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Edited Transcript of ECHO earnings conference call or presentation 22-Apr-20 9:00pm GMT

·53 min read

Q1 2020 Echo Global Logistics Inc Earnings Call CHICAGO Jun 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Echo Global Logistics Inc earnings conference call or presentation Wednesday, April 22, 2020 at 9:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * David B. Menzel Echo Global Logistics, Inc. - President & COO * Douglas R. Waggoner Echo Global Logistics, Inc. - Chairman & CEO * Kyle L. Sauers Echo Global Logistics, Inc. - CFO & Secretary ================================================================================ Conference Call Participants ================================================================================ * Bascome Majors Susquehanna Financial Group, LLLP, Research Division - Research Analyst * David Pearce Campbell Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner * Jack Lawrence Atkins Stephens Inc., Research Division - MD & Analyst * Jeffrey Asher Kauffman Loop Capital Markets LLC, Research Division - MD * Jizong Chan Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst * Kevin Mark Steinke Barrington Research Associates, Inc., Research Division - MD * Stephanie Benjamin SunTrust Robinson Humphrey, Inc., Research Division - Associate * Thomas Richard Wadewitz UBS Investment Bank, Research Division - MD and Senior Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. And welcome to the Echo Global Logistics First Quarter 2020 Earnings Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your host, Mr. Kyle Sauers, Chief Financial Officer. Please go ahead, sir. -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [2] -------------------------------------------------------------------------------- Thank you. Thank you for joining us today to discuss our first quarter 2020 earnings. We appreciate your patience. There were a bunch of participants waiting to get connected to the call, so we wanted to give it a few extra minutes. Hosting the call are Doug Waggoner, Chairman of the Board and Chief Executive Officer; Dave Menzel, President and Chief Operating Officer; and Kyle Sauers, Chief Financial Officer. We've posted presentation slides to our website that accompany management's prepared remarks, and these slides can be accessed in the Investor Relations section of our site, echo.com. 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 contain additional information about factors that could cause actual results to differ from management's expectations. We'll also 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 the press release we issued earlier today and the Form 8-K we filed earlier today. And with that, I'm pleased to turn the call over to Doug Waggoner. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thanks, and good afternoon, everyone. I appreciate all of you joining us today, and we've got a lot to cover. As everyone knows, the coronavirus outbreak has led to a lot of uncertainty right now. So we're going to do our best to give our current views of how the situation may play out and in the near term. I want to thank by -- start by thanking our people as our collective response to this has been overwhelming. We've talked for years about what a difference our culture makes in terms of the dedication of our team to put clients and carriers first. It's times like this when you can really see the difference shine through. Fortunately, we were prepared to transition to remote working and were able to execute a work-from-home capability in short order for 3 primary reasons. Number one, our entire business runs on a common technology platform. All of our systems, including core applications, phones and messaging are designed to enable our teams to seamlessly work together from any location at any time. They are all securely accessible over the web, and we have robust reporting and our people are cross-trained. This all makes a huge difference. Number two, our infrastructure teams have been constantly reinvesting, improving and upgrading our platform. When we hit the trigger to initiate our business continuity plans, our team and our systems were ready. Number three, our people have deep relationships, both internally and externally. These relationships have been built over years of working together. In times of crisis, these relationships are the backbone of our ability to get the job done. During February, we began to ready ourselves to execute our business continuity plans, enabling our entire workforce to work from home. On March 20, we officially closed access to our Chicago headquarters and shortly thereafter, the rest of our offices across the country. Since that time, the vast majority of our workforce has been working from home. All of our systems have remained operational, and our people are productive and efficient. At times like this, it's important to remember that we provide an essential service for our shippers and our carriers. We take that responsibility seriously. Our Managed Transportation clients rely on us for 100% of their transportation needs, and I'm proud of how we've served them through this initial phase. We've received lots of tremendous feedback from our clients, which has been great to hear. On the brokerage side, our clients and carriers depend on us every day. Our people have really stepped up to serve, and our volumes have remained remarkably strong during this time. As we go through our prepared remarks today, we will highlight current trends, our balance sheet strength and our outlook moving forward. But first, let me share our first quarter results as highlighted on Slide 3. Total revenue was $551 million, representing a 2.4% increase from last year. Net revenue was $89.9 million, representing a 9% decrease from last year. Adjusted EBITDA was $14.9 million, representing a 31% decrease from prior year. Non-GAAP fully diluted EPS was $0.19 compared to $0.38 in the year ago period. Given the uncertainty of the current environment and the likelihood that the U.S. will experience a period of lower shipping volumes due to the financial hardship and impact on many businesses, we have taken steps to reduce our operating costs while continuing to invest in our future. Our cost reductions to date have included an overall reduction of all discretionary general and administrative spending, a deferral of all new hire classes through May and a reduction in our workforce, most of which we hope will be temporary. Echo has always been a growth-oriented business. Our strategy is to take market share and grow. Our people are fundamental to that strategy, and for those reasons, it was a difficult decision to take these steps to reduce our workforce. However, we also believe reducing operating costs is a responsible choice as volumes moderate. And while overall, we are pleased with shipping volumes, there have been pockets where declines are evident. We will continue to monitor and evaluate further actions that might be required to ensure that we are in a great position to both recover and thrive when the market begins to rebound. Now I'd like to turn it over to Dave to go into more detail on our performance. -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [4] -------------------------------------------------------------------------------- Thanks, Doug. I also want to start by acknowledging and thanking our entire team for the amazing job they've done adapting to the current situation. Our client and carrier sales teams, operational personnel and other support functions have done an incredible job. Our technology professionals and the capabilities they've deployed over the years have made all of us incredibly productive while working remote. It's been a total team effort. So I want to thank everyone. If you'll turn to Slide 4, I'll take you through our top line performance by mode. Truckload revenue was $368 million in Q1, which was an increase of 4% over the prior year. This increase was driven by a 10% increase in volume and offset by a 6% decrease in revenue per load or pricing. Consistent with the trends that we've been recently reporting on, our contract or primary award volume was the main driver of truckload growth. In fact, our award volume was up 27% year-over-year, resulting in an overall increase in contract mix from 52% a year ago to 59% in Q1 2020. Spot business was down 4% in Q1 as spot remained soft through the first 10 weeks of the quarter. We did see a spike in spot volume in the last couple of weeks of March, which was on a shutdown since the initial shock waves through the economy. This increase was driven by a surge in demand on consumables and medical supplies but was short-lived. Over the past few quarters, our truckload volume trends have been improving, and despite this crisis, that trend continued in the current quarter. As a reminder, truckload volume was down 2% year-over-year in Q3 2019. It improved to up 1% in Q4 2019, and significantly improved in Q1 of 2020 as it increased by 10%. We have seen the demand for consumable products and essential items stabilize into April, and the spot market has again softened. But late March surge did disrupt and tightened capacity, but we've seen that subside as well. And despite the difficult hard shifts this crisis has put on truck drivers, capacity has been relatively loose throughout April. The truckload volume increases have stepped back, and are down by about 4% on a year-over-year basis during the first 13 business days in April. Turning to LTL. We delivered $158 million in revenue in Q1. That was a 2% increase over the prior year. This increase was driven by higher volume in our brokerage business. For the quarter, our volume was up 3%. Despite this gain, we've experienced a more significant decline in LTL volume due to the shutdowns that commenced in mid-March. Our LTL volume has declined by 24% in April, as small- to mid-sized companies seem to have been hit hardest in the initial phase of this economic downturn. Turning to Slide 5. Our transactional revenue of $428 million increased by 4% due to the increase in truckload volume, primarily resulting from the continued success in securing additional contract business and the growth in the LTL brokerage. Our productivity again improved in Q1. As we discussed in our call last quarter, our shipments per sales FTE were up 5% year-over-year in Q4 2019. We improved on that metric in the most recent quarter to 19% increase in shipment per sales FTE. Many of our automation initiatives are enabling this improvement. We had new sales classes lined up to start in March, April and May, but due to the outbreak, we decided to defer those new classes until June. So before this all started, we anticipated bringing in approximately 160 new client and carrier sales reps between March and June. Our current plans will reduce that number to around 60 to 80 new reps. Given the state of the economy, we anticipate reduced attrition as we move through the year. We will continue to evaluate our hiring plans as the year progresses and adjust as we think appropriate based on the speed of the recovery. It's unlikely that we'll grow our overall sales headcount in 2020, but instead, continue to focus on driving productivity increases through technology advancements and adoption. Our Managed Transportation revenue was $123 million in Q1, a decrease of 3% year-over-year. This decline was impacted by a slowdown in the second half of March. As you know, we typically manage 100% of the freight for our Managed Transportation customers. So if their business is impacted, we're going to feel that impact either positive or negative. While many of our clients have experienced increased volume into this crisis, more have seen decreases in volume. Our Managed Transportation customer base is mostly small- to mid-sized businesses, and less-than-truckload is the more dominant mode among these clients. Managed Transportation volume declined by 26% to date in April. And while this decline was widespread, we didn't see a handful of businesses that were deemed to be nonessential and hit more significantly. We're hopeful that the vast majority of those impacted will bounce back when the economy begins to recover. Another big driver that will lead to the growth in our Managed Transportation is new business wins. This year has started off really strong in terms of closed business, as we've already signed $69 million in anticipated revenue and our pipeline remains strong. Our Managed Transportation teams have done a great job throughout this crisis. As Doug said, our clients rely on us, and they rely on Echo for uninterrupted management of all of their transportation needs and both our people and technology proved to be invaluable during this time. Turning to Slide 6. We generated $89.9 million in net revenue, which is a 9% decrease over the prior year. The decrease was primarily attributable to a decline in net revenue margin as our margin of 16.3% was down 204 basis points over the prior year. The decline in margin is primarily due to the increase in award business and a softer spot market. Up until mid-March, the freight markets were relatively balanced and truckload rates were fairly steady. Then the market spiked up in the last 2 weeks of the quarter. We saw a corresponding uptick in spot business, as I said earlier, but at the same time, most of those gross margin -- net revenue margin gains were offset by higher buy prices in support of our contract business. Our net revenue margin has improved in April due to the loosening of capacity and lower fuel costs. In the midst of all this chaos, we continue to invest in our future. We've been making excellent progress on our digital marketplace, and we've had continued improvement in both the utilization and effectiveness of our solutions. At the beginning of the quarter, we launched new features in EchoDrive, which enhanced our search capability and provided proactive load suggestions for our carriers. Those features have been well received and have continued to drive increased EchoDrive usage, inbound offers for carriers and more bookings directly resulting from our online strategy. I'd like to now turn it over to Kyle to review additional Q1 details and forward outlook. -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [5] -------------------------------------------------------------------------------- Thanks, Dave. On Page 7 of the slides, you'll find a summary of our key operating statement line items. Commission expense was $27.2 million in the first quarter of 2020, decreasing 9% year-over-year. Commission expense was 30.3% of net revenue compared to 30.4% for the quarter last year. Non-GAAP G&A expense was $47.8 million in the first quarter of 2020, up 1% from the year ago first quarter of 2019. Depreciation expense was $7 million in the first quarter of 2020, up from $6.3 million a year ago. Cash interest expense was $1.3 million during the first quarter of 2020 compared to $1.4 million in the year ago period, and that decrease is due to a lower amount of outstanding on the combination of our convertible debt in ABL during the quarter. Our non-GAAP effective income tax rate was 25% for the first quarter of 2020. As Doug mentioned, non-GAAP fully diluted earnings per share were $0.19, decreasing from $0.38 in the first quarter of last year. The primary differences between our GAAP and non-GAAP fully diluted EPS in the first quarter of 2020 are $2.8 million of amortization of intangibles from acquisitions, $1.5 million of noncash interest expense and $4.6 million of stock compensation expense. Slide 8 contains cash flow and balance sheet data. We ended the quarter with $39 million in cash on hand and $335 million of accounts receivable, which is the basis for our ABL borrowing base. In the first quarter of 2020, we had free cash flow of $4.6 million and operating cash flow of $9.7 million. Capital expenditures were $5.1 million in the quarter compared to $6.4 million last year. During the quarter, we repurchased approximately 490,000 shares of our common stock for $9.4 million. The repurchase activity was weighted towards the beginning of the quarter, and we suspended repurchase activity in early March. We also repurchased approximately $89 million of our convertible debt at just under par. We've added Slide 9 to dive further into our liquidity position. We feel very good about our ability to manage through any sustained freight downturn given our borrowing capabilities, but want to walk through that flexibility. As I mentioned at the end of the quarter, we had $38.7 million of cash on hand. We also had an available borrowing capacity on our ABL facility of $257.7 million. That borrowing capacity is calculated as 85% of our eligible accounts receivable. At the end of the quarter, we had borrowings of $100 million on the ABL, primarily as a result of the convertible debt repurchases that we've executed recently. So this leaves $157.7 million of remaining borrowing capacity on our ABL at the end of the quarter. As we discussed on our last call, we intend to use this available capacity and our cash on hand to pay off the remaining $69.2 million of convertible debt, which matures at the end of this month. Considering our end of Q1 borrowing base, this leaves us with net liquidity of $127.2 million. Our ABL facility has a maximum borrowing capacity up to $350 million, depending on the borrowing base and carries interest at LIBOR plus 125 when our borrowings are less than half of our available borrowing base, and LIBOR plus 150 when we're over 50%. We expect to be borrowing at LIBOR plus 150 after we pay off the convertible debt. Finally, the ABL facility matures in 3.5 years. This situation has been challenging for many of our shippers. Fortunately, we have strong relationships, and our shippers understand that. For us to be an excellent service provider, we need to be able to pay our people and our carrier partners in a timely fashion. So while there are certainly some customers who simply can't pay their bills as quickly or in some cases, at all, that's a small minority. So we have only seen a small movement in our DSO in the last month. Two things that are worth understanding: First is that I mentioned before, as our receivables balance grows, so does our borrowing base on our ABL, giving us more flexibility; and second, as we've highlighted in the past, we carry credit insurance on the vast majority of our accounts receivable, which provides a nice backstop for any nonpaying customers. Now I want to talk about guidance. As we referenced in our press release, we'll be suspending our full year guidance due to the uncertainty surrounding COVID-19. However, we do want to give you as much information as we can about the upcoming second quarter and trends we're seeing so far through the first couple of weeks of April. Our per day revenue in April is down 12%. The volumes in LTL have weakened more than truckload. And as Dave mentioned earlier, we've seen truckload volumes down 4% and LTL volumes down 24%. These year-over-year comparisons are likely modestly impacted by a Good Friday holiday that was included in this year's first 13 business days, but isn't in last year's comparable. We have seen improved net revenue margins as they were 17.4% so far in April. The lower cost of capacity and lower fuel costs have been the key drivers, but some of that impact has been offset by a shift in mode mix towards truckload. And now for our guidance on Q2. We expect revenue of $450 million to $500 million, a range of down 10% to 19%. This guidance anticipates that freight volume has bottomed out, and we anticipate a modest recovery in the back half of the quarter due to seasonality impacts and businesses slowly ramping back up. We expect commission expense to be between 29.75% and 30.25% of our net revenue. G&A costs are expected to be between $43.5 million and $46.5 million, down 3% at the midpoint compared to last year and down 6% sequentially. We've moved quickly to reduce costs in this environment in a few ways. As highlighted earlier, we've deferred new hire classes, we have moved some personnel from the business to rightsize operations in line with business activities, we've slowed other discretionary investments and we've significantly -- we have significantly less spend in travel and client visits. And we anticipate lower incentive compensation across the org. We also expect depreciation of about $7 million, cash interest of approximately $1.4 million, a tax rate of approximately 25% and share count of approximately 26.2 million. And then excluded from our non-GAAP calculations, in the second quarter, we expect amortization of approximately $2.8 million, noncash interest of about $300,000 and stock compensation expense of about $2.3 million. We will look to provide full year guidance at some point in the future as the economic recovery comes into a fuller focus. Now I turn it back over to Doug. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [6] -------------------------------------------------------------------------------- Thanks, Kyle. Well, this was another strong quarter for Echo despite the onset of the coronavirus in March and the subsequent activation of our business continuity plan. Having 100% of our employees working from home did not slow us down, and we were able to continue providing the high levels of service that our clients and carriers have grown accustomed to. We do know from past market disruptions that it's times like these when we further cement our shipper and carrier loyalties and the depth of those relationships. We've also been quite successful, landing new Managed Transportation deals as well as winning new contractual lanes and routing guides. So not only are we moving the freight and going after market share, but we have not missed a beat on our technology and our data science road maps. We are currently in a mode of continuous technology releases. Those releases are bringing new marketplace capabilities as well as internal efficiencies. We continue to be interested in M&A and believe that the future will yield some good opportunities. We continue to have an active pipeline and are in discussions with several parties. But the current environment causes us to be very thoughtful in terms of valuation, liquidity and financing, and we would expect to have more clarity on M&A in the coming quarters. Looking forward, it's no surprise that we have difficulty projecting the depth and duration of a likely recession. It is obviously hard to know at this moment in time what the recovery will look like. For our own planning purposes, we assume that it will be an extended U-shape recovery, and we believe that we are now at the bottom. But what I do know for sure is that the resiliency of the Echo model will allow us to weather the storm by keeping our costs under control while maximizing gross margins and optimizing profitability. We have a strong balance sheet, and we will emerge from this time as a stronger company, supported by our loyal clients and carriers. And finally, I want to thank all the folks at Echo for tremendous execution during a challenging environment. I can genuinely say that the current adversity has really brought us all together with a closeness and a sense of purpose. And I'm sincerely in awe of the esprit de corps that I have witnessed from the Echo team at all levels of the organization. That concludes our prepared remarks. And at this time, we'd like to open it up for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Jack Atkins with Stephens. -------------------------------------------------------------------------------- Jack Lawrence Atkins, Stephens Inc., Research Division - MD & Analyst [2] -------------------------------------------------------------------------------- Hope everybody is doing well, and congratulations on a good quarter here, all things considered. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [3] -------------------------------------------------------------------------------- Thanks, Jack. -------------------------------------------------------------------------------- Jack Lawrence Atkins, Stephens Inc., Research Division - MD & Analyst [4] -------------------------------------------------------------------------------- So Doug, I guess, if I could start with one for you and then Dave. I mean, can you kind of talk about -- and I hate to ask you to provide like intra-month trends, but I think the market is so dynamic. I think there is just a lot of questions around sort of what's happening and where -- what's the -- where is -- what's the trajectory of things -- what are the -- what's the trajectory looking like today? So is there a way to kind of think about -- are you seeing -- within April, are you seeing things deteriorate further when we think about those month-to-date trends that you guys reported? Or do you feel like things have kind of stabilized now the customers that were going to shut down, were going to slow down activity, they've done that already? Just trying to get a feel for the trajectory of business trends within April. Do you feel like things have stabilized? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [5] -------------------------------------------------------------------------------- Sure, Jack. Jack, this is Dave. I'll give you a little color on that. Obviously, we're -- this is unprecedented, and pretty early into this. So it's new. But I would say this, that we saw a pretty steep decline on the LTL side of our business in March, and we've seen that stabilize in April and actually recover a little bit. Again, Kyle mentioned the difference on Good Friday, in the business days has not, but volume trends indicate LTL, for now, has hit a, let's call it, phase -- hit the bottom, so to speak. It's in a -- the volume seems to be flat to recovering a touch in April. On the truckload side, it was a little different dynamic because we had a bit of a spike late March, as I mentioned earlier, a lot of restocking. And I think manufacturers and distributors may be trying to get product closer to customers, et cetera. And then that volume did also come down pretty steeply in the first couple of weeks in April. On that side, we haven't quite seen as much -- I wouldn't say, I've seen it bounce back. It's actually trending a touch down still, but not at a dramatic rate. So I think it's relatively stable. The declines have stabilized. We've seen a little bounce back on the LTL side. So hopefully, that's helpful and a little color to what we've seen. -------------------------------------------------------------------------------- Jack Lawrence Atkins, Stephens Inc., Research Division - MD & Analyst [6] -------------------------------------------------------------------------------- It definitely is, Dave. And I guess, kind of pivoting to the cost side for a moment. You guys, I think, did a great job sort of laying out a lot of the different levers that you're pulling here to manage expenses in this unprecedented situation. But is there a way to kind of help us frame up between the incentive compensation and the lower levels of hiring, some of the other cost levers you're pulling? What do you think that can do to sort of help from a cost perspective here in 2020? -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [7] -------------------------------------------------------------------------------- Just some... -------------------------------------------------------------------------------- Jack Lawrence Atkins, Stephens Inc., Research Division - MD & Analyst [8] -------------------------------------------------------------------------------- I guess, goalpost would be helpful. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [9] -------------------------------------------------------------------------------- Yes, Jack. I think it's challenging to give too much there for the year because we aren't even guiding for the back half of the year for total costs or revenue. I think there's a lot of uncertainty. I think we do have a lot of flexibility in the model. As you know, incentive compensation is a big part of the model throughout the company. And so that could have quite a bit of variability. We feel like we're moving very quickly on rightsizing the organization to match the business levels. We're very hopeful that in the not-too-distant future, the people that have been furloughed from Echo will be back, joining us and helping to support additional volumes from the customers. But I think it would be hard to project what that looks like for next quarter or the quarter beyond. But I think it's probably the overall headcount costs and labor costs, including incentive compensation, are going to be the lion's share of the cost drivers for us. -------------------------------------------------------------------------------- Jack Lawrence Atkins, Stephens Inc., Research Division - MD & Analyst [10] -------------------------------------------------------------------------------- Okay. Understood. It's going to be sort of top line dependent than it sounds like, which makes sense. Well, last question, and I'll turn it over. Dave, you talked about, obviously, some very challenging trends in the LTL market here over the last month, 1.5 months. Are you seeing any incremental pricing competition sort of arise in the LTL industry? Are you seeing any of that begin to develop over the last several weeks given what tonnage is doing? Meaning are carriers being more competitive, trying to win your business? I guess, is the real (inaudible) to my question. -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [11] -------------------------------------------------------------------------------- Yes. No, I got it, Jack. I would say not really, no. We've had a -- I've talked to a lot of carriers over the last few weeks, obviously. And I think that obviously -- they've experienced, I think, similar volume trends that we have in general. And -- but there has not been a lot of pricing changes. And so I can't forecast what will happen over the next 6 months, say. And I think that a lot of that might depend on the recovery, but it also might depend on the operating cost that everyone's incurring in this environment, moving freight and dealing with the shutdowns and potential terminal disruptions possibly due to staffing issues or illnesses. So there's a lot of moving parts, but I haven't -- I wouldn't say that we've seen anything significant in terms of pricing changes to date. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- Our next question comes from Bascome Majors with Susquehanna. -------------------------------------------------------------------------------- Bascome Majors, Susquehanna Financial Group, LLLP, Research Division - Research Analyst [13] -------------------------------------------------------------------------------- I was hoping we could follow up a bit on the LTL side, given the degree of incremental weakness you're seeking -- you're seeing in the demand front right now. Can you help us understand better how that business, in potentially the gross margin, flex through a down cycle, given that we really just haven't seen a recessionary-like outcome and a large non-asset LTL at this point as a public company? I'll just leave it at that. -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [14] -------------------------------------------------------------------------------- Well, I think on the volume side, our LTL business is both brokerage and Managed Transportation. And so maybe a little steeper decline on the Managed Transportation side. And what's interesting about that is that for Echo, we manage 100% of our clients' transportation. So there is no opportunity to gain share, per se, if a client has to shut down or reduce operations. And so we see -- we kind of feel 100% of that volume decline in that area. It doesn't have, I would say, any impact on gross margin or net revenue margin. Actually, in either case, in terms of the volumes, I would say. But on the brokerage side, the other piece of the puzzle is that the majority of our customers that are LTL shippers on our brokerage side are small- to mid-sized businesses. And so again, the good news for Echo is that the majority of our customer base is in -- I think it's industrial in nature, manufacturing, distribution, wholesale trade. Obviously, there's been an impact. I mentioned -- we mentioned the 24% decline, and it's small- to mid-sized companies. So -- but they're not -- there's not an exposure in, what I would say, some of the heavier hit industries, whether that be obviously, hospitality, tourism, maybe auto and other -- retail apparel, some of the other industries that may have been harder hit, they are not core industries that Echo deals with. So I think it's stabilized. I don't think it has a significant impact on our margins in our LTL -- on the LTL side of our business. Just might have, as Kyle mentioned earlier, overall, a little bit of a mix issue if LTL declines greater than we've talked in the past. It's lower dollars per shipment, but tend to be higher margins. And so that can impact our overall net revenue margins if there is a mix change. And there may be a little bit of a -- we've had a pretty steady mix element here for a while. But this could cause a little bit more mix shift, I'd say, over the -- in the near term. -------------------------------------------------------------------------------- Bascome Majors, Susquehanna Financial Group, LLLP, Research Division - Research Analyst [15] -------------------------------------------------------------------------------- So it sounds like the indication is that we don't see the typical, sometimes significant gross margin flexibility in LTL and a weaker market that we might see in TL? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [16] -------------------------------------------------------------------------------- Yes. The -- it's not as volatile for sure. And I would not expect to see any kind of -- any significant volatility there, not but order of magnitude, like you see it sometimes in truckload. -------------------------------------------------------------------------------- Bascome Majors, Susquehanna Financial Group, LLLP, Research Division - Research Analyst [17] -------------------------------------------------------------------------------- And Kyle, forgive me if I missed this, did you discuss the CapEx budget? And if that has moved at all? -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [18] -------------------------------------------------------------------------------- So we didn't actually talk about it. So most of our CapEx relate to technology, good 2/3 or a little more is our internally developed software. And I think Doug highlighted, we've not pulled back the investments we're making in technology and data science. We're moving forward with all of our technology road maps. We have found some areas to pull back a little bit on projects or initiatives or slow them down on -- more on the refresh and hardware side. But it's really only reducing the CapEx by about 10% or $2 million or $3 million. So we're kind of expecting something in, call it, $23 million, $24 million, $25 million range for the year, something like that. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- Our next question will come from Stephanie Benjamin with SunTrust. -------------------------------------------------------------------------------- Stephanie Benjamin, SunTrust Robinson Humphrey, Inc., Research Division - Associate [20] -------------------------------------------------------------------------------- I was hoping you could discuss a little bit about the sequential volume trends actually during the first quarter. I believe you gave in the last call that truckload volumes were up about 7%, so it doesn't seem that there was some improvement? Was that largely due to that big spike that you saw in the second half of March? And then to your point about kind of the guidance assuming that we are at the bottom from a volume standpoint, what are some of the drivers that you think that should enable that kind of volume improvement as we move forward out of this? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [21] -------------------------------------------------------------------------------- I'll cover -- I'll talk a little bit about that in terms of the monthly progression. On the truckload side, we did see improvement in volume per day in -- throughout the quarter. It was roughly 7% in January and February and came up to just over 11% in March. And I think that the core driver of the volume improvement that we saw has a lot to do with the success that we've been having in the contract and through the RFP season and the RFP cycle. We've been winning greater share, more bids, and we've seen more of that business continuing to come online. So trends were very favorable in terms of our ability to grow the business prior to this crisis. And I think that we had a lot of momentum. And we still see that. We're still seeing awards come across, and we still feel really good about that. And that was a big driver, and I think that just -- and then we had a little bit of the restocking surge, potentially in the last week or 2, we saw it. Like I mentioned in the prepared remarks, some additional spot business that came in, in March that also helped those numbers. And then the second part of your question was -- could you repeat the second part of that question? I think Doug will pick that up. -------------------------------------------------------------------------------- Stephanie Benjamin, SunTrust Robinson Humphrey, Inc., Research Division - Associate [22] -------------------------------------------------------------------------------- Sure. Absolutely. So I think you gave some commentary just about we think we're kind of at the bottom of the impact of this pandemic. Hopefully, but also in the -- with the guidance. So kind of as you look forward, what gives you confidence? Or is bullish in terms of volumes improving from here? -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [23] -------------------------------------------------------------------------------- Yes. Well, I mean, that's an assumption that we made in our planning, as we pointed out in our prepared remarks. And it's based on the fact that the swift downward trend that we saw has subsided and flattened out. We're seeing, as Dave mentioned, a small rebound in LTL. And all of our active shippers are continuing to ship, and we're not getting any news from them that they see another cliff coming. And then as we think about what appears to be a pretty strong effort to get companies back opened up again and back to work, we think that, that can only help volumes, and it's not going to detract from volume. So like I said, it's been a bit of an assumption on our part, but when we put all those pieces together, that's what we come up with. -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [24] -------------------------------------------------------------------------------- Maybe -- this is Kyle. I'll just add to that a little bit that when you think about our range of $450 million to $500 million for the second quarter, the top line, the midpoint of that is down about 14% year-over-year. And we've said that through the first 13 days of the quarter, we're only down 12%, and that includes Good Friday. So arguably, probably down even a little less than that. So when we're thinking about our planning and our ranges, it just assumes some modest seasonal improvement in freight volumes in addition to what Doug's highlighting that conversations we're having with customers and what we're seeing. -------------------------------------------------------------------------------- Stephanie Benjamin, SunTrust Robinson Humphrey, Inc., Research Division - Associate [25] -------------------------------------------------------------------------------- Got it. No, that's very helpful. And then can you just remind us, more from a housekeeping standpoint, what the natural seasonality is from the net revenue margin from 1Q to 2Q? And kind of how that's playing out so far? I know you gave an update already, and it's probably a little early to tell, but any additional color there would be great. -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [26] -------------------------------------------------------------------------------- Yes. I mean we've seen so many different cycles over the past 4 or 5 years that I don't know what the normal is. But I would say that prior to this crisis, going into Q2, we would have -- we've typically seen increased volume, primarily on the truckload side, but across LTL, too, from a seasonal perspective. If you think sequentially, that is driven from more business activity, obviously, and then also just the summer season that drives increased beverage consumption, et cetera. So you get more volume coming into Q2. We also come out of an award cycle and depending on the economic climate, we're in a pretty balanced freight market. And a balanced freight market that's steady, we would expect gross margin compression modest potentially coming into Q2, because you've got more award business coming online. And there is -- it's competitive and rates aren't moving around a lot. And so there is not as much disruption. So that would have been probably the -- a likely scenario before this all happened. And then now that this has all happened, I think the volume assumptions are up in the air a little bit. But we've seen it steady as both Kyle and Doug commented on. So we may see a little bit of volume resurgence, depending on how you think this recession and this economy will play out, but a little bit of resurgence with the change of seasons that will naturally occur, more businesses coming online, and there's been a lot of government support for these small- and mid-sized businesses. So those are some things to -- that could be to look to. And then I think on the capacity side and the margin side, I expect pretty consistent margins on the LTL side, but potentially some expansion on the truckload side, depending on the cost of capacity is coming down. Doug and Kyle have often highlighted the cyclical nature of the business that we're in, and oftentimes, carrier costs move a little faster than shipper costs. And so we'll just have to see how that plays out as we move forward throughout the quarter. But I would not -- sitting here today, would not expect to see compression like I -- on the margin side, like I would have said maybe before this crisis. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- Our next question comes from David Campbell with Thompson, Davis & Co. -------------------------------------------------------------------------------- David Pearce Campbell, Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner [28] -------------------------------------------------------------------------------- Thanks for having a good quarter in a difficult environment. I don't think how anyone could expect you to do any better than that, unless you're living on a different planet. But here on earth, you did a great job. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [29] -------------------------------------------------------------------------------- Thanks, David. -------------------------------------------------------------------------------- David Pearce Campbell, Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner [30] -------------------------------------------------------------------------------- Kyle, I'm surprised that you can't estimate, for us, G&A for 2020 in some sort of range that seems to be of -- it's an area that you're focused on controlling costs. And so I'm surprised you can't give us some estimates based upon your own internal assumptions on revenues. -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [31] -------------------------------------------------------------------------------- Yes. David, I appreciate that, and I understand what you're saying. I think the challenge is without giving revenue guidance for the back half of the year, it's harder to estimate what we would expect our staffing plans to be to support a certain level of business, what incentive compensation might look like. But maybe let me give you a couple of things just to try and help you think about it. We already talked about -- the midpoint of our Q2 G&A is $45 million. So that's down sequentially by close to $3 million, and we talked about that being headcount changes, not as much hiring, lower anticipated incentive comp, production and travel, things like that. And so if you made an assumption that Q3 wasn't going to look different than Q2, I'm not telling you that's our expectation, and we do think that things are going to be looking better. But I think our costs would look similar as they do in Q2, in Q3, if the business was operating similar. So I guess that we're hopeful that volumes start to recover, bringing back most of, if not all of those furloughed employees, so we'd see costs move up in Q3, if that was happening. And then I think Q4 is just a little too far out given all the uncertainty to be giving too much more information at this point. -------------------------------------------------------------------------------- David Pearce Campbell, Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner [32] -------------------------------------------------------------------------------- Yes. Right. Okay. It's really based on the fact that you're not giving us any revenue estimates for the year. But it certainly looks like things should -- can't get any worse on the LTL. I mean, 24% down in April is quite a change from the first quarter. And you said it's mostly the small- and mid-sized customers that's doing that. Is that the way the retailers going out of business? Is that a big factor? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [33] -------------------------------------------------------------------------------- I think it's just maybe -- I would say not going out of business, but just the... -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [34] -------------------------------------------------------------------------------- They're not in business. -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [35] -------------------------------------------------------------------------------- But maybe temporarily not in business, yes, is a good way to put it. But the other -- and I do think we're actually -- we are optimistic on the second half. We mentioned in the prepared remarks that we closed an unprecedented amount of new business in the first quarter and through -- actually through the date of this call, $69 million in Managed Transportation, but a lot of that is LTL as well. And so -- and that business is expected to come online in the back half of Q2 and early in Q3. And some of those accounts, we don't have project plans on yet, so I can't be real specific. But I do think that's also encouraging in terms of the LTL side, and providing a potential upward trend as we move throughout the year from where we're at today. -------------------------------------------------------------------------------- David Pearce Campbell, Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner [36] -------------------------------------------------------------------------------- And my last question is, is there any M&A business? I've read about some truckers going out of business or are in bankruptcy, there should be some small- and mid-sized trucking companies that would be available at a decent price. And so I'm surprised that you haven't found any yet. And do I have something wrong in that assumption that there is... -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [37] -------------------------------------------------------------------------------- Well, we won't be buying any trucking companies as long as I'm around here. But we are certainly interested in non-asset transportation businesses, and probably more in the tuck-in variety. -------------------------------------------------------------------------------- David Pearce Campbell, Thompson, Davis & Company, Inc. - Senior VP, Research Analyst & Institutional Sales Partner [38] -------------------------------------------------------------------------------- I was just thinking, you can convert trucking companies or you can just take their customers and not their assets. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [39] -------------------------------------------------------------------------------- Yes. Well, I think part of what you say is true that the prices are down right now. There is oversupply of capacity. Insurance rates are high. I think it is difficult for the small truckers. We know some of them have just said, hey, I'm going to stay home because I don't like the rates, and it's hard to find loads. And so there is some self-correcting mechanism, I think, built into the marketplace. It would be hard to buy a trucking company and just convert their customers to non-asset brokerage. But that being said, we do think that there are -- there continue to be M&A targets that are more like us, that are smaller brokerages and logistics companies. And as I said in my prepared remarks, we continue to look for those opportunities and have the conversations where they make sense. But at this moment in time, we're probably dragging our feet a little bit in terms of pulling the trigger on anything. And want to wait and see what the landscape looks like as we come out of this thing. -------------------------------------------------------------------------------- Operator [40] -------------------------------------------------------------------------------- Our next question will come from Bruce Chan with Stifel. -------------------------------------------------------------------------------- Jizong Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [41] -------------------------------------------------------------------------------- Just really looking for some color here on how you characterize the competitive environment in brokerage right now. I know, Dave, you mentioned that we're not seeing the same level of seasonal award-related margin compression. But if we look back to the second half of 2019, we saw maybe a surprising amount of competitiveness as everyone was chasing the same contract business. And that we're looking at another very thin spot market here. So what's the likelihood that this kind of bad behavior happens again, especially if this freight rut stretches out a little bit longer? -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [42] -------------------------------------------------------------------------------- Yes. Bruce, this is Doug. I have to be honest and tell you, we haven't been paying a lot of attention to our competitors. We've kind of had our heads down, running the business, doing what we think is right. And as we've said for a long time, we think size and scale and network effect matters. We think that technology and data science matter. We think having strong relationships with our shippers and our carriers matters. And in this current environment, access to capital matters. And having financial strength in a solid balance sheet matters and not being over-levered matters. And so -- and then having the ability to leverage your technology and work from home matters. So when you think about all those things I just rattled off, I mean, those are all the things that define the Echo model. And so we're just trying to execute on our plan, and we think it's working. And I can't really tell you that competitors have had any impact on us one way or the other, and we're taking the market share that we can get. -------------------------------------------------------------------------------- Jizong Chan, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate VP & Equity Research Analyst [43] -------------------------------------------------------------------------------- Okay. That's fair. And then just on that data and technology side, since you mentioned it. Are you seeing any big returns on that right now? You discussed the work from home flexibility, certainly, but as far as may be where some of those algorithms are coming into play, are those helping you out on the buy side? Are those helping you to position? Or are those actually breaking down right now because we're in such a black swan-type situation? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [44] -------------------------------------------------------------------------------- Yes. Bruce, I think they are helping. We've been -- on the algorithm side and price prediction capability, we've been doing that for years, and we've implemented that throughout our systems. And I think that those tools are very valuable. We talked a lot last quarter about our initiatives on the carrier side and rolling out EchoDrive and trying to drive adoption. And as you can imagine, in this environment, more and more dispatchers are working from home and accessing systems remotely. So we're seeing significant increase in adoption in those platforms in terms of both users and searches and actual bookings. We still are doing much of the price negotiation and finalization on our own, but we're very close to being able to roll out automation on that front as well. So we're -- we feel great about that, and I do think that those investments in -- and being able to conduct business with us online, access our freight and our loads, all those kind of things has been very well-timed in terms of where we're at today. -------------------------------------------------------------------------------- Operator [45] -------------------------------------------------------------------------------- Our next question comes from Tom Wadewitz with UBS. -------------------------------------------------------------------------------- Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [46] -------------------------------------------------------------------------------- I apologize if I -- if you mentioned this first one, there was some overlap with the CSX call. But on the gross margin comments, I guess, I would have expected a bigger move up in your gross margin in April versus what you saw in the first quarter. Is that -- I think maybe you said that because the LTL margin doesn't move, but can you tell us what the truckload gross margin, maybe how much that moved in April compared to where it was in March? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [47] -------------------------------------------------------------------------------- So I don't have that exact number in front of me right now. But I would say that to the extent that it did move up, we've only got 13 days. But it did move upward on the truckload side, Managed Transportation and LTL, very steady, no movement there. The fuel price and the mix, Kyle mentioned the mix issue, which is another factor. With LTL being a higher-margin component of our mix, that drags down the overall margin a little bit when that mix shift occurs. So you've got a lot -- you do have a lot of moving parts there. So I think that's probably the level of detail on what we wanted to give on the first 13 days. -------------------------------------------------------------------------------- Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [48] -------------------------------------------------------------------------------- I mean is it -- I guess that if you look at the MDI as an indicator, it would seem that March was super tight. April has gotten dramatically looser. It seems like you've only seen part of that. Is it fair to think that the gross margin would move in a favorable direction as you look forward, recognizing you've only got a little bit of April so far? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [49] -------------------------------------------------------------------------------- Yes. I think it depends on what your assumption is on capacity. I think that could be the case. I would agree. The other thing, I guess, I could have pointed out for you is that we probably saw a little bit of decline in gross margin throughout the quarter, January, February and March. So when you look at that average for Q1, you're kind of getting a little better than maybe what the current trends would have been in March, so to speak. -------------------------------------------------------------------------------- Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [50] -------------------------------------------------------------------------------- Yes. Okay. What's -- in terms of capacity, I know it's a little bit tough to tell, but do you think that the pressure in the spot market is driving -- or is there evidence of capacity really starting to come out of the market in a meaningful way? Or is that something that's just kind of hard to tell? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [51] -------------------------------------------------------------------------------- I think it's a little hard to tell. Certainly, anecdotally, we believe that it is coming out of the market. The demand has dropped quite a bit. There's been big industries impacted. And as we talk to carriers, it's not as if they're closing their doors. But there are certainly examples, plenty of them, of carriers that are less efficient, pulling some drivers or capacity off the road right now in response to lower demand. So it does make sense. I couldn't say if it's -- how temporary that change is. But it's -- the -- any story you hear is going to be about capacity coming out, not coming in. So it's coming out. -------------------------------------------------------------------------------- Thomas Richard Wadewitz, UBS Investment Bank, Research Division - MD and Senior Analyst [52] -------------------------------------------------------------------------------- Okay. Great. Just one more, if I can. It sounds like you've had some good success in the contract side in truckload. How much good is the compliance with that? And how kind of fluid is that situation? Obviously, volumes move with -- customers moving around a lot, but would you expect decent compliance with the contract business you won? Or would you say, it's kind of temporary, just given how dynamic the market is? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [53] -------------------------------------------------------------------------------- Yes. I think it's just dynamic right now. And it's impossible to -- I wouldn't look at it as if -- I understand that there could be compliance issues over time. People might move freight into spot, but in general, I'd say, at this point, it's just a demand issue to the extent that we see -- we've seen some volume decline on the truckload side versus the compliance issue. I -- it's hard to track, but I don't -- I haven't seen any sense of that being a concern. -------------------------------------------------------------------------------- Operator [54] -------------------------------------------------------------------------------- Our next question comes from Jeff Kauffman with Loop Capital Markets. -------------------------------------------------------------------------------- Jeffrey Asher Kauffman, Loop Capital Markets LLC, Research Division - MD [55] -------------------------------------------------------------------------------- I just wanted to follow up briefly on Dave Campbell's question, and thank you, Kyle, for that view of SG&A. I take it by your answer that you feel like you've cut what needs to be cut at this point. And are there other levers you can pull if, say, the question like Bruce asked, the environment doesn't bounce back as we think? Or have we pretty much made our statement on SG&A, and that's just where we're going to go with this? -------------------------------------------------------------------------------- Kyle L. Sauers, Echo Global Logistics, Inc. - CFO & Secretary [56] -------------------------------------------------------------------------------- Yes. I don't think I would say that we're -- we've made one big move and that's it, in either direction, quite frankly, because we're managing the business on a daily and weekly basis. And one of the great things about our business is, we've got KPIs that we measure all day long, every day. And so we're adjusting as we go. So I think to the extent we had volumes that were to deteriorate further, we got ways to adjust further as well. We're obviously hoping it goes the other way. And I think that the nice thing for us is we anticipate that when volumes do rebound, that we can adjust our workforce very quickly back in the positive direction and be able to service all the freight that's available to us. So I think that's a good opportunity. But the quick moves are largely in the compensation area. That includes delaying higher classes like we -- like Dave mentioned earlier or just adjusting our headcount across the organization to match volumes. -------------------------------------------------------------------------------- Jeffrey Asher Kauffman, Loop Capital Markets LLC, Research Division - MD [57] -------------------------------------------------------------------------------- Okay. And then one other follow-up, more for Doug. Doug, thank you for the walk through the cash and liquidity and paying down the convertibles. So when you talked about, if we get back into M&A, it's going to be more of a tuck-in variety. Is that based on the idea that we have $127 million of available borrowing capacity, but we may not want to use all of it even for the right deal? So therefore, that's the idea of a tuck-in or something strategic, but that's kind of the number we should think about in terms of how far you're willing to go for the right deal? -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [58] -------------------------------------------------------------------------------- Well, I mean, on the tuck-ins, we wouldn't be spending all that. -------------------------------------------------------------------------------- Jeffrey Asher Kauffman, Loop Capital Markets LLC, Research Division - MD [59] -------------------------------------------------------------------------------- I guess you hope not, yes. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [60] -------------------------------------------------------------------------------- So I think it's just a matter of we got to take a step back and take a breath, understand where multiples are, understand where the cash flow trends are going and the overall market dynamics. And then based on the amount of EBITDA that we're buying and the multiple that we're buying it at, does it make good business sense. And also what's -- how does the business fit with ours? How quickly can we integrate it on to our platform? How much customer overlap is there? How much carryover? It's all the typical questions that we ask ourselves when we assess a tuck-in opportunity. And then looking at our overall liquidity and seeing, from a risk standpoint, does it make sense. -------------------------------------------------------------------------------- Operator [61] -------------------------------------------------------------------------------- And our next question will come from Kevin Steinke with Barrington. -------------------------------------------------------------------------------- Kevin Mark Steinke, Barrington Research Associates, Inc., Research Division - MD [62] -------------------------------------------------------------------------------- So I wanted to ask about the Managed Transportation business. Obviously, a really strong start to the year with $69 million of new revenue added. Do you think that momentum can continue in this environment? Or maybe do people freeze up on decision making? Or conversely, is there some aspect of the Managed Transportation value proposition that is even more attractive in this type of environment? -------------------------------------------------------------------------------- David B. Menzel, Echo Global Logistics, Inc. - President & COO [63] -------------------------------------------------------------------------------- Yes, Kevin. I mean, I do -- we're not going to predict exactly the pace, but I do think it can continue. We've seen a lot of interest. Our systems are rock solid in terms of our ability to support a client. And that's been very valuable, to have access to the kind of reporting, information and all the things that our transportation management solution offers our customers, is very valuable during this time. We're seeing executives and decision makers having -- trying to focus on strategic issues. And I think that's helping in terms of the pipeline development and having opportunities to move forward. So we feel really good about, a, the success; and then b, the opportunity in this year and in this environment to continue to talk about the value that we can provide to shippers with our solution. So we're excited about the opportunity ahead there. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Chairman and Chief Executive Officer, Mr. Doug Waggoner. -------------------------------------------------------------------------------- Douglas R. Waggoner, Echo Global Logistics, Inc. - Chairman & CEO [65] -------------------------------------------------------------------------------- Yes. I'd just like to thank everybody for joining us today. It's unusual times that we find ourselves in, and I hope you all stay healthy. And we're optimistic that, like I said, we're in the bottom of this U, and we hope that it's a narrow U and not a wide U. But we'll see what the market gives us, and we'll be ready to react accordingly. Look forward to talking to you next quarter. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, you may now disconnect.