Q2 2025 Werner Enterprises Inc Earnings Call

Good afternoon and welcome to the Werner Enterprises Second Quarter 2025 Earnings Conference Call.

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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 2 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.

Our reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation.

On today's call with me are Derek Leathers, Chairman and CEO, and Chris Woof, Executive Vice President, Treasurer, and CFO. I will now turn the call over to Derek.

Thank you, Chris and good afternoon, everyone. We appreciate you joining us today.

We generated solid results during the second quarter and are encouraged by the sequential improvement in financial performance relative to Q1.

The Freight Market faces ongoing uncertainty related to shifting global trade policy and Regulatory issues. We remain focused on providing Superior and diversified solutions to our customers, by investing in our future, through technology, and structurally improving our business with the commitment to delivering value.

The key priorities, we have been focusing on have started to bear fruit. Is evidenced by numerous positive operating metrics in the quarter.

Including year-over-year growth in revenue, net of fuel surcharge for the first time in six quarters, a return to profitability driven by decisive action and execution. And sequential growth in various forms, including revenue, TTS fleet.

1-way revenue per total MI gains from the sale of used equipment, TTS, operating income, and logistics, gross margin.

As a reminder on slide 5, there are 3 priorities that underpinned, our Drive strategy, which we execute day in and day out.

First.

Driving growth in core business. In DTS, our fleet is up here. Today, our dedicated solution is winning in the marketplace. One-way rates are increasing, and we realize year-over-year growth overall. Combined miles across our one-way tractor assets and power link trailer-only offering.

Within logistics, we are back to mid-single-digit growth driven by truckload brokerage and InterMOTO volumes.

Our customers are voting with their Freight. As we Notch several new business Awards with strategic customers across our portfolio.

Second, driving operational excellence is a core competency.

Our focus on creating and fostering a culture around safety. Never changes. Our DOT, preventable accident per million miles continues to Trend favorably as we hire quality, professional drivers and invest in new technology laid and equipment.

We are pleased that the Texas Supreme Court has ruled on the accident that occurred in 2014 reversing, the 90 million jury verdict from 2018. The Court's decision provided much-needed Clarity in the state of Texas,

But legal reforms still needed in many states across the country.

We will continue to work at the state level and with others in and outside our industry for fairness and reasonableness regarding these types of claims and lawsuits

This marks the end of a decade, long and difficult chapter, while we are grateful for the clarity of this decision, brings, we will not lose sight of the tragic loss for the Blake family.

Operational strategy and we are progressing on this front as well.

Volume on our htms platform is growing nearly 2/3 of 1-way trucking volume is now on edge and over half of the dedicated volume.

Logistics has largely been on edge TMS for several quarters, leading to a 20% productivity improvement in brokerage loads per full-time employee.

We are seeing more top and bottom line Tech enabled. Synergies such as growing, no, touch fully, automated load, bookings, and back office, efficiency is like carrier payment automation. We are driving efficiency by scaling. The use of conversational AI calling and notifications for reminders and communication. With new hires Associates and brokerage carriers, our professional drivers have greater technology tools, improving their situational awareness while on the road and providing mobile ease of access to important. Information went off the road

I'm proud of the efforts of our technology team and the willingness of our Associates to lead into change and transformation. These changes are benefiting all of our stakeholders including our customers. While further securing our it infrastructure and Cloud environments. And finally, our reliability and commitment to Excellence was recently, recognized as Warner was named a 2025, top 3pl and Cold Storage provider for food logistics for the 9th consecutive year.

Our final priority is driving Capital efficiency. We are generating positive, cash flow and supporting this. We are maximizing value on the sale of used equipment. Tightening our full year guide on equipment, gains to the upper end of the prior range. Regarding capex, we will continue to invest in the 5ts, trucks trailers terminals, technology and talent.

This year. However, we decided to moderate our equipment spent with a modern and low age Fleet. We have Assets in place to support, growth through the rest of this year, with a strong balance sheet, inclusive of low leverage, we are focused on disciplined return oriented Investments this quarter. We flexed our share, we purchase authorization and bought back 55 million of shares at an exceptional value. When it comes to evaluating the impact of tariffs on our equipment costs, our strong balance sheet yields optionality

Let's start with Slide 6 and discuss our second quarter results. During the quarter, revenues decreased 1% versus the prior year. Revenues net of fuel increased 1%. Adjusted EPS was $0.11, adjusted operating margin was 2.2%, and adjusted TTS operating margin was 2.8% net of fuel surcharge.

results in the quarter benefited from a growing Fleet size due to Dedicated startups and pop-up truck opportunities in 1 way,

1 way Revenue per total Mi growth Cost, Containment discipline and action.

Higher volumes and truckload logistics, particularly in brokerage, are showing stable growth, margins, and increased gains on equipment, both sequentially and year-over-year.

In dedicated retention, remains, strong and shipper conversations are constructive as customers. Look for Reliable and flexible, Transportation Partners, who offer Creative Solutions, High service and scale.

The implementation of new dedicated Fleet signed. Last quarter is progressing, well, and continuing to ramp into Q3 as we hire drivers and build fleets to targeted levels.

additional fleets were awarded in the quarter and the opportunity pipeline remains strong

Our dedicated expertise is a competitive advantage that has and will continue to drive growth over the long run.

In 1 way truckload Revenue per total Mi increased sequentially and was up year-over-year for the fourth consecutive quarter. As recent contractual rate, changes became effective and that had improved sequentially. Our 1-way Fleet size increased sequentially, driven in part from engineered, pop-up Solutions in response to customer requests.

This demonstrates our flexibility and adaptability in meeting customers' needs in an improving market, all while implementing new fleets and dedicated support for brokerage growth and logistics.

We are pleased with our Q2 Trends and Logistics showing double-digit growth sequentially and mid single-digit growth year-over-year. We expect continued growth driven by our track record and reputation with large shippers needing additional capacity.

In addition to sequential and year-over-year, Topline growth expenses were down and operating margin improved.

Turning the slide 7. Our comprehensive Logistics portfolio is a key component of our Diversified Solutions. Focused strategy. Warner's mix of large complex shippers requires a combination of multimodal solutions that are coordinated, reliable, and cost-effective our solution oriented logistic service. Provides expertise that benefits larger customers, while also expanding our reach to small and mid-size shippers.

Customer challenges.

Our large trailer pools, provide capacity, simplify shipper operations, improve efficiency, and minimize the need for costly labor to live load and unload trailers.

Brokerage also, enables new customers to be introduced to Warner in a low-risk setting often leading to expanded business relationships and 1-way truck motor dedicated.

Our inner motorul business is a high service product that provides a lower cost options to customers. We have Partnerships with all of the major railroads for Nationwide rail access and capacity to a combination of private containers and rail owned equipment to provide High service levels of the United States and Mexico across border.

Finally, our dedicated final mile division moves big and bulky goods nationwide directly to homes and B2B in verticals such as furniture, appliances, auto parts, and healthcare.

Our technological advancements are fueling Logistics growth, including running on our Edge TMS platform and other tools, like Warner Bridge, which makes us a preferred user-friendly choice for third-party carriers, and more Automation and load booking and back office processes. Keeping us agile and cost-effective moving on to slide 8, to summarize, our Market Outlook for the remainder of the year,

Although there could be fits and starts we expect stable truckload fundamentals throughout the rest of the year.

Supply and demand in our industries continued to work towards equilibrium in recent years as the current challenging environment lingers. We anticipate ongoing capacity attrition.

Long Haul truckload employment is below the prior peak in 2019, and additional exits. Could accelerate with greater EOP and B1 enforcement Class, 8 truck orders on the decline and lenders driving out capacity through growing repositions given resale values, are on the rise.

Consumers have remained resilient as they search for value and trade down, resulting in relatively stable, non-discretionary spending.

The $1 billion big beautiful bill could stimulate consumer demand and industrial investment over time, both of which would benefit freight volumes.

Tariff and interest rate impacts remain uncertain for both shippers and consumers.

Retail inventories have mostly normalized. While some inventory was pulled forward due to tariffs, non-discretionary goods have had more consistent replenishment cycles. Volumes from our value and discount retailers were steady in Q2 and into July.

Spot rates have weakened since the July 4th holiday and we expect spot rates to follow normal seasonal patterns for the remainder of the year.

Use truck and trailer values of accelerated. Since March benefiting from tariff and other macro uncertainty with that, I'll turn it over to Chris to discuss our second quarter results in more detail.

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

all performance comparisons here are year-over-year unless otherwise noted

Second quarter revenues totaled $750 million, down 1%. Adjusted operating income was $16.6 million, and adjusted operating margin was 2.2%. Adjusted EPS of $0.11 was down $0.06.

We are pleased with the improved adjusted results in the core business. We also benefited from a handful of non-gaap adjustments during the quarter first. The taxes Supreme Court's ruling in favor, Warner's favor reversing and dismissing the landmark in 90 million truck accident verdict from 2018. This ruling led to the reversal of a 45.7 million. Net liability, including interest and benefiting Gap, operating income, our Consolidated, insurance, and claims expense. For the quarter excluding, this benefit was 38.9 Million

In addition, our acquisition of Baylor. Trucking in October 2022, included an earnout provision based on a range of outcomes during the quarter. We settled on a final payout, resulting in the reversal of 7.9 million from previously acred amounts. Although the accured earnout has been included in gaap results since the date of the acquisition, the reversal was classified as a non-gaap adjustment. In the quarter, due to the large 1-time nature of the reversal this benefit was included in other expense.

Last severance expense of 1.3 million, from recent cost, actions was also treated as a non-gaap adjustment Severance is included in the salaries, wages and benefits.

Turning to slide 11.

Truckload transportation services, total revenue for the quarter, was 518 million down. 4%, revenue is net of fuel. Search charges decreased 1% to 462 million.

TTS adjusted operating income was 12.8 million adjusted operating margin, net of fuel was 2.8%. A decrease of 220 basis points of which 150 basis points of the decrease is attributed to higher insurance, and claims expense excluding the 45.7 million reversal.

During the quarter, consolidated gains on the sale of property and equipment totaled $5.9 million.

Let's turn to slide 12 to review, our Fleet metrics.

TTS average trucks were 7,489 during the quarter. The TTS Fleet entered the quarter up 1% year-over-year and up over 100 trucks sequentially. TTS revenue per truck per week, net of fuel, increased 3%, primarily due to higher one-way revenue per total mile, mitigated by lower one-way miles.

Within TTS, dedicated Revenue, net of fuel was 287 million down 7% dedicated represented. 64% of TTS, Trucking revenues up from 63% a year ago.

Dedicated average, trucks decreased, 0.9% year-over-year, but increased sequentially by 1.6% to 4,855 trucks at quarter end. The dedicated fleet was up 50 trucks or 1% from year end and represented 65% of the TTS Fleet.

Dedicated Revenue per truck per week group 0.2% and has increased 28 of the last 30. Quarters. It often takes 90 days or more before, new fleets meet targeted, utility as drivers are higher than integrated. Into the fleet. Equipment is positioned and routes are optimized.

Lower utility in the startup fleets negatively impacted Revenue per truck per week by 60 basis points in the quarter.

Higher insurance costs versus the prior year period, on an adjusted basis, excluding the Texas Supreme Court reversal, was nearly a 200 basis point drag on operating income.

Startup costs for new dedicated fleets was a headwind as well, totaling approximately $1 million.

We expect some additional startup costs to linger into the third quarter. Excluding the elevated insurance and claims costs, dedicated operating income margin improved by 50 basis points.

In our one-way business, for the second quarter, Trucking Revenue, net of fuel, was $164 million, a decrease of 3%. The average truck count of 2,634 declined 3.5% year-over-year but grew slightly on a sequential basis. Revenue per truck per week increased 0.4% due to 2.7% higher rates, mitigated by a 2.3% lower miles per truck per week.

Revenue per loaded mile increased 3.7% year-over-year deadhead improved sequentially but was still elevated year-over-year resulting in a 2.7% increase in Revenue per total mile

Freight conditions were steady throughout the quarter. We experienced tighter conditions around Road. Check week in May, and stable volumes throughout June, which have largely continued into the early stages of the third quarter.

we were able to flex the fleet and provide 1-way capacity for select customers who had temporary needs this work is ongoing

The total 1-way miles decreased 6% versus prior year with 3.5% fewer average trucks. However, increased miles in powerlink offset. The decline in 1-way truckload miles. Ultimately. Resulting, in Combined miles that increased 1%.

Now, turning to logistics on slide 13.

In the second quarter, Logistics revenue was $221 million, representing 30% of total second quarter revenues. Revenue increased 6% year-over-year and 13% sequentially.

Revenue and truckload logistics increased 9% in shipments, which rose 7%, accompanied by gross margin expansion.

Revenue from our Powerlink offering was up 17%, while traditional brokerage recorded mid-single-digit revenue growth. Higher volume was the driving factor, along with modest rate improvements.

In our modal revenues, which make up approximately 13% of logistics. Revenue increased 3%, due to 7% more shipments. Partially offset by a 4% decrease, in Revenue per shipment.

22 is our highest operating income quarter in two years for Intermodal.

Final mile revenues decreased 10% year-over-year but increased 7% sequentially.

Adjusted operating margin of 2.7% improved 190 basis points, driven by volume growth and a double-digit percent reduction in operating expenses.

Moving to slide 14 and our Cost Savings Program.

As we execute our cost savings strategy, we are slightly increasing our 2025 savings target to greater than $45 million from our prior $40 million estimate. In the first half of the year, we achieved $20 million in savings towards that goal.

Actions to achieve the full 45 million have largely already been taken, given high assurance of achieving the remaining 25 million in the second half of the year.

The majority of our cost savings actions are structural and should result in enhanced operating leverage as demand returns.

Let's review our cash flow and liquidity and slide 15.

Operating cash flow is 46 million for the quarter or 6% of total revenue. Net capex was 66 million or nearly 9% of Revenue.

Here today, net capex is 4% of revenue.

We entered the quarter with 725 million of debt, our net debt to adjusted ibida as of June 30th, it was 1.7 times. We have a strong balance sheet access to Capital relatively low, leverage, and no near-term maturities in our debt structure.

Total liquidity at quarter-end was $695 million.

Including 51 million of cash on hand, and 644 million of combined availability on a revolver and receivable of facility, which we closed in the first quarter.

Let's turn to slide 16.

While we have been focused on cost to discipline strategic reinvestment in the business to support future growth, remains a top priority. Ranging from trucks to technology, when it comes to broad capital allocation decisions, we will remain balanced over the long term—strategically reinvesting in the business, returning capital to shareholders, maintaining appropriate leverage, and remaining disciplined and opportunistic with share repurchase and M&A.

During the second quarter, we deployed $55 million of capital to repurchase more than 2.1 million shares at an average price of $66.05, including fees, providing accretive value to shareholders in the future as earnings improve.

We have 1.8 million shares remaining under our board approved Sherry purchase authorization.

Let's review our guidance for the year on slide 17.

We are narrowing our full year. Fleet guidance range from up, 1 to 5% to up 1 to 4 percent. The TTS Fleet is up 1.1% year to date implementations of new fleets and dedicated remain ongoing and over the course of the year as new. Dedicated fleets are seated. Growth is expected to be driven more by dedicated versus 1 way.

We are addressing our full-year net capex guidance, adjusting it from a range of $185 million to $235 million, to a range of $145 million to $185 million, given our strong balance sheet and proactive fleet management. We entered the year with a higher-than-normal inventory of new trucks, ready to support growth.

CapEx for this year is below our historical range, given lower in-ear needs and the deliberate shift to a more asset-light mix.

Dedicated revenue per truck per week increased 0.2% year-over-year but is down 0.1% for the first six months of the year versus the prior year. New fleet startups were a limiting factor this quarter in revenue per truck. Excluding inefficiencies from startups, this metric would have been up by 80 basis points instead of 20 basis points. We expect this metric to remain within our full-year guidance range of 0% to 3%.

One-way truckload revenue per total mile increased 2.7%, near the upper end of our flat to up 3% guidance range for the second quarter.

We are reissuing the same Revenue per total Mi guide of flat to up 3% for the third quarter compared to the prior year period.

Our effective tax rate was 26.2% in the second quarter, our 2025 guidance range of 25 to 26% remains unchanged and we expect a lower effective tax rate in future quarters. The average age of our truck and trailer Fleet at the end of second quarter was 2.4 and 5.5 years respectively.

Regarding other modeling assumptions.

After decreasing on a year-over-year basis for nine straight quarters, equipment gains more than doubled sequentially and year-over-year to 5.9 million in the second quarter, despite the number of units sold being less than half compared to the prior year.

Used tractor values have been elevated, largely due to trade policy. We are adjusting our full-year guidance range for equipment gains from a range of $8 million to $18 million to a range of $12 million to $18 million in the first half of the year. Net interest expense increased $600,000 year-over-year; we expect the inverse in the second half and for net interest expense to be down year-over-year with that. I'll turn it back to Derek.

Thank you, Chris. In summary, our strategy is working, as proven by our second quarter growth. That said, more work remains and will continue to take near-term, decisive action to position Werner for success. We are a large-scale, award-winning, reliable partner with diverse and agile solutions to support customers' transportation and logistics needs. We've been making considerable operational improvements and building a leaner, but more powerful organization.

Our nearly 13,000 hard-working, talented team members are committed to moving this company forward.

And while our hard work is started to pay off, we have a line of sight to accelerate and earnings power.

As the trucking, environment shows signs of improving. We've got Tailwind forming at a macro level and specific to Warner.

Our Fleet is new and modern due to the Investments made the last few years, we're progressing through our transformational technology journey and our balance sheet is strong, enabling flexibility in our Capital, allocation strategy. As the economy grows and transportation helps. Deliver that growth. We expect our earnings to improve leverage to decrease and our investments to begin. Showcasing their value with that. Let's 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're using a speakerphone, please pick up your handset before pressing the keys.

To withdraw your question, please press star, then 2.

Our first question today is from Eric Morgan with Barclays. Please go ahead.

Hey, good afternoon. Uh, thanks for taking my question. Um Derek I guess I just wanted to ask for some thoughts on the cycle, you know, you're calling for stable fundamentals, and normal spot rate, Cadence, um, in the back half and, you know, you listed some favorable trends for capacity, it sounds like maybe demand kind of stable, some tariff uncertainty. So I guess just wondering, you know, when you think about the shape of the upcycle when it eventually arrives, can we get something resembling, kind of a normal quote, unquote, normal, um, upcycle if we don't really get much demand help, like if Supply, just if we see more of the same Trends and capacity, and no real, you know, demand. Um, help to to note, um, what is the shape of the upcycle look like? And what does that mean for your TTS margins?

Yeah, Eric, thanks for the question. Um, obviously this cycle has been longer and more painful than any prior cycle than any of us have been through. So I'm a little hesitant to try to predict the future here. Um, but.

as we think about where we're at and you look at sort of the ongoing nutrition, you look at, you know, um, BLS data now, back to pre-cooked levels, you look at ongoing nutrition both in in uh, downsizing of fleets but also just bankruptcies even today, there was an announcement about a 400 truck carrier. Going going going under her closing their doors down in the Southeast. I think we're going to continue to see that given the the tough rate environment that everybody's living in, uh, We've settled along. We think it's going to be Supply driven upcycle if you will more than demand. Um, but with that said, if I, if I take a step back and look at the consumer and think about the Tariff noise and everything else they've been kind of dealt, uh, and they've been dealing with and yet they're ongoing resiliency. If I compare that to our book of business, which is, uh, heavily discretionary or non-discretionary I should say, non-discretionary goods and discount retail. You know, we think the backdrop sets up pretty well, uh, for where that consumer will migrate to if they are looking to be a little more cautious over the in the coming.

Orders, as well as those consumers that are already in that bucket of kind of hanging in there and staying resilient, and really living in that more, non-discretionary kind of, uh, ordering pattern. Um, with all that, you know, we have ongoing customers, uh, conversations, we just, uh, came through our annual customer Forum where we bring in well, over a billion dollars of Revenue. Under 1 roof for a multi-day event, um, gives me the opportunity to spend time and talk to them about their outlooks. And I think, with the Tariff noise settling with some of the, the, the, the, the white noise in general kind of coming down, uh, a lot of their outlooks are positive and so I, you know, we're not banking on big demand Improvement, but we do think the supply store will continue to play out demand, you know, assumptions are basically for stability, um, and then peak season still peak season. So we've seen over the last couple of years, kind of a return to normal seasonality. We think that is, is really the expectation. At this point, going into the bladder half of the year. If all of that plays out, I think it does set the stage for, uh, an upcycled, um, that that starts to kind of look like,

Prior normal upcycles, not Co. Um, last thing I would just say is, if you think about it from an oem perspective and how curtailed orders have been and well below replacement levels, and Now actions being taken at the OEM level that, that, that, um, are hard to bounce back from, as that demand comes back, I think we've got a little bit of a capacity lid, um, over the over several quarters, if not really, throughout 2026 just as they rebuild their capacity. Um, and that also helps, uh, extend that, uh, upside

And, kind of more than anything, probably, uh, causes a better inflection of the slope.

Appreciate that. And I was also just hoping you could elaborate a bit on the um, temporary elevated. Demand from certain customers. I think I think you called it is that would you say that's a thing of or a sign of things to come like later and when you traditionally see Peak or was that, you know, a function of some of the surge in Imports and you know something that we shouldn't really expect uh to see in back half.

Reverse portfolio companies. Um, that are well, capitalized and able to respond. And and so we think that's really the indication. Most of that activity took place in our 1-way network, uh, where we were able to step up and engineer Solutions on a, a short-term basis. But that short-term can often extend into a long-term, uh, extended relationship. So, right now, many of those sort of short-term activities continue. As we sit here today, some will wind down throughout Q3 Others, May extend well into Q4, it's really too early to tell. Uh, I'm most excited about the fact that these are great examples where customers vote with their Freight, they look for Quality, um, and they tend to aggregate their attention around the that quality provider. Um, and we're happy to serve them in that in that capacity.

Thanks a lot.

Thank you.

The next question is from Brian Ochsenbein.

Hey, good evening guys. Thanks for speaking with the question.

So, good evening, bro. Derek, just wanted to add

just want to ask you a little bit more on the capacity side, um, now that we're, I guess a month or so into

EOP. Um,

They call it greater enforcement, but at least the standardization and focus on it, and non-domicile drivers, focus there on as well. So, I know you've made some comments in the past and you got a cross-border business who might see some of these impacts, maybe not on your fleet, but others. So, can you get a little bit of color on what you're seeing and how you expect this to progress throughout the rest of the year.

Oh yeah, Brian. I'll give it my best shot. Um,

Starting with this, you're right, we don't expect any impact on our Fleet. We've always kept our English language proficiency test, um, in place throughout the time that it wasn't being enforced, we continue to do that. As we bring drivers into our Fleet. We think it's important, uh, from a safety perspective and so, it's something. We've, we've never taken our eye off the ball. On the enforcement side, you know, a month month and a half. In government time is like a minute and a half and everybody else's life, meaning, it just goes slower than we'd like to see, uh, we have seen enforcement starting to ramp up, its kind of a state-by-state thing. Uh, and it's certainly being enforced differently, but in different states. Um, you know, I think as we sit here today, we've seen over 1500 out of service violations, where not just that EOP was was an issue, but it was actually resulted in and out of service violation that number does continue to ramp but obviously at a slower rate than we would have expected or or that maybe we would have wished for, um, I think that enforcement will only continue to gain traction from here. It's just too early to tell uh what level um across all states, ultimately.

We will see it, enforced by, I'd also call everyone's attention to the reality that the enforcement data is only 1 part of the equation because what we do know, uh, relative to scales inspections, and general enforcement over the road in trucking is as enforcement elevates people deviate, or they move or out of the altogether or, or they simply invo avoid in enforcement points. So those Bad actors that may be

Out there that may not be in compliance. Um, May in fact be exiting. They may, in fact, be returning to other occupations. It's hard to know any numbers around that, but I think over time we'll be able to get a better view on that.

I understand. Thanks for all the clarification there, Derek. Um, just in terms of the broader market, obviously we've seen a lot of choppiness and uncertainty, and it's probably set to continue for at least a little while longer. What are you hearing from some of your customers? Is there some commentary on peak season? But just broadly speaking, um, is there a bigger shift to dedicated, pulling away from dedicated? I know there’s probably a mix of different outcomes and opinions you’re hearing, but are you seeing any shift between moving back into dedicated, moving more into one-way, moving more into brokerage? What’s the general sense in terms of how they’re going about procuring or at least thinking about getting more capacity into the end of this year and into next?

Thanks. Yeah. Brian, it's a great question. Uh, again, when we're at this sort of, uh, inflection point or or, or close to it, um, you know what, we hear a lot of is is, you know, again that flight to Quality. So part of that flight to Quality is, you know, 1 way to dedicate it. But we don't want to bring dedicated into our into our business that isn't truly dedicated. So if it's just a capacity solution, you know, that's really the commoditized end of dedicated and we try to, to, to we're pretty averse to that. We'll support that same customer with a 1-way solution and engineered solution, but that won't reside within our dedicated numbers, uh, because we want

And we were able to step up and meet those needs and give them, um, some diversity in their solution set. So across all of that, I think that's really, um, kind of the movement that we're seeing as it relates to their overall dedicated needs. One thing I said I would mention is a bit of a theme: there's a lot less enthusiasm for private fleet growth than what we saw during sort of the COVID years. I think a lot of that was a defensive play on their part because apps and other capacity solutions, they went out and kind of tried to address it themselves. I think now that they've been in the trucking business for a while, they also realize that even when they have the pick of the freight and they can work it through on their own network, it's a little harder than they might have, uh, forecasted. So, not a lot of conversations going on about them growing their private fleet in any significant way, and in some cases, even shrinking or exiting. Uh, so that sets up well for our dedicated pipeline. Uh, so I covered a lot of ground there, but hopefully that answers, uh, the bulk of your question.

Yeah. No, I appreciate the respect, Derek. Thank you. Thank you, Bart. Thank you, Bart.

The next question is from Ravi Shanker with Morgan Stanley. Please go ahead.

Oh great thanks. Good afternoon guys. Uh so uh I I guess congratulations on the uh on on on the case reversal as I know it's something that's been uh that you guys have been pushing for for a while. Do you think that this is

Uh, the star, the light at the end of, uh, the beginning of the tunnel. If you go, uh, for, you know, quarter form and kind of maybe insurance, uh, numbers coming back, uh, in check for the industry.

Yeah, Robbie. Um, you know, I'd love to believe that it's the start of a Title Wave of similar decisions but I think that would be a bit optimistic at this point. Uh, what we do believe is it was the right decision. Uh, we do believe that uh, Supreme Court of Texas affirmed irrefutably. Uh, the, the facts of the case says, we had stated them all along, which is, you know, we were hit head-on in our own land of travel by a vehicle that lost control across the median. And, and, and travel the Cross Lanes of traffic prior to even impacting us in our own lane of travel. We think it's a great win for us, uh, financially. We also think it's great for our drivers to kind of, um, affirmatively be supported by the Supreme Court. Uh, we think we got a lot of work to do still as an industry and as a company on tort reform, we got to do that at a state-by-state level. It's difficult work, the work that needs to be done. All, we're looking for is an even and Equitable playing field. We're not looking for any special advantages or anything else. We've always stood by the reality that if we have a mistake, we're going to stand up to it, learn from it, try to improve, and try to, uh, do what's right? Um,

But with that said, egregious verdicts like this do nothing but uh leak into cost inflation ultimately into real inflation at the consumer level and it's not ultimately good for the US consumer. Um, there's some, you know, remedies out there as you indicated from the torch side. I think uh playing a more active role relative to states where judges are elected versus appointed and making sure that we're not uh asleep at the wheel on that is important. Uh ultimately the most important thing is lowering our accident rate. Um we're committed to doing that. We've been on a on a trend here for multi multi-year trend of continuing to push lower and lower our DOT reportable which are sort of the larger accidents and that's what really really matters. Um and then on the injury side, doing the same thing really leaning in, on better and better. Um injury prevention, better driver training better post injury hair to try to get drivers back in the seat and back in the driving again quicker. Um, so that they can, um, you know, get on back, get back with their lives. So it's in all of the above

Strategy. Ideally, both the industry will have some success at moving things, from a state level into federal court, because we believe that's where they ultimately belong but that's going to be a long fight but 1 worth fighting. Um, and as, as it relates to the insurance line, you know, the the problem there with any kind of prediction is that your, your 1 moment away from another day in court where you've got to kind of fight for, what's right? And you don't really know the outcome. So yes, we are expecting over time to flatten that curve. Uh, we're making

Progress on doing so. Um, but we still, you know, don't love the elevated reality of where insurance sits as a percent of revenue today.

Understood. That's really helpful. Maybe as a follow-up, you did note your, uh, consumer non-discretionary exposure. Um, but I think there has been some view that in this cycle, it's non-discretionary that's under pressure more. I think you've seen some of the CPG companies say that in the UPS or hinted that in their call this morning. Do you feel like you guys...

Have there been a little more pressure, macro-wise, from a demand perspective? And does that potentially give you a little more upside when the upcycle comes?

And people are willing not just to trade down in what store they shop at, but trade down the product mix within that store. Um, but in both of those types of cases, the places that we work and who we haul for, they play in those arenas. And so, uh, we have not seen that, uh, kind of duress within our customer mix. Um, as a matter of fact, you know, several of our customers, as indicated by some of these pop-up, kind of opportunities and project opportunities that we commented on, are actually seeing some increased volumes that needed a special solution to be able to solve for. Now, that doesn't mean I can predict that that's what it looks like two quarters out or even, you know, into the fall. But right now, it appears as though that discount retail, um, non-discretionary arena is holding up pretty well overall, and we're heavily exposed in that part, and we do a really good job in a very unique job for those customers. So that would be the other part of it I would just remind everybody of, is that the work we do for them is not as much just that commoditized, you call we haul type into the.

Spectrum, it's more dedicated, it's more engineered. Uh it's a lot of cross border and as they benefit through this upside, you know, and as they attract customers. What we've seen in Prior Cycles is they tend to hold on to them pretty well. Customers are exposed to a product mix that. Maybe they didn't realize was as strong as it was. And, uh, that's where we see them. Usually take a step up in store growth and same Source sales. And we're along for the ride with them, supporting them in every way.

Very good. Thank you.

Thank you, Robbie. Excuse me. The next question is from Ken Hexter with Bank of America. Please go ahead.

A great good afternoon, Derek and Chris. Um, just a utilization seems to be improving, deadhead improved sequentially. Is that better asset focus on your part? Is that selling more equipment and a sign of excess capacity coming out? I guess this may be positioning that into your thoughts on what's normal for TTS margin gain from Q2 to Q3?

Yeah. Great question Ken and it's interesting because uh, so I'll start with this the utilization gains we've been making, especially across the 1-way network is really engineered in nature. It's it's it's it's structural strategic changes that we're making to be able to sweat the assets more. Uh and we're pretty excited about it especially because uh right now those increased miles don't really uh give you much um leverage to the upside until you start to see rate move. But when it does, um it's it's a real earning opportunity with those excess miles. Um, actually in Q2, what's interesting is they were down slightly but that's more reflective of some of the outside dedicated wins that we had and our need to move some of those high-quality 1-way drivers in some of those engineered Solutions over the dedicated receipt those trucks in 1 way. And and so we had a bit of a utilization impact, um, from our own success, if you will, in dedicated. Um, so that passes here shortly. Like as we as we continue to see dedicated,

Growth. But maybe not quite as lumpy as what it's been in Q2. And then that's coming into Q3. We'll have an opportunity to kind of get our arms back around that Network and the 1-way side, um, and we think there's gains to be made from a, from a productivity perspective. But if you you only have to go back a couple of years to see a a mi per truck game from a couple of years ago, that's double digit higher today than where we used to reside. And that's part of what led to, in a very tough Market with rates that are still pressured, uh, the highest revenue for truck for a week we've seen in, in 1 way, uh, in our history. Now what we need to do is continue to focus on the cost side of the equation, which we've been diligent about and, and, and very methodical about, and we're going to continue to do that. Um, so that that can translate says rates start to improve to expanded margins, which is the first step toward that, March back to double digit, uh, operating margins in in TTS.

And I'm sorry, your thoughts on what that means for kind of normal seasonality for third quarter operating margin in TTS.

Is that Chris's question about Derek? You want to take it?

Yeah, sure, Ken. I can, um, give you some insight on that. Um, you know, overall, it's been a good start to Q3. Revenue is positive, the outlook is positive, and I think it points to sequential improvement in revenue, apart from dedicated within TTS, where we'll continue to ramp up with new fleets, and continue to, um, benefit from.

Uh, the pathway back to, uh, double-digit margins.

Okay. But there's no, I guess you're not talking about a historical average or anything. Moving from a Q2, I don't know if there's a...

130 basis points or any kind of a normal improvement from 2 to the, sorry, just to keep reiterating on it. Yeah, the, the,

I think the difficult thing there is Ken is we could look at the averages, but they wouldn't tell much of a story because about half the time from Q2 to Q3 operating income increases and about half the time it decreases. So it's really dependent on the year you're in, I think Chris's comments, give you a decent direction that we think we're going to see some incremental gains from Q2 to Q3. Um you know we're not talking about Monumental gains, it's going to we're going to have to continue to plug away and work. At the, the work we're doing today to see some small incremental gains, as we continue to climb this mountain because the starting point, unfortunately, for us is, is at the base of the mountain, um, which is where we found ourselves, uh, entering into Q2 and we're going to start that slow climb out.

Totally understand. Can I just squeeze one more in on the age of the fleet? You mentioned it went up to 2.4 years, Derek. Is that anything on moderating? You mentioned moderating equipment spend. Is that a trade-off of buying back the stock versus a deliberate move to age the fleet? I just want to understand if there was a signal there.

Yeah, definitely wasn't a trade-off in order to buy back stock. Our balance sheet is strong enough, we could have done both. It's more reflective of the ongoing uncertainty around tariffs and a little bit of the uncertainty that was wrapped up in in some of the EPA things that are still going on right now in DC. We feel like we're in a really good position. It's a little bit. Also, just to be frank, a reflection of as our Fleet gets more and more engineered as our Fleet gets. Uh, it's 65% of the trucks and dedicated 35% in 1 way. Um, challenging kind of some assumptions as to what is the right Fleet age. So I'm not saying long term, we've determined 2 4 is perfect but 2, 4 doesn't worry me a whole lot compared to our, our more recent range. That was a little lower than that. Um, and we think we're better positioned and still have the optionality if we can get some things done with with some of our OEM Partners um that that Fleet age could go slightly up or slightly down from here. Uh as we look forward through the remainder of the year, but we're going to be we're going to be flexible but uh opportunistic as it relates to the fleet age, but we feel very good about

Uh, the utilization in our terminals to do on-site maintenance versus over the road, and the ability to expand that even further. Um, as well as the ability to allocate these trucks in the right fleets dependent on their age, to be able to still do the work perfectly fine with no impact on service or the driver.

Yeah, great insight. Appreciate your thoughts. Thanks, guys. Thank you, Ken.

The next question is from Tom Wits with UBS. Please go ahead.

Uh, yeah, good afternoon. Um,

How, Derek, how do I think about, uh, or Chris? I guess you're kind of underlying inflation and kind of how much rate you need because it just does seem like you're getting some traction in, you know, revenue per tractor, uh, ex fuel and you know, tracking rate on one way and then, you know, a variety of factors in dedicated that that's moving in a favorable way. But it's like, you know, 2% or 3% gain in, say, revenue per truck per week is not...

Not enough to get you there, I guess.

Would you think that it's, you know?

It's inflation. Going to come down. As you look maybe out beyond a couple of quarters, you think we might be more optimistic about that, or do you say, look?

You know what we've got today continues, and we just really need to make margin progress. We really need like 5, 6, 7% rate. I don't know if you have any thoughts on that. I brought your equation. I know you've had some number of questions related, but I don't know how much rate do you need or is inflation likely to come down if you look out, you know, into '26 or out a couple quarters.

Hey Tom, this is Chris. Um,

Continues to give us confidence that, you know, those in combination is the pathway back to, uh, low double digits, you know, 10% to 12% or more. The good news is in the second quarter, all of those areas and levers are progressing positively for the first time in two years. So, um, we have a ways to go, um, but we're encouraged with the recent momentum, and we remain confident in our gradual progression.

Okay.

Um, the, uh, thank you, and on ...

The, you know, vast. It's a lot better year-over-year. Uh, you know, costs take out supportive for that operating income.

Um, is that kind of the right run rate, assuming, you know, you don't have big shifts in the truckload market backdrop, that you're kind of, you know, $6 million a quarter operating income in Vass? Or how do you think about this?

The run rate there, because it's a pretty big improvement, and it sounds like, you know, if it's cost-driven, that maybe you can kind of keep that going for the next, you know, next 3 quarters before you lap it. I just wanted more thoughts on the, you know, kind of vast operating income that should show good improvements.

Yes. Um, uh, first off, I'll congratulate you for wearing your throwback analyst jacket today, by calling it VAS. Uh, we're a logistics now. Uh, but yeah, sorry. Sorry about that. I don't know. We, our models have been in use for a long time, sorry.

Um, but uh um yeah. So so the structural improvements made there are reflective of some of these Tech Investments we've been talking about. We're very excited about the the ongoing integration that that is now basically complete between Reed, um, CMS and Warner Logistics that teams really found, its stride, structurally. Um, we believe that. Yes, on the horizon, we need to all realize that at some point with this inflection, comes by rate pressure, and that pressure will be managed as well here as anywhere, um, at the same time that will come with our ability to reset sell rates, uh, with our customers. Um, but there's always a timing issue. So, absent of that timing issue as you stated in your question. Um, yeah, we do believe that we have a structurally, different Logistics Group. Now they're operating at a high level of performance. We're proud of the Q2 performance. And as we look forward, we've got momentum in the Q3, um, that continues to uh, give us, uh, optimism.

So, um, I don't know if that fully answers but but, you know, I'm not going to guide you to an actual number, obviously, but we that now I'm doing it. Warner Logistics is on the right path and it's, it's really the output of what's been a very arduous integration effort, as well as the output of the of the 1 where we have, you know, Warner Edge fully integrated. Uh and fully committed minus the small final mile piece of the business.

Okay, well, it's good to see the improvement in logistics. So, uh, thank you.

Thank you.

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

Hey, thanks. Good afternoon. Um, just to follow up on one of the earlier questions about Q3, right? If I just look from Q1 to Q2,

Trucking margins got about 2 points better, is that sort of like the magnitude of improvement, we can continue to inspect expect sequentially or is it? Hey, gains on sale, got better, q1 was really bad and so maybe that's too much improvement to expect on a on a quarter to quarter basis. Any thoughts?

Yeah, I'm not going to guide to a number Scott, but but I will, obviously restate what you just stated, which is q1, was that bad? And so some of the Improvement is just based on the starting point, we need to be, we need to recognize that um gains and on a per unit basis, have been um uh much improved and really a 2 year highs. Um it does

As we still have some to come with some of the implementation still yet to be finalized, um, so it's hard to, you know, we don't guide quarterly, we don't guide annually. So I want to stick to that for now. But hopefully, that gives you some color or some way to think about it.

Hey Scott, maybe just to add to that.

You know, the the cost Savings Program we've been very focused on that, you know, part of that goal is is holding the line as much as we can particularly on on the fixed costs and and even some of the variable as we uh, continue to see more volume particularly on the dedicated side where, as we're adding trucks to existing fleets that comes with a higher contribution margin and as we're turning on, and it takes a while to ramp up these new fleets. We we did experience some startup cost as well as some headwind. Just in kind of the efficiency on a revenue per truck per week basis and dedicated. Some of that will continue into Q3. But when we get past um, kind of the, the maturity stage of these new fleets, uh, the the contribution margin, uh, really starts to take effect and we see the benefit, not only the technology that Derek mentioned, but also just becoming a more agile and lean organization.

That's helpful, and then maybe just a big picture question, you know, there's a big day in that broad transport landscape with the UPS merger. I'm just curious, Derek if you've had a chance to think about what this means for, for your business, is this good for inner modal? I don't know, Channel partners with rails. And does this have any impact in any way? Do you think on your trucking business and with a transcon merger?

Just big picture thoughts.

Yes Scott. I'll be a bit careful here about getting too much into the weeds with with their their respective companies but I will just tell you this from our Viewpoint today as we are digesting and continuing to do so. Um, good news for us is our 2 Partners right now, predominant Partners in the west and the East are up and and in s respectively. Um, we've seen outsized growth in Intermodal. Although from a smaller base than some of the major players they'll continue to grow and make head roads. We think this does create a more competitive product, uh, as it relates to threatening the truckload business that we currently are in, if you look at our length of haul. And if you look at what our 1-way business, looks like and how it's sort of divided between engineered Lanes, cross border of Mexico and, um, expedited freight, those are in each way for different reasons, much tougher to tackle and much tougher to to convert. Um, I'm not not even enough not to believe that there won't be some Freight out there. That's convertible. And that's why we have an intermodal product and that's why we've had some good success converting it ourselves. Um,

So, all all things being equal if there was going to be a merger, West and East as from our point of view, we like this particular option, uh, we think it bodes well for Warner and we think our 65% dedicated exposure as an example is completely insulated from any kind of uh, rail merger. Um, and then within our 1-way, the predominance of what we do is nowhere near in the crosshairs of what the kind of work that would be rail. Convertible doesn't mean there is an opportunity around the edges and we're constantly already working with our customers on some of those opportunities because if it's going to go Intermodal I'd rather go Intermodal here than somewhere else.

Very helpful. Thank you.

Thank you, Scott.

The next question is from Risha Harna with Deutsche Bank. Please go ahead.

Hey, good afternoon, gentlemen. Thank you. Um, so Chris, you and I have talked a lot about. Oh, can you hear me?

Yes, we can. Good afternoon, teacher. Oh, hi. Um, so yeah, Chris, you and I have talked a lot about how, like the gains on sale. Just the trend that's out there right now is maybe a double positive in that, obviously, it provides a nice uplift to earnings, but it also means that the secondary market is improving. And maybe the banks, therefore, have more options than repossessing assets from carriers that are delinquent. Um, they would be more inclined to do that because they can go on and sell those suites. So, maybe you can talk about that.

Kind of the other side of the coin, which is not just, um, you know, what's impacting your financials, but just how this is impacting, um, the supply side of the equation. And if we should expect, you know, into 2026, these gains on sales to be a continued feature of earnings or if you could just provide any guidance as far as the longevity of this trend. Thanks.

Yeah, sure. Hey Rita, um,

Months or so of just being more accommodative um, as smaller fleets continue to be under pressure. So, um, lenders, having options can drive out some additional capacity, in addition, to other things, like the ELP and the B1 enforcement, um, and other things that would drive out capacity from a, a gain standpoint overall for us. Um, second quarter, uh, great to see nearly 6 million, um, over 2 times prior year, really the, the best gains on, uh, used equipment that we've had in 6 quarters, um, and resale values, really being at at the core of that. Um, actually, our unit sales were down a little bit, you know, in terms of the actual units that we're selling from 1 quarter to the next. It can vary. And so a lot of that, well, primarily all of that driven from just higher resale values, that are at more than 2 year highs in terms of its sustainability. Obviously, it depends on the supply of used equipment tariffs and OEM demand. So I think it's a bit early to

Uh, for us to, uh, go out on a limb and say how sustainable, uh, this is, um, but, uh, you know, we have, um, as a result of Q2, we've moved our guide on gains for the full year to the upper end of, uh, where we originally started that guide at the first of the year. Uh, we are expecting Q3 to be a bit lower than Q2, but overall, for the year, um, it still looks like we're heading in the right direction.

Okay, thanks. And if they can ask for one more clarification. You know, you talked about the impact from some of these dedicated and the startup costs on revenue per truck per week. Can you talk about the impacts on margins? I'm just trying to understand maybe what's a clean margin as we sort of work through these startup costs, what you're delivering today versus what the potential is on the current book of business.

Yeah, Rich. I'll start. And then Chris might follow up with some additional color. But when you start up dedicated accounts and especially, I think what's unique here that we need to explain is these are dedicated accounts in new verticals that we have um strategically decided to pursue. Um, they have additional complexities to them, but we think there's also uh the appropriate upside over time. Um, as such as you start them. You, you, you, you have an impact on utilization in that Fleet until drivers start to find their Rhythm and understand their routes. You have impact as it relates to the training and development and sort of R&D that goes into making sure you perform at the level of expectations of the customers. And so there's a lot of just headwind noise. Both from a margin perspective as well as just overall um, um time of, you know, mind share that, that it takes to pull 1 of these off. Uh, when you're in new verticals, you absolutely want to pull it off and you want to pull it off at the highest level, which we are doing, uh, because that then of course, is the gift that keeps on giving and you continue to grow deeper into them. So, uh,

These these have some unique characteristics. We are largely through the headwinds on the ones we've implemented thus far. We do have additional headwinds coming, um, as we look forward with further implementation. Um but along with those implementations comes Fleet at backs into existing dedicated accounts which is much much more streamlined, much simpler and higher contribution margin. And so all of that, all of the above allows us to sort of affirm some of the fleet growth guidance and affirm the reality, that it will be largely indicated as we go into the back half of the year.

And reach, you just to give you a little bit of of size and scope on the startup costs for the new fleets. Uh, we're estimating around a million dollars of expense in the quarter, uh, related to repositioning and travel and hiring. So, just true incremental expense, in addition to that million dollars, we're also estimating that, uh, it there was a a headwind on Revenue per truck per week. You know, we reported, um, that being up about 20 basis points, we think it would be closer to about 80 basis points, so 60 basis points, higher once those fleets get into, um, what we would consider to be, um, settle in and and get mature and more efficient. Um, and start hitting our expectations on Revenue per truck per week. That overall, um, if we fast forward to that point, that we would have seen more of an 80 basis point increase, that translates also to about another million dollars.

Or over a million dollars of of Revenue, net of fuel and TTS, the sum of those. So the pure incremental cost, as well as just some of the, the revenue inefficiency. Um, I would say, would our estimate would be around 40 basis points of of headwind to TTS, adjusted oi margin.

Appreciate that. Thank you.

Thank you, Richard.

No question today.

Yeah, thanks guys. Thanks for squeezing me in here at the end. I guess I wanted to hit on the tractor age and just get a sense of how you think about what sort of optimal it is. I guess it sounds like maybe the opportunity to age this up a little bit. Not sure if I'm reading that correctly; I just want to get a sense of how you think about optimal tractor age and what you have from an equipment perspective right now.

Yeah, Chris this is Derek. Um you know I think it's a if the background was different if the if we were in a different part of the cycle, optimal might take on a slightly different form if I'm being frank. But we've, I, I, I'll answer it differently and say we feel good about the tractor age where we're at today. We feel good about our ability to allocate those assets appropriately because of the type of work and the line of work that they're in and their ability to get to and through a terminal for us, to be able to support them. So we don't believe that we have any kind of equipment. You know, debt if you will that's just sort of pending in the background that we're going to have to make up for, and make some sudden shift, uh, at the same time, regardless of what optimal may or may not be, uh, we don't feel good about, you know, pricing fluctuations or changes that run anticipated or or overpaying for a piece of equipment. Um, or Worse buying into equipment that may or may not. In fact, be the standard, uh, post regulatory changes that are still ongoing in DC right now relative to the EPA. So it's a little

So, I do believe we're making the optimal decision right now to sit back, be patient, um, purchase appropriately, and keep the fleet appropriately young, um, to be able to do the work we do for our customers every day without any impact on service. Um, as well as put our drivers in a piece of equipment they can be proud of. So, we like our positioning. Um, I'd say get, you know, plus or minus 2/10. Is a range that I think we can live within from where we're at today. Um, and uh, we'll continue to be nimble and agile, um, as some of this tariff noise and other things play itself out.

That's helpful. I just want to follow up, Chris. I want to make sure I was following what you were saying about the impact of the startups on the operating income margin. I think, in Q2, can you just give a sense of what that is? Maybe what the clean run rate is, in your opinion, as we enter the third quarter?

Yeah, sure. The run rate on TTS. Adjusted. Oi Chris, overall. Yes, please. Yes.

Um, yeah, so, uh, net of fuel. Just so I was 2.8%. Um, and what we just went through of the approximately, what we would estimate of $1 million in startup costs, and then some of the additional headwind on the revenue side of an additional $1 million. You know, that would get to about 40 basis points. Um, the net fuel impact was also more meaningful in, um, in the quarter. We would estimate that that was about 70 basis points.

Points of of TTS, adjusted oi impact. Um, uh, just, you know, that in that impact on fuel, just being the, uh, the simple math of our fuel Revenue, fuel search charges minus the fuel expense and comparing that year of year. Um, so, you know, that was an additional 70 basis points. All of that in total, would would get us closer, uh, to 4% about 3.9%. Um, if you were to put all of that mapped together, in terms of, you know what, what would have been more normalized?

Okay, that's very helpful. Thank you. I appreciate it.

Thanks Chris.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Derek Leathers, who will provide closing comments.

Thank you, Gary. Um, I just want to thank everybody for taking the time to be with us today. While the macro environment has some uncertainty related to the tariffs, the health of the consumer, and ongoing capacity attrition, we remain committed to our self-help path towards increased profitability and controlling the controllables. The structural improvements to our cost structure combined with an increased focus on operational productivity measures put us in solid footing to leverage the upside as the market comes further into balance.

We have a resilient and diverse portfolio to support our customers' transportation and logistics needs, and our pipeline of recent wins demonstrates the value they see in Warner. I'll close by thanking our customers and our nearly 13,000 associates for their dedication as we keep America moving. Thanks for your time today, everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.