U.S. Xpress Enterprises, Inc. (NYSE:USX) Q2 2020 Earnings Conference Call - Final Transcript
Jul 28, 2020 • 05:00 pm ET
Thank you. [Operator Instructions] Thank you. And our first question comes from the line of Ravi Shanker with Morgan Stanley.
Thank you. Good evening, everyone. Very interesting on the digital fleet, can you give us a little more color here? Specifically, do you think this is a tool that works better in a weak market compared to a tight one, namely, do you expect to get the same level of incremental benefits in terms of utilization if the market really tightens up in the back half of the year? Also, what does it look like in terms of tech spend? Is that something that needs to go up over time and does this expand to your whole fleet over time as well?
Yes. Thanks, Ravi. Yes, I think the big focus on the digital fleet and really, our belief is that it's really agnostic to market conditions that the way that we've designed this fleet is really to be highly optimized to drive efficiency and drive better utilization, and we believe we can achieve that regardless of the market conditions. So I think that either in a weak market or even in an exceptionally strong market, we can out index our legacy fleet to the same tune that we've been doing, and that's our long-term intention. Obviously, we think this is -- we built this to be scalable. Our intention is to scale it as we've laid out in the materials. Long term, we think we can go to about 2,100 tractors within probably the next couple of years, we can have about 2,100 tractors converted into this model. I think at that point, obviously, we would look at whether there's additional growth or those types of things that we can look at. But I think that there's a lot of opportunity here over the next couple of quarters and maybe even into the next couple of years as it relates to conversions from our underperforming areas into this digital fleet.
As it relates to technology spend, obviously, we already have quite a bit of technology spend that's already been recognized. I would say there's probably some small additional spend that we will have to take on. But for the most part, the spend, the run rate is already in our numbers. And so I don't expect a significant ramp-up from where we are today. We have a team that's operating in Atlanta, and that team's really just right across the interstate from Georgia Tech. We put that team together a couple of quarters ago. And so that's been in our numbers for quite a while now. And so we feel comfortable that we don't have to make significant other investments on top of.
Got it. And just a follow-up. You've been pretty open through the quarter of 2019, kind of pointing out that the way you calculate your spot rate is probably different than the rest of your peers and maybe the rest of the industry. And your spot rates