Echo Global Logistics' CEO Presents at JPMorgan Aviation, Transportation and Defense Conference (Transcript)

| About: Echo Global (ECHO)

Echo Global Logistics, Inc. (NASDAQ:ECHO)

JPMorgan Aviation, Transportation and Defense Conference

March 05, 2013 1:55 pm ET


Douglas R. Waggoner - Chief Executive Officer and Director

Unknown Analyst

We'll go ahead and get going with the next presentation from Echo Global Logistics. We have Doug Waggoner, who's the CEO. So Doug's going to give us some comments, and I think he said we'll have plenty of time for Q&A at the end. So Doug, thank you for joining us. It's your first time at our conference, and we look forward to having you back again, hopefully, in the future as well.

Douglas R. Waggoner

Great, thanks. Nice to be here. So there's the ever-present Safe Harbor language. I'm sure you're all familiar with that, so we'll move on and get to the company. So Echo is a relatively young company. We were founded in 2005. We had our IPO in 2009. We focus on third-party logistics, offering transportation management solutions in several channels. First is your traditional brokerage. We also have outsourcing capabilities. Where we're a contractual outsource partner for our customers, and then we have technology-as-a-service. We are aimed at being multimodal, so unlike many brokers that are fixed on a particular mode of transportation, we target small and mid-sized companies, and we think it's important to be a one-stop solution for them, so we strive to be a multimodal company. We've been growing very rapidly. In the 7 years that we've been in the business, you can see on the graph, GDP tracking at a nominal 2.3%.

The 3PL industry generally grows at about a 3x rate to GDP. And then Echo's revenue top line about 43% on a 3-year CAGR basis, and our EPS is about 85%.

So when we think about the market starting at the broad level, according to various sources, transportation, domestic is about $750 billion, estimated to be about 60% greater by 2022. If we look at the outsourced transportation component of that, it's about 18% of overall U.S. domestic transportation, so that equates to about $133 billion current spend on third-party logistics. And according to Armstrong and Associates, that -- the demand for outsourced logistics is growing at about 3x the overall demand for domestic transportation. So we think that's a great place to be in if you're an outsourcer in a market that large. When we think about it, we look at the modes of transportation that we handle. So that would be less-than-truckload, full truckload and intermodal. That, combined, is about $342 billion out of the $750 billion. So if you look at our 2012 revenue of $758 million, we're less than 1 quarter of 1% of that addressable market.

Furthermore, I mentioned that we target small and mid-sized companies. We've looked at some recent research by Ohio State University that said that the small and mid-sized companies equate to about 1/3 of the private sector U.S. economy. So if you do the simple math and apply that to the LTL, truckload and intermodal segments, that's says to us that we have an addressable market of about $100 billion. So again, at our current revenue rates, we're less than 1% of that market. The thing about the small and mid-sized shippers is that we believe that they're generally underserved by the asset-based transportation industry. Just the numbers are too great to warrant the number of touches. They generally don't have transportation management technology, and they generally don't have a lot of human resources dedicated to the transportation management function. So we see a lot of opportunity to help these companies, both with transportation technology, with sourcing and with execution.

Also, because we have the execution capabilities and the technology to manage transportation as a broker, it gives -- it affords us the opportunity to play with larger companies as well. But the play there is a little different. Typically, with a Fortune 500 or Fortune 1000 customer, they're going to be running a large truckload routing guide, so we can bid in to a routing guide and take lanes that we want to participate in. And that's kind of the traditional truckload brokerage play with Fortune 500 companies. So you we do that as well.

Our value proposition spans, really, 3 pillars: people, technology and then the ability to access technology and do it cost-effectively.

So if you think about the people component, we hire heavily right out of college. We've hired about 120 people in 2012. We'll hire another 120 people this year. A central component of our philosophy is that dedicated customer service, the intimacy between our employee and our customer, can differentiate us from any competitor. So whether it's a small transactional spot market shipment or shipper that is relying on their sales rep to be their customer service person or whether it's a contract will outsourced arrangement where we have a dedicated team of 6 people or, perhaps, even people on site, we think that people are important part of the equation. We train them for 6 months after we hire them, and that training spans both operations capacity sourcing and sales experience. So we put a big investment into our people.

On the technology front, our systems are all proprietary. And by the nature of what we do, they're fairly complex. We have the ability to do brokerage in multiple modes. We manage thousands of tariffs. We manage the pricing in the truckload market, which changes by the day, by the -- sometimes, by the hour, across tens of thousands of lanes. We have the execution capabilities to book shipments, to track them, to trace them, invoice them, pay our carriers. So essentially, our entire business is run using technology, and it's all proprietary. We use it on a Software-as-a-Service platform. So customers and carriers that use our system do not have to install any software, they simply use it through the Internet, through portals, and for many of our contractual customers, probably 95% of them will do direct ERP integration so that, as they're processing orders in their order management system, those shipments are coming over and queuing up in our system where they can be either auto-executed through algorithms or they can be put into a queue and manually worked by the account team.

And then finally, the technology scale. Well today, we handle about 7,000 shipments a day across all the modes. And again, because it's a private cloud-based system, it can be scaled to any size that we need.

And then finally, when you're in transportation management, you've got to be able to source capacity. In LTL, we deal with over 100 LTL carriers, probably all the names that you've heard of plus a lot of small local cartage companies and very regional carriers. We've got over 24,000 truckload carriers. And then for our intermodal operations, we deal with all of the major railroads. We're able to negotiate contractual rates on behalf of our customers and secure dedicated capacity where we're also able to go out into the spot market and do it shipment by shipment. And that's a -- spot market pricing, specially in truckload, requires either scale or really good technology because of the number of parameters and the pricing that changes all the time.

We have a lot of carrier automation, so it makes it easy for our carriers to be good partners with us. We try to be a low-cost customer for them. We try to be easy to do business with, and we try to the bring them a lot of volume because we also try to beat them up pretty good on price. But we think, all in all, that our carrier relationships are strong, and we treat carriers like customers and try to come up with win-win scenarios that give them freight in their network where they need it and give us good value for our customers.

Our growth strategy has 4 components. The first one is our sales force. And I'll cover these a little more in a minute. But our sales force, which is a function of adding headcount and increasing the average tenure over time, because with us, tenure equates to productivity. So it's very linear with a very high r^2. So if you know how many people we have and you know what the average tenure is, you can model our revenue production out of our inside sales channel very accurately. But we're adding 120 people this year, just like we did last year, so that'll continue to fuel the inside sales machine. Our enterprise services, that's our contractual outsourced transportation management customers. We have about 203 of those. We secure them at a rate of about 5 to 10 per quarter. And that's -- it's great business for us because it's very sticky. Our retention rate is 96% of revenue, and we're going to continue to add those at the same rate. The third point is truckload and intermodal services. When Echo launched, we had a strong LTL product, and we relied on that LTL product to really gain our growth in the initial years, but realize that the truckload market's probably 10x the size of the LTL market. So as good as we were in LTL, we wanted to be equally good in truckload. And so since about 2010, we've been working hard to add capabilities in truckload, a lot of very finite technology that's associated with sourcing operations and finding the right truck at the right price with the fewest number of phone calls, as well as some predictive capabilities. And for the last 2 quarters, our truckload mode has been growing faster than our LTL mode. And actually, in terms of total revenue, truckload has surpassed LTL. So we often get the reputation in the marketplace as being an LTL broker, but in fact, we've got a fair amount of truckload, and it's growing. And then finally, acquisitions. We do anywhere between 2 to 4 acquisitions per year. They tend to be small, fairly low-risk and digestable, and I'll cover a little of that, a little bit more in a minute. So I talked about the sales force. You can see the overall sales headcount there. I don't know if you can read the legend, so I'll help you out a little bit. The blue bar is a client sales employees. The red bar is carrier sales. So these are people that really touch the carriers side, specifically in truckload. We consider them part of the sales force because we're buying capacity and we're getting customers at the same time. The green bar that you see is sales support, which is really -- that's a code word for training. And the top part is agent sales, which predominantly comes from our acquisitions. What's significant about this chart, I think, if you look at the number of sales headcount that we had in Q4, it actually was lower than the previous year. And we've talked a lot about that this year, if you listened to any of our earnings calls or our guidance. In 2012, we made a decision to extend our training program from 6 weeks to 6 months as part of our truckload focus. We realized that it takes a long time to train people to be able to sell truckload, and it takes a lot of operational experience and sourcing experience and talking to dispatchers. So that green segment that you see is really our investment in 2012 of taking those 120 new hires and putting them through training. Most of them were hired in Q2 and Q3, so the benefit of those people are just now starting to occur. We had a few come on in Q4. I think we have about another 40 coming on in Q1, and then you'll start to see the productivity and the leverage that occurs from that group later in 2013. And it's an ongoing program now. So all of the people that we're hiring are going through that 6 months of training. So it was a significant investment, but we think it's going to do 2 things, and that was the hypothesis: One, improve retention and reduce turnover. And number two, make people more productive faster, and also a lot more competent in selling truckload.

I talked about the Enterprise business in our guidance that we would close between 5 and 10 deals per quarter. You can see by the chart here that we've been growing these very consistently, and we are up to 203 of them. We've averaged 29 per year. These are typically 3-year contracts. We just renewed our largest customer this last week. It's their third renewal. And we think that our solution is very sticky because we have embedded personnel, embedded technology and great execution.

On the acquisition front. We look at acquisitions a couple of ways. One, it's a chance to expand into new geographic territories, get feet on the street closer to customers. In some cases, we get smart people that make the company better. We're certainly buying a book of business, and we're buying a portfolio of customers. The way that you read this chart, if -- we'll start of the bottom line, which is 2007. The -- it's basically showing you on the dark line, where it says $23 million, we did 2 acquisitions in 2007. The total trailing 12-month revenue was $23 million. If you go over to the right, then in Q4 of 2012, the run rate for those same 2 companies was $85 million. So that's -- it represents a 27% compounded annual growth rate. You go on up and move up the chart, 2009, we had one bad deal that we did that held us back a little bit, but you can see '10 was strong, '11 was strong, and '12, it's a little bit early yet. We've done 15 acquisitions. I would say 13 have gone very well, one went okay, and one didn't go well. Of the 13 that went well, we have IRRs ranging from a low of 30% to a high of 350%. Typically, our deals are 6x EBITDA. We put 50% down at closing, and we put the balance at about a 4-year earnout. So that deal structure protects us if the business doesn't work out exactly as planned. But thus far, it's been good. We look for companies where the owners want to be part of Echo. We make them a Regional Vice President of that branch. And as you can see, they tend to grow their business when they're part of Echo. The reason for that is generally, we're giving them additional modes of transportation to sell. So they might be a truckload broker. We're giving them LTL and intermodal. We also freeing up the owner to go back to selling, which is usually what they do best. So we're getting them out of the back office. They don't have worry about accounting, they don't have to worry about technology, and they're able to go out and sell for Echo. And out of the 15 deals that we've done, we've got about 6 former owners that have completed their earnouts, signed employment agreements and joined us as employees. So we think we have a strong culture where people want to be, evidenced by the fact that people that used to own companies want to stay on and be employees for Echo.

I like to remind people that our business is really all about execution. We handle about 7,000 shipments a day in recent weeks. It's -- the average transit time of the shipment in our system is about 3 days. So on any given day, we're managing about 21,000 physical freight shipments using other people's trucks. So you can imagine that to do that and provide a service that satisfies the customers at a fair price, you've got to be able to execute. That means finding the carrier, getting a dispatch, making sure they pick it up, getting the bill created in your system, paying the carrier, tracking all the paperwork, getting it delivered, making appointments and on and on and on. And we capture all that data associated with a single shipment in our data warehouse. Our customers have a single view of all of their transportation across modes and across carriers. And again, we can do ERP integration if it makes sense. So that's all about execution. We think that we do a good job executing both operationally to move the freight, but we also think that we do a good job in terms of executing in sales, closing deals, bringing on new customers. And then finally, we think we do a pretty good job with execution in terms of technology development and building scalable systems that can make us more efficient and bring value to the customers.

The management team. We've got a kind of a mix of people. I come out of the transportation industry, spent most of my career in LTL, but I do have a pretty big chunk of time in technology. I worked as a CIO and also started a technology company at one point in time. Dave Menzel is our CFO, got his start at Arthur Andersen and worked in a series of small startup companies. One of them went public and then was purchased by CMGI. So he's kind of a technology startup person. Scott Boyer worked at large third-party logistics companies, like CAT and PLS and Penske. Tyler Ellison was President of Con-way Multimodal and Chief Operating Officer of Greatwide Logistics and also was officer at Schneider National. So he's a strong truckload background. And Mike Mobley comes from a supply chain and consulting background. Most of his time was at Accenture.

So now we'll talk about the financials. And the summary is that the last 3 years, our total revenue compounded annual growth rate has been about 43%. We've got an increasing track record of improving our profitability. Our operating margins last year, in terms of up income to net revenue, was about $16 million and some change. It was fairly flat last year, but we guided to that, and that was due to this investment we made in additional training. A year prior, it was closer to 8%. And we think that our operating margins will continue to ramp up and we'll start to get more leverage as we scale our net revenue of our G&A, and that comes from a lot of the sales productivity that I talked about earlier and just scaling over our fixed cost structure.

More positive cash flow. We have very little CapEx and so since we went public, we've been -- our cash has been staying pretty steady because we're spending at a rate that's about equal to what we're making. Then we've got a strong balance sheet with $42 million of cash and no debt.

You can see our revenue growth. It's pretty consistent. This is since the first quarter of 2010. So we've given guidance that for 2013, we'll be in the $940 million to $990 million range, and all the way up to 2015, our guidance is $1.5 billion of revenue.

Our net revenue margins have actually been pretty stable. If you look at this chart, it's a little deceiving. You have to look at the scale on the left. You can see back in Q1 of '10, it was $19.1 million. It's bounced around a little bit. Now it's at $18.5 million. That slow drop to the right is predominantly caused by mode shift. As we've grown our truckload and as we've acquired 2 intermodal marketing companies, they carry with them a lower net revenue margin, so that brings down the total. If you look at our gross margins in Q4, we were down about 49 basis points sequentially. That what entirely due to the acquisition of an intermodal company. And we were down about 105 bps year-over-year. Again, about 50% of that was due to the intermodal, and then we had some softening in our LTL margins. If you pull out our truckload margins, which aren't readily apparent, we actually had about 80 basis points of improvement on truckload margins in Q4 year-over-year. A lot of people have asked me about that because they said, well, some other people in the industry didn't see that kind of a trend, and my answer there is just that truckload brokering is all about scale and it's about data. It's about having good algorithms. And we're better now than we were a year ago, and we'll be better next year, because we're in a place where we're growing and starting to achieve some scale. So our sourcing will get better, and that helps the margins, at least on a relative basis, with all other things equal.

Our business mix. On the left, the pie chart, you can see the transactional revenue is about 29% -- I'm sorry, 71%. So that's the shipment-by-shipment, relationship-based, price-sensitive type of business that we handle that would look more like your traditional brokerage. The transactional business has a big relationship component. We have a salesperson that has a relationship with the customer. They don't have to use us on the next shipment, but they will if we give them good service at a competitive price, and like I said, the relationship matters as well. So that's about 71%. The Enterprise business, which are the 3-year contractual freight management, comprises about 29%. Normally, the ratio is about 60-40. 60% transactional to 40% enterprise. It's skewed a little towards transactional, because when we make acquisitions, they're generally 100% transactional. So it dilutes down our contractual business.

The revenue by mode. You can see that the truckload is about 43% of total, LTL is 41%, intermodal is 9%, and then all of the other modes, which are predominantly international, is about 7%.

This is 2 charts showing revenue per salesperson and revenue per employee. The salesperson is the blue line and the employee is the red line. Thousands of dollars per quarter. So you can see there's a nice trend there, and this relates back to what I talked about earlier where the productivity really grows in a linear fashion with tenure.

Our average tenure on our inside sales force in the fourth quarter was about 17 months. A year ago, it was about 14 months. So you can kind of project out, over time, how that grows on a per-person basis.

Our operating income. We've had nice expansion. You can see a little bit of flatness in 2012. That was the investment in training that I mentioned, but we'll continue to see more operating leverage as the business scales.

And then our 2013 objectives. First of all, we're going to grow the top line from the $758 million that we had in 2012 to somewhere between $940 million to $980 million in '13, and that's excluding acquisitions. So it could be more if we complete some deals. We're going to take our non-GAAP earnings per share from $0.62, which we reported in '12, to between $0.82 and $0.90 in '13. We're going to continue to expand our sales force organically, and we'll probably get some acquisitions done, so that'll add some additional people remotely out on the street. We're working really hard on our sales productivity and improving our retention, because that's a key to leverage in our model. So we continue to look at things in terms of how we recruit people, how we train them, how we treat them, the culture of our company, how we pay them, and that's a -- continues to be a focus.

Truckload and intermodal services. We did 2 intermodal acquisitions this year, one that was about $17 million in revenue and one that was $72 million. We're in the process of getting them integrated onto our platform. To do that, we have to create the intermodal pricing and the tracking functionality that we didn't have because it's specific to that mode. Once we have that completed, we'll be able to allow our entire sales force to quote and sell intermodal. And we think that, that's a great opportunity for us. We don't own containers. We don't have a vision of being the next Hunt or Hub or the big strong container-based IMCs. But what we do well is convert small truckload shippers to intermodal. And our experience is the railroads love that because we're not just taking traffic from another one of their customers, we're actually converting it from highway to rail. So we found the rails to be very good to work with. They're interested in what they think Echo can bring them, and we think it's a big opportunity. If you're talking to a customer about a truckload from L.A. to Boston for $5,000 and doing it in 4 days, it's nice to be able to say, "I can save you $1,000 if you can live with an extra day of 2 transit time," and ensures that you're going to get that load one way or the other. So we're continuing to invest in technology on truckload. Scale really matters, so we're trying to build up the volume, build of the data that runs through our algorithms and make us a better sourcer in truckload. We're going to continue to focus on our Enterprise business. We love that business. It's very sticky. If contributes to the bottom line, and it really helps us in the marketplace gain a reputation.

And then, finally, our geographic footprint. We have really good coverage in the West through our acquisitions. We have very spotty coverage in the East. Ironically, most of the freight in this country is controlled east of the Mississippi, so we have a lot of opportunity to fill in the map either organically through opening offices or through acquisitions, and so we'll continue to focus on that. So that concludes my prepared comments, and happy to take questions.

Question-and-Answer Session

Unknown Analyst

Great. Thank you very much, Doug. I've got a couple of questions, and then I think we have plenty of time for a few from the audience as well.

When I think about your mix of business, you have both the LTL and the truckload brokerage. My understanding is LTL tends to be more automated and truckload brokerage tends to be more personnel-intensive. First off, maybe, if you just think that's an accurate way to view it. And then second, do you think there's opportunity over time where you can -- not fully automate, but increase automation of the truckload brokerage process?

Douglas R. Waggoner

Yes. So you're absolutely right. LTL, generally, you get -- you negotiate pricing with the carriers either on a customer-specific basis or wholesale prices that you can resell. So that's all automated. And we have systems that are very similar to how you might think about Orbitz, where you can put in a couple of zip codes, see multiple carrier options, you can see what the transit times are, what the price is, you can see what the service performance, the claims performance of the various carriers. So either the customer or our sales person or operations person can make an informed choice about the right carrier, and it is very automated. All of the LTL carriers have EDI capabilities and a lot of things that make it a seamless transaction. Truckload is destined to be manual. And if you think about a small regional broker, they're going to have a very compact footprint. They'll have intimacy with the lower market. They'll know who the shippers are, they'll know who the carriers are, and they can make a nice little business matching up loads and trucks. Once you spread that out to 48 states and create this ubiquitous footprint, now you've got a lot of geography to cover. We think about the market in the U.S. as 211 distinct markets. So those could be origin points or destination points. If you square that number, you'd come up with the 44,000 origin/destination pairs. And so each one of those lanes has market pricing associated with it, both on the buy side and the sell side. So if you don't have automation and technology, it's a very manual process. You call the carriers that you know operate in that area and you make phone calls until you can find somebody at the right price, and that's how a lot of brokers do it. We try to make it a lot more automated, where we have efforts on to continue to do, so that we can not only rely on our historical pricing data, but we can rely on external data we purchased, or we can use algorithms to model what we think the price should be based on a variety of parameters so that we're not wasting a lot of time making phone calls trying to cover a load with a truck.

It's also important to know, out of 24,000 carriers, which carriers have the highest probability of being able to cover a load at the price that I want to pay. So again, you use algorithms to make you more efficient. So if I could cover a load by making 1 or 2 calls versus 12 calls, it's a huge productivity gain. And those are the kind of systems that we've put in place. With truckload, your smaller truckload carriers don't have technology. They don't have EDI. So if you want your systems to be up-to-date and accurate for tracking and tracing purposes, you've got to have the driver call you and tell you where he is so you can put it in your system, or you got to call the driver. So we have technology rolling out now where we track drivers using their cell phones. And so there is a lot of things that we believe can be done to automate the process, and we're -- those are the things that we're investing in.

Unknown Analyst

And the way we would think some about that is you would drive productivity of your broker workforce, not that you can't -- you have limitations on how much you automate, but the number of transactions or net revenue per broker would improve with your technology?

Douglas R. Waggoner

Absolutely. So -- and it happens on 2 sides of the equation, right? You want your salespeople to generate more loads and more net revenue in a given day, and you want your capacity-sourcing people to cover more loads per day, so -- at the greater margin. So you're looking for tools that help you find trucks quickly to know what the price ought to be, to help you negotiate the right price, to book them, get them entered quickly, passed off to operations. So there's a lot of tweak points where you can both improve margins and improve your own internal efficiency.

Unknown Analyst

Right. Okay, great. Do we have any questions from the audience? It looks like we've got one kind of in the back here.

Unknown Analyst

I'm curious how you compete against some of your larger competitors? Is it mostly targeting smaller end customers, or is it through price or technology?

Douglas R. Waggoner

Yes. I think -- first of all, understand it's a huge market. So there's an 800-pound gorilla in our industry that we compete with every single day. Sometimes they win, sometimes we win. We probably win more often that you would think we would. But it's not because we're better or they are better, it's just -- it's a big market. And being in the right place at the right time with the right truck will get you the load. We also compete against little bitty brokers, 3- or 4-man offices in places that you've never heard of before, and they can be equally effective in the markets that they know. So it's a big ocean. There seems to be room for everybody. That being said, we do go after small and mid-sized companies. The other large brokers that are really focused on truckload brokerage tend to want to go after Fortune 1000. They tend to go after the routing guide business, where you're bidding on lanes in a routing guide for 6 months or 12 months and you're awarded some lanes and you try to strategically pick how far down the list you want to be so that you can get loads at a price where you can cover them and make money. There's a little more risk in that. We do a little bit of that. We kind of pick and choose and stick our toe in the water here and there, but that's not our main course of business. So you're right. There's a lot of times when we're not competing with the really big guys.

Unknown Analyst

Do we have other questions in the audience? I can keep going with you, but let us know if you have any other questions.

What percent of the LTL market do you think is brokered today? And likewise with truckload. And then, are there kind of natural places you might be able to get to, or is there kind of no ceiling on the percent of the market that might be brokered for both of LTL and truck?

Douglas R. Waggoner

I'll start with LTL because I know that best. Back 10 years ago, LTL carriers really hated logistics companies. They probably still do. They're just more polite now. But they really didn't like somebody coming between them and their customer. What's happened in the last 10 years is companies like Echo, like Freightquote, like a lot of others, have really emerged and grown much faster than the industry, and it's because we're providing a real value to an underserved segment of the market. And we're providing things that asset-based carriers can do. I think the LTL carriers woke up and realized that and now have started to embrace third-party logistics as a legitimate sales channel for, particularly, small and mid-sized companies. That being said, they don't want to do with every broker or 3PL out there. They seem to want to choose quality partners and partner with a couple of them, but not everybody. And there's rules of engagement. There's lot's of opportunity for channel conflicts, so we're finding that the LTL carriers are embracing us. I know for a fact that in many instances, we're their largest customer and other 3PLs are right up there in the top 5. So I don't know the exact percentage, but I would venture to say that it's significantly higher than it was a few years ago.

Unknown Analyst

You think it's 20% of the freight maybe?

Douglas R. Waggoner

I don't think it's that much, but I'm going to guess and say maybe it's 10%.

Unknown Analyst


Douglas R. Waggoner

So -- and truckload, I don't know. The truckload market continues to amaze me just how big it is and all the different flavors and permutations and niches there are in truckload. Everything from the Fortune 500 routing guides that include both asset-based truckload carriers and brokers all the way down to our little $5 million and $10 million shippers that single-source all of their transportation to us. I can tell you, when we're selling our enterprise deals to small companies with a freight spend of $20 million or less, we're generally not competing against anybody. We're basically selling to a management team and maybe a transportation person that does everything in-house and has never contemplated outsourcing, and there's not a lot of people really selling that. So we find that an interesting space just because the whole pitch is, we can do it better, cheaper, faster with more technology and better information that you can because you don't have the resources that we do. And it's a pretty compelling argument, and it doesn't cost the customer a lot of money to try it out. So we think that there's a huge opportunity to continue growing that in the segment of customers that we're focused on. When you go upstream and look at the larger companies, I think outsourcing has been fairly prevalent for the last 10 or 20 years, at least outsourcing portions of their supply chain, and I think that'll continue to be the case.

Unknown Analyst

Okay. Checking in for questions in the audience? All right. We've got, let's see. I guess, I'll pose one more here, and then we'll just about be out of time.

You said you don't typically have competitors that you run into for the enterprise sales process. What level of freight spend would you start to see bigger 3PLs that would be involved in an outsourced solution?

Douglas R. Waggoner

We start to see some RFPs when companies are spending $20 million or more on transportation, and generally, it's going to be in truckload. And so maybe it's a private equity-backed company, maybe it's just a CEO who's looking for ways to make some cost savings. But occasionally, you'll find a company that will run an RFP, and they'll invite half a dozen 3PLs to come in and pitch them on managing transportation for them. So on those -- and out of our 203 deals, I would tell you that, that's probably less than 10% of them are we actually part of an RFP process. So -- and there, we could be competing against Schneider Logistics, C.H. Robinson, really anybody.

Unknown Analyst

And is there a particular vertical or a couple of verticals that tend to be better-suited to that enterprise outsourced transportation solution?

Douglas R. Waggoner

Not really. I mean, we haul everything from bottled water and drinks to pork rinds to machinery to water softeners. It's really kind of commodity-agnostic, yes. It's really more about the function and the process and the capability of sourcing. And a lot of our enterprise deals are more about technology. We'll do things like pull in FedEx and UPS data, managed the client's markups, do their general ledger quoting and then feed it back to their ERP system. So a lot of times, it's not necessarily the moving the freight that gets you the deal, it's what you can do with technology.

Unknown Analyst

Right. Okay, great. Next, we have a break next. And then, in the big room, we're going to have a truckload brokerage panel with 3 of the largest private carriers, and Doug is going to be on that panel as well. So if you have more interest in truckload, I encourage you to go there. And Doug, thank you very much for the presentation.

Douglas R. Waggoner


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