#11 A Masterclass in Scaling Freight: The Tech and M&A Blueprint — Doug Waggoner, Echo Global Logistics

[00:00]

Jesse Buckingham: Is the truckload brokerage off the ground?

Doug Waggoner: Well, one of the early challenges are that you don't have enough experience and enough lanes to be competitive. I remember we would get a chance to quote on a truckload shipment. In the early days, you wouldn't know the price. So you'd have to call some carriers, find a pen, put a markup on it and quote it back to the shipper. By then they might've already found a truck or they would tell you CH Robinson's $200 cheaper, you know, and think, well, how do they do that? Because we can't even buy a truck for that. So there was a lot of bootstrapping your way to scale so that you had enough density and enough lanes where you had a Rolodex full of carriers that had back hauls and could give you a below market price where you could make a little money. When we would buy a small LTL broker in 2010, we would tell them, look, we want you to keep selling LTL, but we also want you to sell truckload and we're gonna teach you how to do it. We want you to sell managed transportation and get contracts. So long term contracts will tell you how to do that. We got the technology to do it. So we would take these small little acquisitions and double or triple their revenue in a couple of years simply because we were giving them more to sell and they already had bulk of relationships. Welcome to the Freight Show podcast.

[02:00]

Speaker 2: Today, we're joined by Doug Wagoner, chairman and CEO of Echo Global Logistics, to unpack one of the most remarkable careers in modern freight. Doug takes us back to the early days of deregulation, when tariffs were fixed, deals were done over three martini lunches, and pagers were cutting edge tech. He shares how those early lessons shaped his leadership at Echo and what it took to build one of the largest multimodal brokerages in North America. We explore the company's origin story, from bootstrapping to IPO to going private, and the challenges of integrating 30 acquisitions while keeping culture intact. Doug also shares his perspective on AI's role in logistics, why it's a task killer, not a job killer, and how technology is reshaping productivity across the freight industry. Alright. Let's dive in. This episode is brought to you by Vooma, the back office automation platform built for freight brokerages and three PLs. From AI powered document handling to streamlined workflows, Vooma helps logistics teams move faster and scale smarter. Learn more at Vooma.com.

Jesse Buckingham: Welcome everyone to another episode of the Freight Show. I've been really looking forward to and excited. We've got Doug Wagner on, chairman and CEO, Doug, is that right, of Echo? Yeah. Thank you so much for joining. It's great to have you.

Doug Waggoner: Well, thanks for having me, Jesse. Good to be here.

Jesse Buckingham: Doug, you have been in the logistics industry for a long time. And as I understand it, when you started your career in logistics, this was really just kind of post deregulation. Is that right?

Doug Waggoner: That's right.

Jesse Buckingham: And I would love to understand what did things look like back then? I mean, you were sort of like right on the tail end of it, but take me through that transition, what it felt like in that moment, the opportunities that created, how sort of brokerage emerged as I understand it in that era there, but I'd love to hear it from someone who kind of lived through that period firsthand.

[04:02]

Doug Waggoner: Well, when I graduated from college, I joined a management training program for a trucking company called McLean Trucking Company, named after Malcolm McLean, who was the inventor of ocean containers. He was no longer involved in the LTL company, but at the time McLean was the fourth largest LTL carrier. And I started off in sales, but I went through a six month training program, which started out by driving a truck. They wanted you to understand what the truck driver's life was like. And then you got to be involved with every aspect of the business, you know, working in small terminals, working in large terminals, working on the dock, supervising dock workers and drivers, working in the corporate office. So it was really a great education for a kid right out of college, wanting to learn the industry. And you're right. It was a different time in many respects, starting with deregulation. The industry had just deregulated in 1980. And in those days, prices were set by the ICC, the interstate commerce commission. And so transportation companies just basically charged whatever the tariff rate was. And there was no negotiation and salespeople were really just relationship people that would entertain a lot. I remember going out with a sales rep that I was training with, and he was an old timer. In fact, most of the sales reps in those days were middle aged white men, had three martini lunches. So I would go out with him and make calls and, you know, customer would ask, you know, what's the price and the sales rep would respond. Well, I don't know. It's all regulated. The price is the price. And you would only sell your service. And so that was really interesting. And so we had just deregulated and the industry was really trying to learn how to compete on price because it had never had to. And so in the beginning you would see discounts, like 10% discounts off the tariff price, and they would be tied to, you know, give us more than three shipments and we'll give you a 10% discount. So those were the early days of competition and it got much more sophisticated, much more competitive from there. In fact, in the eighties, there were a lot of LTL carriers that failed, oftentimes because they had a unionized labor with the teamsters and they couldn't compete with the newer non union carriers that were starting up. And so if you look over the last fifty years, there's been dozens and dozens of LTL carrier bankruptcies.

[06:06]

And once they go bankrupt, they never come back because they lose all their freight the following day. But the other way that it was different back then, and this will be probably difficult for your audience to imagine, but you know, the technology of those times was ridiculously premature. We didn't have cell phones. So as a salesperson, I would go to the bank and get rolls of quarters, put them in my ashtray. And while I was out making sales calls, I would have to call a customer or call the office. I would literally drive to a phone booth and get some quarters out of my tray and put them in the phone and make a call. And then we got a big technology upgrade, but it was called pagers. So my office would say, have a customer that wanted to talk to me. They would page me. And then I would call the office, get the customer's information and maybe the customer's number and then call them back from a phone booth. Likewise, we didn't have email in those days. So when you communicated, even intra company communications, if I wanted to communicate with another office, I would type out a memo on a piece of paper, put it in their envelope and stick it in what we call the truck mail. We had our own mail system where paper would move between terminals in a mailbag, and that's how we communicated.

Jesse Buckingham: Wow. And with the I hear a lot about the sort of LTL carriers of the time. Were there sort of long haul over the road, full truckload carriers? Was that a different segment of the market at that time? Or what did that sort of look like for the long haul?

[08:12]

Doug Waggoner: Yeah. You had distinctive carriers that were, you know, more prone towards long haul freight and then those more prone towards regional freight or even local freight. So sort of three classifications of LTL carriers. In those days, the big long haul carriers were yellow, consolidated freightways, roadway, PIE, there was probably a dozen of them. Ironically, all of which are no longer around. And then you had regional players that had a network to serve a regional part of the country.

Jesse Buckingham: Yeah. Interesting. And so the deregulation then caused new competitors to emerge that didn't have unionized labor forces, were able to sort of compete, get to a lower cost structure. So it caused bankruptcies in the LTL side for some. Take me through that sort of market evolution. And then I imagine something similar happened on the full truckload side as well. And that was kind of the era where folks like JB Hunt was sort of coming up and others. Right?

[10:13]

Doug Waggoner: Well, I think, alongside of all this came technology. Right? The physical computer, for instance, allowed us to connect to the system and optimize our business, run our networks and our terminals better. I remember being at yellow in the nineties and we hired a company called the Princeton consulting, which had a tool called super spend, which was a very sophisticated mathematical formula that allows us to optimize our line haul network and decide where to domicile drivers and trucks relative to the balance of our network. So during my career, I saw it go from sort of a backwoods good old boy industry to an industry that started hiring more and more college graduates, implementing technology, implementing mathematics and optimization. I was an econ major. So I did a lot of econometrics and mathematics. It was really gratifying for me to see the industry mature as time has gone on.

Jesse Buckingham: Yeah. That seems like a theme of your career where you've been in the industry for a long time but have always had this sort of tech forward orientation throughout it. And tell me about the beginnings of brokerage. Because as I understand, pre deregulation, you couldn't actually have an MC that didn't have assets associated with it. Right? It was almost not possible.

[12:14]

Doug Waggoner: For that industry to exist. I'm not intimate on the very beginnings of brokerage. My perspective was I knew somebody that went to work for a company called Hub City Terminals, which has now morphed into the Hub Group, but it was a franchise model where people were doing truckload brokerage sort of on an agent basis. I think another big turning point was when Paul Loeb created the company American Backhaulers. And Paul had a concept of finding where a truckload carrier ran empty, either back hauls, and finding capacity to fill that back haul and create a win win situation for both the shipper and the carrier. American Backhaulers were sold to CH Robinson. And I think that was a catalyst for CH Robinson to really scale and grow that business. And then after that, there were lots of copycats.

Jesse Buckingham: What was CH's primary business prior to the American Backhaulers acquisition?

Doug Waggoner: Oh, they had a brokerage business and I'm probably not expert on their history, but their legacy was that they were a produce broker. And they had somewhat of an integration with the transportation and the produce brokering where they could sell the produce and then have a way to move it from the farmers to the stores.

[14:24]

Jesse Buckingham: Yeah. Interesting. And fast forwarding a little bit to the founding of Echo. As I understand it, you had shifted out and were actually in the sort of freight tech ecosystem for a period of time before jumping in with Echo. But I'm curious to hear the origin story of Echo. As I understand it, initially it wasn't necessarily full truckload, but it had its origins in partials, if I'm not mistaken, but I'd love to hear that story.

Doug Waggoner: Right. So I left the LTL industry in 2005, because I wanted to start a SaaS TMS business. I had a partner and we started writing code early in 2005 and had an MVP product by the end of the year. We were starting to market it and bring on customers. The two founders of Echo, Brad Keywell and Eric Lefkovsky, had the vision to start Echo. Brad and Eric were serial entrepreneurs. They started a number of companies and started a company right before Echo called Inner Workings. Inner Workings' business model was that they would deal with commercial printers, find those that had surplus capacity, and then sell that capacity to people that needed to do printing. So effectively they were brokering printing. And as the story goes, they were oftentimes given a particular print job, let's say for Microsoft, and the right type of printer and equipment happened to be with a printer down in Atlanta, Georgia. So they would broker that print job, but then they would have to ship it from Atlanta to Seattle. So Inner Workings became a shipper and as such, they were using CH Robinson to move a lot of their freight. One day they got to tour the CH Robinson facility.

[16:34]

And they said, wow, they're doing what we do. They're doing it with freight and we do it with print. Maybe we should start a business like this because it's such a huge industry. They didn't know anything about transportation. And part of their model at Inner Workings was to essentially be an outsourced provider of print. So they would cozy up with a company and work with the marketing department and whenever something needed to be printed, they would handle it for them. They called that an enterprise customer. So when they started Echo, their idea was we're going to go out and find customers and become their transportation department. So it started out to be outsourced transportation. Brad is a great salesman and he went out and found some big customers right off the bat. So Echo got its start as an outsourced transportation management partner for a dozen shippers. About that time they were introduced to me as somebody that came from the industry and was tech savvy. Their intention all along was to create some prototype technology, test the concept, and then bring in an industry executive to run it. So that's where I came in. I joined Brad and Eric in the first year. Revenues were about $6,000,000 and I think we had 35 employees. And then once I got there, we initially started doing LTL brokerage. So we had the managed transportation business, which was the core. Having come from LTL, I knew all of the CEOs in the industry. And so I went out on a roadshow and started trying to convince the LTL carriers why they ought to let Echo resell their capacity. In those days, LTL carriers did not like brokers. They did not want a third party coming in between them and their customers. So my job was to convince them that we're going to be a reliable partner. We're going to be trustworthy. We're going to be fair. It's not all about price. We're going to add value and we're going to call on small SMB customers

[18:35]

that you probably can't afford to call on Mr. Carrier, because you've got sales reps driving around in Tauruses managing a sales territory, calling on big shippers. They don't have time for the little guys. And so the idea was we will take those customers. We'll aggregate a lot of them. We'll provide the sales. We'll provide the customer service. We'll provide the technology and all you have to do is provide us with the capacity. And so in a time when carriers really didn't want to deal with brokers, we got them to deal with us. At the same time, Robinson had been successful as an LTL broker. I think a big reason why they were so successful is that their person that ran LTL in those days had a very good relationship with the carriers. And I know that because I had worked with him as a carrier and he was very fair. In those days you had a lot of these small brokers that would sort of maybe they were a former LTL sales rep and they wanted to start their own business and leverage their relationships. But a lot of them acted kind of shady, you know, they would misdescribe freight. They would use the wrong weight. They would sort of game the system to make some money and to make a spread. Meanwhile, CH Robinson was very reputable, treated the carriers very fair. So when I went out on my roadshow to recruit carriers, basically said, we're gonna do what CH Robinson does. We're gonna be upstanding partners and we're going to be fair and it's not all about price. So we got a number of the carriers to agree to it and they gave us essentially wholesale pricing. And we started hiring people and selling. And in the early days, we would hire 12 salespeople and within a few months they'd be paying for themselves. So we'd hire 12 more. That just began this cycle that we created, kind of a flywheel effect. And by 2009, our revenue was about $260,000,000.

Jesse Buckingham: Wow. And so that's from very little, like if you said six in like 2007.

[20:35]

Doug Waggoner: And plus we never, aside from we got an early investment from NEA, which is a venture capital firm. They gave us $7,000,000. That was all the capital we raised. And that was enough. We were profitable from then on. And we actually started doing M&A in 2007. We bought our first company and we continued to grow until 2009. We did our IPO and we raised $80,000,000 in the IPO. So that was the second time we raised capital. By the time we paid the bankers and the fees and paid off a little debt that we had, we had about 50,000,000 in cash left over. And so based on that little war chest, we started doing more M&A and fast forward today, we've done about 30 acquisitions.

Jesse Buckingham: And what is, then also just to round out the story, in 2009 at the time we were going public, you were also trying to figure out how to be a truckload broker?

Doug Waggoner: At that point in time, we had our managed transportation business where we would sign air contracts and take over the transportation function for shippers. We had our LTL brokerage, but in those days, the LTL market was maybe a $40,000,000,000 market. Well, truckload was 400,000,000,000. So our next initiative was to figure out how to be a truckload broker. And we tried and failed and we would hire people that had done it. And it wasn't until we really zeroed in on our own approach and processes and built technology around it that we started to have some success. And then the next phase is you gotta get to scale to be competitive.

Jesse Buckingham: Yeah. So what was hard? It sounds like it took a few cycles to start to figure it out. What were the challenges in getting the truckload brokerage off the ground?

[22:39]

Doug Waggoner: Well, one of the early challenges are that you don't have enough experience in enough lanes to be competitive. I remember we would get a chance to quote on a truckload shipment and we'd give the customer a price. In the early days, you wouldn't know the price. So you'd have to call some carriers, find a price and then put a markup on it and quote it back to the shipper. By then they might've already found a truck. Or they would tell you, CH Robinson's $200 cheaper, and think, well, how do they do that? Because we can't even buy a truck for that. So there was a lot of bootstrapping your way to scale so that you had enough density and enough lanes where you had a Rolodex full of carriers that had back hauls and could give you a below market price where you could make a little money. And then we kind of bootstrapped that up to about, I think in 2015, our total revenue was about 1,200,000,000. Half of our revenue was truckload. We had $600,000,000 of truck business. And that's when we did the acquisition of Command and they were a $600,000,000 truckload broker. So in the 2015-2016 timeframe, we essentially doubled our truckload brokerage business, which then gave us the scale to be competitive with pretty much anybody in the industry because the more loads you're moving in a lane, the more carriers that you know in that lane that could potentially move it and the more options you have to find a good price.

Jesse Buckingham: So that's really the density flywheel that you can start to get turning. You've got more freight, you attract more carriers. You've got more available options.

[24:39]

Doug Waggoner: At the same time, you're building technology alongside to make you more efficient, capture price data so that you can do price discovery. Eventually you get to the place where you don't have to call to find out what the price is. You know what the price is in a lane. You understand the seasonality, you understand how the prices fluctuate by week. In 2014, we created a data science department, started creating our own algorithms to predict price. And that was an important part of our evolution.

Jesse Buckingham: Yeah. What was that moment like? Was that transition happening only for the large players? I mean, it's interesting now, pretty much everyone in the industry has to quote so quickly, right, that if you're waiting around to actually get a rate from a specific carrier, you're gonna be too slow. At what point did that start to transition where that was almost like the default for the industry?

Doug Waggoner: I think the first thing was people that had scale and the inclination to use a little mathematics could start to create pricing algorithms. But in the meantime, other companies came along like Freightwaves with Sonar who started to pull supply industry data. So today anybody can get their hands on that data without a lot of technology or analytics. It's available to buy. But that's been an evolution.

Jesse Buckingham: Yeah. Very different. So you guys built the brokerage to 600,000,000. It took a little bit of time, but you were really starting to get that flywheel turning organically before then doing the Command acquisition. And they were based in Chicago as well. Yeah. They were right down the street. Yeah. And what has been your philosophy around

[26:42]

M&A? How have you thought about it? Like where businesses fit in, how you think about evaluating what makes sense for you guys?

Doug Waggoner: Well, in the early days, and I'm talking 2005 through 2016 maybe, we were buying small brokers that would basically bring a book of business with them and give us density, maybe give us a geographical presence. Even though most of our salespeople can sell anywhere, they tend to want to sell in the area that they know, which is some radius around where they live. We found that to be true. But we would buy these brokers. They might be an LTL broker, which was fine because we had LTL brokerage. Or they might be a truckload broker, which is better because we were trying to build our truckload brokerage. We got a lot of talent that way. Part of developing our own approach to truckload was hiring experienced truckload brokers that had successfully built a company. So we learned a lot from them. And the economics were good because we would buy them at a multiple and as a public company, we would trade at a higher multiple. So there was some arbitrage there. The other thing that we were pretty good at is buying these smaller brokers and putting them on our technology and teaching them how to sell the other things that we sold because our strategy from the beginning was to be a multimodal broker. So we got less than truckload. We have full truckload. We have partial truckload. We have intermodal and we have managed transportation. Today we have even more, which is part of our ladder M&A strategy. But when we would buy a small LTL broker in 2010, we would tell them, look, we want you to keep selling LTL, but we also want you to sell truckload and we're gonna teach you how to do it. We want you to sell managed transportation and get contracts, long term contracts. We'll tell you how to do that. We got the technology to do it. So we would take these small little acquisitions

[28:46]

and double or triple their revenue in a couple of years simply because we were giving them more to sell and they already had a book of relationships.

Jesse Buckingham: Yeah. I can imagine that playbook being very accretive. Right? I mean, you get multiple arbitrage, but then you guys give them a bunch of other modes. You can organically increase revenue. You give them a technology stack that either allows them to support that volume with without necessarily having to grow.

Doug Waggoner: Yeah. And it's funny because in most days we were public and I would meet with investors and we would talk about all of our acquisitions and they'd say, oh, you're a roll up. And I'd say, well, not really, you know, because most of our growth is actually organic. Yes, we bought a number of companies, but if you look at the revenue from those companies, it's massive, two, three X growth. And I classify that as organic.

Jesse Buckingham: Yeah. Yeah. It's more that the roll up is traditionally associated with, I'll put everyone on a common backend and a lot of it's multiple arbitrage. And that was gonna be one of my other questions. The multimodality of your offerings has been sort of a core piece. I'm curious to understand more about the value of that and how you think about what offerings you bring in. And is there a tension between sort of focus and breadth?

Doug Waggoner: Well, first from a financial perspective, it's diversification. Right? So if you look at the cyclicality of the truckload freight market, we tend to weather those cycles better than most because a third of our EBITDA comes from truckload brokerage, a third comes from LTL brokerage, and a third comes from managed transportation.

[30:46]

So we take some of the volatility away that the market gives us. Now the flip side is it's hard to do. When we first set out to be multimodal in our sales organization, the question was, okay, do we have an LTL team and a truckload team and an intermodal team and a managed trans team? Or do we try to teach everybody to do everything? And we started off with an LTL sales team and a truckload sales team, and we did some customer surveys. We surveyed our LTL customers and we found out that 80% of them have truckload, but our LTL sales reps don't know how to sell truckload. And we surveyed our truckload customers and found out that 80% of them have LTL, but our truckload salespeople don't know how to sell LTL. So the decision we made was let's train our salespeople to do both. It's hard, but if you've got good training and good reinforcement and the right compensation system, you can guide people to do that. So that's been our strategy.

Jesse Buckingham: And so that is the case today. And then depending on the shipper and their freight mix, they may have more of one or the other, but the reps are covering both.

Doug Waggoner: You have salespeople that tend to drift one direction or the other based on where they've had success and what they feel most comfortable with. But our desire as a company is to encourage them to sell everything that they can.

Jesse Buckingham: Yeah. That makes sense. And start to kind of own more share of wallet. And what about the relationship between the managed trans business and the more brokerage offerings?

[32:50]

Doug Waggoner: Well, managed trans is a really separate offering. The way that we sell that is we basically do an analysis of their freight spend. We look at all the modes. We may bring in our industrial engineers to craft a solution specific for them, depending on where their distribution centers are and where their warehouses are and where does their inbound come from and where are their customers? And so there's a strategy that goes into that. But once we've done our diligence, we craft what we believe is a solution that will save them money and give them better service to their customers. And we pitch it. Typically that solution will include dedicated resources. They'll have a team of Echo people, depending on their volume. It could be a six person team that only works for them, or it could be a half of a person simultaneously. We'll do some technology integration. So we'll integrate our proprietary TMS with their ERP system. So while they're creating orders in their system and creating transactions out of their warehouse, it's queuing our system as transportation that needs to be executed. And then we become their transportation department and every quarter we sit down and do a QBR and we give them updates about the state of the industry and the state of the market and what are the market conditions, how we're performing, how the carriers we've selected are performing, how much money we've saved them. And we do that every quarter and it's very open and transparent. As a result of that, we typically have three year contracts, but we have a 96%

[34:55]

renewal rate when those contracts come up. I think that's a testament to the level of service that we provide and the savings that we provide. Now for those customers that have truckload business, we're really acting almost like a 4PL right? So we might give freight to our competitors because we ran a sourcing process and they won a lane and that's what the customer needs. Now whether the Echo brokerage can participate or not, that's sort of up to that customer, whether they want us to or not. Some want a wall between managed transportation business and our brokerage and others say, no, if you can find a good deal, we'll take it.

Jesse Buckingham: Having both business lines, is it, does it help you? Does it harm you? Is it a conflict? Do they, is it largely the pitch that helps out? Like we bring a lot of expertise to the table because we move a ton of freight? Or are there situations where it's beneficial for you in the sale where someone says, we love that you have that?

Doug Waggoner: Well, yeah, we love the managed transportation business because it's very sticky. Right? And clearly there's a relationship component, but there's also a track record and we've proven that we can execute and add value. And you find a lot of times, especially in the mid market and the SMB space, companies haven't made big investments in their transportation function. So they may not have the resources or the expertise or the technology to do what we do. And they certainly can't buy as well as we buy. So when we meet with an SMB or mid sized company, I think it's pretty clear to them that we can do transportation better than they can, and even when we're making a small profit on it. So that's sort of the pitch and it's been very successful. We've been over 300 customers today that have signed long term contracts and that number grows every quarter.

[37:12]

Jesse Buckingham: Do you have a perspective on whether managed transportation as the way a shipper solves their logistics function is increasing in share? Is it stable? Is it declining? Like what are the sort of dynamics from a shipper perspective?

Doug Waggoner: Every shipper is unique and has their own philosophies about when to outsource something and when not to. Some shippers will run an RFP process and ask us to submit a proposal along with some of our competitors and they'll pick a winner. In other cases, we identify companies in our brokerage that we think are good candidates for managed transportation. And in that case, we'll approach them and say, hey look, we work with you today on a transactional basis and we get some percentage of your freight. But we'd like to propose a solution where we get a hundred percent of your freight. It's a more intimate relationship and a higher valued relationship for both of us.

Jesse Buckingham: What would make somebody a good candidate for that conversation? What are you looking for? What are the signals?

Doug Waggoner: I think when they have a moderate volume of freight, but maybe some level of complexity. So by complexity, I'm thinking that maybe they have multiple origin points and they're trying to serve the geographical country, and it's not economical to do it from one location. So they might have a couple of warehouses, maybe they manufacture different products in different plants. Maybe they've got a mix of LTL and truckload. Maybe they've got some freight that could move intermodal but they don't really know much about how to do intermodal. And then maybe they've got high volumes of LTL and we believe that with our analytics and optimization capabilities, we can combine LTLs into truckload and save them a lot of money. So those types of things would be signals that we might be able to help somebody and

[39:13]

create a managed transportation relationship.

Jesse Buckingham: Yeah. That's interesting. So some amount of complexity where your understanding of how all the pieces come together matters. Are they typically switching vendors predominantly, or is it a greenfield situation?

Doug Waggoner: It's both. I would say the funny story is when we've pitched this to a small company, maybe we're talking to the president of the company or the operating officer, and of course they'll quickly delegate us to the transportation manager. And there was a time when the transportation manager might feel insecure about us coming in to do his job. What they would typically find is that their job is just fine. In fact, what they're going to gain out of this relationship is a team at Echo that works for them. I can remember instances where we were pitching to the executives and when the transportation people got pulled in, they were sort of naysayers. But once they realized we were working for them, they became our biggest allies because we broadened their capabilities in their company.

Jesse Buckingham: Yeah. I imagine there's some sensitivity there, but if you do it right, I can't think of one time that somebody lost their job because we came in as a transportation partner.

Doug Waggoner: That's right. I can't think of one time that somebody lost their job because we came in as a transportation partner.

Jesse Buckingham: Yeah. Very interesting. Doug, you've done sounds like 30 acquisitions and integrating those businesses successfully is not an easy feat. I mean, there's all these sort of memes around most M&A eroding value, etcetera. Obviously not true. There are a lot of counter examples, but there are a lot of ways for it to go wrong. I'm curious to learn some of the hard earned learnings about situations where things have gone really well, maybe situations that they haven't, and what you sort of learned about doing M&A and integration successfully.

[41:17]

Doug Waggoner: Sure. Well, in a typical Echo acquisition, we would be buying, let's say a small broker with a founder or founders. They have their own culture. We have ours. We want to put them on our technology. That's always a challenge because no matter how good or bad your technology is, when you are forced as an employee to use a new technology, you're not going to like it. Even if it's better, you're not gonna like it. So there's a learning curve and a change management process that you have to go through. So we work through that. We have a very good training department. We have a team that helps bring them onto our technology. We work really hard to adapt them into our culture and make it fun. We want it to be a culture they want to be part of. But the other part of it is you've got owners who now have to become employees. And it's very hard as you can imagine, psychologically, to go from being an owner to an employee. And we're aware of that, so we manage them with a light touch. Encourage them to remain entrepreneurial. Our ask is sort of like, be open minded, try to lead your team to join the culture and be part of Echo and take on that identity. And at the same time, we're going to respect your autonomy. And we know we're going to bring a level of bureaucracy that you're not used to. But let's just work together to get through it. So it's an open and honest approach with mutual respect

[43:17]

and we've had really good success with that. In fact, a lot of our early acquisitions where we had an earnout feature to the deal, our owners have stayed on well beyond the end of their earnout. And when we bought brokers, we would typically make them into an Echo branch. So they sort of retain their geographic location and identity and they're still together as a team and we try to make Echo a place that they wanna be part of.

Jesse Buckingham: Yeah. The in my prior life, I was CEO of logistics technology businesses, but similarly, we were typically buying them from founders. And one of the things that required the most care was managing the founder dynamics, especially I imagine it's maybe even more acute in logistics where the relationships that those folks have built with their shippers is really critical. I imagine the default is that you really do need them staying on and engaged and supporting through that transition. How do you guys think about that from your perspective? Like who owns that integration challenge?

Doug Waggoner: Well, that owner is still gonna be the boss of their branch. Right? But we ask them to engage with our integration team and get their employees engaged with our integration team to make it a successful transition. And they've just had a payday. They're feeling good about things. I would say there's a honeymoon period for a while where they're all gung ho. And then after a few months, maybe the reality of

[45:19]

Echo being a little more bureaucratic than what they're used to sets in. And I'm not used to having to ask for permission to do something. So there is that reality that sets in and you've gotta work through that. But we've done it a number of times. We understand the human dynamics and we just work hard to get them through it.

Jesse Buckingham: When we were doing acquisitions, there were learnings about what was really important to integrate very quickly versus what was important to take some time on. Getting the financial systems migrated, getting the CRM migrated so that things came across quickly and you could actually get visibility into what was going on was a really important first, almost sort of nonnegotiable step. But then there were different decisions about whether you continue to maintain the brand of that business or it always comes under the Echo shop. What does leadership look like? What do you enable them to retain decision making autonomy over versus not? And I'm curious if your perspective on that has evolved over the years in terms of what works.

Doug Waggoner: Yeah. In the beginning, we always wanted to put them on our technology and generally did. I'd say that's still our bias, but there are times when you look at the specifics of the company and it's part of making the decision whether or not to do the deal in the first place. Right? Do we want to keep them on their system or put them on ours? There are reasons why you might leave them on their system. Let's say it's a managed transportation business that's deeply integrated with their customers. Well,

[47:21]

to rip out those integrations and integrate them with our system is going to be painful for those customers. So we probably wouldn't do that, at least not in the short term. We'd just take over management of their system, keep their customers on it, and over time, as we can transition customers to our system, we would. In a brokerage business, our desire would generally be to put them on our system pretty quickly. And we have a process for doing that, which has both an IT and a data aspect. As far as the branding goes, we want them to be on the Echo brand, but there have been times where because of their brand identity in their space, we've left it alone. Example of that would be a company called Roadtex that we bought a few years ago. Roadtex was a non-asset temperature controlled LTL carrier. And they also have warehousing and they do retail consolidation for big box retailers. So based on that customer base and their brand identity in that space, we've left their identity as Roadtex, an Echo company. Will we migrate it to Echo maybe someday, but there's no hurry. We're still getting the financial benefits of the deal and they have name recognition with their customers.

Jesse Buckingham: Very interesting. Doug, I'm curious. Your journey as leader of Echo is pretty incredible. Joined from the very early days, took the company public, then took the company private. What are your reflections on running a public company, running a private company, the benefits and trade offs of having done both?

Doug Waggoner: Well, when we did our IPO in 2009,

[49:24]

in retrospect, we were too small to be a public company.

Jesse Buckingham: That is quite early, I would imagine.

Doug Waggoner: But our founders were tech entrepreneurs. So they didn't really appreciate how big transportation companies tend to be that are public companies. And when we first started our IPO work and meeting with analysts and investors, our whole story was about technology. Our pitch was, hey, we're a tech company. We just happened to make money with freight. What happened was, as we were preparing for the IPO roadshow, we would meet with the sell side analysts and we'd be giving our pitch and they'd be sitting there and they say, what's LTL again? And we'd explain it and they'd say, do you mind if I bring in my transport analyst? And we'd say, sure, go ahead. Well, the transportation analyst would come in and we'd tell our story and the transportation analyst would say, hey, I got this. This is something I know. So we sort of went from pitching our story as a tech story to getting sort of pushed into the transportation domain, which is fair because that's what we do, but it's always been tech enabled and data science enabled. It was fun to go through the IPO process. We were probably too small. It hurt our valuation. We generally traded at a discount because we were too small to be a public company. And I remember meeting once with Fidelity and they said to me, I love your story. I like the management team. I'd really like to buy your stock, but I can't. And I said, why? And they said, well, you're too small, because the size positions that we need to take, we're gonna move the price of your stock. If we're getting in, the price is gonna go up. And if we're getting out, which is worse, the price is gonna go down. And we just can't do that until you've got a larger market cap and more daily trading volume.

[51:32]

So bottom line was it was fun to be a public company for a while. Living quarter to quarter and sweating out every 1 or 2 cents of earnings per share is stressful, and going on those quarterly earnings calls especially if you didn't meet expectations is a lot of pressure. But it was also fun. From a selfish standpoint, it was fun to put that notch in my belt and learn the process. I've always been an investor as a hobbyist. So it was fun for me to learn the inner workings of Wall Street and how it all kind of fits together. But after doing it for eleven years, I was getting frustrated that I didn't think we were being valued correctly. I would look at our peer group and we were trading at a discount, even though at that time we had beat consensus estimates nine quarters in a row. Still trading at a discount. So when I got the call from the Jordan Company, our private equity partner, and they said, would you consider going private? I said, well, make an offer. And the rest is history. Now that we've been private, this is my first time working with private equity. I've really enjoyed it. I don't live quarter to quarter anymore. We can think more longer term. We can make investments and not worry about what it's gonna do to next quarter's EPS. And I've got a partner that's really good. They understand the industry. They've owned other assets in the space and they've been great to work with. So I guess I've been blessed to have the best of both worlds and all of those experiences, and I'm having a lot of fun with how we're doing it right now.

Jesse Buckingham: Yeah. That's awesome. It sounds like you're getting some breathing room to execute the strategy and think a little bit longer term. It's interesting. I didn't quite appreciate that one of the challenges of being too small as a public company was the fact that you really couldn't get demand from these big buyers because of the liquidity issue.

[53:36]

Doug Waggoner: Yeah. And then I would talk to investors and say, how big do we have to be to get a better valuation? They said, the rule of thumb is a billion dollar market cap. And we were kind of in the $850 to $900 range towards the end there. Sometimes we would pop over a billion. I think that number has moved up in the last few years. So there are lots of mutual funds and hedge funds and a lot of people that wanna trade transports and buy and own transports. And I think we had a great story and we did a great job, but we were just probably not big enough to be on people's radar as much as we would have liked.

Jesse Buckingham: Yeah. Very interesting. Technology has been such a big part of Echo's DNA. And I know that you're personally interested and excited about everything happening with AI. I'm curious to hear from your perspective as someone who's been in the industry for such a long time and is also leading one of the most important businesses. What are you really excited about with some of these latest developments in technology, especially around AI? And what do you think the risks are that need to be managed and what are the opportunities it creates?

[55:36]

Doug Waggoner: Yeah. I'm super excited about AI. I think it's going to transform our business, our industry, really all businesses eventually. Much like the internet did. Much like cell phones did. I mean, you can look back in time and there were these moments where there was a step transformation. And I think AI is it. Look, we have dozens of use cases we've identified in our company. I'm going to quote my CIO, Zach Jacqueline. He says AI is a task killer and it's a role killer. It's not necessarily a job killer. So to your question about risk, the risk is, as you identify use cases where you can automate, you gotta really think through, okay, how are we going to get an ROI out of that? I'll give you a real world example. One of our use cases that we've identified, and I won't go into the details, but it happens at Echo 600,000 times a month. So divide that by twenty working days, that's 30,000 times a day. And let's say it takes three minutes per task. So that's ninety thousand minutes per day we're doing this and it can be automated with AI very quickly. And we're working on it. That ninety thousand minutes, if you divide it by sixty minutes an hour, it's fifteen hundred hours a day of work. So if that fifteen hundred hours a day is work that's occurring in a centralized group,

[57:41]

there's headcount that can come out. Right? Because you don't. But if that fifteen hundred hours a day is dispersed across 1,500 people, which it is, we're basically freeing up one hour per day per person. So that's not necessarily going to eliminate their job, but it's going to give them an hour more of capacity. Strategically we think about, how can we use that? How can we make them more productive? How can we allow them and enable them to sell more and get more leverage out of that? And so that's one of the challenges. It's pretty easy to automate things, but the question is, what are you gonna do with it? And how does it benefit the company? We don't wanna automate things just to make our employees' lives better, although that's nice, but how does the company get value for that?

Jesse Buckingham: And it's interesting, especially in that circumstance where it's an hour a day. We see this all the time where it is quite rare that you are automating an entire function where it's like, okay, we just don't need those individuals. Most people are doing a bunch of things and it's some amount of time savings. And it also requires a lot of structure around operations and targets to make sure that you see the productivity improvement. Because given an hour of time back, it's very easy for all of us to just kind of slow down and not really use that time necessarily productively. Have you guys learned anything about how to make sure that in those scenarios where you're saving 20%, still a huge impact, you actually translate that through to ultimate business impact?

Doug Waggoner: Well, I would say we're learning as we go. One of the first things we learned, I think we learned it with Vooma actually, that when you first implement automation, you tend to make it optional. Right? And people don't typically opt to use it if they're unfamiliar with it or uncomfortable with it. People want to do things the way they've always done it because that's what they're comfortable with. So the first challenge is actually adoption. How do you get people to use the tool and show them that it's good for them and it's going to make their life better and it's going to make them better for their customers. So that's challenge number one. And then challenge number two is, if you free up capacity, how do you make use of that capacity? And that's where you just have to have metrics in place where you're measuring what people are doing and creating the proper incentives for them to wanna do more.

Jesse Buckingham: Yeah. Yeah. Doug, I could keep going for a long time and we are coming up on time here. I know that you're a busy man. I'm very grateful for the time you've spent with me. Thank you so much for this conversation. Really, really enjoyed the opportunity to learn more about your story and Echo's story. You guys are doing really, really big things. It's really cool to see.

Doug Waggoner: Well, thanks for having me, Jesse. I appreciate it.