USX - Earnings call transcript Q3 2020 | U.S. Xpress Enterprises Inc

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good afternoon, ladies and gentlemen and welcome to the U.S. Xpress Third Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Brian Baubach, Senior Vice President, Corporate Finance. sir. ahead, go Please

Brian Baubach

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

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

today’s investor.usxpress.com. updated also more detailed accompany posted to at website an and discussion have our We presentation on supplemental

supplement this as of will be of We portions call. part referencing today’s

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

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

Eric Fuller

main of our our digital will financial results Thank initiative. Peterson On an call, five third review our on and then will fleet underperforming branded are more management I conclude to remains OTR away market detail take to Variant. themes review which you, good now and afternoon. for a a driving outlook. update have This we expansion. I today’s key will our provide review progress The results tractors transitioning in make quarter priority our transition Brian team and and that we with continue digital we hope as to fleet you solo first, the margin our

the XX% grew substantial second steady elevation, Second, costs during in turnover approximately held lower the improvement and the quarter. increased from fleet the include we as levels operating reduced Variant metrics driver quarter's

the We've largest entertaining of an deploy to as excess the this at of the Third market digital performance because time levels transform we profitability is the boosted through hiring also continued meaningful spend for but time single to through. we purpose-built quarter week as operating the our dedicated the later entire will seek through being per tractor Xpress sixth U.S. improve third over the of business per this trend exciting drivers attracting to our truckload to quarter freight taken pure topic brokerage steps lastly has in of strong strengthened deliver the revenue our not organically initiative time we've per the and fleet scale revenue that address division. is improving profitability model made only start third OTR average and of consecutive $X,XXX through To to an our our deliver on our portion right XXXX. going more challenging fleet. obstacle our issue across profitability Fourth, to continue operations help been believe we increasingly in more our drivers quarter segment. I'm qualified which to uncommitted mile

compared tractors continue approximately XX% we quarter to turnover and XX% average quarter. Variant utilization the accidents prove in with million provides out confidence substantially reduction to of we approximately Variant XXX driver than underperforming scalability legacy of OTR a model third advantage maintaining The more transition the This legacy an XXXX. additional second to real per of in the variants OTR business continues scale fleet and adding as over by fleet. in in road miles quarter or XXX first solo fewer the tractors end our work of

our half we of a expect market only few margin Ultimately, in because growth. driver and that sustained phase are I provides with like profitability detail of market. and the the will also provide program turnover improvement Variant also of it into operating to increased the strong expansion tractors speaks in through the complete former challenges minutes we student more insight why of we historical good driver midst our in discuss transition their our backdrop. to we XXXX that for to OTR long one but unseated As a addressing believe our ratio organic would not regardless a runway first take

are market experienced lessen confident results steps taken ultimately through cycles. that have the We we have our volatility that will the

driven portions in driver's our ability turnover ultimately competitive average to is some XXX% increased a as complicated. division as last unnecessarily in earn and our decades OTR high the years called legacy of systems This their on as Over driver reduction dwell, lower pay. have became experienced miles

as spend unseated to driver we training as significantly meet well high recruiting, capacity to had tractors and bonuses turnover. As excess have a keeping this result of on

was turnover this driver profitability a driver buffer our program the supply and recruiting downside higher levels customer cost million given up key low student the driven. to of source miles demand. per drivers their student of accidents of with to of fleet retention, poor OTR to and meet keep utilizations training was our and to provided solution Our The

company. created reduce our and digitizing improve our Our frictionless Bob has while and operation. an CIO amazing Pischke the accelerating was our complexity velocity also order specifically initiative our in systems driver the to done our job satisfaction designed of

a operation app-based millions of this trucks by the our is significant Variant to environment is to required that Variant develop of work experience. Through Ramsdell them planned, quarters level and Intelligence of allowing turnover. The in results benefit completely provided in the is largely freight in more their Variant. three a we to through team which reduce recruited, moving over-the-road new order platforms. take-home time U.S. remove drivers enabled foundation continue an Cameron proprietary managed was we a fleet greatly points the Further A upon by Variant beginning producing. key driver which spend touch of manual is at to digital millions step operating is frictionless dispatched As Xpress. driver initiative working driving and first also higher to reduction using paradigm Artificial for and in led our pay improving key satisfaction are

their transformation models. aspect As an our of as a driven business to pay utilization result also more drivers increase our miles important of their the job see and This is increases. satisfaction

As we to Variant to in will continue but and the legacy only accident per OTR so claims to dramatic. driven from our miles our transition turnover million fleet improvement tractors continue The over not decline is we will believe expense. result

materially than This more per significant preventable million cost coming given model our down example our lower XX% than are average legacy fleet. business transformation. a an accidents OTR miles is As

adjustments a would XX.X% due quarter the year. competition recruiting This in be through OTR and driven operating to experienced and somewhat drivers quarter to of was results, higher program drivers our in miles driver second experienced at approximate during unseated October fleet tractors experience the the legacy increased beginning and reduction To during hiring during supplement. to a third contributed to slide drivers, of for rapidly satisfaction our are suspension an the quarter successful unsuccessful. external as student the attracting me our the to which this X% basis third pickup was we Variant initial third to Turning to however, address to issue improvement tempered quarter improved momentum on ratio percentage our by indicated prior truckload that earnings program quarter. XXX or X point our led of over fleet Variant ability Early believe made attract improvement

per spot challenge ago given The in tractors an improving in X.X% in resulting was week. experienced drive compared unseated a year-over-year in with segment market. per quarter. tractor to supply as tractor the helped higher per X.X% year over-the-road decrease demand rates This average increase week revenue in dynamics Our revenue per the third the a increase by miles

the division, or per mile. for brokerage revenue the per the of in $X.X our our week offset compared $XX week loss sequential a initiatives improvement X.X% the priority tractor record quarter. increase $X,XXX segment dedicated sixth that of the series an loss the to increase ago million increased surcharges an per increased on in executed by of per monthly a XXXX low Turning the teams $XX revenue We ago driven third revenue X.X% as territory in primarily quarter. per over the of $XXX,XXX per per tractor Improving average is have year beginning The quarter margin of week quarter. since fuel achieved incurred during partially primarily margins to a to an we X.X% remained average result third resulted for load operating lesser was of of average reduction in revenue quarter quarter. increase XXXX; excluding extent revenue The by consecutive per in revenue to per XXXX quarter in quarter third and per tractor miles a million operating in week tractor of in the year compared increased to the third Brokerage million to a and as in count. $XX as of compared

brokerage is XXXX. short-term run exit break-even Our as rate a goal to return we to

call our for review Let to financial results. me Peterson turn now the of Eric over

Eric Peterson

revenue revenues fuel primarily compared $XX million third quarter. to company's million the of increase in increased Operating The increase $X.X an afternoon. brokerage increase truckload offset of division the by million the good attributable million of $X.X decreased to was XXXX was and $XXX.X X an million. in as partially revenues Eric you, surcharge of Thank year revenue for quarter ago

third to revenue of X.X% quarter. $X.X to the compares million prior the as an income Excluding in the operating year quarter fuel favorably of compared of million XXXX of impact surcharges million of the posted $XX $XX.X million quarter. quarter operating We increased in increase third to XXXX income $XXX.X which third

our our per overhead efforts. initiatives week and over-the-road XX.X% to the Revenue on rate higher primary tractor division per compared drivers variable XX.X% dedicated and we in operating of of as in our was accidents and to execute in and earnings claims control digital the per third division ratio for as were lower cost while continue improved X.X% reduced The Our mile quarter. prior X.X% and XXXX extent. improved fix costs quarter

quarter. truckload happy to points that Additionally operating XX.X% report basis I'm from XXX prior to improved in XX.X% our ratio the

successfully to XXX designed some than underperforming tractors this grew areas of quarter first, tractors in divisions as as our initiatives quarter we XXX our on profitable the the follows; by to execute or organization from to more to more and capital XX% grown have to improve approximately approximately profitability to to Variant results for continue in are We continue our the allocate as notable and further we the fleet we the date October. exited approximately in division XXX away

from strategic benefit our our to division. student to continue the over-the-road we program in close decision Second,

Third, quarter that without able Variant operational last were eluding previously quarter. growth announced to realized we for achieve in the we efficiencies

over supplement as volumes basis this not on the a As of model. are unit seeing this slide as X per earnings we on new is increase we significant dilution the outlined

of group are total transitioning the of XXXX of result quarter converted road of target to we we having of over today. effectively in the the the by a of majority As end over of tractors as are a process the first our the XXX solo that success expand operations legacy with the continuing

gross we improving pressure progress results that was operating XXX% robust ratio The for are in quarter. financial segment Finally, but segment our conditions this the brokerage margins approximately the quarter business. market despite recent improved sequentially the making towards in generally through

approximately initiatives fourth we improve XXX points [OTR] the we segment on expect for to As our the basis quarter. execute

levels. which to our the decision driver capital to of in resulted underperforming pace miles compared division and tractors. we This to into legacy contraction the Variant of the fleet dynamic to in turnover strategic market second quarter the to legacy allocate in of as OTR returned OTR pace seated underperforming OTR and quarter third away execute tightens During pre-pandemic fewer resulted division in in our higher continue the the from of XX a approximately Variant due legacy quarter XXXX the million than growth faster fewer our

We conversion future. digital that However, in understood to we believe for be strategy remain our nature. committed linear this that trends and would in positive our not advance are

cost tractors client's we Contract during example, frontend negatives legacy as higher mostly a the For such over In rise a in Warranty time continued the impact to believe loaded. all premiums recruiting we operations. build were the rate occurring the believe of markets, growth insurance in student of contrast, program of inning. positives. and to suspending and and expense and early fleet renewals safety higher the the are we of the related Variant

a cost will as ultimately number ability our scale of and believe we build a this quarter that will of a earnings over prior share. and digitally to was loss a $X.X the of impact revenues year higher quarter. basis. levels our continue to from example, these return a increase on deliver modest unit $X.XX and per per million is the diluted For diluted in unseated Variant profitability compared tractors, share income regular enabled but were Earnings quarter of third to on basis. million reduce that the yielding lower $X.XX second which significant miles XXXX a per $XX.X Net of platform have for We on

sheet. to our Turning balance

very and the net our continue made plus to equivalent as quarters. as had to XX million I'm quarter of We decline next of a continue under availability our that in and three progress we debt pleased EBITDA of $XXX.X the improve will XXXX X.XX of revolving compared credit the have several liquidity. debt cash million times XXXX to Defined the leverage to to times our over net We for with month third first believe cash $XXX.X end quarter. the leverage facility. trail

have We pays the liquidity extent respect certainty we are taking to leverage expenditures with a conservative the concerning approach economic our and greater until and of capital recovery.

quarter on we expect a will capital XXXX quarter capital for quarter approximately over including transaction discussed expenditures to quarter million interest we $XXX of previously third end we believe XXXX, was expenditures fourth range call, up, this for includes which the million from of million Interest and over. of and our million $XX million carry second planned discussed $XX be reduced in the be full-year the where a As million our expense expense $XX million XXXX. the we $X.X carried Through $XXX XXXX. were third to a that for still $XX.X that the net to is

our market I'd we effect million which quarter, the for during Finally, to renew on September in annual Fuller insurance resulted to liability back program were premiums challenging that, With in able approximately remarks. a ultimately to turn the auto increasing concluding $X call like into which Xst. Eric went

Eric Fuller

Variants digital To their business validate in In our model at long-term Eric. means its Xpress Variant. a and vision self-correct aspects ability third continue and dynamically so obviously optimized to platforms model makes artificial and you, utilization What What operations new continuously English, This results to and the manage in are U.S. management. Thank company effective satisfaction. optimization operations intelligence including of for its quarter their to instantaneously. changes all to within being by our react our includes in industry. dispatching potential, ultimately this ecosystem was which the drivers driver this created planning, designed utilizing the to stay fleet plain recruiting, conclude, is

achieving decrease cost. reduction over and a substantial improvement of time we there in over an a on A service is Improved performances time of level growth this approximately our delivering higher As in discussed, utilization in is for and fixed XX%. drug. dramatic turned a XX% approximate safety, driver

moved quarter. OTR end fleet of the into Looking underperforming have the by Variant first on non-XXX initial remain forward, the we tractors the track legacy to

solves When we're inefficiencies upon XXXX. a for and while results to times. through to we as maybe and scale Variant OTR model, Variant year. increase related means We we've The should These of of significant premium that embark for In in see which improve to XXXX to then Variant expect with of the slightly of expected X. experience It fleet. expenses. to of this headwind assumption trucking year to driver are pay, decade continue the look cost balance first which the Increasing expansion this the grow shortage some the baseline are We restocking, can expect cost in of outside we up key experience the our results turnover. last which recovery continued the market, the financial of will scalability resulted a is to over Where expect believe turnover driver general sequential didn’t pricing. of inventory we to legacy the in We it. next economic result challenge to the include This supportive organically in regardless Phase a the third business sustainable quarter we maintaining the strong going our relatively contract place. over in course and support is in beginning the October. quarter margin profitability our to are effectively driver regards high And combine quarter, come we the capacities improved deliver with which into driver the balance increases will improved have offset recruiting spot will next the rates already fourth pick which already that to conditions insurance in we through benign be inflation drivers market experienced to all cycle.

the of we increase be average the shortage the XXX,XXX result, as XX% contract to fewer we XX% on extending to drivers by to rates a cycle will compared year. XXXX beginning up driver expect in likely to there As believe the with

a frictionless of remain of many your improve us that benefit further economic including very the our development front questions. you opportunities given Thank order, conversions our to have today. underperforming please open we We Operator, further in uncertain. of the Our the for in We Variant. time the outlook tractors positive profitability for operation. the again streamlining somewhat remained call

Operator

Our first comes the question Instructions] line with Ravi Shanker Stanley. [Operator from Morgan of

with may your questions. You proceed

Ravi Shanker

everyone. Good evening, Thanks.

Eric Fuller

Good evening.

Ravi Shanker

pain then some short-term it makes taking some So, and like gain for looks here you're long-term which sense.

were I here. you cycle. clarifying point strong in Phase the timing for think Do kind the the abated a But of of to coming unfortunate questions have Variant at X) just few in kind X? timing

Eric Fuller

Meaning Phase XXXX X the trucks? the second of meaning group

Ravi Shanker

beyond XXXX that a yes. Yes, that that? is or the XXXX trucks, Is thing

Eric Fuller

It's a XXXX.

we So, finalized second in the by half be XXXX second should that start XXXX. hopefully will first probably quarter that version and starting of

Ravi Shanker

experienced Okay, drivers only experienced more like so got it. why increasing. is sceptism And of been was little that. you Can you've to you kind XX I mean got also trucks But student And have far. of be bit on detail of drivers. meant out XXX how a convert to you that able just effective initial drivers I I'm as share a had that momentum the impression as Variant also, kind and confused, little to able make

sure So, why need that. experienced misunderstood I'm you drivers, I not maybe

Eric Fuller

train we're turnover think than better We on student. could think experienced issue range expensive things we quality them XX% quality drivers, accelerate think X) a with are comes in if really lot Variant, being level often experienced focused student that And do the we prioritize just drivers. Its over in that that the no, Yes there's that see to of of drivers drivers. that we driver training the also of and we but program, to you robust even higher. and the very that a the incredibly

So, to out of we population keep that that's the try strategy. of part and would students rather

was market rabid from as fees, will be interest to didn’t my And I that six recruiting Variant perspective, within we out lot from that a eight didn’t fair, were recruiting out the weeks or and realistically as this population happen. of we felt all We took With saw the miss then we from we believe get say driver the could traction of It part. probably we externally, initially. drivers. recruiting get and a a went into enthusiasm we our and

do of had And and Variant. to from difficult marketing, be I you but our two really go more get hired could that that. And to XX+ did that, a we see there. can range than And that we the leveraging out there trying on traction feel to other to maintain we're weeks started or drivers believe time testimonials. I little over hiring like And drivers with So, starting be had we and That last kind out or slow our we this the not just we or seven drivers, I I some within that we traction it We're out getting ever there, was getting more kind do supplement started speak as in six bit we need to current at think over some XX the on get to to we of marketing, now spend three, week-to-week XX in basis hump. traction some -- that this a believe getting perspective. hire traction week slide our we'll we'll market. slide name week week. first next get to a eight that our little

I skepticism driver be lot that time thing difficult the but new of said recognize that a was, launching and everybody acceptance. a think was population bigger hard this from driver how a just believing and I there brand we The did new yes the a concept it. have would

now to get but I we're so, some buy in. think starting And

Ravi Shanker

you Got this you to good convinces related of is you results really it. mean, data the noises are just And that just have but initial not real that look lastly, do convinced, and I COVID? kind

Eric Fuller

absolutely we started QX go No, do, we can in when this --. back could and Yes. we

Operator

from Our the of question comes Jack line with Stephens. Atkins next

questions. You may proceed with your

Jack Atkins

you Great, my good afternoon and taking questions. thank for

Eric Fuller

Absolutely.

Jack Atkins

of maybe to XXXX just or this fleet the think it guess way, kind convert got over. legacy in I trucks So, XXXX to you about Eric and left

that to consolidated will group you get to on to annualized Can to turnover. organization If the you savings sort XX% XX% of the of that basis? generate a a down trucks help us were about think

Eric Peterson

exactly trucks you're component at could for I $XX,XXX if one get turnover, to down that's significant, look that just Yes, you on have you to them be we right. that you to and cost hire. those XX% driver averaging said I think up it mean, every

And you're converting In from to third turnover, you're a driver. XXX% those if over. a drivers X) so, less XX% going turnover hiring

XX%, tractors this is is near the If said, miles at more preventable compared better. number a at having you that one XXXX tractors the just XX have that in X/Xrd matric And few And students per safety of the They're are same that down per division. all was XXX million seeing on approximately modal, even mile. exciting XXX That's Those remaining and with miles and much tractors seeing this today per with there a a increasing were with but essentially really million is and still in X) four Variant that accidents down that's about fixed accident seeing per still basis right we're nearby we're right XXXX seven million no that variable perspective to trucks. outperforming the to performing XXX utilization this time To been We're population. and running to put XXXX. incidents just X/Xrds excited now. that XX longer then, accidents four under trucks what's legacy loan. tractors four. are fleet, Eric profitable sudden if this million of utilization tractors their And you got points group our look has XX is XX of at we've This result miles. trucks, as group

tractors getting remaining over a those impact digital with in miles, going our it's earnings. model, So, to tractors the the significant that have XXXX on to miles all overall

Jack Atkins

Because be of it maybe, just in Can a perspective. numbers mean, here kind for be something could of think you of the potential the next to I that I awfully bring the both about like magnitude. that eight showing it I kind maybe are six regardless would these backdrop. freight were up seems that think quarters mean, to bracket is over from big helpful

for when is with potential terms anything to of you know don’t there to in too the other I quantify but you together. those so, all get share sort one help want could you us of buckets put And savings us just

rough numbers. Just

Eric Peterson

that you mean, looked approximately and through I of say is about points of XX% by if round the XXXX to I numbers. basis fleet went Yes. earnings. want represents numbers at XXXX are our you tractors And it probably

So, results. that XXX that's here basis the points overall to points on XXX basis consolidated

Jack Atkins

thank Eric. when one third And maybe as helpful, you you you sort about of then Then much guess the business from I question, of the from me. just just fourth quarter follow-up trend one last Okay. quarter. how to think the go That's and

But operating how But I sellers ratio the the way operating as turned brokerage. the quarter, move we over thinking about guys in we brokerage, there what terms improvements we improvements sequential though Obviously, things improve go up we us a frame the think some ratios know business. challenges be wage maybe the starting for back how that can if be are and driver is in the I the in should that inflation in sequentially will the can we because through to have you improvements given there be that offset given should realize in by thinking you quarter-to-quarter. rate that. is about could year about kind driver you XQ a to of change? of been think And like

Eric Peterson

I Sure, working so it issues. through mean, we're simple still yes.

of bit Variant in that group, we QX to are some initiatives recruiting little that in momentum a relative starting our within that we're still Also, is if growth we're our in QX. our overhang you fleets. our there at But brokerage with So, to look see dealing trending.

brokerage breakeven have In within been our nearly fact week first this year. week our a last had of we

breakeven. And so, towards we are trending a

exiting in be the quarter, noise will But they towards for the brokerage that still a a the brainy perspective. starting be more from we'll to for trend a little have to know think I think breakeven. that close bit of I year. of there I quarter we're don’t

of And time take going about in fix brokerage And think for play the so, good focusing we continue out. in that been I felt I to really that and to bit a place. the have it's little we've things on

is the so If opportunity our dedicated you biggest that at look fleet conversion. running strong, still really overall

So, that we'll of I in but it I perspective, still look I if impact we're earnings at all think think this that think of full the see you sequential of from the transformation. stages recognizing improvements an early

Jack Atkins

Thank it. got guys. you, Okay,

Operator

Our with of America. Bank line Ken next the question comes Hoaxter from of

You proceed your question. may with

Ken Hoaxter

afternoon Hey good great, Eric.

Eric Fuller

afternoon. Good

Ken Hoaxter

on could takes you the the fleet just give a go what maybe you a bit us given success quick and faster can't refresh convert perhaps Maybe here. to why it

Eric Fuller

Yes.

this at conversion the point. So,

So, we moved over that were drivers. XXX to XXX internal trucks

And of this converted they there have into as a driver in digitally model. specific bit that much little an the have willing native, drivers we're we more isn’t a be hand environment they be to holding. where They to looking there's operate more bit over to for. So, type of

And who the does someone take industry. some has experience in so, it

than momentum it's so, we we a internally. brand, specific then why And But it's as we so to explain different to we appreciated. driver and launching a liked. But that that. go think about a And growth we're or happen drive further. was different. model way I it's like in type little have new have a and new externally And drivers perspective fast how said now it's I launching to converted more Was difficult traction I didn’t we now a a now then and of past think and earlier, trying to needed as XXX start would from so recruiting

Ken Hoaxter

seven it an XX XX% of talking the should due with in of you been something them is turnover handful drivers or And you maybe that for a couple annual as there XX where you is a just over. couple out weeks the were turnover best a So, where there kind on behind to Is turnover. the have Variant. there's postmortem wrong, rate. But mean, turnover, figure what about rate of them given had have the page to anything over to of there? I why turned driver was that Or drivers is just

Eric Fuller

Sure. Right.

or negativity. of not best see of hey with Those in, There large hearing and happened, fleets. things indicators the we not fleet. of Variant issues kind whatever. frustrated, to a getting and enough and to us U.S. postmortem lot some kind are have of from We is any the yet lot our a do on a is There drivers. we're this is a this Xpress happened related scale the of We miles, I'm I'm go of the one have

that Some related or we that. things like whether be safety of are terms them make,

the or are or hand, they usually typically it's them, they road for not going their construction On the decided family reason. personal drivers go for with trucking meet is with to leave, to want They're other self-selecting to off to whatever. a

an involuntary us, either see part reason was for So, that something the it's if driver. for related at attrition a voluntary. will to wasn’t or we most the personal it It's that's the more issue

Ken Hoaxter

a Variant. I coming Are want name a or Okay. tractors is And Last you other to from just this is clarify with brand out ahead. internally. the branding my me, question just new for -- then, go

Eric Fuller

We branding they're brand different believe gray, brand. our it out brand from wasn’t have driver-only new is not a completely unique brands the that completely market. there was thought and model piece this to it new red. but are so says of The kind tractors necessary safety legacy we so It and is it in a

are how their of I type the they specifically is for a tractor that So, interact driver mean, day-to-day, do color get the there everything whole all works. How there tractor is is completely we different. with they the the the in, they're the different, they of recruiting this for brand how office,

Ken Hoaxter

Okay, that's great.

guess it of just the want levels utilization with Now, for because seeing me miles solely drivers is we're is is just of down, inventory lastly the, I so low. that for understand I given need lack miles, the that to that

or So, and count drivers wrong? just the the that where or that is is is there see is tractor

Eric Fuller

we tractor of we and of Yes. we our been so of It's carry. it's we a have is count, are hearing where the impact we It's and our taking think situation. tractors through normally going the the did, little unseen But fact the load in lot labor driver basis which situation driver customers. shortages are I biggest think have was a a would unseeded that driver an more on that that, XX Then And this I probably mostly at due bit the in times impact. feeling may some with tractors days And tension some longer unload to issues seen to up. last have shippers tractors.

Ken Hoaxter

Right -- thanks. And numbers, engine you include that right. in your

even not unseated, you call they're it's kind tractors if right, it's so --? of like And

Eric Fuller

Yes.

Ken Hoaxter

Eric, you. appreciate Thanks Okay. I that, thank

Operator

the question Wolfe next with line from comes Group Research. Scott Our of

with proceed question. your may You

Scott Group

guys. afternoon thanks, Hey

Eric Fuller

afternoon. Good

Scott Group

So, maybe just a follow-up there, just a follow-up there.

So, utilization it's those third in for rates done and a good fourth? the one up of When both seven. in think you the expectation

Eric Peterson

perspective. similar from results little a the results, utilization better probably bit maybe it And

are in. improvements on rate likelihood those they season go half quarter, addressing probably than contract in We doesn’t we so QX. the rates the say quarter. of spot I rates some on side, if drive impact the would back the to higher to saw It's potential has Well, greatly currently peak

bit on maybe permit small utilization. little a the incremental some and improvement rates say I'll So,

Scott Group

we So, inflict when actually do see utilization positive?

Eric Peterson

some count. getting started positive we've in Once net our truck growth

that we think QX. can end into I of probably see

passed still can we're and truck that kind through see the We point see we to working some see the I probably that come believe the to the think But I stayed where this starting see quarter there. back. last we're we're growing over QX. I said, And of truck weeks hump, or stabilize, at we're that like that. couple start in we we'll momentum think definitely we're of count. And hopefully losing appropriate

Scott Group

Just we can.

that grow we grow you telling truck that are reported So, the the count grow unseated say? or that count seated or that count

Eric Peterson

because fact as extent take obviously at both grow Because point utilization. the the unseated. net amount we is We've this grow the to we our number the to an seated down count. try probably will count, grow Yes. in seated plans No, that in count. that of that that in impacts grow and Yes, seated this to

Scott Group

know low I question fleet versus not if this if driver driver. a experienced but is really turnover then, about new driver silly an talk what's And or a for typical the don’t But Variant.

they're What's if office. typical? ongoing in the Forget an

Eric Peterson

Sure.

Scott Group

I'm guessing, yes?

Eric Peterson

north experienced. doing closer were per we that XXX'ish to students. we Probably this seated for program, XXX% was of when our running so turnover Yes,

So, the students turned over were significantly higher.

Scott Group

turnover? So, different about even on point want what's the fleet, kind I'm not of I guess legacy there to was sure I'm like it, of you're, so that sort driver I old was so the than it in whatever a like it guess Variant. call you fleet spread XX sounds

Eric Fuller

XXX% fleet have Well, north we of today because drivers running only experienced we're having, or within only legacy we're so. solo our still

of that net the So prior if you the population a at the we we and going percentage had some we're and XXX experience of was as of and seeing XXX XXX% as partially but run still look high had student that our quarters XXX% turnover north in overall say plus in and still it smaller mix was and in with population. to students legacy so XXX% today

Scott Group

comment that real I quick, last not thought thing about of Was heard I just improvement XXX I'm then margin sequential like closer breakeven? is at it or just [indiscernible] a basis points Eric And something a Okay. brokerage. to sure. so the

Eric Peterson

Yes saying Yes averaging the for did be comment will in the points a third quarter. the XXX quarter and we're the fourth sequentially basis that than we four. that was in XXX better

in we're even. a a division at So be XXX week XXX that that'd and Eric mentioned last as

Scott Group

guys. you Thank

Eric Fuller

you. Thank

Operator

Stifel. from comes the David line question next Ross Our of with

proceed your with may You question.

David Ross

Yes, good gentlemen. afternoon

external. of your talked go but Variant drivers You into converting then about needing some to

what in external over-the-road had to that underperforming go the driving you been the drivers So fleet? happens

Eric Fuller

Yes.

decided what fleet as on of to back were fleet quarter, where this plan we're get recruiting should we of decisions out time was decision for happened fleet. we had We attrition to we needed kind to not to in so landed that over that that early recruiting drivers recruiting right were in takes that obviously the with move for because stick sanity not saw anyway to of the that quarter had make place getting wasn't front was eventually Variant, check had fleet Variant and strategy legacy we start wanting we whole for was a couple hey last this this kind that de-prioritized traction, somewhat the go of not we we with kind of into as of fleet. our legacy saying end a So legacy we and at our long-term that traction getting new our that recruiting and

saw and So that's right count was them the drivers the that time fleet we we into fleet. as place old in as new decision why that will digital new bring drop we and not attrition over still truck takes into bring the legacy think the but we

over have will that So obviously the in that of shift amount we over time tractors Variant. into

David Ross

for the a fleet? current have OR variant you Do

Eric Fuller

and lowering turnover. Right driver and now product overall focusing is product the we're on the the utilization the increasing

the able the digital for we're So transition one discuss. standing and for be the we infrastructures in get something in legacy. two further as That's we'll that effect up to one

Eric Peterson

said is is better pad in landing and so grow Eric than what doubling long but investment period. order exactly think our an to this I legacy there Yes term the build fleet we're and

David Ross

non-underperforming So if case -- over-the-road the the that's tractors even

Eric Fuller

capital that so to yes our a through allocation but improve and those obviously tail to our money going strategy kind So that improve be obviously would losing of strategy today earnings looking our we're allocating is at are to trying is focused capital on say the always I profitable we're groups. more

a of point that point the decision tractors XXXX it or make convert some at late does rest So if do make would then from if at and model market, say we those a to sense we a have we growth market because start over in to we look sense that a strategy it may then into grow fleet. the makes and scalable perspective

David Ross

before so actually get I much say going convert? as as Or people if just you your from would or in about talk ever is with there recruiting things Variant you anything AI planning and dispatching to do the managing fleet there well legacy differently it's you what's operating you more on better that guess is the and the benefit efficiently as have even and operate can and you learn

Eric Fuller

To an extent.

place business the of So legacy and fleet to we've of a tried learned a some benefit apply take day-to-day more Artificial to but computer with full that done but it size the is our of that the that. gap] in learn can helps a things We've can that much so amount do us [audio we and really Intelligence some really to full running [audio digital recognize model benefit. it gap]

David Ross

went insurance like was finance the with along in Peterson on change [indiscernible] any for or question with in excess financial increase? coverage there just deductible your a last And premium the the renewal, that the

Eric Peterson

stayed lower million. the did at tower overall, as far $X our the it but amount our lower deductible we as Yes, overall

David Ross

Thank Okay. you.

Operator

next line with from the JPMorgan. Our comes question Brian of Ossenbeck

You may your proceed question. with

Brian Ossenbeck

if capacity think constraints actually things of tight differently? those very can either just helpful. talk I'm some Good there of want changes change just now right Fuller, you're least but Anything structural thanks. peak hearing capacity those something seeing any you're at people some a is be is and well or about is we real closer technology different. about time This we're this or you said or bids the you through on through working mini you out hear to there evening. doing that Eric just one do on more Hey there's when a that is cycle transact would on front to sure

Eric Fuller

the that three some is Yes that where five the this wouldn't I a will to years. think changes structural that next process in difference. we say see really the over RFP significant year year I is

anything to think capacity capture about to going RFP transformational and of this perspective around be everything because concerns capture process. from are than that going trying be XXXX a to doing capacity so capacity into I say the doing year would I they ongoing that's really around focused more shipping the can to everybody's focus

I provider by three that that I a expectation and bit a entrants of been a this to next as the or is new that, I brokers significantly the that over around digital I three to has will little expectation think go do and I some change the into digital continue technology expectation next alignment probably say of up will the a traditional between I years gone of to over be think more forward and and is I market. pushed the so the think the increase think engagement five carrier going process. we that shipper has to will and think the years, So RFP think five and and lot technology our of

Brian Ossenbeck

from ones Okay. you the you other? ones on you is just that risk of old there more different the A got couple might when to truck capabilities new managing overhang Variant, the how new residual used trucks as to there you any one the I [indiscernible] course or go transition wondering Got it. sort are of to a it's and be think

Eric Fuller

in. Now I great look essentially when is think you a happened what's our at trade truck truck cycle if comes a red gets general traded out

it's used we're to really the not have we of that change we to amount So going equipment that on to that offload. have have

not is gray. doing out fleet bringing we're all we're We're in So and our it selling essentially parking what cycle. not cycle entire the truck sticking of red trade with normal

Brian Ossenbeck

Got Okay. it.

for that and could have about fleet legacy in hear down got them from [indiscernible] on you're get these to else sure other other peers of hearing different the when what these new do think very recruiting I going Are the in someone common couple lot you from think platform, the attention after? on I guess that Xpress some sense reasons getting experienced you this? they that trying and someone are like current are weeks what the at more you more and you offers how edge I'm your an of turned part The that pursue that that replicate it's focus drivers you're get than so U.S. you model? future. last you you this a but much the with

Eric Fuller

Yes.

traditional is of in it the this that's value and if is is new long we're leverage we time and convincing recruiting drivers everybody a there and and we and piece at distinctive prove over about of advertises really so over of seeing there out class how you the yes the of technology are of somebody look as hey the model if to and of of much at, is going noise really value the when bit talking the because same innovative. drivers a is type trucking the to is is there piece biggest early talking think I and a we're this we're there starting going strategy yes, and where skepticism we possible all advertising that to that One our out that everybody stuff that about lot a to lot got of kind and traction best you think where treat of minimize different as out right. kind you that's also really the we're perspective utilization That's says go look about is actually yes, me. it's days applying I to term kind so little and there so thing real on it's were there mean the get to from to recruiting and that.

even long lot less the those issues drive lot budget of excites still think a is I to into department. of us the if out and apps and term you're I over we will of advertising quicker. much of scalability one a early got to actually to churn and the large that you're piece big that solves drivers model think said scale allow like turnover one running this have a that actually have recruiting large to days a most going of then We the of costly and the a is that a in think and that us got recruiting that manner in low you've rolling we're lot a replacement have to this scale infrastructure the requires of fact things to churn limitations obviously you've and

operational this technology. perspective a model is of from this an only not leverages technology aspects all play but So

Brian Ossenbeck

offering that in as Okay. way not competitive sort any Do is this but into of branded there of at have out point maybe you're any same run the or recruit? there like feel you market to the advertised trying you

Eric Fuller

of I veteran legacy technology peers their have this applying are that some of class to same our type of fleet. no doubt some

model think think is type the that I I grave is of and it is truly grave think think redesigned different improvement of different the solution the model unique. it I that benefit incremental better to drivers is the the I I our get while that think do a it I don't of and to a and will think greenfield difference some by that applying technology, cradle because doing and we'll there we I significantly anyone approach kind so now from feel out the have that else cradle business see and completely operates and approach. it be think new on market

Brian Ossenbeck

quick All for back right. the brokerage on margin. one Last me

to of You the what mentioned right have that would that improvement things just you few sort market in doing help anyway. the you get that and a how from initiatives moving direction peers just see and put month-over-month would commentary improvement margin that place you're in assume based moving on I

and market here the fourth brokerage? conditions just an above beyond what the seen quarter have into you in So impact make

Eric Fuller

Sure.

to which to emphasize to go to and So as QX some will obviously and new contract some think put management gross when model and our bit group that exposure I kind did out group so then brokerage starting of into brokerage traction margins. spot change significantly this to turned Also helping we're from improve at so of and business too and it of that's around is we year. a perspective better the having business forward. be negative opportunistic we our profitability get little where a to to were market more fruit that bear and margins significant into We're over of much around go trying so like that more our starting shifting trying drive lot operations results, market drive that's within are we a us better and our we a contract little our exposed a

Brian Ossenbeck

Okay. Thanks time. Appreciate guys it. for the

Eric Fuller

All right. Thank you.

Operator

the Arbor Nick to from comes of question next Our Farwell line Group.

proceed question. may You your with

Nick Farwell

economic in the appears demand question. you than this if taking is huge much of for or characterize Eric, are say other versus how cycle there inventory it does I'm thank some demand curious the impact ways ways the different last two of three? this more recent unusual you or period recovery for can executing recoveries, cycle the replenishment example

Eric Fuller

it perspective demand very from a think environment. unique I the is Yes,

of got, and you've really have-nots. you haves the have So the kind

that at industrial where some they at So you really pre-COVID look booming. but pre-COVID. their where look retail they while the and see sectors retail were pre-COVID Retail sector below rebounded then not of one see are actually high We retail's only the the also you haves is are are and increases maybe and has we in demand that the you so they of year-over-year retailers have in seeing were booming or segment not but other actually are that outpacing - and off much you've XX%. larger their retailers got big type as XX% as are fact we other there while significant have XX% some retail within some some is increases volumes have XX% retailers

those retailers I niche think are more clothing smaller regional retailers or And booming. are hurting retailers retailers while of so more definitely retailers box the big or

got that you've So aspect.

back year some that I to is and XXX,XXX are I a down the from anywhere think piece XX,XXX less date I have you those I then cycle to last supply -- this of shut had the have and CDLs social schools down of piece did the at than clearing you'll distancing in we'll and I drivers year. the and actually house, half really the alcohol into where bigger issued of schools big you on due another to more drug the shut less a issued least the other that drug actually haven't have over think XX,XXX then alcohol think in and cycle think XX,XXX have probably go the it's running CDLs this and you think fact that drivers

so We're I think not more to capacity when deficit going with likely that in exit partially this to going back we that be term. because and that's schools able will going short we have not And that anything. to less don't in the deficit's the the drivers about market XXX,XXX it's cycle that come the and than enter XXXX significant to back build XXXX is so prolong

Nick Farwell

it a just that? doesn't to and internal aspect It like like comment? there is gross geographic And very regional gateway versus to sound be

Eric Fuller

the certain weeks would stuff there and see but here some really across might You lumpiness a it's part and whole network. most given the say I for universal

Nick Farwell

is the you especially road about versus or And a rates bit teams those little dedicated haul otherwise, two your then last long over of can sectors in talk business? question my

Eric Fuller

necessary you're has so be this stability is very working to turn market course support I contracts dedicated some dedicated year related rate I increases because going you'll some competitive then Sure. normal so you'll going Yes probably of stability. volatile and and lot not situation increase. pay more and a a have I see on so and mean to when that that the driver think increases this Typically getting are see think it driver like like to you very we're three five that to are driver wage see to and is as

have bid contract higher is change, significant to go There OTR is volatility the going getting volatility increased On a lot The market where rates a fairly pressure to seen in rate is the so just spot reason there through a cycles than big I've and I to long we're side probably cost this happen bid I you've negative spot is think is through that had is a think are flat the of of spiking cycle. really probably to for time. that a in along market. with here to bid had negative cycles see rates two and catch-up went quite the we those bit where we and we'll has it

Nick Farwell

months or three into that the take pay, capacity have question dedicated beyond account much as demand or what much you just to of I degree it's in the of driver that for dedicated you now no you contracts next the it's surcharges you from didn't to five going time six to you years you to and reasons when last the at less at have is five making mentioned others capital but when least know are commitments industry three capacity XX three like such and somehow be other and a capacity the two to constantly re-bidding years. for drivers months environment clue you're what unknown different factors and availability the embedding reflective are in at say So looking of

Eric Fuller

the don't we'll to a we're and have in every ask we with of whole region side that thankfully our almost show usually get if we the we we're increase to discuss usually we're see and the and good pushback. rate dedicated a perspective that need then from dealing and of long about how then we've to driver so to relationship, decision say of as an we address almost market. get, give we solid relationships in the what feel customers issue them we to us them talk pay We we'll the as we pay with, increase customer, of lot usually it and work and done in and case it's on make talk driver Well, this go competition conjunction that lot show XX% kind cases We customer. necessary to as the able is we'll about and with go long-term the is types customer the situations talk that that customer in and with we we a and our about market to the facts these go make dealing in need and look in operating all

Nick Farwell

appreciate very much. you I it. Thank

Eric Fuller

Absolutely.

Operator

like Eric back reached I gentlemen to closing and have remarks. we turn end question-and-answer Ladies over would this session. the call Fuller to today's for Mr. of

Eric Fuller

this do look this Thank want I to at believe thing if a you positive quarter right. there One that you. things in of All I actually quarter. is address lot

look You at insurance our costs.

we're result. You by fact a in not and grow end disappointed that continue things that fleet our that's say we were of statistics. without in to able at digital happened the the quarter the There lot is to positive our really not to degrading look

and game our With to a this liked really the our easily had but We problem. truck the to and long been little have get student have other mid-June quarter-to-quarter, would we're of right the to point would saw the line program and the have some and reinstituted up really back have day of get a results had truck decision on side too training and bit to then the of a see focused momentum around count we to in at up. kind a bottom and could go and a rate fix have count believe or kind try I trying couple we that would is better of not that the of end caught we back things at mean knee-jerked don't long-term we

long we at we fully on we things and for on really structure about focused and the continuing down and confident last we really so a aren't quarter this Xpress in other term always that talking the We're exit and feel of that we about what and it. continue about continuing and in to be going as U.S. pay to we're so and really significantly some we had we're the We're with debt that that to will at we of excited the and up company the believe the as what these massive So future. peaks type we going debt think again valleys capable linear. leverage excited We're even there right is transformation and our in set right to of quarters we next path this situation the we're up mentioned but couple over we're process. with be year are dealing is setting the One to obviously down is than for less leverage thing what past. of future look pay aware

that to doing it thank with So next again forward and quarter. you look

Operator

you for concludes joining today's us Thank conference. today. This

You may at time. lines your disconnect this

U.S. Xpress Enterprises (USX) 23 Oct 202020 Q3 Earnings call transcript