: Turning to slide 11.

Chris: Truckload Transportation Services total revenue for the second quarter was $537 million, down 6%. Revenues net of fuel surcharges fell 5% to $467 million.

Chris: TTS Adjusted Operating Income was $23.3 million, 51% lower versus prior year. Adjusted Operating Margin Net Appeal was 5%, a decrease of 470 basis points.

Chris: A decline in equipment gains drove over 40% of the TTS decline in operating income.

Chris Neil: Werner Fleet Sales continues to produce gains by selling low mileage, technology-loaded equipment. During the quarter, consolidated gains on sale of property and equipment was 2.7 million, a decline of 9.2 million, or down over 78 percent compared to last year.

Chris: Werner Fleet Sales continues to produce gains by selling low-mileage, technology-loaded equipment. During the quarter, consolidated gains on sale of property and equipment was $2.7 million, a decline of $9.2 million, or down over 78% compared to last year.

Chris Neil: Our view for second half improvement in equipment values has moderated and has been pushed to no earlier than fourth quarter as the weaker freight environment has lingered. Net-of-fuel surge charges and equipment gains TTS operating expenses reflected are intentional commitment to control costs, declining modestly year by year and sequentially. But we're more than offset by TTS trucking revenue rate per mile decline of 3 percent versus prior year and a 9 percent smaller fleet size. One-way rate per total mile during the quarter decreased 2.7 percent year by year. Through the first half of the year, rate per total mile was down 4 percent versus prior year.

Christopher D. Wikoff: Our view for second half improvement in equipment values has moderated and has been pushed to no earlier than fourth quarter as the weaker freight environment has lingered. Net of fuel surcharges and equipment gains, TTS operating expenses reflected our intentional commitment to control costs, declining modestly year-over-year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 3% versus prior year and a 9% smaller fleet supply. The one-way rate per total mile during the quarter decreased 2.7% year-over-year.

Chris: Our view for second half improvement in equipment values has moderated and has been pushed to no earlier than fourth quarter as the weaker freight environment has lingered.

Chris: Net of fuel surcharges and equipment gains, TTS operating expenses reflected our intentional commitment to control costs, declining modestly year-over-year and sequentially, but were more than offset by TTS trucking revenue rate per mile decline of 3% versus prior year and a 9% smaller fleet size.

Chris: One-way rate per total mile during the quarter decreased 2.7% year-over-year. Through the first half of the year, rate per total mile was down 4% versus prior year.

Christopher D. Wikoff: Through the first half of the year, rate per total mile was down 4% versus prior year. Several TTS expense categories showed improvement in the quarter. Insurance and claims expense dropped 5 million, or 13% versus prior year.

Chris Neil: Several TTS expense categories showed improvement in the quarter. Insurance and claims expense dropped 5 million, or 13 percent, versus prior year. Operating supplies and maintenance expense was down 3 million and 5 percent, and non-driver salaries wages and benefits was down 2 million or 4 percent. Despite lower equipment gains, dedicated remains steady and durable, generating double-digit operating margins on a trailing 12-month basis. Achieving our long-term TTS operating margin range is a key priority, and we remain focused on producing higher operating margins. While it remains challenging to forecast, we continue to have confidence in our 4 key levers that, over time, will bridge the gap from recent results to our long-term target range.

Chris: Several TTS expense categories showed improvement in the quarter. Insurance and claims expense dropped 5 million or 13 percent versus prior year. Operating supplies and maintenance expense was down 3 million and 5 percent, and non-driver salaries, wages, and benefits was down 2 million or 4 percent.

Christopher D. Wikoff: Operating Supplies and Maintenance Expense was down $3,005,000, and Non-Driver Salaries, Wages, and Benefits was down $2,004,000. Despite lower equipment gains, Dedicated remains steady and durable, generating double-digit operating margins on a trailing 12-month basis. Achieving our long-term TTS operating margin range is a key priority, and we remain focused on producing higher operating margins. While it remains challenging to forecast, we continue to have confidence in our four key levers that, over time, will bridge the gap from recent results to our long-term target range. These include, first, rate improvement in one way. Second, incremental growth for existing fleets and dedicated at a higher contribution margin as we return to normalized volume. Third, normalization in the used equipment market.

Chris: Despite lower equipment gains, Dedicated remains steady and durable, generating double-digit operating margins on a trailing 12-month basis.

Chris: Achieving our long-term TTS operating margin range is a key priority and we remain focused on producing higher operating margins. While it remains challenging to forecast, we continue to have confidence in our four key levers that, over time, will bridge the gap from recent results to our long-term target range.

Chris Neil: These include first rate improvement in one way. Second, incremental growth for existing fleets and dedicated at a higher contribution margin as we return to normalize volume. Third, normalization in the used equipment market. And fourth, structural improvements through our cost-saving initiatives coupled with tech-enabled synergies. Let's turn to slide 12 to review our fleet metrics. TTS average trucks declined to 7,630 during the quarter. We ended second quarter with the TTS fleet down 2 percent sequentially in 8 percent year-by-year. TTS revenue per truck per week net a fuel increased during the quarter by 3 percent and has increased year-by-year 21 of the last 26 quarters.

Chris: These include, first, rate improvement in one way, second, incremental growth for existing fleets and dedicated at a higher contribution margin as we return to normalized volume.

Christopher D. Wikoff: And fourth, structural improvements through our cost-saving initiatives coupled with tech-enabled synergies. Let's turn to slide 12 to review our fleet metrics. TTS average trucks declined to 7,630 during the quarter.

Chris: Third, normalization in the used equipment market, and fourth, structural improvements through our cost-saving initiatives coupled with tech-enabled synergies.

Chris: Let's turn to slide 12 to review our fleet metrics.

Chris: TTS average trucks declined to 7,630 during the quarter. We ended second quarter with the TTS fleet down 2% sequentially and 8% year-over-year.

Christopher D. Wikoff: We ended the second quarter with the TTS fleet down 2% sequentially and 8% year-over-year. GTS revenue per truck per week net of fuel increased during the quarter by 3% and has increased year-over-year in 21 of the last 26 quarters. Within TTS for the second quarter, dedicated revenue net of fuel was $289 million, down 7%. Dedicated revenue represented 63% of segment revenue compared to 64% a year ago. Dedicated ABRA trucks decreased 7% to 4,901 trucks.

Chris: TTS revenue per truck per week net of fuel increased during the quarter by 3% and has increased year-over-year 21 of the last 26 quarters.

Chris Neil: Within TTS for the second quarter, dedicated revenue net a fuel was 289 million, down 7 percent. Dedicated represented 63 percent of segment revenue compared to 64 percent a year ago. Dedicated average trucks decreased 7 percent to 4,901 trucks. At quarter end, dedicated represented 65 percent of the TTS fleet. Dedicated revenue per truck per week increased slightly year-by-year, growing 25 of the last 26 quarters.

Chris: Within TTS for the second quarter, dedicated revenue net of fuel was $289 million, down 7%. Dedicated represented 63% of segment revenue compared to 64% a year ago.

Chris: Dedicated ABRA trucks decreased 7% to 4,901 trucks. At quarter end, dedicated represented 65% of the TTS fleet.

Christopher D. Wikoff: At quarter end, dedicated represented 65% of the TTS fleet. Dedicated revenue per truck per week increased slightly year over year, growing in 25 of the last 26 quarters. While our per-truck production is trending well, the impact of certain fleet losses as a result of maintaining our pricing discipline drove fewer trucks at the end of the quarter. We will continue to exhibit discipline and value customers who are looking for the reliability, scale, safety, and service of our proven dedicated model.

Chris: Dedicated revenue per truck per week increased slightly year over year, growing 25 of the last 26 quarters.

Chris Neil: While our per truck production is trending well, the impact from certain fleet losses has a result of maintaining our pricing discipline to row fewer trucks at the end of the quarter. We will continue to exhibit discipline and value customers who are looking for the reliability, scale, safety, and service of our proven dedicated model. Although not yet widespread, we have seen demand improvement within some of our existing fleets, and with an improving market, we are positioned well to further penetrate new verticals and other hard to serve freight opportunities at reinvestible margins. In our one-way business for the second quarter, trucking revenue net appeal was 169 million, a decrease of 4% versus prior year.

Chris: While our per-truck production is trending well, the impact from certain fleet losses as a result of maintaining our pricing discipline drove fewer trucks at the end of the quarter.

Chris: We will continue to exhibit discipline and value customers who are looking for the reliability, scale, safety, and service of our proven dedicated model.

Christopher D. Wikoff: Although not yet widespread, we have seen demand improvement within some of our existing fleets. And with an improving market, we are positioned well to further penetrate new verticals and other hard-to-surf freight opportunities at reinvestable margins. In our one-way business for the second quarter, trucking revenue net appeal was $169 million, a decrease of 4% versus the prior year. Average truck count declined 11% to 2,730 trucks.

Chris: Although not yet widespread, we have seen demand improvement within some of our existing fleets, and with an improving market, we are positioned well to further penetrate new verticals and other hard-to-surf freight opportunities at reinvestable margins.

Speaker Change: In our one-way business for the second quarter, trucking revenue net of fuel was $169 million, a decrease of 4% versus prior year. Average truck count declined 11% to 2,730 trucks. Revenue per truck per week was up 8% year over year.

Chris Neil: Average truck count declined to 11% to 2730 trucks. Revenue per truck per week was up 8% year of year. One-way bid season is mostly complete. We started to experience improved results in more recent bids, but also recognized that lower contract rates from earlier bid events will become effective. However, with better freight choices expected in the second half, we will be methodical and proactive in transitioning our one-way portfolio to higher rates throughout the end of the year and into 2025. Regarding production and utility, as expected, we've realized another quarter of production gains, achieving just 2% less total miles versus prior year with 11% fewer trucks.

Christopher D. Wikoff: Revenue per truck per week was up 8% year-over-year. The one-way bid season is mostly complete. We started to experience improved results in more recent bids but also recognized that lower contract rates from earlier bid events would become effective during the quarter. However, with better freight choices expected in the second half, we will be methodical and proactive. Transitioning Our One-Way Portfolio to Higher Rates Throughout the End of the Year and into 2020. Regarding production and utility, as expected, we've realized another quarter of production gains, achieving just 2% less total miles versus the prior year, with 11% fewer trucks. We expect the favorable trend to continue, although year-over-year improvements will moderate. In addition, our power-only offering within the logistics segment continues to grow.

Speaker Change: One-way bid season is mostly complete.

Speaker Change: We started to experience improved results in more recent bids, but also recognize that lower contract rates from earlier bid events will become effective during the quarter. However, with better freight choices expected in the second half, we will be methodical and proactive in transitioning our one-way portfolio to higher rates throughout the end of the year and into 2025.

Speaker Change: Regarding production and utility, as expected, we've realized another quarter of production gains, achieving just 2% less total miles versus prior year, with 11% fewer trucks. We expect the favorable trend to continue, although year-over-year improvements will moderate.

Chris Neil: We expect the favorable trend to continue, although year-to-year improvements will moderate. In addition, our power-on the offering within a logistics segment continues to grow. Our one-way truck load miles combined with power-only miles are at 4% year-over-year, showing strong growth in our overall one-way offering, including asset and asset-light alternatives. This is unique, and in a tighter freight market with better rates, the combination of one-way production gains plus power-only volume growth translates to improved ROI and provides for more optionality for our customers. Turning now to our logistics segment on slide 13. In the second quarter, logistics revenue was 209 million, representing 27% of total second quarter revenues.

Speaker Change: In addition, our power-only offering within the logistics segment continues to grow. Our one-way truckload miles combined with power-only miles are up 4% year-over-year, showing strong growth in our overall one-way offering, including asset and asset-light alternatives.

Christopher D. Wikoff: Our one-way truckload miles combined with power-only miles are up 4% year-over-year, showing strong growth in our overall one-way offering, including asset and asset light alternatives. This is unique, and in a tighter freight market with better rates, the combination of one-way production gains plus power-only volume growth translates to improved ROI and provides for more optionality for our customers. Turning now to our logistics segment on slide 13. In the second quarter, logistics revenue was $209 million, representing 27% of total second quarter revenue. Revenues were down 7% year-over-year, but revenues and truckload logistics declined 10%, and shipments decreased 8%.

Speaker Change: This is unique, and in a tighter freight market with better rates, the combination of one-way production gains plus power-only volume growth translates to improved ROI and provides for more optionality for our customers.

Speaker Change: Turning now to our logistics segment on slide 13.

Speaker Change: In the second quarter, logistics revenue was $209 million, representing 27% of total second quarter revenues. Revenues were down 7% year-over-year, but grew 3% sequentially.

Chris Neil: Revenues were down 7% year-over-year, but grew 3% sequentially. Revenue and truck load logistics declined 10%, and shipments decreased 8%. Shipments increased 2% sequentially as volumes from new business came on board during the quarter, and volumes from the existing customer base were generally steady. As previously mentioned, our power-only solution, again, represented the growth growing portion of the truck load logistics volume in the quarter. In our modal revenues, which make up approximately 13% of segment revenue, increased 17% year-over-year due to 34% more shipments, partially offset by a 13% decrease in revenue in the quarter. Adjusted operating margin was 0.8%, down 160 basis points year-over-year, driven by rate and gross margin compression, but increased 140 basis points sequentially due to higher brokerage and power-only shipments, improved brokerage, gross margins, improvements in final mile, and continued cost savings from integration and technology.

Speaker Change: Revenue and truckload logistics declined 10% and shipments decreased 8%.

Christopher D. Wikoff: Shipments increased 2% sequentially as volumes from new business came on board during the quarter and volumes from the existing customer base were generally steady. 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 13% of segment revenue, increased 17% year-over-year due to 34% more shipments partially offset by a 13% decrease in revenue per shipment. Final mile revenues increased sequentially but decreased 9% year-over-year. As expected, we produced operating income and logistics after falling just short of break-even in the first quarter. Adjusted Operating Income was $1.7 million in the second quarter.

Speaker Change: Shipments increased 2% sequentially as volumes from new business came on board during the quarter, and volumes from the existing customer base were generally steady.

Speaker Change: As previously mentioned, our power-only solution, again, represented a growing portion of the truckload logistics volume in the quarter.

Speaker Change: Intermodal revenues, which make up approximately 13% of segment revenue, increase 17% year-over-year due to 34% more shipments partially offset by a 13% decrease in revenue per shipment.

Speaker Change: Final mile revenues increased sequentially but decreased 9% year-over-year.

Speaker Change: As expected, we produced operating income and logistics after falling just short of breakeven in the first quarter.

Christopher D. Wikoff: Adjusted Operating Margin was 0.8%, down 160 basis points year-over-year, driven by rate and gross margin compression, but it increased 140 basis points sequentially due to higher brokerage and power-only shipments, improved brokerage gross margins, improvements in the final model, and continued cost savings from integration and technology. It continues to be a very competitive operating environment, which is pressuring logistics margins in the short term. We do expect operating margins to improve modestly later in the year due to cost savings and technology enhancements.

Speaker Change: Adjusted operating income was $1.7 million in the second quarter.

Speaker Change: Adjusted Operating Margin was 0.8%.

Speaker Change: down 160 basis points year-over-year, driven by rate and gross margin compression, but increased 140 basis points sequentially.

Speaker Change: Due to higher brokerage and power-only shipments, improved brokerage gross margins, improvements in final model, and continued cost savings from integration and technology.

Chris Neil: It continues to be a very competitive operating environment, which is pressuring logistics margins in the short term. We do expect operating margins to improve modestly later in the year due to our cost savings and technology enhancements. In the meantime, we are controlling what we can, including improving revenue quality as well as building our infrastructure and technology to continue to provide industry-leading service and expertise at greater scale. We have expanded our 2024 savings target from 40 million previously communicated to an excess of 45 million. Over 27 million of savings have already been recognized, and we have a clear line of sight on the rest of the program.

Speaker Change: It continues to be a very competitive operating environment, which is pressuring logistics margins in the short term. We do expect operating margins to improve modestly later in the year due to our cost savings and technology enhancements.

Christopher D. Wikoff: In the meantime, we are controlling what we can, including improving revenue quality as well as building our infrastructure and technology to continue to provide industry-leading service and expertise at greater scale. Moving to slide 14 to discuss our cost savings program. We have expanded our 2024 savings target from $40 million previously communicated to an excess of $45 million. Over $27 million of savings have already been recognized, and we have a clear line of sight on the rest of the program.

Speaker Change: In the meantime, we are controlling what we can, including improving revenue quality as well as building our infrastructure and technology to continue to provide industry-leading service and expertise at greater scale.

Speaker Change: Moving to slide 14 to discuss our Cost Savings Program.

Speaker Change: We have expanded our 2024 savings target from $40 million previously communicated to an excess of $45 million. Over $27 million of savings have already been recognized and we have a clear line of sight on the rest of the program. We are currently focused on developing the next phase of our program for 2025.

Chris Neil: We are currently focused on developing the next phase of our program for 2025. Operating cash flow remains strong at 109 million for the quarter, or 14% of total revenue, very consistent with prior year as we continue to realize efficiency in working capital. As expected, netCapex continues to trend down. Second quarter was 99 million, down 52 million, or 35% year of year. As a percent of revenue, year-to-date net capex is less than 8% of revenue compared to over 15% for the same period last year. Yet we continue to maintain a low average age of fleet at 2.1 years on trucks and trailers, averaging below 5 years.

Christopher D. Wikoff: We are currently focused on developing the next phase of our program for 2022. Let's review our cash flow on slide 5. We ended the second quarter with $70 million in cash and cash equivalents.

Speaker Change: Let's review our cash flow on slide 15.

Christopher D. Wikoff: Operating cash flow remains strong at $109 million for the quarter, or 14% of total revenue, very consistent with the prior year as we continue to realize efficiency in working capital. As expected, net capex continues to trend down. The second quarter was $99 million, down $52 million, or 35% year-to-year. As a percent of revenue, year-to-date net capex is less than 8% of revenue, compared to over 15% for the same period last year. Yet we continue to maintain a low average age of the fleet at 2.1 years for trucks and trailers averaging below 5 years.

Speaker Change: We ended the second quarter with $70 million in cash and cash equivalents.

Speaker Change: Operating cash flow remains strong at $109 million for the quarter, or 14% of total revenue, very consistent with prior year as we continue to realize efficiency in working capital.

Speaker Change: As expected, net capex continues to trend down. Second quarter was $99 million, down $52 million or 35% year-to-year.

Speaker Change: As a percent of revenue, year-to-date net CapEx is less than 8% of revenue compared to over 15% for the same period last year. Yet we continue to maintain a low average age of fleet at 2.1 years on trucks and trailers averaging below 5 years.

Chris Neil: As a result, free cash flow through the first half of this year was 79 million or 5% of total revenues, up 350 basis points year-to-year. Total liquidity at quarter end was 470 million, including cash and availability on our revolver. During the quarter, a term loan with 87.5 million outstanding matured and was absorbed into our revolver capacity. Moving to slide 16, we ended the quarter with 670 million in debt, up 73 million, or 12% sequentially, and up 30 million, or 5% compared to a year earlier. On a net debt basis, year-to-year change was up less than 1%.

Christopher D. Wikoff: As a result, free cash flow through the first half of this year was $79 million, or 5% of total revenues, up 350 basis points year-over-year. Total liquidity at quarter end was $470 million, including cash and availability on our revolver. During the quarter, a term loan with $87.5 million outstanding matured and was absorbed into our revolver capacity.

Speaker Change: As a result, free cash flow through the first half of this year was $79 million, or 5% of total revenues, up 350 basis points year-over-year.

Speaker Change: Total liquidity at quarter end was $470 million, including cash and availability on our revolver. During the quarter, a term loan with $87.5 million outstanding matured and was absorbed into our revolver capacity.

Christopher D. Wikoff: Moving to the next slide, we ended the quarter with $670 million in debt, up $73 million or 12% sequentially and up $30 million or 5% compared to a year earlier. On a net debt basis, the year-over-year change was up less than 1%. Net debt to EBITDA was 1.4 times, driven by EBITDA margin compression over the past 12 months. We have a very healthy balance sheet, access to capital, relatively low leverage, and no near-term maturities in our debt structure.

Speaker Change: Moving to slide 16.

Speaker Change: We ended the quarter with $670 million in debt, up $73 million or 12% sequentially and up $30 million or 5% compared to a year earlier. On a net debt basis, year-over-year change was up less than 1%.

Chris Neil: NetDead, the EBITDA, was 1.4 times driven by EBITDA margin compression over the past 12 months. We have a very healthy balance sheet, access to capital, relatively low leverage, and no near term maturities in our desk structure.

Speaker Change: Net debt to EBITDA was 1.4 times.

Speaker Change: We have a very healthy balance sheet, access to capital, relatively low leverage, and no near-term maturities in our debt structure.

Chris Neil: On slide 17, let's recap our strategic priorities related to capital allocation. We continue to prioritize strategic reinvestment in the business while also being balanced over the long term between returning capital to shareholders, reducing debt, and funding M&A. For the first half of the year, we generated nearly 80 million per cash flow. We utilized 18 million per dividends and 67 million per sharey purchase. During the quarter, our board approved a new 5 million share purchase program replacing the prior program. We invested 60 million towards sharey purchases during the quarter. At an average share price of $37.4, we have 3.9 million shares remaining under the board-approved program.

Christopher D. Wikoff: On slide 17, let's recap our strategic priorities related to capital allocation. We continue to prioritize strategic reinvestment in the business while also being balanced over the long term between returning capital to shareholders, reducing debt, and funding M&A. For the first half of the year, we generated nearly $80 million in pre-cash flow.

Speaker Change: On slide 17, let's recap our strategic priorities related to capital allocation.

Speaker Change: We continue to prioritize strategic reinvestment in the business while also being balanced over the long term between returning capital to shareholders, reducing debt, and funding M&A. For the first half of the year, we generated nearly $80 million pre-cash flow. We utilized $18 million for dividends and $67 million for share repurchase.

Christopher D. Wikoff: We utilized $18 million for dividends and $67 million for share repurchase. During the quarter, our board approved a new $5 million share repurchase program, replacing the prior program. We invested $60 million towards share repurchases during the quarter at an average share price of $37.04. We have 3.9 million shares remaining under the board-approved program. Let's continue on slide 18 and a review of our full year 2024 guidance. Our full year fleet guidance remains down 6% to down 3%. We are down 7% year-to-date.

Speaker Change: During the quarter, our board approved a new $5 million share repurchase program, replacing the prior program. We invested $60 million towards share repurchases during the quarter, at an average share price of $37.04. We have 3.9 million shares remaining under the board approved program.

Chris Neil: Let's continue on slide 18 and review of our full year 2024 guidance. Our full year fleet guidance remains down 6% to down 3%. We are down 7% year to date. We see potential for net growth and dedicated in the second half, but remain focused on maintaining price and margin discipline across our portfolio. For 2024, we now expect net capex between 225 and 275 million, down from 250 to 300 million previously. As always, the line shares for trucks and trailing equipment, but we remain focused on investing in technology, terminals, and talent. Dedicated revenue per truck grew year-to-year and is expected to remain within our full year guidance range of 0-2%.

Speaker Change: Let's continue on slide 18 and a review of our full year 2024 guidance.

Speaker Change: Our full year fleet guidance remains down 6% to down 3%.

Christopher D. Wikoff: We see potential for net growth and dedicated in the second half but remain focused on maintaining price and margin discipline across our portfolio. For 2024, we now expect net capex between $225 and $275 million, down from $250 to $300 million previously. As always, the lion's share is for trucks and trailing equipment, but we remain focused on investing in technology, terminals, and talent. Dedicated revenue per truck grew year-over-year and is expected to remain within our full-year guidance range of zero to three.

Speaker Change: We are down 7% year-to-date. We see potential for net growth and dedicated in the second half, but remain focused on maintaining price and margin discipline across our portfolio.

Speaker Change: For 2024, we now expect net capex between $225 and $275 million, down from $250 to $300 million previously.

Speaker Change: As always, the lion's share is for trucks and trailing equipment, but we remain focused on investing in technology, terminals, and talent.

Speaker Change: Dedicated revenue per truck grew year-over-year and is expected to remain within our full year guidance range of 0 to 3 percent.

Chris Neil: 1-way truck load revenue per total mile decreased 2.7% in the second quarter and 4% in the first half within our guidance range. We expect the year-view change in the third quarter to be down 3% to flat as we see increasing opportunity for favorable rate changes going forward. Equipment and property gains were 4.6 million in the first half of the year. We now anticipate lower equipment values to remain for longer. As a result, we are lowering our range and now expect gains in the range of 7 million to 13 million, down from 10 million to 20 million previously.

Christopher D. Wikoff: One-way truckload revenue per total mile decreased 2.7% in the second quarter and 4% in the first half, within our guidance range. We expect the year-over-year change in the third quarter to be down 3% to flat, as we see increasing opportunity for favorable rate changes going forward. Equipment and property gains were $4.6 million in the first half of the year.

Speaker Change: One-way truckload revenue per total mile decreased 2.7% in the second quarter and 4% in the first half, within our guidance range. We expect the year-over-year change in the third quarter to be down 3% to flat, as we see increasing opportunity for favorable rate changes going forward.

Speaker Change: Equipment and property gains were $4.6 million in the first half of the year. We now anticipate lower equipment values to remain for longer. As a result, we are lowering our range and now expect gains in the range of $7 million to $13 million, down from $10 million to $20 million previously.

Christopher D. Wikoff: We now anticipate lower equipment values to remain for longer. As a result, we are lowering our range and now expect gains in the range of $7 million to $13 million, down from $10 million to $20 million previously. Our tax rate in the second quarter was $24.2%.

Chris Neil: Our tax rate in the second quarter was 24.2%. Here today is 28%, reflecting certain one-time discrete items in the first quarter. We expect this to level out throughout the year. Our full year guidance range remains between 24 and a half percent to 25 and a half percent. The average age of our truck and trailer fleet at the end of the second quarter was 2.1 and 4.9 years, respectively, unchanged from the end of 2023.

Christopher D. Wikoff: Year-to-date, 28%, reflecting certain one-time discrete items in the first quarter. We expect this to level out throughout the year. Our full year guidance range remains between 24.5% and 25.5%. The average age of our truck and trailer fleet at the end of the second quarter was 2.1 and 4.9 years, respectively, unchanged from the end of 2020. I'll now turn it back to Derek.

Speaker Change: Our tax rate in the second quarter was 24.2 percent. Year-to-date is 28 percent, reflecting certain one-time discrete items in the first quarter. We expect this to level out throughout the year. Our full year guidance range remains between 24.5 percent to 25.5 percent.

Derek J. Leathers: The average age of our truck and trailer fleet at the end of the second quarter was 2.1 and 4.9 years respectively, unchanged from the end of 2023. I'll now turn it back to Derek.

Derek Leathers: I'll now turn it back to Derek. Thank you, Chris. It was another challenging quarter for our industry, but we stayed the course and focused on controlling the controllables. We are encouraged by our higher sequential operating income and are proud of our safety record and low preventable accident frequency. We are actively taking steps to enhance our operations and advance competitive strength in the marketplace by strategically investing in our business, reducing costs, and optimizing cash flow. We remain focused on providing a high level of service to our valued customers. We improved one-way miles per truck, and we are growing in total one-way miles, including power only, and we are continuing to grow in Mexico, which is supported by the global secular trend to near shore.

Derek J. Leathers: Thank you, Chris. It was another challenging quarter for our industry, but we stayed the course and focused on controlling the controllables. We are encouraged by our higher sequential operating income and are proud of our safety record and low preventable accident frequency. We are actively taking steps to enhance our operations and advance competitive strength in the marketplace by strategically investing in our business, reducing costs, and optimizing cash flow. We remain focused on providing a high level of service to our valued customers.

Derek J. Leathers: Thank you, Chris.

Derek J. Leathers: It was another challenging quarter for our industry, but we stayed the course and focused on controlling the controllables. We are encouraged by our higher sequential operating income and are proud of our safety record and low preventable accident frequency.

Speaker Change: We are actively taking steps to enhance our operations and advance competitive strength in the marketplace by strategically investing in our business, reducing costs, and optimizing cash flow.

Derek J. Leathers: We improved one-way miles per truck, and we are growing in total one-way miles, including power only, and we are continuing to grow in Mexico, which is supported by the global secular trend to near shore. We made further progress on our cost savings initiatives and returned logistics back to profitability despite ongoing pressure. As a result of the intentional evolution in our business, Werner has never been strong.

Derek J. Leathers: We remain focused on providing a high level of service to our valued customers.

Derek J. Leathers: We improved one-way miles per truck, and we are growing in total one-way miles, including power only, and we are continuing to grow in Mexico, which is supported by the global secular trend to nearshore.

Derek Leathers: We made further progress on our cost savings initiatives and return logistics back to profitability, despite ongoing pressures. As a result of the intentional evolution in our business, Warner has never been stronger. We are a more diversified company and better positioned to capitalize on a market turn. We are cycle tested team and our historical results demonstrate our ability to generate earnings power as the market improves and demand accelerates.

Derek J. Leathers: We made further progress on our cost savings initiatives and returned logistics back to profitability despite ongoing pressures. As a result of the intentional evolution in our business, Werner has never been stronger.

Operator: We are a more diversified company and better positioned to capitalize on a market turn. We are a cycle-tested team, and our historical results demonstrate our ability to generate earnings power as the market improves and demand accelerates. With that, let us open it up for questions. 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.

Derek J. Leathers: We are a more diversified company and better positioned to capitalize on a market turn.

Derek J. Leathers: We are a cycle-tested team, and our historical results demonstrate our ability to generate earnings power as the market improves and demand accelerates. With that, let us open it up for questions.

Unknown Attendee: With that, let us open it up for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Speaker Change: We will now begin the question and answer session.

Speaker Change: To ask a question, you may press star then 1 on your telephone keypad.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys.

Unknown Attendee: At this time, we will pause momentarily to assemble our roster.

Speaker Change: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Eric Morgan: The first question comes from Eric Morgan with Barclays. Please go ahead. Hey, good afternoon. Thanks for taking my question. I guess I wanted to ask on peak season. Derek, you mentioned expecting normal seasonality leading up to peak. I think you also called out some project opportunities that have materialized around the West Coast. I am just wondering if you could expand a bit on that and what you are hearing from customers. I guess you are specifically interested in your comment on modest sequential improvement and earnings sequentially. If that is more a three-two comment or maybe extending into 4Q as well, I appreciate it.

Operator: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Eric Morgan with Barclays. Please go ahead. Hey, good afternoon. Thanks for taking my question. I guess I wanted to ask on.

Speaker Change: The first question comes from Eric Morgan with Barclays. Please go ahead.

Eric Thomas Morgan: Hey, good afternoon. Thanks for taking my question. I guess I wanted to ask on peak season. Derek, you mentioned expecting normal seasonality leading up to peak. I think you also called out some project opportunities that have materialized around the West Coast, so.

Eric Thomas Morgan: Derek, you mentioned expecting normal seasonality leading up... I think you also called out some project opportunities that have materialized around the West Coast. Just wondering if you could expand a bit on that and what you're hearing from customers, and I guess specifically interested in your comment on modest sequential improvement in earnings sequentially, if that's more a 3Q comment or maybe extending into 4Q as well. Thanks for the question.

Speaker Change: Just wondering if you could expand a bit on that and what you're hearing from customers and, you know, I guess specifically interested in, you know, your comment on modest sequential improvement, I think, in earnings sequentially, if that's more a 3Q comment or maybe extending into 4Q as well.

Derek Leathers: Thanks for the question.

Derek Leathers: I think it is early for us to be trying to give any definitive prediction on peak season. I think, as you picked up in our opening remarks, what you heard was lots of signs that seem to be indicating a return to normal seasonality right now. We have seen things like the stickiness of road check and it kind of having enduring the period post road check, at least in our network relative to spot rates. We have seen project opportunities like you have talked about. We have seen kind of return to value as it relates to the value of trailer pools and asset-based carriers being favored slightly over brokerage by certain customers.

Derek J. Leathers: So I think it's early for us to be trying to give any kind of definitive prediction on peak season. But I think, as you picked up in our opening remarks, what you heard was, Um, lots of signs that seem to be indicating a return to kind of normal seasonality right now. We've seen things like the stickiness of road check and it kind of has to endure the period post road check, at least in our network, relative to spot rates.

Speaker Change: Thanks for the question.

Speaker Change: So I think it's early for us to be trying to give any kind of definitive prediction on peak season. I think as you picked up in our opening remarks, what you heard was

Speaker Change: Lots of signs that seem to be indicating a return to kind of normal seasonality right now. We've seen things like...

Speaker Change: The stickiness of Roadshack and it kind of having, um...

Speaker Change: Enduring the period post road check, at least in our network, relative to spot rates.

Derek J. Leathers: We've seen project opportunities like you've talked about. We've seen a kind of return to value as it relates to the value of trailer pools and asset-based carriers being favored slightly over brokerage by certain customers. And frankly, just the overarching theme relative to customer conversations where they're back in the business of wanting to make sure that we're having discussions about being prepared for what their needs may look like, being prepared for what their demand may reflect.

Speaker Change: We've seen project opportunities like you've talked about. We've seen kind of a return to value as it relates to the value of trailer pools and asset-based.

Derek Leathers: And frankly, just the overarching theme relative to customer conversations where they are back in the business of wanting to make sure that we are having discussions about being prepared for what their needs may look like, being prepared for what their demand may reflect, and as they start thinking and analyzing where they are from an inventory perspective, making sure that we are able and capable to be able to stand up support for their needs. All of that kind of leads me to believe, although it is still early and we are certainly not predicting an inflection point on the call today, that things are starting to feel back to normal.

Speaker Change: Carriers being favored slightly over brokerage by certain customers.

Speaker Change: and frankly just the overarching theme.

Speaker Change: Relative to customer conversations where

Speaker Change: They're back in the business of wanting to make sure that we're having discussions about being prepared.

Speaker Change: for what their needs may look like, being prepared for what their demand may reflect, and as they start thinking and analyzing more where they're at from an inventory perspective.

Speaker Change: making sure that we're able and capable to be able to stand up support for their needs.

Derek J. Leathers: And as they start thinking and analyzing more where they're at from an inventory perspective, making sure that we're able and capable to be able to stand up support for their needs. All of that kind of leads me to believe, although it's still early and we're certainly not predicting an inflection point on the call today, that things are starting to feel back to normal. If I look externally at external data, another thing I would point to is the, you know, increased rejection rates as of late, kind of the stickiness of some of those trends, all of which sort of point to an equilibrium or balanced type market situation.

Speaker Change: All of that kind of leads me to believe, although it's still early and we're certainly not predicting an inflection point on the call today,

Derek Leathers: If I look externally at external data, another thing I would point to is the increased rejection rates as of late, kind of the stickiness of some of those trends, all of which sort of point to an equilibrium or balanced type market situation. So not one that's yet tight, but one that's certainly more balanced than it's been previously and something we really haven't seen since kind of mid-summer 22 was the last time we saw rejection rates at that level. As far as the modest sequential improvement part of the question, the reality is, we are still inheriting rates that were negotiated through this early cycle bid season in Q1 that are now coming to implementation phases or are already been implemented.

Speaker Change: that things are starting to feel back to normal. If I look externally at external data, another thing I would point to is the ...

Speaker Change: Chris Leathers, Chris Neil, Christopher Wikoff

Derek J. Leathers: So not one that's yet tight, but one that's certainly more balanced than it was previously and something we really haven't seen since kind of mid-summer 22, the last time we saw rejection rates at that level.

Speaker Change: kind of mid-summer 22 was the last time we saw rejection rates at that level.

Derek J. Leathers: As far as the modest sequential improvement part of the question, the reality is we are still inheriting rates that were negotiated through this early cycle bid season in Q1 that are now coming to implementation phases or have already been implemented. Those are countered by more recent conversations and bid activity that are reflective of flat to even positive results. So when you put those two in the mix, and I think it's only prudent to talk in terms of modest improvement sequentially from Q2 to Q3, we'll still steer clear of Q4 for today's purposes because I do think we're at a dynamic point in the market.

Speaker Change: As far as the modest sequential improvement part of the question...

Speaker Change: The reality is we are still inheriting rates that were negotiated.

Speaker Change: through this early cycle bid season in Q1 that are that are now coming to implementation phases or already been implemented. Those are countered by more recent conversations and bid activity that are reflective of flat to even positive type results.

Derek Leathers: Those are countered by more recent conversations and bid activity that are reflective of flat to even positive type results.

Derek Leathers: So when you talk in terms of modest improvement of sequentially from Q2 to Q3, we will still steer clear of Q4 for today's purposes because I do think we are at a dynamic point in the market.

Speaker Change: So when you put those two in the mix, and I think it's only prudent to talk in terms of modest improvement sequentially from Q2 to Q3, we'll still steer clear of Q4 for today's purposes, because I do think we're at a dynamic point in the market.

Derek Leathers: Appreciate that, and maybe just a quick clarification on the guidance for tractor count going from down 7% to potentially down 3 to 6. Did you say that would be coming from dedicated, or is the one way of business potentially where you could add a few tractors if things start to improve? Yeah, it still wouldn't be our desire to add tractors in one way. We've got great optionality in one way between our power only product, our brokerage capabilities through logistics and other ways by which we could step up and serve a customer to include even in our model and the growth we've seen there.

Derek J. Leathers: Appreciate that, and maybe just a quick clarification on the guidance for the tractor count going from down 7% to potentially down 3 to 6. Did you say that would be coming from dedicated, or is it the one-way business potentially where we add a few tractors if things start? Yeah, it still wouldn't be our desire to add tractors in that way.

Speaker Change: Appreciate that. And maybe just a quick clarification on the guidance for tractor count, you know, going from down 7% to potentially down 3 to 6. Did you say that would be coming from dedicated or is, you know, is the one-way business potentially where you could add a few tractors if things start to improve?

Derek J. Leathers: We've got great optionality in one way between our power-only product, our brokerage capabilities through logistics, and other ways by which we could step up and serve a customer to include even intermodal and the growth we've seen there. We're really focused on dedicated, the pipeline is strong right now, and the number of bid opportunities year over year is up significantly at this point from where it was a year ago. It's still a competitive market, and we're still going to be disciplined with price.

Speaker Change: Yeah, it still wouldn't be our desire to add tractors in one way. We've got great optionality in one way between our power-only product, our brokerage capabilities through logistics, and other ways by which we could step up and serve a customer to include even intermodal in the growth we've seen there.

Derek Leathers: We're really focused on dedicated. The pipeline is strong right now. The number of bid opportunities year over year is up significantly at this point from where it was a year ago. It's still a competitive market, and we're still going to be disciplined with price. So modest improvement in terms of dedicated truck growth, but that's really driven by us taking the disciplined approach to how we're going to think about pricing and making sure whatever we enter into on a multi-year agreement is something that can stand the test of time and is reflective of a customer looking for true high quality dedicated service.

Speaker Change: We're really focused on dedicated. The pipeline is strong right now. The number of bid opportunities year over year is up significantly at this point from where it was a year ago. It's still a competitive market and we're still going to be disciplined with price. So modest improvement in terms of dedicated truck growth.

Derek J. Leathers: So modest improvement in terms of dedicated truck growth, but that's really driven by us taking a disciplined approach to how we're going to think about pricing and making sure whatever we enter into on a multi-year agreement is something that can stand the test of time and is reflective of a customer looking for true high-quality dedicated service. Thanks a lot.

Speaker Change: But that's really driven by us taking a disciplined approach to how we're going to think about pricing and making sure whatever we enter into on a multi-year agreement is something that can stand the test of time and is reflective of a customer looking for true, high-quality dedicated service.

Eric Morgan: Great, thanks a lot. Appreciate it.

Bruce Chan: Thank you. The next question is from Bruce Chan with Stifel. Please go ahead. Hey, good afternoon, Jens. Just want to follow up on some of your comments around the cost days. I think you mentioned that that was going up to north of 45 million. Maybe just wondering if you can offer a little bit more color into what sorts of incremental changes are involved in that process relative to last year. Then just if we think about some of this persistence office here, how much additional leverage do you have? What are you watching in terms of guiding when to make the decisions, might be dial up those cost days even more or maybe even dial them back?

Unknown Attendee: I appreciate it. Thank you. The next question is from Bruce Chan with Stiefel. Please go ahead. Hey, good afternoon, gents.

Speaker Change: Great. Thanks a lot. Appreciate it.

Speaker Change: Thank you.

Speaker Change: The next question is from Bruce Chan with Stiefel. Please go ahead.

Unknown Attendee: Just, you know, want to follow up on some of your comments around the cost savings. I think you mentioned that that was going up to north of $45 million. You know, maybe just wondering if you could offer a little bit more color into, you know, what sorts of incremental changes are involved in that process relative to last year? And then, you know, just if we think about some of this persistent softness here, you know, how much additional leverage do you have? What kind of watching are you kind of watching?

Unknown Attendee: Hey, good afternoon, gents. I just, you know, want to follow up on some of your comments around the cost saves. I think you mentioned that that was

Unknown Attendee: going up to north of $45 million. Maybe just wondering if you can offer a little bit more color into what sorts of incremental changes are involved in that process relative to last year. And then just if we think about some of this persistent softness here, how much additional leverage do you have?

Derek J. Leathers: You know, kind of guiding when to make the decision to maybe dial up those cost savings even more or, you know, maybe even dial them back. Yeah, I'll start at the macro level and turn it to Chris to kind of follow up with some specifics. But at the macro level, I think the thing that we've been really focused on or something that's been important in my vision is making sure that we're cutting costs in a structural way, things that are sustainable that we think can carry forward into future periods, but also making sure that we're not cutting for the short term, from a quarter to quarter perspective, per se.

Speaker Change: What are you kind of watching in terms of, you know, kind of guiding when to make the decision to maybe dial up those cost saves even more or, you know, maybe even dial them back?

Derek Leathers: I'll start with the macro in terms of Chris to follow up with some specifics, but at the macro level I think the thing that we've been really focused on or something that's been important in my vision is making sure that we're cutting costs in a structural way, things that are sustainable that we think can carry forward in the future periods, but also making sure that we're not cutting for the short term from a quarter-to-quarter perspective per se. I think we're close enough to the end that we want to be prepared and ready. We've been focused on enhancing our operational capabilities, further integrating our acquisitions, making sure that the team is poised to respond very quickly and very efficiently as this market turn plays out.

Derek J. Leathers: I think we're close enough to the end that we want to be prepared and ready. We've been focused on enhancing our operational capabilities, further integrating our acquisitions, and making sure that the team is poised to respond very quickly and very efficiently as this market turn plays out. And to do that, you've got to make sure you've got the right players on the field.

Speaker Change: Yeah, I'll start at the macro and turn it to Chris to kind of follow up with some specifics. But at the macro level, I think the thing that we've been really focused on or something that's been important in my vision is...

Chris: Making sure that we're cutting costs in a structural way, things that are sustainable that we think can carry forward into future periods.

Chris: but also making sure that we're not cutting...

Chris: for the short term, from a quarter-to-quarter perspective per se. I think we're close enough to the end that we want to be prepared and ready. We've been focused on enhancing our operational capabilities.

Chris C. Neil: And so it's been a prudent approach. It's been a strategic approach. And one, certainly, when there's been friction, I've been pushing for the long game, making sure that this business is set up and poised for the turn. With that, I'll turn it over to Chris for some more commentary on the specifics. Yeah, not a ton to add there, Bruce.

Chris: Further integrating our acquisitions, making sure that the team is poised to respond.

Chris: [inaudible]

Chris Neil: And to do that, you've got to make sure you've got the right players on the field.

Derek Leathers: And so it's been a prudent approach; it's been a strategic approach, and one certainly, when there's been friction, I've been pushing for the long game, making sure that this business is set up in poised for the turn.

Chris: Ben Friction, I've been pushing for the long game, making sure that this business has set up employees for the turn. With that, I'll turn it over to Chris with some more commentary on the specifics. Yeah, not a ton to add there, Bruce, but just to confirm some of the maybe comments that we had in the prepared remarks. You know, we're making great progress there. It's $27 million.

Chris Neil: With that, I'll turn it over to Chris with some more commentary on the specifics. Yeah, not a ton to add there, Bruce, but just confirm some of the maybe comments that we had in the prepared remarks. You know, we're making great progress there. It's 27 million realized year today. We are increasing the 2024 program from 40 to 45 million or more for the year that gets us to about 90 million, just shy of 90 million over two years. And we are already looking at beyond 2024 of the art of the possible there, being mindful of an upcycle, not cutting into the bone, but really continuing to focus on some of those things Derek mentioned: operation, innovation, productivity gains, leveraging technology and M&A integration, all of which leads to these savings programs being largely structural and sustainable.

Chris C. Neil: But just to confirm some of the comments that we had in the prepared remarks, you know, we're making great progress there. It's $27 million realized year to date. We are increasing the 2024 program from $40 to $45 million or more for the year.

Chris: Realize year-to-date, we are increasing the 2024 program from $40 to $45 million or more for the year. That gets us to about $90 million, just shy of $90 million over two years.

Chris C. Neil: That gets us to about $90 million, just shy of $90 million over two years. And we are already looking beyond 2024 in terms of the art of the possible, being mindful of an up cycle, you know, not cutting into the bone but really continuing to focus on some of those things Derek mentioned, operations, innovation, productivity gains, leveraging technology, and M&A integration, all of which leads to these savings programs being largely structural and sustainable.

Speaker Change: And we are already looking at beyond 2024, of the art of the possible there, being mindful of an up cycle, you know, not cutting into the bone, but really continuing to focus on some of those things Derek mentioned, operation, innovation, productivity gains, leveraging technology, and M&A integration, all of which leads to these savings programs being largely structural and sustainable.

Chris Neil: Okay, I appreciate that. And then just, you know, quick housekeeping follow-up on the NetCapX reduction. I imagine that's coming from, you know, the one way, you know, flea comments that, you know, Derek made earlier and possibly from from dedicated, but maybe just a little color on what's driving that reduction. Yeah, I think there's two parts to it, really. The first one is really just as part of any ongoing cost analysis and focused approach to every dollar we spend. And you also start making sure that we're re-examining and re-justifying Indian all capital projects. But since the bulk of what we do in CapEx, let's be honest, it is all in trucks and trailers, the simple reality of some of the discipline approach we've taken to pricing, which has led to walk away kind of moments for us from opportunities that we feel are not sustainably priced, has led us to the flea guidance that is also down, which has led us to revise what it would take to keep the flea days where we wanted to prepare for eventual emission changes and really have this particular fleet in a great position going forward.

Chris C. Neil: Okay, appreciate that. And then, just, you know, quick housekeeping follow-up on the net CapEx reduction. I imagine that's coming from, you know, the one way, you know, flea comments that Derek made earlier and possibly from dedicated, but it may be just a little color on what's driving that reduction. Yeah, I think there's two parts to it, really, Bruce.

Speaker Change: Okay, I appreciate that. And then just, you know, quick housekeeping follow-up on the net CapEx reduction. I imagine that's coming from, you know, the one-way, you know, flea comments that, you know, Derek made earlier and, you know, possibly from Dedicated, but, you know, maybe just a little color on what's driving that reduction.

Chris C. Neil: The first one is really just as part of any ongoing cost analysis and focused approach to every dollar we spend, you also start making sure that we're re-examining and re-justifying any and all capital projects. But since the bulk of what we do in CapEx, let's be honest, is all in trucks and trailers, the simple reality of some of the disciplined approach we've taken to pricing, which has led to walk away moments for us from opportunities that we feel are not sustainably priced, has led us to fleet guidance that is also down, which has led us to revise what it would take to keep the fleet age where we wanted and prepare for eventual emission changes So I like where we've landed. We're not going to spend money just to spend it.

Speaker Change: Yeah, I think there's two parts to it, really, Bruce. The first one is really...

Speaker Change: Just as part of any ongoing cost analysis and focused approach to every dollar we spend, you also start making sure that we're re-examining and re-justifying any and all capital projects.

Speaker Change: But since the bulk of what we do in CAPEX, let's be honest, is all...

Speaker Change: The simple reality of some of the disciplined approach we've taken to pricing, which has led to a walk away kind of moments for us.

Speaker Change: from opportunities that we feel are not sustainably priced.

Speaker Change: has led us to fleet guidance that is also down, which has led us to revise what it would take to keep the fleet age where we wanted and prepare for eventual emission changes.

Chris C. Neil: We want to make sure that we're very thoughtful with every dollar of capital allocation. And at this point, we just felt it was prudent to kind of claw that back some because we believe the fleet is exactly where we want it, it's sized appropriately, and the discipline will lead the day as to whether or not that number would ever need to be expanded. But the range gives us room to do so and to operate within between now and the back half. Okay, very helpful, thank you.

Speaker Change: and really have this particular fleet in a great position going forward. So I like where we've landed. We're not going to spend money just to spend it. We want to make sure that we're very thoughtful with every dollar of capital allocation, and at this point we just felt it was prudent to kind of claw that back some because we believe the fleet is exactly where we want it. It's sized appropriately, and the discipline will lead the day as to whether or not that number would ever need to be expanded, but the range gives us room to do so and to operate within between now and the back half.

Chris Neil: So I like where we've landed. We're not going to spend money just to spend it. We want to make sure that we're very thoughtful with every dollar of capital allocation. And at this point, we just felt it was prudent to kind of claw that back some because we believe the fleet is exactly where we want it. It's sized appropriately. And the discipline will lead the day as to whether or not that number would ever need to be expanded. But the range gives us room to do so and to operate with them between now and the back half.

Chris Neil: Okay, very helpful. Thank you.

Daniel Imbro: The next question is from Daniel Embreaux with Steven. Think, please go ahead. Yep. Hey, thanks. Good afternoon, buddy.

Chris C. Neil: Thank you. The next question is from Daniel Embro with Stephens, Inc. Please go ahead. Yeah, thanks. Good afternoon, everybody.

Speaker Change: Okay, very helpful. Thank you.

Speaker Change: The next question is from Daniel Embro with Stephens, Inc. Please go ahead.

Daniel Embro: Derek, we'll start with a longer-term one, just as we think about the path back towards that long-term 12 to 17% kind of TTS margin. Obviously, this year is going to be depressed, and we've locked in a lot of dedicated business near these rates, but cost savings are going better. I guess, can you update us? Is this going to be a 2025 event where we can get back into that range?

Derek Leathers: Derek, we're starting a longer term one. Just as we think about the past back towards that long term, 12 to 17% kind of TTS margin. Obviously, this year is going to be depressed, and we've locked in a lot of dedicated business near these rates, but cost savings are going better. I guess, can you update us? Is this going to be a 2025 event? We can get back into that range. They're going to get pushed out further to the right, just given kind of how you're seeing the macro today. How are you thinking this product progresses over the next year, year and a half as we move back towards that?

Daniel Embro: Thanks. Good afternoon, everybody. Derek, I want to start with a longer-term one. Just as we think about the path back towards that long-term 12% to 17% TTS margin,

Speaker Change: Obviously this year is going to be depressed and we've locked in a lot of dedicated business.

Speaker Change: near these rates, but cost savings are going better. I guess, can you update us, is this going to be a 2025 event where we can get back into that range? Is that going to get pushed out further to the right, just given kind of how you're seeing the macro today? How are you thinking this kind of progresses over the next year, year and a half as we move back towards that?

Derek Leathers: Yeah, great question. Obviously, it's a very heavy focus here inside this building. It's something we've done a lot of analysis on. It's tough to give you timing without also trying to predict the exact inflection point. And since we can't do that, we're not really signed up at this point. It's a long-term goal. It's one that we believe we have a bridge to get to. Chris will break that down here in a second. But what I'm, you know, excited about right now is the position we put the organization into, the focus that we've applied and disciplined to our pricing.

Daniel Embro: Is that going to get pushed out further to the right, just given kind of how you're seeing the macro today? How are you thinking this kind of progresses over the next year, year and a half as we move back towards that? Yeah, great question.

Speaker Change: Great question. Obviously, it's a very heavy focus here inside this building. It's something we've done a lot of analysis on.

Speaker Change: It's tough to give you timing without...

Derek J. Leathers: Obviously, it's a very heavy focus here inside this building. It's something we've done a lot of analysis on. It's tough to give you timing without also trying to predict the exact inflection point.

Speaker Change: Also trying to predict the exact inflection point.

Speaker Change: And since we can't do that, we're not really signed up at this point to an exact date and time on the return. It's a long-term goal. It's one that we believe we have a bridge to get to. Chris will break that down here in a second.

Chris: But what I'm, you know, excited about right now is the position we've put the organization into, the focus that we've applied and disciplined to our pricing, so that we don't have a lot of makeup work to do with the organic business inside the building. And what we need to do is to go both improve that, but also...

Chris Neil: So that we don't have a lot of makeup work to do with organic business inside the building. Then what we need to do is to go both improve that, but also. So be opportunistic relative to dedicated opportunities that they come to us. You know, the fleet makes it isn't exactly where we'd like it. We'd like to see dedicated as a larger percentage of the fleet. We know logistics, synergies continue to develop with the read acquisition and the tech-enabled investments that we've been making.

Chris: Be opportunistic relative to dedicated opportunities that they come to us, you know, the fleet mix isn't exactly where we'd like it We'd like to see dedicated as a larger percentage of the fleet. We know logistics

Chris: The Synergies continue to develop with the REIT acquisition and the tech-enabled investments that we've been making. So there's a lot of different opportunities in front of us, and Chris will break some of those down for you for now.

Chris Neil: So there's a lot of different opportunities in front of us, and Chris will break some of those down for you for now. Yeah, so Daniel, you know, we talked about, you know, some of those levers and the components that make up that bridge, getting back to the long term range. We're still confident in doing that. Obviously, the pace and timing is difficult to predict, but you know, those levers that we mentioned, the rate improvement in one way, the demand improvement coming back on dedicated for existing fleets, but adding more trucks as a result of that at a higher contribution margin.

Derek J. Leathers: And since we can't do that, we're not really signed up at this point for an exact date and time for the return. It's a long-term goal. It's one that we believe we have a bridge to get to. Chris will break that down here in a second.

Chris: Yeah, so, uh,

Daniel: Daniel, you know, we talked about, you know, some of those levers and the components that make up that bridge getting back to the long-term range. We're still confident in doing that. Obviously, the pace and timing is difficult to predict, but, you know, those levers that we mentioned, the rate improvement in one way.

Unknown Attendee: Unknown Attendee, The Demand Improvement coming back on dedicated

Daniel: [inaudible]

Chris Neil: Plus just having more of value in the back hall normalization of the used equipment market and getting back to some whipped and the resale values and then everything we're doing around those structural changes. Those are the levers we've got confidence in that. And I would just point out, you know, we've in TTS, we've had five consecutive quarters of sequential decline in operating income until second quarter. So adjusted operating income margin went from 4.1% to 4.3% Q1 to Q2, or net a fuel went from 4.7% to 5%. So that's a modest improvement, but it's an improvement nonetheless.

Speaker Change: Plus, just having more value in the back haul, normalization of the used equipment market and getting back to some lift in the resale values, and then everything we're doing around those structural changes. Those are the levers. We've got confidence in that.

Speaker Change: and I would just point out, you know, we've, in TTS, we've had five consecutive quarters of sequential decline in operating income until second quarter.

Speaker Change: Adjusted operating income margin went from 4.1% to 4.3%, Q1 to Q2, or net of fuel went from 4.7% to 5%. So that's a modest improvement, but it's an improvement nonetheless, and we expect that to continue, although modestly.

Daniel Imbro: And we expect that to continue, although modestly. Yeah, appreciate that.

Chris Neil: And then maybe, as a follow-up, Chris, within the guide, if I can just focus on the logistics side. I think the slides mentioned the brokerage margins would be down sequentially. Normally logistics OR has some degradation quarter over quarter, but normally you're not running at a 99.7. So I guess do you expect logistics to remain in the black in the third quarter? Could we take a step back, or what are some of the puts or takes as they move from 2Q to 3Q on logistics OR side? Thanks. Yeah, no good question. We do expect sequential improvement in operating income in logistics as we move forward.

Speaker Change: Unknown Speaker Yeah, appreciate that. And then maybe as a follow up, Chris, in the guide, if I can just focus on the logistics side, I think the slides mentioned the brokerage margins would be down sequentially.

Speaker Change: Normally, Logistics OR has some degradation quarter over quarter, but normally you're not running it at 99.7. So, I guess, do you expect Logistics to remain in the black in the third quarter? Could we take a step back? Or what are some of the puts or takes as we move from 2Q to 3Q on the Logistics OR side? Thanks.

Speaker Change: Yeah, no good question. We do expect sequential improvement in operating income in logistics as we move forward, so we intend to to stay in the black there.

Chris Neil: So we intend to stay in the black there.

Scott Group: Thanks so much, Bethel.

Scott Group: Thank you. The next question is from Scott Group with Wolf Research. Please go ahead. Hey, thanks Afternoon. So I know just falling up on that last question. I think last quarter you talked about. Not a sequential improvement as well, and the trucking OR improved about 30 basis points. Is that sort of what you're talking about? Just directionally again as we think about Q3. I know that's probably a little bit more specific than you guys usually talk on OR. I just want to try and help get expectations in the right place.

Speaker Change: Thanks so much. Best of luck. Thank you.

Speaker Change: The next question is from Scott Group with Wolf Research. Please go ahead.

Scott H. Group: Hey, thanks, afternoon. So I know, just following up on that last question, I think last quarter you talked about modest sequential improvement as well and the trucking OR improved.

Speaker Change: About 30 basis points. Is that sort of what you're talking about, you know, just directionally, again, as we think about Q3? I know that's probably a little bit more specific than you guys usually talk on OR. I'm just – I don't know. I just want to try and help get expectations in the right place.

Chris Neil: Yes, God, I was going to start my answer with, "that's more specific than we normally talk about" OR "so appreciate your commentary there." Look, we believe that the opportunity is there, especially based on some recent events and recent customer interactions, to improve from Q2 to Q3. You know, as a level said, if you look back over like a 10 year history or horizon with Warner, about half the time Q2 to Q3 earnings actually go down, about half the time they go up. Those are kind of rough goal posts to think about. We are currently, you know, the opinion you will see improvement Q2 to Q3, but it will be modest and the emphasis is on the word modest. And time back to the same commentary from Q1 to Q2 gives you some framework to think about.

Speaker Change: Yes, Scott, I was going to start my answer with that's more specific than we normally talk about OR, so I appreciate your commentary there.

Speaker Change: We believe that the opportunity is there, especially based on some recent events and recent customer interactions to improve from Q2 to Q3. You know, as a level set, if you look back over like a 10-year history or horizon with Werner, about half the time,

Speaker Change: Q2 to Q3, earnings actually go down about half the time they go up. Those are kind of rough goalposts to think about. We are currently...

Speaker Change: You know, of the opinion, you will see improvement Q2 to Q3, but it will be modest, and the emphasis is on the word modest, and tying back to the same commentary from Q1 to Q2 gives you some framework to think about.

Chris Neil: Okay, that's helpful.

Derek Leathers: And then for next year, any thoughts on catbacks? And I know there's talk about a pre-buy, or are you guys, how do you think about the pre-buy? Is that something that makes sense for Warner? Yeah, I think it's a complicated one right now. I mean, I love our positioning, Scott. Meaning that our fleet, as we sit here today, is exactly where we wanted it. It hasn't aged any; it hasn't found itself in a position where we've got to kind of refresh or make up for any aging of the fleet, like others maybe in a position they have to do.

Speaker Change: Okay, that's helpful. And then, for next year, any thoughts on...

Speaker Change: CapEx, and I know there's talk about a pre-buy, are you guys, how do you think about the pre-buy, is that something that makes sense for Werner?

Christopher D. Wikoff: But what I'm excited about right now is the positioning we've put the organization into, the focus that we've applied and been disciplined to our pricing so that we don't have a lot of makeup work to do with an organic business inside the building. And what we need to do is to both improve that but also be opportunistic relative to the dedicated opportunities that they bring to us. The fleet mix isn't exactly where we'd like it to be.

Derek J. Leathers: We'd like to see dedicated as a larger percentage of the fleet. We know logistics synergies continue to develop with the Read acquisition and the tech-enabled investments that we've been making. So there are a lot of different opportunities in front of us, and Chris will break some of those down for you for now. Yeah, so, Daniel, you know, we talked about some of those levers and the components that make up that bridge getting back to the long-term range. We're still confident in doing that, although obviously, the pace and timing are difficult to predict.

Speaker Change: Yeah, I think it's a complicated one right now. I mean, I love our positioning, Scott, meaning that our fleet, as we sit here today, is exactly where we wanted. It hasn't aged any, it hasn't found itself in a position where we've got to kind of refresh or make up for any aging of the fleet, like others may be in a position to have to do. So we're able to go into 2025 in a pretty good place. We'll certainly want to hold serve on our fleet age and make sure, especially if we were to

Christopher D. Wikoff: But, you know, those levers that we mentioned, the rate improvement in one way, the demand improvement coming back on dedicated for existing fleets, adding more trucks as a result of that at a higher contribution margin, plus just having more value in the backhaul, normalization of the used equipment market, and getting back to some lift in the resale values, and then everything we're doing around those structural changes, those are the levers. We've got confidence in that.

Derek Leathers: So we're able to go into 2025, and a pretty good place will certainly want to hold serve on our fleet age and make sure especially if we were to some of this dedicated pipeline was to come to fruition, you could see catbacks impacted by our need to grow into that dedicated opportunity. But it's got to be priced right. It's got to be reinvestible. It's got to be the right kind of customer. And so we're going to make sure and be methodical about all of the above. We're not putting out 25 capex guys right now, but it's not our current stance that we're going to be driven heavily by any kind of pre-buy methodology.

Speaker Change: Some of this dedicated pipeline was to come to fruition. You could see CapEx impacted by our need to grow into that dedicated opportunity. But it's got to be priced right. It's got to be reinvestible. It's got to be the right kind of customer.

Christopher D. Wikoff: And I would just point out, you know, we've, in TTS, we've had five consecutive quarters of sequential decline in operating income until the second quarter. So, adjusted operating income margin went from 4.1% to 4.3%, Q1 to Q2, or net of fuel went from 4.7% to 5%. So, that's a modest improvement, but it's an improvement nonetheless. And we expect that to continue, although modestly. Appreciate

Speaker Change: And so we're going to make sure and be methodical about all of the above. We're not putting out 25 CapEx guidance right now, but it's not our current stance that we're going to be driven heavily by any kind of pre-buy methodology.

Derek Leathers: We're going to come into it as with fresh as we can and be thoughtful with how we conclude our final negotiations on truck and trailer purchases for 25. The last thing I'll say is, with some of the back of the political backdrop going on right now and some of the friction, let's just say that's taking place relative to where some of the submission stuff ultimately lands. And some of the mandates versus regulations versus actual already past requirements, and whether or not there could be a retrenching of some of those, it's just too early to talk too much about it.

Speaker Change: We're going to come into it as fresh as we can and be thoughtful with how we conclude our final negotiations on truck and trailer purchases for 2025. The last thing I'll say is with some of the political backdrop going on right now and some of the...

Speaker Change: friction, let's just say that's taking place relative to where some of the submission stuff ultimately lands, and some of the mandates versus regulations versus actual already passed requirements, and whether or not there could be a retrenching of some of those, it's just too early to talk too much about it. And then the final thought on the subject that I do think is relevant is just OEM capacity constraints in general. I think the fear that most would have if I was part of the investor community is, is trucking going to go out and make some massive pre-buy in advance of these regulatory changes.

Derek Leathers: And then the final thought on the subject that I do think is relevant is just OEM capacity constraints in general. I think the fear that most would have if they were if I was part of the investor community is all ears trucking going to go out and make some massive pre-buy in advance of these regulatory changes. And I think the simple reality is the OEM ability to support something like that this time is fundamentally different than it's been in last cycles. There's been numerous reports that talk about sort of a hard cap of around 300, a more likely cap somewhere in the neighborhood of 285.

Speaker Change: And I think the simple reality is the OEM ability to support something like that this time is fundamentally different than it's been in last cycles.

Speaker Change: There's been numerous reports that talk about sort of a hard cap of around 300, a more likely cap somewhere in the neighborhood of 285.

Derek Leathers: Either one of those numbers is a lot closer to replacement level than it is any kind of meaningful pre-buy level. If you look at it from historical standards, both of which, but isn't a really good position as an industry. Not to repeat some mistakes of the past and end up right back in an over capacity situation.

Speaker Change: Either one of those numbers is a lot closer to replacement level than it is any kind of meaningful pre-buy level if you look at it from historical standards, both of which put us in a really good position as an industry not to repeat some mistakes of the past and end up right back in an overcapacity situation.

Derek Leathers: Very helpful.

Daniel Embro: And then maybe as a follow-up, Chris, in the guide, if I can just focus on the logistics side, I think the slides mentioned the brokerage margins would be down sequentially. Normally, logistics OR has some degradation quarter over quarter, but normally, you're not running at 99.7. So I guess do you expect logistics to remain in the black in the third quarter? Or could we take a step back? Or, what are some of the puts or takes as we move from 2Q to 3Q on the logistics OR side? Thanks. Yeah, no, a good question.

Derek Leathers: Thank you, Derek, for your thoughts.

Adam Ruskowski: Thank you, Scott.

Speaker Change: Very helpful. Thank you, Derek, for your thoughts.

Adam Ruskowski: The next question is from Ken Hoexter with Bank of America. Please go ahead.

Scott H. Group: Thank you, Scott.

Speaker Change: The next question is from Kenneth Hoexter with Bank of America. Please go ahead.

Derek Leathers: Hi, this is Adam Ruskowski on for Ken Hexter. Thanks for taking the question. Maybe Derek, you know, on that capacity comment, you noted how your view is based on a return to seasonality on the demand side and some project activity. Maybe just an update on the state of capacity exits and what you're seeing here, the quarter date. Yeah, we continue to monitor and we continue to see, as everyone does, ongoing attrition of capacity, both the employment data, net attrition of registration data, the pace of that attrition, although not maybe elevating any kind of meaningful uptick.

Adam Roszkowski: Hi, this is Adam Roszkowski on for Ken Hoexter. Thanks for taking the question. Maybe, Derek, you know, on that capacity comment, you noted how your view is based on a return to seasonality on the demand side and some project activity. Maybe just an update on the state of capacity exits and what you're seeing here, the quarter to date.

Speaker Change: Yeah, we continue to monitor and we continue to see, as everyone does, ongoing attrition of capacity, both the employment data, net attrition of registration data, the pace of that attrition, although not maybe elevating any kind of...

Derek Leathers: It's still there. It's ever present. We think people are out of the money that they may have accumulated during the COVID years. I think lenders have been lenient to a fault, and I think you'll see a change in that behavior as market conditions improve. So I think there's still a whole lot of people that are going to not make it out of the other end of this very dark time. So as we look and we think about our business, what gives us confidence in that sentiment is the conversations we're having with customers.

Speaker Change: meaningful uptick.

Speaker Change: It's still there. It's ever-present. We think people are out of the money that they may have accumulated during the COVID years.

Speaker Change: I think lenders have been lenient to a fault, and I think you'll see a change in that behavior as market conditions improve. So I think there's still a whole lot of, you know, people that are going to not make it out of the other end of this very dark time.

Speaker Change: So as we look and we think about our business, what gives us confidence in that sentiment is the...

Chris Neil: We recently just held our annual customer forum here in Omaha. We had a billion and a half, roughly, of revenue under one roof, had conversations over a multi-day period with many of our best customers and largest customers. And really across the board, they still find value in these high quality, well capitalized fleets like Warner. And I think that positions us also as market conditions tighten to be on the front end of feeling that impact. And that's why some of our data differs a little bit from some data that may be out there from a macro perspective, like my commentary about spot rates and holding serve post road check that differs from what you might see on a dat load board.

Speaker Change: conversations we're having with customers. You know, we recently just held our annual customer forum here in Omaha, we had a billion and a half roughly of revenue under one roof.

Speaker Change: had conversations over a multi-day period with many of our best customers and largest customers.

Speaker Change: And really, across the board, they still find value in these high-quality, well-capitalized

Speaker Change: Chris Leathers, Chris Neil, Chris Wikoff, Chris Leathers, Christopher Wikoff, Christopher

Derek Leathers: But it doesn't mean that it's not what's happening every day in our network as we speak. So we're preparing for the turn. You know, we're ready for it. And was again, not to be overly repetitive, but we really like our positioning right now and the work we've put into it to getting prepared.

Speaker Change: So we're preparing for the turn, we're ready for it, and again, not to be overly repetitive, but we really like our positioning right now, and the work we've put into getting prepared.

Chris Neil: God of the helpful, thanks. And then on logistics, so expect operating income to kind of improve sequentially. What does that imply for gross margins? I mean, you mentioned the pressure, but is that sequential pressure on gross margins? Maybe just any thoughts there. Thanks. Yeah, Adam, this is Chris. You know, we've had four quarters of holding around 15% gross margin within truck load brokerage. You know, there's a lot of work underway of refining that portfolio, focusing on higher revenue quality as we go forward in effort to sustain gross margin and mitigate as much of that margin squeeze as we get through the turn.

Christopher D. Wikoff: We do expect sequential improvement in operating income in logistics as we move forward, so we intend to stay in the black there. Thanks so much.

Speaker Change: Got it, that's helpful, thanks. And then on logistics, so expect operating income to kind of improve sequentially. What does that imply for gross margins? I mean, you mentioned pressure, but is that sequential pressure on gross margins? Maybe just any thoughts there. Thanks.

Christopher D. Wikoff: Best of luck. Thank you. The next question is from Scott Group with Wolf Research. Please go ahead.

Speaker Change: Yeah, Adam, this is Chris. You know, we've had four quarters of, you know, holding around 15% gross margin. Within truckload brokerage, you know, there's a lot of work underway of, you know, refining that portfolio, focusing on higher revenue quality as we go forward in effort to sustain gross margin and mitigate as much of that margin squeeze as we get through the turn. So we are working on that. There's also other things that can influence favorably, you know, gross margin and logistics, including as we continue to have strength in the power only growth, which is at a higher margin. You know, we've had six quarters of sequential growth.

Chris Neil: So we are working on that. There's also other things that can influence favorably, you know, gross margin and logistics, including as we continue to have strength in the power only growth, which is at a higher margin. And, you know, we've had six quarters of sequential growth in power only, you know, up double-digit percent C of a year and both revenue and volume. So if some mix continues to change there, you know, that is that's positive. So that's the growth gross margin perspective. And then, you know, we've continued to take out cost in SNA and operating expenses through technology, through integration.

Scott H. Group: Hey, thanks for the afternoon. So I know, just following up on that last question, I think last quarter, you talked about modest sequential improvement as well, and the trucking OR improved about 30 basis points. Is that sort of what you're talking about?

Speaker Change: in power only, you know, up double digit percents year over year in both revenue and volume. So if some mix continues to change there, you know, that is that's positive. So that's the growth gross margin perspective.

Speaker Change: And then, you know, we've continued to take out cost in SG&A and operating expenses through technology, through integration. Overall, the operating expenses and logistics in the second quarter are down 10% year-over-year, so good progress there. You know, all of that put together gives us confidence that we'll continue to see sequential improvement there in operating income, even with some of the margin squeeze with the turn in the end cycle.

Chris Neil: Overall, the operating expenses and logistics in the second quarter are down 10% year of year. So good progress there. You know, all of that put together gives us confidence that we'll continue to see sequential improvement there in operating income, even with some of the margin squeeze with the turn in the in cycle.

Derek Leathers: And that was well stated, and I have nothing to add to that part of the answer. What I would say though, in addition to all of that, the other reality is, as Chris alluded to, some of the synergies we're seeing through the tech-enabled investment that we've been making and what we have now fully implemented in logistics. And that can be done; that will be done through some of the productivity games that we're picking up over time. So we're both excited about the opportunity to expand gross margin, but also in a world will be competitive as far as I can see we've got to make sure we're more and more efficient and that tech is allowing us to do more with less. We are encouraged by early science.

Derek J. Leathers: You know, just directionally, again, as we think about Q3, I know that's probably a little bit more, but I just want to try and help get expectations in the right place. Yeah, Scott, I was going to start my answer with that being more specific than we normally talk about OR. So I appreciate your commentary there.

Speaker Change: And that was well stated. I have nothing to add to that part of the answer. What I would say, though, in addition to all of that...

Speaker Change: The other reality is, as Chris alluded to, some of the synergies we're seeing through the tech-enabled...

Speaker Change: investment that we've been making and what we and now fully implemented in the logistics

Speaker Change: It's my belief that we've got to prepare for a world as we go into the out years of 25, 26 and beyond.

Speaker Change: where 15% is going to be a very competitive number, and the real goal, the real...

Speaker Change: Aspirational expectation is, how do you take 15% and turn it into a meaningful improvement in bottom line OI?

Speaker Change: And that can be done, that will be done, through some of the productivity gains that we're picking up over time. So we're both excited about the opportunity to expand gross margin, but also, in a world that will be competitive, as far as the eye can see, we've got to make sure we're more and more efficient, and that tech is allowing us to do more with less, and we are encouraged by early signs.

Jason Seidl: Thank you. The next question is from Jason Seidl, with TD Cowan. Please go ahead. Thank you, Robert. Or hey, Derek and Chris and team, wanted to touch a little bit on your outlook. You know, if you look at some of the news out there for the low-end consumer, it seems that there's some pressure out there where you listen to McDonald's or Pepsi, and you guys have always had a little bit more outsized exposure. Are you forecasting maybe a little bit of a change in some of your end markets? Are you seeing something different? Yeah, great question.

Speaker Change: Thank you.

Speaker Change: The next question is from Jason Seidl with TD Cowen. Please go ahead.

Derek J. Leathers: Look, we believe that the opportunity is there, especially based on some recent events and recent customer interactions, to improve from Q2 to Q3. You know, as a level set, if you look back over like a 10 year history or horizon with Werner, about half the time, Q2 to Q3, earnings actually go down about half the time they go up. Those are kind of rough goalposts to think about.

Jason H. Seidl: Thank you, Robert. Hey, Derek and Christian's team. I wanted to touch a little bit on your outlook.

Jason H. Seidl: You know, if you look at some of the news out there for the low-end consumer, it seems that there's some pressure out there, whether you listen to McDonald's or Pepsi, and you guys have always had a little bit more outsized exposure. Are you forecasting maybe a little bit of a change in some of your end markets? Are you seeing something different?

Derek J. Leathers: We are currently, you know, the opinion is that you will see improvement from Q2 to Q3, but it will be modest, and the emphasis is on the word modest. Tying back to the same commentary from Q1 to Q2 gives you some framework to think about. Okay, that's helpful.

Derek Leathers: I think there's a multi-part answer there. I'll try to be brief.

Speaker Change: Yeah, great question. I think there's a multi-part answer there. I'll try to be brief.

Derek Leathers: First off, yes, we are expanding verticals in which we participate as we look at our dedicated fleet exposure. We are continuing to expand and our bandwidth and our ability to serve. Looking for like kind of opportunities, meaning very hard to serve driver involved. Defensible positions, but it doesn't have to be in that retail segment. In addition, on one way, same thing, we've been expanded the engineered portion of our fleet. Some of the cross-border Mexico, which is not nearly as retail focused as the rest of our portfolio. And then expanding into growing verticals that are part of Warner Premium Services and the work we're doing there with really kind of higher value, harder to serve, higher expectations, and more difficult transit.

Derek J. Leathers: And then for next year, any thoughts on CapEx, and I know there's talk about a pre-buy. Are you guys, how do you think about the pre-buy? Is that something that makes sense for Werner? Yeah, I think it's a complicated one right now.

Speaker Change: First off, yes, we are expanding verticals in which we participate. As we look at our dedicated fleet exposure, we are continuing to expand and our

Derek J. Leathers: I mean, I love our positioning, Scott, meaning that our fleet, as we sit here today, is exactly where we wanted it to be. It hasn't aged any, and it hasn't found itself in a position where we've got to kind of refresh or make up for any aging of the fleet, like others may be in a position to have to do. The last thing I'll say is with some of the political backdrop going on right now, and some of the friction, let's just say, that's taking place relative to where some of the submission stuff ultimately lands, and some of the mandates versus regulations versus actual already passed requirements, and whether or not there could be a retrenching of some of those, it's just too early to talk too much about it.

Derek J. Leathers: And then the final thought on the subject that I do think is relevant is just OEM capacity constraints in general. I think the fear that most would have if I were part of the investor community is, is trucking going to go out and make some massive pre-buys in advance of these regulatory changes? And I think the simple reality is the OEM ability to support something like that this time is fundamentally different than it was in previous cycles. There's been numerous reports that talk about sort of a hard cap of around 300, a more likely cap somewhere in the neighborhood of 285.

Speaker Change: [inaudible]

Speaker Change: In addition, on one way, same thing, we've been expanding the engineered portion of our fleet, some of the cross-border Mexico, which is not nearly as retail-focused as the rest of our portfolio, and then expanding into growing verticals that are as part of Werner Premium Services and the work we're doing there with really kind of higher value, harder to serve, higher expectations, and more difficult transit.

Derek Leathers: All of the above is one of those things that's taking place as we look forward.

Speaker Change: All of the above is one of those things that's taking place as we look forward. But then back to the original part of the question around the consumer, we're certainly not...

Derek Leathers: But then back to the original part of the question around the consumer. We're certainly not planning this, the next six, several quarters based on any kind of sudden uptick and consumer strength. Instead, it's our belief that the consumer has been more resilient than we would have originally expected. They are staying stronger for longer, but we are very exposed into the discount retail space. They're doing really well. They tend to do really well during these times. And even across our dedicated portfolio, we're growing across the majority of all of our discount retailers because their business is growing, and their needs become more complex as that growth takes place.

Speaker Change: planing this net the next several quarters based on any kind of sudden uptick in consumer strength instead It's our belief that that consumer has been more resilient than we would have originally expected

Speaker Change: They are staying stronger for longer.

Speaker Change: but we are very exposed into the discount retail space. They're doing really well. They tend to do really well during these times. And even across our dedicated portfolio, we're growing across the majority of all of our discount retailers because their business is growing and their needs become more complex as that growth takes place.

Derek Leathers: So it's not a demand-driven or consumer-driven kind of model as we think about building this bridge back to our long-term operating margins. It's more execution, analysis, engineering, and then lining up with the right type of customer.

Speaker Change: So, it's not a demand-driven or consumer-driven kind of model as we think about building this bridge back to our long-term operating margins. It's more execution, analysis, engineering, and then lining up with the right type of customer.

Chris Neil: That's great color, Derek. And follow up. You talked about how your spot is a little bit different than sort of the generic spot that we see posted out there from some of the providers. And you're not the first large trucking company that has told us that. What's sort of the difference between the spot rate that you guys see versus that sort of load board spot rate? Thanks for the question, Jason. Chris Neil. I think there's a number of reasons for it. You know, we saw a spot that increased with Road Check Week and it continued into the July 4th holiday, and we were able to retain a good chunk of those gains.

Speaker Change: That's great color, Derek. And a follow-up, you know, you talked about how...

Speaker Change: Your spot is a little bit different than sort of the generic spot that we see posted out there from some of the providers, and you're not the first large trucking company that has told us that. What's sort of the difference between the spot rate that you guys see versus that sort of load board spot rate?

Chris C. Neil: Thanks for the question, Jason. This is Chris Neil. I think there's a number of reasons for it. You know, we saw a spot that increased with Road Check Week, and it continued into the July 4th holiday, and we were able to retain a good chunk of those gains.

Chris Neil: I think as a carrier with some scale and an ability to execute. We have access to customer load boards and other places of opportunity there that are less, you know, that are less commoditized than the traditional live, live, live, live unload part of spot. And so I think it's just as a bigger, a bigger carry. We've got a better opportunity there to serve other customers. In addition to that, we have several tools that consider network balance. And so those tools have helped us to identify, provide good recommendations on freight selection, freight, obviously optionality, and freight selection.

Chris C. Neil: I think as a carrier with some scale and an ability to execute, we have access to customer load boards and other places of opportunity there that are available.

Chris C. Neil: that are less, you know, that are less commoditized.

Chris C. Neil: than the traditional live, live, live, load, live unload, part of Spot. And so I think it's just as a bigger, bigger carrier. We've got a better opportunity there to to serve other customers. In addition to that, we have several tools that consider network balance.

Chris C. Neil: And so those tools have helped us to identify, provide good recommendations on freight selection. Freight, obviously, optionality and freight selection then will help drive improved spot rates.

Derek Leathers: Then we'll help drive improved spot rates. And then, in addition, although not widespread yet, we have had opportunities to participate in some projects with some customers. And I think you've got to have scale and capability in order to be considered for some of those projects. So all those things, I think, together enable us to maybe play in a little different place in terms of the spot market, then maybe some of the more commoditized parts of that piece of the network. The one thing I would add to that as well is some of the very intents of work we've been doing over the last several weeks is analyzing our network, understanding where we have that optionality that Chris refers to and what that network leverage might look like as it relates to an improving freight market.

Chris C. Neil: And then, in addition, although not widespread yet, we have had opportunities to participate in some projects with some customers.

Chris C. Neil: And I think you've got to have scale and capability in order to be considered for some of those projects. So all those things I think together enable us to maybe play in a little different place in terms of the spot market than maybe some of the more commoditized parts of that piece of the network.

Chris C. Neil: So the one thing I would add is that it...

Chris C. Neil: The one thing I would add to that as well is...

Chris C. Neil: Some of the very intensive work we've been doing over the last several weeks.

Chris C. Neil: is analyzing our network, understanding where we have that optionality that Chris refers to and what that network leverage might look like.

Derek Leathers: Traditionally, Werner has been very conservative in the spot market. We're still at, as we sit here today, very minimally exposed. To spot, but we have done the analysis and we are comfortable that, as we are, as we said here today, roughly 20% of our one way network, one way fleet would be available to participate in spot market opportunities, project opportunities and or other ways by which we could influence the end rate per mile within the network. We're prepared to do so. We will be doing so as opportunities present itself; whether it gets to 20 is really up to our customer base and those interactions that we have in the interim because we're going to make sure that we get that one way network back to a reinvestable level.

Chris C. Neil: as it relates to an improving freight market.

Speaker Change: Traditionally, Werner's been very conservative in the spot market. We're still, as we sit here today, very...

Speaker Change: very minimally exposed to Sprott.

Speaker Change: But we have done the analysis and we are comfortable that as we sit here today, roughly 20% of our one-way network, one-way fleet,

Speaker Change: would be available to participate in spot market opportunities, project opportunities, and or other ways by which we could influence the end rate per mile within the network.

Speaker Change: We're prepared to do so. We will be doing so as opportunities present itself. Whether it gets to 20 is really up to our customer base and those interactions that we have in the interim, because we're going to make sure that we get that one-way network back to a reinvestable level.

Derek Leathers: That makes sense, and you mentioned projects. Are you anticipating project work to take up here in the back after the year noticeably? I think it's too early to say noticeably, but if you go all the way back to Q4 commentary a year ago, we talked about the volume of project opportunities was actually pretty strong. The problem was it didn't come along with the appropriate rates and premiums that that kind of volume requires from an ability to serve it. And so this year, if we were to look and plan towards normal seasonality, I think it will be an opportunity for rates to be reflective of the complexity of doing that work.

Speaker Change: That makes sense. And you mentioned projects. Are you anticipating project work to tick up here in the back half of the year, noticeably?

Speaker Change: I think it's too early to say noticeably, but if you go all the way back to Q4 commentary a year ago, we talked about volume of project opportunities was actually pretty strong. The problem was it didn't come along with the appropriate rates and premiums that that kind of volume requires from an ability to serve it.

Speaker Change: And so this year, if we were to look and plan towards normal seasonality, I think it will be an opportunity for your rates to be reflective of the complexity of doing that work.

Derek Leathers: It's too early to tell how strong that volume will be, but even in Lake Q2 and into Q3, we have some project work underway as we speak, and that's certainly something that's been a couple years since we've been able to see take place.

Speaker Change: It's too early to tell how strong that volume will be, but even in late Q2 and into Q3 we have some project work underway as we speak, and that's certainly something that's been a couple years since we've been able to see take place.

Derek Leathers: I appreciate the time, gentlemen.

Tom Wadowicz: Thank you.

Tom Wadowicz: The next question is from Tom Wadowicz with UBS. Please go ahead. Yeah, good afternoon. I'll just if I miss this, but I wanted to get a little more perspective just on how we auto model the dedicated truck count looking forward. I think you had kind of telegraph that there'd be some reductions in second quarter when we saw that in fleet. But how do you think about dedicated fleet size in 3Q and 4Q? And what's the risk that you know, you kind of see further competitive pressures caused that to decline or you feel pretty comfortable that you're kind of stable with that flea level.

Derek J. Leathers: Either one of those numbers is a lot closer to replacement level than it is to any kind of meaningful pre-buy level if you look at it from historical standards, both of which put us in a really good position as an industry not to repeat some mistakes of the past and end up right back in an overcapacity situation. Very helpful. Thank you, Derek, for your thoughts. Thank you, Scott. The next question is from Kenneth Hoexter with Bank of America. Please go ahead.

Speaker Change: Appreciate the time, gentlemen.

Speaker Change: Thank you.

Speaker Change: The next question is from Tom Wadewitz with UBS. Please go ahead.

Kenneth Scott Hoexter: Hi, this is Adam Roszkowski on behalf of Kenneth Hoexter. Thanks for taking the question. Maybe Derek, you know, on that capacity comment, you noted how your view is based on a return to seasonality on the demand side and some project activity. Maybe just an update on the state of capacity and what you're seeing here. Yeah, we continue to monitor, and we continue to see, as everyone does, ongoing attrition of capacity, both the employment data, net attrition of registration data, the pace of that attrition, although maybe not registering any kind of meaningful uptick. It's still there.

Derek J. Leathers: It's always present. We think people are out of the money that they may have accumulated during the COVID years. I think lenders have been lenient to a fault, and I think you'll see a change in that behavior as market conditions improve. But I think there are still a whole lot of people that are going to not make it out of the other end of this very dark time. That differs from what you might see on a DAT load board, but it doesn't mean that it's not what's happening every day in our network as we speak. So we're preparing for the turn. We're ready for it. And again, not to be overly repetitive, but we really like our position right now and the work we've put into getting prepared. I got it.

Thomas Richard Wadewitz: Yeah, good afternoon. Apologize if I missed this, but I wanted to get a little more perspective just on how we ought to model the dedicated truck count looking forward.

Speaker Change: I think you had kind of, you know, telegraphed that there'd be some reductions in second quarter, and we saw that in fleet. But how do you think about dedicated fleet size in 3Q and 4Q, and what's the risk that

Speaker Change: you know you kind of see further competitive pressures cause that to decline or you feel pretty comfortable that you're you're kind of stable with that fleet level.

Adam Roszkowski: It's helpful. Thanks. And then on logistics, so expect operating income to kind of improve sequentially. What does that imply for gross margins? I mean, you mentioned the pressure, but is that sequential pressure on gross margins? Yeah, Adam, this is Chris.

Derek Leathers: Yeah, Tom, I mean, nothing certain till until until the ink is dry, but clearly if you look at fleet size overall right now and you look at long to your end of year or back half fleet guidance, it implies some stabilization. We also committed, and I'll reiterate that the dedicated pipeline is very strong. Where the rubber meets the road, though, is pricing discipline versus customer expectation. And so we're enthused about the number of opportunities, the number of bidible events, the amounts amounts of trucks right now in the queue. And the year-over-year difference is significant in terms of dedicated demand and trucks currently either being bid or out or already out to bid.

Christopher D. Wikoff: So good progress there. You know, all of that put together gives us confidence that we'll continue to see sequential improvement there in operating income, even with some of the margin squeeze with the turn in the end cycle. And that was well stated. I have nothing to add to that part of the answer.

Christopher D. Wikoff: You know, we've had four quarters of holding around 15% gross margin within truckload brokerage. There's a lot of work underway to refine that portfolio, focusing on higher revenue quality as we go forward in an effort to sustain gross margin and mitigate as much of that margin squeeze as we get through the turn. So we are working on that.

Derek J. Leathers: What I would say, though, in addition to all of that, the other reality is, as Chris alluded to, some of the synergies we're seeing through the tech-enabled investment that we've been making and now fully implemented in logistics. It's my belief that we've got to prepare for a world as we go into the out years of 25, 26, and beyond, where 15% is going to be a very competitive number. And the real goal, the real, you know, aspirational expectation is how do you take 15% and turn it into a meaningful improvement in bottom-line OI?

Christopher D. Wikoff: There are also other things that can influence favorably gross margin and logistics, including as we continue to have strength in the power-only growth, which is at a higher margin. You know, we've had six quarters of sequential growth in power only, double-digit percent year over year in both revenue and volume. So if some mix continues to change there, you know, that's positive. So that's the gross margin perspective. And then, you know, we've continued to take out costs in SG&A and operating expenses through technology and integration. Overall, operating expenses and logistics in the second quarter were down 10% year over year.

Speaker Change: Yeah, Tom, I mean, nothing's certain until the ink has dried, but...

Speaker Change: Clearly, if you look at fleet size overall right now, and you look at long to end of year or back half fleet guidance, it implies some stabilization. We also commented, and I'll reiterate that the dedicated pipeline is very strong. Where the rubber meets the road, though, is

Speaker Change: Pricing Discipline vs. Customer Expectation. And so, we're enthused about the number of opportunities, the number of biddable events, the amounts of trucks right now in the queue.

Speaker Change: and the year-over-year difference is significant in terms of dedicated demand in trucks currently either being bid or out or already out to bid.

Derek Leathers: The question will become how many of those land our bend if there is one is toward truck growth and dedicated in the back half. But time will tell. The important factor right now, at this point in the cycle, is maintaining discipline, doing what's right for our shareholders, and making sure that whatever trucks we're putting into service, I can turn around and buy one to replace it when it's time to do so. What do you think is driving that pipeline to be stronger? Is that because that that sounds more optimistic? Like I think you know some of the competitive commentary earlier in the year was was a lot more cautious about increased pressure, but if you're seeing that pipeline stronger, that you know that seems constructive. So what do you think is behind that?

Speaker Change: The question will become, how many of those land? Our bend, if there is one, is toward truck growth, and dedicated in the back half.

Speaker Change: But time will tell. The important factor right now at this point in the cycle is maintaining discipline, doing what's right for our shareholders, and making sure that whatever trucks we're putting into service, I can turn around and buy one to replace it when it's time to do so.

Derek J. Leathers: And that can be done, that will be done through some of the productivity gains that we're picking up over time. So we're both excited about the opportunity to expand gross margin, but also, in a world that will be competitive as far as the eye can see, we've got to make sure we're more and more efficient and that technology is allowing us to do more with less. And we are encouraged by the early signs. Thank you. The next question is from Jason Seidl with TD Cowen. Please go ahead. Thank you, operator. Hey, Derek and Christian team.

Speaker Change: What do you think is driving that pipeline to be stronger? Because that sounds more optimistic, like I think some of the competitive commentary earlier in the year was a lot more cautious about increased pressure. But if you're seeing that pipeline stronger, that seems constructive. So what do you think is behind that?

Derek Leathers: Yeah, I don't know that there's a difference between the early and the later commentary; the pipeline has been pretty strong throughout. It's the competitive pressure part, meaning the number of bidders number. You know how low will somebody go, whether they understand the business well enough at the time they're pricing it. You know, there's always a bit of a disadvantage of income and see and dedicated. We know the business we're operating, the business, and we realize the differences between the RFP and the real world, and so at times, you know that that could be a headwind. And so we did telegraph that we thought it might be in a couple of cases, and as it turned out, it was. We don't see similar headwinds right now as we look forward on any kind of significantly losses. Yes, there's going to be some work to still be done, but we're more encouraged by the quality of those bids that are in house, the quality of the underlying customer, and the fact that they view their supply chain as a strategic advantage. Those kind of customers understand the importance of best in class dedicated, not just somebody that's a lot to local on the side of the door. And so we're going to continue to differentiate through the work that we do every day, and I think the opportunity for us to get back on the growth trajectory and dedicated is in front of us.

Speaker Change: Yeah, I don't know that there's a difference between the early and the later commentary. The pipeline has been pretty strong throughout.

Speaker Change: It's the competitive pressure part, meaning the number of bidders, how low will somebody go, whether they understand the business well enough at the time they're pricing it. There's always a bit of a disadvantage of incumbency and dedicated.

Speaker Change: We know the business, we're operating the business, and we realize the differences between the RFP and the real world. And so at times you know that that could be a headwind, and so we did telegraph that we thought it might be in a couple of cases, and as it turned out it was.

Speaker Change: We don't see similar headwinds right now as we look forward on any kind of significant fleet losses. Yes, there's going to be some work to still be done.

Speaker Change: But we're more encouraged by the quality of those bids that are in-house, the quality of the underlying customer, and the fact that they view their supply chain as a strategic advantage.

Speaker Change: Those kind of customers understand the importance of best-in-class, dedicated, not just somebody that's slapped a logo on the side of the door. And so we're going to continue to differentiate through the work that we do every day, and I think the opportunity for us to get back on a growth trajectory and dedicated is in front of us.

Chris Wetherbee: Hey Tom, I would just add one quick statistic to that: where we sit right now in the third quarter, we see more net winds being implemented in the dedicated fleet than losses being realized for the quarter. We obviously still have a couple more months to go, but in terms of that net growth and dedicated in the second half relative to the first, in order to get back into that guidance given where we're at, you know, mid year, we're on our way. Okay, so you think even in three key we ought to see that truck on move up a bit given what we're seeing at this time.

Jason H. Seidl: I wanted to touch a little bit on your outlook. You know, if you look at some of the news out there for the low-end consumer, it seems that there's some pressure out there, whether you listen to McDonald's or Pepsi, and you guys have always had a little bit more outsized exposure. Unknown Attendee: Are you forecasting maybe a little bit of a change in some of your end markets? Are you seeing anything?

Speaker Change: Hey, Tom, I would just add one quick statistic to that. Where we sit right now in the third quarter, we see...

Thomas Richard Wadewitz: More net wins being implemented in the dedicated fleet than losses being realized for the corridor. We obviously still have a couple more months to go, but in terms of...

Speaker Change: That net growth and dedicated in the second half relative to the first in order to get back into that guidance given where we're at, you know, mid-year, we're on our way.

Speaker Change: Okay, so you think even in 3k we ought to see that truck move up a bit?

Chris Wetherbee: Yeah, okay, thanks for the time. Appreciate it.

Speaker Change: Given what we're seeing at this time.

Bascome Majors: Thank you. The next question is from Basque majors with Susquejana, please go ahead.

Speaker Change: Okay, thanks for the time. Appreciate it.

Derek J. Leathers: Yeah, great question. I think there's a multi-part answer to that, but I'll try to be brief.

Speaker Change: Thank you.

Speaker Change: The next question is from Bascome Majors with Susquehanna. Please go ahead.

Derek Leathers: Derek, you talked to yourself about the kind of mix season alley typically see in three key three Q, and if we look back historically though four Q is typically up, but I think it's 11 out of the last 12 years, and I was just curious if you could frame a little more granularly. What it is you're seeing in July that gives you confidence that this will be on the better side of that historic seasonality, and what gives you so much pause about really talking in any way, shape, or form about the fourth quarter, given how consistent that is, other than I guess last year was the one year out of those 12 that you didn't grow sequentially? Thank you.

Derek J. Leathers: First off, yes, we are expanding the verticals in which we participate. We look at our dedicated fleet exposure. We are continuing to expand our bandwidth and our ability to serve, looking for like-kind opportunities, meaning very hard-to-serve, driver-involved, defensible positions, but it doesn't have to be in that retail segment. In addition, in one way, same thing, we've been expanding the engineered portion of our fleet, some of the cross-border Mexico, which is not nearly as retail-focused as the rest of our portfolio, and then expanding into growing verticals that are part of Werner Premium Services and the work we're doing there with really kind of higher value, harder-to-serve, higher expectations, and more difficult transit.

Speaker Change: Derek, you talked yourself about the...

Bascome Majors: kind of mixed seasonality you typically see in 3Q. And if we look back historically though, 4Q is typically up, I think it's 11 out of the last 12 years. And I was just curious if you could frame a little more granularly

Derek J. Leathers: All of the above is one of those things that's taking place as we look forward. But then back to the original part of the question around the consumer, we're certainly not planning the next several quarters based on any kind of sudden uptick in consumer strength. Instead, it's our belief that that consumer has been more resilient than we would have originally expected. They are staying stronger for longer.

Speaker Change: What it is you're seeing in July that gives you confidence that this will be on the better side of that historic seasonality?

Derek J. Leathers: But we are very exposed to the discount retail space. They're doing really well. They tend to do really well during these times, and even across our dedicated portfolio, we're growing across the majority of all of our discount retailers because their business is growing, and their needs are becoming more complex as that growth takes place. So it's not a demand-driven or consumer-driven kind of model as we think about building this bridge back to our long-term operating margins. It's more execution, analysis, engineering, and then lining up with the right type of customer. That's a great color, Derek.

Jason H. Seidl: And as a follow-up, you talked about how your spot is a little bit different than sort of the generic spot that we see posted out there from some of the providers. And you're not the first large trucking company that has told us that. What's the sort of difference between the spot rate that you guys see versus that sort of load board spot? Thanks for the question, Jason. This is Chris Neil.

Chris C. Neil: I think there's a number of reasons for it, you know. We saw a demand increase during road check week, and it continued into the July 4 holiday, and we were able to retain a good chunk of those gains. I think, as a carrier with some scale, and, and, and, and an ability to execute, we have access to customer load boards and other, other places of opportunity there that are less commoditized than the traditional And so I think it's just as a bigger carrier; we've got a better opportunity there to serve other customers. In addition to that, we have several tools that consider network balance.

Chris C. Neil: And so those tools have helped us to identify and provide good recommendations on freight selection. Freight, obviously, optionality, and freight selection will then help drive improved spot rates. And then, in addition, although not widespread yet, we have had opportunities to participate in some projects with some customers. And I think you've got to have scale and capability in order to be considered for some of those projects.

Speaker Change: What gives you so much pause about really talking in any way, shape, or form about the fourth quarter, given how consistent that is, other than, I guess, last year was the one year out of those 12 that you didn't grow sequentially? Thank you.

Derek Leathers: Yeah, thank you for the question. So, a few things when I was talking earlier about Q to Q three, that seasonality is the one that is, or that earnings trend is one that's a bit of a coin toss over a decade-plus period in terms of whether it goes up or goes down. Obviously, Q three to Q four almost always goes up. It's the granular look that you ask for; would be things like, as I said here today, what gives me what gives me optimism. Rejection rates that have continued to kind of hold steady at and around 5% that tends to be a line of the sand relative to the market being an equilibrium, spot projects coming up and being implemented and ran over a more extended period projects that start and then get extended further than originally anticipated.

Chris C. Neil: So all those things, I think, together enable us to maybe play in a little different place in terms of the spot market than maybe some of the more commoditized parts of that piece of the network. So the one thing I would add is that it... The one thing I would add to that as well is some of the very intensive work we've been doing over the last several weeks analyzing our network, understanding where we have that optionality that Chris refers to, and what that network leverage might look like as it relates to an improving freight market. Traditionally, Werner has been very conservative in the spot market.

Speaker Change: Yeah, thank you for the question.

Speaker Change: So, a few things. When I was talking earlier about Q2 to Q3, that seasonality is the one that is, or that earnings...

Speaker Change: Trend is one that's a bit of a coin toss over a decade plus period in terms of whether it goes up or goes down Obviously q3 to q4 almost always goes up It's the granular look that you ask for would be things like as I sit here today. What gives me what gives me optimism?

Speaker Change: Rejection rates that have continued to kind of hold steady at and around five percent.

Speaker Change: That tends to be a line in the sand relative to the market being at equilibrium. Spot projects coming up and being implemented and ran over a more extended period. Projects that start and then get extended further than originally anticipated.

Derek Leathers: All of those things give me optimism.

Derek Leathers: The pause about trying to predict Q4 is everything from the election to the war in Ukraine to the reality of the stressed consumer, all of the geopolitical issues that are going on with the Suez Canal and labor issues at the ports. There are so many unknowns between now and Q4 that I just think it would be inappropriate for me to get too granular at this point. I'd rather focus on the reality of the work we're doing to reposition this network, the work we're doing to understand the optionality within one way to be able to flux up in a stronger market.

Speaker Change: All of those things give me optimism.

Speaker Change: The pause about trying to predict Q4 is everything from, you know, the election, to the war in Ukraine, to the reality of the stressed consumer, all of the geopolitical issues that are going on with the

Speaker Change: Suez Canal and labor issues at the ports. There are so many unknowns between now and Q4 that I just think it would be inappropriate for me to get too granular at this point. I'd rather focus on the reality of the work we're doing to reposition this network, the work we're doing to understand the optionality within one way, to be able to flex up in a stronger market.

Derek J. Leathers: We're still, as we sit here today, very minimally exposed to spot, but we have done the analysis, and we are comfortable that, as we sit here today, roughly 20% of our one-way network, one-way fleet would be available to participate in spot market opportunities, project opportunities, and or other ways by which we could influence the end rate per mile within the network. We're prepared to do so. We will be doing so as opportunities present themselves.

Speaker Change: The work that's already taken place, and as Chris mentioned, is resulting in dedicated fleets being implemented in the short term that is outpacing any losses due to price differences.

Speaker Change: Those are the things that I think drive long-term value, and those need to be done, and we need to be prepared and ready to execute. So that's where our efforts are going to be. I can't predict the future any better than anybody else, but there is a lot of positivity afoot that it's going to take time to play out and come to the bottom line. I want to be clear about that.

Derek Leathers: So that's why efforts are going to be. I can't predict the future any better than anybody else, but there is a lot of positivity afoot that it's going to take time to play out and come to the bottom line. I want to be clear about that because we still have inherent headwinds on games on sale and that equipment market being under duress. We still have headwinds from bids that were negotiated in Q1 that are implemented, and we're still living with some of that rates, although we held the line on rate better than most, as seen through our rate from our reduction year over year being lesser than almost anyone's.

Speaker Change: because we still have...

Speaker Change: Inherent headwinds on games on sale and that equipment market being under duress.

Speaker Change: We still have headwinds from bids that were negotiated in Q1 that are implemented, and we're still living with some of that rates, although we held the line on rate better than most, as seen through our rate per mile reduction year over year being lesser than almost anyone's.

Derek Leathers: So we like our positioning; we're ready to we're ready and prepared to improve from here, but it is going to be modest. It's going to be slow going, and but we're going to work to maximize its potential.

Speaker Change: So we like our positioning. We're ready and prepared to improve from here, but it is going to be modest, it's going to be slow going, but we're going to work to maximize its potential.

Derek Leathers: Thank you for that thoughtful answer, and just to maybe put an emphasis on the 4Q piece, and an earlier question you talked about last year having plenty of project demand but not appropriate project pricing to support the cost structure of that work that you would another carriers did. When would we be far enough into the third quarter where you kind of know whether or not you're going to get the kind of pricing that typically supports that 4Q lift for the project work at Werner. Yeah, I think it's going to become evident over the next 45 days.

Speaker Change: Thank you for that thoughtful answer and just to...

Speaker Change #100: To maybe put an emphasis on the 4Q piece, in an earlier question you talked about last year having plenty of project demand but not appropriate project pricing to support the cost structure of that work that you and other carriers did.

Speaker Change #101: When would we be far enough into the third quarter where you kind of know whether or not you're going to get the kind of pricing that typically supports that 4Q lift for the project work at Werner?

Speaker Change #102: Yeah, I think it's going to become evident over the next, you know, 45 days. I think it could become evident even sooner than that as we continue to watch and monitor both attrition on the carrier side, employment data, rejection rates.

Derek Leathers: I think it could become evident even sooner than that as we continue to watch and monitor both attrition on the carrier side, employment data, rejection rates, all of the above, is not to mention, you know, the retailers' response to current inventory levels being in balance or, in many cases, below balance and what that destocking activity starts looking like. Unfortunately, it's just not this day that we have that total visibility, and so we're going to be cautious in our guidance to try to paint the clear picture as we can. But certainly, over the next coming weeks, it'll become much more clear.

Speaker Change #102: All of the above, not to mention, you know, the retailer's response to current inventory levels being at imbalance or in many cases below balance.

Speaker Change #102: and what that destocking activity starts looking like.

Speaker Change #102: Unfortunately, it's just not this day that we have that total visibility, and so we're going to be cautious in our guidance to try to paint the clearest picture as we can. But certainly over the coming weeks, it'll become much more clear.

Derek Leathers: Thank you.

Chris Wetherbee: And the final question today is from Chris Wetherbee with Wells Fargo. Please go ahead. Yeah, he takes good afternoon, guys. You know, maybe along a similar line, just thinking about the dedicated fleet count. And you got to ask a bunch of questions about this.

Speaker Change #102: Thank you.

Speaker Change #102: And the final question today is from Chris Wetherbee with Wells Fargo. Please go ahead.

Christian F. Wetherbee: Hey, thanks, good afternoon guys. You know, maybe along a similar line, just the thinking about the dedicated fleet count and

Chris Wetherbee: But I guess I'm curious, what would sort of get you to the upper band of the additions in the back after the years as a go sort of into this dynamic of sort of improving fundamentals in the spaces we get into the fourth quarter. Just want to get a sense of kind of how you're building that bridge. It sounds like the pipeline is pretty visible. It's just simply sort of getting more out of the pipeline, or just also include some macro uplift as well. I think it really comes down to winery. I mean, if I was to fully expose our current dedicated pipeline, or in this may be true for others as well in the industry, I think most people would be shocked at how many trucks are in that pipeline at any given time.

Christian F. Wetherbee: You got asked a bunch of questions about this, but I guess I'm curious, what would sort of get you to the upper band of the additions in the back half of the year? Does it go sort of into this?

Speaker Change #103: dynamic of sort of improving fundamentals in the space as we get into the fourth quarter. Just want to get some sense of kind of how you're building that bridge. It sounds like the pipeline is pretty visible. Is it just simply sort of getting more out of the pipeline or does it also include some macro uplift as well?

Speaker Change #105: No, I think it really comes down to win rate. I mean, if I was to...

Speaker Change #106: fully expose our current dedicated pipeline, and this may be true for others as well in the industry, I think most people would be shocked at how many trucks are in that pipeline at any given time, both in number of bids, number of customers, and also total truck count.

Derek Leathers: Both in number of bids, number of customers, and also total truck count. So it really comes down to kind of what that win rate looks like and whether we use a traditional win rate over a 10-year period, or we use a more depressed win rate that's been the case maybe over the last 18 months. We know that when the market's loose, that win rate goes down. We know when the market gets deep equilibrium, we get to a long term run rate, and we know when it's tight, the win rates even higher than that. I think we're, relatively speaking, at equilibrium today.

Speaker Change #106: So it really comes down to kind of what that win rate looks like and whether we use a traditional win rate.

Speaker Change #106: Over a 10-year period, or we use a more depressed wind rate, that's been the case.

Speaker Change #106: maybe over the last 18 months.

Speaker Change #106: We know that when the market's loose, that win rate goes down. We know when the market gets to equilibrium, we get to a long-term run rate. And we know when it's tight, the win rate's even higher than that.

Derek Leathers: So the win rate starts to tick up from where it's been, but isn't at a level that we're yet able to give any kind of overly bullish commentary or exact truck health. There's a lot of decisions that will be made in the next 30 days. We will be making our cases to why we're the best choice and best able to serve that customer. And we'll know more as we get further in the quarter. I wish I could tell you more than that, but the pipeline and the activity are strong. It's a matter of win rate from here.

Speaker Change #106: I think we're, relatively speaking, at equilibrium today, so the win rate starts to tick up from where it's been, but isn't at a level that we're yet...

Speaker Change #106: Able to give any kind of overly bullish commentary or exact truck counts.

Speaker Change #106: There's a lot of decisions that will be made in the next 30 days. We'll be making our case as to why we're the best choice and best able to serve that customer, and we'll know more as we get further in the quarter. I wish I could tell you more than that, but the pipeline and the activity is strong. It's a matter of when we're from here.

Derek Leathers: And then one quick follow-up just on the one-way truckload side. I would get curious about the opportunities for utilization as we get into the second half of the year. So we do see some improvement in overall activity, get more of the project business. How much could utilization sort of add to the one way truckload business? Yeah, great question. I mean, we are really proud. I'll start with that. We're really proud of the progress our One Way team has made with utilization. It's kind of the ultimate control the controllables. You can't do much about rate and a fragmented market like the one that one way division finds itself in, but you can go out and efficiently utilize the assets, and you can do everything in your power to make sure that every one of those assets is producing as much as it possibly can.

Speaker Change #107: And then one quick follow-up just on the one-way truckload side. I guess I'm curious about the opportunities for utilization as we get into the second half of the year. Assuming we do see some improvement in overall activity, get more of the project business, how much could utilization sort of add to the one-way truckload business?

Speaker Change #108: Yeah, great question. I mean, we are really proud. I'll start with that. We're really proud of the progress our one-way team has made with utilization. It's kind of the ultimate control, the controllables. You can't do much about rate in a fragmented market like the one the one-way division finds itself in, but you can go out and efficiently utilize the assets and you can do everything in your power to make sure that every one of those assets is producing as much as much as it possibly can.

Derek Leathers: And to have double-digit year-over-year increases in production is not easy to come by, but it's intentional. The cops get tougher because we go forward. There's no doubt about that. It's our belief that you were going to hold serve and make incremental improvements from here. But where we're at from a production standpoint is kind of best in class, and we're going to work to push that envelope further.

Speaker Change #108: And to have double-digit year-over-year increases in production is not easy to come by, but it's intentional.

Speaker Change #108: The comps get tougher as we go forward, there's no doubt about that. It's our belief that we're going to hold serve and make incremental improvements from here. But where we're at from a production standpoint is kind of best in class, and we're going to work to push that envelope further. It also ties into some of my opening comments about our 25th anniversary in Mexico.

Derek J. Leathers: Whether it gets to 20 is really up to our customer base and those interactions that we have in the interim because we're going to make sure that we get that one-way network back to a reinvestable level. That makes sense.

Derek Leathers: It also ties into some of my opening comments about our 25th anniversary in Mexico. We're seeing growth in Mexico. We're participating in the new showing. We have a dominant position there. Those typically are longer linked to all more efficient loads. They're difficult to do. It takes expertise to pull it off and do it effectively, but we're well positioned to do all of the above. So all of that lends me or gives me confidence in our ability to continue to put up great production numbers, but it will be incremental from here, and the cops will get tougher.

Speaker Change #108: We're seeing growth in Mexico, we're participating in the New York Shoring, we have a dominant position there, those typically are longer length of haul, more efficient loads.

Speaker Change #108: They're difficult to do. It takes expertise to pull it off and do it effectively. But we're well positioned to do all of the above. So all of that lends me or gives me confidence.

Speaker Change #108: and our ability to continue to put up great production numbers. But it will be incremental from here, and the comps will get tougher. That's just the reality of the project that started about a year ago in great earnest.

Derek Leathers: That's just a reality of the project that started about a year ago in great earnest. Thank you.

Speaker Change #109: Okay, that's very helpful. Thanks so much, appreciate it.

Derek Leathers: This concludes our question and answer session.

Speaker Change #109: Thank you.

Derek Leathers: I would like to turn the conference back over to Derek Leathers for any closing remarks. We've taken actions to improve the operations across the portfolio and drive structural cost savings that will position us better for better operating leverages. Things improve. While it's difficult to forecast exact timing of market tightness, we have a long history of performance when market dynamics normalize, and we're prepared to deliver on that promise once again. While fleet reductions are a reality, so is the pricing discipline that drove the decrease. We remain committed to our customers, but we must achieve reinvestible margins to justify longer-term capital commitments.

Speaker Change #108: This concludes our question and answer session. I would like to turn the conference back over to Derek Leathers for any closing remarks.

Jason H. Seidl: And you mentioned projects. I mean, are you anticipating project work to pick up in the back half of the year? I think it's too early to say noticeably, but, you know, if you go all the way back to Q4 commentary a year ago, we talked about the volume of project opportunities being actually pretty strong. The problem was it didn't come along with the appropriate rates and premiums that that kind of volume requires from an ability to serve it.

Derek J. Leathers: And so this year, if we were to look at and plan for normal seasonality, I think it will be an opportunity for your rates to be reflective of the complexity of doing that work. It's too early to tell how strong that volume will be, but even in late Q2 and into Q3, we have some project work underway as we speak, and that's certainly something that it's been a couple years since we've been able to see take place. I appreciate the time, gentlemen. Thank you. The next question is from Tom Wadewitz of UBS. Please go ahead.

Derek J. Leathers: Thanks, Gary. I want to thank everybody for being with us today.

Thomas Richard Wadewitz: Yeah, good afternoon. Apologize if I missed this, but I wanted to get a little more perspective on how we ought to model the dedicated truck count looking forward. I think you kind of, you know, telegraphed that there'd be some reductions in the second quarter, and we saw that in the fleet. But what do you think about the dedicated fleet size in 3Q and 4Q? And what's the risk that, you know, further competitive pressures cause that to decline, or you feel pretty comfortable that you're kind of stable with that fleet level? Yeah, Tom. I mean, nothing's certain until the ink is dry.

Speaker Change #110: As we've discussed on several earnings calls, this has been the worst freight environment I've seen in 30 plus years in the industry. That said, we are focused on preparing for the coming inflection.

Derek J. Leathers: But clearly, if you look at fleet size overall right now, and you look at long-term to end of year or back half fleet guidance, it implies some stabilization. We also commented, and I'll reiterate that the dedicated pipeline is very strong. Where the rubber meets the road, though, is pricing discipline versus customer expectation.

Derek J. Leathers: And so we're enthused about the number of opportunities, the number of biddable events, the months' amounts of trucks right now in the queue. And the year over year difference is significant in terms of dedicated demand and trucks currently either in bid or out or already out to bid. The question will become how many of those lands are bent if there is one is toward truck growth and dedicated in the back half.

Derek J. Leathers: But time will tell. The important factor right now at this point in the cycle is maintaining discipline, doing what's right for our shareholders, and making sure that whatever trucks we're putting into service, I can turn around and buy one to replace it when it's time to do so. What do you think is driving that pipeline to be stronger? Is that because that sounds more optimistic, like I think, you know, some of the competitive commentary earlier in the year was a lot more cautious about increased pressure. But if you're seeing that pipeline stronger, that seems constructive. So what do you think is behind that? Yeah, I don't know if there's a difference between the early and the later commentary.

Derek J. Leathers: The pipeline has been pretty strong throughout. It's the competitive pressure part, meaning the number of bidders, how low will somebody go, whether they understand the business well enough at the time they're pricing it. There's always a bit of a disadvantage of incumbency and dedication.

Derek J. Leathers: Those kind of customers understand the importance of best-in-class dedicated support, not just somebody that's slapped a logo on the side of the door. And so we're going to continue to differentiate through the work that we do every day, and I think the opportunity for us to get back on a growth trajectory and be dedicated is in front of us. Hey, Tom, I would just add one quick statistic to that. Where we sit right now in the third quarter, we see more net wins being implemented in the dedicated fleet than losses being realized for the quarter.

Derek J. Leathers: We know the business, we're operating the business, and we realize the differences between the RFP and the real world. And so at times, you know that that could be a headwind, and so we did telegraph that we thought it might be in a couple of cases, and as it turned out, it was. We don't see similar headwinds right now as we look forward to any kind of significant flea losses. Yes, there's going to be some work to still be done, but we're more encouraged by the quality of those bids that are in-house, the quality of the underlying customer, and the fact that they view their supply chain as a strategic advantage.

Derek J. Leathers: We obviously still have a couple more months to go. But in terms of that net growth and dedicated in the second half relative to the first, in order to get back into that guidance, given where we're at, you know, mid year, we're on our way. Okay, so you think even in three key, we ought to see that truck move up a bit. Unknown AttendeeGiven what we're seeing at this time. Yeah, okay. Thanks for the time.

Speaker Change #110: We're focusing on controlling what we can and improving execution throughout the business. We've taken actions to improve the operations across the portfolio and drive structural cost savings that will position us better.

Christopher D. Wikoff: I appreciate it. Thank you. The next question is from Bascome Majors with Susquehanna. Please go ahead.

Speaker Change #110: For better operating leverage as things improve.

Speaker Change #110: While it's difficult to forecast exact timing of market tightness, we have a long history of performance when market dynamics normalize, and we're prepared to deliver on that promise once again.

Derek J. Leathers: While fleet reductions are a reality, so is the pricing discipline that drove the decrease.

Derek J. Leathers: We remain committed to our customers, but we must achieve reinvestible margins to justify longer-term capital commitments. In short, we're taking actions now that have better positioned the business for an improving freight market.

Derek Leathers: In short, we're taking actions now that have better positioned the business for an improving freight market.

Derek Leathers: I'll close by thanking our over 13,000 associates for their dedication and commitment to our customers and each other as we keep America moving. While it's been tougher for longer over the past couple of years, Warner is a structurally stronger company today, but a lot to be excited about as this downcycle mirrors its natural end. As we transition from the current environment into a more normalized one, we are poised to capitalize and deliver shareholder value.

Derek J. Leathers: I'll close by thanking our over 13,000 associates for their dedication and commitment to our customers.

Derek J. Leathers: and each other as we keep America moving. While it's been tougher for longer over the past couple of years, Werner is a structurally stronger company today with a lot to be excited about as this down cycle nears its natural end.

Derek J. Leathers: As we transition from the current environment into a more normalized one, we are poised to capitalize and deliver shareholder value. I'd like to thank you all for your interest in Werner, and I hope you all enjoy the rest of your day.

Derek Leathers: I'd like to thank you all for your interest in Warner, and I hope you all enjoy the rest of your day.

Bascome Majors: Derek, you talked to yourself about the kind of mixed seasonality you typically see in 3Q, and if we look back historically, though, 4Q is typically up, I think it's 11 out of the last 12 years, and I was just curious if you could frame it a little more granularly. What it is you're seeing in July that gives you confidence that this will be on the better side of that historic seasonality? What gives you so much pause about really talking in any way, shape, or form about the fourth quarter, given how consistent that is, other than, I guess, last year was the one year out of those 12 that you didn't grow sequentially? Thank you. Yeah, thank you for the question. So, a few things.

Derek J. Leathers: When I was talking earlier about Q2 to Q3, that seasonality is the one that is, or that earnings trend is one that's a bit of a coin toss over a decade plus period in terms of whether it goes up or goes down. Obviously, Q3 to Q4 almost always goes up. It's the granular look that you ask for would be things like, as I sit here today, what gives me optimism?

Derek J. Leathers: Rejection rates that have continued to kind of hold steady at and around five percent. That tends to be a line in the sand relative to the market being at equilibrium. Spot projects coming up and being implemented and run over a more extended period. Projects that start and then get extended further than originally anticipated.

Derek J. Leathers: All of those things give me optimism. The pause about trying to predict Q4 is everything from the election to the war in Ukraine to the reality of the stressed consumer and all of the geopolitical issues that are going on with the Suez Canal and labor issues at the ports.

Derek J. Leathers: There are so many unknowns between now and Q4 that I just think it would be inappropriate for me to get too granular at this point. I'd rather focus on the reality of the work we're doing to reposition this network. The work we're doing to understand the optionality within one way to be able to flex up in a stronger market. The work that's already taken place, and as Chris mentioned, is resulting in dedicated fleets being implemented in the short term. That is outpacing any losses due to price differences.

Unknown Attendee: The conference is now concluded.

Derek J. Leathers: Those are the things that I think drive long-term value, and those need to be done, and we need to be prepared and ready to execute. So that's where our efforts are going to be. I can't predict the future any better than anybody else.

Derek J. Leathers: I'll close by thanking our over 13,000 associates for their dedication and commitment to our customers and each other as we keep America moving. While it's been tougher for longer over the past couple of years, Werner is a structurally stronger company today with a lot to be excited about as this down cycle nears its natural end. As we transition from the current environment into a more normalized one, we are poised to capitalize on and deliver shareholder value. I'd like to thank you all for your interest in Werner, and I hope you all enjoy the rest of your day. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Derek J. Leathers: But there is a lot of positivity afoot that it's going to take time to play out and come to the bottom line. I want to be clear about that because we still have inherent headwinds on gains on sales and the equipment market being under duress. We still have headwinds from bids that were negotiated in Q1 that are implemented, and we're still living with some of those rates. Although we held the line on rates better than most, as seen through our rate per mile reduction year over year being less than almost anyone's. So we like our positioning.

Unknown Attendee: Thank you for attending today's presentation.

Derek J. Leathers: We're ready and prepared to improve from here, but it is going to be modest. It's going to be slow going, but we're going to work to maximize its potential. Thank you for that thoughtful answer. And just to put an emphasis on the 4Q piece.

Bascome Majors: In an earlier question, you talked about last year having plenty of project demand but not appropriate project pricing to support the cost structure of that work that you and other carriers did. When would we be far enough into the third quarter where you kind of know whether or not you're going to get the kind of pricing that typically supports that 4Q lift for the project work at Werner? Yeah, I think it's going to become evident over the next, you know, 45 days. I think it could become evident even sooner than that, as we continue to watch and monitor both attrition on the carrier side, employment data, rejection rates, all of the above, and not to mention, you know, the retailer's response to current inventory levels being at an imbalance, or in many cases below balance, and what that destocking activity starts looking like.

Speaker Change #111: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Bascome Majors: Unfortunately, it's just not this day that we have that total visibility, and so we're going to be cautious in our guidance to try to paint the clearest picture as we can, but certainly over the coming weeks, it'll become much more clear. Thank you. And the final question today is from Chris Wetherbee with Wells Fargo. Please go ahead.

Unknown Attendee: You may now disconnect.

Christian F. Wetherbee: Hey, thanks. Good afternoon, guys. Maybe along a similar line, just thinking about the dedicated fleet count, and you got asked a bunch of questions about this.

Derek J. Leathers: But I guess I'm curious, what would sort of get you to the upper band of the additions in the back half of the year? Does it go sort of into this dynamic of sort of improving fundamentals in the space as we get into the fourth quarter? I just want to get some sense of kind of how you're building that bridge. It sounds like the pipeline is pretty visible. Is it just simply sort of getting more out of the pipeline, or does it also include some macro uplift as well? No, I think it really comes down to win rates.

Christian F. Wetherbee: I mean, if I were to fully expose our current dedicated pipeline, and this may be true for others as well in the industry, I think most people would be shocked at how many trucks are in that pipeline at any given time, both in the number of bids, number of customers, and also the total truck count. So it really comes down to kind of what that win rate looks like and whether we use a traditional win rate over a 10-year period, or we use a more depressed win rate that's been the case maybe over the last 18 months.

Christian F. Wetherbee: We know that when the market's loose, that win rate goes down. We know when the market gets to equilibrium, we get to a long-term run rate, and we know when it's tight, the win rate's even higher than that.

Derek J. Leathers: I think we're, relatively speaking, at equilibrium today, so the win rate starts to tick up from where it's been, but it isn't at a level that we're yet able to give any kind of overly bullish commentary or exact truck counts. There are a lot of decisions that will be made in the next 30 days. We'll be making our case as to why we're the best choice and best able to serve that customer, and we'll know more as we get further into the quarter. I wish I could tell you more than that, but the pipeline and the activity are strong. It's a matter of win rate from here on out.

Christian F. Wetherbee: And then one quick follow-up just on the one-way truckload side. I guess I'm curious about the opportunities for utilization as we get into the second half of the year. Assuming we do see some improvement in overall activity, and get more of the project business, how much could utilization sort of add to the one-way truckload? Yeah, great question.

Derek J. Leathers: I mean, we are really proud. I'll start with that. We're really proud of the progress our one-way team has made with utilization. It's kind of the ultimate control, the controllables.

Derek J. Leathers: You can't do much about rate in a fragmented market like the one the one-way division finds itself in, but you can go out and efficiently utilize the assets, and you can do everything in your power to make sure that every one of those assets is producing as much as it possibly can. And to have double-digit year-over-year increases in production is not easy to come by, but it's intentional. The comps get tougher as we go forward. There's no doubt about that.

Derek J. Leathers: It's our belief that we're going to hold, serve, and make incremental improvements from here, but where we're at from a production standpoint is kind of best in class, and we're going to work to push that envelope further. It also ties into some of my opening comments about our 25th anniversary in Mexico. We're seeing growth in Mexico, and we're participating in the new shoring. We have a dominant position there. Those typically are longer-length haul, more efficient loads. They're difficult to do,

Derek J. Leathers: It takes expertise to pull it off and do it effectively, but we're well-positioned to do all of the above. All of that gives me confidence in our ability to continue to put up great production numbers, but it will be incremental from here, and the comps will get tougher. That's just a reality of the project that started about a year ago in great earnest. Okay, that's very helpful.

Christian F. Wetherbee: Thanks so much. I appreciate it. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Derek Leathers for any closing remarks. Thanks, Gary.

Derek J. Leathers: I want to thank everybody for being with us today. As we've discussed on several earnings calls, this has been the worst freight environment I've seen in 30 plus years in the industry. That said, we are focused on preparing for the coming inflection. We're focusing on controlling what we can and improving execution throughout the business. We've taken actions to improve operations across the portfolio and drive structural cost savings that will position us better for better operating leverage as things improve.

Derek J. Leathers: While it's difficult to forecast the exact timing of market tightness, we have a long history of performance when market dynamics normalize, and we're prepared to deliver on that promise once again. While fleet reductions are a reality, so is the pricing discipline that drove the decrease. We remain committed to our customers, but we must achieve reinvestable margins to justify longer-term capital commitments. In short, we're taking actions now that have better positioned the business for an improving freight market.

Unknown Attendee: Music Music