Echo Global Logistics (ECHO) Douglas R. Waggoner on Q4 2015 Results - Earnings Call Transcript

| About: Echo Global (ECHO)

Echo Global Logistics, Inc. (NASDAQ:ECHO)

Q4 2015 Earnings Call

February 04, 2016 5:00 pm ET

Executives

Kyle Sauers - Chief Financial Officer

Douglas R. Waggoner - Chairman and Chief Executive Officer

David B. Menzel - President & Chief Operating Officer

Analysts

Jack Atkins - Stephens, Inc.

Alexander Michael Johnson - UBS Securities LLC

Alexander Vecchio - Morgan Stanley & Co. LLC

Thomas Stephen Albrecht - BB&T Capital Markets

Allison M. Landry - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Matt Elkott - Cowen & Co. LLC

David Pearce Campbell - Thompson Davis & Co., Inc.

Matthew Young - Morningstar Research

Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Echo Global Logistics Fourth Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode to prevent background noise. We will have a question-and-answer session, and the instructions will follow at that time. . As a reminder, this conference is being recorded.

Now, I would now like to turn the call to Mr. Kyle Sauers, Chief Financial Officer. Please go ahead, sir.

Kyle Sauers - Chief Financial Officer

Thank you. And thank you for joining us today to discuss our fourth quarter 2015 earnings. Hosting the call are Doug Waggoner, Chairman 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 Form 8-K we filed earlier today.

With that, I'm pleased to turn the call over to Doug Waggoner.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks and good afternoon, everyone.

The 10th full year of Echo's history was truly a remarkable one. We surpassed $1.5 billion in revenue for the year. We financed and closed the acquisition of Command Transportation, one of the respected truckload brokers in the business. We grew our truckload net revenue by over 100%. I'm very proud of the company we've built and the people who have joined me in doing so. Most importantly, I'm excited for what is yet to come.

This has been a record year for Echo in all respects. I'd like to take you through some of our accomplishments for the year. Revenue grew 29% to $1.51 billion. Net revenue grew to $290 million, increasing 39% from 2014. We doubled our truckload sourcing team for the second year in a row adding 260 people to our carrier sales group during the year. Truckload revenue is up 56% to $965 million. Gross margin's expanded by 145 basis points while, at the same time, increasing truckload as a percentage of our revenue from 53% to 64%. Lastly, we increased non-GAAP EBITDA in 2015 by 37% to $67.8 million.

I want to talk to you more specifically about our fourth quarter results. Turning to page three of the slides, you will find a review of the numbers for the fourth quarter of 2015. Revenue grew 36% to $407 million. The year-over-year revenue headwind from the dropping fuel prices was approximately $34 million. Net revenue grew to $80 million up by 48%. Our net revenue margin increased by 159 basis points, with our mode mix continuing to shift towards our truckload service. Truckload now comprises 68% of our total revenue, up from 53% (sic) [53.5%] a year ago.

Reported non-GAAP EBITDA grew by 48% to $18.6 million. After affecting for Command integration costs of $840 million (sic) [$840,000] during the quarter, non-GAAP EBITDA grew by 54%. Non-GAAP fully diluted earnings per share were $0.28 per share or $0.30 per share excluding the Command integration cost.

In this softer economic environment where truckload's spot opportunities that have been fewer, truckload's spot rates were down, and fuel has continued to decline, ECHO has one again shown the resiliency of a business model and strategic growth plan that performs well in more challenging environments.

Now, I want to turn the call over to Dave, who will discuss our fourth quarter results in more detail.

David B. Menzel - President & Chief Operating Officer

Thanks, Doug.

On slide four, we break down our revenue by mode. And as you can see, our truckload revenue grew 74% to $278 million on a year-over-year basis. The acquisition of Command drove 70% of that growth and Echo grew organically by 4%. Our historical Echo growth was driven by a 21% growth in volume and was offset by a 15% decline in rates. To achieve this growth in a weak market, our teams have gone above and beyond the runways to add value to customers, both contractually and transactionally. And this was evidence of our ability to differentiate our struggles which we recognize is critical in this environment. Our ability to grow also provides more freight to our carriers, fulfilling our goal to provide backhaul, to reduce their empty miles, and lower their downtime.

Command's truckload volume was down 2% year-over-year, primarily due to their strong position in the spot market. Having said that, the energy and drive that they're bringing to the table every day is palpable, and we have great confidence in their ability to grow. And Command is especially well positioned to provide needed capacity to shippers when the market tightens as we expect it will over time as new government regulations kick in and economic conditions change.

Switching gears to LTL, our revenue was off by 6% to $103 million, primarily due to restructuring of a fee-based contract, which we discussed in the past. On top of that, lower rates contributed to this decrease. Excluding the impact of the contract restructure, our LTL volume was up 6% over the prior year. Intermodal revenue was up 3% at $18 million for the quarter. The increase was attributable revenue from Command and that was offset by volume and pricing decreases in Echo's historical business. These reductions were due to softer over-the-road rates, which impacted intermodal opportunities.

Page five breaks down revenue by client type. Our transactional revenue grew by 50% on a year-over-year basis, totaling $337 million in Q4 2015. Transactional revenue was down 2% year-over-year, excluding the impact of Command. Again, volume gains were offset by lower rates. We closed out the quarter with 1,620 sales reps, which includes client sales and carrier sales, reflecting an increase of 498 people from a year ago. The year-over-year increase was primarily due to the acquisition of Command. Our transactional revenue per sales rep increased 3% on a year-over-year basis despite softer rates, which is evident from our ability to deliver sales force productivity gains despite the more difficult market conditions.

Our Managed Transportation revenue declined 7% to $70 million in Q4 2015. As discussed on previous calls, earlier this year, we renewed two customers to a multi-year contracts with fee-based structures, which impact both are top-line revenue and our reported shipment volumes but not necessarily our net revenue. These changes when isolated reduced Managed Transportation revenue by 14% in Q4. Despite this impact, our Managed Transportation net revenue increased by 10% year-over-year. This is important as our delivered numbers is our success in the marketplace. We closed over 40 deals in 2015 with an estimated $64 million in annual revenue. Pipeline continues to be strong, and we're looking forward to another great year in 2016 as we continue to move up market, leveraging our technology, managed services, and stronger truckload offering to continue to grow our Managed Transportation business.

In addition to these wins, we continue to renew business at very high rates. Our revenue renewal rate was 93% in Q4 and 94% for the year. That's an outstanding job by our Managed Trans team for delivering the kind of client satisfaction necessary to achieve these results.

Slide six breaks down our net revenue and our mode and client mix. As Doug already highlighted, we drove a 48% increase in net revenue in a tough market. The primary drivers of that growth were the acquisition of Command, the organic growth of our truckload business, and the expansion of our truckload net revenue margins. Our truckload net revenue margin improved on a year-over-year basis, both at Echo and at Command. Echo's historical truckload margin improved by 310 basis points, and Command's truckload margin improved by 116 basis points. In total, our truckload margin was up 436 basis points year-over-year.

We've mentioned in previous calls, our truckload net revenue margin gains are the result of a combination of factors, primarily the relatively loose capacity that currently exists, its impact on our committed business, lower fuel prices, and continued improvement in our execution. With respect to LTL, our net revenue margin was relatively flat as we saw a 7 basis point uptick on a year-over-year basis.

Finally, I'd like to give an update on the progress of the Command integration. I think it's fair for me to say that all of us at Echo and Command are genuinely excited to be working together and enthusiastic about the opportunity to realize all of the synergies we've talked about since this acquisition was announced. Our operational execution and management around the day-to-day business has been smooth, especially when considering the efforts of our people to ensure a successful merger of our sales, sourcing, and operations functions, all on a common technology platform.

To that end, we're making excellent progress integrating Command's truckload technology with Echo's multimodal platform. And we anticipate it to go live this summer. Once that technology deployment is complete, we'll combine our truckload sourcing organizations to unleash the power of our combined network. This combination will drive powerful benefits to our clients, our carriers, and our employees.

On the client side, we're going to be able to offer more capacity and more lanes to enable them to lower cost and improve the performance of their supply chains. On the carrier side, we'll be able to offer more freight as all of the Echo sales organization will have improved visibility to our trucks, thus improving our ability to reload and drive more revenue to our carriers. And just as importantly, this improved offering will benefit all of our sales people as they'll have more truckload capacity along with the multimodal capability to better serve our clients.

Finally, I want to thank all of our people who have been working so hard on the details of this integration while remaining committed to serving their clients and the carriers. Our teams have done an amazing job and continue to bring the passion, enthusiasm, and commitment to drive the transformation of our business.

I'd now like to turn it over to Kyle to review some additional details regarding our financial performance.

Kyle Sauers - Chief Financial Officer

Thanks, Dave.

On page seven of the slides, you'll find a summary of our key operating statement line items. Commission expense was $24.1 million in the fourth quarter of 2015, increasing 63% year-over-year. Commission expense was 30.1% of net revenue, representing a 286 basis point increase from the fourth quarter of 2014. This increase is the result of our continued shift towards truckload, particularly with the addition of Command.

Non-GAAP SG&A expense was $37.4 million in the fourth quarter of 2015, up 39% from the fourth quarter of 2014. However, this amount includes $840,000 of integration costs related to the Command acquisition that Doug had referenced earlier. Without those costs, non-GAAP SG&A expense would have increased 36% over the prior year. And the increase from the prior year is primarily due to the Command acquisition but also includes other investments in the growth of our business.

Depreciation expense was $3.4 million in the fourth quarter of 2015, increasing 25% year-over-year. The increase is largely attributable to the added depreciation costs from the Command acquisition. Our non-GAAP effective income tax rate was 37.0% for the fourth quarter of 2015 compared to 39.0% in the prior year.

Non-GAAP EBITDA increased 48% from the fourth quarter of 2014 to $18.6 million, or increased 54% to 19.4 million after considering the integration costs mentioned earlier. Non-GAAP net income increased 42% from the fourth quarter of 2014 to $8.5 million, or increased 51% after the integration costs. Non-GAAP fully diluted earnings per share were $0.28, increasing 11% from the fourth quarter of 2014, or $0.30, and increasing 18% after considering the integration costs.

GAAP fully diluted earnings per share were $0.06 a share in the fourth quarter of 2015. The primary differences from our non-GAAP EPS are $4.2 million of amortization of intangibles from acquisitions, $1.8 million of non-cash interest expense, and $4.8 million of stock compensation expense.

Slide eight contains selected cash flow and balance sheet data. In the fourth quarter of 2015, we generated $18 million in operating cash flow and $13 million in free cash flow. During the trailing 12 months, we generated $71 million of operating cash flow and $56 million of free cash flow. Capital expenditures totaled $4.7 million in the quarter, an increase of $2 million from the fourth quarter of 2014. We ended the quarter with $57 million in cash, $196 million of account receivable, and nothing drawn down on our $200 million ABL facility.

Near the end of fourth quarter, we announced that our board of directors had authorized the repurchase of up to $50 million of our common stock and convertible debt over the next two years. We have significant balance sheet flexibility and strong cash flows. At recent prices, we believe our stock is undervalued, and the potential to buy securities at these levels is a good way to return capital to shareholders. We will provide an update on our next call regarding any activity that occurred during this quarter.

Now, I'd like go through our 2016 full-year guidance. We expect total revenue between $1.80 billion and $1.88 billion. We have assumed no change in the fuel prices from today's rates in this guidance, but I will point out that the year-over-year fuel headwind, given today's rate, is about $100 million. Commission expense for the year should be between 30.0% and 31.0%, SG&A costs between $157 million and $165 million. That does not include an additional integration cost between $6 million and $8 million throughout the year.

Depreciation costs are expected to be in range of $16 million to $17 million for the year. Cash used for CapEx during 2016 should be in the range of $22 million to $26 million. Cash interest expense should be in the range of $6.6 million to $7.0 million, our tax rate should approximate 38.0% for the year. Amortization of intangibles would be around $16 million, non-cash interest approximately $7.6 million, stock compensation expense should be between $13.0 million and $14.0 million for the year with $9 million to $9.5 million of that in the first half of the year, and we ended the year with $30.5 million shares outstanding. Nearer term, we expect the first quarter 2016 SG&A cost excluding integration cost to increase $1 million to $2 million sequentially from the $36.6 million recorded in the fourth quarter of 2015.

And then a quick update on our growth thus far during the first quarter of 2016. Total revenue is up 46% on a daily-basis compared to the same period in 2015, and this compares to our 36% total revenue growth in the fourth quarter of 2015 and a 40% growth rate in the third quarter. And while I remind everyone that January doesn't tell the whole story for Q1, we're certainly encouraged by the strength.

I would now like to turn it back over to Doug.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks, Kyle.

In conclusion, we had another very strong quarter, which is one more step on the way to achieving our 2018 targets of $3 billion in revenue and $150 million in non-GAAP EBITDA. We grew truckload volume by over a 105%, and our organic truckload volume grew by over 20% for the eighth consecutive quarter. We posted a year-over-year improvement to our gross margins of 159 basis points to 19.7% even though our mix of truckload and LTL revenue changed significantly.

In the fourth quarter of 2014, for every dollar of LTL revenue, we produced $1.47 of truckload revenue. A year later, in Q4 of 2015, for every dollar of LTL revenue, we had $2.70 of truckload revenue. Offsetting the dramatic change in this mode mix is the fact that our pure truckload margins improved year-over-year by 436 basis points. That's the beauty of our non-asset variable cost business model. When the economic cycle goes into the contraction phase, purchased transportation costs declined faster than our price to customers and margins expand. So even though gross revenue can be affected by macroeconomic forces, net revenue remains healthy.

In 2015 and especially in the second half, we had the impact of falling fuel which impacts the top line but, because it's generally a pass-through, does not impact net revenue and mathematically causes margins to expand. We know at some point in the future the economic cycle will turn, and capacity will tighten, and purchased transportation price will rise initially faster than we can pass it through. This causes margin compression. But due to the economic expansion, we get outsized volume and revenue growth, and again, net revenue does not suffer. Furthermore, a tight market creates opportunities for incremental spot market freight at significantly higher margins, which contributes to both gross revenue and net revenue growth. Finally, because so many of our employees are paid on commissions, our SG&A expense varies directly with our net revenue. And over time, we gain operating leverage by scaling our net revenue over our fixed costs.

Regarding our acquisition of Command, I continue to be extremely excited about this transformational deal. As Dave mentioned, the integration is going well. We've already integrated a number of functional areas including HR, IT, training, marketing, payroll, and our benefits department with the remaining operational and back-office integration tied to the technology cutover, which is expected this summer. I'm very optimistic about we'll be able to do for the clients of both companies once we've combined the capacity sourcing and sales capabilities of Echo and Command. We will have achieved critical density in our network with best-in-class technology that maximizes productivity and net revenue margins.

And with that, I'd like to open it up for questions.

Question-and-Answer Session

Operator

Thank you. . And our first question comes from the line of Jack Atkins from Stephens. Your line is now open.

Jack Atkins - Stephens, Inc.

Good afternoon guys and congratulations on a great quarter.

Kyle Sauers - Chief Financial Officer

Thanks, Jack.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks, Jack.

Jack Atkins - Stephens, Inc.

So I guess just kind of starting out, once again, a very strong quarter of organic truckload volume growth. And this is in the face of a very challenging market, obviously. So could you maybe talk about what you guys are doing to see your volume really accelerate like it is on a year-over-year basis when a lot of other folks are having trouble in the spot market?

David B. Menzel - President & Chief Operating Officer

Well, Jack, this is Dave. So I mean, throughout the year, we've been aggressively competing in the marketplace. As you know, the last two years, we made significant investments in our sourcing teams. We've ramped up the size of our sourcing organization to almost 300 people by year-end. Year-to-date, this is talking about just Echo alone, and result of those investments have paid off both contractually or in committed business, as well as in the transactional part of our business. As a matter of fact, our in-site sales organization, which sells primarily, transactionally, had 40% year-over-year growth in their truckload business. So despite the fact that the economy has been soft, we've had some nice wins that have shown up throughout the year. And we provide an excellent service of those accounts, so we've been able to expand, in some cases, those relationships. It's true that there hasn't been a lot of spot market on the larger committed accounts because of the environment that we're in. But fortunately, we've been able to continue to penetrate the small- and mid-sized market and take advantage of the service we're providing to some of our core customers.

Jack Atkins - Stephens, Inc.

Okay, great, great, Dave. Thank you for that. And when we think about the guidance, the revenue guidance for the full year, what's sort of baked in there, I guess, more in the back half, if anything else, in terms of revenue synergies once the acquisition is fully integrated?

David B. Menzel - President & Chief Operating Officer

So, Jack, this is Kyle. Without calling out any specific numbers that are baked in, all those synergies we're expecting are included in the full-year guidance. We do expect those to start to work their way in later in the year after we complete that integration. I think the opportunity, as Dave talked about earlier, to leverage that combined carrier network really offers us a lot. It will take some time to make that happen, but there's huge opportunity there.

Jack Atkins - Stephens, Inc.

Okay, great. Thanks, Kyle. And last question and I'll hand it over. You guys have been really aggressive adding heads. I think that's proven to be a very wise strategy over the last 24 months. Can you talk about your plan for head count additions in 2016 in terms of new adds versus the end of fourth quarter, and how we should expect total heads to grow year-over-year in 2016?

David B. Menzel - President & Chief Operating Officer

So, Jack, this is Dave. We talked about the net adds typically in the area of sales primarily. Over the past couple of years, our targets have been in the neighborhood of 120 to 140. I think in 2014, we exceeded that amount, probably came pretty close to those targets this year. When we look ahead for 2016, the numbers probably will be closer to a 100. And the main reason for that is over the last two years, we've been investing pretty significantly in the sourcing side of the business in the carrier sales organization. And with this acquisition of Command, we feel like we can make modest investments in that area because of the power of the two teams that we have and the productivity that we're going to gain when we bring the technologies together. There won't be as aggressive ramp there, but more of the head count will be added to the client sales organization. So long story short, it looks like about 100 net.

Jack Atkins - Stephens, Inc.

Okay, that's great. Thanks again for the time.

David B. Menzel - President & Chief Operating Officer

Thank you.

Operator

Our next question is from the line of Tom Wadewitz from UBS. Your line is now open please.

Alexander Michael Johnson - UBS Securities LLC

Hi, good afternoon. It's Alex Johnson on for Tom.

Kyle Sauers - Chief Financial Officer

Hi, Alex.

David B. Menzel - President & Chief Operating Officer

Hey, Alex.

Alexander Michael Johnson - UBS Securities LLC

So just one housekeeping question first. I wanted to make sure that I'm understanding correctly how fuel is flowing through the model, and is it safe to assume that the fuel is matched up one-for-one on the gross revenue line and on the cost of transportation?. And I guess if you could give some detail if it's required for what you saw in first quarter of 2015, like we're not facing any kind of net revenue dollar headwind in first quarter of 2016, are we?

Kyle Sauers - Chief Financial Officer

I'm not sure I understood the second piece of the question. Let me the answer the first. As a general rule, we feel like fuel is a pass-through. However, oftentimes, you are buying with an all-in-rate, not with a fuel surcharge. And sometimes, you sell with a fuel surcharge, and sometimes you don't. So the general rule, we feel like it's a pass-through, but you don't necessarily measure it exactly. The second part of your question maybe you could repeat.

Alexander Michael Johnson - UBS Securities LLC

So – I think you just answered the question. That was very helpful.

Kyle Sauers - Chief Financial Officer

Okay.

Alexander Michael Johnson - UBS Securities LLC

If I could just ask a second question. There's a lot of talk about how Internet retailer supply chains may be shifting, and I'm just wondering, even if it's not a direct impact for you, how that might affect you even if it's indirectly?

Douglas R. Waggoner - Chairman and Chief Executive Officer

Well, I think when you're talking about truckload volumes, the Internet retailing possibly shifts the traffic lanes when company supply chains change. I think where you see more impact is on the LTL and small parcel businesses where there's a lot more delivery direct to the doorstep. And in fact, I would contend that that's played a big role in taking away what we used to know as peak season in the third and fourth quarter. So I think there's definitely been an impact over the last 10 years of Internet retailing. And it shifts the lanes and the modes that freight moves in, which will have different effects on different companies depending on the modes and lanes that they participate in, and then the peak season effect.

Alexander Michael Johnson - UBS Securities LLC

Okay, great. Thanks for the time. I'll turn it over to someone else.

Kyle Sauers - Chief Financial Officer

Thanks, Alex.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks, Alex.

Operator

Thank you. Our next question is from the line of Alex Vecchio from Morgan Stanley. Your line is open.

Alexander Vecchio - Morgan Stanley & Co. LLC

Good evening, thanks for taking the questions. Hey, Kyle. I know you mentioned the revenue figure for January. Can you provide us with some color on how net revenue margins have trended in January so far?

Kyle Sauers - Chief Financial Officer

Yes, you're right. We didn't comment on that. They haven't changed dramatically from what we saw in the fourth quarter, maybe ticked down a bit, but that's about where we are so far.

Alexander Vecchio - Morgan Stanley & Co. LLC

Okay. And, given the fuel dynamics, I think last year when you gave guidance for 2015, you helped us think a little bit about how lower fuel would be essentially an optical tailwind to net revenue margins. Do you think you might be able to do the same for 2016? How much of a tailwind to net revenue margins, if fuel stays where it is right now, it would be?

David B. Menzel - President & Chief Operating Officer

So Kyle can comment on the quantity. I think that if you think about how fuel prices have changed throughout the year, you're probably looking at, in terms of year-over-year comparisons, kind of a decelerating tailwind as the year progresses since fuel prices came down pretty steadily throughout the year. We measured the impact fuel had on our truckload margins alone in Q4, and it was close to 170 basis points. So it was a pretty significant factor relative to the margin lift that we've seen. So not sure if it's exactly on that order of magnitude as the year progresses, and there's obviously other factors that are going to affect net revenue margins, but I think you'd see a continued tailwind that begins to moderate through the second half of the year.

Alexander Vecchio - Morgan Stanley & Co. LLC

Okay, that's helpful. And then, just lastly, you guys gave a lot of – a guidance on the cost side. I didn't have time just to kind of run it through in my model. But high level, how do you think about incremental margins on net revenues in 2016 maybe from a full-year perspective and then also presumably the cadence of those incremental margins will accelerate in the back half as you kind of leverage those cost selling synergies with Command? I just want to make sure that's kind of the right way to think about it. And then, holistically, what should the full year kind of shake out at?

Kyle Sauers - Chief Financial Officer

Sure so, because we don't give guidance on gross margins, it's – and EBITDA, it's a little difficult to give you some exact numbers. But what would I tell you is that depending on where those margin shake out, if you start looking at the midpoint of our different guidance ranges, we absolutely see leverage throughout the year. And you can think about incremental margins in kind of the mid to high 20s. In terms of cadence, I think you're exactly right that once we start to get some of those synergies from combining the carrier sales force and getting the access to that for all of our client sales side, that's when you start to see a lot of that incremental leverage really pick up.

Alexander Vecchio - Morgan Stanley & Co. LLC

Okay, makes sense. Thanks for the time.

Kyle Sauers - Chief Financial Officer

Thanks.

David B. Menzel - President & Chief Operating Officer

Thank you.

Operator

And our next question is from the line Tom Albrecht from BB&T. Your line is open.

Thomas Stephen Albrecht - BB&T Capital Markets

Hey guys. I had an overlapping call so I missed part of yours. But I was wondering did you provide sort of an organic revenue figure for Command where you done in the June and September quarters?

David B. Menzel - President & Chief Operating Officer

We did. We indicated that Command was down or pretty flat. Let me check my notes. I think it was down 2%.

Kyle Sauers - Chief Financial Officer

The volumes were down.

David B. Menzel - President & Chief Operating Officer

Volumes were down. So we didn't give a revenue number, we just give the volume number on Command. I can check. I don't have – revenues were probably up by about 15%, rates were down by about 15%, so incremental revenue would probably be down about 17% for Command...

Thomas Stephen Albrecht - BB&T Capital Markets

Okay.

David B. Menzel - President & Chief Operating Officer

...year-over-year.

Thomas Stephen Albrecht - BB&T Capital Markets

Okay, thank you. And then, I don't know which of you might want to comment on this, but it's been our sense kind of talking in the marketplace that there could be a little bit of volumes putback into the spot market as calendar 2016 unfolds. People go through their bids. They probably weren't going to do a lot during the holiday seasons. But with spot rates $0.25 to $0.35 a mile below contract, what is your expectation? Could we see a little bit of pleasant surprise on spot volumes coming back into the market, not because the market's tight but just because that's where the rates are?

Douglas R. Waggoner - Chairman and Chief Executive Officer

Well, I think you see some shippers that are renegotiating their routing guides at this time, trying to take advantage of the softer market...

Thomas Stephen Albrecht - BB&T Capital Markets

Yeah.

Douglas R. Waggoner - Chairman and Chief Executive Officer

...and I think – we also all believe that at some point, it will be – the cycle will turn, and capacity will get tighter again, and then, those routing guys are going to be strained. So it's hard to predict the future, but when that happens, I think it does create more spot rates.

Thomas Stephen Albrecht - BB&T Capital Markets

But does it have to be tight for that to happen? I mean, it just seems to me that there's an opportunity for a transportation manager who maybe has 5% of his loads in the spot market to put 7% or 8% in, just a little bit, just enough to make it interesting.

Douglas R. Waggoner - Chairman and Chief Executive Officer

It just kind of depends on the rules of the routing guide and the kind of commitments they make to the participants. And it's really a customer-by-customer situation. I wouldn't be able to paint the whole market with that.

Thomas Stephen Albrecht - BB&T Capital Markets

Right, okay. And then did you talk about what the sort of pipeline of business conversations you're having within enterprises? Do you have a healthy pipeline for new wins as we look at calendar 2016?

David B. Menzel - President & Chief Operating Officer

Well, we do. We commented in the script about the wins we had last year. We increased the amount of business that we brought in. I think the total was $64 million in terms of estimated revenue from the wins we had in 2015...

Kyle Sauers - Chief Financial Officer

(34:42)

David B. Menzel - President & Chief Operating Officer

...and we do have a strong pipeline and continue to make improvements to our technology and our service capabilities and see a nice opportunity to leverage a lot of the strengths that we have even in our truckload brokerage operation to provide additional benefits to our Managed Transportation clients. So the pipeline's good and strong, and we're excited about the ability to continue to grow that business.

Thomas Stephen Albrecht - BB&T Capital Markets

Okay, thank you very much guys.

David B. Menzel - President & Chief Operating Officer

Thanks, Tom.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks, Tom.

Operator

And our next question is from the line of Allison Landry from Credit Suisse. Please go ahead.

Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker)

Thanks. So thinking about legacy Echo and Command and as we get into the bid season in 2016, how are you planning on approaching the market in terms of bidding on more committed versus spot business this year?

David B. Menzel - President & Chief Operating Officer

So, Allison, as you know we've always had a healthy amount of transactional business that is almost a different description than when we call spot. It's obviously quoted on a spot basis on a lot of cases, but Echo has had a significant amount of transactional business. I think that as we begin to integrate the two companies, we'll develop a philosophy which is, if fully we can add value and participate in a routing guide in a profitable way, that we'll participate. And I would anticipate over time that you'd see a little bit increase on the Command side in terms of that kind of routing guide participation. But at the same time, we don't believe in being too aggressive in participating in places that don't make sense for our business. So I think over time there'll be some slight – modest increases on Command side. I think that to some extent Echo's mixed. It's not a perfect science. It depends a lot on the economy and situations and opportunities that we have with specific customers. So our philosophy is to develop those relationships and expand them where they make sense. And that will be true for both companies.

Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker)

Okay, that was helpful. And thinking longer term, just given all uncertainties surrounding crude, what gives you confidence in the $3 billion of gross revenues that you've targeted for 2018? Are you assuming crude prices go back up between now and then? I guess. I'm just trying to understand whether there've been any changes in your internal assumptions as we're thinking about the long-term revenue bridge.

Kyle Sauers - Chief Financial Officer

I think that's a really good question, Allison. Really, in light of what's happened with spot rates and fuel over the last six months to a year, that obviously has a dramatic impact on our top-line revenue. In fact, if you look at the two years stack difference between 2016, our plan and our guidance, and then 2014, it's about $250 million impact just from fuel. So having said that, we do expect rates to go up over the next few years. There's plenty of government regulations that have gone into effect or that we expect will that will cause that to happen. But I think what's important is really in any market, we've proven we can take pretty significant share, and we plan to continue to do so in the coming years. And that's what drives that organic growth. And then we got a really strong history of buying good businesses and integrating them seamlessly. We're doing it with Command right now, and its going fantastically. And out of that, we expect to get some really significant synergies, and we've talked about those before. And we also expect to be able to replicate that acquisition success again in the coming years through that 2018 date. So all these factors, I'd say, really lead us to a conclusion we can achieve those targets, and we're confident in that.

Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker)

Okay, thank you.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thanks, Allison.

Operator

And our next question is from the line of Matt Elkott from Cowen & Company. Your line is open.

Matt Elkott - Cowen & Co. LLC

Thank you. This is Matt for Jason. Thanks for taking our question. Going back to the net margin question, you guys had a pretty impressive improvement in net margins. My question is based on what you're seeing in the marketplace right now, are we at a point of stabilization in the freight supply demand dynamics at these tempered levels? And if that's the case, how could that impact your net revenue margins going forward in the near-to-intermediate future before we start seeing potentially another capacity tightening?

Douglas R. Waggoner - Chairman and Chief Executive Officer

I think that a – as I said in my remarks that we're at a point in the cycle where prices of capacity have gone down faster and that's helped fueled the margin expansion along with fuel. Right now, it seems pretty stable. It's not getting any better or any worse so margins are remaining pretty much the same as they were in the fourth quarter. And as I said earlier, if the economy picks up at all or some of the ELD regulations start to impact capacity and put a squeeze on the supply, I think we will we will see prices tick up. And then that could have some downward pressure on margins.

Matt Elkott - Cowen & Co. LLC

I see, fair enough, and just one last clarification. Did you guys talk about the factors behind the difference in the Command and Echo legacy gross margin improvement?

David B. Menzel - President & Chief Operating Officer

Well I think that – we didn't talk a lot about it, so it's a good question. So in Echo's case, we have a slightly larger amount of committed business. So we both benefited from a gross margin perspective on the increase in fuel. But Echo probably had a larger increase relative to purchased capacity relative to committed business. So we saw greater margin gains throughout the year than Command saw. But at the same time, Command has always had higher net revenue margins on their truckload business. So it's more about the two are coming closer together than anything else.

Matt Elkott - Cowen & Co. LLC

Hey, great. Thank you very much, guys.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thank you.

Operator

And our next question is from David Campbell from Thompson Davis & Company. Please go ahead.

David Pearce Campbell - Thompson Davis & Co., Inc.

Yeah, hi, everybody. Just wanted to clarify something, and Kyle, I couldn't hear you too well because of my phone problem. But you said revenue in January was up 46%. Is that correct?

Kyle Sauers - Chief Financial Officer

That's correct. On a day-over-day basis in January, up 46%, correct.

David Pearce Campbell - Thompson Davis & Co., Inc.

Right. And obviously, that's better than you did in the fourth quarter. And I think Dave Menzel mentioned something about the benefits of integration that's continuing to help that number, that revenue growth number because I haven't heard of any trucking company doing better than percentage growth in the first and the fourth quarter, but certainly, that's a very impressive number.

Kyle Sauers - Chief Financial Officer

Yeah, we're real pleased with it. And like I mentioned, January's only one month in the quarter, but we think it's a good sign.

David Pearce Campbell - Thompson Davis & Co., Inc.

Can you give us any indications of monthly trends – from October, November, December and the fourth quarter – the revenue growth?

David B. Menzel - President & Chief Operating Officer

I would say it was pretty consistent throughout those three months. I don't have those specific monthly numbers in front of me, but it was – there weren't dramatic swings in the fourth quarter on a monthly basis.

David Pearce Campbell - Thompson Davis & Co., Inc.

So it was pretty much the same throughout the quarter, so all of a sudden you're doing a lot better in January.

David B. Menzel - President & Chief Operating Officer

Yep.

David Pearce Campbell - Thompson Davis & Co., Inc.

That's very good. Thanks very much. I'll do some work, thank you.

Kyle Sauers - Chief Financial Officer

Thanks, David.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thank you, David.

David B. Menzel - President & Chief Operating Officer

Thank you, David.

Operator

And our next question is from Matt Young from Morningstar. Please go ahead.

Matthew Young - Morningstar Research

Thanks, good afternoon. I think you guys had said that revenue per rep was up about 3%. How much of that would be kind of the mix impact of adding Command versus simply boosting underlying productivity at historical Echo?

David B. Menzel - President & Chief Operating Officer

The historical inside sales was flat year-over-year. So from that perspective, it was mostly Command. We had a little bit of a decline in some of our branch and outside sales areas. You've got to remember fuels and rates and all the downward pressures that we had on that metric. But the – kind of the core Echo productivity level of our inside sales organization was flat, which again is pretty positive given the rate declines. But Command has a higher number and it impacted it slightly upward.

Matthew Young - Morningstar Research

So if you hold constant the noise with a softer market, it sounds to me that you're making progress on kind of the underlying organic productivity gains?

David B. Menzel - President & Chief Operating Officer

Yeah, for sure.

Matthew Young - Morningstar Research

And is that a function at this point of a longer tenure? Obviously, going way back, tenure was at a year, and over time, it's come up to maybe just under two years. Do you get the sense that it has to do with a little bit more of a tenure and less turnover and so forth, or training?

David B. Menzel - President & Chief Operating Officer

Yeah, I would – all of those things. I think that turnover's been a little higher this year than we probably would want it to be. But our tenure continues to go up. I think our tenure is at 25 months now. And so, we're getting the logical increase in productivity that would come with an increase in tenure. And we continue to invest in the training, the development of our people, and feel really good about the things that we're doing and having the opportunity to look at how Command does and integrating kind of the best of both practices as we move forward. So we've been making modifications to our programs to really learn from each other. We're really excited about what's to come in terms of being able to train new reps and getting them productive and successful.

Matthew Young - Morningstar Research

Okay, great. And then just wondering if I missed it, forgive me, but could you provide an approximate enterprise account number at year end?

David B. Menzel - President & Chief Operating Officer

Yeah, we stopped disclosing the actual count a while ago. So we're not putting the numbers out anymore there, Matt, so...

Matthew Young - Morningstar Research

Okay, fair enough.

David B. Menzel - President & Chief Operating Officer

... the model.

Matthew Young - Morningstar Research

All right, I appreciate it. Thanks.

David B. Menzel - President & Chief Operating Officer

Okay.

Kyle Sauers - Chief Financial Officer

Thanks.

Operator

And we have a follow-up question from Tom Albrecht from BB&T. Please go ahead.

Thomas Stephen Albrecht - BB&T Capital Markets

Hey, guys. I just wanted to make sure I understood everything and maybe you said this or maybe this wasn't asked, but was Command's gross margin higher than the consolidated 19.7% that we saw even though its mostly truckload?

David B. Menzel - President & Chief Operating Officer

No, it's not higher than that. We don't disclose the specifics, but it's not higher than the total. Obviously, LTL's a little higher margin than the truckload still. And so, it's not above that.

Thomas Stephen Albrecht - BB&T Capital Markets

Okay. All right, I was just curious. Thank you.

Kyle Sauers - Chief Financial Officer

Yeah.

Operator

And ladies and gentlemen, this concludes our Q&A session. I would like to turn it back to management for final remarks.

Douglas R. Waggoner - Chairman and Chief Executive Officer

Thank you. I would like to just take this opportunity to thank all of our employees at Echo and Command for doing a great job in a relatively tough quarter and producing some fantastic results and we're going to keep plugging away and have a great 2016. And for the investors and analysts out there, we'll see you at the conference where we'll talk to you on the next call. Thank you.

Operator

Thank you for participating in today's conference. This concludes the program and you may all disconnect. Have a wonderful day.

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