Werner Enterprises Announces Q4 and Full-Year 2024 Financial Results
Werner Enterprises, Inc. (Nasdaq: WERN), a leading transportation and logistics company, has released its financial results for the fourth quarter and full year ending December 31, 2024. Despite ongoing challenges in the freight market, the company has demonstrated resilience, with key indicators showing early signs of recovery.
CEO’s Perspective on 2024 Performance
Chairman and CEO Derek Leathers highlighted various aspects of the company’s performance in the fourth quarter. “The quarter included several factors of a one-time nature. Although the freight market remains challenging, we saw early indications of an improving landscape,” Leathers stated. He noted that revenue per total mile in the One-Way Truckload division increased year-over-year for the second consecutive quarter, and the company’s peak season exceeded expectations, with volumes doubling compared to the previous year at higher rates.
Leathers also pointed out that the Dedicated fleet saw sequential growth, and the company was recognized with multiple “Carrier of the Year” awards from Dedicated customers. Additionally, Werner’s Logistics division showed sequential improvement in adjusted operating income, achieving its best quarter of the year.
Despite these positive developments, insurance expenses were notably high in the fourth quarter due to large-dollar claims. “Our insurance expenses were elevated due to unfavorable claim developments, but our safety metrics remain near record-low levels,” Leathers emphasized. “During this downturn, our strategic focus has been on controlling what we can, investing in our operations, and making decisions that will create long-term value for our shareholders.”
Financial Performance Overview
Total revenues for the fourth quarter reached $754.7 million, representing a decrease of $67.3 million compared to the same period in 2023. This decline was driven primarily by a $52.8 million (or 9%) reduction in Truckload Transportation Services (TTS) revenues and a $13.8 million (or 6%) decline in Logistics revenues. A significant portion of the TTS revenue drop stemmed from lower fuel surcharge revenues, which decreased by $27.1 million. Excluding the impact of fuel surcharge revenues, the company’s total revenue declined by 5%, or $40.2 million.
Operating income for the quarter was $13.4 million, reflecting a sharp decline of $24.6 million (or 65%) compared to the previous year. Operating margin also decreased by 280 basis points to 1.8%. On a non-GAAP basis, adjusted operating income was $12.2 million, marking a $27.0 million (or 69%) decline. Adjusted operating margin fell by 320 basis points to 1.6%, compared to 4.8% in the previous year’s fourth quarter.
Insurance and Claims Expense Impact
Insurance and claims expenses for the quarter totaled $49.5 million, with $19 million attributable to unfavorable developments on large-dollar claims. This resulted in a 250-basis-point reduction in adjusted operating margin and negatively Werner impacted non-GAAP adjusted diluted earnings per share (EPS) by $0.22. The industry has faced increasing litigation and settlement costs, particularly for larger carriers. However, Werner’s safety performance remains commendable, with near-record-low preventable accident rates based on U.S. Department of Transportation data.
Truckload Transportation Services (TTS) Performance
The Truckload Transportation Services (TTS) segment saw revenue decline by $52.8 million, bringing total segment revenues to $527.3 million. Trucking revenues, net of fuel surcharges, fell 6% year-over-year.
- Operating income declined to $11.7 million, a drop of $22.6 million compared to Q4 2023.
- Non-GAAP adjusted operating income also decreased to $14.6 million, largely due to the $19 million impact from insurance claims.
- Operating margin fell to 2.2%, down 370 basis points from the previous year’s 5.9%.
- Non-GAAP adjusted operating margin, net of fuel surcharge, was 3.1%, down 440 basis points from 7.5%.
The segment’s average fleet size declined by 8.2% year-over-year, with an average of 7,495 trucks in operation. The Dedicated division, which accounted for 65% of the TTS fleet, had 4,840 trucks by the end of the quarter, down from 5,265 trucks a year earlier. However, average revenue per truck per week, net of fuel surcharge, increased by 2.5%.
Dedicated and One-Way Truckload Performance
The Dedicated division experienced a 7.7% reduction in average trucks year-over-year but recorded a slight sequential increase of 27 trucks. Year-over-year, the quarter-end fleet size was down 8.1%, but Dedicated revenues Werner per truck per week, net of fuel surcharge, increased by 1.1%. Customer retention remains strong, exceeding 90%, and the segment’s pipeline for new business remains robust.
One-Way Truckload operations saw seasonal volume growth, more than doubling premium-rated peak shipments compared to the prior year. Additionally, One-Way revenues per total mile, net of fuel surcharge, increased by 3.3% year-over-year. Although Werner the segment’s average truck count declined by 9.2%, total One-Way miles declined by only 7.6%, driven by a 1.7% improvement in miles per truck per week. This marks the seventh consecutive quarter of mileage efficiency improvements.
Other Financial Highlights
- Net interest expense was $9.5 million, an increase of $2.2 million due to higher borrowing costs.
- Effective tax rate for Q4 2024 declined to 7.3%, down from 23.1% in the prior-year quarter, due to return-to-provision adjustments.
- Strategic investment gains of $8.7 million contributed $0.10 per share, compared to a $0.3 million loss in Q4 2023.
Full-Year 2024 Financial Summary
For the full year, Truckload Transportation Services revenue, net of fuel surcharge, declined by 6%, reaching $1.84 billion. Total trucking fuel surcharge revenues dropped by 21% to $263.3 million, reflecting fluctuations in fuel costs. Non-trucking and other revenues increased significantly by 33% to $38.4 million.
Operating income for the full year was $75.2 million, representing a 56% decline. Adjusted operating income was $85.1 million, a decrease of 53% from 2023. The full-year operating margin fell from 7.3% to 3.5%, while adjusted operating margin, net of fuel surcharge, dropped from 9.1% to 4.5%.