After adding a slate of experienced executives to the team a year and a half ago, White Plains, New York-based freight brokerage Capital Logistics says it is back on a high-growth trajectory. After posting approximately 85 percent revenue growth in 2018, Capital believes it is poised to double in 2019.
Last year, Capital’s domestic business brought in top line revenue of $45 million, while international freight accounted for $7 million. Capital also opened three regional offices in 2018: Palm Beach Gardens, Florida; Queens, New York; and Newport, Rhode Island.
FreightWaves spoke to Capital Logistics CEO Jeff Gerson by phone.
Gerson explained that he founded Capital Logistics in 2009 with his business partner with a focus on produce. The Great Recession economy was initially tough, but a few key customer relations got the brokerage to $10 million in revenue within a few years. Eventually, Capital hit a new plateau at around $25 million in revenue, but a new vice president of sales, carrier operations executive, and head of carrier sales, each with a decade or more of experience at a large, incumbent third-party logistics provider (3PL) helped Capital press the accelerator again.
“About three years ago we leveled off around $25 million to $27 million in gross [revenue] and had trouble ramping it up,” Gerson said. “We started doing some serious recruiting and brought in some veterans from the industry, each one with approximately 10 years of experience. We combined that with a new transportation management system and all the different services that help the little broker stand out.”
“Fifteen years ago, the biggest [3PLs] had technology that no had else had access to or could compete with,” Gerson said.
Capital Logistics uses Aljex, a cloud-based transportation management solution acquired by Descartes in February 2018. Capital Logistics also uses Descartes MacroPoint as its visibility solution provider.
Gerson said that Capital will grow loads covered faster than headcount, realizing productivity gains while scaling as Capital’s sales force grows more experienced.
“Our strategy to be competitive is handling more and more freight with fewer people,” Gerson said. “We have to be more efficient than our competitors and more efficient than we were two or three years ago.”
Capital Logistics has asked for contract rates mostly flat year-over-year this bid season, aggressively pursuing contract volumes in response to industry consensus that 2019 will see a market biased more toward contract than spot.
Despite softening spot prices and volumes, Gerson said Capital is in a good position to continue growth. Because Capital’s mix of business is about 70-30 contract to spot, the brokerage is in a sweet spot when capacity is neither too tight nor too loose. In FreightWaves view, the confidence that small brokerages have in their ability to double revenue in a year when gross domestic product growth is expected to slow and the S&P 500 may go sideways speaks to the value proposition that 3PLs offer their customers.
Capital Logistics is still concentrated in refrigerated freight, although now produce is about half of that business. Capital also saw its international freight forwarding and customs clearance group focusing on household goods moves for Fortune 500 companies grow from $1 million in 2017 revenues to $7 million last year. An intriguing international niche that Capital also works in is fine art, specifically moving artworks purchased at auction in London to homes and offices in the United States and installing them.
At this point in its growth story, Capital is maximizing its organic growth opportunities, but Gerson said that once the brokerage reaches the $100 million revenue and $15 million gross profit mark, it will have enough EBITDA to consider acquisitions.
Gerson cited “the explosive growth, bringing in all the young people, and building a company” as his favorite part of Capital’s recent success. In the first eight weeks of the year, Capital is already tracking ahead of its 100 percent year-over-year growth target.