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Echo Global Logistics Inc (NASDAQ:ECHO)
Q1 2020 Earnings Call
Apr 22, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Echo Global Logistics First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your host, Mr. Kyle Sauers, Chief Financial Officer. Please go ahead, sir.

Kyle Sauers -- Chief Financial Officer

Thank you and thank you for joining us today to discuss our first quarter 2020 earnings. We appreciate your patience. There were a bunch of participants waiting to get connected to the call, so we wanted to give it a few extra minutes. Hosting the call are Doug Waggoner, Chairman of the Board and Chief Executive Officer; Dave Menzel, President and Chief Operating Officer; and Kyle Sauers, Chief Financial Officer. We've posted presentation slides to our website that accompany management's prepared remarks and these slides can be accessed in the Investor Relations section of our site echo.com.

During the course of this call, management will be making forward-looking statements based on our best view of the business as we see it today. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. We'll also be discussing certain non-GAAP financial measures and the definition and reconciliation of each non-GAAP financial measure to its most directly comparable GAAP financial measure is contained in the press release we issued earlier today and the Form 8-K we filed earlier today. And with that, I'm pleased to turn the call over to Doug Waggoner.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks and good afternoon everyone. I appreciate all of you joining us today and we've got a lot to cover. As everyone knows, the coronavirus outbreak has led to a lot of uncertainty right now. So we're going to do our best to give our current views of how this situation may play out and in the near-term. I want to thank by -- start by thanking our people as our collective response to this has been overwhelming. We've talked for years about what a difference our culture makes in terms of the dedication of our team to put clients and carriers first. It's times like this when you can really see the difference shine through. Fortunately, we were prepared to transition to remote working and we're able to execute a work-from-home capability in short order for three primary reasons.

Number one, our entire business runs on a common technology platform. All of our systems including core applications, phones, and messaging are designed to enable our teams to seamlessly work together from any location at any time. They are all securely accessible over the web and we have robust reporting and our people are cross-trained. This all makes a huge difference. Number two, our infrastructure teams have been constantly reinvesting, improving, and upgrading our platform. When we hit the trigger to initiate our business continuity plans, our team and our systems were ready. Number three, our people have deep relationships both internally and externally. These relationships have been built over years of working together. In times of crisis, these relationships are the backbone of our ability to get the job done.

During February, we began to ready ourselves to execute our business continuity plans enabling our entire workforce to work from home. On March 20, we officially closed access to our Chicago headquarters and shortly thereafter, the rest of our offices across the country. Since that time, the vast majority of our workforce has been working from home. All of our systems have remained operational and our people are productive and efficient. At times like this, it's important to remember that we provide an essential service for our shippers and our carriers. We take that responsibility seriously. Our Managed Transportation clients rely on us for 100% of their transportation needs and I'm proud of how we've served them through this initial phase. We've received lots of tremendous feedback from our clients, which has been great to hear. On the brokerage side, our clients and carriers depend on us every day. Our people have really stepped up to serve and our volumes have remained remarkably strong during this time. As we go through our prepared remarks today, we will highlight current trends, our balance sheet strength, and our outlook moving forward, but first let me share our first quarter results as highlighted on Slide 3.

Total revenue was $551 million representing a 2.4% increase from last year. Net revenue was $89.9 million representing a 9% decrease from last year. Adjusted EBITDA was $14.9 million representing a 31% decrease from prior year. Non-GAAP fully diluted EPS was $0.19 compared to $0.38 in the year ago period. Given the uncertainty of the current environment and the likelihood that the U.S. will experience a period of lower shipping volumes due to the financial hardship and impact on many businesses, we have taken steps to reduce our operating costs while continuing to invest in our future. Our cost reductions to date have included an overall reduction of all discretionary general and administrative spending, a deferral of all new hire classes through May, and a reduction in our workforce, most of which we hope will be temporary.

Echo has always been a growth-oriented business. Our strategy is to take market share and grow. Our people are fundamental to that strategy and for those reasons, it was a difficult decision to take these steps to reduce our workforce. However, we also believe reducing operating costs is a responsible choice as volumes moderate and while overall, we are pleased with shipping volumes, there have been pockets where declines are evident. We will continue to monitor and evaluate further actions that might be required to ensure that we are in a great position to both recover and thrive when the market begins to rebound. Now I'd like to turn it over to Dave to go into more detail on our performance.

David B. Menzel -- President and Chief Operating Officer

Thanks, Doug. I also want to start by acknowledging and thanking our entire team for the amazing job they've done adapting to the current situation. Our client and carrier sales teams, operational personnel, and other support functions have done an incredible job. Our technology professionals and the capability they've deployed over the years have made all of us incredibly productive while working remote. It's been a total team effort. So I want to thank everyone. If you'll turn to Slide 4, I'll take you through our top line performance by mode.

Truckload revenue was $368 million in Q1, which was an increase of 4% over the prior year. This increase was driven by a 10% increase in volume and offset by a 6% decrease in revenue per load or pricing. Consistent with the trends that we've been recently reporting on, our contract or primary award volume was the main driver of truckload growth. In fact, our award volume was up 27% year-over-year resulting in an overall increase in contract mix from 52% a year ago to 59% in Q1 2020. Spot business was down 4% in Q1 as spot remained soft through the first 10 weeks of the quarter. We did see a spike in spot volume in the last couple of weeks of March, which was when the shutdown sent their initial shock waves through the economy. This increase was driven by a surge in demand on consumables and medical supplies, but was short-lived.

Over the past few quarters, our truckload volume trends have been improving and despite this crisis, that trend continued in the current quarter. As a reminder, truckload volume was down 2% year-over-year in Q3 2019. It improved to up 1% in Q4 2019 and significantly improved in Q1 2020 as it increased by 10%. We have seen the demand for consumable products and essential items stabilize into April, but [Phonetic] the spot market has again softened. The late March surge did disrupt and tighten capacity, but we've seen that subside as well and despite the difficult hardships this crisis has put on truck drivers, capacity has been relatively loose throughout April. Truckload volume increases have stepped back and are down by about 4% on a year-over-year basis during the first 13 business days in April.

Turning to LTL, we delivered $158 million in revenue in Q1. That was a 2% increase over the prior year. This increase was driven by higher volume in our brokerage business. For the quarter, our volume was up 3%. Despite this gain, we've experienced a more significant decline in LTL volume due to the shutdowns that commenced in mid-March. Our LTL volume has declined by 24% in April as small to mid-sized companies seem to have been hit hardest in the initial phase of this economic downturn.

Turning to Slide 5, our transactional revenue of $428 million, increased by 4% due to the increase in truckload volume primarily resulting from the continued success in securing additional contract business and the growth in the LTL brokerage. Our productivity again improved in Q1. As we discussed in our call last quarter, our shipments per sales FTE were up 5% year-over-year in Q4 2019. We improved on that metric in the most recent quarter to 19% increase in shipment per sales FTE. Many of our automation initiatives are enabling this improvement. We have new sales classes lined up to start in March, April, and May, but due to the outbreak, we decided to defer those new classes until June. So before this all started, we anticipated bringing in approximately 160 new client and carrier sales reps between March and June.

Our current plans will [Phonetic] reduce that number to around 60 to 80 new reps. Given the state of the economy, we anticipate reduced attrition as we move through the year. We will continue to evaluate our hiring plans as the year progresses and adjust as we think appropriate based on the speed of the recovery. It's unlikely that we'll grow our overall sales headcount in 2020, but instead continue to focus on driving productivity increases through technology advancements and adoption.

Our Managed Transportation revenue was $123 million in Q1, a decrease of 3% year-over-year. This decline was impacted by a slowdown in the second half of March. As you know, we typically manage 100% of the freight for our Managed Transportation customers. So, if their business is impacted, we're going to feel that impact either positive or negative. While many of our clients have experienced increased volume into this crisis, more have seen decreases in volume. Our Managed Transportation customer base is mostly small to mid-sized businesses and less than truckload is the more dominant mode among these clients. Managed Transportation volume declined by 26% to date in April, and while this decline was widespread, we did [Phonetic] see a handful of businesses that were deemed to be non-essential and hit more significantly. We're hopeful that the vast majority of those impacted will bounce back when the economy begins to recover.

Another big driver that will lead to the growth in our Managed Transportation is new business wins. This year has started off really strong in terms of closed business as we've already signed $69 million in anticipated revenue and our pipeline remains strong. Our Managed Transportation teams have done a great job throughout this crisis. As Doug said, our clients rely on us -- they rely on us for uninterrupted management of all of their transportation needs and both our people and technology proved to be invaluable during this time.

Turning to Slide 6, we generated $89.9 million in net revenue, which is a 9% decrease over the prior year. The decrease was primarily attributable to a decline in net revenue margin as our margin of 16.3% was down 204 basis points over the prior year. The decline in margin is primarily due to the increase in award business and a softer spot market. Up until mid-March, the freight markets were relatively balanced and truckload rates were fairly steady. Then the market spiked up in the last two weeks of the quarter. We saw a corresponding uptick in spot business as I said earlier, but at the same time, most of this gross margin -- net revenue margin gains were offset by higher buy prices in support of our contract business. Our net revenue margin has improved in April due to the loosening of capacity and lower fuel costs.

In the midst of all this chaos, we continue to invest in our future. We've been making excellent progress on our digital marketplace and we've had continued improvement in both the utilization and effectiveness of our solutions. At the beginning of the quarter, we launched new features in EchoDrive, which enhanced our search capability and provided proactive load suggestions for our carriers. Those features have been well received and have continued to drive increased EchoDrive usage, inbound offers for carriers, and more bookings directly resulting from our online strategy. I'd like to now turn it over to Kyle to review additional Q1 details and forward outlook.

Kyle Sauers -- Chief Financial Officer

Thanks, Dave. On Page 7 of the slides, you'll find a summary of our key operating statement line items. Commission expense was $27.2 million in the first quarter of 2020, decreasing 9% year-over-year. Commission expense was 30.3% of net revenue compared to 30.4% for the quarter last year. Non-GAAP G&A expense was $47.8 million in the first quarter of 2020, up 1% from the year ago first quarter of 2019. Depreciation expense was $7 million in the first quarter of 2020, up from $6.3 million a year ago. Cash interest expense was $1.3 million during the first quarter of 2020 compared to $1.4 million in the year ago period and that decrease is due to a lower amount outstanding on the combination of our convertible debt and ABL during the quarter. Our non-GAAP effective income tax rate was 25% for the first quarter of 2020. As Doug mentioned, non-GAAP fully diluted earnings per share were $0.19, decreasing from $0.38 in the first quarter of last year. The primary differences between our GAAP and non-GAAP fully diluted EPS in the first quarter of 2020 are $2.8 million of amortization of intangibles from acquisitions, $1.5 million of non-cash interest expense, and $4.6 million of stock compensation expense.

Slide 8 contains cash flow and balance sheet data. We ended the quarter with $39 million in cash on hand and $335 million of accounts receivable, which is the basis for our ABL borrowing base. In the first quarter of 2020, we had free cash flow of $4.6 million and operating cash flow of $9.7 million. Capital expenditures were $5.1 million in the quarter compared to $6.4 million last year. During the quarter, we repurchased approximately 490,000 shares of our common stock for $9.4 million. The repurchase activity was weighted toward the beginning of the quarter and we suspended repurchase activity in early March. We also repurchased approximately $89 million of our convertible debt at just under par.

We've added Slide 9 to dive further into our liquidity position. We feel very good about our ability to manage through any sustained freight downturn given our borrowing capabilities, but want to walk through that flexibility. As I mentioned at the end of the quarter, we had $38.7 million of cash on hand. We also had an available borrowing capacity on our ABL facility of $257.7 million. That borrowing capacity is calculated as 85% of our eligible accounts receivable.

At the end of the quarter, we had borrowings of $100 million on the ABL primarily as a result of the convertible debt repurchases that we've executed recently. So this leaves $157.7 million of remaining borrowing capacity on our ABL at the end of the quarter. As we discussed on our last call, we intend to use this available capacity and our cash on hand to pay off the remaining $69.2 million of convertible debt, which matures at the end of this month. Considering our end of Q1 borrowing base, this leaves us with net liquidity of $127.2 million.

Our ABL facility has a maximum borrowing capacity up to $350 million, depending on the borrowing base and carries interest at LIBOR plus 125 basis points when our borrowings are less than half of our available borrowing base and LIBOR plus 150 basis points when we're over 50%. We expect to be borrowing at LIBOR plus 150 basis points after we pay off the convertible debt. Finally, the ABL facility matures in 3.5 years.

This situation has been challenging for many of our shippers. Fortunately, we have strong relationships and our shippers understand that. For us to be an excellent service provider, we need to be able to pay our people and our carrier partners in a timely fashion. So while there are certainly some customers who simply can't pay their bills as quickly or in some cases not [Phonetic] at all, that's a small minority. So we have only seen a small movement in our DSO in the last month. I think two things that are worth understanding. First is that I mentioned before, as our receivables balance grows, so does our borrowing base on our ABL giving us more flexibility and second, as we've highlighted in the past, we carry credit insurance on the vast majority of our accounts receivable, which provides a nice backstop for any non-paying customers.

Now I want to talk about guidance. As we referenced in our press release, we'll be suspending our full-year guidance due to the uncertainty surrounding COVID-19. However, we do want to give you as much information as we can about the upcoming second quarter and trends we're seeing so far through the first couple of weeks of April. Our per day revenue in April is down 12%, volumes in LTL have weakened more than truckload and as Dave mentioned earlier, we've seen truckload volumes down 4% and LTL volumes down 24%. These year-over-year comparisons are likely modestly impacted by a Good Friday holiday that was included in this year's first 13 business days, but isn't in last year's comparable. We have seen improved net revenue margins, they were 17.4% so far in April. The lower cost of capacity and lower fuel costs have been the key drivers, but some of that impact has been offset by a shift in mode mix toward truckload.

And now for our guidance on Q2, we expect revenue of $450 to $500 million, a range of down 10% to 19%. This guidance anticipates that freight volume has bottomed out and we anticipate a modest recovery in the back half of the quarter due to seasonality impacts and businesses slowly ramping back up. We expect commission expense to be between 29.75% and 30.25% of our net revenue. G&A costs are expected to be between $43.5 million and $46.5 million, down 3% at the midpoint compared to last year and down 6% sequentially. We've moved quickly to reduce costs in this environment in a few ways. As highlighted earlier, we've deferred new hire classes. We have removed some personnel from the business to right-size operations, in line with business activities. We've slowed other discretionary investments and we have significantly less spend in travel and client visits and we anticipate lower incentive compensation across the org.

We also expect depreciation of about $7 million, cash interest of approximately $1.4 million, a tax rate of approximately 25%, and share count of approximately 26.2 million. And then excluded from our non-GAAP calculations in the second quarter, we expect amortization of approximately $2.8 million, non-cash interest of about $300,000, and stock compensation expense of about $2.3 million. We will look to provide full-year guidance at some point in the future as the economic recovery comes into fuller focus. I now want to turn it back over to Doug.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks, Kyle. Well, this was another strong quarter for Echo despite the onset of the coronavirus in March and the subsequent activation of our business continuity plan. Having 100% of our employees working from home did not slow us down and we were able to continue providing the high levels of service that our clients and carriers have grown accustomed to. We do know from past market disruptions that it's times like these when we further cement our shippers and carrier loyalties and the depth of those relationships. We've also been quite successful landing new Managed Transportation deals as well as winning new contractual lanes and routing guides. So not only are we moving the freight and going after market share, but we have not missed a beat on our technology and our data science road maps. We are currently in a mode of continuous technology releases. Those releases are bringing new marketplace capabilities as well as internal efficiencies.

We continue to be interested in M&A and believe that the future will yield some good opportunities. We continue to have an active pipeline and are in discussions with several parties, but the current environment causes us to be very thoughtful in terms of valuation, liquidity, and financing and we would expect to have more clarity on M&A in the coming quarters. Looking forward, it's no surprise that we have difficulty projecting the depth and duration of a likely recession. It is obviously hard to know at this moment in time what the recovery will look like. For our own planning purposes, we assume that it will be an extended U-shaped recovery and we believe that we are now at the bottom, but what I do know for sure is that the resiliency of the Echo model will allow us to weather the storm by keeping our costs under control while maximizing gross margins and optimizing profitability. We have a strong balance sheet and we will emerge from this time as a stronger company supported by our loyal clients and carriers.

And finally, I want to thank all the folks at Echo for tremendous execution during a challenging environment. I can genuinely say that the current adversity has really brought us all together with a closeness and a sense of purpose and I'm sincerely in awe of the esprit de corps that I have witnessed from the Echo team at all levels of the organization. That concludes our prepared remarks and at this time, would like to open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Jack Atkins with Stephens. Please go ahead.

Jack Atkins -- Stephens -- Analyst

Hey guys, good afternoon. Hope everybody is doing well and congratulations on a good quarter here, all things considered.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks, Jack.

Jack Atkins -- Stephens -- Analyst

So Doug, I guess if I could start with one for you and Dave. I mean can you kind of talk about it and I hate to ask you to provide like intra-month trends, but I think the market is so dynamic, I think there's just a lot of questions around sort of what's happening and where -- what's the trajectory looking like today. So is there a way to kind of think about, are you seeing -- within April, are you seeing things deteriorate further when we think about those month-to-date trends that you guys reported or do you feel like things have kind of stabilized now the customers that were going to shut down or going to slow down activity, they've done that already. Just trying to get a feel for the trajectory of business trends within April. Do you feel like things have stabilized?

David B. Menzel -- President and Chief Operating Officer

Sure, Jack, this is Dave. I'll give you a little color on that. Obviously, this is unprecedented and pretty early into this. So it's new, but I would say this that we saw a pretty steep decline on the LTL side of our business in March and we've seen that stabilize in April and actually recover a little bit. Again, Kyle mentioned the difference on Good Friday in the business days and not, but volume trends indicate LTL, for now, has hit a let's call it -- hit the bottom so to speak. The volume seems to be flat to recovering a touch in April.

On the truckload side, it was a little different dynamic because we had a bit of a spike late March as I mentioned earlier, a lot of restocking. I think manufacturers and distributors maybe trying to get product closer to customers etc and then that volume did also come down pretty steeply in the first couple of weeks in April. On that side, we haven't quite seen as much -- I wouldn't say I've seen it bounce back, it's actually trending a touch down still, but not at a dramatic rate. So I think it's relatively stable. The declines have stabilized. We've seen a little bounce back on the LTL side. So hopefully that's helpful and a little color to what we've seen.

Jack Atkins -- Stephens -- Analyst

It definitely is Dave. Thank you, thank you for that and I guess kind of pivoting to the cost side for a moment. You guys I think did a great job sort of laying out a lot of the different levers that you're pulling here to manage expenses in this unprecedented situation, but is there a way to kind of help us frame up between the incentive compensation and then the lower levels of hiring and some of the other cost levers you're pulling, what you think that can do to sort of help from a cost perspective here in 2020? Just some, I guess, goalposts would be helpful.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Yeah, Jack, I think it's challenging to give too much there for the year because we aren't even guiding for the back half of the year for total costs or revenue. I think there's a lot of uncertainty. I think we do have a lot of flexibility in the model. As you know, incentive compensation is a big part of the model throughout the company and so that could have quite a bit of variability. We feel like we're moving very quickly on right-sizing the organization to match the business levels. We're very hopeful that in the not too distant future, the people that have been furloughed from Echo will be back joining us and helping to support additional volumes from the customers, but I think it'll be hard to project what that looks like for next quarter or the quarter beyond, but I think it's probably the overall headcount costs and labor costs including incentive compensation are going to be the lion's share of the cost drivers for us.

Jack Atkins -- Stephens -- Analyst

Okay, understood. It's going to be sort of top line dependent than [Phonetic] it sounds like, which makes makes sense. Last question and I'll turn it over. Dave, you talked about, obviously, some very challenging trends in the LTL market here over the last month, month and a half. Are you seeing any incremental pricing competition sort of arise in the LTL industry. Are you seeing any of that begin to develop over the last several weeks given what tonnage is doing? Meaning are carriers being more competitive trying to win your business I guess is really the gist of my question?

David B. Menzel -- President and Chief Operating Officer

Yeah, I got it, Jack. I would say, not really, no. I've talked to a lot of carriers over the last few weeks obviously and I think that they've experienced I think similar volume trends that we have in general, but there's not been a lot of pricing changes and so I can't forecast what will happen over the next six months, say, and I think that a lot of that might depend on the recovery, but it also might depend on the operating cost that everyone's incurring in this environment, moving freight and dealing with the shutdowns, and potential terminal disruptions possibly due to staffing issues or illnesses. So there is a lot of moving parts, but I haven't -- I wouldn't say that we've seen anything significant in terms of pricing changes to date.

Jack Atkins -- Stephens -- Analyst

Okay, that's helpful, thanks again for the time guys.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks, Jack.

Operator

Thank you. Our next question comes from Bascome Majors with Susquehanna. Please go ahead.

Bascome Majors -- Susquehanna -- Analyst

Yeah, thanks for taking my questions here. I was hoping we could follow-up a bit on the LTL side given the degree of incremental weakness you're seeing in the demand front right now. Can you help us understand better how that business and potentially the gross margin inflects [Phonetic] through a down cycle given that we really just haven't seen a recessionary like outcome in a large non-asset LTL at this point as a public company. I'll just leave it at that.

David B. Menzel -- President and Chief Operating Officer

Well, I think on the volume side, our LTL business is both brokerage and Managed Transportation and so maybe a little steeper decline on the Managed Transportation side. What's interesting about that is that for Echo, we manage 100% of our clients transportation. So there is no opportunity to gain share per se if a client has to shut down or reduce operations and so we see -- we kind of feel 100% of that volume decline in that area. It doesn't have, I would say, any impact on gross margin, our net revenue margin, actually in either case in terms of the volumes I would say, but on the brokerage side, the other piece of the puzzle is that the majority of our customers that our LTL shippers on our brokerage side are small to mid-size businesses and so again, the good news for Echo is that the majority of our customer base is in I think -- it's industrial in nature, manufacturing, distribution, wholesale trade.

Obviously, there's been an impact. We mentioned the 24% decline and it's small and mid-sized companies, but there's not an exposure in what I would say some of the heavier hit industries whether that be obviously hospitality, tourism, maybe auto and other retail apparel, some of the other industries that have been harder hit, that are not core industries that Echo deals with. So I think its stabilized. I don't think it has a significant impact on our margins on the LTL side of our business. Just might have, as Kyle mentioned earlier, overall, a little bit of a mix issue if LTL declines greater than we've talked in the past, it's lower dollars per shipment, but tend to be higher margins and so that can impact our overall net revenue margins if there's a mix change and there maybe a little bit of a -- we've had a pretty steady mix element here for a while, but this could cause a little bit more mix shift I'd say in the near-term.

Bascome Majors -- Susquehanna -- Analyst

It sounds like the indication is that we don't see the typical sometimes significant gross margin flexibility in LTL in a weaker market that we might see in TL.

David B. Menzel -- President and Chief Operating Officer

Yeah, it's not as volatile for sure and I would not expect to see any significant volatility there, not by order of magnitude like you see it sometimes in truck loading.

Bascome Majors -- Susquehanna -- Analyst

And Kyle, forgive me if I missed this, did you discuss the capex budget and if that has moved at all? Thanks.

Kyle Sauers -- Chief Financial Officer

So -- we didn't actually talk about it. So you know what, most of our capex relates to technology, you know, good two-thirds or a little more is our internally developed software and I think Doug highlighted, we've not pulled back on the investments we're making in technology and data science. We're moving forward with all of our technology road maps. We have found some areas to pull back a little bit on projects or initiatives or slow them down, more on the refresh and hardware side, but that's really only reducing the capex by about 10% or $2 million or $3 million. So we're kind of expecting something in the -- call it $23 million, $24 million, $25 million range for the year, something like that.

Bascome Majors -- Susquehanna -- Analyst

Thank you.

Operator

Thank you. Our next question will come from Stephanie Benjamin with SunTrust. Please go ahead.

Stephanie Benjamin -- SunTrust -- Analyst

Hi, good afternoon.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Good afternoon.

Stephanie Benjamin -- SunTrust -- Analyst

I was hoping you could discuss a little bit about the sequential volume trends actually during the first quarter. I believe you gave on the last call that truckload volumes were up about 7%, so it doesn't seem that there were some improvement. Was that largely due to that big spike that you saw in the second half of March and then to your point about kind of the guidance assuming that we are at the bottom from a volume standpoint, what are some of the drivers do you think that you should enable that kind of volume improvement as we move forward out of this?

David B. Menzel -- President and Chief Operating Officer

I'll cover -- I'll talk a little bit about that in terms of the monthly progression. On the truckload side, we did see improvement in volume per day throughout the quarter. It was roughly 7% in January and February and came up to just over 11% in March and I think that the core driver of the volume improvement that we saw has a lot to do with the success that we've been having in the contract and through the RFP season and the RFP cycle. We've been a winning greater share, more bids and we've seen more of that business continuing to come online.

So trends were very favorable in terms of our ability to grow the business prior to this crisis and I think that we had a lot of momentum and we still see that, we're still seeing awards come across and we still feel really good about that and that was a big driver and I think that just -- and then you had a little bit of the restocking surge potentially in the last week or two. We saw it like I mentioned in the prepared remarks, some additional spot business that came in, in March that also helped those numbers. And then the second part of your question was -- could you repeat the second part of that question. I think Doug will pick that up?

Stephanie Benjamin -- SunTrust -- Analyst

Sure, absolutely. So I think you gave some commentary just about we think we're kind of at the bottom of the impact of this pandemic hopefully, but with the guidance. So, kind of as you look forward, what gives you confidence or bullish in terms of volumes improving from here?

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Yeah, well, I mean that's an assumption that we made in our planning as we pointed out in our prepared remarks and it's based on the fact that the swift downward trend that we saw has subsided and flattened out. We're seeing, as Dave mentioned, a small rebound in LTL and all of our active shippers are continuing to ship and we're not getting any news from them that they see another cliff coming. And then as we think about, you know, what appears to be a pretty strong effort to get companies back opened up again and back to work. We think that, that can only help volumes and it's not going to detract from volumes. So like I said, it's a bit of an assumption on our part, but when we put all those pieces together, that's what we come up with.

Kyle Sauers -- Chief Financial Officer

Maybe -- this is Kyle. I'll just add to that a little bit that when you think about our range of $450 million to $500 million for the second quarter, the top line, the midpoint of that is down about 14% year-over-year and we've said that through the first 13 days of the quarter, we're only down 12% and that includes Good Friday. So arguably probably down even a little less than that. So when we're thinking about our planning in our ranges, it just assumes some modest seasonal improvement in freight volumes in addition to what Doug's highlighting the conversations we're having with customers and what we're seeing.

Stephanie Benjamin -- SunTrust -- Analyst

Got it. That's very helpful. And then can you just remind us more from a housekeeping standpoint what the natural seasonality is from the net revenue margin from 1Q to 2Q and kind of how that's playing out so far. I know you gave an update already and it's probably a little early to tell, but any additional color there would be great?

David B. Menzel -- President and Chief Operating Officer

Yeah, I mean we've seen so many different cycles over the past four or five years that I don't know what the normal is, but I would say that prior to this crisis going into Q2, we would have -- we've typically seen increased volume primarily on the truckload side, but across LTL, too from a seasonal perspective, if you think sequentially that is driven from more business activity, obviously and then also just the summer season that drives increased beverage consumption etc. So you get more volume coming into Q2 and we also come out of an award cycle and depending on the economic climate, we were in a pretty balanced freight market. In a balanced freight market that's steady, we would expect gross margin compression, modest potentially coming into Q2 because you've got more award business coming online and, you know, it's competitive and rates aren't moving around a lot and so there's not as much disruption.

So that would have been probably a likely scenario before this all happened and then now that this has all happened, I think the volume assumptions are up in the air a little bit, but we've seen it steady as both Kyle and Doug commented on. So we may see a little bit of volume resurgence depending on how you think this recession and this economy will play out, but a little bit of resurgence with the change of seasons that will naturally occur more businesses coming online and there's been a lot of government support for these small and mid-sized businesses. So those are some things that could be to look to.

And then I think on the capacity side and the margin side, I'd expect pretty consistent margins on the LTL side, but potentially some expansion on the truckload side depending on, you know, the cost of capacity is coming down, Doug and Kyle have often highlighted the cyclical nature of the business that we're in and oftentimes carrier costs move a little faster than shipper costs and so we'll just have to see how that plays out as we move forward throughout the quarter, but I would not, sitting here today, would not expect to see compression on the margin side like I would have said maybe before this crisis.

Stephanie Benjamin -- SunTrust -- Analyst

Great and I'll leave it at that. Thanks.

Operator

Thank you. Our next question comes from David Campbell with Thompson Davis & Co. Please go ahead.

David Campbell -- Thompson Davis & Co -- Analyst

Yes, thanks for taking my question and thanks for having a good quarter in a difficult environment. I don't think how anyone could expect you to do any better than that, unless you're living on a different planet, but here on Earth, you did a great job.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks, David.

David Campbell -- Thompson Davis & Co -- Analyst

Kyle, I'm surprised that you can't estimate for us G&A for 2020 and some sort of range. That seems to be an area that you are focused on controlling costs and so I'm surprised you can't give us some estimates based upon your own internal assumptions on revenues.

Kyle Sauers -- Chief Financial Officer

Yeah, David, I appreciate that and I understand what you're saying. I think the challenge is without giving revenue guidance for the back half of the year, it's harder to estimate what we would expect our staffing plans to be to support a certain level of business when [Phonetic] incentive compensation might look like, but maybe let me give you a couple of things just to try and help you think about it.

We already talked about the midpoint of our Q2 G&A is $45 million. So that's down sequentially by close to $3 million and we talked about that being headcount changes, not as much hiring, lower anticipated incentive comp, reduction in travel, things like that and so if you made an assumption that Q3 wasn't going to look any different than Q2, I'm not telling you that's our expectation and we do think that things are going to be looking better, but I think our costs would look similar as they do in Q2 in Q3 if the business was operating similar.

So I guess that we're hopeful that volumes start to recover and we are bringing back most of, if not, all of those furloughed employees. So we'd see costs move up in Q3 if that was happening and then I think Q4 is just a little too far out given all the uncertainty to be giving too much more information at this point.

David Campbell -- Thompson Davis & Co -- Analyst

Yeah. Right, OK. It's really based on the fact that you're not giving us any revenue estimates for the year, but it certainly looks like things can't get any worse on the LTL. I mean 24% down in April is quite a change from the first quarter and you said its mostly the small and mid-size customers that's doing that. Is that the way -- retailers going out of business, is that a big factor?

Kyle Sauers -- Chief Financial Officer

I think it's just maybe -- I would say not going out of business, but just the --

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

They are not in business.

Kyle Sauers -- Chief Financial Officer

Just maybe temporarily not in business is a good way to put it, but the other -- and I do think we're actually, we are optimistic on the second half. We mentioned in the prepared remarks that we closed an unprecedented amount of new business in the first quarter and through -- actually through the date of this call, $69 million in Managed Transportation and a lot of that is LTL as well and so -- and that business is expected to come online in the back half of Q2 and early in Q3, some of those accounts we don't have project plans on yet. So I can't be real specific, but I do think that's also encouraging in terms of the LTL side and providing a potential upward trend as we move throughout the year from where we're at today.

David Campbell -- Thompson Davis & Co -- Analyst

And then my last question is, is there any M&A business -- I've read about some truckers going out of business or in [Phonetic] bankruptcy, there should be some small and mid-size trucking companies that would be available at a decent price. So I'm surprised that you haven't found any yet and do I have something wrong in that assumption that there -- [Speech Overlap].

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

We won't be buying any trucking -- yeah, David, we won't be buying any trucking companies as long as I'm around here, but we are certainly interested in the non-asset transportation businesses and probably more in the tuck-in variety.

David Campbell -- Thompson Davis & Co -- Analyst

I was just thinking you could convert trucking companies -- you could just take their customers and not their assets.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Yeah, well, I think part of what you said is true that the prices are down right now. There is oversupply of capacity. Insurance rates are high. I think it is difficult for the small truckers. We know some of them have just said, hey, I'm going to stay home because I don't like the rates and it's hard to find loads and so there is some self-correcting mechanism I think built into the marketplace. It would be hard to buy a trucking company and just convert their customers to non-asset brokerage, but that being said, we do think that there are -- there continue to be M&A targets that are more like us that are smaller brokerages and logistics companies and as I said in my prepared remarks, we continue to look for those opportunities and have the conversations where they make sense, but at this moment in time, we're probably dragging our feet a little bit in terms of pulling the trigger on anything and want to wait and see what the landscape looks like as we come out of this thing.

David Campbell -- Thompson Davis & Co -- Analyst

Okay, thanks.

Operator

Thank you. Our next question will come from Bruce Chan with Stifel. Please go ahead.

Bruce Chan -- Stifel -- Analyst

Yes, gents, good morning or excuse me, good afternoon and thanks for the time. Just looking for some color here on how you characterize the competitive environment in brokerage right now. I know, Dave, you mentioned that we're not seeing the same level of seasonal award related margin compression, but if we look back to the second half of 2019, we saw maybe a surprising amount of competitiveness as everyone was chasing the same contract business and we're looking at another very thin spot market here. So what's the likelihood that this kind of bad behavior happens again especially if this freight rut stretches out a little bit longer?

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Yeah, Bruce, this is Doug. I have to be honest and tell you we haven't been paying a lot of attention to our competitors. We've kind of had our heads down running the business, doing what we think is right and as we've said for a long time, we think size and scale and network effect matters. We think that technology and data science matter. We think having strong relationships with our shippers and our carriers matters and in this current environment, access to capital matters and having financial strength and a solid balance sheet matters and not being over-levered matters and so -- and then having the ability to leverage your technology and work from home matters. So when you think about all those things I just rattled off, I mean those are all the things that define the Echo model and so we're just trying to execute on our plan and we think it's working and I can't really tell you that competitors have had any impact on us one way or the other and we're taking the market share that we can get.

Bruce Chan -- Stifel -- Analyst

Okay, that's fair and then just on that data and technology side since you mentioned it, are you seeing any big returns on that right now. You discussed the work from home flexibility, certainly, but as far as maybe where some of those algorithms are coming into play. Are those helping you out on the buy side? Are those helping you to position or are those actually breaking down right now because we're in such a black swan type situation?

David B. Menzel -- President and Chief Operating Officer

Yeah, Bruce, I think they are helping. We've been on the algorithm side and price prediction capability, we've been doing that for years and we've implemented that throughout our systems and I think that those tools are very valuable. We talked a lot last quarter about our initiatives on the carrier side and rolling out EchoDrive and try to drive adoption. As you can imagine in this environment, more and more dispatchers are working from home and accessing systems remotely. So we're seeing significant increase in adoption in those platforms in terms of both users and searches and actual bookings. We still are doing much of the price negotiation and finalization on our own, but we're very close to being able to roll out automation on that front as well. So we feel great about that and I do think that those investments in being able to conduct business with us online, access our freight and our loads, all those kind of things has been very well timed in terms of where we're at today.

Bruce Chan -- Stifel -- Analyst

Okay, great. I appreciate it. I'll hand it over.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thanks, Bruce.

Operator

Thank you. Our next question comes from Tom Wadewitz with UBS. Please go ahead.

Tom Wadewitz -- UBS -- Analyst

Yeah, good afternoon. I apologize if you mentioned this first one, there was some overlap with the CSX call, but on the gross margin comments, I guess I would have expected a bigger move up in your gross margin in April versus what you saw in the first quarter. Is that I think maybe you said that's because the LTL margin doesn't move, but can you tell us what the truckload gross margin -- maybe how much that moved in April compared to where it was in March?

David B. Menzel -- President and Chief Operating Officer

So I don't have that exact number in front of me right now, but I would say that to the extent that it did move up [Indecipherable], but it did move up, upward on the truckload side, Managed Transportation and LTL very steady, no movement there. The fuel price and the mix, Kyle mentioned the mix issue, which is another factor with LTL being a higher margin component of our mix that drags down the overall margin a little bit when that mix shift occurs. So you do have a lot of moving parts there. So I think that's probably the level of detail on what we wanted to give on the first 13 days.

Tom Wadewitz -- UBS -- Analyst

I mean is it -- I guess if you, yeah, look at the MDI as an indicator, it would seem that March was super tight, April has gotten dramatically looser. It seems like you've only seen part of that, is it fair to think that the gross margin would move in a favorable direction as you look forward, recognizing you've only got a little bit of April so far?

David B. Menzel -- President and Chief Operating Officer

Yeah, I think it depends on what your assumption is on capacity. I think that could, that could be the case, I would agree. The other thing I guess I could have pointed out for you is that we probably saw a little bit of decline in gross margin throughout the quarter. You know, January, February, March, when you look at that average for Q1, you're kind of getting a little maybe what the current trends would have been in March so to speak.

Tom Wadewitz -- UBS -- Analyst

Yeah, OK. What's -- in terms of capacity, I know it's a little bit tough to tell, but do you think that the pressure in the spot market is driving or is there evidence that capacity really is starting to come out of the market in a meaningful way or is that something that's just kind of hard to tell?

David B. Menzel -- President and Chief Operating Officer

I think it's a little hard to tell certainly anecdotally. We believe that it is coming out of the market, the demand is -- there has been big industries impacted and as we talk to carriers, it is not as if they are closing their doors, but there is certainly examples, plenty of them of carriers that are less efficient, pulling some drivers of capacity off the road right now in response to lower demand. So it does make sense, I couldn't say if it's -- how temporary that changes, but it's -- any story you hear is going to be about capacity coming out, not coming in, so it's coming out.

Tom Wadewitz -- UBS -- Analyst

Okay, great. Just one more if I can, you know, it sounds like you've had some good success in the contract side in truckload. How good is the compliance with that and how kind of fluid is that situation? Obviously, volumes move with customers moving around a lot, but would you expect to be in compliance with the contract business you won [Phonetic] or would you say it's kind of temporary just given how dynamic the market is?

David B. Menzel -- President and Chief Operating Officer

Yeah, I think it's just dynamic right now, it's impossible to -- I wouldn't look at it as if, I understand that there could be compliance issues over time. You know people might move freight into the spot, but in general, I'd say at this point, it's just a demand issue to the extent that we've seen some volume decline on this truckload side versus a compliance issue. It's hard to track, but I don't -- I haven't seen any sense of that being a concern.

Tom Wadewitz -- UBS -- Analyst

Right, OK. Great. Thank you for the time. I appreciate it.

David B. Menzel -- President and Chief Operating Officer

Yep.

Operator

Thank you. Our next question comes from Jeff Kauffman with Loop Capital Markets. Please go ahead.

Jeff Kauffman -- Loop Capital Markets -- Analyst

Thank you very much and thank you for taking my question. I just wanted to follow-up briefly on Dave Campbell's question and thank you Kyle for that view of SG&A. I take it by your answer that you feel like you've cut what needs to be cut at this point and are there other levers you can pull if say the question like Bruce asked, the environment doesn't bounce back as we think or have we pretty much made our statement on SG&A and that's just where we're going to go with this?

Kyle Sauers -- Chief Financial Officer

Yeah, I don't think I would say that we're -- we've made one big move and that's it in either direction quite frankly because we're managing the business on a daily and weekly basis and one of the great things about our business is we've got KPIs that we measure all day long, every day and so we're adjusting as we go. So, I think to the extent we had volumes that were to deteriorate further, we've got ways to adjust further as well. We're obviously hoping it goes the other way and I think that the nice thing for us as we anticipate that when volumes do rebound that we can adjust our workforce very quickly back in the positive direction and be able to service all the freight that's available to us. So I think that's a good opportunity, but the quick moves are largely in the compensation area that includes delaying hire classes like Dave mentioned earlier or just adjusting our headcount across the organization to match volumes.

Jeff Kauffman -- Loop Capital Markets -- Analyst

Okay and then one other follow-up, more for Doug. Doug, thank you for the walk through the cash and liquidity and paying down the convertibles. So, when you talked about if we get back into M&A, it's going to be more of a tuck-in variety. Is that based on the idea that we have $127 million of available borrowing capacity, but we may not want to use all of it even for the right deal. So therefore, that's the idea of a tuck-in or something strategic, but that's kind of the number we should think about in terms of how far are you willing to go for the right deal?

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Well, I mean on the tuck-ins, we wouldn't be spending all that.

Jeff Kauffman -- Loop Capital Markets -- Analyst

I should hope not, yeah.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

So I think it's just a matter of, we got to take a step back and take a breath, understand where multiples are, understand where the cash flow trends are going in the overall market dynamics and then based on the amount of EBITDA that we're buying and the multiple that we're buying it at, does it make good business sense and also what's, how does the business fit with ours, how quickly can we integrate that on to our platform, how much customer overlap is there, how much carrier -- it's all the typical questions that we ask ourselves when we assess a tuck-in opportunity and then looking at our overall liquidity and seeing from a risk standpoint, does it make sense.

Jeff Kauffman -- Loop Capital Markets -- Analyst

Okay, that's all I have. Thank you.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

Thank you, Jeff.

Operator

Thank you. And our next question will come from Kevin Steinke with Barrington. Please go ahead.

Kevin Steinke -- Barrington -- Analyst

Hi, good afternoon. So I wanted to ask about the Managed Transportation business. Obviously a really strong start to the year with $69 million of new revenue added. Do you think that momentum can continue in this environment or maybe do people freeze up on decision making or conversely, is there some aspect of the Managed Transportation value proposition that is even more attractive in this type of environment?

David B. Menzel -- President and Chief Operating Officer

Yeah, Kevin, I mean I do we're not going to predict exactly the pace, but I do think it can continue. We've seen a lot of interest. Our systems are rock solid in terms of our ability to support a client and that's been very valuable to have access to the kind of reporting information and all the things that our transportation management solution offers our customers, you know, its very valuable during this time. We're seeing executives and decision makers having -- trying to focus on strategic issues and I think that's helping in terms of the pipeline, development, and having opportunities to move forward. So we feel really good about A) the success and then B) the opportunity this year and in this environment to continue to talk about the value that we can provide to shippers with our solution. So we're excited about the opportunity ahead.

Kevin Steinke -- Barrington -- Analyst

Great, thanks. That's all from me today. Thank you.

Operator

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Chairman and Chief Executive Officer, Mr. Doug Waggoner.

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

I would just like to thank everybody for joining us today. It's unusual times that we find ourselves in and hope you all stay healthy and we're optimistic that, you know, like I said, we're in the bottom of this U and we hope that it's a narrow U and not a wide U, but we'll see what the market gives us and we'll be ready to react accordingly. Look forward to talking to you next quarter.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Kyle Sauers -- Chief Financial Officer

Douglas R. Waggoner -- Chairman of the Board and Chief Executive Officer

David B. Menzel -- President and Chief Operating Officer

Jack Atkins -- Stephens -- Analyst

Bascome Majors -- Susquehanna -- Analyst

Stephanie Benjamin -- SunTrust -- Analyst

David Campbell -- Thompson Davis & Co -- Analyst

Bruce Chan -- Stifel -- Analyst

Tom Wadewitz -- UBS -- Analyst

Jeff Kauffman -- Loop Capital Markets -- Analyst

Kevin Steinke -- Barrington -- Analyst

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