Shares of U.S. Xpress Enterprises Inc. plummeted in after-hours trading Feb. 9 on the heels of the company’s fourth-quarter results, which included word that its digital truckload unit Variant deteriorated late last year.
Chattanooga-based U.S. Xpress reported a fourth-quarter net loss of $5.3 million on operating revenues of nearly $532 million. In the same period of 2020, the company posted a profit of $7.5 million on $456 million in revenues. The main cause of the red ink was Variant, which the U.S. Xpress launched in late 2019 as a technology-first truckload business that used artificial intelligence tools to manage drivers’ routes. Although the Variant tractor fleet finished the year above 1,500 as expected—versus about 700 at the end of 2020—its revenue per truck fell and its turnover rate rose in the second half of last year.
President and CEO Eric Fuller said Feb. 9 that the technology models of the Atlanta-based Variant team—Fuller and his team have built Variant away from HQ to help instill a disruptive mindset—needed “a few refinements” and that the unit as a whole needed more trucking sector expertise. Variant’s software, he told analysts and investors on a conference call, wasn’t getting a full view of the freight moving through U.S. Xpress’ network and some of its logic rules needed a course correction.
Fuller’s explanation helped put into context the sudden exit in mid-December of former Variant President Cameron Ramsdell. Fuller noted in a regulatory filing that the Variant project had “multiple opportunities for collaboration with subject matter experts in our other operations” in order to meet its potential. About two months later, the changes made—which include Variant’s tech and operations groups reporting directly to Fuller—have resulted in $10 million in annualized cost savings and have lifted Variant’s revenue per tractor per week to about $4,100, an increase of about 7% from the second half of last year.
“We’re still all in on this model,” Fuller said on U.S Xpress’ conference call, later adding that he “absolutely” thinks Variant can produce profits now that it has scaled to 1,500 trucks. “We still believe in [the] thesis.”
Investors aren’t (yet) sharing Fuller’s confidence: U.S. Xpress stock (Ticker: USX) fell to about $3.50 in after-hours trading, which was down about 20% from where they closed the regular session. They have now lost more than half of their value in the past six months, reducing the company’s market capitalization to about $220 million.
