» Hawaiian Holdings Management Presents at Deutsche Bank 2012 Aviation and Transportation Conference (Transcript)
» SeaCube Container Leasing Management Presents at Deutsche Bank Aviation and Transportation Conference (Transcript)
Their earnings compounded at about 55% CAGR during that period while we were public and we outperformed – our stock price outperformed S&P by 5.6x. I started United Rentals in 1997 and ran it for 10 years and became the largest rental company in the world and we outperformed the S&P by 2.2x during the time that I ran it.The reason that I’ve picked transportation logistics and specifically this truck brokerage model to be my next venture is it’s large, it’s growing and it’s fragmented. So if we’re going to create a $5 billion company we have to find an industry that is 10 times the size of that or more. Transportation logistics is clearly that. Logistics worldwide is about $3 trillion. US logistics is about $1 trillion. US trucking is about $350 billion and only about $50 billion of that or about 15% currently goes through brokers. The other $350 billion goes direct between a shipper and a carrier. So we’re positioning the company not just to compete for the $50 billion that’s going to brokers right now, but for the $300 billion that’s not yet going through brokers, but we think will. We have reason to support our belief that that 15% brokerage penetration is going to increase. If you look at the trucking business which goes up and down straight with GDP, you compare that to truck brokerage which has been growing at two to three times GDP over the last decade. So that tells us that there’s an outsourcing trend already happening that’s just going to continue and that makes sense because from an economic point of view it is profitable for a shipper and it is profitable for a carrier to use a broker rather than go to direct many times. If you’re a shipper, instead of making two or three calls to some trucking companies thinking you’ve checked out the market, you’re better off calling a C.H Robinson and Echo and hopefully an XPO and indirectly through the brokerage market, check out tens of thousands of carriers availability. You’re more likely to get a better deal by going through a broker.
Similarly, if you’re one of the 96% of the 250,000 trucking companies in the United States who have less than 20 trucks, you are better off using a broker rather than just going through the roller decks. You can’t afford to have a roomful of sales people checking out the market, knowing the prices, knowing the availability of freight. You can make a call to XPO and we will find you freight for your truck. So I think over time that 50% penetration is going to up a lot. This is a very similar bet as I made at United Rentals in 1997 where I thought a similar percentage of penetration, mid teen percent was too low and equipment needed to be rented more to make economic sense too and lo and behold today over half of construction equipment in America is rented.In addition to being a large market, a growing market, truck brokerage is very, very fragmented, much more fragmented than in other industries that I’ve consolidated. So you have on one hand you have 250,000 trucking companies for vendors. On the other hand you have literally millions of retailers, manufacturers, industrial, commercial enterprises of all sizes needing to ship goods. In the middle of that the truck brokers. You have over 10,000 licensed truck brokers in the United States. It’s a large number. It gets more interesting. Of those 10,000 truck brokers, only 25 of them have more than $200 million of revenue. So literally 99% of the 10,000 truck brokers out there have less than $10 million of EBITDA. Most of them have less than $10 million of revenue. Read the rest of this transcript for free on seekingalpha.com