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U.S. Xpress Enterprises Reports Third Quarter 2021 Results

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CHATTANOOGA, Tenn., October 21, 2021--(BUSINESS WIRE)--U.S. Xpress Enterprises, Inc. (NYSE: USX) today announced results for the third quarter of 2021.

Third Quarter 2021 Financial Highlights Compared to Third Quarter 2020

  • Operating revenue grew 13.8% to $491.1 million compared to $431.5 million

  • Variant exited the quarter with 1,283 tractors, representing growth of 149%, and contributed to the total tractor count growing sequentially for the first time since the second quarter of 2020

  • Net loss attributable to controlling interest of $5.5 million or $0.11 per share compared to net income attributable to controlling interest of $10.7 million or $0.20 per diluted share

  • During the quarter, the Company recognized an $0.18 per diluted share unrealized loss on a strategic equity investment, which is excluded from the Company’s adjusted results1

  • Adjusted net income attributable to controlling interest1, a non-GAAP measure, of $3.4 million or $0.07 per diluted share compared to $10.7 million or $0.20 per diluted share

"Our third-quarter results reflect further progress in our digital transformation, which is positioning us for long-term profitable growth against the backdrop of operating in an increasingly tight macro environment. During the third quarter, we successfully grew total tractor count sequentially, repriced most of our dedicated portfolio and grew revenue as well as the percentage of loads booked digitally in our Brokerage segment," said Eric Fuller, President and CEO, U.S. Xpress. "From a financial results perspective, the Dedicated repricing and Variant tractor count growth were both weighted towards the end of the quarter and were outweighed by wage inflation and investments in our digital transformation that we expect to drive long-term profitable growth. We remain on track to exit the year with 1,500 tractors in Variant, and we continue to target doubling our revenues over the next four years."

Third Quarter and Year-to-Date 2021 Financial Highlights

Quarter Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Operating revenue

$

491,140

$

431,469

$

1,416,921

$

1,286,514

Revenue, excluding fuel surcharge

$

451,824

$

403,679

$

1,306,998

$

1,190,463

Operating income

$

6,635

$

15,891

$

23,539

$

28,500

Net income (loss) attributable to controlling interest

$

(5,478

)

$

10,696

$

16,156

$

10,978

Earnings (loss) per diluted share

$

(0.11

)

$

0.20

$

0.31

$

0.20

Adjusted net income attributable to controlling interest1

$

3,430

$

10,696

$

10,153

$

12,978

Adjusted earnings per diluted share1

$

0.07

$

0.20

$

0.19

$

0.24

Operating Ratio

Truckload operating ratio

98.0

%

94.6

%

97.9

%

96.3

%

Brokerage operating ratio

101.6

%

108.1

%

100.0

%

108.9

%

Operating ratio

98.6

%

96.3

%

98.3

%

97.8

%

Adjusted operating ratio1

98.5

%

96.1

%

98.2

%

97.6

%

Update on Variant

Variant’s tractor count increased to 1,283 tractors or 149% over the last 12 months, which contributed to Variant’s revenue growing to 17.5% of Truckload revenue in the quarter compared to 6.7% of Truckload revenue in the third quarter of 2020. Variant continues to not only scale but outperform the legacy over-the-road (OTR) key metrics in turnover, utilization, preventable accidents per million miles, and average revenue per tractor per week.

Mr. Fuller noted, "We reached a major milestone in the third quarter as Variant tractor count growth outpaced attrition in the legacy OTR division, driving total tractor count growth sequentially. The Variant brand is resonating in the professional driver community, and we continue to have success bringing new professional drivers into Variant despite an increasingly challenging driver market."

Truckload Segment

Quarter Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Over the road

Average revenue per tractor per week*

$

3,770

$

3,680

$

3,776

$

3,566

Average revenue per mile*

$

2.421

$

2.047

$

2.286

$

1.921

Average revenue miles per tractor per week

1,558

1,798

1,651

1,856

Average tractors

3,413

3,684

3,384

3,781

Dedicated

Average revenue per tractor per week*

$

4,340

$

4,065

$

4,274

$

4,085

Average revenue per mile*

$

2.527

$

2.353

$

2.455

$

2.360

Average revenue miles per tractor per week

1,717

1,728

1,741

1,731

Average tractors

2,520

2,710

2,575

2,717

Consolidated

Average revenue per tractor per week*

$

4,012

$

3,843

$

3,991

$

3,783

Average revenue per mile*

$

2.468

$

2.173

$

2.361

$

2.097

Average revenue miles per tractor per week

1,625

1,768

1,690

1,804

Average tractors

5,933

6,394

5,959

6,498

* Excluding fuel surcharge revenues

The Truckload segment generated an operating ratio of 98.0% compared to 94.6% in the third quarter of 2020. Adjusted operating ratio1 which adjusts for the impact of the Company’s fuel surcharge program, was 97.8% for the third quarter of 2021 compared to 94.1% in the third quarter of 2020. This change was primarily the result of higher fixed costs as a percentage of revenue as well as the tractor count declining 461 tractors year-over-year. In addition, inflationary pressures in both wage and fuel expenses were only partially offset by the increased rate per mile in the quarter.

In the OTR division, the average revenue per tractor per week increased 2.4%, or $90 per tractor per week, compared with the third quarter of 2020. The increase in average revenue per tractor per week was the result of an 18.3% increase in average revenue per mile, attributable to a strong freight market and Variant’s Optimizer 2.0 prioritizing yield which is the combination of rate and utility. This increase was partially offset by a 13.3% decrease in revenue miles per tractor per week, which we attribute to decisions made by Variant’s Optimizer to prioritize yield and the increasingly challenging professional driver market.

The Dedicated division’s average revenue per tractor per week increased 6.8%, or $275 per tractor per week to $4,340, compared to the third quarter of 2020, primarily a result of a 7.4% increase in average revenue per mile partially offset by a 0.6% decline in average revenue miles per tractor per week.

Mr. Fuller commented, "The most important takeaway from our Truckload segment is that our total tractor count has troughed and grew sequentially in the third quarter. This is an important inflection point for the business as the growth of Variant has begun to outpace the attrition of our legacy OTR division. With Variant growing and our Dedicated rate increases helping to attract drivers, we are positioned to close out the year with strong momentum heading into 2022."

Brokerage Segment

Quarter Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Brokerage revenue

$

90,820

$

55,970

$

269,148

$

152,475

Gross margin %

11.2

%

6.7

%

12.3

%

6.1

%

Load Count

43,766

38,779

130,627

123,205

Percentage of loads processed on digital platform

82.7

%

49.8

%

74.4

%

28.2

%

The Brokerage segment continues to provide additional selectivity for the Company’s assets to optimize yield while at the same time offering expanded capacity solutions to customers. Brokerage segment revenue increased to $90.8 million in the third quarter of 2021 compared to $56.0 million in the third quarter of 2020, primarily as a result of increased revenue per load and, to a lesser extent, an increase in load count in the quarter. Brokerage operating loss was $1.4 million in the third quarter of 2021 compared to an operating loss of $4.5 million in the year-ago quarter.

Mr. Fuller said, "We continue to grow revenue, load count, and the percentage of transactions processed on our digital platform in our Brokerage segment in line with our near-term profitability expectations for this business. Our focus remains on capturing market share and growing load count from a more diverse customer base, building out our carrier network density, and delivering purpose built technological products to our customers. We believe these actions will all positively contribute to operating margin improvement at scale."

Liquidity and Capital Resources

At the end of the third quarter 2021, the Company had $180.1 million of liquidity (defined as cash plus availability under the Company’s revolving credit facility), $356.8 million of net debt (defined as long-term debt, including current maturities, less cash balances), and $280.9 million of total stockholders' equity.

The Company expects its net capital expenditures to approximate $130 million to $150 million for the full year of 2021. Through September 30, 2021, net capital expenditures were $71.1 million.

Outlook

Mr. Fuller commented, "As we think about the future of our industry and where we want to be positioned, we are making investment decisions based upon a longer-term horizon of three to five years. We believe that at that time, the convergence of digital processes, artificial intelligence, automation, alternative fuels, and workforce choices will have dramatically shaped the future of our industry, and those who embrace digital transformation will be in a position to succeed. The decisions and investments that we are making today are designed to position us as a leader in the future state of freight transportation. Between now and then, we will remain focused on investing in our future with an emphasis on growing Variant’s tractor count, and consequently, we expect gradual margin expansion, though our quarterly results may fluctuate until we reach maturity."

Conference Call

A conference call and simultaneous webcast is scheduled today at 5:00 p.m. ET to discuss the Company’s 2021 third-quarter results and provide a business and financial update. Access to the webcast is available at investor.usxpress.com. To listen to the conference call, please dial 1-877-423-9813 or, for international callers, 1-201-689-8573 and ask to be joined to the U.S. Xpress Third-Quarter 2021 Earnings Conference Call.

Supplemental Financial Information

Additional information regarding the U.S. Xpress’ operating results is provided below as well as on the Company’s investor page at investor.usxpress.com.

(1) Non-GAAP Financial Measures

In addition to our net income determined in accordance with U.S. generally accepted accounting principles (‘‘GAAP’’), we evaluate operating performance using certain non-GAAP measures, including Adjusted Operating Ratio, Adjusted Operating Income, Adjusted Net Income Attributable to Controlling Interest, and Adjusted EPS (on a consolidated and, as applicable, segment basis). Management believes the use of non-GAAP measures assists investors and securities analysts in understanding the ongoing operating performance of our business by allowing more effective comparison between periods. Further, management uses non-GAAP Adjusted Operating Ratio, Adjusted Operating Income, Adjusted Net Income Attributable to Controlling Interest, and Adjusted EPS measures on a supplemental basis to remove items that may not be an indicator of performance from period-to-period. The non-GAAP information provided is used by our management and may not be comparable to similar measures disclosed by other companies. The non-GAAP measures used herein have limitations as analytical tools and should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. You should not consider the non-GAAP measures used herein in isolation or as substitutes for analysis of our results as reported under GAAP. Management compensates for these limitations by relying primarily on GAAP results and using non-GAAP financial measures on a supplemental basis.

Pursuant to the requirements of Regulation G and Regulation S-K, we have provided reconciliations of Adjusted Operating Ratio, Adjusted Operating Income, Adjusted Net Income Attributable to Controlling Interest, and Adjusted EPS to the most comparable GAAP financial measures at the end of this press release.

Forward-Looking Statements

This press release contains certain statements that may be considered 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, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements may be identified by their use of terms or phrases such as "expects," "estimates," "projects," "believes," "anticipates," "plans," "intends," "outlook," "strategy," "optimistic," "will," "could," "should," "may," "focus," "seek," "potential," "continue," "goal," "target," "objective," derivations thereof, and similar terms and phrases. In this press release, such statements may include, but are not limited to, statements in the "Outlook" section, statements regarding the freight and driver market, expected rates, expected margins, statements regarding future unit, revenue and profit growth of our Variant fleet and Brokerage segment, our ability to scale our digital businesses, expected net capital expenditures, and any other statements concerning: any projections of earnings, revenues, cash flows, capital expenditures, operating ratio, operating margin, compliance with financial covenants, or other financial items; any statement of plans, strategies, or objectives for future operations; any statements regarding future economic or industry conditions or performance; and any statements of belief and any statements of assumptions underlying any of the foregoing. Forward-looking statements are based upon the current beliefs and expectations of our 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 in, contemplated by, or underlying the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those in the forward-looking statements: general economic conditions, including inflation and consumer spending; political conditions and regulations, including future changes thereto; changes in tax laws or in their interpretations and changes in tax rates; future insurance and claims experience, including adverse changes in claims experience and loss development factors, or additional changes in management's estimates of liability based upon such experience and development factors that cause our expectations of insurance and claims expense to be inaccurate or otherwise impacts our results; impact of pending or future legal proceedings; future market for used revenue equipment and real estate; future revenue equipment prices; future capital expenditures, including equipment purchasing and leasing plans and equipment turnover (including expected trade-ins); fleet age; future depreciation and amortization; changes in management’s estimates of the need for new tractors and trailers; future ability to generate sufficient cash from operations and obtain financing on favorable terms to meet our significant ongoing capital requirements; our ability to maintain compliance with the provisions of our credit agreement; freight environment, including freight demand, rates, capacity, and volumes; future asset utilization; loss of one or more of our major customers; our ability to renew dedicated service offering contracts on the terms and schedule we expect; surplus inventories, recessionary economic cycles, and downturns in customers' business cycles; strikes, work slowdowns, or work stoppages at the Company, customers, ports, or other shipping related facilities; increases or rapid fluctuations in fuel prices, as well as fluctuations in surcharge collection, including, but not limited to, changes in customer fuel surcharge policies and increases in fuel surcharge bases by customers; interest rates, fuel taxes, tolls, and license and registration fees; increases in compensation for and difficulty in attracting and retaining qualified professional drivers and independent contractors; classification of independent contractors; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, intermodal, and brokerage (including digital brokerage) competitors; regulatory requirements that increase costs, decrease efficiency, or reduce the availability of drivers, including revised hours-of-service requirements for drivers and the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program that implemented new driver standards and modified the methodology for determining a carrier’s Department of Transportation safety rating; future safety performance; our ability to reduce, or control increases in, operating costs; future third-party service provider relationships and availability; execution of the Company’s current business strategy or changes in the Company’s business strategy, including whether implementation of such strategies will improve profitability; the ability of the Company’s infrastructure to support future organic or inorganic growth; our ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; our ability to adapt to changing market conditions and technologies, including the future use of autonomous tractors; disruptions to our information technology; the cost of and our ability to effectively and efficiently implement technology initiatives; costs, diversion of management’s attention, and potential payments made in connection with the multiple class action lawsuits a stockholder derivative lawsuit arising out of our IPO; credit, reputational and relationship risks of certain of our current and former equity investments; our ability to maintain effective internal controls without material weaknesses; our voting control is concentrated with certain members of the Fuller and Quinn families, which limits the ability of other stockholders to influence corporate matters; and the impact of the recent coronavirus outbreak or other similar outbreaks. Readers should review and consider these factors along with the various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

About U.S. Xpress Enterprises

Through its subsidiaries, U.S. Xpress Enterprises, Inc. offers customers over-the-road, dedicated, and brokerage services. Founded in 1985, the Company utilizes a combination of smart technology, a modern fleet of tractors and a network of highly trained, professional drivers to efficiently move freight for a wide variety of customers. U.S. Xpress implements a range of digital initiatives and technology to drive innovation in the industry, streamline the value chain for customers and improve the overall driver experience.

USX Financial

Condensed Consolidated Income Statements (unaudited)

Quarter Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

2021

2020

2021

2020

Operating Revenue:

Revenue, excluding fuel surcharge

$

451,824

$

403,679

$

1,306,998

$

1,190,463

Fuel surcharge

39,316

27,790

109,923

96,051

Total operating revenue

491,140

431,469

1,416,921

1,286,514

Operating Expenses:

Salaries, wages and benefits

158,942

137,541

445,445

412,889

Fuel and fuel taxes

46,715

33,208

130,902

103,265

Vehicle rents

22,700

20,956

65,710

64,168

Depreciation and amortization, net of (gain) loss

19,509

25,785

65,096

77,871

Purchased transportation

159,152

125,997

458,302

373,117

Operating expense and supplies

38,683

33,927

105,641

101,249

Insurance premiums and claims

18,242

17,835

58,952

65,141

Operating taxes and licenses

3,677

3,359

10,193

10,756

Communications and utilities

2,677

2,187

8,029

6,895

General and other operating

14,208

14,783

45,112

42,663

Total operating expenses

484,505

415,578

1,393,382

1,258,014

Operating Income

6,635

15,891

23,539

28,500

Other Expenses (Income):

Interest expense, net

3,572

4,381

10,816

14,664

Other, net

12,062

-

(8,129

)

2,000

15,634

4,381

2,687

16,664

Income (Loss) Before Income Taxes

(8,999

)

11,510

20,852

11,836

Income Tax Provision (Benefit)

(3,361

)

1,337

4,732

1,867

Net Income (Loss)

(5,638

)

10,173

16,120

9,969

Net Income (Loss) attributable to non-controlling interest

(160

)

(523

)

(36

)

(1,009

)

Net Income (Loss) attributable to controlling interest

$

(5,478

)

$

10,696

$

16,156

$

10,978

Income (Loss) Per Share

Basic earnings (loss) per share

$

(0.11

)

$

0.22

$

0.32

$

0.22

Basic weighted average shares outstanding

50,563

49,667

50,293

49,462

Diluted earnings (loss) per share

$

(0.11

)

$

0.20

$

0.31

$

0.20

Diluted weighted average shares outstanding

50,563

51,194

51,839

50,493

Condensed Consolidated Balance Sheets (unaudited)

September 30,

December 31,

(in thousands)

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

5,995

$

5,505

Customer receivables, net of allowance of $163 and $157, respectively

227,825

189,869

Other receivables

19,227

19,203

Prepaid insurance and licenses

21,751

14,265

Operating supplies

12,505

8,953

Assets held for sale

18,344

12,382

Other current assets

28,590

16,263

Total current assets

334,237

266,440

Property and equipment, at cost

885,992

896,264

Less accumulated depreciation and amortization

(376,155

)

(394,603

)

Net property and equipment

509,837

501,661

Other assets:

Operating lease right-of-use assets

275,247

287,251

Goodwill

59,221

59,221

Intangible assets, net

24,320

25,513

Other

42,713

39,504

Total other assets

401,501

411,489

Total assets

$

1,245,575

$

1,179,590

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

129,808

$

83,621

Book overdraft

2,605

-

Accrued wages and benefits

48,200

40,095

Claims and insurance accruals

47,698

47,667

Other accrued liabilities

5,860

5,986

Current portion of operating leases

82,015

78,193

Current maturities of long-term debt and finance leases

84,478

103,690

Total current liabilities

400,664

359,252

Long-term debt and finance leases, net of current maturities

278,271

255,287

Less debt issuance costs

(369

)

(314

)

Net long-term debt and finance leases

277,902

254,973

Deferred income taxes

28,926

25,162

Other long-term liabilities

14,837

14,615

Claims and insurance accruals, long-term

46,376

55,420

Noncurrent operating lease liability

194,525

209,311

Commitments and contingencies

-

-

Stockholders' Equity:

Common stock

505

497

Additional paid-in capital

266,698

261,338

Retained earnings (deficit)

13,726

(2,430

)

Stockholders' equity

280,929

259,405

Noncontrolling interest

1,416

1,452

Total stockholders' equity

282,345

260,857

Total liabilities and stockholders' equity

$

1,245,575

$

1,179,590

Condensed Consolidated Cash Flow Statements (unaudited)

Nine Months Ended September 30,

(in thousands)

2021

2020

Operating activities

Net income (loss)

$

16,120

$

9,969

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Deferred income tax provision

3,764

1,543

Depreciation and amortization

62,049

68,104

Losses on sale of property and equipment

3,047

9,767

Share based compensation

5,294

3,421

Other

546

3,186

Unrealized (gain) on investment

(8,129

)

-

Changes in operating assets and liabilities

Receivables

(38,064

)

(8,354

)

Prepaid insurance and licenses

(7,486

)

(11,747

)

Operating supplies

(3,420

)

(204

)

Other assets

(8,284

)

(3,047

)

Accounts payable and other accrued liabilities

36,762

21,413

Accrued wages and benefits

8,105

7,863

Net cash provided by operating activities

70,304

101,914

Investing activities

Payments for purchases of property and equipment

(141,068

)

(129,582

)

Proceeds from sales of property and equipment

70,016

36,192

Other

-

...

(1,880

)

Net cash used in investing activities

(71,052

)

(95,270

)

Financing activities

Borrowings under lines of credit

235,612

231,254

Payments under lines of credit

...

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