U.S. Xpress Enterprises, Inc. Class A

Greetings ladies and gentlemen and welcome to US Express Capital second quarter of 2022 earnings conference call. At this time all participants are in listen only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, they start in zero on your telephone keypad. As a reminder, this conference is being recorded. I will now turn it over to your host, Mr. Matt Garvey, Vice President, Investor Relations.

Thank you, Operator, and good afternoon, everyone. Welcome to the U.S. Express second quarter 2022 earnings call. Eric Fuller, U.S. Express's President and CEO, will lead our call today, followed by Eric Peterson, our CFO, who will discuss our financial results. Our discussion today includes forecasts and other information that are considered forward-looking statements. While these statements reflect our current outlook, they are subject to a number of risks and uncertainties that can cause actual results to differ materially. These risk factors are described in U.S. Express's most recent Form 10-K filed with the SEC. We undertake no duty or obligation to update our forward-looking statements. During today's call, we will discuss certain non gap measures which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with us gap. A reconciliation of these non gap measures to the most comparable gap measure can be found in our earnings release. As a reminder, a replay of this call will be available on the investor section of our website. We also have posted an updated supplemental presentation to accompany today's discussion on our website at investor.usexpress.com. We will be referencing portions of this supplement as part of today's call. And with that, I would like to turn the call over to Eric Fuller.

Thank you, Matt, and good afternoon, everyone. Today, I would like to provide an update on variance key metrics in the quarter, highlight key achievements in the quarter from our other business segments, And following Eric Peterson's discussion of our financial results, provide our market outlook for the second half of 2022. Turning to Variant, Variant generated operating revenue of $87 million in the second quarter net of fuel surcharges, an increase of 4% sequentially compared to the first quarter. This increase in revenue is primarily driven by an increase in seated truck count of 200 tractors, bringing the fleet size to 1,889 exiting the quarter, which more than offset the sequential declines in both utilization and rate per mile. In addition, Variant has grown approximately 200 tractors since the end of the second quarter. We continue to believe that Variant is the growth engine for our company because of the large market for one-way freight movement and that we can implement technology to improve capacity, cost, and service levels for our customers while at the same time improving the experience for our professional drivers. Improving both variant and our overall financial results depends on three main pillars. First, improving per tractor utilization primarily within our variant fleet. Second, lowering our fixed costs both as a percentage of revenue and per mile. And finally, continuing to increase our overall tractor count, which in the near term will help to lower our fixed costs as a percentage of revenue and per mile, and over the long term will allow us to realize the better per tractor economics across a larger fleet as we improve variance utilization. All three of these pillars are critical to achieving our financial results. Looking at variance other key metrics, variance turnover remained elevated in the quarter at 150%. while a portion of this was due to the short-term disruption from reorganizing our fleet operations. In order for turnover to improve materially, utilization has to get back to where it was a few quarters ago, which is why we're so focused on improving utilization in the fleet. Revenue per tractor per week declined sequentially in the second quarter to $3,863 due to a combination of lower utilization within the fleet and a lower rate per mile as a large decline in the spot market portion of our business more than offset a meaningful increase in contracted rates in the quarter. Finally, preventable accidents per million miles decreased 3% sequentially in the quarter. Fleet safety continues to be a priority for the company, and we've made tremendous progress over the last few years improving our safety stats, not only in variant, but across the entire company. Attorneys are dedicated, The dedicated division continues to perform well in the second quarter, building off its momentum from late Q1 and continues to benefit from our get healthy initiatives made to the division throughout 2021. Revenue per truck per week increased 13% year over year and 4% sequentially to $4,913. The increased revenue per truck was primarily driven by increased rate per mile partially offset by lower utilization compared to the second quarter of last year. The sequential increase in revenue per truck per week was driven by a combination of a higher rate per mile and higher utilization compared to the first quarter. Total division revenue benefited from these dynamics as well from an additional 125 tractors in the fleet year-over-year. Customer interest in our dedicated offerings continued to grow. We see opportunities to modestly add truck count here, which would be accretive to our overall truck load results. We see more opportunity to improve margins in dedicated through responsible growth, improving our utilization, and lowering our driver turnover. Turning to brokerage, our brokerage segment gross margin benefited from the softening market conditions, which allowed for a lower cost to cover loads. Additionally, We right-sized our technology investments and operational headcount in the second quarter, and expect these changes to benefit our operating income beginning in the third quarter. If current market conditions persist, we expect this segment's quarterly operating income in each quarter of the second half of the year to be consistent with the second quarter. Before I turn the call over to Eric Peterson to discuss our financials, I wanted to once again thank our employees who have worked tirelessly over the last two quarters executing on our three main pillars. We're in a much better place than when we began the year with our brokerage segment profitable and our dedicated division performing well. Seeing improvements in our dedicated division and its ability to turn around its financial performance gives me the confidence that Variant will mature from a startup to a standalone commercial business. With that, I would like to turn the call over to Eric Peterson.