Echo Global Logistics Reports Second Quarter 2019 Results CHICAGO, July 24, 2019 /PRNewswire/ -- Echo Global Logistics, Inc. (NASDAQ: ECHO), a leading provider of technology-enabled transportation management services, today reported financial results for the quarter ended June 30, 2019. "We are pleased with our performance during the quarter given the softer freight environment and the weak spot market," said Doug Waggoner, Chairman of the Board of Directors and Chief Executive Officer at Echo. "We again grew volumes in our truckload ("TL") contract freight, less than truckload ("LTL") freight and Managed Transportation business. In addition, we improved our net revenue margin again this quarter, while at the same time reducing our selling, general and administrative costs and increasing our free cash flow(1) compared to the prior year." Second Quarter 2019 Highlights Revenue decreased 12.8% to $553.8 million from the second quarter of 2018; Net revenue(1) decreased 5.8% to $100.6 million from the second quarter of 2018 LTL revenue increased 2.8% from the second quarter of 2018 Managed Transportation revenue decreased 4.9% to $125.6 million and Transactional revenue decreased 14.8% to $428.2 million from the second quarter of 2018 Net revenue margin increased to 18.2% in the second quarter of 2019 from 16.8% in the second quarter of 2018 Net income decreased to $5.1 million, compared to $7.7 million in the second quarter of 2018 Fully diluted EPS decreased to $0.19 in the second quarter of 2019; non-GAAP fully diluted EPS(1) decreased to $0.42 in the second quarter of 2019 Adjusted EBITDA(1) declined 5.4% to $23.1 million, compared to $24.4 million in the second quarter of 2018 Free cash flow(1) increased to $20.3 million, up 78.8% from the prior year (1)Represents a non-GAAP financial measure. For the definition and a discussion of each non-GAAP financial measure contained in this release, see "Non-GAAP Financial Measures." For a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure, see the "Reconciliation of Non-GAAP Financial Measures" section of this release. Summarized financial results and select operating metrics are as follows: Three Months Ended June 30, Dollars in millions, except per share data 2019 2018 % change (unaudited) Transactional revenue $ 428.2 $ 502.8 (14.8) % Managed Transportation revenue 125.6 132.0 (4.9) % Revenue 553.8 634.8 (12.8) % Transportation costs 453.2 528.0 (14.2) % Net revenue(1) 100.6 106.8 (5.8) % Commission expense 31.1 32.4 (4.0) % Change in contingent consideration 0.2 0.1 300.0 % Stock compensation expense 2.4 2.2 9.1 % Other selling, general and administrative 46.5 50.0 (7.1) % Selling, general and administrative expenses 80.1 84.6 (5.3) % Depreciation 6.8 5.8 16.5 % Amortization 3.0 3.2 (6.2) % Depreciation and amortization 9.8 9.0 8.4 % Income from operations 10.7 13.1 (18.6) % Cash interest expense 1.3 1.6 (17.6) % Non-cash interest expense 2.2 2.1 4.1 % Interest expense 3.6 3.8 (5.3) % Income before provision for income taxes 7.1 9.4 (23.9) % Income tax expense (2.1) (1.7) 22.0 % Net income $ 5.1 $ 7.7 (34.0) % Fully diluted EPS $ 0.19 $ 0.28 (31.3) % Diluted shares(1) 26.8 27.9 Note: Amounts may not foot due to rounding. (1)See the "Reconciliation of Non-GAAP Financial Measures" and "Non-GAAP Financial Measures" sections of this release. Reconciliation of Non-GAAP Financial Measures Three Months Ended June 30, Dollars in millions, except per share data 2019 2018 % change (unaudited) Revenue $ 553.8 $ 634.8 (12.8) % Transportation costs 453.2 528.0 (14.2) % Net revenue(1) $ 100.6 $ 106.8 (5.8) % Net income $ 5.1 $ 7.7 (34.0) % Depreciation 6.8 5.8 16.5 % Amortization 3.0 3.2 (6.2) % Non-cash interest expense 2.2 2.1 4.1 % Cash interest expense 1.3 1.6 (17.6) % Income tax expense 2.1 1.7 22.0 % EBITDA(1) $ 20.5 $ 22.1 (7.6) % Change in contingent consideration 0.2 0.1 300.0 % Stock compensation expense 2.4 2.2 9.1 % Adjusted EBITDA(1) $ 23.1 $ 24.4 (5.4) % Fully diluted EPS $ 0.19 $ 0.28 (31.3) % Change in contingent consideration 0.01 0.00 316.1 % Amortization 0.11 0.12 (2.4) % Non-cash interest expense 0.08 0.08 8.3 % Stock compensation expense 0.09 0.08 13.5 % Tax effect of adjustments (0.06) (0.09) (28.8) % Non-GAAP fully diluted EPS(1) $ 0.42 $ 0.46 (8.9) % Cash generated from operations $ 27.1 $ 17.0 59.6 % Capital expenditures (6.8) (5.6) 20.7 % Free cash flow(1) $ 20.3 $ 11.4 78.8 % Operating Metrics Net revenue margin 18.2 % 16.8 % 134 bps Total employees 2,672 2,584 3.4 % Sales employees and agents 1,805 1,726 4.6 % TL revenue % 65.4 % 69.9 % (448) bps LTL revenue % 29.8 % 25.3 % 451 bps Note: Amounts may not foot due to rounding. (1)See the "Non-GAAP Financial Measures" section of this release for the definition and a discussion of each Non-GAAP financial measure. 2019 Third Quarter and Full Year Guidance "We expect revenue for the third quarter to be between $530 million and $570 million and we are updating our full year 2019 revenue guidance to be in the range of $2.10 billion to $2.25 billion," said Kyle Sauers, Chief Financial Officer at Echo. Conference Call A conference call, with accompanying presentation slides, will be broadcast live on July 24, 2019 at 4:00 p.m. Central Time (5:00 p.m. Eastern Time). Doug Waggoner, Chairman of the Board of Directors and Chief Executive Officer; Dave Menzel, President and Chief Operating Officer; and Kyle Sauers, Chief Financial Officer, will host the call. To participate in the call, dial 877-303-6235 (toll free) or 631-291-4837 (toll) and reference "Echo Global Logistics." To listen to a live webcast of the call, visit the Echo website at http://ir.echo.com. A replay of the webcast will be available for one year following the live webcast in the Investor Relations section of the Echo website. To listen to an audio replay, call 855-859-2056 (toll free) or 404-537-3406 (toll) and enter conference ID 9099545. The audio replay will be available through July 31, 2019. Non-GAAP Financial Measures This release includes the following financial measures defined as "Non-GAAP financial measures" by the Securities and Exchange Commission (the "SEC"): Net revenue, EBITDA, Adjusted EBITDA, Non-GAAP fully diluted EPS and Free cash flow. Net revenue is calculated as revenue less transportation costs. EBITDA is defined as net income excluding the effects of depreciation, amortization, cash and non-cash interest expense and income taxes. Adjusted EBITDA is defined as EBITDA (as previously defined) excluding the effects of changes in contingent consideration and stock compensation expense. Non-GAAP fully diluted EPS is defined as fully diluted EPS excluding changes in contingent consideration, amortization, non-cash interest expense, stock compensation expense and the tax effect of these adjustments. Free cash flow is defined as net cash provided by operating activities reduced by capital expenditures. We believe such measures provide useful information to investors because they provide information about the financial performance of the Company's ongoing business. Net revenue, EBITDA, Adjusted EBITDA, Non-GAAP fully diluted EPS and Free cash flow are used by management in its financial and operational decision-making and evaluation of overall operating performance. These measures may be different from similar measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles. For a reconciliation of each non-GAAP financial measure to the nearest comparable GAAP financial measure, see "Reconciliation of Non-GAAP Financial Measures" included in this release. Forward-Looking Statements All statements made in this release, other than statements of historical fact, are or may be deemed to be forward-looking statements. These statements are forward-looking statements under the federal securities laws. We can give no assurance that any future results discussed in these statements will be achieved. These statements are based on current plans and expectations of Echo Global Logistics and involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. Information concerning these risks, uncertainties and other factors is contained under the headings "Risk Factors" and "Forward-Looking Statements" and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2018, and other filings with the SEC. Echo Global Logistics, Inc. Condensed Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 In thousands, except per share data (unaudited) (unaudited) Revenue $ 553,775 $ 634,811 $ 1,091,858 $ 1,211,902 Costs and expenses: Transportation costs 453,173 528,022 892,489 1,005,190 Selling, general and administrative expenses 80,138 84,644 160,333 165,162 Depreciation and amortization 9,793 9,033 19,261 17,939 Income from operations 10,672 13,112 19,775 23,612 Interest expense (3,555) (3,754) (6,968) (7,504) Income before provision for income taxes 7,117 9,358 12,807 16,107 Income tax expense (2,050) (1,680) (4,244) (3,702) Net income $ 5,067 $ 7,678 $ 8,564 $ 12,405 Basic earnings per share $ 0.19 $ 0.28 $ 0.32 $ 0.45 Diluted earnings per share $ 0.19 $ 0.28 $ 0.32 $ 0.45 Note: Amounts may not foot due to rounding. Echo Global Logistics, Inc. Condensed Consolidated Balance Sheets June 30, 2019 December 31, 2018 In thousands (unaudited) Cash and cash equivalents $ 16,022 $ 40,281 Accounts receivable, net of allowance for doubtful accounts 321,680 337,426 Other current assets 12,034 16,025 Total noncurrent assets 498,307 484,593 Total assets $ 848,044 $ 878,325 Accounts payable $ 220,035 $ 216,280 Other current liabilities 42,116 50,627 Convertible notes, net 153,381 183,168 Other noncurrent liabilities 56,783 38,319 Stockholders' equity 375,729 389,932 Total liabilities and stockholders' equity $ 848,044 $ 878,325 Note: Amounts may not foot due to rounding. Echo Global Logistics, Inc. Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2019 2018 In thousands (unaudited) Net cash provided by operating activities $ 51,206 $ 34,680 Net cash used in investing activities (13,198) (14,231) Net cash (used in) provided by financing activities (62,266) 693 (Decrease) Increase in cash and cash equivalents (24,259) 21,141 Cash and cash equivalents, beginning of period 40,281 23,515 Cash and cash equivalents, end of period $ 16,022 $ 44,656 Note: Amounts may not foot due to rounding. About Echo Global Logistics Echo Global Logistics, Inc. (NASDAQ: ECHO) is a leading provider of technology-enabled transportation and supply chain management services. Headquartered in Chicago with more than 30 offices around the country, Echo offers freight brokerage and Managed Transportation solutions for all major modes, including truckload, partial truckload, LTL, intermodal and expedited. Echo maintains a proprietary, web-based technology platform that compiles and analyzes data from its network of over 50,000 transportation providers to serve clients across a wide range of industries and simplify the critical tasks involved in transportation management. For more information on Echo Global Logistics, visit: www.echo.com. ECHO: Earnings INVESTOR RELATIONS CONTACTS: Kyle Sauers Chief Financial Officer Echo Global Logistics 312-784-7695 Zach Jecklin SVP of Strategy Echo Global Logistics 312-784-2046 MEDIA RELATIONS: Christopher Clemmensen SVP of Marketing Echo Global Logistics 312-784-2132 SOURCE Echo Global Logistics, Inc.