In third-quarter 2020 financial and operational results released after trading ended on Wednesday afternoon, Chicago-based third-party logistics provider Echo Global Logistics (NASDAQ: ECHO) reported record gross revenues, which grew by 23.2% year-over-year to $691.5 million.
That smashed the consensus estimate of $608 million and was $76.5 million more than the upper limit of guidance provided by management in the second-quarter earnings release, largely driven by substantial volume growth in both truckload (TL) and less than truckload (LTL). Margins were squeezed in the quarter and Echo posted net earnings of $6.8 million, or 40 cents per share, compared to $4.8 million, or 39 cents per share, beating consensus earnings of 29 cents per share.
Net revenue margin — the difference between Echo’s revenue from customers and its cost to buy trucking capacity — compressed by 275 basis points year-over-year and 260 basis points sequentially to 14.5%. In the first 17 business days of October, Echo’s net revenue margin has expanded to 15%.
In a quarter when margins were squeezed, the record volumes reported by Echo led to an increase in commission expense by 2.5% due to higher net revenue, but overall headcount was reduced by 3.5%.
Echo Chairman and CEO Doug Waggoner praised his team’s ability to deliver record revenue and volume in a challenging environment with tight capacity and supply disruptions.
Managed transportation revenue increased by 23% to $157.6 million in the quarter due to an 18.6% increase in TL — including partial TL — revenue per shipment, a 33.6% increase in TL volumes and a 9.4% increase in LTL volumes.
Transactional revenue increased by 23.2% to $533.9 million due to a 15.9% increase in TL revenue per shipment and an 11% increase in TL volumes.
Echo’s book of business continues to shift from LTL to truckload as TL revenue represents 70.6% of total revenue, up 490 basis points year-over-year, and a 220-basis-point increase sequentially. Echo was able to grow revenue per shipment on the TL side of the business by 16.5% y/y coupled with a 13.6% increase in volumes while on the LTL side revenue per shipment fell 1.8% as LTL volumes grew by 6.6% y/y.
So far in October, revenue per day is up 37% year-over-year while TL shipments per day are up 18% and LTL shipments per day are up 14%.
The midpoint in Echo’s guidance for Q4 revenue was about 35% above the third quarter of 2019, at $700 million, on the basis that the company has had continued success in taking market share.
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