USA Truck's (USAK) CEO Randy Rogers on Q2 2016 Results - Earnings Call Transcript

| About: USA Truck, (USAK)

USA Truck, Inc. (NASDAQ:USAK)

Q2 2016 Earnings Conference Call

August 03, 2016 09:00 AM ET

Executives

Jody Burfening - IR

Randy Rogers - President and CEO

Martin Tewari - President, Trucking

Jim Craig - President, USAT Logistics

Joe Kaiser - VP and Principal Financial Officer

Analysts

Brad Delco - Stephens

John Larkin - Stifel

Donald Broughton - Avondale Partners

Matthew Frankel - Cowen

Operator

Good morning and welcome to the USA Truck Second Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Ms. Jody Burfening. Please go ahead.

Jody Burfening

Thank you, Aaron and good morning everyone and welcome to USA Truck’s second quarter earnings conference call. Joining us this morning from the company are Randy Rogers, President and Chief Executive Officer, Martin Tewari, President, Trucking, Jim Craig, President, USAT Logistics and Joe Kaiser Vice President and Principal Financial Officer. Before beginning the call, I would like remind everyone that this call will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements may be identified by the use of terms or phrases such as expects, estimates, anticipates, projects, believes, plans, goals, intends, may, will, should, could, potential, continued, future, strategy and terms and phrases of similar substance.

Forward-looking statements are based on the current beliefs and expectations of management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified which could cause future events and actual results to differ materially from those set forth and contemplated by the underlying forward-looking statements. Accordingly, the company’s actual results may differ from those set forth in the forward-looking statements.

Investors should review and consider factors that may affect future results and other disclosures by the company in its press release, annual reports and Form 10-K and other filings with the Securities and Exchange Commission. The company disclaims any obligation to update or revise any forward-looking statements to reflect actual results or changes in factors affecting the forward-looking information.

Also on today's conference call management will be referring to certain non-GAAP financial measures in its analysis of the results to supplement the GAAP financial statement. A reconciliation of these non-GAAP measures to GAAP is provided in tables at the end of the slide presentation accompanying today's conference call’s prepared remarks.

With those housekeeping items out of the way, I would now like to turn the call over to Randy. Good morning, Randy.

Randy Rogers

Morning Jody and good morning everyone. I'll begin this morning's call by giving you an overview of our consolidated second quarter results and the strategies we have underway to strengthen our operations and financial results.

After that Martin and Jim will go through more specifics on our trucking and logistics businesses and Joe will summarize our balance sheet and liquidity. I'll then come back on to update you on the whole company outlook. With that introduction let's turn to Slide three please. This wasn't the quarter that we anticipated nor wanted to report. For the second quarter of 2016 we had operating revenue of a 109.9 million, both trucking and USAT Logistics our asset light division were negatively impacted by soft freight conditions and we saw the rate environment deteriorate markedly as the quarter continued.

In trucking base revenue per loaded mile was down $0.17 or 9.1% compared to last year's period. This reduction was due in part to a loss of volume from certain dedicated customers who chose to take advantage of either favorable one way rates or in sourcing strategies creating an overall less favorable mix for the company. While we were awarded new business neither the phasing nor the volume was sufficient to offset the lost business.

Late Q2 and early Q3 awards of better quality freight should begin to contribute to reducing that impact. For the period USAT Logistics produced operating income of 2.2 million but this was overshadowed by trucking's $2.7 million operating loss. For the quarter trucking's operating OR was 103% compared to 96.8% for the prior year period. Despite these challenges as you'll see on Slide four, we've been making progress in trucking to lower our cost structure and improve operational efficiencies. We reduced overhead costs and we realized savings of approximately 2 million annually through the reduction in force we implemented in Q2.

That's on top of the reduction in force we implemented in the prior quarter when we reduced our staff department headcount by about 10%. We've also taken further steps to reduce company owned tractors and capital employed. Since year end we've reduced 84 tractors including 73 in the second quarter alone to better manage market demand. The same time we've accelerated our migration to an asset light model. In Q2 we expanded our independent operator fleet by 17.6% and we increased USAT Logistics load count 12.3% year over year while still maintaining a gross margin of 18.1%.

On Slide five I've listed again for emphasis the four key initiatives of the strategy we adopted to improve USA Truck's performance. Although our results for this quarter were disappointing we think these actions will produce improved results moving forward. At this point I'll ask Martin to explain some of the trends in trucking operations and give us more details on the segments improvement plans and rate outlook. Martin?

Martin Tewari

Thanks Randy. Moving to Slide six you'll see a summary of trucking's results over the past four quarters. There are a lot a numbers here for you to review so I'll call out a few you need to know to properly interpret this quarter's metrics. First on the plus side we're continuing to refine our network to transition from a back haul to more profitable head haul markets. We increased total miles sequentially and for the third quarter improved our average weekly miles per truck bringing that metric up 3.4% and to 1985. Second as you new reducing collision frequency and overall safety performance is one of our goals. This quarter's insurance and claims line was up sequentially one penny due to actuarial adjustments for prior year occurrences is now reflective of the actual safety improvements realized this year.

Third our operations and maintenance line for the quarter included $0.02 per mile related to the write off of uncollectable warranty receivables and to the timing of trailer disposals, which in turn generated higher maintenance cost during the quarter. With new tractor deliveries being delayed until Q3 the continued operation of 2012 trucks created a drag on maintenance performance. Finally with respect to non asset component of our fleet we expect our expectations and our independent contractor recruiting growing 17.6% over the last year and 16.3% year to date. As a result our purchase transportation costs per mile was 12.2% higher.

Moving ahead to Slide seven, I'd like to provide more details on maintenance and our strategy. We're making headway in transitioning from a fixed to variable maintenance cost by closing maintenance shops, outsourcing more direct repair of maintenance spend and operating only a modest footprint of four shops focused on preventative maintenance, minor repairs and trade preparation. In June we launched the restructuring of our road assist program which we expect to produce savings of approximately half a million in the second half of the year.

We’re also in the process of negotiating national agreements with third party service providers to reduce the cost of parts and repairs. At the same time we're continuing to reduce our fleet to better match demand. We reduced a number of company owned tractors by 73 units in Q2 and plan to reduce the fleet by a total of a 130 owned tractors and more than 400 trailers in 2016. We plan to retire all 2012 tractors by the end of Q3, and we'll also accelerate the retirement of approximately 220, 2013s.

As you can see from the box on the left side of your screen that shows maintenance cost per mile by tractor year model, this will have a very positive impact on our maintenance cost. As of the end of June the average of our fleet was 27 months for tractors and 57 months for trailers, we're purchasing tractors with multiyear warranties and our goal is for 100% of our fleet to be covered this way.

Moving to Slide 8 I’d like to touch on our rate outlook, our plan to increase our base revenue per mile for the second half of the year over the second quarter. Factors we expect to help us accomplish this are a strong pipeline of new business opportunities we've been building to better support our network. New freight awards we received in June and July will help us recoup some of the ground lost in Q2, of course there's always some wins and losses during the quarter but we expect new awards to put us in a good position for the rest of the year. Third are the reductions we're making in our reliance in the spot market while increasing the amount of committed freight we handle and finally better pricing we've been receiving by being more selective upgrading our lands and tightening our capacity. With that I'll turn the call over to Jim.

Jim Craig

Thanks Martin. Let's turn to Slide nine for a summary of the results of our asset light business. For the quarter net revenue was down 10.7% due to a combination of soft freight volumes manifest in itself a significant dollar revenue per invoice and lower fuel surcharge revenue. As you probably the expected June freight lift that has taken place almost every year for the past three decades did not occur in 2016. Nonetheless we held our gross margin at 18.1% and year over year our load count was up 12.3%. Relative to the first quarter it was up 7.5%, both numbers indicate continued market share gains resulting from early traction of our revised sales and operating model an energized USAT Logistics team and daily focus on aggressive business development activities.

The USAT Logistics volume is job one, and we've had encouraging growth increasing loads per person per day by nearly 20%, from an average of 3.2 in January to 4.6 at the end of the second quarter. Three of our highest performing offices in the second quarter were early adopters of our new sales and operating model under which we have client managers who focus on business development, customer service and pricing responsibilities and carrier managers who are responsible for carrier selection, negotiation, dispatch and load management. We expect this model to further enhance productivity, produce better customer service and improve yields over time.

As you recall from our Q1 call, we are placing a lot of focus on recruiting, training and supporting superior talent. We recently added 11 logistics professionals with strong customer relationships and are already seeing meaningful contributions from those new employees.

Slide 10 lays out some of our important initiatives for the second half of the year. To further drive our market share expansion intentions as of July 1st we have fully implemented the roll out of USAT Logistics new client and carrier focused roles I outlined earlier, across our network of offices. We now have dedicated local sales reps at seven of our nine regional centers as well as recently introduced in an outside sales agent program.

We'll continue to invest in revenue generated talent in our regional centers while holding the line on administrative and support positions, and we'll push forward with our rebranding efforts which include a new website, collateral, press coverage and trade show activities. We'll be driving to keep enhancing productivity with a goal of six loads per person per day by the end of the year. And we'll be adding a new array of services including the expanse flatbed service offering that we think will enhance our value to both current and future customers. And with that I'll pass the call over to Joe Kaiser for a quick financial discussion.

Joe Kaiser

Thank you, Jim. On Slide 11 you'll find highlights of our balance sheet and capital expenditure. We ended the quarter with a 131.4 million in total debt and capital lease obligations net of cash. Compared to 101.3 million at the end of 2015. Debt to adjusted EBITDA was 2.6 times compared to 1.8 times at the end of March 2016, with 58 million liquidity under our revolver we have the liquidity for investments needed to execute on our strategy, which is focused on driving increased return on invested capital. In the second half of 2016 we expect to acquire a 15 to 23 million of new revenue equipment primarily under capital lease arrangements to fulfill existing commitments. Based on our forecast for equipment sales proceeds net cash capital will now only be about 15 to 20 million. During the second quarter we repurchased just over 718,000 shares under our stock repurchase authorization at a cost of 13.4 million. I'll now pass the baton back to Randy to wrap things up.

Randy Rogers

Thanks, Joe. Turning to Slide 12 you'll see the initiatives we're focused on for the second half of the year. In our trucking business we've already reduced maintenance costs and continue to transition to a more asset light model in an effort to improve adjusted OR over the first half of the year. As per USAT Logistics we're going to continue to drive our load count in an effort to advance to our goal of reaching 50% of total consolidated revenue. In closing the results what we reported today are disappointing to all of us and speaking for myself very frankly frustrating. They're frustrating because we believe all the initiatives we have underway and the steps we're taking to improve utilization, sales productivity, reduced cost and focusing on those things within our control will yield sustained or sustainable improvements in our trucking business.

We clearly have a great team in place, we're improving the fundamentals of the business in large ways and small and we're on the right track. We have a great strategy in place to accelerate growth at USAT Logistics and over time shift our mix of asset-light based revenue. There's no getting around the fact that this quarter set us back but we're on the right path and fully committed to achieving our objectives and increasing return on invested capital for USA Trucking and our shareholders.

Thank you for your attention at this point Operator we'd like to open the call for questions.

Question-and-Answer Session

Operator

Certainly. We will now begin the question and answer session. [Operator Instructions] And our first question comes from Brad Delco of Stephens, please go ahead.

Brad Delco

Morning Randy, morning guys. Martin can you talk first, you made some comments of winning some business in late June and July and you think that's going to help improve base rates, seems like or my sense is that the later in the bid season the more aggressive people got on pricing so can you just help us sort of understand how we'll see rates inflect here from second to third and maybe in the fourth based on these recent awards.

Martin Tewari

Yes, we Brad we -- on these recent awards it looks like the amount of business is about 4 or 5% of our base revenue and we're looking at you know improved rate numbers over what we reported in the second quarter so you know we as we go through the quarter and renegotiate rates with customers, as well as look at the future pricing opportunities as you know the sort of the season starts in September where customers are repricing their business. We'll be taking a firmer position going forward with improved service in our business and delivering better customer value.

Brad Delco

Okay, but I guess consistently what I've heard from others is you know as you've, you know a lot of these contracts go effective over the course of the year and third quarter's generally when you see the most rate pressure, are you saying that you don't think that's necessarily the case based on the cadence of how these contracts have come on.

Martin Tewari

We've seen that -- you know most of our contracts have been implemented with our customers and so we're transitioning right now into new agreements and new pricing terms with customers going forward so you know we will see an uptick in our rate per mile and you know in the second half of this year.

Brad Delco

And then Jim the comments about the 11 additions to your team, wonder if, could you remind us when those came on and that's sort of the reason why we had a similar gross margin year over year but just a little bit more SG&A costs, which put pressure on EBIT?

Martin Tewari

Those higher have been taking place throughout the second and now into July, given the mandate to all of my regional centers that are operating profitably to continue to invest in their capacity, their assets, which are people. And so we’ll continue to do so. The intention of course is that those individual be self funding very quickly, and once the new hirers what we call self funding we’ll go out to the market and find the next talented person to join the team. So there is a couple of those people that you saw on the press release were leadership roles over our agent initiative and our enterprise sales strategy, but the majority of them are front line market facing individuals out and they also generating revenue every day.

Randy Rogers

And Brad, this is Randy I think to really say product on the USAT Logistics side is we’ve been restructuring of the way we operate there, the productivities per person measured by low count per day has seen a considerable increase, so I think that’s a very favorable -- a very positive sign.

Brad Delco

Absolutely. And maybe Jim just a follow up, would you expect to see, it seems like so you made the investment you didn’t necessarily see, all the revenue that was expected to be generated occur yet. So we should see improvement second to third all else being equal or higher than you expected?

Jim Craig

On the net revenue side, you see improvement. Productivity, again we’re aiming for six loads per person per day, which is an 80% of group number of where we started the year. So like I said, we’re not going to be responsible and hire people and just for sake of hiring, we’re going to hire them very strategically and only after we’ve seen the return on those investments so we’ll make additional investments.

Brad Delco

And then I thought Jim you made a comment that you did not see a seasonal uptick in June. It seems like a lot of other transportation folks have said that they saw seasonality, saw strengthening in June and into early July? Why do you think necessarily you might not have seen that in your logistics business?

Jim Craig

Well, I think as a third party we’re the last ones to enjoy that lift because again lot of our businesses over flow. The asset providers who may have seen some additional volumes, but not enough to impact us very positively. Our biggest setback in June quite frankly was the DOT roadside inspections that took place in the second week of June I believe since that was announced one advanced a lot of our smaller carriers, a lot of the independent drivers chose to take that week off of their trucks, go on a vacation to avoid the roadside inspections. And so we had some capacity situation pop up where we were paying significantly more for trucks to cover our business. And so our net revenues during that week, a little bit of hangover and the next week really hurt our June results.

Brad Delco

I wonder why they would do that.

Jim Craig

Again, surprise roadside inspections have been announced a month in advance.

Brad Delco

And then, Randy, just a high level question for you. Can you give us an update on the CFO role and what you’re looking for on that?

Randy Rogers

Sure. I hope we’ve engaged a professional search firm. We’ve received resumes we’ve been screening and we’re starting to beginning the interview process there.

Brad Delco

But no timing that you could provide us?

Randy Rogers

No, our time is going to be fine in the right persons really and I think we’ve received number of resumes that we’re interested in exploring and we’re going to do that over the coming weeks.

Brad Delco

And then Joe I am going to include as well. I mean can you give us the CapEx for the quarter, net CapEx, for second quarter?

Joseph Kaiser

Net CapEx for the quarter was 15.3 million.

Randy Rogers

So we’re been -- got some trailers and tractors during the quarter, primarily trailers from the second quarter.

Brad Delco

But the guidance is 15% to 20% for the year?

Randy Rogers

Yes.

Brad Delco

And ’16, is a net number?

Randy Rogers

Correct.

Operator

Our next question comes from John Larkin of Stifel. Please go ahead.

John Larkin

Just wanted to talk a little bit about the independent contractor or owner operator strategy, it sounds like that’s working working quite well, as your owner operator count is up quite nicely. Are you recruiting experienced owner operators, or are you creating your own owner operators through some lease purchase program. Could you give us a little more detail on that please?

Martin Tewari

Hey, John, Martin. The owner operator, it's a mixture of both. We probably have about 50%-60% our experienced owner operators coming-in, and probably about 30%-40% our drivers that want to become owner operators or independent contractors. And we’re not in the equipment leasing business, but we try to help them out with options.

John Larkin

You mentioned that you’ve lost a coupled of dedicated contracts in the second quarter as some customers are opting to take their carriage in-house, and others are opportunistically taking advantage of the low spot market rates. Are there any other dedicated contracts that you have that could be a risk in the second half of the year of going the same route?

Martin Tewari

We’re pretty solid with the remainder of our dedicated costs going forward most of whom are in multiyear agreements, except for -- I think we have one customer that isn’t in a multiyear agreement.

John Larkin

And then as far as the diminishing sides of the fleet is concerned, have you been able to keep the fleet fully seated throughout this process. I noticed your utilization is rising nicely. But the other part of that equation of course is, do you have all the operational trucks fully seated with qualified drivers?

Martin Tewari

We’re about -- we’re hovering at around 5.5%-6% mark as far as unseated tractors.

John Larkin

Where would you like to see that?

Randy Rogers

That’s a good number. I think if we can keep it right in that 5%-6% range, we’ll be happy with that.

John Larkin

And then obviously in the turnover behave, this year compared to say last year at this time?

Randy Rogers

It's been about flat for us. We haven’t seen any increase or decrease. Obviously, we’d like to continue to make improvement on turnover. But it's been flat year-over-year.

John Larkin

Do you share a turnover percentage with investors?

Randy Rogers

We don’t.

John Larkin

Fair enough everybody calculated it to the different way, anyway, so it's probably…

Randy Rogers

Yes…

John Larkin

…meaning less number. So you mentioned that the productivity of each of the individual brokers in the asset light division is up 20% since the beginning of the year, yet the load count year-over-year, which maybe an apples-to-oranges comparison is up 12%. Does that imply that there has been some forced turnover, you’ve eliminated some of the less productive people and are actively trying to replace those with some of the seasoned professionals that you spoke about earlier?

Randy Rogers

Yes, John if you remember from our previous earnings call, we closed the Kansas City and selected the offices. So, shortly after my arrival here, they didn’t make it to the extent, took out five positions there. And in the second quarter we closed our El Paso office. El Paso is just opened when I got here. I thought the right thing to do is to give them six months to prove themselves and just buy return on that investment. Unfortunately, tough market conditions and frankly it was El Paso so they sure going to be successful, and so we made a self decision to close that office and eliminate three positions there. So we effectively have taken fewer -- we have fewer people facing the market more loads, 12% becomes 20%.

John Larkin

And then since your revenue per loaded mile pre-fuel surcharge is down a little bit more than some others in the publicly traded space. Was that due to those dedicated contracts or was it due to more exposure to the spot market than others. And it does sound as if you’re trying to reduce that spot market exposure. Can you give us a sense for how that’s progressing?

Randy Rogers

Sure. The majority of that decline in rate was associated with the hit that we took on the dedicated side of our business. In the spot market, we typically -- we’re continuing to reduce that and we hope to reduce our exposure in the spot market and 30% going forward in the second half of the year?

Randy Rogers

And I think that’s going to be aided by the reduction in our fleets that allow us to freight some of the freight and eliminate some of that lower yielding freight.

Operator

Our next question comes from Donald Broughton of Avondale Partners. Please go ahead.

Donald Broughton

So, I want to dig a little further into the spot market. You have some, I think, fairly aggressive goals that reduce the amount of spot market exposure. Certainly in today’s market for that, it makes a lot of sense. So, the question is what percentage of your overall book is in the spot versus under contract?

Randy Rogers

Donald, it's less than 5% of our business, and we want to continue to produce on that number.

Donald Broughton

So, if the spot and the loss of dedicated drove 9% drop or $0.17 a mile drop, the contract rates was relatively even? Or did you see a significant decrease in contract rates as well?

Randy Rogers

In contract rates, we did see a decrease in the 2.5%-3% range.

Donald Broughton

For a second, it looked like maybe the tail is wagging the dogs, so to speak. I understand about disposal of the older equipment. Certainly, the numbers you are showing in your slide presentation, they’re not atypical over the age of your truck. Any of those driver of the car knows that older the car gets the more maintenance it costs. So, the question is -- am I hearing that you’re going to bring the average age of the fleet down? Or is it just that you’re going to dispose of the oldest equipment?

Joseph Kaiser

John, this is Joe. We definitely want continue to bring the average age of our fleet down as we thought it a couple of quarters ago. Without downsizing our fleet, it will help get our tractors newer and then with limited investments we have been able to bring that markdown. So, it would be indication that would take out the 2012 by Q3 and then the 2013 so we’re going to start aggressively taking those out as well, that should help lower our average age of our fleet.

Donald Broughton

But that’s because of the disposal of the oldest, not the addition of new. Or am I missing something here? Because given your CapEx plans, it sounds as if you’re just holding, getting rid of the -- selling and the oldest equipment, but not really buying them any new?

Joseph Kaiser

Well, as our total Company owned tractors reduces we don’t have to make as much of an investment, but we’re still making the investments this year. So we have 15 -- 23 million less in Q3 here to take and most of that is beyond capital leases.

Donald Broughton

Help me out with some, because I am looking at the results here and just to comment on the elephant in the middle of the room. Margins and your logistics business have gone down on a year-over-year basis. I suspect you may be the only publicly traded logistics business that reported that kind of the results, pretty sure you are. And obviously margins at your asset base business deteriorated dramatically. Yours’ is a business in which operating fundamentals, you know what financial results are going to be before you actually do the math. We see what the deterioration of these operating fundamentals. You had to early on in the quarter know that there was a high likelihood you were going to print a loss, a negative number. Is that not correct?

Joseph Kaiser

Don, I think this was the rate environment was what deteriorated on us and it was very -- it was progressively over the quarter. There’re number of different things and a lot of puts and takes in this that we needed to evaluate. Obviously, we’ve been reorienting our network, adding new customers, reducing certain lanes with existing customers because they don’t fit our network and be much more disciplined in our network approach. Obviously, the dedicated losses affected us. And so, I think there were so many puts and takes. It was a pretty significant effort to truly understand the impact of that and we needed to work through that more towards the end of the quarter.

Donald Broughton

So you did, or didn’t see this coming?

Randy Rogers

The customer losses were not -- and quite honestly we’re still working with some of these customers. So, these were specific lanes that we lost. And some of them we decided, or at least in one case, we decided not to, as they adopted one way rates, not to participate. And that’s simply because it didn’t fit our new network. And this is -- I’ll give an example of a West Coast move. Now that we’ve taken out all of our capacity in the West Coast, focusing on our footprint in the East, that simply didn’t make sense for us. So, these were very quickly, these changes were fairly quickly implemented and we also had new business that we were generating from existing customers in different lanes. And so, we had to see how that shaped out, so it was very difficult to get a very clear picture of the overall impact, very quickly.

Donald Broughton

Let me help you out with where I am going with this. If you’re looking at the quarter, and as things are proceeding, it becomes increasingly obviously that you’re going to lose money, not make money. How do you sit in front of your Board and say we’re being fiduciarily responsible to go out and repurchase 8.3% of our outstanding shares, 718,000 shares of our own stock when we know we’re about to put money losing quarter. How do you justify that?

Randy Rogers

I mean, I think it was -- we’ve certainly repurchased one of the three pillars of our model to increase shareholder value over time. We believe the stock is a long-term value…

Donald Broughton

But if you’re losing money and you’re paying 2 times book for the stock, there is a whole host of people that would argue that’s not being feduciariliy responsible. But all right. Good luck gentlemen. It’s a tough environment out there, I know.

Operator

And our next question comes from Matthew Frankel of Cowen. Please go ahead.

Matthew Frankel

Couple of questions, first is on the new outside sales agent program. I just want to better understand what that program is. I know a lot of companies that have this program, or introduced the program, tend to battle a conflict between the independent agents and the in-house sales people? Or there is a fine line to walk there. So, can you talk about walking that line, and just explain that program a little bit better?

Randy Rogers

Sure. We’re focusing on secondary markets where we don’t plan on making our own direct investments any time in the near future, call it the flyer states if you will. You’re absolutely right on the conflict issue and concern. Fortunately, I have a lot of experience and some staff from that very experience in my previous staffs. And so we’re designing our program to be very disciplined. We’re not looking to sign up every person who might want to represent our brand in the marketplace but been quite selective. And unlike many other programs, we are putting geographic and market restrictions on our agent candidates where they will have a pre-defining list of customers that they have inside and relationships to that we do not have to speed the sales cycle on our behalf. And they’ll be working closely with our regional center managers to make sure they’re part of our sales strategies and market engagement and not another competitor in the marketplace.

Matthew Frankel

Is there a goal to get to ex-amount of agents over ex-amount of time, or is it just growth as much as you can grow it?

Randy Rogers

No, we have some specific goals. We’ve very experienced talented leader over that segment, and she’s got some very clear goals for agent recruiting between now and the end of the year. And we also have -- I have some aspirations for a significant contribution to our revenue and margin results in 2017.

Matthew Frankel

And just on the fleet side itself, because you’re taking down, I believe under 8% from where we are today by the end of the year. If the market weren’t to improve much more than it is today and we have just a natural capacity tightening in the marketplace. Would you actually expect to reduce the size of that fleet a little bit further next year? Where do you think you’ll be at the end of this year relative to where you want to be? I mean, idiosyncratically, would you say truck or is it more just see where the market is and we’ll take it from there?

Joseph Kaiser

Matt, I think you’re exactly right. This is Joe. We’re going to match our fleet to the demand out there in the market and keep it in line with that and not chase -- we’re not going to reckless and chase the rates down.

Matthew Frankel

And then in the used market, used truck, I think your net CapEx for the quarter, you said earlier it was about $16 million, that’s right in the middle of the range what it will be for the year. What is the used truck market look like in terms of pricing today? And how conservative do you think you’re being with what you expect to get for the assets you’ve got? And does it even really matter? Or is it just a matter that you need strength for you today and over the next few months. So whatever the market is, the market is.

Joseph Kaiser

I think that that’s exactly right. The market is soft as we all know. We think that there is more value to the Company long-term to get these assets off of us.

Operator

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

Randy Rogers

Thanks everybody for attending the call and for asking insightful questions. We’re planning to be in Boston for the Cowen Conference on September 8th and hope to see some of you there. We also look forward to giving you our Q3 update in November. Enjoy the rest of the day and the rest of the summer. Thank you.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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