XPO Inc (XPO) 2012 Q4 法說會逐字稿

Welcome to the XPO Logistics fourth-quarter 2012 conference call and webcast. My name is John and I will be your Operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session. Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the Company regarding forward-looking statements and the use of non-GAAP financial measures.

During this call the Company will be making certain forward-looking statements within the meaning of applicable Security Laws, which by their nature involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of factors that could cause actual results to differ materially is contained in the Company's SEC filings. The forward-looking statements in the Company's earning release or made on this call are made only as of today, and the Company has no obligation to update any of these forward-looking statements including its outlook.

During this call, the Company also may refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the Company's earnings release and the related financial tables. You can find a copy of the Company's earning release which contains additional important information regarding forward-looking statements and non-GAAP financial measures, in the Investor Section on the Company's website at www.xpologistics.com.

And I will now turn the call over to CEO, Brad Jacobs.

Thank you, Operator, and good morning, everybody. Welcome to our quarterly conference call. With me today in Greenwich are John Hardig, our CFO; and Scot Malat, our Chief Strategy Officer. I'm pleased to report that we remain on track with scaling up the business, and we're achieving that scale in a way that balances the three parts of our strategy -- acquisitions, cold-starts and optimizing operations.

First on acquisitions, as you saw last night we purchased Covered Logistics. Covered is a well run freight broker that we plan to integrate and scale up quickly. It had $27 million of 2012 revenue, and the purchase price was $8 million in cash plus $3 million in three-year restricted stock. The co-founders of Covered are Tuck and Paul Jasper and Patrick Gillihan, and they're staying on to lead the operations in Lake Forest, Illinois and Dallas.

The Covered team has deep roots in the industry and they share our passion for growth. We'll put them on to our technology which will connect them to the entire XPO organization. At the same time, we'll give them access to our network of over 22,000 carriers. Covered's relationships with over 4,000 carriers and their lane history should also have a positive effect on the XPO system both in terms of pricing and in finding trucks.

Covered is our sixth acquisition and our second this year. As you know, we acquired East Coast Air Charter a couple weeks ago. The company has been a partner to our Expedited division for more than decade and we know them very well. They're a specialist provider of expedited air charter logistics, which fits right in with our expedited offerings. We've been using East Coast to meet the demand for urgent air cargo from our existing customers, and now that we brought that service in-house, we can cross-sell Air Charter across all our divisions.

East Coast is based in Stateville, North Carolina and had 2012 revenues of $43 million. They have a proprietary technology that's popular with their customers. We're also impressed with their people, Bill McBane who owned and ran the company is staying on to lead the operation with his wife Lisa. Each acquisition we make adds lane and pricing histories as well as carrier relationships. All of our XPO brokerage branches can leverage this information to purchase transportation more effectively and grow the business.

In 2012, all of our locations continued to scale up and three of our branches show that they have the potential to be mega branches. Not only do they have strong leaders, but they're also located in very attractive areas for recruitment. Two of the three were cold-starts, Charlotte and Chicago. And the third one is in Gainesville which we acquired with Turbo Logistics. We plan to supercharge the growth in these locations and apply that same model to other cities that meet the same criteria. We're also accelerating our sales and marketing efforts across the Company. We've identified 3 million small and medium-sized shippers and another 1,000 large shippers that have the potential to become major customers for us. We put our sales people on salesforce.com and have assigned a single point of contact to each customer and prospect.

It's been a busy 14 months. We opened 17 cold-starts, 8 in truck brokerage, 8 in Freight Forwarding, and 1 Expedite. And we've grown our Company's headcount from 208 to more than 900 employees. We've expanded our footprint to 60 offices in the US and Canada. And we put the foundation in place to support the much larger Company that we're building. So we are pursuing every opportunity for growth. In the fourth quarter revenue, was up 146%, and gross margin dollars were up 118% compared with the prior year. All of our divisions had year-over-year revenue growth.

Turning to 2013, we're providing the following guidance. We intend to purchase companies this year with combined historical revenue of at least $300 million. We also intend to open at least three Freight Brokerage cold-starts in 2013 and add at least 400 sales and carrier procurement personnel in our Freight Brokerage Group. We expect to generate positive EBITDA by the fourth quarter and to achieve an annual revenue run rate of more than $1 billion as of December 31. With that I'll asked John to give you some more color on the quarter. John?

Thanks, Brad. I'll start by giving you some details on the performance of our three business units during the quarter. Starting with Freight Brokerage, revenue was up 760% from last year to $71 million. And gross margin dollars increased 586%. A little over $27 million of the revenue increase came from the mid-quarter acquisition of Turbo on October 24 which exceeded our plan for the quarter. The balance of the increase came from our acquisitions of Kelron, Continental and BirdDog and from organic growth. Freight Brokerage gross margin percentage was down year-over-year. The decline was primarily due to the addition of our eight cold-starts which are still in startup phase. However, gross margins improved sequentially for the second consecutive quarter. Gross margin percentage was up 80 basis points to 13.4% in Q4 from 12.6% last quarter.

In Expedited Transportation, our revenue increased 9%, but gross margin percentage decreased to 16.6% down from 20.9% last year. We continue to see the effects of slower expedited market on our margins compounded by the higher rates to owner operators that we put into effect in March last year. SG&A increased 11% as we've continued to make investments in our Expedite sales force and recruiting efforts to increase the number of independent fleet owners we use.

In our Freight Forwarding segment, we're starting to see the results of our investments. Revenue increased 10% and gross margin increased 62% compared with the same quarter last year. The increase in revenue and our Company-owned locations had a positive impact on margins. And as result, we increased our Freight Forwarding operating income significantly despite higher SG&A expense associated with opening locations in Charlotte, Atlanta, Los Angeles, Houston, Chicago and Minneapolis.

On the Corporate side, expenses during the fourth quarter were $10.1 million which is an increase of $5.3 million from a year ago. Included in this number is $1.4 million in litigation related legal costs, $1 million of acquisition related transaction costs and $924,000 in non-cash share-based compensation expense. Net interest expense was $3.2 million for the quarter which was mostly from the convertible notes. We expect book interest expense from the convertible notes in 2013 to be $12.5 million which includes $6 million of non-cash amortization of bond discount.

Our income tax rate for the quarter was a 34.9%. During 2013 we do not expect to record a deferred tax benefit, so our effective tax rate will be negligible. The benefits of our NOLs remain available to us to reduce future taxes to the extent of income generation in subsequent periods.

Earnings per share available to common shareholders was a loss of $0.57 for the quarter. Our liquidity position remains very strong. We had $252 million of cash on our balance sheet at December 31. Looking at current macro conditions, transportation volumes in general have been steady. There's some positive signs in the industry but it's too early to call them a sustained trend. We have not yet seen a meaningful pick up in truckload volumes and capacity remains relatively balanced in most parts of the country.

We're showing that we can grow in this type of environment and this is a great time for us to build strongly relationships with our carriers because they're looking for more freight. And these relationships will increasingly be valued when demand does pick up and capacity tightens. Now I'm going to hand over to Scot who will be giving you an update on our strategy and then we will go to Q&A. Scot?

All right, thanks, John. I'll go over the progress we're making with our cold-starts and I'll talk about some of the broader strategic initiatives that are driving our momentum. Our truck brokerage cold-starts are ramping up nicely. So far this year, in January and February, the eight cold-start locations are trending in the combined revenue run rate of $60 million to $65 million. We're happy with that, especially considering that we're in a seasonal low point right now. The run rate includes about $10 million of contribution from BirdDog and the Turbo branches that we consolidated into our existing operations in 2012 and the bulk of it is organic growth.

The success of our cold-start program is grounded in three key components of our plan -- recruiting, training and IT. In recruiting, we've continued to refine our processes to find the best talent from inside and outside the industry. As you can see in the release, we're up to almost 600 sales and carrier procurement people in our Freight Brokerage segment as of the end of the year. And today we're excited to launch our new careers website, which is part of a broader employment branding strategy to accelerate our hiring piece. You can find it at jobs.xpologistics.com. It's going to help us hit our 2013 target of adding at least 400 net new sales people and carrier procurement people in Freight Brokerage. In addition to that, we'll add sales people from acquisitions, and then we'll hire more people as we scale up those acquisitions.

As we ramp up recruiting, our leading edge training programs are helping increase the productivity of our sales people. Marie Fields and her training team are coming out with new modules every month and not just for new hires. We're enhancing our continuing education programs. For example, in February we have experienced sales people in advanced level training sessions on the flatbed and intermodal. These programs complement the significant amount of direct coaching that sales people receive from their branch presidents.

On IT, we're moving fast and we're building up our proprietary technology. We launched a platform last March. We released new pricing tools and truck finding capabilities in July. And we introduced our proprietary freight optimizer software in December. The algorithms that our IT team has created provide actionable pricing information and efficient ways to find the right carrier for each load. This year we're planning to release upgraded LTL capabilities, sophisticated new carrier analytics and new customer and carrier portals.

For our Expedite segment, we're excited about adding the capabilities of Air Charter. We see an opportunity to grow Air Charter as part of a range of our services. Our Expedite team is also focused on the strategic verticals of cross-border Mexico, temperature-controlled and defense. We grew revenues in these strategic areas by 12% in the fourth quarter. And we're adding to our sales force to mine the core Expedite market and take share. At the same time, we're fine-tuning the way we buy Expedited Transportation and we expect margins and load count to improve in 2013 starting with Q2.

For Freight Forwarding, we continue to add new offices with the goal of gaining critical mass. Most recently, we opened Montreal and Nashville. We now have 29 locations in our network, 9 of those are Company-owned offices. We expect substantial conditions in 2013 from some of our new Company-owned locations in big markets such as Houston, LA and Chicago. So we have a lot of momentum going into 2013. We're continue to invest in growing the sales force and that will have a new-term effect on profitability. But we expect our financial results to improve sequentially starting in Q2 of this year. We feel confident about our outlook of positive EBITDA by the fourth quarter. And we've set the stage to scale up both our top and bottom lines dramatically over the next several years. With that, we'll open the floor for questions. Operator?

Thank you. We'll now begin the question-and-answer session.

(Operator Instructions)

Scott Schneeberger.

Congratulations and good looking outlook. I was wondering if you could touch a bit on you mentioned the 3 million small and mid-size shippers, that sounds like a huge portfolio of opportunity. Could you elaborate on that a little bit more, please?

Sure. So the customers that we're targeting fall in two different categories. The small medium-sized enterprises and the large national accounts mostly Fortune 1000 companies. The Fortune 1000 companies have huge transportation spends and represent huge opportunities for us and we're going to service them, service them, service them, give them world-class service, we're going to put dedicated teams on them. We already have through inheritance, through the companies that we bought, good relations with a bunch of them but there's a lot, lot more to go on that. On the small or midsize customers, there's 3 million of them that we've identified. We've done a lot of demographic studies and a lot of IT research. And what we've done is divide that up throughout the organization so we don't have more than one office calling the same customer. So we have a single point of contact. So all of our sales people are on salesforce.com and in the system you're signed an account. And that's our job. Our job is to provide good service to small, medium and large size customers.

Thanks. And with regard to, obviously you saw the guidance with regard to acquisitions. What -- is there a large acquisition that you guys are anticipating? Does that have anything to do with your goal to break even or the EBITDA positive by the fourth quarter or more measured pace on the acquisitions? Curious if there's a big one embedded in there.

So we've looked at over 1,000 acquisitions, usually in-person meetings, sometimes phone meetings. Most of them people that someone in our group knew from a previous job or we developed relationships since we've come here. Most of them are proprietary, a few came through intermediaries. We've winnowed that list down to about 100 companies that we think could make a good match with XPO and we think the people would fit in with our culture and we think they're kind of customers, the right kind of customers and it could work. We're not going to buy all 100 of those, we're only trying to do three or four a year more or less.

In order to do the acquisitions that we outlined for you this morning in the press release and on the call, we could do one big acquisition and blow away through the $300 million or we could you two large acquisitions and really blow it way. Or we could do a bunch of small acquisitions or a medium number of medium acquisitions. Very difficult to predict that, I'm not trying to be coy with you because I don't know. We're in discussions with lots of lots of different companies and we'll see which ones get to the finish line.

Thanks and one more clarification, then I'll turn it over. Scot, you mentioned 400 net new sales people, that's organic, not including acquired sales people from acquisitions, correct?

That's right and not including the sales people we add as we ramp up those acquisitions.

Okay, thanks. Appreciate it, guys.

Justin Yagerman from Deutsche Bank.

Hello, good morning, guys, it's Rob on for Justin. Brad, could you talk a little bit more about the Covered Logistics acquisition? Can you give us a sense of the type of gross profit margins the company generated, EBITDA or an EBITDA type multiple that you guys had paid for the company?

Yes, Covered, this is Scot, Covered is a great little -- a great acquisition outside of Chicago and a great location to find industry talent. They had high margins. On a gross margin basis, high teens. This is a fast-growing company. They've increased the size of their company by multiples over the last several years. They've been investing in sales force and even despite that because they have the high gross margins, their EBITDA is in the same place you'd see other targets that we've seen out there in the mid-single digits percentage wise.

Got that, that color is really helpful. And I guess as part of this transaction you guys offered to pay $3 million in XPO stock. Sounds like this company is growing a lot -- is going very fast I would imagine that was part of the reason why you guys were willing to pay out the equity as part of this deal. But could you give us a sense, is this something we should be thinking about looking forward or is this just a very unique case?

Every case is its own story. In this case we didn't want to do an earn out because in some of these relatively small transactions, to administer the earn out and to account for the earn out and to resolve any conflicts that come out with the earn out is sometimes troublesome. So we figured, let's put a little stock in the deal, they wanted stock, they see the upside. We've been talking to them for the better part of a year as they got to know us, we got to know them. It made some sense for the upside and to bridge valuation expectations to put some stock in there. One big benefit of putting stock in a deal, it keeps people's head of the game. They're married to XPO by their pocketbook and they want XPO to succeed and they feel they're part of the whole organization and not in a silo somewhere. So we felt with $3 million of stock issuance, it's really not horribly dilutive, it's not going to move the needle a lot and it accomplished all the things I just mentioned.

That's helpful. I guess one final question on the Covered Logistics acquisition before I turn it to a different part of the results. You had indicated they've got a Dallas service center, you guys opened a Dallas branch. Is there an opportunity to integrate the two together and make it a very big service center or do you plan to operate that independently?

Yes, we're going to operate that separately. One of the owners of Covered runs the Dallas office. He wants to grow that very quickly and we're all behind that.

Every acquisition is a case-by-case customized situation. In this case, it make sense to keep them separate. In the case of Turbo, which had a Dallas office, it made sense to put them together and that's worked out really, really well. The Dallas office that we have is combined with the people who came over from Turbo is noted for a lot more energy now it's a larger office.

That's helpful. I guess, John, too you had mentioned briefly on the tax rate, did I hear correctly that it should be negligible for on effective tax rates at close to 0% effective tax rate, or did I mishear that in your prepared remarks?

No, that's right. That's what we're expecting to do in 2013 and it really has to do with the fact that we're going to be back in valuation allowance land. So the deferred tax asset on the balance sheet we're not going to really get the benefit of that on the P&L this year. All of that obviously will change dramatically once we start to generate earnings and we've got, as I said -- as I mentioned, full use of those NOLs that we've accumulated so far. It's really more of an accounting thing this year. We're not allowed to, as I think I said in the last call, we're not allowed to use acquisitions in our projections for earnings. And so when we look at our ability to use those NOLs we're forced to take a very conservative view, and so that's what really drives the tax rate.

Okay so we should start to see a help then in fourth quarter and then beyond as you guys start to generate positive earnings?

That's right.

All right, I appreciate your time.

Our fourth quarter -- just to be clear, fourth quarter will be positive EBITDA from a net income perspective because of how you account for the convertibles; it could take a few more quarters.

Okay, understand. Thanks, guys.

Bill Greene, Morgan Stanley.

Scot, could I ask for some clarification? I may have missed in your remarks, but did you give any sense for a break out between what 2012 had as a cold-start total revenue and then acquired revenue? It may actually be hard to parse that out, but I thought I'd try anyway.

Yes, it is relatively rough. We've tried to break it out in a lot of different ways so we can get at numbers that you need. One of the things is we added $27 million from Turbo in this quarter so you can back that out, which was a great result which is moving pretty quickly. Through the year we've given some different ramp rates and talked about where the cold-starts were so you can piece those together to get an idea. Right now they're on a $60 million to $65 million revenue run rate which does get some benefit of acquisitions. It does get tougher and tougher as we integrate these offices and work together more and more which is a great thing, just harder for us to break it out for you in different pieces. And you know the sizes of the acquisitions and what we've grown, so you can get an idea of what's been organic versus not. But we can go over after the call if you want.

No, that's helpful. I just wanted to -- I wasn't sure if I missed a specific number. All right. Can I ask a little bit about gross margin as well? We've seen some of the larger brokers have been struggling a bit in that area and I'm curious how you guys think about the evolution of that as you grow. Is it reasonable to think that our numbers in, let's say in a truckload brokerage world can get toward those high teens, or are you having to revamp and rethink where those gross margins go given where the industry is?

I don't know whether it's going to get up to the high teens, and if it is, when it's going to do that. The issues are what's capacity going to be. So capacity is very tight historically as you know, the margins have been a little lower. And when capacity is really loose, they go higher. But when capacity is loose, you have less volume. So I would actually prefer being in a situation where margins are a little bit lower but volume is a lot higher.

Yes, because it seems today we've got this balance market yet margins aren't better, which I would think this would be -- admittedly you don't have the volume, so it's tough to exploit but on the other hand we don't have the tightness. So it seems like they contradict one another almost.

Well I got to tell you, of the three different choices being balanced, being loose, being very tight, balance is the worst for an intermediary broker. And unfortunately we've been in balance for about a year now. And every once in a while there's a weather crisis that makes it tight and that lasts for about three weeks and then capacity comes back on. So sooner -- and it's a dynamic market, sooner or later the balance will break due to what ever events and it will either get loose or tight end business will get better. But in terms of margins, I don't think we can look at margins in a vacuum as a single point as been all-encompassing. It's one of a bunch of data to look at.

Yes, no that's fair. When I look at this forecast on positive EBITDA for the fourth quarter, can we talk a little bit about what the drivers are to that, what may or may not cause that? In other words, if we think about you did some acquisitions you didn't expect and you grew faster than you expect and expand, I guess that could pressure some of the cost as well. So maybe talk a little bit about puts and takes, what might cause you to revise that higher or lower. What are the key metrics there that we need to watch?

Yes, we laid them out in our outlook, I think $300 million is a right amount of acquisitions to look for in terms of revenue, historical revenue run rate. If we were to exceed that I would -- that'd be a great thing and we found some good companies to go buy. But I think $300 million is probably the right number to look at. 400 net new sales people and at least three new cold-starts. We factored that in, that's an investment we're making. We're happy to do it over the next several years. We think that'll be very accretive for us and it's a great investment for us to make. So it's really the two biggest levers are acquisitions and then hiring base.

It raises an interesting point. This is an interesting business model in a non-asset world as opposed to previous asset businesses I've been in where your capital investment goes into fleet or hard assets and you capitalize that over a bunch of years and it bleeds out in the P&L. Here our CapEx is minimal, it's basically IT. And our main use of capital is to hire -- apart from acquisitions -- is to hire people, hire sales people. And unlike capitalizing that in an asset heavy business, that goes right to SG&A, it goes right to earnings, a hit to earnings.

Exactly.

Exactly, so the two different levers are acquisitions, if we do more acquisitions we could become more profitable. If we do more sales, which is a good thing business wise because it's how we grow long term. In the short term, while they're getting productive, which can take up to a year, that's a hit. So if we hired more people, which is a good thing long term, it's a bad thing short term.

Right, no exactly. And that was my point, I was trying to think through because it's actually counterintuitive because of the way these things work. And with earn outs, that can happen as well, right, the better things are to some extent you can end up paying more than you expected which is a bit weird.

Although we're-- although that's a good thing to pick up more because there's something -- it's like with sales people, we always want our sales people to be making more money because the only way they're making more money is if they're making more money with the Company as well.

Exactly, it's just counterintuitive. So in terms of the acquisition and you gave some guidance around that, is there any reason we'd need think about any capital raises that are required to do what you've set out here?

Not for the base case scenario, but I don't want to shut the door and say absolutely not and then if we get some very interesting acquisition opportunities and we want to load up on cash to capitalize on those, you get upset with us because it's conceivably possible that we do raise more capital. Whether that's debt, whether that's equity, whether it's combination, who knows?

Okay, fair enough. Last question, is -- in Covered Logistics you mentioned the oil and gas sector, obviously it's a hot topic particularly in transports given that there's a lot of trucking involved in this stuff now. Do you have an outsized exposure here where we would think that that's actually a pretty big growth segment for you or is it still so small relative to the whole mix that it's not a real driver?

It's still small but it has a good opportunity to grow.

Okay. All right. Thank you so much for the time.

Peter Nesvold, Jefferies.

Scot, tell me if I'm doing the math wrong here, if I annualize the $108.5 million for fourth quarter I get to about $450 million of annualized revenue and I recall you're targeting $500 million toward the exit rate. Is -- was there something about the timing of the acquisitions that explains the bridge or did we come up a few million short of the year in target?

Yes, there's a couple things. One, Turbo came on in the middle of the quarter so you don't get a full help of Turbo. We came within spitting distance of 500, certainly ECAC goes over that and then Covered grows even more over that, but it's roughly in that range.

Okay. As then we look ahead to the $1 billion run rate target for exiting 2013, exiting roughly $450 million, $500 million this year, acquiring $300 million so that's about $200 million of organic growth, get dangerous and I get into too much math, but it implies about a 40% organic rate, does that seem about right?

Yes.

Okay. In terms of cash flow, you used about $31 million, $32 million of cash flow this year from operating activities and CapEx. As you look ahead to achieving the plan for '13, how much cash do you expect to use prior to acquisitions for this year?

From an EBITDA perspective it will -- EBITDA will improve as we go through the year and then turn positive. Interest expense is about $6.5 million. CapEx is in the range of $7 million to $10 million for the year. There are no real taxes. So gives you an idea.

Okay. So the $250 million that you have seems sufficient, to the prior question about the need or likelihood of following equity linked deals this year. It seems like the $250 million is there depending on the size of the transactions that you might do this year.

Yes, the only thing that I left out was working capital. Working capital is usually rough range is 8% of sales as we grow, so use that in terms of cash. But yes, in terms of the plan, the plan is fully funded.

Okay, terrific. Thanks a lot, guys.

David Tameron, Stifel Nicolaus.

Wanted to focus on carrier capacity. With the addition of ECAC and then Covered, the 4,000 from Covered, what does that take your current carrier capacity up to?

A little over 22,000.

And the 4,000 from Covered, where those 4,000 unique or how much of that overlapped with who you originally had?

A fair amount of overlap because we're both focusing on those carriers with under 100 trucks, typically 50 trucks. So there was a fair amount of overlap.

Okay, and how would you characterize the capacity environment so far for 1Q '13?

Flat, very flat. If I was forced to say is a more tight or more loose, I'd say it's a little more loose. The reason I say that is when you go to our offices particularly for instance Charlotte where we have 130 people just [dialing] for diesel all day long, most of the board is pretty cleaned up by 1.00 in the afternoon, 2.00 in the afternoon. So it's not like we're scrambling for trucks, you can find trucks in most lanes.

Okay and how do you think that that changes over the year and what are you doing in preparation for the new hours of service rules that -- after the delay being rejected yesterday will likely be put in place July 1 of this year?

One real interesting about this industry is if you go back and look at all the surveys that come out about predicting what capacity is going to do for the next year, about half the time it's right and about half the time it's wrong. So I don't know whether it's easy -- I know it's not easy to predict what capacity is going to do over the course of the year at the beginning of the year. But if we have to get -- take a view, I would say that rates will go up a little bit, maybe 1% or 2% on average. And that it's going to stay fairly balanced. The hours of service will take some capacity out. But we notice that every time the capacity comes out, more capacity comes in. Doesn't tie in with the headlines when you read the headlines, you hear all about the shortages and driver shortage and that's all real, but when you look at the actual reality of capacity, capacity actually is there. And there was another part of your question, what do we do to prepare?

Yes, what are you preparing to do?

We would love capacity to get rally tight or really loose. The balance situation is right now, well, that's when we really earn a living I guess. I guess it's probably a good thing, it pushes us. But life gets a lot easier for broker whether it's one way or another and what we do is we try to service our customers, service our customers, service our customers and treat our carriers with respect. And as long as we do both those two things, we'll be well positioned to capitalize on any disruptions that occur in the market and to be able to take care of both of those two important constituencies.

Okay, thank you. In regards to the 2013 guidance and goals, what's the expected timing of cold-starts throughout the year?

Hard to say. It all depends on who we fall in love with when. So we are always looking for strong branch presidents, people who have been there and done that before. People have charisma and leadership and know the business really, really well inside and out, preferably both on the sales side and carrier side. And when we find someone that we really want to be part of our organization, we'll plant a flag in whatever city he or she wants to work in and do a cold-start. We have a little bit more of a bias towards locations that can be larger locations going -- that have the demographics both in terms of being able to hire people from the industry, because we like a quarter to a third or so of the personnel in a branch to be from the industry to help transfer best practices and help mentor the new people. And we want to have -- be in places where there's a good workforce demographic where we can hire people of good caliber.

So nothing really imminent in the end of the first quarter and the beginning of second quarter?

I wouldn't rule that out. We're in discussions with a number of potential branch presidents, a handful. And who knows whether something will work out. A lot of times that's a courting process, a mutual get to know process. It's not something we want to rush in to or they want to rush in to because it's a big deal for both of us. But I wouldn't rule out that we open a branch in the first quarter, it's possible.

Okay. And then my last topic I'd like to discuss today is your timing of hiring. Is that something that you're looking to do more seasonally typically when college is coming out, middle of the year? Is that ratable over the year, is there any expected real seasonality to that?

It's really not seasonal. That's a year long day in day out process. We've got a group of eight people that are just doing recruiting and talent management. And we're all over the Internet and we're all over the college -- we're all over the place getting very good flow of people. What is the gating factor is how are we doing.

So if there's a branch that's growing by leaps and bounds and the utilization is going up and their numbers are looking good and the morale is great and they're begging for more people, so okay, we'll give you more people. If any of those factors aren't there, we'll slow down a little bit. Let's go at a more measured pace. Let's get more training. Let's get more mentorship. Let's get more oversight and why pile on more people while we're still getting our act together. So it really is an internal decision based on how well we're doing in the different locations.

Is that also -- is the turnover affect playing to the factor as well? Obviously as you've been growing, you probably had a pretty low turnover with all the excitement around all the offices. But do you expect that to increase in 2013 as you continue to layer on additional hundreds of people?

It'll go up a little bit for the reasons you said. But turnover is the enemy. Turnover is something we don't want to have whether it's voluntary or involuntary. And the way we are tackling that is first of all, on the intake make sure that we're hiring people as the match for the job. That they have a personality and a skill set and a background that's applicable to what they're going to do. And then train them and train them and spend more time in training than would be necessary in some cases. But over-train and over-train to give them all different types of training whether it's classroom training or structured simulation or on the job or the mentorship or the continuing education classes or direct coaching from the branch presidents or any of the modules that Marie has rolled out. She's rolled out 10 new modules for new hires on all different topics.

So train them, train them, train them because if you hire somebody, and we've seen that in some of the smaller competitors that have hired people without proper training, it doesn't work because then the sales people can't perform. They disappoint customers. They disappoint carriers. They don't make a lot of money and they leave or they get fired. So the turnover is a waste of -- it's a real waste of resources because when you hire someone it takes about a year before we start making money from them. Until they get up to call it $11,000, $12,000 a month in gross margin, we're still losing money on that person. We're still investing in that person, which we're more than happy to do. Because if you get somebody who makes it through the first year and has found their voice and has gotten their self confidence and has learned the nuances in the business, it can be a very mutually profitable arrangement between them and the Company.

Okay, thank you.

Ryan Bouchard, Avondale Partners.

I was wondering if you could help us think about that the Corporate operating expense in 2013 or at least give us idea of what you expect for the first quarter?

Well for the year we're projecting Corporate expense to be between $33 million and $37 million. And I think the first quarter will be about in line for what we did in the fourth quarter last year. But we're looking at a little bit of -- we've got some increased headcount based on the organic growth in Corporate. Most of that is around IT and accounting. And so that's going to drive a little bit of an increase year over year.

Ryan, as you know because we've talked about this before, we're building XPO like a tank. We're building it with the infrastructure in place upfront with IT, with accounting, with the training, with the recruiting, with all the monthly operating review infrastructure, with all the Sarbanes-Oxley, with all the things that are in place so that we can be a multi-billion dollar Company. What we don't want to do is to grow a multi-billion dollar Company and say oops, what about the infrastructure? So this investment in infrastructure is critical to our growth.

Okay, makes sense. And then turning over to the Expedite division. So is it safe to assume that the gross margin is probably in this 16.5% neighborhood given the pay increases at least until maybe the economy really picks up, is that safe?

No. We're working with our fleet owners and our owner operators to make sure that we have plans in place that both help margin but also help loads and help our owner operators and fleet owners get out on the road more. So we are addressing some of those plans with them now. It probably won't affect first quarter but as we go through the year that hopefully will take -- make an impact. Expedite certainly is more macro sensitive than some of our other areas. I'd say if you look at our Freight brokerage division it -- depending on where the market goes, we can make money, we can keep moving. And Freight Forwarding same kind of thing. When you're talking about Expedited it is a little more macro sensitive but we should be able to fix some things and work with on our owner operators and fleet owners to improve that before -- a little bit irregardless of the macro.

Okay. Can you talk at all about what you're seeing in that division so far in the first quarter? Has it -- did it start out doing fine in January and has it slowed in February? Or can you give us any color on that?

Yes, it's -- look it's been relatively weak. It hasn't done that much. January was stronger on a year-over-year basis but January is a slow month. It's a quiet month in general. So I wouldn't -- you don't make too much of that because March is going to make a bigger part of the quarter. February is probably a little slower than January was on a year-over-year basis. But March will be a lot more important.

Okay. And then you spoke earlier about the Covered Logistics, their operation in Dallas and how you're not combining those but it looks like they also have one near Chicago. Would you combine that office with your Chicago mega center?

No, because our Chicago office is right downtown and Covered is in Lake Forest. And in Chicago, suburb people don't want to come to the city often and the city people don't want to reverse commute out to the suburbs often, so it make sense to keep them separate. And they are two different -- part of the same organization but they're two different units with their own integrity.

Okay. Same situation with East Coast Air Charter, you'll leave that separate?

Yes, absolutely. They're firmly based. They're in Statesville and there's absolutely no reason to move them anywhere. They're doing a great job and let them keep doing it right there.

Okay, very good. Well thanks, guys, I appreciate the time.

Ryan Cieslak, KeyBanc Capital Markets.

Good morning and thanks for taking my questions, and congratulations on a successful year.

Thank you, Ryan.

The first question I want to take another angle at the gross margins within Freight Brokerage and how should we'd be thinking about that into 2013? Obviously you guys saw some nice sequential improvement in the fourth. I'm assuming some of that has to do with the increased productivity with the cold-starts and just buying capacity a little bit better. Should we continue to see sequential improvement or maybe what is your positive EBITDA assumption by the fourth quarter imply from a gross margin standpoint?

Thanks, Ryan. There's a couple of levers there. We do continue to expect that we will buy better. We are buying better every month, every quarter we buy better than the last quarter, the relationships we have with trucking, with the carriers that we use continues to improve and over time we'll buy better. That gross margin will depend on a few different factors. It'll depend on new business. When you bring on new business, you could bring it on at very good pricing. You could price it right in line with the market. But as you're getting new lanes that you've never done before, takes some time for you to work with the right carriers and choose the right carriers for that load and for that lane. And over time, those margins and those lanes will move up, so it will depend on these percentage of new business we're bringing versus the amount of business we're bringing in on existing lanes.

It also will depend M&A and margins of the business that come in. The biggest factor in that'll be pretty much length of haul and mix of business. If you have a business that we acquire that has a longer length of haul, that maybe does produce, you're average revenue per load could be multiples of the [12.50] an average, it could be $3,000, $4,000. And then your gross margin percentage could be lower but your gross margin dollars transactions could be higher which would be fine with us and we can make a lot of money. Conversely we could do -- we can work with a company that maybe has a little bit bigger mix in LTL. Or we can -- LTL can grow a little faster and LTL has a much higher gross margin percentage, but the average revenue per load could be something like $250. And that can be very profitable and we can do that as well.

So those are the factors that'll go into it. But I do expect us to have a very large percentage of new accounts. We have our sales people out there mining new accounts, aggressively going after new business all year. And I expect that has some margin percentage, lower margin percentage as you grow into that business.

Okay, that's helpful. Appreciate it. And then I also want to see what kind of impact Hurricane Sandy had in the quarter here on you guys and then also if it is having any sustainable impact here into the first quarter?

Sandy was great for about three weeks. And then capacity can back on. I mean there still is some residual disruption here up in the Northeast. But it's basically more or less back to normal.

Okay. And then you mentioned Turbo Logistics I think was running ahead of your -- or ran ahead of your expectations in the fourth quarter, I think it was $27 million in revenue or so. I wanted to see what's the drivers behind that? What are you seeing specifically within that acquisition that makes you feel good about the run rate you're seeing and talk a little bit about that would be great.

Well, I love Turbo. Turbo turned out to be an amazing, amazing acquisition. And what was amazing about it was the depth of the relationships they have with these large Fortune 500 companies and their commitment to passionately service them and make sure you don't go home at night till all the loads are covered and covered well. And the relationships they have are really, really impressive and I've been personally going on some customer visits with Jeff Battle, the head of national sales there, and I was very, very impressed with it.

Now what specifically is impressive is we bought Turbo. It had historical revenue of about $124 million. And since then they've made some additions with a couple key accounts that add another $10 million or $15 million of revenue. So what was a company that we thought had $124 million of revenue now has $135 million, $140 million of revenue which is a bonus, it's great.

Okay, great. And then also on the cold-starts, I think, Scot, you mentioned annualizing right now around $60 million to $65 million. How should we think about the existing cold-starts, how that should progress into '13? And maybe a better way of asking it is, as some of these cold-starts get into their second year, what's the expectation of what they should be generating from a revenue standpoint? I know it'll depend on the size and the location, but what's the expectation there?

It will depend on the size and location. Every one of the cold-starts has a little bit different life of its own. Roughly they've been getting into the ranges of $5 million to $10 million in the first year. And you can expect -- the difference is Chicago, which started in August is our largest cold-start, it's moved very quickly. We've ramped that up very strong. So I would think a little bit more in terms of sales people and the 400 sales people that we'll be adding on over the year. And I think the existing sales people, which we now gave you which is almost 600 sales people and then the 400 sales people that we're bringing on each year. In year one, the revenue for a sales person as it's defined there with carrier procurement and logistics coordinators makes around $350,000 in revenue, the revenue run rate at the end of the first year is close -- it's $675,000 or so on revenue run rate basis. And you can calculate it off of that probably.

Yes, no that's helpful. I appreciate that. Lastly closing on the cold-starts, have you guys updated or do you have an updated longer term goal or target for how many you want to open up within Freight Brokerage?

Nothing's changed there. The long-term plan is we'll probably have 20 or so over time. It may be -- it may morph a little bit into a smaller number of larger locations, but overall, parameters are about the same.

Okay, thanks for taking the call.

David Campbell, Thompson Davis & Company.

Brad, as someone answered a question about the Corporate expense a few minutes ago and the answer was $33 million to $37 million this year. I'm confused, is that compared to what was a $40 million run rate in the fourth quarter?

Well keep in mind David, that we did do -- in first three quarters of last year we had a Corporate allocation where we were allocating some of that Corporate expense into the field. And so about -- there's about $2 million of that in 2012 and so you've got to think about adjusting the 2012 number into '13.

Right. So the $40 million run rate in the fourth quarter is only $38 million?

No. The $40 million is $40 million from an apples to apples. I would say that there were a couple of cost we pulled out in the Corporate expense in the fourth quarter that you can look at. When you look at over the run rate of the year in terms of M&A transaction costs and litigation related and different things that we broke out, as you look out over the course of the year, yes I think that our run rate will be lower than that $10 million or so on an apples-to-apples basis.

Okay. So some of the costs are going into other divisions, other divisional expenses?

It's actually the exact opposite. We really tried to break out and move things from Corporate out, so if you notice when I had said mid to high, high 20s Corporate expense for this last year we came in around $27 million or so. We grossed it up to $29 million because we took things out of the division and started putting it into Corporate so that it's much easier for you to follow, so it'll be more transparent. And next year that includes that extra $2 million that we're taking out of the divisions and putting into Corporate so that you can see it more clearly.

It's much better from a Management point of view to have that transparency as well because if you're allocating it all out into the field, it gets lost. So from an organizational perspective, we like to see, and I suppose investors would like to see too then, what are we actually spending on the Corporate infrastructure. Rather than it being allocated and brings down the margin a little bit of the field but you cannot really track it. So we manage this Company in an old-school way from a financial perspective. We break up every single one of the -- part of the organization and put into a business unit.

And we have a budget and every month we sit down and we spend an hour to three hours doing a variance analysis for each one of those business units. And we say okay look, where do we come out better, where do we come out worse, why did we do better, why did we do worse? How are we doing on the action items from last month, what's our new action items to improve the performance for the next month? And hen you have the Corporate functions buried into the field, it's hard to manage that because you're sitting with people doing an operating review with people who aren't from Corporate. So why are you going over that with them? So that's why we're breaking that out. It looks like a big number, but it's an honest number.

Right, right. So basically the Corporate cost, if you take out especially take out the non-recurring stuff in the fourth quarter, Corporate costs are -- will go up very little next year in 2013 and primarily from IT, new IT personnel?

They'll go up some, but they're not going to up proportionally the way they have because that reference I made before of building it like a tank, once you've got that infrastructure in place you get advantages of the scale. You don't have to go up one from one as you grow the top line, you can leverage the SG&A.

Right and tell me something about the East Coast partnership that you mentioned with the old Expedited business. Is that partner -- was that partnership used to obtain capacity and so this $43 million of East Coast revenue is additional Expedited revenues, or was some of it purchased transportation cost? Just what -- how does that work?

Yes, we -- our predecessor company, which you followed, Express-1, used to do a lot of business with East Coast for years and we continue to do business with East Coast after we became XPO Logistics. So some of that $43 million is inter Company eliminated going forward. But we'll grab all the margin, instead of splitting the margin with Bill, it'll all go into XPO now. But the growth for East Coast, the growth opportunity is he's got these great relationships with 200 different air carriers. He's got great relationship with all these expediters who use air charter services but we also have relationships with a whole large universe of customers who use Expedite services. And for most of those Expedite shipments, which are unplanned, ground transportation is just fine. But some of them are so urgent that if you're going to go from Detroit to Mexico and it has to be there this afternoon for example, you're going to go by plane, you're not going to go by truck.

So the synergy is for us to feed those leads in a bigger way to have all 60 of our locations all across North America have this air charter capability in their mind and then feed them into East Coast Air Charter. That's where the growth is there. So that business could be an over $100 million business in a few years, that could easily happen.

Right, right. And as far as what's happened at Expedited since the second quarter, do we think most of that is a macro effect of the economy that the fact that it went down in profitability as much as it has?

Well I think that's part of it, but to be perfectly honest, it was partly our own doing. We towards the beginning of the year made a call that we wanted to raise rates that we pay to the carriers, which we did, we gave them another, more than $0.10 a mile, and we called it completely wrong because the market got weaker. So we got in the worst of both worlds, we're paying more to the drivers and we're getting paid less from the customers and that was the margin squeeze, so that's a mea culpa on our part.

So the solution in 2013 other than East Coast is what?

We've revamped that completely. We've done a lot of analysis and we've done a lot of discussing with our carrier base of this isn't working for us, what will work for us and we've changed the compensation programs. For competitive reasons, I'm not going to tell you all the details on a large conference call, but basically what we're doing is we're paying for total miles not just the loaded miles and we've decreased the amount. And people are happy with that because the most important thing that owner operators want is they want miles. They want to be moving, they don't want to be parked. So if we -- in the new setup, we're going to give them more miles but we're going to keep a little bit more of the top line. So I think that ship is guided right -- right guided now and I think it is in a very good direction.

I don't want to give you the wrong impression. I was out in Buchanan about a month ago, morale is high, energy is high, there's good strong leadership. There's good bench there. Express-1 is one of -- we're ranked by Transport Topics the fifth largest expediter but we can't quite figure out who's three and four, we think we're the third biggest one. And it's a strong business unit of ours. If Expedite was a $50 billon industry instead of a $4 billion, $5 billion industry, we do all Expedite because Expedite customers really need it. They're calling you because they've got an urgent problem that you can solve and when you go to our office in Buchanan, it's very uplifting. It's very invigorating. Because you go out there in a suburb of a suburb and you walk in the office and you're so surprised with the energy level and the intensity, it's like an emergency room. It is very, very focused people, very professional. Been in the business a long time who have a lot of trust in them by the customers.

And some of the biggest users of Expedite in the auto industry and life science industries, they really only go to three or four different expediters including ourselves. They go with FedEx Custom Critical, they go with Panther, they go with us. Sometimes they only go with those three, sometimes go with one or two others. I'm very proud of what we're doing there.

So the East Coast should help, shouldn't it?

Yes. East Coast will help because in the ground transportation at Expedite minutes count and something that's got -- requires air, seconds count sometimes. Is someone calls up, they need something, do you have solution for this or not? They're not going to wait around for you to call them back 45 minutes later. So having that all integrated with us is a good plus.

Right. And is there any falloff in Panther? Panther is number three or four I guess in the industry since they've been acquired by Arkansas Best, is there any falloff in that? I saw Andy Clarke leaving, that didn't sound good.

Well I like Andy Clarke, and if he didn't have a non compete, I'd probably offer him a job. I think Panther is a great company, its actually number two after FedEx Custom Critical and that's a competitor that we respect and take seriously.

And there hasn't been any fallout from being acquired by Arkansas Best?

There's always some changes when a company is acquired, but I'm not writing off Panther, that's for sure.

Okay, great. And the interest cost next year, you mentioned -- someone mentioned $12.5 million, is that the number, is that the correct number?

That's right. And that's really coming from the convert, David.

I understand, yes. Okay, thanks.

Most of that is non-cash.

I understand, right. Thank you very much.

Jack Atkins, Stephens.

I have a couple quick follow ups here. When we think about, Brad, the -- you talked quite a bit about Turbo and how that's performing but I'm curious to know how the other acquisitions you guys made in 2012 have performed thus far relative to expectations? Specifically Kelron and Continental, how have those businesses done since you've closed those transactions?

Continental, very good. Continental at first was a little hesitant to start working with Charlotte and covering their loads and now they're the biggest proponents for doing that. They're covering a very big chunk of their loads through Charlotte, our national operations center there and using more of their time to grow their business.

BirdDog worked out well. It was basically a tuck-in. Those folks came over. They were just down the road from us from in Charlotte, came over to our organization, they're in there fully integrated and working out great.

Kelron, Kelron is good. Kelron was a company that was losing a tag and now it's in the budget this year for making $200 million. And if it executes on that, we bought it for $8 million, so from a financial perspective it worked really well. From a customer perspective, it worked extremely well because they have a small select group of large customers that they have good relationships with that we can go much deeper with now that we've got more capacity, now that we've got more back office.

Turbo, I spoke earlier in the call. Love it, love it, love it. East Coast it is too early to declare victory, but I'm very optimistic about it. And of course our sixth acquisition we closed yesterday, so we can't give a report card yet.

Sure, that all makes a lot of sense, and thank you for that update. And then last question for me, Scot, did I hear you right that you noted earlier that the first quarter EBITDA level should be similar to the fourth quarter, is that the right way to think about it?

Roughly, yes. We've added a lot of sales people. One of the things we gave in the release the number of sales people, you should really look at that. So from third quarter to fourth quarter, we really made a big investment in sales, we'll continue to do that. But as you start to see a lot of numbers will start to overpower that as you go through the year, but the investment that we made in sales people in 4Q. In addition that seasonality in 1Q, 1Q by far on a seasonal basis is the lowest quarter of the year. On a revenue basis, on a margin basis, 1Q seasonally will always be the smallest quarter of the year.

Okay, great. Thanks for the time.

Cabeza Howe, [Albetta Equity].

First of all I need a clarification on your $500 million run rate, that includes East Coast and Covered Logistics, right?

Yes, we're over $500 million now, now that we've bought East coast and Covered. We missed it by a smidge going into the end of the year came really close, but now that we've done those acquisitions, we're over it.

Okay, thank you. On your Kelron operation, I think in last conference call you mentioned about you would [count] some of the business in that unit, so do you have a percentage to share regarding how much business you are counting and what's your long-term revenue target for the Kelron unit?

Yes, Kelron we did look at the business and saw what makes sense and what doesn't and as Brad said it's -- we're looking to be -- to add a few million dollars in EBITDA this year from Kelron. So I think we've done some things that make sense. The business, from a revenue standpoint that affected probably 20% to 25% of the business and we're going to grow it. We are going to grow Kelron. Vancouver office, things are going very well. That's the largest office there and we're going to be adding sales force and adding headcount to that to grow that business. It's got great leaders and great people, they service their accounts very well. Toronto, Montreal are also the same thing. We're going to be adding people and growing. Then Cleveland is very small and we've been adding people and we're going top grow that as well. So we'll continue to grow the top line now that we've built the business more profitable.

So are you done with integration on the Kelron?

Yes, yes.

Okay, that's great.

Usually we integrate things faster than we integrate Kelron. Kelron had two little curlicues to it, one is it had French Language we had to work out, and the other had currency changes. So from a technology point of view, it was wiser to go a little bit slower than normal.

Okay, that's good. Everything is fine right in terms of --

Yes.

Okay. Also, generally when you acquire business due to this integration issue, do you normally see any interruption during the business, the existing business?

Not if it's done right, no. That's something that is done in a methodical way and an organized way and a planned way. Things -- I've worked on integration of hundreds and hundreds of acquisitions over the years, they never go perfectly, that's naive, it doesn't work like that because there's a lot of change that takes place in a short amount of time. But if it's done well and it's done with a good spirit and it's done with professionals who know what they're doing and it's a coordinated way, it's a good thing to -- it's like ripping a Band-Aid off, sometimes you just rip it off and do it.

Okay, great. Can you talk about your longer term, any potential for the Dallas cold-start -- in particular when you compared it to your mega (inaudible) you mentioned Chicago, Gainesville and Charlotte?

Every cold-start has it is own life and a lot of these cold-starts will get up to in the range of several million dollars in EBITDA, $3 million to $5 million in EBITDA. But if you look at some of the areas that we've really focused in on, Charlotte, Chicago, Gainesville, which is not a cold-start but something we purchased, not only do they have strong leaders but they're also located in areas where we can recruit effectively both from transportation people from inside the industry and then people that have been outside the transportation industry where you can really scale those up to be much larger. So we'd expect Chicago and Charlotte and then a few other places that we've been targeting that could get to much larger sizes than that.

Great. I think last time you mentioned about a five-year plan and you said probably you are going to finalize the next set of KPIs probably at the beginning of the year, do you have any update on that? For example, do you have any long-term uptick, particlarly for your gross margin, operating margin or EBITDA margin?

Nothing has changed there in the long-term plan. We started out with $177 million in 2011. We're now in a run rate of over $500 million. We want to get to $1 billion by the end of this year and we think we'll do that through organically and through acquisitions. And we want to get to $4 billion to $6 billion by 2016. And we think that's a reasonable goal and it's one we're marching towards. In terms of the lower level margins, we're going to be of a size that we're going to approximate what's going on in the industry as a whole. So if you look at the larger competitors and see what their margins are, we would probably end up like there. Of course that'll depend a little bit on business mix too.

Okay, great. So on your longer term growth driver would you say that it is more -- will be more on medium and small-sized businesses?

You mean on the acquisitions, Capeza?

No I mean growth drivers, your customer base. So what do you think will be your main growth drivers, it's going to more from the small and the medium-sized business or is it going to be from more from large corporation?

We're going after both. There's -- we're able to service both very well. We're able to do a good job with large customers and with small customers and we're going after both segments. It's a different approach because the large customers, there's only about 1,000 of them and it's a more sophisticated longer term sales approach. It's less transactional. The smaller customers, there's 3 million of them and so we have a lot of people calling a lot of different customers for there.

Okay, so right now you are (inaudible) in terms of percentage, is it more from the large corporations or small and medium-sized businesses?

We have more smaller customers than larger customers and over time that mix will go in the other direction.

Right. But in terms of revenue percentage, is it still more from the small and medium sizes?

Yes, right now the majority of our revenue is from small and medium-sized. Over time, the percentage that's coming from the larger accounts will increase.

Got you. In terms of IT, can you talk about a little bit about your IT for your Freight Forwarding and Expedited? Are you using the same IT system as your Brokerage business?

There's two parts of the IT, there's the back office part and there's the customer facing carrier facing part. On the back office part, yes. On the customer facing part, we have a -- we work with a selective system. On Expedite we work with a [PNet] system on CGL. And then we have our own [Mongrel] system for the truck brokerage.

Okay, great. So do you have any update on your Robinson litigation?

We generally don't comment on litigation publicly.

Okay. Thank you very much for answering, that's all for me.

That was our last question. I'll turn it back over to you, Brad, for any closing remarks.

Okay, thank you. I apologize the call went past the morning open, we'll have to figure out what time we'll do it next time so we don't cut into the trading day. Thank you for your questions and look forward to seeing you over the quarter and talking to in 90 days. Have a great day. Thanks, bye.

Thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating, you may now disconnect.