Echo Sees Billion-Dollar Year Ahead as Truckload Demand Rises

Echo Sees Billion-Dollar Year Ahead as Truckload Demand Rises

A surge in business during the first quarter carried over into April at Echo Global Logistics, as shippers turned to the third-party logistics provider for trucks.

Revenue was up 27 percent year-over-year in the first weeks of April, following a 21.4 percent jump in revenue the first quarter, Echo CEO Doug Waggoner said.

Echo now expects gross revenue to rise 18 to 24 percent in 2014, breaking the billion-dollar barrier, after rising 16.7 percent last year to $884.2 million.

In the first quarter, Echo increased total revenue 21.4 percent to $247.7 million, including $65 million in revenue attributed to two first-quarter acquisitions. Revenue per truckload leaped 18.7 percent, spurred by an unprecedented sequential quarterly spike in rates.

“Throughout the quarter, they spiked up pretty consistently,” COO David Menzel said in an earnings conference call, according to a transcript from Seeking Alpha. In contrast, truckload rates declined 2.5 to 5 percent in the first quarter compared with the last three years.

The rates rose faster than Echo could pass on costs to shippers, cutting into Echo’s net revenue margin and profit. Net revenue margin dropped  from 18.9 percent a year ago to 17 percent in the first quarter. Net profit fell 18.4 percent from a year ago to $2.4 million.

However, Menzel said Echo improved its ability to adjust rates in the face of “extreme” market conditions. “Shippers are understanding of the capacity environment,” he said. Echo increasingly taps into smaller to midsize carriers to secure capacity, he said.

“We anticipate the (truckload) market to continue to get tight,” Waggoner said. “You’ve got produce season coming up, you’ve got a continuously improving economy. You’ve got the regulations, you’ve got the driver shortage” — all likely to push truck rates higher.

“We have seen a little tiny bit of softening but I wouldn’t want to say too much about that because it is still very strong, still very tight capacity,” Menzel said.

Contact William B. Cassidy at wcassidy@joc.com and follow him on Twitter: @wbcassidy_joc.