Werner Enterprises Reports Second Quarter 2023 Results

Business Wire
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In this article:

Second Quarter 2023 Highlights (all metrics compared to second quarter 2022)

  • Total revenues of $811.1 million, down 3%

  • Operating income of $47.2 million, down 37%; non-GAAP adjusted operating income of $51.1 million, down 34%

  • Operating margin of 5.8%, down 320 basis points; non-GAAP adjusted operating margin of 6.3%, down 300 basis points

  • Diluted EPS of $0.47, down 58%; non-GAAP adjusted diluted EPS of $0.52, down 40%

OMAHA, Neb., August 03, 2023--(BUSINESS WIRE)--Werner Enterprises, Inc. (Nasdaq: WERN), a premier transportation and logistics provider, today reported results for the second quarter ended June 30, 2023.

"While macroeconomic conditions and continued softness in the freight market remained challenging in the second quarter 2023, we grew total revenue net of fuel year-over-year led by our Logistics segment that grew for the 11th-straight quarter, and our Dedicated business that remained steady with continued revenue-per-truck growth," said Derek J. Leathers, Chairman, President and CEO. "We are progressing our cost savings program with moderating expense trends emerging. Our results continue to reflect a business model that is durable, diversified and resilient. The combination of our talented associates, operational scale, reputation for service excellence and innovation positions us well as the freight market strengthens."

Total revenues for the quarter were $811.1 million, a decrease of $25.2 million compared to the prior year quarter, due to a $43.4 million decrease in Truckload Transportation Services ("TTS") revenues, partially offset by Logistics revenues growth of $20.7 million or 10%. The TTS revenue decline was largely due to $42.0 million lower fuel surcharge revenues. Net of fuel surcharges, consolidated total revenues grew during the quarter by $16.8 million or 2%.

Operating income of $47.2 million decreased $27.7 million, or 37%, while operating margin of 5.8% decreased 320 basis points. On a non-GAAP basis, adjusted operating income of $51.1 million decreased $26.5 million, or 34%. Adjusted operating margin of 6.3% declined 300 basis points from 9.3% for the same quarter last year.

TTS operating income decreased by $18.8 million and TTS adjusted operating income decreased by $18.3 million. Logistics operating income decreased $8.1 million and adjusted operating income decreased by $7.5 million. Corporate and Other (including driving schools) operating income decreased by $0.7 million.

Net interest expense of $6.2 million increased $4.8 million primarily due to higher interest rates for variable rate debt and an increase in average debt outstanding. The effective income tax rate during the quarter was 25.2%, compared to 24.4% in second quarter 2022.

During second quarter 2023, we had net losses on our strategic investments of $0.8 million, or $0.01 per share, compared to net gains of $24.1 million, or $0.28 per share, in second quarter 2022. Consistent with prior reporting, increases or decreases to the values of these strategic investments are adjusted out for determining non-GAAP adjusted net income and non-GAAP adjusted earnings per share.

Net income attributable to Werner of $29.9 million decreased 59%. On a non-GAAP basis, adjusted net income attributable to Werner of $33.2 million decreased 41%. Diluted EPS of $0.47 decreased 58%. On a non-GAAP basis, adjusted diluted EPS of $0.52 decreased 40%.

Key Consolidated Financial Metrics

Three Months Ended

June 30,

Six Months Ended

June 30,

(In thousands, except per share amounts)

2023

2022

Y/Y

Change

2023

2022

Y/Y

Change

Total revenues

$

811,096

$

836,276

(3

)%

$

1,643,810

$

1,600,881

3

%

Truckload Transportation Services revenues

570,192

613,616

(7

)%

1,158,522

1,172,033

(1

)%

Werner Logistics revenues

224,549

203,861

10

%

453,218

392,869

15

%

Operating income

47,198

74,923

(37

)%

100,584

158,434

(37

)%

Operating margin

5.8

%

9.0

%

(320) bps

6.1

%

9.9

%

(380) bps

Net income attributable to Werner

29,881

72,290

(59

)%

65,105

126,039

(48

)%

Diluted earnings per share

0.47

1.12

(58

)%

1.02

1.93

(47

)%

Adjusted operating income (1)

51,103

77,603

(34

)%

108,648

163,794

(34

)%

Adjusted operating margin (1)

6.3

%

9.3

%

(300) bps

6.6

%

10.2

%

(360) bps

Adjusted net income attributable to Werner (1)

33,243

56,132

(41

)%

71,508

119,098

(40

)%

Adjusted diluted earnings per share (1)

0.52

0.87

(40

)%

1.12

1.82

(38

)%

(1) See attached Reconciliation of Non-GAAP Financial Measures - Consolidated.

Truckload Transportation Services (TTS) Segment

  • Revenues of $570.2 million decreased $43.4 million; Trucking revenues, net of fuel surcharges, decreased less than 1%

  • Operating income of $45.2 million decreased $18.8 million; non-GAAP adjusted operating income of $47.9 million decreased $18.3 million due to a lower rate per mile, higher salaries, wages and benefits, and lower gains on the sale of property and equipment

  • Operating margin of 7.9% decreased 250 basis points from 10.4%; non-GAAP adjusted operating margin of 8.4% decreased 240 basis points from 10.8%

  • Non-GAAP adjusted operating margin, net of fuel, of 9.7% decreased 370 basis points from 13.4%

  • Average segment trucks in service totaled 8,351, an increase of 65 trucks year over year, or 0.8%

  • Dedicated unit trucks at quarter end totaled 5,260, or 63% of the total TTS segment fleet, compared to 5,320 trucks, or 63%, a year ago

  • Average revenues per truck per week decreased 1.1% for TTS and increased 1.5% for Dedicated

During second quarter 2023, Dedicated experienced steady freight demand from our customers. One-Way Truckload customer freight demand during second quarter 2023 began to stabilize as the quarter progressed in terms of revenue per truck and loaded miles, but was much weaker than normal compared to a seasonally strong freight market in second quarter 2022.

Key Truckload Transportation Services Segment Financial Metrics

Three Months Ended

June 30,

Six Months Ended

June 30,

(In thousands)

2023

2022

Y/Y

Change

2023

2022

Y/Y

Change

Trucking revenues, net of fuel surcharge

$

486,626

$

488,208

0

%

$

979,868

$

960,569

2

%

Trucking fuel surcharge revenues

76,677

118,641

(35

)%

164,978

198,456

(17

)%

Non-trucking and other revenues

6,889

6,767

2

%

13,676

13,008

5

%

Total revenues

$

570,192

$

613,616

(7

)%

$

1,158,522

$

1,172,033

(1

)%

Operating income

45,159

64,004

(29

)%

96,145

140,097

(31

)%

Operating margin

7.9

%

10.4

%

(250) bps

8.3

%

12.0

%

(370) bps

Operating ratio

92.1

%

89.6

%

250 bps

91.7

%

88.0

%

370 bps

Adjusted operating income (1)

47,915

66,184

(28

)%

101,640

144,457

(30

)%

Adjusted operating margin (1)

8.4

%

10.8

%

(240) bps

8.8

%

12.3

%

(350) bps

Adjusted operating margin, net of fuel surcharge (1)

9.7

%

13.4

%

(370) bps

10.2

%

14.8

%

(460) bps

Adjusted operating ratio (1)

91.6

%

89.2

%

240 bps

91.2

%

87.7

%

350 bps

Adjusted operating ratio, net of fuel surcharge (1)

90.3

%

86.6

%

370 bps

89.8

%

85.2

%

460 bps

(1) See attached Reconciliation of Non-GAAP Financial Measures - Truckload Transportation Services (TTS) Segment.

Werner Logistics Segment

  • Revenues of $224.5 million increased $20.7 million, or 10%

  • Operating income of $4.4 million decreased $8.1 million

  • Operating margin of 1.9% decreased 420 basis points from 6.1%

  • Adjusted operating income of $5.5 million decreased $7.5 million

  • Adjusted operating margin of 2.4% decreased 400 basis points from 6.4%

Truckload Logistics revenues (77% of Logistics revenues) increased 30%, driven by an increase in shipments due to the November 2022 ReedTMS acquisition, partially offset by a decline in revenues per shipment.

Final Mile revenues (12% of Logistics revenues) increased $3.5 million and 15%.

Intermodal revenues (11% of Logistics revenues) decreased 49%, due to a decline in shipments and lower revenues per shipment.

Logistics operating income decreased $8.1 million and adjusted operating income decreased $7.5 million in second quarter 2023, due to a seasonally soft and competitive freight and rate market in second quarter 2023 compared to a seasonally strong freight market in second quarter 2022.

Key Werner Logistics Segment Financial Metrics

Three Months Ended

June 30,

Six Months Ended

June 30,

(In thousands)

2023

2022

Y/Y

Change

2023

2022

Y/Y

Change

Total revenues

$

224,549

$

203,861

10

%

$

453,218

$

392,869

15

%

Operating expenses:

Purchased transportation expense

185,397

166,241

12

%

373,895

323,762

15

%

Other operating expenses

34,797

25,130

38

%

70,031

47,936

46

%

Total operating expenses

220,194

191,371

15

%

443,926

371,698

19

%

Operating income

$

4,355

$

12,490

(65

)%

$

9,292

$

21,171

(56

)%

Operating margin

1.9

%

6.1

%

(420) bps

2.1

%

5.4

%

(330) bps

Adjusted operating income (1)

$

5,504

$

12,990

(58

)%

$

11,861

$

22,171

(47

)%

Adjusted operating margin (1)

2.4

%

6.4

%

(400) bps

2.6

%

5.6

%

(300) bps

(1) See attached Reconciliation of Non-GAAP Financial Measures - Werner Logistics Segment.

Cash Flow and Capital Allocation

Cash flow from operations in second quarter 2023 was $114.9 million compared to $112.6 million in second quarter 2022, an increase of 2%.

Net capital expenditures in second quarter 2023 were $151.4 million compared to $116.3 million in second quarter 2022, an increase of 30%. We plan to continue to invest in new trucks, trailers and our terminals to improve our driver experience, optimize operational efficiency and more effectively manage our maintenance, safety and fuel costs. The average ages of our truck and trailer fleets were 2.1 years and 5.1 years, respectively, as of June 30, 2023.

Gains on sales of property and equipment in second quarter 2023 were $11.9 million, or $0.14 per share, compared to $20.7 million, or $0.24 per share, in second quarter 2022. Year over year, we sold significantly more trucks and trailers and realized substantially lower average gains per truck and trailer. Gains on sales of property and equipment are reflected as a reduction of Other Operating Expenses in our income statement.

We did not repurchase shares of our common stock in second quarter 2023. As of June 30, 2023, we had 2.3 million shares remaining under our share repurchase authorization.

As of June 30, 2023, we had $47 million of cash and cash equivalents and $1.5 billion of stockholders’ equity. Total debt outstanding was $640 million at June 30, 2023. After considering letters of credit issued, we had available liquidity consisting of cash and cash equivalents and available borrowing capacity as of June 30, 2023 of $511 million.

2023 Guidance Metrics and Assumptions

The following table summarizes our updated 2023 guidance and assumptions:

Prior

(as of 5/3/23)

Actual

(as of 6/30/23)

New

(as of 8/3/23)

Commentary

TTS truck count from BoY to EoY

(2)% to 1%

(annual)

(4)%

(YTD23)

(4)% to (2)%

(annual)

  • Adjusting fleet size to adapt to softer freight market

Net capital expenditures

$350M to $400M

(annual)

$254M

(YTD23)

$400M to $450M

(annual)

  • Greater pace of refreshing the fleet to reduce average equipment age

TTS Guidance

Dedicated RPTPW* growth

0% to 3%

(annual)

3.0%

(1H23 vs 1H22)

0% to 3%

(annual)

  • Expect low single-digit percent increase YoY with difficult comparisons

One-Way Truckload RPTM* growth

(6)% to (3)%

(1H23 vs. 1H22)

(4.2)%

(1H23 vs 1H22)

(7)% to (4)%

(3Q23 vs. 3Q22)

  • Stabilizing OWT freight conditions in 3Q, then modest seasonal improvement in 4Q

* Net of fuel surcharge revenues

Assumptions

  • Effective income tax rate of 25.2% in 2Q23 compared to 2Q22 of 24.4%. Expect annual effective tax rate in the range of 24.0% to 25.0%.

  • Average truck age of 2.1 years and average trailer age of 5.1 years as of 6/30/23. Expect average truck and trailer ages of 2.2 years and 5.0 years, respectively, as of 12/31/23.

Call Information

Werner Enterprises, Inc. will conduct a conference call to discuss second quarter 2023 earnings today beginning at 4:00 p.m. CT. The news release, live webcast of the earnings conference call, and accompanying slide presentation will be available at werner.com in the "Investors" section under "News & Events" and then "Events Calendar." To participate in the conference call, please dial (844) 701-1165 (domestic) or (412) 317-5498 (international). Please mention to the operator that you are dialing in for the Werner Enterprises call.

A replay of the conference call will be available on August 3, 2023 at approximately 6:00 p.m. CT through September 3, 2023 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international) and using the access code 2120201. A replay of the webcast will also be available at werner.com in the "Investors" section under "News & Events" and then "Events Calendar."

About Werner Enterprises

Werner Enterprises, Inc. (Nasdaq: WERN) delivers superior truckload transportation and logistics services to customers across the United States, Mexico and Canada. With 2022 revenues of $3.3 billion, an industry-leading modern truck and trailer fleet, over 14,000 talented associates and our innovative Werner EDGE technology, we are an essential solutions provider for customers who value the integrity of their supply chain and require safe and exceptional on-time service. Werner provides Dedicated and One-Way Truckload services as well as Logistics services that include truckload brokerage, freight management, intermodal and final mile. As an industry leader, Werner is deeply committed to promoting sustainability and supporting diversity, equity and inclusion.

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are based on information presently available to the Company’s management and are current only as of the date made. Actual results could also differ materially from those anticipated as a result of a number of factors, including, but not limited to, those discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and subsequently filed Quarterly Reports on Form 10-Q.

For those reasons, undue reliance should not be placed on any forward-looking statement. The Company assumes no duty or obligation to update or revise any forward-looking statement, although it may do so from time to time as management believes is warranted or as may be required by applicable securities law. Any such updates or revisions may be made by filing reports with the U.S. Securities and Exchange Commission ("SEC"), through the issuance of press releases or by other methods of public disclosure.

Consolidated Financial Information

INCOME STATEMENT

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

$

%

$

%

$

%

$

%

Operating revenues

$

811,096

100.0

$

836,276

100.0

$

1,643,810

100.0

$

1,600,881

100.0

Operating expenses:

Salaries, wages and benefits

266,373

32.9

253,639

30.3

534,688

32.5

495,635

31.0

Fuel

77,740

9.6

125,446

15.0

169,154

10.3

213,867

13.3

Supplies and maintenance

64,964

8.0

62,656

7.5

133,189

8.1

119,681

7.4

Taxes and licenses

25,408

3.1

23,791

2.8

50,833

3.1

47,624

3.0

Insurance and claims

36,806

4.5

41,071

4.9

73,291

4.4

68,563

4.3

Depreciation and amortization

74,898

9.2

68,471

8.2

149,211

9.1

135,700

8.5

Rent and purchased transportation

217,086

26.8

197,116

23.6

437,310

26.6

382,353

23.9

Communications and utilities

4,669

0.6

3,781

0.4

9,402

0.6

7,707

0.5

Other

(4,046

)

(0.5

)

(14,618

)

(1.7

)

(13,852

)

(0.8

)

(28,683

)

(1.8

)

Total operating expenses

763,898

94.2

761,353

91.0

1,543,226

93.9

1,442,447

90.1

Operating income

47,198

5.8

74,923

9.0

100,584

6.1

158,434

9.9

Other expense (income):

Interest expense

8,139

1.0

1,787

0.2

16,055

1.0

3,226

0.2

Interest income

(1,899

)

(0.2

)

(313

)

—

(3,451

)

(0.2

)

(588

)

—

Loss (gain) on investments in equity securities, net

(79

)

—

(24,095

)

(2.8

)

2

—

(14,289

)

(0.9

)

Loss from equity method investment

844

0.1

—

—

844

—

—

—

Other

86

—

126

—

93

—

199

—

Total other expense (income)

7,091

0.9

(22,495

)

(2.6

)

13,543

0.8

(11,452

)

(0.7

)

Income before income taxes

40,107

4.9

97,418

11.6

87,041

5.3

169,886

10.6

Income tax expense

10,087

1.2

23,809

2.8

21,487

1.3

41,242

2.6

Net income

30,020

3.7

73,609

8.8

65,554

4.0

128,644

8.0

Net income attributable to noncontrolling interest

(139

)

—

(1,319

)

(0.2

)

(449

)

—

(2,605

)

(0.1

)

Net income attributable to Werner

$

29,881

3.7

$

72,290

8.6

$

65,105

4.0

$

126,039

7.9

Diluted shares outstanding

63,687

64,726

63,689

65,327

Diluted earnings per share

$

0.47

$

1.12

$

1.02

$

1.93

CONDENSED BALANCE SHEET

(In thousands, except share amounts)

June 30,
2023

December 31,
2022

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

46,502

$

107,240

Accounts receivable, trade, less allowance of $10,360 and $10,271, respectively

437,644

518,815

Other receivables

33,312

29,875

Inventories and supplies

16,026

14,527

Prepaid taxes, licenses and permits

8,687

17,699

Other current assets

67,164

74,459

Total current assets

609,335

762,615

Property and equipment

2,976,274

2,885,641

Less – accumulated depreciation

1,031,850

1,060,365

Property and equipment, net

1,944,424

1,825,276

Goodwill

129,104

132,717

Intangible assets, net

91,512

81,502

Other non-current assets (1)

330,818

295,145

Total assets

$

3,105,193

$

3,097,255

LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY

Current liabilities:

Checks issued in excess of cash balances

$

11,530

$

—

Accounts payable

119,744

124,483

Current portion of long-term debt

3,750

6,250

Insurance and claims accruals

81,932

78,620

Accrued payroll

47,375

49,793

Accrued expenses

18,831

20,358

Other current liabilities

31,967

30,016

Total current liabilities

315,129

309,520

Long-term debt, net of current portion

636,250

687,500

Other long-term liabilities

55,802

59,677

Insurance and claims accruals, net of current portion (1)

239,897

244,946

Deferred income taxes

321,897

313,278

Total liabilities

1,568,975

1,614,921

Temporary equity - redeemable noncontrolling interest

39,148

38,699

Stockholders’ equity:

Common stock, $.01 par value, 200,000,000 shares authorized; 80,533,536

shares issued; 63,389,496 and 63,223,003 shares outstanding, respectively

805

805

Paid-in capital

130,694

129,837

Retained earnings

1,923,865

1,875,873

Accumulated other comprehensive loss

(6,623

)

(11,292

)

Treasury stock, at cost; 17,144,040 and 17,310,533 shares, respectively

(551,671

)

(551,588

)

Total stockholders’ equity

1,497,070

1,443,635

Total liabilities, temporary equity and stockholders’ equity

$

3,105,193

$

3,097,255

(1) Under the terms of our insurance policies, we are the primary obligor of the damage award in a previously disclosed adverse jury verdict, and as such, we have recorded a $79.2 million receivable from our third-party insurance providers in other non-current assets and a corresponding liability of the same amount in the long-term portion of insurance and claims accruals in the unaudited condensed balance sheets as of June 30, 2023 and December 31, 2022.

SUPPLEMENTAL INFORMATION

(Unaudited)

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Capital expenditures, net

$

151,448

$

116,349

$

254,191

$

153,423

Cash flow from operations

114,943

112,570

281,790

267,527

Return on assets (annualized)

3.9

%

10.9

%

4.2

%

9.7

%

Return on equity (annualized)

7.9

%

21.3

%

8.7

%

18.7

%

Segment Financial and Operating Statistics Information

SEGMENT INFORMATION

(Unaudited)

(In thousands)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

2023

2022

Revenues

Truckload Transportation Services

$

570,192

$

613,616

$

1,158,522

$

1,172,033

Werner Logistics

224,549

203,861

453,218

392,869

Other (1)

19,376

18,946

39,877

36,459

Corporate

501

478

976

867

Subtotal

814,618

836,901

1,652,593

1,602,228

Inter-segment eliminations (2)

(3,522

)

(625

)

(8,783

)

(1,347

)

Total

$

811,096

$

836,276

$

1,643,810

$

1,600,881

Operating Income

Truckload Transportation Services

$

45,159

$

64,004

$

96,145

$

140,097

Werner Logistics

4,355

12,490

9,292

21,171

Other (1)

(86

)

461

463

906

Corporate

(2,230

)

(2,032

)

(5,316

)

(3,740

)

Total

$

47,198

$

74,923

$

100,584

$

158,434

(1) Other includes our driver training schools, transportation-related activities such as third-party equipment maintenance and equipment leasing, and other business activities.

(2) Inter-segment eliminations represent transactions between reporting segments that are eliminated in consolidation.

OPERATING STATISTICS BY SEGMENT

(Unaudited)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

2022

% Chg

2023

2022

% Chg

Truckload Transportation Services segment

Average trucks in service

8,351

8,286

0.8

%

8,456

8,262

2.3

%

Average revenues per truck per week (1)

$

4,483

$

4,532

(1.1

)%

$

4,457

$

4,472

(0.3

)%

Total trucks (at quarter end)

Company

8,000

8,145

(1.8

)%

8,000

8,145

(1.8

)%

Independent contractor

285

255

11.8

%

285

255

11.8

%

Total trucks

8,285

8,400

(1.4

)%

8,285

8,400

(1.4

)%

Total trailers (at quarter end)

27,110

25,905

4.7

%

27,110

25,905

4.7

%

One-Way Truckload

Trucking revenues, net of fuel surcharge (in 000’s)

$

176,824

$

188,173

(6.0

)%

$

359,954

$

374,933

(4.0

)%

Average trucks in service

3,075

3,102

(0.9

)%

3,133

3,083

1.6

%

Total trucks (at quarter end)

3,025

3,080

(1.8

)%

3,025

3,080

(1.8

)%

Average percentage of empty miles

14.01

%

12.39

%

13.1

%

14.05

%

12.07

%

16.4

%

Average revenues per truck per week (1)

$

4,423

$

4,665

(5.2

)%

$

4,419

$

4,677

(5.5

)%

Average % change YOY in revenues per total mile (1)

(5.2

)%

13.7

%

(4.2

)%

17.1

%

Average % change YOY in total miles per truck per week

0.1

%

(12.9

)%

(1.3

)%

(10.5

)%

Average completed trip length in miles (loaded)

604

692

(12.7

)%

612

704

(13.1

)%

Dedicated

Trucking revenues, net of fuel surcharge (in 000’s)

$

309,802

$

300,035

3.3

%

$

619,914

$

585,636

5.9

%

Average trucks in service

5,276

5,184

1.8

%

5,323

5,179

2.8

%

Total trucks (at quarter end)

5,260

5,320

(1.1

)%

5,260

5,320

(1.1

)%

Average revenues per truck per week (1)

$

4,517

$

4,452

1.5

%

$

4,479

$

4,349

3.0

%

Werner Logistics segment

Average trucks in service

33

58

(43.1

)%

36

55

(34.5

)%

Total trucks (at quarter end)

32

57

(43.9

)%

32

57

(43.9

)%

Total trailers (at quarter end)

2,885

1,920

50.3

%

2,885

1,920

50.3

%

(1) Net of fuel surcharge revenues

Non-GAAP Financial Measures and Reconciliations

To supplement our financial results presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), we provide certain non-GAAP financial measures as defined by the SEC Regulation G, including non-GAAP adjusted operating income; non-GAAP adjusted operating margin; non-GAAP adjusted operating margin, net of fuel surcharge; non-GAAP adjusted net income attributable to Werner; non-GAAP adjusted diluted earnings per share; non-GAAP adjusted operating revenues, net of fuel surcharge; non-GAAP adjusted operating expenses; non-GAAP adjusted operating expenses, net of fuel surcharge; non-GAAP adjusted operating ratio; and non-GAAP adjusted operating ratio, net of fuel surcharge. We believe these non-GAAP financial measures provide a more useful comparison of our performance from period to period because they exclude the effect of items that, in our opinion, do not reflect our core operating performance. Our non-GAAP financial measures are not meant to be considered in isolation or as substitutes for their comparable GAAP measures and should be read only in conjunction with our consolidated financial statements prepared in accordance with GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

The following tables present reconciliations of each non-GAAP financial measure to its most directly comparable GAAP financial measure as required by SEC Regulation G. In addition, information regarding each of the excluded items as well as our reasons for excluding them from our non-GAAP results is provided below.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – CONSOLIDATED

(unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Non-GAAP Adjusted Operating Income and

Non-GAAP Adjusted Operating Margin (1)

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

Operating income and operating margin – (GAAP)

$

47,198

5.8

%

$

74,923

9.0

%

$

100,584

6.1

%

$

158,434

9.9

%

Non-GAAP adjustments:

Insurance and claims (2)

1,387

0.2

%

1,321

0.1

%

2,774

0.2

%

2,642

0.1

%

Amortization of intangible assets (3)

2,518

0.3

%

1,359

0.2

%

5,290

0.3

%

2,718

0.2

%

Non-GAAP adjusted operating income and

non-GAAP adjusted operating margin

$

51,103

6.3

%

$

77,603

9.3

%

$

108,648

6.6

%

$

163,794

10.2

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Non-GAAP Adjusted Net Income

Attributable to Werner and Non-GAAP

Adjusted Diluted EPS (1)

$

Diluted EPS

$

Diluted EPS

$

Diluted EPS

$

Diluted EPS

Net income attributable to Werner and diluted EPS – (GAAP)

$

29,881

$

0.47

$

72,290

$

1.12

$

65,105

$

1.02

$

126,039

$

1.93

Non-GAAP adjustments:

Insurance and claims (2)

1,387

0.02

1,321

0.02

2,774

0.04

2,642

0.04

Amortization of intangible assets, net of amount attributable to noncontrolling interest (3)

2,346

0.04

1,187

0.02

4,946

0.08

2,374

0.04

Loss (gain) on investments in equity securities, net (4)

(79

)

—

(24,095

)

(0.37

)

2

—

(14,289

)

(0.22

)

Loss from equity method investment (5)

844

0.01

—

—

844

0.01

—

—

Income tax effect of above adjustments (6)

(1,136

)

(0.02

)

5,429

0.08

(2,163

)

(0.03

)

2,332

0.03

Non-GAAP adjusted net income attributable to

Werner and non-GAAP adjusted diluted EPS

$

33,243

$

0.52

$

56,132

$

0.87

$

71,508

$

1.12

$

119,098

$

1.82

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – TRUCKLOAD TRANSPORTATION SERVICES (TTS) SEGMENT

(unaudited)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Non-GAAP Adjusted Operating Income and

Non-GAAP Adjusted Operating Margin (1)

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

Operating income and operating margin – (GAAP)

$

45,159

7.9

%

$

64,004

10.4

%

$

96,145

8.3

%

$

140,097

12.0

%

Non-GAAP adjustments:

Insurance and claims (2)

1,387

0.3

%

1,321

0.2

%

2,774

0.3

%

2,642

0.2

%

Amortization of intangible assets (3)

1,369

0.2

%

859

0.2

%

2,721

0.2

%

1,718

0.1

%

Non-GAAP adjusted operating income and

non-GAAP adjusted operating margin

$

47,915

8.4

%

$

66,184

10.8

%

$

101,640

8.8

%

$

144,457

12.3

%

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Non-GAAP Adjusted Operating Expenses and

Non-GAAP Adjusted Operating Ratio (1)

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

Operating expenses and operating ratio – (GAAP)

$

525,033

92.1

%

$

549,612

89.6

%

$

1,062,377

91.7

%

$

1,031,936

88.0

%

Non-GAAP adjustments:

Insurance and claims (2)

(1,387

)

(0.3

)%

(1,321

)

(0.2

)%

(2,774

)

(0.3

)%

(2,642

)

(0.2

)%

Amortization of intangible assets (3)

(1,369

)

(0.2

)%

(859

)

(0.2

)%

(2,721

)

(0.2

)%

(1,718

)

(0.1

)%

Non-GAAP adjusted operating expenses and

non-GAAP adjusted operating ratio

$

522,277

91.6

%

$

547,432

89.2

%

$

1,056,882

91.2

%

$

1,027,576

87.7

%

Three Months Ended

June 30,

Six Months Ended

June 30,

Non-GAAP Adjusted Operating Expenses, Net of Fuel Surcharge;

Non-GAAP Adjusted Operating Margin, Net of Fuel Surcharge;

and Non-GAAP Adjusted Operating Ratio, Net of Fuel Surcharge (1)

2023

2022

2023

2022

$

$

$

$

Operating revenues – (GAAP)

$

570,192

$

613,616

$

1,158,522

$

1,172,033

Less: Trucking fuel surcharge (7)

(76,677

)

(118,641

)

(164,978

)

(198,456

)

Operating revenues, net of fuel surcharge – (Non-GAAP)

493,515

494,975

993,544

973,577

Operating expenses – (GAAP)

525,033

549,612

1,062,377

1,031,936

Non-GAAP adjustments:

Trucking fuel surcharge (7)

(76,677

)

(118,641

)

(164,978

)

(198,456

)

Insurance and claims (2)

(1,387

)

(1,321

)

(2,774

)

(2,642

)

Amortization of intangible assets (3)

(1,369

)

(859

)

(2,721

)

(1,718

)

Non-GAAP adjusted operating expenses, net of fuel surcharge

445,600

428,791

891,904

829,120

Non-GAAP adjusted operating income

$

47,915

$

66,184

$

101,640

$

144,457

Non-GAAP adjusted operating margin, net of fuel surcharge

9.7

%

13.4

%

10.2

%

14.8

%

Non-GAAP adjusted operating ratio, net of fuel surcharge

90.3

%

86.6

%

89.8

%

85.2

%

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES – WERNER LOGISTICS SEGMENT

(unaudited)

(In thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2023

2022

2023

2022

Non-GAAP Adjusted Operating Income and

Non-GAAP Adjusted Operating Margin (1)

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

$

% of Op. Rev.

Operating income and operating margin – (GAAP)

$

4,355

1.9

%

$

12,490

6.1

%

$

9,292

2.1

%

$

21,171

5.4

%

Non-GAAP adjustments:

Amortization of intangible assets (3)

1,149

0.5

%

500

0.3

%

2,569

0.5

%

1,000

0.2

%

Non-GAAP adjusted operating income and

non-GAAP adjusted operating margin

$

5,504

2.4

%

$

12,990

6.4

%

$

11,861

2.6

%

$

22,171

5.6

%

(1) Non-GAAP adjusted operating income; non-GAAP adjusted operating margin; non-GAAP adjusted operating margin, net of fuel surcharge; non-GAAP adjusted net income attributable to Werner; non-GAAP adjusted diluted earnings per share; non-GAAP adjusted operating revenues, net of fuel surcharge; non-GAAP adjusted operating expenses; non-GAAP adjusted operating expenses, net of fuel surcharge; non-GAAP adjusted operating ratio; and non-GAAP adjusted operating ratio, net of fuel surcharge should be considered in addition to, rather than as substitutes for, GAAP operating income; GAAP operating margin; GAAP net income attributable to Werner; GAAP diluted earnings per share; GAAP operating revenues; GAAP operating expenses; and GAAP operating ratio, which are their most directly comparable GAAP financial measures.

(2) We accrued pre-tax insurance and claims expense for interest related to a previously disclosed excess adverse jury verdict rendered on May 17, 2018 in a lawsuit arising from a December 2014 accident. The Company is appealing this verdict. Additional information about the accident was included in our Current Report on Form 8-K dated May 17, 2018. Under our insurance policies in effect on the date of this accident, our maximum liability for this accident is $10.0 million (plus pre-judgment and post-judgment interest) with premium-based insurance coverage that exceeds the jury verdict amount. We continue to accrue pre-tax insurance and claims expense for interest at $0.5 million per month until such time as the outcome of our appeal is finalized. Management believes excluding the effect of this item provides a more useful comparison of our performance from period to period. This item is included in our Truckload Transportation Services segment in our Segment Information table.

(3) Amortization expense related to intangible assets acquired in our business acquisitions is excluded because management does not believe it is indicative of our core operating performance. This item is included in our Truckload Transportation Services and Werner Logistics segments.

(4) Represents non-operating mark-to-market adjustments for unrealized gains/losses on our minority equity investments, which we account for under Accounting Standards Codification ("ASC") 321, Investments – Equity Securities. Management believes excluding the effect of gains/losses on our investments in equity securities provides a more useful comparison of our performance from period to period. We record changes in the value of our investments in equity securities in other expense (income) in our Income Statement.

(5) Represents earnings/losses from our equity method investment, which we account for under ASC 323, Investments - Equity Method and Joint Ventures. Management believes excluding the effect of earnings/losses from our equity method investment provides a more useful comparison of our performance from period to period. We record earnings/losses from our equity method investment in other expense (income) in our Income Statement.

(6) The income tax effect of the non-GAAP adjustments is calculated using the incremental income tax rate excluding discrete items, and the income tax effect for 2022 has been updated to reflect the annual incremental income tax rate.

(7) Fluctuating fuel prices and fuel surcharge revenues impact the total company operating ratio and the TTS segment operating ratio when fuel surcharges are reported on a gross basis as revenues versus netting the fuel surcharges against fuel expenses. Management believes netting fuel surcharge revenues, which are generally a more volatile source of revenue, against fuel expenses provides a more consistent basis for comparing the results of operations from period to period.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230803184286/en/

Contacts

Christopher D. Wikoff
Executive Vice President, Treasurer
and Chief Financial Officer
(402) 894-3700

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