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 (“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: • FirstFleet Acquisition • Overview • Results of Operations • Liquidity and Capital Resources • Regulations • Critical Accounting Estimates The MD&A should be read in conjunction with our 2025 Form 10-K. FirstFleet Acquisition: On January 27, 2026, we acquired 100% of the equity interests of FirstFleet, headquartered in Murfreesboro, Tennessee, for $245.0 million, which includes a maximum $35.0 million earnout based on gross revenue net of fuel surcharge for the period April 1, 2026, through March 31, 2027, and a $5.9 million deferred transaction bonus payout. Under a separate agreement, we also acquired real estate properties from FirstFleet for $37.8 million. FirstFleet brings added scale to Werner with approximately 2,400 tractors, 11,000 trailers and 37 strategically located properties near 130 customer sites around the country. We funded these transactions using cash on hand and our existing revolving credit facility, in addition to assuming $57.2 million of finance lease liabilities. Additional information regarding the FirstFleet acquisition is included in Note 2 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q. 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, 24 Table of Contents 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 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 first quarter 2026 to first quarter 2025, 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. 25 Table of Contents 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) March 31, Percentage Change in Dollar Amounts 2026 2025 3ME (in thousands) $ % $ % % Operating revenues $ 808,610 100.0 $ 712,114 100.0 13.6 Operating expenses: Salaries, wages and benefits 279,661 34.6 243,225 34.2 15.0 Fuel 82,445 10.2 63,092 8.9 30.7 Supplies and maintenance 67,805 8.4 60,040 8.4 12.9 Taxes and licenses 22,828 2.8 22,344 3.1 2.2 Insurance and claims 41,928 5.2 43,777 6.2 (4.2) Depreciation and amortization 76,197 9.4 70,049 9.8 8.8 Rent and purchased transportation 221,104 27.3 206,142 28.9 7.3 Communications and utilities 4,591 0.6 4,357 0.6 5.4 Other 8,056 1.0 4,920 0.7 63.7 Total operating expenses 804,615 99.5 717,946 100.8 12.1 Operating income (loss) 3,995 0.5 (5,832) (0.8) 168.5 Total other expense, net 9,937 1.2 7,556 1.1 31.5 Loss before income taxes (5,942) (0.7) (13,388) (1.9) 55.6 Income tax benefit (1,481) (0.1) (3,167) (0.5) 53.2 Net loss (4,461) (0.6) (10,221) (1.4) 56.4 Net loss attributable to noncontrolling interest 199 0.1 123 — 61.8 Net loss attributable to Werner $ (4,262) (0.5) $ (10,098) (1.4) 57.8 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 March 31, 2026 2025 TTS segment (in thousands) $ % $ % Trucking revenues, net of fuel surcharge $ 508,281 $ 433,073 Trucking fuel surcharge revenues 78,468 57,640 Non-trucking and other operating revenues 7,563 11,162 Operating revenues 594,312 100.0 501,875 100.0 Operating expenses 580,374 97.7 502,791 100.2 Operating income (loss) $ 13,938 2.3 $ (916) (0.2) 26 Three Months Ended March 31, TTS segment 2026 2025 % Change Average tractors in service 8,454 7,415 14.0 % Average revenues per tractor per week (1) $ 4,625 $ 4,493 2.9 % Total tractors (at quarter end) Company 8,730 7,135 22.4 % Independent contractor 310 305 1.6 % Total tractors 9,040 7,440 21.5 % Total trailers (at quarter end) 35,715 24,930 43.3 % One-Way Truckload Trucking revenues, net of fuel surcharge (in 000’s) $ 136,401 $ 154,421 (11.7) % Average tractors in service 2,122 2,632 (19.4) % Total tractors (at quarter end) 1,960 2,605 (24.8) % Average percentage of empty miles 15.59 % 16.01 % (2.6) % Average revenues per tractor per week (1) $ 4,944 $ 4,513 9.6 % Average % change in revenues per total mile (1) 3.6 % 0.3 % Average % change in total miles per tractor per week 5.7 % (3.5) % Average completed trip length in miles (loaded) 608 576 5.6 % Dedicated Trucking revenues, net of fuel surcharge (in 000’s) $ 371,880 $ 278,652 33.5 % Average tractors in service 6,332 4,783 32.4 % Total tractors (at quarter end) 7,080 4,835 46.4 % Average revenues per tractor per week (1) $ 4,518 $ 4,482 0.8 % (1) Net of fuel surcharge revenues. 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 loss, as well as certain statistical data regarding the Werner Logistics segment. Three Months Ended March 31, 2026 2025 Werner Logistics segment (in thousands) $ % $ % Operating revenues $ 195,836 100.0 $ 195,558 100.0 Operating expenses: Purchased transportation expense 168,530 86.1 167,158 85.5 Other operating expenses 29,311 14.9 28,875 14.7 Total operating expenses 197,841 101.0 196,033 100.2 Operating loss $ (2,005) (1.0) $ (475) (0.2) Three Months Ended March 31, Werner Logistics segment 2026 2025 % Change Average tractors in service 26 20 30.0 % Total tractors (at quarter end) 26 22 18.2 % Total trailers (at quarter end) 2,650 3,200 (17.2) % Total containers (at quarter end) 375 200 87.5 % 27 Table of Contents Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 Operating Revenues and Operating Profitability Operating reve nues increased 13.6% for the three months ended March 31, 2026, comp ared to the same period of the prior year. When comparing first quarter 2026 to first quarter 2025, TTS segment reven ues increased $92.4 million, or 18.4%, and Werner Logistics revenues increased $0.3 million, or flat year over year. We had operating income of $4.0 million in first quarter 2026 compared to an operating loss of $5.8 million in first quarter 2025, and our operating margin percentage increased to 0.5% in first quarter 2026 from (0.8)% in first quarter 2025. TTS segment had operating income of $13.9 million in first quarter 2026 compared to an operating loss of $0.9 million in first quarter 2025, and its operating margin percentage increased to 2.3% in first quarter 2026 from (0.2)% in first quarter 2025. Year over year, our consolidated and TTS segment operating results were positively impacted by lower insurance and claims expense for our legacy business (not including FirstFleet), the addition of FirstFleet operating results, profitability in One-Way Truckload, and higher gains from the sale of used equipment. During the fourth quarter 2025, we began to incur costs in connection with the strategic restructuring of our One-Way Truckload business to enhance long-term profitability and fleet utilization by maximizing production and mitigating unprofitable freight. Our restructuring actions are complete and we anticipate additional recognized benefits from these efforts as we realize a full quarter impact of these actions in the second quarter 2026. Werner Logistics had an operating loss of $2.0 million in first quarter 2026 compared to an operating loss of $0.5 million in first quarter 2025, and its operating margin percentage decreased to (1.0)% in first quarter 2026 from (0.2)% in first quarter 2025. Truckload Logistics operating margin was pressured during first quarter 2026, as higher spot freight rates drove an increase in purchased transportation costs, which accelerated more rapidly than sell-side rate renewals with our customers. We believe the margin pressure is mostly transitory as contract rates are reset. In January 2026, we expanded our Dedicated offering through the acquisition of FirstFleet, adding scale, density and exposure to more resilient customer verticals, including grocery and food & beverage. At the same time, we also restructured our One-Way Truckload business to create a more balanced and higher-producing network to deliver improved profitability. We are also noticing strong momentum in Werner Logistics, Intermodal and Final Mile. As a result, we believe we are better positioned to capitalize on an improved market. Industry capacity has continued to contract driven by regulatory enforcement actions related to non-domiciled commercial driver's licenses (“CDLs”), B1 Visas, and English Language Proficiency standards. As challenging operating conditions continue, carrier bankruptcies in the trucking industry further limit capacity. Spot freight rates remained elevated during the first quarter 2026 and throughout April 2026, defying seasonal norms. We expect seasonal improvement in spot freight rates throughout the year as capacity attrition continues. In the TTS segment, trucking revenues, net of fuel surcharge, increased 17.4% in first quart er 2026 compared to first quarter 2025 due t o a 14.0% increase in the average number of tractors in service and a 2.9% increase in average revenues per tractor per week, net of fuel surcharge. The TTS segment average number of tractors in service increase was due primarily to a 32.4% increase in Dedicated average tractors in service, which was mostly due to the addition of FirstFleet, partially offset by a 19.4% decrease in One-Way Truckload average tractors in service as a result of our One-Way Truckload restructuring plan. The result of our One-Way Truckload restructuring is showing early gains, with first quarter 2026 One-Way Truckload average total miles per tractor per week up 5.7% over prior year despite disruption from winter storms, and One-Way Truckload revenues per total mile, net of fuel surcharge increasing 3.6%. Execution of these initiatives led to One-Way Truckload average revenues per tractor per week, net of fuel surcharge increasing 9.6%, reflecting the combined effect of our restructuring and pricing actions. We expect One-Way Truckload fleet average revenues per total mile, net of fuel surcharge, to increase 1% to 4% in second quarter 2026 compared to second quarter 2025. The increase in TTS average revenues per tractor per week, net of fuel surcharge was also due to a 0.8% increase in Dedicated average revenues per tractor per week, net of fuel surcharge. We are updating our full-year 2026 guidance for Dedicated average revenues per tractor per week, net of fuel surcharge, from a range of a decrease of 1% to an increase up to 2%, to be flat or increase up to 3%, as we have been successful in securing price increases in contract renewals for our Dedicated business. The average number of tractors in service in the TTS segment increased 14.0% to 8,454 in first qu arter 2026 from 7,415 in first quarter 2025. W e ende d first quarter 2026 w ith 9,040 tractors in the TTS segment, an increase of 1,600 tractors compared to the end of first quarter 2025, and a sequential increase of 1,940 tractors compared to the end of the fourth quarter 2025. Within TTS, Dedicated ended first quarter 2026 with 7,080 tractors (or 78% of our total TTS segment fleet) compared to 4,835 tractors (or 65%) a year ago. We continue to expect our full-year 2026 TTS average tractors in service to increase in a range of 23% to 28% when compared to 2025. The Dedicated pipeline is strong and we expect truck growth in the TTS segment as the year progresses. 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 increased 36.1% to $78.5 million in first quarter 2026 from $57.6 million in first quarter 2025 due primarily to the impact of 17.6 million more company tractor miles and higher average diesel fuel prices in first quarter 2026. These revenues represent collections from customers for the increase in fuel and fuel-related expenses, including the fuel 28 Table of Contents 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 $0.1 million in first quarter 2026 and $4.1 million in first quarter 2025 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 first quarter 2026, Werner Logistics revenues increased $0.3 million, or flat compared to first quarter 2025. Truckload Logistics revenues (72% of total Werner Logistics segment revenues) decreased $6.5 million, or 4%, in first quarter 2026, driven by a decrease in shipments of 9%, partially offset by a 5% increase in revenue per shipment. The revenue per load improvement from disciplined pricing and load acceptance was more than offset by higher purchased transportation costs. Intermodal revenues (17% of total Werner Logistics segment revenues) increased $5.1 million, or 18%, due to 22% more shipments, partially offset by a 3% decline in revenue per shipment. Final Mile revenues (11% of total Werner Logistics segment revenues) increased $1.7 million, or 8%, in first quarter 2026, and decreased 7% sequentially. Operating Expenses Our operating ratio (operati ng expenses expressed as a percentage of ope rating revenues) was 99.5% in first quarter 2026 compared to 100.8% in first quarter 2025. Expense items that impacted the overall operating ratio are described on the following pages. The tables on pages 26 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 $36.4 million, or 15.0%, in first quarter 2026 compared to first quarter 2025, and increased 0.4% as a percentage of operating revenues. The higher dollar amount of salaries, wages and benefits expense in the first quarter of 2026 was due primarily to increased driver and non-driver pay, the impact of 17.6 million more company tractor miles, and higher benefit costs. The increase in non-driver and driver pay was due primarily to a higher average number of non-driver and driver employees. These increases were mostly due to the impact of the FirstFleet acquisition. Non-driver salaries, wages and benefits in our non-trucking Werner Logistics segment increased 5% in first quarter 2026 compared to first quarter 2025. We renewed our workers’ compensation insurance coverage on April 1, 2026. Our coverage levels are the same as the prior policy year. We maintain a self-insurance retention of up to $2.0 million per claim. Our workers’ compensation insurance premiums for the policy year beginning April 2026 are $0.6 million higher than the previous policy year due to the FirstFleet acquisition. We anticipate a tightening market for high-quality drivers. 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 increased $19.4 million, or 30.7%, in first quarter 2026 compared to first quarter 2025, and increased 1.3% as a percentage of operating revenues, due to the impact of 17.6 million more company tractor miles and higher average diesel fuel prices in first quarter 2026. Average diesel fuel prices were 46 cents per gallon higher in first quarter 2026 than in first quarter 2025, and were 50 cents per gallon higher than in fourth quarter 2025. 29 Table of Contents 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 April 2026, the average diesel fuel price per gallon was $1.87 higher than the average diesel fuel price per gallon in April 2025, and $1.85 higher than in second quarter 2025. 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 March 31, 2026, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations. Supplies and maintenance increased $7.8 million, or 12.9%, in first quarter 2026 compared to first quarter 2025, and was flat as a percentage of operating revenues. The expense increase was driven by an increase in over-the-road tractor and trailer maintenance, higher tolls costs, and the impact of 17.6 million more company tractor miles in first quarter 2026, resulting primarily from the FirstFleet acquisition. Insurance and claims decreased $1.8 million, or 4.2%, in first quarter 2026 compared to first quarter 2025, and decreased 1.0% as a percentage of operating revenues. We had lower expense for small dollar liability claims, resulting primarily from lower expense for new claims and favorable reserve development in first quarter 2026 compared to unfavorable reserve development in first quarter 2025. Our expense for large dollar liability claims was also lower, due primarily to a lower amount of unfavorable reserve development and lower expense for new claims. The expense for new claims was impacted by decreased cost per claim in first quarter 2026 compared to the same period in 2025. We also incurred insurance and claims expense of $1.5 million for first 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 impact of these decreases was partially offset by the addition of insurance and claims expense in connection with the FirstFleet acquisition in January 2026. 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 generally a 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 $6.1 million, or 8.8%, in first quarter 2026 compared to first quarter 2025, and decreased 0.4% as a percentage of operating revenues due primarily to depreciation and amortization of tangible and intangible assets recorded in the FirstFleet acquisition. These increases were partially offset by lower intangible amortization driven by a restructuring of our One-Way Truckload operating segment during the fourth quarter 2025 that impaired certain customer relationships and trade names. The average age of our tractor fleet remains low by industry standards and was 2.9 years as of March 31, 2026, and the average age of our trailers was 6.3 years. We are continuing to invest in new tractors and trailers, technology, and our terminal network in 2026 to improve our driver experience, increase operational efficiency and more effectively manage our maintenance, safety and fuel costs. Rent and purchased transportation expense increased $15.0 million, or 7.3%, in first quarter 2026 compared to first quarter 2025, and decreased 1.6% 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 30 Table of Contents 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 $0.1 million in first quarter 2026 and $4.1 million in first quarter 2025 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 $1.4 million in first quarter 2026, and increased to 86.1% as a percentage of Werner Logistics revenues in first quarter 2026 from 85.5% in first quarter 2025. Rent and purchased transportation expense for the TTS segment increased $9.7 million in first quarter 2026 compared to first quarter 2025 due primarily to an increase in operating lease expense in connection with the FirstFleet acquisition, and more independent contractor miles. Independent contractor miles increased 0.8 million miles in first quarter 2026 and as a percentage of total miles were 5.5% in first quarter 2026 compared to 5.6% in first quarter 2025. 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 $3.1 million, or 63.7%, in first quarter 2026 compared to first quarter 2025, and increased 0.3% as a percentage of operating revenues due primarily to increased costs associated with professional services in connection with the FirstFleet acquisition, partially offset by higher net gains on sales of property and equipment (primarily used tractors and trailers) and decreased bad debt expense. 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 $3.8 million in first quarter 2026 compared to $2.8 million in first quarter 2025. We sold more tractors and fewer trailers in first quarter 2026 compared to first quarter 2025, and realized lower average sale prices for our used equipment. We anticipate stable used equipment demand and resale values through 2026. Increased supply of used equipment from regulatory enforcement is likely to be offset by equipment manufacturers production constraints, aging fleets, and higher-priced 2027 engines, which may be an incentive towards high quality used assets. As a result, gains on our used equipment for full-year 2026 are expected to range between $8 million and $18 million. Other Expense (Income) Other expense, net of other income, increased $2.4 million in first quarter 2026 compared to first quarter 2025, due primarily to a $2.1 million increase in net interest expense. Net interest expense increased primarily due to an increase in average debt outstanding, partially offset by a decrease in average interest rates. Net interest expense for full-year 2026 is expected to be between $40 million and $45 million. Income Tax Expense (Benefit) We had an income tax benefit of $1.5 million in first quarter 2026 compared to an income tax benefit of $3.2 million in first quarter 2025. Our effective income tax rate (income taxes expressed as a percentage of income (loss) before income taxes) increased to 24.9% in first quarter 2026 compared to 23.7% in first quarter 2025. We continue to estimate our full-year 2026 effective income tax rate to be approximately 25.5% to 26.5%. 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 March 31, 2026 is strong. As of March 31, 2026, we had $61.5 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 amount of funding available of $1.4 billion under our Credit Facilities, for which our total 31 Table of Contents available borrowing capacity was $451.1 million as of March 31, 2026 (see Note 9 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 2025 Form 10-K includes our disclosure of material cash requirements as of December 31, 2025. Except as described below, there were no other material changes in the nature of these items during the three months ended March 31, 2026. • Debt Obligations and Interest Payments – As of March 31, 2026, we had outstanding debt under the Credit Facilities with an aggregate principal amount of $878.2 million, with $8.6 million expected to be paid within 12 months. As of March 31, 2026, future interest payments associated with the Credit Facilities are estimated to be $81.1 million through 2027, with $46.8 million payable within 12 months. See Note 9 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q for further detail of the Credit Facilities and the timing of expected future principal payments. • Finance Leases – We assumed finance leases in connection with our FirstFleet acquisition. As of March 31, 2026, we had finance lease payment obligations of $53.6 million, with $26.7 million payable within 12 months. See Note 6 in the Notes to Consolidated Financial Statements under Item 1 of Part I of this Form 10-Q for further detail of our finance lease obligations and the timing of expected future payments. Cash Flows During the three months ended March 31, 2026, we generated cash flow from operations of $83.5 million, a 184.1% or $54.1 million increase in cash flows compared to the same three-month period a year ago. The increase in net cash provided by operating activities was due primarily to an increase in earnings adjusted for various noncash items, and an increase in cash provided by working capital changes for the three-month period ended March 31, 2026. We were able to make net capital expenditures, make strategic investments, and pay dividends with the net cash provided by operating activities, supplemented by borrowings under our existing credit facilities. Net investing activities used $194.0 million for the three-month period ended March 31, 2026, and provided $2.4 million during the same period in 2025. Net cash invested in our FirstFleet acquisition was $184.8 million. Net property and equipment additions (primarily revenue equipment) were $2.0 million for the three-month period ended March 31, 2026, compared to net proceeds from the sales of property and equipment of $7.6 million during the same period of 2025. We currently estimate net capital expenditures (primarily revenue equipment) in 2026 to be in the range of $185 million to $225 million, compared to net capital expenditures in 2025 of $162.7 million. 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 March 31, 2026, we were committed to property and equipment purchases of approximately $18.1 million. Net financing activities provided $112.1 million during the three months ended March 31, 2026, and used $20.5 million during the same period in 2025. We had net borrowings on our debt under our Credit Facilities of $126.2 million during the three months ended March 31, 2026, increasing our outstanding debt to $878.2 million at March 31, 2026. We had net repayments on our debt of $10.0 million during the three months ended March 31, 2025. We paid dividends of $8.4 million during the three months ended March 31, 2026 and $8.7 million during the same period in 2025. We currently plan to continue paying a quarterly dividend. We did not repurchase any shares of common stock during the three months ended March 31, 2026 and 2025. As of March 31, 2026, the Company had not purchased any shares pursuant to our current Board of Directors repurchase 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 2025 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. Since the filing of our 2025 Form 10-K, the regulatory status of non-domiciled commercial driver’s licenses has transitioned from an Interim Final Rule ("IFR") to a Final Rule. On February 13, 2026, the Federal Motor Carrier Safety Administration published "Restoring Integrity to the Issuance of Non-Domiciled Commercial Driver’s Licenses," which became effective on March 16, 2026. 32 Table of Contents This Final Rule formally replaces the September 2025 IFR and establishes a restrictive eligibility standard for foreign-domiciled drivers. While the rule is currently being challenged in the U.S. Court of Appeals for the D.C. Circuit, the court has not issued a stay as of the effective date, and enforcement has commenced. Werner is currently assessing how these restrictions impact our driver recruiting pipelines and the potential for workforce attrition as existing non-compliant licenses expire. There have been no other material changes in the status of the proposed regulations previously disclosed in the 2025 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 2025 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 2025 Form 10-K.