Q2 2021 Echo Global Logistics Inc Earnings Call
Okay.
Thank you for standing by while come to the Echo Global logistics second quarter 2021 earnings call.
At this time all participants are in a listen only mode. After the speaker's presentation. There will be question and answer session to ask.
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I would now like to hand, the conference over to your Speaker today, Pete Rogers Chief financial.
I'm sure. Please go ahead.
Thank you and thank you for joining us today to discuss our second quarter 2021 earnings on the call today are Doug Waggoner, Chairman of the Board and Chief Executive Officer, Dave Menzel, President and Chief operating Officer, and Pete Rogers, Chief Financial Officer, we have posted presentation.
As to our website that accompany management's prepared remarks, and these slides can be accessed in the Investor Relations section of our site at Echo Dot com as outlined on slide 2 of that presentation. During the course of this call management will be making forward looking statements based on our best view of the business as we see it today, our SEC filings.
<unk> flat, including our form 10-K contain additional information about factors that could cause actual results to differ from management's expectations.
We also will be discussing certain non-GAAP financial measures the definition and reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is contained in.
Billings release, and the form 8-K, we filed earlier today and with that I'm pleased to turn the call over to Doug Waggoner.
Thanks Pete.
Good afternoon, everyone I appreciate all of you joining today.
And I'll start on slide 3 of our presentation and hit some of the highlights for the quarter.
The themes and results for the <unk>.
In the press were going to sound familiar to our last few calls because we've been able to maintain and even accelerate our business momentum this period.
The financial highlights speak for themselves first.
Echo delivered record revenue in the second quarter as total revenue was $935 million, representing an 82%.
The increase from last year's second quarter. This is our fourth consecutive quarter of record revenue.
Second.
That record quarterly revenue performance came with numerous records at the individual business levels as well.
We had record brokerage revenues of $717 million.
Second quarter managed transportation revenues of $218 million.
Record truckload revenues of $687 million and record LTM revenues of $218 million.
Third.
We also drove record adjusted gross profit of 136 million.
Representing a 55% increase from last year's comparable quarter.
Fourth the record quarterly revenues and gross profit dollars are further translating into profitability growth as we delivered record adjusted EBITDA of $36.2 million or 45, 145% increase.
Record prior year.
And our adjusted EBITDA margin was also at a record high of 26.6%.
Fifth and lastly, non-GAAP fully diluted EPS was also a new record at 84 cents compared to 19 in the year ago period, reflecting a 355.
Over the percent increase.
On slide 4 we illustrate the combination of factors behind this success.
<unk> excellent execution by our people and our robust freight environment.
Second technology is enabling our people to become more productive and allowing them to capitalize on profit.
Notably capture market share gains.
And third data science is providing real time insight into pricing and market conditions that allow us to provide valuable services to shippers and carriers.
As we look into the future we believe that our continued investment in each of these areas, we will enhance our value proposition across.
<unk> freight market and will help us capture greater value as we continue to scale the business across the brokerage and managed transportation businesses in the evolving digital freight marketplace.
The record breaking revenue adjusted gross profit adjusted EBITDA and adjusted EPS in the second quarter demonstrate that.
Our approach over the last few years as it is yielding the intended results for example.
In the second quarter.
We once again demonstrated increased productivity per client representative or productivity in brokerage increased by 7% on a year over year basis.
Our truckload.
<unk> grew by 27% and again this reflects our ability to execute and continue capturing market share at a time when capacity remains constrained.
Our managed transportation revenue grew by 85% on a year over year basis, we continued to renew clients at a high rate and continue.
On new business.
We also continued to focus on enhancing our digital marketplace and as a result have seen increases in freight books directly through automated channels and carriers book from Echo drive.
And as a result of our outperformance throughout the first half of the year and our continued confidence in.
<unk> brings me to execute we are raising our top line guidance by roughly 8% and Pete will walk you through the specifics of that in a few minutes.
We're very proud of the organization's performance in Q2, and an environment characterized by tight capacity and growing demand there is ample opportunity to continue to demonstrate our value.
The shippers carriers and shareholders, we will remain focused on sustaining our momentum and continuing to leverage our differentiated model that appropriately blends technology in touch.
Now, let me turn it over to Dave to cover additional details by mode.
Thanks, Doug consistent.
Consistent with trends observed earlier.
And our abilities here.
<unk> remains very tight and shippers continue to face a huge challenge to secure capacity in today's market.
This has been the story for the first half of 2021, and certainly continues to be true as we head into Q3.
Given the significant fragmentation in the truckload market are.
Earlier now you proposition that includes a combination of a robust carrier network proprietary technology and highly engaged talented people continue to be big Differentiators for echo.
All of this enables our consistent execution, which I'm proud to say has led to echo again being voted as the number 1 <unk>.
A unique doll and the inbound logistics annual shipper survey.
As indicated on slide 5 this is the fifth consecutive year with Echo taken our number 1 position and I want to thank all of our clients for voting for.
Management.
<unk> last quarter I highlighted the different points of the freight cycle and that goes ability to adapt our business model and approach to each phase of the cycle and this most recent quarter. It was a lot less about adaptation and a lot more about execution and communication.
<unk> financial our financial results in little more detail as indicated.
So on slide 6 we delivered another record quarter with truckload revenue of $687 million in Q2, representing an increase of 95% over the prior year. This growth was driven by a 27% increase in volume.
And a 54% increase in revenue per shipment.
This significant.
<unk> rise in rates is directly attributable to the increase in truck rates caused by tight capacity as our cost of capacity as measured by truckload cost per mile increased by 57% in Q2.
Our increase in revenue per shipment was the result of the spot business priced at current market rates as well as adjustments.
Indicators continue to make towards contractual business as our large accounts continue to update their routing guides.
Our volume growth was driven by an increase in spot business. In fact, our spot volume was up by 73% and our award volume was down by 4% as you would expect the contingent ex escalation in.
Truckload cost caused routing guides to breakdown, which drove an increase in spot business. Our team did a great job capitalizing on market opportunities, while providing capacity to shippers in response to the tight market. This resulted in a shift of our freight mix versus the year ago period.
Spot freight represented 52% of overall volume.
Volume in Q2 to 2021 as compared to 38% in Q2.2020.
Our spot growth was also fueled by our API connections with key.
Automated pricing algorithms, we grew our automated spot business by over 90% and we see this as a big opportunity.
For future growth.
Given the tightness in capacity.
It is imperative that we continue to leverage and grow our carrier network, we added more new carriers to our network and the productivity of our carrier sales organization continues to improve despite these tight market conditions.
Enabling this execution is the continued adoption of our echo.
<unk> platform, enabling carriers to have direct access to our freight the bookings from carriers direct access increased by over 500% over the year ago period, and our active carrier count increased by 88%.
Our technology tools, coupled by our reputation in the marketplace continue to enhance.
<unk> to access needed capacity to provide reliable service to our shippers in both contract and spot market.
Turning to our less than truckload business. We also delivered another record with revenue of $218 million in Q2, representing a 54% increase over the prior year.
Our growth.
And <unk> was again, a combination of both volume and rates as our <unk> shipments grew by 27%.
And our revenue per shipment increased by 21%.
From a volume perspective, our <unk> business was impacted by significant growth in managed transportation driven by new clients and strong brokerage growth.
Our dart due to a strong economy and in part due to favorable year over year comps driven by the slowdown in 2020 caused by the pandemic.
Capacity remains very tight with LPL carriers due to a combination of strong demand in a challenging labor market almost all of the carriers I've talked to recently have concerns over attracting and retaining.
Retaining drivers as well as dockworkers. This tighter capacity is driving the <unk> rates up and a 23% increase in rates was the highest we've seen this rate increase stems from an unusually low average shipment costs in Q2.2020 related to the overall pandemic slowdown and steady rate increases since then.
Fortunate.
<unk> the depth of our LTE network enables us to provide solutions to our clients who are facing the obvious challenges with rapidly rising rates.
Continuing on slide 6 we delivered record brokerage revenue of $717 million in Q2.
Which was an increase of 81% over the prior year, our growth was driven by the combination.
<unk> volume and rates as I just highlighted.
On June 30, our sales organization totaled 1773 employees and agents.
An increase of 187 people from the prior year again. This metric includes a combination of commission client sales Commission carrier sales and operational employees that direct.
Please support both clients and carriers. This is a 12% increase in our sales team. Despite the increase in head count or sales productivity improved as brokerage shipments per FTE was up by 7% in Q2.
We talk a lot about improved productivity is evidence of the value of our continued investment in technology and adaption.
<unk> of our business model.
Adaptation of our business model as our industry continues to evolve to a more digital world.
It's important that I also slowdown in mentioned how important our culture is an acknowledged that our work force plays an integral role in driving our growth and client satisfaction.
In June we were identified as 1 of <unk>.
It is best and brightest companies to work for and this was our eighth year, receiving this award we're very proud of this recognition and it's a nice third party acknowledgment of the strength of our culture.
Our managed transportation business also achieved record results as new business wins have been integrated and shipping volumes continued continue to accelerate.
Right.
We delivered revenue of $218 million in Q2, and 85% increase over the prior year <unk>.
Additionally, we signed $18 million in new business in Q2, and renewed a significant portion of our business at an impressive 97% rate of renewal.
Our managed transportation team continues to adapt and successfully navigate this on.
Precedent freight environment and deliver for our shippers.
Turning to slide 7 we generated a record $136 million and adjusted gross profit of 55% increase over the prior year. The increase was driven by record revenue, but offset by 255 basis points of compression, resulting.
Adjusted gross profit margin of 14, 6%.
The adjusted gross profit margin decline was in both <unk> and truckload, but as you might expect truckload was the primary driver is this decline was 289 basis points approximately 100 basis points of this was due to higher the higher cost of.
And the remainder can be attributed to the generally higher rates.
Making this point, even more clear our adjusted gross profit per load.
Actually increased by over 20% on a year over year basis. So despite this margin decline our adjusted gross profit per load was at an increased level.
All.
All in all very strong adjusted gross profit performance and reflective again of strong execution across all segments of our business.
Now I'll turn it back over to Pete.
Thanks, Dave on page 8 of the slides, you'll find a summary of our key operating statement line items.
Commission expense was $40.8 million in the second quarter.
For a 2021, increasing 53% versus the prior year Commission expense was 30% of adjusted gross profit down from 32% from the second quarter of last year.
Non-GAAP G&A expense was $59 million in the second quarter of 2021, increasing 26, 6%.
Second quarter of 2020, the main drivers of the increased expense, where head count increases and incentive compensation.
Depreciation expense was $6.1 million in the second quarter of 2021 down from $7 million a year ago.
Cash interest expense was <unk> $7 million during the second quarter of 2021 compared to 1 point.
From the $1 million in Q2 of 2020.
The cash interest savings was due to a lower amount of our outstanding debt or.
Our non-GAAP effective income tax rate was 23, 5% for the second quarter of 2021.
As Doug previously mentioned non-GAAP fully diluted EPS was <unk> 84.
2 increasing from 19 in the second quarter of 2020.
Primary differences between our GAAP and non-GAAP fully diluted EPS in the second quarter of 2021, or $2.6 million of amortization of intangibles from acquisitions and $2.3 million of stock compensation expense.
Slide 9 contains selected cash flow balance sheet and liquidity data.
We ended the quarter was $63.9 million in cash on hand, and $546.2 million of accounts receivable, which was the basis for our ABL borrowing base in Q2 of 2021, we had free cash flow of $21.6 billion and.
And cash flow of $27.1 million.
Capital expenditures totaled $5.5 million in the quarter compared to $5.1 million in the prior year.
On slides 9 and 10, we've highlighted components of our strong balance sheet and liquidity position as I previously stated at the end of the quarter, we had 63, 9% or sorry.
And operating $63.9 million of cash on hand, with borrowings of $120 million on the ABL, leaving us with net debt of $55.2 million, our combined cash on hand and available borrowings on the ABL leaves us with net liquidity of $293 million at the end of the second quarter as a reminder, borrowing.
Alright capacity on the ABL is calculated at 85% of our eligible accounts receivable with a maximum loan facility of $350 million.
Now I'll walk you through our guidance for the third quarter and the full year 2021, which we have highlighted on slide 11 as usual. We also want to give you. Some recent trends through the early parts.
Growing debate, which this quarter is 16 business days of activity.
Our momentum has remained strong and per day revenue in July is up 53% over last year truckload volumes are up 16% and LCL volumes are up 18% compared to last July.
And our adjusted gross profit margin in early July.
July around 14, 7%.
Now for the guidance around some of our main drivers of performance in Q3, we expect the following.
Revenue of $910 million to $940 million, which represents a 34% year over year growth growth rate at the midpoint.
The outlook reflects.
Next our belief that demand remains strong and capacity constraints persist throughout Q3.
We anticipate commission costs to be approximately 30% of our adjusted gross profit.
G&A costs are expected to be between 59, 5% to $62.5 million in Q3, we will continue to invest in our future through the addition of new sales.
And operations individuals along with the expansion of our technology and data science teams.
Please reference the slide deck for guidance on some of our other cost line items.
Given the strength of the first half coupled with our continued confidence in the power of our business model. We are also raising our full year guidance.
We now expect revenue to.
To range between 345 billion and $3.55 billion.
<unk> up 39%.
At the midpoint versus 2020 that is also an 8% increase at the midpoint versus our prior outlook of $3.5 billion to $335 billion consistent.
Consistent with our belief in continued strength.
<unk> in Q3, we believe similar conditions will exist throughout the rest of 2021 with the seasonal impact on Q4.
Commission expense is still forecasted to be approximately 30% of adjusted gross profit G&A costs are expected to be between $232 million and $238 million and with that.
I would like to turn it back over to Deb.
Thanks Pete.
As we mentioned to start the call.
The story around our execution and the reasons behind it remain the same are.
Our unique combination of people, our technology and our data science.
It has led to record financial results and recognition by shippers.
Or is that echo is the number 1 logistics provider in the 2021 inbound logistics survey.
The quarter in quite the year, so far and as Pete highlighted with our guidance. We anticipate these market conditions will persist throughout 2021 and into 2022, and we believe financial results will follow as we continue to focus on taking market.
Sure and scaling the business throughout rate cycles, and we continue to focus on automated connectivity with shippers and carriers developing algorithms across the business that will help us shape and at times automate decision, making and refining internal processes with technology.
We continue.
Progress.
In the second quarter on many of these initiatives and are confident that these initiatives will drive meaningful financial results in the future.
And that concludes our prepared remarks and at this time I would like to open up the call for questions.
Okay, sorry, Mike I can ask a question you will need to press star 1 on your telephone.
Can we draw your question press the pound key.
To ask a question please press star 1 and our first.
Question is from Jack Atkins.
Please ask your question.
Hey, great good evening.
Congratulations on a great quarter, guys really impressive.
Yes, Jeff.
I guess to start when we look at the volume growth in the second quarter plus 27%.
Against.
Strange comparison with Covid into 'twenty, but we've now seen a string of double digit volume growth quarters out of Echo.
For truckload and I guess.
Doug or Dave whoever wants to take it maybe growth wanted to take it when you start thinking about breaking down what's driving that volume growth.
It's tough to break it down like that but clearly there is the market and then there's internal things that are going on at Echo, which really I think.
Are you gonna accelerating a flywheel here your API connectivity.
Your your technology initiatives, which driving productivity could you kind of break that down between the market and sort of what you're doing to help us understand you know.
The differentiation between Echo in Italy.
Other peers.
Sure Jack I'll get I'll get started I mean, obviously.
As you indicated it's been a growing market, it's been a very tight capacity and I talked about in my prepared remarks, I think sometimes it's out.
Outsiders to kind of get their arms around.
What we mean when we say we've got this unique value proposition that is a combination of Ah.
Really a robust carrier network with strong relationships and <unk>.
Long tenured relationships within our network the ability to grow it.
Proprietary technology, that's evolving very rapidly which includes.
Both predictive capabilities in direct connections with shippers and carriers to enable bookings and really a culture of engaged people that provide top notch service and so what we've been focusing on really for the last 3 or 4 now relative.
Since 2015 aggressively.
It's growing our business growing our relationships.
With our with our client base, providing great service and then getting opportunities to continue to grow and I think it's it's the bundle of all of those things Thats working very well and it's.
<unk> been very successful like Doug said in his remarks, the numbers kind of speak for themselves. We've shown a lot of growth we'd certainly no.
No that the market has been positive tight capacity, it's a very fragmented and shippers need help and that goes right into our wheelhouse and I think thats net.
That's kind of the overall summary.
Yes, I would just add and it was in our prepared remarks, Jack that we talked about appropriately blending technology in touch.
And goodbye.
The freight marketplace as being very diverse with very very sophisticated shippers and very very sophisticated trucking companies on 1 end of the spectrum and on the other than the spectrum <unk> got people that run their business on a whiteboard and we think that we kind of have a multi pronged.
And we for sales and marketing approach that can.
Touch each of those shippers and each of those carriers, depending on their level of sophistication and engage with them and bring value to them. So.
It's really that holistic approach I think that gives us the biggest opportunity to take market share.
Okay.
Yes, just following up on that.
We've seen quite a bit of volatility for echo.
The good parts of the cycle on the more challenging parts of the cycle, but it really feels like we've hit an inflection from a market share perspective over the last several quarters.
Look forward and think about how the.
Our business can perform moving forward through peaks and troughs. The cycles do you feel like that that volatility maybe is coming coming down and the <unk>.
<unk> coming up and you can maybe grow volume I don't want to put words in your mouth through cycles, because you've got all these opportunities whether it's in the contract market.
API connection et cetera could you talk about that for a moment.
Well I think that achieving scale it gives us more ability to win contract freight from the larger shippers and so when you get to the part of the cycle when the market softens.
We can get more aggressive on our contractual freight.
I.
However, I think that some of our new API connectivity is going to give us more access to spot freight regardless of where we are in the cycle and then of course.
The cycle starts to soften and Theres, a little bit less volume you start to see margin expansion.
Because the byproduct falls faster than the sell price.
Do have that has an offsetting impact with.
With volume so I do think that we can weather the cycles better than when we were smaller and that's attributable to scale.
Okay, well. Thanks, so much for the time guys I'll turn it over.
Thanks Jack.
Our next question is from Beth.
<unk>.
Ronnie.
Please ask your question.
Good evening and thanks for taking my questions and congratulations on the results.
You've had effectively 4 straight quarters of.
No just comically super seasonal revenue performance and looking at the guidance and some of the commentary around the second.
It sounds like you're baking in some return to seasonality from this very high base can you talk a little bit about.
Maybe on the micro level, you know how things are trending month per months and.
In truckload or LCL or any other way you want to frame. It I just want understand when windows semblance of seasonality has started to return.
And how that's trending or if there's some conservatism in there just anything to help us triangulate why you guided what you got it. Thank you.
I think that I think.
I think what we've seen is more of a steady consistent.
Performance on volume the rate on the rate side.
So I would say.
Significant escalation beginning in.
May or June of last year through probably March or April of this year.
Level from a rates perspective kind of leveled off so I think what youre seeing when you think about like our forecast moving forward is more of a function.
We had a.
Our comparable in the prior year, then a softening per se.
I will say that there won't be a little bit of seasonality potentially in Q4.
So I think that we will have to wait and see how that plays out.
There's typically less business days.
<unk> have less shipping business day.
In Q4, and the holidays can kind of create a little bit of a slowdown so so.
A small factor to consider but having said that I think that the last several months and going into July I would characterize more as steady and consistent then.
And then.
Seasonal volatile.
Into that point can you talk a little about whether the large asset based L. T cells disruptive.
Situation in the later part of the quarter has.
Created some more customer acquisition in.
Anything that really hasnt shown up in the numbers yet in that side of your business.
I would say that the day.
I would say the disruption that is.
That we've seen on the <unk> side due to the capacity constraints in their overall volumes has left some of the.
Smaller shippers looking for options and has created opportunities for us on the brokerage side of our business to do a little more to have a little more growth. So theres been some of that it's not overly significant obviously.
It's a.
A small shipper is reliant on a single or 1 or 2 carriers and.
If there's any there are either embargo embargo in a an important terminal or Theres a service delay in a lane, we can come in with more options and <unk>.
And that can drive growth and we're seeing some of that play out in terms of our solution to the small and medium sized shippers.
Yes.
Thank you for that lastly.
On capital allocation you know, it's been a while since you've bought back common equity the market doesn't seem to want to give you a ton of credit for a.
A lot of the progress you just went through with with Jack on some of the higher highs and higher lows here.
Is the.
Our buyback, becoming a more attractive use of capital. If this continues just thoughts on.
When you and the board will have those discussions and if theyre evolving. Thank you.
Yeah, Thanks, Pat I.
I think we're always evaluating different uses of our capital.
Talks over.
The past couple of quarters on potential M&A.
We are obviously still have a $120 million in debt and then we obviously do have we still have $60.2 million in authorization on the common stock and we're always kind of evaluating those against each other.
So it's something we'll continue to look at in Q3 and.
He will make the best decision for our shareholders.
Thank you for the time.
Thanks Pascal.
Our next question is from Stephanie more of <unk>.
Your line is open.
Hi, good afternoon. Thank you for the question.
Hi, Stephanie.
I wonder.
So on a little bit on.
Contractual renewals or what youre seeing and any kind of.
Bidding season that RFP, obviously, we've made.
Meaningful strides every year and playing more in the spot market just given the environment, but loved against what I hear what some of your shippers are saying and what we can expect kind of going forward.
Yes, I think that we felt we feel very good about.
About the level of kind of contractual business that we've been pursuing and renewing.
And expanding the.
What we did see and we've talked about this a little more on our call last quarter.
Was.
As the pandemic.
It is such a kind of develop the RFP cycle. If you will during really the latter part of 2020 and to some extent rolling into 2021 was slowed down.
The bid the bid activity was was a lot lower and it started to I would say pretty significantly increase.
In Q1, and again into Q2 as a matter of fact in Q2, we saw a greater number of <unk>.
Of awards kind of wrapped up.
Then we've seen than we saw in 2019. So we've seen it we've seen that escalation continue theres been a little bit of a trend toward.
More.
<unk>, many bids and less than annual rewards awards.
As basically shippers are trying to secure capacity and.
Many of the other carriers in the market participants are uncertain as to where rates are going.
In response to that oftentimes a shorter award.
More of these vehicles, a little easier for everybody to get their arms around and we've seen that increase a bit in Q2, and you know probably continue.
Relatively high and kind of catching up from where it was in 19.
Great. Thank you and then I did want to touch on.
That just general competition, obviously, there is that the larger now net from Uber freight to acquire a big managed transportation player.
Managed transportation has been a nice growth driver for you guys and our strategy over over several years now so wed love to think how you're viewing the competition does broadly.
Lee speaking, but now any changes to the strategy within managed transportation.
Well, we're familiar with both both parties of that transaction and.
There are good competitors, but it's a huge market. We we tend to offer our managed transportation services.
Us too.
Small and mid sized companies and I think the trans place offering in general.
<unk> to larger larger shippers with a greater freight expense so.
We don't really.
See them a lot in our activities.
We are a supplier to them.
Our other asset based carriers and brokers, so you're a good customer of ours, and we would anticipate that anticipate that that will remain in place.
Got it well thank you so much.
Thanks.
And our next question is from.
Stifel. Please ask your question your line is open.
Hey, good evening gents, thanks for making things easy for me here.
Maybe just a follow up on that.
M&A question and some of what Youre seeing out there in the competitive marketplace, obviously, Uber and transplant, it's not the only deal.
Jan space you've got.
Some other call it mid sized players out there that are combining and maybe following a little bit of the Echo command playbook from back in 2015 and I'm. Just wondering as you look for that share growth with the very large shippers.
Are you seeing more of a crowded field as you start to respond to some of those rfps in.
But we've seen an approach those large shipper bids.
Yeah, Bruce I mean, as you know we've done 21 acquisitions and we feel that its something that we can execute on most of ours with the exception of command tended to be smaller tuck in deals.
As we look at bigger deals there is a lot of competition.
These days, especially from the private equity crowd.
There's a lot of money.
It's cheap so its competitive and as a result, we've seen the prices go up so although we're interested in M&A, we want to make thoughtful decisions on valuation.
Some of the valuations that we've seen don't work for.
So we continue to look maybe we have to set our sights with smaller companies, but I think theres a lot of deals to be done and we're very active with our own pipeline and looking at deals.
As there continues to be consolidation in the space.
I do think that it's going.
Going to favor the bigger stronger players and it's going to be tougher for the smaller.
Brokers to compete as we go forward, so I'm glad to be in the club.
And we're going to continue to scale our business.
Okay. That's helpful and it certainly answers part of my question, but I guess the other part is that.
You've got a market leadership position right now and then you also see a lot of mid sized players that are combining to maybe challenge.
Call it ranking there.
This sort of size.
The size of listing so are you concerned that.
As you go into some of the shipper bids.
Youre going to have a more challenging time, winning that contract business and growing share with with those large customers.
I am not.
Bruce.
As such a large market and all of those competitors, even prior to combining where people that we competed with and.
And anyone given shipper's routing guides.
Youre going to have lanes that you favor in lanes that youre not interested in in and Theres a lot to choose from and.
We've had no trouble competing against people that are bigger than us and competing against people that are smaller than us.
We think some of the things we highlighted in our prepared remarks help us do that we.
<unk> size and scale helped us do that and it's only going to get better so.
I don't really see any influence on our ability to be competitive with individual shippers just because some midsized players are.
Getting bigger.
That's great very helpful. Thank you.
We think our thanks Bruce.
Question is from Tom <unk> of UBS.
Ask your question.
Yes, good afternoon.
I wanted to ask you about the kind of.
Net view on.
Target mix.
Or maybe what.
Desirable mix for you.
Contract and spot freight and how many beds.
It does seem like.
We've seen with.
The biggest player in the market.
Too much contract business can be.
Somewhat of a burden or getting it all repriced in net.
Files that kind of commentary.
But I know that's a good place to growth. So maybe can you give a thought on where you want to go with that and also our.
<unk> been a good thing for <unk>.
AGL broker or not necessarily.
Sure Tom.
That's a good question and something that we've been asked a lot about I think in the past.
And trying to help people understand I think that the way we see it as.
Is that the contract space in that space are both important.
Markets for us to grow and be successful and so.
We were.
We're trying to grow both of those.
Those.
The components of our truckload business.
At the same time and we.
We believe that the mix shifts that we see from time to time are more of a factor of market conditions and net.
Obviously as we pursue contract business, we need to be strategic we need to be.
Very careful about how we pursue opportunities in that because.
The commitments, we've made we won't honor and so when the market changes quickly. It does result in a greater amount of negative loads and you can see some.
Essence, basically margin fluctuation, probably greater in that contract side of your.
Your business. However, we approach that in a profitable way and we're going to we're going to continue to do that so I think that this.
This it's hard to define the mix I think it's going to be a factor of market conditions more so than our specific strategy and then the second piece of the puzzle on the mini bids so let's do that.
It is generally.
So the thing because.
It enables us to be effective in pricing something at current market prices. It doesn't expose the carrier to significant amount of risk that meets the shippers requirements.
Have their network operating effectively.
It takes a little bit of the volatility out of the equation.
A pause.
They're not new we've been seeing these these mini bids have been.
A factor for a long time, and obviously because of the pandemic and the significant kind of rate increases that have occurred over the last 12 months.
The preponderance or the amount of the mini bids.
Has increased a bit but I would expect as things stabilize and that gets back to a more normal rate overtime.
Yes.
Great. Okay, and then 1 more I don't know if this could be for you Dave or for Doug.
What do you see from shippers and how do you think the market evolve.
And in terms of.
Central modal shift it seems like the truckload market has been so tight this year that there's probably been some meaningful spillover freight into LTE al.
I think you know.
Hi, truckload rate environment would encourage shippers to use intermodal, but you can't get boxes, you can't get chat needs. So.
Paul how do you, what's your best framework and kind of shipper feedback.
If you look at a couple of quarters in terms of.
What you might see on modal shift maybe Thats. A 22 question 2022 question or just a couple of quarters out.
Yes.
It's a really great question and it's Super hard to answer because every mode.
But it is completely constrained right I mean.
<unk> non intermodal capacity is at its kind of limit and truckload capacity is close to its limit I think truckload capacity has the ability to kind of flex up and down a little more effectively than those than intermodal and L. T. Also I do think truckloads kind of <unk>.
Comes the default option and as things get tied up or delayed through the supply chain truckload.
It tends to be.
1 of the faster mode to get something from point a to point B. So I think I think it does lead more to the truckload side of the business.
Mainly due to capacity constraints.
Trains within LCL and intermodal.
Do you think there would be like a shift.
More truckload, if you look out a few quarters or so.
I don't know that.
I don't know that there'll be a material shift because all 3 modes that we just talked about are a relatively constrained.
And relative to Echo, specifically I would not expect kind of a meaningful shift, but I guess it.
When I look at the brokerage side of our business. It is.
Think it's fair to say, our truckload business has grown faster the market opportunity is bigger we serve both small and large customers in the <unk>.
Outside of our business, our niches more about SMB and small customers. So echo specific the opportunity is probably bigger on the truckload side than the other modes, but in terms of the overall market conditions that wouldn't be price tough 1 for me to to.
To say I, just feel like the truckload side.
Side has the ability to flex a little bit more nimble.
And then the other 2 intermodal.
Intermodal or <unk>.
Great makes sense. Thank you for the time.
Thanks, Tom.
And our next question is from Elliot Alper of Cowen. Please ask your question. Your line is open.
Great. Thanks for the question just 1 from me so so.
Strong growth in your technology initiatives.
You talked about kind of how youre positioning yourself in the marketplace and among your competitors could grow both shippers and carriers on your platform that are enabling these bookings.
I didn't hear the last part.
Our positioning in the marketplace with what to enable bookings or to enable bookings.
Yes, we do.
A lot with.
API integrations with.
Our systems so.
As you can imagine if you're a large shipper and you run a routing guide and you've got a bid board to offer your spot freight.
To your.
Routing guide participants.
We're doing that in a much more automated way.
We are able to incorporate algorithms and what that does is it.
Allows us to respond to a 100% of the opportunities with more informed pricing and automate the.
So the result of that has as its bringing more volume to us.
I think the only thing I will just add we've talked a little bit about this in the past a little bit in the script. The marketing tagline is technology at your fingertips experts by your side and so I think that our strategy is to combine the best of both.
<unk> enable online access easy integration.
Automated pricing, where it makes sense and if that's what the customer wants we're there for them in that regard, but at the same time.
We value the workforce that we have and the talent of the team and the ability to do problem resolution and provide excellent.
With World. So we are trying to combine both of those strategies and meet the needs of a broad marketplace.
And likewise with the carriers.
Okay.
And our next question is from David Campbell, Thompson Davis and company.
Please ask your question your line is now open.
Yeah, Hi, Thanks for taking the question I am.
Well it seems like your forecast revenues.
For the third quarter.
It looks like you're anticipating some somewhat of a slowdown or less growth.
In August and September than Youre getting in July.
The city's mean percentage increasing.
July would indicate.
Has that sustained a lot more than your revenue forecast for the linked quarter.
So because of the.
With the bears is getting more difficult.
In September than are than a year ago.
Yes, it's simple.
On a comparable issue David.
As you get further into August and September obviously, you had the acceleration of truckload rates.
And then you also had obviously things are coming back online after a kind of a soft Q2. So you had some of the.
Probably a little bit of a buildup.
And so it's really just a comp issue as you think about that.
Extending into Q3.
Right so.
So therefore anticipate.
Less growth in the fourth quarter as well coming from.
The difficult comparisons from a year ago.
I think thats, probably a fair a fair assessment that the comps get a lot harder in the second half of the year than they were in the first and that's true in both.
Third and fourth quarter.
Yes.
You mentioned EMEA.
Your presentation.
Thank you.
<unk> added employee.
Yes.
Third in the second quarter.
And.
I may have written down the employees wrong, but I think he said.
Awesome.
<unk> ended the quarter with 1000.
<unk> thousand 73 employees is that we see.
Yeah.
That was sales employees not total employees 1773.
Which we're just in the sales organization.
Total employees was there was a higher number.
Okay. Okay.
Since the sales people.
That compares with.
Oh I have more employees than they had last year.
You can go over it hasn't gone away.
Yes, that's 187 million that's 187 more people than we had on the sales team than we had last year, but that again, that's just the sales org not the total employees.
And that excludes.
Sales agents or just sales employees.
Sales employees and agents actually.
240, or so agents and thats not a big change in that in that number very little change.
Right right right right right right.
Okay. Thank you very much I appreciate.
And the answers.
Thanks, David Thank you David.
And our last question is from Jack Atkins of Stephens. Your line is open.
Okay, great. Thanks for taking the follow up I just wanted to maybe revisit the capital allocation question for a moment.
Kind of go back to a bathroom in both basket.
And Stephanie we're asking about in different ways, but.
When when we when we think about your Bill you're building your cash balance business cash flow is really well.
But at the same time, we had this large transaction transplant sold for almost 3 times your enterprise value and it's and it's the same size businesses.
That you that you are in it and to generate similar levels of net revenue clear.
Clearly the market is just materially undervalued in your business relative to.
Strategic players in the industry. So I'm just sort of curious what why not why not lean in and be more aggressive on the buyback.
Yeah, you know I just I just think there's a disconnect.
Act here that perhaps you guys can take advantage of I would just be Doug I'd be curious to get your thoughts on that.
Well I think we've always wanted to save our dry powder for M&A, because we thought that was the best use of capital, but I think that you bring up a really good point and the absence of those types of opportunities we have to take a strong look at buying back our own equity because.
Probably the next best return on capital.
Okay.
Thanks very much.
Thank you Jack.
And there are no further questions at this time I will turn the call over back to Todd <unk>, Chairman and Chief Executive Officer for his closing.
England.
I just want to thank everybody for joining us and your kind of emerged on our Q2 performance and we look forward to talking to you again next quarter. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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