Echo beats on revenue and earnings in ‘challenging freight market’ (with video)

Echo Global Logistics headquarters in Chicago.

Detailing its financial and operating results for the fourth quarter of 2019 on Wednesday after the close, Echo Global Logistics (NASDAQ: ECHO) reported non-GAAP earnings per share of 26 cents, beating the Street’s estimate of 16 cents; Echo’s revenue of $531.7 million beat estimates of $522 million.

“I’m proud of the results we posted this year in light of the challenging freight market, triggered by excess truckload capacity throughout much of the year,” said Doug Waggoner, Echo chairman and CEO, in a statement. “I am particularly excited about the year over year volume growth we’ve seen in early January, and believe the freight cycle will improve in 2020.”

After a year of a weak spot market and contract prices de-rating, Echo managed to protect its net revenue margins, which compressed by only 70 basis points year-over-year to 16.9%. Still, gross revenue fell 8.8% compared with the fourth quarter of 2018, and net revenue dropped 12.4% year-over-year.

Although gross revenue fell by double digits, sales, general and administrative expenses were cut by only 5.3%, so they consumed a larger portion of net revenues. Commission expense stayed fairly constant as a percentage of net revenue.

Net income fell 79.7% to $1.4 million.

Echo’s revenue mix between transactional revenue and managed transportation stayed constant, with 77.3% from transactional and 22.6% from managed transportation.

Management expects freight markets in the first quarter and the rest of 2020 to improve substantially.

“We expect full year 2020 revenue to be in the range of $2.25 billion to $2.45 billion,” said Kyle Sauers, Echo chief financial officer, in a statement. “We also expect first quarter revenue to be between $530 million and $570 million.”

On the earnings call, management noted that volume trends in January had already improved; truckload volumes were up in the fourth quarter, and the revenue declines were entirely due to lower rates.

Echo moved 7% more loads per day in January 2020 than in January 2019 for 1% higher revenue per day; January net revenue margins came in at 16.3%, down sequentially from the fourth quarter of 2019.

For the full year of 2019, Echo’s revenue came in at $2.18 billion, down 10.4% from 2018. In response to weak trucking industry volumes and a collapse in spot pricing, Echo cut its total employees by 2.2% and its sales staff by 2.7%.

On the earnings call, management said it would invest between $25 million and $27 million in capital expenditures in 2020, primarily technology, with about 75% of the tech spend on software and the remainder on infrastructure and a hardware refresh.