Echo Global Logstics reports strong Q1 earnings
May 05, 2011
First quarter earnings for Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services, saw total revenue-at $129.4 million-increase by 45.3 percent compared to the first quarter of 2010.
Operating income at $3.5 million was up 77.1 percent, and net income at $2.2 million was up 83 percent. Net revenue, which is total Revenue less transportation costs, was up 49.8 percent at $25.5 million.
Echo’s Transactional business, which is comprised of business that is not under a long-term contract such as a brokerage-type shipment or an existing relationship without a contract, saw a 69.2 percent gain at $87.2 million. And the company’s Enterprise business, which focuses on three-year deals with customers (but sometimes less than three years and sometimes more up to five years) focuses on contractually agreed upon transportation management programs including technology services, staffing, training, and implementation, was up 12.5 percent at $42.2 million.
Quarterly shipment volume for Echo at 314,777 was up 41.0 percent annually.
Echo CEO Doug Waggoner told LM in an exclusive interview that the majority of these shipments came from small-to-mid-size companies that lack deep resources in their transportation management operations and processes.
“We have a value proposition that includes, hopefully, saving them money, automating their transportation management function, and giving them access to our technology that they can integrate with their ERP systems, and dedicated customer service for our Enterprise customers,” said Waggoner. “A lot of companies just don’t have the capital budget to invest into transportation management systems or the staffing to go into the market to procure transportation management as effectively as we can. Cost savings, great TMS technology, and dedicated customer service across multiple modes and asset-based providers, with Echo managing it, is a great value proposition.”
He explained that the company is also making inroads by expanding its sales force along with the recent roll out of its Flex TMS system, which currently has two customers on board and several more ready to follow suit.
The company’s less-than-truckload (LTL) and truckload segments, as a percentage of total revenue were fairly similar to last year’s first quarter, with LTL accounting for 49.9 percent and truckload accounting for 32.9 percent.
“We have a large LTL business and have been building our truckload business and are real pleased with how it is moving along,” said Waggoner. “If you look at what the market has to offer, there is obviously a lot more truckload potential than there is LTL. We feel very good about our LTL business and are growing truckload at a similar pace.”
The company’s truckload business did not translate as well into quarterly numbers, because Echo parted ways with a very large truckload Enterprise account during the second half of last year, which off-set annual comparisons, said Waggoner. Echo has been investing heavily into truckload in terms of people and have been adding more technology functionality to its truckload services, which he said is resulting in Echo signing deals with larger truckload shippers as it broadens its base in that area.
Looking ahead, Waggoner said that Echo is focused on growth through the expansion of its sales force, securing new Enterprise clients, and throgh acquisitions that add to its geographic coverage.
When asked what types of companies and businesses are of most interest to Echo, Waggoner said the company would like to make four-to-five acquisitions per year, with an eye on small 3PLs or brokers in the LTL or truckload space that are small and regionalized and add to Echo’s geographic footprint and know their market and customers in that particular market.
“If it extends our reach into a market and our knowledge into that region and we empower the business of a single-mode broker, we give them additional modes to sell and technology and our Enterprise solution,” said Waggoner. “Most of these acquisitions we look at are 100 percent transactional focusing on brokerage, and we teach them how to go up market to larger customers and sell a more sophisticated solution. We have done those, and they have worked out very well for us and we will continue to do them.”
Morgan Stanley analyst William Greene wrote in a research note that Echo showed some evidence that growth and leverage are gaining traction after a disappointing 2010.
“The company is producing solid organic growth and acquisition/partnership opportunities,” wrote Greene.
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