Welcome everyone to Deutsche Bank's Industrial Conference for 2026. I'm Richa Harnain, and I head the Equity Research Transportation franchise here. Very pleased to have Werner Enterprises with us today. Derek Leathers, Chairman and CEO, along with Chris Wikoff, CFO, and Chris Neil, who heads up the IR efforts along with a number of other responsibilities. Thank you for the full suite here. Maybe we could jump right in. I'll start with you, Derek. Perhaps you can start with level setting on where we are in the cycle. You seemed very constructive on your earnings call a few days ago. I wanted to hear more on kind of what cards the market is dealing you before we talk about specific strategies that Werner's implementing around that framework. Let's start with the supply side. You used the term early innings to describe where we are with respect to some of the recent initiatives on capacity and cleaning that up. Just elaborate there on what makes you think we're so early, what could be next, et cetera. Yeah, sure. There's a lot there, but I'll certainly take a swing at it. Where we're at, obviously, is we are in the turn now versus the pending turn. I think it's been a supply-driven turn, which is different than what we've seen historically. Usually, when these kind of tightening events happen, it's driven by upticks in demand. This one has been supply-led with a lot of the attrition that's been taking place. I used early innings because I think there's a multifaceted level of enforcement going on. I think most of the focus has been on the non-domiciled CDL, and people kind of have a belief that, well, these will fade out over this sort of expiration timeline that's been widely publicized over the next, call it, now we're down to probably more like a year to 15 months. But the reality is there's a lot more going on than that. When I say early innings is because I'm speaking to everything from what we're seeing with start at the beginning of the funnel, right? The schools and school networks around the country where they're actually going in and validating that these schools are in fact training drivers versus just issuing training certificates. They've closed out. They removed about 10,000 schools from the Federal Register already. They've closed down approaching 850, 900 schools at this point. As that school closure rate continues, that tightens supply even further, but it should be tightened if you're not actually training these drivers. By contrast, for instance, we've had nine of our schools audited and came out of those audits with very flying colors, like almost zero defect across the nine schools. We are comfortable that what we are doing is trying to train drivers the right way. On the electronic logging side, which has probably got the least attention, I think that is where a lot of my early innings comments come from. They have stopped 400, nearly 500 at this point, new entrants into the marketplace because the ELDs did not pass the basic kind of sniff test of certification, and they were too easily able to be edited or manipulated. They have taken many of the existing ELD providers out, but there is a lot more of that that needs to happen. At the starting point of all this, there is over 1,000 electronic logging companies registered in the U.S. By contrast, 90% of market share in Canada is done by about nine companies, and really two to three of those companies have the bulk of that, and that is because they do not allow self-certification. As we start going down a path of more government oversight of electronic logging, which should exist in our view, seldom does industry ask for regulation, but in this case, they need to be certifying these electronic logging devices. You are going to see a lot more capacity that is only able to operate today because of its ability to manipulate its hours. The reason the market was so saturated was that 10 trucks were able to behave like 15. As you take those 10 trucks out, you are really taking the equivalent capacity of 15 trucks out because you cannot operate with these extra hours and kind of reset your logs on a daily basis. It is kind of the combination of all of that, and then other legs of that stool are things like we are seeing increased interest in cabotage enforcement for the first time in many years, and that needs to exist. These are B-1 drivers crossing the border into the U.S. By law they should deliver, have to pick up and go back immediately to the country they came from. In reality, we know from CBP data that they were spending 21- 27 days in the U.S. on average for every trip, which means they are not just hauling that trip, they are hauling four or five trips while in the country. With proper enforcement techniques that are still in the early innings of rolling out, more of this will be captured. As it gets captured and caught and therefore removed, I think the supply side tightening continues to strengthen. The last statement is just all of the above is done without any real demand impetus, and I think there is a lot of positive reasons to believe that demand is going to continue to, if worst case kind of stay stable, but more likely case as we get into the latter half of the year is Christmas is still going to come. Peak season is still going to be a reality. You are going to see demand inflection. When that happens, combined with increased enforcement, I think the tightening gets much more significant. Yeah. I want to get into that demand side. Just real quick, on the supply side, you talked about maybe October, some budget increases that could help the government sort of enact some of these increased enforcement actions. I know you're very much involved in that process, so what are you hearing there? What could come next? Yeah. From the Federal Motor Carrier Safety Administration side and DOT, they kind of work October to October from a budgeting perspective. So whether it's new monies or just reallocated monies that they have access to increase their efforts. I don't want to get too specific on the stats because I might misquote them, but from an order of magnitude, the budget for FMCSA is about $1 billion. FAA is, I believe it's $36 billion or $37 billion. The order of magnitude of who you have to try to manage and keep safe in FMCSA is 10x what you have to do on the aviation side in terms of number of entities you're trying to manage and enforce compliance on. So they need more funding. But whether they get more funding or not, I've been assured they have the available resources, and they will only get more resources as they're able to go through this new allocation process post-October, which will increase enforcement. Okay. Very good. All right, great. Let's shift gears to the demand side. On your call, you talked about lean inventory levels in retail. I believe you characterized customer feedback generally as being fairly positive heading into the fall. Yeah, so just discuss that more. What are your customers telling you, and how are you feeling about the demand set up for Werner into peak? I know you said there will definitely be a Christmas, things like that. Yeah, thoughts on that. Yeah. Because of our outsized exposure to retail, we keep a very close eye on retail inventories and what's happening at the retail level. You can't really broad brush it obviously because every retailer is in a little bit of a different situation. But as we look across our network of customers, what we see is that the COVID hangover is over. They've got inventories either where they want them or in many cases, even a little leaner than their long-term historical run rate. Some of that's efficiencies on their part, but regardless of that, what it really means is they're in a replenishment mode. As we see the consumer resiliency staying stronger than I would've honestly expected at this point, and you see retailers adapting to the consumer's behavior, which is to be a little more frugal, a little more thoughtful with their spend. Winning retailers are winning, and that's who we do business with. We're heavily exposed into discount retail. We're heavily exposed into folks that are catering to that sort of more thoughtful, more prudent consumer. We're pretty optimistic as we look into the peak. Obviously, it's early in peak season discussions. But what we're hearing, what we're seeing, leads us to believe that we'll be back to a more normalized peak kind of activity this fall. That bodes really well with the setup for us to be able to do what we do, which is to provide solutions at scale to retailers that are built around peak season, and do so effectively. What does that mean, Derek, normalized peak? What is that relative to what you had last year? How much greater? Well, last year started to approach from a volume perspective, like what looked and felt a little more normal than we've seen in a few years. But the market conditions weren't right for the pricing to be reflective of how difficult peak season work is. In other words, it wasn't quite the opportunity to be rewarded for how difficult what we pull off is during peak season. This season is shaping up to be more both normalized in volume but also in the pricing capabilities that we've displayed. If you go back, you have to go back to the COVID years and even prior to see the kind of lift that's expected during peak season based on the complexity that comes along with those solutions that we provide. Okay. How does inflation influence your thinking? You talked about how the consumer's been pretty resilient, thoughtful, but resilient. Even on the regulatory side, inflation's becoming a hotter topic with what's happening in the Middle East, what it means for energy prices and things. Do you feel like there's any sort of hesitation from the administration to endorse some of these because there are these policies to cut capacity because they are inflationary, or because it's about safety, it is getting bipartisan buy-in and you feel good about the sustainability of both demand and supply in light of inflation? Well, I think you mentioned earlier that I stay pretty close to the ongoings in D.C. I do, and one of the reasons I do is exactly to your question. I've early on had some concerns that there might be some willingness or some ability or desire to trade off enforcement for what could be inflationary pressures on truck pricing or transportation pricing. The messages we've received have been loud and clear. There is no trade-off for safety. They're unwilling to bend on anything that's safety related. The facts support that this has been a less safe environment over the last several years. This influx of capacity operating outside of the rules has clearly demonstrated a negative impact on safety on America's roadways. If you look at all the largest, well-capitalized carriers in America, we're at 2025 or in some cases, historic lows in accident per million miles, and yet the industry has shown an increase in some of these accidents per million mile metrics, as well as fatalities on America's roadways. That's unacceptable. If all the largest players are getting safer and safer, yet the whole industry metric is moving up, there's only one reason that's happening, and that's because of some of this influx. They're laser-focused on cleaning it up, and they've shown no desire to make a trade-off, and I feel confident they're going to continue. The last thing I would just say is, I think it's a little bit overblown when people think about it from an inflationary impact because transportation, just the transportation portion of product cost is somewhere in that 3%, 3.5%, 3.7% range. So even if that number goes by 25%, you're talking about a pretty minimal impact on the cost of goods, and they've already demonstrated the ability to mitigate much larger impacts than that with tariffs and other things without it sorting through to end customer inflation. So I think they'll get creative on their side to hold that out of the cost of goods. We deserve, need, and are going to request to be paid fairly for our services. The industry hasn't been reinvestable in several years, and it's time we have to get back to the health that we need to be able to reinvest in this business. On the demand side, inflation hasn't really been. Yeah. I think it changes consumer behavior. We see consumers that trade down in the choice of goods, but they're still. We're in the very consumer-centric, perishable, non-discretionary categories. They're going to buy that stuff. They might buy a different quality of it, but it still takes the same amount of space in a trailer. So whether it's private label or name brand, it consumes the same amount of space in our trailer. We've seen volumes hold up very well with some of our core retailers. Okay. I'm going off a few tangents because you talk really fast, so I think it can squeeze in a couple, a couple more questions. All right, so maybe just marrying those two things, right? Supply, demand. You're already seeing some very solid rate recovery. One-Way revenue per truck per week growth was the strongest you said in a decade, right? Dedicated legacy revenue per truck per week up high single digits. I know a lot of the progress was due by lower truck count, too, and I do want to get into that, some of the company specific stuff you're doing. But maybe looking out, you raised your outlook for rate. What's it really going to take to get to the high end of your outlook of 5% for Dedicated? You're already at 3% in the first half. Supply-demand looks poised to improve from here. Peak looks good. Tell us, what gets you to your target? What needs to happen to exceed it? Maybe Chris, you want to take that. Yeah, sure. Just to be clear for the listeners on, I think what you're referring to, you're referring to Dedicated revenue per truck per week guide that we raised at 3%-5%. Yep. You're right. For the first half of the year, we are up 3%. For the second quarter, year-over-year, Dedicated revenue per truck per week was up 5% just on our organic business, given that we did have an acquisition of FirstFleet at the end of January, that was all 100% within our Dedicated portfolio. On an organic basis, we are up closer to 8% on a year-over-year basis. What's driving that and how does that play into having confidence of this 3%-5% range for the full year on a year-over-year basis? One points to the contractual rate renewals, which in Dedicated, we're seeing low to mid-single digit rate renewals. There's also a utility and a production improvement aspect that can drive up revenue per truck per week. We're seeing that both in One-Way, given our One-Way restructuring that we talked about the last couple of quarters, but not just in One-Way. We're also seeing that in Dedicated, in part given the improved density that really came with the FirstFleet acquisition, it largely being more southeast concentrated. With that density, which we're still settling into, given that the second quarter was the first full quarter of having that acquisition as part of the portfolio, that density allows us to utilize the assets in Dedicated just more productively, more efficiently, in essence, able to support the same reliability requirements and same volume for our Dedicated customers with less assets. Both of those are contributing to both the overall and the organic number that we saw in the second quarter and gives us confidence of that getting within that 3%-5% guide for the full year. Okay. Are you satisfied with low to mid-single digit rate renewals in Dedicated? Or do you think, just given what we're seeing in the spot market, should we continue to expect acceleration from there? Well, one thing I would just point out there to start is the Dedicated starting point is in a much healthier position than where One-Way was. The role it can play in getting the overall back into the double digit long-term range that we've talked about, we can push that Dedicated portfolio forward without asking for sort of outsized increases. But understand, like any of this stuff, it's an average. So there are fleets that are absolutely in more need than that, and there are fleets on the other end of the spectrum that might be very healthy, and what we're really looking for is more efficiency in that fleet, and it doesn't have to come through rate. Like Chris stated, you can do a lot of things with revenue per truck per week that doesn't have to impact the customer from a rate per mile perspective or rate per day perspective because we simply sweat the asset more, and we're able to do that and still get that increased revenue to the bottom line quicker. There's a lot of ways to move Dedicated. I know it's the hardest thing for folks to really wrap their mind around unless they're inside the business and looking at it every day. To kind of bluntly answer your question, we're going to ask for what we need on a customer-by-customer basis, and all of that is with the aspiration to get the business back to reinvestable levels, which includes getting TTS to double-digit margins. Okay. That's what you meant by the double digits. Yes. Just wanted to get. Okay, cool. Let's talk about the shape of the recovery. You talked about depressed July trends. I think you said it was the second weakest month of the year. I know there's been a lot of consternation in the market around maybe the seasonal slowdown that we've been seeing. Does it feel normal to you at this point? How do you think the back half sort of builds as it relates to momentum? When do we start to see trends kind of come back from maybe the August, the summer lulls, if you will? Yeah, I think a few things, right? I think the market is very skittish right now, to say the least. The reaction or overreaction to any data point seems to be at all-time highs. If you look at July, first of all, my comment about July being the second weakest month of the year was an industry comment. That's industry-wide. If you just look through history, July is a seasonally slow month. It always has been. You come off the 4th of July hangover kind of holiday. Everybody kind of slows down what's happening out there. Automotive always takes a big drop down in July. They have for decades. There's a lot of reasons why tonnage slows down in July. But rejection rates are still hovering at or near 14%. That's very high levels. Anything north of 10% is a very tight market indicator. Spot rates have settled some, but they settled off of a rate that increased more rapidly and to higher highs than we've seen in any of the prior cycles in terms of its pace of acceleration. There's always going to be a tempering moment. It's a matter of when does it come. But I would just tell you, like in our network, in our conversations, in our dialogue, there's nothing but increased momentum. There's no other indications other than increased positivity, increased momentum, and probably most importantly, increased acceptance from the shipper community that this is real and it's here to stay. Enforcement and other activities that are taking place are going to continue to keep a pretty decent lid on the supply side for a while. As we get closer into the fall peak, it's just going to get tighter from here. There's no concerns, if you will, from my perspective about what some of these little snippets of news that we've seen in July. You have a Dedicated portfolio, you have a One-Way portfolio. Are you seeing the flow go more to one place than the other? Is there more of a drive to Dedicated, given that maybe you have more long-term capacity, or do you think people are more willing to commit to One-Way and see what happens? Well, I think this stuff happens in waves, right? I'll go back to the early innings. In the early innings of a turn like this, the first thing you see is a tremendous amount of freight that's in the spot market or has been in the spot market that's looking to find a home and contract. Shippers are quickly trying to pull it back, re-bid it, mini-bid it, and get it into contract. That is where all of their focus is because it limits their immediate pain and the immediate exposure that they have in spot. That has been ongoing. It is only picking up in pace. The volume of that type of activity seems to increase week over week over week. The secondary wave is when they start to look for long-term security or long-term safety via Dedicated. What we will do is we will have the same disciplined approach there that we have traditionally, which is if it is truly Dedicated, so it is driver-involved, complicated freight with potentially even specialized equipment, that is the kind of stuff we want to see and land in Dedicated. It is stickier, it is long-term. Once you have it, you keep it not just for a year or two, but often for decades. The other stuff that is really One-Way business that they are trying to package up and put into a continuous move format, we have interest in that, and we are going to be looking at those and bidding those. That kind of freight will reside in our One-Way network because that is really what it is. Someday, when this turn sees its way through the other end, that always gets unbundled and redistributed and put back into the spot market eventually. We want to house that where we think it belongs. But we will be disciplined there. We are going to stick within One-Way to kind of the three big pillars of cross-border Mexico, expedited freight, and then some of the verticals around pharma, medical, and healthcare in general, because those are areas that we think are closely aligned with very high service expectations, more complexity than general One-Way freight, and things where we can build a real relationship over the long haul. Richa, it might be worth just clarifying, particularly for the listener, the basis of your question. We have leaned more into Dedicated in terms of being a growing mix of the overall TTS business, t he Truckload Transportation Services business. More recently, total TTS tractor fleet being around 8,700 trucks, but Dedicated being about 80% of them or about 7,000 trucks. We are more heavily weighted on the Dedicated side, particularly with the FirstFleet acquisition. Yeah, rational question of where do we look to grow? We like the benefits that come with Dedicated. Everything that Derek said of it just being more difficult to serve with large, complex shippers. But it comes with benefits of being a more integrated partner with our customers, long-term sticky contracts, round trip billable miles, and there's a higher expectation around reliability, which is becoming more and more valuable right now for the shipper. But that also comes with more of a premium and just the durability of those long-term, highly integrated type of contracts and partnership. But on the One-Way side, because of the restructuring that we've talked about the last couple of quarters, which in the second quarter was really showing some very strong proof points, with raising margins over 700 basis points year-over-year, revenue per truck that I think you alluded to earlier which surged almost 30% up year-over-year. That's showing a lot of benefit. In the second quarter, we were wrapping up that restructuring. Some of the slower pace of hiring just delayed some of reseating some of those trucks as we moved assets out of certain markets and into more profitable markets as part of restructuring. My point with all this is there can still be some growth in One-Way, even though we're more weighted on the Dedicated side. There can still be some more growth in One-Way as we continue to reseat those trucks and really settle into the post-restructuring environment of One-Way, which is really showing to be a strong contributor to expanding TTS margins. Okay. Part of that restructuring, I know your fleet count, or you had 18% fewer trucks in One-Way, and a lower legacy Dedicated count too, right? How much— Sequential basis, yeah. On a sequential basis. How much of that influenced the headlines of weight figures I referenced earlier, and just what are the key underpinnings of why fleet's declining? When can we get to a point of fleet growth? Yeah. The 18% of One-Way being smaller fleet, that's Q1 to Q2. That was expected as part of the overall One-Way restructuring effort, which may have been a noisy narrative over the last couple of quarters. But again, I think the proof points have been really strong in the second quarter. So really at the core of it, what One-Way restructuring was aimed at was moving towards higher performing freight, with customers and markets that just have greater upside as the market tightens, and coupled with some operational and structural changes that maximize production. So of the about 28% increase in revenue per truck per week, about 16% of that was from production improvement. More miles per truck, longer length of haul, more team-oriented type of freight. And then the rest of it was in double-digit revenue per total mile improvement, essentially rate improvement. Really a combination of maximizing some tightening of the market, but also benefiting from some operational and structural changes. Does all of that contribute to those better metrics? Yeah, absolutely. That was the intent. It was a significant contributor to our ability for the overall segment TTS, for us to be able to nearly double operating margins Q1 to Q2 in TTS and on a year-over-year basis with One-Way restructuring being a big enabler to do that. The FirstFleet acquisition was highly accretive, so that helped. Also, insurance and claims being meaningfully down year- over- year, that helped. But the One-Way restructuring was a very large contributor to margin expansion in the quarter. The only thing I would add is to maybe get right to the heart of, I think what you mean or what you're looking for with your question is We didn't get that rate by just yielding off a bunch of freight because we shrank the fleet. Yeah. That's not what happened. Some counterpoints to that would be this. In addition to the rate lift that we got in Q2 year- over- year, I would point out that our length of haul actually increased nearly 100 mi or right at about 100 mi. That generally brings the rates down. When you go longer length of haul, rates go lower per mile. That was a counterweight to the progress that we were still able to show. But possibly the bigger thing in all of that is that as we went through the restructuring and we had to have the level set where we wanted our network to be and where those trucks would exist, what it forced us to unfortunately not be able to do is benefit nearly as much in Q2 from the spot market itself. Our exposure in the spot market in Q2 was about half what it was in Q2 of the prior year. With half the exposure on a percent basis, even less than half on a pure miles basis, we were able to produce the 10%+ rate per mile lift. As we've now stabilized that fleet, so we're not looking to continue to shrink it, now we have jobs advertised in markets where we'd want to stay and want to be, and we're able to reseat and grow from there. It becomes much more of an interesting dynamic relative to rates because you are able to, in fact, get a normalized amount of your fleet exposed into the spot market while also settling in on these new lanes and then working to find even increased productivity gains as we get better at the lanes that we are now settling into. There's a lot of optimism in the building about how we can continue to tweak this going forward, but it must also begin with the shrinking is over. We now have to start to grow from here. As you're going to be more, sounds like much more thoughtful about the growth that you target with the assets you have. You kind of referenced earlier, not all Dedicated is created equal, right? You want to be in the right sort of Dedicated. Maybe talk about the competitive dynamics and sort of the areas you want to compete in and what makes you more well-positioned to win most to the competition. Yeah, sure. It starts with we want to work with large enterprise type customers that have scale, whereby if you win a Dedicated fleet at a site and you do a really good job, that organically leads to site two, three, four, five over time, and you end up able to sell deeper into the portfolio. There's more cross-selling opportunities to other products we have because you're so entrenched and Dedicated, and that's a long-term relationship. The characteristics are stuff where it's often driver-involved freight. So our driver's doing a lot more than just being a truck driver. He's actually participating at the store level with deliveries into the back room. In some cases, they have access to the delivery locations. They can do night deliveries, unattended deliveries, things like that. We like it when it's really truly Dedicated from a service expectation. I often say 98% in One-Way service levels will get you carrier of the year every time, and it will get you fired in Dedicated, because the expectation is that much higher. That is harder to haul, more driver involved, more tech involved in terms of the routing and optimization to build and model these fleets. That is the kind of work we like doing. If it happens to require specialized equipment, in many cases even better because it is even more difficult from a capital perspective. Once you are in, you are able to perform for that customer for many, many years. Is going to be more tailored. Do you still want to be heavy in Dedicated, or can it also be in One-Way, could you go— No, I think you will see growth on both sides of the ledger. Dedicated will be decision by decision, fleet by fleet, opportunity by opportunity. That is why it is always the hardest to put a number on where you think you will be. I can tell you the pipeline in Dedicated is very, very strong right now. The question of what gets through the other end of the pipe based on our productiveness and our pricing discipline, that will always be a bit of a TBD, but we have multiple fleets that we know are coming or we are implementing in the back half of the year, and we are excited about that. On One-Way, it is really a matter of having gone through a very difficult restructuring, and as Chris mentioned, oftentimes when you move those trucks and assets, the driver is not moving with it. We lost some drivers through this process, and now we are stabilized and able to reset. Tornado coming. That is right. You scared us. I think we should maybe, I think also for the long [inaudible]. Local weather warning? Yeah. Tornado warning. Over the long haul. Well. Longer term, I think, as Chris mentioned, we've been leaning into Dedicated more over the last decade, obviously much more focused after the acquisition, FirstFleet. But I think Dedicated share gain over the course of the next 5-10 years is probably going to be significant as we talk about where we're going to put assets. We just mentioned that whether it's in One-Way in the short term or if we're Dedicated, there's opportunities for both. But I think it's important as you think about the landscape, to think about Dedicated being a place where there will be share gain to carriers of scale with reliability vetting process. I think that's something that's thought about for a while and the reason why we've leaned into Dedicated more over the last 5-10 years. Mm-hmm. Is driver availability a gating factor? It's coming up more and more. Want to talk to that? Yeah. It's certainly going to be a tough driver market out there. There's no doubt about that. There's plenty of people that have CDLs out there. The question is, are they able to be vetted? Are they able to meet the strict safety and regulatory requirements that we're looking for in our fleet? We're pretty uniquely positioned. When you have three-quarters of the jobs you're out there trying to recruit for are in Dedicated, where they're home nightly, home multiple times a week, that's an attractive job. They're also coupled with pay packages that are generally above average compared to a One-Way alternative. It's better pay, better lifestyle. All the way around, that's the job they're looking for. We like that. We love the fact that we've got our own driver school network that produces very high-quality drivers, and we have tons of metrics to compare drivers coming out of our schools and their safety standards and their retention, maintenance costs, everything across the board. They're coming out ready to drive and to do a really good job. We put them with a trainer, and we finish them with another, call it three to five weeks of additional oversight and training to prepare them even further. We know how to do this, and we know in a tight driver market that that's something that is, I would call it like a net tailwind. The driver market will be a headwind, but it's a net tailwind relative vis-à-vis our competitors based on some of the job offerings we have, as well as the infrastructure we've previously built around our driver schools. In the third quarter, the pace of hiring as well as the trend line on retention, both of those are improving in the third quarter relative to the second quarter. That's helpful, and as those things go, so will go the fleet in terms of opportunity for growth in the second half. As we sit here today, the TTS fleet is up versus where we ended the second quarter. Okay. Are you seeing any sort of trend of owner-operators in One-Way maybe having a more difficult time? Like you said, there's a maybe flight to quality almost. Are those carriers just finding it really hard to secure freight on their own, and they're choosing to drive more with Werner? Is that happening yet? Yeah, I think that's part of the evolution, like when I talk about different waves of thinking, right? Early on after Montgomery, I found it interesting because I thought a lot of the online commentary, especially from owner-operator type community, was cheering from the mountaintop, thinking it was awesome that this ruling came out. I thought kind of the opposite for them. I thought I was worried for them because it's going to be very difficult to vet an individual owner-operator in this new world that we're in post-Montgomery. I think a more logical step is that you're going to find a lot of them looking for. When they come to that conclusion on their own, it's going to take some time, but I think they're going to need to come and find shelter inside of larger fleets and operating as an owner-operator with carriers like Werner. We are certainly gearing up for that and have seen some early success, but it's very early, and the numbers are immaterial at this point. We want to have a welcome home for those high-quality drivers that we can bring into our own fleet, make sure that we do the additional vetting that we need, wrap them up in our own safety and other programs where they can participate. We can make sure that we're putting an asset out there we can be proud of. Even though rates have improved, your margins are up a lot. I know you also monitor the competitive landscape quite closely. The small carriers, maybe not just owner-operators, but more like the middle tier. Are they still struggling because of things like insurance and getting the loads, or are they benefiting from this rate environment that now we're seeing more of a recovery in terms of financial? Well, I think to the extent that they're able to and participate within the spot market, they're seeing some rate relief like everybody else is. But there's a lot of carriers that are still in a very precarious situation after these last three and a half, four years— Yeah. —we've been through, many of which aren't going to make it still. I mentioned on the call that it's not just enforcement. I do think we're going to continue to see some attrition across the small and medium size because of the position they were put in for three and a half years of really kind of the Wild West out there in many respects. That's unfortunate. Hopefully, they can make it. I hate seeing four and five decade-old companies going under, and we saw way too much of that over the last couple of years. Okay. All right, so let's talk about profitability improvement opportunity. I think, Chris, on the last call, you gave us some pretty pointed thoughts on what to expect in terms of margin expansion into next quarter through year-end. Maybe remind us of what those were and discuss the key drivers of that which are in your control. So things aside from the cycle, as we talked about, and sort of how to think about contribution of the various items that you're talking. Sure. First, we can talk more on a consolidated basis, and then we can talk individually about the TTS segment and Werner Logistics. But overall, prior to the second quarter, the three quarters prior to that, so second half of last year and the first quarter of this year, consolidated adjusted operating income margins was roughly around 1.5%. In the second quarter, it doubled. It was right around 3%, so 150 basis point increase. What we said on the last call is that type of a trend, that zip code could be possible as we go from Q2 to Q3, so continuing to expand margins. Then as we progress through the entire second half and the rest of the year, it's our expectation that we'll continue to expand margins and be approaching on a consolidated basis more of the mid-single digits as we exit 2026 and enter into 2027. That is on a consolidated basis. Now what is happening underneath that? From a TTS perspective, revenue lift ongoing in the second half given further rate improvement from renewals. The productivity gains that we are seeing will also be helpful in terms of revenue per truck in both the One-Way and the Dedicated, so that will be helpful. Some modest fleet growth. From a revenue perspective, on a bottom line, obviously, a lot of that rate improvement and production improvement goes right to the bottom line as we are modestly growing the fleet, particularly in Dedicated, as we add trucks to existing fleets. That comes at a higher contribution margin. All those help to contribute to expand margin in TTS. Plus, we anticipate second half of the year will have improved gains on the sale of used equipment. A better second half versus the first half. We have $18 million of synergies that we have targeted for the FirstFleet acquisition and the ability to expand margins 300 basis points over the course of, call it a year and a half, but that is well underway. It is ahead of schedule. There is $7 million that we believe we will be realizing out of that $18 million in this current year, 2026, the majority of that in the second half. All of those are compounding for TTS, and gives us confidence in our ability to continue to expand margins there. In the second half, we were right at mid-single-digit operating margins in TTS, 5.5%, and we expect to be up and to the right over the next couple of quarters. From a Werner Logistics perspective, more pressure on margins, particularly in brokerage, in the first half of the year, just given the volatility and spike in spot rates and just the impact on our purchased transportation costs in a brokerage environment for us that is more weighted towards a contract type of freight. Less ability to be as agile on the sell side as the purchased transportation costs were increasing at a rapid pace. We knew that was temporary. It was temporary. As we came into the third quarter, those margins were meaningfully improving. We are talking like an improvement versus second quarter of 300 basis points, maybe upwards of 400 basis points. When you just extrapolate that across the overall segment, that gives us confidence of getting back to positive adjusted operating income margins in the second half. Certainly second half versus first half will be a contributor to margin expansion just given the brokerage margins improvement. What is the normalized margin potential of the new Werner versus remaining? Yeah, we have talked for many quarters for quite some time now of confidence that we have of getting back to low double-digit margins for TTS. So your question was overall Werner, but TTS, two-thirds of our portfolio, 5.5% in the second quarter, but a pathway back to low double-digit margins at the mid-cycle. The bridge to get there, so call it that additional 600 basis points- 700 basis points from where we are at today, is a combination of market help, meaning further rate improvement, some demand improvement in Dedicated, where we are adding trucks at a higher contribution margin, and also the improvement in the sale of used equipment and better gains. The last several quarters, six to eight quarters, gains have been in a 40 basis points- 50 basis points as a percentage of revenue. But in normal mid-cycle and peak years, that is more to the tune of 150 basis points- 200 basis points. So gain normalization alone on used equipment could contribute 150 basis points by itself. All of that in kind of the market help side, but then there is self-help. What we are doing in production, that should continue. What we are doing on the FirstFleet synergies, that is very much on track and will be, it can continue to be more and more accretive. The cost discipline that we have shown in the past years, coupled with more technology-enabled synergies and cost savings as we go forward. When we think about our technology transformation journey, which we are well into over the last two or three years, we are later innings on kind of the build of the tech stack, but I think we are in early innings of the synergies to come from technology. Multiple piece parts to get there, but we've continued quarter after quarter to challenge ourselves internally on that pathway back to low double digits. Because of that, we continue to have confidence that that's where we should land at the mid-cycle. Chris, how quickly do you think you can get there? Do you feel like mid-cycle, you said at the mid-cycle you kind of want to be there. Do you think the mid-cycle could be more further out because the cycle could be longer? Actually— Yeah, I don't think we're at the mid-cycle today. Yeah. I don't think we're going to be at the mid-cycle between now and the end of 2026. Could we be at mid-cycle in 2027? Yeah, very possible. I think it is going to be an elongated upcycle for all the reasons where we started this conversation of it's supply-driven. That's going to continue. Enforcement's going to continue to ramp, and we really haven't even gotten into the demand side of things. Maybe that's on the horizon with where ISM has been now for seven consecutive months and the July report that just came out being much more constructive than June, and I think at a four-year high in terms of the ISM PMI manufacturing index. Some constructive things on the horizon from a demand standpoint, as we said earlier, but not yet reflecting in tonnage or in freight. I think that's more upside as we go into 2027. When would you be happy if you get to double-digit margins? I would expect that there's good opportunity for us to get there in 2027, and we'll be narrowing that gap even over the next five or six months as we close out 2026. I think just to frame that a little bit, just remind everybody that we're two-thirds of the way through the first mid-cycle since the start of a turn that wasn't clearly turning at the first part of the year. It only takes a couple of cycle. We got to get through a couple of cycles, but I agree with Chris, and I think it's in the cards, and we've got a lot of work to do. A lot of work to do to do that, but I think it's in the cards in 2027. But we need to at least get through one full mid-cycle and start the second one to be able to have more confidence, to be able to answer that more clearly. When do you think is the starting point of the next mid-cycle officially? Because I know everything's kind of fluid. Yeah, it's interesting because we'll still be finishing 2026 stuff up in Q3 and Q4, and yet 2027 in not widespread, but in select cases, will already be kicking off. So this fall, you'll already see certain select 2027 bids coming to market. I think the other opportunity that's just very robust right now is regardless of any of that, the mini-bid reality. The reality of people finding freight coming back to their desk that they thought was covered through prior bids that isn't actually covered because of attrition, because of enforcement, because of whatever the case may be. We're seeing a high scale or high volume of that type of activity, and I expect that'll just continue as we go forward. Yeah. Were you the one that said maybe we shouldn't call them mini-bids anymore or something? Because they're always, it just feels like normal course of business now. I don't think that was me, but I concur with the thought. Okay. Maybe we touched on a lot of the topics I had on my list. You talked about the positive influence that's had on your business, the slight quality. You successfully fought your own nuclear verdict. I'm switching to this Lupus case, by the way, and how it's impacted C.H. Robinson. You fought your own nuclear verdict in recent years. I'm sure you feel for the C.H. Robinson team, but just talk to us more about the implications for your business. You do have a brokerage arm, and it does rely on third-party operators where you don't have explicit control over that carrier safety standard. How do you deal with this risk and what do you think about insurance renewals and things like that? Is that a risk for you? Yeah, I think it's a new world that we're dealing with post Montgomery and then obviously the verdict that just took place recently. The biggest thing we need to continue to focus on is making sure we have the best- in- class vetting and very significant oversight to our overall brokerage operation. We're continuously evolving that and we just remind folks that as the technology improves, I mean third-party technology that's out there improves, it's our ability to access that technology and put it to work. Our ability to vet is improving all of the time. We believed that the Montgomery decision was going to go the way it went, so we had significant work underway throughout this entire year to re-examine and re-challenge whether there was any better tech that could do more for us on the vetting side. We feel like we're in really good shape, but it's a never-ending battle. We have to continue to iterate on all of the above to make sure that we're putting our best foot forward every day relative to vetting. In general, as I sit here today, I feel like we're in a pretty good spot, but we've got to continue to work at it. On the shipper side, I think there's clearly been a market reaction to Montgomery and also the Texas verdict where size matters. I talked on the call about assets matter. Assets matter, size matters. Those things matter, and they want to work with folks that not just have the safety record and the performance data that we can demonstrate to them and the vetting processes that we can demonstrate to them, but they also want the scale and the size of the balance sheet. They want to make sure that they're not working with somebody that's going to put their business at risk the first time they have an accident because there is no insulation between them and the ultimate plaintiff. Our job is to obviously, first and foremost, we talk about it all the time, nothing we do is worth getting hurt or hurting others. That has to be how we live and breathe every day. We've got to continue to try to drive accidents lower. But when and if they happen, we've got to make sure that we've got the right structure from an insurance perspective, and we've got to make sure that we have the right ability to weather that storm, and stand up and respond to whatever that tragedy might be. Yes, I do feel for C.H. I do think these nuclear verdicts continue to get out of hand. I do believe we're going to wake up in a world of $30 eggs someday if we don't get it under control. But there's a lot of work that's being done to try to figure out what is the best practice? How do we deem a carrier safe? It would be really nice if we lived in a world where an organization that exists called the Federal Motor Carrier Safety Administration, was able to also clearly then label a carrier as safe or unsafe. We're not in that world today. We need clarity, and we're going to continue to push for that out of FMCSA and DOT. Any questions in the room before we wrap? [inaudible] Why is Werner Logistics still under- earning? Yeah. The margin pressure in brokerage was the biggest factor in the first half, and so now that is real-time correcting over the last several weeks. Early into July, it was already correcting meaningfully compared to the second quarter. That's going to be very helpful. On the intermodal side, which is growing double digits, but there also was some margin pressure just with some higher fuel costs that was not necessarily being passed on to the customer in the second quarter, some higher drayage costs. Those are some aspects that are now improving. So that will also help. But overall, we're still targeting low to mid-single, in terms of aspirational margins for the overall Werner Logistics segment. Just working through, and I think we're on the other side of those brokerage margins. As well as some volume drop in our Werner PowerLink or power-only fleet, which we're in the process of building back as well. Do you know is the insurance cost premiums rising impacting that? Well, I think they are going to rise for everybody as a whole. Just like on the asset side, ours have risen modestly compared to the rest of the industry. I think it is going to be the same on the brokerage side. We have those policies in place. I think it is the smaller carriers where they are not only going to see significant premium increases, but there is wholesale policies that they do not even have that they have to go after at a time where they are really backed into a corner and going to be forced to take a big bite in order to secure these policies to stay viable as much as possible as a small broker. Okay. We kept you for longer than I said, but thank you so much, and you may need to get to your next meeting. Thank you for being here. It was really [inaudible]. Thanks for having us.