Jacobs continued, “Our cold-start program is running ahead of plan: Ann Arbor opened in mid-April, and Dallas started operating last week. Phoenix, our first cold-start, has exceeded our expectations – it launched in December and quickly ramped up revenues to $760,000 in April. Given our cold-start performance and healthy backlog of acquisition candidates, we’re comfortable with our target of a $500 million revenue run rate by year-end.
“At our new operations center in Charlotte, where our goal is 100 hires by year-end, we’re already nearly 30% staffed. The new IT platform we rolled out in March is giving us greater internal visibility, and stronger tools for sales and service management. And we recently added two key leaders in carrier procurement and employee training. These roles are vital to our strategy, and we’ve brought top talent on board.
“While it was a very successful quarter in terms of executing our plan, the investments in new infrastructure impacted our earnings, as expected. We also experienced market softness for both expedited and freight forwarding services. However, our truck brokerage business delivered very strong growth, with same-store profitability more than doubling year-over-year. We’re focused on optimizing our operations within each operating segment to position the company for substantial value creation in the coming years.”
First Quarter 2012 Results by Business Unit
- Expedited transportation: The Express-1 business generated total revenue of $22.4 million for the quarter, an 8.1% improvement from the same period last year. Revenue growth was driven by an increase in project-based air charter revenue and growth in cross-border-Mexico and temperature-controlled transactions. Gross margin percentage was 18.6%, compared with 22.0% in 2011. The decline in gross margin percentage was due to an increase in revenue from lower-margin air charter and international business, higher insurance claims, and a higher rate paid to owner operators. Express-1’s operating income was $1.6 million for the quarter, a 16.9% decrease from the same period last year.
- Freight forwarding: The Concert Group Logistics (CGL) business generated total revenue of $15.5 million for the quarter, a 1.8% decrease from the same period last year. Gross margin percentage declined to 10.3% for the quarter, from 11.0% in the same period a year ago, due primarily to a greater mix of lower-margin international business. Operating income was $162,000 for the quarter, compared with $472,000 last year, reflecting lower gross margins and higher SG&A costs associated with new company-owned locations in Charlotte, N.C., and Atlanta, Ga.
- Freight brokerage: The company’s freight brokerage business generated total revenue of $7.9 million for the quarter, a 32.5% improvement from the same period last year. Revenue growth was largely driven by increased volume at the South Bend, Ind., office and the new Phoenix, Ariz., office. Gross margin percentage was 13.0%, compared with 15.5% in 2011. The decline in gross margin was primarily due to lower-margin sales to strategic customers during the start-up phase of the Phoenix sales office. Operating loss was $154,000 for the quarter, compared with operating income of $138,000 for the same period in 2011, reflecting costs associated with new facilities, partially offset by higher operating income from the South Bend operation.