USA Truck, Inc.

Good morning and welcome to the USA Truck Third Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Mike Stevens, Senior Vice President, Finance, Strategy, and Investor Relations. Please go ahead.

Thank you, Grant. Good morning and welcome to USAT Capacity Solutions' third quarter earnings conference call. Joining us this morning from the company are James Reed, President and CEO, and Zach King, Senior Vice President and CFO. We thank you for joining us today. In order to help you better understand USAT Capacity Solutions and its results, Some forward-looking statements could be made during the call. As we all know, forward-looking statements, by their very nature, are subject to uncertainties and risks. For a more complete discussion of factors that could affect the company's future results, please refer to the forward-looking statement section of the company's earnings press release and the company's most recent SEC public filings. In order to provide more meaningful comparison, certain information discussed on the conference call could include non-GAAP financial measures as outlined and described in the tables in our earnings press release. I'll now turn the time over to Zach.

Thank you, Mike. We want to thank everyone for joining us on the call today and appreciate your interest in and support of USA Truck. We hope you all had an opportunity to review our earnings release from last night. As we stated in the release, the third quarter was the tale of two freight markets. The first half of the quarter was much like the second quarter, where the market placed downward pressure on price and volume. and required us to transition more trucks to the depressed spot market. However, around the middle of August, we experienced a tightening of capacity, which abruptly strengthened customer demand. We believe this shift was the result of approximately 1.3 million people in the trucking industry still unemployed when compared to the 500,000 receiving unemployment benefits at this time last year. This was according to the Bureau of Labor Statistics. When coupled with limited supply of new driving professionals entering the workforce due to COVID-19 concerns, and truck driving school closures, it created capacity constraints. These constraints positively impacted both of our segments, increasing our base revenue per load in mile and trucking and our revenue per load in USAT logistics, but made it more difficult to recruit qualified driving professionals and increase costs when securing third party capacity. If you'll please turn with me to slide number three, we'll do a brief review of our financial results. Consolidated quarterly operating revenues came in at $141.8 million, which represents an 8.3% increase year over year. Base revenue was up 14.5% excluding fuel. Consolidated adjusted operating ratio for the quarter was 96.4%, down from 99.7% in the prior year, primarily driven by improvements in our base revenue per mile in our trucking segment and increases in revenue per load in our USAT logistics segment while controlling our cost structure. Our adjusted earnings per diluted share was 29 cents. Turning to slide four, Trucking operating revenue before intersegment eliminations increased $3.8 million or 4.1% to $97.4 million. Base revenues excluding fuel were up 10.1% to $89.5 million compared to $81.3 million for the third quarter of 2019. Our trucking segment generated $3.8 million in adjusted operating income and a 95.8% adjusted operating ratio, which is the third the best third quarter trucking adjusted operating ratio in over a decade. The primary driver of these results was a 19 cent increase in base revenue per loaded mile when compared to the third quarter of 2019. Utilization also increased 14 miles per truck, or approximately 1% from the third quarter of 2019, related to our continued regionalization strategy. These rate and utilization outcomes positively affected base revenue per available tractor per week, which increased $318, or 10.1% year over year. Our deadhead percentage for the third quarter of 2020 improved by 70 basis points from the second quarter. The average available tractor count for the third quarter of 2020 was 1,969, which is a 1.1% decrease when compared to the third quarter of 2019. This truck count decrease is the result of continuing to moderate our fleet to improve asset utilization and profitability. Turning to slide six, we will review the results of our USAT logistics segment. Revenue before intersegment eliminations increased $12.7 million from the third quarter of 2019, or 32.2% to $52.1 million. Our logistics segment generated $1 million in adjusted operating income and had a 98% adjusted operating ratio. Gross margin dollars increased $1.1 million to $5.9 million in the quarter. Gross margin percentage for the third quarter of 2020 was 11.3% versus 12.2% for the comparable quarter in 2019. Load count decreased to 32,100 loads during the third quarter from the 33,400 loads in the second quarter. That decreased to 3.7%, but increased by 4%, or approximately 1,200 loads year over year. This market environment drove our margin per load up to $183 per load from $156 per load year over year. If you'll turn with me to slide number seven, we'll highlight some key balance sheet and liquidity measures. As of September 30, 2020, total debt and lease liabilities were $182 million, and stockholders' equity was $78.2 million. Net debt was $180.8 million, and our net debt to adjusted EBITDA for the trailing 12 months was 3.5 times. down from the 4.1 times in the second quarter. This decrease is the result of a net debt decrease of $8.6 million from the second quarter of 2020 and a $5.4 million improvement in our trailing 12-month EBITDA. The company had approximately $47.6 million available to borrow under its credit facility as of September 30, 2020. As discussed in prior quarters, we continue to expect minimal CapEx to the end of 2020. However, as discussed on our last call, during July we did enter into an agreement to release 189 new tractors and dispose of certain high-cost tractors during the back half of 2020. To date, we have received approximately half of the total tractor order and expect the remainder of those tractors to be delivered throughout the remainder of the fourth quarter. With that, I'll now turn the call over to James.