Greater reliance on high volume customers paying lower rates drove second quarter profit down 39.2 percent year-over-year at Express-1 Expedited Solutions, despite higher revenue.
The expedited transportation and brokerage company’s operating revenue rose 9.3 percent to $44.1 million from the same period a year ago. Much of that year-over-year growth came from international expansion at Express-1 and strong demand for truckload brokerage in the quarter, the company said.
Express-1, the company’s expedited trucking division, increased its sales 12.2 percent to $23.1 million, but operating profit dropped 18.9 percent to $2 million. The division is the fifth-largest U.S. expedited trucking business ranked by revenue, according to SJ Consulting Group, with $77 million in sales last year.
Mexican and Canadian cross-border shipments accounted for 22.6 percent of the Express-1 division’s total revenue in the quarter, the company said. Those high-revenue international shipments also cost more to move, and typically have lower margins than Express-1’s domestic expedited shipments.
The company also said many of its high-volume customers “have not yet participated in rate increases,” putting more pressure on its profit margin.
“Domestic demand began to strengthen late in the quarter, as reflected in our June gross margin of 16.9 percent,” said Mike Welch, CEO of the $158 million company. “We are continuing to see significant growth in our business with Mexico, where Express-1’s expertise in border logistics is a competitive advantage,” said Welch.
Revenue at freight forwarder Concert Logistics Group dropped 2.2 percent to $15.7 million, and the division’s operating profit fell 28.1 percent to $399,000.
The company’s biggest boost came from Bounce Logistics, a truckload brokerage, which increased profit 22 percent to $172,000 and sales 43 percent to $6.7 million. However, Bounce’s business also tends to generate lower margins, the company said. Tightening truck capacity also affected margins, as truckload rates rose.
The company’s shareholders vote Sept. 1 on a proposed $150 million investment from Jacobs Private Equity, a venture capital firm owned by Bradley S. Jacobs. If the shareholders approve the deal, Jacobs will become chairman and CEO. He plans to build Express-1 into a multi-billion dollar business through acquisitions.