Werner Enterprises ((WERN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Werner Enterprises’ recent earnings call painted a picture of both triumphs and trials. The company reported strong growth in its Logistics and Dedicated segments, alongside significant strides in technology transformation and operational efficiency. However, these positives were tempered by challenges in the One-Way business, margin pressures in Logistics, and considerable legal and insurance expenses.
Logistics Double-Digit Growth
The Logistics division of Werner Enterprises continued its impressive double-digit growth trajectory. This was achieved despite some anticipated changes in the mix, with lower operating costs year-over-year contributing to the positive performance.
Dedicated Revenue Growth
Werner’s Dedicated segment saw revenue growth both sequentially and year-over-year, driven by recent business awards and startups. Notably, dedicated revenue per truck per week grew by 1.3%, marking a remarkable 29 out of the last 31 quarters of growth.
Operational Excellence and Safety Improvements
The company reported a significant decline in DOT preventable accidents per million miles, which fell by a low-double-digit percentage from Q3 of last year. Werner’s cost savings plan is also on track, with 80% of the $45 million target for 2025 already achieved.
Technology Transformation Success
Werner has successfully completed a comprehensive rebuild of its technology stack, transitioning to a modern, scalable, secure, cloud-based platform. This transformation has resulted in a 40% reduction in the largest expense within a back-office department over two years.
One-Way Business Challenges
The One-Way business segment faced difficulties, with decreased miles per truck and higher-than-anticipated startup costs in the Dedicated segment posing challenges.
Logistics Margin Pressure
Despite growth, the Logistics segment experienced margin pressure due to changes in the mix and increased purchase transportation costs.
Legal Settlement Impact
Werner recorded an $18 million legal settlement and $3.4 million in legal fees related to driver pay litigation, which impacted the GAAP EPS by $0.26.
Higher Insurance and Claims Expenses
Insurance and claims expenses were significantly higher compared to the previous year, contributing to a decrease in the adjusted operating margin.
Forward-Looking Guidance
Looking ahead, Werner Enterprises outlined several strategic priorities during the earnings call. Revenue increased by 3% year-over-year to $771 million, with adjusted EPS at negative $0.03 and an adjusted operating margin of 1.4%. The company has achieved 80% of its $45 million cost savings target for 2025 and is on track to reach the full goal by year-end. Despite challenges, Werner remains optimistic about long-term growth, supported by its tech transformation and strategic positioning in new verticals such as tech and aftermarket automotive parts.
In summary, Werner Enterprises’ earnings call revealed a company navigating a complex landscape of growth and challenges. While strong performances in Logistics and Dedicated segments and technological advancements are promising, issues in the One-Way business and rising costs present hurdles. Nevertheless, with strategic priorities in place and a focus on operational excellence, Werner is poised for future growth.