(This story has been updated with comments emailed to FreightWaves by CEO Shoaib Makani and a copy of the letter sent to KeepTruckin employees.)
KeepTruckin, the maker of electronic logging devices, has laid off 18% of its global workforce.
Employees who received the termination notice on March 31 in a letter signed by CEO Shoaib Makani were told that the layoffs were effective that day. In an email to FreightWaves, he said the company now has 1,550 employees.
The layoffs affected 349 employees out of a team of 1,900 employees, Makani said in the letter.
Reasons for the layoffs should bring pause to anybody in the freight industry who has been comforted by the strong volumes and rising rates of the past few weeks. Those volumes and rates have been fueled by demand to resupply store shelves that have been emptied of supplies by concerned buyers. Keep Truckin is seeing some other worrying signs.
“Our data science team has observed a 10% reduction in vehicle activity in our network over the past two weeks, with the hardest-hit regions declining by more than 20%,” Makani wrote in the letter. “If this pandemic spreads across North America, we are facing an extended quarantine that will inevitably increase churn, lower rates of new customer acquisition and cause our total annual recurring revenue to contract.”
In the email to FreightWaves, Makani provided more details on the downturn the company has seen. He revised the letter’s statement on the size of recent declines to say that KeepTruckin’s data science team has seen a 12% drop in activity over the company’s network in the past two weeks. New England and the West Coast have been hit by drops of more than 20%.
KeepTruckin’s revenue is growing on a month to month basis, he said. But “we anticipate a meaningful increase in churn in April and May due to small trucking companies going out of business or pausing their operations, and lower rates of new customer acquisition,” Makani wrote. “The combination of those two could result in a decline in our total revenue.”
While KeepTruckin’s ELD business has a reputation of being focused on smaller operators, Makani said more than 50% of the company’s revenue comes from companies with more than 20 assets. Its customer base is 65,000 companies and 300,000 drivers, he said in his email.
FreightWaves Outbound Tender Volume Index in SONAR, the company’s market dashboard, reflected a steadily rising volume of freight for the last several weeks before a turndown in the most recent week.
There were several other steps that the company undertook, according to the letter. Bonuses earned in 2019 will not be paid out. Employees with a salary more than $50,000 will have their pay cut by 10%. Co-founders Ryan Johns and Obaid Khan are taking 50% cuts in pay. And Makani is taking no salary “until we get through this.”
The letter did refer to a severance package.
The cuts reportedly impacted virtually all the workers in the company’s Chicago office, which has only recently relocated to bigger space as part of a growth plan.
Survival is key, Makani suggested. “I have a duty to make sure that KT can weather any storm,” he wrote. “We are in the midst of the worst we have seen in our lifetimes.”
Although KeepTruckin has been known mostly as an electronic logging device (ELD) provider, it has sought to push into new areas. It purchased and then soon shuttered One Point Logistics, citing issues with trying to maintain the dual role of being a broker and operating a smart load board at the same time. In his email, Makani said the layoffs do not affect the team working on the load board.
A little more than a year ago, the company secured $149 million in a series D investment. Greenoaks Capital was the lead lender in that deal; existing investors also took part. With that investment, it brought KeepTruckin’s funding up to $229 million.
Makani, in his email, said KeepTruckin has $80 million of cash and cash equivalents. “The steps we have taken today will take us to cashflow profitability,” he said.
ELDs and what it calls the Smart Load Board are not the only products of the company. It also provides in-cab cameras and GPS tracking.
In a blog post in reaction to the pandemic published just the day before the layoff notice, KeepTruckin’s head of regulatory affairs Travis Baskin posted that the company’s engineering team “has ensured 24-hour coverage with on-call staff to monitor systems and respond to alerts.”