WERNER ENTERPRISES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) summarizes the financial statements from management’s perspective with respect to our financial condition, results of operations, liquidity and other factors that may affect actual results. The MD&A is organized in the following sections: • Overview • Results of Operations • Liquidity and Capital Resources • Regulations • Critical Accounting Estimates The MD&A should be read in conjunction with our 2024 Form 10-K. Overview: We have two reportable segments, TTS and Werner Logistics, and we operate in the truckload and logistics sectors of the transportation industry. In the truckload sector, we focus on transporting consumer nondurable products that generally ship more consistently throughout the year. In the logistics sector, besides managing transportation requirements for individual customers, we provide additional sources of truck capacity, alternative modes of transportation, a North American delivery network and systems analysis to optimize transportation needs. Our success depends on our ability to efficiently and effectively manage our resources in the delivery of truckload transportation and logistics services to our customers. Resource requirements vary with customer demand, which may be subject to seasonal or general economic conditions. Our ability to adapt to changes in customer transportation requirements is essential to efficiently deploy resources and make capital investments in tractors and trailers (with respect to our TTS segment) or obtain qualified third-party capacity at a reasonable price (with respect to our Werner Logistics segment). We may also be affected by our customers’ financial failures or loss of customer business. Revenues for the operating segments (Dedicated and One-Way Truckload) within our TTS reportable segment are typically generated on a per-mile basis and also include revenues such as stop charges, loading and unloading charges, equipment detention charges and equipment repositioning charges. To mitigate our risk to fuel price increases, we recover additional fuel surcharge revenues from our customers that generally recoup a majority of the increased fuel costs; however, we cannot assure that current recovery levels will continue in future periods. Because fuel surcharge revenues fluctuate in response to changes in fuel costs, we identify them separately and exclude them from the statistical calculations to provide a more meaningful comparison between periods. The key statistics used to evaluate trucking revenues, net of fuel surcharge, are (i) average revenues per tractor per week, (ii) One-Way Truckload average revenues per total mile, (iii) average percentage of empty miles (miles without trailer cargo), (iv) average trip length (in loaded miles) and (v) average number of tractors in service. General economic conditions, seasonal trucking industry freight patterns and industry capacity are important factors that impact these statistics. Our TTS segment also generates a small amount of revenues categorized as non-trucking revenues, which consist primarily of the intra-Mexico portion of cross-border shipments delivered to or from Mexico where the TTS segment utilizes a third-party capacity provider. We exclude such revenues from the statistical calculations. Our most significant resource requirements are company drivers, independent contractors, tractors, and trailers with respect to our TTS segment and qualified third-party capacity providers with respect to our Werner Logistics segment. Independent contractors supply their own tractors and drivers and are responsible for their operating expenses. Our financial results are affected by company driver and independent contractor availability and the markets for new and used revenue equipment. We are self-insured for a significant portion of bodily injury, property damage and cargo claims; workers’ compensation claims; and associate health claims (supplemented by premium-based insurance coverage above certain dollar levels). For that reason, our financial results may also be affected by driver safety, medical costs, weather, legal and regulatory environments and insurance coverage costs to protect against catastrophic losses. The operating ratio is a common industry measure used to evaluate our profitability and that of our TTS segment operating fleets. The operating ratio consists of operating expenses expressed as a percentage of operating revenues. The most significant 24 Table of Contents variable expenses that impact the TTS segment are driver salaries and benefits, fuel, fuel taxes (included in taxes and licenses expense), payments to independent contractors (included in rent and purchased transportation expense), supplies and maintenance and insurance and claims. As discussed further in the comparison of operating results for third quarter 2025 to third quarter 2024, several industry-wide issues have caused, and could continue to cause, costs to increase in future periods. These issues include shortages of drivers or independent contractors, changing fuel prices, changing used truck and trailer pricing, compliance with new or proposed regulations and tightening of the commercial truck liability insurance market. Our main fixed costs include depreciation expense for tractors and trailers and non-driver salaries, wages and benefits. The TTS segment requires substantial cash expenditures for tractor and trailer purchases. We fund these purchases with net cash from operations and financing available under our existing credit facilities, as management deems necessary. We provide non-trucking services primarily through the three divisions within our Werner Logistics segment (Truckload Logistics, Intermodal, and Final Mile). Unlike our TTS segment, the Werner Logistics segment is less asset-intensive and is instead dependent upon qualified associates, information systems and qualified third-party capacity providers. The largest expense item related to the Werner Logistics segment is the cost of purchased transportation we pay to third-party capacity providers. This expense item is recorded as rent and purchased transportation expense. Other operating expenses consist primarily of salaries, wages and benefits, as well as depreciation and amortization, supplies and maintenance, and other general expenses. We evaluate the Werner Logistics segment’s financial performance by reviewing operating expenses and operating income expressed as a percentage of revenues. Purchased transportation expenses as a percentage of revenues can be impacted by the rates charged to customers and the costs of securing third-party capacity. We have a mix of contracted long-term rates and variable rates for the cost of third-party capacity, and we cannot assure that our operating results will not be adversely impacted in the future if our ability to obtain qualified third-party capacity providers changes or the rates of such providers increase. Results of Operations: The following table sets forth the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the prior year. Three Months Ended (3ME) September 30, Nine Months Ended (9ME) September 30, Percentage Change in Dollar Amounts 2025 2024 2025 2024 3ME 9ME (in thousands) $ % $ % $ % $ % % % Operating revenues $ 771,499 100.0 $ 745,701 100.0 $ 2,236,761 100.0 $ 2,275,579 100.0 3.5 (1.7) Operating expenses: Salaries, wages and benefits 268,720 34.8 258,335 34.6 762,396 34.1 783,492 34.4 4.0 (2.7) Fuel 64,059 8.3 64,886 8.7 187,552 8.4 214,506 9.4 (1.3) (12.6) Supplies and maintenance 65,496 8.5 61,548 8.2 187,796 8.4 185,311 8.2 6.4 1.3 Taxes and licenses 23,189 3.0 23,565 3.2 68,633 3.1 74,223 3.3 (1.6) (7.5) Insurance and claims 38,060 4.9 27,678 3.7 75,024 3.4 95,937 4.2 37.5 (21.8) Depreciation and amortization 72,184 9.4 71,584 9.6 212,990 9.5 218,526 9.6 0.8 (2.5) Rent and purchased transportation 243,115 31.5 211,667 28.4 677,537 30.3 626,009 27.5 14.9 8.2 Communications and utilities 3,967 0.5 4,186 0.6 12,054 0.5 13,019 0.6 (5.2) (7.4) Other 5,730 0.8 4,657 0.6 5,311 0.2 11,762 0.5 23.0 (54.8) Total operating expenses 784,520 101.7 728,106 97.6 2,189,293 97.9 2,222,785 97.7 7.7 (1.5) Operating income (loss) (13,021) (1.7) 17,595 2.4 47,468 2.1 52,794 2.3 (174.0) (10.1) Total other expense, net 8,884 1.1 9,051 1.2 23,671 1.0 22,804 1.0 (1.8) 3.8 Income (loss) before income taxes (21,905) (2.8) 8,544 1.2 23,797 1.1 29,990 1.3 (356.4) (20.7) Income tax expense (benefit) (822) (0.1) 2,004 0.3 11,479 0.5 8,002 0.3 (141.0) 43.5 Net income (loss) (21,083) (2.7) 6,540 0.9 12,318 0.6 21,988 1.0 (422.4) (44.0) Net loss attributable to noncontrolling interest 508 — 25 — 1,071 — 354 — 1,932.0 202.5 Net income (loss) attributable to Werner $ (20,575) (2.7) $ 6,565 0.9 $ 13,389 0.6 $ 22,342 1.0 (413.4) (40.1) 25 Table of Contents The following tables set forth the operating revenues, operating expenses and operating income (loss) for the TTS segment and certain statistical data regarding our TTS segment operations, as well as statistical data for One-Way Truckload and Dedicated operations within TTS. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 TTS segment (in thousands) $ % $ % $ % $ % Trucking revenues, net of fuel surcharge $ 451,960 $ 449,864 $ 1,335,936 $ 1,377,883 Trucking fuel surcharge revenues 59,456 62,749 172,297 205,698 Non-trucking and other operating revenues 8,370 10,190 31,075 27,417 Operating revenues 519,786 100.0 522,803 100.0 1,539,308 100.0 1,610,998 100.0 Operating expenses 533,618 102.7 501,196 95.9 1,489,967 96.8 1,547,553 96.1 Operating income (loss) $ (13,832) (2.7) $ 21,607 4.1 $ 49,341 3.2 $ 63,445 3.9 Three Months Ended September 30, Nine Months Ended September 30, TTS segment 2025 2024 % Change 2025 2024 % Change Average tractors in service 7,503 7,414 1.2 % 7,469 7,660 (2.5) % Average revenues per tractor per week (1) $ 4,633 $ 4,667 (0.7) % $ 4,585 $ 4,612 (0.6) % Total tractors (at quarter end) Company 7,120 7,155 (0.5) % 7,120 7,155 (0.5) % Independent contractor 325 290 12.1 % 325 290 12.1 % Total tractors 7,445 7,445 — % 7,445 7,445 — % Total trailers (at quarter end) 24,625 25,860 (4.8) % 24,625 25,860 (4.8) % One-Way Truckload Trucking revenues, net of fuel surcharge (in 000’s) $ 159,501 $ 164,577 (3.1) % $ 478,005 $ 502,697 (4.9) % Average tractors in service 2,638 2,605 1.3 % 2,635 2,707 (2.7) % Total tractors (at quarter end) 2,480 2,540 (2.4) % 2,480 2,540 (2.4) % Average percentage of empty miles 15.65 % 15.33 % 2.1 % 15.72 % 14.98 % 4.9 % Average revenues per tractor per week (1) $ 4,649 $ 4,860 (4.3) % $ 4,650 $ 4,763 (2.4) % Average % change in revenues per total mile (1) 0.4 % 0.3 % 1.2 % (1.2) % Average % change in total miles per tractor per week (4.7) % 6.6 % (3.5) % 5.9 % Average completed trip length in miles (loaded) 558 578 (3.5) % 572 586 (2.4) % Dedicated Trucking revenues, net of fuel surcharge (in 000’s) $ 292,459 $ 285,287 2.5 % $ 857,931 $ 875,186 (2.0) % Average tractors in service 4,865 4,809 1.2 % 4,834 4,953 (2.4) % Total tractors (at quarter end) 4,965 4,905 1.2 % 4,965 4,905 1.2 % Average revenues per tractor per week (1) $ 4,624 $ 4,563 1.3 % $ 4,549 $ 4,531 0.4 % (1) Net of fuel surcharge revenues. 26 The following tables set forth the Werner Logistics segment’s revenues, purchased transportation expense, other operating expenses (primarily salaries, wages and benefits expense), total operating expenses, and operating income (loss), as well as certain statistical data regarding the Werner Logistics segment. Three Months Ended September 30, Nine Months Ended September 30, 2025 2024 2025 2024 Werner Logistics segment (in thousands) $ % $ % $ % $ % Operating revenues $ 232,585 100.0 $ 206,774 100.0 $ 649,320 100.0 $ 618,168 100.0 Operating expenses: Purchased transportation expense 199,616 85.8 176,205 85.2 555,100 85.5 525,758 85.1 Other operating expenses 29,955 12.9 30,914 15.0 87,353 13.4 94,534 15.2 Total operating expenses 229,571 98.7 207,119 100.2 642,453 98.9 620,292 100.3 Operating income (loss) $ 3,014 1.3 $ (345) (0.2) $ 6,867 1.1 $ (2,124) (0.3) Three Months Ended September 30, Nine Months Ended September 30, Werner Logistics segment 2025 2024 % Change 2025 2024 % Change Average tractors in service 23 20 15.0 % 24 22 9.1 % Total tractors (at quarter end) 23 20 15.0 % 23 20 15.0 % Total trailers (at quarter end) 4,010 3,475 15.4 % 4,010 3,475 15.4 % Total containers (at quarter end) 375 200 87.5 % 375 200 87.5 % Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024 Operating Revenues and Operating Profitability Operating reve nues increased 3.5% for the three months ended September 30, 2025, comp ared to the same period of the prior year. When comparing third quarter 2025 to third quarter 2024, TTS segment reven ues decreased $3.0 million, or 0.6%, and Werner Logistics revenues increased $25.8 million, or 12.5%. We had an operating loss of $13.0 million in third quarter 2025 compared to $17.6 million operating income in third quarter 2024, and our operating margin percentage decreased to (1.7)% in third quarter 2025 from 2.4% in third quarter 2024. TTS segment had an operating loss of $13.8 million in third quarter 2025 compared to $21.6 million operating income in third quarter 2024, and its operating margin percentage decreased to (2.7)% in third quarter 2025 from 4.1% in third quarter 2024. Our third quarter 2025 consolidated and TTS segment operating results were negatively impacted by an $18.0 million litigation settlement agreement and $3.4 million of related legal fees. In October 2025, we reached an agreement with the plaintiffs in the consolidated class action lawsuits entitled Abarca et al. v. Werner that are pending in the United States District Court for the District of Nebraska, to settle these cases for a combined $18.0 million. An accrual for this settlement was recorded as of September 30, 2025. The settlement is subject to court approval (see Note 9 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding legal proceedings). Werner Logistics had operating income $3.0 million in third quarter 2025 compared to an operating loss of $0.3 million in third quarter 2024, and its operating margin percentage increased to 1.3% in third quarter 2025 from (0.2)% in third quarter 2024. The increase in Werner Logistics operating margin was pressured during third quarter 2025, as the conclusion of higher margin project work was replaced with contractual business. Dedicated retention and pipeline remains strong, as we are continuing to see steady momentum in adding new business. Overall demand was below normal seasonality for most of the third quarter 2025, however we did see improvement in One-Way Truckload demand through September and October 2025. The 2025 peak season shipments are projected to be lower while 2025 peak revenue per shipment is expected to be flat compared to 2024. Spot freight rates, which have trended positively recently in late September and into October 2025, continue an upward trend which is consistent with normal seasonality. Industry capacity has continued to contract following recent regulatory and enforcement actions related to non-domiciled commercial driver's licenses (“CDLs”), B1 Visas, and English Language Proficiency standards. As challenging operating conditions continue, we are also seeing an increase in bankruptcies in the trucking industry further limiting capacity. Trucking revenues, net of fuel surcharge, increased 0.5% in third quart er 2025 compared to third quarter 2024 due to a 1.2% increase in the average number of tractors in service. TTS average revenues per tractor per week, net of fuel surcharge, decreased 0.7%, due primarily to a 4.7% decrease in One-Way Truckload average total miles per tractor per week, partially offset by a 0.4% increase in One-Way Truckload revenues per total mile, net of fuel surcharge. One-Way Truckload average tractors in service increased 1.3%. We expect One-Way Truckload fleet average revenues per total mile, net of fuel surcharge, to decrease 1% or increase up to 1% in fourth quarter 2025 compared to fourth quarter 2024. Although One-Way Truckload average total miles per tractor per week decreased in third quarter 2025, we believe this decrease is temporary as One-Way 27 Table of Contents Truckload production has been recovering throughout October 2025. Despite inefficiencies from new Dedicated fleet startups during third quarter 2025, Dedicated average revenues per tractor per week, net of fuel surcharge, increased 1.3%. We have observed that it often takes 90 days or more before new fleets meet targeted levels. We expect Dedicated average revenues per tractor per week, net of fuel surcharge, will remain flat or increase up to 1.5% in 2025 compared to 2024. The average number of tractors in service in the TTS segment increased 1.2% to 7,503 in third qu arter 2025 from 7,414 in third quarter 2024. W e ended third quarter 2025 and 2024 w ith 7,445 tractors in the TTS segment, flat year-over-year, and a sequential decrease of 100 tractors compared to the end of the second quarter 2025. Within TTS, Dedicated ended third quarter 2025 with 4,965 tractors (or 67% of our total TTS segment fleet) compared to 4,905 tractors (or 66%) a year ago. We are lowering our expectation for our TTS segment fleet size at the end of 2025 to decrease 2% or remain flat when compared to the fleet size at the end of 2024. Implementations of new fleets in Dedicated remain ongoing, and over the remainder of 2025, One-Way Truckload fleet is expected to further decline. We cannot predict whether future driver shortages, if any, would have a further adverse effect on our fleet size. If such a driver market shortage were to occur, it could result in further fleet size reductions, and our results of operations could be adversely affected. Trucking fuel surcharge revenues decreased 5.2% to $59.5 million in third quarter 2025 from $62.7 million in third quarter 2024 due primarily to the impact of 7.4 million fewer company tractor miles, partially offset by higher average diesel fuel prices in third quarter 2025. These revenues represent collections from customers for the increase in fuel and fuel-related expenses, including the fuel component of our independent contractor cost (recorded as rent and purchased transportation expense) and fuel taxes (recorded in taxes and licenses expense), when diesel fuel prices rise. Conversely, when fuel prices decrease, fuel surcharge revenues decrease. To lessen the effect of fluctuating fuel prices on our margins, we collect fuel surcharge revenues from our customers for the cost of diesel fuel and taxes in excess of specified base fuel price levels according to terms in our customer contracts. Fuel surcharge rates generally adjust weekly based on an independent U.S. Department of Energy fuel price survey which is released every Monday. Our fuel surcharge programs are designed to (i) recoup higher fuel costs from customers when fuel prices rise and (ii) provide customers with the benefit of lower fuel costs when fuel prices decline. These programs generally enable us to recover a majority, but not all, of the fuel price increases. The remaining portion is generally not recoverable because it results from empty and out-of-route miles (which are not billable to customers) and tractor idle time. Fuel prices that change rapidly in short time periods also impact our recovery because the surcharge rate in most programs only changes once per week. Werner Logistics revenues are generated by its three divisions. Werner Logistics recorded revenue and brokered freight expense of $0.2 million in third quarter 2025 and $3.2 million in third quarter 2024 for certain shipments performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in consolidation. In third quarter 2025, Werner Logistics revenues increased $25.8 million, or 12.5%, compared to third quarter 2024. Truckload Logistics revenues (75% of total Werner Logistics segment revenues) increased $19.8 million, or 13%, in third quarter 2025, driven by a 12% increase in shipments. The Power Only solution, which utilizes third-party carriers who provide only a driver and a tractor, represented a growing portion of Truckload Logistics operations in third quarter 2025. Power Only revenues increased 26% while traditional brokerage recorded mid-single digit revenue growth in third quarter 2025 compared to third quarter 2024. Truckload Logistics volume in October has weakened and margins have been pressured as purchased transportation costs have increased. Intermodal revenues (15% of total Werner Logistics segment revenues) increased $6.4 million, or 23%, in third quarter 2025, due to a 22% increase in shipments and relatively stable revenue per shipment. Final Mile revenues (10% of total Werner Logistics segment revenues) decreased $0.3 million, or 1%, in third quarter 2025, but increased 4% sequentially. Operating Expenses Our operating ratio (operati ng expenses expressed as a percentage of ope rating revenues) was 101.7% in third quarter 2025 compared to 97.6% in third quarter 2024. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 25 through 27 show the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the same period of the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TTS and Werner Logistics. Salaries, wages and benefits increased $10.4 million or 4.0% in third quarter 2025 compared to third quarter 2024 and increased 0.2% as a percentage of operating revenues. The higher dollar amount of salaries, wages and benefits expense in the third quarter of 2025 was due primarily to the impact of an $18.0 million litigation settlement agreement discussed above, partially offset by the impact of 7.4 million fewer company tractor miles and decreased non-driver pay. The $18.0 million litigation settlement is included in our TTS segment. The decrease in non-driver pay was due primarily to a smaller average number of non-driver employees. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment decreased 10% in third quarter 2025 compared to third quarter 2024. 28 Table of Contents We renewed our workers’ compensation insurance coverage on April 1, 2025. Our coverage levels are the same as the prior policy year. We continue to maintain a self-insurance retention of $2.0 million per claim. Our workers’ compensation insurance premiums for the policy year beginning April 2025 are $0.1 million lower than the previous policy year. While we currently believe the driver recruiting and retention market may be less difficult in the near term, a competitive driver market presents labor challenges for customers and carriers alike. Several factors impacting the driver market include a declining number of, and increased competition for, driver training school graduates, aging truck driver demographics and increased truck safety regulations. We continue to take significant actions to strengthen our driver recruiting and retention as we strive to be the truckload employer of choice, including competitive driver pay, providing a modern tractor and trailer fleet with the latest safety equipment and technology, investing in our driver training school network and offering a wide variety of driving positions including daily and weekly home time opportunities. We are unable to predict whether we will experience future driver shortages or maintain our current driver retention rates. If such a driver shortage were to occur and driver pay rate increases became necessary to attract and retain drivers, our results of operations would be negatively impacted to the extent that we could not obtain corresponding freight rate increases. Fuel decreased $0.8 million or 1.3% in third quarter 2025 compared to third quarter 2024 and decreased 0.4% as a percentage of operating revenues, due to the impact of 7.4 million fewer company tractor miles, partially offset by higher average diesel fuel prices in third quarter 2025. Average diesel fuel prices were 5 cents per gallon higher in third quarter 2025 than in third quarter 2024 and were 19 cents per gallon higher than in second quarter 2025. We continue to employ measures to improve our fuel mpg such as (i) limiting tractor engine idle time by installing auxiliary power units, (ii) optimizing the speed, weight and specifications of our equipment and (iii) implementing mpg-enhancing equipment changes to our fleet including new tractors, more aerodynamic tractor features, idle reduction systems, trailer tire inflation systems, trailer skirts and automated manual transmissions to reduce our fuel gallons purchased. However, fuel savings from mpg improvement is partially offset by higher depreciation expense and the additional cost of diesel exhaust fluid. Although our fuel management programs require significant capital investment and research and development, we intend to continue these and other environmentally conscious initiatives, including our active participation as a U.S. Environmental Protection Agency (“EPA”) SmartWay Transport Partner. The SmartWay Transport Partnership is a national voluntary program developed by the EPA and freight industry representatives to reduce greenhouse gases and air pollution and promote cleaner, more efficient ground freight transportation. For October 2025, the average diesel fuel price per gallon was 5 cents higher than the average diesel fuel price per gallon in October 2024 and 8 cents higher than in fourth quarter 2024. Shortages of fuel, increases in fuel prices and petroleum product rationing can have a material adverse effect on our operations and profitability. We are unable to predict whether fuel price levels will increase or decrease in the future or the extent to which fuel surcharges will be collected from customers. As of September 30, 2025, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. Supplies and maintenance increased $3.9 million or 6.4% in third quarter 2025 compared to third quarter 2024 and increased 0.3% as a percentage of operating revenues. Supplies and maintenance expense increased due primarily to higher costs for tires, tolls, over-the-road trailer maintenance, and driver and placement driver-related costs such as driver advertising and lodging. These increases were partially offset by lower costs for over-the-road tractor maintenance and the impact of 7.4 million fewer company tractor miles in third quarter 2025. Taxes and licenses decreased $0.4 million or 1.6% in third quarter 2025 compared to third quarter 2024 and decreased 0.2% as a percentage of operating revenues due primarily to lower costs for fuel taxes. The decrease in fuel tax expense in the third quarter of 2025 was impacted by 7.4 million fewer company tractor miles. Insurance and claims increased $10.4 million or 37.5% in third quarter 2025 compared to third quarter 2024 and increased 1.2% as a percentage of operating revenues. We had higher expense for small dollar liability claims, resulting primarily from higher expense for new claims and a lower amount of favorable reserve development. Our expense for large dollar liability claims was also higher, primarily due to a higher amount of unfavorable reserve development, partially offset by lower expense for new claims. The expense for new claims was impacted by increased cost per claim in third quarter 2025 compared to the same period in 2024. We also incurred insurance and claims expense of $1.5 million for third quarter of the prior year for accrued interest related to the adverse jury verdict rendered on May 17, 2018. We continued to accrue pre-tax insurance and claims expense for interest at $0.5 million per month (excluding months where the plaintiffs requested an extension of time to respond to our petition for review) until our appeal was finalized in second quarter 2025. The majority of our insurance and claims expense results from our claim experience and claim development under our self-insurance program; the remainder results from insurance premiums for claims in excess of our self-insured limits. We believe our elevated insurance and claims expense is a 29 Table of Contents reflection of the ongoing unprecedented rise in verdicts and litigation settlements across the industry, particularly for larger carriers. We ren ewed our liability insurance policies on August 1, 2025, and are responsible for the first $15.0 million per claim on all claims with an annual $7.5 million aggregate for claims between $15.0 million and $20.0 million. For the policy year that began August 1, 2024, we were responsible for the first $15.0 million per claim on all claims with an annual $7.5 million aggregate for claims between $15.0 million and $20.0 million . We maintain liability insurance coverage with insurance carriers in excess of the $15.0 million per claim. Our liability insurance premiums for the policy year that began August 1, 2025 are slightly higher than premiums for the previous policy year. Depreciation and amortization expense increased $0.6 million or 0.8% in third quarter 2025 compared to third quarter 2024 and decreased 0.2% as a percentage of operating revenues due primarily to an increase in depreciation of trailers, as we incurred higher costs for recent specialty trailer purchases. The increase was partially offset by a decrease in technology equipment depreciation as we continue to transition to more cloud-based technology solutions. The average age of our tractor fleet remains low by industry standards and was 2.5 years as of September 30, 2025, and the average age of our trailers was 5.5 years. We are continuing to invest in new tractors and trailers, technology, and our terminal network in 2025 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. Rent and purchased transportation expense increased $31.4 million or 14.9% in third quarter 2025 compared to third quarter 2024, and increased 3.1% as a percentage of operating revenues. Rent and purchased transportation expense consists mostly of payments to third-party capacity providers in the Werner Logistics segment and other non-trucking operations, payments to independent contractors in the TTS segment, and cloud-based technology fees. The payments to third-party capacity providers generally vary depending on changes in the volume of services generated by the Werner Logistics segment. Werner Logistics recorded revenue and brokered freight expense of $0.2 million in third quarter 2025 and $3.2 million in third quarter 2024 for certain shipments performed by the TTS segment (also recorded as trucking revenue by the TTS segment), and these transactions between reporting segments are eliminated in consolidation. Werner Logistics purchased transportation expense increased $23.4 million in third quarter 2025 as a result of higher logistics revenues, and increased to 85.8% as a percentage of Werner Logistics revenues in third quarter 2025 from 85.2% in third quarter 2024. Rent and purchased transportation expense for the TTS segment increased $3.1 million in third quarter 2025 compared to third quarter 2024 due primarily to more independent contractor miles. Independent contractor miles increased 1.9 million miles in third quarter 2025 and as a percentage of total miles were 6.4% in third quarter 2025 compared to 5.1% in third quarter 2024. Because independent contractors supply their own tractors and drivers and are responsible for their operating expenses, the increase in independent contractor miles as a percentage of total miles shifted costs from other expense categories, including (i) salaries, wages and benefits, (ii) fuel, (iii) depreciation, (iv) supplies and maintenance and (v) taxes and licenses to the rent and purchased transportation category. Challenging operating conditions continue to make independent contractor recruitment and retention difficult. Such conditions include inflationary cost increases that are the responsibility of independent contractors and a shortage of financing available to independent contractors for equipment purchases. Historically, we have been able to add company tractors and recruit additional company drivers to offset any decrease in the number of independent contractors. If a shortage of independent contractors and company drivers were to occur, increases in per-mile settlement rates (for independent contractors) and driver pay rates (for company drivers) may become necessary to attract and retain these drivers. These increased expenses could negatively affect our results of operations to the extent that we would not be able to obtain corresponding freight rate increases. Other operating expenses increased $1.1 million in third quarter 2025 compared to third quarter 2024 and increased 0.2% as a percentage of operating revenues due primarily to $3.4 million of legal fees related to the Abarca et al. v. Werner litigation discussed above and increased bad debt expense. These increases were partially offset by higher gains on sales of property and equipment (primarily used tractors and trailers) and decreased costs associated with professional services. Gains on sales of property and equipment are reflected as a reduction of other operating expenses and are reported net of sales-related expenses (which include costs to prepare the equipment for sale). Gains on sales of property and equipment were $4.5 million in third quarter 2025 compared to $2.6 million. We sold fewer tractors and trailers in third quarter 2025 compared to third quarter 2024 and realized much higher average gains per tractor and trailer. Recently, used tractor values have been elevated due largely to tariff uncertainties. We expect used equipment values to remain stable in the near term given manufacturing production constraints and the evolving regulatory environment that will be an incentive towards higher quality used assets, including assets with lower miles and remaining warranties. As a result, we are narrowing our full-year guidance range for gains on our used equipment from a range of $12 million and $18 million to a range of $14 million to $16 million in 2025. 30 Table of Contents Other Expense (Income) Other expense, net of other income, decreased $0.2 million in third quarter 2025 compared to third quarter 2024, due primarily to a $0.7 million decrease in net interest expense, partially offset by a $0.5 million decrease in the amount of net earnings recognized from our investments (see Note 6 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our investments). Net interest expense decreased primarily due to a decrease in average interest rates, partially offset by an increase in average debt outstanding. During the first quarter 2025, we entered into a LSA, which bears interest at a lower rate than the 2022 Credit Agreement (see Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our credit facilities and interest rate swaps). We continue to expect net interest expense for full-year 2025 to be flat-to-down compared to 2024, as we start to benefit from lower interest rates under the LSA. Income Tax Expense (Benefit) We had an income tax benefit of $0.8 million in third quarter 2025 compared to income tax expense of $2.0 million in third quarter 2024. Our effective income tax rate (income taxes expressed as a percentage of income (loss) before income taxes) decreased to 3.8% in third quarter 2025 compared to 23.5% in third quarter 2024 due primarily to the impact of $4.7 million of unfavorable return to provision adjustments related to changes in deferred tax assets and liabilities for certain acquired entities and a subsidiary located in Mexico. We estimate our fourth quarter 2025 effective income tax rate to be approximately 26.0% to 27.0%. Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024 Operating Revenues and Operating Profitability Operating revenues decreased 1.7% for the first nine months of 2025, compared to the same period of the prior year. When comparing the first nine months of 2025 to the first nine months of 2024, TTS segment revenues decreased $71.7 million, or 4.5%, and Werner Logistics revenues increased $31.2 million, or 5.0%. In the TTS segment, trucking revenues, net of fuel surcharge, decreased $41.9 million, due primarily to a 2.5% decrease in average tractors in service and a 0.6% decrease in average revenues per tractor per week, net of fuel surcharge. TTS segment fuel surcharge revenues for the first nine months 2025 decreased $33.4 million, or 16.2%, when compared to the same period of the prior year due to the impact of 36.9 million fewer company tractor miles and lower average diesel fuel prices. The increase in Werner Logistics revenues was primarily due to higher volumes in Truckload Logistics. We had operating income of $47.5 million for the first nine months of 2025 compared to $52.8 million for the first nine months of 2024, and our operating margin percentage decreased to 2.1% for the first nine months of 2025 from 2.3% for the first nine months of 2024. TTS segment had operating income of $49.3 million for the first nine months of 2025 compared to $63.4 million for the first nine months of 2024, and its operating margin percentage decreased to 3.2% for the first nine months of 2025 from 3.9% for the first nine months of 2024. Our consolidated and TTS segment operating results for the nine months ended September 30, 2025 were positively impacted by a $45.7 million liability reversal through insurance and claims expense as a result of a favorable decision related to a lawsuit arising from a December 2014 accident, and a net favorable change of $7.9 million to the contingent earnout liability related to the Baylor Trucking, Inc. acquisition. The Baylor Trucking, Inc. contingent consideration arrangement was finalized through negotiations in April 2025. These positive impacts were partially offset by an $18.0 million settlement agreement and $3.4 million of related legal fees related to the Abarca et al. v. Werner litigation as discussed above . For additional information related to legal proceedings and the contingent consideration arrangement, see Notes 9 and 5, respectively, in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report. Werner Logistics had operating income of $6.9 million for the first nine months of 2025 compared to an operating loss of $2.1 million for the first nine months of 2024, and its operating margin percentage increased to 1.1% for the first nine months of 2025 from (0.3)% for the first nine months of 2024. Operating Expenses Our operating ratio (operating expenses expressed as a percentage of operating revenues) was 97.9% for the nine months ended September 30, 2025 and 97.7% for the nine months ended September 30, 2024. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 25 through 27 show the consolidated statements of income in dollars and as a percentage of total operating revenues and the percentage increase or decrease in the dollar amounts of those items compared to the same period of the prior year, as well as the operating ratios, operating margins, and certain statistical information for our two reportable segments, TTS and Werner Logistics. Salaries, wages and benefits decreased $21.1 million, or 2.7%, in the first nine months of 2025 compared to the same period in 2024 and decreased 0.3% as a percentage of operating revenues. The lower dollar amount of salaries, wages and benefits expense in the first nine months of 2025 was due primarily to the impact of 36.9 million fewer company tractor miles and decreased non-driver pay, partially offset by the impact of an $18.0 million litigation settlement agreement discussed above. The $18.0 million litigation settlement is included in our TTS segment. The decrease in non-driver pay was due primarily to a smaller average number of non-driver employees, partially offset by severance expense of $1.3 million from cost saving 31 Table of Contents initiatives. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment decreased 12% in the first nine months of 2025 compared to the same period in 2024. Fuel decreased $27.0 million, or 12.6%, in the first nine months of 2025 compared to the same period in 2024 and decreased 1.0% as a percentage of operating revenues due to lower average diesel fuel prices and 36.9 million fewer company tractor miles in the first nine months of 2025. Average diesel fuel prices were 18 cents per gallon lower in the first nine months of 2025 than in same period in 2024. Supplies and maintenance increased $2.5 million, or 1.3%, in the first nine months of 2025 compared to the same period in 2024 and increased 0.2% as a percentage of operating revenues. Supplies and maintenance expense increased due primarily to higher costs for tires and advertising, partially offset by lower costs for over-the-road tractor maintenance and the impact of 36.9 million fewer company tractor miles. Taxes and licenses decreased $5.6 million or 7.5% in first nine months of 2025 compared to the same period in 2024 and decreased 0.2% as a percentage of operating revenues due primarily to lower costs for fuel taxes. The decrease in fuel tax expense in first nine months of 2025 was impacted by 36.9 million fewer company tractor miles. Insurance and claims decreased $20.9 million, or 21.8%, in the first nine months of 2025 compared to the same period in 2024 and decreased 0.8% as a percentage of operating revenues due primarily to the impact of a $45.7 million liability reversal through insurance and claims expense as a result of a favorable decision in second quarter 2025 related to an adverse jury verdict rendered on May 17, 2018 for a December 2014 accident, effectively ending the lawsuit in favor of Werner. For additional information related to this lawsuit, see Note 9 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report. The favorable impact of the liability reversal was partially offset by higher expense for liability claims. We had higher expense for large dollar liability claims, resulting primarily from higher amount of unfavorable reserve development, partially offset by lower expense for new claims. Our expense for small dollar liability claims was also higher, primarily due to a lower amount of favorable reserve development and higher expense for new claims. The expense for new claims was impacted by decreased cost per claim in first nine months of 2025 compared to the same period in 2024. Depreciation and amortization expense decreased $5.5 million, or 2.5%, in the first nine months of 2025 compared to the same period in 2024 and decreased 0.1% as a percentage of operating revenues due primarily to decreases in depreciation of tractors as we had fewer average tractors in service, and technology equipment as we continue to transition to more cloud-based technology solutions. These decreases were partially offset by an increase in depreciation for trailers due to higher costs for recent specialty trailers purchases. Werner Logistics purchased transportation expense increased $29.3 million in the first nine months of 2025 as a result of higher logistics revenues, and increased 0.4% as a percentage of Werner Logistics revenues to 85.5% in the first nine months of 2025 from 85.1% in the same period in 2024. Rent and purchased transportation expense for the TTS segment increased $15.4 million in the first nine months of 2025 compared to the same period in 2024 due primarily to more independent contractor miles, higher technology-related costs, and additional operational facility costs. Independent contractor miles increased 5.4 million miles in the first nine months of 2025 and as a percentage of total miles were 9.0% in the first nine months of 2025 compared to 4.7% in the first nine months of 2024. These increases were partially offset by lower reimbursements to independent contractors because of lower average diesel fuel prices in first nine months of 2025. Other operating expenses decreased $6.5 million in the first nine months of 2025 compared to the same period in 2024 and decreased 0.3% as a percentage of operating revenues due primarily to the impact of a $7.8 million net favorable change to the contingent earnout liability related to the Baylor Trucking, Inc. acquisition and higher gains on sales of property and equipment (primarily used tractors and trailers), partially offset by legal fees related to the Abarca et al. v. Werner litigation discussed above and increased bad debt expense. Gains on sales of property and equipment were $13.3 million in the first nine months of 2025 compared to $8.8 million, including $1.8 million from the sale of real estate, in the same period in 2024. We sold fewer tractors and trailers in the first nine months of 2025 compared to the same period in 2024 and realized much higher average gains per tractor and trailer, as used equipment values have been elevated due largely to global trade policy. Other Expense (Income) Other expense, net of inco me, increased $0.9 million in the first nine months of 2025 compared to the same period in 2024 due primari ly to a $1.7 million increase in net interest expense, partially offset by a $0.8 million increase in the amount of net earnings recognized from our investments (see Note 6 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our investments). Net interest expense increased 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 of 2024 (see Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for further information on our debt and interest rate swaps) and an increase in average debt outstanding. 32 Table of Contents Income Tax Expense Income tax expense increased $3.5 million in the first nine months of 2025 c ompared to the same period in 2024, due primarily to an increase in the effective income tax rate. Our effective income tax rate increased to 48.2% in the first nine months of 2025 compared to 26.7% in the first nine months of 2024 due primarily to the impact of $4.7 million of unfavorable return to provision adjustments related to changes in deferred tax assets and liabilities for certain acquired entities and a subsidiary located in Mexico. Liquidity and Capital Resources: We closely manage our liquidity and capital resources. Our liquidity requirements depend on key variables, including the level of investment needed to support business strategies, the performance of the business, capital expenditures, borrowing arrangements, and working capital management. Capital expenditures, business acquisitions, stock repurchases, and dividend payments are components of our cash flow and capital management strategy, which to a large extent, can be adjusted in response to economic and other changes in the business environment. Management’s approach to capital allocation focuses on investing in key priorities that support our business and growth strategies and providing stockholder returns, while funding ongoing operations. Management believes our financial position at September 30, 2025 is strong. As of September 30, 2025, we had $51.0 million of cash and cash equivalents and $1.4 billion of stockholders’ equity. Cash is invested primarily in short-term money market funds. In addition, we have a maximum borrowing capacity of $1.375 billion under our credit facilities, for which our total available borrowing capacity was $644.1 million as of September 30, 2025 (see Note 7 in the Notes to Consolidated Financial Statements (Unaudited) set forth in Part I of this report for information regarding our credit facilities). We believe the six commercial banks in our $1.075 billion syndicated credit facility all have strong tier-one capital ratios and good loan-to-deposit ratios. We believe our liquid assets, cash generated from operating activities, and borrowing capacity under our existing credit facilities will provide sufficient funds to meet our cash requirements and our planned stockholder returns for the foreseeable future. Item 7 of Part II of our 2024 Form 10-K includes our disclosure of material cash requirements as of December 31, 2024. There were no material changes in the nature of these items during the nine months ended September 30, 2025. Cash Flows During the nine months ended September 30, 2025, we generated cash flow from operations of $119.5 million, a 53.8% or $139.2 million decrease in cash flows compared to the same nine-month period a year ago. The decrease in net cash provided by operating activities was due primarily to working capital changes and a decrease in net income for the nine-month period ended September 30, 2025. We were able to make net capital expenditures, make strategic investments, pay dividends, and repurchase company stock with the net cash provided by operating activities, supplemented by borrowings under our existing credit facilities. Net investing activities used $99.8 million for the nine-month period ended September 30, 2025, and $206.5 million during the same period in 2024. Net property and equipment additions (primarily revenue equipment) were $93.3 million for the nine-month period ended September 30, 2025, compared to $206.1 million during the same period of 2024. We currently estimate net capital expenditures (primarily revenue equipment) in 2025 to be in the range of $155 million to $175 million, compared to net capital expenditures in 2024 of $234.9 million. Given our strong balance sheet and proactive fleet management, we entered 2025 with a higher-than-normal inventory of new tractors ready to support growth. These factors, combined with a deliberate shift to a more asset light operational mix are expected to result in net capital expenditures below our historical range in 2025. We intend to fund these net capital expenditures through cash flows from operations and financing available under our existing credit facilities, if necessary. As of September 30, 2025, we were committed to property and equipment purchases of approximately $82.1 million. Net financing activities used $10.9 million during the nine months ended September 30, 2025 compared to $56.4 million during the same period in 2024. We had net borrowings on our debt of $75.0 million during the nine months ended September 30, 2025, increasing our outstanding debt to $725.0 million at September 30, 2025. We had net borrowings on our debt of $41.3 million during the nine months ended September 30, 2024. We paid dividends of $25.7 million during the nine months ended September 30, 2025 and $26.4 million during the same period in 2024. We currently plan to continue paying a quarterly dividend. Financing activities for the nine months ended September 30, 2025, also included stock repurchases of 2,113,007 shares at a cost of $55.6 million, including broker commissions and excise taxes. Financing activities for the same period in 2024 included common stock repurchases of 1,787,810 shares at a cost of $67.1 million, including broker commissions and excise taxes. On August 7, 2025, the Board of Directors approved a new stock repurchase program under which the Company is authorized to 33 Table of Contents repurchase up to 5,000,000 shares of its common stock. Upon approval of the new program, the Board of Directors withdrew the previous stock repurchase authorization, which had 1,783,342 shares remaining available for repurchase. As of September 30, 2025, the Company had not purchased any shares pursuant to the new authorization and had 5,000,000 shares remaining available for repurchase. The Company has repurchased, and may continue to repurchase, shares of the Company’s common stock. The timing and amount of such purchases depend upon economic and stock market conditions and other factors. Regulations: Item 1 of Part I of our 2024 Form 10-K includes a discussion of pending proposed and recently enacted federal, state, and local regulations that could have an impact on our operations. The following is an update to the regulations set forth in our 2024 Form 10-K. In January 2025, California voluntarily withdrew the Advanced Clean Fleets (“ACF”) waiver request from the U.S. Environmental Protection Agency. Also, in June 2025, Congress rescinded the previously granted waivers for Advanced Clean Trucks (“ACT”). In September 2025, the California Air Resources Board, voted to repeal the ACF regulations from the California Administrative Code. Werner continues to monitor any California Air Resources Board-related regulatory developments. The rescission of the waiver request, approved waivers, and state regulations will potentially impact tractor prices, availability, performance, and efficiency. In September 2025, the U.S. Department of Transportation enacted an emergency rule to strengthen federal oversight of how states issue non-domiciled commercial learner’s permits (“CLPs”) and CDLs. The rule comes in response to a nationwide review conducted by the Federal Motor Carrier Safety Administration revealing widespread non-compliance among state driver licensing agencies. The rule tightens eligibility for non-domiciled CLPs and CDLs, strengthens safeguards, and makes clear when these licenses must be canceled or revoked. There have been no other material changes in the status of the proposed regulations previously disclosed in the 2024 Form 10-K. Critical Accounting Estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the (i) reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and (ii) reported amounts of revenues and expenses during the reporting period. We evaluate these estimates on an ongoing basis as events and circumstances change, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Actual results could differ from those estimates and may significantly impact our results of operations from period to period. It is also possible that materially different amounts would be reported if we used different estimates or assumptions. Information regarding our Critical Accounting Estimates can be found in our 2024 Form 10-K. Estimates of accrued liabilities for insurance and claims for bodily injury and property damage is a critical accounting estimate that requires us to make significant judgments and estimates and affects our financial statements. There have been no material changes to this critical accounting estimate from that discussed in our 2024 Form 10-K.