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 | % | |||||||||||||
