USAK - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the USA Truck Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Jimmie Acklen. Please go ahead.

Jimmie Acklen

Good morning, and welcome to USA Truck's third quarter earnings conference call.

from Officer; are Vice and Chief Officer. morning and Reed, President this Financial Executive Chief Jason us the James company President and Joining Bates, Executive within this Securities the of as Securities XXXX, Section contain Please Exchange XXA and Act call amended; of reminded of Section that forward-looking be amended. statements XXE the as Act meaning of XXXX, will the of the subject those to are statements to Securities of sections the are such Harbor amended. by the Act And created Reform pursuant and made provisions as of Private Litigation Safe XXXX,

Also, to on the press results results with be measures these financial that are cause of and it speaks from statements tables releases, other analysis subject forward-looking consider Forward-looking to date XX-K which Securities non-GAAP on its supplement in by the on the is only other Any the filings to and affect risks that accompanying today's in of certain Form provided contemplated statement. reconciliation non-GAAP at results as referring GAAP the that disclosures management materially presentation I’ll GAAP today's report by forward-looking statements. its to and uncertainties future differ the the Exchange factors in annual review and the slide could Commission. now call. and Jason. to of end conference financial the Please turn the will call, measures conference over A statements made. actual those is of the call may company

Jason Bates

and our from we an you on We appreciate thank opportunity Truck. We had the and hope today last joining support to Jimmie. for USA to us want you, review release Thank of Great. your night. earnings interest in all call everyone

a quarter fifth We to consolidated delivered team report that of profitability. consecutive are has pleased our

we three years by first our has its USA of team nearly are marks time of consecutive quarter intend challenges. trend quarters the QX to and by hard exhibited consolidated achieved entire build five commitment work in in We encouraged upon. a the this spite Truck profitability,

may have of Davis release a press X-K announcing you Company. As issued last noticed, the week we acquisition Transfer and

to to and accretive call. consolidated excited more will the immediately the discuss as to our them earnings, expect are have detail a Davis later organization be which of our part We we team in in

income If you increase the or $X.XX financial a share for for per review me results. for in Slide net year-over-year. the $X.XX operating adjusted per came please an adjusted of will income a was the expenses. represents revenues quarter turn This with operating represents $X.XX ratio improvement $X.X year-over-year. XXX of year-over-year diluted million basis which $X.X points points, X, our basis Consolidated at adjusting XX.X% quarter. $XXX million $XXX.X And was which and diluted related transaction sequentially. Consolidated improvement for Net a to or was XX.X%, million when share represents quarter, for EPS

This million operating trucking generated and $X.X a sequentially. improvement, improvement of Our $X.X million year-over-year income is third million the quarter XXXX. of $X.X in segment

XX%, And $XXX,XXX was third the income sequentially. basis and points, of an USAT $X basis improvement XX finally, This quarter quarter points Our the is XXXX. sequentially. operating improvement year-over-year in of generated operating segment ratio for of million Logistics a million and XXX $X.X our year-over-year improvement

XXX XXX basis unseasonably of improvement an quarter operating strong the points for of but year-over-year XX.X%, points, sequentially. often XXX, third ratio a operating quarter Our was of decline basis ratio

key will measures. and to balance highlight If the next liquidity sheet some you turn we will slide, with me

equity second million As the quarter XX.X improved times X.X to X.X XXXX. times, of from debt credit the high X times was in to XX, under facility. a company of as second of debt the sequentially million. borrow total XX.X Total XXXX, the adjusted XX.X to and Net to XXXX, had was quarter in and September our compared its obligations decreased lease available stockholders’ end EBITDA million of capital of

the of of XX, its approximately company facility. had borrow As Davis acquisition, upon to under XX.X Transfer October million available XXXX, credit closing the

as Our XXXX XX, ratio the figure leverage XXXX, actual our times. times X approximately of proforma for X.X Davis be September of transaction October versus XX, would reported

communicated So, transaction, leverage, the range X execute of as target not times. Davis increased times to and the our the significantly acquisitions X model our we to to us We’ve how about did to had lever with going questions transaction you remain can the to out people sheet slightly see, while balance we within need previously several reach leverage forward.

we As disclosed of Davis’ disclose to days financials and closing transaction. the within two-year required in of XX are perform X-K, a our audit

you months available of future. purposes you that unaudited the such, the provide we the near next to reiterating information all have to financials. in audited over would As that, modelling said and points utilize until with that information at for you couple data time, share Having the is we this following this

First, transfer XXX and has roughly are contractors. are which independent one-third of company-owned trucks, currently Davis approximately two-thirds

revenues roughly Second, XX-month million. consolidated their $XX are trailing

is sized that trailing high data executed their within of just can you transactions. proforma a in for acquisition price the Third, provided, market million XX XX-month Fourth, the I with purchase similarly leverage industry see ranges adjusted the XXs. and operating ratio was

we in-service the trucks as factor of later industry on contributing count issues I’ll along call. the brief the We XXX will OEMs new our a was truck Year-to-date, which situation, we unseated quarter, Finally, to deliveries, scheduled the experience deliveries. our new opposed some some of tractor of XXX to in call. from address experienced James received to in provide which continue delays on discussed unanticipated last in as update truck others with a the

original trucks reasons, year their commitment as on receipts New to still reduced calendar to expect a as OEMs improved juncture satisfaction. for to truck XXX The XXXX. us for at of are are XXX telling maintenance this us economy, able fuel expense, substantially well critical driver variety including be they deliver of for

record, were be some of not on if deliveries part will surprised based slip their XXXX. we to the in However, first of QX track

call So, I'll James. to with that, pass the

James Reed

Thanks Jason.

this management has quarter, call together. these But to performance. see we been also us. including our the outlined on ability had teams. Jason and strength Jason full-year with results, well of the of was is from leadership consecutive as and can the this As fifth drivers, just more our testament and of logistics turnaround to teams, noted, previously execute so it This It’s our that, than that another that proud our well. strategy that as strong marks with the is the teams, to team he to you professionals. a is be operations first our our first his profitable testament new quarter and journey as This believe it year with assembled We're hard result newly a but starting to was associated group as beginning last capability

in we're OR believe market are him also but here. improvement, profitability. improvements that moves of is glad self-help an So, improving but environment. market to we independent our cease, have has have of reiterate from and what We strong been yet we rate, opportunities The we perspective, a and year-over-year to outpaced accomplishing much rate have story

the revenue by our per now sequentially. trucking or the higher $XXX Base driven third Moving tractor and available The a primarily unseated tractor sequential per results X, X%, expected year-over-year $XX to quarter. of quarter increased or in was Slide decrease count segment. week for decreased for during our discussion XX.X% than

the loaded revenue year-over-year of we tractor revenue faced However, seating Deadhead seen years. service throughout the per more XXX quarter of a challenges XXXX, points, our $X.XX real or third outcome solid partly quarter increase for or our X.X% basis. XX.X% year-over-year, and week, Base year-over-year. X.X%, to measure sequentially. sequentially. miles Even grown and growth X.X% basis in The point the in year-over-year drop trucks which trucks percentage utilization quarter dedicated comparative pressures XXXX per sequential than critical haul. per the available a length most had or by $X.XXX per or highest XX third and available basis three sequentially. Loaded though points tractor mile decreased on truck miles mile miles expect a compared XX some is have when of per the at network week in will and unseated decreased we and increased per have driven offerings, We corresponding one of the reductions increased refine was number see XX in XX% increased

a exacerbated the resulting a Jason replace As to we unexpected volume and of we the trucks say won’t bring doesn't in supply belabor other glut and than strategic thoughtful driver’s is maintenance issue. mentioned When trucks, that arrive new on used the the our performance to OEM delivery financially a prudent to truck We according road burden the tractors receiving chain the facility. point that truck see off delays schedule, as older very new meant of and in influx, older plan. result

average looked just at of Our as points X.X%, at numbers the percentage today XXX X.X%. XXX was I year-over-year XXXX tractor basis the third morning which sequentially. worse unseated was points this quarter basis and worse for and we’re

replacement planned average peaked our We the company's we’re originally still quarter tractor on year-end. average older shared than ongoing the fleet noted the replacement So, cycle. under our Still at and third oldest that average driving Despite basis number age goal progress ground of years. we of to just in lost had age the improving OEMs our our an that reiterate age our recent toward last approximately make accelerate at issues fleet fleet our and every In quarterly expected, by years. three up day. earlier, X.X the delivery call, to with of X.X years The we but ended history. XXXX look

that to we to immediate the in Our respond counteract quarter to team took them. was measures and headwinds the quick had

to we approach be As manager in our our more recruitment changed modified reduced a fleet. recruitment and We driver we out a advertising last ratio strategy. rolled discussed quarter, targeted driver driver intelligent to and

compared available we third the driver second drivers. announced the was without take quarter, to this XXXX pay from for quarter the when relatively that response of the effect of average also compared reduction launched quarter in XXXX. is professional that flat, at of third a third our X,XXX, X,XXX which to average tractor quarter X,XXX, the count would our XXXX and of that successfully X.X% handing all is result which We change in The time

However, our we the when as outlined to include now Transfer the the acquisition. nearly of acquisition, that impact briefly opportunity actions today want tractors team's are above, pleased trucks. take Transfer to Davis of available Davis I I’m is over this the on a to X,XXX comment fleet result you and report X,XXX

areas driver freight for our operate Davis need a We domiciles areas Southeast. a immediate. [Q] we in the to we practical out quarterly are network to will all where instantly transaction These have to the have of all a a made a always noted as purposes, prior may in conduit instantly the in them we’ve high we notice synergies instantly benefits had need continue reference to density The number in it For have most. has. greater address access yard to and One that calls. markets are have we in of We and facility no Davis. in where discussions of

not While exist, was transaction synergies. of done for the they the value this

a that We provides and to key an to improve and of is but stages our but shared our detailed chance revenue has our What areas acknowledge go, earnings progress, Jason the tractors opportunities, address the trucking and previously. savings has a mentioned, the week, opportunities. USA in it we been as Truck's the begun accretive we are Overall, two-year on Davis priority. per per way that we of completing audit just future as remain in tractor of still story tremendous will call focus made identified continuing review a long immediately give top do have update know is business to strategic seating have early business

million Logistics million Turning revenues Operating reduction next now year-over-year USAT improvement, XX.X% million. Logistics $X.X quarter. $XX.X in is a operating $X but $X.X generated and X.X% the the year-over-year increased sequentially. it’s a sequentially. or of slide. or to $XXX,XXX generated million, $X.X XX.X% of represents or million third $XXX,XXX This income and sequentially. margin year-over-year improvement of in gross USAT or X.X% $XXX,XXX an This

strong the gross the improvement was X.X% XX.X% of percentage from XXXX, unseasonably margin of an of XXXX Our second quarter quarter XXXX. the for in over quarter reduction a and XX.X%, third third

sequentially. Finally, X.X% our load increased X.X% count declined and year-over-year

of our our spot operating business strength logistics and quarter service strong business to logistics market Our are contributor These in to pursuing reflection our quarter, earlier contract of in improved. approximately sequentially year. preserving continues was be contracted higher in a The dive software business. our of support a thus transactions. market based. the business abandoning allowed the headfirst our to market logistics softens commitments the measure a evident buy of better half continuing metrics us spot the direct a our results. decision market, freight to is direct this purely in to as margins result spot was not margins then contractual This In opposed spot to a and into volumes freight of and as to This our clearly

to now X. Slide Moving

call. As we on few will key been Most report these targets. have the discussed we a some detail of already mentioned back on previously, strategic in have quarterly

average. the revenue available First, versus tractor we were which per per ahead XXXX of than communicated already on plans base week, is schedule better XX.X% our

gap of X%, mitigating actions we earlier. today roughly the of Available of end outlined X.X% count that tractor closed this the I Our higher percentage quarter full level year's of remains but X.X% unseated most with targeted our last the than near average above is tractor X,XXX.

a basis remains of OEM combined cost us goal gap to delayed also for low-end the in in close quarter. the comparative target to trucks series and been million this should million of the the CPM initiatives. corporate a targeting of the acquisition fourth the X% with Davis $X help Our on We’ve receipt X% reduction on growth, $X

many get our this to is comparative While we on success dependent cost CPM have identified opportunities savings increased date, miles reductions. on to the front

this truck had focus We this and focus reduction not to the committed improvement put to driven initiatives which and freight targeted on initiatives, for day-to-day, significant rate downward but we remain previously have the per savings We intentional changes, driving miles on metric. cost business driving wherever will possible range us network revenue achieve it’s year. of and dedicated to an and expansion, mix pivoted pressure does

our Finally, consolidated was in levels. targeted revenue USAT of of Logistics XX.X% the quarter, revenue just ahead

consolidated five continues business this Our delivered of remains total said as commitment. goal profitability segment year our trajectory. every was a on we to this still tougher self-helped OR we ahead grow succeed. in long-term that OR XXXX, in us XXX-basis consistently expect point is then We’ve and to revenues, XXX.X%. we is day per XX.X, USA Year-to-date points improvement. story That by we of we OR three a task improvements, puts Year-to-date basis or will Truck now expect after do, so, well we years consecutive unique XX% which are and and the that that the at get what trending and in for said We’ve of trucking but schedule on XXX a which remain landscape slower some. quarters towards our would our a of gets doing the first improvement XXXX, story. adjusted

and time. disciplined Our team sustainable is network, in be we anticipate to focused over customer on mix, rate, execution structural changes that

and with maintaining a customers. a changes those be environment at healthy that aided We existing again. improvement market increasing spend priority. competitively well-ahead will of a healthy notable while that growing preserving historically deep share industry by comps a was discount also share performing that via rate and the and to has a priced Recall solidify been cannot USA will it Truck continue Likewise, not happen logistics by will business

USA productivity the or as prospects world experience cost we improvement economic add and opportunities revenue successfully we exactly our Well many USA economic productivity professor service results address improve laden shovel thus Economic has here growth. I there a increase also in we opportunity build Truck. operating historically productivity at and to as for used mostly support should about driven Like we and is how digging expand lies Beyond will and in transformed somewhere the base, opportunity improvement. that’s areas Professor efficient the well. our my to our that structure. structurally ditches our to Truck long next been waste mechanism improving as future we have execution I financial that feel now are sustained is in Todd, that by that say, our can a we who had and with have the and our expansion performance. people more believe it. network thus customer

to our of might domiciles and point inefficiency. been structural Some driver examples future and being deficiencies cost, be We this network articulate turnover, discussed a driver helpful the key past focus. in of

retaining network. their good and and well our approach living very Our having network, attracting of out plan into pay performing have results companies new recruiting transportation don't drivers drivers is

of in located the The over to that actively Davis unpaid properly second the that directly reduce and issues terminals. addition cost see find we is, maintenance to and miles working the we’re of lack locations and non-revenue The to right enough one related Southeast as further the the road addresses this.

equipment higher of age past replacement our replacement Next, a high maintenance and dissatisfied cycle led drivers. cost, fleet, to expensive cycles,

are our just through move historically, issues drives other don't We want but the And trailers these bit has to it. tractors assure issues outcomes sector waste, into program. replacement things our are just had tire are we or us Truck us to That’s an state to an productivity from this nuanced, and replacement have These sector. until and to don't I tire most beginning to and is program strategy. tire finally, improvement Simple to effective what recently, to opportunity idiots, a all recap We're I to on represent system. unique this being addressing won't our wanted current perspective which not a this couldn't real, improve effective paint in from as yet. of have. strategy. cost down We actively he with economic OR own casing you think eliminate share USA cost each paths but these tires we that our management in other working that management we even I thus companies basic. means venture yet a addressing and go address like

future opportunities team our and ahead seize further Our excited for is the even improve to performance.

stated as fellow making customers and support the of quarter-after-quarter. continue result happened the are above in our improving the and all, appreciate but past, Just support this our we employees community, belief from to we

to is Finally, I welcome new teammates want Truck. Transfer. to This Davis USA time offer heartfelt our a part to great of a at be

the [indiscernible] of excited for companies. how now We’re prospects the combined future about

Andrea, turn to back I’ll that, questions. with over So, for it you Thanks.

Operator

first of from Delco Instructions] Our [Operator Brad question comes ahead. Please Stephens. go

Brad Delco

James, Jason. morning Good hi

Jason Bates

Brad. Hi

Brad Delco

Got you a can back will what the whether or the couple questions. queue. shoot finance I of them get has give what of financing? couple their that in a off is, and us historically of on-balance age or not with fleet's turnover Davis, driver fleet On off-balance-sheet been, and sheet

James Reed

Jason have the and take I’ll financing. will then So, first the address two I

from number, they don't to compared So, have XX%. a but it’s and standpoint USA specific incredibly to turnover compared below want the disclose Truck turnover to the low I industry.

the is And So, have financing. then address Jason of fantastic approximately profile. turnover X.X years. the The age fleet

Jason Bates

Yes.

your as so we part the brought of answer outstanding that on sheet. are board a and So, Did of that the transaction debt, question assets Brad? we balance paid of all on any

Brad Delco

of not necessarily Yes. … on But a leases are operating you taking bunch

Jason Bates

No, we're not.

Brad Delco

that is How capitalized? business

Jason Bates

no Yes, leases. operating

Brad Delco

the you you September say then put driver the was And place? you what date? The can or in quantify XX, Did pay? increase

Jason Bates

increase. so haven't Yes. September we of amount or disclosed exact quantified – that XX the

we move they mutually happens. and number I cause right, about, different to but when are know, that criteria that performance can beneficial, or talked down, think are there you up As that

willing the for to a but hard it’s for were who us so, on to be to in right the those substantial driving markets a and behavior right was increase. number concrete that, it that And are put needless say,

James Reed

to And that just add I’ll Brad.

on is, one said, what mean and pay on that I the their can the the drivers there, this, no and basis go way changed components performance. anybody different a out weekly of Jason CPM of in can it of get but are based out we via As our is that some interesting such a sauce. secret structure a understand surveys

seated the paycheck day. So, we they That the we’re trucks. to situation really long selective heavily a our improved said, be been onto more where revenue much own coming and incented a to able drive control drivers truck on in are day seeing we’re that situation trucks and after the net and are filling about haven't kind we’re in their time of

Brad Delco

I cognizant And quarter the pay use what’s to benefit cost trying we out need driver different XX, in a we bit imagine to effect that maybe see unseated offset from cost? count, an figure immediate of that or truck be could the the went I do if the in little September increased of way, fourth that’s into some but if driven improvement a would

Jason Bates

you Brad, to into No. observation a That that would take is very good we and consideration. encourage

be it While there will be a not is to going benefit self-funding.

Brad Delco

it be to will marginally quarter? dilutive fourth So,

Jason Bates

have there Yes. I you as headwinds increase mean, an basis some apples-to-apples on in said, will like I you compensation. with any would

James Reed

increases But sorry go said rate this. in to we Brad, some were call, of customers to on and secure we as support of did we our able the

is so, but to customers drive and right, continue we we will over And improvements productivity the with continue to that sure long-term. to cover work can Jason make we’ll our absolutely

Jason Bates

line What line that a increase wage of different line will variety there if come Yes, items. this inflation my point. so the result in will that a as through help of looking That’s clear things to at are be see James wage item. just a you're different addressing is, item, of Brad, you offset the lot is

Brad Delco

rates then, guys. And extremely been volatile for you Okay. have

look at think saw sequential I comparisons of steady for XX% what teens, been a and in you lap pretty XX% like sort any Can increases? you low the ago? as we year fourth quarter challenging provide have rate those quarter fourth rate high us color should you last to third in you on from holding improvement

James Reed

I had will I’ll you implemented initial XX% strategy be was but I is rate I surprised, our of QX the three performance we’ve I the quarter say, had. we’ve increases. efforts which we the that consecutive rate you remind This and get for had of quarters just mean, team our and Yes. that the had into network first tell with plus definitely after to pleased kind expected tough to the won’t of comps going quarter

into fourth provide that there say, year-over-year. still little number, a Jason want quarter even year-over-year of would how I specific challenge double to we’ve this in like kind the kind don’t but said bit of, it’s high I Going always would there. model don't comp single of a to is I know digits digits low you

Jason Bates

continue you going the get, the that’s much Yes, so quarter this until with but business keep in absolutely contract and of as know to what participate presents customers Brad, we able that doing oftentimes the when know business rates the fourth are but project year, year, were to how that true our you mind increases. is and search it hard still opportunities disproportionately same to of you with look working do get that support are into network and you you pretty different last business don't at or we be to special to we're in like in customers going handedly to do our solid underlying profitable,

James Reed

squarely first time don't but in year we memory we said we search. last was and participated this last you, in healthy, around Pretty to need be here that QX, this anybody's remember the on

build. point which have basically upon to one data we So,

get we’ll smarter and time. So, over this about smarter

with bear there. bit us little So, a

Brad Delco

bit acquisition, should budget can leverage looks for suggests just is then of this XXXX, for you three XXXX? like now, Sure a initial Average under thoughts question, on you elevated And remain it sort little on for me queue. took get us to thing. any back years that last more will CapEx age Jason give CapEx I what in

Jason Bates

Yes.

to relatively similar this going probably to what it’s to think we I year. guided be

from our yet We final the approval board. got haven't

$XX We’re the to in be don't to it number. next to going say here hold actually going But to net a Again, getting I CapEx to me and them board our meetings range. we're December. million would first plan week look our on that and having $XX basis in probably that bless be that then million giving at them

we We in you probably to a I will invest year. sure next cash number think purposes probably with. now, quarter, we roughly, little cognizant to more has that safe but give modelling bit And how able number to manage from sustain a Truck XXX that. concrete CapEx go a We we’re to grow then expect generating flows XXX probably that’s trucks next that to in right be making past, to be about to we disciplined operating been in our want want USA be the more and of the will cycle

Brad Delco

I’ll queue. great. get in Okay, Thanks guys. back

Jason Bates

Thanks Brad.

James Reed

Thanks Brad.

Operator

next Jason go Seidl Cowen. ahead. Please Our from comes question of

Jason Seidl

Jason you morning on XQ to and the good gentlemen. very of back on wanted James, operator. thinking much, touch back questions. Thank I some Davis jump then to

a management things to you you USA at use stuff guys trucking the Truck learn in look So, the and doing of team look with company it’s at really are that clear to try and you could you look OR, guys are type their implement you at good what average legacy? age the fleet,

Jason Bates

a Yes. really great question. That’s

trucking said it’s Davis just kind in wanted screw So, company opportunity is, want don't before up. of answer it call, I take which to we great and bought a we the reiterate to we – that, because I something the

our It’s so, immediately right. as to is accretive run you're to things. great intent a essentially standalone And right. earnings, it some They and do

So, out run and kind how drivers crazy, with of them, trucking turns outside don’t question, well they of that diligence I this handle I their you your at hire outside I And funny live but me, met was that asked due companies like them, looked do it network? I is first of when a guess drivers network.

the He opportunities. of intense in And and We some now Truck. is Vice of the USA so, role has we transfers President pretty actually days. have that had Todd Davis, some about conversations officially of overlap some couple back-office opportunities, part last as who Davis network been had also here

primary opportunity get in Florida and of network provide to have the in and as is spring the drivers South candidly. a our this of go we board to theses home that one So, they acquisition into out of

forth and of tendering where freight So, each by we’ve to two the opportunities other. identified us real back can share freight

In freight a them. we where specific and fact, instances on lane it and we empty been running already there on was that over to had lane Davis have passed

going as intent to Davis sharing So, to the to will managers, fleet Davis of run drivers name is continue essentially and words report it best is Davis standalone, practices lot be a Davis two, to there, the between but Davis. not will freight the and continue anywhere.

hope that I question? answers So, your

Jason Seidl

does. your fleet, it guys the average when that excluding? gave transaction Davis age the And or No, you was of including

Jason Bates

James was number average No, good provided That age just well. Davis the and USA question. as the Fleet Truck then average

Jason Seidl

Well [indiscernible].

Jason Bates

is Correct, correct. that

Jason Seidl

Okay.

Just that transactions, Well very company. clarification. it wanted make was a on the to congratulations good seems

to Let XQ, sequential me right. the bit was just because little I last to think quarter improvement, and around a are such be this, going only fourth questions a

how we your over say, softness market you at thinking the given increase that seen have the that, least per should and pay last know driver be month. we So, about some in spot

So, how XQ at the should versus in sequential XQ. numbers we look

James Reed

let at implications. and short about me Jason the So, first take will talk a the have I environment

So, spot we pretty what business there the but as softening of in that to the side you market to margins prices meant that some a have better our at our business been higher has and of contract we’re capacity from so buy standpoint, contract given market, yes even an lower particular, on spot in environment look able hold freight, percentage helpfully. logistics and

implications the that. that’s So, one of of

QX know year it’s your are I loaded customers, interesting, to I about leader and customers still [indiscernible] pulling concerned the truckload XXXX, was in think question capacity. is the Customer this be actually. QX just bid our and reason of sales this as on more activity is, talking the extremely to morning to compared you that’s on demand pretty rest the business, so On side,

throw how so, I Jason kind translates the pull we let And not than QX this of and QX, that pen going at will in this deal it, him to year were worse with and is, be year. last grenade which to we’re

some of you put around as we’re kind Jason. business and So, that’s maybe parameters headed can a where that

Jason Bates

Yes.

are up of to raised puts Jason kind way you the think right. I So, and there question. the you’ve Because nice heated take, going with be

concerns I year. out last some the capacity think that thresholds They that get, there, then prevail some and industry, blitz I lot inflation out of I you that were get load you meeting volume would customers shippers to on have activity say trucks a driver concerned tripped different could locations. back in think were based have volumes of we with the thresholds are they might last customers surge on have sure all We and last year it’s locations think going I’m of different wage year making didn’t that different this of up. with sure were, the if to about times more that certain and I

they those and So have but little sell that was for capacity. concerns, of a year, better bit who providing themselves how very us that. being definitely think they capacity about similar I prepared that are they what beneficial were to think there, the This I disciplined for handle

them. one to the a it and will foray one it and until plain of hard But So, into get again, first that’s that so peak markets was good referenced know that’s point sure is advantage but something to take like want make fourth the this earlier, and providing our kudos through we fourth with volume, – they last quarter again is participating nice was in quarter kind search what we’re we a what and quarter we look only [ph] it year are with data that as in them, very exactly that the in in it. – James and to so have that the capacity we them peak of support usually can we need, there something actively that

when model, to this I'm I see the the James improve project my and day every think that, to end goals at of that expect like think what done model be as I about we how internally to looking conservative year. to at expect alluded we’ve year-over-year about just we I and pretty but quarter trying we some I’m So, have lofty

Jason Seidl

always. Okay. That’s Well thank time gentlemen, you good color for and I that. as appreciate the

Jason Bates

you. Thank

James Reed

Pleasure.

Operator

from of ahead. David Please Stifel. comes question Ross go next Our

David Ross

Good gentlemen. morning,

James Reed

Hi Dave.

David Ross

in comments It’s of start it been it around through what terms or road a versus Davis other you frankness bid freight all into good are a and acquisition, looking so the make-up far. process, the over a grow to is call bit of do guess the in little was competitive and – I more, than is I the the guys company dedicated? business. appreciate entertaining digging Davis very why your a

James Reed

Yes.

So, why Davis.

First and the knew to wanted not of on we can an it in call smallish options footprint, but presence you we this We that fit the this We USA that or acquisition. we a that you We’ve right, accretive Truck could lot from organically talked as it business knew that some if grow find footprint that standpoint. said all, could of a be only we a addition, terminal story. operator it Southeast intend aren't help quarter-after-quarter. there could either grow can the as that about grow via

One forth. deficiencies competitors It route expensive on of have creates which service established cost of creates outside and side. with has that It’s don't out so network. encourage. our of been It of so extremely we miles, many our the live our customers that model drivers on our the issues

they they’ve So, what question we knew your was didn’t I and of, got not the the kind many process. amazing Davis perfect like through deal. of They is an think day of it a private at two you they say for you’re relationship people culture were years. the one was it an way, more but felt It process? introduction. then a be kind end feel and wanted. was of getting price could, between a in fit To relationship great fit executives with so like great auction fit. got culture they to good candid, highest they the just There best we and was asking auction and it this our It To organizations, we deal. of We’ve on we the and talked an many, that a other had focused past, a were

modeling behind why I don't of XXs they The accretive to We operating to a self XXs be mid-to-high if this know – picked will I just of say are the is certainly why lower that’s somebody OR OR else this. may the ask try hasn't bunch at to other us did of is, a up. that’s question not in somebody thing your is, somebody to reality a question, And our situation. them we even available, accretive but

So, it’s better may a us that opportunity get to for not unique exist people. for other

So…

Jason Bates

Scale there overall And that. that the of Whereas been really relevant, companies for are I Yes. our for us of to the add worse mean people I just – wouldn't it is energy XX% guys excited synergies this represent and most and go would for because these transaction the it acquiring out revenues. people. slightly under also us right? it was think to just time and enough process big perfect where go through beneficial wasn't we’re together a we can mutually was with other about acquisition But it the for and this. I have

David Ross

And why way where own guess than a management or any just business, they, a running is there I selling retiring? rather over change their founder

Jason Bates

great it’s No, a question.

founded the it years, And maybe years well. father XX in but, so another some we ran himself, in have and uncle Gary been then and and the as his a many XXXX business in grandfather, involved for in of was this Todd personal save involved and business Todd’s maybe it little by business for should another was Todd’s to the here is, many,

fact could a around years. guy, was, candidly trucking stepped said you don't and what me is, way around the guess few into a several him that the years, has so I agreed to purchase Todd hooks some he I will for he are the ensure in as and agreement this stick of they we’ve it uncle and know say got, approaching for sticks retirement, want you from standalone the risk young So, the company, Gary I business, away being know, relatively Todd is a to

team. are integral his really him aren’t it’s he's next of entrepreneurial It ready interesting. are they step being be few dad and long-long a running to company, opportunity. risk don't part but of a There out where want the retirement great on kind and perfect, just there, of a but time plan there an our small at uncle of management the generation are so We these a So, to is operators, for lot and here age perfect away. going

David Ross

It road would have been versus over the dedicated?

Jason Bates

to That’s mostly that. mostly because hard have characterization answer think And over address didn’t what is, dedicated. they, by the what basis, quasi-dedicated to almost the call daily that I Southeast. a those are but our customer is, on they would really I and over in run answer yes. purposes the road. we I but volumes relationships over mean are for have, trucks routes exclusively on same road not carriers. commitments again. that the with I it a they Oh, say a is over customers customer question runs specific and They list They the list, they looks would like the And same

is most realize the as home were diligence, talking drivers Dodd In of Davis the out fact, we’re week. yesterday the we going as days a couple of something operations in we to a came are that through didn’t but

really like And business. so, dedicated a it looks

David Ross

to as would year? are improved, you the as about pace if than back versus paid is OR’s guess a like, slower improved talk comes around And the Or even the even the in, equipment the services then, Truck I in drivers how ago? as earlier USA year more, load operation, service, you comments it versus can

Jason Bates

mean service reality and the say and I business it’s an we’re – be Yes. has to good question It’s but service interesting way the a to is in it, the enough. business. a commoditized of terrible

our customers service so, what are. And service our agreements we at targeted daily about with our We a on have levels look basis.

have say focused better in see specific and To really always service worse that’s something changed don't network are prove and it’s make it’s we numbers, it some every it be that room organization perfectly right coming net expectation is I'd of frankly on net, the disclose an will to on we a a we’re improve single We improved as now. day, and is that it candid, gotten service as our our and but and in improve we’ve as ways. some our ways their and the the hasn't is they couple byproduct much, at our committed got and time. is that customers two-year worst year we having have network redesign, of same said understand we’re more into that business. a network network seen a service, customers process just I appreciative understand a and of redesign we’re a that service really seen better It some customers appreciate natural patience one and of supportive this it’s denser that as group commoditized so pretty because and thoughtful really a but of

good will better You looking new customers. for or enough be you be

solutions. new for looking be will they So,

David Ross

what question, are used year on just been for Excellent. seeing market. you Last it How truck and this the developing has trades?

James Reed

Yes.

I was So, know memory, robust a better by means you truck say, would I mean, as it market. no but obviously prior, is, used this in I recent characterize it would than it’s year

them that disciplined I making tried schedules I are think not got a we can, for find about methodical finding make money to aligned sometimes us. of and and these that them will have where for does some them market very really trade, lot sure a trucks, to able of be at back tough good give is venues where ourselves in so need team places to a times spots. job depreciation a we’re are we we’ve to and turn And credit, with they good finding manufacturers that time our job really but and in we a sell to the

advantage enough good And hard it’s that but able it’s is to not so, market, of. again take it’s some team work something with a our great

David Ross

Thank you, Excellent. very much.

James Reed

David. you, Thank

Jason Bates

David. Thanks

Operator

Jeff next Capital comes Markets. ahead. go question Please of Kaufman Loop Our from

Jeff Kaufman

you? you. Thank guys, are how Hi

James Reed

morning, Good Jeff.

Jason Bates

Hi, how Jeff, are you doing?

Jeff Kaufman

Couple of good. Good, network relative almost network, a per on questions rough given give couple dedicated Could to idea questions. the you kind then Davis what a like Congratulations. your look in other mentioned truck network? you that per the week like might Davis miles operates of me that and

James Reed

Yes.

Jeff. ready, well first not James, of we're this is So, all,

may have you I for to think, welcome but met want once, I you Thank call. you being the here. I to

Jeff Kaufman

you. Thank

James Reed

folded something yet. that operations trucking our the into in will So, we It’s haven’t be that disclosed future.

on not are say of you I'd relatively so, And a color to get likely similar. lot it. it’s

load We Given, little our core that those co-pathetic about bit is repeatedly. than it to lower business, however have but we similar and existing our view dedicated. nature business. dedicated truck that a And it’s integrated very highly talked an as

business dedicated have to good the road got versa. You’ve vice to supplement a and business over your

keep why that’s and combine so we them And them combined.

intentionally for say cloudy of we’d about little bit kind there, what So, given expect it’s profile. normal I’d but a the

Jason Bates

Yes.

if utilization. specifically question around so, was And your

and talked had utilization previous about per Jeff and is little And to oftentimes similar alluded about in your mile calls, I to you but a and per rate as is those in James week about is higher. you know, per lower, really and revenue very truck dedicated As talked it you lot area terms business. a our it’s think so when purple our

Jeff Kaufman

about getting truck that XXXX] Yes, ballpark? same day revenue [XXXX, I’m per is per Davis week for

Jason Bates

Yes.

give numbers specific prepared now not we’re point So, and fuel all-in like is that that or to that this including at is ex-fuel?

Jeff Kaufman

That’s all-in.

Jason Bates

Yes.

you company it and will infer kind you So, given commentary I vis-à-vis, of our in-line there. being mean relatively our that with about what at where averages similar is probably can

Jeff Kaufman

helpful. that’s Okay, no

finish terms Also, issue you modelling. quarter given that this equity in fourth Just with was where share some of to there deal? count do anticipate

Jason Bates

as because I we that be I got were X.X in things million the forfeitures but X.X would some say like share you’ve should to So, think, issued, well. and you’ve million range got probably then eight, that

probably assumption safe that’s think X.X I X.X. So, a to

Jeff Kaufman

I we’re been customers by don't increases terms anymore. terms what of rate increase? people but of into not the from a where great are slowing, I spot your market, curious are I'm seeing is in know if you rate new oh in in market. getting about way, today truck because it contracts then going in there’s rate across increases. in per per you a the you on the terms what rising, contract We are changes at spot of different fantastic signing And increase revenue know Maybe we the Okay. week the that, of signing the lot buy contracts new asking still business speculation talk looks talk the about

James Reed

been our couple So, a is things I’m understand. really gives think a that don't glad has that I it quarter-by-quarter. it Part of realized similar you asked people me cycle because of relatively quite talk chance that to bid about question

QX, last but of QX, activity on has QX, this XX% couple new have quarter, are QX. our each the we bid been you is our coverage, XXXX, said in So, quarters. In

And in in in half of the the year’s next we've already first place so, year. embedded part kind of half the that second a the that’s put of there’s [indiscernible]

And your now at increases so, XX% XX% the big if you’re consecutive quarters, of baked for next in that already we’ve be looking three half portion, should for reported, model first what year-over-year year. a

right was question a I current but early, do that case, So, QX. said, half really activity. that’s really you for and in around the It’s bids the That bid of are if nicely. up there’s think now your can own sets math, flight pretty the bunch first your

not XX% tell I kind I don't dodging know year-over-year. that you but range in even So, to I that you, X% the of I’m just expect would to answer, that be

Jeff Kaufman

Okay, great. very Well much. congratulations and you thank

Jason Bates

Thanks Jeff.

coverage. the excited We’re you to have on

Operator

comes go question Barry Asset Please ahead. from Management. of Haimes next Our Sage

Barry Haimes

to then versus as as second year might year? my question talked have Spring early if downwards Thanks where process quite seeing, And you’ve I a in it what lot if a couple the been of sort much still you to had questions. and on been in couple which change it’s in James and is, network, bit up wondering how it of a trending fall you quarter. of guys. have at Maybe following you if you so, how you're people are get now little just you accounting want a be the robust might about are the at what trend this running Good freight it. where changed thought, still freight or the just will talk the down There’s out been about of change hasn't to network, question. remains – to that sense a

made So, next good would a out. you if already, it market drivers your and changes but of presumably you’ve had had some year, more you change you

looking more a how you for XX% more, there much if Thanks. trying just are feel you XX% to remains to to get change So, could? changed be

Jason Bates

absolutely. Yes,

our weeks through been so varies about into it we concern move third disclose the going we affects no the crazy. a every going the into were halfway area freight between of day, in volume down standpoint. the from doubt So, It our couple have October down, quarter Interestingly, picked There up it turn ability to downs it your September first businesses that turn considerably is was slowed about volume. two don't but to September. question it watch the it down strong. really of I Candidly then again turn went down number, an on and and load last quarter.

turn down of last has So environment in that’s flipped the twice kind what eight weeks. the

environment front. So, it’s that interesting been on really a

we’re In terms our network, process. a year of into two-year a

the pieces overall are changing. it’s of say it we but So, structural little of is the would together number redesign. left of there and real a an XX% be is guessing make, to kind it putting there. a gut do XX% I'm like remaining like really probably just think XX% some way easy I can here more Barry, way. to on my XX% additional lifting thinks of point that changes kind the we’re says then would we're not moving there’s probably that We where heavy to bit network a And a puzzle out year-over-year Everybody

You and bid rebid year and and know, companies freight bid our year. freight the each transportation each customers their rebid their of each

to over after turning would I kind a expect networks so, constantly And the XX% after of XX% year of year. year

then of think XX% year, we after for normal would that’s but I kind they pretty on the competitors. rebuilding to but kind a this to on of say of year answer, our long network, around So, maybe are XX% of expect after move we’re XX% to way and of the year I structural most XX%

James Reed

our second James a the way that our defined that, help over this wage which that Barry aligning we alluding driver little we is, us out the and to or are we’ve that domicile designed, takes network Yes, move to one, network. and year say, one is thing all but Davis driver are that then designed to I acquisition next rolled front address it, needle want initiatives we or that with freight things the would it add our candidly strategic the the two. this with I increase longer innings would we piece where just customers, to And have in with that on of And that early that of combined was that effort.

Barry Haimes

bit could terminal about more Great. quick the one the talked terminal network. the of and little been if has attractions a more Davis one I throw with And one, you wanting as do in to

about You and Thanks. witness would more know, you being in but without through you many geographically leading would and most do tipping to acquisition have your some that how terminals think [indiscernible]? see like chart the hand, build you’d organics or you of

Jason Bates

Yes. Great question.

bit. So, me to just situation clarify Davis little allow the a

locations Georgia; that to going where and and maintenance Lakeland, and I now take synergies. Valdosta, some park have Florida them opportunities and suddenly Carnesville, of drivers as they but can we and move of, take trailers, So, advantage advantage wouldn't terms terminals in locations going as to characterize start Georgia are to is get of in out USA to in those we Truck tractors

out. to want point I just So, that

terms of said I additional In facilities, mean previously. this we’ve

if there levels of low low they that tell organic looking a all at a as strategic we at this short. priority, just others much right up be, in to opportunities the I likely and with highest could in year sheet situation more come don't capital other been standpoint, balance have be have we’re a facilities up looking now. the we’re little an from for the acquisition Opportunistically, our at as process. you network, candidly has are and may integration and it’s we're two looking right about We for and think organic see now terminal things we being as come levels future those be near We looking a need year, more the that Davis. but

Barry Haimes

much appreciate Thanks, so guys, Great. it.

Jason Bates

Barry. Thanks

Operator

is next Please of follow-up a Our question Delco go Stephens. Brad ahead. from

Brad Delco

kind follow-up. that a sort just thanks are of I of trucking? brief. points clipped forgot. or of guys, Hi taking corporate the mentioned that you again that independent the goal margins of XXX I’ll into be basis market, target the James, the is future was for improving

James Reed

just That’s trucking.

it’s XXX XXX, XXX mean, So, we makes great expect always it’s a say but I to I a say but still OR. me quarter, Jason trucking. had – we XX

of to call one about reduce in have to opportunities domicile the spoke with we the We challenges efficiently. our location outer leverage pursuant I These miles have our of and sending we’re earlier home. the opportunities cost, the kind un-dispatched we disproportionate network a incur question, is, drivers our route to are amount unpaid Barry’s and of our more of miles. facilities because driver

but don't you not to a going improve Two to tell specific number, I’m the that. we’ve tell it’s OR. levels going you a significant opportunity told I'm targeted about. to and do beyond that Our competitors the you

So, execution now starting we and path I next level. really good really of we’ve we have path, line just to how about do down on, sight and this, and got feel be the we a clear told want optimistic here, trajectory lead will the but to overly about been – don't that are take the that going we to you to to results it’s that to solid get we’ve about. just the

Jason Bates

doing what we're our we're It And we’re to do started said plans methodical And and very to now the right? it going we’ve you Brad, and the network. telling opened getting we’ve are. what opportunities then It us and tried up be with to right right where be, started they and in to right markets That the next needed rates freight no with freight the dedicated. and getting for saying right?

with Now, we're focusing on that. getting aligned drivers

which to have effects. very are going of All positive

so, next biggest there, move to one. out on then low And through this, go after steer our fruit and we're hanging to the step just trying way and the

Brad Delco

independent dynamic, cost saying your are Okay, of and it because sounds if we are be like in that was dependent appreciate weaker you improvement, you mile could guys good. improve market I in, that of there the be freight of into further per we getting freight drive but are on the know understand market you color and mentioned in may cost seeing improvement freight what difficult more miles, part I miles, kind challenging a ability if will to market. a going I more

it. dynamic So, that think I wanted to explained I and you understand just

thanks. So,

James Reed

on the example here call. Yes. just that four gave I’m in The the you. Well, examples one caution about want basis, talking but of CPM I did we I that say earlier to in reducing aren't showing even outer paying route variable on miles in That the change miles for miles that if example. your we’re cost structure metrics. up cost is improves there out no because

aware Brad, down we And a four are should do in points things call So, of just I the everybody just market even the we’ve want be things I that that. do mentioned that will can accomplish to about. that we talked think those in

Brad Delco

Okay, guys. great. Thanks

James Reed

you, Thank Brad.

Operator

would like conference any question-and-answer our to session. for to the concludes over turn I James Reed closing remarks. This back

James Reed

Thanks, Andrea.

Times New even in week upcoming is hope back, quarter's NASDAQ many you events. following of this our now results further acquisition we we our week; see XXnd this the Watch Day. story. in is shared will Austin for and to and We the Veterans I support on before support. at Day. in truer will the tractor York, ATA and for on your November; us be As Square at Veterans these Jason driver Navy is Thanks the model ever. next Transfer, believe of hosting and be first Thanks Street for Davis year this again joining and that for a USA at Truck I and than USA

Operator

Thank concluded. today's now attending is for conference presentation. you The

You disconnect. may now

USA Truck (USAK) 26 Oct 182018 Q3 Earnings call transcript