OMAHA, Neb. — Werner Enterprises Inc. is reporting a downturn in the company’s total revenue for 2024.
“The fourth quarter included several puts and takes that are more one-time in nature,” said Derek Leathers, chairman, CEO. “While the freight market continues to present challenges, fourth quarter provided early signs of an improving environment. One-Way revenue per total mile increased year-over-year for the second consecutive quarter. Peak season was better than expected with peak volumes that were two times last year at higher rates. Dedicated average fleet size grew sequentially, and we are proud of the numerous Carrier of the Year awards during 2024 from Dedicated customers.
“Our Logistics division reported adjusted operating income that improved sequentially and represented the best quarter of the year. “While our fourth quarter insurance expense was elevated due to unfavorable development on large dollar claims, our safety metrics remain near record low levels. During this downturn, we have focused on controlling what we can by investing in ourselves and making strategic decisions that position us favorably for creating long-term value for our shareholders as conditions improve.”
Q4 Decrease
Total revenues for the quarter were $754.7 million, a decrease of $67.3 million compared to the prior-year quarter, due to a $52.8 million, or 9%, decrease in Truckload Transportation Services (“TTS”) revenues and a decline in Logistics revenues of $13.8 million, or 6%. A portion of the TTS revenue decline was due to $27.1 million lower fuel surcharge revenues. Net of trucking fuel surcharge revenues, consolidated total revenues decreased $40.2 million, or 5%, during the quarter.
Operating income of $13.4 million decreased $24.6 million, or 65%, while operating margin of 1.8% decreased 280 basis points. On a non-GAAP basis, adjusted operating income of $12.2 million decreased $27.0 million, or 69%. Adjusted operating margin of 1.6% declined 320 basis points from 4.8% for the same quarter last year.
“During the quarter, we incurred $49.5 million of insurance and claims expense, of which $19 million resulted from unfavorable development on large dollar claims, contributing 250 basis points of the year-over-year decrease in adjusted operating margin, and $0.22 of negative impact to non-GAAP adjusted diluted EPS,” Werner said in a press release. “This is a reflection of the ongoing unprecedented rise in verdicts and litigation settlements across the industry, particularly for larger carriers. In contrast to these trends, in 2024 we produced near 20-year record lows in U.S. Department of Transportation preventable accidents per million miles, trailing only 2023.”
Unfavorable Claims
TTS operating income and adjusted operating income both decreased $22.6 million, largely driven by the $19 million of unfavorable claims development during the fourth quarter. Logistics operating income decreased $3.3 million and adjusted operating income decreased $0.6 million. Corporate and Other (including driving schools) operating income was $0.4 million compared to $1.0 million operating loss in prior year.
Net interest expense of $9.5 million increased $2.2 million primarily due to the impact of replacing lower-cost debt and interest rate swaps with higher-cost debt and interest rate swaps upon certain maturities in the second quarter. The effective income tax rate during the quarter decreased to 7.3%, compared to 23.1% in fourth quarter 2023 driven by certain discrete return-to-provision adjustments for a prior year.
Q4 Gains
“During fourth quarter 2024, we had gains on our strategic investments of $8.7 million, or $0.10 per share, compared to losses of $0.3 million in fourth quarter 2023,” Werner said. “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 $11.9 million decreased 50%. On a non-GAAP basis, adjusted net income attributable to Werner of $4.7 million decreased 81%. Diluted EPS of $0.19 decreased 48%. On a non-GAAP basis, adjusted diluted EPS of $0.08 decreased 80%, including $19 million of unfavorable claims development during the quarter.
Truckload Transportation Services (TTS) Segment
- Revenues of $527.3 million decreased $52.8 million; trucking revenues, net of fuel surcharge, decreased 6% year over year.
- Operating income of $11.7 million decreased $22.6 million; non-GAAP adjusted operating income of $14.6 million decreased $22.6 million due largely to $19 million of unfavorable claims development in the quarter, a smaller fleet size, and lower gains on the sale of property and equipment (down 55%).
- Operating margin of 2.2% decreased 370 basis points from 5.9%; non-GAAP adjusted operating margin, net of fuel surcharge, of 3.1% decreased 440 basis points from 7.5%.
- Average segment trucks in service totaled 7,495, a decrease of 673 trucks year over year, or 8.2%.
- Dedicated unit trucks at quarter end totaled 4,840, or 65% of the total TTS segment fleet, compared to 5,265 trucks, or 66%, a year ago.
- Average revenues per truck per week, net of fuel surcharge, increased 2.5% for TTS.
During fourth quarter 2024, Dedicated experienced net reduction in average trucks, down 7.7% year over year and up 27 trucks, or 0.1%, sequentially. Quarter-end fleet size was down 8.1% year over year and down 1.3% sequentially. Dedicated average revenues per truck per week, net of fuel surcharge, increased 1.1% year over year.
Despite a highly competitive environment, pipeline opportunities are strong and customer retention is over 90%. One-Way Truckload volume was seasonally stronger than 2023. 2024 more than doubled the number of premium-rated peak shipments and improved y/y in rate. One-Way revenues per total mile, net of fuel surcharge, increased 3.3% year over year. Despite a 9.2% decline in One-Way average trucks, One-Way Truckload miles were only down 7.6%, due to the impact of a 1.7% increase in miles per truck per week, the seventh consecutive quarter of improvement.
Werner Logistics Segment
- Revenues of $213.2 million decreased $13.8 million, or 6%.
- Operating income of $1.2 million decreased $3.3 million; non-GAAP adjusted operating income of $2.4 million decreased $0.6 million.
- Operating margin of 0.6% decreased 140 basis points from 2.0%; non-GAAP adjusted operating margin of 1.1% decreased 20 basis points from 1.3%.
Truckload Logistics revenues (76% of Logistics revenues) decreased $11.0 million, or 6%, driven by a decline in revenue per shipment and a decrease in shipments. Brokerage volumes decreased year over year while Power Only volume increased over 21%, marking the eighth consecutive quarter of Power Only volume growth.
Intermodal revenues (13% of Logistics revenues) increased $0.5 million, or 2%, due to an increase in shipments, partially offset by lower revenue per shipment year over year.
Final Mile revenues (11% of Logistics revenues) decreased $3.3 million, or 12%, due to lower volumes in furniture and appliance vertical.
Logistics operating income decreased $3.3 million and adjusted operating income decreased $0.6 million year over year in fourth quarter 2024. While Truckload Logistics continues to operate in an ongoing competitive environment, fourth quarter was our highest operating income and operating margin quarter since 2023 driven by sequentially higher revenue combined with further cost savings actions taken during the quarter.
Cash Flow and Capital Allocation
Cash flow from operations in fourth quarter 2024 was $71.0 million compared to $118.3 million in fourth quarter 2023, a decrease of 40%.
Net capital expenditures in fourth quarter 2024 were $28.8 million compared to $34.5 million in fourth quarter 2023, a decrease of 17%. We continue to prioritize business reinvestment in safe and modern equipment, including trucks and trailers, as well as in technology, our terminal network and our talent. The average ages of our truck and trailer fleets were 2.1 years and 5.3 years, respectively, as of December 31, 2024. Maintaining an industry-leading low-age, modern fleet improves our driver experience and results in more effective equipment maintenance, safety and fuel efficiency.
Gains on sales of property and equipment in fourth quarter 2024 were $6.5 million, or $0.07 per share, compared to $3.1 million, or $0.04 per share, in fourth quarter 2023. Gains in fourth quarter 2024 included $5.1 million gain from selling a parcel of real estate, which is adjusted out of income for purposes of the non-GAAP measures. Excluding the gain on real estate, gains on sale of used equipment were down year-over-year by $1.7 million, or 55%, driven by a change in the mix of equipment sold. We sold fewer trucks compared to prior year, but at modestly improved average unit gains. Gains on sales of property and equipment are reflected as a reduction of other operating expenses in our income statement.
Final Comments
“We did not repurchase shares of our common stock in fourth quarter 2024,” Werner said. “As of December 31, 2024, we had 3.9 million shares remaining under our share repurchase authorization. As of December 31, 2024, we had $41 million of cash and cash equivalents and $1.5 billion of stockholders’ equity. Total debt outstanding was $650 million at December 31, 2024, flat year over year. After considering letters of credit issued, we had available liquidity consisting of cash and cash equivalents and available borrowing capacity as of December 31, 2024 of $460 million.”
Dana Guthrie is an award-winning journalist who has been featured in multiple newspapers, books and magazines across the globe. She is currently based in the Atlanta, Georgia, area.
