WERNER ENTERPRISES, INC. (Form 10-Q)

Werner Enterprises’ First Quarter 2025 Financial Performance

Werner Enterprises, a leading transportation and logistics company, has released its financial results for the first quarter of 2025. The report provides insights into the company’s overall performance, revenue and profit trends, strengths and weaknesses, and the outlook for the future.

Overview of Financial Performance

In the first quarter of 2025, Werner Enterprises reported operating revenues of $712 million, a 7.4% decrease compared to the same period in 2024. The company had an operating loss of $5.8 million in the first quarter of 2025, compared to $15.6 million in operating income in the first quarter of 2024. The operating margin percentage decreased from 2.0% in the first quarter of 2024 to -0.8% in the first quarter of 2025.

The company’s financial results were negatively impacted by several factors, including:

• Elevated insurance costs and claims
• Extreme weather conditions in areas where the company operates
• Higher costs to progress its technology strategy and transformation
• Isolated operating inefficiencies and lower utilization due to customer decisions and tariff-induced uncertainties

Revenue and Profit Trends

Werner Enterprises has two main business segments: Truckload Transportation Services (TTS) and Werner Logistics.

Truckload Transportation Services (TTS) Segment

• TTS segment revenues decreased 8.9% in the first quarter of 2025 compared to the same period in 2024.
• TTS had an operating loss of $0.9 million in the first quarter of 2025, compared to $20.8 million in operating income in the first quarter of 2024. The operating margin percentage decreased from 3.8% to -0.2%.
• The average number of tractors in the TTS segment decreased 6.6% to 7,415 in the first quarter of 2025.
• Dedicated customer retention remains strong, and interest in Dedicated solutions from new customers is increasing.
• One-Way Truckload freight conditions were more stable early in the quarter but weakened in March due to trade policy uncertainties.

Werner Logistics Segment

• Werner Logistics revenues decreased 3.4% in the first quarter of 2025 compared to the same period in 2024.
• Werner Logistics had operating losses of $0.5 million in the first quarter of 2025 and $2.3 million in the first quarter of 2024. The operating margin percentage improved from -1.2% to -0.2%.
• The competitive operating environment continued to pressure Werner Logistics’ operating margin for most of the first quarter of 2025, but improved in March 2025.

Analysis of Strengths and Weaknesses

Strengths:

• Dedicated customer retention remains strong, and interest from new customers is increasing.
• The company is investing in new tractors, trailers, technology, and its terminal network to improve the driver experience, increase operational efficiency, and manage costs more effectively.
• The company has a strong financial position, with $52 million in cash and cash equivalents and $1.4 billion in stockholders’ equity as of March 31, 2025.
• The company has a maximum borrowing capacity of $1.375 billion under its credit facilities, with $725.3 million in available borrowing capacity as of March 31, 2025.

Weaknesses:

• Elevated insurance costs and claims, extreme weather conditions, and higher technology costs negatively impacted the company’s financial performance in the first quarter of 2025.
• One-Way Truckload freight conditions weakened in March 2025 due to trade policy uncertainties, and this trend continued into April 2025.
• The competitive operating environment continued to pressure Werner Logistics’ operating margin for most of the first quarter of 2025.
• The company is facing challenges in recruiting and retaining independent contractors, which could lead to increased per-mile settlement rates and driver pay rates, negatively affecting the company’s results of operations.

Outlook for the Future

Werner Enterprises is cautiously optimistic about the future, but the company is facing some uncertainties:

• The company expects its TTS segment fleet size at the end of 2025 to increase in the range of 1% to 5% compared to the end of 2024, as it implements new dedicated contracts in late the second quarter and early third quarter of 2025.
• The company is slightly lowering its expectation for the One-Way Truckload fleet average revenues per total mile, net of fuel surcharge, to remain flat or increase up to 3% in the second quarter of 2025 compared to the second quarter of 2024 due to higher freight volatility caused by tariff-related uncertainties.
• The company continues to expect Dedicated average revenues per tractor per week, net of fuel surcharge, to remain flat or increase up to 3% in 2025 compared to 2024.
• The company estimates net capital expenditures (primarily revenue equipment) in 2025 to be in the range of $185 million to $235 million, compared to $234.9 million in 2024. Tariffs on equipment will have an impact on the company’s capital expenditure decisions, including the timing of purchases for the remainder of the year.
• The company expects its full-year 2025 effective income tax rate to be approximately 25.0% to 26.0%, as it expects an elevated effective income tax rate in future quarters.

Overall, Werner Enterprises is facing some challenges in the current market environment, but the company remains focused on investing in its operations, managing costs, and providing value to its customers. The company’s strong financial position and continued investments in its business should help it navigate the uncertainties and position it for future growth.