Update: Echo Global Logistics Q2 2014 Earnings Recap

Aug. 9.14 | About: Echo Global (ECHO)

Summary

Echo Global Logistics reported second quarter earnings with a 36% revenue beat and a 31% EPS beat compared to the same quarter of 2013.

As anticipated, the beats spurred a share price bump of 8%.

As Echo continues to track successfully against its 2017 goals, investors should see further share price improvement.

Echo Global Logistics (NASDAQ:ECHO) reported second quarter 2014 earnings on July 24th. Beats on revenue and EPS are always welcome news. Revenue increased 36% over 2013's second quarter to $305.1 million and non-GAAP EPS increased 31% to $0.22. But, the true measure for Echo isn't achieved by comparing it to the prior year's results. Just in 2014, Echo has acquired three companies with the latest being labeled "the most profitable company" acquired to date. Rather, a better measure on Echo's progress is a comparison to the goals it set on June 9th, 2014 to achieve by 2017 (discussed previously here).

The goals Echo set for 2017 included increasing annual revenue to $2.0 billion, increasing non-GAAP EBITDA to $100 million, growing truckload revenue to 60% of total revenue, having over 335 enterprise clients and increasing employee sales tenure to 28 months. Echo's second quarter progress was as follows:

  • To achieve a $2.0 billion revenue mark through a steady percentage growth, Echo must reach $1.03 billion by year-end 2014. To date, Echo has tallied $552.8 million, tracking easily toward $1.03 billion. But, management delivered even better news and raised revenue projections for the full year to $1.14 billion to $1.18 billion. It is pertinent to note management had already raised revenue projections in the last quarterly reporting to $1.04 billion to $1.1 billion. Then, with the last acquisition in May, it was bumped again to $1.07 billion to $1.13 billion.

  • The non-GAAP EBITDA total year-to-date is $17.2 million. Compared to the first six months of 2013, this is a 17.8% increase. However, even though the year-over-year second quarter EBITDA amount is 30.5% greater, the margin fell from 22.8% to 22.1%. On a grimmer note, operating margins fell from 17.1% to 13%. Comparing, however, to the 2017 goals, the non-GAAP EBITDA to revenue ratio grew to 3.87%, a significant improvement over the 2014 first quarter rate of 2.78% and well on the way to the 5% target. But, management reiterated in the earnings call that short-term margins are not the primary concern. Rather, growing sales will grow revenue and margins.

  • Truckload revenue grew from 45% in the second quarter of 2013 to 52.4% in the second quarter of 2014.

  • Echo added 7 enterprise clients in the quarter which helped drive the highest percentage of enterprise revenue growth since 2012. The enterprise client count should now total 243 (based on adding 7 clients in each quarter of 2014).

  • Additions to headcount resulted in a staff with less tenure in the short term. But increasing demand drove headcount growth so the slip is considered not only tolerable but somewhat necessary.

Echo strives to "make transportation less complicated for its clients." It's doing a pretty fair job of making investment decisions less complicated for its shareholders too.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I plan to recommend ECHO to my investment club at the August meeting.