WERNER ENTERPRISES INC — Call Transcript 2025

Good afternoon and welcome to the Werner Enterprises second quarter 2025 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 for questions. 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. 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 Investors section of our website at werner.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. A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. On today's call with me are Derek Leathers, Chairman and CEO, and Chris Wikoff, 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 a commitment to delivering value. The key priorities we have been focusing on have started to bear fruit as 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 one-way revenue per total mile, gains from sale of used equipment, TTS operating income, and logistics gross margin. As a reminder on slide 5, there are three priorities that underpin our DRIVE strategy, which we execute day in and day out. First, driving growth in core business in DTS. Our fleet is up year to date. Our dedicated solution is winning in the marketplace. One-way rates are increasing and we realize year-over-year growth in overall combined miles across our one-way tractor assets and PowerLink trailer-only offering. Within logistics, we are back to mid-single-digit growth driven by Truckload Brokerage and Intermodal Services 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-laden equipment. We are pleased 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 reform is 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 this decision brings, we will not lose sight of the tragic loss for the Blake family. Our focus on safety improvement is shown through our investments in technology, an increasing part of our operational strategy, and we are progressing on this front as well. Volume on our Werner EDGE TMS Platform is growing. Nearly two-thirds of one-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 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 efficiencies 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 when 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. Finally, our reliability and commitment to excellence was recently recognized as Werner was named a 2025 Top 3PL and Cold Storage Provider for Food Logistics for the ninth consecutive year. Our final priority is driving capital efficiency. We're 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 5 T's: trucks, trailers, terminals, technology, and talent this year. However, we decided to moderate our equipment spend 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 repurchase 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 turn to 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 surcharges. Results in the quarter benefited from a growing fleet size due to dedicated startups and pop up truck opportunities in one-way. One-way revenue per total mile growth, cost containment, discipline and action, higher volumes in truckload logistics, particularly in brokerage at stable gross 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 sign 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 one way, truckload revenue per total mile increased sequentially and was up year-over-year for the fourth consecutive quarter, as recent contractual rate changes became effective and deadhead improved sequentially. Our one-way fleet size increased sequentially, driven apart 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 in Dedicated and supporting brokerage growth in Logistics. We are pleased with our Q2 trends in Logistics, showing double-digit growth sequentially and mid-single-digit growth year-over-year. We expect continued growth driven by a track record and reputation with large shippers needing additional capacity. In addition to sequential and year-over-year top line growth, expenses were down and operating margin improved. Turning to slide 7, our comprehensive Logistics portfolio is a key component of our diversified, solution-focused strategy. One is a mix of large, complex shippers. Regional requires a combination of multimodal solutions that are coordinated, reliable, and cost effective. Our solution-oriented Logistics service provides expertise that benefits larger customers while also expanding our reach to small and mid-sized shippers. Truckload Brokerage complements our truckload division, offering customers additional capacity and flexibility through creative and competitive solutions. We offer tailored solutions that are mode agnostic, combining the strengths of all Werner services to solve 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 Werner in a low-risk setting, often leading to expanded business relationships in one-way, truckload, or Dedicated. Our Intermodal business is a high-service product that provides a lower-cost option to customers. We have partnerships with all of the major railroads for nationwide rail access and capacity through a combination of private containers and rail-owned equipment to provide high service levels across the United States and Mexico cross border. Finally, our dedicated Final Mile Services 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 Werner EDGE TMS Platform and other tools like Werner Bridge, which makes us a preferred user-friendly choice for third-party carriers and enables more automation in 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 industry has 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 ELD and B1 enforcement. Class 8 truck orders are on the decline, and lenders are driving out capacity through growing repossessions, 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 one 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 from the tariff pause. 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. Used truck and trailer values have 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 $753 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 Texas Supreme Court's ruling in Werner's favor reversing and dismissing the landmark $90 million truck accident verdict from 2018. This ruling led to the reversal of a $45.7 million net liability including interest and benefiting GAAP 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 accrued amounts. Although the accrued 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 one-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%. Revenues net of fuel surcharges 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 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 ended the quarter up 1% year-over-year and up over 100 trucks, or 1.4%. Sequentially, TTS revenue per truck per week net of fuel increased 0.3% 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 0.7%. 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 grew 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 hired and 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 were 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 50 basis points in our one way business for the second quarter. Trucking revenue net of fuel was $164 million, a decrease of 3%. 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 mileage. One way 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 one way capacity for select customers who had temporary needs. This work is ongoing. The total one way miles decreased 6% versus prior year with 3.5% fewer average trucks. However, increased miles in PowerLink offset the decline in one 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. Revenues increased 6% year-over-year and 13% sequentially. Revenue in Truckload Logistics increased 9% and shipments increased 7% with 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 with modest rate improvement. Intermodal 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. Q2 was our highest operating income quarter in two years for Intermodal. Final Mile Services revenues decreased 10% year-over-year but increased 7% sequentially. Logistics adjusted operating margin of 2.7% improved 190 basis points driven by volume growth and 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 on Slide 15. Operating cash flow was $46 million for the quarter or 6% of total revenue. Net CapEx was $66 million or nearly 9% of revenue year to date. Net CapEx is 4% of revenue. Free cash flow year to date is $17.3 million or 1.2% of total revenues. We ended the quarter with $725 million of debt. Our net debt to adjusted EBITDA as of June 30 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 securitization facility, which we closed in the first quarter. Let's turn to Slide 16. While we have been focused on cost 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 $26.05, including fees, providing accretive value to shareholders. In the future, as earnings improve, we have 1.8 million shares remaining under our board-approved share repurchase authorization. Let's review our guidance for the year. On slide 17, we are narrowing our full year fleet guidance range from up 1%-5% to up 1%-4%. The TTS fleet is up 1.1% year to date. Implementations of new fleets in Dedicated remain ongoing, and over the course of the year, as new Dedicated fleets are seeded, growth is expected to be driven more by Dedicated versus One-Way. We are adjusting our full year net CapEx guidance from a range of $185 million-$235 million to a range of $145 million-$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 end-year needs and a 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 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%-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 mile 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%-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 the 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 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-$18 million to a range of $12 million-$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 we'll 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 hardworking, talented team members are committed to moving this company forward. While our hard work has started to pay off, we have a line of sight to accelerated earnings power as the trucking environment shows signs of improving. We've got tailwinds forming at a macro level and specific to Werner. 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 one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. Up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today is from Eric Morgan with Barclays. Please go ahead. Hey, good afternoon. Thanks for taking my question, 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 in the back half, and you listed some favorable trends for capacity. It sounds like maybe demand is kind of stable, some tariff uncertainty. I guess just wondering when you think about the shape of the upcycle when it eventually arrives, can we get something resembling a normal upcycle if we don't really get much demand help? If supply just, we see more of the same trends on capacity and no real demand help to note, what does the shape of the upcycle look like and what does that mean for your TTS margins? Yeah, Eric, thanks for that question. Obviously, this cycle has been longer and more painful than any prior cycle that any of us have been through. I'm a little hesitant to try to predict the future here. As we think about where we're at and you look at sort of the ongoing attrition, you look at BLS data now back to pre-COVID or even below pre-COVID levels, you look at ongoing attrition, both in downsizing the fleets but also just bankruptcies. Even today, there was an announcement about a 400-truck carrier going under or closing their doors down in the Southeast. I think we're going to continue to see that given the tough rate environment that everybody's living in. We've said all along we think it's going to be a supply-driven upcycle, if you will, more than demand. With that said, 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 and they've been dealing with and yet their ongoing resiliency, if I compare that to our book of business, which is heavily discretionary or non-discretionary, I should say non-discretionary goods and discount retail, we think the backdrop sets up pretty well for where that consumer will migrate to if they are looking to be a little more cautious in the coming quarters, as well as those consumers that are already in that bucket kind of hanging in there and staying resilient and really living in that more non-discretionary kind of ordering pattern. With all that, we have ongoing customer conversations. We just came through our annual customer forum where we bring in well over $1 billion of revenue under one roof for a multi-day event. Gives me the opportunity to spend time and talk to them about their outlooks. I think with the tariff noise settling, with some of the white noise in general kind of calming down, a lot of their outlooks are positive. We're not banking on big demand improvement, but we do think the supply story will continue to play out. Demand assumptions are basically for stability and then peak season, still peak season. We've seen over the last couple of years kind of a return to normal seasonality. We think that is really the expectation at this point going into the latter half of the year. If all of that plays out, I think it does set the stage for an upcycle that starts to kind of look like prior normal upcycles, not Covid. 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 are hard to bounce back from as that demand comes back. I think we've got a little bit of a capacity lid over several quarters, if not really throughout 2026, just as they rebuild their capacity and that also helps extend that upcycle and kind of more than anything probably causes a better inflection of the slope. Appreciate that. I was also just hoping you could elaborate a bit on the temporary elevated demand from certain customers I think you called it. Would you say that's a thing or a sign of things to come like later and when you traditionally see peak or was that a function of some of the surge in imports and something that we shouldn't really expect to see in the back half? I think it's a little bit of both to be frank. I think the biggest sign that it represents to me is, and we see this often at this point in the inflection where there's a flight to quality. When a customer has, whether it's driven by a surge of imports or it's driven by a sudden increase in demand or any other reason, any other external factor, the question is where do they go for that support and where we find them going to for that support. When you're closer to this sort of inflection point and you're kind of at that equilibrium level, it is to quality diverse portfolio companies that are well capitalized and able to respond. We think that's really the indication. Most of that activity took place in our one network where we were able to step up and engineer solutions on a short term basis. That short term can often extend into a long term extended relationship. 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. I'm most excited about the fact that these are great examples where customers vote with their freight, they look for quality and they tend to aggregate their attention around that quality provider and we're happy to serve them in that capacity. Thanks a lot. Thank you. The next question is from Brian Ossenbeck with JPMorgan. Please go ahead. Hey, good evening, guys. Thanks for taking the question. I just wanted to. To ask you a little bit more on the capacity side, now that we're I guess a month. Or so into ELP, we call it. Greater enforcement, at least the standardization and focus on it and non-domicile drivers focus there on as well. I know you've made some comments on that in the past and you've got a cross-border business who might see some of these impacts. Maybe not on your fleet, but others. You can get a little bit of color what you're seeing and how you expect this to progress throughout the rest of the year. Yeah, Brian, I'll give it my best shot starting with this. You're right. We don't expect any impact on our fleet. We've always kept our English language proficiency test 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 from a safety perspective. It's something 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 in everybody else's life. Meaning it just goes slower than we'd like to see. We have seen enforcement starting to ramp up. It's kind of a state-by-state thing and it's certainly being enforced differently in different states. I think as we sit here today we've seen over 1,500 out-of-service violations where not just that ELP was an issue, but it actually resulted in an out-of-service violation. That number does continue to ramp, but obviously at a slower rate than we would have expected or that maybe we would have wished for. I think that enforcement will only continue to gain traction from here. It's just too early to tell what level 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 one part of the equation because what we do know relative to scales, inspections, and general enforcement over the road and trucking is as enforcement elevates, people deviate or they move out of the altogether or they simply avoid enforcement points. Those bad actors that may be out there, that may not be in compliance, 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. Understood. Thanks for all the clarification there, Derek. 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 doing? Hearing from some of your customers is using commentary on peak season, but just broadly speaking, bigger shift to dedicated, pulling away from dedicated. Now there's probably a mix of different outcomes and opinions you're hearing, but you're 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 again. When we're at this sort of inflection point or close to it, what we hear a lot of is that flight to quality. Part of that flight to quality is one way to dedicated. We don't want to bring dedicated into our business that isn't truly dedicated. If it's just a capacity solution, that's really the commoditized end of dedicated. We are pretty averse to that. We'll support that same customer with a one way solution, an engineered one, but that won't reside within our dedicated numbers because we want pure play dedicated in those numbers. We see some of that. What I would tell you we see probably more of as of late is customers looking for that sort of portfolio approach. Coming out of our recent forum, the conversations I've had with customers is a higher level of excitement and they can come to somebody like Werner and they can work with us on their one way needs. In that same relationship, they can work across Truckload Brokerage and specifically PowerLink Power, which is our power only solution. They often have Intermodal needs and we're able to step up and meet those needs and give them some diversity in their solution set. Across all of that, I think that's really kind of the movement that we're seeing as it relates to their overall dedicated needs. One thing I would say is a bit of a theme is a lot less enthusiasm for private fleet growth than what we saw during the COVID years. I think a lot of that was a defensive play on their part because absent other capacity solutions, they went out and tried to address it themselves. Now that they've been in this trucking business for a while, they also realize that even when they have the pick of the freight and they can work it through their own network, it's a little harder than they might have forecasted. 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. That sets up well for our dedicated pipeline. I covered a lot of ground there, but hopefully that answers the bulk of your question. Yeah, no, I appreciate the perspective, Derek. Thank you. Thank you. Thank you, Brian. The next question is from Ravi Shanker with Morgan Stanley. Please go ahead. Great, thanks. Good afternoon, guys. Congratulations on the case reversal, as I know it's something that you guys have been pushing for for a while. Do you think that this is the start, the light at the end, the beginning of the tunnel, if you will, for kind of court reform and maybe insurance numbers coming back in check for the industry? Yeah. Ravi, you know, I'd love to believe that it's the start of a tidal wave of similar decisions, but I think that would be a bit optimistic at this point. What we do believe is it was the right decision. We do believe that the Texas Supreme Court affirmed irrefutably the facts of the case as we had stated them all along, which is, you know, we were hit head on in our own lane of travel by a vehicle that lost control across the median and traveled across lanes of traffic prior to even impacting us in our own lane of travel. We think it's a great win for us financially. We also think it's great for our drivers to kind of affirmatively be supported by the Texas Supreme Court. 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, but 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 do what's right. With that said, egregious verdicts like this do nothing but leak into cost inflation, ultimately into real inflation at the consumer level. It's not ultimately good for the U.S. consumer. There are some, you know, remedies out there, as you indicated, from the tort side. I think playing a more active role relative to states where judges are elected versus appointed and making sure that we're not asleep at the wheel on that is important. Ultimately, the most important thing is lowering our accident rate. We're committed to doing that. We've been on a multi-year trend of continuing to push lower and lower our DOT reportables, which are sort of the larger accidents, and that's what really, really matters. On the injury side, doing the same thing, really leaning in on better and better injury prevention, better driver training, better post-injury care to try to get drivers back in the seat and back driving again quicker so that they can, you know, get back with their lives. It's an 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. That's going to be a long fight, but one worth fighting. As it relates to the insurance line, the problem there with any kind of prediction is that you're one 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. Yes, we are expecting over time to flatten that curve. We're making progress on doing so. We still 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 high consumer non-discretionary exposure, but I think there has been some view that in this cycle it's non-discretionary that's under pressure more. You've seen some of the CPG companies say that, and UPS hinted that in the call this morning. Do you feel like you guys have 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? Look, I think the consumer has been more frugal perhaps than they have in prior cycles. What I mean by that, especially since you mentioned CPG companies, I'll stay away from names, but we know that private label, white label type products have become more in vogue and people are willing not just to trade down in what store they shop at, but trade down the product mix within that store. In both of those types of cases, the places that we work and who we haul for, they play in those arenas. We have not seen that kind of duress within our customer mix. As a matter of fact, 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. That doesn't mean I can predict that that's what it looks like two quarters out or even into the fall, but right now it appears as though that discount retail, non-discretionary arena is holding up pretty well overall and we're heavily exposed in that part and we do a really good job and a very unique job for those customers. 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 end of the spectrum. It's more dedicated, it's more engineered, it's a lot of cross border and as they benefit through this upside, and as they attract customers, what we've seen in prior cycles is they tend to hold onto them pretty well. Customers are exposed to a product mix that maybe they didn't realize was as strong as it was. That's where we see them usually take a step up in store growth and same store sales and we're along for the ride with them, supporting them in every way. Very good. Thank you. Thank you, Ravi. Excuse me. The next question is from Ken Hoexter. With Bank of America. Please go ahead. Great. Good afternoon, Derek and Chris. Utilization seems to be improving. Deadhead. Improved sequentially. Is that better asset focus on your part? Is that selling more equipment? Sign of excess capacity coming out? I guess just maybe positioning that into. Your thoughts on what's normal for TTS. Margin gain from 2Q to 3Q? Yeah, great question Ken. It's interesting because, I'll start with this. The utilization gains we've been making, especially across the one-way network, are really engineered in nature. It's structural, strategic changes that we're making to be able to sweat the assets more. We're pretty excited about it, especially because right now those increased miles don't really give you much leverage to the upside until you start to see rate move. When it does, it's a real earning opportunity with those excess miles. Actually, in Q2, what's interesting is they were down slightly, but that's more reflective of some of the outsized dedicated wins that we had and our need to move some of those high-quality one-way drivers in some of those engineered solutions over to dedicated, reseat those trucks in one-way. We had a bit of a utilization impact from our own success, if you will, in dedicated. That passes here shortly as we continue to see dedicated growth, but maybe not quite as lumpy as what it's been in Q2. That's coming into Q3, we'll have an opportunity to kind of get our arms back around that network on the one-way side. We think there's gains to be made from a productivity perspective. You only have to go back a couple of years to see a miles per truck gain from a couple of years ago that's double-digit higher today than where we used to reside. That's part of what led to, in a very tough market with rates that are still pressured, the highest revenue per truck per week we've seen in one-way 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 very methodical about. We're going to continue to do that so that that then translates as rates start to improve to expanded margins, which is the first step toward that march back to double-digit operating margins in TTS. I'm sorry, your thoughts on what that means for kind of normal seasonality for third quarter operating margin in TTS. Is that a Chris question? Derek, you want to take it? Derek? Yeah, sure, Ken. I can give you some insight on that. Overall, it's been a good start to Q3. Revenue is positive, the outlook is positive, and I think points to sequential improvement in revenue in part from dedicated within TTS where we'll continue to ramp up with new fleets and continue to benefit from the streak of wins that we signed last quarter. I know your question was specifically on TTS, but broadly Q2 to Q3, we're also seeing very positive momentum in logistics, and we expect that to continue. From a TTS perspective, we expect some ongoing improvement in operating income, and as Derek Leathers mentioned, we continue to be confident in the pathway back to double-digit TTS operating margins. Okay, but there's no, I guess you're not talking a historical average or anything. Moving from a 2Q, I don't know if there's a 130 basis point or any kind of a normal improvement from 2Q that. Sorry, just to keep reiterating on it. 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. 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. We're not talking about monumental gains. We're going to have to continue to plug away and work at the work we're doing today to see some small incremental gains as we continue to climb this mountain. The starting point, unfortunately for us, is at the base of the mountain, which is where we found ourselves 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 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 a stock versus a deliberate move. To age the fleet? I just want to understand if there. Was a signal there. Yeah, it 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 some of the EPA things that are still going on right now in D.C. 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, it's 65% of the trucks in dedicated, 35% in one way, challenging kind of some assumptions as to what is the right fleet age. I'm not saying long term we've determined 24 is perfect. 24 doesn't worry me a whole lot compared to our more recent range that was a little lower than that. We think we're better positioned and still have the optionality if we can get some things done with some of our OEM partners that that fleet age could go slightly up or slightly down from here as we look forward through the remainder of the year. We're going to be flexible but opportunistic as it relates to the fleet age. We feel very good about the utilization in our terminals to do on-site maintenance versus over the road and the ability to expand that even further, 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. Derek, great insight. Appreciate your thoughts. Thanks, Chris. Thank you, Ken. The next question is from Tom Wadewitz with UBS. Please go ahead. Yeah, good afternoon. Derek, how do I think about, or Chris, I guess your kind of underlying inflation and kind of how much rate you need because it does seem like you're getting some traction in revenue per tractor ex fuel and traction and rate on one way and then a variety of factors in dedicated that's moving in a favorable way. It's like 2% or 3% gain in, say, revenue per truck per week is not enough to get you there, I guess. Would you think that, is inflation going to come down as you look maybe out beyond a couple quarters? Are you more optimistic about that, or do you say, look, you know what we've got today continues and we just really, to make margin progress, we really need like 5%, 6%, 7% rate? I don't know if you have any thoughts on that broader 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 into 2026 or out a couple quarters. Hey Tom, this is Chris. Yeah, we certainly need rate recovery in one way. As you know, we've had multiple years of significant rate reduction. I think we've held in well relative to the overall industry, but broadly it's been a couple of years of rate reduction while other expense line items have been on an inflationary trend, as you said. We certainly need more in the range of mid single digit improvement in rate. It's not only about particularly one way rates. To get back to the low double digit TTS kind of mid cycle adjusted OI margins that we've talked about, it's rate but also continued growth in dedicated in addition to ongoing cost discipline, leveraging our technology investments, and a sustained recovery in the used equipment market. Those are really the levers that we talked about. We continue to pressure test within our own walls here, those levers, and it continues to give us confidence that those in combination is the pathway back to low double digits, 10%-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. We have a ways to go, but we're encouraged with the recent momentum and we remain confident in our gradual progression. Thank you. And on the, you know, vas, it's a lot better year-over-year. You know, cost takeout supportive for that operating income. Is that kind of the right run rate assuming you know you don't have big shifts in truckload market backdrop, that you're kind of, you know, $6 million a quarter operating income in VAs, or how do you think about 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 three quarters before you lap it. Just any more thoughts on the, you know, kind of VAS operating income, that should good improvement. Yeah. Tom, first off, I'll congratulate you for wearing your throwback analyst jacket today by calling it VAs. It's Werner Logistics now. Sorry about that. I don't know. We. Our model's been in use for a long time. The structural improvements made there are reflective of some of these tech investments we've been talking about. We're very excited about the ongoing integration that is now basically complete between ReedTMS and Werner Logistics. That team's really found its stride structurally. We believe that yes, on the horizon we need to all realize that at some point with this inflection comes buy rate pressure and that pressure will be managed as well here as anywhere. At the same time, that will come with our ability to reset sell rates with our customers. There's always a timing issue. Absent of that timing issue, as you stated in your question, 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 into Q3 that continues to give us optimism. I don't know if that fully answers, but I'm not going to guide you to an actual number obviously, but Werner Logistics is on the right path and it's really the output of what's been a very arduous integration effort as well as the output of the one place where we have Werner EDGE fully integrated and fully committed, minus the small Final Mile Services piece of the business. Okay, it's good to see the improvement in logistics. Thank you. Thank you. The next question is from Scott Group with Wolfe Research. Please go ahead. Hey, thanks. Afternoon. Just to follow up on one of. The earlier questions about Q3, right. If I just look Q1 to Q2, trucking margins got about 2 points better. Is that sort of like the magnitude of improvement we can continue to expect sequentially, or is it, hey, gains. On sale got better. Q1 was really bad, so maybe that's too much improvement to expect on a quarter-to-quarter basis. Any thoughts? Yeah, I'm not going to guide to a number, Scott, but I will obviously restate what you just stated, which is Q1 was that bad. Some of the improvement is just based on the starting point. We need to recognize that gains and on a per unit basis have been much improved, and really at two-year highs. It does come down to what's the number of units that we're going to be able to move and what's that gain line going to look like. I would just think about it as it's up and down the P&L. It's the ongoing, it's the increase in the cost takeout, it's the execution that we've been talking about relative to one-way and one-way improvements. All of that in the soup, and we're going to see sort of small incremental gains from Q2 to Q3 would be our expectation. Now we've got to go and execute on that. Things that make that optimism kind of resonate with me is the pipeline looks strong, both dedicated and one-way. The stuff in what we refer to as BI, business implementation, is strong, especially for this time of year. That's already secured and going through the final implementation stages and launch with the dedicated side. That does include headwinds still that come with launching a new dedicated fleet, but the bigger part of those headwinds is behind us. We still have some to come with some of the implementation still yet to be finalized. It's hard to, we don't guide quarterly, we don't guide annually. I want to stick to that for now, but hopefully that gives you some color or some way to think about it. Scott, maybe just to add to that, the cost savings program, we've been very focused on that. Part of that goal is holding the line as much as we can, particularly on the fixed costs and even some of the variable as we 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 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. When we get past kind of the maturity stage of these new fleets, the contribution margin really starts to take effect and we see the benefit not only of the technology that Derek mentioned but also just becoming a more agile and lean organization. That's helpful. Maybe just a big picture question, it is a big day in the broad transport landscape with the UPNs merger. I'm just curious, Derek, if you've had a chance to think about what this. Means for your business, is this good for Intermodal? I don't know, channel partners with Rails, and does this have any impact in any way, do you think, on your. Trucking business with the transcon merger? Just big picture thoughts. Yeah, Scott, I'll be a bit careful here about getting too much into the weeds with their respective companies. I will just tell you this from our viewpoint today as we are digesting and continuing to do so. Good news for us is our two partners right now, predominant partners in the west and the east, are UP and NS respectively. We've seen outsized growth in Intermodal, although from a smaller base than some of the major players, but continue to grow and make headroads. We think this does create a more competitive product 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 one-way business looks like and how it's sort of divided between engineered lanes, cross-border Mexico, and expedited freight, those are in each way for different reasons much tougher to tackle and much tougher to convert. I'm not naive 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. All things being equal, if there was going to be a merger west and east, from our point of view we like this particular option. We think it bodes well for Werner and we think our 65% dedicated exposure, as an example, is completely insulated from any kind of rail merger. Within our one-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 isn't opportunities around the edges and we're constantly already working with our customers on some of those opportunities. 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 Richa Harneit with Deutsche Bank. Please go ahead. Good afternoon, gentlemen. Thank you. Chris, you and I have talked a lot about. Can you hear me? Yes, we can. Good afternoon. Oh, hi. Chris, you and I have talked a lot about how the gains on sale, just the trend that's out there right now, as maybe a double positive, and that obviously it provides a nice uplift to earnings, but it also means that the secondary market improving and maybe the banks therefore have more options when they repossess assets from carriers that are delinquent. They would be more inclined to do that because they can go on and sell those fleets. Maybe you can talk about the other side of the coin, which is not just what's impacting your financials, but how this is impacting the supply side of the equation, and if we should expect into 2026 these gains on sales to be a continued feature of earnings or if you could give us any guidance as far as the longevity of this trend. Thanks. Yeah, sure. Hey Richa, from a supply side standpoint, your point is 100% valid. Bankruptcies are up and lenders, with the rise in resale values, just have more options besides what they've been doing more so over the last 18 months or so of just being more accommodative as smaller fleets continue to be under pressure. Lenders having options can drive out some additional capacity in addition to other things like the ELP and the B1 enforcement and other things that would drive out capacity. From a gain standpoint overall for U.S. second quarter, great to see nearly $6 million, over two times prior year. Really the best gains on used equipment that we've had in six quarters and resale values really being at the core of that. Actually, our unit sales were down a little bit. In terms of the actual units that we're selling from one quarter to the next, it can vary. A lot of that, primarily all of that, driven from just higher resale values that are at more than two-year highs. In terms of its sustainability, obviously it depends on the supply of used equipment, tariffs, and OEM demand. I think it's a bit early for us to go out on a limb and say how sustainable this is. As a result of Q2, we've moved our guide on gains for the full year to the upper end of where we originally started that guide first of the year. We are expecting Q3 to be a bit lower than Q2, but overall for the year, it still looks like we're heading in the right direction. Okay, thanks. And if I can ask one more clarification. 1. 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 impact 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 Neil might follow up with some additional color. 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 strategically decided to pursue. They have additional complexities to them, but we think there's also the appropriate upside over time. As such, as you start them, you have an impact on utilization in that fleet. Until drivers start to find their rhythm and understand the routes, you have impact as it relates to the training, the development and sort of R&D that goes into making sure you perform at the level and expectations of the customers. There's a lot of just headwind noise, both from a margin perspective as well as just overall time, mind share that it takes to pull one of these off 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, because that then of course is the gift that keeps on giving and you continue to grow deeper into them. 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 as we look forward with further implementation. Along with those implementations comes fleet add backs into existing dedicated accounts, which is much, much more streamlined, much simpler and higher contribution margin. 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 in dedicated as we go into the back half of the year. Henrietta, just to give you a little bit of size and scope on the startup costs for the new fleets, we're estimating around $1 million of expense in the quarter related to repositioning and travel and hiring. Just true incremental expenses. In addition to that $1 million, we're also estimating that there was a headwind on revenue per truck per week. You know, we reported 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 what we would consider to be settled in and get mature and more efficient and start hitting our expectations on revenue per truck per week, overall if we fast forward to that point, we would have seen more of an 80 basis points increase. That translates also to about another $1 million or over $1 million of revenue net of fuel and TTS, the sum of those. The pure incremental cost as well as just some of the revenue inefficiency, I would say our estimate would be around 40 basis points of headwind to TTS adjusted OI margin. Appreciate that. Thank you. Thank you, Richa. The final question today is from Chris Wethebee with Wells Fargo. Please go ahead. Yeah, hey, thanks guys. Thanks for squeezing me in here at the end. I guess wanted to hit on the. Tractor age and just get a sense. How you think about what sort of optimal is. I guess it sounds like maybe the opportunity to age this up a little bit. Not sure if I'm reading that correctly. 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. I think if the backdrop was different, if we were in a different part of the cycle, optimal might take on a slightly different form, if I'm being frank. 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. We don't believe that we have any kind of equipment 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 at the same time. Regardless of what optimal may or may not be, we don't feel good about pricing fluctuations or changes that were unanticipated or overpaying for a piece of equipment or worse, buying into equipment that may or may not in fact be the standard post regulatory changes that are still ongoing in D.C. right now relative to the EPA. I do believe we're making the optimal decision right now to sit back, be patient, purchase appropriately, keep the fleet appropriately young to be able to do the work we do for our customers every day without any impact on service, as well as put our drivers in a piece of equipment they can be proud of. We like our positioning. I'd say ±0.2 is a range that I think we can live within from where we're at today. We'll continue to be nimble and agile as some of this tariff noise and other things play itself out. Okay, that's helpful. Just one follow up, Chris. I just wanted to make sure I was following what you were saying about the impact of the startups. On the operating income margin, I think in 2Q, can you just give a sense of what that is, maybe what the clean. Run rate is, in your opinion, as. We enter the quarter? Yeah, sure. The run rate on TTS adjusted OI. Chris? Overall. Yes, please. Yes, yes. Net of fuel adjusted OI was 2.8%, and what we just went through of the approximately what we would estimate of $1 million in startup cost and then some of the additional headwind on revenue side of an additional $1 million, that would get to about 40 basis points. The net fuel impact was also more meaningful in the quarter. We would estimate that was about 70 basis points of TTS adjusted OI impact. That net impact on fuel is just the simple math of our fuel revenue, fuel surcharges minus the fuel expense and comparing that year-over-year, so that was an additional 70 basis points. All of that in total would get us closer to 4%, about 3.9%. If you were to put all of that math together in terms of what would have been more normalized. Okay, that's very helpful, thank you. 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. 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 increased focus on operational productivity measures, put us in a 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 Werner. 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.

Speaker 7: Good afternoon and welcome to the Werner Enterprises second quarter 2025 earnings conference call. All participants will be in listen-only mode. Good afternoon and welcome to the Werner Enterprises second quarter 2025 earnings conference call. good afternoon and welcome to the werner enterprises second quarter 2025 earnings conference call All participants will be in listen-only mode. all participants will be in listen-only mode Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. After today's presentation, there will be an opportunity for questions. Should you need assistance, please signal a conference specialist by pressing the Star key followed by zero. 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 for questions. after today's presentation there will be an opportunity for questions 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. Opportunity to ask questions. opportunity to ask questions To ask a question, you may press Star then one on your telephone keypad. to ask a question you may press star then one on your telephone keypad To withdraw your question, please press Star then two. to withdraw your question please press star then two Please note this event is being recorded. please note this event is being recorded I would now like to turn the conference over to Chris Neil, Senior Vice President. I would now like to turn the conference over to Chris Neil, Senior Vice President. i would now like to turn the conference over to chris neil senior vice president President of Pricing and Strategic Planning. President of Pricing and Strategic Planning. president of pricing and strategic planning Please go ahead. Please go ahead. please go ahead

Speaker 10: 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 Investors section of our website at werner.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. A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. Good afternoon everyone. good afternoon everyone Earlier today we issued our earnings release with our second quarter results. earlier today we issued our earnings release with our second quarter results The release and a supplemental presentation are available in the Investors section of our website at werner.com. the release and a supplemental presentation are available in the investors section of our website at werner.com Today's webcast is being recorded and will be available for replay later today. 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. 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. 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. the company reports results using non-gaap measures which we believe provides additional information for investors to help facilitate the comparison of past and present performance A reconciliation to the most directly comparable GAAP measures is included in the tables attached to the earnings release and in the appendix of the slide presentation. a reconciliation to the most directly comparable gaap measures is included in the tables attached to the earnings release and in the appendix of the slide presentation On today's call with me are Derek Leathers, Chairman and CEO, and Chris Wikoff, Executive Vice President, Treasurer, and CFO. I will now turn the call over to Derek. On today's call with me are Derek Leathers, Chairman and CEO, and Chris Wikoff, Executive Vice President, Treasurer, and CFO. on today's call with me are derek leathers chairman and ceo and chris wikoff executive vice president treasurer and cfo I will now turn the call over to Derek. i will now turn the call over to derek

Speaker 3: 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 a commitment to delivering value. Thank you, Chris, and good afternoon everyone. thank you chris and good afternoon everyone We appreciate you joining us today. 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. 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. 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 a commitment to delivering value. 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 a commitment to delivering value The key priorities we have been focusing on have started to bear fruit as 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 one-way revenue per total mile, gains from sale of used equipment, TTS operating income, and logistics gross margin. As a reminder on slide 5, there are three priorities that underpin our DRIVE strategy, which we execute day in and day out. First, driving growth in core business in DTS. Our fleet is up year to date. Our dedicated solution is winning in the marketplace. One-way rates are increasing and we realize year-over-year growth in overall combined miles across our one-way tractor assets and PowerLink trailer-only offering. The key priorities we have been focusing on have started to bear fruit as 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 one-way revenue per total mile, gains from sale of used equipment, TTS operating income, and logistics gross margin. the key priorities we have been focusing on have started to bear fruit as 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 one-way revenue per total mile gains from sale of used equipment tts operating income and logistics gross margin As a reminder on slide 5, there are three priorities that underpin our DRIVE strategy, which we execute day in and day out. as a reminder on slide 5 there are three priorities that underpin our drive strategy which we execute day in and day out First, driving growth in core business in DTS. first driving growth in core business in dts Our fleet is up year to date. our fleet is up year to date Our dedicated solution is winning in the marketplace. our dedicated solution is winning in the marketplace One-way rates are increasing and we realize year-over-year growth in overall combined miles across our one-way tractor assets and PowerLink trailer-only offering. one-way rates are increasing and we realize year-over-year growth in overall combined miles across our one-way tractor assets and powerlink trailer-only offering Within logistics, we are back to mid-single-digit growth driven by Truckload Brokerage and Intermodal Services 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-laden equipment. We are pleased 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 reform is still needed in many states across the country. Within logistics, we are back to mid-single-digit growth driven by Truckload Brokerage and Intermodal Services volumes. within logistics we are back to mid-single-digit growth driven by truckload brokerage and intermodal services volumes Our customers are voting with their freight as we notch several new business awards with strategic customers across our portfolio. 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. second driving operational excellence is a core competency Our focus on creating and fostering a culture around safety never changes. 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-laden equipment. our dot preventable accident per million miles continues to trend favorably as we hire quality professional drivers and invest in new technology-laden equipment We are pleased the Texas Supreme Court has ruled on the accident that occurred in 2014, reversing the $90 million jury verdict from 2018. we are pleased 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 reform is still needed in many states across the country. the court's decision provided much-needed clarity in the state of texas but legal reform is 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 this decision brings, we will not lose sight of the tragic loss for the Blake family. Our focus on safety improvement is shown through our investments in technology, an increasing part of our operational strategy, and we are progressing on this front as well. Volume on our Werner EDGE TMS Platform is growing. Nearly two-thirds of one-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 20% productivity improvement in brokerage loads per full-time employee. 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. 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. this marks the end of a decade-long and difficult chapter While we are grateful for the clarity this decision brings, we will not lose sight of the tragic loss for the Blake family. while we are grateful for the clarity this decision brings we will not lose sight of the tragic loss for the blake family Our focus on safety improvement is shown through our investments in technology, an increasing part of our operational strategy, and we are progressing on this front as well. our focus on safety improvement is shown through our investments in technology an increasing part of our operational strategy and we are progressing on this front as well Volume on our Werner EDGE TMS Platform is growing. volume on our werner edge tms platform is growing Nearly two-thirds of one-way trucking volume is now on EDGE, and over half of the dedicated volume. nearly two-thirds of one-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 20% productivity improvement in brokerage loads per full-time employee. logistics has largely been on edge tms for several quarters leading to 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 efficiencies 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 when 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. Finally, our reliability and commitment to excellence was recently recognized as Werner was named a 2025 Top 3PL and Cold Storage Provider for Food Logistics for the ninth consecutive year. We are seeing more top and bottom line tech-enabled synergies such as growing no-touch, fully automated load bookings and back office efficiencies like carrier payment automation. we are seeing more top and bottom line tech-enabled synergies such as growing no-touch fully automated load bookings and back office efficiencies 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. 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 when off the road. our professional drivers have greater technology tools improving their situational awareness while on the road and providing mobile ease of access to important information when 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. 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. these changes are benefiting all of our stakeholders including our customers while further securing our it infrastructure and cloud environments Finally, our reliability and commitment to excellence was recently recognized as Werner was named a 2025 Top 3PL and Cold Storage Provider for Food Logistics for the ninth consecutive year. finally our reliability and commitment to excellence was recently recognized as werner was named a 2025 top 3pl and cold storage provider for food logistics for the ninth consecutive year Our final priority is driving capital efficiency. We're 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 5 T's: trucks, trailers, terminals, technology, and talent this year. However, we decided to moderate our equipment spend 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 repurchase 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. Our final priority is driving capital efficiency. our final priority is driving capital efficiency We're generating positive cash flow and supporting this. we're 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. 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 5 T's: trucks, trailers, terminals, technology, and talent this year. regarding capex we will continue to invest in the 5 t's trucks trailers terminals technology and talent this year However, we decided to moderate our equipment spend with a modern and low age fleet. however we decided to moderate our equipment spend with a modern and low age fleet We have assets in place to support growth through the rest of this year. 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. with a strong balance sheet inclusive of low leverage we are focused on disciplined return-oriented investments This quarter we flexed our share repurchase authorization and bought back $55 million of shares at an exceptional value. this quarter we flexed our share repurchase 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. when it comes to evaluating the impact of tariffs on our equipment costs our strong balance sheet yields optionality Let's turn to 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 surcharges. Results in the quarter benefited from a growing fleet size due to dedicated startups and pop up truck opportunities in one-way. One-way revenue per total mile growth, cost containment, discipline and action, higher volumes in truckload logistics, particularly in brokerage at stable gross 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. Let's turn to Slide 6 and discuss our second quarter results. let's turn to slide 6 and discuss our second quarter results During the quarter, revenues decreased 1% versus the prior year. 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 surcharges. 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 surcharges Results in the quarter benefited from a growing fleet size due to dedicated startups and pop up truck opportunities in one-way. results in the quarter benefited from a growing fleet size due to dedicated startups and pop up truck opportunities in one-way One-way revenue per total mile growth, cost containment, discipline and action, higher volumes in truckload logistics, particularly in brokerage at stable gross margins, and increased gains on equipment both sequentially and year-over-year. one-way revenue per total mile growth cost containment discipline and action higher volumes in truckload logistics particularly in brokerage at stable gross 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. 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 sign 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 one way, truckload revenue per total mile increased sequentially and was up year-over-year for the fourth consecutive quarter, as recent contractual rate changes became effective and deadhead improved sequentially. Our one-way fleet size increased sequentially, driven apart 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 in Dedicated and supporting brokerage growth in Logistics. The implementation of new dedicated fleet sign last quarter is progressing well and continuing to ramp into Q3 as we hire drivers and build fleets to targeted levels. the implementation of new dedicated fleet sign 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. 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. our dedicated expertise is a competitive advantage that has and will continue to drive growth over the long run In one way, truckload revenue per total mile increased sequentially and was up year-over-year for the fourth consecutive quarter, as recent contractual rate changes became effective and deadhead improved sequentially. in one way truckload revenue per total mile increased sequentially and was up year-over-year for the fourth consecutive quarter as recent contractual rate changes became effective and deadhead improved sequentially Our one-way fleet size increased sequentially, driven apart from engineered pop-up solutions in response to customer requests. our one-way fleet size increased sequentially driven apart 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 in Dedicated and supporting brokerage growth in Logistics. this demonstrates our flexibility and adaptability in meeting customers' needs in an improving market all while implementing new fleets in dedicated and supporting brokerage growth in logistics We are pleased with our Q2 trends in Logistics, showing double-digit growth sequentially and mid-single-digit growth year-over-year. We expect continued growth driven by a track record and reputation with large shippers needing additional capacity. In addition to sequential and year-over-year top line growth, expenses were down and operating margin improved. Turning to slide 7, our comprehensive Logistics portfolio is a key component of our diversified, solution-focused strategy. One is a mix of large, complex shippers. Regional requires a combination of multimodal solutions that are coordinated, reliable, and cost effective. Our solution-oriented Logistics service provides expertise that benefits larger customers while also expanding our reach to small and mid-sized shippers. Truckload Brokerage complements our truckload division, offering customers additional capacity and flexibility through creative and competitive solutions. We offer tailored solutions that are mode agnostic, combining the strengths of all Werner services to solve customer challenges. We are pleased with our Q2 trends in Logistics, showing double-digit growth sequentially and mid-single-digit growth year-over-year. we are pleased with our q2 trends in logistics showing double-digit growth sequentially and mid-single-digit growth year-over-year We expect continued growth driven by a track record and reputation with large shippers needing additional capacity. we expect continued growth driven by a track record and reputation with large shippers needing additional capacity In addition to sequential and year-over-year top line growth, expenses were down and operating margin improved. in addition to sequential and year-over-year top line growth expenses were down and operating margin improved Turning to slide 7, our comprehensive Logistics portfolio is a key component of our diversified, solution-focused strategy. turning to slide 7 our comprehensive logistics portfolio is a key component of our diversified solution-focused strategy One is a mix of large, complex shippers. one is a mix of large complex shippers Regional requires a combination of multimodal solutions that are coordinated, reliable, and cost effective. regional requires a combination of multimodal solutions that are coordinated reliable and cost effective Our solution-oriented Logistics service provides expertise that benefits larger customers while also expanding our reach to small and mid-sized shippers. our solution-oriented logistics service provides expertise that benefits larger customers while also expanding our reach to small and mid-sized shippers Truckload Brokerage complements our truckload division, offering customers additional capacity and flexibility through creative and competitive solutions. truckload brokerage complements our truckload division offering customers additional capacity and flexibility through creative and competitive solutions We offer tailored solutions that are mode agnostic, combining the strengths of all Werner services to solve customer challenges. we offer tailored solutions that are mode agnostic combining the strengths of all werner services to solve 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 Werner in a low-risk setting, often leading to expanded business relationships in one-way, truckload, or Dedicated. Our Intermodal business is a high-service product that provides a lower-cost option to customers. We have partnerships with all of the major railroads for nationwide rail access and capacity through a combination of private containers and rail-owned equipment to provide high service levels across the United States and Mexico cross border. Finally, our dedicated Final Mile Services division moves big and bulky goods nationwide directly to homes and B2B in verticals such as furniture, appliances, auto parts, and healthcare. Our large trailer pools provide capacity, simplify shipper operations, improve efficiency, and minimize the need for costly labor to live load and unload trailers. 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 Werner in a low-risk setting, often leading to expanded business relationships in one-way, truckload, or Dedicated. brokerage also enables new customers to be introduced to werner in a low-risk setting often leading to expanded business relationships in one-way truckload or dedicated Our Intermodal business is a high-service product that provides a lower-cost option to customers. our intermodal business is a high-service product that provides a lower-cost option to customers We have partnerships with all of the major railroads for nationwide rail access and capacity through a combination of private containers and rail-owned equipment to provide high service levels across the United States and Mexico cross border. we have partnerships with all of the major railroads for nationwide rail access and capacity through a combination of private containers and rail-owned equipment to provide high service levels across the united states and mexico cross border Finally, our dedicated Final Mile Services division moves big and bulky goods nationwide directly to homes and B2B in verticals such as furniture, appliances, auto parts, and healthcare. finally our dedicated final mile services 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 Werner EDGE TMS Platform and other tools like Werner Bridge, which makes us a preferred user-friendly choice for third-party carriers and enables more automation in 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 industry has 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 ELD and B1 enforcement. Our technological advancements are fueling logistics growth, including running on our Werner EDGE TMS Platform and other tools like Werner Bridge, which makes us a preferred user-friendly choice for third-party carriers and enables more automation in load booking and back office processes, keeping us agile and cost effective. our technological advancements are fueling logistics growth including running on our werner edge tms platform and other tools like werner bridge which makes us a preferred user-friendly choice for third-party carriers and enables more automation in 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. 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 industry has continued to work towards equilibrium in recent years. supply and demand in our industry has continued to work towards equilibrium in recent years As the current challenging environment lingers, we anticipate ongoing capacity attrition. 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 ELD and B1 enforcement. long haul truckload employment is below the prior peak in 2019 and additional exits could accelerate with greater eld and b1 enforcement Class 8 truck orders are on the decline, and lenders are driving out capacity through growing repossessions, 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 one 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 from the tariff pause. 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. Class 8 truck orders are on the decline, and lenders are driving out capacity through growing repossessions, given resale values are on the rise. class 8 truck orders are on the decline and lenders are driving out capacity through growing repossessions 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. consumers have remained resilient as they search for value and trade down resulting in relatively stable non-discretionary spending The one big beautiful bill could stimulate consumer demand and industrial investment over time, both of which would benefit freight volumes. the one 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. tariff and interest rate impacts remain uncertain for both shippers and consumers Retail inventories have mostly normalized, while some inventory was pulled forward from the tariff pause. retail inventories have mostly normalized while some inventory was pulled forward from the tariff pause Non-discretionary goods have had more consistent replenishment cycles. non-discretionary goods have had more consistent replenishment cycles Volumes from our value and discount retailers were steady in Q2 and into July. 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. 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 Used truck and trailer values have 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. Used truck and trailer values have accelerated since March, benefiting from tariff and other macro uncertainty. used truck and trailer values have 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. with that i'll turn it over to chris to discuss our second quarter results in more detail

Speaker 1: Thank you, Derek. Let's continue on slide 10. All performance comparisons here are year-over-year unless otherwise noted. Second quarter revenues totaled $753 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 Texas Supreme Court's ruling in Werner's favor reversing and dismissing the landmark $90 million truck accident verdict from 2018. This ruling led to the reversal of a $45.7 million net liability including interest and benefiting GAAP 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. Thank you, Derek. thank you derek Let's continue on slide 10. let's continue on slide 10 All performance comparisons here are year-over-year unless otherwise noted. all performance comparisons here are year-over-year unless otherwise noted Second quarter revenues totaled $753 million, down 1%. second quarter revenues totaled $753 million down 1% Adjusted operating income was $16.6 million and adjusted operating margin was 2.2%. adjusted operating income was $16.6 million and adjusted operating margin was 2.2% Adjusted EPS of $0.11 was down $0.06. adjusted eps of $0.11 was down $0.06 We are pleased with the improved adjusted results in the core business. 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. we also benefited from a handful of non-gaap adjustments during the quarter First, the Texas Supreme Court's ruling in Werner's favor reversing and dismissing the landmark $90 million truck accident verdict from 2018. first the texas supreme court's ruling in werner's favor reversing and dismissing the landmark $90 million truck accident verdict from 2018 This ruling led to the reversal of a $45.7 million net liability including interest and benefiting GAAP operating income. this ruling led to the reversal of a $45.7 million net liability including interest and benefiting gaap operating income Our consolidated insurance and claims expense for the quarter excluding this benefit was $38.9 million. 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. 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 accrued amounts. Although the accrued 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 one-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%. Revenues net of fuel surcharges decreased 1% to $462 million. TTS adjusted operating income was $12.8 million. During the quarter, we settled on a final payout resulting in the reversal of $7.9 million from previously accrued amounts. during the quarter we settled on a final payout resulting in the reversal of $7.9 million from previously accrued amounts Although the accrued 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 one-time nature of the reversal. although the accrued 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 one-time nature of the reversal This benefit was included in other expense. 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. 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. 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%. turning to slide 11 truckload transportation services total revenue for the quarter was $518 million down 4% Revenues net of fuel surcharges decreased 1% to $462 million. revenues net of fuel surcharges decreased 1% to $462 million TTS adjusted operating income was $12.8 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 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 ended the quarter up 1% year-over-year and up over 100 trucks, or 1.4%. Sequentially, TTS revenue per truck per week net of fuel increased 0.3% 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 0.7%. Dedicated represented 64% of TTS trucking revenues, up from 63% a year ago. 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. 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 sale of property and equipment totaled $5.9 million. excluding the $45.7 million reversal during the quarter consolidated gains on sale of property and equipment totaled $5.9 million Let's turn to slide 12 to review our fleet metrics. let's turn to slide 12 to review our fleet metrics TTS average trucks were 7,489 during the quarter. tts average trucks were 7,489 during the quarter The TTS fleet ended the quarter up 1% year-over-year and up over 100 trucks, or 1.4%. the tts fleet ended the quarter up 1% year-over-year and up over 100 trucks or 1.4% Sequentially, TTS revenue per truck per week net of fuel increased 0.3% primarily due to higher one-way revenue per total mile mitigated by lower one-way miles within TTS. sequentially tts revenue per truck per week net of fuel increased 0.3% 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 0.7%. dedicated revenue net of fuel was $287 million down 0.7% Dedicated represented 64% of TTS trucking revenues, up from 63% a year ago. 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 grew 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 hired and 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 were a headwind as well, totaling approximately $1 million. Dedicated average trucks decreased 0.9% year-over-year but increased sequentially by 1.6% to 4,855 trucks at quarter end. 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. 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 grew 0.2% and has increased 28 of the last 30 quarters. dedicated revenue per truck per week grew 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 hired and integrated into the fleet, equipment is positioned, and routes are optimized. it often takes 90 days or more before new fleets meet targeted utility as drivers are hired and 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. 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. 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 were a headwind as well, totaling approximately $1 million. startup costs for new dedicated fleets were 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 50 basis points in our one way business for the second quarter. Trucking revenue net of fuel was $164 million, a decrease of 3%. 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 mileage. One way freight conditions were steady throughout the quarter. We expect some additional startup costs to linger into the third quarter. we expect some additional startup costs to linger into the third quarter Excluding the elevated insurance and claims costs, dedicated operating income margin improved 50 basis points in our one way business for the second quarter. excluding the elevated insurance and claims costs dedicated operating income margin improved 50 basis points in our one way business for the second quarter Trucking revenue net of fuel was $164 million, a decrease of 3%. trucking revenue net of fuel was $164 million a decrease of 3% Average truck count of 2,634 declined 3.5% year-over-year but grew slightly on a sequential basis. 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 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. 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 mileage. deadhead improved sequentially but was still elevated year-over-year resulting in a 2.7% increase in revenue per total mileage One way freight conditions were steady throughout the quarter. one way 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 one way capacity for select customers who had temporary needs. This work is ongoing. The total one way miles decreased 6% versus prior year with 3.5% fewer average trucks. However, increased miles in PowerLink offset the decline in one 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. Revenues increased 6% year-over-year and 13% sequentially. Revenue in Truckload Logistics increased 9% and shipments increased 7% with gross margin expansion. Revenue from our PowerLink offering was up 17% while traditional brokerage recorded mid single digit revenue growth. 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 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 one way capacity for select customers who had temporary needs. we were able to flex the fleet and provide one way capacity for select customers who had temporary needs This work is ongoing. this work is ongoing The total one way miles decreased 6% versus prior year with 3.5% fewer average trucks. the total one way miles decreased 6% versus prior year with 3.5% fewer average trucks However, increased miles in PowerLink offset the decline in one way truckload miles, ultimately resulting in combined miles that increased 1%. however increased miles in powerlink offset the decline in one 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. now turning to logistics on slide 13 in the second quarter logistics revenue was $221 million representing 30% of total second quarter revenues Revenues increased 6% year-over-year and 13% sequentially. revenues increased 6% year-over-year and 13% sequentially Revenue in Truckload Logistics increased 9% and shipments increased 7% with gross margin expansion. revenue in truckload logistics increased 9% and shipments increased 7% with gross margin expansion Revenue from our PowerLink offering was up 17% while traditional brokerage recorded mid single digit revenue growth. revenue from our powerlink offering was up 17% while traditional brokerage recorded mid single digit revenue growth Higher volume was the driving factor with modest rate improvement. Intermodal 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. Q2 was our highest operating income quarter in two years for Intermodal. Final Mile Services revenues decreased 10% year-over-year but increased 7% sequentially. Logistics adjusted operating margin of 2.7% improved 190 basis points driven by volume growth and 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. Higher volume was the driving factor with modest rate improvement. higher volume was the driving factor with modest rate improvement Intermodal 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. intermodal 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 Q2 was our highest operating income quarter in two years for Intermodal. q2 was our highest operating income quarter in two years for intermodal Final Mile Services revenues decreased 10% year-over-year but increased 7% sequentially. final mile services revenues decreased 10% year-over-year but increased 7% sequentially Logistics adjusted operating margin of 2.7% improved 190 basis points driven by volume growth and double digit percent reduction in operating expenses. logistics adjusted operating margin of 2.7% improved 190 basis points driven by volume growth and 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. 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. 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 on Slide 15. Operating cash flow was $46 million for the quarter or 6% of total revenue. Net CapEx was $66 million or nearly 9% of revenue year to date. Net CapEx is 4% of revenue. Free cash flow year to date is $17.3 million or 1.2% of total revenues. We ended the quarter with $725 million of debt. Our net debt to adjusted EBITDA as of June 30 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. 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. 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. 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 on Slide 15. let's review our cash flow and liquidity on slide 15 Operating cash flow was $46 million for the quarter or 6% of total revenue. operating cash flow was $46 million for the quarter or 6% of total revenue Net CapEx was $66 million or nearly 9% of revenue year to date. net capex was $66 million or nearly 9% of revenue year to date Net CapEx is 4% of revenue. net capex is 4% of revenue Free cash flow year to date is $17.3 million or 1.2% of total revenues. free cash flow year to date is $17.3 million or 1.2% of total revenues We ended the quarter with $725 million of debt. we ended the quarter with $725 million of debt Our net debt to adjusted EBITDA as of June 30 was 1.7 times. our net debt to adjusted ebitda as of june 30 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. 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 securitization facility, which we closed in the first quarter. Let's turn to Slide 16. While we have been focused on cost 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 $26.05, including fees, providing accretive value to shareholders. 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 securitization facility, which we closed in the first quarter. 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 securitization facility which we closed in the first quarter Let's turn to Slide 16. let's turn to slide 16 While we have been focused on cost discipline, strategic reinvestment in the business to support future growth remains a top priority, ranging from trucks to technology. while we have been focused on cost 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. 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 $26.05, including fees, providing accretive value to shareholders. during the second quarter we deployed $55 million of capital to repurchase more than 2.1 million shares at an average price of $26.05 including fees providing accretive value to shareholders In the future, as earnings improve, we have 1.8 million shares remaining under our board-approved share repurchase authorization. Let's review our guidance for the year. On slide 17, we are narrowing our full year fleet guidance range from up 1%-5% to up 1%-4%. The TTS fleet is up 1.1% year to date. Implementations of new fleets in Dedicated remain ongoing, and over the course of the year, as new Dedicated fleets are seeded, growth is expected to be driven more by Dedicated versus One-Way. We are adjusting our full year net CapEx guidance from a range of $185 million-$235 million to a range of $145 million-$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. In the future, as earnings improve, we have 1.8 million shares remaining under our board-approved share repurchase authorization. in the future as earnings improve we have 1.8 million shares remaining under our board-approved share repurchase authorization Let's review our guidance for the year. let's review our guidance for the year On slide 17, we are narrowing our full year fleet guidance range from up 1% - 5% to up 1%- 4%. on slide 17 we are narrowing our full year fleet guidance range from up 1% - 5% to up 1%- 4% The TTS fleet is up 1.1% year to date. the tts fleet is up 1.1% year to date Implementations of new fleets in Dedicated remain ongoing, and over the course of the year, as new Dedicated fleets are seeded, growth is expected to be driven more by Dedicated versus One-Way. implementations of new fleets in dedicated remain ongoing and over the course of the year as new dedicated fleets are seeded growth is expected to be driven more by dedicated versus one-way We are adjusting our full year net CapEx guidance from a range of $185 million - $235 million to a range of $145 million - $185 million. we are adjusting our full year net capex guidance from a range of $185 million - $235 million to a range of $145 million - $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. 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 end-year needs and a 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 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%-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 mile guide of flat to up 3% for the third quarter compared to the prior year period. CapEx for this year is below our historical range given lower end-year needs and a deliberate shift to a more asset-light mix. capex for this year is below our historical range given lower end-year needs and a 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 prior year. 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 prior year New fleet startups were a limiting factor this quarter in revenue per truck. 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. 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%- 3%. we expect this metric to remain within our full year guidance range of 0%- 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. 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 mile guide of flat to up 3% for the third quarter compared to the prior year period. we are reissuing the same revenue per total mile 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%-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 the 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 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-$18 million to a range of $12 million-$18 million in the first half of the year. Our effective tax rate was 26.2% in the second quarter. our effective tax rate was 26.2% in the second quarter Our 2025 guidance range of 25% - 26% remains unchanged, and we expect a lower effective tax rate in future quarters. our 2025 guidance range of 25% - 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 the second quarter was 2.4 and 5.5 years, respectively. the average age of our truck and trailer fleet at the end of the 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. 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 prior year, used tractor values have been elevated largely due to trade policy. despite the number of units sold being less than half compared to 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 - $18 million to a range of $12 million - $18 million in the first half of the year. we are adjusting our full year guidance range for equipment gains from a range of $8 million - $18 million to a range of $12 million - $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. Net interest expense increased $600,000 year-over-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. 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. with that i'll turn it back to derek

Speaker 3: Thank you, Chris. In summary, our strategy is working as proven by our second quarter growth. That said, more work remains, and we'll 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 hardworking, talented team members are committed to moving this company forward. While our hard work has started to pay off, we have a line of sight to accelerated earnings power as the trucking environment shows signs of improving. We've got tailwinds forming at a macro level and specific to Werner. Our fleet is new and modern due to the investments made the last few years. Thank you, Chris. thank you chris In summary, our strategy is working as proven by our second quarter growth. in summary our strategy is working as proven by our second quarter growth That said, more work remains, and we'll continue to take near-term decisive action to position Werner for success. that said more work remains and we'll 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 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. we've been making considerable operational improvements and building a leaner but more powerful organization Our nearly 13,000 hardworking, talented team members are committed to moving this company forward. our nearly 13,000 hardworking talented team members are committed to moving this company forward While our hard work has started to pay off, we have a line of sight to accelerated earnings power as the trucking environment shows signs of improving. while our hard work has started to pay off we have a line of sight to accelerated earnings power as the trucking environment shows signs of improving We've got tailwinds forming at a macro level and specific to Werner. we've got tailwinds forming at a macro level and specific to werner Our fleet is new and modern due to the investments made the last few years. 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're progressing through our transformational technology journey, and our balance sheet is strong, enabling flexibility in our capital allocation strategy. 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. 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. with that let's open it up for questions

Speaker 7: 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're using a speakerphone, please pick up your handset before pressing the keys. We will now begin the question-and-answer session. 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're using a speakerphone, please pick up your handset before pressing the keys. to ask a question you may press star then one on your telephone keypad. if you're using a speakerphone please pick up your handset before pressing the keys Up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today is from Eric Morgan with Barclays. Up your handset before pressing the keys. up your handset before pressing the keys To withdraw your question, please press star then two. to withdraw your question please press star then two Our first question today is from Eric Morgan with Barclays. our first question today is from eric morgan with barclays Please go ahead. Please go ahead. please go ahead

Speaker 4: Hey, good afternoon. Thanks for taking my question, 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 in the back half, and you listed some favorable trends for capacity. It sounds like maybe demand is kind of stable, some tariff uncertainty. I guess just wondering when you think about the shape of the upcycle when it eventually arrives, can we get something resembling a normal upcycle if we don't really get much demand help? If supply just, we see more of the same trends on capacity and no real demand help to note, what does the shape of the upcycle look like and what does that mean for your TTS margins? Hey, good afternoon. hey good afternoon Thanks for taking my question, Derek. thanks for taking my question derek I guess I just wanted to ask for some thoughts on the cycle. 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 in the back half, and you listed some favorable trends for capacity. you know you're calling for stable fundamentals and normal spot rate cadence in the back half and you listed some favorable trends for capacity It sounds like maybe demand is kind of stable, some tariff uncertainty. it sounds like maybe demand is kind of stable some tariff uncertainty I guess just wondering when you think about the shape of the upcycle when it eventually arrives, can we get something resembling a normal upcycle if we don't really get much demand help? i guess just wondering when you think about the shape of the upcycle when it eventually arrives can we get something resembling a normal upcycle if we don't really get much demand help If supply just, we see more of the same trends on capacity and no real demand help to note, what does the shape of the upcycle look like and what does that mean for your TTS margins? if supply just we see more of the same trends on capacity and no real demand help to note what does the shape of the upcycle look like and what does that mean for your tts margins

Speaker 3: Yeah, Eric, thanks for that question. Yeah, Eric, thanks for that question. yeah eric thanks for that question Obviously, this cycle has been longer and more painful than any prior cycle that any of us have been through. I'm a little hesitant to try to predict the future here. As we think about where we're at and you look at sort of the ongoing attrition, you look at BLS data now back to pre-COVID or even below pre-COVID levels, you look at ongoing attrition, both in downsizing the fleets but also just bankruptcies. Even today, there was an announcement about a 400-truck carrier going under or closing their doors down in the Southeast. I think we're going to continue to see that given the tough rate environment that everybody's living in. We've said all along we think it's going to be a supply-driven upcycle, if you will, more than demand. Obviously, this cycle has been longer and more painful than any prior cycle that any of us have been through. obviously this cycle has been longer and more painful than any prior cycle that any of us have been through I'm a little hesitant to try to predict the future here. i'm a little hesitant to try to predict the future here As we think about where we're at and you look at sort of the ongoing attrition, you look at BLS data now back to pre-COVID or even below pre-COVID levels, you look at ongoing attrition, both in downsizing the fleets but also just bankruptcies. as we think about where we're at and you look at sort of the ongoing attrition you look at bls data now back to pre-covid or even below pre-covid levels you look at ongoing attrition both in downsizing the fleets but also just bankruptcies Even today, there was an announcement about a 400-truck carrier going under or closing their doors down in the Southeast. even today there was an announcement about a 400-truck carrier going under or closing their doors down in the southeast I think we're going to continue to see that given the tough rate environment that everybody's living in. i think we're going to continue to see that given the tough rate environment that everybody's living in We've said all along we think it's going to be a supply-driven upcycle, if you will, more than demand. we've said all along we think it's going to be a supply-driven upcycle if you will more than demand With that said, 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 and they've been dealing with and yet their ongoing resiliency, if I compare that to our book of business, which is heavily discretionary or non-discretionary, I should say non-discretionary goods and discount retail, we think the backdrop sets up pretty well for where that consumer will migrate to if they are looking to be a little more cautious in the coming quarters, as well as those consumers that are already in that bucket kind of hanging in there and staying resilient and really living in that more non-discretionary kind of ordering pattern. With all that, we have ongoing customer conversations. With that said, 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 and they've been dealing with and yet their ongoing resiliency, if I compare that to our book of business, which is heavily discretionary or non-discretionary, I should say non-discretionary goods and discount retail, we think the backdrop sets up pretty well for where that consumer will migrate to if they are looking to be a little more cautious in the coming quarters, as well as those consumers that are already in that bucket kind of hanging in there and staying resilient and really living in that more non-discretionary kind of ordering pattern. with that said 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 and they've been dealing with and yet their ongoing resiliency if i compare that to our book of business which is heavily discretionary or non-discretionary i should say non-discretionary goods and discount retail we think the backdrop sets up pretty well for where that consumer will migrate to if they are looking to be a little more cautious in the coming quarters as well as those consumers that are already in that bucket kind of hanging in there and staying resilient and really living in that more non-discretionary kind of ordering pattern With all that, we have ongoing customer conversations. with all that we have ongoing customer conversations We just came through our annual customer forum where we bring in well over $1 billion of revenue under one roof for a multi-day event. Gives me the opportunity to spend time and talk to them about their outlooks. I think with the tariff noise settling, with some of the white noise in general kind of calming down, a lot of their outlooks are positive. We're not banking on big demand improvement, but we do think the supply story will continue to play out. Demand assumptions are basically for stability and then peak season, still peak season. We've seen over the last couple of years kind of a return to normal seasonality. We think that is really the expectation at this point going into the latter half of the year. We just came through our annual customer forum where we bring in well over $1 billion of revenue under one roof for a multi-day event. we just came through our annual customer forum where we bring in well over $1 billion of revenue under one roof for a multi-day event Gives me the opportunity to spend time and talk to them about their outlooks. gives me the opportunity to spend time and talk to them about their outlooks I think with the tariff noise settling, with some of the white noise in general kind of calming down, a lot of their outlooks are positive. i think with the tariff noise settling with some of the white noise in general kind of calming down a lot of their outlooks are positive We're not banking on big demand improvement, but we do think the supply story will continue to play out. we're not banking on big demand improvement but we do think the supply story will continue to play out Demand assumptions are basically for stability and then peak season, still peak season. demand assumptions are basically for stability and then peak season still peak season We've seen over the last couple of years kind of a return to normal seasonality. we've seen over the last couple of years kind of a return to normal seasonality We think that is really the expectation at this point going into the latter half of the year. we think that is really the expectation at this point going into the latter half of the year If all of that plays out, I think it does set the stage for an upcycle that starts to kind of look like prior normal upcycles, not Covid. 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 are hard to bounce back from as that demand comes back. I think we've got a little bit of a capacity lid over several quarters, if not really throughout 2026, just as they rebuild their capacity and that also helps extend that upcycle and kind of more than anything probably causes a better inflection of the slope. If all of that plays out, I think it does set the stage for an upcycle that starts to kind of look like prior normal upcycles, not Covid. if all of that plays out i think it does set the stage for an upcycle that starts to kind of look like prior normal upcycles not covid 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 are hard to bounce back from as that demand comes back. 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 are hard to bounce back from as that demand comes back I think we've got a little bit of a capacity lid over several quarters, if not really throughout 2026, just as they rebuild their capacity and that also helps extend that upcycle and kind of more than anything probably causes a better inflection of the slope. i think we've got a little bit of a capacity lid over several quarters if not really throughout 2026 just as they rebuild their capacity and that also helps extend that upcycle and kind of more than anything probably causes a better inflection of the slope

Speaker 4: Appreciate that. I was also just hoping you could elaborate a bit on the temporary elevated demand from certain customers I think you called it. Appreciate that. appreciate that I was also just hoping you could elaborate a bit on the temporary elevated demand from certain customers I think you called it. i was also just hoping you could elaborate a bit on the temporary elevated demand from certain customers i think you called it Would you say that's a thing or a sign of things to come like later and when you traditionally see peak or was that a function of some of the surge in imports and something that we shouldn't really expect to see in the back half? Would you say that's a thing or a sign of things to come like later and when you traditionally see peak or was that a function of some of the surge in imports and something that we shouldn't really expect to see in the back half? would you say that's a thing or a sign of things to come like later and when you traditionally see peak or was that a function of some of the surge in imports and something that we shouldn't really expect to see in the back half

Speaker 3: I think it's a little bit of both to be frank. I think the biggest sign that it represents to me is, and we see this often at this point in the inflection where there's a flight to quality. When a customer has, whether it's driven by a surge of imports or it's driven by a sudden increase in demand or any other reason, any other external factor, the question is where do they go for that support and where we find them going to for that support. I think it's a little bit of both to be frank. i think it's a little bit of both to be frank I think the biggest sign that it represents to me is, and we see this often at this point in the inflection where there's a flight to quality. i think the biggest sign that it represents to me is and we see this often at this point in the inflection where there's a flight to quality When a customer has, whether it's driven by a surge of imports or it's driven by a sudden increase in demand or any other reason, any other external factor, the question is where do they go for that support and where we find them going to for that support. when a customer has whether it's driven by a surge of imports or it's driven by a sudden increase in demand or any other reason any other external factor the question is where do they go for that support and where we find them going to for that support When you're closer to this sort of inflection point and you're kind of at that equilibrium level, it is to quality diverse portfolio companies that are well capitalized and able to respond. We think that's really the indication. Most of that activity took place in our one network where we were able to step up and engineer solutions on a short term basis. That short term can often extend into a long term extended relationship. 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. I'm most excited about the fact that these are great examples where customers vote with their freight, they look for quality and they tend to aggregate their attention around that quality provider and we're happy to serve them in that capacity. When you're closer to this sort of inflection point and you're kind of at that equilibrium level, it is to quality diverse portfolio companies that are well capitalized and able to respond. when you're closer to this sort of inflection point and you're kind of at that equilibrium level it is to quality diverse portfolio companies that are well capitalized and able to respond We think that's really the indication. we think that's really the indication Most of that activity took place in our one network where we were able to step up and engineer solutions on a short term basis. most of that activity took place in our one network where we were able to step up and engineer solutions on a short term basis That short term can often extend into a long term extended relationship. that short term can often extend into a long term extended relationship Right now many of those sort of short term activities continue as we sit here today. 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. some will wind down throughout q3 others may extend well into q4 It's really too early to tell. it's really too early to tell I'm most excited about the fact that these are great examples where customers vote with their freight, they look for quality and they tend to aggregate their attention around that quality provider and we're happy to serve them in that capacity. i'm most excited about the fact that these are great examples where customers vote with their freight they look for quality and they tend to aggregate their attention around that quality provider and we're happy to serve them in that capacity

Speaker 4: Thanks a lot. Thanks a lot. thanks a lot

Speaker 3: Thank you. Thank you. thank you

Speaker 7: The next question is from Brian Ossenbeck with JPMorgan. The next question is from Brian Ossenbeck with JPMorgan. the next question is from brian ossenbeck with jpmorgan Please go ahead. Please go ahead. please go ahead

Speaker 11: Hey, good evening, guys. Thanks for taking the question. Hey, good evening, guys. hey good evening guys Thanks for taking the question. thanks for taking the question I just wanted to. I just wanted to. i just wanted to To ask you a little bit more on the capacity side, now that we're I guess a month. To ask you a little bit more on the capacity side, now that we're I guess a month. to ask you a little bit more on the capacity side now that we're i guess a month Or so into ELP, we call it. Or so into ELP, we call it. or so into elp we call it Greater enforcement, at least the standardization and focus on it and non-domicile drivers focus there on as well. I know you've made some comments on that in the past and you've got a cross-border business who might see some of these impacts. Maybe not on your fleet, but others. You can get a little bit of color what you're seeing and how you expect this to progress throughout the rest of the year. Greater enforcement, at least the standardization and focus on it and non-domicile drivers focus there on as well. greater enforcement at least the standardization and focus on it and non-domicile drivers focus there on as well I know you've made some comments on that in the past and you've got a cross-border business who might see some of these impacts. i know you've made some comments on that in the past and you've got a cross-border business who might see some of these impacts Maybe not on your fleet, but others. maybe not on your fleet but others You can get a little bit of color what you're seeing and how you expect this to progress throughout the rest of the year. you can get a little bit of color what you're seeing and how you expect this to progress throughout the rest of the year

Speaker 3: Yeah, Brian, I'll give it my best shot starting with this. You're right. We don't expect any impact on our fleet. We've always kept our English language proficiency test 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 from a safety perspective. It's something we've never taken our eye off the ball on the enforcement side. Yeah, Brian, I'll give it my best shot starting with this. yeah brian i'll give it my best shot starting with this You're right. you're right We don't expect any impact on our fleet. we don't expect any impact on our fleet We've always kept our English language proficiency test in place throughout the time that it wasn't being enforced. we've always kept our english language proficiency test in place throughout the time that it wasn't being enforced We continue to do that as we bring drivers into our fleet. we continue to do that as we bring drivers into our fleet We think it's important from a safety perspective. we think it's important from a safety perspective It's something we've never taken our eye off the ball on the enforcement side. it's something 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 in everybody else's life. Meaning it just goes slower than we'd like to see. We have seen enforcement starting to ramp up. It's kind of a state-by-state thing and it's certainly being enforced differently in different states. I think as we sit here today we've seen over 1,500 out-of-service violations where not just that ELP was an issue, but it actually resulted in an out-of-service violation. That number does continue to ramp, but obviously at a slower rate than we would have expected or that maybe we would have wished for. I think that enforcement will only continue to gain traction from here. It's just too early to tell what level across all states ultimately we will see it enforced by. You know, a month, month and a half in government time is like a minute and a half in everybody else's life. you know a month month and a half in government time is like a minute and a half in everybody else's life Meaning it just goes slower than we'd like to see. meaning it just goes slower than we'd like to see We have seen enforcement starting to ramp up. we have seen enforcement starting to ramp up It's kind of a state-by-state thing and it's certainly being enforced differently in different states. it's kind of a state-by-state thing and it's certainly being enforced differently in different states I think as we sit here today we've seen over 1,500 out-of-service violations where not just that ELP was an issue, but it actually resulted in an out-of-service violation. i think as we sit here today we've seen over 1,500 out-of-service violations where not just that elp was an issue but it actually resulted in an out-of-service violation That number does continue to ramp, but obviously at a slower rate than we would have expected or that maybe we would have wished for. that number does continue to ramp but obviously at a slower rate than we would have expected or that maybe we would have wished for I think that enforcement will only continue to gain traction from here. i think that enforcement will only continue to gain traction from here It's just too early to tell what level across all states ultimately we will see it enforced by. it's just too early to tell what level 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 one part of the equation because what we do know relative to scales, inspections, and general enforcement over the road and trucking is as enforcement elevates, people deviate or they move out of the altogether or they simply avoid enforcement points. Those bad actors that may be out there, that may not be in compliance, 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'd also call everyone's attention to the reality that the enforcement data is only one part of the equation because what we do know relative to scales, inspections, and general enforcement over the road and trucking is as enforcement elevates, people deviate or they move out of the altogether or they simply avoid enforcement points. i'd also call everyone's attention to the reality that the enforcement data is only one part of the equation because what we do know relative to scales inspections and general enforcement over the road and trucking is as enforcement elevates people deviate or they move out of the altogether or they simply avoid enforcement points Those bad actors that may be out there, that may not be in compliance, may in fact be exiting. those bad actors that may be out there that may not be in compliance may in fact be exiting They may in fact be returning to other occupations. 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. 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

Speaker 11: Understood. Thanks for all the clarification there, Derek. 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 doing? Understood. understood Thanks for all the clarification there, Derek. thanks for all the clarification there derek 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. 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 doing? what are you doing Hearing from some of your customers is using commentary on peak season, but just broadly speaking, bigger shift to dedicated, pulling away from dedicated. Now there's probably a mix of different outcomes and opinions you're hearing, but you're 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. Hearing from some of your customers is using commentary on peak season, but just broadly speaking, bigger shift to dedicated, pulling away from dedicated. hearing from some of your customers is using commentary on peak season but just broadly speaking bigger shift to dedicated pulling away from dedicated Now there's probably a mix of different outcomes and opinions you're hearing, but you're seeing any shift between moving back into dedicated, moving more into one way, moving more into brokerage. now there's probably a mix of different outcomes and opinions you're hearing but you're 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. 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. Thanks. thanks

Speaker 3: Yeah, Brian, it's a great question again. When we're at this sort of inflection point or close to it, what we hear a lot of is that flight to quality. Part of that flight to quality is one way to dedicated. We don't want to bring dedicated into our business that isn't truly dedicated. If it's just a capacity solution, that's really the commoditized end of dedicated. We are pretty averse to that. We'll support that same customer with a one way solution, an engineered one, but that won't reside within our dedicated numbers because we want pure play dedicated in those numbers. We see some of that. What I would tell you we see probably more of as of late is customers looking for that sort of portfolio approach. Yeah, Brian, it's a great question again. yeah brian it's a great question again When we're at this sort of inflection point or close to it, what we hear a lot of is that flight to quality. when we're at this sort of inflection point or close to it what we hear a lot of is that flight to quality Part of that flight to quality is one way to dedicated. part of that flight to quality is one way to dedicated We don't want to bring dedicated into our business that isn't truly dedicated. we don't want to bring dedicated into our business that isn't truly dedicated If it's just a capacity solution, that's really the commoditized end of dedicated. if it's just a capacity solution that's really the commoditized end of dedicated We are pretty averse to that. we are pretty averse to that We'll support that same customer with a one way solution, an engineered one, but that won't reside within our dedicated numbers because we want pure play dedicated in those numbers. we'll support that same customer with a one way solution an engineered one but that won't reside within our dedicated numbers because we want pure play dedicated in those numbers We see some of that. we see some of that What I would tell you we see probably more of as of late is customers looking for that sort of portfolio approach. what i would tell you we see probably more of as of late is customers looking for that sort of portfolio approach Coming out of our recent forum, the conversations I've had with customers is a higher level of excitement and they can come to somebody like Werner and they can work with us on their one way needs. In that same relationship, they can work across Truckload Brokerage and specifically PowerLink Power, which is our power only solution. They often have Intermodal needs and we're able to step up and meet those needs and give them some diversity in their solution set. Across all of that, I think that's really kind of the movement that we're seeing as it relates to their overall dedicated needs. One thing I would say is a bit of a theme is a lot less enthusiasm for private fleet growth than what we saw during the COVID years. Coming out of our recent forum, the conversations I've had with customers is a higher level of excitement and they can come to somebody like Werner and they can work with us on their one way needs. coming out of our recent forum the conversations i've had with customers is a higher level of excitement and they can come to somebody like werner and they can work with us on their one way needs In that same relationship, they can work across Truckload Brokerage and specifically PowerLink Power, which is our power only solution. in that same relationship they can work across truckload brokerage and specifically powerlink power which is our power only solution They often have Intermodal needs and we're able to step up and meet those needs and give them some diversity in their solution set. they often have intermodal needs and we're able to step up and meet those needs and give them some diversity in their solution set Across all of that, I think that's really kind of the movement that we're seeing as it relates to their overall dedicated needs. across all of that i think that's really kind of the movement that we're seeing as it relates to their overall dedicated needs One thing I would say is a bit of a theme is a lot less enthusiasm for private fleet growth than what we saw during the COVID years. one thing i would say is a bit of a theme is a lot less enthusiasm for private fleet growth than what we saw during the covid years I think a lot of that was a defensive play on their part because absent other capacity solutions, they went out and tried to address it themselves. Now that they've been in this trucking business for a while, they also realize that even when they have the pick of the freight and they can work it through their own network, it's a little harder than they might have forecasted. 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. That sets up well for our dedicated pipeline. I covered a lot of ground there, but hopefully that answers the bulk of your question. I think a lot of that was a defensive play on their part because absent other capacity solutions, they went out and tried to address it themselves. i think a lot of that was a defensive play on their part because absent other capacity solutions they went out and tried to address it themselves Now that they've been in this trucking business for a while, they also realize that even when they have the pick of the freight and they can work it through their own network, it's a little harder than they might have forecasted. now that they've been in this trucking business for a while they also realize that even when they have the pick of the freight and they can work it through their own network it's a little harder than they might have forecasted 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. 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 That sets up well for our dedicated pipeline. that sets up well for our dedicated pipeline I covered a lot of ground there, but hopefully that answers the bulk of your question. i covered a lot of ground there but hopefully that answers the bulk of your question

Speaker 11: Yeah, no, I appreciate the perspective, Derek. Thank you. Yeah, no, I appreciate the perspective, Derek. yeah no i appreciate the perspective derek Thank you. thank you

Speaker 3: Thank you. Thank you, Brian. Thank you. thank you Thank you, Brian. thank you brian

Speaker 7: The next question is from Ravi Shanker with Morgan Stanley. The next question is from Ravi Shanker with Morgan Stanley. the next question is from ravi shanker with morgan stanley Please go ahead. Please go ahead. please go ahead

Speaker 8: Great, thanks. Good afternoon, guys. Great, thanks. great thanks Good afternoon, guys. good afternoon guys Congratulations on the case reversal, as I know it's something that you guys have been pushing for for a while. Do you think that this is the start, the light at the end, the beginning of the tunnel, if you will, for kind of court reform and maybe insurance numbers coming back in check for the industry? Congratulations on the case reversal, as I know it's something that you guys have been pushing for for a while. congratulations on the case reversal as i know it's something that you guys have been pushing for for a while Do you think that this is the start, the light at the end, the beginning of the tunnel, if you will, for kind of court reform and maybe insurance numbers coming back in check for the industry? do you think that this is the start the light at the end the beginning of the tunnel if you will for kind of court reform and maybe insurance numbers coming back in check for the industry

Speaker 3: Yeah. Ravi, you know, I'd love to believe that it's the start of a tidal wave of similar decisions, but I think that would be a bit optimistic at this point. What we do believe is it was the right decision. We do believe that the Texas Supreme Court affirmed irrefutably the facts of the case as we had stated them all along, which is, you know, we were hit head on in our own lane of travel by a vehicle that lost control across the median and traveled across lanes of traffic prior to even impacting us in our own lane of travel. We think it's a great win for us financially. We also think it's great for our drivers to kind of affirmatively be supported by the Texas Supreme Court. Yeah. yeah Ravi, you know, I'd love to believe that it's the start of a tidal wave of similar decisions, but I think that would be a bit optimistic at this point. ravi you know i'd love to believe that it's the start of a tidal wave of similar decisions but i think that would be a bit optimistic at this point What we do believe is it was the right decision. what we do believe is it was the right decision We do believe that the Texas Supreme Court affirmed irrefutably the facts of the case as we had stated them all along, which is, you know, we were hit head on in our own lane of travel by a vehicle that lost control across the median and traveled across lanes of traffic prior to even impacting us in our own lane of travel. we do believe that the texas supreme court affirmed irrefutably the facts of the case as we had stated them all along which is you know we were hit head on in our own lane of travel by a vehicle that lost control across the median and traveled across lanes of traffic prior to even impacting us in our own lane of travel We think it's a great win for us financially. we think it's a great win for us financially We also think it's great for our drivers to kind of affirmatively be supported by the Texas Supreme Court. we also think it's great for our drivers to kind of affirmatively be supported by the texas supreme court 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, but 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 do what's right. With that said, egregious verdicts like this do nothing but leak into cost inflation, ultimately into real inflation at the consumer level. It's not ultimately good for the U.S. consumer. There are some, you know, remedies out there, as you indicated, from the tort side. We think we got a lot of work to do still as an industry and as a company on tort reform. 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. we got to do that at a state-by-state level It's difficult work, but work that needs to be done. it's difficult work but work that needs to be done All we're looking for is an even and equitable playing field. all we're looking for is an even and equitable playing field We're not looking for any special advantages or anything else. 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 do what's right. 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 do what's right With that said, egregious verdicts like this do nothing but leak into cost inflation, ultimately into real inflation at the consumer level. with that said egregious verdicts like this do nothing but leak into cost inflation ultimately into real inflation at the consumer level It's not ultimately good for the U.S. consumer. it's not ultimately good for the u.s consumer There are some, you know, remedies out there, as you indicated, from the tort side. there are some you know remedies out there as you indicated from the tort side I think playing a more active role relative to states where judges are elected versus appointed and making sure that we're not asleep at the wheel on that is important. Ultimately, the most important thing is lowering our accident rate. We're committed to doing that. We've been on a multi-year trend of continuing to push lower and lower our DOT reportables, which are sort of the larger accidents, and that's what really, really matters. On the injury side, doing the same thing, really leaning in on better and better injury prevention, better driver training, better post-injury care to try to get drivers back in the seat and back driving again quicker so that they can, you know, get back with their lives. It's an all-of-the-above strategy. I think playing a more active role relative to states where judges are elected versus appointed and making sure that we're not asleep at the wheel on that is important. i think playing a more active role relative to states where judges are elected versus appointed and making sure that we're not asleep at the wheel on that is important Ultimately, the most important thing is lowering our accident rate. ultimately the most important thing is lowering our accident rate We're committed to doing that. we're committed to doing that We've been on a multi-year trend of continuing to push lower and lower our DOT reportables, which are sort of the larger accidents, and that's what really, really matters. we've been on a multi-year trend of continuing to push lower and lower our dot reportables which are sort of the larger accidents and that's what really really matters On the injury side, doing the same thing, really leaning in on better and better injury prevention, better driver training, better post-injury care to try to get drivers back in the seat and back driving again quicker so that they can, you know, get back with their lives. on the injury side doing the same thing really leaning in on better and better injury prevention better driver training better post-injury care to try to get drivers back in the seat and back driving again quicker so that they can you know get back with their lives It's an all-of-the-above strategy. it's an 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. That's going to be a long fight, but one worth fighting. As it relates to the insurance line, the problem there with any kind of prediction is that you're one 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. Yes, we are expecting over time to flatten that curve. We're making progress on doing so. We still don't love the elevated reality of where insurance sits as a percent of revenue today. 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. 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 That's going to be a long fight, but one worth fighting. that's going to be a long fight but one worth fighting As it relates to the insurance line, the problem there with any kind of prediction is that you're one 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. as it relates to the insurance line the problem there with any kind of prediction is that you're one 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 Yes, we are expecting over time to flatten that curve. yes we are expecting over time to flatten that curve We're making progress on doing so. we're making progress on doing so We still don't love the elevated reality of where insurance sits as a percent of revenue today. we still don't love the elevated reality of where insurance sits as a percent of revenue today

Speaker 8: Understood, that's really helpful. Maybe as a follow-up, you did note your high consumer non-discretionary exposure, but I think there has been some view that in this cycle it's non-discretionary that's under pressure more. You've seen some of the CPG companies say that, and UPS hinted that in the call this morning. Do you feel like you guys have 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? Understood, that's really helpful. understood that's really helpful Maybe as a follow-up, you did note your high consumer non-discretionary exposure, but I think there has been some view that in this cycle it's non-discretionary that's under pressure more. maybe as a follow-up you did note your high consumer non-discretionary exposure but i think there has been some view that in this cycle it's non-discretionary that's under pressure more You've seen some of the CPG companies say that, and UPS hinted that in the call this morning. you've seen some of the cpg companies say that and ups hinted that in the call this morning Do you feel like you guys have 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? do you feel like you guys have 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

Speaker 3: Look, I think the consumer has been more frugal perhaps than they have in prior cycles. What I mean by that, especially since you mentioned CPG companies, I'll stay away from names, but we know that private label, white label type products have become more in vogue and people are willing not just to trade down in what store they shop at, but trade down the product mix within that store. In both of those types of cases, the places that we work and who we haul for, they play in those arenas. We have not seen that kind of duress within our customer mix. As a matter of fact, 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. Look, I think the consumer has been more frugal perhaps than they have in prior cycles. look i think the consumer has been more frugal perhaps than they have in prior cycles What I mean by that, especially since you mentioned CPG companies, I'll stay away from names, but we know that private label, white label type products have become more in vogue and people are willing not just to trade down in what store they shop at, but trade down the product mix within that store. what i mean by that especially since you mentioned cpg companies i'll stay away from names but we know that private label white label type products have become more in vogue and people are willing not just to trade down in what store they shop at but trade down the product mix within that store In both of those types of cases, the places that we work and who we haul for, they play in those arenas. in both of those types of cases the places that we work and who we haul for they play in those arenas We have not seen that kind of duress within our customer mix. we have not seen that kind of duress within our customer mix As a matter of fact, 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. as a matter of fact 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 That doesn't mean I can predict that that's what it looks like two quarters out or even into the fall, but right now it appears as though that discount retail, non-discretionary arena is holding up pretty well overall and we're heavily exposed in that part and we do a really good job and a very unique job for those customers. 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 end of the spectrum. It's more dedicated, it's more engineered, it's a lot of cross border and as they benefit through this upside, and as they attract customers, what we've seen in prior cycles is they tend to hold onto them pretty well. That doesn't mean I can predict that that's what it looks like two quarters out or even into the fall, but right now it appears as though that discount retail, non-discretionary arena is holding up pretty well overall and we're heavily exposed in that part and we do a really good job and a very unique job for those customers. that doesn't mean i can predict that that's what it looks like two quarters out or even into the fall but right now it appears as though that discount retail non-discretionary arena is holding up pretty well overall and we're heavily exposed in that part and we do a really good job and a very unique job for those customers 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 end of the spectrum. 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 end of the spectrum It's more dedicated, it's more engineered, it's a lot of cross border and as they benefit through this upside, and as they attract customers, what we've seen in prior cycles is they tend to hold onto them pretty well. it's more dedicated it's more engineered it's a lot of cross border and as they benefit through this upside and as they attract customers what we've seen in prior cycles is they tend to hold onto them pretty well Customers are exposed to a product mix that maybe they didn't realize was as strong as it was. That's where we see them usually take a step up in store growth and same store sales and we're along for the ride with them, supporting them in every way. Customers are exposed to a product mix that maybe they didn't realize was as strong as it was. customers are exposed to a product mix that maybe they didn't realize was as strong as it was That's where we see them usually take a step up in store growth and same store sales and we're along for the ride with them, supporting them in every way. that's where we see them usually take a step up in store growth and same store sales and we're along for the ride with them supporting them in every way

Speaker 8: Very good. Very good. very good Thank you. Thank you. thank you

Speaker 3: Thank you, Ravi. Thank you, Ravi. thank you ravi

Speaker 7: Excuse me. Excuse me. excuse me The next question is from Ken Hoexter. The next question is from Ken Hoexter. the next question is from ken hoexter With Bank of America. With Bank of America. with bank of america Please go ahead. Please go ahead . please go ahead

Speaker 9: Great. Good afternoon, Derek and Chris. Utilization seems to be improving. Great. great Good afternoon, Derek and Chris. good afternoon derek and chris Utilization seems to be improving. utilization seems to be improving Deadhead. Deadhead. deadhead Improved sequentially. Is that better asset focus on your part? Is that selling more equipment? Improved sequentially. improved sequentially Is that better asset focus on your part? is that better asset focus on your part Is that selling more equipment? is that selling more equipment Sign of excess capacity coming out? I guess just maybe positioning that into. Sign of excess capacity coming out? sign of excess capacity coming out I guess just maybe positioning that into. i guess just maybe positioning that into Your thoughts on what's normal for TTS. Your thoughts on what's normal for TTS. your thoughts on what's normal for tts Margin gain from 2Q to 3Q? Margin gain from 2Q to 3Q? margin gain from 2q to 3q

Speaker 3: Yeah, great question Ken. It's interesting because, I'll start with this. The utilization gains we've been making, especially across the one-way network, are really engineered in nature. It's structural, strategic changes that we're making to be able to sweat the assets more. We're pretty excited about it, especially because right now those increased miles don't really give you much leverage to the upside until you start to see rate move. When it does, it's a real earning opportunity with those excess miles. Actually, in Q2, what's interesting is they were down slightly, but that's more reflective of some of the outsized dedicated wins that we had and our need to move some of those high-quality one-way drivers in some of those engineered solutions over to dedicated, reseat those trucks in one-way. Yeah, great question Ken. yeah great question ken It's interesting because, I'll start with this. it's interesting because i'll start with this The utilization gains we've been making, especially across the one-way network, are really engineered in nature. the utilization gains we've been making especially across the one-way network are really engineered in nature It's structural, strategic changes that we're making to be able to sweat the assets more. it's structural strategic changes that we're making to be able to sweat the assets more We're pretty excited about it, especially because right now those increased miles don't really give you much leverage to the upside until you start to see rate move. we're pretty excited about it especially because right now those increased miles don't really give you much leverage to the upside until you start to see rate move When it does, it's a real earning opportunity with those excess miles. when it does it's a real earning opportunity with those excess miles Actually, in Q2, what's interesting is they were down slightly, but that's more reflective of some of the outsized dedicated wins that we had and our need to move some of those high-quality one-way drivers in some of those engineered solutions over to dedicated, reseat those trucks in one-way. actually in q2 what's interesting is they were down slightly but that's more reflective of some of the outsized dedicated wins that we had and our need to move some of those high-quality one-way drivers in some of those engineered solutions over to dedicated reseat those trucks in one-way We had a bit of a utilization impact from our own success, if you will, in dedicated. That passes here shortly as we continue to see dedicated growth, but maybe not quite as lumpy as what it's been in Q2. That's coming into Q3, we'll have an opportunity to kind of get our arms back around that network on the one-way side. We think there's gains to be made from a productivity perspective. You only have to go back a couple of years to see a miles per truck gain from a couple of years ago that's double-digit higher today than where we used to reside. That's part of what led to, in a very tough market with rates that are still pressured, the highest revenue per truck per week we've seen in one-way in our history. We had a bit of a utilization impact from our own success, if you will, in dedicated. we had a bit of a utilization impact from our own success if you will in dedicated That passes here shortly as we continue to see dedicated growth, but maybe not quite as lumpy as what it's been in Q2. that passes here shortly as we continue to see dedicated growth but maybe not quite as lumpy as what it's been in q2 That's coming into Q3, we'll have an opportunity to kind of get our arms back around that network on the one-way side. that's coming into q3 we'll have an opportunity to kind of get our arms back around that network on the one-way side We think there's gains to be made from a productivity perspective. we think there's gains to be made from a productivity perspective You only have to go back a couple of years to see a miles per truck gain from a couple of years ago that's double-digit higher today than where we used to reside. you only have to go back a couple of years to see a miles per truck gain from a couple of years ago that's double-digit higher today than where we used to reside That's part of what led to, in a very tough market with rates that are still pressured, the highest revenue per truck per week we've seen in one-way in our history. that's part of what led to in a very tough market with rates that are still pressured the highest revenue per truck per week we've seen in one-way 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 very methodical about. We're going to continue to do that so that that then translates as rates start to improve to expanded margins, which is the first step toward that march back to double-digit operating margins in TTS. Now what we need to do is continue to focus on the cost side of the equation, which we've been diligent about and very methodical about. now what we need to do is continue to focus on the cost side of the equation which we've been diligent about and very methodical about We're going to continue to do that so that that then translates as rates start to improve to expanded margins, which is the first step toward that march back to double-digit operating margins in TTS. we're going to continue to do that so that that then translates as rates start to improve to expanded margins which is the first step toward that march back to double-digit operating margins in tts

Speaker 9: I'm sorry, your thoughts on what that means for kind of normal seasonality for third quarter operating margin in TTS. I'm sorry, your thoughts on what that means for kind of normal seasonality for third quarter operating margin in TTS. i'm sorry your thoughts on what that means for kind of normal seasonality for third quarter operating margin in tts Is that a Chris question? Is that a Chris question? is that a chris question Derek, you want to take it? Derek? Derek, you want to take it? derek you want to take it Derek? derek

Speaker 1: Yeah, sure, Ken. I can give you some insight on that. Overall, it's been a good start to Q3. Revenue is positive, the outlook is positive, and I think points to sequential improvement in revenue in part from dedicated within TTS where we'll continue to ramp up with new fleets and continue to benefit from the streak of wins that we signed last quarter. I know your question was specifically on TTS, but broadly Q2 to Q3, we're also seeing very positive momentum in logistics, and we expect that to continue. From a TTS perspective, we expect some ongoing improvement in operating income, and as Derek Leathers mentioned, we continue to be confident in the pathway back to double-digit TTS operating margins. Yeah, sure, Ken. yeah sure ken I can give you some insight on that. i can give you some insight on that Overall, it's been a good start to Q3. overall it's been a good start to q3 Revenue is positive, the outlook is positive, and I think points to sequential improvement in revenue in part from dedicated within TTS where we'll continue to ramp up with new fleets and continue to benefit from the streak of wins that we signed last quarter. revenue is positive the outlook is positive and i think points to sequential improvement in revenue in part from dedicated within tts where we'll continue to ramp up with new fleets and continue to benefit from the streak of wins that we signed last quarter I know your question was specifically on TTS, but broadly Q2 to Q3, we're also seeing very positive momentum in logistics, and we expect that to continue. i know your question was specifically on tts but broadly q2 to q3 we're also seeing very positive momentum in logistics and we expect that to continue From a TTS perspective, we expect some ongoing improvement in operating income, and as Derek Leathers mentioned, we continue to be confident in the pathway back to double-digit TTS operating margins. from a tts perspective we expect some ongoing improvement in operating income and as derek leathers mentioned we continue to be confident in the pathway back to double-digit tts operating margins

Speaker 9: Okay, but there's no, I guess you're not talking a historical average or anything. Okay, but there's no, I guess you're not talking a historical average or anything. okay but there's no i guess you're not talking a historical average or anything Moving from a 2Q, I don't know if there's a 130 basis point or any kind of a normal improvement from 2Q that. Moving from a 2Q, I don't know if there's a 130 basis point or any kind of a normal improvement from 2Q that. moving from a 2q i don't know if there's a 130 basis point or any kind of a normal improvement from 2q that Sorry, just to keep reiterating on it. Sorry, just to keep reiterating on it. sorry just to keep reiterating on it

Speaker 3: 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. 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. We're not talking about monumental gains. We're going to have to continue to plug away and work at the work we're doing today to see some small incremental gains as we continue to climb this mountain. The starting point, unfortunately for us, is at the base of the mountain, which is where we found ourselves entering into Q2, and we're going to start that slow climb out. 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. 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 It's really dependent on the year you're in. 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. 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 We're not talking about monumental gains. we're not talking about monumental gains We're going to have to continue to plug away and work at the work we're doing today to see some small incremental gains as we continue to climb this mountain. we're going to have to continue to plug away and work at the work we're doing today to see some small incremental gains as we continue to climb this mountain The starting point, unfortunately for us, is at the base of the mountain, which is where we found ourselves entering into Q2, and we're going to start that slow climb out. the starting point unfortunately for us is at the base of the mountain which is where we found ourselves entering into q2 and we're going to start that slow climb out

Speaker 9: Totally understand. Totally understand. totally understand Can I just squeeze one more in? Can I just squeeze one more in? can i just squeeze one more in On the age of the fleet? You went up to 2.4 years. Derek. On the age of the fleet? on the age of the fleet You went up to 2.4 years. you went up to 2.4 years Derek. derek Is that anything on moderating? Is that anything on moderating? is that anything on moderating You mentioned moderating equipment spend. Is that a trade-off of buying? You mentioned moderating equipment spend. you mentioned moderating equipment spend Is that a trade-off of buying? is that a trade-off of buying Back a stock versus a deliberate move. Back a stock versus a deliberate move. back a stock versus a deliberate move To age the fleet? To age the fleet? to age the fleet I just want to understand if there. I just want to understand if there. i just want to understand if there Was a signal there. Was a signal there. was a signal there

Speaker 3: Yeah, it 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 some of the EPA things that are still going on right now in D.C. 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, it's 65% of the trucks in dedicated, 35% in one way, challenging kind of some assumptions as to what is the right fleet age. I'm not saying long term we've determined 24 is perfect. 24 doesn't worry me a whole lot compared to our more recent range that was a little lower than that. Yeah, it definitely wasn't a trade off in order to buy back stock. yeah it definitely wasn't a trade off in order to buy back stock Our balance sheet is strong enough. our balance sheet is strong enough We could have done both. 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 some of the EPA things that are still going on right now in D.C. it's more reflective of the ongoing uncertainty around tariffs and a little bit of the uncertainty that was wrapped up in some of the epa things that are still going on right now in d.c We feel like we're in a really good position. 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. 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, it's 65% of the trucks in dedicated, 35% in one way, challenging kind of some assumptions as to what is the right fleet age. as our fleet gets it's 65% of the trucks in dedicated 35% in one way challenging kind of some assumptions as to what is the right fleet age I'm not saying long term we've determined 24 is perfect. 24 doesn't worry me a whole lot compared to our more recent range that was a little lower than that. i'm not saying long term we've determined 24 is perfect 24 doesn't worry me a whole lot compared to our more recent range that was a little lower than that We think we're better positioned and still have the optionality if we can get some things done with some of our OEM partners that that fleet age could go slightly up or slightly down from here as we look forward through the remainder of the year. We're going to be flexible but opportunistic as it relates to the fleet age. We feel very good about the utilization in our terminals to do on-site maintenance versus over the road and the ability to expand that even further, 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. We think we're better positioned and still have the optionality if we can get some things done with some of our OEM partners that that fleet age could go slightly up or slightly down from here as we look forward through the remainder of the year. we think we're better positioned and still have the optionality if we can get some things done with some of our oem partners that that fleet age could go slightly up or slightly down from here as we look forward through the remainder of the year We're going to be flexible but opportunistic as it relates to the fleet age. we're going to be flexible but opportunistic as it relates to the fleet age We feel very good about the utilization in our terminals to do on-site maintenance versus over the road and the ability to expand that even further, 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. we feel very good about the utilization in our terminals to do on-site maintenance versus over the road and the ability to expand that even further 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

Speaker 9: Derek, great insight. Derek, great insight. derek great insight Appreciate your thoughts. Appreciate your thoughts. appreciate your thoughts Thanks, Chris. Thanks, Chris. thanks chris

Speaker 3: Thank you, Ken. Thank you, Ken. thank you ken

Speaker 7: The next question is from Tom Wadewitz with UBS. The next question is from Tom Wadewitz with UBS. the next question is from tom wadewitz with ubs Please go ahead. Please go ahead. please go ahead

Speaker 6: Yeah, good afternoon. Derek, how do I think about, or Chris, I guess your kind of underlying inflation and kind of how much rate you need because it does seem like you're getting some traction in revenue per tractor ex fuel and traction and rate on one way and then a variety of factors in dedicated that's moving in a favorable way. It's like 2% or 3% gain in, say, revenue per truck per week is not enough to get you there, I guess. Would you think that, is inflation going to come down as you look maybe out beyond a couple quarters? Are you more optimistic about that, or do you say, look, you know what we've got today continues and we just really, to make margin progress, we really need like 5%, 6%, 7% rate? Yeah, good afternoon. yeah good afternoon Derek, how do I think about, or Chris, I guess your kind of underlying inflation and kind of how much rate you need because it does seem like you're getting some traction in revenue per tractor ex fuel and traction and rate on one way and then a variety of factors in dedicated that's moving in a favorable way. derek how do i think about or chris i guess your kind of underlying inflation and kind of how much rate you need because it does seem like you're getting some traction in revenue per tractor ex fuel and traction and rate on one way and then a variety of factors in dedicated that's moving in a favorable way It's like 2 % or 3% gain in, say, revenue per truck per week is not enough to get you there, I guess. it's like 2 % or 3% gain in say revenue per truck per week is not enough to get you there i guess Would you think that, is inflation going to come down as you look maybe out beyond a couple quarters? would you think that is inflation going to come down as you look maybe out beyond a couple quarters Are you more optimistic about that, or do you say, look, you know what we've got today continues and we just really, to make margin progress, we really need like 5%, 6%, 7% rate? are you more optimistic about that or do you say look you know what we've got today continues and we just really to make margin progress we really need like 5% 6% 7% rate I don't know if you have any thoughts on that broader 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 into 2026 or out a couple quarters. I don't know if you have any thoughts on that broader equation. i don't know if you have any thoughts on that broader 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 into 2026 or out a couple quarters. 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 into 2026 or out a couple quarters

Speaker 1: Hey Tom, this is Chris. Yeah, we certainly need rate recovery in one way. As you know, we've had multiple years of significant rate reduction. I think we've held in well relative to the overall industry, but broadly it's been a couple of years of rate reduction while other expense line items have been on an inflationary trend, as you said. We certainly need more in the range of mid single digit improvement in rate. It's not only about particularly one way rates. Hey Tom, this is Chris. hey tom this is chris Yeah, we certainly need rate recovery in one way. yeah we certainly need rate recovery in one way As you know, we've had multiple years of significant rate reduction. as you know we've had multiple years of significant rate reduction I think we've held in well relative to the overall industry, but broadly it's been a couple of years of rate reduction while other expense line items have been on an inflationary trend, as you said. i think we've held in well relative to the overall industry but broadly it's been a couple of years of rate reduction while other expense line items have been on an inflationary trend as you said We certainly need more in the range of mid single digit improvement in rate. we certainly need more in the range of mid single digit improvement in rate It's not only about particularly one way rates. it's not only about particularly one way rates To get back to the low double digit TTS kind of mid cycle adjusted OI margins that we've talked about, it's rate but also continued growth in dedicated in addition to ongoing cost discipline, leveraging our technology investments, and a sustained recovery in the used equipment market. Those are really the levers that we talked about. We continue to pressure test within our own walls here, those levers, and it continues to give us confidence that those in combination is the pathway back to low double digits, 10%-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. We have a ways to go, but we're encouraged with the recent momentum and we remain confident in our gradual progression. To get back to the low double digit TTS kind of mid cycle adjusted OI margins that we've talked about, it's rate but also continued growth in dedicated in addition to ongoing cost discipline, leveraging our technology investments, and a sustained recovery in the used equipment market. to get back to the low double digit tts kind of mid cycle adjusted oi margins that we've talked about it's rate but also continued growth in dedicated in addition to ongoing cost discipline leveraging our technology investments and a sustained recovery in the used equipment market Those are really the levers that we talked about. those are really the levers that we talked about We continue to pressure test within our own walls here, those levers, and it continues to give us confidence that those in combination is the pathway back to low double digits, 10 %- 12% or more. we continue to pressure test within our own walls here those levers and it continues to give us confidence that those in combination is the pathway back to low double digits 10 %- 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. the good news is in the second quarter all of those areas and levers are progressing positively for the first time in two years We have a ways to go, but we're encouraged with the recent momentum and we remain confident in our gradual progression. we have a ways to go but we're encouraged with the recent momentum and we remain confident in our gradual progression

Speaker 6: Thank you. Thank you. thank you And on the, you know, vas, it's a lot better year-over-year. You know, cost takeout supportive for that operating income. Is that kind of the right run rate assuming you know you don't have big shifts in truckload market backdrop, that you're kind of, you know, $6 million a quarter operating income in VAs, or how do you think about 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 three quarters before you lap it. Just any more thoughts on the, you know, kind of VAS operating income, that should good improvement. And on the, you know, vas, it's a lot better year-over-year. and on the you know vas it's a lot better year-over-year You know, cost takeout supportive for that operating income. you know cost takeout supportive for that operating income Is that kind of the right run rate assuming you know you don't have big shifts in truckload market backdrop, that you're kind of, you know, $6 million a quarter operating income in VAs, or how do you think about the run rate there? is that kind of the right run rate assuming you know you don't have big shifts in truckload market backdrop that you're kind of you know $6 million a quarter operating income in vas or how do you think about 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 three quarters before you lap it. 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 three quarters before you lap it Just any more thoughts on the, you know, kind of VAS operating income, that should good improvement. just any more thoughts on the you know kind of vas operating income that should good improvement

Speaker 3: Yeah. Tom, first off, I'll congratulate you for wearing your throwback analyst jacket today by calling it VAs. It's Werner Logistics now. Yeah. yeah Tom, first off, I'll congratulate you for wearing your throwback analyst jacket today by calling it VAs. tom first off i'll congratulate you for wearing your throwback analyst jacket today by calling it vas It's Werner Logistics now. it's werner logistics now

Speaker 6: Sorry about that. I don't know. Sorry about that. sorry about that I don't know. i don't know We. We. we Our model's been in use for a long time. Our model's been in use for a long time. our model's been in use for a long time

Speaker 3: The structural improvements made there are reflective of some of these tech investments we've been talking about. We're very excited about the ongoing integration that is now basically complete between ReedTMS and Werner Logistics. That team's really found its stride structurally. We believe that yes, on the horizon we need to all realize that at some point with this inflection comes buy rate pressure and that pressure will be managed as well here as anywhere. At the same time, that will come with our ability to reset sell rates with our customers. There's always a timing issue. Absent of that timing issue, as you stated in your question, 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 into Q3 that continues to give us optimism. The structural improvements made there are reflective of some of these tech investments we've been talking about. the structural improvements made there are reflective of some of these tech investments we've been talking about We're very excited about the ongoing integration that is now basically complete between ReedTMS and Werner Logistics. we're very excited about the ongoing integration that is now basically complete between reedtms and werner logistics That team's really found its stride structurally. that team's really found its stride structurally We believe that yes, on the horizon we need to all realize that at some point with this inflection comes buy rate pressure and that pressure will be managed as well here as anywhere. we believe that yes on the horizon we need to all realize that at some point with this inflection comes buy rate pressure and that pressure will be managed as well here as anywhere At the same time, that will come with our ability to reset sell rates with our customers. at the same time that will come with our ability to reset sell rates with our customers There's always a timing issue. there's always a timing issue Absent of that timing issue, as you stated in your question, we do believe that we have a structurally different logistics group now. absent of that timing issue as you stated in your question we do believe that we have a structurally different logistics group now They're operating at a high level of performance. 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 into Q3 that continues to give us optimism. we're proud of the q2 performance and as we look forward we've got momentum into q3 that continues to give us optimism I don't know if that fully answers, but I'm not going to guide you to an actual number obviously, but Werner Logistics is on the right path and it's really the output of what's been a very arduous integration effort as well as the output of the one place where we have Werner EDGE fully integrated and fully committed, minus the small Final Mile Services piece of the business. I don't know if that fully answers, but I'm not going to guide you to an actual number obviously, but Werner Logistics is on the right path and it's really the output of what's been a very arduous integration effort as well as the output of the one place where we have Werner EDGE fully integrated and fully committed, minus the small Final Mile Services piece of the business. i don't know if that fully answers but i'm not going to guide you to an actual number obviously but werner logistics is on the right path and it's really the output of what's been a very arduous integration effort as well as the output of the one place where we have werner edge fully integrated and fully committed minus the small final mile services piece of the business

Speaker 6: Okay, it's good to see the improvement in logistics. Thank you. Okay, it's good to see the improvement in logistics. okay it's good to see the improvement in logistics Thank you. thank you

Speaker 3: Thank you. Thank you. thank you

Speaker 7: The next question is from Scott Group with Wolfe Research. Please go ahead. The next question is from Scott Group with Wolfe Research. the next question is from scott group with wolfe research Please go ahead. please go ahead

Speaker 2: Hey, thanks. Afternoon. Hey, thanks. hey thanks Afternoon. afternoon Just to follow up on one of. Just to follow up on one of. just to follow up on one of The earlier questions about Q3, right. The earlier questions about Q3, right. the earlier questions about q3 right If I just look Q1 to Q2, trucking margins got about 2 points better. Is that sort of like the magnitude of improvement we can continue to expect sequentially, or is it, hey, gains. If I just look Q1 to Q2, trucking margins got about 2 points better. if i just look q1 to q2 trucking margins got about 2 points better Is that sort of like the magnitude of improvement we can continue to expect sequentially, or is it, hey, gains. is that sort of like the magnitude of improvement we can continue to expect sequentially or is it hey gains On sale got better. On sale got better. on sale got better Q1 was really bad, so maybe that's too much improvement to expect on a quarter-to-quarter basis. Q1 was really bad, so maybe that's too much improvement to expect on a quarter-to-quarter basis. q1 was really bad so maybe that's too much improvement to expect on a quarter-to-quarter basis Any thoughts? Any thoughts? any thoughts

Speaker 3: Yeah, I'm not going to guide to a number, Scott, but I will obviously restate what you just stated, which is Q1 was that bad. Some of the improvement is just based on the starting point. We need to recognize that gains and on a per unit basis have been much improved, and really at two-year highs. It does come down to what's the number of units that we're going to be able to move and what's that gain line going to look like. I would just think about it as it's up and down the P&L. It's the ongoing, it's the increase in the cost takeout, it's the execution that we've been talking about relative to one-way and one-way improvements. All of that in the soup, and we're going to see sort of small incremental gains from Q2 to Q3 would be our expectation. Yeah, I'm not going to guide to a number, Scott, but I will obviously restate what you just stated, which is Q1 was that bad. yeah i'm not going to guide to a number scott but i will obviously restate what you just stated which is q1 was that bad Some of the improvement is just based on the starting point. some of the improvement is just based on the starting point We need to recognize that gains and on a per unit basis have been much improved, and really at two-year highs. we need to recognize that gains and on a per unit basis have been much improved and really at two-year highs It does come down to what's the number of units that we're going to be able to move and what's that gain line going to look like. it does come down to what's the number of units that we're going to be able to move and what's that gain line going to look like I would just think about it as it's up and down the P&L. i would just think about it as it's up and down the p&l It's the ongoing, it's the increase in the cost takeout, it's the execution that we've been talking about relative to one-way and one-way improvements. it's the ongoing it's the increase in the cost takeout it's the execution that we've been talking about relative to one-way and one-way improvements All of that in the soup, and we're going to see sort of small incremental gains from Q2 to Q3 would be our expectation. all of that in the soup and we're going to see sort of small incremental gains from q2 to q3 would be our expectation Now we've got to go and execute on that. Things that make that optimism kind of resonate with me is the pipeline looks strong, both dedicated and one-way. The stuff in what we refer to as BI, business implementation, is strong, especially for this time of year. That's already secured and going through the final implementation stages and launch with the dedicated side. That does include headwinds still that come with launching a new dedicated fleet, but the bigger part of those headwinds is behind us. We still have some to come with some of the implementation still yet to be finalized. It's hard to, we don't guide quarterly, we don't guide annually. I want to stick to that for now, but hopefully that gives you some color or some way to think about it. Now we've got to go and execute on that. now we've got to go and execute on that Things that make that optimism kind of resonate with me is the pipeline looks strong, both dedicated and one-way. things that make that optimism kind of resonate with me is the pipeline looks strong both dedicated and one-way The stuff in what we refer to as BI, business implementation, is strong, especially for this time of year. the stuff in what we refer to as bi business implementation is strong especially for this time of year That's already secured and going through the final implementation stages and launch with the dedicated side. that's already secured and going through the final implementation stages and launch with the dedicated side That does include headwinds still that come with launching a new dedicated fleet, but the bigger part of those headwinds is behind us. that does include headwinds still that come with launching a new dedicated fleet but the bigger part of those headwinds is behind us We still have some to come with some of the implementation still yet to be finalized. we still have some to come with some of the implementation still yet to be finalized It's hard to, we don't guide quarterly, we don't guide annually. it's hard to we don't guide quarterly we don't guide annually I want to stick to that for now, but hopefully that gives you some color or some way to think about it. i want to stick to that for now but hopefully that gives you some color or some way to think about it

Speaker 1: Scott, maybe just to add to that, the cost savings program, we've been very focused on that. Part of that goal is holding the line as much as we can, particularly on the fixed costs and even some of the variable as we 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 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. Scott, maybe just to add to that, the cost savings program, we've been very focused on that. scott maybe just to add to that the cost savings program we've been very focused on that Part of that goal is holding the line as much as we can, particularly on the fixed costs and even some of the variable as we 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. part of that goal is holding the line as much as we can particularly on the fixed costs and even some of the variable as we 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 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. 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 When we get past kind of the maturity stage of these new fleets, the contribution margin really starts to take effect and we see the benefit not only of the technology that Derek mentioned but also just becoming a more agile and lean organization. When we get past kind of the maturity stage of these new fleets, the contribution margin really starts to take effect and we see the benefit not only of the technology that Derek mentioned but also just becoming a more agile and lean organization. when we get past kind of the maturity stage of these new fleets the contribution margin really starts to take effect and we see the benefit not only of the technology that derek mentioned but also just becoming a more agile and lean organization

Speaker 2: That's helpful. Maybe just a big picture question, it is a big day in the broad transport landscape with the UPNs merger. I'm just curious, Derek, if you've had a chance to think about what this. That's helpful. that's helpful Maybe just a big picture question, it is a big day in the broad transport landscape with the UPNs merger. maybe just a big picture question it is a big day in the broad transport landscape with the upns merger I'm just curious, Derek, if you've had a chance to think about what this. i'm just curious derek if you've had a chance to think about what this Means for your business, is this good for Intermodal? Means for your business, is this good for Intermodal? means for your business is this good for intermodal I don't know, channel partners with Rails, and does this have any impact in any way, do you think, on your. I don't know, channel partners with Rails, and does this have any impact in any way, do you think, on your. i don't know channel partners with rails and does this have any impact in any way do you think on your Trucking business with the transcon merger? Just big picture thoughts. Trucking business with the transcon merger? trucking business with the transcon merger Just big picture thoughts. just big picture thoughts

Speaker 3: Yeah, Scott, I'll be a bit careful here about getting too much into the weeds with their respective companies. I will just tell you this from our viewpoint today as we are digesting and continuing to do so. Good news for us is our two partners right now, predominant partners in the west and the east, are UP and NS respectively. We've seen outsized growth in Intermodal, although from a smaller base than some of the major players, but continue to grow and make headroads. We think this does create a more competitive product as it relates to threatening the truckload business that we currently are in. Yeah, Scott, I'll be a bit careful here about getting too much into the weeds with their respective companies. yeah scott i'll be a bit careful here about getting too much into the weeds with their respective companies I will just tell you this from our viewpoint today as we are digesting and continuing to do so. i will just tell you this from our viewpoint today as we are digesting and continuing to do so Good news for us is our two partners right now, predominant partners in the west and the east, are UP and NS respectively. good news for us is our two partners right now predominant partners in the west and the east are up and ns respectively We've seen outsized growth in Intermodal, although from a smaller base than some of the major players, but continue to grow and make headroads. we've seen outsized growth in intermodal although from a smaller base than some of the major players but continue to grow and make headroads We think this does create a more competitive product as it relates to threatening the truckload business that we currently are in. we think this does create a more competitive product 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 one-way business looks like and how it's sort of divided between engineered lanes, cross-border Mexico, and expedited freight, those are in each way for different reasons much tougher to tackle and much tougher to convert. I'm not naive 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. All things being equal, if there was going to be a merger west and east, from our point of view we like this particular option. We think it bodes well for Werner and we think our 65% dedicated exposure, as an example, is completely insulated from any kind of rail merger. If you look at our length of haul and if you look at what our one-way business looks like and how it's sort of divided between engineered lanes, cross-border Mexico, and expedited freight, those are in each way for different reasons much tougher to tackle and much tougher to convert. if you look at our length of haul and if you look at what our one-way business looks like and how it's sort of divided between engineered lanes cross-border mexico and expedited freight those are in each way for different reasons much tougher to tackle and much tougher to convert I'm not naive 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. i'm not naive 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 All things being equal, if there was going to be a merger west and east, from our point of view we like this particular option. all things being equal if there was going to be a merger west and east from our point of view we like this particular option We think it bodes well for Werner and we think our 65% dedicated exposure, as an example, is completely insulated from any kind of rail merger. we think it bodes well for werner and we think our 65% dedicated exposure as an example is completely insulated from any kind of rail merger Within our one-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 isn't opportunities around the edges and we're constantly already working with our customers on some of those opportunities. If it's going to go Intermodal, I'd rather go Intermodal here than somewhere else. Within our one-way, the predominance of what we do is nowhere near in the crosshairs of what the kind of work that would be. within our one-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 isn't opportunities around the edges and we're constantly already working with our customers on some of those opportunities. rail convertible doesn't mean there isn't opportunities around the edges and we're constantly already working with our customers on some of those opportunities If it's going to go Intermodal, I'd rather go Intermodal here than somewhere else. if it's going to go intermodal i'd rather go intermodal here than somewhere else

Speaker 2: Very helpful, thank you. Very helpful, thank you. very helpful thank you

Speaker 3: Thank you, Scott. Thank you, Scott. thank you scott

Speaker 7: The next question is from Richa Harneit with Deutsche Bank. The next question is from Richa Harneit with Deutsche Bank. the next question is from richa harneit with deutsche bank Please go ahead. Please go ahead. please go ahead

Speaker 5: Good afternoon, gentlemen. Thank you. Chris, you and I have talked a lot about. Can you hear me? Good afternoon, gentlemen. good afternoon gentlemen Thank you. thank you Chris, you and I have talked a lot about. chris you and i have talked a lot about Can you hear me? can you hear me

Speaker 3: Yes, we can. Good afternoon. Yes, we can. yes we can Good afternoon. good afternoon

Speaker 5: Oh, hi. Chris, you and I have talked a lot about how the gains on sale, just the trend that's out there right now, as maybe a double positive, and that obviously it provides a nice uplift to earnings, but it also means that the secondary market improving and maybe the banks therefore have more options when they repossess assets from carriers that are delinquent. They would be more inclined to do that because they can go on and sell those fleets. Maybe you can talk about the other side of the coin, which is not just what's impacting your financials, but how this is impacting the supply side of the equation, and if we should expect into 2026 these gains on sales to be a continued feature of earnings or if you could give us any guidance as far as the longevity of this trend. Thanks. Oh, hi. oh hi Chris, you and I have talked a lot about how the gains on sale, just the trend that's out there right now, as maybe a double positive, and that obviously it provides a nice uplift to earnings, but it also means that the secondary market improving and maybe the banks therefore have more options when they repossess assets from carriers that are delinquent. chris you and i have talked a lot about how the gains on sale just the trend that's out there right now as maybe a double positive and that obviously it provides a nice uplift to earnings but it also means that the secondary market improving and maybe the banks therefore have more options when they repossess assets from carriers that are delinquent They would be more inclined to do that because they can go on and sell those fleets. they would be more inclined to do that because they can go on and sell those fleets Maybe you can talk about the other side of the coin, which is not just what's impacting your financials, but how this is impacting the supply side of the equation, and if we should expect into 2026 these gains on sales to be a continued feature of earnings or if you could give us any guidance as far as the longevity of this trend. maybe you can talk about the other side of the coin which is not just what's impacting your financials but how this is impacting the supply side of the equation and if we should expect into 2026 these gains on sales to be a continued feature of earnings or if you could give us any guidance as far as the longevity of this trend Thanks. thanks

Speaker 1: Yeah, sure. Yeah, sure. yeah sure Hey Richa, from a supply side standpoint, your point is 100% valid. Bankruptcies are up and lenders, with the rise in resale values, just have more options besides what they've been doing more so over the last 18 months or so of just being more accommodative as smaller fleets continue to be under pressure. Lenders having options can drive out some additional capacity in addition to other things like the ELP and the B1 enforcement and other things that would drive out capacity. From a gain standpoint overall for U.S. second quarter, great to see nearly $6 million, over two times prior year. Really the best gains on used equipment that we've had in six quarters and resale values really being at the core of that. Actually, our unit sales were down a little bit. Hey Richa, from a supply side standpoint, your point is 100% valid. hey richa from a supply side standpoint your point is 100% valid Bankruptcies are up and lenders, with the rise in resale values, just have more options besides what they've been doing more so over the last 18 months or so of just being more accommodative as smaller fleets continue to be under pressure. bankruptcies are up and lenders with the rise in resale values just have more options besides what they've been doing more so over the last 18 months or so of just being more accommodative as smaller fleets continue to be under pressure Lenders having options can drive out some additional capacity in addition to other things like the ELP and the B1 enforcement and other things that would drive out capacity. lenders having options can drive out some additional capacity in addition to other things like the elp and the b1 enforcement and other things that would drive out capacity From a gain standpoint overall for U.S. second quarter, great to see nearly $6 million, over two times prior year. from a gain standpoint overall for u.s second quarter great to see nearly $6 million over two times prior year Really the best gains on used equipment that we've had in six quarters and resale values really being at the core of that. really the best gains on used equipment that we've had in six quarters and resale values really being at the core of that Actually, our unit sales were down a little bit. actually our unit sales were down a little bit In terms of the actual units that we're selling from one quarter to the next, it can vary. A lot of that, primarily all of that, driven from just higher resale values that are at more than two-year highs. In terms of its sustainability, obviously it depends on the supply of used equipment, tariffs, and OEM demand. I think it's a bit early for us to go out on a limb and say how sustainable this is. As a result of Q2, we've moved our guide on gains for the full year to the upper end of where we originally started that guide first of the year. We are expecting Q3 to be a bit lower than Q2, but overall for the year, it still looks like we're heading in the right direction. In terms of the actual units that we're selling from one quarter to the next, it can vary. in terms of the actual units that we're selling from one quarter to the next it can vary A lot of that, primarily all of that, driven from just higher resale values that are at more than two-year highs. a lot of that primarily all of that driven from just higher resale values that are at more than two-year highs In terms of its sustainability, obviously it depends on the supply of used equipment, tariffs, and OEM demand. in terms of its sustainability obviously it depends on the supply of used equipment tariffs and oem demand I think it's a bit early for us to go out on a limb and say how sustainable this is. i think it's a bit early for us to go out on a limb and say how sustainable this is As a result of Q2, we've moved our guide on gains for the full year to the upper end of where we originally started that guide first of the year. as a result of q2 we've moved our guide on gains for the full year to the upper end of where we originally started that guide first of the year We are expecting Q3 to be a bit lower than Q2, but overall for the year, it still looks like we're heading in the right direction. we are expecting q3 to be a bit lower than q2 but overall for the year it still looks like we're heading in the right direction

Speaker 5: Okay, thanks. And if I can ask one more clarification. 1. Okay, thanks. okay thanks And if I can ask one more clarification. 1. and if i can ask one more clarification 1 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 impact 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. You talked about the impact from some of these dedicated and the startup costs on revenue per truck per week. 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 impact on margins? can you talk about the impact 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. 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

Speaker 3: Yeah, Rich, I'll start and then Chris Neil might follow up with some additional color. 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 strategically decided to pursue. They have additional complexities to them, but we think there's also the appropriate upside over time. As such, as you start them, you have an impact on utilization in that fleet. Until drivers start to find their rhythm and understand the routes, you have impact as it relates to the training, the development and sort of R&D that goes into making sure you perform at the level and expectations of the customers. Yeah, Rich, I'll start and then Chris Neil might follow up with some additional color. yeah rich i'll start and then chris neil might follow up with some additional color 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 strategically decided to pursue. 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 strategically decided to pursue They have additional complexities to them, but we think there's also the appropriate upside over time. they have additional complexities to them but we think there's also the appropriate upside over time As such, as you start them, you have an impact on utilization in that fleet. as such as you start them you have an impact on utilization in that fleet Until drivers start to find their rhythm and understand the routes, you have impact as it relates to the training, the development and sort of R&D that goes into making sure you perform at the level and expectations of the customers. until drivers start to find their rhythm and understand the routes you have impact as it relates to the training the development and sort of r&d that goes into making sure you perform at the level and expectations of the customers There's a lot of just headwind noise, both from a margin perspective as well as just overall time, mind share that it takes to pull one of these off 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, because that then of course is the gift that keeps on giving and you continue to grow deeper into them. 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 as we look forward with further implementation. Along with those implementations comes fleet add backs into existing dedicated accounts, which is much, much more streamlined, much simpler and higher contribution margin. There's a lot of just headwind noise, both from a margin perspective as well as just overall time, mind share that it takes to pull one of these off when you're in new verticals. there's a lot of just headwind noise both from a margin perspective as well as just overall time mind share that it takes to pull one of these off 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, because that then of course is the gift that keeps on giving and you continue to grow deeper into them. you absolutely want to pull it off and you want to pull it off at the highest level which we are doing because that then of course is the gift that keeps on giving and you continue to grow deeper into them These have some unique characteristics. these have some unique characteristics We are largely through the headwinds on the ones we've implemented thus far. we are largely through the headwinds on the ones we've implemented thus far We do have additional headwinds coming as we look forward with further implementation. we do have additional headwinds coming as we look forward with further implementation Along with those implementations comes fleet add backs into existing dedicated accounts, which is much, much more streamlined, much simpler and higher contribution margin. along with those implementations comes fleet add backs into existing dedicated accounts which is much much more streamlined much simpler and higher contribution margin 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 in dedicated as we go into the back half of the year. 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 in dedicated as we go into the back half of the year. 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 in dedicated as we go into the back half of the year

Speaker 1: Henrietta, just to give you a little bit of size and scope on the startup costs for the new fleets, we're estimating around $1 million of expense in the quarter related to repositioning and travel and hiring. Just true incremental expenses. In addition to that $1 million, we're also estimating that there was a headwind on revenue per truck per week. You know, we reported 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 what we would consider to be settled in and get mature and more efficient and start hitting our expectations on revenue per truck per week, overall if we fast forward to that point, we would have seen more of an 80 basis points increase. Henrietta, just to give you a little bit of size and scope on the startup costs for the new fleets, we're estimating around $1 million of expense in the quarter related to repositioning and travel and hiring. henrietta just to give you a little bit of size and scope on the startup costs for the new fleets we're estimating around $1 million of expense in the quarter related to repositioning and travel and hiring Just true incremental expenses. just true incremental expenses In addition to that $1 million, we're also estimating that there was a headwind on revenue per truck per week. in addition to that $1 million we're also estimating that there was a headwind on revenue per truck per week You know, we reported that being up about 20 basis points, we think it would be closer to about 80 basis points, so 60 basis points higher. you know we reported 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 what we would consider to be settled in and get mature and more efficient and start hitting our expectations on revenue per truck per week, overall if we fast forward to that point, we would have seen more of an 80 basis points increase. once those fleets get into what we would consider to be settled in and get mature and more efficient and start hitting our expectations on revenue per truck per week overall if we fast forward to that point we would have seen more of an 80 basis points increase That translates also to about another $1 million or over $1 million of revenue net of fuel and TTS, the sum of those. The pure incremental cost as well as just some of the revenue inefficiency, I would say our estimate would be around 40 basis points of headwind to TTS adjusted OI margin. That translates also to about another $1 million or over $1 million of revenue net of fuel and TTS, the sum of those. that translates also to about another $1 million or over $1 million of revenue net of fuel and tts the sum of those The pure incremental cost as well as just some of the revenue inefficiency, I would say our estimate would be around 40 basis points of headwind to TTS adjusted OI margin. the pure incremental cost as well as just some of the revenue inefficiency i would say our estimate would be around 40 basis points of headwind to tts adjusted oi margin

Speaker 5: Appreciate that. Thank you. Appreciate that. appreciate that Thank you. thank you

Speaker 3: Thank you, Richa. Thank you, Richa. thank you richa

Speaker 7: The final question today is from Chris Wethebee with Wells Fargo. Please go ahead. The final question today is from Chris Wethebee with Wells Fargo. Please go ahead. the final question today is from chris wethebee with wells fargo. please go ahead

Speaker 12: Yeah, hey, thanks guys. Thanks for squeezing me in here at the end. I guess wanted to hit on the. Yeah, hey, thanks guys. yeah hey thanks guys Thanks for squeezing me in here at the end. thanks for squeezing me in here at the end I guess wanted to hit on the. i guess wanted to hit on the Tractor age and just get a sense. Tractor age and just get a sense. tractor age and just get a sense How you think about what sort of optimal is. I guess it sounds like maybe the opportunity to age this up a little bit. Not sure if I'm reading that correctly. Just want to get a sense of how you think about optimal tractor age and what you have from an equipment perspective right now. How you think about what sort of optimal is. how you think about what sort of optimal is I guess it sounds like maybe the opportunity to age this up a little bit. i guess it sounds like maybe the opportunity to age this up a little bit Not sure if I'm reading that correctly. not sure if i'm reading that correctly Just want to get a sense of how you think about optimal tractor age and what you have from an equipment perspective right now. just want to get a sense of how you think about optimal tractor age and what you have from an equipment perspective right now

Speaker 3: Yeah, Chris, this is Derek. I think if the backdrop was different, if we were in a different part of the cycle, optimal might take on a slightly different form, if I'm being frank. 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. We don't believe that we have any kind of equipment 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 at the same time. Yeah, Chris, this is Derek. yeah chris this is derek I think if the backdrop was different, if we were in a different part of the cycle, optimal might take on a slightly different form, if I'm being frank. i think if the backdrop was different if we were in a different part of the cycle optimal might take on a slightly different form if i'm being frank I'll answer it differently and say we feel good about the tractor age where we're at today. 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. 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 We don't believe that we have any kind of equipment 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 at the same time. we don't believe that we have any kind of equipment 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 at the same time Regardless of what optimal may or may not be, we don't feel good about pricing fluctuations or changes that were unanticipated or overpaying for a piece of equipment or worse, buying into equipment that may or may not in fact be the standard post regulatory changes that are still ongoing in D.C. right now relative to the EPA. I do believe we're making the optimal decision right now to sit back, be patient, purchase appropriately, keep the fleet appropriately young to be able to do the work we do for our customers every day without any impact on service, as well as put our drivers in a piece of equipment they can be proud of. We like our positioning. I'd say ±0.2 is a range that I think we can live within from where we're at today. Regardless of what optimal may or may not be, we don't feel good about pricing fluctuations or changes that were unanticipated or overpaying for a piece of equipment or worse, buying into equipment that may or may not in fact be the standard post regulatory changes that are still ongoing in D.C. right now relative to the EPA. regardless of what optimal may or may not be we don't feel good about pricing fluctuations or changes that were unanticipated or overpaying for a piece of equipment or worse buying into equipment that may or may not in fact be the standard post regulatory changes that are still ongoing in d.c right now relative to the epa I do believe we're making the optimal decision right now to sit back, be patient, purchase appropriately, keep the fleet appropriately young to be able to do the work we do for our customers every day without any impact on service, as well as put our drivers in a piece of equipment they can be proud of. i do believe we're making the optimal decision right now to sit back be patient purchase appropriately keep the fleet appropriately young to be able to do the work we do for our customers every day without any impact on service as well as put our drivers in a piece of equipment they can be proud of We like our positioning. we like our positioning I'd say ± 0.2 is a range that I think we can live within from where we're at today. i'd say ± 0.2 is a range that i think we can live within from where we're at today We'll continue to be nimble and agile as some of this tariff noise and other things play itself out. We'll continue to be nimble and agile as some of this tariff noise and other things play itself out. we'll continue to be nimble and agile as some of this tariff noise and other things play itself out

Speaker 12: Okay, that's helpful. Okay, that's helpful. okay that's helpful Just one follow up, Chris. Just one follow up, Chris. just one follow up chris I just wanted to make sure I was following what you were saying about the impact of the startups. I just wanted to make sure I was following what you were saying about the impact of the startups. i just wanted to make sure i was following what you were saying about the impact of the startups On the operating income margin, I think in 2Q, can you just give a sense of what that is, maybe what the clean. On the operating income margin, I think in 2Q, can you just give a sense of what that is, maybe what the clean. on the operating income margin i think in 2q can you just give a sense of what that is maybe what the clean Run rate is, in your opinion, as. Run rate is, in your opinion, as. run rate is in your opinion as We enter the quarter? We enter the quarter? we enter the quarter

Speaker 1: Yeah, sure. The run rate on TTS adjusted OI. Chris? Overall. Yeah, sure. yeah sure The run rate on TTS adjusted OI. the run rate on tts adjusted oi Chris? chris Overall. overall

Speaker 12: Yes, please. Yes, Yes, please. yes please Yes, yes

Speaker 1: yes. Net of fuel adjusted OI was 2.8%, and what we just went through of the approximately what we would estimate of $1 million in startup cost and then some of the additional headwind on revenue side of an additional $1 million, that would get to about 40 basis points. The net fuel impact was also more meaningful in the quarter. We would estimate that was about 70 basis points of TTS adjusted OI impact. That net impact on fuel is just the simple math of our fuel revenue, fuel surcharges minus the fuel expense and comparing that year-over-year, so that was an additional 70 basis points. All of that in total would get us closer to 4%, about 3.9%. yes. yes Net of fuel adjusted OI was 2.8%, and what we just went through of the approximately what we would estimate of $1 million in startup cost and then some of the additional headwind on revenue side of an additional $1 million, that would get to about 40 basis points. net of fuel adjusted oi was 2.8% and what we just went through of the approximately what we would estimate of $1 million in startup cost and then some of the additional headwind on revenue side of an additional $1 million that would get to about 40 basis points The net fuel impact was also more meaningful in the quarter. the net fuel impact was also more meaningful in the quarter We would estimate that was about 70 basis points of TTS adjusted OI impact. we would estimate that was about 70 basis points of tts adjusted oi impact That net impact on fuel is just the simple math of our fuel revenue, fuel surcharges minus the fuel expense and comparing that year-over-year, so that was an additional 70 basis points. that net impact on fuel is just the simple math of our fuel revenue fuel surcharges minus the fuel expense and comparing that year-over-year so that was an additional 70 basis points All of that in total would get us closer to 4%, about 3.9%. all of that in total would get us closer to 4% about 3.9% If you were to put all of that math together in terms of what would have been more normalized. If you were to put all of that math together in terms of what would have been more normalized. if you were to put all of that math together in terms of what would have been more normalized

Speaker 12: Okay, that's very helpful, thank you. Appreciate it. Okay, that's very helpful, thank you. okay that's very helpful thank you Appreciate it. appreciate it

Speaker 3: Thanks, Chris. Thanks, Chris. thanks chris

Speaker 7: 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. This concludes our question-and-answer session. 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. i would like to turn the conference back over to mr derek leathers who will provide closing comments

Speaker 3: Thank you, Gary. 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 increased focus on operational productivity measures, put us in a 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 Werner. Thank you, Gary. thank you gary I just want to thank everybody for taking the time to be with us today. 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. 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 increased focus on operational productivity measures, put us in a solid footing to leverage the upside as the market comes further into balance. the structural improvements to our cost structure combined with increased focus on operational productivity measures put us in a 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 Werner. 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 werner 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. I'll close by thanking our customers and our nearly 13,000 associates for their dedication as we keep America moving. 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. thanks for your time today everyone

Speaker 7: The conference is now concluded. The conference is now concluded. the conference is now concluded Thank you for attending today's presentation. Thank you for attending today's presentation. thank you for attending today's presentation You may now disconnect. You may now disconnect. you may now disconnect