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Express-1 Expedited
Solutions is now on peoples’ radar because of the success of 2006 and the completion
of their restructuring
Services
Trucking
(XPO-AMEX)
Express-1 Expedited Solutions, Inc.
429 Post Road, PO Box 210
Buchanan, MI 49107
Phone: 269-695-2700
Mike Welch
President and CEO
Jeff Curry
VP Corporate Development
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – March 29, 2007
BIO:
Mike Welch
Chief Executive Officer
In 1989 Mr. Welch co-founded Express-1, Inc., a Midwest based expedited carrier,
which has grown to be one of the largest ground expedite companies in the
country. Mr. Welch merged Express-1 with Segmentz, Inc. in
September of 2004. Mr. Welch has been involved in the transportation industry for over
twenty years with expertise in the expediting industry. After some aggressive
restructuring in 2005, Segmentz, Inc changed its name to Express-1 Expedited Solutions,
Inc and the resulting company focuses exclusively in ground expedited
transportation. Mr. Welch has a Bachelor of Science Degree in Industrial Marketing
from Western Michigan University.
Company Profile:
About Express-1 Expedited Solutions, Inc.
Offering same-day, time - sensitive, and dedicated transportation to over 1500 customers,
Express-1 is one of the largest ground expedite companies in the country. The company's
premium transportation service is provided through its 24/7 operations center, by its
experienced inside sales staff that uses the latest in vehicle tracking and dispatch
software. Express-1 covers the 48 states and Canada and has outside sales staff that
covers the Midwest and Southeast. Express-1 utilizes an asset light operating model
working with independent contractors that live throughout the country. Express-1 Expedited
Solutions, Inc. is publicly traded on the American Stock Exchange under the symbol XPO.
Mike Welch, President. Founded the business in 1989.
Has been in transportation his entire working life. Graduate of Western Michigan University.
CEOCFO: Mr. Welch, you are on the good
side of a restructure; tell us what is going on and where you are now.
Mr. Welch: “The restructuring is
complete. At the time before restructuring, we were a transportation company that
specialized in a multitude of things, anything from pick up and delivery,
airport-to-airport freight, brokerage, truckload freight and expediting, which is what we
currently still do. We purchased Express-1 by segments back then and when the smoke
cleared, Express-1 was the only profitable company out of the four different groups of
business that we held. Therefore, we restructured, we disposed of the other units and we
just focused 100% on the expedited freight. By doing that, we were able to change our name
back to our original name, Express-1. In all of 2006, the shareholders saw the Express-1
results; they also saw what it can do and how the model works. We are a non-asset based
company; we deal with all owner-operators and they use satellites to communicate so they
are spread strategically throughout the United States. We specialize in hot shipments that
are very time-critical and sometimes value-critical as far as the cost of the freight and
by doing that, we can charge a premium dollar to offer that service to our
customers.”
CEOCFO:
Who is using your services?
Mr. Welch: “We provide service to
various industries. We have everything from financial printing, to appliance makers and
automakers; anybody involved in any type of manufacturing process uses just-in-time
delivery. We also do some specialized work like medical equipment that has high value. We
also do some pharmaceutical work and high-tech work that also has a lot of high value in
their products where they do not want to put it on an everyday common carrier.”
CEOCFO:
Would you tell us about the expedited trucking industry and your place in it?
Mr. Welch: “The ground expediting
industry has estimates of anywhere from 3 to $5 billion as far as the niche in our market.
There are two bigger players than us and they probably control close to a half-a-billion
dollars in revenue. The rest of it is really controlled by smaller players. We feel that
at our size as a true ground expediter, we are probably around number four in the country
as far as size.”
CEOCFO:
Why are your customers coming to you?
Mr. Welch: “It is our people; we have
developed a culture and a reputation that we are very much like a Southwest Airlines, Inc.
(NYSE: LUV) or a Lands’ End. They get response from our people, so they trust us and
we do what we say we are going to do. On top of that, we have great technology. Technology
is only as good as your people and we have just outstanding people that make our company
run.”
CEOCFO:
How do you recruit your drivers?
Mr. Curry: “We have a sales unit over in our
recruiting area just like we would sales for picking up new customers. They are rewarded
on their success and working with our owner operators and bringing them onboard Express-1.
Each week we have a class of new perspective owner operators that are road tested and are
given written tests. They go through a couple days of orientation and then we satellite
and decal their truck while they are here. We go through that each week in order to grow
the fleet, and hopefully in unison with our customer base growing at the same time,
because we cannot keep the trucks in the fleet if we do not have business for them.”
CEOCFO:
Do customers work with you on a shipment-by-shipment basis or through long-term contracts?
Mr. Welch: “We have long-term contracts
as far as rate agreements and many of our performance standards that we have set up with
them. However, we generally do not have any type of guarantee for revenue and it is all
day-by-day. If you can imagine 500 ambulances, spread out throughout the country and
waiting for that next emergency and that is kind of, what we do. That is also why we can
get the premium dollar for our service.”
CEOCFO:
What is the financial picture of the company?
Mr. Welch: “We had a strong 2006. After
the restructuring, we were very profitable. We did about close to $2.8 million in net
income. We were also fortunate that EBITDA was $3.9 million, so it was real good cash flow
for us. In January (2007), we paid off our line of credit so our balance sheet looks very
strong too. The nice thing about this business going forward is we do not have a lot of
capex. The major investment is satellites, but we do invest in things such as training,
recruiting and people. That is why we are in my opinion so good because that is where our
money goes, investing in the improvement of our people. We are not burdened with a heavy
capex in our business.”
CEOCFO:
Do you see acquisitions in the future or consolidation among the lesser players?
Mr. Welch: “I think you will see some
of that going forward. People, businesses and carriers have recognized that this is a good
market and there is an interest in it. Just based on that alone, I think people would be
interested in acquisitions and looking at getting a bigger piece of the market
share.”
CEOCFO:
Since you work with owner operators are things such as the cost of gas, environmental
regulations and the general economy of the trucking industry a concern for you?
Mr. Welch: “They are factors in any new
equipment that is purchased. Obviously, there have been many changes in the engines. New
equipment will cost the owner operator more money at future purchases. It is too early to
hit anybody as far as new purchases because we are only two months into the year. The same
thing happened last time the engine change occurred and I believe that was early 2000. It
adds to the cost of the owner operator therefore making it a little more difficult to
attract drivers, because the cost is getting higher for them as they go. What we have been
able to do commercially is with our business you can get involved with us with different
types of vehicles. Our equipment ranges from cargo vans, to freightliner spreaders, which
are nothing more than bigger European cargo vans. We also run straight trucks. Right now
probably only 15% of our business is handled in tractor-trailers. We have the advantage of
lower priced equipment, newer equipment and a lower barrier of entry to these other
operators.”
CEOCFO:
Are there geographic areas or industries where you would like to make inroads and how do
you get there?
Mr. Welch: “Yes there are. There is a
huge amount of expediting going on in the southeast and Midwest and the Texas corridor
going to both the southeast and the Midwest. That is where a lot of the nation’s
manufacturing is, so we seem to do a lot around there. Historically in the west coast
there is not as much because of the long distance between cities. A lot of their emergency
just-in-time freight is handled by air cargo and the domestic air carriers. As far as
industries, ten years ago it was primarily automotive and they were the leaders and the
spearhead of expedited just-in-time freight. We have seen a huge growth in other
industries year-by-year, because everybody is trying to create a leader inventory system.
It has been very exciting for us because we see these other industries that use to not
participate in our niche of the industry and they are doing it now. Therefore, it is
moving throughout all industries. Lastly is high-value freight and that would be the
pharmaceuticals, museums, those type of things that are looking for a specialized carrier
to handle their freight. They do not want to commingle their freight with a common
carrier.”
CEOCFO:
What do you see for Express-1 two or three years down the line?
Mr. Welch: “Our goal is to continue our
solid bottom line and solid growth. We have historically as Express-1, and we have been in
business since 1989, right around 20% historical growth. We foresee that we will be able
to continue to do that and we are putting resources in place so that we can do that. On
top of that it is important to deliver a profitable bottom line, not only for the
investors but to help spur and fund that growth and we are very confident that we can do
that going forward.”
CEOCFO:
Why should investors be interested and what should they be aware of that does not jump off
the page?
Mr. Welch: “One thing they should do is
look at our balance sheet and at what we have accomplished. We were a little bit burned by
the reorganization and the other services that were offered by our predecessors, but now
when you look at us as a stand-alone company and you look at what we are doing, it stands
out. I think it is quite unusual to have a small cap company as profitable and having the
consistent growth. It may not stand out because it is mired in the old company that people
do not see as they have only seen one year of success. As they continue to see these
successful years, I think it has got to stand out. We have had many people call and we are
on radars now because of what we accomplished in 2006.”
CEOCFO:
In closing, what should people remember most about Express-1 Expedited Solutions?
Mr. Welch: “It is a niche in the
transportation business and at this point, it is the most profitable niche as far as
rates. It is a specialty market, not a commodity and it is nice to invest or to be part of
an industry that is not a commodity. It is certainly service, service, and more service
and to grow you have to continue to create value and value propositions for your
customers, which by doing that it certainly helps us go forward and the industry as a
whole will move forward.”
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