November 8, 2011
The third quarter was one of dramatic change and improvement for myFreightWorld and its shareholders. Let me summarize the major developments of the quarter.
-Management. In June we added two seasoned executives, Drew White and Nick Gentry, as head of operations and finance, respectively. In September we accepted the resignation of Mike Head as President and CEO and I assumed those duties. The Board and I wish to thank Mike for his years of service to the Company. In October we added Steve Ruggiero, President of our wholly-owned All Modes subsidiary, to our senior management team. Also in October, we added Janette Sims, a highly-accomplished financial executive with years of big company experience, as our Controller. Together with Mark Hebden, EVP and head of marketing for the Company, this group represents the senior management team that will take the Company into the next chapter of our development. Each brings a skill set and experience that totally compliments those of the others. I am absolutely confident that this team will take the Company to solid profitability and ultimately to excellence. Also listening on this call today is a large segment of our employees. I want to take this opportunity to thank each and every employee of myFreightWorld for your dedication, hard work and contribution toward making our company, now but especially in the future, a leader in our sector.
FINANCIAL HIGHLIGHTS
Nick will have a bit more detail on these momentarily but let me just touch on the highlights.
--Top Line Growth. We continue to experience superb top-line revenue growth. Our loads for the three months ended September 30, 2011 increased to 57,000 from 38,000 thousand in the prior year quarter, a count reflected in our revenue increase. Nick will touch more on that shortly.
--Margin. Net margins increased to $840 thousand from $477 thousand in the year-earlier period, an increase of 43%. For the nine months, those numbers are $2.1 million versus $1.2 million, an increase of 79%.
--EBITDA. Reported Earnings Before Interest, Taxes, Depreciation and Amortization decreased from $83,000 in 2010 to -$263,000 in 2011. This difference is largely the result of inclusion of Informed Logistics Technologies, LLC and MFW Holdings, LLC in our results as well as non-cash expense associated with certain discontinued professional services and one-time bad debt charges by way of clean-up. Overall, our financial performance as measured by cash from core operations continues to trend noticeably upward after adjusting for seasonality.
--Balance Sheet improvements. The most dramatic improvement has been in our balance sheet. From the brink of the abyss in early 2011, we have reduced our accounts payable to customary commercial ratios as of this moment. Our commercial carriers are essentially being paid currently. This has led to our Dun and Bradstreet Paydex rating being increased to commercially conforming levels and this is allowing us to go back on offense in the markets, as I will describe below.
--Audit. As a result of these improvements, as well as vital improvements in the financial and management controls of the Company, we are now able to audit the business. To this end, we have retained Weaver Martin & Samyn of Kansas City to conduct an audit of the 2010 year-end balance sheet and the full-year 2011 results. We were pleased to garner significant interest in our audit process and chose Weaver & Martin over two national firms because we felt that Weaver & Martin were best equipped to meet our current needs.
In summary, our financial improvement has been dramatic and the momentum continues in a very positive direction.
STRATEGIC ALLIANCES AND ACQUISITIONS
--Freight Management International. This superb partner has added to the carrier choices available to our customers and improved upon the rates we can offer in certain lanes. The relationship has added 6% to our loads and a similar amount to our revenues.
--All Modes Transportation. Our AMT subsidiary has added significantly to our revenue in 2011 and is expected to add significantly to our EBITDA and operating cash flow in 2012. Led by Steve Ruggiero, a longtime and respected industry veteran, AMT focuses on the Truckload segment of the transportation business, a vastly larger and more profitable sector than the LTL, or less than truckload, sector.
--ILT. During 2011 the Company absorbed Informed Logistics Technologies, the intellectual property repository for our software. This had the effect of reducing our reported income but is actually vital to the ultimate success of the business. Previously ILT and MFW Holdings LLC were not consolidated in our results. Although consolidation has the temporary effect of reducing our reported profits it is the right thing for the business and will ultimately help create significantly value for our shareholders.
MARKETS.
During 2012, under the leadership of Mark Hebden, look for our business mix to change favorably in terms of more truckload business, which is higher margin, and more contract business, which is both higher margin and “stickier” in terms of customer churn. Look for us to add significantly to our agent roster (agents are independent sales generators for the Company). Also look for additional blue chip customers to be added to our existing list of the leaders in US transportation. We will begin providing metrics as to business mix and its effects on margins and profitability beginning with our 2011 year-end earnings report.
OUTLOOK.
Barring a catastrophic macro-economic event, we look for 2012 to be a good year and potentially a terrific one. We expect to achieve positive EBITDA by the end of the third quarter of 2012 and net income within two or three quarters after that. Upon completion of our current capital raising exercise, a $1,000,000 bridge financing, which is over 80% committed as of this moment, we expect to have sufficient capital and resources to operate until cash flow turns positive in 2012. We expect to continue to show year over year and quarter over quarter improvement (adjusted for seasonality) in revenues, EBITDA and net income.
We expect to add both carriers and third party logistics companies to our client roster in 2012. We have been largely out of the carrier market for an extended period of time but our recent credit rating improvements will allow the addition of important contract carriers going forward. We will also introduce enhancements to our software in response to market input. We don’t discuss those enhancements publicly but they are customer-driven and we expect them to add noticeably to our business in 2012.
We expect to return to conventional bank markets in 2012. We enjoy a good relationship with our existing bank but our growth will require capital, and the most efficient way to obtain that capital is through conforming bank credit lines. We expect our balance sheet assets and income statement results will begin to support a conventional bank receivables financing during 2012. By utilizing such financing for our combined businesses we can achieve significant savings in financing costs while supplying the business with the capital it needs to grow. Once our audit is complete in the spring of 2012 we will begin testing those markets in earnest.
PHILOSOPHY.
I want to make a quick comment about our philosophy. We are a Pink Sheet company. While there are many exceptions, in general Pink Sheet companies are highly speculative investments and may be subject to manipulation and other activities. One of the chief characteristics of Pink Sheet companies is that oftentimes a company’s intrinsic value bears only a passing resemblance to the valuation afforded it in the Pinks—both higher and lower. We believe in the marketplace and, as such, we believe that a properly functioning market for any stock will have many buyers and many sellers haggling it out in that marketplace, relying on the same public data plus their individual judgment to make informed investment decisions. Ultimately, we believe that such a situation leads to a stock’s price reflecting the intrinsic value of the company, and may well lead to a natural transition to a different and more liquid trading marketplace.
As a result of these beliefs, the entire focus of the Board and management of the Company is on building that intrinsic value as quickly as possible. We believe that over the longer haul, honesty and fair dealing with all our stakeholders—customers, suppliers, employees and shareholders—will add permanently to that intrinsic value and that it will compound over time. We do not believe that hyping the stock adds at all to intrinsic value but in actuality erodes credibility and ultimately impairs value. Therefore, we don’t engage in activity whose purpose is to create a short-term gain in the share price. We will always tell investors everything they need to know on a timely basis in order to make an informed investment decision. If a material event occurs between earnings announcements we will disclose it promptly and, if it is significant enough, we will hold investor calls and meetings to allow full and transparent discussion of the development. However, you should not expect frequent non-material announcements from us; we are frankly too busy for that to be a good use of our time and your money.
This imperative of increasing intrinsic value through straightforward and honest dealings is the motivating factor behind all our corporate actions. We expect our performance to be judged accordingly, and we welcome the challenge.
Thank you. And now I’ll turn it over to Nick to give a bit of insight into our financials.
