USX - Earnings call transcript Q3 2019 | U.S. Xpress Enterprises Inc

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Operator

Greetings and welcome to the U.S. Xpress Third Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to Senior conference Vice like host, to now Baubach, Brian President, would turn over the your I Corporate Finance. with ahead, go your sir. Please conference,

Brian Baubach

your and quarter Thank in Eric me Fuller, operator and Chief morning Chief are We you, Executive Financial and Officer; good here today our Peterson, earnings XXXX appreciate third President call. Eric With everyone. participation Officer.

section X, reminder, will be the Investors call XXXX. replay November available through this of of a website As a our on

presentation to at supplemental today's We discussion website have a also our accompany investor.usxpress.com. on posted

our Before may variety could other prospects. we remarks include of Act forward-looking and those constitute from statements Such Such or differ within uncertainties begin, this let factors statements. risks, are Reform of me remind to do update and These March meaning contain other not Forward-Looking about factors are everyone actual any set subject that XX-K future the the risks results call to Litigation XXXX. that duty Private such such undertake materially expectations, cause in Securities to certain X, XXXX. beliefs, a implied XXXX statements. statements and of filed plans Statements We by on estimates, indicated that forth

considered in to accordance certain prepared these of the isolation Additionally, performance. results useful be can GAAP. we in information or measures today's The additional for non-GAAP evaluating as U.S. GAAP substitute release. earnings in presentation we during in most be will measure believe A call, not non-GAAP found discuss should our which a measures, can be with our of comparable reconciliation this

to point, I this will At over the call Eric Fuller. turn

Eric Fuller

third the to and with the strategic I today's good and before then detail. opening conclude quarter our or On market discuss quarter Peterson your will on initiatives. a call our financial Thank results our comment more update then and I third an in outlook you, call will will provide review questions. Eric Brian, morning. results on

trucking we think consider our that turns, following keep cycle you more and as as results about the you even important ask thing; you mind As the our prospects in

XX% is term our which perform This record to we business First, business, our with a quarter. well another for pleased revenue that to delivered per per tractor steadier in the business of $X,XXX. through of have less as third quarter to longer accounts excess that continue I’m contracts cycles. report of performance achieved revenue exposure we week Dedicated approximately

truckload X% professional and as quarter, the the of our grew to training, combination we amongst the approximately offering equipment, superior truck drivers versus population. miles, a overall quality as fleet the business XXXX Second, we respect well driver cycle, attribute which through stability

and professional we and and offerings lower continue to our in digital create technologies internal invest improve execute Third, to costs designed drivers. truck efficiencies, our are customers our to that initiatives

base. market with the Finally, leverage non-contract improvement we the fleet of in Dedicated in believe freight the upswing on larger capitalize eventual revenue advantage our are significant and inherent exposure, positioned in to business, well and operating OTR our the a take we

in our and utilization market mile, operations. the Turning imbalance demand quarter This of over freight third only in fleet, to ability supply the tractor non-contractor were our not volumes continue our excess road we pressured consistent of levels. also the supply year the where our revenue results, ago portions with optimize see to our per to relatively particularly overall but brokerage

year's approximately pricing the quarter, levels. the record from declined over high operations last non-contracted XX% road For in our by

and significantly market initiatives. impact Dedicated second our the better grew marginally internal While exposure spot results the income, levels. with of volatility brokerage $X.X Together quarter million in of operating from positive decline overcame our impact

freight its contract has fleet, our approximately XX% our moving of XX% XX% which historically segment, reminder, base a of spot asset rates or under non-contracted under rates. is move seen with OTR As approximately

incremental up spot year-out, made market Year-in by specific of various price services information as loads reported spot our is the vast the such Xpress’s is U.S. majority and projects or DAT. necessarily to and from not of comparable customers

in our second call, discussed the drove combined over closed in to my capacity relocation supply market of road the we XX% Mexico of As quarter our excess the operations spot exposure our for miles. than with more

to third the which exposure largely marginally was market soft of continued quarter, rates result the the our sequentially, increased Through spot trends.

as be new to continues by result pressure market spot the and market. the entrants in headwinds aggressive of a under pricing created Additionally, unprecedented digital unsustainable in

OTR a detail, year-over-year approximately were the third over basis. in our Looking road in our up the results X.X% rates at contract on more quarter

XX% our down them puts discount rates the at XX% were spot approximate an contract. which approximately However, year-over-year,

than of Our the our higher average below over premium than been have has contract more years. for any those spot spot years, and XX not last our XX% contract rates rates been

year As operations. a our spot we of cycle conditions will are this over to approximately have not of target we we market regardless and said, representative XX% based in our road market the continue believe typical and experienced history, exposure the on

tractor with revenue combined a with of over in rate the enter quarter quarter was per week As a result XXXX of operations. X.X% the road per the decrease in a miles third mile. revenue per for a week, decrease average result, per X.X% This average per compared declined tractor XX.X%

surcharges quarter the division of quarter. tractor ago territory average per excluding week of $XXXX achieved X.X% average The Dedicated XXXX compared row. third a quarter of increased in the revenue third as per in XXXX Turning fuel year week per second tractor in record revenue the per for over in to the our quarter remained to

divisions a per is increase revenue of the primarily result the in mile. X.X% The increase

Dedicated discussed significantly division execution a have improved we As prior utilization. as we of rate attractive the have the achieve in on manage we to accounts combination calls, more

quarter quarter of further is are lows million this third the for fewer consecutive have million believes and revenue results, for with initiative on encouraged of on working been opportunity we load. decreased a gains. over to per have the and four revenue the XXXX decrease of as We third XX.X segment year quarters as experienced improvement and Brokerage in very in compared the $XX there XXXX

an operating incurred primarily in in partially is to operating $X the load by result as $XXX This $XXX drop $XXX,XXX compared revenue year income per million a of We cost drop load. offset of the ago a of quarter. per in loss

of like our now minutes would lower updating improve technology satisfaction to a accelerate many on improve our driver utilizing costs. initiatives, few the strategic and business, I spend of center our to our customers on which and processes, velocity you

our to project frictionless has our the Information on utilizing To our integrating with order the further an we been are His at Officer beginning early of mandate on basis. legacy systems with XXXX decisions business. initiative many our first our existing and recruited made a reduce Chief a manual a of and that to data efforts, daily priority systems digitize

to idea we this of as the give areas describe through just you opportunity me first, a of all work Company. the better Let

If the at look to you is from XX that order the in points, time order, it customer typically are books touch billed. time the the there

door These consuming, touch not by points only decisions errors office and decisions. require This opens manual, suboptimal also back entry work any time personnel. both data to the and our but times is drivers

automate fully most goal is to touch and optimize Our then points them.

freight. our of spend employees reduction actually required them efficient significant It will in work. a to result office work level routine the by allow job be make time by in end will moving more our removing while which the drivers The also more should cab,

to As let's filled macro an he out arrival driver a a look Automatic the and the shipper, at be information driver. areas. what time example, in arrive When other driver waiting trailer had which would consuming which input bill take for is us both to The arrivals. and opening have door by again data would have, entry would the the to they meet

any to that which consolidate our is we the not the do information. so have aggregated doesn't populate one system, one have - do the system, team not driver we all making need to good we these is progress. The What isn't problem into that very working have do into the data information and we auto data items, can on so input

million annualized line over next four touches another sight to approximately eliminated with days. have XX we of fact, the In million

been training Another important reaching our initiative in potentially redeveloped impact facilities. has driver investment with far our

Tunnel was Georgia which of in Hill first The in February. opened

for continuous with drivers new providing skills necessary experienced abilities with and for program opportunities drivers our the the a learning goal of knowledge, This provides career. successful

positive While seeing still are have its drivers training. results rollout, those from this early we completed who in

claims are expense. accident We optimistic reducing training and satisfaction improve the our drivers that will overtime, also and this insurance rate Company's and while retention, their

positive results third a open in July we are opened the few months. and expect facility a next the seeing, that in we second to facility Given

upgrade our training facilities is the to to plan country. Our continue across

most up is to immediately for we measure, testing drivers drivers have are XXXX. testing As which our from our an effective safety all we the XX% additional been through hair that of follicle of moving

of like I over review would turn call our now a the financial for Eric results. to Peterson

Eric Peterson

and Eric morning. as you, the decrease $XXX.X third XXXX compared revenue the quarter Thank good million, year for to million quarter. $XX.X a of was ago Operating

as year. million Excluding main revenues were discontinued of Company's January a brokerage The which decrease was Mexico the driver revenue. Operating $XX.X quarter in operations, third a reminder a revenue $XX the from this in for decrease million.

$XX.X was our the period income of segment, in achieved million conditions. recruiting per compared in revenue the X.X% of quarter. less a retention with market truckload as producing came million, negative for $X.X X.X% quarter In the truck, had during we success XXXX trucks and prior more Operating third

a to we quarter. XX.X% a operating an delivered third relative for quarter, year ratio XXXX which operating the reported We in is XX% increase ratio that ago the

has as a Eric decline profitability largely of Our line. the market outlined challenging which result

tractor was in saw on per quarter, production progress an fleet in Dedicated current $XXXX basis which average XX.X% degradation the X.X% productivity road offset unit production saw the by third week increase per revenue in This our week. fleet, over to revenue tractor per per revenue $XXXX XXXX. the average of per per Our quarter to in partially unit made $XXXX, revenue decrease from a

second and million, of was result third In compares to of quarter, lower utilization. quarter. mile addition, $X.X the since a to $X.XX $XX.X of a the inflation Net driver as in wage income quarter and prior per year's which net loss very pay increased last similar approximately quarter XXXX million for

per per $X.XX in Loss the the of quarter earnings diluted compared diluted was third year of share share to $X.XX XXXX prior in quarter.

net be firmed of capital our year to million and for dollars. for narrowed tractor trailer our $XXX XXX expenditures compared the trade up, million $XXX $XXX to million dollars have have our million previous between expectations delivery to and we schedules As guidance and

manage replacement continue miles our to will XXX,XXX to an We approximate tractors cycle.

$XXX.X We a ended and facility. revolving of had in million credit $XXX.X with quarter cash debt million of the net availability third under

at is and our much requirements, higher based which one, for with manage on credit ratio under the historical leverage agreement the remains agreement levels. comfort calculated X.X credit business leverage within to ability Our zone our our well to managing

our with intend our towards stated we Consistent delever times. strategy the to overtime organization one IPO, as during

However, we factors. with incremental initiatives, expect decisions, vary conditions, progress financing will market other and will be equipment amongst internal

We we million XXXX to would in expense we market the third conditions our and for for expect approximately before the expect thereafter. currently $X.X quarter leverage was interest are of expense to improve beginning million $XX the to half trough to peak full-year first Interest believe continue in and be XXXX.

turn like call With Fuller for to to the that, Eric remarks. concluding I back would

Eric Fuller

Eric. you, Thank

Turning to enter with strong new remained customer due our market play transactional from digital new we to quarter, environment the relationships. challenging outlook. The and the XXXX has capacity entrants to market added and as spot pressure freight fourth

through of continuation experienced We XXXX a the exhibit quarter expect negative market conditions fourth of October. to

Our on in of an conditions was ratio prior assumption improving operating full-year guidance adjusted to market and flat a predicated versus conditions or of June July. XX.X% XX.X% of the XXXX

provide peak ratio contexts declined has current would full-year season the rates October through and develop. market end, through if freight persist To approximate been adjusted slow operating freight year XX.X%. environment Instead, a our experienced for to

longer Xpress exit our freight the the rate cycle able from we remain has given capacity next significant industry. of U.S. to outlook we for this positive In and deploy the capacity against up term, will And be on growing industry. the

carriers of skyrocketing insurance exiting combination of stages trucks falling the sale, recent for regulatory orders, truck indicate smaller constraints capacity of the market. early the all premiums believe and for backlog growing the new We used

Additionally, major the squeeze to expected and drug in clearing the and for January, go further a market live the out which alcohol industry of we will capacity be is event overtime. house believe

our opportunity as our in upon to strategy cycle this continue remain have operations team, our to for we significant business. profitability our and the improve I outlook through we our initiatives. confident execute include, and our To

questions. you today. call open for Thank your again Operator, time please the for

Operator

with Atkins Please Thank your question. proceed line you. from [Operator first Stephens. Instructions] question Your comes of the Jack with

Jack Atkins

my taking Hey, much so questions. good morning. Thanks for guys,

Eric Peterson

Morning. Good

Eric Fuller

morning Jack. Good

Jack Atkins

B, bit little deterioration least to as we out mitigate there. about seeing the some of imply sequentially XXX So, know the peek much XX.XX fourth outlook through with can first thinking approximately off what you there. that and the but fourth profitability that Can would are maybe to talk of I we right with deterioration guess a the is is it let about, of what hearing a a folks the into driving which I me full-year XXX you about peak, just about full-year kind for just head about for your a start way of the for is that aren't commentary most next north Can do pressure half quarter, talk some year? Eric what a the sequential cost there and that into that XXX, at of A you think a something quarter.

Eric Peterson

thanks, Yes, Jack.

trying market quarter, starting quarter, would fourth conditions that consistent at the there what - and the think would the year. that mid result for we I approximated a be exiting for if that the XX.X in are on XX.X would quarter fourth we be is quarter, more to comparable the that third did stay a third which say

our the far insurance primarily have claims term, to we initiatives a immediate can as Those what numbers at longer line that, and longer do looking As initiatives, we opportunity we our more over in quarter-to-quarter. for an necessarily where are there we looking from and overtime mitigate that are are to the and on progress making believe that be progress item. is shown not the going come expense, term

you mentioned going cost to side, loads, our to that out that results as of of efficient of type on friction the But as on can’t cost the what order number. seeing to Fuller cost it's earlier, out where the the organization quarter-to-quarter. from the I’m from doing going continue again, also Once the hockey think I ultimately is are initiative we that I become of a those show term to is as take which is take well. longer that something digitization stick platform, cash Eric in

think the our the is be that the over we which primarily current deterioration in market, our believe exposure in in market conditions to off earnings, the fleet, have thing has Really headwinds been in biggest managed to nature the temporary that I we our which spot cycles road the through. on based prior

Jack Atkins

the more you. Got Okay, sort assume But I to got XX.X commentary, sure does mean, Eric, just correctly, seasonal the the levels, just out assumed I the to be does make assume I'm just guess understand, I October it. that you the I couple months what guidance in our year of is back the uptick, through. specific any XX.X, that to know or guess that trying on September into that number. or of figure persists that

Eric Peterson

kind to headed. feel would unfortunately, of was little the call October, it than normal optimistic we lot would about market In a we bit Yes. a what life, like I seasonal a September, of to a in the October feel. life where saw felt little weaker market. starting

think put bit I more cautious to that little approach probably our So outlook. a

are I But do think mentioned like As still peak. see we things last pop are it's probably don't be anything a going muted and there years. to you going have some some and to couple is and it's the like peak, a we that ups be seeing think seen very I And that. there peak earlier, I think opportunities in we projects that

at things that this go So movement and not I are based point, type we as we fact I any into on noting. Unfortunately did really tell November worth see guidance was December. not seeing you, will is if improvement of the think the that

see some have of still we the season. that our customers peak will But a to that our cautious of little with dialogue optimism with pickup bit some relative we

for approach the is how And so this we that guidance are on cautious little we being the reason fourth quarter. a

Jack Atkins

that are the stable? trucks One challenging last up we one, Why probably look sequentially over. XQ the not when average the business to it look maybe we shrink on you why there, market, But, at OTR are got sequentially would growing OTR is fleet think will because was I business, talk XXX the a XXX. XQ. to consolidated Okay, turn fleet company fleet you. I such plans - at about over that the guess I the it keep and a it is when is XX.XX, a Can or within OTR

Eric Fuller

Yes, typically quarters that you admittedly a is and at even into giving last throw rates, see the running were Group spot four contract years conversation, now three the XXXX I we over if OTR But rates go have running we point. look us only that counter to a XX of been XXXX, this few and headwinds of we are really back are where would really in to this quarters and rates lot scenario.

we cycle we it's far a if look of so counts, counts over we to lot do when opposed upside out there will because our think this and to a truck larger is us. think so, greater that for truck So our we as opportunity time prudent the approach, of are opportunity with period be from count keeping long upside there believe opportunities truck coming of reduced grow to

additional And next that already Dedicated. will number going to of our that next us continue the in of to months, accounts do have XX one we of over saw We also bit couple allow days have growth a we want grow are we that Dedicated the Jack, in other But good thing Dedicated. in anticipate did to some I growth over Dedicated. mention is also sold,

grow trucks shift drivers road into so go that grow and opportunities us leads about fleet it with to we and very Dedicated optimistic those over So our and and also the to feel now. ability Dedicated ahead then

Jack Atkins

Okay, got morning, time again Thanks you. this for guys. the

Eric Fuller

Great.

Operator

proceed with question. comes question next line Wolfe Please Group Scott your from the with Research. Your of

Scott Group

good morning, guys. thanks, Hey,

understand take so Just road over I Dedicated the and begin? the that are contracts as them into going put last to you trucks and point, add these

Eric Fuller

would. We

over would opportunity into first is time, assets in to be will trough of the an move relatively opportunity to market that and to road there but has grow the if and Now both, the our with both our turn we would and a due that intention those belief the grow market drivers Dedicated. out those take

Scott Group

So CapEx preliminary but cash the thought on understand I what is and this for CapEx does this year? year, what for mean next

Eric Peterson

to Yes, and the XXX,XXX to cycles we are is think be going going going to at we see extent be obviously, to earnings, higher through look what more cash and side to stick will prudent and be I percentage we earned. equipment are leases. a we what our is to that going we are with financing are be earnings to compared still the when you But better results debt will and leased to have going going of we

Scott Group

I Okay, right so have just about just to fourth quarter, saying expectations. the clarify are and we want the what guys then you all

guess are I get to Peterson - quarter, fourth a you that quarter made third be a comment Eric similar saying you wouldn't So you that to should OR XX.X.

to should I'm for sure quarter sure are we so third, modeling your guidance? we want fourth I not years, similar make to we just the a OR to Just be understand what or XX.X getting

Eric Peterson

to are that slightly I point That I so in approximately saying you is to your be fourth quarter extent might mid in XX.X, the - to to XX.X, results mean the it are lower. think third. going compared a approximate the similar that We

Scott Group

the and downs road how you metrics two in mile those And Okay. five fourth? in down over the rate the about are per utilization third, and thinking eight then

Eric Fuller

still at anticipate we a peak anticipate that some will But boost think probably little we up Yes, that I similar results. this I point, season rates bit. mean,

Scott Group

lastly, Okay. is on think on just, us should sales bit you took I'm more And step on forward? how number going that residuals we up. Can a sales? loss about then a that just depreciation of a guessing, and losses give

Eric Peterson

million equipment that. in go some would we there a that third third. we I the really to what the But that forward Yes, I on experience by basis. were drove Depreciation losses Yes, that dollars. than would out up There putting expect a quarter. number some took say of that couple be, during lower

Scott Group

we again, Do start should the to think you appreciation starting in move fourth? lower to

Eric Peterson

Slightly.

Scott Group

you Thank guys. Okay. Alright.

Eric Fuller

Thank you.

Operator

your question from with next Shanker Your comes Ravi of Morgan question. line Please the Stanley. with proceed

Ravi Shanker

morning Thanks, gentlemen. good

of great Just are may market of just your the a question. but the Rather staying which you response to first a for of having you a previously why macro are understand the go place is the you are market little kind if we in telling return. is think giving waiting where the market than for be right time I difficult back comes trying to about are your you here. I follow-up I'm of the doing. that while here market going strategy you back little saying come One what understanding in are some not just peers hard, kind to - and where where still will going be, now. a the right is

so like? And that scenario does what look

Eric Fuller

Right, yes.

working I are Dedicated road our move utilization we that and freight, into more mean, the the assets, consistency or side. the to into rate us consistent side both contract give will opportunities So on on either over diligently

seeing truck believe some that And while can so count growth. we accomplish we

would has built our have to where numerous the run the I if were that network improve we say approach our I profitability and to understand Again, scenarios through our we that shrinking. fleet we network shrink could not is

grow count issue and truck look infrastructure, prudent and if so model overall putting infrastructure so. infrastructure do more for us, it's so and us from an that our that is it there miles we over a of part fixed for believe our better And, to is opportunity revenue at costs is that we to more

Ravi Shanker

mean, actions cost maybe I repositioning like are is more saying any can big or the is Okay. spoke you cost items. the we you other anything a know to long-term great. you predict about and on are I follow-up but fleet such, cost you good do truck mean that of initiatives decisive take. the what things are can which short-term on I lot I is And hear But to there -. doing that there in a tech guys

Eric Fuller

We down. have taken

if our group So count overhead our look the truckload and operations count, of the though is spots has truck grown, been bright headcount. at, look group think - and us SG&A we maintain our though able at truck you that we the I one for within have to the

are the we increase in trucks. having so handle And not to headcount to order additional

I road. So think significant lead results to the better will that down is that and

We is catastrophic a positive to continuing company are level focus of in major the in of had the within accidents we on seen had we we our that area insurance that is attention and in maybe past. costs, haven't that have ton the results a that getting some had fact, area,

so follicle move we a testing door. we that quality hair continue, driver into that have as comes believe will in especially the and better And

feel we really So optimistic there.

the two And where quarters that have believe really we then are around this been to three the on for we frictionless focused we and it order going next I quarters about now. is that to see optimization, process automation impact, really are start working

what would done did in to kind or stuff, things past. And heard that do rudimentary a of it was call of maybe we the lot just maybe some hadn't trying I

financials. some results really that some I bear really we start think our in Now, are focused things significant around to will

Ravi Shanker

Very good. Thanks guys.

Eric Fuller

you. Thank

Operator

Your next Please with Stifel. David the your of comes proceed line Ross question. question with from

David Ross

Good morning, gentlemen.

Eric Fuller

Good morning.

Eric Peterson

morning. Good

David Ross

seeing Are you drivers. this pay I pressure little year? Eric, about a any talk wanted to

Eric Peterson

situation. focused a help couple it You the changing driver obviously things get things. this more a bit look know, around year as That Company perspective, easier with And I driver really think is from at not, make little to I recruiting. the within traction in particularly we deal a us to to us starting we are with. are frictionless piece, then

seeing as what what of a that call see larger drivers stability, more are typically we feel flat are and also seeing equality is I carriers more weak, is broadly But market well. little we in as to market you then to bit the continues there the where the move a of

not And increase so pressure drivers we to that to order are wages feeling any in in. bring

David Ross

serious utilization extra their them trucks in hard declining just pay now. to get the And with is the and the miles, year-over-year because it down

Eric Peterson

we the at were, look group, was utilization and road back we comparable. if operating the over quarters same our we look where at ago, if in So to roughly two were environment, our go

count irregular be So believe a we the do in And route degradation again truck related significant is are growth. affected seeing network, to other. way the it of one not to on because utilization difficult that we or

So of we to same that to in amount the able revenue bring continue are utilization. is getting

us So if we don't making are And think affect would look necessarily on the that that basis, hasn't fact, and that a drivers think probably affected truck-by-truck less. same in I you so the at I And will forward significantly say going around don't either. that.

David Ross

that on before benefit? then And the you from you costs get any do hair follicle testing, incremental anticipate any material,

Eric Peterson

hair other do now, unfortunate. a right us of just hair so are But I we follicle. think analysis request I the those that mean, significant. with can are carriers - do mean, still trying to and we costs And obviously are a listed is both we not requires hair follicle government get I which of to a part minimal. still number

won't later that, bit reduction reduction count hair they to Outside truck of saw who follicle. truck follicle. relative a we are we our We at of other when see than a we count in of some believe degradation peers little if significant a believe that went as in all to because hair the significant their a

about our tested hair to follicle we in half keep also of have point. had this up drivers And mind

not truck it's and a ago or that, these our three one that carriers two saw huge can we other maintain years like hit. So to of We went from zero XXX believe count.

part our our hair I truck up anticipation testing. But of boosting count will strategy follicle that was say of on

at higher see strategy we a slight number being versus recruiting see there if our of then are and a in So, with thought lower a as do we that degradation a degradation better number doing well. it was some we classes, from trucks and

David Ross

you. Thank Excellent.

Operator

Morgan. line Ossenbeck comes Your with with from proceed Brian next JP question question. Please over your

Brian Ossenbeck

the taking questions. for Hey, good Thanks morning.

over that in future. in in to little of XXX% Just in off that on of then How on kind add I It a Dedicated buckets going that there to have terms follicle biggest road it sounds little cycle is much those factor right you in fleet place Is plays really rank the get cap in example? to to testing the the terms road you how more your there hair is the more view the there, thought. right the the for upsized of your to But a from wanting the any out. last cycle maybe you order the that on at depending of on putting size? from If maybe bit here growing Obviously, headwind them. be put of and of bit like please time? chance view the is tractors could well, the a as or and Dedicated

Eric Fuller

Yes, and I our Dedicated. strategy look, mean, have still is a to higher to Dedicated grow long-term concentration

We closer like are still see that XX. be it to run we XX% in roughly to would

growth focused are around there. we So

very in to opportunities cycle be group. other X% quarter, And, goes a within quarter market I we of out of Our that probably, growth to is be Dedicated to over from see within we to try because to that XX% aggressive the and the growth regardless can going of think is sight continuing Dedicated, line anywhere right. half next are in within the bring impactful where

a will something benefit follicle term. longer hair that us The give is testing

for less higher to think catastrophic then period service time, I better accidents, it of see have really turnover, start less interplays. will see less that you driver a we accidents, usually of see definitely, you a you all think you once so quality

day get it one. probably the of of to an longer absolutely would where those say tail to in impact. we But, that deals building impact long-term cycle, we to look a not. one at as that still as focus up I more XX%. Dedicated But on relates as want

level basis we that that strategy. to to our a to back But still long-term revenue regardless then are get trying also, cycle XX%, so on spot and their stay long-term within keeping to committed total there,

Brian Ossenbeck

so is end to any quarter markets you Can growth other for that of in around are relative in you of are near-term geographies, how when then at, just Dedicated you going looking is terms XX% pipeline that being pipeline. terms context and Okay, opportunities? the overtime grow, else to perhaps some you last about if looking there more put so to big talk and the what aggressive other verticals, or the in

Eric Fuller

Yes, so say, within I Dedicated opportunities current customer would opportunities, of I base. mean, a lot our

do think base to the a a number strategy a in seem to retracted that has level. and was are there kind lot of of and high they their that few have last with thing trying that was a perform within the large can year opened I up their carrier Dedicated, gone business those few to back part, customers at interesting and understand

decent last large of benefits of mile Dedicated, some think into Dedicated, could we some some but growth it us the of within saying not is current see things types we products and different our because think customer us and I and that that, different within we are verticals kind So more whether There presence going not also within that. consumer towards we or of so like other opportunity electronics base. types be or types maybe specific any of products, into other like products are for

very retail, but prioritize think this been heavy we point continue have We is opportunities. can and other will up we to grocery discount I that, to there

I is pipeline down definitely interesting an It pipeline say significantly. is from would enough. was opportunity standpoint the overall the So

as seeing like But opportunities carriers well. said, is opportunity, less I there are is what because those better in we

months think growth I now in we so did And a feel as as XX bullish Dedicated from probably perspective, ago. we just

Brian Ossenbeck

thanks Okay, Peterson. for one update there. May that be for

just the know headroom give color where I context up of earlier bit us ratio you will about out the at further a the the got credit in you ratios the already, you you raising If some facility, first think took for you top on of year, give like that some leverage little just but September. the can end half

was maybe be was how as needed, caution first ceiling, new topping of given out. Thank So us an abundance to more you it felt close little going are that guidance you context can you. you think half to the to for you and your maybe give a the why

Eric Peterson

are would U.S. have monitoring great just to, the we continually Xpress everyone, credit conditions. We like amend to and term financial our And reminder, did loan, we our thanks. market facility. Yes, partners on we

ahead as the deteriorated, was requirements peak And XXXX. could in adjust to covenant the prudent the go, half thought that the and where where that it market financial in we go in quarter could facility conditions or have and regarding the of second second

really conditions. it’s on depend mentioned, the I As market going to

and that. to financial remind strategy like I breach ahead and try that eye of financial on never monitor so covenant our we and the our have something to our of are in been closely of is And with would to because partners stay it going keep we that

to right conditions, our is Our strategy and that to We times organization, one are organization realize since the term successful to initiatives. like in that really we on depend and levered but hasn't now going market would is longer mark IPO. the changed the how we

going are large the a that. part in obviously, to But market conditions play

was number down be to to continue we'll the a going don't markets to of line I has that dependent perfect sight anybody that and going and that So right is on that peaks largely path I think it where is where now. say something

Brian Ossenbeck

guys. for time. Alright Thanks the

Operator

next comes Lynch. Bank question line question. Please America Ken Hoaxter Merrill your of from proceed with with Your of

Ken Hoaxter

on want and so Eric Eric. I I you after guess And wire I’m increasing little to continue Hey, follow-up that tractors listening be that. Ravi's confused the a the the bit longer, conditions in good still to much a I primed. bit then a back guess not quarter. the But guess morning market? to on react I on just the if maybe why comment going get

would driver you assets? is would going though some to expanding are from reducing face negative in testing, even fleet in a to of fleet what the decline the that you are anticipating be follicle XXX%.Why for be there? there you the you be are reaction capacity and preparation expand in XX% to from want losing going If hair the you fleet wouldn't some Why

Eric Fuller

that things. hadn't started Dedicated Yes, business One, a do in just couple so have we a I think is already sold. yet. And

take onboard When SAP out to opportunities, are of will move a opportunities, building little So of those the a as can while and we those up. opportunities we truck over Dedicated these lot road. we

anticipate. early to ahead than go probably us and So staffing quicker would allow by capacity and at be will ahead typically full going we

view we we opportunities as the pipeline. positive that have a so in And the with that

that And piece. is one so I think

think other I the piece is-.

Ken Hoaxter

that have if have the But mean, points - you if your Eric, the many and can prepared, say, to a want mean Okay, I if I are just it always sense, when why I margins, percentage When this. jump we but this in XX be what there of is you it market, that decrease get have pressuring are heard more have got not market to are move. could that I pressure that capacity you you operating difference. on risk spot for guess add calls and your to I there other you questions the at, to can I so got peers but it ability because that you at is things exposure OR. changing? point, at expand I guess because XXX% makes XX%

Eric Fuller

the about with over days. It next it capacity. XX means piece Yes, the Dedicated These having opportunities is are on-boarding the really Dedicated

follicle testing, some after XX% a hair as out. periods trucks hair they the some to peers at being high able if piece truck follicle you as go testing. so this in that drop their for back as other of big saw is, to hair historically, to And testing a is But I much a to went as went quarters our follicle and think count look shift five

So revenue. costs a our hit, if hair believe infrastructure and we significant to hit that testing, our to to our then fleet were reduce would follicle we take huge suffer. then be a and go And overall will

boost to able potential of fixed revenue right in the infrastructure of follicle loss that our and we testing. our mitigate anticipation loss go being hair by we is and believe now, count of truck so to as strategy And coverage try costs to

Ken Hoaxter

if that minimize and losing drivers, No. mean, try more a opposed even tractors you because to stuck with as if would me, expanding you are your that. I is XX with at figured fleet to to tractors, fewer more to even you then you are want risk, are confusing you OR

Eric Fuller

Yes.

two situations, So right. different

we we naturally not look we at we that fleet, number orders have down. if that some with are back we truck trades, with that very So, new up, come when count and additional and could of the reduce concern is constantly and look we additional at assets, little the on that the bring that physical trades the truck the problem our pull we a that tractors degradation saw could bringing assets,

asset issue driver an issue. So not a it's its

by reason of have the out can manage fairly to to it's that we that is the us of just put reduce allowing is actually market. and asset number that. very do The So would drivers of trucks easy take, we the number the trades as we occurring reducing number the tractors or into the increasing play by we

Ken Hoaxter

into peak adjust operating timing of or a season the year, a of kind CapEx timing into a at that leases going there could is that faster any the that of Okay, leases you should speed? so is end or look kind we

Eric Peterson

the as it earlier made we to Eric truck I this really, we our the count, the impact look at of answer on that a call this our fixed point add overhead financial last think know add without you were from If count to truck and that SG&A cost. just to Yes is able Eric. increasing relates incremental to

with are to the variable infrastructure. challenging earnings, the costs primarily trucks one-third even So fixed our incremental actually in two-thirds accretive market a

offset a And of a over those the road actually the rates those would say so I and and little are help tailwind. trucks that become suffering down some headwinds in volumes that incremental where market the a

if strategy, we long cycles you stayed we market that cycles follow the if have now. the market next the in look spot if in looking how at look on out of we the and be our we But understand long believe and should also, in this rates you than the the historical where are quarters. we of lower we couple are contract, coming And historically right

Ken Hoaxter

Okay, topic Just maybe quick switching for a second. another to

you there rates. to mentioned on to exposure kind can rate spot get brokerage something You you away the I from on the pressured exposure for the but on your think customers highlighted the do market Is spot you the brokerage not exposure that really on can necessarily the spot I own spot do brokerage current in salesforce work given to segment. maybe of your maybe decrease on your that exposure the anything - and early Eric

Eric Fuller

define rate that look have of specific quote one not Yes, brokerage, that or is one that long-term supply have in we customers, the on and at with, we time it and we spot anything just major major our come which spot from usually directs spot the we order. predicated that so a contract because and not how call a could don't as at of would spot be our demand is reason - we

spot our of are define we not contracted clarify, business. just does we working but as from getting towards to Most it come brokerage more

Chief so we made some and Marketing big made was Over or months within XX the change significant XX pretty ago, have starting improvement. months sales a we about XX our I nine-months, group. really that last is changes think to some within it And, Officer show our or

that on phones, Xpress typically not million done, that customers on We the after the focused the tail shippers. an U.S. kind traditionally may has have group focused is spend. is small going customers, people inside or small, a which smaller mega million up that of of sales $XX that We something also on opened $XX

a around in help group trying And fill built so gaps. shippers and to we now smaller bring have to

just We within some That days. significant XX pretty group are seeing wins. launched the last

wouldn't numbers. there the program. quarters, to out fill to And last from to business are we with going that So the contract some be of are see trucks next consistent in more in that spot couple their group. that be through able are the quarter’s think I over going wins we But starting really some

Ken Hoaxter

clarify said the you spot not are about headwinds just you the talking when I under so unprecedented the the entire was to on spot your engine. market pricing digital new entrants. just by to digital just want exposure Just pricing created

Eric Fuller

Yes, They market are the are unsustainable. to cash, And try money. margins have grab negative out and it I there. mean taking rates at floor unlimited They are share. through digital don't shoving brokers make gross if you the have look to is that any to they apparently

this the very they are And in opinion. are my And aggressive creating situation so in these guys market.

if I in the think bad the without these situation market, at you market this of look brokers trying it you brokers aggressively as are how market behaving digital to market normal would those Because think it have the as I look not supply does. it's like of not makes type demand because share. buy

Ken Hoaxter

noting next XX that So they is months. happened Hunt and just - what for at looking though comment XX with lose that with, to spend and willing the JV are to money operating

But prepare think you cutting - I believe Amazon all or around. there? the staying you the and longer out said, maybe markets on coming yet very they expect got that should are shortly. have that to a you the market we pressure over the to you Wouldn't afraid ourselves you that rebound in unlimited be saying convoy, cycle prepping mentioned, capital just fleet light of for for

Eric Fuller

Yes.

But got think that you are also got the levels. you unprecedented brokers have would they out are two long believe rates Yes, their seen business the fashion call rates you flip have a to taking pushing small that market, in into are well. pushing Because carriers quicker own they have marginal we side, pushing situations. out these we than of time these capacity. as of a they in are I what So on digital we

from And a that even market they are so perspective. aggressive I the in think price though

themselves the they I because really think hurting own their back killing in end, are capacity. are also they

the still And we in short that self it will seeing scenario, think we thing believe with time. in of that correct correction. relatively that this I market will a are period everything So probably speed that

to equities at Venture and look thing, see are And from last to capital make of kind cash see, to it, then endless I supply make you And going this know, also of think I rework mean from I obviously, forever. to just don't starting whole the this some is point, beginning and at private having this we capacity of And profit. you think you never I a never that think that. was money

little a think that is bit. changing world I

Ken Hoaxter

guys. Thank much. very Thanks, I you the appreciate time.

Eric Fuller

Thanks Ken.

Operator

reached management the to turn closing I like answer and back the over of for gentlemen, would call and have we the end question to Ladies and session remarks.

Eric Fuller

Great. mention, fact, and some and what want everybody the I Alright. alcohol come say to a believe go significant One into call, I still appreciate may that we larger have to do haven't we I that drug want - the impact may would January, to do anticipated. call. XXXX, much you on is we in I than just the on as up into effect clearing thing that going - have goes didn't of impact in

would normally we for think because is this towards push that asset have quicker situation. occur to the a fashion than in going market probably regulatory favorable back in maybe position so to And this of going guys

So to up. bring want I that just

anyway, appreciate and you guys months. But in I everything few to talk Thank you. we'll

Operator

at you This lines time. does conclude this today's conference, you for may disconnect Thank your your participation.

U.S. Xpress Enterprises (USX) 1 Nov 192019 Q3 Earnings call transcript