While a first look at some of the figures in the Variant US Xpress segment seems to indicate a slight improvement in its performance, CEO Eric Fuller told analysts that the best is yet to come.
“Variant is the engine of our company’s growth, and improving its financial performance is critical to our long-term success,” Fuller said Thursday.
Variant figures that looked better were figures that looked good on all trucks in the first quarter. For example, Variant’s average revenue per tractor per week rose to $ 4,065 from $ 3,740 consecutively compared to the fourth quarter of 2021, an 8.7% increase that would have been easy to overcome or surpass on many trucks.
Driver turnover, which has always been called one of the benefits that Variant was going to provide, was a staggering 148% in the first quarter versus 107% in the fourth quarter. This figure of 107% has already declined in the second half, which began with a solid turnover of 58% in the first quarter of 2021 and has consistently deteriorated by the end of the year.
Security has also been touted as a strong option. But the number of preventable accidents per million miles rose to 8.12 from 6.82 in the fourth quarter.
At the end of the quarter, the number of trucks in Variant was 1691 against 1555. This is an increase of 8.7% and now accounts for about half of the company’s fleet (as opposed to a special unit). Fuller said during the call that the increase was disappointing and below expectations. (In contrast, the number of trucks in the Variant between the third and fourth quarters of 2021 increased by 21.2%.)
Variant’s operating income for the quarter was $ 84 million less fuel, Fuller said during a call about earnings. This is an increase of 17% consistently. US Xpress’s total operating income was $ 464.3 million for the quarter without fuel.
During the call, Fuller and CFO Eric Peterson were skeptical, promising that changes to the Variant operating model would eventually succeed.
If there’s a lift for the Variant, then it’s going to be a tech truck in a truck that strives to make the most of processes for efficient routing, a team-based approach designed to keep drivers much better than the aging U.S. Xpress (NYSE: USX) business, and with a team of managers largely drawn from the world of technology doing their job in Atlanta and away from Chattanooga, Tennessee.
It also shocked the world in early December when campaign president Cameron Rumsdel, was fired.
Fuller said US Xpress and Variant spent most of the first quarter, including some time away, reviewing Variant’s activities “as it moves from a quick start to a large-scale business” with a “more disciplined approach to key performance management and growth.” income ”.
Asked by JP Morgan analyst Brian Osenbeck, Fuller said – without naming Rumsdel by name – that after his departure the US Xpress hired a “domestic technology team” to test how the Variant works.
“We invited a team and conducted a workload and process analysis,” Fuller said. Many of these processes have been reengineered and management structures have changed.
In particular, Fuller said that the “communities” that were created to drive a certain group of trucks have undergone structural changes.
The problem, he said, is that during this time, while most of the staff was trained in the new processes, some ancillary activities failed. Fuller in particular noted the inability of drivers to receive timely answers to their calls, which led to a certain push for high turnover in Variant.
All the renewed communities are now working, Fuller said, “and in April compared to March we have seen a significant improvement in turnover.” The renewed communities, which began operating in February – the first out of the box – received the most significant increase in performance, Fuller said.
The US Xpress tractor fleet grew by 144, of which 136 came out of the Variant. But the total number of US Xpress tractors has been declining for several years, and in a slide show distributed with the company’s profits, US Xpress said “the company’s fixed costs have risen while the number of tractors has fallen, affecting our immediate financial results.” .
The average number of tractors on average on the US Xpress was 6,239, compared to 6,095. Fuller said he said the company has the infrastructure for an additional 2,000 sitting tractors, “another $ 425 million in revenue.”
Other highlights of the US Xpress earnings report:
– Fuller noted the performance of a special unit of the company, in which the average revenue from the tractor for the week increased by 13.33%, and the average revenue per mile – by 17.5%. He said use in the special segment was severely affected in January by drivers recovering after a spike in the December-January omicron version of COVID-19.
– Adjusted US Xpress performance for the quarter was 99.4%. Unlike Heartland’s competitors trucks 09.30 NASDAQ: HTLDMarten (ONSDAQ: MRTN) and PAM Transportation (NASDAQ; PTSI) all had PR in the 80s for the quarter.
– US Xpress result: operating profit was $ 200,000 compared to operating income of $ 8 million in the first quarter of 2021. It had adjusted operating income of $ 2.8 million and adjusted losses per diluted share of 2 cents. This loss of 2 cents was actually only 1 cent worse than the consensus estimates, according to SeekingAlpha.
Disclosure: FreightWaves founder and CEO Craig Fuller retains ownership of shares of US Xpress through his family trust.
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