TUCSON, Ariz. — TuSimple Holdings needs closure on a raft of investigations before it can reclaim technology leadership in the nascent autonomous trucking industry. But a balance sheet with nearly $1 billion is a big advantage.
“Our runway is three years, and that’s excluding any strategic decision on China,” TuSimple Chief Financial Officer Eric Tapia told FreightWaves in an interview at the company’s testing operations site. “China’s a great business. They have some interesting initiatives with OEMs. But right now, even if we wanted to, we cannot sell it as we have this regulatory cloud.”
It is more than a single cloud.
The need to keep its U.S.-based intellectual property separate from TuSimple’s China operations led to a national security agreement that TuSimple signed in February 2022 with the Committee on Foreign Investment in the U.S. The interagency committee overseen by the Department of Treasury is still looking into TuSimple.
Shedding the China business presumably would help satisfy the CFIUS. And the $250 million or more a sale would bring would further bolster the balance sheet. China operations burn about $80 million a year in cash, Tapia said.
“There’s so much value [in China] that we’re not getting credit for,” Tapia said. “If we can maximize an exit value, even if we get a fraction of that, it’s still better than what we have today. There’s very [few] synergies among China and the U.S., but just from an optics perspective, it makes it a lot easier.”
TuSimple cash burn slows with healthy balance sheet
Despite getting closure on various investigations, including one by the Federal Motor Carrier Safety Administration involving a no-injury crash near Tucson on Interstate 10 a year ago, TuSimple still has some image issues.
A squabble between co-founders Xiaodi Hou and Mo Chen followed months of boardroom drama. That included the ouster of Hou, the rehiring of CEO Cheng Lu and finally Hou’s resignation from the board.
TuSimple is behind on filing several required financial statements, mostly because auditor KPMG quit just before the deadline for filing its report for the third quarter. That, in turn, delayed its annual 10-K filing. In a March 15 8-K filing, TuSimple provided its year-end cash report and projected $55 million to $65 million in savings from laying off 350 employees in December.
Read more: TuSimple employees talk about life after massive layoffs
The company is close to hiring a new auditor.
“Most of our conversations have been with the risk partners, because they want to make sure that they associate themselves with a good company, that our financials are real,” Tapia said, adding that KPMG left its positive assessments intact when it resigned. “From a reputational perspective, they just don’t want to get associated with TuSimple.”
A clean bill of financial health is making hiring another auditor easier. Potential auditors focus on CFIUS; when a board of directors audit committee investigation will wrap up and when TuSimple will return to compliance with Nasdaq regulations.
“They can see our finances are pretty straightforward,” Tapia said.
Could TuSimple be sold for its cash?
With a book value of about $309 million, is TuSimple a candidate for a buyer that would strip its cash?
“All the hedge funds ask like, ‘Hey, give back money to the shareholders by selling.’ I mean, technically, yes,” Tapia said.
But the company’s B-share ownership structure gives Chen, the company chairman, 59% of the voting power in TuSimple.
“If Mo doesn’t want to sell, he won’t sell,” Tapia said. “Somebody can say $1.2 billion. We know that it’s worth a lot more than that, so that B-share structure is protecting us.”
TuSimple closed at $1.35 a share Tuesday, far off its 52-week high of $13.40.
“The reality is, when you look at other players in our space, even in this corrected economy, we should be trading at a different multiple for our shareholders,” Tapia said. “There’s a lot of value of what we want to bring that is not reflected today in our stock price.”
TuSimple truck inventory for sale
Frugal cash management slowed TuSimple’s burn rate before the end-of-year layoffs. Shuttering a Texas-based cash-consuming autonomous freight business with safety drivers contributed significantly. TuSimple has 45-50 low-mileage Peterbilt and Navistar trucks to sell plus a larger number of trailers.
“We’re planning to break even in most of these lease acquisitions and sales,” Tapia said. “You won’t see most of those trucks in the next couple of months, because were liquidating.”
Of the 30-35 trucks TuSimple plans to retain, seven to 11 are dedicated to a driverless route between Tucson and Phoenix that TuSimple plans to launch in 2024. The company has run driverless pilots on the interstate between Tucson and Phoenix since December 2021. Securing enough customers to increase freight density on the I-10 route is a near-term challenge.
TuSimple spent significantly more money than it generated to run freight originating in Texas. It wants to “reach commercial viability” on one or two lanes with no human driver.
Supply chain disruptions during and following the worst of the pandemic are in the rearview mirror.
“Supply chain for us is no longer a material risk,” said Tapia, who oversees purchasing in addition to his CFO role. “For me, the biggest risk is execution.”
Editor’s note: Deletes mention of SEC investigation.
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