U.S. Xpress Enterprises (USX) Tops Q2 EPS by 31c, Revenues Beat

U.S. Xpress Enterprises (NYSE: USX) reported Q2 EPS of $0.18, $0.31 better than the analyst estimate of ($0.13). Revenue for the quarter came in at $422.5 million versus the consensus estimate of $414.76 million.

Second Quarter 2020 Financial Highlights

• Operating revenue of $422.5 million compared to $413.9 million in the second quarter of 2019
• Operating income of $16.3 million compared to $8.8 million in the second quarter of 2019
• Operating ratio of 96.1% compared to 97.9% in the second quarter of 2019
• Adjusted operating ratio1, a non-GAAP measure, of 95.9% compared to 97.5% in the second quarter of 2019
• Net income attributable to controlling interest of $9.5 million, or $0.18 per diluted share, compared to $2.7 million in the second quarter of 2019, or $0.05 per diluted share

Eric Fuller, President and CEO, commented, “I am very pleased with our second quarter results as we are beginning to see the tangible, financial benefits of our strategic initiatives focused on utilizing technology to improve our processes, accelerate the velocity of our business, improve our customers’ and drivers’ satisfaction, and lower our costs. The approximate 500 basis points of sequential margin improvement we achieved exceeded normal seasonality. The successful launch of our digital fleet, ongoing success in reducing overhead costs, better safety performance, and lower fuel costs more than offset a sequential decrease in revenue per mile in our Over-the-Road division as there continued to be excess tractor capacity relative to freight demand in the market for a majority of the quarter due in part to COVID-19.”

Mr. Fuller continued, “A major digital initiative that we have been working on over the last two years has been the development, launch, and ramp of our digital fleet. This fleet is largely recruited, planned, dispatched, and managed using artificial intelligence and digital platforms. We developed the concept as a hypothesis in 2018 based in part on the business models of the digital freight brokerages. During 2019, we began building our technology leadership and teams to construct the necessary databases, applications, and processes to launch a pilot fleet with a small number of trucks in the fourth quarter of 2019. The test was successful and we expanded the pilot fleet to approximately 100 trucks in the first quarter. Given the positive results of the first quarter pilot we moved to a full production model, scaling the business to approximately 400 trucks in the second quarter of 2020. Phase one of our plan is to convert a total of 900 Over-the-Road solo trucks, with the lowest returns, to our digital platform over the next few quarters. Phase two of our plan will be to potentially convert an additional 1,200 trucks over the next couple of years. While the conversion will not be linear, we expect our margins to expand further.”

Mr. Fuller added, “The Over-the-Road division experienced substantial improvement in the second quarter driven by the conversion of an additional 300 of our lowest performing tractors into our digital fleet. This conversion helped drive our OTR utilization up by 3.5%, as compared to the first quarter of 2020, while contributing to a reduction in both our fixed and variable costs.”

Mr. Fuller concluded, “Our Dedicated division continued to perform very well in the second quarter having delivered its fifth consecutive quarter of record productivity. Average revenue per tractor per week expanded from the first quarter, to $4,122, while we grew the truck count in this division by 1.3%. I continue to be very pleased with our team’s execution and we remain focused on organically growing the Dedicated division given the stability that we believe this business provides through economic cycles.”

Outlook

The Company’s baseline assumptions for the balance of 2020 include a general sequential economic recovery that may be volatile nationally or by region at times, a muted increase of capacity, and a relatively benign cost inflation, which should allow for a more favorable rate environment over the next several quarters. Based on these assumptions, we expect our internal initiatives around digitization and cost management, combined with our continued strength in Dedicated and an improving rate outlook have us well positioned to continue improving our margins through 2021.

For earnings history and earnings-related data on U.S. Xpress Enterprises (USX) click here.

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